MIRVAC PROPERTY TRUST
AND ITS CONTROLLED ENTITIES
Annual Report
For the year ended 30 June 2021
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 stapled unitholders of Mirvac Property Trust
Page
2
7
8
9
10
11
12
13
37
38
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2021
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 2021.
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 (resigned 19 November 2020)
Jane Hewitt
·
James M. Millar AM
·
· Samantha Mostyn AO
· Peter Nash
· Robert Sindel (appointed on 1 September 2020)
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
Mirvac showed resilience and continued to build towards recovery in FY21, with a strong performance for the full year ended
30 June 2021. The impacts of the global pandemic continued to play out, causing uncertainty and challenging conditions in
some operating markets. However, the consolidated entity’s robust balance sheet provided stability and optionality to make
strategic, value accretive investments in line with our urban strategy. Mirvac’s purpose, to Reimagine Urban Life, and our
people focus underpinned engagement and productivity, whilst our embedded innovation capability inspired us to find new
ways to address environmental and social challenges, and drive positive change.
Key financial highlights for the year ended 30 June 2021:
·
·
·
·
profit attributable to the stapled unitholders of MPT of $797.9 million (2020: $538.4 million);
operating cash inflow of $437.9 million (2020: $372.2 million);
distributions of $389.8 million (2020: $358.0 million), representing 9.9 cents per stapled unit (2020: 9.1 cents per stapled
unit); and
net tangible assets per stapled unit of $2.32, up from $2.22 (June 2020).
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 2021:
The consolidated entity’s capital structure is monitored at the Mirvac Group level. Key capital management highlights include:
· maintaining the Group’s existing Moody’s A3 and Fitch A- credit ratings;
· maintaining adequate liquidity through cash and undrawn debt facilities, which combined total $867.0 million as at 30 June
·
2021;
headline gearing within the Group’s preferred range of 20-30 per cent, with headline gearing in FY22 to be near the mid-
point of this preferred range; and
· maintaining a competitive cost of debt, which is expected to reduce from 3.4 per cent in FY21 as the Group’s hedge profile
changes.
2
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2021
REVIEW OF OPERATIONS AND ACTIVITIES (continued)
FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS (continued)
Key operational highlights for the year ended 30 June 2021:
·
·
·
·
investment property revaluations provided an uplift of $404.8 million for the 12 months to 30 June 2021;
progressed construction of Suncorp’s new headquarters at 80 Ann Street, Brisbane (50% interest). The 60,000sqm office
precinct is 81 per cent pre-committed and practical completion remains on track for FY22;
a design by SHoP Architects and Woods Bagot was selected for the 60,000sqm premium commercial and retail precinct
planned at 55 Pitt Street, Sydney (50% interest). The stage 2 DA has been submitted, with estimated completion expected
in CY26; and
continued strong cash collections across our investment property portfolio, with collection of arrears de-risked with
adequate ECL provisions.
Outlook and risks1
The outlook for our investment portfolio is strong, supported by high quality assets, in the most preferred markets and
supported by strong tenant covenants to provide stable and visible cash flows.
Office:
After a year of weak tenant demand2, major office markets including Sydney and Melbourne CBDs recorded stable net
absorption by year end, in line with sharply improved business sentiment3. While elevated incentives are likely to be a feature
for some time, vacancy in most markets is expected to begin declining through FY23 as supply reduces and demand improves
again. However, our high quality, modern and efficient office portfolio benefits from low vacancy, low exposure to small tenants,
long WALE and low capex requirements. These attributes have provided resilience throughout the pandemic and continue to
differentiate the portfolio as both tenant and investor demand grows for modern, flexible, technology-enabled, sustainable
workplaces that are fit for purpose in a post-pandemic world.
80 Ann Street, Brisbane will enter into the portfolio in the second half of FY22. It is currently 81 per cent pre-committed4 and
will drive NOI growth, providing a boost to performance of the portfolio. 55 Pitt Street, Sydney has also progressed along its
development pipeline, contributing to the next wave of office precincts that are beginning to take shape. These landmark
pipeline projects provide assurance of the Office portfolio’s ability to continue to generate passive returns and drive significant
value for the consolidated entity into the future.
Industrial:
As one of the few beneficiaries of the global pandemic, industrial property has received a boost from a number of tailwinds
including accelerating e-commerce, a rising housing construction cycle and wide-scale supply chain investment5. Our Industrial
portfolio benefits from a 100 per cent Sydney exposure and proximity to infrastructure. It includes assets which are widely
viewed as market leading prime logistics facilities. Our Industrial portfolio has zero vacancy, long WALE and low capital
expenditure, and is well placed to capitalise on the heightened demand for institutional quality logistics facilities in strategic
locations with proximity to transport connections.
Sydney industrial vacancy rates tightened throughout FY21 and this is expected to continue through FY22 particularly as
COVID-19 restrictions ease6. While tailwinds such as e-commerce are an incremental driver of industrial floor space demand,
the pandemic is also expected to see an acceleration of demand requirements towards modern, highly efficient logistics spaces
in strategic locations7. Our portfolio remains well positioned due to its long WALE, high composition of listed and multi-national
tenants, limited short-term expiry risk (<4 per cent) and modern, well-located assets.
Retail:
The impacts of the global pandemic continue to play out across the retail sector and the impact on our retail assets has varied
during the financial year. Generally, strong pent-up demand was evident once restrictions eased in assets with strong localised
catchments, whilst out of trade area and CBD assets continued to experience the impacts of lower than normal tourist, worker
and student populations.
The outlook for the retail sector remains challenging as we move into FY22, with pandemic impacts continuing to cause
disruption and uncertainty. However, as Australian vaccination rates increase and restrictions ease, we expect increased
mobility, an improvement in consumer confidence and pent-up demand from elevated household savings rates, to improve
our operating performance.
While CBD, tourism and student catchments will take time to recover, well located assets within dense and growing catchments
are likely to attract quality retailers and businesses.
1 These statements are future looking and based on our reasonable belief at the time they were made. They include possible outlooks for our operating environments, but are subject to external factors and the uncertain
environment caused by the global pandemic.
2 JLL REIS June 2020.
3 Source: NAB Monthly Business Survey, https://business.nab.com.au/monthly-business-survey-june-2021-2-47997/
4 Includes non-binding Heads of Agreement
5 JLL REIS June 2020, Asia Pacific logistics and industrial investment poised to double within five years, JLL, 13 July 2021,
https://www.jll.com.au/en/newsroom/pacific-logistics-and-industrial-investment-poised-to-double-within-five-years
6 SA1 Property, Mirvac Research.
7 UBS, Australian Real Estate Sector Update - Looking into 2021, 19 January 2021.
3
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2021
REVIEW OF OPERATIONS AND ACTIVITIES (continued)
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.
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
2021
No. units
m
3,936.0
1.4
3,937.4
2020
No. units
m
3,932.7
1.6
3,934.3
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
5,020,678
Susan Lloyd-Hurwitz
65,172
Christine Bartlett
50,000
Jane Hewitt
55,172
James M. Millar AM
74,045
Samantha Mostyn AO
65,123
Peter Nash
Robert Sindel
70,000
Former Non-Executive Key Management Personnel (KMP)
Peter Hawkins1
-
1 Peter Hawkins ceased as a Non-Executive Director on 19 November 2020.
Performance rights/rights
to acquire stapled
securities
-
1,850,357
-
-
-
-
-
-
Interests in securities of
related entities or related
bodies corporate
-
-
-
-
-
-
-
-
-
-
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 $20.0 million (2020: $31.6 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.
4
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2021
REVIEW OF OPERATIONS AND ACTIVITIES (continued)
Net current asset deficiency
As at 30 June 2021, the Trust was in a net current liability position of $170.2 million (2020: $195.4 million). The Trust repays
its borrowings with excess cash, but had access to $616.0 million of unused borrowing facilities at 30 June 2021 (2020: $734.0
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
In July 2021, the NSW and Victorian State Governments implemented new restrictions in response to the increase in COVID-
19 cases. These restrictions have not had a significant impact 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.
On 29 July 2021, the consolidated entity contracted to acquire a 50 per cent interest in The EY Centre, 200 George Street,
Sydney and contracted to sell a 49.9 per cent interest in this asset to an aligned capital partner (with the consolidated entity
retaining a 50.1 per cent interest) resulting in a 11 per cent valuation uplift being recognised by the consolidated entity in
respect to its interest.
No other events have occurred since the end of the year which have significantly affected or may significantly affect the
consolidated entity’s operations, the results of those operations, or state of affairs 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 2021 can be found
in the 30 June 2021 Annual Report of the Mirvac 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 2021 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.
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.
5
Mirvac Property Trust and its controlled entities
Directors’ report
For the year ended 30 June 2021
REVIEW OF OPERATIONS AND ACTIVITIES (continued)
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
12 August 2021
6
Auditor’s Independence Declaration
As lead auditor for the audit of Mirvac Property Trust for the year ended 30 June 2021, 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.
Voula Papageorgiou
Partner
PricewaterhouseCoopers
Sydney
12 August 2021
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo NSW 2000, 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.
7
Mirvac Property Trust and its controlled entities
Consolidated financial statements
For the year ended 30 June 2021
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
13
F OPERATING ASSETS AND LIABILITIES
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
15
15
16
16
16
17
21
22
22
22
23
24
26
26
26
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 Auditor's remuneration
27
28
28
30
30
31
32
32
32
33
35
35
36
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 12 August 2021. 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 2021
Revenue
Other income
Net revaluation gain from investment properties
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
2021
$m
686.7
404.8
32.7
7.7
2.2
447.4
1,134.1
189.3
58.8
1.3
64.3
20.0
2.5
797.9
-
797.9
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
-
-
797.9
538.4
Cents
20.3
20.3
Cents
13.7
13.7
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 2021
Current assets
Cash and cash equivalents
Receivables
Other assets
Assets held for sale
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
C1
C2
F2
F3
F4
F5
F4
D2
E2
E3
2021
$m
31.4
8.5
18.2
132.8
190.9
10,651.9
470.0
74.5
42.8
11,239.2
11,430.1
0.1
160.2
200.8
361.1
6.8
-
1,884.0
1,890.8
2,251.9
9,178.2
5,373.6
5.4
3,799.2
9,178.2
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
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 2021
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 – Employee Exemption Plan
(EEP)
Long-term incentives (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
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
Reversal of costs of issuing equity
Distributions
Total transactions with owners in their capacity as
owners
Balance 30 June 2021
E2
E2
E2
E2
E1
E2
E2
E2
E2
E1
Attributable to stapled unitholders
Contributed
equity
$m
5,316.4
Reserves
$m
5.4
Retained
earnings
$m
3,210.7
Note
Total
equity
$m
8,532.5
538.4
-
538.4
0.9
9.6
0.6
39.7
(358.0)
-
-
-
0.9
9.6
0.6
39.7
-
-
-
-
-
-
-
-
538.4
-
538.4
-
-
-
(358.0)
50.8
5,367.2
-
5.4
(358.0)
3,391.1
(307.2)
8,763.7
-
-
-
0.9
5.0
0.3
0.2
-
-
-
-
-
-
-
-
-
797.9
-
797.9
797.9
-
797.9
-
-
-
-
(389.8)
0.9
5.0
0.3
0.2
(389.8)
6.4
5,373.6
-
5.4
(389.8)
3,799.2
(383.4)
9,178.2
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
11
Note
C2
B3
H5
Mirvac Property Trust and its controlled entities
Consolidated statement of cash flows
For the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
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
Contributions to joint ventures
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
Principal elements of lease payments
Distributions paid
Net cash outflows from financing activities
Net increase 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
2021
$m
692.1
(213.2)
478.9
28.1
1.0
(70.1)
437.9
(333.8)
84.7
(1.2)
(250.3)
577.0
(459.0)
6.0
(0.1)
(307.0)
(183.1)
4.5
26.9
31.4
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
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
12
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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 2021
Basis of preparation (continued)
Impact of COVID-19 on the consolidated entity
The consolidated entity has navigated through a period of change and has demonstrated its adaptability to the
rapidly changing conditions in which it operates. The June and July 2021 lockdowns across the country, and in
particular in NSW, have seen non-essential businesses into forced closure and the mandatory cessation of
construction for two weeks. This latest outbreak draws upon the lessons learned in the prior year and the
consolidated entity faced the challenges presented once again by the pandemic, however this time with a deeper
understanding of the impacts across its tenants, customers and employees. Experts are confident that the
vaccination roll out across the country will see the easing of restrictions and a solid level of activity return, albeit
this will take some time.
The consolidated entity has considered the continuing impact of the COVID-19 pandemic in preparing its annual
report. As in the prior year, the impact of COVID-19 increases the level of judgement required across the
consolidated entity’s key judgement areas, in particular the measurement of the assets. Further details are
outlined in the following sections of this financial report:
Investment Properties
Refer to Note C1
Receivables
Refer to Note F1
Going Concern
The consolidated entity has considered its ability to continue as a going concern, using projected cash flow forecasts
and other metrics and information for at least the next 12 months from the approval 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 beyond this period.
As of 30 June 2021, the consolidated entity was in a net current liability position of $170.2m (June 2020: $195.4m)
but had undrawn capacity under its debt facilities of $616.0m (June 2020: $734.0m) maturing in December 2023.
As of 30 June 2021, the consolidated entity had capital commitments of $45.4m (June 2020: $12.4m).
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
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
Amended standards and interpretations adopted by the consolidated entity for the year ended 30 June 2021 have not had a
significant impact on the current period or any prior period and are not likely to have a significant impact in future periods.
These are listed below:
- AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material [AASB 101 and AASB 108]
- AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business [AASB 3]
- Revised Conceptual Framework for Financial Reporting and AASB 2019-1 Amendments to Australian Accounting
Standards – References to the Conceptual Framework
- AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform [AASB 7, AASB 9 and
AASB 139].
14
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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, is recognised over time when the services are provided.
Revenue
Lease revenue
Service revenue
Total property rental revenue
Other revenue
Total revenue
Gain on financial instruments
Net revaluation gain on units in unlisted funds
Total gain on financial instruments
2021
$m
577.7
107.3
685.0
1.7
686.7
7.7
7.7
2020
$m
604.9
87.5
692.4
1.4
693.8
7.6
7.6
15
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
B3 EXPENSES
Investment property expenses and outgoings
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:
Statutory levies
Insurance
Outgoings
Other property expenses
Total investment property expenses and outgoings
Interest paid
Borrowing costs capitalised
Total finance costs
Bad debts expense
Loss allowance on trade debtors
Total impairment loss on receivables
2021
$m
39.5
3.9
15.9
130.0
189.3
70.1
(5.8)
64.3
-
1.3
1.3
2020
$m
36.7
3.1
17.9
125.1
182.8
69.3
(16.4)
52.9
5.1
36.4
41.5
B4 EVENTS OCCURRING AFTER THE END OF THE YEAR
In July 2021, the NSW and Victorian State Governments implemented new restrictions in response to the increase in
COVID-19 cases. These restrictions have not had a significant impact 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.
On 29 July 2021, the consolidated entity contracted to acquire a 50 per cent interest in The EY Centre, 200 George Street,
Sydney and contracted to sell a 49.9 per cent interest in this asset to an aligned capital partner (with the consolidated entity
retaining a 50.1 per cent interest) resulting in a 11 per cent valuation uplift being recognised by the consolidated entity in
respect to its interest.
No other events have occurred since the end of the year which have significantly affected or may significantly affect the
consolidated entity’s operations, the results of those operations, or state of affairs 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.
16
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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.
To assist with calculating reliable estimates, the consolidated entity uses independent valuers on a rotational basis.
Approximately 25 per cent of the portfolio is independently valued every six months, with management internally estimating
the fair value of the remaining properties using estimation techniques by suitably qualified personnel. In response to 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 more significant. For the full year ended 30 June
2021, 41 independent valuations were undertaken by the consolidated entity, covering 60 per cent of its investment property
portfolio by value.
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.
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.
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 the developer’s risk and profit. This valuation is then discounted back to the present value.
Ground leases
On initial recognition, a lease liability reflecting the leasehold arrangements of investment properties is 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.
17
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
C1 INVESTMENT PROPERTIES (continued)
At 30 June 2021, $6.9m of lease liabilities for ground leases has been recognised in the consolidated SoFP (2020: $7.0m).
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 to which they relate.
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 net property income and do not change under
AASB 16 Leases.
Derecognition of investment properties
Investment properties are reclassified from non-current to current assets held for sale when they satisfy the conditions under
AASB 5 Non-current Assets Held for Sale and Discontinued Operations.
For reclassification to occur, the disposal of the investment property must be highly probable with an exchanged contract and
settlement pending. Once control of an investment property transfers to a purchaser, usually upon settlement, the consolidated
entity will derecognise the book value of the Investment property with any resultant gain or loss recognised in the consolidated
SoFP.
As at 30 June 2021, the consolidated entity had exchanged contracts for the disposal of Cherrybrook Shopping Village,
Cherrybrook NSW and settlement is expected to occur in FY22. Accordingly, the consolidated entity has reclassified the
investment property to assets classified as held for sale on the consolidated SoFP.
Movements in investment properties
Balance 1 July
Expenditure capitalised
Acquisitions
Disposals
Transfer to held for sale
Net revaluation gain from fair value adjustments
Ground lease liability unwind
Amortisation expenses
Balance 30 June
Total investment properties
Total investment properties under construction
2021
Total
$m
10,187.3
345.9
48.5
(82.2)
(132.8)
404.8
(0.1)
(119.5)
10,651.9
10,358.6
293.3
2020
Total
$m
9,853.3
398.6
-
(130.5)
-
154.5
(0.1)
(88.5)
10,187.3
9,566.8
620.5
18
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
C1 INVESTMENT PROPERTIES (continued)
Fair value measurement and valuation basis
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.
The key inputs and sensitivity to changes are explained below.
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.
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
6,803.8 312.0 – 1,519.0
104.0 – 407.0
1,025.0
2,823.1 311.0 – 1,121.0
6,413.4 312.0 – 1,573.0
102.5 – 486.0
2,895.2 304.0 – 1,439.0
878.7
2.50 – 3.80
2.82 – 3.02
2.30 – 3.84
2.64 - 3.97
2.77 - 3.05
2.03 - 3.53
4.38 – 6.75
4.09 – 5.75
4.75 – 8.75
4.50 – 7.25
4.50 – 6.00
5.00 – 9.00
5.85 – 7.25
5.25 – 6.61
6.25 – 9.50
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
Sector
2021
Office
Industrial
Retail
2020
Office
Industrial
Retail
19
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
C1 INVESTMENT PROPERTIES (continued)
As a result of the COVID-19 pandemic, there is still some heightened uncertainty in assessing the fair values
of investment properties. Market evidence of similar properties in similar markets in which the consolidated
entity invests was limited in the office and retail sectors as sales volumes were impacted by the COVID-19
pandemic, with prospective purchasers demonstrating caution and preserving capital. In the industrial asset
class, the level of demand has increased over the past twelve months as the sector has proven to be resilient
during recent times of economic uncertainty.
In consideration of the COVID-19 pandemic, 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)
iii)
iv)
v)
vi)
vii)
viii)
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 were used as the
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 were viewed as having the least risk in valuations;
Market rents: rents that could be achieved if tenancy was leased on the open market as at valuation
date. Passing rent refers to contractual rent as at the valuation date;
Growth rates and incentives: 10-year forecasts for incentives and growth rates applied to future leasing
assumptions;
Downtime: period of vacancy between leases on a tenancy;
COVID-19 impact on the tenancies, in particular rental relief requested, ability to trade and industry
that the tenants operate in; and
Fair value inputs: capitalisation rate, discount rate and terminal rate applied to capitalisation income,
DCF and terminal 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.
The consolidated entity considered the 30 June 2021 valuations with regard to the July 2021 outbreaks of
COVID-19, in particular for its retail investment properties. There was expected to be some impact to the future
cash flows and rent relief requests, possibly accompanied by the reinstatement of a mandatory code for
landlords. However, based on information as at 30 June 2021, these impacts to the valuation of the consolidated
entity’s investment properties were not expected to have a material impact.
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 fair value at 30 June 2021.
The below table presents the outcome of the sensitivity analysis as the decrement or increment to the fair value of each
asset class of the consolidated entity’s investment property portfolio (including Office JV but excluding IPUC and
development assets) should the unobservable inputs increase or decrease by 25 bps. For example an increase of 25 bps
of the capitalisation rate, discount rate and terminal yield in the consolidated entity’s Office portfolio would have resulted
in a decrement of $367.7m in addition to the fair value presented as at 30 June 2021.
Capitalisation rate, discount rate and terminal yield
movement by
Office
Industrial
Retail
Total
25 bps
$m
(367.7)
(51.8)
(127.4)
(546.9)
25 bps
$m
379.3
58.6
139.6
577.5
20
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
C1 INVESTMENT PROPERTIES (continued)
Future committed operating lease receipts
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.
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
C2 INVESTMENTS IN JOINT VENTURES
2021
$m
472.5
1,628.5
1,442.2
3,543.2
2020
$m
492.7
1,558.6
1,415.2
3,466.5
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.
Judgement in testing for impairment of investments in JVs
The Trust assesses at the end of each reporting period whether there is any indication that its investment in the JV may be
impaired. If any such indication exists, the Trust shall estimate the recoverable amount of the asset. The recoverable amount
is the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use.The Trust has
measured its investment in JV’s at fair value less costs of disposal. The fair value of the JV is primarily determined based on
the value of the underlying investment property held by the JV and is 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.
As at the date of this report there is no indication of impairment in the Trust investment in JV’s. All JVs are established or
incorporated in Australia.
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.
Principal activities
Summarised SoFP
Cash and cash equivalents
Other current assets
Total current assets
Total non-current assets
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
Mirvac 8 Chifley Trust
Mirvac (Old Treasury)
Trust
2021
$m
2020
$m
2021
$m
2020
$m
Total
2021
$m
Property investment
Property investment
1.8
0.4
2.2
2.3
0.6
2.9
5.9
1.0
6.9
457.8
474.8
486.8
6.7
6.7
-
453.3
50.0
226.7
226.7
3.1
3.1
-
474.6
50.0
237.3
237.3
7.0
7.0
-
486.7
50.0
243.3
243.3
5.8
1.1
6.9
455.8
6.8
6.8
-
455.9
50.0
228.0
228.0
7.7
1.4
9.1
944.6
13.7
13.7
-
940.0
470.0
470.0
2020
$m
8.1
1.7
9.8
930.6
9.9
9.9
-
930.5
465.3
465.3
21
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
C2 INVESTMENTS IN JOINT VENTURES (continued)
Mirvac 8 Chifley Trust
Mirvac (Old Treasury)
Trust
2021
$m
31.7
6.6
6.6
50.0
3.3
12.9
2020
$m
28.1
22.6
22.6
50.0
11.3
13.7
2021
$m
41.9
58.8
58.8
50.0
29.4
12.8
2020
$m
46.6
39.2
39.2
50.0
19.6
13.4
Total
2021
$m
73.6
65.4
65.4
32.7
25.7
2020
$m
74.7
61.8
61.8
30.9
27.9
Summarised SoCI
Revenue
Profit after tax
Total comprehensive income/(loss)
Trust’s share of profit/(loss) after tax (%)
Trust’s share of profit/(loss) after tax ($m)
Distributions received/receivable from JVs
Capital expenditure commitments
At 30 June 2021, the consolidated entity had no capital commitments approved but not yet provided for regarding its share of
JVs (2020: nil).
C3 COMMITMENTS
At 30 June 2021, capital commitments on the consolidated entity’s investment property portfolio were $45.4m (2020: $12.4m).
There were no investment properties pledged as security by the consolidated entity (2020: nil).
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 2021, 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 2021 is $2,500.0 million
(2021: $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 2021, the consolidated entity had $616.0 million of undrawn facilities available (2020: $734.0 million ).
22
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
D2 BORROWINGS AND LIQUIDITY (continued)
2021
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
2020
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
1,884.0
-
-
-
- 1,884.0
1,766.0
-
-
-
- 1,766.0
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.
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.
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
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 a
counterparty will
not make
payments to
Mirvac as they fall
due
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
Management of exposures
·
Interest rate derivatives manage cash flow interest rate
risk by converting floating rate borrowings to fixed or
capped rates with a 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.
· 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.
23
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
D3 FINANCIAL RISK MANAGEMENT (continued)
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 (bps). 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 2021.
Total impact on profit after
tax and equity
Changes in:
Australian interest rates
2021
2020
25 bps
$m
25 bps
$m
25 bps
$m
25 bps
$m
$4.7 m decrease
$4.7 m increase
$3.3 m decrease
$3.3 m increase
Based on current exposures, there is no material foreign exchange sensitivity in the consolidated entity.
Liquidity risk
Maturity 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:
2021
Maturing in:
1 to 2
years
$m
-
2 to 5
years
$m
-
74.4 1,922.9
Less than
1 year
$m
160.2
64.7
Over 5
years
$m
-
-
Total
$m
160.2
2,062.0
Less than
1 year
$m
139.8
71.6
2020
Maturing in:
1 to 2
years
$m
-
72.9
2 to 5
years
$m
-
1,876.9
Over 5
Total
years
$m
$m
-
139.8
- 2,021.4
0.1
225.0
0.1
0.4
74.5 1,923.3
6.3
6.3
6.9
2,229.1
0.1
211.5
0.1
73.0
0.3
1,877.2
7.0
6.5
6.5 2,168.2
Payables
Borrowings
Lease
liabilities
D4 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
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.
24
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
D4 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (continued)
Units in unlisted funds are traded in inactive markets. The fair value of investments not traded in an active market is determined
by the unit price as advised by the fund’s trustee. The fair value of the security is determined based on the value of the fund’s
underlying assets. The fund’s assets are subject to regular external valuations which 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. This means 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:
2021
2020
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Note
Financial assets carried at
fair value
Units in unlisted funds
F2
-
-
-
-
74.5
74.5
74.5
74.5
-
-
-
-
65.6
65.6
65.6
65.6
The following table presents a reconciliation of the carrying value of Level 3 instruments (excluding investment properties
which are shown in note C1):
2021
Units in unlisted funds
$m
2020
Units in unlisted funds
$m
Other financial assets
$m
Balance 1 July
Acquisitions
Net revaluation gain on financial
instruments
Repayments
Balance 30 June
65.6
1.2
7.7
-
74.5
58.0
-
7.6
-
65.6
79.7
-
-
(79.7)
-
25
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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 2021
31 December 2020
30 June 2021
Total distribution
Distributions for the year ended 30 June 2020
31 December 2019
30 June 2020
Total distribution
E2 CONTRIBUTED EQUITY
Distribution
Cents
Date
paid/payable
Total amount
$m
4.80
5.10
9.90
6.10
3.00
9.10
1 Mar 2021
31 Aug 2021
28 Feb 2020
14 Sep 2020
189.0
200.8
389.8
240.0
118.0
358.0
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
Reversal of costs of issuing equity
Balance 30 June
2021
2020
No. units
m
3,932.7
0.5
2.7
0.1
-
-
3,936.0
Units
$m
5,367.2
0.9
5.0
0.3
-
0.2
5,373.6
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
The number of stapled units issued as listed on the ASX at 30 June 2021 was 3,937.4 million (2020: 3,934.3 million) which
includes 1.4 million of stapled units issued under the LTI and EIS (2020: 1.6 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.
Balance 30 June 2020
Balance 30 June 2021
Capital reserve
$m
(1.4)
(1.4)
NCI reserve
$m
6.8
6.8
Total reserves
$m
5.4
5.4
26
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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 the consolidated entity’s investment property rental income, many of the consolid-
ated entity’s tenants have experienced cash flow and financial difficulties, in particular, the retail sector, due to man-
datory closures, a halt on discretionary spending, employment instability and the general economic downturn.
The calculation of the ECL considers the historical bad debt write-offs which are specific to each segment, less
collateral held and adjusted for specific known factors, including:
- financial situation of a tenant;
- industry in which the tenant operates and if this has been impacted by mandatory government restrictions;
- 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.
For the year ended 30 June 2021, there were no trade debtors written off (2020: $5.1m). The increase in the ECL
provision for trade debtors during the year was $1.3m (2020: $36.4m). These amounts are included in impairment
loss on receivables in the consolidated SoCI.
Trade receivables
Accrued income
Total receivables
Ageing
2021
Loss
allowance
$m
(19.5)
-
(19.5)
Gross
$m
25.6
2.4
28.0
Net
$m
6.1
2.4
8.5
Gross
$m
47.1
7.9
55.0
Days past due
2021
Total receivables
Loss allowance
Balance 30 June 2021
2020
Total receivables restated
Loss allowance restated
Balance 30 June 2020
Not past due
1 - 30
31 - 60
61 - 90
2.4
-
2.4
7.9
-
7.9
5.1
-
5.1
15.9
(5.6)
10.3
3.5
(2.5)
1.0
13.5
(13.5)
-
2.9
(2.9)
-
11.5
(11.5)
-
2020
Loss
allowance
restated
$m
(36.8)
-
(36.8)
Net
$m
10.3
7.9
18.2
91 -
120
1.8
(1.8)
-
3.2
(3.2)
-
Over 120
Total
12.3
(12.3)
-
3.0
(3.0)
-
28.0
(19.5)
8.5
55.0
(36.8)
18.2
27
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
F1 RECEIVABLES (continued)
Loss allowance
Balance 1 July
Amounts utilised for write-off of receivables
Loss allowance recognised
Balance 30 June
2021
$m
(36.8)
18.6
(1.3)
(19.5)
Restated
2020
$m
(2.5)
-
(34.3)
(36.8)
The consolidated entity does not have any significant credit risk exposure to a single customer. The consolidated entity holds
collateral over receivables of $64.4 million (2020: $158.9 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
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
F3 GOODWILL
Balance 1 July
Balance 30 June
Impairment testing
2021
$m
74.5
74.5
2021
$m
42.8
42.8
2020
$m
65.6
65.6
2020
$m
42.8
42.8
Goodwill acquired in a business combination is tested annually for impairment. Goodwill is impaired if the recoverable
amount, calculated as the higher of the value in use and the fair value less costs to sell, is less than its carrying amount. 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 estimation of the recoverable amount of goodwill
depends on the nature of the CGU. For the consolidated entity CGU, the value in use is the discounted present value of
estimated cash flows that the CGU will generate, which primarily comprise of the consolidated entity’s investment
properties in office, industrial and retail.
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 cash flow projections are based on a management
approved forecasts covering an initial period of 5 years and the subsequent 5 years are based on a growth rate of 3.0% p.a.
28
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
F3 GOODWILL (continued)
Impairment testing (continued)
The key assumptions used to determine the forecast cash flows include net market rent, capital expenditure, growth rate,
discount rate and market conditions.
Net market rent
Other cash flows
The rent at which a tenancy could be leased in the market including outgoings recovery
These cashflows are minimal in comparison to the rental cashflows but form part of the IIP CGU
Capital expenditure
Growth rate
The amount of additional investment required to upgrade or maintain the Group’s investment
properties
The rate at which cashflows will grow over time. The growth rate has been adjusted to reflect
current market conditions and does not exceed the long-term average growth rate.
The cash flow projections are based on management approved forecasts covering an initial period
of five years and the subsequent five years are based on a growth rate of 3.0% p.a.
Cash flow 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 asset class and industry experience, management is comfortable
that a ten year cash flow projection is appropriate.
Terminal growth rate
The constant rate that cash flows are expected to grow at into perpetuity
Pre-tax discount rate
The rate of return used to convert cashflows into present value, these are specific to the risks of
each of the cash flows within the consolidated entity. This includes using the weighted investment
property portfolio discount rate, which was 6.5% as at 30 June 2021, and then applying a premium
adjustment to this rate on the basis that a prospective purchaser would expect there to be multiple
benefits to acquiring a portfolio of assets.
Mirvac Property Trust
Growth rate
30 June 20211
% pa
3.0
Discount rate
30 June 2021
% pa
5.9
Growth rate
30 June 20201
% pa
3.0
Discount rate
30 June 2020
% pa
6.6
1. Weighted average growth rate used to extrapolate cashflows beyond the initial management approved 5-year forecast period.
Sensitivity
If the pre-tax discount rate and the growth rate or terminal growth rate applied to the cash flow projections were increased or
decreased by 0.5%, and 1.0% respectively, the consolidated entity’s value in use calculations would have sufficient
headroom and this would not result in an impairment.
Based on information available and market conditions as at 30 June 2021 and up to the date of this report, management have
considered that a reasonably foreseeable change in the other assumptions used in the goodwill assessment would not result
in an impairment to the value of goodwill as at 30 June 2021 (2020: nil). The foreseeable change in the assumptions also
considered the June and July 2021 COVID-19 pandemic lockdowns into consideration.
29
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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
2021
$m
2.0
26.8
102.7
-
28.7
160.2
-
-
2020
$m
25.7
18.7
22.6
1.7
71.1
139.8
29.0
29.0
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
2021
$m
118.0
389.8
(307.0)
200.8
2020
$m
246.4
358.0
(486.4)
118.0
30
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
G CONSOLIDATED ENTITY STRUCTURE
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 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.
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 Trust
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.
One unit on issue held by Mirvac Limited as custodian for MPT.
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
31
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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
2021
$m
266.0
10,078.1
905.1
2,622.7
5,373.4
7.6
2,074.4
7,455.4
675.7
675.7
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
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 2021, the parent entity did not provide any other guarantees (2020: nil), have any contingent liabilities (2020: nil),
or any capital commitments (2020: 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 2021 in respect of the following:
Health and safety claims
The consolidated entity has no contingent liabilities relating to JVs (2020: nil).
H2 EARNINGS PER STAPLED UNIT
2021
$m
0.2
2020
$m
0.2
Basic earnings per stapled unit (EPU) is calculated by dividing:
·
·
the profit attributable to stapled unitholders; by
the weighted average number of ordinary units (WANOU) outstanding during the year.
Diluted EPU adjusts the WANOU to take into account the dilutive potential of ordinary securities from security-based
payments.
32
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
H2 EARNINGS PER STAPLED UNIT (continued)
Earnings per stapled unit
Basic EPU (cents)
Diluted EPU (cents)
Profit for the year attributable to stapled unitholders ($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
2021
20.3
20.3
797.9
3,935.6
3,937.1
2020
13.7
13.7
538.4
3,931.6
3,933.2
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 2020
4,402,940
845,000
465,428
74,099
-
Changes
617,738
-
420,344
141,628
-
Balance 30
June 2021
5,020,678
845,000
420,344
215,727
-
Value 30
June 2021
$
14,660,380
2,467,400
1,227,404
629,923
-
Minimum
securityholding
guideline1
$
Date
securityholding to
be attained1
2,250,000
950,000
950,000
800,000
800,000
June 2021
June 2021
June 2021
May 2022
March 2026
617,199
770,437
(617,199)
(770,437)
-
-
-
-
$900,000
$800,000
June 2021
June 2021
Executive KMP
Susan Lloyd-Hurwitz
Brett Draffen
Campbell Hanan
Stuart Penklis
Courtenay Smith
Former Executive
KMP
Shane Gannon
Susan MacDonald
1 Minimum securityholding requirement and attainment date is based on the new requirements effective from FY19.
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 2021 and no unvested or unexercised options are held by Executive KMP as at 30 June 2021.
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 2020
Rights
issued
Long-term Incentives
Rights
vested/forfeited
relating to
performance
period ended 30
June 2021
Deferred Short-term
Incentives (STI)
Rights
vested/
forfeited
Rights
issued
Balance 30
June 2021
Executive KMP
Susan Lloyd-Hurwitz
Brett Draffen
Campbell Hanan
Stuart Penklis
Courtenay Smith
2,149,864
874,524
448,471
443,080
-
1,017,412
386,616
214,787
180,873
90,436
(1,159,793)
(440,721)
(206,185)
(206,185)
-
-
-
-
-
90,436
(157,126)
(100,918)
(75,369)
(69,978)
-
1,850,357
719,501
381,704
347,790
180,872
33
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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
Vesting
date
Vested
Number
of rights
Susan
Lloyd-
Hurwitz
Total
Brett
Draffen
Total
Campbell
Hanan
Total
Stuart
Penklis
Total
Courtenay
Smith
Total
STI
LTI
STI
STI
LTI
LTI
STI
LTI
STI
STI
LTI
LTI
STI
LTI
STI
STI
LTI
LTI
STI
LTI
STI
STI
LTI
LTI
STI
STI
LTI
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
3 Dec 20
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
3 Dec 20
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
3 Dec 20
1 Oct 18
3 Dec 18
30 Sep 19
30 Sep 19
2 Dec 19
3 Dec 20
26 Mar 21
26 Mar 21
26 Mar 21
94,727
1,159,793
62,399
62,398
770,547
1,017,412
3,167,276
60,841
440,721
40,077
40,077
292,808
386,616
1,261,140
45,438
206,185
29,931
29,931
136,986
214,787
663,258
40,047
206,185
29,931
29,931
136,986
180,873
623,953
45,218
45,218
90,436
180,872
204,610
1,433,041
183,838
176,996
1,684,444
1,649,225
5,332,154
131,417
544,556
118,074
113,681
640,089
626,705
2,174,522
98,146
254,762
88,182
84,901
299,457
348,170
1,173,618
86,502
254,762
88,182
84,901
299,457
293,195
1,106,999
106,579
103,233
127,515
337,327
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
30 Jun 23
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
30 Jun 23
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
30 Jun 23
30 Sep 20
30 Jun 21
30 Sep 20
30 Sep 21
30 Jun 22
30 Jun 23
8 Mar 22
8 Mar 23
30 Jun 23
94,727
880,978
62,399
-
-
-
1,038,104
60,841
334,771
40,077
-
-
-
435,689
45,438
156,617
29,931
-
-
-
231,986
40,047
156,617
29,931
-
-
-
226,595
-
-
-
-
% of
total
grant
100%
76.0%
100%
100%
76.0%
100%
100%
76.0%
100%
100%
76.0%
100%
Value of
rights
204,610
1,089,111
183,838
-
-
-
1,477,559
131,417
413,863
118,074
-
-
-
663,354
98,146
193,619
88,182
-
-
-
379,947
86,502
193,619
88,182
-
-
-
368,303
-
-
-
-
Lapsed
Number
of
rights
-
278,815
-
-
-
-
278,815
-
105,950
-
-
-
-
105,950
-
49,568
-
-
-
-
49,568
-
49,568
-
-
-
-
49,568
-
-
-
-
% of
total
gra
nt
0%
24%
0%
0%
24%
0%
0%
24%
0%
0%
24%
0%
Value of
rights
-
343,930
-
-
-
-
-
130,693
-
-
-
-
130,693
-
61,143
-
-
-
-
61,143
-
61,143
-
-
-
-
61,143
-
-
-
-
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.
34
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
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 2021 were $20.0 million (2020:
$31.6 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
(Purchase)/Sale of investment property from/to related party
Amounts due to entities related to Responsible Entity
Loans from entities related to Responsible Entity
Note
F4
D2
2021
$000
6,567
(19,965)
(69,809)
(25,747)
(172,389)
(48,500)
28,716
1,884,000
2020
$000
6,128
(31,610)
(69,046)
(24,527)
(240,361)
80,500
71,099
1,766,000
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 recognised
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
Net cash inflows from operating activities
2021
$m
797.9
(404.8)
119.5
1.3
(79.0)
(7.7)
(2.2)
(7.1)
20.0
437.9
2020
$m
538.4
(154.5)
88.5
36.4
(40.4)
(7.6)
(18.4)
(3.0)
(67.2)
372.2
35
Mirvac Property Trust and its controlled entities
Notes to the consolidated financial statements
For the year ended 30 June 2021
H5 RECONCILIATION OF PROFIT TO OPERATING CASH FLOW (continued)
Net Debt Reconciliation
Current
lease
liabilities
$m
-
0.1
(0.1)
0.1
0.1
(0.1)
0.1
Non-
current
lease
liabilities
$m
-
7.0
-
(0.1)
6.9
-
(0.1)
Non-
current
borrowings
$m
(1,447.0)
-
(319.0)
-
(1,766.0)
(118.0)
-
Total
liabilities
$m
(1,447.0)
7.1
(319.1)
-
(1,759.0)
(118.1)
-
Cash and
cash
equivalents
$m
16.9
-
10.0
-
26.9
4.5
-
Total
$m
(1,430.1)
7.1
(309.1)
-
(1,732.1)
(113.6)
-
Balance 1 July 2019
Recognised on adoption of AASB 16
Net cash flow movements
Other non-cash movements
Balance 30 June 2020
Net cash flow movements
Other non-cash items
Balance 30 June 2021
0.1
6.8
(1,884.0)
(1,877.1)
31.4
(1,845.7)
H6 AUDITOR’S REMUNERATION
Audit services
Audit and review of financial reports
Other assurance services
Total auditor’s remuneration
2021
$000
$000
757.6
226.3
983.9
2020
$000
$000
699.0
270.4
969.4
36
Mirvac Property Trust and its controlled entities
Directors’ declaration
For the year ended 30 June 2021
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 8 to 36 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 2021 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
12 August 2021
37
Independent auditor’s report
To the stapled securityholders 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 2021 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 2021
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 & 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 NSW 2000, 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.
38
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
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.
Amongst other relevant topics, we
communicated the following key
audit matters to the Audit, Risk and
Compliance Committee:
●
Fair value of investment
properties
This matter is further described in
the Key audit matters section of our
report.
For the purpose of our audit we used overall
consolidated entity materiality of $19.425
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 within the
range of commonly acceptable thresholds.
39
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) $10,651.9m
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 consolidated entity.
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 consolidated entity 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
determine those properties at greater risk of fair value
being materially misstated. Our risk assessment was
informed by our understanding of each property,
40
● Fair values are highly sensitive to changes in
key assumptions.
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
appropriateness 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 appropriateness of the
capitalisation rate, discount rate and market
rents used in the valuation by comparing
them against market data for comparable
properties.
● Assessed the appropriateness of rental
income data used in the valuation against
rental income recorded in the general ledger
in FY21 for each property.
We also assessed the reasonableness 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 2021, 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.
41
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 consolidate 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.
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
Voula Papageorgiou
Partner
Joe Sheeran
Partner
Sydney
12 August 2021
42