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Annual Report 2019
Our purpose to
reimagine urban life
inspires us to be
a force for good.
MIRVAC GROUP
ANNUAL REPORT 2019
Mirvac is a leading, diversified, Australian
property group, with an integrated development
and asset management capability. Recognising
the contribution we make to Australia’s major
cities, our purpose, to Reimagine Urban Life,
inspires us to be a force for good.
CONTENTS
Reporting suite
01 About this report
01
04 Financial and operational highlights
06 Letters to securityholders
10
Forces of change
Our business:
> Office & Industrial
> Retail
> Residential
> Build-to-rent
12
20
24
29
30 Our people
36 Risk management
38
Sustainability
43 Governance
74
Financial report
122 Directors’ declaration
123
130 Securityholder information
132 Glossary
133 Directory & upcoming events
Independent auditor’s report
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).
ABOUT THIS REPORT
The FY19 Annual Report is a consolidated summary of Mirvac Group’s
operations, performance and financial position for the year ended 30 June
2019. In this report, unless otherwise stated, references to ‘Mirvac’, ‘the Group’,
‘company’, ‘parent entity’, ‘we’, ‘us’ and ‘our’ refer to Mirvac Limited and its
controlled entities as a whole. Mirvac Limited also includes Mirvac Property
Trust and its controlled entities. References in this report to a ‘year’ relate
to the financial year ended 30 June 2019. All dollar figures are expressed in
Australian dollars (AUD) unless otherwise stated. The consolidated financial
statements included in this report were authorised for issue by the Directors
on 8 August 2019. The Directors have the power to amend and reissue the
financial statements. Mirvac’s full-year financial statements can be viewed on,
or downloaded from, Mirvac’s website www.mirvac.com
01
REPORTING SUITE
Mirvac’s reporting suite sets out the Group’s financial and
operational performance for the year ended 30 June 2019
across the following documents:
MGR FY19 Results Presentation
An in-depth overview of Mirvac’s financial, operational
and sustainability performance for the financial year.
MGR FY19 Additional Information
Information supporting Mirvac’s FY19 Results Presentation.
MGR FY19 Annual Report
An in-depth overview of Mirvac’s financial, operational
and sustainability performance for the 2019 financial year,
along with the Group’s corporate governance statement,
its remuneration report and its detailed financial statements.
MGR FY19 Property Compendium
A detailed summary of Mirvac’s investment portfolio,
other investments, and its commercial and residential
development pipeline as at 30 June 2019.
MPT FY19 Annual Report
An overview of the Mirvac Property Trust for the financial year.
02
ABOUT MIRVAC
Mirvac is an Australian Securities Exchange
(ASX) top 50 company and one of Australia’s
leading and most innovative property groups.
Since 1972 Mirvac has played a vital role in the
evolution of our cities, reimagine urban life and
creating places that enrich the lives of many
thousands of Australians.
Our reputation as a leader in Australia’s
property industry has been built by delivering
innovative and exceptional workplace precincts,
retail destinations, high-quality homes and
connected communities for our customers,
while driving long-term value for our stapled
securityholders. We own and manage assets
across the office, industrial and retail sectors
in our investment portfolio, and we currently
hold approximately $22 billion of assets
under management.
Our integrated approach gives us
a competitive advantage across the lifecycle
of a project. From site acquisition, urban
planning and design, through to construction
and development, leasing, sales and marketing,
property management and long-term ownership,
we exercise control over the entire process.
Our integrated model also ensures stable
income and growth through a balance of
passive and active capital, enabling us to
respond to fluctuations in the property cycle.
Our goal is to add value to Australia’s
cities through innovative, visionary design,
development, asset management and
construction. Our team is committed to
operating in a way that is economically,
socially and environmentally sustainable
in order to leave behind a lasting, positive
legacy in everything that we do.
OUR PURPOSE
As our company grows and we take on
more challenging projects in different
sectors, it is more important than ever
to be united behind a single purpose.
WHAT WE DO
We’re a creator, owner and manager of some
of Australia’s most renowned and recognisable
projects, with a strategy to be focused,
diversified and integrated. This means:
At Mirvac, we are in business to reimagine
urban life. This purpose drives all employees
at Mirvac to look beyond profit. It inspires us
to be a force for good and leave a positive
legacy in everything we do.
Whether it be breathing life into underutilised
spaces, lovingly restoring and adapting heritage
buildings, creating dynamic new workplaces
or bringing to life connected communities
where families can grow and thrive, we are
committed to enriching the lives of our
customers and communities.
We know that to reimagine urban life is
a great challenge, and it comes with much
responsibility. Our passionate, highly engaged
workforce has embraced the challenge to
think differently, to act conscientiously and
apply their experience, passion and energy
every day in the pursuit of an enhanced
urban environment for us all to enjoy.
WE ARE FOCUSED
deploying capital with discipline and
delivering on our promises, with a strong
focus on our customers.
WE ARE DIVERSIFIED
maintaining an appropriate balance of passive
and active invested capital through cycles,
and retaining capability across the office,
industrial, retail and residential sectors.
WE ARE INTEGRATED
leveraging our integrated model to create,
own and manage quality Australian assets.
Underpinning this strategy is a commitment
to our people, our customers, innovation,
technology, sustainability and safety. We’re
passionate about creating long-term value
for our securityholders and having a positive
impact on the communities in which
we operate.
Both our strategy and our purpose to
reimagine urban life continue to produce
strong results across the business.
ASX TOP 50
One of Australia’s
leading & most innovative
property groups
MIRVAC GROUP ANNUAL REPORT 2019 03
SED I N T E G R ATED D
I
V
E
OUR PURPOSE & STRATEGY
R
S
I
F
I
E
D
U
C
O
F
SAFETY
INNOVATION
PEOPLE &
LEADERSHIP
TECHNOLOGY
SUSTAINABILITY
04
04
MIRVAC GROUP
MIRVAC GROUP
ANNUAL REPORT 2019
ANNUAL REPORT 2019
FINANCIAL AND
OPERATIONAL HIGHLIGHTS
the future is bright
WITH A STRONG SET OF FINANCIAL METRICS FOR FY19,
MIRVAC HAS MAINTAINED THE IMPRESSIVE GROWTH
TRAJECTORY OF RECENT YEARS.
STATUTORY PROFIT
05
$1.02bn
$631m $2.50 11.6 cpss
NET TANGIBLE ASSETS
PER STAPLED SECURITY 1 OF
DISTRIBUTION INCREASED 5% TO
OPERATING PROFIT
up from $2.31 at June 2018
up 4% representing 17.1cpss
STRONG
OPERATING CASH FLOW
GEARING OF
ACHIEVED A ROIC OF
SECURED
DELIVERED RESIDENTIAL
GROSS MARGINS OF
$518m
20.5%
10.1%
for the Group
$1.7bn
of residential pre-sales
27%
MAINTAINED A 5.0 STAR
LEASED APPROXIMATELY
ACHIEVED
NABERS Energy rating average
across the office portfolio
250,000sqm
of office, industrial & retail space
2,611
residential lot settlements,
default rate <2%
$3.1bn
active commercial
development pipeline
more than tripled
community investment
3 years
ahead of target
caption goes here
1. NTA per stapled security, based on ordinary securities including Employee Incentive Scheme securities.
06
LETTERS TO SECURITYHOLDERS
FY19 was another outstanding year for Mirvac. Our strong performance, which has
characterised recent years, continued throughout the year. The sustained growth can
be attributed to the success of our urban asset creation strategy, the strength and
resilience of our diversified model and our team’s unwavering commitment to
our purpose to reimagine urban life.
CHAIRMAN’S LETTER
Mirvac is in exceptional shape, with a high-performing investment portfolio that will generate steadily growing income, all in the safe hands
of a highly engaged and passionate workforce. In an era when many Australians have lost faith in some of our largest institutions, we continue
to focus on earning our stakeholders’ trust every day, being a force for good and leaving a positive legacy in everything we do.
John Mulcahy,
Chairman
FINANCIAL HIGHLIGHTS
FY19 saw the Group deliver yet another strong
set of financial metrics. With a statutory profit
of $1.02 billion, I’m pleased to report that we
have successfully delivered at the top end
of guidance and maintained the impressive
growth trajectory of recent years.
$1.02bn
FY19 Statutory profit
Susan Lloyd-Hurwitz,
CEO & Managing Director
Our performance was anchored by the
significant gains of our Office & Industrial
business and its high-quality investment
portfolio which, together with our award-winning
asset creation capability, continue to generate
significant value. These gains, coupled with the
quality and location of our residential product
and focus on our domestic owner-occupier
customer base, as well as the urban expertise
of our retail team, has safeguarded the Group
against the challenging market conditions in
some of the sectors in which we operate in FY19.
MIRVAC GROUP ANNUAL REPORT 2019 At an operating level, our profit was up
4 per cent to $631 million, representing
17.1 cents per stapled security. We achieved
a strong operating cash flow of $518 million
and we paid distributions of 11.6 cents
per stapled security, up 5 per cent.
After a period of challenging residential market
conditions, we are seeing early indications of
a housing market recovery. At the same time,
we are reaching the end of the capitalisation
rate compression cycle and entering a period
where income will drive superior investment
performance. As a result, we are maintaining
our disciplined approach to investing capital.
With 87 per cent of our capital allocated to our
investment portfolio and 13 per cent to our active
development pipeline, we are confident that
Mirvac can continue to create long-term value
and grow distributions to our securityholders.
CAPITAL MANAGEMENT
Mirvac’s disciplined approach to capital
allocation has resulted in a robust balance
sheet which, together with our integrated
model, enables the business to operate
through market cycles and respond quickly
to investment opportunities, as and when
they arise.
During the financial year, Mirvac successfully
completed a fully underwritten institutional
placement and Security Purchase Plan (SPP)
to position the business for future growth.
The placement was strongly supported by both
existing and new investors, raising $796.2 million,
including approximately $46.2 million raised
under the SPP, to support the delivery of
the next generation of value accretive office,
industrial, residential and mixed-use projects
and provide additional funding impetus for
continued investment through the cycle. We
were heartened by the support we received
from our investors during this process.
During the first half of the financial year,
Mirvac received an A- rating with a stable
outlook from Fitch Ratings and maintained
the A3 rating from Moody’s Investor Service
(equivalent to A-), recognising our healthy
balance sheet and strong capital position.
Gearing also remained within our range of
between 20 to 30 per cent at 20.5 per cent.
Our overall earnings profile remains solid,
supported by a $3.1 billion active commercial
development pipeline and a high performing,
strategically-located investment portfolio.
We have noted that our active development
earnings will continue to flex with the economic
cycle. However, the increasing quality and
strength of our passive earnings underpin
our confidence that we will continue to
deliver for our securityholders.
CORPORATE GOVERNANCE
Against a backdrop of challenging housing
markets, a sustained period of political
uncertainty and the further erosion of trust
in some of Australia’s largest and best-known
institutions, it is more important than ever
before that companies like ours act fairly,
responsibly and transparently.
At Mirvac, we believe we have a duty not
only to our securityholders, our employees
and our customers, but also to the communities
in which we operate and the cities and towns
in which we live.
On behalf of the Board and the leadership team
at Mirvac, I want to emphasise our commitment
to creating and promoting a strong culture
where people are driven to look beyond
profit to genuinely being a force for good.
We have a highly engaged workforce that
never loses sight of a purpose that is bigger
than profit. Our team is driven to meet
milestones and targets but also to care
about making a difference to people’s lives.
We are proud of the high standards of
corporate governance to which we adhere.
Systems, procedures and practices are
regularly reviewed, benchmarked against
best practice and updated.
Additionally, the Board is actively involved in
the business and meets regularly to discuss
matters such as Mirvac’s strategy, the Group’s
activities and operations, outlook, risks and
remuneration. To capitalise on the strong
position of the Group, the Board will increase
its focus on customer satisfaction, technology
and the company’s long-term strategy in FY20.
REMUNERATION
Every year, our remuneration outcomes are
reported openly and transparently. Following
last year’s review of our performance and
reward framework, we are pleased to report the
new performance management structure has
been enthusiastically welcomed and adopted
by employees. Under the new framework,
changes were made to performance ratings,
our long-term incentives, and we increased
the mandatory minimum securityholdings
for both Non-Executive Directors and key
management personnel.
The strong, sustained performance – both
financial and non-financial – has translated
into full vesting of the long-term incentives
and above target short-term incentive
outcomes. Combined with a 44 per cent
security price increase during FY19, this
has resulted in increased actual earnings for
our CEO & MD and other key management
personnel. The Mirvac Board very strongly
believes in aligning pay to performance and
we believe the remuneration outcomes reflect
this strong performance, outperforming the
stretching targets that the Board sets for
management each year.
The full remuneration report for FY19 can be
viewed on page 52.
07
DIVERSITY & INCLUSION
We remain committed to fostering a respectful,
diverse and inclusive environment, where
different backgrounds, opinions and ideas
are accepted, encouraged and celebrated. We
believe this has a positive impact on the health,
wellbeing and happiness of our workforce
as well as driving engagement, productivity
and ultimately better business outcomes.
To this end, we have a Diversity & Inclusion
strategy in place with a focus on gender
balance, and we’ve worked hard to improve
gender parity at Mirvac over recent years.
As well as maintaining a 50 per cent gender
representation on our Board, we continue to
seek a 50/50 gender balance on shortlists for
senior appointments. We have successfully
maintained a like-for-like gender pay gap of
zero per cent for three consecutive years
thanks to our gender pay parity reviews, and
43 per cent of our senior management roles
are now held by women, in line with our target.
Thanks to the efforts of the team in
implementing this strategy, these achievements
are now considered to be ‘business as usual’
at Mirvac. In recognition of our commitment
to gender equality, Mirvac was awarded
Workplace Gender Equality Agency Employer
of Choice for the fifth consecutive year.
OUTLOOK
The hard work of the team to transform the
business means we are now well positioned
to mitigate adverse market cycles and use
them to our advantage by capitalising on the
opportunities they present. Our high-quality
investment portfolio continues to provide
secure and growing income to the Group,
while our development pipeline and asset
creation skillset provide significant potential
for future growth.
Mirvac’s strong financial performance and
robust corporate governance framework have
ensured the business remains in excellent
shape and will continue to provide value
to our securityholders and customers, while
making a real difference to people’s lives
in the communities in which we operate.
I would like to thank my Board colleagues,
our senior leaders and our team for their
commitment and hard work over the past
12 months. I would like to thank you, our
securityholders, for your support of Mirvac.
We look forward to another year of growth
and success ahead.
John Mulcahy
Chairman
0808
MIRVAC GROUP
ANNUAL REPORT 2019
CEO & MANAGING DIRECTOR’S LETTER
In a year that was marked by uncertainty and
a challenging operating market, our reputation
for quality and operational excellence and our
unwavering commitment to our urban strategy,
have stood us in good stead.
The strength and resilience of our business
were evident throughout the year. The
housing market and the political and economic
uncertainty caused by consecutive State and
Federal elections presented challenges within
our operating environment. Our business
stood up to the test on all fronts.
OPERATIONAL EXCELLENCE
In FY19, the Office & Industrial business
continued to deliver. We are now Australia’s
second largest office manager, with approximately
$15 billion of office and industrial assets under
management and we have successfully created
one of Australia’s youngest and lowest capital
expenditure portfolios.
Our award-winning asset creation capability
was showcased once again during the year
with the delivery of Axle, Commonwealth Bank’s
new state-of-the-art office building at our
reimagined South Eveleigh precinct. It features
next generation design, smart technology,
pioneering placemaking and sustainability
principles, and sets new benchmarks in
commercial property and workplace design.
Our ability to deliver award-winning buildings
continually improves the quality of our portfolio
and drives increasing passive earnings for
the Group. This proven capability, combined
with the number and calibre of projects in
our development pipeline, gives us confidence
that we can continue to generate strong
future returns.
Over the past 12 months, we have added
a number of new development opportunities
to our Industrial pipeline including at Badgerys
Creek, Kemps Creek (both in Western Sydney)
and Auburn (in Sydney). This is in line with
our strategy to grow our Industrial portfolio
while maintaining a 100 per cent weighting
to Sydney. We see significant earnings
potential for these future industrial estates.
Our Retail business delivered another solid
result, which is pleasing given the highly
competitive and rapidly evolving retail sector.
We have successfully created a portfolio of
thriving retail centres that offers the right
retail in the right urban locations – densely
populated with low unemployment, high
incomes and strong population growth.
As a result, despite divesting over $700 million
since 2013, the retail portfolio has doubled
in value in the past six years. The enhanced
services, partnerships and experiences Mirvac
is creating, has seen specialty productivity grow
by 36 per cent across the portfolio during that
timeframe and occupancy has been maintained
above 99 per cent. This success is testament to
the team’s energy and passion for reimagining
our retail offering, and our commitment to
constantly curating retail mixes and creating
unique experiences that respond to the
ever changing needs of our customers.
For our Residential business, while recent
months have seen some potential signs of
recovery, there is no doubt the housing market
deteriorated throughout the financial year
with average dwelling prices down by between
9 and 10 per cent in Sydney and Melbourne
during that time. Investor activity reduced
significantly, while tightening credit made
it more difficult for home buyers to secure
finance, which impacted the industry
as a whole.
However, averages mask the significant
variations between sub-markets. They also
ignore the superior quality of the Mirvac
offering. Our long standing reputation for
quality continues to attract owner-occupiers
who now, more than ever, seek a product
and a brand they can trust.
It is this quality that has seen our residential
team win a number of prestigious awards this
financial year. You can read more about these
awards on page 25.
Consequently, we have seen sustained demand
for, and sales of, our projects throughout the year
with over 1,700 lots exchanged. We exceeded our
target of over 2,500 residential lot settlements
during the financial year settling 2,611 lots, and
our defaults have remained under 2 per cent.
This too is a testament to our focus on quality –
in this case, ensuring that our customers are well
placed and supported to settle their purchases
in a timely fashion. Our residential gross margin
of 27 per cent reflects the capital efficiency of
our development structures, and we have started
to carefully restock in the changing market, with
a number of new development opportunities in
established Mirvac sub-markets including Henley
Brook, WA and Wantirna South, VIC, putting us
in a strong position to take advantage of the
anticipated upswing.
REIMAGINING RENTING
The build-to-rent (BTR) sector remains in its
infancy in Australia, but we believe it has potential
for significant growth and can deliver much more
than financial rewards. International experiences
suggest that revolutionising the rental sector in
Australia can provide significant social benefits
for hundreds of thousands of renters as they
move along their housing journey, giving them
access to high-quality, well maintained rental
property, with secure tenures, and a sense of
stability, as well as excellent customer service.
Mirvac is firmly at the forefront of this
new sector in Australia, having founded the
Australian Build-to-Rent Club with a 30 per cent
investment from the Clean Energy Finance
Corporation in July 2018 and subsequently
launching our first purpose-built BTR asset,
at Pavilions, Sydney Olympic Park. This project
is under construction, on time and on budget
and we look forward to welcoming our first
customers at Pavilions in June 2020.
In FY19, we confirmed plans for a second
BTR project, close to Queen Victoria Market
in Melbourne. As interest in the new sector
grows, along with appetite for BTR projects
from all fronts, we remain focused on further
extending our BTR development pipeline
throughout FY20.
A PASSIONATE, ENGAGED WORKFORCE
Of all the factors that have influenced Mirvac’s
success and strong performance, the most
important has been the genuine recognition
that our best asset is our people. A team of
curious and passionate people, aligned with
a clear vision, has created a workplace where
individuals are committed to our overall
purpose and to leaving a positive legacy.
In FY19, we maintained our employee
engagement score of 90 per cent for the
second consecutive year, as measured by
Willis Towers Watson. These results show that
our team continues to believe in our purpose
and strategy and is proud of the projects and
services we’re delivering for our customers.
We recognise that we need to continue
to work hard to maintain this high standard.
The survey also gives us the opportunity to
listen to feedback from our people on areas
that are still in need of improvement. We have
taken these comments on board and we are
focused on ensuring Mirvac continues to
be a great place to work.
PRIORITISING SAFETY
At Mirvac, we prioritise safety above all else.
We pursue safety excellence which means looking
beyond merely preventing harm to improving
the overall wellbeing of our employees, suppliers,
communities and the environment. This requires
a thorough and proactive approach to safety.
Two years ago, we launched a new health and
safety strategy, Thrive, which has been successful
in reinforcing and strengthening the safety
practices, behaviours and cultures across our
business, with another year of positive results in
FY19. This year we broadened our safety metrics
to include a critical incident frequency rate
(CIFR). This enables us to identify and examine
incidents and near misses so we can work
towards preventing them rather than reacting
to them. In FY19, we achieved a CIFR of 0.91 and
we reduced our lost time injury frequency rate to
1.02, another record low. You can read more about
our initiatives under the strategy on page 32.
A FLEXIBLE & INCLUSIVE WORKPLACE
Championing gender diversity, innovative thinking,
workplace flexibility and inclusive leadership are
all vital parts of Mirvac’s DNA. We continue to
encourage all of our employees to adopt some
form of flexibility into their working week, day or
month through our My Simple Thing initiative,
and we recently relaunched Mirvac Stars, which
celebrates the achievements of people going
above and beyond in their roles.
We believe that empowering women to
become future leaders must start at an early
age, and we have partnered with the GWS
Giants football club on a leadership program for
year 9 girls called ‘Giant Goals’ to demonstrate
what a career in the property industry could
look like and to encourage girls to consider
studying STEM subjects for their NSW HSC.
We are also committed to the Property Council
of Australia’s successful ‘Girls in Property’
programme, working with girls in year 10
to demonstrate the types of careers that
can be pursued in the property industry.
A FORCE FOR GOOD
One of the goals set out in our 2014 This
Changes Everything sustainability strategy
was to become net positive carbon by 2030,
and this year we released Planet Positive:
which is our plan setting out how we intend to
get there. It includes continuing to maximise
energy efficiency and developing all-electric
buildings powered by 100 per cent renewable
energy. This work will mean that from 2030 and
each year afterwards, Mirvac will be avoiding
emissions equivalent to planting over 1.4 million
trees and taking 22,300 cars off the road.
Targeting and then exceeding net zero
carbon are not just the right things to do,
they make good business sense. Transitioning
to a lower carbon portfolio will allow us to
increase energy price certainty and create
greater value for our stakeholders. They also
have the added benefit of helping us to retain
premium tenants and minimise vacancy rates,
and with low carbon building policy reforms
on the horizon, we aim to be ahead of the
curve when it comes to compliance.
We also recognise that it is important to be
transparent about our understanding of the
potential financial impacts of climate change to
our business and what we are doing in response,
and last year we made a commitment to report
under the Task Force on Climate-related
Financial Disclosures (TCFD). Our first TCFD
report is now available on our website and we
expect that the depth and quantification of our
risks will develop over the next several years.
Our sustainability strategy is now firmly
embedded across the business and has
resulted in a variety of new, pioneering
initiatives and achievements during the
financial year including: working with social
enterprise, Homes for Homes, to address the
need for more social and affordable housing in
Victoria; partnering with the Property Industry
Foundation to build a six-bedroom house in
Toongabbie, Sydney, where five homeless
youths will live and receive care, mentoring and
support from Marist180; and donating a parcel
of land to DVConnect where, with the help
of Halcyon, we have built Queensland’s first
purpose-built bridging accommodation facility
to support victims of domestic violence.
In order to contribute to a world that is
free of forced labour, modern slavery, human
trafficking and child labour, we have been
working on the first stage of a modern slavery
risk assessment so that we can start to identify
and eradicate modern slavery within our supply
chain, starting with our construction business,
and we expect to release this shortly.
09
As a result of our ongoing commitment to
community investment throughout FY19,
particularly through the provision of upfront
amenity at our masterplanned communities,
we increased our community contributions by
more than 800 per cent from a FY17 baseline,
three years ahead of our 30 per cent target.
We also launched our first Social Return on
Investment (SROI) report during the financial
year. It’s our first attempt at measuring our
social impact and while we continue to refine
our measurement tool, the process is already
informing the design and delivery of new
projects in order to continue to make
a positive impact on people’s lives.
INNOVATION AS A
COMPETITIVE ADVANTAGE
Our award-winning innovation program, Hatch,
continued to work on a number of exciting
initiatives in FY19. Cultivate, the pop-up urban
farm we created in partnership with start-up,
Farmwall, in the basement of EY Centre,
200 George Street, Sydney expanded to
a second and larger site at 275 Kent Street
in partnership with Westpac. Our unique co
working pilot, The Third Space, came to a close
at Broadway Sydney but opened in a different
format at Orion Springfield in QLD, where it
continues to test the market in pursuance of the
ideal co-working model for a retail environment.
We have now tasked Hatch to think about how
Mirvac can help digital natives live better urban
lives as we think about reimagining urban life
for multiple generations of Australians.
A POSITIVE OUTLOOK
The operational excellence for which Mirvac
is known continues to differentiate the Group.
Our passionate team, the high calibre of our
projects and our commitment to making
a difference, as well as delivering financial
returns, have created a brand that inspires
the trust and loyalty of our customers, partners
and importantly you, our securityholders.
Our purpose continues to inspire us to make
a positive contribution and be a force for good.
This is more important than ever in today’s
environment where political uncertainty,
economic volatility and the lack of trust
in large institutions, lead people to ask
more of corporations and governments.
Underpinning our success is our people
and strong culture here at Mirvac. Together,
we work hard to ensure that the places and
communities we are creating are sustainable,
innovative and connected, and have our
customers at their heart.
On behalf of our Executive Leadership Team,
I would like to thank the Board for their ongoing
guidance, the whole Mirvac team for their
commitment and enthusiasm, and you our
securityholders, for your valued support.
90%Maintained employee
engagement score
Susan Lloyd-Hurwitz
CEO & Managing Director
10
FORCES OF CHANGE
As our cities continue to expand, and our industry evolves at an increasingly rapid pace, our business is
challenged to forecast and act upon what the urban landscape will look like in the coming years. We are acutely
aware of a number of significant macro-trends that are shaping our world. As a leading Australian property group,
we’re focused on monitoring these trends and understanding their potential impact to our business, our workforce
and our customers, in order to both manage the risks and embrace the opportunities they present.
HOUSING AFFORDABILITY
Despite recent housing market declines, Australia remains one
of the most expensive places in the world to buy a house 1. The
result is an intergenerational divide where younger generations
have diminishing prospects of buying a house in the established
neighbourhoods their parents enjoy. Our initiative, The Right
Start, gives first home buyers a leg up towards buying their
first property. We’ve also further advanced our involvement in
the emerging build-to-rent sector, and launched a Rent-to-Buy
product in WA, which we believe will improve choice, quality
and security of tenure for renters and give them a helping
hand towards home ownership.
EQUALITY AND EMPOWERMENT
Over the past 12 months, we have seen an increased focus on the
violation of human rights; from Australia’s disturbing rate of violence
against women, to attempts to curb the widespread global problem of
modern slavery. As a White Ribbon Workplace, we have taken active
steps to break the cycle of violence against women, providing our
workforce with tools that build respect, support equality and assist
community groups who are doing the same. As a founding member
of the Australian Supply Chain Sustainability School, we have been
working with other Australian companies to make better supplier
choices to help eradicate exploitation and modern slavery. We also
want to support and empower companies that deliver positive social
outcomes. Over the next 10 years, we’re continuing towards our goal
to direct $100 million to the social sector, including through social
procurement with Indigenous businesses, social enterprises,
and B Corps 2.
$100m social sector investment,
including social procurement
1. The Economic Intelligence Unit’s Worldwide Cost of Living Survey 2019.
2. A certified B Corporation is a business that meets the highest standard of verified social
and environmental performance, public transparency, and legal accountability to balance
profit and purpose.
3. The Global Assessment Report on Biodiversity and Eco-System Services, 2019 (IPBES).
CHALLENGES FACING THE BUILDING INDUSTRY
The building industry was the subject of heavy scrutiny during FY19,
following concerns about building quality and the use of combustible
cladding. As a result, we are seeing a greater understanding from our
customers that the underlying value of any property is dependent
on the quality of the design and construction. Our unique integrated
capability enables us to exercise tight control over the quality of our
projects, throughout their entire lifestyle. This commitment to quality
and design excellence over 47 years has built trust and confidence in
our brand.
MIRVAC GROUP ANNUAL REPORT 2019 DETERIORATION OF INSTITUTIONAL TRUST
The findings of recent Royal Commissions, together with the recent political
uncertainty, further undermined the foundations of public trust in Australia in
FY19. In this climate, we believe we have more responsibility than ever to be
a force for good. As such, we’ve renewed our efforts to ensure we are trusted
by our customers and securityholders by being transparent in our reporting
processes. We continue to listen to stakeholders to understand where we are
doing well, and where we need to improve. Underscoring our commitment to
be a force for good in our communities, we’ve far exceeded our goal to triple
our community investment three years ahead of target, and have introduced
unlimited paid volunteer leave so that our people can give back in their
own communities.
11
we believe we have more
responsibility than ever
to be a force for good
AUSTRALIA’S FIRST LARGE-SCALE
One Planet Living
Community
MARRICK & CO, SYDNEY
CLIMATE CHANGE
This year, the City of Sydney joined 600 other municipal
bodies from around the world in declaring a climate emergency.
The devastating impacts of climate change continue to come
to light with the latest research 3 showing one million species
are threatened with extinction and calling out the current global
response as insufficient. Our sustainability strategy, This Changes
Everything, has seen Mirvac implement transformative change
across the business. This year, for instance, we released our plan
to reach net positive carbon by 2030 which sets out the actions
we’ll take to reduce our carbon emissions and ultimately, eliminate
more than we emit. We also delivered Australia’s first large-scale
One Planet Living Community at Marrick & Co, Sydney which
adheres to a framework that supports residents to live
comfortably within the earth’s resources.
DIGITAL DISRUPTION
New technologies are transforming the way we live, work and play.
We welcome the opportunities presented to our business and the
ways in which new technologies enable us to innovate as part of
our purpose to reimagine urban life. Digital disruption typically marks
changes in consumer needs and tastes and we have therefore tasked
our innovation team, Hatch, to explore ways in which our business can
help digital natives thrive. We are also implementing smart technology
across our portfolio and using data across our business to better
understand our customers, tenants and communities, in order to
create places that meet and exceed their expectations.
12
MIRVAC GROUP
ANNUAL REPORT 2019
Office & Industrial
EY Centre, 200 George Street, Sydney
13
During FY19, Mirvac successfully consolidated its reputation as a visionary creator
and trusted manager of some of Australia’s most exceptional office and industrial assets.
The Group further enhanced its high-performing investment portfolio with the delivery of
new, state-of-the-art workplaces, and the continual improvement of its existing buildings.
With over $15 billion of assets under management, Mirvac is now the second largest
listed manager of office and industrial assets in the country.
OFFICE
95 per cent of the office portfolio is made
up of premium and A-grade assets which
is testament to our award-winning creation
capability and commitment to quality. The
calibre of our buildings and our focus on
major metropolitan areas, close to transport
hubs, have enabled our portfolio to benefit
from the favourable office market conditions
and 30 year vacancy rate lows in Sydney
and Melbourne in FY19. Our 85 per cent
weighting to these cities is set to increase
with the further progression of our $3.1 billion
active development pipeline, as we build out
our next generation of passive income.
2019 PCA Excellence &
Innovation Award for Best
Sustainable Development
EY Centre, 200 George, Sydney
(New Building)
Sirius House, 23 Furzer St, ACT
(Existing Building)
This year, we officially opened the first two
buildings at our reimagined South Eveleigh
precinct in Sydney: Axle and Yerrabingin
House. With over 3,800 workers now in situ at
South Eveleigh, enjoying the amenity already
delivered as part of stage one, our vision to
create a thriving, connected and sustainable
community is quickly taking shape. We are
encouraged by the positive feedback we
have already received about both buildings.
In the next year, two more office assets will be
completed including The Foundry, which is
the second Commonwealth Bank workplace
at South Eveleigh, and our landmark office
tower, Olderfleet in Melbourne. The Locomotive
Workshops at South Eveleigh and Suncorp’s
new headquarters at 80 Ann Street in Brisbane
will follow in FY21 and FY22. These projects
remain on time and on budget, supported by
our unique integrated business model. Their
delivery will mean that by FY22, we will have
one of the youngest portfolios in Australia
and will have developed 85 per cent of
our assets directly.
Our focus on quality extends to our existing
assets where our buildings are being constantly
refined, upgraded and managed. This reduces
the materials and resources they consume and
enhances the comfort and wellness of those
who occupy them.
This strategy drives partnership and
investment across the portfolio and has
led to some significant achievements this
year, including the 46,000 square metre,
whole building lease renewal of the Federal
Department of Health and Ageing at Sirius
House, Woden, ACT, six years ahead of the
lease expiry date. Mirvac’s occupancy and
retention rates are among the highest
in the industry.
We remain focused on continually improving
the experience of our office and industrial
customers and enhancing the lives of the
communities in which we operate. Our strong
partnerships with leading architects, urban
designers, planners and interior designers
enable us to innovate and redefine the
future of work with each new project. This
combination of passion and partnership has
led to the creation of digitally enabled, future-
proofed, sustainable buildings and precincts
that promote collaboration, creativity and
productivity for our customers.
Office Snapshot
FY19
$6.7bn
Portfolio value
31
Number of properties
657,140sqm
Net lettable area
98.2%
Occupancy
6.4 years
Weighted average lease expiry
5.43%
Weighted average cap rate
5.7%
Like-for-like NOI growth
FY18
FY17
$5.7bn
$4.9bn
28
28
641,808sqm 623,826sqm
97.5%
97.6%
6.6 years
6.5 years
5.69%
5.92%
12.7%
0.0%
376 Collins Street, Melbourne
14
In FY19, we significantly grew our Industrial portfolio in line with our strategy, bringing our total assets under management to
over $1.3 billion and our industrial development pipeline to $1.2 billion. Demand from leading retail and logistics operators for
premium industrial facilities remains strong, particularly in the Sydney market, where 100 per cent of our Industrial portfolio
is located. We expect this demand for quality to continue based on the significant potential for future growth of e-commerce
in Australia, coupled with the diminished supply of prime industrial sites in strategic, well connected locations.
Calibre Industrial Estate, Sydney
INDUSTRIAL
Industrial Snapshot
This year, we proudly opened our premium
industrial estate, Calibre at Eastern Creek,
Western Sydney, NSW. The site was transformed
from a government-owned quarantine station
to a thriving warehouse and logistics hub in
just four years. It is now home to a collection of
leading brands including CEVA Logistics, Miele,
Pet Circle, Sheldon & Hammond and ACFS
e-Solutions, who are leveraging the high-quality
facilities, as well as the excellent transport links,
to support and accelerate business growth and
improve delivery times for their customers.
FY19
$877m
Portfolio value
10 1
Number of properties
469,315sqm
Net lettable area
99.7%
Occupancy
7.7 years
Weighted average lease expiry
5.72%
Weighted average cap rate
7.8%
Like-for-like NOI growth
FY18
FY17
$809m
$873m
17
19
431,980sqm
499,791sqm
100%
95.3%
7.1 years
7.0 years
6.19%
6.37%
With our reputation for the creation of premium
industrial assets now confirmed with Calibre,
our intention is replicate this success with
several new development opportunities. These
include a 54-hectare site at Badgerys Creek in
Western Sydney, NSW which has the potential
to become Stage 1 of a future 244-hectare
industrial estate, just 800 metres from the new
Western Sydney Airport. The site will benefit
from transport connections and approximately
$20 billion of infrastructure improvements in
the Western Sydney area by 2026. The Group
also secured a 56-hectare site at Mamre Road,
Kemps Creek, Western Sydney, NSW and
a 14-hectare site at Manchester Road, Auburn,
NSW, with the potential to develop both into
leading industrial precincts over the next
few years.
We continue to focus on enhancing the
quality, functionality, flexibility and occupier
amenity of the portfolio, which includes some of
Australia’s largest and most notable industrial
precincts, such as Nexus Industry Park and
Hoxton Distribution Park in NSW. Through our
integrated development capabilities, as well
as strong relationships with our customers,
government and other key stakeholders,
we are ideally placed to deliver high-quality
facilities, and the associated infrastructure
to unlock value and generate employment
opportunities in key metropolitan locations.
We continue to focus on enhancing the quality,
functionality, flexibility and occupier amenity
of the portfolio.
1.3%
2.0%
1. Excludes properties being held for development. Variance between FY17/FY18 and FY19 as some individual
properties were amalgamated into estates during FY19 (FY18 comparable of 10 assets and FY17 comparable of 13).
MIRVAC GROUP ANNUAL REPORT 2019 SETTING THE BENCHMARK IN SUSTAINABILITY
In Australia, the building industry contributes to approximately
25 per cent of the nation’s carbon emissions, and as a leading
Australian property group, we recognise that we have an opportunity
to influence meaningful change in the way we build and manage
our assets. One area where we can have a significant impact is
in our office portfolio, where we have direct influence over the
assets that we own and manage, as well as our active
commercial development pipeline.
When we released our refreshed sustainability strategy in
June last year, we made a commitment to ensure all new office
developments were built to a minimum 5.5 star NABERS Energy
rating, a minimum 4.5 star NABERS Water rating and a minimum
Gold WELL Shell & Core rating.
Designing and developing sustainable assets is not just
good for the environment, it is also good for our customers
and securityholders. Assets that are energy and water efficient
deliver lower utility costs and higher valuations. At our Sydney
headquarters, 200 George Street, for example, we achieved
a 5.5 star NABERS Energy rating which is half a star above our
original design target of 5 stars. The half of a star improvement
alone represents a saving in energy costs of almost $200,000
per year, as well as a $4 million uplift in valuation.
While reducing our water, energy and gas consumption has been
challenging – particularly during Australia’s hottest summer on
record this year – we continued to make good progress, achieving
a further 3.6 per cent reduction in carbon intensity and a 2.3 per cent
reduction in water intensity across the investment portfolio.
“
We have one of the most
sustainable office portfolios in the
country, which is testament to our
high-quality asset management,
a firm focus on driving energy
efficiency at our assets and our
investment in renewable energy.
”Campbell Hanan, Head of Office & Industrial
4x
3x NABERS Energy rating
Green Star Performance
Mirvac’s office portfolio is one of
the greenest portfolios in Australia
15
David Malcolm Justice Centre, Perth (copyright @kyntran)
A MARKET-LEADING PORTFOLIO
Our commitment to embedding sustainability in the design process,
along with a keen focus on improving building performance through
our in-house capability, delivered a number of industry-leading
sustainability ratings in our office portfolio during the financial year.
At 1 Darling Island in Pyrmont NSW, for example, we achieved a 6 star
NABERS Energy rating without the use of GreenPower. As well as the
installation of a 100kW solar PV system, the rating was achieved
through the team’s ongoing work to improve operational performance
and energy efficiency. 1 Darling Island now joins Mirvac’s 65 Pirrama Road
in Sydney and 23 Furzer Street in Canberra in having achieved 6 star
NABERS Energy ratings, representing market-leading performance.
Meanwhile, 275 Kent Street, Sydney, NSW became one of the first
buildings in Australia to recertify as a 6 Star Green Star Performance
rating. This was repeated later in the year with 23 Furzer Street also
recertifying as a 6 Star Green Star building.
In addition to a 5.5 star NABERS Energy rating at our multi-award
winning EY Centre, 200 George Street in Sydney, NSW, we’ve also
now achieved a 6 Star Green Star Performance rating and a 5.5 star
NABERS Indoor Environment rating for the base building, which
recognises the building’s exceptional standards of thermal comfort,
air quality, noise reduction, lighting and office layout.
In Perth, WA, the David Malcolm Justice Centre achieved a 6 Star
Green Star Performance rating (the first in Perth to do so) as well
as a 5 star NABERS Energy rating, and was recognised with the
Commercial ESD & Sustainability Award: Premium/A Grade at
the Property Council of Australia’s WA Property Awards.
Overall, Mirvac’s office portfolio now boasts four 6 Star Green Star
Performance rated buildings, along with three 6 star, two 5.5 star
and seven 5 star NABERS Energy rated buildings, making it one
of the greenest portfolios in Australia.
16
South Eveleigh, Sydney
$15bn
total assets
under management
$3.1bn
active commercial
development pipeline
MIRVAC GROUP ANNUAL REPORT 2019 17
CONTINUED EXCELLENCE AT EY CENTRE
When it was completed in 2016, EY Centre, 200 George
Street, Sydney was a one-of-a kind building, featuring
a world-first closed cavity timber façade and blind
system, LED lighting throughout the entire building
and a comprehensive metering and monitoring system.
Its unique architecture, leading sustainability features
and world-class innovation have seen the Francis-Jones
Morehen Thorp-designed building collect 19 awards
over the past three years.
In FY19, EY Centre was recognised again for outstanding
building performance, winning the prestigious International
Project of the Year award and the Building Performance
Champion at the Chartered Institution of Building Services
Engineers (CIBSE) Performance Awards in London.
As well as building performance, the awards recognised
EY Centre’s high levels of user satisfaction and comfort,
and its significant and measurable reduction of energy
consumption and carbon emissions.
The judges noted that the EY Centre was
‘ an exemplary project. The commitment
to aftercare reinforces the true desire for
a whole life approach. This should be the
benchmark for all buildings.’
In addition to this, EY Centre received the Award for Best
Sustainable New Development at the Property Council of
Australia’s Innovation & Excellence Awards in May this year.
With EY Centre setting a new benchmark for sustainable
design and delivery, Mirvac has now committed to a set
of minimum sustainability design standards to be used
for all future office developments and refurbishments.
These include implementing LED lighting throughout
all buildings; purchasing 100 per cent renewable energy
to be used on site; ensuring a quality façade to optimise
thermal comfort and energy efficiency; reducing potable
water intensity; maximising the recycling capability at
each asset; using highly efficient plant and equipment; and
ensuring a high-performance building control strategy.
EY Centre, 200 George Street, Sydney
#HELLOSOUTHEVELEIGH
In May 2019, together with our consortium partners AMP Capital,
Sunsuper and Centuria Property Funds, we celebrated the official
opening of the first two buildings at the revitalised South Eveleigh
precinct (previously known at Australian Technology Park). Axle,
the first of two Commonwealth Bank of Australia workplaces to be
delivered at the precinct, together with Yerrabingin House, which
features a gym and childcare centre, marked a significant milestone
in the transformation. The precinct is on track to be complete by
2020 and will be home to 18,000 workers, including 10,000 from
Commonwealth Bank.
Our vision for South Eveleigh is to create an environment for
collaboration, innovation and exchange. We aim to achieve this
by imaginatively mixing workspace with public and recreational
facilities that engage the broader community, incorporating
a variety of unique experiences to inspire creativity and ensure
everyone feels welcome. This vision is now taking shape with
a number of successful initiatives in place, which celebrate the
rich history of the site, while creating strong cultural connections.
We have a particular focus on the local Indigenous community
which has such a strong history and presence in the Sydney
suburbs of Eveleigh and Redfern.
Community day at South Eveleigh
South Eveleigh will be
home to 18,000 workers
including 10,000 from Commonwealth Bank of Australia
Now open for business, the farm welcomes
workers, visitors and the local community to
a series of planned workshops to learn about
Indigenous culture and native plants and tend
to the farm. They also have the opportunity
to purchase produce from the farm.
We have also worked closely with our
neighbours, Carriageworks, on a comprehensive
public art strategy for the precinct, with local
artists commissioned to create pieces inspired
by the history of Eveleigh. Indigenous artist
Jonathan Jones, has commenced working on
two artworks which celebrate the Indigenous
legacy of the site. Jonathan worked closely with
Indigenous elder, Uncle Chicka, to develop the
artwork ‘Welcome to Country’. Uncle Chicka
worked at the Eveleigh Railway Workshops
for many years and the artwork conveys his
personal history of the site through letters
stencilled into a series of banners that form
a canopy above the entry garden.
Local artist Chris Fox was also inspired
by the history of the precinct for his ‘Central
Pavilion’, which will be an iconic meeting point
at the heart of South Eveleigh’s Village Square.
Finally, artist Nell drew on her family history
and connection with the Railway Workshops
when designing her adult sized ‘Treehouse’
structure covered in hundreds of steel leaves.
The artworks will play a crucial role in the
activation of the site by sparking community
conversations, imagination and engagement.
18
CONNECTING PAST, PRESENT AND FUTURE
One example of a successful cultural and community initiative at South Eveleigh,
is Australia’s first Indigenous urban food production farm on the rooftop of Yerrabingin
House. The aim of the venture was to create a unique space that offers an array of
compelling engagement and educational experiences focused on celebrating and
remembering Aboriginal culture.
Yerrabingin rooftop farm, South Eveleigh
MEET THE ARTIST
Nell
Artist Nell was commissioned to deliver two major public artworks
at South Eveleigh: ‘Happy Rain’ a light work for Yerrabingin House
and ‘Eveleigh Treehouse’, a collaboration with design and architectural
collective, Cave Urban. She shared her inspiration for the ‘Treehouse’,
her personal connection with the site and the important role
she believes public art plays in bringing communities closer:
My great-grandfather worked as a shunter and then boilermaker at Bay 4 at
the Eveleigh Railway Workshops from 1931 to 1952. The job kept the family afloat
during the depression. I learnt more about this time in my family’s history after
being commissioned to create the South Eveleigh artworks. ‘Treehouse’ tells the
story of the convergence of nature and industry at the site over the last century.
Public art is an essential part of building a strong community. With ‘Treehouse’,
we invited the community to over twenty working bees at Eveleigh Works (the
blacksmith workshop) to help forge hundreds of tiny leaves which will adorn the
structure. It was a great way to bring the community together for a shared purpose.
At South Eveleigh, public art was considered by Mirvac and its partners from
the outset of the project and it is being integrated throughout the precinct in
a sophisticated and interesting way. It has the power to harmonise the environment
and make people feel good. ‘Treehouse’ will be a place where people can come
and sit and have lunch or just contemplate their surrounds. It’s designed to
appeal to all generations and will have a ramp for pram and wheelchair access.
It’s really about bringing people together.
Artist Nell with Eveleigh Works blacksmith, Matthew Mewburn
MIRVAC GROUP ANNUAL REPORT 2019 19
CO-CREATING FOR THE FUTURE
The delivery of Commonwealth Bank’s new
state-of-the-art workplace at South Eveleigh
and our progress on the new headquarters
for Deloitte at 477 Collins Street, Melbourne
and Suncorp at 80 Ann Street, Brisbane,
has consolidated our reputation as a partner
of choice for some of Australia’s leading
brands. These customers are committed to
promoting collaboration and innovation within
their workforces and providing an enhanced
employee experience that will attract and
retain top talent. They want to create the
very best working environments for their
people and we share this vision. We also
have the experience, cutting-edge skill-set
and proven capability to deliver on it.
The Mirvac difference can be seen in our unique
approach to developing commercial assets
through co-creation with our customers and
our communities. From a deep understanding
of our customers and their requirements, as
well as a consultative community approach,
Mirvac works collaboratively from the outset of
a project. We anticipate future trends such as
new technologies and the impact of climate
change and then deliver assets of which both
Mirvac and our partners are deeply proud.
At 477 Collins Street, Mirvac has worked
closely with Deloitte to embrace technology-
enabled workplace design in line with global
advancements in smart technology. The
final building will incorporate a network of
sophisticated sensors, enabling us to measure
factors like occupancy, temperature, light and
CO2, and optimise operations in response.
The building will also include a fibre-optic
backbone and diverse riser to accommodate
future technology needs.
Central Pavilion, South Eveleigh (artist impression)
Mirvac’s industry leading retail expertise also
enables us to improve the customer experience
at our new and existing workplace precincts
through the introduction of diverse, tailored
experiential retail that reflects the needs of our
office tenants and the local community. Using
insights from our Retail team and feedback from
our customers, this year we have reimagined the
retail offering at Riverside Quay in Melbourne and
275 Kent Street in Sydney. This has succeeded
in attracting workers and customer beyond the
nine-to-five, enhancing the ground plane and
contributing to the wider urban fabric of these
inner-city locations. Retail will also be a dynamic
feature of South Eveleigh, where an immersive
retail experience by The Grounds is set to open
in FY20. At 80 Ann Street in Brisbane, an urban
retail lane, an eat street and shared spaces for
meetings and remote working will revive the
historic bustling marketplace at Turbot Street,
while inviting the wider community to discover
and enjoy the revitalised precinct.
The Mirvac difference can be seen in our unique
approach to developing commercial assets through
co-creation with our customers and our communities.
20
Retail
Our centres are strategically located within
higher income, higher growth and densely
populated urban catchment areas, with an
overweight to the strong Sydney market.
Incorporating approximately 440,000 square
metres of space and more than 1,600 retailers,
our intricate understanding of local markets
enables our team to deliver bold and innovative
experiences, inspiring our customers and
creating value for our securityholders.
The Retail sector is rapidly evolving. From
shopping in-store, to online with click and
collect or click and dispatch options, customers
now have the ability to tailor their shopping
experience to their particular preference
and lifestyle needs. We are embracing the
opportunities created by the shifting landscape
and applying our expertise to create retail
experiences that ensure we stay relevant,
while delivering a significant, positive impact
on people’s lives.
$4.5bn
assets under management
Australia’s retail landscape is experiencing a step change.
Shopping centres within our capital cities are emerging as
the heart and vital pulse of their surrounding urban villages.
We have responded to our customers’ desire for community
connections as well as convenience with the creation of a
dynamic portfolio of urban centres across Australia’s eastern
seaboard, with assets under management of over $4.5 billion.
We’re bringing this philosophy to life across
our portfolio by constantly enhancing our
assets to meet and exceed the expectations of
our customers. We know that having the right
retail mix and the right customer experiences
will drive strong performance, so each of
our centres offers a carefully curated retail
environment that caters directly to the needs
of its customers. To this end, we have advanced
our development and repositioning pipeline
across the portfolio during the last 12 months,
with a focus on segments that support the
lifestyle aspirations of our customers, because
we know today’s shopping centres must go
beyond retail if they are to remain relevant.
Quality food and entertainment resonates
strongly with our customers, so we have
continued to reweight our portfolio towards
more lifestyle-based offers. One-third of our
total portfolio gross lettable area (GLA) is now
focused towards food catering, entertainment
and other services (such as fitness operators),
and 46 per cent of our portfolio gross income
is attributed to these same categories,
up from 26 per cent in FY13.
At Mirvac, we are fully engaged in the new
retail paradigm. We understand the importance
of ongoing adaptation. As long as we continue
to excite and inspire our customers with new
experiences, to reinvent and reimagine our
portfolio, to embrace change and treat digital
as an opportunity not a threat, and help our
retailer partners on the journey, we believe
we will be able to drive value for our customers,
communities and securityholders.
Stanhope Village, Sydney
MIRVAC GROUP ANNUAL REPORT 2019 CONNECTING COMMUNITIES
As the average home size becomes smaller and people increasingly embrace
apartment or medium-density living, our retail centres are, more than ever,
providing a place for those in their local communities to socialise and connect.
At Mirvac, we’re continuously looking at how we can provide our customers
with environments and experiences that extend beyond retail.
21
Tramsheds, Sydney
Retail Snapshot
FY19
$3.4bn
Portfolio value
17
Number of properties
437,899sqm
(excludes 1-3 Smail St and 80 Bay St)
Net lettable area
99.2%
Occupancy
4.1 years
Weighted average lease expiry
5.41%
Weighted average cap rate
2.6%
Like-for-like NOI growth
FY18
FY17
$3.2bn
$3.1bn
17
17
419,262sqm 418,578sqm
99.2%
99.4%
3.8 years
4.2 years
5.49%
5.67%
3.0%
3.0%
Brisbane Street Art Festival, Toombul, QLD
At Broadway Sydney, for instance, we piloted a unique co-working program
called The Third Space, offering start-ups, freelancers, students and artists
a high-tech rentable place to work, with the added benefit of being close to
all the amenity a retail centre provides. The popular concept, which attracted
over 3,000 bookings at Broadway during its 12-month trial, has now been
implemented at Orion Springfield Central in Brisbane for the next 12 months.
We’re also responding to a growing consumer trend for fresh and seasonal
produce. At Tramsheds, Sydney we run a weekly farmers’ market where
visitors can purchase directly from local providores and attend workshops and
masterclasses held by community operators. Launched in 2018, it continues
to be a great day out for families while celebrating businesses in the area.
Recognising the role we play in bringing people together, Mirvac also runs
a Mums & Co program nationally to connect parents, grandparents and
carers in the community. This year alone, the program – which has over 31,000
registrations – has seen over 100 local events, meet ups and activations held
at our centres, offering those in the community the chance to learn a new skill,
meet over coffee or enjoy a night out.
Another popular initiative this financial year was the Brisbane Street Art Festival
(BSAF), held at Toombul in QLD. Over ten high-impact surfaces of the centre
were surrendered to local and international artists, who, over the course of
two weeks delighted audiences with mural painting, graffiti art and live theatre.
Members of the public were also invited to get their hands dirty and participate
in the arts, with Toombul hosting a dedicated artist-in-residence pop-up space
for the duration of the festival. The BSAF partnership builds on the success of
the centre’s regular sell-out artisan and maker workshops.
Rhodes Waterside, Sydney
1,600+
Retailers
440,000
square metres of GLA
22
Riverside Quay, Melbourne
SOCIAL IMPACT
As well as connecting the community,
Mirvac’s retail centres are focused on having
a direct and positive impact through a range
of social initiatives.
At Cherrybrook Village in Sydney for instance,
the centre management team worked with
Anglicare to provide food relief for families
in need, inviting customers to donate non-
perishable food items, such as pasta, rice, tea
and coffee and tinned goods, which Anglicare
then delivered to families across Sydney.
The response from the local community
was fantastic, with over 3,000 food items
collected at Cherrybrook alone.
Meanwhile at Toombul, Brisbane, the
team partnered with not-for-profit, Nundah
Community Enterprises Cooperative (NCEC),
to provide people in the area who have learning
difficulties, intellectual disabilities or mental
illness with meaningful job opportunities.
Being local means that it’s easier for NCEC
to stay connected with their employees,
their employees’ families and networks of
support. The partnership is also aligned with
the Group’s target to direct $100 million of
our procurement spend towards the social
sector under Mirvac’s sustainability strategy,
This Changes Everything.
We also continued to show our commitment to
equality and inclusiveness for all, with our retail
centres proudly showing their support for the
Sydney Gay and Lesbian Mardi Gras during the
financial year. The Group’s Sydney retail centres
were given colourful makeovers, with rainbow
decorated escalators and pedestrian crossings,
and at Broadway, Sydney a glittering disco lift
experience was installed for customers to enjoy.
In this landscape, it's about being bold,
continuously adapting to changing consumer
behaviours and then refining our approach.
Retail is constantly evolving.
Susan MacDonald, Head of Retail
Tramsheds, Sydney
MIRVAC GROUP ANNUAL REPORT 2019 23
NATIONAL RECYCLING WEEK
One of Mirvac’s commitments under its
sustainability strategy is to send zero waste
to landfill by 2030. It’s another ambitious target
(in addition to our targets to be net positive in
carbon and water), and something that we can
directly influence at our office, industrial and
retail assets.
Each year, Mirvac participates in National
Recycling Week, encouraging our tenants and
customers to reduce their waste and to recycle.
The focus in FY19 was on reducing single-use
items (such as plastic bags, plastic straws and
coffee cups) and contamination in our recycling
streams. Contamination in recycling bins – such
as food scraps or single-use plastic - can lead
to a significant amount of avoidable waste.
Mirvac’s retail centres took to National
Recycling Week with gusto, running local
promotions that reflected the centres’
brand and the interests of their customers.
At our Birkenhead Point in Sydney, for example,
we invited customers to trade in 10 plastic
shopping bags in return for a reusable bag,
designed by illustration artist, Sally Spratt.
The team collected around 3,700 plastic bags
to be sent to recycling in just one week, which
is equivalent to over 20 kilograms of plastic.
The team at St Marys Village in Sydney offered
their customers free reusable straws, helping to
reduce the millions of single-use straws that flow
into landfill each day. As well as introducing new
recycling bins at the centre, St Marys Village has
also implemented a Return and Earn Machine,
with over 7.3 million plastic bottles, cans, glass
bottles and cartons recycled as at 30 June,
an initiative that will continue to run as a way
of educating customers.
It wasn’t just our retail centres that took part in
the action. At the David Malcolm Justice Centre,
our office tower in Perth, Western Australia,
the team ran an Eco-Friendly Fair, with tenants
of the building given an opportunity to enjoy
the afternoon sun and talk to local businesses
about composting, fermenting, reusable bags,
beeswax wraps and micro waste.
Although National Recycling Week runs for
just seven days of the year, Mirvac continues
to strive for maximum resource recovery
outcomes through robust service and trade
agreements, along with strong due diligence
on the facilities where our waste and recycling
are processed. We also continue to encourage
avoidance of waste in the first place and to
improve source separation at each of our
sites to reduce contamination.
Separate to National Recycling Week, our team at Cooleman Court in Canberra was named ACT’s Biggest Recycler at the 10th annual
Actsmart Business Sustainability Awards during the financial year. Their Coolo Recycling Warriors program, which encourages retailers
to find ways to recycle and to reduce their carbon footprint, has seen recycling rates at the centre increase from 52 per cent in FY17 to
85 per cent in FY19, equating to over 600 tonnes of waste being diverted from landfill.
We were one of the first retail landlords to make a comprehensive
investment in EV charging infrastructure and while Australia has generally
lagged in this space we see a great take up of this technology in the future.
It’s a great demonstration of the way Mirvac is adapting for the future,
facilitating a more sustainable urban landscape and supporting
the growing needs of our customers.
Toombul, Queensland
Tim Weale, Mirvac’s National Manager, Retail Solutions
INNOVATIVE ENERGY SOLUTIONS IN RETAIL
Since 2017, our Retail team has been investing
significantly in EV charging infrastructure at our
retail assets, and in FY19, the team introduced
an exciting new tenant at Toombul, Brisbane
which brings with it an equally exciting
EV offering.
Chargefox is the fastest growing open-
charging network in Australia, and at Toombul
it has installed a new state-of-the-art
ultra-rapid charging station that delivers up
to 200 kilometres of driving with just eight
minutes of charge, or 400 kilometres with
15 minutes of charge. The station can charge
two cars simultaneously and is backed up
by 100 per cent renewable energy.
Mirvac has been leading the way when it
comes to EV charging at our retail centres.
An early adopter of the technology, we now
have 84 charging bays offered across 12 centres
within our portfolio, including 38 universal EV
charging bays, 14 Tesla Supercharging bays
and 31 Tesla destination charging sites (in
addition to the Chargefox ultra-rapid station
at Toombul).
When Mirvac unveiled the Tesla Supercharger
at Broadway in March 2018 it was the only
Sydney CBD outlet offering over 200 kilometres
of charge in just 30 minutes. The same offer
is being installed at Moonee Ponds Central
in Melbourne.
In addition to EV chargers, Mirvac has
committed to trialling an innovative solar
energy solution at Stanhope Village in Sydney.
The lightweight, portable solar technology,
called SolPod, was launched in April this year by
ERM Power and will provide renewable energy
to the Centre. Weighing just 14 kilograms each,
the panels can be installed and connected in
hours, rather than days, meaning labour costs
and safety risks are considerably reduced.
The commercial-grade solar panels are due to
be installed on the rooftop of Stanhope Village
in the next financial year, and are estimated
to help Mirvac avoid approximately 100 tonnes
of carbon emissions during the trial.
24
Residential
Our Brighton Lakes masterplanned community at Moorebank in Sydney
won the UDIA NSW’s Award for Excellence in Greenfield Development for its
“
trifecta of innovation, community and
stakeholder engagement, and masterful
planning and design
”
The Eastbourne, Melbourne
Mirvac’s reputation for design excellence and community creation spans close to half a century.
During this time, we’ve delivered some of the country’s most significant urban renewal projects and
created thriving new communities across Australia. In FY19, the resilience of our business, together
with the trust in our quality brand, has safeguarded us against the full impact of the residential
downturn. With a robust pipeline of approximately 28,000 lots, we are well positioned for
future growth and remain committed to creating places people are proud to call home.
MIRVAC GROUP ANNUAL REPORT 2019 25
Residential Snapshot
FY19
27,992
Number of pipeline lots
2,611
Number of lots settled
$1.7bn
Pre-sales secured
27%
Residential gross margin
12.6%
Residential return on invested capital
FY18
FY17
27,406
29,186
3,400
3,311
$2.2bn
$2.7bn
25.4%
25%
18.1%
18%
Gainsborough Greens, Queensland
Mirvac is well known for its legacy projects
and this year saw the delivery of a raft of
these across the country. With the arrival of
these new, high-quality homes and thriving,
connected communities, we have continued
to set new benchmarks in design excellence,
placemaking and sustainability.
The Eastbourne is one such project. This
$460 million development in East Melbourne
features 258 apartments, including a 500 square
metre penthouse with a 300 square metre
terrace and 25-metre lap pool, with unparalleled
views of Fitzroy Gardens, Melbourne CBD and
beyond. Providing new levels of extraordinary
sophistication and elegance, this landmark
building has redefined luxury residential
living in Australia.
Marrick & Co in Sydney is another project
that has reimagined the way we live. The
new community underscores our absolute
commitment to sustainability, as the first
large-scale project in Australia to achieve
a One Planet Living accreditation. One Planet
Living is a framework developed by Bioregional
Australia, which encourages people to live
comfortably within the earth’s resources.
To achieve this, our team has introduced
a range of social and environmental initiatives
to ensure the buildings and the people living,
working and visiting them, are kinder to
the environment.
Brighton Lakes, Sydney
Mirvac Design strengthened its reputation as
one of Australia’s leading architectural practices,
taking out three wins and a commendation
at the 2019 NSW Australian Institute of
Architecture Awards. Harold Park in Sydney
won both the prestigious Lloyd Rees Award
for Urban Design and the Lord Mayor’s Award,
which recognised the significant achievements
of Mirvac Design in transforming the former
paceway into a fantastic place to live and
visit. My Ideal House by Mirvac Design, in
collaboration with Madeleine Blanchfield, won
the award for Sustainable Architecture, and
Moreton Manor in Bondi, Sydney received
a Commendation in the Residential (alterations
and additions) category. With all of our projects,
we believe we have a responsibility to make
a positive contribution to the urban environment.
These awards, reflecting the judgment of peers
and customers, recognised our ability to deliver
on this responsibility.
Looking to the future, our robust residential
development pipeline has the potential
to deliver many more legacy projects.
At 505 George Street, Sydney, our proposed
landmark tower has already started to win
awards for its concept design and at Wantirna
South, Victoria, we’re planning to transform
a 171-hectare disused quarry into an exceptional
new community with idyllic parkland surrounds.
These future projects provide more exciting
opportunities for our team to continue to
utilise their experience and passion to deliver
on our purpose to reimagine urban life.
The ability to deliver progressive developments
of this calibre, that pioneer new thinking, is
underpinned by our wealth of experience at
the forefront of the industry, together with
our unique end-to-end capability. We have
finely honed our approach to planning, design
and construction over 47 years. We continue
to put our customers first and our thorough
understanding of how they live enables
us to create homes and communities that
support and enhance their lifestyles. At our
masterplanned communities, we prioritise
the delivery of key amenity such as schools,
retail offerings, parklands, sports facilities
and community centres, laying the foundations
for strong resilient communities from the
outset. This physical social infrastructure
is also complemented by social networks
we foster that develop new communities,
enabling them to thrive long after the
construction teams have left.
It’s encouraging to see our projects continue
to receive recognition from our industry peers
and the public. With over 600 industry awards
won since our inception in 1972, Mirvac added
several more prestigious accolades during
this financial year.
Our Brighton Lakes masterplanned community
at Moorebank in Sydney won the UDIA
NSW’s Award for Excellence in Greenfield
Development and was commended for
its “trifecta of innovation, community and
stakeholder engagement, and masterful
planning and design”. Ovo, our landmark
residential tower at Green Square, Sydney
developed with Landcom, was celebrated
as an example of high density done well
winning the UDIA Excellence for High
Density Development Award 2018.
More than 600 industry
awards won since 1972.
26
Altona North, Melbourne
ALTONA NORTH
A PROJECT OF PURPOSE
Being a force for good is at the core of our
business. We’re committed to leaving a positive
legacy in the communities in which we operate,
and our new masterplanned community,
The Fabric at Altona North in Melbourne’s
inner-west, is a shining example of this.
HOMES FOR HOMES
As a property company, Mirvac recognises
the intrinsic value that having a home brings,
both in the physical sense and in the way that
it provides a sense of belonging and connection.
With this in mind, we were proud to announce
an innovative partnership during the financial
year which will see Mirvac direct 0.1 per cent
from the sale proceeds of every home at The
Fabric at Altona North, to Homes for Homes.
Homes for Homes is a funding model from
social enterprise, The Big Issue, that aims to
increase the supply of social and affordable
housing in Victoria. The fund they have
established is administered by experts
in each state who direct the investments
to the people who are most in need.
As well as making the initial 0.1 per cent
donation, Mirvac will facilitate a caveat
on the home titles that will see a further
0.1 per cent directed to the Homes for Homes
fund whenever the properties are sold in
the future. A property sold at Altona North
for $700,000, for example, would reflect
a donation of $700, which when multiplied
for future sales has a significant impact.
By working with organisations like Homes
for Homes, we can make a tangible difference
in the community.
The team at Altona North has been passionately
pursuing new and exciting ways to enhance our
community connections in the area, while
having a positive environmental impact.
ZERO ENERGY DESIGN HOMES
It’s not just social value we’re delivering at
Altona North; we’re innovating when it comes
to environmental sustainability too, with a
7 Star NatHERS rating being targeted across
the entire project, above Victoria’s standard
6 Star NatHERS. This will see every home built
with thicker walls, increased insulation and
high-performing double glazing to improve
overall thermal performance, reducing the need
for heating and cooling and providing economic
and environmental benefits for residents.
In addition to this, the team at The Fabric is
working with the Australian Renewable Energy
National Agency (ARENA) on an arrangement
for Stage 1 that will take environmental
performance at the project to the next level.
The initiative is expected to involve a funding
agreement in which ARENA will contribute
towards the incremental capital cost required
to implement zero energy design homes
across Stage 1. These homes will include:
> a solar PV and battery system;
> performance double glazing;
> efficient reverse cycle air-conditioning;
> heat pump hot water system;
> energy-efficient appliances;
> an EV charging station;
> LED lighting throughout; and
>
real-time energy monitoring to identify
which areas are consuming the most power.
The trial, which will be rolled out to all homes
within Stage 1, is another exciting step in
improving our sustainability offering for our
residential customers, while helping them
to reduce their energy bills. We believe that
if we build better and more sustainable
homes, we can influence positive and lasting
behavioural change.
MIRVAC GROUP ANNUAL REPORT 2019 A SMART SOLAR SOLUTION WITH ALLUME
In 2018, the team connected with an Australian
start-up called Allume, who, through its
unique solar distribution technology called
SOLSHARE, is making solar more affordable
and more accessible for multi-metered buildings.
SOLSHARE works within the building’s existing
metering infrastructure to allow solar to be
distributed and billed to individual apartments.
Effectively working ‘behind the meter’, it requires
no changes to existing infrastructure which
makes installation more affordable and there
are no constraints on the residents’ choices
of energy retailer. The system has also been
designed to optimise energy use, sending solar
to residents at times during the day that will
save them the most money. We have also taken
the opportunity to use our purchasing power
as a force for good by ensuring that the first
installation will be done by Bunjil Energy,
an indigenous owned company.
Innovation and sustainability are key to how
we do business at Mirvac, and in FY19, our
innovation team, Hatch, launched an exciting
new sustainability initiative aimed at reducing
our customers’ energy bills and their carbon
emissions at the same time.
Recognising the impact rising energy prices
are having on Australian households, and with
the demand for solar energy ever increasing,
the team embarked on a mission to incorporate
renewable energy at our apartment projects –
an asset class where it has traditionally been
more challenging to install renewable energy
for a number of reasons, such as the smaller
roof space available and the way energy is
distributed to residents.
Mirvac first started researching solar energy
for its apartments in 2017, which led to the
trial of smart energy systems at two of our
apartment projects – Ascot House in Brisbane
and Marrick & Co. in Sydney. Following these
trials, as well as experiments with an eco-
concierge at the Forge tower at Yarra’s Edge
in Melbourne and The Moreton in Sydney,
it became clear that many of our customers
want solar and are prepared to pay for it.
27
With the number of apartment dwellers looking
for a solar energy solution increasing – in both
Australia and around the globe – it’s a technology
that’s ripe with potential; so much so that Mirvac
has invested in and taken a minority interest in
Allume in order to further accelerate bringing
the product to market. As well as providing the
Group with a potential future revenue stream,
the overall commitment to the SOLSHARE
technology gives Mirvac a strong competitive
advantage when it comes to its sustainability
offering at its residential developments. The first
project to trial SOLSHARE will be Folia at our
Apartments of Tullamore precinct in Melbourne,
VIC, where 39 prestige apartments will benefit
from this ground-breaking technology.
It’s also an initiative that sees Mirvac fulfil
its commitment to offer renewable energy to
all of our residential customers, a strategic
goal under our This Changes Everything
sustainability strategy leading to us:
deliver savings on energy bills
drive positive customer behaviour
reduce carbon emissions
We continue to explore new ways of enhancing the sustainability of
our residential communities – a great example of Mirvac’s bold approach
to designing and developing progressive projects for the future.
Stuart Penklis, Head of Residential
Gledswood Hills, Sydney
28
The Zimmerman family
HOUSE WITH NO BILLS
MEASURING OUR SOCIAL IMPACT
Mirvac’s industry-leading experiment,
House with No Bills, was launched in 2017
and a family of four, the Zimmermans, were
selected to move in – rent free - as part of
the study in June 2018.
Mirvac’s intent for House with No Bills was
to design and build an energy-efficient home
that would reduce a family’s energy bills,
as well as their carbon footprint. To achieve
this, the house has been built with increased
roof insulation, solar PV panels and battery
installation, LED lighting throughout, energy-
efficient appliances and intelligent controls.
Smart metering and monitoring systems have
also helped to keep track of where and how
energy is being used, which has assisted the
family to adapt and make behavioural changes.
A key goal for the family, in particular, has
been learning how to optimise their solar
energy consumption.
In the first three months of the experiment,
the house was using more energy than was
modelled for a typical family of four. As well as
building systems that needed to be fine-tuned,
there were unexpected usage patterns due
to Mr and Mrs Zimmerman’s shift work.
Mirvac and Curtin University worked with the
family to recommend small changes, leading
to a marked improvement in energy usage.
In fact, in a number of months that followed
these changes the house generated more solar
energy than it consumed, effectively performing
as a net positive house. In April this year, for
example, 105 per cent of the home’s electricity
was generated through solar energy, with the
excess energy exported to the electricity grid.
Having gained rich insights into the way
our customers consume energy, and a better
understanding of the information our future
customers will need to reduce energy bills,
we have now extended the House with No Bills
project until December 2019, helping the
Zimmerman family to continue to save for
a deposit for their first home in the process.
Our hope is that our learnings from the House
with No Bills project will inform future design
and help create more affordable, energy-
efficient communities across Australia.
As a company that has a direct and lasting
impact on the built environment, we’re
committed to helping to create communities
that are sustainable and resilient – places
where people feel healthy, happy, connected
and safe, particularly as our cities continue to
urbanise and grow at a rapid pace.
We recognise that in addition to providing
the infrastructure and amenity that ensures
we help build thriving communities with
strong bonds, it’s important to measure and
understand our impact so that we can be more
strategic in how we design and deliver new
projects in the future.
In 2015, we worked with KPMG to develop
a Social Return on Investment (SROI) framework
and tool that would help us to quantify the
social value we were creating in our residential
projects. We wanted to clearly understand
the impact of including features such as open
spaces and quality landscaping, community
programs and events, walkability, playgrounds,
parks and sporting facilities, and well lit areas. In
FY19 we analysed twenty-seven of our existing
projects using a combination of project data and
data collected from residential customer surveys.
The research found that:
> by improving the sense of safety through
the creation of open spaces, enhanced
connectivity and engagement activities,
it was estimated that Mirvac created
$10 million in social value through
a reduction in costs related to crime,
such as loss of property, medical expenses,
prevention and law enforcement costs;
similarly, by having communities that
promote physical activity (through quality
open spaces, walkability, and bicycle paths)
approximately $468,000 of value was
created in reduced healthcare costs and
reductions in lost productivity; and
in terms of our wider economic impact,
we created or are forecast to create over
5,200 jobs throughout the construction
period (ranging from between 18 to 500 jobs
per site). This equates to around $2 billion
in salaries and wages paid, a significant
contribution to the Australian economy.
>
>
Overall, the SROI study estimated that for every
dollar Mirvac invested across the 27 residential
projects, $1.79 of social and economic value was
created for local communities. Our first attempt
to measure our SROI showed us that the
process and methodology were far from perfect,
but we have learned from the experience. We
realised that trying to measure too many inputs
across a large number of projects, or measure
outputs where data wasn’t readily available,
created a reporting burden for our development
managers and consequently this hindered the
capture of consistent or complete data from
across each project. Having broad baseline data
also meant that our findings were somewhat
oversimplified, and we learned that attributing
a value to an outcome is not an easy thing to do.
In the next iteration of measuring social impact,
to commence in FY20, we will take these
learnings and look at measuring fewer areas
with a higher level of confidence across fewer
projects, while aligning it with our emerging
social purpose – to build strong community
bonds. We recognise that SROI is an imperfect
science, but we remain strongly committed
to better understanding our social impact and
being part of the growing capability in this area.
We believe its measurement will be invaluable
in helping to guide how we invest in our
residential projects in the future.
MIRVAC GROUP ANNUAL REPORT 2019 BUILD-TO-RENT
Long established in Europe, the US and
Japan, the emergence of the build-to-rent
(BTR) sector is gathering pace in Australia,
in response to a lack of housing affordability,
as well as demographic and lifestyle change.
BTR describes a market in which institutional
investors provide substantial rental stock into
the market. It offers a higher level of tenure
security as well as a greater degree
of amenity for tenants.
We see build-to-rent as a crucial
step towards giving renters control
and peace of mind. It will enable
us to cater to customers at every
stage of their journey – from renter
to purchaser – whether they are
renting as a lifestyle choice or while
they are saving for their own home.
Susan Lloyd-Hurwitz,
Mirvac’s CEO & Managing Director
We are proud to be at the forefront of this
new sector, having launched the Australian
Build-to-Rent Club with the Clean Energy
Finance Corporation in July 2018. Construction
is progressing well on our first purpose-built
BTR apartment buildings at Pavilions, Sydney
Olympic Park, which is expected to complete
in mid-2020.
In June 2019, we extended our interests in the
sector into Melbourne with the confirmation of
our second BTR project, which is pictured below.
Mirvac sees huge potential for the sector,
and it is an important growth area for our
business. But we recognise that a strong,
thriving BTR sector won’t just deliver economic
and financial benefits. Revolutionising the rental
sector in Australia will also deliver significant
social benefits for hundreds of thousands of
renters, giving them access to high-quality,
well maintained rental property, with secure
tenures, and a sense of stability, as well as
improved customer service. We believe this
will have a positive and lasting impact on
the mental, physical and financial wellbeing
of a significant segment of the Australian
population, and we look forward to extending
our interests in BTR further in FY20.
29
MELBOURNE BACKS BTR
In June 2019, we entered into an agreement
with developer PDG to deliver 490 purpose-built,
BTR apartments as part of the $450 million
Munro development in Melbourne’s CBD.
The Munro development is a key project
within the City of Melbourne’s $250 million
renewal of the Queen Victoria Market precinct.
PDG was appointed by the City of Melbourne
to develop the Munro precinct and the company
will develop the BTR project as part of the final
stage of the precinct, commencing later this
year, as well as a hotel and fine-grain retail.
As one of Melbourne’s first BTR projects,
Mirvac and PDG’s plans to deliver BTR
apartments within this new precinct was
welcomed by the Lord Mayor of Melbourne,
Sally Capp, who said the proposal would
provide vital long-term rental accommodation
in an area of the city that is expected to
grow by 22,000 people by 2040.
Under our new brand of LIV | Mirvac,
we are developing our BTR operating
platform, which is set to revolutionise
the renting sector in Australia through
a combination of on-site management,
technology and design.
In order to maximise operational
efficiencies across the portfolio, we are
working to upscale by drawing on our
existing land bank and proven new
business capability.
Over the long-term we see the
potential to grow our BTR portfolio
to 5,000 apartments, funded through
a combination of our balance sheet
and third party capital.
Munro project (artist impression)
The provision of high-quality accommodation in the Munro development will make a significant
contribution to the revitalisation of the growing City North precinct. Offering more diverse and
affordable housing options is important for our city’s liveability. We hope to see more build-to-rent
projects considered in the future as a way to help meet the needs of our growing population.
Sally Capp, The Lord Mayor of Melbourne
30
MIRVAC GROUP
ANNUAL REPORT 2019
OUR PEOPLE
At Mirvac, we believe our high-performing
and talented workforce is fundamental to our
success, helping us to execute our strategy
and deliver value to our customers, partners
and securityholders. We know that when we
invest in our people and provide them with
the right tools, technology and environment
to do their jobs effectively – while ensuring
they have flexibility in the way they manage
work and life – we’re enabling them to do
their best work and deliver our strong
financial and operational performance.
We also believe that our unique and vibrant
culture is a key competitive advantage, allowing
us to attract and retain top talent and ensure
that we have the right people in the right roles.
At a time when institutional trust in Australia
has been fractured, our culture – underpinned
by our purpose and an ambition to be a force
for good – continues to set us apart. Having
a strong culture is also important for the
delivery of our strategy and current business
activities, and likewise, means we are resilient
and well placed to adapt to market changes.
Each year, we seek feedback from our people
on their experience of working at Mirvac.
It gives us an opportunity to hear from our
employees about what they think we’re doing
well, and equally, to provide feedback on the
things we need to improve. As part of the
survey, we measure employee engagement,
which indicates how willing our people are
to go above and beyond to support Mirvac’s
success. Last year, we achieved a high employee
engagement score of 90 per cent, and we were
extremely pleased to maintain this in FY19 1.
Our score places us well above the industry
and Australian norms, and above the global
high-performing norm.
It’s been great to see from the results that
our people continue to understand and believe
in our purpose and strategy, and that they’re
proud of the projects and services we’re
delivering for our customers. In addition to this,
our people tell us that they value working for
a company that is a leader in health and safety,
sustainability, diversity and inclusion, people
leadership and flexibility.
They value initiatives such as My Simple
Thing, through which we encourage all of our
employees to adopt some form of flexibility
into their working week, day or month and to
be open about it with their teams. Another
successful people-focussed initiative is our
health and safety program, Thrive, which is
aimed at both the physical and mental wellness
of our people. This year we relaunched our
recognition program Mirvac Stars which
acknowledges the people going above and
beyond in their roles; and our mentoring
and leadership programs, which are aimed
at developing our workforce capability.
Engagement really starts with a strong
relationship between an employee and their
immediate manager and so we are committed
to ensuring we have capable managers,
focused on the right things.
We continue to offer our employees an industry-
leading 20 weeks of paid parental leave for the
primary carer and four weeks of paid parental
leave for partners. Importantly, we also now pay
superannuation on all paid and unpaid leave so
that parents who take time out of the workforce
to raise a family are not disadvantaged in
building wealth for retirement.
We want to remain an attractive place to work,
and we want to continue to provide a workplace
environment where our people are inspired to
do their best.
PEOPLE
HIGHLIGHTS IN FY19
employee
engagement
90%
97%
of our people said they are willing to work
beyond what is required of them to help
Mirvac to succeed
95%
of our people believe Mirvac
is socially and environmentally
responsible and has a positive
impact on the community
94%
of our people believe Mirvac
supports diversity in the workplace
89%
of our people understand
the risks in our business,
are comfortable raising
issues and know who to
report the issues to
75%
of our people have some
form of a flexible work
arrangement in place
OUR GUIDING PRINCIPLES
We’re extremely proud of the culture we have created at Mirvac. Underpinning this strong culture are our values,
which govern the way we work with each other, with our customers and with our partners. They are:
WE PUT
PEOPLE FIRST
This means that we listen to, understand
and respond to our customers and treat
all people with respect.
WE ARE PASSIONATE
ABOUT QUALITY & LEGACY
We strive to deliver enduring customer-focused
quality which leaves a positive legacy in the
communities in which we operate.
WE
COLLABORATE
We build trust and collaborate across the
business, as well as with our partners.
WE ARE
CURIOUS & BOLD
We ask what’s possible and we deliver
on our purpose with confidence.
WE ARE GENUINE &
DO THE RIGHT THING
Being down to earth, taking ownership
and doing what we say we’ll do is key
to our success.
HOW WE
WORK MATTERS
How we work is our differentiator and we
strive to be leaders in safety, sustainability,
innovation, inclusion and learning.
It’s been great to hear from our people that our values resonate with them, that they see the values demonstrated at Mirvac,
and that they feel our values reflect the qualities and behaviours that will help us to deliver on our strategy and purpose.
1. Mirvac measures its employee engagement through Willis Towers Watson.
2. Compared to FY18.
31
STRONG SUCCESSION
PIPELINES AT
PEOPLE
LEADERSHIP INDEX
75%
(above 70% target)
83%
(above 80% target)
RETENTION OF
KEY TALENT
96%
(above 90% target)
RETURN TO WORK
FROM PARENTAL LEAVE
INCREASE IN MEN TAKING
PARENTAL LEAVE 2
91%
32%
WOMEN IN
SENIOR ROLES
43%
(40:40:20 target)
32
SAFETY
The safety and wellbeing of our people are
our number one priority at Mirvac, and our
HSE strategy, Thrive, which is now in its second
year, sets out the practices and behaviours
that we believe will keep our workforce
healthy and safe.
In FY19, we broadened our focus and metrics
around safety to include a critical incident
frequency rate (CIFR), which enables us to
identify and examine critical incidents and
near misses, and drive systemic change that
strengthens our HSE practices. In doing so,
we can further establish a safety culture that
works towards preventing injury rather than
reacting to it. Our CIFR in FY19 was 0.91 and
we reduced our lost time injury frequency rate
again this year to 1.02, another record low.
We’ve also begun to embrace new technology
platforms and leverage our analytics capability
within the HSE function. During the financial
year, our HSE and Business Intelligence teams
worked together to develop a tool that can
track the frequency of safety incidents that
have occurred across the Group, and potentially
predict when and where they are likely to
happen again. For example, a pilot tool looked
at how weather patterns influenced the number
of safety incidents – such as slips, trips and
falls – at our retail centres and construction
sites, and was such a success that Mirvac is
now looking at how it can apply the tool
across the business.
INDICATOR
We were also pleased to obtain accreditation
for our Construction Business from the Office
of the Federal Safety Commissioner during the
financial year, which both strengthens our safety
capability and enables stronger government
partnerships. To receive accreditation, the team
undertook a thorough review of our safety
management system to ensure all documents
contained the right information and were easy
to read and understand, and apply on site.
As well as providing our people with a safe
place to work, the health and wellbeing of
our people are of the utmost importance
and we believe we have a duty to support our
people with their physical and mental health.
Statistics show that in any one year, one million
Australians are affected by depression and
twice as many are affected by anxiety 1. The
construction industry, in particular, reports
a high incidence of mental health issues.
Through Thrive, we’ve launched a number
of initiatives aimed at promoting positive
mental wellbeing, including free access to
a meditation app, mindfulness seminars,
meditation classes, and free Pilates and yoga
classes at various locations around the country.
We also continued to encourage active lifestyles
for our employees, running ‘Steptember’ in
September last year – through which we raised
$47,000 for the Cerebral Palsy Alliance – and
holding sessions on the benefits of sleeping
well and nutrition.
fall prevention
site establishment & logistics
In July last year, and following a review of
our Health and Safety Management System,
we released eight critical focus areas for safety
at Mirvac. These critical focus areas have been
identified as being the high-risk activities most
relevant to our operations. They comprise:
>
>
> civil works & groundworks
> cranes & materials handling
> electrical safety
> worker health & welfare
> emergency procedures
>
sustainability & environment
Mirvac prescribes a set of minimum
requirements for the management of each
of our critical risks, which are known as the
Mirvac Minimum Requirements (MMRs).
GLEN O’NEILL (1975-2019)
Group General Manager, HSE & Construction Legal
Earlier this year we were saddened by the sudden passing of our colleague,
Glen O’Neill. Glen was a brilliant lawyer, respected colleague, much loved friend
and dedicated family man. His leadership of the HSE function at Mirvac led to
a marked improvement in our understanding and provision of safety at Mirvac.
We recognise his significant contribution to our business. He is deeply missed.
HSE Leader
Actions
LTIFR 2
Timely
Reporting
Workers
Compensation
claim count
2017
Training
Fatalities
CIFR
134% 2.6 14.3hrs 22
99.9% 0
2018
211% 1.3
21hrs
22
99.7% 0
2019
200% 1.02 14hrs
20 93.0% 0
TARGET
100% <2 <24hrs n/a 98.0% 0
—
—
0.91
<1.5
Our HSE management systems within construction continued to be certified to ISO 14001, OHSAS 18001, and AS/NZS 4801. Limited assurance has been
provided by Pricewaterhouse Coopers. Data sets that have been assured are marked with a
1. https://www.beyondblue.org.au/the-facts
2. Service providers and employees.
. For further information visit mirvac.com/sustainability.
HSE STATISTICS IN FY19MIRVAC GROUP ANNUAL REPORT 2019 33
OUR WORKFORCE AT A GLANCE
Board representation
Paid parental leave policy
50 : 50
20 weeks
Primary
carer
4 weeks
Non-primary
carer
43%
Female
representation in
senior management
Gender split
43% 57%
Ethnicities
Languages
>25 >33
Headcount
1,540
Employees
by location
59
WA
126
QLD
1,096
NSW
259
VIC
34
DIVERSITY AND INCLUSION
Having a diverse and inclusive culture, where our people feel supported and encouraged
to speak up, is essential for our business. Having breadth of diversity across age, gender
and culture leads to better engagement and brand perception, higher levels of employee
retention and more creative and innovative solutions to business issues.
Our Diversity & Inclusion strategy has
a focus on gender balance, and the work
we have done to improve gender equality
across the Group – such as our industry-
leading shared care parental leave policy
and gender pay parity – is now considered
business as usual.
We continue to be recognised externally for
our gender equality focus during the financial
year, receiving the Workplace Gender Equality
Agency (WGEA) Employer of Choice citation
for the fifth consecutive year, and ranking as
the 31st best company for gender equality
globally in Equileap’s Global Top 200 , as well
as the sixth best company in Australia. Direct
Advice for Dads and Core Data also identified
Mirvac as a leading Australian employer for
fathers for the second year in a row.
In addition to this, our commitment to
embedding diversity and gender equality
at Mirvac was recognised at the Australian
Human Resources Institute Awards in
November last year when Susan Lloyd-Hurwitz
was presented with the CEO Diversity
Champion Award.
As well as gender diversity, we believe
cultural diversity is important to ensure
diversity of thought. We became a signatory
to CareerSeekers’ Article 23 Program which
has formalised our commitment to employing
newly arrived refugees via CareerSeekers’
intern program.
CareerSeekers is a not-for-profit social enterprise that helps to create employment
opportunities for people seeking asylum and refugees who are either studying
or looking to re-establish their careers in Australia. Participants undertake a paid
internship over 12 weeks, which provides them with local experience and a local
reference, while helping them establish a network within their chosen profession.
Mirvac has supported three CareerSeekers over the past three years. Ayad Yousif
is one of them. Ayad came to Australia in 2016 on a humanitarian visa. Having
worked as a civil engineer in Iraq, Ayad heard about CareerSeekers through
a friend and decided to get in touch.
CareerSeekers gave Ayad lessons on how to adapt to Australia’s workplace
environment, understand Australian culture and improve his communication skills.
He was also able to practice interviewing through a series of mock interviews –
a process he says is completely different in Iraq.
Through CareerSeekers, Mirvac employed Ayad on a three-month internship in July
2017. By December that year he was made a permanent employee and now works
as a Post-Completion Coordinator in Mirvac’s residential business in Melbourne
(Ayad also completed a Diploma in Building & Construction during that time).
“CareerSeekers helped to build my confidence and has given me the opportunity to
live a good lifestyle in Australia, working with a respected and well-known company,”
Ayad said.
Ayad’s placement through CareerSeekers is good for Mirvac too.
“Working with CareerSeekers helps us to create a more diverse and inclusive culture,
which has a number of positive flow-on effects for our business. This includes higher
levels of employee engagement, increased innovation and a wider range of skills.”
Chris Akayan, Mirvac’s Head of Culture & Reputation
Ayad Yousif
MIRVAC GROUP ANNUAL REPORT 2019 35
INNOVATION
Innovation is instrumental to Mirvac’s
continued future success and our Hatch
team progressed with a number of innovative
projects across the Group in FY19.
We introduced our urban farm concept,
Cultivate, at 275 Kent Street, Sydney for
our anchor tenants, Westpac; opened our
co-working hub, The Third Space, at Orion
Shopping Town Centre in QLD; and trialled
a pet concierge at Green Square in Zetland,
Sydney, which we ran in partnership with
the RSPCA.
This year, Hatch, together with Mirvac
Ventures, embarked on one of the most
exciting innovations yet – a technology that
uses artificial intelligence and data analytics to
automate construction processes on site. The
technology is expected to significantly reduce
time spent on monitoring construction progress,
freeing our employees to spend more time on
high-value work. Early testing has shown that
the automation could result in a 10 per cent
efficiency gain to the top 10 site-based
personnel – and this is just the beginning.
The technology has now helped to launch its
own start-up company, and Mirvac has such
a high level of confidence in the technology
that it has participated in funding its growth.
It’s just another way Mirvac is using technology
and innovation to be at the forefront of change
in our industry.
Cultivate
HELPING PEOPLE WHO HAVE EXPERIENCED DOMESTIC VIOLENCE
MIRVAC VENTURES
Last year, Mirvac proudly became a White
Ribbon accredited organisation in recognition
of the steps we’ve taken (and continue to
take) to stop violence against women, and
the support we offer to those affected by it.
This includes offering employees affected
by domestic violence 10 days of paid leave,
as well as financial assistance and access
to specialist service through our Employee
Assistance Program.
Our support went a step further this
financial year, with the delivery of a bridging
accommodation facility to provide a safe, stable
and comfortable environment for women with
children exiting domestic violence situations.
Mirvac and property developers, Halcyon,
along with not-for-profit organisation,
DV Connect, have collaborated on building
the facility, which, once complete, will comprise
a mix of one-, two-, and three-bedroom units
each with their own kitchenette, living area
and courtyard. It’s intended to provide those
leaving violent domestic situations with a safe
place, giving them the opportunity to plan
for the future, and, where relevant, re-enter
the workplace with confidence.
In 2018 alone, DV Connect placed 4,000
women and children in Queensland motels
because all other shelters were at capacity.
“Domestic violence is a serious,
prevalent and preventable
issue in Australia”, said
Mirvac’s Co-Head of Human
Resources, Kristen Sweeney.
“Working with Halcyon and
DVConnect to support families
experiencing domestic violence is
another example of how Mirvac
can help to make a real difference
and play an important role
in a community response.”
DV Connect is funded largely by the
Queensland Department of Child Safety,
Youth and Women and is the only state-
wide telephone service offering a free crisis
hotline for anyone affected by domestic
or family violence.
Mirvac Ventures is our new internal corporate
venture funding platform, which was created
in response to the increasingly competitive
business landscape and to fund investment
opportunities provided by technological
advancement. Mirvac Ventures has been
seeded with an initial allocation of $10 million
and will serve to enhance our core business by
allocating funding to all forms of innovation that
create a sustainable competitive advantage.
With Mirvac’s market-leading reputation
for delivering quality products, we wish to
maintain our edge and our ability to be agile
and innovative. Mirvac Ventures aims to invest
in early stage companies that deliver mutually
beneficial value, augment or improve our core
business, drive our strategy and enhance
our ability to put customers at the centre
of everything we do.
Along with the construction tech start-up
as worked on with Hatch, Mirvac Ventures
is currently pursuing key investment themes
focused on renewable energy, agtech, property
data management and the fractionalisation
of real estate assets.
MIRVAC IS PROUDLY A WHITE RIBBON WORKPLACE. WE PROMOTE RESPECTFUL
RELATIONSHIPS AND GENDER EQUALITY WITHIN THE WORKPLACE AND
DEMONSTRATE A CULTURE OF ZERO TOLERANCE OF VIOLENCE.
36
RISK MANAGEMENT
RISK GOVERNANCE
The Board has adopted a consolidated
risk management policy & framework which
incorporates governance, compliance, risk
appetite and business continuity management.
This approach is consistent with the Australian
and New Zealand standard on risk management
(ISO 31000:2009).
The Board determines the overall risk appetite
for the Group and has approved strategies,
policies and practices to ensure key risks are
identified and managed within the approved
risk appetite.
OUR PRINCIPAL STRATEGIC
RISKS AND OPPORTUNITIES
A number of the risks and opportunities Mirvac
faces in delivering its strategic plan are set
out in the below table. They are largely related
to our portfolio of assets and are typical of
a property group. These are not the only risks
associated with Mirvac. The risks are grouped
by theme rather than order of importance.
The Board has charged management with
the responsibility for managing risk across
the group and the implementation of mitigation
strategies under the direction of the CEO & MD
and supported by other senior executives.
The Group Risk function, led by the Head of Risk,
provides a centralised role in facilitating the risk
management framework, advising business units
on risk management plans and consolidating risk
reporting to senior executives, the ARCC and
ultimately the Board.
While we have a dedicated risk team, each area
of the business is ultimately accountable for
its specific risks, and we want to empower our
people to identify and mitigate these effectively.
An overview of the risk management policy &
framework is available on Mirvac’s website:
www.mirvac.com/about/corporate-governance
RISK AND OPPORTUNITY
HOW WE’RE ADDRESSING IT
INVESTMENT PERFORMANCE
Mirvac’s business is impacted by the value of
our property portfolio. This can be influenced
by many external aspects outside our direct
control, including the health of the economy
and the strength of the property market.
Mirvac partners with aligned investors to leverage capability and develop recurring income streams. Prudent
capital decisions are made on the basis of due diligence and market research to ensure investor confidence is
retained. We take steps to anticipate shifts in market conditions and to make strategic decisions in securing
development pipeline opportunities. Buying and selling at the right time in the property cycle has enabled us to
deliver sustainable returns to our securityholders for the past six years. When we approach new acquisitions, we are
mindful of the fundamentals needed to maintain growth through our sustainable urban-focused business model.
MACRO-ENVIRONMENT
Mirvac is impacted by changing domestic and
international economic and macro-prudential
and regulatory measures, which impact access to
capital, investor activity, and foreign investment.
Mirvac monitors a wide range of economic, property market and capital market indicators as well as uses
trend analysis to assess macro-economic changes, and is attentive to these shifts.
We are currently monitoring the following:
Office: Mirvac has one of the youngest office portfolios in Australia with a substantial overweight to Sydney and
Melbourne, Australia’s deepest and most attractive office markets for both tenants and investors. This ensures it is
well placed to capture demand from high-quality tenants. Mirvac monitors movements in both supply and demand
and has an internal strategic forecasting process to optimise leasing decisions. Having a young and modern office
portfolio also ensures Mirvac’s capital expenditure on its assets is expected to remain relatively lower than that
of our AREIT peers. In terms of office developments, the Group manages uncertainty around tenant demand in
a number of ways, such as substantially pre-letting development projects ahead of construction and by partially
selling down office developments to capital partners in advance of completion.
Industrial: Continued strength in investor demand for prime-grade industrial assets in key locations is resulting
in strong investor demand for quality assets in major markets like Sydney. In this environment Mirvac retains
a focus on creating new, high quality and well located assets, generating secure cash flow profiles. Mirvac
continues to focus on properties based on proximity to infrastructure, long lease terms and secure cash flow
profiles while also considering the rapid growth of e-commerce and renewed focus from tenants to speed up
supply chain fulfilment.
Retail: Mirvac continues to manage its retail portfolio effectively by leveraging its strategic partnerships,
experiential expertise and integrated capability. Mirvac is focused on continually refreshing its retail assets
(via refurbishment, redevelopment or tenant remixing) to adapt to changing market dynamics. This active
management has seen an increased weighting to more resilient and experiential categories such as food
and beverage, entertainment, services and non-retail. Furthermore, Mirvac maintains a focus on key urban
and metropolitan markets, which are economically resilient over the long term, ensuring the business is
well placed to meet the challenges and opportunities of the changing retail landscape.
Residential: Recent indicators reflect early signs of stabilisation in housing markets. Recent fiscal and monetary
stimulus measures, as well as changes to serviceability requirements, have positively impacted dwelling purchase
sentiment. In this environment, location, build quality and a deep understanding of customers remains key for
attracting demand. With stricter lending criteria, both domestically and offshore, concerns have been raised
over the ability of residential property purchasers to settle. Mirvac has a range of strategies in place and
carefully and proactively monitors its settlement risk profile, with a proven track record of low defaults.
REPUTATION
In an Australian context of low institutional trust,
Mirvac must maintain and enhance trust and
reputation to retain a social licence to operate.
Mirvac provides consistent, high-quality communication and transparent and responsible reporting. We have committed
to proactively sharing our progress as a business to help us earn and retain trust. We track trust and reputation through
stakeholder research and are pleased to see strong results.
We were ranked the number one ESG company in Australia by J.P. Morgan ESGQ in 2018. We provide good
earnings visibility, guidance and full disclosure to our securityholders so they can make informed choices.
Our strong Residential brand is leveraged to consistently attract substantial residential pre-sales,
delivering one of the highest levels of repeat buyers in the property industry.
MIRVAC GROUP ANNUAL REPORT 2019 37
SUPPLY CHAIN
With a broad range of suppliers providing
an equally diverse range of goods and services,
Mirvac’s stakeholders can be directly and
indirectly impacted by the practices of our
suppliers, and the materials they’re supplying.
PLANNING AND REGULATION
Mirvac’s activities can be affected by government
policies in many ways, from local decisions regarding
zoning and developments, right through to national
positions on immigration.
Historically, Mirvac has looked at supply chain risk on a project-by-project basis. Working groups have since been
developed group-wide to address key areas such as modern slavery, worker exploitation, material import risk,
high-risk materials, and cyber security. We are elevating our controls to identify and mitigate our exposure to
these risks and ensure full compliance to emerging legislation.
Mirvac’s stakeholder relations team works closely with the broad organisation to help coordinate proactive
and constructive engagements with all levels of government to ready our business to respond to changing
community expectations.
IMPACTS OF CLIMATE CHANGE
Climate change can not only affect our assets,
it can affect our business operations. It is vital
Mirvac responds to the implications of climate
change by implementing appropriate adaptation
and mitigation strategies for the portfolio, and
building resilience throughout the business.
Mirvac regularly assesses its portfolio for climate risk and resilience. We have reported under the Task Force on
Climate-related Financial Disclosure (TCFD) recommendations and climate risk is emerging as a consideration
in due diligence during the acquisition and development process. Mirvac strives to design developments and
major renovations to a high standard for green building and community certifications, as well as energy and water
performance ratings.
Mirvac recently released its plan to reach net positive carbon to help investors and other stakeholders understand how
we will meet this goal by 2030, and provide the metrics and milestones to track our progress. Renewable energy will be
an important part of achieving net positive with the added benefit of energy price stability for our portfolio.
CAPITAL MANAGEMENT
Maintaining a diversified capital structure to
support delivery of stable investor returns and
maintain access to equity and debt funding.
Mirvac has a capital management framework, approved and monitored by the Board. The framework
aims to address the market, credit and liquidity risks while also meeting the Group’s strategic objectives.
The Group seeks to maintain a minimum investment-grade credit rating of BBB+ to reduce the cost of capital
and diversify its sources of debt capital. The Group’s target gearing ratio is between 20 and 30 per cent.
HEALTH AND SAFETY
Maintaining the health, safety and wellbeing
of our people is our most important duty of
care obligation, and critical to Mirvac’s
ongoing success.
We continue to pursue safety excellence and to improve the overall wellbeing of our employees, suppliers,
our community and the environment.
During FY19, Mirvac launched a revised, modernised and simplified HSE Management System, establishing the
Mirvac Minimum Requirements (MMR) and standards for managing HSE at Mirvac to ensure we consistently
manage critical HSE risks across all parts of the business.
Mirvac Construction maintained certification for HSE (AS/NZS 4801:2001 OHS Management Systems, OHSAS
18001:2007 OHS management systems and AS/NZS ISO 14001:2004 – Environmental Management Systems).
Additionally, Mirvac Construction obtained accreditation in August 2018 under the Work Health and Safety
Accreditation Scheme administered by the Office of the Federal Safety Commissioner.
PEOPLE
We are mindful that we require a motivated,
high-performing, and capable workforce to
deliver business strategy and a desired culture.
Mirvac’s people strategy includes a range of initiatives designed to ensure we have the right culture and
capabilities so our people are engaged and enabled to deliver on our strategy. The Group has a range of
programs aimed at creating great leaders, growing and retaining key talent, and fostering a diverse and
inclusive workplace.
Mirvac has been defining, measuring and curating its desired culture for some time. We have clearly defined
values that align to our purpose to reimagine urban life and we measure our leaders on whether they demonstrate
supporting behaviours that underpin these values. We think it is critical that our people do the right thing,
a core Mirvac value, and that we have an environment where people feel ‘safe to speak up’, which in addition
to mitigating reputational and conduct risk, leads to better business outcomes.
Mirvac’s remuneration strategy is designed to attract the best talent, and motivate and retain individuals,
while aligning to the interests of executives, securityholders and community expectations.
Read more on Mirvac’s people initiatives on page 30.
TECHNOLOGICAL CHANGE
Technology is changing our world at
a rapid pace, and without high responsiveness,
companies are less able to innovate and
take advantage of new technologies.
A core element of Mirvac’s strategy is understanding and preparing for disruption and building a resilient
business. Some examples include:
>
continued exploration of new construction technology to drive better outcomes,
including pre-fabricated components;
embracement of technologies to further integrate sustainability across all business units,
such as solar and battery systems, and smart building management systems;
an innovation program to ensure we continue to innovate in a meaningful way. Our innovation team,
Hatch, performs business scans to understand and respond to disruptive technology; and
additional investment in resources for customer solutions and business systems.
>
>
>
DATA, SYSTEMS AND
BUSINESS DISRUPTION
(INCLUDING CYBER SECURITY)
It’s crucial we have the ability to manage a major
incident causing physical or information disruption
timely and efficiently. This includes cyber security
threats and/or breaches to our information systems
and/or damage to physical assets which could cause
significant damage to our business and reputation.
Mirvac has a business continuity management policy which identifies and addresses the key response actions,
systems and tools required to effectively manage and continue business critical processes during a business
impacting event. The Crisis and Incident Management Plan establishes clear accountabilities and first response
protocols based on a three-tiered incident severity rating system. The Disaster Recovery Plan specifies
an action plan for IT staff involved in the recovery of critical IT business systems following a disaster.
Mirvac is committed to protecting the organisation through maintaining the confidentiality, integrity
and availability of Mirvac information and information systems in a secure environment.
Mirvac has established a high standard for the management of all IT security incidents and to prevent
or mitigate the side effects of data-related security breach.
38
REIMAGINING URBAN LIFE, SUSTAINABLY
RESOURCES
REIMAGINED
ENRICHED
COMMUNITIES
TRANSPARENT
GOVERNANCE
CLIMATE
CHANGE
Net positive
(carbon)
2030
10MW renewable
energy installed
2023
NATURAL
RESOURCES
Net positive
(water)
Zero waste
to landfill
80% operational
waste recycled
Water intensity
reduced by 5% in
O&I and Retail
5MW renewable
energy installed
Carbon intensity
reduced by 5% in
O&I and Retail
2021
Water white paper
released1
Waste white paper
released
Water metering
and monitoring
installed
2020
Net positive
(carbon) white
paper released
2019
96% construction
waste recycled
OUR
COMMUNITY
SOCIAL
INCLUSION
OUR
PEOPLE
TRUSTED
PARTNER
Net positive
legacy
2030
$100m social
sector investment
Highly engaged,
capable and
diverse workforce
2030
Most trusted
owner and
developer
2025
$30m
social
procurement
by 2025
Community
wellbeing measure
developed
2023
Triple community
investment
2022
Social enterprise
capacity building
partnership
launched
40:40:20
women in senior
management
2022
Social housing
investment pilot
launched
House with No Bills
research findings
released
2020
Community
engagement
standard
developed
Social return on
investment report
released
2019
Unlimited paid
volunteer leave
Define social
procurement
20% improvement
in health and
wellbeing
2020
Data integrity
charter released
Personalised
health and
wellbeing support
implemented
2019
Modern slavery
risk heat map
released
Human Rights
approach released
ONGOING
ONGOING
ONGOING
Maintain Board
climate capability
New off ice buildings
4.5 Star NABERS Water
All (new) off ice
Gold WELL rated
New off ice buildings
NABERS 5.5 Star Energy
All new Residential
projects to include solar
1. Target extended from 2020.
Maintain global high
performing engagement
Maintain Risk Culture
Index performance
Understand and
share stakeholder
trust feedback
Clear earnings
visibility/guidance
Transparent
reporting
Maintain Board
diversity
MIRVAC GROUP ANNUAL REPORT 2019 39
SUSTAINABILITY
EVOLVING OUR APPROACH TO SUSTAINABILITY
Since Mirvac released its strategy, This Changes Everything, over five years ago, there has been a notable change in our approach to sustainability.
From the way we design and manage our assets to the new technologies we’re implementing across the Group, being environmentally and socially
responsible has become firmly embedded at Mirvac. As well as ensuring we’re delivering value to our securityholders, we’re continuously looking at
how we can reduce our impact on the planet, affect positive change in our communities and ensure that we remain a force for good.
We announced a refresh of This Changes Everything in June last year, taking our material issues from 19 to six. By doing so, we believe we can
focus on the things that matter most to Mirvac and our key stakeholders so we can make a bigger difference in these areas. These material
issues comprise climate change, natural resources, our communities, social inclusion, our people, and being a trusted partner.
Each of these material issues and their key milestones are outlined on page 38.
We also released our first Social Return on
Investment (SROI) report during the financial
year (see page 28), which outlines our findings
of an SROI analysis of 27 residential projects. As
our first attempt at measuring our social impact,
it wasn’t perfect, but we remain committed to
progressing our work in this area.
Another key achievement this year was
defining our social focus – to build strong
bonds – so we can better align the support
we provide through our community activities
and have a more meaningful impact. Our
unlimited paid volunteer leave provides
a great way for our employees to continue to
build strong bonds in the community, whether
those are physical, as our teams from across
Development, Design, Construction, Des+Pres
and Marketing showed with the work they did
for the Westmead Children’s Hospital, Sydney
(see page 41), or relational, such as working
with local communities.
During the financial year, we were also proud to
announce a partnership with social enterprise,
Homes for Homes (see page 26), which will
see 0.1 per cent of proceeds directed from the
sale of 300 homes to their fund in perpetuity,
helping to address the need for more social
and affordable housing in Victoria.
Some of the targets in our strategy are
now core to our business, such as our high-
performing and engaged workforce, 50 per
cent gender diversity on our Board, and the
transparent reporting of our business and
of our earnings.
There’s no doubt we still a have a lot of work to
do. Next year, we’ll release our plan around waste,
and change our energy supply arrangements to
take a big leap forward on renewable energy
and eliminating our carbon emissions.
We see great value in measuring our social
impact, and we’ll take the lessons we learned
from our first endeavour to progress our
work in this area.
We’re also going to develop a method to
measure a sense of belonging at our residential
communities so that we can work towards
tackling the growing epidemic of loneliness.
Having reached our community investment
target three years early, we’ll be looking to set
a new target which further demonstrates our
commitment to leave a positive legacy. We’ll
also continue to progress our target to direct
$100 million to the social sector, including
social procurement.
MOST RELEVANT SUSTAINABLE DEVELOPMENT GOALS
OUR PROGRESS TO DATE
We’ve made significant progress since we
released our refreshed sustainability strategy,
and it’s been pleasing to see our environmental
and social impact become a more fundamental
part of the choices we make.
One of our key achievements in FY19 was
the release of Planet Positive, our plan to reach
net positive carbon by 2030 (see page 40 for
more). Climate change is one of the biggest
risks businesses face, and eliminating our
carbon footprint is not only the right thing to
do for the planet and for future generations,
it’s critical to our long-term success.
Some of the key steps we’ll take to reimagine
our resources will be to continue to prioritise
energy efficiency and commit to renewable
energy. Our focused work to reduce our
impact has led to our portfolio being one of
the greenest in the country, with three 6 star
NABERS Energy ratings, constituting a quarter
of all 6 star NABERS Energy buildings.
In light of the significant risks posed by
climate change, we’ve also begun reporting
our climate risks and mitigations under the
Task Force on Climate-related Financial
Disclosures framework.
Recognising that there is now an increased
requirement from the community for business
to do better, and in line with our commitment to
leave a positive legacy, we’ve also defined our
community engagement standard, starting with
our Residential business. Local communities
and their representative governments are
critical stakeholders for us, and we aim to be
their most trusted development partner. Setting
a high standard and a consistent approach to
how we engage ensures that we can continue
to help deliver communities that flourish.
Investing in our communities is also a priority
at Mirvac, and right across the Group we see
people making choices that combine good
commercial outcomes with genuine social
contributions. Last year, we set a target to
triple our community investment by 2022
from our FY17 baseline, and in the first year
we increased this by 81 per cent. This year,
we exceeded our 2022 target early, with our
community investment increasing by more
than 800 per cent since FY17. This was driven
largely by our investments in upfront amenity
at our residential communities, such as
schools and parks.
40
MIRVAC GROUP
ANNUAL REPORT 2019
PLANET POSITIVE:
OUR PLAN TO REACH NET
POSITIVE CARBON BY 2030
Climate change is one of the greatest
challenges we face today, with the potential
to significantly impact our business, as well as
our planet, in a number of ways. Construction
delays, loss in productivity, rising material,
water and energy costs and damage to
property are just some of the climate-related
risks we face as weather events caused by
higher temperatures continue to become
more extreme.
The built environment is responsible for
approximately 25 per cent of Australia’s
carbon emissions and as a leading Australian
property group, we have a responsibility
to reduce our impact on the environment
and address climate change risks.
This year, we released Planet Positive: our
plan to reach net positive carbon by 2030.
It explains the strategies we’ll adopt to achieve
and exceed net zero within our portfolio by
2030, even as new developments come on
line and our business grows, making sure
that we balance environmental, social and
commercial sustainability requirements.
We’re mindful that as well as our responsibility
to the planet, we have a responsibility to make
choices that are cost-effective. Transitioning
to a lower carbon economy sooner rather than
later means we will be financially better off too.
Our strategy involves maximising energy
efficiency and building all-electric buildings
powered by 100 per cent renewable energy.
After all, we believe the cheapest tonne of
carbon for Mirvac and for the planet is the
one we don’t emit.
Emissions tCO2e
Scope 1
Natural Gas
Refrigerants
Diesel
Petrol
LPG
Total Scope 1
Scope
Electricity
Total Scope 1 + 2
Scope 3
Natural gas
Electricity
Travel
Waste
Diesel
Petrol
LPG
Total Scope 3
Total
Potable water usage (kL)
Retail
Office & Industrial
Total (kL)
Total waste (tonnes)
Construction
Investment
Total
Construction
Investment
FY13
2,697
1,383
2,333
646
7
7,066
71,426
78,492
471
12,542
2,812
9,915
178
51
1
25,970
104,462
492,216
349,597
841,813
35,565
12,833
48,398
FY18
4,007
1,513
1,154
101
54
6,828
73,772
80,600
582
9,555
3,304
8,017
59
5
3
21,525
102,125
485,976
453,826
939,802
23,393
25,685
49,078
FY19
FY19 Source data
81,816 GJ
496kg
507,506L
54,629L
52,087 L
95,242,179kWh
81,816GJ
87,118,091kWh
10,258,259km
48,551T
507,506L
54,629L
52,087L
4,193
843
1,375
130
81
6,623
78,041
84,664
639
8,962
2,982
10,164
71
7
5
22,829
107,493
493,605
488,577
982,182
21,377
27,173
48,551
96%
Recycled
69%
Recycled
4%
Landfill
31%
Landfill
Note: A minor error in Scope 3 Electricity emissions FY18 is corrected in this version. Emissions estimates follow
NGERS emissions accounting requirements except for refrigerants; Mirvac includes emissions related to R22 use.
As a result of our work to be net positive carbon, by 2030 and for
each year afterwards, the carbon we don’t emit will be equivalent to
planting 1.4 million trees and taking over 22,300 cars off the road.
Sarah Clarke, Group General Manager of Sustainability and Reputation
41
Mirvac team in Vietnam
CONCLUDING OUR FIRST
RECONCILIATION ACTION PLAN
Mirvac embarked on its first Reconciliation
Action Plan (RAP) in July 2017 and we are
proud of what that plan has helped us to
achieve. Our RAP has given us a platform
from which to build stronger relationships
with Indigenous Australians and create
greater respect and opportunities.
By listening and engaging with local partners,
we have developed some great working
relationships, such as our partnership with
Yerrabingin at our South Eveleigh development
which resulted in Australia’s first Indigenous
rooftop farm. Together we were able to
co-create an experience at the precinct
that will engage and connect the community
to Aboriginal culture and traditions, while
educating them on the history of the site.
Through cultural awareness education, we
have been able to begin providing our people
with the knowledge and experience to help
them consider the cultures of Aboriginal and
Torres Strait Islander people in the delivery
of our projects.
We have also learned a lot about how we can
do things differently in the future. We recognise
that our biggest opportunity for impact is
through procurement, and by directing our
buying power towards Indigenous owned
businesses. Since launching the RAP in July
2017, we have procured $8.2 million of goods
and services from Indigenous businesses,
and we know through our relationship with
Supply Nation that Indigenous businesses
are 100 times more likely to employ
Indigenous people.
In the coming months we will be developing
the next iteration of our RAP, and we will
continue to engage with the key stakeholders
to ensure this plan is reflective of their needs.
We look forward to launching this at the
beginning of 2020.
BUILDING STRONG BONDS
As a leading Australian property developer,
we recognise that we’re in a unique position
to have a positive impact – through the
way we build and manage our investment
assets, apartments and houses, as well as the
relationships we cultivate in our communities.
In FY19, we renewed our overall social focus
to build strong bonds. As well as allowing us
to have a much deeper and more meaningful
impact in the communities in which we work,
this also means we can provide opportunities
to those who don’t always get them and leave
a positive legacy.
Our Homes for Homes initiative (see page 26),
is just one way we’re building strong bonds
with the community – in this case, providing
funding to increase access to social and
affordable housing in Victoria.
Members of our leadership team took building
strong bonds to another level in May this year,
volunteering their time and raising money
to help build a home for a disadvantaged
family in Vietnam. Together with our strategic
partner, Boral, the team worked with Habitat for
Humanity over the course of a week, using their
unlimited volunteer leave to do so. While the
40-degree heat and 80 per cent humidity were
certainly no walk in the park, the group helped
to construct two-thirds of the home and raised
close to $130,000 in the process.
We also believe we can build strong bonds to
help combat loneliness in Australia. Research
by Swinburne University and the Australian
Psychological Society found that one in four
Australian adults are lonely, and that lonely
Australians have significantly worse mental
and physical health than those Australians
who felt connected.
At Mirvac, we have an opportunity to build
strong relational bonds through volunteering,
such as our annual National Community Day;
through the amenity we deliver at our sites
and by creating spaces that encourage
interaction; and through community events,
such as Mirvac’s Summer Festival that runs
across our residential projects each year.
Our Construction and Development teams
also continued to strengthen their bonds
with the Westmead Children’s Hospital in
Sydney during the financial year, helping to
refurbish the parents’ accommodation and
kids’ playground, as well as working with our
partners to deliver The Teddy Bear Clinic
at the Sydney Royal Easter Show. The Teddy
Bear Clinic was designed so that kids (and
adults) could experience for themselves some
of the aspects involved in being treated at the
hospital and received both the Gold and Best
in Show awards for the exhibit.
In the next financial year, we’ll continue to
progress our social focus of building strong
bonds in the activities we run across our
business, and we’ll look to develop a method
that measures a sense of belonging to help
avoid loneliness.
ENRICHING COMMUNITIES
$16,139,531
of community investment (including
$1,401,307 of management costs)
822%
$951,967
value of hours of support
$836,566
in kind donations
$728,218
leverage contributions
$12,949,691
cash donations
42
MIRVAC GROUP
ANNUAL REPORT 2019
Governance
CONTENTS
43
Board of directors
44
46 Directors’ report
Remuneration report
52
Auditor’s independence declaration
73
74
Financial report
122 Directors’ declaration
123
130 Security information
132 Glossary
133 Directory & upcoming events
Independent auditor’s report
44
Board of directors
Directors’ experience and areas of special responsibilities
THE MEMBERS OF THE MIRVAC BOARD AND THEIR QUALIFICATIONS, EXPERIENCE AND
RESPONSIBILITIES ARE SET OUT BELOW:
John Mulcahy
PhD (Civil Engineering),
FIEAust, MAICD
Independent
Non-Executive Chair
> Chair of the Nomination
Committee
> Member of the Audit, Risk
and Compliance Committee
> Member of the Human
Resources Committee
John Mulcahy was appointed
a Non-Executive Director of
Mirvac in November 2009
and the Independent Non-
Executive Chair in November
2013. John has more than 30
years of leadership experience
in financial services and
property investment. John is
the former Managing Director
and Chief Executive Officer
of Suncorp-Metway Limited.
Prior to joining Suncorp-
Metway, 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 is currently a Director
of ALS Limited (formerly
Campbell Brothers Limited)
(appointed February 2012),
Deputy Chair of GWA Group
Limited (appointed November
2010), Chair of ORIX Australia
Corporation Ltd and a
Director of Zurich Australian
Insurance Limited and The
Shore Foundation Limited.
John is a former Director
and Chair of Coffey
International Limited and
former Guardian of the Future
Fund Board of Guardians.
Susan Lloyd-Hurwitz
BA (Hons), MBA (Dist)
Christine Bartlett
BSc, MAICD
Peter Hawkins
BCA (Hons), FAICD, SFFin, ACA (NZ)
Jane Hewitt
BAppSc Land Economics
Independent Non-Executive
> Member of the Human
Resources Committee
Jane Hewitt was appointed
a Non-Executive Director of
Mirvac in December 2018.
Jane has over 27 years’
experience in real estate
development and asset
management. She founded
UniLodge in 1996 and
pioneered the corporatisation
and professional development
and management of student
accommodation facilities on
and off university campuses
in Australia and New Zealand.
As an entrepreneur and
founder, Jane has extensive
operational experience
and a strong track record
in developing successful
partnerships in real estate
and business ventures. She
developed UniLodge into
an operation with assets of
approximately $1 billion.
More recently, Jane has
worked with Social Ventures
Australia and currently
serves on a not-for-profit
board as Chair of the Beacon
Foundation. She is also a
founding member of the
Sydney Business Alliance to
End Homelessness.
Chief Executive Officer
& Managing Director –
Executive
Independent Non-Executive
> Member of the Audit, Risk
and Compliance Committee
Susan Lloyd-Hurwitz was
appointed Chief Executive
Officer & Managing Director
of Mirvac in August 2012
and an Executive Director
in November 2012.
Prior to this appointment,
Susan was Managing Director
at LaSalle Investment
Management. 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 industry for
over 29 years, with extensive
experience in investment
management in both the
direct and indirect markets,
development, mergers and
acquisitions, disposals,
research and business
strategy.
Susan is the Immediate Past
President of the Property
Council of Australia, Deputy
Chair of the Green Building
Council of Australia, a
member of the NSW Public
Service Commission Advisory
Board, President of INSEAD
Australasian Council and
a member of the INSEAD
Global Board.
Susan holds a Bachelor
of Arts (Hons) from The
University of Sydney and
an MBA (Distinction) from
INSEAD in France.
Christine Bartlett was
appointed a Non-Executive
Director of Mirvac in
December 2014. She is
currently a Director of GBST
Holdings Ltd (appointed June
2015 and appointed Deputy
Chair in January 2016), Sigma
Healthcare Limited (appointed
March 2016), TAL Life Limited
and Chair of The Smith Family.
She is also an external Director
of the Board of Clayton Utz
and a Director of iCare.
Christine is a member of the
UNSW Australian School of
Business Advisory Council
and the Australian Institute of
Company Directors. Previously,
she has been a Director of
PropertyLook and National
Nominees Limited and
Deputy Chair of the Australian
Custodial Services Association.
Christine is an experienced
Chief Executive Officer
and senior executive, with
extensive line management
experience gained through
roles with IBM, Jones
Lang LaSalle and National
Australia Bank Limited.
Her executive career has
included Australian, regional
and global responsibilities
based in Australia, the USA
and Japan. Christine brings
a commercial perspective
especially in the areas of
financial discipline, identifying
risk, complex project
management, execution of
strategy, fostering innovation
and taking advantage of new
emerging technologies.
Christine holds a Bachelor of
Science from the University
of Sydney and has completed
senior executive management
programs at INSEAD.
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 in January 2006,
following his retirement from
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 is currently a member
of the Bank of Melbourne
Advisory Board and a Director
of Crestone Holdings Limited
and Liberty Financial Pty Ltd.
Peter was previously a
Director of Westpac Banking
Corporation (December
2008 to December 2018),
BHP (NZ) Steel Limited
(1990 to 1991), Visa Inc. (2008
to 2011), Treasury Corporation
of Victoria and Clayton Utz.
MIRVAC GROUP ANNUAL REPORT 2019 45
James M. Millar AM
BCom, FCA, FAICD
Samantha Mostyn
BA, LLB
Peter Nash
BComm, FCA, F Fin
John Peters
BArch, AdvDipBCM, ARAIA, FAICD
Elana Rubin
BA (Hons), MA, FFin, FAICD, FAIM
Independent Non-Executive
> Chair of the Audit, Risk and
Compliance Committee
> Member of the
Nomination Committee
James M. Millar was appointed
a Non-Executive Director of
Mirvac in November 2009. He
is the former Chief Executive
Officer of Ernst & Young
(EY) in the Oceania Region,
and was a Director on their
global board.
James commenced his
career in the Insolvency &
Reconstruction practice at EY,
being involved in a number of
sizeable corporate workouts.
He has qualifications in both
business and accounting.
James is a Director of
Macquarie Media Limited
(appointed April 2015),
Chair of the Export
Finance and Insurance
Corporation (appointed
December 2014) and Chair
of Forestry Corporation
NSW (appointed March 2013).
James serves a number
of charities and is Chair of
the Vincent Fairfax Family
Foundation (appointed
April 2009) and a Director
of Vincent Fairfax Ethics
in Leadership Foundation
(appointed September 2016).
James is a former Chair of
The Smith Family, and a
former Director of Fairfax
Media Limited (July 2012 to
December 2018) and Slater
& Gordon Ltd (December
2015 to December 2017).
Independent Non-Executive
> Member of the Human
Resources Committee
Independent Non-Executive
> Member of the Audit, Risk
and Compliance Committee
Independent Non-Executive
> Member of the Human
Resources Committee
Independent Non-Executive
> Member of the Audit, Risk
and Compliance Committee
Samantha Mostyn was
appointed a Non-Executive
Director of Mirvac in March
2015. Samantha is a corporate
advisor and is also a Director
of Transurban Holdings
Limited (appointed December
2010), the Chair of an
Australian APRA regulated
Citibank subsidiary Board,
Chair of Carriageworks and a
Director of the GO Foundation.
Samantha has significant
experience in the Australian
corporate sector both in
executive and non-executive
capacities, in particular in the
areas of human resources,
corporate and government
affairs, sustainability
management and diversity.
Samantha has held senior
executive positions including
Group Executive Culture and
Reputation, IAG and Global
Head HR and Culture, Cable &
Wireless in London. She serves
on the Australian faculty of
the Cambridge University
Business & Sustainability
Leadership Program.
Samantha was previously a
Director of Virgin Australia
Holdings Limited (September
2012 to May 2019), a Director
of the Sydney Theatre
Company, a Commissioner
with the Australian Football
League and the Deputy
Chair of the Diversity Council
of Australia. She has also
served on the boards of
the National Sustainability
Council and the National
Mental Health Commission.
Peter Nash was appointed
a Non-Executive Director of
Mirvac in November 2018.
He is currently the Chair of
Johns Lyng Group Limited
(appointed October 2017) and
a Director of Westpac Banking
Corporation (appointed
March 2018) and ASX Limited
(appointed June 2019).
Peter was a Senior Partner
with KPMG until September
2017, having been admitted
to the partnership of KPMG
Australia in 1993. He served
as the National Chair of
KPMG Australia from 2011
until August 2017, where
he was responsible for the
overall governance and
strategic positioning of
KPMG in Australia. In this
role, Peter also served as a
member of KPMG’s Global
and Regional Boards. Peter’s
previous positions with KPMG
included Regional Head of
Audit for Asia Pacific, National
Managing Partner for Audit in
Australia and Head of KPMG
Financial Services.
Peter has worked in
geographically diverse
and complex operating
environments providing
advice on a range of topics
including business strategy,
risk management, business
processes and regulatory
change. Peter has also
provided financial and
commercial advice to many
government businesses at
both a Federal and state level.
Peter is a former member
of the Business Council of
Australia and its Economic
and Regulatory Committee.
Peter is a board member of
the Koorie Heritage Trust and
Reconciliation Australia Limited.
John Peters was appointed
a Non-Executive Director of
Mirvac in November 2011.
John brings to the Board
over 40 years’ experience in
architectural design, project
management, property
development and property
management.
John was the principal
of a private property
development company
focused on substantial
mixed-use developments
and redevelopments in
South East Queensland for
over 20 years. 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.
> Member of the
Nomination Committee
Elana Rubin was appointed
a Non-Executive Director of
Mirvac in November 2010 and
has extensive experience in
property and financial services.
Elana is a Director of Afterpay
Touch Group Limited
(appointed July 2017),
and Slater & Gordon Ltd
(appointed March 2018).
She is also a Director of
several unlisted and public
sector Boards in property,
infrastructure and insurance.
Elana is the former Chair and
Director of Australian Super,
one of Australia’s leading
superannuation funds, a
former Chair and Director of
Victorian WorkCover Authority
and a member of the Federal
Government’s Infrastructure
Australia and Climate Change
Authority. Elana was also
a Director of Mirvac Funds
Management Limited, the
responsible entity and trustee
for Mirvac’s listed and unlisted
funds. She was previously a
Director of a number of other
listed and unlisted companies.
Company secretary
Sean Ward
BEc, BComm, FGIA, FFin, MBA (Dist)
Sean Ward was appointed Company Secretary
in August 2013 and in May 2017 was also
appointed Head of Risk. Sean joined Mirvac as
Group Company Secretary in April 2013 and
has more than 20 years’ corporate experience.
Prior to joining Mirvac, Sean was the Head of
Subsidiaries at Westpac Banking Corporation,
providing company secretarial support for all
of Westpac’s listed and unlisted entities and
before this was a Senior Companies Advisor
at ASX Limited. Sean completed his Masters
of Business Administration with the Australian
Graduate School of Management in 2016.
46
Directors’ report
The Directors of Mirvac Limited present their report, together with the consolidated financial report of Mirvac Group (Mirvac or Group) for the year ended
30 June 2019. Mirvac comprises Mirvac Limited (parent entity) and its controlled entities, which include Mirvac Property Trust and its controlled entities.
PRINCIPAL ACTIVITIES
The principal continuing activities of Mirvac consist of real estate investment, development, third party capital management and property asset
management. Mirvac performs these activities across three major segments: Office & Industrial, Retail and Residential.
DIRECTORS
The Directors of Mirvac in office at any time during the financial year and up to the date of this report together with information on their qualifications and
experience are set out on pages 44 to 45.
REMUNERATION REPORT
The Remuneration report as required under section 300A (1) of the Corporations Act 2001 is set out on pages 52 to 72 and forms part of the Directors’
report.
MEETINGS OF DIRECTORS
The number of Directors’ meetings held and attended by each Director during the year ended 30 June 2019 is detailed below:
Board
Audit, Risk &
Compliance Committee
Human Resources
Committee
Nomination
Committee
Special Purpose 1
Committee
Director
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
John Mulcahy
Susan Lloyd-Hurwitz
Christine Bartlett
Peter Hawkins
Jane Hewitt
James M. Millar AM
Samantha Mostyn
Peter Nash
John Peters
Elana Rubin
12
12
12
12
6
12
12
7
12
12
12
12
12
12
6
12
12
7
12
12
6
—
6
6
—
6
—
4
—
6
6
—
6
6
—
6
—
4
—
6
5
—
—
5
2
—
5
—
5
—
5
—
—
5
2
—
5
—
5
—
3
—
—
3
—
3
—
—
—
3
3
—
—
3
—
3
—
—
—
3
—
—
—
—
—
3
—
—
—
—
—
—
—
—
—
3
—
—
—
—
1. A special purpose Due Diligence Committee was established by the Board in 2019 for the purposes of the equity raising announced to the market on 29 May 2019.
OTHER DIRECTORSHIPS
Details of all directorships of other listed companies held by each Director in the three years immediately before 30 June 2019 are as follows:
Director
John Mulcahy
Susan Lloyd-Hurwitz
Christine Bartlett
Peter Hawkins
Jane Hewitt
James M. Millar AM
Samantha Mostyn
Peter Nash
John Peters
Elana Rubin
Company
ALS Limited (formerly Campbell Brothers Limited)
GWA Group Limited
Nil
GBST Holdings Ltd
Sigma Healthcare Limited
MG Responsible Entity Limited
Westpac Banking Corporation
Nil
Fairfax Media Limited
Macquarie Media Limited
Slater & Gordon Ltd
Cover-More Group Limited
Transurban Holdings Limited
Virgin Australia Holdings Limited
ASX Limited
Johns Lyng Group Limited
Westpac Banking Corporation
Nil
Afterpay Touch Group Limited
Slater & Gordon Ltd
Touchcorp Limited
Date appointed
Date ceased
February 2012
November 2010
Current
Current
June 2015
March 2016
April 2015
December 2008
July 2012
April 2015
December 2015
December 2013
December 2010
September 2010
June 2019
October 2017
March 2019
Current
Current
November 2016
December 2018
December 2018
Current
December 2017
April 2017
Current
May 2019
Current
Current
Current
July 2017
March 2018
January 2015
Current
Current
August 2017
MIRVAC GROUP ANNUAL REPORT 2019 47
Group outlook 5
Despite a challenging year in some sectors, Mirvac has benefited from
the strength and resilience of its diversified model, its urban strategy and
award-winning urban asset creation capability, enabling the Group to
successfully operate through market cycles. Its high-quality investment
portfolio with its secure income stream, $3.1bn active commercial
development pipeline and $1.7bn of exchanged residential pre-sales,
have resulted in a strong capital position and platform for future growth.
Mirvac further strengthened its reputation for prudent capital management
in FY19. Pleasingly, gearing has been reduced to 20.5 per cent, and the
Group benefits from a diversified debt portfolio with a long weighted
average debt maturity, and excellent visibility of future cash flows. Mirvac
is committed to maintaining its rigorous approach to capital management,
creating a firm foundation from which to continue to meet its strategic
objectives without increasing its overall capital management risk profile.
As a result of Mirvac’s continued strong financial performance over several
years, the Group begins FY20 poised to continue to capitalise on existing
and new investment opportunities, actively invest in its people, technology
and sustainability, and deploy its award-winning asset creation capability.
With its strong capital position, extensive development pipeline and highly
engaged, passionate workforce, Mirvac is confident it will continue to
generate value for securityholders and enrich the lives of its customers
and communities for many years to come.
Risks
As a property group involved in property 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 achievement of its targeted financial outcomes. Mirvac’s
risk management policy and framework is integrated with its day-to-day
business processes and is supported by a dedicated Group Risk function.
For the year ended 30 June 2019, the Group continued to ensure internal
and external risks were identified and appropriate strategies were
implemented to manage the impact of those risks. Further information
on the material risks identified for each of the sectors is outlined on
pages 36-37.
REVIEW OF OPERATIONS AND ACTIVITIES
FY19 FINANCIAL AND CAPITAL MANAGEMENT HIGHLIGHTS
FY19 saw Mirvac build on the success of recent years with yet another
solid operating performance and robust set of metrics for the financial year
ended 30 June 2019. Mirvac’s strong capital position, which is underpinned
by the strength of its diversified model and the passive income stream
from its high-performing investment portfolio, has enabled the Group to
capitalise on strategic investment opportunities.
Financial highlights for the year ended 30 June 2019:
> profit attributable to the stapled securityholders of $1,019m
(June 2018: $1,089m), anchored by the strong performance of the
Office & Industrial division and significant fair value gains in the
investment portfolio as a result of capitalisation rate compression
across all segments;
> operating profit after tax of $631m (June 2018: $608m 2)
up 4 per cent, representing 17.1 cents per stapled security (cpss);
> operating cash flow of $518m (June 2018: $663m);
>
full-year distributions of $440m, representing 11.6 cpss and
growth of 5 per cent over FY18; and
> net tangible assets (NTA) per stapled security 3 of $2.50
(June 2018: $2.31).
Capital management highlights for the year ended 30 June 2019:
>
successfully completed a fully underwritten $750m institutional
placement and $46.2m Security Share Plan in the fourth quarter.
The placement was strongly supported and will assist the delivery
of the next generation of value accretive office, industrial, residential
and mixed-use projects;
>
>
>
> completed 58m of stapled security buy-backs, totalling $130m during
the first half, with a total of 59m stapled securities purchased since
the commencement of the buy-back on 23 February 2018;
issued $665m US Private Placement notes with tenors of 11,13,
15 and 20 years;
received an A- rating with a stable outlook from Fitch Ratings
during the first half year and maintained its A3 rating from
Moody’s Investor Service (equivalent to A-);
stable average borrowing costs at 4.8 per cent per annum
(June 2018: 4.8 per cent), including margins and line fees, following
the issuance of new debt and the repayment of lower cost
revolving bank debt following the capital raising;
reduced gearing to 20.5 per cent, within the Group’s target range
of 20 to 30 per cent 4;
increased liquidity to $1.4bn in cash and committed undrawn
bank facilities; and
increased weighted average debt maturity to 8.5 years from 6.8 years
(June 2018).
>
>
>
2. Excludes specific non-cash items and related taxation. The June 2018 operating profit after tax has been restated to align with the new operating profit definition adopted by the Group from 1 July 2018.
3. NTA per stapled security, based on ordinary securities including Employee Incentive Scheme securities.
4. Net debt (at foreign exchange hedged rate) excluding leases (total tangible assets – cash).
5. These future looking statements should be read in conjunction with future releases to the ASX.
48
Directors’ report
continued
REVIEW OF OPERATIONS AND ACTIVITIES CONTINUED
FY19 OFFICE & INDUSTRIAL HIGHLIGHTS
Mirvac’s Office and Industrial (O&I) division creates some of the country’s
largest and most complex mixed-use, commercial and industrial precincts,
and as at 30 June 2019 has $15bn 6 assets under management. Mirvac
works with leading brands to deliver commercial assets featuring smart
technology and design excellence. Its young, efficient, sustainable portfolio
is comprised of over 95 per cent premium or A-grade office assets, with an
85 per cent overweighting to the strong Sydney and Melbourne markets
providing a significant stream of passive, secured income to the Group.
For the year ended 30 June 2019, Mirvac’s Office & Industrial division
delivered earnings before interest and tax of $518m.
Office
Highlights across the office portfolio for the year ended 30 June
2019 included:
>
increased occupancy to 98.2 per cent 7, with a long WALE
of 6.4 years 8,
> achieved like-for-like net operating income growth of 5.7 per cent;
> completed 82 leasing deals over approximately 96,400 square
metres 9, with highlights including:
> Sirius House, 23 Furzer Street, Woden, ACT: renewed the
Department of Health and Ageing for 100 per cent of the
46,000 square metre office building for a further 10 years,
amounting to a 16-year lease term;
> Olderfleet, 477 Collins Street, Melbourne, VIC: secured Lander
& Rogers and Urbis each for 5,000 square metres for a 10-year
lease term; and
> Locomotive Workshops, South Eveleigh, Sydney NSW: secured
>
Quantium for 12,000 square metres for a 7-year term;
total office asset revaluations provided an uplift of $392m
(or 6.3 per cent) over the previous book value for the 12 months
to 30 June 2019, supported by an overweight to prime assets in
Sydney and Melbourne;
> maintained positive leasing spreads at 16.6 per cent; and
>
reduced incentives to 15.6 per cent (June 2018: 22 per cent).
During the financial year, Mirvac continued to deploy its award-winning
asset creation capability in order to progress its $3.1bn active
office development pipeline, which is 90 per cent 10 pre-committed.
Progress includes:
> Olderfleet, Melbourne, VIC: construction is progressing on
schedule and topped out in July 2019. The building is now
94 per cent 10 pre-leased. The Group remains on track to
reach practical completion in FY20;
> South Eveleigh, Sydney, NSW (formerly Australian Technology
Park): in March 2019 practical completion was achieved on the
Axle building (Building 1). Commonwealth Bank’s lease commences
August 2019 and the new workplace is now home to approximately
3,800 Commonwealth Bank employees. Yerrabingin House
(Building 3), a community centre with Indigenous rooftop farm,
public realm including sports courts, an oval and skatepark, and
stage 1 retail elements were also completed in March 2019.
Structural works on The Foundry (Building 2) are ongoing and it is
due for practical completion in mid-2020. The project’s major tenant,
Commonwealth Bank, has pre-committed to 100 per cent of office
space for a 15-year lease term;
Includes IPUC.
6.
7. By area, including equity accounted investments and OOP and excluding assets held for sale.
8. By income, including equity accounted investments and OOP and excluding assets held for sale.
9. Excludes leasing of assets under development.
10. Includes Heads of Agreement.
11. These future looking statements should be read in conjunction with future releases to the ASX.
12. By area.
13. By income.
> Locomotive Workshops, South Eveleigh, Sydney, NSW: secured
planning approvals and commenced redevelopment in May 2019.
Practical completion is targeted for FY21;
> 80 Ann Street, Brisbane QLD: demolition is progressing well with
a construction commencement ceremony scheduled for August
2019. Suncorp has pre-committed to over 39,600 square metres
of office and retail space, representing approximately 66 per
cent of the building’s total NLA, for a 10-year term. Mirvac sold
a 50 per cent interest in the development to M&G Real Estate for
a total consideration of $418m. Practical completion remains on
track for 2HFY22;
> 383 La Trobe Street, Melbourne, VIC: acquired in 1HFY19 and planning
is in progress for a potential 40,000 square metres office tower;
> 55 Pitt Street, Sydney, NSW: planning is progressing well for
a potential office tower of greater than 40,000 square metres; and
> Corner of Walker Street and Pacific Highway, North Sydney, NSW:
secured interests amounting to 25 per cent of unit entitlements
in two North Sydney office towers.
Outlook 11
While global uncertainty and softer economic growth locally are likely
to impact expansion plans of major office occupiers overall, the outlook
for Sydney and Melbourne CBD markets remains well supported given
vacancy rates for both markets are around 4 per cent. While vacancy is
set to rise a little in the Melbourne CBD near term due to a large volume of
new stock completing, the vast majority of this stock has been pre-leased
as tenants seek better quality premises and space efficiencies. A more
staggered and smaller supply pipeline in Sydney will mitigate vacancy
rises over the next few years.
Tenant demand in Brisbane also reflects a flight to quality space as
demand for prime-grade stock has more than doubled that for secondary
in the past year, a trend that is expected to continue. Similarly, the Perth
office market has seen a pick-up in net absorption over the past year as
tenants consolidate from fringe locations into the CBD, with prime-grade
stock outperforming secondary. With very limited supply near term,
prospects for better rental growth have lifted.
Mirvac will continue to focus on the key urban markets of Sydney and
Melbourne, as well as creating innovative, collaborative and flexible workplaces
that generate value for the Group, while improving the quality of the portfolio.
Industrial
Highlights across the industrial portfolio for the year ended
30 June 2019 included:
> achieved 99.7 per cent occupancy 12, with a long WALE of 7.7 13 years;
> achieved like-for-like net operating income growth of 7.8 per cent;
total industrial asset revaluations of $50m, representing a 6.0 per
>
cent uplift over the previous book value for the full year to
30 June 2019; and
> completed over 91,700 square metres of leasing activity including:
> Nexus Industrial Park Building 4, Lyn Parade, Prestons, NSW:
renewed Legrand for 7 years over 23,300 square metres to 2028;
> Nexus Industrial Park Building 1, Lyn Parade, Prestons,
NSW: extended the lease to Amari Metals by 7 years over
13,100 square metres to 2028; and
> 274 Victoria Road, Rydalmere, NSW: extended the lease to Thales
for 10 years over 22,700 square metres to 2032.
MIRVAC GROUP ANNUAL REPORT 2019 49
REVIEW OF OPERATIONS AND ACTIVITIES CONTINUED
The Industrial business unit is an important growth area for the business
and during the year Mirvac increased its future industrial development
pipeline in Sydney to $1.2 billion by securing the following sites:
> Stage 1 of a future 244-hectare industrial estate at Badgerys Creek
in Western Sydney 14, NSW for a total consideration of $71m, under
a put-and-call option arrangement. Located just 800 metres from
the new Western Sydney International Airport and close to the M7
motorway and the proposed M12 motorway, Stage 1 is a 54-hectare
site set to benefit from approximately $20bn of infrastructure
improvements in the Western Sydney area by 2026;
> a 56-hectare future industrial estate and logistics hub at Mamre
Road, Kemps Creek, NSW, approximately 6km from the new
Western Sydney International Airport. Similar to the Badgerys Creek
site, this strategic site will benefit from its proximity to the M4, M7
and proposed M12 motorways, as well as approximately $20bn of
infrastructure improvements to be rolled out across the Western
Sydney area; and
> a 14-hectare, future industrial estate and logistics hub at Manchester
Road, Auburn, Sydney, 3.3km from Parramatta CBD and 18km from
the Sydney CBD, for $94.2m 15. The project is a joint venture with
an investment vehicle sponsored by Morgan Stanley Real Estate
Investing and has an end value of $250m 16.
Mirvac also sold a 50 per cent interest in Calibre at Eastern Creek, NSW
to the Mirvac Industrial Logistics Partnership for approximately $125m.
Practical completion was achieved on the Estate during the year and the
development is 100 per cent leased.
Outlook 17
Demand drivers for industrial are mixed with both weaker global trade
and uncertainty impacting global production firms, while softer domestic
indicators, such as forward orders and confidence of wholesale trade
firms, point to softer take-up near term. Conversely, the structural shift to
growing e-commerce volumes and customer demands for convenience
and faster delivery times is spurring demand for logistics space. According
to Knight Frank 18, the Sydney industrial market continues to record the
lowest vacancy rate of any major industrial market, resulting in most
major sub-markets recording annual rent growth greater than inflation.
Mirvac’s strategic overweight to the strong Sydney market ensures that
the industrial portfolio will continue to provide a secure, growing income to
the Group.
FY19 RETAIL HIGHLIGHTS
Mirvac owns and manages a dynamic portfolio of urban shopping centres
across Australia’s eastern seaboard with assets under management of
over $4.5bn. The portfolio is focused on higher income, higher growth
and densely populated urban catchment areas, with an overweight to the
strong Sydney market. Incorporating approximately 437,900 square metres
of space and more than 1,600 retailers, Mirvac’s intricate understanding
of its local markets enables the Retail team to constantly improve the
experience of their customers.
For the year ended 30 June 2019, the retail portfolio delivered operating
earnings before interest and tax of $168m.
Highlights across the retail portfolio for the year ended 30 June
2019 included:
> achieved solid net revaluation gains of 2.2 per cent underpinned
by like-for-like income growth of 2.6 per cent;
> maintained high occupancy of 99.2 per cent; 19
> achieved comparable MAT sales growth of 2.7 per cent 20 and
comparable specialty sales growth of 2.0 per cent;
> comparable specialty sales productivity of >$10,000 per square
metre, with specialty occupancy costs increasing to 15.5 per cent; and
> executed lease deals across approximately 61,900 square metres,
with leasing spreads of 1.0 per cent.
The Group’s retail development and repositioning pipeline progressed
during the financial year, including:
> South Village Shopping Centre, Kirrawee, NSW: opened on
14 November 2018. The centre is anchored by Coles and ALDI with
a mixed offer including services, health and wellness operators and
a restaurant precinct including Criniti’s and Lone Star Rib House;
> Kawana Shoppingworld, Sunshine Coast, QLD: completed the
construction of a 6,900 square metre expansion of the centre
introducing Event Cinema’s only Gold Class offering on the
Sunshine Coast and an expanded dining precinct. The project
was 100 per cent leased at completion;
> Birkenhead Point Brand Outlet, Sydney, NSW: improved car park
circulation by introducing a ticketless and parking guidance system
and new wayfinding, together with redesigned entry and exit points,
resulting in a more seamless parking experience;
> Rhodes Waterside, Sydney, NSW: completed the construction of
a 3,700 square metre redevelopment of the asset, introducing
ALDI and relocating Bing Lee to strengthen the fresh food and
homewares offer. The project was fully leased on completion;
> Toombul, Brisbane, QLD: construction is progressing on a $43m,
4,500 square metre re-development, introducing a dining and
entertainment precinct. The precinct will be anchored by Archie
Brothers, Cirque Electriq and an upgraded cinema. The development
is due for completion in mid-FY20; and
launched the first ultra-rapid electric vehicle (EV) charging station
at Toombul in Brisbane, QLD in partnership with Chargefox. The
portfolio now boasts the ultra-rapid station along with 38 universal
EV charging bays, 14 Tesla Supercharging bays and 31 Tesla
destination charging sites covering all current charging formats.
>
Outlook 17
While the broader retail environment faces some challenges, shopping
centres with strong catchment fundamentals continue to be better
supported. Mirvac’s retail portfolio is located in the service-based economies
of Sydney, South East Queensland and Melbourne, which continue to record
stronger employment and higher jobs growth than populations within
regional areas. In addition, centres that offer vibrant customer experiences
continue to attract quality tenants. Mirvac’s focus on high-quality asset
management in urban catchments with strong fundamentals is expected to
support continued outperformance in the retail sector.
14. Subject to conditions precedent, rezoning and planning approvals.
15. Subject to conditions precedent.
16. Subject to planning approvals.
17. These future looking statements should be read in conjunction with future releases to the ASX.
18. Knight Frank Research, Industrial Vacancy Reports Q1 2019.
19. By area.
20. Total comparable MAT sales growth would equate to approximately 2 per cent adjusting for major supermarkets and DDS categories reporting 53 weeks of sales.
50
Directors’ report
continued
REVIEW OF OPERATIONS AND ACTIVITIES CONTINUED
FY19 RESIDENTIAL HIGHLIGHTS
Mirvac has long set the standard in residential design, quality and community
building, leveraging its integrated model to deliver complex projects that
require significant capital and resources. An attention to detail, focus on
creating legacy and an absolute commitment to customer service has forged
a reputation for creating exceptional, much-loved homes and communities in
Australia’s key cities of Sydney, Melbourne, Brisbane and Perth.
For the year ended 30 June 2019, Residential delivered earnings before
interest and tax of $201m.
Highlights across the residential business for the year ended
30 June 2019 included:
>
settled 2,611 residential lots, exceeding the Group’s target of more
than 2,500 residential lot settlements in FY19. Defaults for the
financial year remained below 2 per cent;
secured future income with residential pre-sales of $1.7bn 21. Mirvac’s
existing pipeline supports the ability to release over 10,000 lots over
the next four years;
>
>
> delivered gross development margins of 27 per cent 22, driven by our
ability to buy and sell in the right markets and at the right time in
capital efficient structures;
released over 1,280 residential lots across both new and existing
projects, with over 1,700 exchanges. Successful releases included:
> Crest, Gledswood Hills, NSW: 86 per cent of released lots pre-sold;
> Woodlea, VIC: 96 per cent of released lots pre-sold;
> Tullamore, VIC: 60 per cent of released MPC lots pre-sold;
> Everleigh, QLD: 53 per cent of released lots pre-sold;
> acquired a consolidated landholding at Henley Brook, WA, 22km
>
north-east of Perth and 18km from Perth Airport. The 33.5-hectare
site will comprise over 550 land lots with an estimated development
end value of approximately $140m 23; and
further supplemented the Group’s residential pipeline of approximately
28,000 lots by entering into an agreement with Boral to develop
a 171-hectare, quarry site at Wantirna South, located within the
Dandenong Valley Parkland corridor approximately 25km south-east
of the Melbourne CBD. Mirvac proposes approximately 1,700 lots
with an estimated development end value of $1.3bn 24.
Outlook 24
Several gauges of market performance including auction activity,
turnover and price results suggest a meaningful positive shift through
June and July. Significant reduction in loan pricing across all product
types following reductions in the official cash rate, fiscal policy stimulus
and better policy certainty post elections have contributed to a lift in home
buying sentiment of late. The recent lift in borrowing capacity post APRA’s
changes to the mortgage serviceability buffer indicate pre-conditions are
in place for a more positive spring selling season in the established market.
Better buying confidence is likely to lead to more solid demand for off-the-
plan purchases over the next year as buyers seek high-quality projects
that offer good connection to employment.
BUILD-TO-RENT
Mirvac sees huge growth potential for the sector in Australia, given the
lack of housing affordability and the growing numbers of Australians who
are renting. Mirvac believes BTR can revolutionise the rental experience
with improved choice, quality and security of tenure.
Since it launched its Australian Build-to-Rent Club with the Clean Energy
Finance Corporation in July 2018, Mirvac has been at the forefront of the
emerging BTR sector in Australia.
Build-to-Rent highlights for the year ended 30 June 2019 included:
>
further progressed construction at Mirvac’s first purpose-built BTR
asset in Australia, the Pavilions project at Sydney Olympic Park in
NSW. The project is due for completion in September 2020, with
leasing to commence in June 2020; and
> entered into a binding agreement with developer, PDG, to acquire
490 completed BTR apartments in the Munro development
within the Queen Victoria Market on a fund through basis for a
total investment amount of $333.5m. The agreement is subject to
conditions precedent, including planning and redesign, which will
ensure the building delivers purpose-built, BTR product.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Details of the state of affairs of the Group are disclosed on pages 47 to 50.
Other than those matters disclosed, there were no significant changes to
the state of affairs during the financial year.
MATTER SUBSEQUENT TO THE END OF THE YEAR
As announced on 3 July 2019, the Group confirmed the successful
completion of the non-underwritten Security Purchase Plan (SPP). A total
of $46.2m was raised under the SPP, with 15.9m new stapled securities
issued to eligible applicants on 4 July 2019.
No other events have occurred since the end of the year which have
significantly affected or may significantly affect Mirvac’s operations, the
results of those operations, or Mirvac’s state of affairs in future years.
21. Adjusted for Mirvac’s share of JVA and Mirvac managed funds.
22. Excludes previously provisioned projects.
23. Subject to rezoning and planning approvals $1.3bn is 100 per cent of the expected project gross revenue.
24. These future looking statements should be read in conjunction with future releases to the ASX.
MIRVAC GROUP ANNUAL REPORT 2019 51
ENVIRONMENTAL REGULATIONS
Mirvac and its business operations are subject to compliance with both
Commonwealth and state environmental protection legislation. The Board
is satisfied that adequate policies and procedures are in place to ensure
Mirvac’s compliance with the applicable legislation. In addition, Mirvac is
also subject to the reporting requirements of the National Greenhouse and
Energy Reporting Act 2007 and Building Energy Efficiency Disclosure Act
2010. Mirvac is not aware of any incidents that have resulted in material
non-compliance with environmental regulations during the financial year.
CORPORATE GOVERNANCE STATEMENT
Mirvac is committed to ensuring that its systems, procedures and
practices reflect high standards of corporate governance. The Directors
believe that a strong corporate governance framework is critical in
fostering a culture that values ethical behaviour, integrity and respect, to
protect securityholders’ and other stakeholders’ interests.
During the year ended 30 June 2019, Mirvac’s corporate governance
framework was consistent with the third edition of the Corporate
Governance Principles and Recommendations released by the ASX
Corporate Governance Council.
Mirvac’s Corporate governance statement for the year ended 30 June 2019
and copies or summaries of the Group policies referred to in it are published
on Mirvac’s website at: www.mirvac.com/about/corporate-governance.
TAX GOVERNANCE STATEMENT
Mirvac has adopted the Board of Taxation’s Tax Transparency Code (TTC).
As part of the TTC, Mirvac has published a Tax governance statement
(TGS) which details Mirvac’s corporate structure and tax corporate
governance systems. Mirvac’s TGS can be found on Mirvac’s website at:
www.mirvac.com/about/corporate-governance.
FRAUD, BRIBERY AND CORRUPTION
Mirvac has zero tolerance regarding fraud, bribery and corruption and
requires all employees and service providers to adhere to the highest
standards of honesty and integrity in the conduct of all its activities. Mirvac
will uphold all laws relevant to countering fraud, bribery and corruption in
the jurisdictions in which it operates.
Any allegation of a person from within or associated with Mirvac
(notwithstanding the capacity in which they are acting), acting in a manner
inconsistent with this statement will be treated seriously, regardless of
the seniority of those involved. Disciplinary action including dismissal
may result. Where it is believed that a criminal offence may have been
committed, the police and other relevant bodies may be informed.
NON-AUDIT SERVICES
From time to time, Mirvac may engage its external auditor,
PricewaterhouseCoopers, to perform services additional to their
statutory audit duties. Details of the amounts paid or payable to
PricewaterhouseCoopers for audit and non-audit services provided during
the year ended 30 June 2019 are set out in note H5 to the consolidated
financial statements.
In accordance with the advice received from the ARCC, the Board is
satisfied that the provision of non-audit services is compatible with
the general standard of independence for auditors imposed by the
Corporations Act 2001 and did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
> all non-audit services were reviewed by the ARCC to ensure they did
not affect the impartiality and objectivity of the auditor; and
> none of the services undermined the general principles relating to
auditor independence as set out in Accounting Professional & Ethical
Standards 110 Code of Ethics for Professional Accountants, including
reviewing or auditing the auditor’s own work, acting in a management
or a decision-making capacity for the Group, acting as advocate for
the Group or jointly sharing economic risk and rewards.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s independence declaration as required under
section 307C of the Corporations Act 2001 is set out on page 73 and forms
part of the Directors’ report.
ROUNDING OF AMOUNTS
The amounts in the consolidated financial statements have been rounded
off to the nearest million (m) dollars in accordance with ASIC Corporations
Instrument 2016/191.
This statement is made in accordance with a resolution of the Directors.
Susan Lloyd-Hurwitz
Director
Sydney
8 August 2019
52
Remuneration report
Contents
Page
1 Message from the Human Resources Committee
2 Who is covered by this report
3 Key questions
4 Our remuneration strategy and the link to business strategy
5 Executive KMP remuneration at Mirvac
6 How remuneration is structured
7 Business and executive remuneration outcomes
8 Summary of FY19 remuneration
9 Actual remuneration received in FY19
10 Total remuneration in FY19
11 LTI grants in FY19
12 Equity instrument disclosures relating to KMP
13 Other transactions with KMP
14 Service agreements for the Executive KMP
15 Governance and how remuneration decisions are made
16 Non-Executive Directors’ remuneration
17 Additional required disclosures
52
53
53
55
58
58
62
64
65
66
67
68
70
70
70
71
72
1 MESSAGE FROM THE HUMAN RESOURCES COMMITTEE (HRC)
The HRC wishes to thank you for your support at last year’s AGM and
for sharing your views on our remuneration practices and is pleased
to present securityholders with the FY19 remuneration report. This
report outlines Mirvac’s approach to remuneration for its executives and
in particular the link between Mirvac’s strategy and its remuneration
framework and the link between performance and reward, and
remuneration outcomes for senior executives.
People and Culture – Key Highlights
The HRC has oversight of Mirvac’s People Strategy, Culture and key
Human Resources practices, and Mirvac’s remuneration framework is an
integral component of our People Strategy.
We have maintained an overall engagement score of 90 per cent in the Willis
Towers Watson’s engagement survey. Our score places us well above the
industry and Australian norms, and above the Global High Performing Norm,
the highest external benchmark. The results show that:
> 97 per cent of our people are willing to work beyond what is required of
them to assist Mirvac to succeed;
> 95 per cent of our people believe Mirvac is socially and environmentally
responsible and has a positive impact on the community;
> 94 per cent of our people believe Mirvac supports diversity in the
workplace; and
> 89 per cent of our people understand the risks in our business, are
comfortable raising issues and know who to report the issues to.
The HRC recognises the growing focus on culture as a driver of employee
behaviours and their impact on strategy execution and performance.
Mirvac’s values define our desired behaviours and culture and are
measured via our annual employee survey. Pleasingly, this year’s survey
found that:
> 91 per cent of people believe Mirvac values are demonstrated through
clear and visible actions by the employees; and
> 88 per cent believe management decisions are consistent with the values.
It has been great to see from the survey results that our people continue
to understand and believe in our purpose and strategy, and that they are
proud of the projects and services we are delivering for our customers.
In addition to this, our people tell us that they value the work we do
around health and safety, sustainability, diversity and inclusion, people
leadership and flexibility. Some diversity and inclusion highlights include;
> Mirvac has been awarded with the Employer of Choice for Gender
Equality citation for the fifth year in a row. This prestigious citation
acknowledges our ongoing commitment to gender equality;
the Group’s annual gender pay parity review showed that both the
organisation-wide and the by-level gaps continue to decrease, and the
like-for-like gender pay gap is zero for the third year;
>
> we continued to meet our target of women in senior leadership
positions with more than 40 per cent of senior leadership roles held by
women; and
> we partnered with the GIANTS Foundation to launch the Mirvac Giant
Leadership Goals Program. This program is aimed at growing the
female talent pipeline by highlighting the career opportunities within
the property industry and encouraging Year 9 females to consider
selecting STEM subjects in high school.
More on our People Strategy and how this supports Mirvac’s performance
can be found in the Our People section, page 30.
Reward Framework
Throughout FY19, the HRC continued to oversee the performance and
remuneration of the CEO/MD and other Executive Leadership Team
members, along with the Group remuneration framework and incentive
schemes, ensuring that the financial reward balances performance
with prudent risk-taking while also creating alignment between our
securityholders and other stakeholders.
Mirvac’s remuneration framework reflects our commitment to deliver
competitive remuneration for excellent performance in order to attract
the best and motivate and retain talented individuals, while aligning the
interests of executives and securityholders.
At the heart of our remuneration framework are:
>
incentives based on financial measures and strategic objectives that
reflect key goals critical to sustained organisational success;
> consideration of business and operational risk through the
design of performance objectives, clawbacks and the exercise of
Board discretion;
incentives that align the interests of executives to those of
securityholders;
>
> vesting periods for deferred incentives that reflect the time horizons
over which Mirvac invests, while providing appropriate stretch and
incentive for executives;
> best-practice governance and ensuring remuneration outcomes
are reasonable taking into account community and stakeholder
expectations
> best-practice governance; and
>
target remuneration levels and remuneration outcomes that
appropriately reflect the challenge and complexity of being an active
developer and of being an integrated diverse property company.
MIRVAC GROUP ANNUAL REPORT 2019 53
Pay for Performance: Remuneration Outcomes for FY19
Mirvac delivered strong performance against key financial measures and key strategic objectives in FY19, including security price growth of 44 per cent
over the 12 months.
Mirvac is now a leading property company recognised for its quality projects and assets; is trusted by investors (as indicated by the success of the capital
raising in May 2019); has great people with exceptional employee engagement (90 per cent) and a culture that has become a source of competitive
advantage; and, is a leader in sustainability (within the property sector and beyond).
The strong, sustained performance – both financial and non-financial – has translated into full vesting of the long-term incentives and above target
short-term incentive outcomes. Combined with a 44 per cent securityprice increase over the last 12 months, this has resulted in increased actual earnings
for our CEO/MD and other KMP. The Mirvac Board very strongly believes in aligning pay to performance and we believe the remuneration outcomes
reflect this strong performance, outperforming the stretching targets that the Board sets for management each year.
2 WHO IS COVERED BY THIS REPORT
This report covers the key management personnel (KMP) of Mirvac, who are the people responsible for determining and executing Mirvac’s strategy.
This includes both the Executive KMP (the CEO/MD, CFO and heads of business units who are part of the Executive Leadership Team) as well as
Non-Executive Directors.
For FY19, the KMP were:
KMP
Non-Executive KMP
John Mulcahy
Christine Bartlett
Peter Hawkins
Jane Hewitt 1
James M. Millar AM
Samantha Mostyn
Peter Nash 2
John Peters
Elana Rubin
Executive KMP
Susan Lloyd-Hurwitz
Brett Draffen
Shane Gannon
Campbell Hanan
Susan MacDonald
Stuart Penklis
Position
Chair
Director
Director
Director
Director
Director
Director
Director
Director
CEO/MD
Chief Investment Officer
CFO
Head of Office & Industrial
Head of Retail
Head of Residential
1. Jane Hewitt joined the Board as a Non-Executive Director on 10 December 2018.
2. Peter Nash joined the Board as a Non-Executive Director on 19 November 2018.
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
3 KEY QUESTIONS
Key questions
Mirvac approach
Remuneration in FY19
1 How is Mirvac’s performance
reflected in this year’s
remuneration outcomes?
Mirvac’s remuneration outcomes are strongly linked to the delivery of sustainable securityholder
value over the short and long term.
Short term: Mirvac has delivered strong performance in terms of operating profit, ROIC and delivery of
strategic objectives, and while not a measure on the Group STI scorecard, security price growth of 44
per cent in 12 months. This has resulted in above-target performance on our balanced scorecard and a
corresponding higher than usual payout of short-term incentives (STI).
Long term: The three-year performance period for the FY17 long-term incentives (LTI) completed
on 30 June 2019. The FY17 LTI was divided into two components, with half tested against relative
TSR and the other half tested against ROIC, both over a three-year period. Mirvac’s absolute TSR
performance of 72.97 per cent was at the 88th percentile of the comparator group, resulting in
vesting of 100 per cent of the relative TSR component. Mirvac’s ROIC performance of 11.3 per cent
outperformed the stretch target of 10 per cent, resulting in 100 per cent vesting for this component.
As a result, total vesting for the FY17 LTI award is 100 per cent. The Board is committed to ensuring
executives’ remuneration links to the achievement of sustainable value for securityholders and
therefore will continue to use relative TSR and ROIC for the FY20 LTI award for the KMP.
Term as KMP
Full Year
Full Year
Full Year
Part Year
Full Year
Full Year
Part Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Full Year
Further info
Section 4
Page 56
54
Remuneration report
continued
Key questions
Mirvac approach
2 What changes have been made
to the remuneration structure
in FY19?
3 Are any changes planned for
FY20?
Remuneration framework
4 Where does Mirvac’s remuneration
sit relative to the market?
5 What proportion of
remuneration is “at risk”?
6 Are there any clawback
provisions for incentives?
7 What is Mirvac’s minimum
securityholding requirement?
LTI: The performance measures continue to be relative TSR and ROIC for the FY19 LTI award for
the KMP. The weighting of the performance measures was adjusted from 50:50 to 40 per cent
for relative TSR and 60 per cent for ROIC. This re-weighting maintains focus on relative TSR, an
important measure in aligning remuneration outcomes for Executives with securityholder outcomes,
but increases focus on ROIC, which is the key long-term financial measure that underpins long-
term decision making and long-term value creation, and best aligns the LTI hurdles with Mirvac’s
business and value-creation strategy.
The comparator group for relative TSR will also no longer include Aveo and Lendlease and only
consist of the A-REIT constituents, so as to better align the peer group to the market in which we
compete for capital.
There is also a change in the way in which the ROIC hurdle is set and measured. Taking into
account the transition to a more normalised part of the property cycle, the Board believes that
vesting of the ROIC component ought to commence on the achievement of Mirvac’s WACC, the
point at which management creates value for securityholders, with full vesting on achieving a
premium of 1.8 per cent outperformance of WACC, which represents both significant stretch and
value creation for securityholders. So as not to encourage unnecessary risk-taking, 50 per cent
of the award will vest one-third into the 1.8 per cent premium. That is, 50 per cent will vest upon
0.6 per cent outperformance of WACC. The remaining 50 per cent of the award will vest over
the remaining 1.2 per cent outperformance. After calculating the outcome based on the vesting
schedule detailed above, the Board shall have +/-20 per cent discretion to adjust the vesting
outcomes for the ROIC performance hurdle to ensure vesting outcomes reflect management’s
performance over the performance period.
STI: There were no changes to STI methodology.
Operating profit: Mirvac’s definition of operating profit has been updated to include the security-
based payment expense. This change has been implemented to align with market practice (ASX
top 20 and A-REIT).
Minimum securityholding requirement: The minimum securityholding requirement increased from:
>
100 per cent to 150 per cent of fixed remuneration for the CEO/MD; and
> 50 per cent to 100 per cent of fixed remuneration for other Executives.
Executives will have five years from the commencement of their role on the Executive Leadership
Team, or for current Executives three years from 1 July 2018, to establish their Mirvac security
ownership to the minimum.
Risk: We have incorporated more explicit consideration of risk and risk culture in determining
Executives’ performance and reward outcomes, and for determining the Group STI pool.
Individual changes: Stuart Penklis, Head of Residential, received a fixed pay increase from $700,000
to $800,000 per annum as at 1 July 2018.
While Mirvac generally does not provide year-on-year increases to senior executives’ fixed
remuneration, the adjustment to Stuart’s remuneration was appropriate to bring him into line with
the remuneration of Susan MacDonald and Campbell Hanan, aligning the target remuneration for
the three Heads of businesses.
There were no increases to the fixed remuneration or total target remuneration for any other
Executive KMP during FY19.
No, there are no significant changes planned for FY20. However, in line with previous years, the
Board will review and adjust (if necessary) the threshold and stretch performance levels for the
performance objectives applicable to the STI and LTI awards.
Fixed and variable pay are both aimed at the market median, with remuneration opportunities for
outstanding performance extending up to the 75th percentile of the market
The majority of Executive KMP’s remuneration is based on performance and is therefore at risk.
The remuneration package for the CEO/MD is 70 per cent performance related pay, and for other
Executives the remuneration package is, on average, 58 per cent performance related pay.
Yes, the Board has the ability to claw back incentives in the event of a material financial
misstatement, any misconduct that is, or may be, harmful to the Group, and/or gross negligence.
The minimum securityholding requirement is:
>
>
> 50,000 securities for Non-Executive Directors.
Executives have five years from the commencement of their role on the Executive Leadership
Team, or for current Executives five years from 1 July 2018, to establish their Mirvac security
ownership to the minimum.
Non-Executive Directors have three years from their date of appointment to the Board, or for Non-
Executive Directors who were appointed to the Board prior to FY18 three years from 12 December
2017, to acquire securities up to the minimum.
150 per cent of fixed remuneration for the CEO/MD;
100 per cent of fixed remuneration for other Executives; and
Further info
Section 6
Page 58
Section 6
Page 58
Section 6
Page 58
Section 5
Page 58
Section 6
Page 58
Section 12
Page 68
Section 16
Page 71
MIRVAC GROUP ANNUAL REPORT 2019 Key questions
Mirvac approach
Short term incentives (STI)
8 Are any STI payments
deferred?
Yes, 25 per cent of STI for Executive KMP are awarded as rights over Mirvac securities, half of which
vest in one year and half in two years. If the Executive resigns before the vesting period ends, the
rights do not vest and are forfeited.
9 Are STI payments capped?
Yes, an Executive’s STI is capped at double their STI target, achievable only in circumstances of
both exceptional individual and Group performance.
Long-term incentives (LTI)
10 What are the performance
measures for the LTI?
11 Does the LTI have re-testing?
12 Are dividends/distributions paid
on unvested LTI awards?
13
Is the size of LTI grants
increased in light of
performance conditions?
14 Can LTI participants hedge
their unvested LTI?
15 Does Mirvac buy securities
or issue new securities for
security-based awards?
16 Does Mirvac issue
share options?
Executive service agreements
17 What is the maximum
an executive can receive
on termination?
For the FY19 LTI award, performance is measured over a three-year period with 40 per cent of the
award subject to relative TSR and 60 per cent of the award subject to ROIC, with the Board having
over-arching discretion to ensure vesting outcomes are appropriately aligned to performance.
For the FY17 and FY18 awards, performance is measured over a three-year period with 50
per cent of the award subject to relative TSR and 50 per cent of the award subject to ROIC,
with the Board having over-arching discretion to ensure vesting outcomes are appropriately
aligned to performance.
No, there is no re-testing.
No, dividends/distributions are not 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, there is no adjustment to reflect the performance conditions. The grant price for allocation
purposes is not reduced based on performance conditions. Mirvac uses a ‘face value methodology’
for allocating performance rights to each Executive KMP, being the average security price for the
month leading up to grant, discounted for the assumed value of dividends and distributions not
paid during the three-year performance period.
No, this is prohibited.
For deferred STI awards, securities are purchased on-market. For LTI awards, the Board has
discretion to issue new securities or buy existing securities on-market.
No, Mirvac uses performance rights for the deferred STI and LTI awards.
Executive KMP termination entitlements are limited to 12 months’ fixed remuneration.
55
Further info
Section 5
Page 58
Section 6
Page 60
Section 6
Page 58
Section 6
Page 60
Section 6
Page 60
Section 6
Page 60
Section 6
Page 60
Section 6
Page 60
Section 6
Page 58
Section 6
Page 58
Section 14
Page 70
4 OUR REMUNERATION STRATEGY AND THE LINK TO BUSINESS STRATEGY
Mirvac’s remuneration strategy is designed to support and reinforce its business strategy. The at-risk components of remuneration are tied to measures
that reflect the successful execution of our business strategy in both the short and long term.
Our strategic drivers are reflected in STI performance measures and LTI performance measures. So, Mirvac’s actual performance directly affects what
executives are paid.
56
Remuneration report
continued
Our strategic drivers…
Are reflected in STI
performance measures…
And LTI performance
measures…
Result…
Relative Total Shareholder Return (TSR)
Measures the performance of Mirvac
securities over time, relative to other entities
in a comparison group.
Return on Invested Capital (ROIC)
Reflects how efficiently Mirvac is using its
assets to generate earnings. It is calculated
by dividing Total Return by average Invested
Capital over the 3-year period.
Reflects the alignment
of business strategy to
create sustainable value
for securityholders.
Operating Profit
Reflects how much revenue the business has generated for the year,
less operating costs and represents a key driver of securityholder value.
Return on Invested Capital (ROIC)
Reflects how efficiently Mirvac is using its assets to generate earnings. It is
calculated by dividing total return by average invested capital over 12 months.
Ensures management delivers on core initiatives
relating to Group strategy and operating model.
Measures include performance against Group or
divisional specific initiatives and/or integrated projects.
Represents how well Mirvac is meeting the expectations of key
external stakeholders.
Measures include retail customer, office tenant and residential
customer satisfaction surveys, as well as qualitative feedback
from key institutional investors and third party capital investors.
There is a strong correlation between high levels of
employee engagement and a positive culture delivering
securityholder returns.
Measures include engagement, key talent retention, gender
diversity and flexibility targets.
A culture of innovation will drive and safeguard long
term securityholder returns.
Measures include performance against agreed
innovation missions.
Mirvac is committed to providing a safe workplace
for its employees, suppliers and communities and
to ensuring its activities do not have an adverse
impact on the environment.
Measure include lost time injury frequency rate, total
recordable injury frequency rate, timely incident
reporting and sustainability targets.
Provide customers and investors an experience
that delivers excellence, consistently exceeds
expectations and engenders loyalty.
Have an engaged and motivated workforce
with superior skills and capabilities.
Be recognised as a leader in
sustainability. Provide workplaces
free from harm and supported by
a culture where safety remains
an absolute priority.
1. Consistent with the financial statements disclosures, the FY18 operating profit has been updated from $580m to $608m as a result of the 1 July 2018 operating profit definition change.
Capital efficiency and financial performanceOperational excellenceInnovation leadershipHSE&S leadershipCustomer and investor satisfactionPeople & LeadershipMIRVAC GROUP ANNUAL REPORT 2019 57
Directly affects what
executives are paid
Mirvac’s actual performance…
Measures include
From FY17-FY19
> Mirvac’s absolute TSR performance of 72.97 per cent was at the 88th
percentile relative to its comparator group.
> Mirvac’s average annual ROIC was 11.3% over the period.
In FY19
> Operating profit was $631m, up from $608m 1 in FY18.
> ROIC was 10.1% down from 11.4% in FY18.
Capital partnerships
> sold down a 50% interest in Calibre at Eastern Creek to the Mirvac Industrial Logistics Partnership (MILP),
a partnership between Mirvac and a vehicle sponsored by Morgan Stanley Real Estate Investing, August 2018
> facilitated the acquisition of a 50 per cent interest in 10-20 Bond Street, Sydney by an investment vehicle sponsored
by Morgan Stanley Real Estate Investing (MSREI), in March 2019.
> acquired a 14-hectare, future industrial estate and logistics hub at Manchester Road, Auburn, Sydney from PAYCE
for $94.2 million in June 2019. The acquisition is a joint venture with an investment vehicle sponsored by Morgan
Stanley Real Estate Investing (MSREI).
Overall a successful year for operational excellence initiatives in terms delivering new capabilities and
functionality within budget. Key initiatives and agreed outcomes for delivered successfully throughout FY19.
Customer satisfaction targets set for each of our key divisions were exceeded.
Continued positive feedback being received from investors on our delivery of our strategy.
People & Leadership targets set were either met or exceeded.
> Maintained employee engagement score of 90%, placing Mirvac above the Global High Performing Norm, the survey’s highest external benchmark (target >GHPN).
> 43% of senior leadership positions held by females (target >40%).
> 75% of employees have some sort of flexible arrangement in place, evenly spread across both males and females (target >75%).
> Our continued strategic focus on gender balance is having a positive impact on gender pay parity, the organisation-wide pay
and by-level gaps continue to decrease and the like-for-like gender pay gap is zero for the third year (target = 0 like-for-like).
> Attrition of employees identified as key talent is 4 per cent, which is well within range of less than 10 per cent (target >90% retention).
The Hatch innovation program is a platform to facilitate a strategic approach to innovation at Mirvac and ensure it is supported by a
robust innovation process, funding, resources, and innovation strategy. Some of the mission highlights for FY19:
> 3 start-ups created by intrapreneurs focused across the following industries: construction tech, agri-tech (Cultivate) and retail
(The Third Space). One initiative spun out with a Mirvac employee as co-founder;
> Strengthened Mirvac’s innovation culture via 25 per cent of the workforce trained in our Hatch methodology and involvement
with over 60 business projects;
> Reinforced Mirvac’s customer centric culture with over 2,200 customer interactions aimed at solving ‘jobs to be done’ and pain points.
Sustainability
The Group achieved a sustainability score of
93 per cent against a hurdle of 80 per cent.
Following the refresh of the sustainability
strategy in FY18, each division focused on
the ESG areas that align with their social and
environmental impacts and capabilities. This
has enabled progress on key areas, including:
> Launching Mirvac’s first Social Return on
Investment (SROI) report and distributing
that report to ESG-interested investors
> Developing Mirvac’s community
engagement standard
> A significant increase in community investment
reporting and for-purpose procurement
> Launching Planet Positive, Mirvac’s plan to
reach net positive in carbon by 2030
> Understanding enterprise-wide climate risk and
reporting under the Task Force on Climate-
related Financial Disclosures framework
> Preparing to manage modern slavery and
other human rights issues in the supply chain.
The focused approach has been well-received by
the market through ongoing recognition of our
ESG performance, with Macquarie Bank rating
MGR in the top performance quintile, CGI Glass
Lewis naming Mirvac an ESG leader, and JPM
ranking Mirvac the number 1 ESG company in
Australia in their ESGQ Australia ladder.
Mirvac won various sustainability
awards, including:
> Two PCA Innovation and Excellence Awards,
including the award for Best Sustainable
Development for the EY Centre, and the
Best Sustainable Development – Existing
Buildings for 23 Furzer Street
> 2018 Green Globe Built Environment Award,
in recognition of the Bay Centre, Pyrmont
Mirvac also achieved a number of
industry leading sustainability ratings
in its office portfolio, including:
> 1 Darling Island, Pyrmont –
6 Star NABERS Energy rating,
without the use of GreenPower
> 200 George Street, Sydney –
6 Star Green Star Performance rating
> 275 Kent Street, Sydney –
a recertified 6 Star Green
Star Performance rated building
HSE
Mirvac’s thorough and proactive approach
to safety resulted in another year of positive
results in FY19. We have continued to see a
steady improvement of both the lost time
injury frequency rate (LTIFR) and the critical
incident frequency rate (CIFR). More details
can be found in the Safety section, page 32.
LTI vesting outcome for Executive KMP in FY19 = 100% of targetAverage STI in FY19 for other eligible Executives FY19 = 131% of targetCEO/MD STI outcome in FY19 = 128% of target 58
Remuneration report
continued
5 EXECUTIVE KMP REMUNERATION AT MIRVAC
Mirvac’s executive remuneration approach is strongly performance focused. A significant proportion of executive remuneration is based on sustained
performance, aligned with the business strategy.
Executive remuneration at Mirvac is:
> performance based:
>
>
the remuneration package for the CEO/MD is 70 per cent performance related pay;
the remuneration package for other Executive KMP is, on average, 58 per cent performance related pay; and
is therefore at risk;
> equity focused:
> 52 per cent of the CEO/MD’s total remuneration is paid in equity; and
> about one-third of other Executive KMP members’ total remuneration is paid in equity;
> encouraging an ownership mindset: as a minimum securityholding:
the CEO/MD is required to hold 150 per cent of fixed remuneration as Mirvac securities; and
>
> all other Executive KMP are required to hold 100 per cent of their fixed remuneration as Mirvac securities; and
> multi-year focused:
> 50 per cent of STI deferral is subject to a one-year holding lock and the remaining 50 per cent to a two-year holding lock; and
> LTI performance is measured over a three-year period.
The graphs below set out the remuneration structure and mix for the CEO/MD and other Executive KMP members at Mirvac:
CEO/MD
Performance Dependent
Fixed remuneration
30%
Target STI
24%
Maximum LTI 2
46%
Cash
18%
Deferred 1
6%
Relative TSR
(40% of award)
18%
ROIC
(60% of award)
28%
Other Executive KMP
Performance Dependent
Fixed remuneration
42%
Target STI
31%
Cash
23%
Maximum LTI 2
27%
Deferred 1
8%
Relative TSR
(40% of award)
11%
ROIC
(60% of award)
16%
1. Deferred STI: 50 per cent deferred for 12 months and 50 per cent deferred for 24 months. Subject to clawback.
2. LTI granted as performance rights with performance measured over a three-year period. Subject to clawback.
6 HOW REMUNERATION IS STRUCTURED
MARKET POSITIONING OF FIXED AND TOTAL REMUNERATION
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.
Fixed remuneration acts as a base-level reward for a competent level of performance. It includes cash, compulsory superannuation and any salary-
sacrificed items (including fringe benefits tax). Fixed remuneration at Mirvac is targeted at the median (50th percentile), with flexibility based on:
>
>
>
>
> market pay levels for comparable roles.
the size and complexity of the role;
the criticality of the role to successful execution of the business strategy;
role accountabilities;
skills and experience of the individual; and
Total target remuneration (being fixed remuneration, STI and LTI) 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 exceed stretch targets.
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. From time to time, the Board engages its independent remuneration advisor to provide remuneration benchmarking data as input into setting
remuneration for Executive KMP. Refer section 15, Page 70.
For business roles
> primary comparison group: A-REIT, plus Lendlease; and
>
secondary comparison group: general industry with a similar market capitalisation (50 per cent to 200 per cent of Mirvac’s 12-month average
market capitalisation).
MIRVAC GROUP ANNUAL REPORT 2019 59
For corporate roles
> primary comparison group: general industry with a similar market capitalisation (50 per cent to 200 per cent of Mirvac’s 12-month average market
capitalisation). The use of general industry reflects the greater transferability of skills for these roles; and
secondary comparison group: specific peers in the A-REIT, plus Lendlease.
>
STI: HOW DOES IT WORK?
Purpose
Eligibility
Target, minimum
and maximum STI
opportunity
Group STI scorecard/
pool funding
Motivate and reward employees for contributing to the delivery of annual business performance.
All permanent Mirvac employees are eligible to participate in the STI plan, subject to having more than three months’ active service
during the financial year and remaining employed on, or not having provided notice of termination before, the award date.
A target STI is set for each individual, which will be earned if Group and individual performance meets the stretch targets. Actual
STI awards depend on Group and individual performance but can range from zero up to the maximum of 200 per cent of the
target opportunity.
Gateway: Group operating profit must be at least 90 per cent of plan before any STI payments are made.
The STI pool funding is calculated based on operating profit and ROIC (both with 50 per cent weighting) and moderated by the
Board, based on achievement of strategic objectives. The targets for the individual strategic objectives are not disclosed as some are
commercially sensitive; however, our performance against targets will be disclosed retrospectively as we have done this year on pages
56 and 57. The objectives are quantitative in nature and are set in line with the short- and medium-term strategic objectives.
Category
Financial
measures
Measure
Rationale for using
Measurement
Operating
profit
ROIC
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.
For both financial performance measures on
the Group STI scorecard, a threshold, plan
and stretch goal is set at the start of the
financial year, with the outcome calculated
based on the following scale:
Performance level
Group STI score
% target
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