The GPTGroup ANNUALREPORT2009 ANNUAL REPORT 2009 www.gpt.com.au CONTENTS 2 CHAIRMAN’S REPORT 4 YEAR AT A GLANCE 6 CEO’S REPORT 12 OPERATIONAL REPORT – Australian Retail – Australian Office – Australian Industrial/Business Parks – Australian Funds Management – Other Investments 34 CORPORATE RESPONSIBILITY 44 INVESTOR RELATIONS 46 CORPORATE GOVERNANCE 58 FINANCIAL REPORTS 58 The GPT Group – Directors’ Report – Financial Report 174 GPT Management Holdings – Directors’ Report – Financial Report 223 SUPPLEMENTARY INFORMATION 227 DIRECTORY This page Erskine Park, Sydney CHAIRMAN’S REPORT 1 1 2009 was a year of great change and great progress for GPT. Over the course of the year over $1 billion of non–core assets We started the year in a market which was struggling with were sold, including the US retail assets and European funds the global financial crisis and a business which had begun a management businesses, contributing to reduced gearing process of restructuring and repositioning. I am pleased to say (23.5% at December). The strengthening of our financial that we have ended the year a simpler business, with a clear position has been reflected in increased credit ratings. strategy and a vigorous desire to return to our roots and focus We have no need to refinance any debt until the end of 2012 our energies on the high quality portfolio which has always – a great position to be in while markets remain fragile and been at the heart of GPT. debt expensive. In addition we have clarified our gearing and For the Board, investors, and the property sector generally, distribution policies, ensuring that we are able to balance our the past two years have brought some unprecedented future funding needs with a sustainable return to investors. challenges. As outlined in the 2008 Annual Report, the cyclical We exceeded our guidance, with realised operating income for economic downturn progressed with unprecedented speed the year of $375.8 million, $10.8 million above our guidance. and led to a range of challenges – for funding and for property This was a good result in a challenging environment. income and values. GPT was not immune to these issues. Consistent with our strategy to return GPT to an Australian In 2008 we made many difficult decisions which set GPT on focus, Australian investments now represent over 90% of the a path to greater financial strength, a simplified business business’ real estate investments. and a reinvigorated Board and management. With further I was appointed Chairman at the Annual General Meeting deterioration in the credit market, and global economic (AGM) in May 2009, replacing Peter Joseph who stepped down environments impacting property returns and investor from the Board at that time. Malcolm Latham also retired sentiment, the first half of 2009 saw us make slow progress on from the Board in May. Malcolm and Peter dedicated many our desire to exit offshore investments and further reduce our years to GPT and the interests of investors and we thank them gearing. for their contribution. Responding to the evolving environment continued to be In May, we also welcomed Lim Swe Guan (a Government of essential as the year progressed and in May we were one Singapore Investment Corporation nominee) and Michael of the first property groups to announce a second capital Cameron, our newly appointed Chief Executive Officer, to the raising, providing the opportunity to accelerate the Group’s Board and appointed Rob Ferguson as Director and Deputy exit from the Joint Venture with Babcock & Brown. An In Chairman. Further changes to the Board were announced Specie Dividend of the European component of the Joint with the appointment of Brendan Crotty and Eileen Doyle as Venture in August retained any future upside for investors. 1 Ken Moss, Chairman 3 818 Bourke Street, Melbourne 2 2 Wollongong Central, NSW I am pleased to say that we have ended the year a simpler business, with a clear strategy and a vigorous desire to return to our roots and focus our energies on the high quality portfolio which has always been at the heart “of GPT. 2 3 Directors (in December 2009 and February 2010 respectively). as a more transparent and stable income stream, with With new Directors in place and Rob now having built a solid significantly less risk, emerges. understanding of the business, I will step down at the 2010 GPT owns one of Australia’s highest quality diversified” Annual General Meeting, and it is intended that Rob will property portfolios and we are committed to returning take on the role of Chairman (subject to ratification of his GPT to a pre–eminent Australian real estate business. The appointment as a Director by investors). Ian Martin will not acquisition of an interest in Highpoint Shopping Centre in stand for re–election and will also leave the Board at that Victoria and progress on developments in the Brisbane CBD time. and Charlestown NSW are exciting opportunities to enhance As outlined by Peter Joseph (GPT’s previous Chairman) GPT’s portfolio and contribute to future returns for investors. at the Annual General Meeting in 2009, as a Board, we In 2009 we dealt with many issues and established a platform acknowledge that the security price performance of GPT has from which to grow again. Entering 2010 we have a strong been disappointing and that investors suffered as a result. base for the future and we will now build on our domestic The changes we have made, including the renewed Board, business as we consolidate the changes made over the acknowledge that performance and represent an opportunity course of 2009. Our management team has worked hard to for the Group to move forward. The reconstituted Board achieve so much over the course of the year and should be provides an appropriate balance between continuity and commended for their efforts and their focus in repositioning change, and a strong mix of skills and experience to take GPT the business. into the future. In closing, I would like to thank our investors for their support A reinvigorated team, led by Michael Cameron who and assure you of the ongoing efforts of the Board and commenced with GPT on 1 May, and a range of management management to maximise the performance of GPT’s portfolio changes to streamline our structure were also put in place and to provide stable and consistent returns. during the year, providing us with an appropriate level of resourcing for a simpler, Australian based business. 2009 was a pivotal year. One which saw us continue to restructure and reposition GPT to reflect the Group’s heritage and strengths – our quality, diversity, scale and great culture Ken Moss which is firmly based in Australia. We recognise this has been Chairman a painful process for investors but believe it will reap benefits The GPT Group 3 THE GPT GROUP ANNUAL REPORT 2009 YEAR AT A GLANCE RESULTS SUMMARY $375.8 million realised operating income $0.69 net tangible assets per security (NTA) 4.5 cents distributed per security (DPS) $9.2 billion total assets $2.5 billion total liabilities 23.5% gearing (headline)^ 4,810 million new securities issued FIVE YEAR PERFORMANCE SUMMARY YEAR ENDED 31 DECEMBER 2005 2006 2007 2008 2009 Total assets M $10,431.7 $12,001.9 $13,966.9 $13,029.8 $9,163.4 Total liabilities M $4,058.4 $4,559.8 $5,671.5 $6,217.5 $2,495.0 Net assets M $6,373.3 $7,442.1 $8,295.4 $6,812.3 $6,668.4 Realised operating income M $492.3 $558.6 $605.1 $468.8 $375.8 Securities in issue (‘000) 2,016,717 2,041,531 2,099,614 4,467,363 9,277,585 Distribution per security cents 24.4 27.5 28.9 17.7 4.5 Borrowings as % of total assets 35% 36% 36% 33.7%^ 23.5%^ Net asset backing per security $3.16 $3.60 $3.86 $1.43 $0.69 Closing market price at 31 December $4.10 $5.60 $4.04 $0.92 $0.61 GPT one year return 16.7% 45.2% (23.4%) (74.9%) (14.4%) LPT ASX one year return 12.5% 34.0% (8.4%) (54.0%) 7.9% All ordinaries one year return 21.1% 25.0% 18.0% (40.4%) 39.6% ^ On a net debt basis 1 Australia Square, Sydney 3 2–4 Harvey Road, Kings Park, NSW 5 Wollongong Central, NSW 4 2 1 Farrer Place, Sydney 4 Dandenong Plaza, VIC 2 3 4 5 1 5 THE GPT GROUP ANNUAL REPORT 2009 CEO’S REPORT GPT’s Australian portfolio consists of high quality real estate in the retail, office and industrial/business park sectors. An extensive funds management and development platform 1 complement this focus. The last couple of years have been disappointing for investors, YEAR OF REINVIGORATION however we have made significant progress in stabilising GPT in 2009. We ended the year with a business which is clean, On 6 August 2009, I presented the vision for a reinvigorated transparent and in good shape for the future. Building on the GPT firmly focused on a future in Australia. The refined progress achieved by the GPT team early in 2009, our priority strategy, based on active ownership of Australian retail, since my appointment in May has been the restoration of office and industrial/business park real estate, is aimed at confidence and trust in GPT. increasing returns to Securityholders, capitalising on the Group’s competitive advantages of scale, quality, diversity and Over the course of the year, GPT has made progress on a culture, and improving the security price over the next five number of key initiatives that have materially enhanced years.