INDUSTRIAL RESIDENTIAL OFFICE RETAIL Places to shop, eat and play. Real living that creates ...

152 Pages·2017·6.27 MB·English

Mirvac Group
Annual Report 2019
Our purpose to
reimagine urban life
inspires us to be
a force for good.
MIRVAC GROUP ANNUAL REPORT 2019
Mirvac is a leading, diversifed, Australian
property group, with an integrated development
and asset management capability. Recognising
the contribution we make to Australia’s major
cities, our purpose, to Reimagine Urban Life,
inspires us to be a force for good.
CONTENTS
01 About this report
01 Reporting suite
04 Financial and operational highlights
06 Letters to securityholders
10 Forces of change
Our business:
12 > Ofice & Industrial
20 > Retail
24 > Residential
29 > Build-to-rent
30 Our people
36 Risk management
38 Sustainability
43 Governance
74 Financial report
122 Directors’ declaration
123 Independent auditor’s report
130 Securityholder information
132 Glossary
133 Directory & upcoming events
Mirvac Group comprises Mirvac Limited ABN 92 003 280 699
and its controlled entities (including Mirvac Property Trust
ARSN 086 780 645 and its controlled entities).
01
ABOUT THIS REPORT REPORTING SUITE
The FY19 Annual Report is a consolidated summary of Mirvac Group’s Mirvac’s reporting suite sets out the Group’s financial and
operations, performance and financial position for the year ended 30 June operational performance for the year ended 30 June 2019
2019. In this report, unless otherwise stated, references to ‘Mirvac’, ‘the Group’, across the following documents:
‘company’, ‘parent entity’, ‘we’, ‘us’ and ‘our’ refer to Mirvac Limited and its
MGR FY19 Results Presentation
controlled entities as a whole. Mirvac Limited also includes Mirvac Property
An in-depth overview of Mirvac’s financial, operational
Trust and its controlled entities. References in this report to a ‘year’ relate
and sustainability performance for the financial year.
to the financial year ended 30 June 2019. All dollar figures are expressed in
Australian dollars (AUD) unless otherwise stated. The consolidated financial MGR FY19 Additional Information
statements included in this report were authorised for issue by the Directors Information supporting Mirvac’s FY19 Results Presentation.
on 8 August 2019. The Directors have the power to amend and reissue the
MGR FY19 Annual Report
financial statements. Mirvac’s full-year financial statements can be viewed on,
An in-depth overview of Mirvac’s financial, operational
or downloaded from, Mirvac’s website www.mirvac.com
and sustainability performance for the 2019 financial year,
along with the Group’s corporate governance statement,
its remuneration report and its detailed financial statements.
MGR FY19 Property Compendium
A detailed summary of Mirvac’s investment portfolio,
other investments, and its commercial and residential
development pipeline as at 30 June 2019.
MPT FY19 Annual Report
An overview of the Mirvac Property Trust for the financial year.
02 MIRVAC GROUP A N N U A L REPO RT 2 0 1 9
ABOUT MIRVAC
OUR PURPOSE WHAT WE DO
Mirvac is an Australian Securities Exchange As our company grows and we take on We’re a creator, owner and manager of some
(ASX) top 50 company and one of Australia’s more challenging projects in diferent of Australia’s most renowned and recognisable
leading and most innovative property groups. sectors, it is more important than ever projects, with a strategy to be focused,
Since 1972 Mirvac has played a vital role in the to be united behind a single purpose. diversified and integrated. This means:
ce
thrveoaulutsitnaiongnd p sol afo cofe uAsru tcshitatriate lesia,n nrresici.mh athgein leiv uersb oafn m liafen ya nd Au
atrt b MMainirrv vlaiafcec .,t Two heloi sao rpke u birnep yboosunesd idn perirsvosef sitto .a Ilrtle ienimspapiglroeinyse ue s  dWeEpli vlAoeRyriEn gF OocanCp UoituSarEl pwDriothm disiescsi, pwliinthe a nsdtr o ng
Our reputation as a leader in Australia’s to be a force for good and leave a positive focus on our customers.
property industry has been built by delivering legacy in everything we do. WE ARE DIVERSIFIED
c
w
sirneeohntcnaioluneivlr e aidtctyertiivhsevetodiin nl adcganeo tldriomos ne.nm gWxsuc-, etehne piorgtmtiwheion s-vnq fauolnluar wd eloi to mufyror kah rcp nooulamausgcrtee oess mat pasrepnserldecset ,id ns cts, oWbspruh aiblecdrteihnseg, rliso ni,vt gc ibn rtego al byltir ifreneeag sct thodoinynrinngaeg lmci faetienc idn n tacoedo wuam npwmdtoienurrgknu pithtilileaeisrcseite dasg e maianndadiun arsteatcrtitinaiavilne, gir nie nagtvna cei las apptenpadrbo icrpleiatrsypiai diateaec lnrb ottahisalraslo n stuchegeech too ofcf rpysica. elses, siv, e
across the ofice, industrial and retail sectors where families can grow and thrive, we are WE ARE INTEGRATED
in our investment portfolio, and we currently committed to enriching the lives of our leveraging our integrated model to create,
hold approximately $22 billion of assets customers and communities. own and manage quality Australian assets.
under management. We know that to reimagine urban life is Underpinning this strategy is a commitment
Our integrated approach gives us a great challenge, and it comes with much to our people, our customers, innovation,
a competitive advantage across the lifecycle responsibility. Our passionate, highly engaged technology, sustainability and safety. We’re
of a project. From site acquisition, urban workforce has embraced the challenge to passionate about creating long-term value
planning and design, through to construction think diferently, to act conscientiously and for our securityholders and having a positive
and development, leasing, sales and marketing, apply their experience, passion and energy impact on the communities in which
property management and long-term ownership, every day in the pursuit of an enhanced we operate.
we exercise control over the entire process. urban environment for us all to enjoy. Both our strategy and our purpose to
Our integrated model also ensures stable reimagine urban life continue to produce
income and growth through a balance of strong results across the business.
passive and active capital, enabling us to ASX TOP 50
respond to fluctuations in the property cycle.
Our goal is to add value to Australia’s One of Australia’s
cities through innovative, visionary design,
development, asset management and
construction. Our team is committed to leading & most innovative
operating in a way that is economically,
socialy and environmentaly sustainable property groups
in order to leave behind a lasting, positive
legacy in everything that we do.
03
T
A
OUR PURPOSE & STRATEGY
SAFETY INNOVATION PEOPLE & TECHNOLOGY SUSTAINABILITY
LEADERSHIP

D
E

D
I
V
E
R
S
I
F
I
E
D
O
F
S
U
C

D
E

N
I

G
E
T
R
04 MIRVAC GROUP ANNUAL REPORT 2019
FINANCIAL AND
OPERATIONAL HIGHLIGHTS
the future is bright
WITH A STRONG SET OF FINANCIAL METRICS FOR FY19,
MIRVAC HAS MAINTAINED THE IMPRESSIVE GROWTH
TRAJECTORY OF RECENT YEARS.
05
STATUTORY PROFIT
$1.02bn
NET TANGIBLE ASSETS
OPERATING PROFIT PER STAPLED SECURITY1 OF DISTRIBUTION INCREASED 5% TO
$631m $2.50 11.6 cpss
up 4% representing 17.1cpss up from $2.31 at June 2018
STRONG DELIVERED RESIDENTIAL
OPERATING CASH FLOW GEARING OF ACHIEVED A ROIC OF SECURED GROSS MARGINS OF
$518m 20.5% 10.1% $1.7bn 27%
for the Group of residential pre-sales
MAINTAINED A 5 .0 STAR LEASED APPROXIMATELY ACHIEVED
NABERS Energy rating average 250,000sqm 2,611
across the ofice portfolio of ofice, industrial & retail space residential lot settlements,
default rate <2%
$3.1bn
more than tripled active commercial
community investment development pipeline
3 years
ahead of target
caption goes here
1. NTA per stapled security, based on ordinary securities including Employee Incentive Scheme securities.
06 MIRVAC GROUP ANNUAL REPOR T 2 0 1 9
LETTERS TO SECURITYHOLDERS
FY19 was another outstanding year for Mirvac. Our strong performance, which has
characterised recent years, continued throughout the year. The sustained growth can
be attributed to the success of our urban asset creation strategy, the strength and
resilience of our diversifed model and our team’s unwavering commitment to
our purpose to reimagine urban life.
CHAIRMAN’S LETTER
Mirvac is in exceptional shape, with a high-performing investment portfolio that will generate steadily growing income, all in the safe hands
of a highly engaged and passionate workforce. In an era when many Australians have lost faith in some of our largest institutions, we continue
to focus on earning our stakeholders’ trust every day, being a force for good and leaving a positive legacy in everything we do.
John Mulcahy,
Chairman
Susan Lloyd-Hurwitz,
CEO & Managing Director
FINANCIAL HIGHLIGHTS
FY19 saw the Group deliver yet another strong Our performance was anchored by the
set of financial metrics. With a statutory profit significant gains of our Ofice & Industrial
of $1.02 billion, I’m pleased to report that we business and its high-quality investment
have successfully delivered at the top end portfolio which, together with our award-winning
of guidance and maintained the impressive asset creation capability, continue to generate
growth trajectory of recent years. significant value. These gains, coupled with the
quality and location of our residential product
and focus on our domestic owner-occupier
customer base, as well as the urban expertise
of our retail team, has safeguarded the Group
$1.02bn against the challenging market conditions in
some of the sectors in which we operate in FY19.
FY19 Statutory profit
07
At an operating level, our profit was up CORPORATE GOVERNANCE DIVERSITY & INCLUSION
4 per cent to $631 million, representing
Against a backdrop of challenging housing We remain committed to fostering a respectful,
17.1 cents per stapled security. We achieved
markets, a sustained period of political diverse and inclusive environment, where
a strong operating cash flow of $518 million
uncertainty and the further erosion of trust diferent backgrounds, opinions and ideas
and we paid distributions of 11.6 cents
in some of Australia’s largest and best-known are accepted, encouraged and celebrated. We
per stapled security, up 5 per cent.
institutions, it is more important than ever believe this has a positive impact on the health,
before that companies like ours act fairly, wellbeing and happiness of our workforce
After a period of challenging residential market
responsibly and transparently. as well as driving engagement, productivity
conditions, we are seeing early indications of
and ultimately better business outcomes.
a housing market recovery. At the same time,
At Mirvac, we believe we have a duty not
we are reaching the end of the capitalisation
only to our securityholders, our employees To this end, we have a Diversity & Inclusion
rate compression cycle and entering a period
and our customers, but also to the communities strategy in place with a focus on gender
where income will drive superior investment
in which we operate and the cities and towns balance, and we’ve worked hard to improve
performance. As a result, we are maintaining
in which we live. gender parity at Mirvac over recent years.
our disciplined approach to investing capital.
As well as maintaining a 50 per cent gender
On behalf of the Board and the leadership team
With 87 per cent of our capital allocated to our
representation on our Board, we continue to
at Mirvac, I want to emphasise our commitment
investment portfolio and 13 per cent to our active
seek a 50/50 gender balance on shortlists for
to creating and promoting a strong culture
development pipeline, we are confident that
senior appointments. We have successfully
where people are driven to look beyond
Mirvac can continue to create long-term value
maintained a like-for-like gender pay gap of
profit to genuinely being a force for good.
and grow distributions to our securityholders.
zero per cent for three consecutive years
We have a highly engaged workforce that  thanks to our gender pay parity reviews, and
CAPITAL MANAGEMENT
never loses sight of a purpose that is bigger 43 per cent of our senior management roles
Mirvac’s disciplined approach to capital
than profit. Our team is driven to meet are now held by women, in line with our target.
allocation has resulted in a robust balance
milestones and targets but also to care
sheet which, together with our integrated Thanks to the eforts of the team in
about making a diference to people’s lives.
model, enables the business to operate implementing this strategy, these achievements
through market cycles and respond quickly We are proud of the high standards of are now considered to be ‘business as usual’
to investment opportunities, as and when corporate governance to which we adhere. at Mirvac. In recognition of our commitment
they arise. Systems, procedures and practices are to gender equality, Mirvac was awarded
regularly reviewed, benchmarked against Workplace Gender Equality Agency Employer
During the financial year, Mirvac successfully
best practice and updated. of Choice for the fifth consecutive year.
completed a fully underwritten institutional
placement and Security Purchase Plan (SPP) Additionally, the Board is actively involved in OUTLOOK
to position the business for future growth. the business and meets regularly to discuss
The hard work of the team to transform the
The placement was strongly supported by both matters such as Mirvac’s strategy, the Group’s
business means we are now well positioned
existing and new investors, raising $796.2 million, activities and operations, outlook, risks and
to mitigate adverse market cycles and use
including approximately $46.2 million raised remuneration. To capitalise on the strong
them to our advantage by capitalising on the
under the SPP, to support the delivery of position of the Group, the Board will increase
opportunities they present. Our high-quality
the next generation of value accretive ofice, its focus on customer satisfaction, technology
investment portfolio continues to provide
industrial, residential and mixed-use projects and the company’s long-term strategy in FY20.
secure and growing income to the Group,
and provide additional funding impetus for
while our development pipeline and asset
REMUNERATION
continued investment through the cycle. We
creation skillset provide significant potential
were heartened by the support we received Every year, our remuneration outcomes are
for future growth.
from our investors during this process. reported openly and transparently. Following
last year’s review of our performance and Mirvac’s strong financial performance and
During the first half of the financial year,
reward framework, we are pleased to report the robust corporate governance framework have
Mirvac received an A- rating with a stable
new performance management structure has ensured the business remains in excellent
outlook from Fitch Ratings and maintained
been enthusiastically welcomed and adopted shape and will continue to provide value
the A3 rating from Moody’s Investor Service
by employees. Under the new framework, to our securityholders and customers, while
(equivalent to A-), recognising our healthy
changes were made to performance ratings, making a real diference to people’s lives
balance sheet and strong capital position.
our long-term incentives, and we increased in the communities in which we operate.
Gearing also remained within our range of
the mandatory minimum securityholdings
I would like to thank my Board colleagues,
between 20 to 30 per cent at 20.5 per cent.
for both Non-Executive Directors and key
our senior leaders and our team for their
management personnel.
Our overall earnings profile remains solid,
commitment and hard work over the past
supported by a $3.1 billion active commercial
The strong, sustained performance – both 12 months. I would like to thank you, our
development pipeline and a high performing,
financial and non-financial – has translated securityholders, for your support of Mirvac.
strategically-located investment portfolio.
into full vesting of the long-term incentives We look forward to another year of growth
We have noted that our active development
and above target short-term incentive and success ahead.
earnings will continue to flex with the economic
outcomes. Combined with a 44 per cent
cycle. However, the increasing quality and
security price increase during FY19, this
strength of our passive earnings underpin
has resulted in increased actual earnings for
our confidence that we will continue to
our CEO & MD and other key management
deliver for our securityholders.
personnel. The Mirvac Board very strongly
believes in aligning pay to performance and
we believe the remuneration outcomes reflect John Mulcahy
this strong performance, outperforming the Chairman
stretching targets that the Board sets for
management each year.
The full remuneration report for FY19 can be
viewed on page 52.
08 MIRVAC GROUP ANNUAL REPORT 2019
CEO & MANAGING DIRECTOR’S LETTER
In a year that was marked by uncertainty and Our Retail business delivered another solid Consequently, we have seen sustained demand
a challenging operating market, our reputation result, which is pleasing given the highly for, and sales of, our projects throughout the year
for quality and operational excellence and our competitive and rapidly evolving retail sector. with over 1,700 lots exchanged. We exceeded our
unwavering commitment to our urban strategy, We have successfully created a portfolio of target of over 2,500 residential lot settlements
have stood us in good stead. thriving retail centres that ofers the right during the financial year settling 2,611 lots, and
retail in the right urban locations – densely our defaults have remained under 2 per cent.
The strength and resilience of our business
populated with low unemployment, high This too is a testament to our focus on quality –
were evident throughout the year. The 
incomes and strong population growth. in this case, ensuring that our customers are well
housing market and the political and economic
placed and supported to settle their purchases
uncertainty caused by consecutive State and As a result, despite divesting over $700 million
in a timely fashion. Our residential gross margin
Federal elections presented challenges within since 2013, the retail portfolio has doubled
of 27 per cent reflects the capital eficiency of
our operating environment. Our business in value in the past six years. The enhanced
our development structures, and we have started
stood up to the test on all fronts. services, partnerships and experiences Mirvac
to carefully restock in the changing market, with
is creating, has seen specialty productivity grow
OPERATIONAL EXCELLENCE a number of new development opportunities in
by 36 per cent across the portfolio during that
established Mirvac sub-markets including Henley
In FY19, the Ofice & Industrial business timeframe and occupancy has been maintained
Brook, WA and Wantirna South, VIC, putting us
continued to deliver. We are now Australia’s above 99 per cent. This success is testament to
in a strong position to take advantage of the
second largest ofice manager, with approximately the team’s energy and passion for reimagining
anticipated upswing.
$15 billion of ofice and industrial assets under our retail ofering, and our commitment to
management and we have successfully created constantly curating retail mixes and creating REIMAGINING RENTING
one of Australia’s youngest and lowest capital unique experiences that respond to the
The build-to-rent (BTR) sector remains in its
expenditure portfolios. ever changing needs of our customers.
infancy in Australia, but we believe it has potential
Our award-winning asset creation capability For our Residential business, while recent for significant growth and can deliver much more
was showcased once again during the year months have seen some potential signs of than financial rewards. International experiences
with the delivery of Axle, Commonwealth Bank’s recovery, there is no doubt the housing market suggest that revolutionising the rental sector in
new state-of-the-art ofice building at our deteriorated throughout the financial year Australia can provide significant social benefits
reimagined South Eveleigh precinct. It features with average dwelling prices down by between for hundreds of thousands of renters as they
next generation design, smart technology, 9 and 10 per cent in Sydney and Melbourne move along their housing journey, giving them
pioneering placemaking and sustainability during that time. Investor activity reduced access to high-quality, well maintained rental
principles, and sets new benchmarks in significantly, while tightening credit made property, with secure tenures, and a sense of
commercial property and workplace design. it more dificult for home buyers to secure stability, as well as excellent customer service.
finance, which impacted the industry
Our ability to deliver award-winning buildings Mirvac is firmly at the forefront of this
as a whole.
continually improves the quality of our portfolio new sector in Australia, having founded the
and drives increasing passive earnings for However, averages mask the significant Australian Build-to-Rent Club with a 30 per cent
the Group. This proven capability, combined variations between sub-markets. They also investment from the Clean Energy Finance
with the number and calibre of projects in ignore the superior quality of the Mirvac Corporation in July 2018 and subsequently
our development pipeline, gives us confidence ofering. Our long standing reputation for launching our first purpose-built BTR asset,
that we can continue to generate strong quality continues to attract owner-occupiers at Pavilions, Sydney Olympic Park. This project
future returns. who now, more than ever, seek a product is under construction, on time and on budget
and we look forward to welcoming our first
and a brand they can trust.
Over the past 12 months, we have added
customers at Pavilions in June 2020.
a number of new development opportunities It is this quality that has seen our residential
to our Industrial pipeline including at Badgerys team win a number of prestigious awards this In FY19, we confirmed plans for a second
Creek, Kemps Creek (both in Western Sydney) financial year. You can read more about these BTR project, close to Queen Victoria Market
and Auburn (in Sydney). This is in line with awards on page 25. in Melbourne. As interest in the new sector
our strategy to grow our Industrial portfolio grows, along with appetite for BTR projects
while maintaining a 100 per cent weighting from all fronts, we remain focused on further
to Sydney. We see significant earnings extending our BTR development pipeline
potential for these future industrial estates. throughout FY20.