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Office REIT Annual Report 2021

Centuria Office REIT – Annual Report 2021[| ] A

02 About us

04 Key metrics
06 Letter from the Chairman & Fund Manager 09 Senior Management
10 Portfolio overview
12 Sustainability and governance
14 Meet the Board of Directors
17 Directors’ report
21 Lead Auditor’s Independence Declaration 22 Financial statements
42 Directors’ Declaration
43 Independent Auditor’s Report
47 Corporate Governance Statement 48 Additional ASX information
49 Disclaimers 55 Corporate directory

The artwork on the cover of this report was commissioned by Centuria and created by Toby Bishop, a young Kungarakan artist who lives on the South Coast of NSW. The design uses dots and lines to represent tracks and journeys. It depicts people walking in similar directions towards a positive future.

B[| ] Centuria Office REIT – Annual Report 2021

Balanced geographic diversification without single market concentration

Portfolio of young assets

Access to recreational amenity, essential retail & hospitality

COF’s largest single market exposure is c.17%

Average asset age c.17 years

All assets within close proximity to a mix of retail and hospitality amenity

K E Y FA C T S

Geographically diversified office portfolio with 22 assets located across Australia

Tenant covenants - 82% of income derived from Government, Multinational Corporations and Listed Companies

Over 63% of leases expire at or beyond FY2025

Included in the S&P/ ASX 300 Index

Connectivity with key transport nodes & reduced commute time

COF exposed market rents average a significant discount to Sydney CBD

All assets serviced by public transport links c.80% of assets within close proximity of heavy rail

Avg. portfolio rents of c.$465psm

CENTURIA OFFICE REIT - NABERS Sustainability Portfolio Index Ratings: Energy 4.7 Stars | Water 3.2 Stars

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825 ANN STREET, FORTITUDE VALLEY, QLD
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Centuria Office REIT – Annual Report 2021[| ] 01

About us

Centuria Office REIT (ASX: COF) is a real estate investment trust (REIT). Centuria Property Funds Limited (CPFL), is the Responsible Entity for COF and is a wholly owned subsidiary of Centuria Capital Group (ASX:CNI or “Centuria”). Centuria is included in the S&P/ASX200 Index and is a specialist, external funds manager with more than $17billion of assets under management across Australasia.

Centuria specialises in real estate sectors including industrial, healthcare, decentralised office, agriculture, large-format retail and daily-needs retail.

Its suite of investment products includes listed and unlisted real estate funds across debt and equity markets. Additionally, Centuria provides investment bond options.

COF is Australia’s largest listed pure-play office fund with 22 highquality office buildings worth more than $2.0 billion, as at 30 June 2021. COF’s portfolio is predominantly positioned within city fringe and metropolitan markets that lend themselves to larger floorplates, modern amenities, attractive rents, and better work commutability via excellent public transport routes and road arterials. The portfolio is also geographically disbursed with no single-market concentration.

Throughout the 2021 Financial Year, COF delivered solid results, underpinned by a record year of leasing activity and exposure to Australia’s better performing office markets. Leasing success translated into a 25.0% total shareholder return throughout FY21. COF achieved an average 98.3% rent collection, demonstrating the resilience of portfolio through the COVID-19 impacted operating period. Occupancy was 93.1%, with a portfolio WALE at 4.3 years as at 30 June 2021.

Centuria remains COF’s largest unitholder with a 19.9% co-investment as at 30 June 2021.

CENTURIA CAPITAL (CNI) FUNDS MANAGEMENT PLATFORM

bn GROUP AUM $17.4

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$16.5bn REAL ESTATE AUM[1]

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$5.5bn $11.0bn $0.9bn
LISTED REAL ESTATE UNLISTED REAL ESTATE INVESTMENT BONDS
CENTURIA LIFE
$3.1bn $2.1bn $0.3bn $7.9bn $1.6bn $1.5bn INVESTMENT BONDSCENTURIA
CENTURIA CENTURIA ASSET PLUS SINGLE MULTI MULTI ASSET
INDUSTRIAL REIT OFFICE REIT LIMITED ASSET ASSET OPEN END GUARDIAN FRIENDLY
ASX:CIP ASX:COF NZX:APL FUNDS FUNDS FUNDS SOCIETY
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Note: AUM as at 30 June 2021. All figures above are in Australian dollars (currency exchange ratio of AU$1.000:NZ$1.0753). Numbers presented may not add up precisely to the totals provided due to rounding.

1 Includes commenced development projects valued on an as if completed basis, cash and other assets, assets exchanged but not settled.

02[| ] Centuria Office REIT – Annual Report 2021

V I S I O N

To be Australia's leading pure play office REIT

A C L E A R A N D S I M P L E S T R AT E G Y

Focused on generating sustainable and quality income streams and executing initiatives to create value across a portfolio of quality Australian office assets

C E N T U R I A O F F I C E R E I T I S

K E Y O B J E C T I V E S

AUSTRALIA’S LARGEST LISTED PURE PLAY OFFICE REIT

OVERSEEN BY AN ACTIVE MANAGEMENT TEAM WITH DEEP REAL ESTATE EXPERTISE

PORTFOLIO CONSTRUCTION

A portfolio of quality Australian office assets diversified by geography, tenants and lease expiry

ACTIVE MANAGEMENT

Primarily focused on maintaining occupancy and extending portfolio WALE

STRONGLY SUPPORTED BY CENTURIA GROUP

CAPITAL MANAGEMENT

A robust and diversified capital structure with appropriate gearing

UNLOCK OPPORTUNITIES TO CREATE FURTHER VALUE

Continue to enhance the portfolio and upgrade asset quality

100 BROOKES ST, FORTITUDE VALLEY, QLD

Centuria Office REIT – Annual Report 2021[| ] 03

1 By gross income

2 Based on COF closing price of $2.47 per unit on 30 July 2021

3 Total Securityholder Return (TSR) equals change in unit price during the period, plus distributions declared

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04 [| ] Centuria Office REIT – Annual Report 2021
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F O C U S

4 As COVID-19 impacts and the National Code of Conduct on Commercial Leases remained active, it is possible that further rent relief claims could be received for FY21 period

5 Gearing is defined as total borrowings less cash divided by total assets less cash and goodwill

Quality, young office buildings positioned in highly-connected, affordable office markets throughout Australia.

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8 CENTRAL AVE, EVELEIGH, NSW
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Centuria Office REIT – Annual Report 2021[| ] 05

Letter from the Chairman & Fund Manager

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MATTHEW HARDY Chairman

GRANT NICHOLS Fund Manager

Australia’s largest listed pure play office REIT

06[| ] Centuria Office REIT – Annual Report 2021

Dear Unitholders,

It is our pleasure to provide Centuria Office REIT’s (ASX: COF) 2021 Annual Report, which highlights a solid trading performance throughout the year. COF’s resilient performance is credited to its quality portfolio and exposure to Australia’s better performing office markets, predominantly positioned within fringe and metropolitan markets.

COVID-19 IMPACT

On 7 April 2020, the National Code of Conduct for Commercial Leases (NCCCL) was announced, which governs rent relief available for affected tenants. Portfolio rent collection remained resilient with July 2020 to June 2021 rent collections having averaged 98%. Included within the outstanding rent is agreed rent relief claims related to the NCCCL. These rent relief claims, both waivers and deferrals, totalled about $1.9 million for the same period.

LEASING

FY21 was punctuated by a record year of leasing activity. More than 52,000sqm was leased across 61 transactions, accounting for 18.1% of NLA. Importantly, half of these transactions were secured by new tenants. This reflects solid tenant demand for modern, affordable fringe and metropolitan office accommodation.

During the year, the market has seen a flight to quality with tenants opting for affordable accommodation as well as assets that provide larger floorplates, modern amenities, and, most especially, better work commutability via excellent public transport routes and road arterials.

FY21 FINANCIAL RESULTS

Leasing success translated into a solid trading performance with COF achieving $102.2million in Funds from Operations (FFO), representing 19.9 cents per unit (cpu) which was at the top end of the REIT’s guidance range. COF delivered distributions of 16.5cpu, which equated to an attractive 6.7% distribution yield. Statutory net profit for FY21 was $76.9million, while the NTA was $2.48 per unit as at 30 June 2021. Total shareholder return throughout the 12-month period was a healthy 25%.

ACTIVE PORTFOLIO MANAGEMENT

COF owns 22 high quality assets worth c.$2.0 billion with a weighted average capitalisation of 5.81%. During FY21, the portfolio achieved an average 98.3% rent collection, a significant outcome in the current COVID-impacted trading period demonstrating the resilience of the COF portfolio and quality of the underlying tenants. Occupancy was 93.1%, with a portfolio WALE at 4.3 years as at 30 June 2021.

More than 80% of the REIT’s portfolio income is derived from government, multinational corporations and listed entities. Over a quarter (27%) is generated from Australian Federal and State Government tenants. A further 55% of income is derived from multinational corporations and listed entities.

Proactive asset management during FY21 underpinned COF’s significant leasing achievements. Funds from Operations during FY21 benefited from receipt of a surrender payment from Foxtel, who surrendered their lease over the entire building at 35 Robina Town Centre Drive, Robina, QLD. Under the agreement, COF received a surrender payment equivalent to the rent payable under the remaining Foxtel lease term discounted to June 2020. Pleasingly, since the surrender occurred in July 2020, the building has been largely re-let, with occupancy increasing to 88.6%, which demonstrates COF’s continued success in active leasing management.

Additionally, five new tenants at 100 Brookes Street, Fortitude Valley QLD increased occupancy to 100% and extended the building’s WALE from 3.7 to 4.9 years. In South Australia, 131 Grenfell Street, Adelaide, retained 100% occupancy following a three-year lease to a new SA Government department. Full building occupancy was also retained at 1 Richmond Road, Keswick SA following a new five-year lease to ARTC.

Approximately 63% of COF’s portfolio leases now expire at or beyond FY25.

As at 30 June 2021, COF externally revalued 14 of its 22 properties, resulting in a like for like increase of $16.3 million.

CAPITAL MANAGEMENT

During FY21, COF secured a significant $405milllion debt refinance, which increases its weighted average debt maturity to 4.2 years (from 2.3 years) and signifies strong lender support and confidence in the quality of COF’s office portfolio.

The REIT now has $106.7 million of undrawn debt and no debt tranche expiring before June 2024. All-in debt cost was maintained at c.2.4%. COF has significant debt covenant headroom with an interest coverage ratio of 6.6x (covenant 2.0x) and loan to value ratio of 35.0% (covenant 50%).

TRANSACTIONS

COF divested a 25% interest in 465 Victoria Avenue, Chatswood NSW for $44.7 million, which unwound the REIT’s only minority interest in its portfolio at a price that was $2.8 million above prior book value.

Centuria Office REIT – Annual Report 2021[| ] 07

Letter from the Chairman & Fund Manager

GOVERNANCE & SUSTAINABILITY

During FY21, COF increased its focus on Environment, Social and Governance (ESG) initiatives with my appointment (Matthew Hardy) as independent Chair and Nicole Green as Independent Non-Executive Director. Peter Done remains an Independent Non-Executive Director.

The COF portfolio also achieved a high 4.7-star average NABERS Energy rating and 3.2 NABERS Water rating. Buildings within the portfolio benefit from a relatively young average age of c.17 years, lending themselves to sustainable features and low maintenance expenditure.

By the REIT’s nature, it has no staff and is solely a portfolio of assets. CPFL is the responsible entity for COF and a wholly owned subsidiary of Centuria Capital Group. COF aligns itself to Centuria’s sustainability approach. The CPFL Board is acutely aware of COF’s ESG responsibilities and support the initiatives being actioned by Centuria Capital. Throughout FY21, sustainability initiatives employed by Centuria Capital include a commitment to its first Sustainability Report, which will be released later in 2021 and will address responses to the Task Force on Climate Related Financial Disclosure recommendations. Other initiatives and sustainability highlights during FY21 were;

The Establishment of Centuria’s Culture and ESG Board Committee;
The Release of Centuria’s first Modern Slavery Statement;
Completing employee and tenant engagement surveys where 94% of employees expressed enjoyment working at Centuria, and 91% of tenants recommend Centuria; and

SUMMARY & OUTLOOK

It is our pleasure to provide FY22 distribution guidance of 16.6 cpu, with a FFO guidance of 18.0 cpu.

While there remains uncertainty due the ongoing disruptions caused by COVID-19, we have seen increasing white collar employment growth and greater confidence from tenants in relation to their future office accommodation requirements. Throughout FY22 and following the vaccine rollout, we expect to see more employees returning to the office and further improving leasing activity.

We thank COF unitholders for your on going support and look forward to updating you further throughout FY22.

Yours sincerely,

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MATTHEW HARDY GRANT NICHOLS CHAIRMAN FUND MANAGER

Retaining Centuria membership to the Diversity Council of Australia.

FY21 results

FINANCIAL SNAPSHOT FY21 FY20 Statutory profit / (loss) ($m) 76.9 23.1 Statutory profit / (loss) per unit (cpu) 15.0 5.0 Funds from operation ($m) 102.2 85.4 Funds from operation per unit1 (cpu) 19.9 18.6 Annualised FFO yield2 (%) 8.5 9.0 Distribution ($m) 84.9 84.5 Distribution per unit (cpu) 16.5 17.8 Annualised distribution yield2 (%) 7.0 8.6 Return on equity3 (%) 6.0 7.2	BALANCE SHEET METRICS FY21 FY20
	Investment Properties4 ($m) 2,046.2 2,085.7
	Total Assets ($m) 2,068.9 2,119.3
	Total Liabilities ($m) 793.9 836.3
	Net Assets ($m) 1,275.0 1,283.0
	Units on Issue (m) 514.5 514.5
	NTA per unit5 ($) 2.48 2.49
	Gearing6 (%) 33.5 34.5

1 FFO is the Trust’s underlying and recurring earnings from its operations. This is calculated as the statutory net profit adjusted for certain non-cash and other items

2 Based on the COF full year guidance divided by closing price ($2.34 per unit on 30 June 2021) and FY20 FFO divided by closing price ($2.07 per unit on 30 June 2020)

3 Return on equity calculated as (closing NTA minus opening NTA plus distributions) divided by opening NTA
4 Refer to Note A2 in the interim financial report for a summary of the impacts of AASB 16

5 NTA per unit is calculated as net assets less goodwill divided by closing units on issue

6 Gearing is defined as total borrowings less cash divided by total assets less cash and goodwill

08[| ] Centuria Office REIT – Annual Report 2021

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NISHI, 2 PHILLIP LAW ST,
CANBERRA, ACT
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60 MARCUS CLARKE ST, 54 MARCUS CLARKE ST,
CANBERRA, ACT CANBERRA, ACT
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COF CANBERRA PORTFOLIO
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Senior Management
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Jason Huljich Grant Nichols Liam Schofield Ross Lees Anna Kovarik Ara Galstian Belinda Cheung
JOINT CEO HEAD OF OFFICE ASSISTANT FUND MANAGER HEAD OF FUNDS GROUP CHIEF RISK DEPUTY CFO SENIOR FINANCE MANAGER
& FUND MANAGER CENTURIA OFFICE REIT MANAGEMENT OFFICER & COMPANY LISTED PROPERTY FUNDS
CENTURIA OFFICE REIT SECRETARY
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Centuria Office REIT – Annual Report 2021[| ] 09

High-quality pure-play office portfolio as at 30 June 2021

Portfolio overview

PORTFOLIO WEIGHTING

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WA 14.2%
QLD 23.6%
97.1 4.5
OCCUPANCY (%) WALE (YRS) 98.2 3.3
OCCUPANCY (%) WALE (YRS)
NT
QLD
WA
SA
NSW 25.0%
NSW
97.8 5.4
ACT OCCUPANCY (%) WALE (YRS)
SA 2.9% VIC
100 3.8 ACT 16.7%
OCCUPANCY (%) WALE (YRS) VIC 17.6%
93.5 5.5
OCCUPANCY (%) WALE (YRS)
69.9 3.2
OCCUPANCY (%) WALE (YRS)
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FY21 TENANT MIX

TOTAL GOVERNMENT EXPOSURE 27%

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ASX Listed
Government 12%
Listed Multinational 6% 26%
Multinational
19%
National
Other 27%
10%
82%
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COMMONWEALTH WA QLD NSW SA
32,136sqm 14,288sqm 7,130sqm 8,555sqm 2,860sqm
four properties two properties one property two properties one property
15.7% of income 5.0% of income 3.0% of income 2.4% of income 1.0% of income
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10[| ] Centuria Office REIT – Annual Report 2021

Strong leasing track record & focus on maintaining high occupancy

LEASING EXECUTED

FY15 5,116sqm OR 5.1% OF PORTFOLIO 96.7%	FY16 12,439sqm OR 11.1% OF PORTFOLIO 97.2%	FY17 20,321sqm OR 15.5% OF PORTFOLIO FY18 17,970sqm OR 9.7% OF PORTFOLIO FY19 21,758sqm OR 10.0% OF PORTFOLIO PORTFOLIO OCCUPANCY 97.3% 98.9% 98.4%	FY20 32,378sqm OR 10.6% OF PORTFOLIO 98.1%	FY21 52,077sqm OR 18.1% OF PORTFOLIO
				93.1%

154 MELBOURNE ST, SOUTH BRISBANE, QLD

WEIGHTED AVERAGE LEASE EXPIRY (% BY INCOME) as at 30 June 2021

TENANT PROFILE BY SIZE (SQM) as at 30 June 2021

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INCOME WALE (JUN-20) 4.7YEARS 43.6%
<500sqm
INCOME WALE (JUN-21) 4.3YEARS
35.0% 500-1000sqm 9%
1000-2000sqm 7%
>2000sqm 12%
19.5%
17.7%
16.1%
13.4%
9.4% 72%
6.9% 6.8% 7.2% 7.3%
1.8%
VACANT FY22 FY23 FY24 FY25 FY26+
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Centuria Office REIT – Annual Report 2021[| ] 11

Sustainability at Centuria Capital

Centuria Office REIT is externally managed by Centuria Capital (ASX:CNI) and benefits from Centuria Capital’s sustainability approach. Centuria Capital will be releasing its first Sustainability Report later this year. Highlights to be featured in this report are summarised here.

ENVIRONMENTAL

SOCIAL

GOVERNANCE

ESG REPORTING

Centuria Capital to release its first Sustainability Report

CLIMATE ACTION

Supports the recommendations of the TCFD

ENVIRONMENTAL DATA

Energy, emission (scope 1&2), and water data collected for assets within COF

CENTURIA OFFICE REIT

NABERS Sustainability Portfolio Index Ratings Energy 4.7 Stars | Water 3.2 Stars

MEMBER

Of the Diversity Council of Australia

TENANT ENGAGEMENT[1]

91% of surveyed tenants would recommend Centuria as an asset manager

SPECIALISED HEALTHCARE REAL ESTATE UNDER MANAGEMENT

Completed $72.2m of social and affordable housing

EMPLOYEE ENGAGEMENT[2]

94% of employees enjoy working at Centuria

BOARD DIVERSIFICATION

Appointment of 4 independent directors to Group and RE Boards

CENTURIA CAPITAL: Kristie Brown (ASX:COF) CPFL: Nicole Green (ASX:CIP) CPFL2: Jennifer Cook, Natalie Collins

CULTURE & ESG BOARD COMMITTEE ESTABLISHED[3]

Oversight of modern slavery, diversity & inclusion, climate change

FIRST MODERN SLAVERY STATEMENT DELIVERED

Over a third of cleaning contracts by value assessed using the Property Council of Australia Informed 365 platform

GENDER DIVERSITY AT CENTURIA

63% male employees | 37% female employees

EMPLOYEE TRAINING

Code of Conduct Financial Education Cyber Security

100 BROOKE ST, FORTITUDE VALLEY, QLD

1 Centuria Capital undertakes regular tenant surveys. The figure reported from the Group’s FY21 survey

2 Centuria Capital undertakes regular employee engagement surveys The reported figure is from the Groups FY21 survey

3 The Centuria Culture and ESG Board Committee is chaired by Susan Wheeldon, Independent Non-Executive Director of Centuria Capital Limited

12[| ] Centuria Office REIT – Annual Report 2021

Sustainability – Centuria Office REIT

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Improvement in COF’s overall operational efficiency has been driven by a focus on asset upgrades under the NABERS rating scheme

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4.7 NABERS Energy Sustainability Portfolio Index Rating, up from 4.5 the previous year

CONSUMPTION/EMISSIONS INTENSITY	UNIT OF MEASURE	CY2020	CY2019
Energy consumption intensity	MJ/sqm	263	329
Water consumption intensity	L/sqm	481	826
Scope 1 and 2 GHG emissions intensity kg CO2-e/sqm		71	92

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3.2 NABERS Water Sustainability Portfolio Index Rating

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CASE STUDY

1 Richmond Road, Keswick, SA

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Increased NABERS Energy rating from 3 Stars to 5 Stars over three years through smart design and base building upgrades, substantially increasing efficiency

COF ENVIRONMENTAL DATA

Environmental Data reported is for calendar years 2019 and 2020. Reported figures only represent data for assets within the Centuria Office REIT.

	UNIT OF MEASURE	CY20	CY19
NLA (annual weighted average)	sqm	300,537	224,012
RESOURCE CONSUMPTION(OPERATIONALLY CONTROLLED PROPERTIES)
Base building grid connected electricity	MWh	18,159	18,051
Gas use (whole building)	MWh	3,798	2,423
Water use (whole building)	kL	144,576	185,134
GHG EMISSIONS(OPERATIONALLY CONTROLLED PROPERTIES)
Scope 1	tCO2-e	705	450
Scope 2	tCO2-e	20,720	20,071
Total scope 1 and 2	tCO2-e	21,425	20,520
Scope 3 (metered tenant usage)	tCO2-e	5,901	5,210
CONSUMPTION / EMISSIONS INTENSITY
Energy consumption intensity	MJ/sqm	263	329
Water consumption intensity	L/sqm	481	826
Scope 1 and 2 GHG emissions intensity	kg CO2-e/sqm	71	92

Environmental data is reported where Centuria is deemed to have operational control of an asset.

OPERATIONAL CONTROL

Operational Control refers to Centuria’s capacity to directly manage the day-to-day activities of assets, by employing Centuria’s or a nominated delegate’s management policies. This definition is consistent with the principles outlined in the National Greenhouse and Energy Reporting Act 2007.

EMISSIONS

Centuria use emissions factors from each corresponding year’s National Greenhouse and Energy Reporting (Measurement) Determination. Emissions are reported for material energy sources collected including electricity and natural gas.

ENVIRONMENTAL DATA FOR FY2021

Environmental Data for FY2021 will be disclosed in Centruria’s first Sustainability Report to be released later this year.

Data Excludes: 131-139 Grenfell Street, Adelaide, SA and 483 Kingsford Smith Drive, Hamilton, QLD

Centuria Office REIT – Annual Report 2021[| ] 13

Meet the Board of Directors

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Matthew Hardy

CHAIRMAN & INDEPENDENT NON-EXECUTIVE DIRECTOR

Matthew has been an Independent NonExecutive Director of Centuria Property Funds Limited (CPFL), the responsible entity of Centuria Office REIT (COF), since July 2013 and was appointed Chairman of the Board in June 2021. He is also a member of CPFL’s Audit, Risk and Compliance Committee. He brings more than 30 years, senior-level experience across direct real estate, equities and funds management to the Board.

His career spans UK and Australian markets in direct property valuation and consultancy for global companies including Richard Ellis (now CBRE) and Jones Lang Wootton (now JLL). Previous roles include Hambros Equities’ senior REIT analyst and Barclays Global Investors’ Head of Property and Director of Property Investments, where he managed property securities funds as well as Listed and Wholesale property funds.

Matthew has been the Managing Director, Head of Australia for Real Asset Search and Consultancy Group Ferguson Partners since 22 February 2021. Since 2002, Matthew has been a founding Director of real estate specialist executive search and consultancy, Conari Partners, and its corporate predecessor, Thomas Hardy.

Prior to assuming his current Board positions, Matthew was General Manager to the Mirvacmanaged, listed REIT, Capital Property Trust. He was also Mirvac Fund Management’s Head of Investments and Developments where he drove strategy and new business development. After leaving his executive position at Mirvac, Matthew served as a Non-executive Director of Mirvac Funds Management.

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Peter Done

INDEPENDENT NON-EXECUTIVE DIRECTOR

Peter was appointed to the Board of Centuria Property Funds Limited (CPFL), the responsible entity of Centuria Office REIT (COF), in December 2007. He is also a member of CPFL’s Audit, Risk and Compliance Committee. He has extensive knowledge in accounting, audit and financial management in the property development and financial services industries, corporate governance, regulatory issues and Board processes through his many senior roles.

Peter hails from a 38-year career at KPMG. From 1979, he held the position of Partner until his retirement in 2006. During his 27 years as Partner, Peter was the lead audit partner for many clients, including those involved in property development, primary production and television and film production and distribution.

Peter holds a Bachelor of Commerce (Accounting) from the University of New South Wales and is a Fellow of Chartered Accountants Australia and New Zealand.

Peter is also an Independent Non-executive Director of Centuria Capital Group and Centuria Property Funds No. 2 Limited.

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Nicholas Collishaw

NON-EXECUTIVE DIRECTOR

Nicholas has been a Non-Executive Director of Centuria Property Funds Limited, the responsible entity of Centuria Office REIT (COF), since October 2017. Previously he was Centuria Capital’s CEO of Listed Property Funds, joining in May 2013. Nicholas brings to the Board more than 30 years experience across domestic and international real estate and investment markets.

Between 2005 and 2012, he was Mirvac Group’s CEO and Managing Director, responsible for successfully guiding the real estate development and investment company through the Global Financial Crisis and implementing sustained growth strategies.

Nicholas has held senior positions with James Fielding Group, Paladin Australia, Schroders Australia and Deutsche Asset Management. He has extensive experience in all major real estate markets in Australia and investment markets in the United States, United Kingdom and the Middle East.

Nicholas is currently Executive Director and Co-Founder of Lincoln Place, an Australian funds manager specialising in the retirement sector, as well as Chairman of Redcape Hotel Group.

Nicholas is also a Non-Executive Director of Centuria Capital Group, Centuria Property Funds No. 2 Limited and Centuria Heathcare Asset Management Limited.

Following the reporting date, Nicholas resigned from the Centuria Property Funds Limited Board effective 30 August 2021.

He is a member of the Royal Institution of Chartered Surveyors (RICS) and the Australian Institute of Company Directors (AICD). Matthew holds a Bachelor of Science (Urban Estate Surveying) from Nottingham Trent University.

Matthew is also the Chairman of Centuria Healthcare Asset Management Limited.

14[| ] Centuria Office REIT – Annual Report 2021

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Darren Collins

INDEPENDENT NON-EXECUTIVE DIRECTOR

Darren has been an Independent NonExecutive Director of Centuria Property Funds Limited (CPFL), the responsible entity of Centuria Office REIT (COF), since March 2015. He is also the Chairman of CPFL’s Audit, Risk and Compliance Committee. He brings extensive accounting, audit and financial management experience to the Board having been the lead financial executive for businesses operating in Asia, Australia and the United States of America. He has a strong background in corporate governance and regulation for listed companies.

Between 1997 and 2013, Darren was Computer Sciences Corporation (CSC)’s Vice President of Finance and Administration of several operating divisions. From 2004 to 2009, he was also a non-executive director of three IT services companies listed on the stock exchanges of Singapore, Hong Kong and Kuala Lumpur, respectively.

Darren holds a Bachelor of Commerce (Accounting) from the University of New South Wales and is an associate of Chartered Accountants Australia and New Zealand.

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Nicole Green

INDEPENDENT NON-EXECUTIVE DIRECTOR

Nicole is a highly experienced legal professional and currently Minter Ellison’s Infrastructure Industry Leader and a Partner in its Projects, Infrastructure & Construction Division. She focuses on both high-profile infrastructure developments and large scale commercial, industrial and residential developments, including urban renewal.

She has more than 24 years legal experience and was Minter Ellison’s Sydney Office Managing Partner and former national lead of its Government Practice.

Nicole is also a board member for Infrastructure Partnerships Australia and chairs the University of New South Wales (UNSW) Law and Justice Advisory Council. She holds a Bachelor of Commerce (Finance) / LLB from UNSW.

Nicole currently sits on the following Centuria-related boards:

Centuria Property Funds Limited (CPFL) (Independent Non-Executive Director)
CPFL Audit, Risk & Compliance Committee (ARCC).

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Centuria Office REIT – Annual Report 2021[| ] 15

NISHI 2 PHILLIP LAW STREET, CANBERRA, ACT

16[| ] Centuria Office REIT – Annual Report 2021

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Directors’ Report

For the year ended 30 June 2021

The directors of Centuria Property Funds Limited (‘CPFL’), the Responsible Entity of Centuria Office REIT (‘COF’) present their report, together with the consolidated financial statements of the Trust and its subsidiaries (‘the Trust’) for the year ended 30 June 2021 and the independent auditor’s report thereon.

DIRECTORS OF THE RESPONSIBLE ENTITY

The directors of Centuria Property Funds Limited during or since the end of the financial year are:

			Directorship of other
Name	Appointed	Resigned	listed companies
Peter Done	5 Dec 2007	-	Centuria Capital Limited
Matthew Hardy	4 Jul 2013	-
Darren Collins	10 Mar 2015	-
Nicholas Collishaw	1 Oct 2017	-	Centuria Capital Limited
			Redcape Hotel Group Management Ltd
Nicole Green	2 Jul 2021	-
Roger Dobson	1 Oct 2017	29 Jul 2020

The company secretary of Centuria Property Funds Limited during or since the end of the financial year is:

Name	Appointed
Anna Kovarik	5 Jul 2018

Roger Dobson resigned from the board of the Responsible Entity, Centuria Property Funds Limited effective 29 July 2020. Nicole Green was appointed to the Board on 2 July 2021.

Refer to Note D2 of the annual financial report for directors’ unitholdings in the Trust.

No director holds a right or option over interests in the Trust. No options over any issued or unissued units in the Trust have been issued to any director.

There are no contracts to which any director is a party to under which a director is entitled to a benefit and/or confers a right to call for or be delivered interests in the Trust.

PRINCIPAL ACTIVITIES

The Trust is a registered managed investment scheme domiciled in Australia.

The principal activity of the Trust is investment in commercial office property within Australia. There have been no significant changes in the nature of the Trust’s activities since the date of the Trust’s establishment.

The Trust did not have any employees during the financial year.

SIGNIFICANT CHANGE IN THE STATE OF AFFAIRS

In the opinion of the Responsible Entity there were no significant changes in the state of affairs of the Trust that occurred during the financial year.

Centuria Office REIT – Annual Report 2021[| ] 17

Directors’ Report

For the year ended 30 June 2021

REVIEW OF OPERATIONS

RESULTS

The results of the operations of the Trust are disclosed in the consolidated statement of profit or loss and other comprehensive income of these financial statements. The Trust’s profit from continuing operations for the year ended 30 June 2021 was $76,936,000 (30 June 2020: $23,053,000).

As at 30 June 2021, the Trust’s Net Tangible Assets (‘NTA’) was $2.48 per unit (30 June 2020: $2.49 per unit). The current period results have been affected by the COVID-19 pandemic. The Trust continued to apply the National Cabinet Mandatory Code of Conduct (‘the Code’) and where appropriate, granted applicable tenants rent relief packages to alleviate the impacts of the COVID-19 pandemic in the form of rent waivers or deferrals. The COVID-19 impact on the Fund is disclosed in Note C1 and C2.

INVESTMENT PROPERTY VALUATIONS

The total value of the Trust’s portfolio as at 30 June 2021 was $2,046 million (30 June 2020: $2,086 million), a decrease of 2% from the prior year. During the year, the Trust sold its interest in 465 Victoria Avenue, Chatswood NSW for $44.7 million, with all the proceeds used to repay debt.

The weighted average capitalisation rate for the portfolio firmed 12 basis points year on year to 5.81% as at 30 June 2021 (30 June 2020: 5.93%).

The COVID-19 pandemic gives rise to uncertainty in the market and which may have an impact on key drivers of property valuations. The Trust engaged external valuers to prepare independent valuations for the entire portfolio of investment properties over the course of the financial year.

LEASING AND OCCUPANCY

The Trust secured 61 leases across 52,077 square metres (‘sqm’) representing 18.1% of the portfolio’s Net Lettable Area (‘NLA’) in the year ended 30 June 2021. This comprised of 33 new leases across 26,388 sqm and 28 renewals across 25,689 sqm.

As at 30 June 2021, the Weighted Average Lease Expiry (‘WALE’) of the portfolio was 4.3 years (30 June 2020: 4.7 years) and the occupancy rate was 93.1% (30 June 2020: 98.1%).

CAPITAL MANAGEMENT

As at 30 June 2021, the Trust had a multi-bank debt facility totalling $812.5 million (30 June 2020: $880.0 million) with a weighted average expiry of 4.2 years (30 June 2020: 3.4 years). Drawn borrowings totalled $704.3 million (30 June 2020: $749.0 million), and the all-in interest cost for FY21 was 2.2% (30 June 2020: 2.2%) with 80% of the drawn debt hedged (30 June 2020: 75%). The Trust’s gearing at 30 June 2021 was 33.5% (30 June 2020: 34.5%).

OUTLOOK

The Responsible Entity’s strategy and ongoing focus remains unchanged. The Responsible Entity’s primary focus is on actively managing the Trust’s portfolio, with an emphasis on tenant retention to ensure income and occupancy are maximised. The Responsible Entity will also continue to review asset allocation and assess potential acquisition opportunities that are considered complementary to the existing portfolio and the Trust’s objective of delivering sustainable income returns to unitholders.

The Trust’s FFO guidance for the year ending 30 June 2022 is expected to be 18.0 cpu. The 2022 financial year distribution guidance is 16.6 cpu which will be paid in equal quarterly instalments.

DISTRIBUTIONS

Distributions paid or payable in respect of the financial year were:

	30 Jun 2021	30 Jun 2021	30 Jun 2020	30 Jun 2020
	Cents		Cents
	per unit	$’000	per unit	$’000
September quarter	4.125	21,224	4.450	15,855
December quarter	4.125	21,224	4.450	22,840
March quarter	4.125	21,224	4.450	22,896
Junequarter	4.125	21,224	4.450	22,896
Total	16.500	84,896	17.800	84,487

Key dates in connection with the 30 June 2021 distribution are:

Event	Date
Ex-distribution date	29 June 2021
Record date	30 June 2021
Distributionpayment date	10 August 2021

The Funds From Operations for the year ended 30 June 2021 was $102.2 million (30 June 2020: $85.4 million), representing a 19.7% increase from prior year.

The Trust declared distributions of 16.5 cpu during the 2021 financial year which was in line with guidance provided as part of the June 2020 year end result. The table below provides a reconciliation from the consolidated statement of profit or loss and other comprehensive income to the FFO for the year:

	30 Jun 2021	30 Jun 2020
	$’000	$’000
Net proft for the year	76,936	23,053
ADJUSTMENTS:
Loss on fair value of investment properties	15,137	38,102
Rent free and abatement	10,945	7,397
Amortisation of incentives and leasing fees	6,227	4,122
Realised/unrealised loss/(gain) on fair value
of derivatives	(4,816)	4,876
Straight-lining of rental income	(2,133)	(4,471)
Adjustments for AASB 16	(61)	(57)
Transaction costs	-	48
Goodwill impairment	-	6,356
Once-off refnancingcosts	-	5,942
Funds from operations	102,235	85,368

DISTRIBUTION REINVESTMENT PLAN

The Trust did not activate the Distribution Reinvestment Plan (‘DRP’) during the year ended 30 June 2021.

18[| ] Centuria Office REIT – Annual Report 2021

ENVIRONMENTAL REGULATION

The Trust’s operations are not subject to any significant environmental regulation under Commonwealth, State or Territory legislation.

OPTIONS GRANTED

No options were granted over unissued units in the Trust during or since the end of the financial year.

No unissued units in the Trust were under option as at the date of this report.

No units were issued in the Trust during or since the end of the financial year as a result of the exercise of an option over unissued units in the Trust.

EVENTS SUBSEQUENT TO BALANCE DATE

There are no other matters or circumstances which have arisen since the end of the period in the date of this report, in the opinion of the Responsible Entity, which significantly affect the operations of the Trust, the results of those operations, or the state of affairs of the Trust, in future financial years.

INDEMNIFYING OFFICERS OR AUDITORS

INDEMNIFICATION

Under the Trust’s constitution the Responsible Entity, including its officers and employees, is indemnified out of the Trust’s assets for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Trust.

The Responsible Entity has not indemnified or agreed to indemnify any auditor or other officer of the Trust, or any related body corporate.

INSURANCE PREMIUMS

The Responsible Entity has paid insurance premiums in respect of directors’ and officers’ liability and legal expense insurance contracts, for current and former directors and officers, including senior executives of the Responsible Entity.

TRUST INFORMATION IN THE DIRECTORS’ REPORT

RESPONSIBLE ENTITY INTERESTS

The following fees were paid or payable to the Responsible Entity and related parties during the financial year:

	30 Jun 2021	30 Jun 2020
	$’000	$’000
Management fees	11,543	10,421
Property management fees	2,727	3,089
Leasing fees	1,755	799
Facility management fees	1,632	1, 799
Project management fees	1,154	449
Custodian fees	791	798
Due diligence acquisition fees	100	100
Administration fees	256	-
	19,958	17,455

The Responsible Entity and/or its related parties that hold units in the Trust during the financial year are outlined in Note D2 to the financial statements.

OTHER TRUST INFORMATION

The number of units in the Trust at the end of the financial year are disclosed in Note C6 to the financial statements.

The recorded value of the Trust’s assets as at the end of the financial year is disclosed in the consolidated statement of financial position as “Total assets” and the basis of recognition and measurement is included in the notes to the financial statements.

Centuria Office REIT – Annual Report 2021[| ] 19

For the year ended 30 June 2021

Directors’ Report

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 21.

ROUNDING OFF OF AMOUNTS

The Trust is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, related to the ‘rounding off’ of amounts in the Directors’ Report and financial statements. Amounts in the Directors’ Report and financial statements have been rounded off, in accordance with the instrument, to the nearest thousand dollars, unless otherwise indicated. This report is made in accordance with a resolution of Directors.

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Matthew Hardy Darren Collins Director Director

Sydney 3 August 2021

20[| ] Centuria Office REIT – Annual Report 2021

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of Centuria Property Funds Limited, the Responsible Entity of Centuria Office REIT

I declare that, to the best of my knowledge and belief, in relation to the audit of Centuria Office REIT for the financial year ended 30 June 2021 there have been:

i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

Peter Zabaks

Partner

Sydney

3 August 2021

KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.

Liability limited by a scheme approved under Professional Standards Legislation.

Centuria Office REIT – Annual Report 2021[| ] 21

Financial Report Contents

Consolidated statement of proft or loss and other comprehensive income	24
Consolidated statement of fnancial position	25
Consolidated statement of changes in equity	26
Consolidated statement of cash fows	27
Notes to the consolidated fnancial statements	28
A About the report	28
A1 General information	28
A2 Signifcant accounting policies	28
B Trust performance	29
B1 Distribution	29
B2 Revenue	30
B3 Expenses	30
B4 Earnings per unit	30
C Trust’s assets and liabilities	31
C1 Trade and other receivables	31
C2 Investment properties	32
C3 Trade and other payables	34
C4 Borrowings	35
C5 Derivatives	35
C6 Issued capital	36
C7 Contingent assets, liabilities and commitments	36
C8 Cash and cash equivalents	36
D Trust structure	37
D1 Interest in material subsidiaries	37
D2 Related parties	38
D3 Parent entity disclosures	39
E Other notes	40
E1 Auditor’s remuneration	40
E2 Financial instruments	40
E3 Events subsequent to reporting date	41
E4 Additional information	41
Directors’ declaration	42
Independent auditor’s report	42

22[| ] Centuria Office REIT – Annual Report 2021

235 WILLIAM ST, NORTHBRIDGE, WA

Centuria Office REIT – Annual Report 2021[| ] 23

Consolidated statement of profit or loss and other comprehensive income

For the year ended 30 June 2021

		30 Jun 2021	30 Jun 2020
	Note	$’000	$’000
REVENUE
Rent and recoverable outgoings	B2	161,805	146,314
Total revenue from continuing operations		161,805	146,314
OTHER INCOME
Gain on fair value of derivative fnancial instruments		4,816	-
Other income		7	106
Total other income		4,823	106
Total revenue from continuing operations and other income		166,628	146,420
EXPENSES
Rates, taxes and other property outgoings		41,167	35,638
Finance costs	B3	18,418	22,719
Loss/(gain) on fair value of investment properties	C2	15,137	38,102
Management fees	D2	11,543	10,421
Other expenses		2,251	1,975
Rental waivers expense		942	1,538
Expected credit loss expense		234	1,694
Goodwill Impairment Expense		-	6,356
Loss on fair value of derivative fnancial instruments		-	4,876
Transaction costs		-	48
Proft from continuing operations for the year		76,936	23,053
Net proft for the year		76,936	23,053
OTHER COMPREHENSIVE INCOME
Other comprehensive income for the year		-	-
Total comprehensive income for the year		76,936	23,053
BASIC AND DILUTED EARNINGS PER UNIT
Basic earnings per unit (cents per unit)	B4	15.0	5.0

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

24[| ] Centuria Office REIT – Annual Report 2021

Consolidated statement of financial position

As at 30 June 2021

		30 Jun 2021	30 Jun 2020
	Note	$’000	$’000
ASSETS
Current assets
Cash and cash equivalents	C8	15,644	28,809
Trade and other receivables	C1	5,369	3,263
Other assets		1,625	1,536
Total current assets		22,638	33,608
Non-current assets
Investment properties	C2	2,046,221	2,085,650
Total non-current assets		2,046,221	2,085,650
Total assets		2,068,859	2,119,258
LIABILITIES
Current liabilities
Trade and other payables	C3	31,943	22,260
Distributions payable	B1	21,224	22,896
Total current liabilities		53,167	45,156
Non-current liabilities
Borrowings	C4	700,800	746,372
Derivative fnancial instruments	C5	7,240	12,056
Lease liability	C2	32,660	32,722
Total non-current liabilities		740,700	791,150
Total liabilities		793,867	836,306
Net assets		1,274,992	1,282,952
EQUITY
Issued capital	C6	1,283,138	1,283,138
Accumulated losses		(8,146)	(186)
Total equity		1,274,992	1,282,952

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Centuria Office REIT – Annual Report 2021[| ] 25

Consolidated statement of changes in equity

For the year ended 30 June 2021

		Issued	Retained earnings/
		capital	(accumulated losses)	Total equity
	Note	$’000	$’000	$’000
Balance at 1 July 2019		833,320	61,248	894,568
Net proft for the year		-	23,053	23,053
Total comprehensive income for the year		-	23,053	23,053
Units issued		461,299	-	461,299
Equity raising costs		(11,481)	-	(11,481)
Distributions provided for or paid	B1	-	(84,487)	(84,487)
Balance at 30 June 2020		1,283,138	(186)	1,282,952
Balance at 1 July 2020		1,283,138	(186)	1,282,952
Net proft for the year		-	76,936	76,936
Total comprehensive income for the year		-	76,936	76,936
Distributions provided for or paid	B1	-	(84,896)	(84,896)
Balance at 30 June 2021		1,283,138	(8,146)	1,274,992

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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26[| ] Centuria Office REIT – Annual Report 2021

Consolidated statement of cash flows

For the year ended 30 June 2021

		30 Jun 2021	30 Jun 2020
	Note	$’000	$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		185,778	159,963
Payments to suppliers		(63,000)	(60,711)
Interest received		7	106
Interest paid		(17,250)	(14,582)
Net cash generated by operating activities	C8	105,535	84,776
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for investment properties		(30,379)	(689,007)
Proceeds from sale of investment properties		44,516	-
Net cash generated by/(used in) investing activities		14,137	(689,007)
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution paid		(86,568)	(77,118)
Proceeds from borrowings		177,500	282,525
Repayment of borrowings		(222,200)	(32,000)
Payments for borrowing costs		(1,569)	(1,789)
Payments for derivative fnancial instruments		-	(5,942)
Proceeds from issue of units		-	461,299
Equity issue costs		-	(11,481)
Net cash (used in)/generated by fnancing activities		(132,837)	615,494
Net (decrease)/increase in cash and cash equivalents		(13,165)	11,263
Cash and cash equivalents at beginning of fnancial period		28,809	17,546
Cash and cash equivalents at end of fnancial year	C8	15,644	28,809

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

Centuria Office REIT – Annual Report 2021[| ] 27

Notes to the consolidated financial statements

For the year ended 30 June 2021

A About the report

A1 GENERAL INFORMATION

Centuria Office REIT is a registered managed investment scheme under the Corporations Act 2001 and domiciled in Australia. The principal activity of the Trust is disclosed in the directors’ report.

STATEMENT OF COMPLIANCE

The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB).

For the purposes of preparing the financial statements, the Trust is a for-profit entity.

The financial report was authorised for issue in accordance with a resolution of the board of directors of Centuria Property Funds Limited, the Responsible Entity, on 3 August 2021.

BASIS OF PREPARATION

The consolidated financial statements have been prepared on the basis of historical cost, except for investment property and derivative financial instruments which have been measured at fair value at the end of the reporting period. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, which is the Trust’s functional currency, unless otherwise noted.

(i) Going concern

The financial report has been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

The COVID-19 pandemic has created uncertainty on the global financial markets and has affected the ability of impacted tenants to meet their rental obligations. The Trust has completed an extensive assessment on trade receivables and the directors remain confident that the Trust will be able to continue as a going concern.

The principal accounting policies adopted in the preparation of the interim financial report are consistent with those of the previous financial year and corresponding interim reporting period. Refer to Note C1.

(ii) Net current liability position

The directors of the Responsible Entity note that the Trust is in a net current liability position of $30.5 million as at 30 June 2021. Given the Trust has the headroom in existing loan covenants and the ability to draw from the $106.7 million of available funds in the facility to fund working capital requirements, has a 4.2 year weighted average debt expiry, and the future cash generating potential of the Trust, the directors of the Responsible Entity expect the Trust will be able to pay its debts as and when they fall due.

A2 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies and methods of computation in the preparation of the consolidated financial statements are consistent with those adopted in the previous financial year ended 30 June 2020 unless specifically outlined below or in the relevant notes to the consolidated financial statements.

When the presentation or classification of items in the consolidated financial statements has been amended, comparative amounts are also reclassified, unless it is impractical.

Accounting policies are selected and applied in a manner that ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events are reported.

These financial statements contain all significant accounting policies that summarise the recognition and measurement basis used and which are relevant to provide an understanding of the financial statements. Accounting policies that are specific to a note to the financial statements are described in the note to which they relate.

USE OF ESTIMATES AND JUDGEMENTS

In the application of the Trust’s accounting policies, the Responsible Entity is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The judgements, estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period; or in the period of the revision and future periods if the revision affects both current and future periods. The key estimates and judgements in the financial report relate to the valuation of investment properties (Note C2) and derivative financial instruments (Note E2).

Judgements made by the Responsible Entity that have significant effects on the financial statements and estimates with significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

SEGMENT REPORTING

The Trust operates in one segment, being investments in Australian office property. The Trust has determined its one operating segment based on the internal information that is provided to the chief operating decision maker and which is used in making strategic decisions. The Responsible Entity has been identified as the Trust’s chief operating decision maker.

After taking into account all available information, the directors of the Responsible Entity have concluded that there are reasonable grounds to believe the basis of preparation of the financial report on a going concern basis is appropriate.

ROUNDING OF AMOUNTS

The Trust is a scheme of a kind referred to in ASIC Legislative Instrument 2016/191, related to the ‘rounding off’ of amounts in the Directors’ Report and financial statements. Amounts in the Directors’ Report and financial statements have been rounded off, in accordance with the instrument to the nearest thousand dollars, unless otherwise indicated.

28[| ] Centuria Office REIT – Annual Report 2021

B Trust performance

B1 DISTRIBUTION

B1 DISTRIBUTION
Ce	30 Jun 2021 nts per unit $’000 Ce	30 Jun 2020
		nts per unit $’000
September quarter December quarter March quarter June quarter	4.125 21,224 4.125 21,224 4.125 21,224 4.125 21,224	4.500 15,855 4.500 22,840 4.500 22,896 4.500 22,896
Total	16.500 84,896	17.800 84,487

Key dates in connection with the 30 June 2021 distribution are:

Key dates in connection with the 30 June 2021 distribution are:
Event	Date
Ex-distribution date	29 June 2021
Record date	30 June 2021
Distribution payment date	10 August 2021

DISTRIBUTION AND TAXATION

Under current Australian income tax legislation, the Trust is not liable for income tax for the financial year as the Trust has fully distributed its distributable income as determined under the Trust’s constitution, whilst its unitholders are presently entitled to the income.

Distributions paid and payable are recognised as distributions within equity. A liability is recognised where distributions have been declared but have not been paid. Distributions paid are included in cash flows from financing activities in the consolidated statement of cash flows.

Centuria Office REIT – Annual Report 2021[| ] 29

Notes to the consolidated financial statements

For the year ended 30 June 2021

B2 REVENUE

B2 REVENUE
	30 Jun 2021	30 Jun 2020
	$’000	$’000
Rental income	134,498	118,384
Recoverable outgoings	25,174	23,459
Straight-lining of lease revenue	2,133	4,471
	161,805	146,314

RECOGNITION AND MEASUREMENT

Revenue is measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Trust and the revenue can be reliably measured.

(i) Rental income

Rental income from investment property is recognised in profit or loss on a straight line basis over the term of the lease. Rental income not received at reporting date is reflected in the consolidated statement of financial position as a receivable. If rents are paid in advance these amounts are recorded as payables in the consolidated statement of financial position.

Lease incentives granted are recognised as an integral part of the net consideration agreed for the use of the leased premises, irrespective of the incentive’s nature or form or the timing of payments. The aggregate cost of lease incentives are recognised as a reduction of rental income on a straight-line basis over the lease term.

Contingent rents based on the future amount of a factor that changes other than with the passage of time are only recognised when charged.

(ii) Recoverable outgoings

The Trust recovers the costs associated with general building and tenancy operation from lessees in accordance with specific clauses within lease agreements. These are invoiced monthly based on an annual estimate. The consideration is due 30 days from the invoice date. Should any adjustment be required based on actual costs incurred, this is recognised in the statement of profit or loss and other comprehensive income within the same reporting period and billed annually.

(iii) Interest revenue

Interest revenue is accrued on a time basis, by reference to the principal outstanding using the effective interest rate method.

(iv) Sale of properties

Any gain or loss arising on the sale of an investment property is recognised when the control of the asset is passed on to the buyer, which normally coincides with the settlement of the contract for sale.

B3 EXPENSES

RECOGNITION AND MEASUREMENT

Finance costs are recognised in the profit or loss statement as they accrue. Finance costs are recognised using the effective interest rate applicable to the financial liability.

(i) Finance costs

Finance costs include interest expense and amortised borrowing costs.

	30 Jun 2021	30 Jun 2020
	$’000	$’000
Interest expense	17,722	16,362
Derivative instrument break cost	-	5,942
Amortisation of borrowing costs	696	415
	18,418	22,719

(ii) Other expenses

All other expenses, including rates, taxes and other property outgoings and management fees are recognised in profit or loss on an accruals basis. Other operating expenses include legal, accounting and audit fees.

(iii) Goods and services tax

Revenues, expenses and assets are recognised exclusive of goods and services tax (‘GST’) which is recoverable from the Australian Taxation Office (‘ATO’) as an input tax credit (‘ITC’).

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included in receivables or payables in the consolidated statement of financial position.

Cash flows are included in the consolidated statement of cash flows with the amount of GST included. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the ATO is classified as operating cash flows.

B4 EARNINGS PER UNIT

B4 EARNINGS PER UNIT
	30 Jun 2021	30 Jun 2020
Basic earnings per COF unit
(cents per unit)	15.00	5.00
Earnings used in calculating basic
earnings per unit ($’000)	76,936	23,053
Weighted average number of
COF units (‘000)	514,522	459,257

30[| ] Centuria Office REIT – Annual Report 2021

C Trust’s assets and liabilities

C1 TRADE AND OTHER RECEIVABLES

	30 Jun 2021	30 Jun 2020
	$’000	$’000
Current
Trade receivables	3,804	1,898
Expected credit loss provision	(1,929)	(1,694)
Other receivables	3,494	3,059
	5,369	3,263

Refer to Note E2 for details on fair value measurement and the Trust’s exposure to risks associated with financial assets (other receivables are not considered to be financial assets).

RECOGNITION AND MEASUREMENT

Loans and receivables are initially recognised at fair value and subsequently amortised cost using the effective interest rate method less any allowance under the expected credit loss (‘ECL’) model.

Refer to the policy application below for further details.

RECOVERABILITY OF LOANS AND RECEIVABLES

The Trust followed the Code in determining which tenants were applicable for rent relief. The criteria included:

Eligibility for and receipt of JobKeeper
Annual turnover up to $50 million
Revenue impacted by greater than 30%

Rent relief has been provided in the form of rent waivers and deferrals. Waivers granted relating to the 2021 financial year which were agreed with the tenant retrospectively have been expensed during the year. Rental deferrals have been negotiated with tenants and is spread over the remaining lease term and recognised on a straight line basis.

During the 2021 financial year, the Trust had granted $1.9m of rent relief made up of $0.9 million in rental waivers and $1.0 million of deferrals to applicable tenants. As at 30 June 2021, an ECL provision of $1.9 million was recognised for the trade receivables in relation to rental income receivable and tenant outgoing recoveries.

Given that COVID-19 is an ongoing situation, the Responsible Entity has continued to analyse the age of outstanding receivable balances post balance sheet date and applied estimated percentages of recoverability by tenant adjusted for waivers and deferrals granted, other current observable data as a means to estimate ECL, as well as the financial stress of counterparties and their ability to operate as a going concern. Debts that are known to be uncollectible are written off when identified.

At each reporting period, the Trust assesses whether financial assets carried at amortised cost are ‘credit-impaired’. A financial asset is ‘credit-impaired’ when one or more events that has a detrimental impact on the estimated future cash flows of the financial asset have occurred.

The Trust recognises loss allowances at an amount equal to lifetime ECL on trade and other receivables. Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of the trade receivables and are a probabilityweighted estimate of credit losses. Credit losses are measured as the difference between cash flows due to the Trust in accordance with the contract and the cash flows that the Trust expects to receive.

The COVID-19 pandemic has created volatility in the global and local financial market and some impacted tenants may not be able to meet their rental obligations. On 7 April 2020, the National Cabinet announced the Mandatory Code of Conduct for Commercial Tenancies (the ‘Code’) which was implemented by each of the States and Territories during the financial year. The Trust applied the Code across all assets and granted applicable tenants relief packages to alleviate the impacts of COVID-19 in the form of rent waivers or deferrals during the mandated period until the Code ceased to apply.

Centuria Office REIT – Annual Report 2021[| ] 31

Notes to the consolidated financial statements

For the year ended 30 June 2021

C2 INVESTMENT PROPERTIES

	30 Jun 2021	30 Jun 2020
	$’000	$’000
Opening balance	2,085,650	1,321,475
Purchase price of investment properties	-	624,527
Stamp duty and other transaction costs	-	33,412
Capital improvements and associated costs	15,357	13,259
	15,357	671,198
(Loss)/gain on fair value	(15,137)	(38,102)
Change in deferred rent and lease incentives	1,992	19,415
Change in capitalised leasing fees	3,065	385
Disposal at fair value	(44,706)	-
Initial recognition of right of use asset	-	32,779
Transfers from/(to) held for sale	-	78,500
Closing balance^	2,046,221	2,085,650

LEASES AS LESSOR

The Trust leases out its investment properties under operating leases. The future minimum lease payments receivable under non-cancellable leases are as follows:

leases are as follows:
	30 Jun 2021	30 Jun 2020
	$’000	$’000
Less than one year	120,407	115,016
Between one and fve years	340,369	342,855
More than fve years	156,511	176,829
	617,287	634,700

^ The carrying amount of investment properties includes components related to deferred rent, capitalised lease incentives and leasing fees amounting to $46,139,000 (30 June 2020: $41,804,000) and a right of use asset of $31,971,000 (30 June 2020: $32,375,000).

==> picture [596 x 375] intentionally omitted <==

----- Start of picture text -----

235 WILLIAM STREET, NORTHBRIDGE, WA
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32[| ] Centuria Office REIT – Annual Report 2021

								Last
	30 Jun 2021	30 Jun 2020	30 Jun 2021	30 Jun 2020	30 Jun 2021	30 Jun 2020		Independent
	Fair Value	Fair Value	Capitalisation	Capitalisation	Discount	Discount	30 Jun 2021	Valuation
Property	$’000	$’000	Rate %	Rate %	Rate %	Rate %	Valuer	Date
NSW
8 Central Ave, Eveleigh NSW*	200,000	189,000	5.13	5.38	6.13	6.75	CBRE	Jun 2021
201 Pacifc Hwy, St Leonards NSW*	107,000	106,500	5.63	5.63	6.38	6.63	Directors	Dec 2020
9 Help St, Chatswood NSW	92,500	86,000	5.38	5.75	6.38	6.75	Colliers	Jun 2021
203 Pacifc Hwy, St Leonards NSW*^	68,000	69,500	5.75	5.88	6.63	6.75	JLL	Jun 2021
465 Victoria Ave, Chatswood NSW**	-	41,875	-	5.75	-	6.75
77 Market St, Wollongong NSW	36,000	35,500	6.75	7.25	7.75	7.75	MMJ	Jun 2021
ACT
2 Phillip Law St, NewActon ACT^	252,000	253,000	5.00	5.13	5.75	6.00	Colliers	Jun 2021
60 Marcus Clarke St, Canberra ACT^	61,000	62,250	6.75	7.00	7.00	7.50	Directors	Dec 2020
54 Marcus Clarke St, Canberra ACT^	22,800	20,900	7.25	7.50	7.00	7.00	M3	Jun 2021
QLD
825 Ann St, Fortitude Valley QLD	155,000	163,000	6.00	6.00	6.75	7.00	Directors	Dec 2020
154 Melbourne St, South Brisbane QLD	80,500	88,000	6.00	6.00	6.50	7.00	Savills	Jun 2021
100 Brookes St, Fortitude Valley QLD	82,000	78,500	6.00	6.25	6.50	7.00	Savills	Jun 2021
483-517 Kingsford Smith Dr, Hamilton QLD	77,000	77,500	6.25	6.13	7.00	7.00	Directors	Dec 2020
35 Robina Town Ctr Dr, Robina QLD#	42,000	52,000	7.50	7.25	7.75	6.75	JLL	Jun 2021
555 Coronation Dr, Brisbane QLD	39,000	34,500	6.75	7.00	7.25	7.50	Directors	Dec 2020
VIC
818 Bourke St, Docklands VIC	220,000	223,000	5.13	5.13	6.00	6.25	Directors	Dec 2020
576 Swan St, Richmond VIC	65,500	66,500	5.50	5.50	6.50	6.50	Directors	Dec 2020
2 Kendall St, Williams Landing VIC	69,000	64,500	5.75	6.00	6.75	7.00	C&W	Jun 2021
WA
235 William St, Northbridge WA	181,750	188,000	6.50	6.50	6.75	7.00	JLL	Jun 2021
46 Colin St, Perth WA^~	66,971	67,375	7.00	7.25	7.00	7.25	JLL	Jun 2021
144 Stirling St, Perth WA	70,000	65,000	6.00	6.25	6.75	7.00	Directors	Dec 2020
SA
1 Richmond Rd, Keswick SA	39,200	36,000	7.00	7.25	7.75	8.00	Knight Frank	Jun 2021
131-139 Grenfell St, Adelaide SA	19,000	17,250	7.00	7.75	6.50	8.00	Colliers	Jun 2021
	2,046,221	2,085,650

The Trust owns 50% of these properties.
** The Trust owned 25% of 425 Victoria Avenue, Chatswood NSW which was sold on 1 February 2021 for $44.7m.
^ The Trust holds a leasehold interest in these properties.

~ A right of use asset on the ground lease at 46 Colin St is included in the fair value of the property. The carrying value of the lease liability as at 30 June 2021 was

$32,660,000 (30 June 2020: $32,722,000).

The Trust executed a deed of surrender with Foxtel, tenant at 35 Robina Town Centre Drive, Robina QLD. As part of the agreement, COF received a surrender payment equivalent to the present value of the rent payable under the remaining Foxtel lease term.

The Trust’s weighted average capitalisation rate for the year is 5.81% (2020: 5.93%).

Centuria Office REIT – Annual Report 2021[| ] 33

Notes to the consolidated financial statements

For the year ended 30 June 2021

RECOGNITION AND MEASUREMENT

Investment properties are properties held either to earn rental income or for capital appreciation or for both. Investment properties are initially recorded at cost which includes stamp duty and other transaction costs. Subsequently, the investment properties are measured at fair value with any change in value recognised in profit or loss. The carrying amount of investment properties includes components relating to deferred rent, lease incentives and leasing fees.

An investment property is derecognised upon disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognised.

VALUATION TECHNIQUES AND SIGNIFICANT UNOBSERVABLE INPUTS

The fair values of the investment properties were determined by the directors of the Responsible Entity or by an external, independent valuation company having an appropriate recognised professional qualification and recent experience in the location and category of the properties being valued. Fair value is based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Transactional volumes in the office markets reduced during the COVID-19 pandemic driven by the uncertainties around what the potential impact of Government mandated restrictions would be on cash flow and valuations. However, office yields in metropolitan areas have remained stable compared to other markets given these types of properties offer more affordable rents. Office buildings with minimal vacancy, strong tenant base and long WALE have remained strong performers with stable or tightening capitalisation rates.

The valuations were prepared by considering the following valuation methodologies:

Capitalisation Approach: the annual net rental income is capitalised at an appropriate market yield to arrive at the property’s market value. Appropriate capital adjustments are then made where necessary to reflect the specific cash flow profile and the general characteristics of the property.
Discounted Cash Flow Approach: this approach incorporates the estimation of future annual cash flows over a 10 year period by reference to expected rental growth rates, ongoing capital expenditure, terminal sale value and acquisition and disposal costs. The present value of future cash flows is then determined by the application of an appropriate discount rate to derive a net present value for the property.
Direct Comparison Approach: this approach identifies comparable sales on a dollar per square metre of lettable area basis and compares the equivalent rates to the property being valued to determine the property’s market value.

The valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting of vacant accommodation and the market’s general perception of their credit-worthiness; the allocation of maintenance and insurance responsibilities between the lessor and lessee; and the remaining economic life of the property. It has been assumed that whenever rent reviews or lease renewals are pending with anticipated reversionary increases, all notices and, where appropriate, counter notices have been served validly and within the appropriate time.

FAIR VALUE MEASUREMENT

The fair value measurement of investment property has been categorised as a Level 3 fair value as it is derived from valuation techniques that include inputs that are not based on observable market data (unobservable inputs).

Signifcant unobservable inputs	Fair value measurement sensitivity to signifcant	Range of inputs	Range of inputs
	INCREASE in input DECREASE in input	30 June 2021 30 June 2020
Net market rent Capitalisation rate Discount rate	Increase Decrease Decrease Increase Decrease Increase	$267 - $788 5.00% - 7.50% 5.75% - 7.75%	$258 - $667 5.13% - 7.75% 6.00% - 8.00%

Capitalisation and discount rates are considered significant Level 3 inputs. Refer to Note E2 for further information.

A further sensitivity analysis was undertaken by the Trust to assess the fair value of investment properties given the uncertain impact of the COVID-19 pandemic on property values. The table below illustrates the impact on valuation of movements in capitalisation rates and discount rates:

Fair Value at	Capitalisation rate impact	Capitalisation rate impact
30 June 2021	-0.25%	+0.25%
$’000	$’000	$’000
2,046,221	90,608	(83,130)

C3 TRADE AND OTHER PAYABLES

	30 Jun 2021	30 Jun 2020
	$’000	$’000
Current
Trade creditors and expenses payable	15,436	4,775
Other current creditors and accruals	16,507	17,485
	31,943	22,260

Refer to Note D2 for amounts payable to related parties.

RECOGNITION AND MEASUREMENT

Trade payables and other accounts payable are recognised when the Trust becomes obliged to make future payments resulting from the purchase of goods and services and are recorded initially at fair value, net of any attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost.

A provision is recognised if, as a result of a past event, the Trust has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

34[| ] Centuria Office REIT – Annual Report 2021

C4 BORROWINGS

C4 BORROWINGS
	30 Jun 2021	30 Jun 2020
	$’000	$’000
Non-current
Secured loan	704,329	749,029
Borrowing costs	(3,529)	(2,657)
	700,800	746,372

At 30 June 2021, the Trust had the following secured debt facilities:

	30 Jun 2021	30 Jun 2020
Secured loan facility	$’000	$’000
Facility limit	812,500	880,000
Facilities used - bank loans	(704,329)	(749,029)
Facilities used - bank guarantee	(1,496)	(1,496)
Facilities unused	106,675	129,475

As at 30 June 2021, the Trust had $565.0 million (2020: $565.0 million) of interest rate swaps hedged against its drawn debt. Refer to Note C5 for further details on interest rate swap contracts held at 30 June 2021.

The debt facilities are secured by first mortgages over the Trust’s investment properties and a first ranking fixed and floating charge over all assets of the Trust.

The secured loan has covenants in relation to Loan to Value Ratio (‘LVR’) and Interest Coverage Ratio (‘ICR’) which the Trust has complied with during the year.

RECOGNITION AND MEASUREMENT

Borrowings are recorded initially at fair value, net of any attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest rate method with any difference between the initial and recognised amount and redemption value being recognised in profit or loss over the period of borrowing and are derecognised when the contractual obligations are discharged, cancelled or expire.

Refer to Note E2 for details on the Trust’s exposure to risks associated with financial liabilities.

C5 DERIVATIVES

INTEREST RATE SWAP CONTRACTS

Under interest rate swap contracts, the Trust agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Trust to mitigate the risk of changing interest rates on the cash flow exposures on the variable rate debt held. The following table details the specific instruments held at reporting date, showing the notional principal amounts and contracted fixed interest rate of each contract:

		Contracted	Notional	Fair
		fxed	amount of	value of
		interest	contract	liabilities
Type of contract	Maturity Date	rate	$’000	$’000
30 June 2021
Extendable interest rate swap	16 May 2024	1.27%	60,000	(1,401)
Extendable interest rate swap	30 May 2022	1.15%	70,000	(726)
Extendable interest rate swap	25 Sep 2021	0.70%	50,000	(302)
Extendable interest rate swap	20 Nov 2021	0.68%	50,000	(317)
Extendable interest rate swap	22 Nov 2021	0.69%	75,000	(583)
Extendable interest rate swap	16 May 2022	1.33%	60,000	(1,550)
Extendable interest rate swap	26 Sep 2022	0.93%	50,000	(748)
Extendable interest rate swap	20 Nov 2022	0.75%	50,000	(610)
Extendable interest rate swap	24 Feb 2023	0.64%	100,000	(1,003)
			565,000	(7,240)
30 June 2020
Extendable interest rate swap	17 May 2021	1.27%	60,000	(2,216)
Extendable interest rate swap	28 May 2021	1.15%	70,000	(1,288)
Extendable interest rate swap	25 Sep 2021	0.70%	50,000	(754)
Extendable interest rate swap	20 Nov 2021	0.68%	50,000	(791)
Extendable interest rate swap	22 Nov 2021	0.69%	75,000	(851)
Extendable interest rate swap	16 May 2022	1.33%	60,000	(2,378)
Extendable interest rate swap	26 Sep 2022	0.93%	50,000	(1,206)
Extendable interest rate swap	20 Nov 2022	0.75%	50,000	(978)
Extendable interest rate swap	24 Feb 2023	0.64%	100,000	(1,594)
			565,000	(12,056)

RECOGNITION AND MEASUREMENT

Derivatives are initially recognised at fair value and attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and the resulting gain or loss is recognised in profit or loss.

The fair value of interest rate swaps is the estimated amount that the entity would receive or pay to transfer the swap at reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties.

The Trust has not applied hedge accounting to its derivative financial instruments.

Refer to Note E2 for details on the Trust’s exposure to risks associated with financial liabilities.

Centuria Office REIT – Annual Report 2021[| ] 35

Notes to the consolidated financial statements

For the year ended 30 June 2021

C6 ISSUED CAPITAL

C6 ISSUED CAPITAL
	30 Jun 2021 Units ‘000 $’000	30 Jun 2020
		Units ‘000 $’000
Opening balance Units issued Equity raising costs	514,522 1,283,138 - - - -	356,291 833,320 158,231 461,299 - (11,481)
Closing balance	514,522 1,283,138	514,522 1,283,138

All units in the Trust are of the same class and carry equal rights to capital and income distributions.

An equity instrument is any contract that evidences a residual interest in the assets of a Trust after deducting all of its liabilities. Equity instruments issued by the Trust are recognised at the proceeds received, net of direct issue costs.

C7 CONTINGENT ASSETS, LIABILITIES AND COMMITMENTS

Unless otherwise stated in this report, the Trust has no contingent assets, liabilities or commitments as at 30 June 2021.

C8 CASH AND CASH EQUIVALENTS

C8 CASH AND CASH EQUIVALENTS
	30	Jun 2021	30 Jun 2020
		$’000	$’000
Cash and bank balances		15,644	28,809
		15,644	28,809

RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH FLOWS FROM OPERATING ACTIVITIES:

RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH FLOWS FROM OPERATING ACTIVITIES:
	30 Jun 2021	30 Jun 2020
	$’000	$’000
NET PROFIT FOR THE YEAR	76,936	23,053
Adjustments:
Net loss/(gain) on fair value of investment properties	15,137	38,102
Goodwill impairment	-	6,356
Derivative break costs	-	5,942
(Gain)/loss on fair value of derivatives	(4,816)	4,876
Change in deferred rent and lease incentives	4,708	3,024
Change in capitalised leasing fees	1,520	1,099
Borrowing cost amortisation	696	415
Changes in operating assets and liabilities:
(Increase)/decrease in receivables	(2,106)	835
Decrease/(increase) in other assets	314	(32,446)
Increase in payables	13,146	33,520
Net cash generated by operating activities	105,535	84,776

Cash and cash equivalents comprise of cash on hand and cash in banks.

36[| ] Centuria Office REIT – Annual Report 2021

D Trust structure

D1 INTEREST IN MATERIAL SUBSIDIARIES

RECOGNITION AND MEASUREMENT

(i) Business combination

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the Trust elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred.

When the Trust acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

If the business combination is achieved in stages, any previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

(ii) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Trust and entities controlled by the Trust. Control is achieved where the Trust is exposed to, or has rights to, the variable returns from its involvement with an entity and has the ability to affect these returns through its power over the entity.

The Trust accounts for business combinations using the acquisition method when control is transferred to the Trust. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. When the Trust loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

(iii) Subsidiaries

The consolidated financial statements include the assets, liabilities and results of Centuria Office REIT and the subsidiaries it controls. Subsidiaries are entities controlled by the Trust in accordance with AASB 10. Control exists when an investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the financial report from the date that control commences until the date that control ceases.

The Trust uses the purchase method of accounting to account for the acquisition of subsidiaries. Intercompany transactions, balances and recognised gains on transactions between Trust entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Trust.

the Trust.
Name of entity Country of domicile Class o unit	Equity interest
	f s 30 Jun 2021 % 30 Jun 2020 %
Centuria Urban REIT Australia Ordinary 100 100 Centuria Urban REIT Sub Trust Australia Ordinary 100 100 Centuria Urban REIT Sub Trust No. 2 Australia Ordinary 100 100 Centuria Metropolitan REIT No. 2 Australia Ordinary 100 100 Centuria Metropolitan Property Trust Australia Ordinary 100 100

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date on which control commences until the date on which control ceases.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the consolidated group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets attributable to unit holders of consolidated subsidiaries are identified separately from the Trust’s unit holders. Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Centuria Office REIT – Annual Report 2021[| ] 37

Notes to the consolidated financial statements

For the year ended 30 June 2021

D2 RELATED PARTIES

KEY MANAGEMENT PERSONNEL

The Trust does not employ personnel in its own right. However it is required to have an incorporated Responsible Entity to manage the activities of the Trust and this is considered the key management personnel. The directors of the Responsible Entity are key management personnel of that entity and their names are:

Peter Done
Matthew Hardy
Darren Collins
Nicholas Collishaw
Nicole Green	Appointed 2 July 2021
Roger Dobson	Resigned 29 July 2020

No compensation is paid directly by the Trust to any of the directors or key management personnel of the Responsible Entity.

KEY MANAGEMENT PERSONNEL LOAN DISCLOSURES

The Trust has not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally related entities at any time during the reporting period.

RESPONSIBLE ENTITY FEES AND OTHER TRANSACTIONS

The Responsible Entity is entitled to a management fee which is calculated at 0.60% of the gross value of assets held plus GST, however, the Responsible Entity has elected to charge a management fee calculated at 0.55% of the gross value of assets held plus GST.

Custodian fees are paid to the custodians. Custody fees paid to Centuria Property Funds Limited are calculated in relation to some of the Trust’s assets and in accordance with the constitution at a rate of 0.05% of the Fund’s gross assets.

At reporting date, an amount of $2,107,940 (2020: $779,046) owing to the Responsible Entity and its related parties was included in trade and other payables. The payables are non-interest bearing with payment terms and conditions consistent with normal commercial practices. The following fees were paid and/or payable to the Responsible Entity and its related parties from the Trust and all subsidiaries during the financial year:

	30 Jun 2021	30 Jun 2020
Management fees	11,543,457	10,421,000
Property management fees	2,726,904	3,088,924
Leasing fees	1,755,223	798,898
Facility management fees	1,632,280	1,799,498
Project management fees	1,154,135	448,518
Custodian fees	790,934	798,000
Due diligence acquisition fees	100,000	100,000
Administration fees	256,307	-
	19,959,240	17,454,838

All transactions with related parties are conducted on normal commercial terms and conditions. From time to time Centuria Property Funds Limited, its directors or its director-related entities may buy or sell units in the Trust. These transactions are on the same terms and conditions as those entered into by other Trust investors.

RELATED PARTY INVESTMENTS HELD BY THE FUND

At 30 June 2021, the Fund did not hold any units in related parties to the Responsible Entity (30 June 2020: nil).

==> picture [543 x 290] intentionally omitted <==

38[| ] Centuria Office REIT – Annual Report 2021

UNITS IN THE TRUST HELD BY RELATED PARTIES

At 30 June 2021, the following related parties of the Responsible Entity hold units in the Trust:

Entity hold units in the Trust:
	Closing	Closing
	units held	interest held
30 June 2021
Centuria Capital No. 2 Offce Fund	75,233,773	14.62%
Over Fifty
Guardian Friendly Society Limited	14,861,980	2.89%
Centuria Growth Bond Fund	5,808,906	1.13%
Centuria Capital No. 2 Fund	3,396,219	0.66%
Centuria Property Funds No. 2 Limited	2,263,375	0.44%
Centuria Balanced Bond Fund	975,493	0.19%
Roger Dobson	205,128	0.04%
Peter Done	202,044	0.04%
Nicholas Collishaw	153,217	0.03%
John McBain	73,027	0.01%
Darren Collins	34,500	0.01%
Matthew Hardy	32,316	0.01%
Jason Huljich	3,896	0.01%
Total	103,243,874	20.08%

30 June 2020
Centuria Capital No. 2 Offce Fund	72,633,773	14.12%
Over Fifty
Guardian Friendly Society Limited	14,861,980	2.89%
Centuria Growth Bond Fund	8,408,906	1.63%
Centuria Capital No. 2 Fund	3,396,219	0.66%
Centuria Property Funds No. 2 Limited	2,263,375	0.44%
Centuria Balanced Bond Fund	975,493	0.19%
Roger Dobson	135,828	0.03%
Peter Done	152,044	0.03%
Nicholas Collishaw	153,217	0.03%
John McBain	75,260	0.01%
Darren Collins	34,500	0.01%
Matthew Hardy	32,316	0.01%
Jason Huljich	3,896	0.01%
Total	103,126,807	20.06%

D3 PARENT ENTITY DISCLOSURES

As at, and throughout the current and previous financial year, the parent entity of the Trust was Centuria Office REIT. The amounts reflected below do not include the performance and financial position of its subsidiaries.

of its subsidiaries.
	30 Jun 2021	30 Jun 2020
	$’000	$’000
RESULTS OF PARENT ENTITY
Proft for the year	76,936	23,053
Total comprehensive
income for the year	76,936	23,053

At reporting date, Centuria Office REIT has not entered into any guarantees or commitments to purchase property plant and equipment.

The accounting policy for measuring the parent entity’s investment in underlying subsidiaries was changed during the year from measuring at cost to fair value. This change has also been applied retrospectively to prior year comparative information.

Financial position of	30 Jun 2021	30 Jun 2020
parent entity at year end	$’000	$’000
ASSETS
Current assets	221	5,884
Non-current assets	1,313,820	1,315,926
Total assets	1,314,041	1,321,810
LIABILITIES
Current liabilities	2,096	1,843
Non-current liabilities	36,954	37,015
Total liabilities	39,050	38,858
EQUITY
Issued capital	1,283,138	1,283,138
Retained earnings	(8,146)	(186)
Total equity	1,274,992	1,282,952

No other related parties of the Responsible Entity held units in the Trust.

OTHER TRANSACTIONS WITHIN THE TRUST

No director has entered into a material contract with the Trust since the end of the previous year and there were no material contracts involving directors’ interests subsisting at year end.

Since balance date, the COVID-19 pandemic has continued to evolve and may have an impact on specific areas of judgement required for preparing these financial statements.

The Trust has continued to re-evaluate the significant inputs used to drive property valuations and recoverability of tenant arrears on a regular basis as detailed in Note C1. Based on these evaluations, the Trust has determined there are no material events which would give rise to an adjustment.

Centuria Office REIT – Annual Report 2021[| ] 39

Notes to the consolidated financial statements

For the year ended 30 June 2021

E Other notes

E1 AUDITOR’S REMUNERATION

	30 Jun 2021	30 Jun 2020
	$’000	$’000
KPMG:
Audit and review of fnancials	138	151

CAPITAL MANAGEMENT

The capital structure of the Trust consists of cash and cash equivalents and the proceeds from the issue of the units of the Trust.

The Trust’s overall investment strategy remains unchanged from the prior year.

FINANCIAL RISK MANAGEMENT OBJECTIVES

E2 FINANCIAL INSTRUMENTS

The directors of the Responsible Entity consider that the carrying amount of the financial assets and financial liabilities approximate their fair value in the financial statements. All financial instruments are measured at amortised cost with the exception of the derivative financial instruments. Derivative financial instruments are measured at fair value and have a level 2 designation in the fair value hierarchy. There were no transfers between levels of the fair value hierarchy during the period.

Independent valuations are obtained from third parties to support the fair value measurement of financial instruments at each reporting date to meet the requirements of International Financial Reporting Standards.

Valuation techniques

The fair value of financial assets and financial liabilities are determined as follows:

The fair value of interest rate swaps are determined using a discounted cash flow analysis. The future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contracted interest rates, discounted at a rate that reflects the credit risk of various counterparties.

The Trust classifies fair value measurements using a fair value hierarchy that reflects the subjectivity of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1: derived from quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust can access at the measurement date.
Level 2: derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The Trust is exposed to a variety of financial risks as a result of its activities. These potential risks include market risk (interest rate risk), credit risk and liquidity risk. The Trust’s risk management and investment policies seek to minimise the potential adverse effects of these risks on the Trust’s financial performance.

MARKET RISK

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Trust’s activities expose it primarily to the financial risks of changes in interest rates. The Trust enters into derivative financial instruments to manage its exposure to interest rate risk and these include interest rate swaps that the Trust has entered into to mitigate the risk of rising interest rates.

There has been no change to the Trust’s exposure to market risks or the manner in which it manages and measures the risk from the previous year.

(i) Interest rate risk management

In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates their effective interest rates at reporting date:

i	30 Jun 2021 Effective nterest rate Total $’000	30 Jun 2020
		Effective interest rate Total $’000
FINANCIAL LIABILITIES Cash and cash equivalents Trade and other receivables	0.01% 15,644 -% 5,369	0.01% 28,809 -% 3,263
	21,013	32,072
FINANCIAL LIABILITIES Borrowings (excluding borrowing costs) Interest rate swaps	1.60% 704,329 0.80% 7,240	1.58% 749,029 0.82% 12,056
	711,569	761,085

The determination of what constitutes ‘observable’ requires significant judgement by the Responsible Entity. The Responsible Entity considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

40[| ] Centuria Office REIT – Annual Report 2021

(ii) Interest rate sensitivity

The sensitivity analysis below has been determined based on the Trust’s exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period, in the case of financial assets and financial liabilities that have variable interest rates.

At reporting date, if variable interest rates had been 100 (2020: 100) basis points higher or lower and all other variables were held constant, the impact to the Trust would have been as follows:

Variable + / -	Sensitivity impact
	Rate increase $’000 Rate decrease $’000
30 June 2021 Net proft/(loss) 100 bps	7,681 (12,911)
	7,681 (12,911)
30 June 2020 Net proft/(loss) 100 bps	13,904 (19,560)
	13,904 (19,560)

The Trust’s sensitivity to interest rates calculated above is after taking into account the impact of interest rate changes on the interest rate swap fair values. The methods and assumptions used to prepare the sensitivity analysis have not changed during the year.

The following tables summarise the maturity profile of the Trust’s financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Trust can be required to pay. The tables include both interest and principal cash flows:

		Total
	Effective	principal	Less than
	interest	and interest	1 year	1 to 5 years	5+ years
	rate	$’000	$’000	$’000	$’000
30 Jun 2021
Trade and
other payables	-%	15,436	15,436	-	-
Borrowings	1.60%	752,430	11,288	447,458	293,684
Derivative fnancial
instruments	0.80%	3,929	2,008	1,921	-
		771,795	28,732	449,379	293,684
30 Jun 2020
Trade and other
payables	-%	4,775	4,775	-	-
Borrowings	1.58%	814,863	12,265	767,485	35,113
Derivative fnancial
instruments	0.82%	5,787	2,847	2,940	-
		825,425	19,887	770,425	35,113

The principal amounts included in the above borrowings is $704 million (2020: $749 million).

CREDIT RISK

The Trust has adopted the policy of dealing with creditworthy counterparties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the financial risk of financial loss from default. The Trust’s exposure and the credit ratings of its counterparties are continuously monitored by the Responsible Entity.

At 30 June 2021, the main financial assets exposed to credit risk are trade receivables. There were no significant concentrations of credit risk to counterparties at 30 June 2021. Refer to Note C1 for details of trade receivables.

The credit risk on receivables is minimal because of the proven remittance history of the counterparties. Credit risk from balances with banks and financial institutions is managed by the Responsible Entity in accordance with the Trust’s investment policy. Cash investments are made only with approved counterparties.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date.

E3 EVENTS SUBSEQUENT TO REPORTING DATE

There are no other matters or circumstances which have arisen since the end of the period and the date of thisreport, in the opinion of the Responsible Entity, which significantly affect the operations of the Trust, the results of those operations, or the state of affairs of the Trust, in future financial years.

E4 ADDITIONAL INFORMATION

The registered office and principal place of business of the Trust and the Responsible Entity are as follows:

Registered office: Principal place of business: Level 41, Chifley Tower, Level 41, Chifley Tower, 2 Chifley Square 2 Chifley Square SYDNEY NSW 2000 SYDNEY NSW 2000

The Trust assessed the collectibility of trade receivables impacted by the COVID-19 pandemic, refer to Note C1 for the details of testing.

LIQUIDITY RISK

The Trust’s strategy of managing liquidity risk is in accordance with the Trust’s investment strategy. The Trust manages liquidity risk by maintaining adequate banking facilities and through the continuous monitoring of forecast and actual cash flows and aligning the profiles of financial assets and liabilities.

Centuria Office REIT – Annual Report 2021[| ] 41

Directors’ Declaration

For the year ended 30 June 2021

In the opinion of the Directors’ of Centuria Property Funds Limited, the Responsible Entity of Centuria Office REIT (‘the Trust’):

(a) the consolidated financial statements and notes set out on pages 24 to 41 are in accordance with the Corporations Act 2001 , including:
(i) complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and
(ii) giving a true and fair view of the Trust’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 Trust will be able to pay its debts as and when they become due and payable.

Note A1 confirms that the consolidated 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 and chief financial officer required by section 295A of the Corporations Act 2001 .

This declaration is made in accordance with a resolution of Directors.

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Matthew Hardy Director

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Darren Collins Director

Sydney 3 August 2021

42[| ] Centuria Office REIT – Annual Report 2021

Independent Auditor’s Report

To the unitholders of Centuria Office REIT

Opinion

We have audited the Financial Report of Centuria Office REIT (the Fund).

In our opinion, the accompanying Financial Report of the Fund is in accordance with the Corporations Act 2001 , including:

giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001 .

The Financial Report comprises:

Consolidated statement of financial position as at 30 June 2021;
Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended;
Notes including a summary of significant accounting policies; and
Directors' Declaration.

The Group consists of the Fund and the entities it controlled at the year-end or from time to time during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards . We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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 are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.

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 of the current period.

This matter was 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 this matter.

KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are Liability limited by a scheme trademarks used under license by the independent member firms of approved under Professional the KPMG global organisation. Standards Legislation.

Centuria Office REIT – Annual Report 2021[| ] 43

Valuation of investment property ($2,046.2m)

Refer to Note C2 to the Financial Report

The key audit matter

The valuation of investment properties is a key audit matter as they are significant in value (being 98.9% of total assets) and contain assumptions with estimation uncertainty.

The properties being valued at fair value increased the judgment applied by us when evaluating evidence available.

The Group approached the uncertainty risk, including consideration of the COVID-19 pandemic, using internal methodologies and through the use of external valuation experts.

We focused on the significant forward-looking assumption the Group applied in external and internal valuation models with a consideration to the impact of COVID-19 including:

Discount rates: these are complicated in nature and differ due to the asset classes, geographies and characteristics of individual investment properties;
Capitalisation rates (cap rates): reflects the yield that an investor would look to recover their investment in a particular class of asset; and
Forecast cash flows, including: market rental income, leasing and rental relief assumptions.
In assessing this Key Audit Matter, we involved our real-estate valuation specialists, who understand the Group’s investment profile and business and the economic environment it operates in.

We paid particular attention to knowledge and sources of information available regarding market conditions specific to year end.

How the matter was addressed in our audit Our procedures included:
Understanding the Group’s process regarding the valuation of investment property, including specific considerations of the impact of COVID-19 and the resulting valuation approach;
Assessing the Group’s methodologies used in the valuations of investment property for consistency with accounting standards and Group policies;
Assessing the scope, competence and objectivity of external experts engaged by the Group and internal valuers;
For the total portfolio, taking into account the asset classes, geographies and characteristics of individual investment properties, we assessed the appropriateness of adopted discount and cap rates and market rental income through comparison to market analysis published by industry experts, recent market transactions, other market data points available, inquiries with the Group and historical performance of the investment properties;
Assessing the appropriateness of the Group’s leasing assumptions against each property’s actual rental income, weighted average lease expiry, actual vacancy levels, the Group’s tenant credit risk assessment and expected rental relief with consideration of industry views;
Consulting with our real estate valuation specialists: o To gain an understanding of prevailing market conditions, including existence of market transactions, and
Assess the appropriateness of the property valuation risk profiles and approach to evaluating the appropriateness of valuation assumptions.
Held discussions with external valuers to gain further understanding of specific investment property valuations and underlying assumptions adopted and updated market conditions;
Assessing the disclosures in the financial report including checking the sensitivity analysis

44[| ] Centuria Office REIT – Annual Report 2021

calculations, using our understanding obtained from our testing, against accounting standard requirements. This was considered in light of changes and uncertainties of COVID-19 that existed at balance date and up until issuance of our audit report.

Other Information

Other Information is financial and non-financial information in Centuria Office REIT’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors of Centuria Property Funds Limited (the Responsible Entity) are responsible for the Other Information.

The Other information we obtained prior to the date of this Auditor’s Report was the Director’s Report, Corporate Governance Statement and Additional ASX Information. The Letter from the Chairman & Fund Manager, portfolio overview and portfolio profile are expected to be made available to us after the date of the Auditor’s Report.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we 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.

We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group and Fund's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

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 Australian Auditing Standards will always detect a material misstatement when it exists.

Centuria Office REIT – Annual Report 2021[| ] 45

Misstatements can arise from fraud or error. They 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.

KPMG

Peter Zabaks Partner

Sydney 3 August 2021

46[| ] Centuria Office REIT – Annual Report 2021

Corporate Governance Statement

The corporate governance statement for the Trust was last updated on 10 September 2021 and is available on the Centuria website at https://centuria.com.au/centuria-capital/corporate/sustainability/governance/.

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818 BOURKE STREET, DOCKLANDS, VIC
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Centuria Office REIT – Annual Report 2021 [| ] 47
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Additional ASX information

As at 27 July 2021

DISTRIBUTION OF UNITS

DISTRIBUTION OF UNITS
	Number	Number	Percentage
Holding	of units	of holders	of total (%)
1 to 1,000	480,692	1,186	0.1
1,001 to 5,000	7,485,322	2,410	1.5
5,001 to 10,000	13,023,939	1,688	2.5
10,001 to 100,000	72,173,724	2,786	14.0
100,001 and over	421,359,130	165	81.9
Total	514,522,807	8,235	100.0

SUBSTANTIAL UNIT HOLDERS

SUBSTANTIAL UNIT HOLDERS
	Number of	Percentage
	units	of total (%)
CENTURIA CAPITAL GROUP	102,539,746	19.93
THE VANGUARD GROUP, INC.	37,782,644	7.34
MONDRIAN INVESTMENT PARTNERS LTD	37,733,527	7.33
LEDERER GROUP	36,454,502	7.09
MARTIN CURRIE AUSTRALIA	27,144,968	5.28
Total	241,655,387	46.97

VOTING RIGHTS

All Units carry one vote per unit without restriction.

TOP 20 UNIT HOLDERS

TOP 20 UNIT HOLDERS
	Number of	Percentage of
	units	issued units
HSBC CUSTODY NOMINEES	153,804,861	29.89
CENTURIA INVESTMENT HOLDINGS PTY LIMITED	75,233,773	14.62
J P MORGAN NOMINEES AUSTRALIA LIMITED	68,816,371	13.38
CITICORP NOMINEES PTY LIMITED	41,829,312	8.13
NATIONAL NOMINEES LIMITED	18,102,354	3.52
CENTURIA FUNDS MANAGEMENT LIMITED	3,396,219	0.66
BINET PTY LTD	3,379,593	0.66
THE TRUST COMPANY (AUSTRALIA) LIMITED	3,187,586	0.62
BNP PARIBAS NOMS PTY LTD	2,576,529	0.50
CENTURIA PROPERTY FUNDS	2,263,375	0.44
BNP PARIBAS NOMINEES PTY LTD	1,883,245	0.37
BNP PARIBAS NOMS (NZ) LTD	1,584,829	0.31
NETWEALTH INVESTMENTS LIMITED	1,549,033	0.30
G C F INVESTMENTS PTY LTD	1,400,000	0.27
SOUTH CREEK INVESTMENTS PTY LTD	1,206,077	0.23
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD	1,165,189	0.23
KOLL PTY LTD	1,100,000	0.21
TRISTAR METALS PTY LTD	1,000,000	0.19
HORRIE PTY LTD	995,898	0.19
CS FOURTH NOMINEES PTY LTD	950,708	0.19
	385,424,952	74.91

48[| ] Centuria Office REIT – Annual Report 2021

Corporate directory

CONTACT US

Unitholder Inquiries

Centuria Investor Services GPO Box 3993 Sydney NSW 2000 T. 1800 182 257

MAIL TO

Centuria Capital Limited Level 41, Chifley Tower, 2 Chifley Square SYDNEY NSW 2000

CENTURIA

Head Office

Level 41, Chifley Tower, 2 Chifley Square SYDNEY NSW 2000

T. (02) 8923 8923 F. (02) 9460 2960 [email protected]

GROUP CHIEF

RISK OFFICER AND COMPANY SECRETARY

Anna Kovarik

Level 41, Chifley Tower, 2 Chifley Square SYDNEY NSW 2000 T. (02) 8923 8923 F. (02) 9460 2960

Disclaimer

Centuria Property Funds Limited (ABN 11 086 553 639, AFSL 231149) (‘CPFL’) is the Responsible Entity of Centuria Office REIT (‘COF’).

This report has been prepared for general information purposes only. It is not a product disclosure statement, pathfinder document or any other disclosure document for the purposes of the Corporations Act and has not been, and is not required to be, lodged with the Australian Securities & Investments Commission.

The information contained in this report does not constitute financial product advice. Before making an investment decision, the recipient should consider its own financial situation, objectives and needs, and conduct its own independent investigation and assessment of the contents of this report, including obtaining investment, legal, tax, accounting and such other advice as it considers necessary or appropriate.

This report may contain forward-looking statements, guidance, forecasts, estimates, prospects, projections or statements in relation to future matters (‘Forward Statements’). Forward Statements can generally be identified by the use of forward looking words such as “anticipate”, “estimates”, “will”, “should”, “could”, “may”, “expects”, “plans”, “forecast”, “target” or similar expressions. Forward Statements including indications, guidance or outlook on future revenues, distributions or financial position

and performance or return or growth in underlying investments are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. Past performance is also not indicative of future performance.

OPT IN TO ELECTRONIC ANNUAL REPORT

If you would prefer to receive this digitally, you can opt in by emailing COF. [email protected] and requesting to receive the annual report via email. We recommend using your personal email address.

Not only will you be helping the environment, you will also help reduce costs and increase profitability for all unitholders in the fund.

You can update your email, or change your annual report delivery method back to post at any time by emailing COF.Enquiry@CenturiaInvestor. com. au with your request.

If you have any questions, please contact Centuria Investor Services on 1800 182 257.

Centuria Office REIT – Annual Report 2021[| ] 49

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CENTURIA.COM.AU/COF
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50 [| ] Centuria Office REIT – Annual Report 2021
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AI assistant

CENTURIA OFFICE REIT — Annual Report 2021

64683_rns_2021-09-20_daac7bcd-ec99-4cdc-84b8-dfd75a2c8b3a.pdf

Contents

02 About us

Portfolio of young assets

K E Y FA C T S

About us

CENTURIA CAPITAL (CNI) FUNDS MANAGEMENT PLATFORM

bn GROUP AUM $17.4

$16.5bn REAL ESTATE AUM[1]

To be Australia's leading pure play office REIT

A C L E A R A N D S I M P L E S T R AT E G Y

C E N T U R I A O F F I C E R E I T I S

K E Y O B J E C T I V E S

ACTIVE MANAGEMENT

UNLOCK OPPORTUNITIES TO CREATE FURTHER VALUE

F O C U S

Letter from the Chairman & Fund Manager

Dear Unitholders,

COVID-19 IMPACT

LEASING

FY21 FINANCIAL RESULTS

ACTIVE PORTFOLIO MANAGEMENT

CAPITAL MANAGEMENT

TRANSACTIONS

Letter from the Chairman & Fund Manager

GOVERNANCE & SUSTAINABILITY

SUMMARY & OUTLOOK

FY21 results

Portfolio overview

PORTFOLIO WEIGHTING

FY21 TENANT MIX

TOTAL GOVERNMENT EXPOSURE 27%

Strong leasing track record & focus on maintaining high occupancy

LEASING EXECUTED

Sustainability at Centuria Capital

ENVIRONMENTAL

SOCIAL

GOVERNANCE

ESG REPORTING

CLIMATE ACTION

ENVIRONMENTAL DATA

CENTURIA OFFICE REIT

MEMBER

TENANT ENGAGEMENT[1]

SPECIALISED HEALTHCARE REAL ESTATE UNDER MANAGEMENT

EMPLOYEE ENGAGEMENT[2]

BOARD DIVERSIFICATION

CULTURE & ESG BOARD COMMITTEE ESTABLISHED[3]

FIRST MODERN SLAVERY STATEMENT DELIVERED

GENDER DIVERSITY AT CENTURIA

EMPLOYEE TRAINING

Sustainability – Centuria Office REIT

CASE STUDY

COF ENVIRONMENTAL DATA

OPERATIONAL CONTROL

EMISSIONS

ENVIRONMENTAL DATA FOR FY2021

Meet the Board of Directors

Matthew Hardy

CHAIRMAN & INDEPENDENT NON-EXECUTIVE DIRECTOR

Peter Done

INDEPENDENT NON-EXECUTIVE DIRECTOR

Nicholas Collishaw

NON-EXECUTIVE DIRECTOR

Darren Collins

INDEPENDENT NON-EXECUTIVE DIRECTOR

Nicole Green

INDEPENDENT NON-EXECUTIVE DIRECTOR

Directors’ Report

DIRECTORS OF THE RESPONSIBLE ENTITY

PRINCIPAL ACTIVITIES

SIGNIFICANT CHANGE IN THE STATE OF AFFAIRS

Directors’ Report

REVIEW OF OPERATIONS

RESULTS

INVESTMENT PROPERTY VALUATIONS

LEASING AND OCCUPANCY

CAPITAL MANAGEMENT

CENTURIA OFFICE REIT Annual Report 2021