Mirvac Property Trust 2020
MIRVAC PROPERTY TRUST
AND ITS CONTROLLED ENTITIES
Annual Report
For the year ended 30 June 2020
The consolidated entity comprises Mirvac Property Trust (ARSN 086 780 645) and its controlled entities.
Index
Directors' report
Auditor’s independence declaration
Consolidated financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor’s report to the unitholders of Mirvac Property Trust
Page
2
7
8
9
10
11
12
13
43
44
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2020
DIRECTORS’ REPORT
The Directors of Mirvac Funds Limited (ABN 70 002 561 640, AFSL 233121), the Responsible Entity of Mirvac Property Trust
(MPT or Trust), present their report, together with the consolidated report of MPT (ARSN 086 780 645) and its controlled
entities (consolidated entity) for the year ended 30 June 2020.
MPT and its controlled entities together with Mirvac Limited and its controlled entities form the stapled entity, Mirvac Group
(Mirvac or Group).
Responsible Entity
The Responsible Entity of the Trust is Mirvac Funds Limited, an entity incorporated in New South Wales. The immediate parent
entity of the Responsible Entity is Mirvac Woolloomooloo Pty Limited (ABN 44 001 162 205), incorporated in New South Wales,
and its ultimate parent entity is Mirvac Limited (ABN 92 003 280 699), incorporated in New South Wales.
Directors
John Mulcahy
The following persons were Directors of Mirvac Funds Limited during the whole of the year and up to the date of this report,
unless otherwise stated:
·
· Susan Lloyd-Hurwitz
· Christine Bartlett
· Peter Hawkins
·
Jane Hewitt
·
James M. Millar AM
· Samantha Mostyn
· Peter Nash
·
John Peters (resigned on 19 November 2019)
· Elana Rubin (resigned on 19 November 2019)
Principal activities
The principal continuing activities of the consolidated entity consist of property investment for the purpose of deriving rental
income and investments in unlisted funds. There has been no significant change in the principal activities of the consolidated
entity during the year.
REVIEW OF OPERATIONS AND ACTIVITIES
FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS
Notwithstanding the impact of the COVID-19 global pandemic, which began to create challenging operating conditions
across the consolidated entity’s business from the third quarter, the consolidated entity has recorded a solid performance for
the financial year ended 30 June 2020. The consolidated entity’s robust capital position entering into the pandemic, ensured
it remained resilient in the face of significant disruption. Despite the economic and financial impacts of COVID-19, the
consolidated entity continued to capitalise on strategic, value accretive, investment opportunities. This, together with a focus
on our people and their ability to maintain productivity, mitigated the impact of COVID-19 on the consolidated entity and will
support the recovery process.
Key financial highlights for the year ended 30 June 2020:
·
·
·
·
profit attributable to the stapled unitholders of MPT of $538.4 million (2019: $893.1 million);
operating cash inflow of $372.2 million (2019: $434.8 million);
distributions of $358.0 million (2019: $440.3 million), representing 9.1 cents per stapled unit (2019: 11.6 cents per stapled
unit); and
net tangible assets per stapled unit of $2.22, up from $2.17 (June 2019).
Refer to the consolidated statement of financial position and notes to the consolidated financial statements, for the
consolidated entity’s value of assets and basis used to value its assets.
Key capital management highlights for the year ended 30 June 2020:
The consolidated entity’s capital structure is monitored at the Group level. Key capital management highlights relating to the
Group include:
·
·
entered into $810.0 million of new debt facilities with maturities ranging from 3 to 4.5 years;
reduced average borrowing costs at 4.0 per cent per annum (2019: 4.8 per cent), including margins and line fees;
2
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2020
FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS (continued)
Key capital management highlights for the year ended 30 June 2020 (continued):
gearing of 22.8 per cent, at the lower end of the Group’s target range of 20 to 30 per cent;
substantial liquidity of $14.0bn in cash and committed undrawn bank facilities;
·
·
· weighted average debt maturity is 6.7 years (June 2019: 8.5 years); and
· maintained an A- rating with a stable outlook from Fitch Ratings and A3 rating from Moody’s Investors Service (equivalent
to A-).
Key operational highlights for the year ended 30 June 2020:
·
·
·
investment property revaluations provided an uplift of $154.5 million for the 12 months to 30 June 2020;
completed the sale of St Mary’s Village for $68.0 million in December 2019;
477 Collins Street, Melbourne: achieved practical completion, despite COVID-19 related restrictions and enhanced health
and safety measures in place from March 2020. The building is now 96 per cent pre-leased;
·
· South Eveleigh, Sydney: achieved practical completion for The Foundry (Building 2) in May 2020, on schedule despite
COVID-19 restrictions in place on site. This is the third building to be delivered at the precinct, following Axle (Building 1)
and Yerrabingin House (Building 3), a community centre with Indigenous rooftop farm. Mirvac has also delivered a public
realm including sports courts, an oval and skatepark, and retail, at the precinct. The project’s major tenant, Commonwealth
Bank of Australia, has pre-committed to 100 per cent of office space for a 15‑year lease term;
80 Ann Street, Brisbane: construction has progressed and practical completion remains on track for the 30 June 2022
financial year. 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 net lettable area (NLA), for a 10‑year term.
383 La Trobe Street, Melbourne: lodged a planning application for a new commercial precinct with 44,000 square metres
of A-grade office space over 31 levels, accommodating up to 4,000 future workers once complete;
55 Pitt Street, Sydney: lodged a proposal for a new commercial tower with the potential to deliver approximately 60,000
square metres of premium commercial and retail space;
·
·
· Toombul, Brisbane: completed a $43m, 4,500 square metre redevelopment delivering a new dining and entertainment
precinct, anchored by Archie Brothers, Cirque Electriq and an upgraded cinema; and
· Moonee Ponds Central, Melbourne: completed and opened a vibrant new dining destination and outdoor plaza with
communal seating designed to servicing a rapidly growing and diversifying local population.
Outlook and risks
The consolidated entity’s diversified urban portfolio ensures it is well placed for the future. Rental cash flows are supported by
a modern investment portfolio with strong metrics. This underpins the consolidated entity’s future distributions and drives
positive return on invested capital.
Office:
The onset of the pandemic and recent shift to working from home for many white-collar industries is likely to result in both
cyclical and structural changes for the office sector. Declining corporate profit and softer business confidence nearer term will
impact net absorption of office space as it has done in past cycles, while the structural impacts on tenant demand will take
some time to become clear.
Various research indicates both the importance of the workplace for collaboration and culture building, which is especially
important for onboarding. In addition, through the pandemic more research has come to light highlighting that both the
propensity and ability to work from home differs markedly by both age and income, with young people and those in the lower
income brackets experiencing more difficulties. As such, a hybrid model of both working from home and workplace is likely to
be more common in future.
While the expectations of office workers has changed, so too has the expectation of their employers. The demand for modern
space offerings involves not just collaborative spaces, but ultimate flexibility for tenants in integrating systems and their
preferred technology solutions which can vary widely from areas such as cyber security to air filtration. Of equal importance is
rising demand from occupants for access to data on their tenancy in order to measure their environmental impact and optimise
their space. These changing requirements of tenants are not easily achieved in older prime assets and are likely to result in
better leasing outcomes for new, well located and technologically advanced office assets.
Industrial:
The pandemic has resulted in some positive structural tailwinds for the industrial sector, both from increased levels of online
spending and some disruption to supply chain. This is likely to result in some increased inventory and space needs. Near term
there are some headwinds for occupancy demand from some sectors given economic weakness and a slowdown in housing
construction. However, Sydney is well placed to perform well given it is Australia’s largest city and undergoing multi-billion
dollar, new road investment. Supply-side constraints are more prevalent in Sydney than other Australian cities and there is a
significant volume of aged, inefficient stock. As such, a pipeline of well located, high quality precinct stock is likely to
outperform.
3
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2020
FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS (continued)
Retail:
The nearer term impact to retail will largely be driven by the direction of COVID-19 and the ability for community transmission
to be contained. Higher frequency datasets provide clues to the future outlook. As restrictions were eased in Australia and
around the world during May and June, visitation to physical retail outlets increased significantly. In locations where community
transmission has been minimal for some time, the visitation and dwell time at retail destinations has been climbing higher with
some in Australia back to or near their mid-February levels as of late July, according to Google Mobility. Also, expenditure
patterns including from the Commonwealth Bank of Australia showed physical store spend recovered sharply in May, though
the composition of spend by category has diverged. Households are likely to continue spending strongly on household goods
during the pandemic, though large recoveries in spend for categories like restaurants and personal care have been evident
once restrictions eased.
Over the next year, higher unemployment and underemployment will constrain discretionary spending. In an environment of
challenged leasing conditions, tenants are seeking access to large trade area populations in quality assets.
Significant changes in the state of affairs
Details of the state of affairs of the consolidated entity are disclosed within the Review of Operations and Activities section
above.
The impacts of the COVID-19 pandemic to the consolidated entity are outlined throughout the annual report and
summarised under Note A - Basis of Preparation.
Interests in the Trust
Total ordinary stapled units issued
Stapled units issued under Long-Term Incentive Plan (LTI) and Employee Incentive
Scheme (EIS)
Total stapled units issued
2020
No. units
m
3,932.7
1.6
3,934.3
2019
No. units
m
3,909.4
1.7
3,911.1
Refer to note E2 to the consolidated financial statements for the consolidated entity’s movements in stapled units during the
financial year. This includes any stapled units issued and withdrawn during the financial year.
Instruments held by Directors
Particulars of Directors’ interests in the stapled securities of Mirvac or a related body corporate, are as follows:
Mirvac stapled
securities
Director
105,172
John Mulcahy
4,402,940
Susan Lloyd-Hurwitz
55,172
Christine Bartlett
596,117
Peter Hawkins
Jane Hewitt1
20,000
55,172
James M. Millar AM
Samantha Mostyn2
48,705
Peter Nash3,4
33,448
Former Non-Executive Key Management Personnel (KMP)
John Peters5
Elana Rubin6
1.
Jane Hewitt joined the Board as a Non-Executive Director on 10 December 2018.
-
-
Performance rights/rights
to acquire stapled
securities
-
2,149,864
-
-
-
-
-
-
Interests in securities of
related entities or related
bodies corporate
-
-
-
-
-
-
-
-
-
-
-
-
2.
Samantha Mostyn participates in the voluntary Non-Executive Director Fee Sacrifice Rights Plan. In addition to the above securities, she has 6,042 rights which will
automatically be converted to Mirvac securities in the first trading window of the 30 June 2021 financial year which when added to her current securityholding will result in her
exceeding the minimum securityholding requirement.
Peter Nash joined the Board as a Non-Executive Director on 19 November 2018.
Peter Nash participates in the voluntary Non-Executive Director Fee Sacrifice Rights Plan. In addition to the above securities, he has 7,551 rights which will automatically be
converted to Mirvac securities in the first trading window of the 30 June 2021 financial year.
John Peters ceased as a Non-Executive Director on 19 November 2019.
Elana Rubin ceased as a Non-Executive Director on 19 November 2019.
3.
4.
5.
6.
4
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2020
Refer to note H3 to the consolidated financial statements for detailed information regarding Directors’ and key management
personnel’s interest in the stapled securities of Mirvac including any options granted and exercised over unissued stapled
securities.
Fees paid to the Responsible Entity or its associates
Fees paid to the Responsible Entity out of Trust property during the year were $31.6 million (2019: $20.2 million). Fees charged
by the Responsible Entity represent recovery of costs. No fees were paid out of Trust property to the Directors of the
Responsible Entity during the year. Fees paid to the Responsible Entity and its associates out of Trust property during the
year are disclosed in note H4 to the consolidated financial statements.
Net current asset deficiency
As at 30 June 2020, the Trust was in a net current liability position of $195.4 million (2019: $422.3 million). The Trust repays
its borrowings with excess cash, but had access to $734.0 million of unused borrowing facilities at 30 June 2020 (2019:
$1,053.0 million). Accordingly, the Directors of the Responsible Entity expect that the Trust will have sufficient cash flows to
meet all financial obligations as and when they fall due.
Matters subsequent to the end of the year
The consolidated entity acquired the remaining 50% interest of South Village, Kirrawee NSW retail centre from a related party
of the Responsible Entity for $48.5m on 31 July 2020.
In the event the COVID-19 pandemic impacts are more severe or prolonged than anticipated, this may have further
adverse impacts on the recoverability and fair value of assets post 30 June 2020. The additional restrictions
implemented in early August 2020 in Victoria as a result of the sudden increased number of COVID-19 cases has
not had any significant impacts on the consolidated entity’s operations to date and is not expected to have a
material impact on the recoverability or fair value of the consolidated entity’s assets.
No other events have arisen since the end of the year which have significantly affected or may significantly affect the
operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future
years.
Environmental regulations
The consolidated entity and its business operations are subject to compliance with both Commonwealth and State environment
protection legislation. The Board is satisfied that adequate policies and procedures are in place to ensure the consolidated
entity’s compliance with the applicable legislation. In addition, the consolidated entity is also subject to the reporting
requirements of the National Greenhouse and Energy Reporting Act 2007 and Building Energy Efficiency Disclosure Act 2010.
The consolidated entity is not aware of any incidents that have resulted in material non-compliance with environmental
regulations during the financial year.
More information on Mirvac’s sustainability strategy, actions and performance for the year ended 30 June 2020 can be found
in the 30 June 2020 Annual Report of the Group.
Non-audit services
From time to time, the consolidated entity 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 2020 are set out in note H6 to the consolidated financial statements.
In accordance with the advice received from the Audit, Risk & Compliance Committee (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 Trust, acting as advocate for the Trust
or jointly sharing economic risk and rewards.
·
5
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2020
Insurance of officers
During the year, the Responsible Entity has not indemnified, or entered into any agreement indemnifying against a liability,
any person who is or who has been an officer of the Responsible Entity of the Trust. No insurance premiums are paid for out
of the assets of the Trust in regards to insurance cover provided to Mirvac Funds Limited.
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 7 and forms part of the Directors’ report.
Rounding of amounts
The amounts in the financial statements have been rounded off to the nearest tenth of a million (m) dollars in accordance with
the ASIC Corporations Instrument 2016/191.
This statement is made in accordance with a resolution of the Directors.
Susan Lloyd-Hurwitz
Director
Sydney
20 August 2020
6
Auditor’s Independence Declaration
As lead auditor for the audit of Mirvac Property Trust for the year ended 30 June 2020, I declare that
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to
the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Mirvac Property Trust and the entities it controlled during the period.
Jane Reilly
Partner
PricewaterhouseCoopers
Sydney
20 August 2020
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
7
Mirvac Property Trust and its controlled entities
Consolidated financial statements
For the year ended 30 June 2020
CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
9
10
11
12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A BASIS OF PREPARATION
B RESULTS FOR THE YEAR
B1 Segment information
B2 Revenue
B3 Expenses
B4 Events occurring after the end of the year
B5 Income tax
C INVESTMENT ASSETS
C1 Investment properties
C2 Investments in joint ventures
C3 Commitments
D CAPITAL STRUCTURE AND RISKS
D1 Capital management
D2 Borrowings and liquidity
D3 Financial risk management
D4 Fair value measurement of financial
instruments
E EQUITY
E1 Distributions
E2 Contributed equity
E3 Reserves
13
19
19
20
20
20
21
26
27
28
28
29
31
32
32
33
F OPERATING ASSETS AND LIABILITIES
F1 Receivables
F2 Other financial assets
F3 Goodwill
F4 Payables
F5 Provisions
G CONSOLIDATED ENTITY STRUCTURE
G1 Controlled entities
G2 Parent entity
H OTHER DISCLOSURES
H1 Contingent liabilities
H2 Earnings per stapled unit
H3 Key management personnel
H4 Related parties
H5 Reconciliation of profit to operating
cash flow
H6 Auditors’ remuneration
33
34
35
36
36
36
38
38
38
39
41
41
42
These financial statements cover the financial statements for the consolidated entity consisting of Mirvac Property Trust and
its controlled entities. The financial statements are presented in Australian currency.
The Responsible Entity of Mirvac Property Trust is Mirvac Funds Limited (ABN 70 002 561 640, AFSL 233121), a company
limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are:
Mirvac Funds Limited
Level 28
200 George Street
Sydney NSW 2000.
A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ report
on pages 2 to 6, both of which are not part of these financial statements.
The financial statements were authorised for issue by the Directors on 20 August 2020. The Directors have the power to
amend and reissue the financial statements.
Through the use of the internet, the Trust has ensured that its corporate reporting is timely and complete. All press releases,
financial reports and other information are available in the Investor Centre section on the Group’s website.
8
Mirvac Property Trust and its controlled entities
Consolidated statement of comprehensive income
For the year ended 30 June 2020
Revenue
Other income
Net revaluation gain from investment properties and investment properties under
construction
Share of net profit of joint ventures
Gain on financial instruments
Net gain on sale of assets
Total other income
Total revenue and other income
Investment property expenses and outgoings
Amortisation expenses
Impairment loss on receivables
Finance costs
Responsible Entity fees
Other expenses
Profit before income tax
Income tax expense
Profit for the year attributable to stapled unitholders
Other comprehensive income that may be reclassified to profit or loss
Other comprehensive income for the year
Total comprehensive income for the year attributable to stapled
unitholders
Earnings per stapled unit attributable to stapled unitholders
Basic earnings per stapled unit
Diluted earnings per stapled unit
Note
B2
C1
C2
B2
B3
B3
B3
H4
B5
H2
H2
2020
$m
693.8
154.5
30.9
7.6
18.4
211.4
905.2
182.8
53.6
41.5
52.9
31.6
4.4
538.4
-
538.4
2019
$m
663.5
523.3
17.3
5.1
-
545.7
1,209.2
180.7
39.4
-
72.4
20.2
3.4
893.1
-
893.1
-
-
538.4
893.1
Cents
13.7
13.7
Cents
24.2
24.2
The above consolidated statement of comprehensive income (SoCI) should be read in conjunction with the accompanying
notes.
9
Mirvac Property Trust and its controlled entities
Consolidated statement of financial position
As at 30 June 2020
Current assets
Cash and cash equivalents
Receivables
Other assets
Total current assets
Non-current assets
Investment properties
Investments in joint ventures
Other financial assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Lease liabilities
Payables
Provisions
Total current liabilities
Non-current liabilities
Lease liabilities
Payables
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity attributable to the stapled unitholders
Note
F1
C1
C2
F2
F3
F4
F5
F4
D2
E2
E3
2020
$m
26.9
18.2
17.4
62.5
10,187.3
465.3
65.6
42.8
10,761.0
10,823.5
0.1
139.8
118.0
257.9
6.9
29.0
1,766.0
1,801.9
2,059.8
8,763.7
5,367.2
5.4
3,391.1
8,763.7
2019
$m
16.9
14.2
14.6
45.7
9,846.2
461.3
58.0
42.8
10,408.3
10,454.0
-
221.6
246.4
468.0
-
6.5
1,447.0
1,453.5
1,921.5
8,532.5
5,316.4
5.4
3,210.7
8,532.5
The above consolidated statement of financial position (SoFP) should be read in conjunction with the accompanying notes.
10
Mirvac Property Trust and its controlled entities
Consolidated statement of changes in equity
For the year ended 30 June 2020
Balance 30 June 2018
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as owners
Unit-based payments
Expense recognised – Employee Exemption Plan
(EEP)
Long-term incentives (LTI) vested
Legacy schemes vested
Stapled units issued net of transaction costs
Stapled unit buy-back
Distributions
Total transactions with owners in their capacity as
owners
Balance 30 June 2019
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners in their capacity as
owners
Unit-based payments
Expense recognised – EEP
LTI vested
Legacy schemes vested
Stapled units issued net of transaction costs
Distributions
Total transactions with owners in their capacity as
owners
Balance 30 June 2020
Note
Attributable to stapled unitholders
Contributed
equity
$m
4,775.9
-
-
-
Reserves
$m
5.4
-
-
-
Retained
earnings
$m
2,757.9
893.1
-
893.1
Total
equity
$m
7,539.2
893.1
-
893.1
E2
E2
E2
E2
E2
E1
E2
E2
E2
E2
E1
1.0
7.4
0.7
645.0
(113.6)
-
540.5
5,316.4
-
-
-
0.9
9.6
0.6
39.7
-
-
-
-
-
-
-
-
-
-
-
-
(440.3)
1.0
7.4
0.7
645.0
(113.6)
(440.3)
-
5.4
(440.3)
3,210.7
100.2
8,532.5
-
-
-
-
-
-
-
-
538.4
-
538.4
538.4
-
538.4
-
-
-
-
(358.0)
0.9
9.6
0.6
39.7
(358.0)
50.8
5,367.2
-
5.4
(358.0)
3,391.1
(307.2)
8,763.7
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
11
Note
C2
B3
H5
D4
Mirvac Property Trust and its controlled entities
Consolidated statement of cash flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
Distributions received from joint ventures
Distributions received
Interest paid
Net cash inflows from operating activities
Cash flows from investing activities
Payments for investment properties
Proceeds from sale of investment properties
Proceeds from sale of controlled entity
Proceeds from loans to unrelated parties
Contributions to joint ventures
Payments for acquisition of controlled entity, net of cash acquired
Payments for financial assets
Net cash outflows from investing activities
Cash flows from financing activities
Proceeds from loans from entities related to Responsible Entity
Repayments of loans to entities related to Responsible Entity
Proceeds from issue of stapled units
Payments for equity raising costs
Payments for stapled unit buy-back
Principal elements of lease payments
Distributions paid
Net cash (outflows)/inflows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2020
$m
632.3
(220.5)
411.8
-
27.9
1.8
(69.3)
372.2
(374.7)
130.3
-
-
(0.2)
-
-
(244.6)
726.0
(407.0)
49.9
-
-
(0.1)
(486.4)
(117.6)
10.0
16.9
26.9
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
2019
$m
718.1
(243.8)
474.3
0.1
43.5
1.8
(84.9)
434.8
(794.1)
-
191.6
79.7
-
(157.4)
(13.0)
(693.2)
1,403.5
(1,278.5)
663.9
(10.3)
(113.6)
-
(416.5)
248.5
(9.9)
26.8
16.9
12
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
A BASIS OF PREPARATION
Mirvac Group – stapled securities
A Mirvac Group stapled security comprises one Mirvac Limited share ‘stapled’ to one unit in the Trust to create a single listed
security traded on the Australian Securities Exchange (ASX). The stapled securities cannot be traded or dealt with separately.
Mirvac Limited (the deemed parent entity) and Mirvac Funds Limited (as Responsible Entity for MPT) have common directors
and operate as Mirvac Group. Mirvac Limited and MPT have a Deed of Cooperation to recharge each other on a cost recovery
basis, where permitted by law, to maintain the best interests of Mirvac as a whole.
The stapled security structure will cease to operate on the first of:
· Mirvac Limited or MPT resolving by special resolution in a general meeting, and in accordance with its Constitution, to
terminate the stapled security structure; or
· Mirvac Limited or MPT commencing winding up.
The ASX reserves the right (but without limiting its absolute discretion) to remove entities with stapled securities from the
official list if their securities cease to be stapled together, or either entity issues any equity securities of the same class which
are not stapled.
Mirvac Limited and MPT remain separate legal entities in accordance with the Corporations Act 2001. For accounting
purposes, Mirvac Limited has been deemed the parent entity of Mirvac Group.
Statement of compliance
These consolidated financial statements are general purpose financial statements. They have been prepared in accordance
with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board,
the Corporations Act 2001 and International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
Basis of preparation
The consolidated entity is a for-profit entity for the purpose of preparing the financial statements.
These financial statements have been prepared on a going concern basis, using historical cost conventions except for:
·
investment properties, investment properties under construction and other financial assets and financial liabilities which
have been measured at fair value; and
assets held for sale which are measured at lower of carrying value and fair value less costs to sell.
·
All figures in the financial statements are presented in Australian dollars and have been rounded off to the nearest tenth of a
million dollars in accordance with ASIC Corporations Instrument 2016/191, unless otherwise indicated.
13
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
Impact of COVID-19 on the consolidated entity
The World Health Organization declared a global pandemic in March 2020 as a result of the novel coronavirus
(COVID-19), the effects of this health crisis are continuing to unfold, and the extent of the social, medical and
economic impacts worldwide are unknown. The consolidated entity has considered the impact of COVID-19 in
preparing its financial report for the year.
The critical accounting estimates and key judgements areas of the consolidated entity have required additional
consideration, analysis and sensitivity due to the impact of COVID-19. Given the uncertainty of the extent of the
pandemic, changes to the estimates and outcomes that have been applied in the measurement of the
consolidated entity’s assets and liabilities may arise in the future. Other than adjusting events that provide
evidence of conditions that existed at the end of the financial year, the impact of events that arise after the
reporting period will be accounted for in future reporting periods.
In the real estate sector, the pandemic has accelerated some trends already gaining momentum such as
increased demand for online shopping, whilst other trends including the densification of office and living spaces
have experienced the reverse as social distancing measures gain importance in the fight against the pandemic.
The Government also introduced a National Cabinet Mandatory Code of Conduct for SME commercial tenants
(the Code) which outlined a framework by which lessors and impacted tenants should negotiate in response to
the pandemic.
It is expected that the severity of the effects of the pandemic for the real estate sector will continue to be impacted
as a result of the extent and duration of social distancing measures and specifically the impacts of the
consolidated entity across the segments in which it operates, these are summarised below:
Office & Industrial
The return-to-office rate varies by state, with Victoria undergoing an extended lockdown from July 2020,
and by employer, as workers are facing public transport challenges and social distancing challenges in the
workplace. Some tenants are reassessing their office footprint in light of the work from home mandate and
an opportunity to reduce costs as a result, however, to date the consolidated entity has not experienced a
significant decline in demand for office space.
The Industrial portfolio has benefited from the increase in online sales particularly for logistics and e-
commerce tenants and as a whole the sector has exhibited a degree of resilience during the pandemic.
Retail
Supermarkets had experienced a surge in sales as a result of panic buying across the country and from
people staying in rather than dining out. Conversely, Government mandated closures for some specific
industries had resulted in a temporary cessation of trade for those retailers and others who voluntarily
closed during the peak months of April through to June 2020. As a result of those closures and reduced
patronage in the consolidated entity’s shopping centres, a number of retailers sought rental relief from the
consolidated entity.
The impact of COVID-19 increases the level of judgement required across a number of key areas for the
consolidated entity, in particular the recognition and measurement of the assets of the consolidated entity. The
COVID-19 assumptions and considerations for the critical accounting estimates and key judgements areas of
the consolidated entity, are outlined in further detail in the following sections of this financial report:
Revenue – Refer to Note B2
Investment in Joint Ventures – Refer to
Note C3
Expenses – Refer to Note B3
Borrowings – Refer to Note D2
Investment Properties – Refer to
Note C1 and C2
Expected Credit Loss – Refer to Note F1
Intangible Assets – Refer to Note F3
14
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
Going Concern
The consolidated entity has prepared an assessment of its ability to continue as a going concern, considering
projected cash flow forecasts and other consolidated entity metrics and information for at least the next twelve
months from the date of these financial statements, taking into consideration an estimation of the continued business
impacts of COVID-19. This assessment assumes the consolidated entity will be able to continue trading and realise
assets and discharge liabilities in the ordinary course of business for at least 12 months from the date of these
financial statements.
As of 30 June 2020, consolidated entity was in a net current liability position of $195.4 million. However, it had
access to $734.0 million of unused borrowing facilities maturing in 3 years. As of 30 June 2020, the consolidated
entity had $12.4 million of capital commitments.
Further, various forecast scenarios indicate that the consolidated entity is expected to continue to operate, with
headroom, within available liquidity levels and the terms of its debt facilities. Key to the forecasts are relevant
assumptions regarding the business, the consolidated entity’s integrated model, the markets in which the
consolidated entity operates in, the consolidated entity’s customers and tenants and its access to various sources
of capital.
These assumptions have been supported by the following:
• the consolidated entity has cash of $26.9 million as at 30 June 2020 and has available undrawn debt facilities of
$734.0 million;
• the consolidated entity’s limited tenant and investment exposure to the severely impacted industries of hospitality,
travel, accommodation and tourism;
• the consolidated entity’s weighted average debt expiry is 6.7 years;
• the consolidated entity’s gearing is monitored at the Group level and at 30 June 2020 is at 22.8%;
• the consolidated entity does not expect any potential covenant breaches for a period of 12 months from the date
of approval of these financial statements.
Comparative Information
Where necessary, comparative information has been restated to conform to the current year’s disclosures and are
presentational in nature. These restatements had no impact to the reported net assets or profit for the year ended 30 June
2019.
15
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
Critical accounting estimates and judgements
The preparation of financial statements requires estimation and judgement. The areas involving a higher degree of estimation
or judgement are discussed in the following notes:
Revenue
Investment properties
Investments in joint ventures
Note
B2
C1
C2
Fair value measurement of financial instruments
Goodwill
Note
D4
F3
New and amended standards adopted by the Trust
This section explains the impact of the adoption of AASB 16 Leases on the consolidated entity’s financial statements and
discloses the new accounting policies that have been applied from 1 July 2019.
Accounting
standard
Nature of
change
Application
Impact on
financial
statements
AASB 16 Leases
AASB 16 sets out the principles for the recognition, measurement, presentation and disclosure of
leases. This standard results in almost all leases being recognised on the consolidated SoFP of
lessees, as the distinction between operating and finance leases is removed. Under the new
standard, an asset (the right to use the leased item) and a financial liability to pay rentals are
recognised. The only exceptions are short-term (less than 12 months) and low-value leases.
The Trust has adopted AASB 16 retrospectively from 1 July 2019, but has not restated comparatives
previous reporting period, as permitted under the specific transition provisions in the standard. The
reclassifications and the adjustments arising from the new leasing rules are therefore recognised in
the opening consolidated SoFP on 1 July 2019.
Measurement of lease liabilities
On adoption of AASB 16, the consolidated entity recognised lease liabilities in relation to leases
which had previously been classified as ‘operating leases’ under the principles of AASB 117 Leases.
These liabilities were measured at the present value of the remaining lease payments, which
contained the following components:
·
·
·
fixed payments (including in-substance fixed payments), less any lease incentives receivable;
variable lease payments that are based on an index (CPI) or a fixed rate as outlined in the
lease, initially measured using the index (CPI) or fixed rate as at the commencement date;
and
lease payments with reasonably certain extension options.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be
readily determined, which is generally the case for leases in the consolidated entity, the lessee’s
incremental borrowing rate is used, being the rate that the individual lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar
economic environment with similar terms, security and conditions. The incremental borrowing rate is
calculated by applying the interest rate on the consolidated entity’s external borrowings for a term
near equivalent to the lease. If there are no borrowings that mature within a reasonable proximity of
the lease term, indicative pricing of where the consolidated entity can price a new debt capital market
issue for a comparative term will be used in the calculation. The weighted average incremental
borrowing rate applied to the lease liabilities on 1 July 2019 was 4.08% per annum.
Lease term
The consolidated entity determines the lease term as the non-cancellable period of a lease together
with both:
·
the periods covered by an option to extend the lease if it is reasonably certain to exercise that
option; and
periods covered by an option to terminate the lease if the lessee is reasonably certain not to
exercise that option.
·
Practical expedients applied
In applying AASB 16 for the first time, the consolidated entity has used the following practical
expedients permitted by the standard:
·
applying a single discount rate to a portfolio of leases with reasonably similar
16
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
·
·
·
characteristics;
accounting for operating leases with a remaining lease term of less than 12 months as at
1 July 2019 as short-term leases;
excluding initial direct costs for the measurement of the right-of-use asset at the date of
initial application; and
using hindsight in determining the lease term where the contract contains options to
extend or terminate the lease.
The consolidated entity has also elected not to reassess whether a contract is, or contains, a lease
at the date of initial application. Instead, for contracts entered into before the transition date the
consolidated entity relied on its assessment made applying AASB 117 and Interpretation 4
Determining whether an Arrangement contains a Lease.
Lessor accounting
The adoption of AASB 16 did not have a significant impact on the accounting for assets held as
lessor under operating leases.
Financial statement impact on adoption at 1 July 2019
There is no 1 July 2019 opening retained earnings adjustment from the Trust’s adoption of AASB 16. The movements in the
consolidated SoFP from the adoption of AASB 16 resulted from the Trust’s investment properties that are held as leasehold
being grossed up for the lease liability recognised upon adoption as shown in the table below.
The comparatives have not been restated due to the application of the modified retrospective approach. The difference
between the operating lease commitments ($nil) at 30 June 2019 and the balance of the lease liabilities ($7.1m) recognised
at 1 July 2019 reflects the inclusion of ground leases in lease liabilities. These were previously excluded from the operating
lease commitments as they form part of investment properties.
17
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
The following table shows the adjustments for AASB 16 as recognised for each individual financial statement line item. Line
items that were not affected by the changes have been included within “all other”.
Consolidated statement of financial position (extract)
Current assets
All other current assets
Total current assets
Non-current assets
Investment properties
All other non-current assets
Total non-current assets
Total assets
Current liabilities
Lease liabilities
All other current liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
All other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Retained earnings
All other equity
Total equity
30 June 2019
As originally presented
$m
Total AASB 16
impact
$m
45.7
45.7
9,846.2
562.1
10,408.3
10,454.0
-
468.0
468.0
-
1,453.5
1,453.5
1,921.5
8,532.5
3,210.7
5,321.8
8,532.5
-
-
7.1
-
7.1
7.1
0.1
-
0.1
7.0
-
7.0
7.1
-
-
-
-
1 July 2019
Restated
$m
45.7
45.7
9,853.3
562.1
10,415.4
10,461.1
0.1
468.0
468.1
7.0
1,453.5
1,460.5
1,928.6
8,532.5
3,210.7
5,321.8
8,532.5
Other amended standards and interpretations adopted by the consolidated entity for the year ended 30 June 2020 have not
had a significant impact on the current period or any prior period and are not likely to have a significant impact on in future
periods. The other amendments are listed below:
·
·
·
·
AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates and Joint
Ventures
AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements 2015-2017 Cycle
AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendment, Curtailment or Settlement
Interpretation 23 Uncertainty over Income Tax Treatments and AASB 2017-4 Amendments to Australian
Accounting Standards – Uncertainty over Income Tax Treatments
There are no other standards that are not yet effective and that would be expected to have a material impact on the
consolidated entity in the current or future reporting periods and on foreseeable future transactions.
18
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
B RESULTS FOR THE YEAR
This section explains the results and performance of the consolidated entity, including detailed breakdowns and analysis.
B1 SEGMENT INFORMATION
The consolidated entity is a single segment for reporting to the Executive Leadership Team (ELT). The ELT are the chief
operating decision makers of the consolidated entity.
The consolidated entity operates predominantly in Australia. No single customer in the current or prior year provided more
than 10 per cent of the consolidated entity’s revenue.
B2 REVENUE
The consolidated entity’s revenue is principally property rental revenue. Property rental revenue comes from holding properties
as investment properties and earning rental yields over time.
Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade allowances and
duties and taxes paid. The consolidated entity recognises revenue for the following revenue stream:
Investment property rental revenue
The consolidated entity invests in properties for rental yields and capital appreciation. Rental revenue from
investment properties is recognised on a straight-line basis over the lease term, net of any incentives. Modifications
to the leases are accounted for as a new lease from the effective date of the modification, considering any prepaid
or accrued lease payments relating to the original lease as part of the lease payments for the new lease. The
consolidated entity also provides services to the lessees which primarily consist of general building management
and operations in accordance with their lease agreements. Service income, representing the recovery of associated
costs from the lessees, are recognised over time when the services are provided.
As a result of COVID-19, the consolidated entity has or is in the process of granting rental relief to a number of its
tenants across its operating segments of Retail and Office and Industrial.
From mid-March 2020 the consolidated entity commenced a tenant focussed rental relief strategy to engage with
its tenants to ascertain the estimated extent of relief the consolidated entity’s tenants would require in light of
mandatory Government shut downs, increased social distancing measures and for the population to work from
home if possible.
Each tenant has had their rental relief request reviewed and considered on a case by case basis, with
consideration given to the Code, if applicable, and each tenant’s specific circumstance. The types of relief
provided have included rental abatements, rent free periods combined with lease extensions, rental payment
deferrals or a combination of these. Accordingly, some judgement has been required to be applied in order to
determine that the relief provided or proposed to be provided constitutes a lease modification under AASB 16
Leases.
In considering the appropriate treatment for rental relief provided or expected to be provided, the Consolidated
entity considered the following:
i.
ii.
iii.
if the lease amendment for the provision of relief by the lessor was executed on or before the reporting
date;
if the lease amendment for the provision of relief by the lessor is substantial such that the change in the
scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions
of the lease has resulted in a lease modification, irrespective of whether the Code applies to the tenancy;
and
whether the application of AASB 9 Financial Instruments is more appropriate to recognise an expected
credit loss for trade debtors at the reporting date or derecognise the debtor to the extent it will not be
realised in the future.
As a number of rental relief negotiations had not been finalised and amended leases executed by 30 June 2020,
there was minimal impact to the amount of investment property rental revenue recognised for the year. Instead,
the impact from the COVID-19 pandemic was recognised as an expense in accordance with AASB 9 Financial
Instruments and ASIC guidance, a corresponding amount of $41.5m has been included within impairment loss on
receivables.
19
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
B2 REVENUE (continued)
Revenue
Lease revenue1
Service revenue
Total property rental revenue
Interest revenue
Other revenue
Total revenue
Gain on financial instruments
Net revaluation gain on units in unlisted funds
Total gain on financial instruments
1.
Includes straight-lining of lease revenue of $10.1 million (2019: $7.2 million).
B3 EXPENSES
Investment property expenses and outgoings
2020
$m
604.9
87.5
692.4
-
1.4
693.8
7.6
7.6
2019
$m
576.7
84.7
661.4
0.1
2.0
663.5
5.1
5.1
Investment property expenses relate to those costs which are required to be incurred to allow for the occupation and
maintenance of investment properties in order to continue to earn rental revenue. Expenses include statutory levies, insurance
and other property outgoings and are recognised on an accruals basis.
Profit before income tax includes the following specific expenses:
Interest paid
Borrowing costs capitalised
Total finance costs
Bad debts expense
Loss allowance on trade debtors
Total impairment loss on receivables
Net gain on sale of assets
Net gain on sale of investment properties and investments
Total gain on sale of assets
B4 EVENTS OCCURRING AFTER THE END OF THE YEAR
2020
$m
69.3
(16.4)
52.9
5.1
36.4
41.5
18.4
18.4
2019
$m
84.9
(12.5)
72.4
-
-
-
-
-
In the event the COVID-19 pandemic impacts are more severe or prolonged than anticipated, this may have further
adverse impacts on the recoverability and fair value of assets post 30 June 2020.
COVID-19The additional restrictions implemented in early August 2020 in Victoria as a result of the sudden
increased number of cases has not had any significant impacts on the consolidated entity’s operations to date and
is not expected to have a material impact on the recoverability or fair value of the consolidated entity’s assets.
No other events have arisen since the end of the year which have significantly affected or may significantly affect the operations
of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future years.
B5 INCOME TAX
The consolidated entity’s profit is earned by trusts which are not subject to taxation. Income from the trusts is instead attributed
to unitholders who pay income tax at their marginal tax rates.
Tax allowances for depreciation are distributed to the stapled unitholders as a tax deferred component of the distribution.
20
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
C INVESTMENT ASSETS
…………………………………………………………………………………………………
This section includes investment properties and investments in joint ventures. They represent the core assets of the business
and drive the value of the consolidated entity.
C1 INVESTMENT PROPERTIES
The consolidated entity holds a property portfolio for long-term rental yields and capital appreciation. Depending on the specific
arrangements for each property, they are classified as investment properties or properties held through joint ventures.
Investment properties
Investment properties are properties owned by the consolidated entity. Investment properties include investment properties
under construction, which will become investment properties once construction is completed.
The consolidated entity accounts for its investment properties at fair value and revaluations are recognised as other income.
The fair value movements are non-cash and do not affect the consolidated entity’s distributable income.
Judgement in fair value estimation
Fair value is the price that would be received to sell an asset in an orderly transaction between market participants. Fair value
is based on the highest and best use of an asset - for all of the consolidated entity’s property portfolio, the existing use is its
highest and best use.
As a result of the COVID-19 pandemic, assessing fair value as at the reporting date involved considering
uncertainties around the underlying assumptions and inputs to fair value given the forward-looking nature of these
assumptions.
The uncertainty exists largely in the first two years of the valuation cash flow, and increases in investment
properties with higher near-term expiry and with greater proportions of SME tenants due to the potential for
increased vacancy in the market and the difficultly for SMEs to maintain turnover in the current environment.
The COVID-19 pandemic has also created unprecedented economic uncertainty, in particular the absence of a
significant level of market transactions which are ordinarily a key source of evidence for assessing the fair value
of investment properties. Australia is navigating through the impact of the COVID-19 pandemic and the length of
time it will take the measures implemented by the Government to manage the effects of COVID-19 on the broader
economy and property markets, is still unknown.
As such, the 30 June 2020 valuation process has been adjusted for the current period compared to the process
that would typically be followed and adopted in more normalised market conditions. To assist with calculating
reliable estimates, Mirvac uses independent valuers on a rotational basis. Approximately 25% of the portfolio is
independently valued each year, with management internally estimating the fair value of the remaining properties
using estimation techniques by suitably qualified personnel. As a result of a lack of market transactions and the
uncertainty provided by COVID-19, the consolidated entity increased the level of independent valuations across
its segments, particularly across the markets and asset types it invests in where the impacts from COVID-19 have
been significant. As at 30 June 2020, the consolidated entity undertook independent valuations covering 42% of
its investment property portfolio, by value and by number.
The fair values are a best estimate but may differ to the actual sales price if the properties were to be sold. The key judgements
for each valuation method are explained below:
Market sales comparison: Utilises recent sales of comparable properties, adjusted for any differences including the nature,
location and lease profile.
Currently, market sales comparison information is not readily available and can be difficult to obtain to support any
material movement in property yields across the sectors in which the consolidated entity has exposure. This is
largely due to a lack of recent transaction activity in Australia as a result of the COVID-19 pandemic. Direct similar
comparisons are typically difficult and will be more challenging to identify in the current environment.
21
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
C1 INVESTMENT PROPERTIES (continued)
Discounted cash flow (DCF): Projects a series of cash flows over the property’s life and a terminal value, discounted using
a discount rate to give the present value.
The projected cash flows incorporate expected rental income (based on contracts or market rates), operating costs, lease
incentives, lease fees, capital expenditure, and a terminal value from selling the property. The terminal value is calculated by
applying the terminal yield to the net market income. The discount rate is a market rate reflecting the risk associated with the
cash flows, the nature, location and tenancy profile of the property relative to comparable investment properties and other
asset classes.
Capitalisation rate: The rate or yield at which the annual net income from an investment is capitalised to ascertain its capital
value at a given date. The annual net income is based on contracted rents, market rents, operating costs and future income
on vacant space. The capitalisation rate reflects the nature, location and tenancy profile of the property together with current
market evidence and sales of comparable properties.
The valuations undertaken by the consolidated entity’s independent experts consider the DCF methodology to be
one of the most reliable valuation techniques to apply in the current environment, as this methodology allows the
DCF calculation to capture the impact of the COVID-19 pandemic by adjusting the future cash flows for the
expected tenant rental relief and also make assumptions on the extent and timing of recovery.
This methodology is in contrast to the capitalisation approach, where cash flows are not adjusted for risk but,
rather, risk is reflected in determining the discount rate. This discount rate inherently requires a more explicit
consideration of the wider than normal range of possible future outcomes.
The DCF methodology also requires an appropriate discount rate to be used whereby there is consistency between
the risk factors inherent in the cash flows and the risk factors accounted for in the discount rate, without double
counting of the same risk factors. This is because although it is considered more reliable to adjust the cash flow
projections in order to consider specific risk factors in the DCF model, in the current circumstances it may not be
practical to quantify the full impact in the cash flows alone.
Accordingly, the consolidated entity has in most cases used a mid-point valuation which has involved the
determination of fair value using both the DCF and capitalisation rate approaches and adopted a value that is
between these two amounts.
Investment properties under construction: There generally is not an active market for investment properties under
construction, so fair value is measured using DCF or residual valuations. DCF valuations for investment properties under
construction are as described above but also consider the costs and risks of completing construction and letting the property.
Residual: Estimates the value of the completed project, less the remaining development costs which include construction,
finance costs and an allowance for developer’s risk and profit. This valuation is then discounted back to the present value.
Ground leases
On adoption of AASB 16 on 1 July 2019, a lease liability reflecting the leasehold arrangements of investment properties needs
to be separately disclosed in the consolidated SoFP and the carrying value of the investment properties is adjusted (i.e.
increased) so that the net of these two amounts equals the fair value of the investment properties. The lease liabilities are
calculated as the net present value of the future lease payments discounted at the incremental borrowing rate.
At 30 June 2020, $7.1m of lease liabilities for ground leases has been recognised in the consolidated SoFP.
Lease liabilities are subsequently measured by:
> increasing the carrying amount to reflect interest on the lease liability;
> reducing the carrying amount to reflect the lease payments made; and
> remeasuring the carrying amount to reflect any reassessment or lease modifications.
Some ground leases contain variable payment terms that are linked to sales generated. Variable lease payments that depend
on sales are recognised in the consolidated SoCI in the period in which the condition that triggers those payments occurs.
Interest on the lease liabilities and any variable lease payments not included in the measurement of the lease liabilities are
recognised in the consolidated SoCI in the period in which they relate.
22
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
C1 INVESTMENT PROPERTIES (continued)
The key inputs and sensitivity to changes are explained below.
Lease incentives
The carrying amount of investment properties includes lease incentives provided to tenants. Lease incentives are deferred
and recognised on a straight-line basis over the lease term as a reduction of property rental income and do not change under
AASB16.
Movements in investment properties
Balance 1 July
Adoption of AASB16 – ground leases
Restated investment properties at 1 July 2019
Expenditure capitalised
Acquisitions
Disposals
Transfer from joint venture
Net revaluation gain from fair value adjustments
Ground lease liability unwind
Amortisation expenses
Balance 30 June
Total investment properties
Total investment properties under construction
Fair value measurement and valuation basis
2020
Total
$m
9,846.2
7.1
9,853.3
398.6
-
(130.5)
-
154.5
(0.1)
(88.5)
10,187.3
9,566.8
620.5
2019
Total
$m
8,274.2
-
8,274.2
522.4
278.4
-
319.0
523.3
-
(71.1)
9,846.2
9,321.5
524.7
The basis of valuation of investment properties is fair value. Fair values are based on market values, being the price that would
be received to sell an asset in an orderly transaction between market participants at the reporting date.
Investment properties are measured as Level 3 financial instruments. Refer to note D4 for explanation of the levels of fair
value measurement. The following are the unobservable inputs used in determining the fair value measurement of
investment properties. Movement in any of the unobservable inputs is likely to have an impact on the fair value of investment
property. The higher the net market income or 10-year compound annual growth rate, the higher the fair value. The higher
the capitalisation rate, terminal yield or discount rate, the lower the fair value.
Unobservable inputs
Details
Capitalisation rate
The rate at which net market income is capitalised to determine the value of
a property
Discount rate
The rate of return used to convert a monetary sum, payable or receivable in
the future, into present value.
This should reflect the opportunity cost of capital, that is, the required rate
of return the capital can earn if put to other uses having regard to a similar
risk profile.
Terminal yield
The capitalisation rate used to convert income into an indication of the
anticipated value of the property at the end of the holding period when
carrying out a discounted cash flow calculation.
Market rate and growth rate
The rent at which a tenancy could be leased in the market including rental
growth in future years at the date of valuation. Market rent includes gross
rent and net rent. Gross rent is where outgoings are incorporated in the rent
being paid. Net market rent is where the owner recovers outgoings from the
tenant on a pro-rata basis.
23
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
C1 INVESTMENT PROPERTIES (continued)
The DCF, capitalisation rate and residual valuation methods all use unobservable inputs in determining fair value; ranges of
the inputs are included below:
Level 3 fair
value
$m
Net market
income
$/sqm
10-year compound
annual growth rate
%
Capitalisation
rate
%
Terminal
yield
%
Discount
rate
%
Inputs used to measure fair value
6,375.4
878.7
2,933.2
5,890.1
839.1
3,117.0
312 – 1,573
102.5 – 486.0
304 – 1,439
300 - 1,531
117 - 470
206 - 1,374
2.64 - 3.97
2.77 - 3.05
2.03 - 3.53
3.10 - 4.00
2.92 - 3.47
2.50 - 4.04
4.63 - 6.75
4.84 - 6.50
4.75 - 8.75
4.88 - 7.25
5.25 - 7.00
5.00 - 9.00
6.25 - 7.25
6.25 - 7.50
6.50 - 9.50
4.75 - 6.50
4.88 - 6.75
4.50 - 8.00
5.00 - 7.50
5.13 - 7.00
4.75 - 8.25
6.25 - 7.75
6.75 - 7.38
6.50 - 9.50
Sector
2020
Office
Industrial
Retail
2019
Office
Industrial
Retail
Movement in any of the unobservable inputs is likely to have an impact on the fair value of investment property. The higher
the net market income or 10-year compound annual growth rate, the higher the fair value. The higher the capitalisation rate,
terminal yield or discount rate, the lower the fair value.
COVID-19 impacts on fair value measurement
Whilst the current economic climate and the impacts of the COVID-19 pandemic are still unfolding and remain
uncertain, the assessment undertaken to determine the fair value of the consolidated entity’s portfolio is based on
the assumptions and analysis performed and outlined below.
An evaluation of each investment property in the portfolio was undertaken considering the following factors:
i)
ii)
Location and asset quality across the markets that the consolidated entity invests in;
Capital expenditure including development and operational capital expenditure forecasts;
Tenancy schedules: Tenancy schedules including all contractual lease information are used as the
iii)
basis of all forecasts and valuations, specifically the contracted cash flows from the tenants and including tenant
size and weighted average lease expiry. Assets with long WALEs and a small number of large tenants are
viewed as having the least risk in valuations;
iv)
date. Passing rent refers to contractual rent as at the valuation date;
Market rents: Rents that could be achieved if tenancy was leased on the open market as at valuation
v)
assumptions;
Growth rates and incentives: Ten-year forecasts for incentives and growth rates applied to future leasing
vi)
Downtime: Period of vacancy between leases on a tenancy;
vii)
the tenants operate in; and
COVID-19 impact on the tenancies, in particular rental relief requested, ability to trade and industry that
viii)
discounted cash flow and terminal capitalisation income.
Fair value inputs: Capitalisation rate, discount rate and terminal rate applied to capitalisation income,
Following this evaluation on a property basis, the valuations have been calibrated on a portfolio basis, by segment,
to ensure consistency in any assumptions such as in the modelling of leasing retention rates, incentives, downtime,
growth, COVID-19 support adjustments and the expected recovery period where relevant.
24
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
C1 INVESTMENT PROPERTIES (continued)
Sensitivity Analysis
Due to the significant judgement of fair value the COVID-19 pandemic presents, a sensitivity analysis has been undertaken to
further stress test the consolidated entity’s assessment of the fair value at 30 June 2020.
The following sensitivity analysis is based on a range of potential capitalisation rate and discount rate movements on a portfolio
basis compared to the capitalisation rates and discount rates adopted by the consolidated entity at 30 June 2020, and are
considered to be the key unobservable inputs that would be expected to have the most material impact on the fair values
adopted if they moved.
As noted in note C1 the base case was the fair value for each property as at reporting date, where primarily the midpoint of
the DCF and capitalisation approaches were adopted. The stress testing performed was based on the same approach adopted
for each property. the stress testing was based on softening both the capitalisation rate and terminal yield and the discount
rate by 0.125% and 0.25%.
The below table presents the outcome of the sensitivity analysis as the decrement to the fair value of the investment property
portfolio (including JV but excluding investment property under construction and development assets), should the
unobservable inputs move by the amount indicated. For example, a softening of 12.5bps of the capitalisation rate and terminal
yield and the discount rate of 25bps across the investment property portfolio would have resulted in a decrement of $297.0m
in the fair value presented as at 30 June 2020.
Discount rate
movement by
0%
0.125%
0.25%
Future committed operating lease receipts
Capitalisation rate and terminal yield movement by
0%
-
($56.0m)
($99.0m)
0.125%
($200.0m)
($247.0m)
($297.0m)
0.25%
($395.0m)
($431.0m)
($473.0m)
Property rental revenue is accounted for as operating leases. The revenue and expenses are recognised in the consolidated
SoCI on a straight-line basis over the lease term. Payments for operating leases are made net of any lease incentives.
The future receipts are shown as undiscounted contractual cash flows.
Future operating lease receipts as a lessor
Within one year
Between one and five years
Later than five years
Total future operating lease receipts as a lessor
2020
$m
492.7
1,558.6
1,415.2
3,466.5
2019
$m
503.4
1,505.6
1,437.6
3,446.6
25
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
C2 INVESTMENTS IN JOINT VENTURES
A joint venture (JV) is an arrangement where the Trust has joint control over the activities and joint rights to the net assets.
Refer to note G1 for details on how the Trust decides if it controls an entity.
The Trust initially records its JVs at the cost of the investment and subsequently accounts for them using the equity method.
Under the equity method, the Trust’s share of the JVs’ profit or loss is added to/deducted from the carrying amount each year.
Distributions received or receivable are recognised by reducing the carrying amount of the JVs.
When transactions between the Trust and its JVs create an unrealised gain, the consolidated entity eliminates the unrealised
gain relating to the Trust’s proportional interest in the JVs. Unrealised losses are eliminated in the same way unless there is
evidence of impairment, in which case the loss is realised.
Judgement in testing for impairment of investments in JVs
JVs are tested for impairment at the end of each year, and impaired if necessary, by comparing the carrying amount to the
recoverable amount. The recoverable amount is calculated as the estimated present value of future distributions to be received
from the JVs and from its ultimate disposal.
JVs held by the consolidated entity primarily hold investments in investment property. As the accounting policies
of the consolidated entity are consistently applied to the JVs, the impacts from COVID-19 pertaining to Investment
property, outlined in note C1 also apply to the underlying assets of the JVs.
Additionally, JVs have been assessed for their recoverability using COVID-19 impacted cashflows and assumptions.
Their ability to continue as a going concern for at least 12 months post the date of this annual report has also been
reviewed by assessing the cashflows, access to liquidity and impacts of COVID-19 to each JVs. Accordingly, at 30
June 2020, none of the consolidated entity’s investments in JVs is considered to be impaired (2019: none).
All JVs are established or incorporated in Australia.
26
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
C2 INVESTMENTS IN JOINT VENTURES (continued)
The table below provides summarised financial information for those JVs that are significant to the Trust. The information
below reflects the total amounts presented in the financial statements of the relevant JVs and not the Trust’s share. The
information has been amended to reflect any unrealised gains or losses on transactions between the Trust and its JVs.
Joynton North Property Trust and Tucker Box Hotel Group ceased to be investments in JVs by 30 June 2019.
Mirvac 8 Chifley
Trust
Mirvac (Old
Treasury) Trust
Tucker Box Hotel
Group
Joynton North
Property Trust
2020
$m
2019
2020
2019
$m
Property
investment
$m
$m
Property
investment
2020
$m
2019
$m
Hotel investment
2020
$m
2019
$m
Property
investment
Principal activities
Summarised SoFP
Cash and cash
equivalents
Other current assets
Total current assets
2.3
0.6
2.9
2.0
1.2
3.2
5.8
1.1
6.9
5.7
1.1
6.8
Total non-current assets
474.8
479.0
455.8
443.6
Other current liabilities
Total current liabilities
Total non-current
liabilities
Net assets
Trust’s share of net assets
(%)
Trust’s share of net assets
($m)
Carrying amount in
consolidated SoFP
3.1
3.1
3.3
3.3
6.8
6.8
6.7
6.7
-
474.6
-
478.9
-
455.9
-
443.7
50.0
50.0
50.0
50.0
237.3
239.4
228.0
221.9
237.3
239.4
228.0
221.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Mirvac 8 Chifley
Trust
Mirvac (Old
Treasury) Trust
Tucker Box Hotel
Group
Joynton North
Property Trust
Total
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
2019
$m
2020
$m
28.1
-
-
-
-
22.6
22.6
50.0
11.3
2019
$m
25.7
-
-
-
-
20.3
20.3
50.0
10.2
Summarised SoCI
Revenue
Interest income
Depreciation and
amortisation
Interest expense
Income tax expense
Profit after tax
Total comprehensive
income/(loss)
Trust’s share of
profit/(loss) after tax (%)
Trust’s share of
profit/(loss) after tax ($m)
Distributions
received/receivable from
JVs
46.6
-
47.4
-
-
-
-
39.2
39.2
50.0
19.6
-
-
-
40.2
40.2
50.0
20.1
-
-
-
-
-
-
-
-
-
(17.5)
-
-
6.9
0.1
(27.6)
(27.6)
49.0
(13.6)
2.0
-
0.1
-
-
1.2
1.2
49.9
-
-
-
-
-
-
-
-
-
-
13.7
12.8
13.4
13.0
0.8
16.6
0.6
30.9
17.3
1.1
27.9
43.5
Capital expenditure commitments
At 30 June 2020, the consolidated entity had no capital commitments approved but not yet provided for regarding its share of
JVs (2019: nil).
C3 COMMITMENTS
At 30 June 2020, capital commitments on the consolidated entity’s investment property portfolio were $12.4m (2019: $27.8m).
There were no investment properties pledged as security by the consolidated entity (2019: nil).
27
Total
2020
$m
2019
$m
8.1
1.7
9.8
7.7
2.3
10.0
930.6
922.6
9.9
9.9
-
930.5
10.0
10.0
-
922.6
465.3
461.3
465.3
461.3
2020
$m
74.7
-
-
-
-
61.8
61.8
2019
$m
57.6
-
0.1
6.9
0.1
34.1
34.1
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
D CAPITAL STRUCTURE AND RISKS
This section outlines the market, credit and liquidity risks that the consolidated entity is exposed to and how it manages these
risks. Capital comprises unitholders’ equity and net debt (borrowings less cash).
D1 CAPITAL MANAGEMENT
The consolidated entity’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern,
so that it can provide returns to unitholders and aim to address the market, credit and liquidity risks while also meeting the
Group’s strategic objectives.
The consolidated entity’s capital structure is monitored at the Group level. The Group seeks to maintain an 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.
If the Group wishes to change its gearing ratio, it could adjust its dividends/distributions, issue new equity (or buy back
securities), or sell property to repay borrowings.
At 30 June 2020, the Group was in compliance with all debt covenants.
D2 BORROWINGS AND LIQUIDITY
The consolidated entity borrows using loans from related parties.
The consolidated entity has one loan facility from a related party. The total facility limit as at 30 June 2020 is $2,500.0 million
(2019: $2,500.0 million) and can be drawn in Australian or US dollars. The facility expires on 18 December 2023. Interest
accrues at the related party’s cost of financing from their borrowing facilities, calculated including associated derivative financial
instruments.
At 30 June 2020, the consolidated entity had $734.0 million of undrawn facilities available (2019: $1,053.0 million).
2020
Floating
interest
rate
$m
Fixed interest maturing in:
Less
than 1
year
$m
2 to 5
years
$m
1 to 2
years
$m
Over 5
years
$m
2019
Fixed interest maturing in:
Floating
interest
rate
$m
Less
than 1
year
$m
Total
$m
1 to 2
years
$m
2 to 5
years
$m
Over 5
years
$m
Total
$m
Loans
from
related
party
1,766.0
-
-
-
- 1,766.0
1,447.0
-
-
-
- 1,447.0
Borrowings are initially recognised at fair value, net of transaction costs. Borrowings are subsequently measured at amortised
cost using the effective interest rate method. The fair value of borrowings is considered to approximate their carrying amount
as the interest rates are variable.
The table below details the carrying amount and fair value of borrowings of the Group. These amounts do not represent the
facilities of the consolidated entity but are relevant to the consolidated entity as this profile determines the facilities used to
calculate the related party’s cost of funds, which are then used as a basis for the interest on the consolidated entity’s
borrowings from the related party.
As part of its COVID-19 response the Group increased the amount of liquidity available via new undrawn bank debt
facilities, and also extended the maturity date of some facilities that were due to expire within the next 15 months
for a further 12 months. This effectively reduced the amount of debt that would need to be repaid in the next 2 years.
Due to the wide-reaching impacts of COVID-19, many other companies also sought to extend their liquidity around
the same time, which saw an increase in demand for credit facilities and pricing increases. As a result, credit
availability did reduce however given Mirvac’s strong statement of financial position, banking relationships and credit
rating, the Group was able to obtain approvals for these increased facilities in excess of what was required and the
increased cost of the facilities was not significant.
28
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
D2 BORROWINGS AND LIQUIDITY (continued)
2020
2019
Current
$m
-
200.0
200.0
-
200.0
Non-
current
$m
717.5
3,396.0
4,113.5
(14.0)
4,099.5
Total
carrying
amount
$m
717.5
3,596.0
4,313.5
(14.0)
4,299.5
1,119.0
Total
fair value Current
$m
$m
Non-
current
$m
717.5
3,709.0
4,426.5
(14.0)
4,412.5
-
-
-
-
-
-
3,448.4
3,448.4
(13.0)
3,435.4
Total
carrying
amount
$m
Total
fair value
$m
-
3,448.4
3,448.4
(13.0)
3,435.4
1,292.1
-
3,486.0
3,486.0
(13.0)
3,473.0
Unsecured bank
facilities
Bank loans
Bonds
Total unsecured
borrowings
Prepaid borrowing costs
Total borrowings
Undrawn bank facilities
The fair value of the bank loans is considered to approximate their carrying amount; although some loans have fixed interest
rates, the impact is immaterial. The fair value of the bonds is calculated as the expected future cash flows discounted by the
relevant current market rates.
The following table sets out the Group’s net exposure to interest rate risk by maturity periods. These amounts do not represent
the facilities of the consolidated entity but are relevant to the consolidated entity as this profile determines the facilities used
to calculate the related party’s cost of funds, which is then used as a basis for the interest on the consolidated entity’s
borrowings from the related party. Exposures arise predominantly from liabilities bearing variable interest rates as the Group
intends to hold fixed rate liabilities to maturity.
2020
Floating
interest
rate
$m
Fixed interest maturing in:
Less
than 1
year
$m
1 to 2
years
$m
2 to 5
years
$m
Over 5
years
$m
2019
Fixed interest maturing in:
Floating
interest
rate
$m
Less
than 1
year
$m
Total
$m
1 to 2
years
$m
2 to 5
years
$m
Over 5
years
$m
Total
$m
Bank
loans
Bonds
Interest
rate
swaps
Total
717.5
2,064.6
-
200.0
-
-
-
325.0
-
717.5
432.0 3,021.6
-
2,064.6
-
-
-
200.0
-
300.0
-
-
547.0 3,111.6
(1,800.0)
982.1
300.0
500.0
400.0
800.0
400.0 1,125.0
300.0
732.0 3,739.1
- (1,800.0)
264.6
100.0
100.0
300.0 1,000.0
500.0 1,300.0
400.0
-
947.0 3,111.6
D3 FINANCIAL RISK MANAGEMENT
The consolidated entity’s activities expose it to a variety of financial risks including market risk, credit risk and liquidity risk.
The consolidated entity seeks to minimise the potential impact of these financial risks on financial performance, for example,
by using derivative financial instruments to protect against interest rate and foreign exchange risk.
Financial risk management is carried out by a central treasury department (Mirvac Group Treasury) under policies approved
by the Board. The Board provides overall risk management principles and policies covering specific areas. Mirvac Group
Treasury identifies, evaluates, reports and manages financial risks in close cooperation with the consolidated entity in
accordance with Board policy.
29
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
D3 FINANCIAL RISK MANAGEMENT (continued)
A summary of the Group’s key risks identified, exposures and management of exposures is detailed in the table below:
Risk
Market risk -
interest rate
Market risk -
foreign
exchange
Market risk -
price
Credit risk
Definition
The risk that the
fair value or cash
flows of financial
instruments will
fluctuate due to
changes in market
interest rates
The risk that the
fair value of a
financial
commitment, asset
or liability will
fluctuate due to
changes in foreign
exchange rates
The risk that the
fair value of other
financial assets at
fair value through
profit or loss will
fluctuate due to
changes in the
underlying
share/unit price
The risk that a
counterparty will
not make
payments to the
Mirvac as they fall
due
Management of exposures
·
Interest rate derivatives manage cash flow interest rate
risk by converting floating rate borrowings to fixed or
capped rates with target of 55 per cent.
· Mirvac does not manage the fair value risk for debt
instruments from interest rates, as it does not have an
impact on the cash flows paid by the business.
· Refer to note D2 for details on the interest rate exposure
for borrowings.
· Cross currency interest rate swaps to convert non-
Australian dollar borrowings to Australian dollar
exposures. These cross currency interest rate swaps
have been designated as cash flow hedges with the
movements in fair value recognised while they are still in
an effective hedge relationship.
· Foreign currency borrowings as a natural hedge for
foreign operations.
· The Group is exposed to minimal price risk and so does
not manage the exposures.
Exposures arising from
· Borrowings issued at
fixed rates and variable
rates
· Derivatives
· Bonds denominated in
other currencies
· Receipts and payments
which are denominated
in other currencies
· Other financial assets at
fair value through profit
or loss, with any
resultant gain or loss
recognised in other
comprehensive income
· Cash and cash
equivalents
· Receivables
· Derivative financial
assets
· Setting credit limits and obtaining collateral as security
(where appropriate).
· Diversified trading spread across large financial
institutions with investment grade credit ratings.
· Regularly monitoring the exposure to each counterparty
· Other financial assets
and their credit ratings.
Liquidity risk The risk that
Mirvac will not be
able to meet its
obligations as they
fall due
· Payables
· Borrowings
· Derivative financial
liabilities
· Refer to note F1 for details on credit risk exposure on
receivables. The Group deems the exposure to credit risk
as not significant for all other classes of financial assets
and liabilities.
· Regular forecasts of the Group’s liquidity requirements.
Surplus funds are only invested in highly liquid
instruments.
· Availability of cash, marketable securities and committed
credit facilities.
· Ability to raise funds through issue of new securities
through placements or DRP.
· Refer to note D2 for details of liquidity risk of the Group’s
financing arrangements.
Market risk - interest rate risk
In relation to the Group, borrowings issued at variable rates expose Mirvac to cash flow interest rate risk. Borrowings issued
at fixed rates expose Mirvac to fair value interest rate risk. Mirvac manages its cash flow interest rate risk by using interest
rate derivatives, thereby maintaining fixed rate exposures within the policy range. Such interest rate derivatives have the
economic effect of converting borrowings from floating rates to fixed or capped rates or vice versa.
Sensitivity analysis
This sensitivity analysis shows the impact on profit after tax and equity if Australian interest rates changed by 25 basis points
(bp). Given the low interest environment that the consolidated entity is operating in and with official interest rates holding for
the medium term, a 25bps movement is a more appropriate sensitivity to consider for 30 June 2020.
Total impact on profit after
tax and equity
Changes in:
Australian interest rates
2020
25 bp
$m
25 bp
$m
2019
50 bp
$m
50 bp
$m
$3.3 m decrease
$3.3 m increase
$7.3m decrease
$7.3m increase
Based on current exposures, there is no material foreign exchange sensitivity in the consolidated entity.
30
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
D3 FINANCIAL RISK MANAGEMENT (continued)
Liquidity risk
Maturities of financial liabilities
The consolidated entity’s maturity of financial liabilities is provided in the following table. The amounts disclosed in the table
are the contractual undiscounted cash flows:
2020
Maturing in:
Payables
Borrowings
Lease
liabilities
Less than
1 year
$m
139.8
71.6
1 to 2
years
$m
-
72.9
2 to 5
years
$m
-
1,876.9
Over 5
years
$m
-
-
Total
$m
139.8
2,021.4
0.1
211.5
0.1
73.0
0.3
1,877.2
6.5
6.5
7.0
2,168.2
D4 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
2019
Maturing in:
1 to 2
years
$m
-
63.4
2 to 5
years
$m
-
1,613.0
Over 5
years
$m
-
-
Total
$m
221.6
1,739.8
-
63.4
-
1,613.0
-
-
-
1,961.4
Less
than 1
year
$m
221.6
63.4
-
285.0
The consolidated entity measures various financial assets and liabilities at fair value which, in some cases, may be subjective
and depend on the inputs used in the calculations. The different levels of measurement are described below:
·
·
·
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: not traded in an active market but calculated with significant inputs coming from observable market data; and
Level 3: significant inputs to the calculation that are not based on observable market data (unobservable inputs).
The consolidated entity holds no Level 1 or Level 2 financial instruments.
The methods and assumptions used to estimate the fair value of financial instruments are as follows:
Other financial assets
Other financial assets include units in unlisted funds and loan notes. The carrying value of other financial assets is equal to
the fair value; refer to note F2 for further details.
Units in unlisted funds are traded in inactive markets. The fair value of investments that are not traded in an active market is
determined by the unit price as advised by the trustee of the fund. The fair value of the security is determined based on the
value of the underlying assets held by the fund. The assets of the fund are subject to regular external valuations. These
valuations are based on discounted net cash inflows from expected future income and/or comparable sales of similar assets.
Appropriate discount rates determined by the external valuer are used to determine the present value of the net cash inflows
based on a market interest rate adjusted for the risk premium specific to each asset. The fair value is determined using
valuation techniques that are not supported by prices from an observable market; so, the fair value recognised in the
consolidated financial statements could change significantly if the underlying assumptions made in estimating the fair values
were significantly changed.
The following table summarises the financial instruments measured and recognised at fair value on a recurring a basis:
2020
2019
Note
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Financial assets carried at
fair value
Units in unlisted funds
F2
-
-
-
-
65.6
65.6
65.6
65.6
-
-
-
-
58.0
58.0
58.0
58.0
31
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
D4 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (continued)
The following table presents a reconciliation of the carrying value of Level 3 instruments (excluding investment properties
which are shown in note C1):
2020
Units in unlisted funds
$m
2019
Units in unlisted funds
$m
Other financial assets
$m
58.0
-
7.6
-
65.6
39.9
13.0
5.1
-
58.0
79.7
-
-
(79.7)
-
Balance 1 July
Acquisitions
Net revaluation gain on financial
instruments
Repayments
Balance 30 June
E EQUITY
This section includes distributions, unitholders’ equity and reserves. It represents how the consolidated entity raised equity
from unitholders in order to finance activities both now and in the future. …
……………………
E1 DISTRIBUTIONS
Half-yearly ordinary distributions paid/payable per stapled security were as follows:
Distributions for the year ended 30 June 2020
31 December 2019
30 June 2020
Total distribution
Distributions for the year ended 30 June 2019
31 December 2018
30 June 2019
Total distribution
E2 CONTRIBUTED EQUITY
Distribution
Cents
Date
paid/payable
Total amount
$m
6.10
3.00
9.10
5.30
6.30
11.60
28 Feb 2020
14 Sep 2020
28 Feb 2019
30 Aug 2019
240.0
118.0
358.0
193.9
246.4
440.3
Ordinary units are classified as equity. Each ordinary unit entitles the holder to receive distributions when declared, and one
vote per unit at securityholders’ meetings on polls and proceeds on wind up of the Trust in proportion to the number of units
held.
When new units or options are issued, the directly attributable incremental costs are deducted from equity.
Movements in paid up equity
Balance 1 July
Stapled units issued under EEP
Long-term performance plan, LTI and EIS stapled
units converted, sold, vested or forfeited
Legacy schemes vested
Stapled unit issuance
Stapled unit buy-back
Balance 30 June
2020
2019
No. units
m
3,909.4
0.3
6.9
0.2
15.9
-
3,932.7
Units
$m
5,316.4
0.9
9.6
0.6
39.7
-
5,367.2
No. units
m
3,707.6
0.4
6.7
0.3
252.5
(58.1)
3,909.4
Units
$m
4,775.9
1.0
7.4
0.7
645.0
(113.6)
5,316.4
32
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
E2 CONTRIBUTED EQUITY (continued)
The number of stapled units issued as listed on the ASX at 30 June 2020 was 3,934.3 million (2019: 3,911.1million) which
includes 1.6 million of stapled units issued under the LTI and EIS (2019: 1.7 million). Units issued to employees under the
Mirvac LTI and EIS are accounted for as options and are recognised by the Group in the security-based payments reserve,
not in contributed equity.
E3 RESERVES
Non-controlling interests (NCI) reserve
The NCI reserve was used to record the discount received on acquiring the NCI in Mirvac Real Estate Investment Trust, a
controlled entity of the consolidated entity, in December 2009.
$m
Balance 30 June 2019
Balance 30 June 2020
Capital reserve
(1.4)
(1.4)
NCI reserve
6.8
6.8
Total reserves
5.4
5.4
F OPERATING ASSETS AND LIABILITIES
F1 RECEIVABLES
Receivables are initially recognised at fair value. Receivables are subsequently measured at amortised cost using the effective
interest rate method, less provision for impairment if required. Due to the short-term nature of current receivables, their carrying
amount (less loss allowance) is assumed to be the same as their fair value.
The ECL of receivables is reviewed on an ongoing basis. The consolidated entity applies the simplified or general approach
to measuring ECL as appropriate based on the different characteristics of each financial asset class. To measure the ECL,
management has grouped together the consolidated entity’s receivables based on shared credit risk characteristics and the
days past due. The consolidated entity uses judgement in making assumptions about risk of default and ECL rates and the
inputs to the impairment calculation, based on the consolidated entity’s past history, existing market conditions and future
looking estimates at the end of each reporting period. Receivables which are known to be uncollectable are written off.
The consolidated entity has considered the impact on its trade debtors in light of increased credit risk resulting from
the impacts of COVID-19.
Trade debtors
For trade debtors relating to Retail, Office and Industrial for investment property rental income, trade debtors have
significantly increased as at 30 June 2020, as a result of COVID-19. Many of the consolidated entity’s tenants have
experienced cash flow and financial difficulties due to mandatory closures, a halt on discretionary spending,
employment instability and the general economic downturn. As a result, the Expected Credit Loss (ECL) which
records a provision of uncollectable debts over the life of the lease with the debtor, has also significantly increased
as at 30 June 2020.
The calculation of the ECL considers the historical bad debt write offs which is specific to each segment, less
collateral held and adjusted for specific known factors such as the financial situation of a tenant. Further, with the
impact of COVID-19, the consolidated entity has extended the ECL provision as at 30 June 2020 for two key areas:
1. For tenants with rental relief deals pending, where the arrears are likely to be written off but the lease amendment
was not executed by 30 June 2020 or the negotiations finalised, this amount is considered to be at risk and likely to
be converted into an incentive in the future and a provision taken for this amount in full. In these cases, where the
consolidated entity has no reasonable expectations of recovering all or part of the receivable, the receivable has
been reduced with a corresponding expense recognised; and
2. For trade debtors which are net of rental relief and collateral held, consideration has been given to the following
factors in order to assess the severity by which the tenant has been impacted by the pandemic on a high, medium
or low basis and an increase in ECL provision recorded accordingly:
> the industry in which the tenant operates and if this has been impacted by mandatory Government restrictions;
> the size and legal structure of the tenant;
> location and demographic information affecting the tenant; and
> sales data, rental relief requests and other impacts on trading activities during the pandemic.
33
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
F1 RECEIVABLES (continued)
2020
Loss
allowance
$m
(35.7)
-
-
(35.7)
Gross
$m
46.0
7.9
-
53.9
Net
$m
10.3
7.9
-
18.2
Gross
$m
5.7
8.1
2.9
16.7
2019
Loss
allowance
$m
(2.5)
-
-
(2.5)
Net
$m
3.2
8.1
2.9
14.2
Not past due
1 - 30
31 - 60
Days past due
61 - 90
91 - 120
Over 120
Total
7.0
-
11.0
-
15.7
(10.3)
2.6
(1.0)
13.5
(10.9)
1.0
(0.5)
11.5
(9.5)
0.6
(0.3)
3.2
(2.8)
0.4
(0.2)
3.0
(2.2)
1.1
(0.5)
53.9
(35.7)
16.7
(2.5)
Trade receivables
Accrued income
Other receivables
Total receivables
Ageing
2020
Total receivables
Loss allowance
2019
Total receivables
Loss allowance
Loss allowance
Balance 1 July
Amounts utilised for write-off of receivables
Loss allowance recognised
Balance 30 June
2020
$m
(2.5)
-
(33.2)
(35.7)
2019
$m
(2.9)
0.4
-
(2.5)
The consolidated entity does not have any significant credit risk exposure to a single customer. The consolidated entity holds
collateral over receivables of $158.9 million (2019: $159.9 million). The collateral held equals the carrying amount of the
relevant receivables. The terms and conditions of the collateral are outlined in the lease agreements, however generally as a
lessor, the consolidated entity has the right to call upon the collateral if a lessee breaches their lease. Refer to note D3 for
further details on the consolidated entity’s exposure to, and management of, credit risk.
F2 OTHER FINANCIAL ASSETS
Units in unlisted funds
The Trust may hold units in unlisted funds which do not give the Trust control, as explained in note G1, or significant influence,
as explained in note C2. These units are accounted for at fair value. Distributions received are recognised in revenue and any
changes in fair value are recognised in the gain or loss on foreign exchange and financial instruments in the consolidated
SoCI.
Units in unlisted funds are traded in inactive markets and therefore the fair value is estimated based on the value of the
underlying assets held by the funds. The underlying assets of the funds are valued by external valuers based on market sales
comparison and/or discounted cash flows. Refer to note C1 for details of these valuation methods.
Impairment
Recoverability of other financial assets is reviewed on the same basis as receivables. Refer to note F1 for details.
Non-current
Units in unlisted funds
Total non-current other financial assets
2020
$m
65.6
65.6
2019
$m
58.0
58.0
34
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
F3 GOODWILL
Balance 1 July
Balance 30 June
Impairment testing
2020
$m
42.8
42.8
2019
$m
42.8
42.8
Goodwill is tested annually for impairment. For the purpose of assessing impairment, assets are grouped at the lowest levels
for which goodwill is monitored for internal management purposes and allocated to cash generating units (CGU). The allocation
is made to groups of CGU identified according to operating segments.
An asset is impaired if the recoverable amount, calculated as the higher of value in use and the fair value less costs to sell, is
less than its carrying amount.
The consolidated entity has assessed whether the impact of COVID-19 has led to any impairment of assets,
including intangibles which involves assessing the financial performance, including estimates of future cash flows
and earnings of the CGUs and which may be significantly affected by the direct or indirect impacts of the pandemic.
Indicators of impairment may include, but are not limited to, significant changes with an adverse effect on an entity
that have taken place during the period, or will take place in the near future in the market or economic environment
in which the entity operates; and the extent to which assets are used or are expected to be used.
Where indicators of impairment were present at 30 June 2020, an assessment of the recoverable amount has
been undertaken of the relevant intangible asset. As at 30 June 2020 no intangibles were impaired (2019: none).
The CGU of the consolidated entity is investment property; the value in use is the discounted present value of estimated cash
flows from net rental revenue that the CGU will generate. The cash flow projections are based on forecasts covering a 10-year
period. AASB 136 Impairment of Assets recommends that cash flow projections should cover a maximum period of five years,
unless a longer period can be justified. As the cash flow projections used for budgeting and forecasting are based on long-
term, predictable and quantifiable leases, with renewal assumptions based on sector and industry experience, management
is comfortable that a 10-year cash flow projection is more appropriate. The key assumptions used to determine the forecast
cash flows include net market rent, capital expenditure, capitalisation rate, growth rate, discount rate and market conditions.
The growth rate has been adjusted to reflect current market conditions and does not exceed the long-term average growth
rate for the business in which the consolidated entity operates.
The growth rate applied beyond the initial period is noted in the table below. The growth rate does not exceed the long-term
average growth rate for each CGU.
Mirvac Property Trust
Growth rate
30 June 20201
% pa
-
Discount rate
30 June 2020
% pa
6.6
Growth rate
30 June 20191
% pa
-
Discount rate
30 June 2019
% pa
6.9
1.
The value in use calculation is based on forecasts approved by management covering a 10-year period. No forecast growth rate is assumed as the value in use calculations are based on forecast
cash flows from existing projects and investment properties.
No intangible assets were impaired in 2020 (2019: nil).
The Directors and management have considered reasonably possible changes to the key assumptions and have not identified
any reasonably possible changes that could cause an impairment.
35
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
F4 PAYABLES
Payables are measured at amortised costs. Due to the short-term nature of current payables, their carrying amount is assumed
to be the same as their fair value. For the majority of non-current payables, the carrying amount is also not significantly different
to their fair value.
Trade payables due more than 12 months after year end are classified as non-current.
Current
Trade payables
Rent in advance
Other accruals
Other creditors
Amounts due to entities related to Responsible Entity
Total current payables
Non-current
Other creditors
Total non-current payables
F5 PROVISIONS
Note
H4
2020
$m
25.7
18.7
22.6
1.7
71.1
139.8
29.0
29.0
2019
$m
63.1
23.3
47.4
0.7
87.1
221.6
6.5
6.5
A provision is made for the amount of any distribution declared at or before the end of the year but not distributed by the end
of the year. Refer to note E1 for further details.
Distributions payable
Balance 1 July
Interim and final distributions declared
Payments made
Balance 30 June
G CONSOLIDATED ENTITY STRUCTURE
2020
$m
246.4
358.0
(486.4)
118.0
2019
$m
222.6
440.3
(416.5)
246.4
This section provides information on how the consolidated entity’s structure affects its financial position and performance.
G1 CONTROLLED ENTITIES
Controlled entities
The consolidated financial statements of the consolidated entity incorporate the assets, liabilities and results of all controlled
entities. Controlled entities are all entities over which the consolidated entity has power to direct the activities of the entity and
an exposure to and ability to influence its variable returns from its involvement with the entity.
Controlled entities are fully consolidated from the date of control is obtained until the date that control ceases. Inter-entity
transactions and balances are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of
impairment of the assets transferred.
36
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
G1 CONTROLLED ENTITIES (continued)
Structured entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding
who controls the entity. The consolidated entity considers that all funds and trusts in which it currently has an investment, or
from which it currently earns income, to be structured entities. Depending on the consolidated entity’s power to direct the
activities of the entity and its exposure to and ability to influence its own returns, it may consolidate the entity. In other cases,
it may sponsor or have some form of exposure to a structured entity but not consolidate it.
If the consolidated entity does not control a structured entity but has significant influence, it is treated as an associate. Refer
to note C2.
Funds and trusts
The consolidated entity invests in a number of funds and trusts which invest in real estate as investment properties. The
investees finance their operations through borrowings and through equity issues. The consolidated entity determines whether
it controls or has significant influence over these funds and trusts as discussed above.
The following entities were wholly owned and established in Australia and controlled by MPT as at the current year end:
10-20 Bond Street Trust
367 Collins Street Trust
367 Collins Street No. 2 Trust
380 St Kilda Road Trust1
477 Collins Street No. 1 Trust
Australian Office Partnership Trust
Eveleigh Trust
James Fielding Trust
Joynton North Property Trust
Joynton Properties Trust
Meridian Investment Trust No. 1
Meridian Investment Trust No. 2
Meridian Investment Trust No. 3
Meridian Investment Trust No. 4
Meridian Investment Trust No. 5
Meridian Investment Trust No. 6
Mirvac 90 Collins Street Trust
Mirvac Allendale Square Trust
Mirvac Ann Street Trust
Mirvac Bay St Trust
Mirvac Bourke Street No.1 Sub-Trust
Mirvac Broadway Sub-Trust
Mirvac Capital Partners 1 Trust
Mirvac Collins Street No.1 Sub-Trust
Mirvac Commercial No.3 Sub Trust
Mirvac Commercial Trust1
Mirvac Group Funding No.2 Pty Limited
Mirvac Group Funding No.3 Pty Limited
Mirvac Hoxton Park Trust
Mirvac Industrial No. 1 Sub-Trust
Mirvac Kensington Trust2
Mirvac Kirrawee Trust No.1
Mirvac Kirrawee Trust No.2
Mirvac La Trobe Office Trust
Mirvac Living Trust
Mirvac Padstow Trust No.1
Mirvac Parramatta Sub-Trust No. 1
Mirvac Pitt Street Trust
Mirvac Property Trust No.3
Mirvac Property Trust No.4
Mirvac Property Trust No.5
Mirvac Property Trust No.6
1.
2.
One unit on issue held by Mirvac Limited as custodian for MPT.
This entity was established during the year.
Mirvac Property Trust No.7
Mirvac Real Estate Investment Trust
Mirvac Retail Head Trust
Mirvac Retail Sub-Trust No. 1
Mirvac Retail Sub-Trust No. 2
Mirvac Retail Sub-Trust No. 3
Mirvac Retail Sub-Trust No. 4
Mirvac Rhodes Sub-Trust
Mirvac Rydalmere Trust No. 1
Mirvac Rydalmere Trust No. 2
Mirvac Smail Street Trust
Mirvac Toombul Trust No. 1
Mirvac Toombul Trust No. 2
Old Treasury Holding Trust
Springfield Regional Shopping Centre Trust
The George Street Trust
37
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
G2 PARENT ENTITY
The financial information for the parent entity, MPT, has been prepared on the same basis as the consolidated financial
statements.
Parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Profit for the year
Total comprehensive income for the year
2020
$m
73.7
9,390.9
633.1
2,236.4
5,367.2
7.6
1,779.6
7,154.4
442.7
442.7
2019
$m
1,415.4
9,104.4
802.9
2,088.8
5,316.4
7.6
1,691.6
7,015.6
702.5
702.5
As outlined in note D2, MPT is a borrower under a loan facility from a related party of the Group. This related party mainly
sources MPT’s funding needs from external debt facilities. MPT is party to a guarantee deed poll to guarantee the external
debt of the related party.
At 30 June 2020, the parent entity did not provide any other guarantees (2019: nil), have any contingent liabilities (2019: nil),
or any capital commitments (2019: nil).
H OTHER DISCLOSURES
This section provides additional required disclosures that are not covered in the previous sections.
H1 CONTINGENT LIABILITIES
A contingent liability is a possible obligation that may become payable depending on a future event or a present obligation that
is not probably to require payment/cannot be reliably measured. A provision is not recognised for contingent liabilities.
The consolidated entity had contingent liabilities at 30 June 2020 in respect of the following:
Health and safety claims
The consolidated entity has no contingent liabilities relating to JVs (2019: nil).
H2 EARNINGS PER STAPLED UNIT
2020
$m
0.2
2019
$m
0.2
Basic earnings per stapled unit (EPU) is calculated by dividing:
·
·
the profit attributable to stapled unitholders; by
the weighted average number of ordinary units (WANOU) outstanding during the year.
Diluted EPU adjusts the WANOU to take into account the dilutive potential of ordinary securities from security-based
payments.
38
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
H2 EARNINGS PER STAPLED UNIT (continued)
Earnings per stapled unit
Basic EPU (cents)
Diluted EPU (cents)
Profit for the year attributable to stapled unitholders ($m) used to calculate basic and
diluted EPU
WANOU used in calculating basic EPU (m)
WANOU used in calculating diluted EPU (m)
H3 KEY MANAGEMENT PERSONNEL
Key management personnel (KMP) compensation
2020
13.7
13.7
538.4
3,931.6
3,933.2
2019
24.2
24.2
893.1
3,695.8
3,697.7
KMP are employed by an entity controlled by Mirvac Limited. Payments made from the consolidated entity to Mirvac Limited
and its controlled entities do not include any amounts directly attributable to the compensation of KMP. The total payments
made to Mirvac Limited and its controlled entities are shown in note H4.
Equity instrument disclosures relating to KMP
Securityholdings
The number of ordinary securities in Mirvac held during the year by each Executive KMP, including their personally-related
parties, is set out below:
Balance 1
July 2019
Changes
Balance 30
June 2020
3,260,835 1,142,105
(544,497)
1,389,497
568,286
48,913
225,428
240,000
157,606
612,831
74,099
-
4,402,940
845,000
617,199
465,428
770,437
74,099
Value 30
June 2020
$
9,554,380
1,833,650
1,339,322
1,009,979
1,671,848
160,795
Minimum
securityholding
guideline
$
Date
securityholding to
be attained1
2,250,000
950,000
900,000
800,000
800,000
800,000
June 2021
June 2021
June 2021
June 2021
June 2021
May 2022
Executive KMP
Susan Lloyd-Hurwitz
Brett Draffen
Shane Gannon
Campbell Hanan
Susan MacDonald
Stuart Penklis2
1.
Attainment date is based on the minimum securityholding requirement effective for the 30 June 2019 financial year.
2.
Stuart Penklis has five years from the date he became an Executive KMP in May 2017, to build his securityholding to the expected level.
Options
No options (i.e. a right to acquire a security upon payment of an exercise price) were granted as remuneration during the
year ended 30 June 2020 and no unvested or unexercised options are held by Executive KMP as at 30 June 2020.
Performance rights held during the year
The number of performance rights in Mirvac held during the year by each Executive KMP, including their personally-related
parties, is set out below:
Balance
1 July 2019
Rights
issued
Long-term Incentives
Rights
vested/forfeited
relating to
performance
period ended 30
June 2020
Deferred Short-term
Incentives (STI)
Rights
vested/
forfeited
Rights
issued
Balance 30
June 2020
Executive KMP
Susan Lloyd-Hurwitz
Brett Draffen
Shane Gannon
Campbell Hanan
Susan MacDonald
Stuart Penklis
2,513,678
1,032,059
978,134
535,387
529,539
485,425
770,547
292,808
277,397
136,986
136,986
136,986
(1,061,320)
(403,302)
(382,076)
(188,680)
(188,680)
(165,094)
124,797
80,154
76,095
59,862
59,862
59,862
(197,838)
(127,195)
(120,773)
(95,084)
(89,236)
(74,099)
2,149,864
874,524
828,777
448,471
448,471
443,080
39
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
H3 KEY MANAGEMENT PERSONNEL (continued)
Details of the movement in the number and value of performance rights held by Executive KMP during the year are set out
below:
Executive
KMP
Plan
Grant
date
Number of
rights
granted
Value at
grant
date1
Susan
Lloyd-
Hurwitz
Total
Brett
Draffen
Total
Shane
Gannon
Total
Campbell
Hanan
Total
Susan
MacDonald
Total
Stuart
Penklis
Total
STI
LTI
STI
STI
LTI
STI
STI
LTI
STI
LTI
STI
STI
LTI
STI
STI
LTI
STI
LTI
STI
STI
LTI
STI
STI
LTI
STI
LTI
STI
STI
LTI
STI
STI
LTI
STI
LTI
STI
STI
LTI
STI
STI
LTI
STI
LTI
STI
STI
LTI
STI
STI
LTI
26 Sep 17
6 Dec 17
1 Oct 18
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
26 Sep 17
6 Dec 17
1 Oct 18
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
26 Sep 17
6 Dec 17
1 Oct 18
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
26 Sep 17
6 Dec 17
1 Oct 18
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
26 Sep 17
6 Dec 17
1 Oct 18
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
26 Sep 17
6 Dec 17
1 Oct 18
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
103,111
1,061,320
94,727
94,727
1,159,793
62,399
62,398
770,547
3,409,022
66,354
403,302
60,841
60,841
440,721
40,077
40,077
292,808
1,405,021
63,012
382,076
57,761
57,760
417,525
38,048
38,047
277,397
1,331,626
49,646
188,680
45,438
45,438
206,185
29,931
29,931
136,986
732,235
43,798
188,680
45,438
45,438
206,185
29,931
29,931
136,986
726,387
34,052
165,094
40,047
40,047
206,185
29,931
29,931
136,986
682,273
210,346
1,599,940
214,083
204,610
1,433,041
183,838
176,996
1,684,444
5,707,298
135,362
607,977
137,501
131,417
544,556
118,074
113,681
640,089
2,428,657
128,544
575,979
130,540
124,762
515,894
112,096
107,923
606,400
2,302,138
101,278
284,435
102,690
98,146
254,762
88,182
84,901
299,457
1,313,851
89,348
284,435
102,690
98,146
254,762
88,182
84,901
299,457
1,301,921
69,466
248,879
90,506
86,502
254,762
88,182
84,901
299,457
1,222,655
% of
total
grant
100.0%
43.4%
100%
100.0%
43.4%
100%
100.0%
43.4%
100%
100.0%
43.4%
100%
100.0%
43.4%
100%
100.0%
43.4%
100%
Vesting
date
26 Sep 19
30 Jun 20
30 Sep 19
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
26 Sep 19
30 Jun 20
30 Sep 19
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
26 Sep 19
30 Jun 20
30 Sep 19
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
26 Sep 19
30 Jun 20
30 Sep 19
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
26 Sep 19
30 Jun 20
30 Sep 19
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
26 Sep 19
30 Jun 20
30 Sep 19
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
Vested
Number
of rights
103,111
460,612
94,727
-
-
-
-
-
658,450
66,354
175,033
60,841
-
-
-
-
-
302,228
63,012
165,820
57,761
-
-
-
-
-
286,593
49,646
81,887
45,438
-
-
-
-
-
176,971
43,798
81,887
45,438
-
-
-
-
-
171,123
34,052
71,650
40,047
-
-
-
-
-
145,749
Value of
rights
Lapsed
Number
of
rights
210,346
694,374
214,083
-
-
-
-
-
1,118,80
3
135,362
263,862
137,501
-
-
-
-
-
536,725
128,544
249,975
130,540
-
-
-
-
-
509,059
101,278
123,445
102,690
-
-
-
-
-
327,413
89,348
123,445
102,690
-
-
-
-
-
315,483
69,466
108,013
90,506
-
-
-
-
-
267,985
-
600,708
-
-
-
-
-
-
600,708
-
228,269
-
-
-
-
-
-
228,269
-
216,256
-
-
-
-
-
-
216,256
-
106,793
-
-
-
-
-
-
106,793
-
106,793
-
-
-
-
-
-
106,793
-
93,444
-
-
-
-
-
-
93,444
% of
total
grant
0.0%
56.6%
0.0%
0.0%
56.6%
0.0%
0.0%
56.6%
0.0%
0.0%
56.6%
0.0%
0.0%
56.6%
0.0%
0.0%
56.6%
0.0%
Value of
rights
-
905,566
-
-
-
-
-
-
905,566
-
344,115
-
-
-
-
-
-
344,115
-
326,004
-
-
-
-
-
-
326,004
-
160,990
-
-
-
-
-
-
160,990
-
160,990
-
-
-
-
-
-
160,990
-
140,866
-
-
-
-
-
-
140,866
1.
The calculation of the value of performance rights used the fair value as determined at the time of grant. For the LTI grants subject to Return On Invested Capital (ROIC) performance, the
initial accounting treatment assumes 75 per cent vesting, which is reflected in the above valuation.
40
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
H4 RELATED PARTIES
The Responsible Entity
The Responsible Entity of the Trust is Mirvac Funds Limited, an entity incorporated in New South Wales and ultimately
controlled by Mirvac Limited.
As outlined in the Explanatory Memorandum dated 4 May 1999, Mirvac Funds Limited charges MPT Responsible Entity fees
on a cost recovery basis. Fees charged by Mirvac Funds Limited for the year ended 30 June 2020 were $31.6 million (2019:
$20.2 million).
Transactions with related parties
Property rental revenue from entities related to Responsible Entity
Fees paid to Responsible Entity
Interest paid to entities related to Responsible Entity
Property management fee expense paid to entities related to Responsible Entity
Capital expenditure paid to entities related to Responsible Entity
Sale of investment property to related party
Amounts due to entities related to Responsible Entity
Loans from entities related to Responsible Entity
Note
F4
D2
2020
$000
6,128
(31,610)
(69,046)
(24,527)
(240,361)
80,500
71,099
1,766,000
2019
$000
4,848
(20,202)
(84,947)
(23,599)
(323,540)
-
87,080
1,447,000
Transactions between the consolidated entity and related parties were made on commercial terms and conditions.
Transactions between Mirvac and its JVs were made on commercial terms and conditions. Distributions received from JVs
were on the same terms and conditions that applied to other unitholders.
H5 RECONCILIATION OF PROFIT TO OPERATING CASH FLOW
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash at bank
and short-term deposits at call.
Profit for the year attributable to stapled unitholders
Net revaluation gain from investment properties and investment properties under
construction
Amortisation expenses
Impairment loss on receivables
Lease incentives and straight-lining of lease revenue
Net gain on financial instruments
Net gain on sale of assets
Share of net profit of JVs net of distributions received
Change in operating assets and liabilities
(Increase)/decrease in receivables
Increase in other assets
(Decrease)/increase in payables
Net cash inflows from operating activities
2020
$m
538.4
(154.5)
88.6
36.4
(40.4)
(7.6)
(18.4)
(3.0)
(40.1)
(2.9)
(24.3)
372.2
2019
$m
893.1
(523.3)
71.1
-
(35.8)
(5.1)
-
26.2
1.6
(1.7)
8.7
434.8
41
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2020
H5 RECONCILIATION OF PROFIT TO OPERATING CASH FLOW (continued)
Net Debt Reconciliation
Balance 1 July 2018
Net cash flow movements
Other non-cash movements
Balance 30 June 2019
Balance 1 July 2019
Recognised on adoption of AASB 16
Net cash flow movements
Other non-cash items
Balance 30 June 2020
H6 AUDITORS’ REMUNERATION
Audit services
Audit and review of financial reports
Other assurance services
Total auditors’ remuneration
Current
lease
liabilities
$m
-
-
-
-
-
0.1
(0.1)
0.1
0.1
Non-
current
lease
liabilities
$m
-
-
-
-
Non-
current
borrowings
$m
(1,322.0)
(125.0)
-
(1,447.0)
-
7.0
-
(0.1)
6.9
(1,447.0)
-
(319.0)
-
(1,766.0)
Total
liabilities
$m
(1,322.0)
(125.0)
-
(1,447.0)
(1,447.0)
7.1
(319.1)
-
(1,759.0)
Cash and
cash
equivalents
$m
26.8
(9.9)
-
16.9
16.9
-
10.0
-
26.9
Total
$m
(1,295.2)
(134.9)
-
(1,430.1)
(1,430.1)
7.1
(309.0)
-
(1,732.0)
2020
$000
$000
699.0
201.7
900.7
20191
$000
$000
639.0
159.2
798.2
1 2019 audit fee revised to reflect additional billing relating to the 30 June 2019 audit not agreed at the date of signing.
42
Mirvac Property Trust and its controlled entities
Directors’ declaration
For the year ended 30 June 2020
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 7 to 42 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2020 and of its
performance for the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they
become due and payable.
The basis of preparation note confirms that the financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer/Managing Director and the Chief Financial
Officer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Susan Lloyd-Hurwitz
Director
Sydney
20 August 2020
43
Independent auditor’s report
To the unitholders of Mirvac Property Trust
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Mirvac Property Trust (the registered scheme, MPT or Trust) and its
controlled entities (together the consolidated entity) is in accordance with the Corporations Act 2001,
including:
(a) giving a true and fair view of the consolidated entity's financial position as at 30 June 2020 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The consolidated entity’s financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2020
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies and
other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the consolidated entity in accordance with the auditor independence requirements
of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124
T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
44
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis
of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial report as a whole, taking into account the geographic and management structure of the
consolidated entity, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
Amongst other relevant
topics, we communicated
the following key audit
matters to the Audit, Risk
and Compliance
Committee:
● Fair value of
investment properties
● Expected credit losses
These are further described
in the Key audit matters
section of our report.
For the purpose of our audit we used
overall consolidated entity materiality of
$18.6 million, which represents
approximately 5% of the adjusted profit
before tax of the consolidated entity.
We applied this threshold, together with
qualitative considerations, to determine
the scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the effect of
misstatements on the financial report as
a whole.
We chose adjusted profit before tax of
the consolidated entity because, in our
view, it is the benchmark against which
the performance of the consolidated
entity is most commonly measured.
Profit before tax is adjusted for fair value
movements in investment property,
unlisted equity investments and foreign
exchange movements because they are
significant non-cash items.
We utilised a 5% threshold based on our
professional judgement, noting it is
Our audit focused on where the
consolidated entity made
subjective judgements; for
example, significant accounting
estimates involving assumptions
and inherently uncertain future
events.
The consolidated entity owns and
manages investment property
assets across Sydney, Melbourne,
Brisbane, Perth and Canberra.
The accounting processes are
structured around a consolidated
entity finance function at its head
office in Sydney. Our audit
procedures were predominantly
performed from Sydney, along
with a number of property and
development site visits being
performed at various locations
across the year.
45
within the range of commonly
acceptable thresholds.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report for the current period. The key audit matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in
that context.
Key audit matter
How our audit addressed the key audit matter
Fair value of investment properties
(Refer to note C1) $10,187m
Investment properties are recognised at fair value.
The consolidated entity’s estimate of fair value of
investment properties includes assumptions about
unobservable inputs including future market and
economic conditions which are inherently subject to
the risk of change. The economic impact of the
COVID-19 pandemic in Australia has increased the
level of judgement and uncertainty in the
assumptions used in determining the fair value of
investment properties as described in note C1.
At each reporting period, the Directors determine
the fair value of the consolidated entity’s investment
property portfolio having regard to the consolidated
entity’s valuation policy which requires all properties
to be externally valued by valuation experts at least
once every two years. In the period between
external valuations the Directors’ valuation is
supported by internal valuation models.
Fair value of investment properties was a key audit
matter because:
● investment property balances are financially
significant in the Consolidated Statement of
Financial Position.
● the impact of changes in the fair value of
investment properties can have a significant
effect on the consolidated entity’s total
comprehensive income.
● investment property valuations are inherently
subjective due to the use of unobservable
inputs in the valuation methodology.
We performed tests of selected controls related to:
● the consolidated entity’s compliance with its
policy to externally value all properties at least
once in the last two years and to rotate
valuation firms.
● the approval of the adopted fair values for all
individual properties by the Directors of the
Group.
We agreed the fair values of all properties to the
external valuation or internal valuation model
(together, the ‘valuations’) and assessed the
competency, capability and objectivity of the relevant
external or internal valuer.
We read recent independent property market reports
to develop our understanding of the prevailing market
conditions in which the Group invests.
We engaged PwC valuation experts to join our
discussions with several valuation firms to obtain an
understanding and assess the appropriateness of the
methodology used by each of the firms to address the
increased market uncertainty related to COVID-19
impacting the valuations.
We met with management to discuss the specifics of
the property portfolio including, amongst other things,
any significant leasing activity, capital expenditure and
vacancies impacting the portfolio.
We evaluated the completeness and accuracy of
tenancy schedules used in the valuations on a sample
basis to evaluate whether the relevant leasing
information had been correctly input.
We performed a risk assessment over the
consolidated entity's investment property portfolio to
46
● fair values are highly sensitive to changes in
key assumptions.
determine those properties at greater risk of fair value
being materially misstated. Our risk assessment was
informed by our understanding of each property,
consideration of the results of the consolidated entity's
estimate of fair value and our understanding of current
market conditions including the impact of COVID-19.
For those properties which were assessed as being at
greater risk, we performed procedures to assess the
reasonableness of key assumptions used in the
consolidated entity’s assessment of fair value. In our
audit procedures over the valuations we:
● Obtained the valuation and held discussions
with management to develop an
understanding of the basis for assumptions
used.
● Assessed the appropriateness of the
methodology adopted and the mathematical
accuracy of the valuations.
● Assessed the reasonableness of the
capitalisation rate, discount rate and market
rents used in the valuation by comparing them
against market data for comparable
properties.
● Assessed the reasonableness of rental
income data used in the valuation against
rental income recorded in the general ledger in
FY20 for each property.
We also assessed the appropriateness of the
consolidated entity’s disclosures against the
requirements of Australian Accounting Standards,
including the impact of COVID-19.
Key audit matter
How our audit addressed the key audit matter
Expected credit losses
(Refer to note F1) $36m
The consolidated entity assesses the recoverability
of trade receivables using an Expected Credit Loss
(ECL) model.
The consolidated entity has applied judgement in
assessing the recoverability of the carrying value of
gross tenant trade receivables, following the write
off of receivables to the extent of contractually
agreed rental relief at 30 June 2020.
For pending rental relief at balance date, the
consolidated entity has applied judgement to
In our audit procedures over the ECL model we:
● Obtained the model and held discussions with
management to develop an understanding of
the methodology applied and basis for
assumptions used in the models.
● Assessed the appropriateness of the
methodology adopted including the treatment
of agreed and pending rental relief and the
mathematical accuracy of the model.
● We assessed the expected loss rates used in
the consolidated entity’s model for
47
determine whether all or part of the associated
receivables will be recovered. The consolidated
entity has recognised the amount of rental relief
expected to be contractually agreed in the future in
the expected credit loss provision.
Any remaining trade receivables were assessed for
recoverability using the consolidated entity’s ECL
model. The future impact of the COVID-19
pandemic on the consolidated entity’s tenants is
uncertain and significant judgement was required to
be exercised by the consolidated entity in
calculating the ECL.
This included judgement applied in determining:
● appropriate groupings of tenants by risk
(‘risk category’); and
● the expected loss rate for each risk
category.
We considered measurement of ECL to be a key
audit matter because of the extent of judgement
involved.
reasonableness against our understanding of
the historical loss rates of the consolidated
entity and the observed economic impact of
COVID-19 on the industries in which the
consolidated entity’s tenants operate.
● For a sample of tenant trade receivables, we
evaluated the allocation of tenant trade
receivables to the risk categories by
comparing the consolidated entity’s assessed
risk against our understanding of the tenant’s
business including industry, location and size.
We also assessed the appropriateness of the
consolidated entity’s disclosures against the
requirements of Australian Accounting Standards,
including the impact of COVID-19.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the annual report for the year ended 30 June 2020 but does not include the financial report and our
auditor’s report thereon. Our opinion on the financial report does not cover the other information and
accordingly we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we
have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of Mirvac Funds Limited, the responsible entity (the directors) are responsible for the preparation
of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and
the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the
preparation of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the consolidated
entity to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the consolidated entity or to
cease operations, or have no realistic alternative but to do so.
48
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.
This description forms part of our auditor's report.
PricewaterhouseCoopers
Jane Reilly
Partner
Joe Sheeran
Partner
Sydney
20 August 2020
49
158
MIRVAC GROUP – ANNUAL REPORT 2020Mirvac Group mirvac.com