GPT GROUP — Interim / Quarterly Report 2019

Aug 11, 2019

General Property Trust ABN: 58 071 755 609

Interim Financial Report 30 June 2019

The GPT Group (GPT) comprises General Property Trust (the Trust) and its controlled entities and GPT Management Holdings Limited (the Company) and its controlled entities.

General Property Trust is a registered scheme, registered and domiciled in Australia. GPT RE Limited is the Responsible Entity of General Property Trust. GPT Management Holdings Limited is a company limited by shares, incorporated and domiciled in Australia. GPT RE Limited is a wholly owned controlled entity of GPT Management Holdings Limited.

Through GPT's internet site, GPT has ensured that its corporate reporting is timely, complete and available globally at minimum cost to the Trust. All press releases, financial reports and other information are available on GPT's website: www.gpt.com.au.

Directors' Report 3
Auditor's Independence Declaration11
Financial Statements12
Consolidated Statement of Comprehensive Income12
Consolidated Statement of Financial Position 13
Consolidated Statement of Changes in Equity 14
Consolidated Statement of Cash Flows 15
Notes to the Financial Statements 16
Result for the half year16
1. Segment information16
Operating assets and liabilities20
2. Investment properties20
3. Equity accounted investments22
Capital structure23
4. Equity23
5. Earnings per stapled security 23
6. Distributions paid and payable 24
7. Borrowings24
Other disclosure items26
8. Cash flow information26
9. Lease revenue 26
10. Commitments27
11. Fair value disclosures 27
12. Accounting policies 28
13. Adoption of new accounting standards28
14. Events subsequent to reporting date29
Directors' Declaration30
Independent Auditor's Report31

DIRECTORS' REPORT

For the half year ended 30 June 2019

The Directors of GPT RE Limited, the Responsible Entity of General Property Trust, present their report together with the financial statements of the General Property Trust (the Trust) and its controlled entities (the trust consolidated entity) for the half year ended 30 June 2019. The trust consolidated entity together with GPT Management Holdings Limited and its controlled entities form the stapled entity, The GPT Group (GPT).

General Property Trust is a registered scheme, GPT Management Holdings Limited is a company limited by shares, and GPT RE Limited is a company limited by shares, each of which is incorporated and domiciled in Australia. The registered office and principal place of business is the MLC Centre, Level 51, 19 Martin Place, Sydney NSW 2000.

1. OPERATING AND FINANCIAL REVIEW

Review of operations

Funds from Operations (FFO) represents GPT's underlying and recurring earnings from its operations. This is determined by adjusting statutory net profit after tax under Australian Accounting Standards for certain items which are non-cash, unrealised or capital in nature. GPT's distribution policy is a payout ratio of approximately 95-105 per cent of Adjusted Funds from Operations (AFFO) which is broadly defined as FFO less maintenance capex and lease incentives. FFO and AFFO have been determined in accordance with the guidelines issued by the Property Council of Australia.

The reconciliation of FFO to net profit after tax is set out below:

	30 Jun 19	30 Jun 18	Change
For the half year ended	\$M	\$M	%
Retail
- Operations net income	158.0	156.8	0.8%
- Development net income	(0.7)	1.0	N/A
	157.3	157.8	(0.3%)
Office
- Operations net income	137.7	132.9	3.6%
- Development net income	1.0	0.6	66.7%
	138.7	133.5	3.9%
Logistics
- Operations net income	56.9	51.8	9.8%
- Development net income	0.2	6.0	(96.7%)
	57.1	57.8	(1.2%)
Funds management net income	22.7	21.1	7.6%
Corporate management expenses	(14.4)	(14.0)	2.9%
Net finance costs	(59.5)	(58.8)	1.2%
Income tax expense	(6.0)	(8.0)	(25.0%)
Funds from Operations (FFO)	295.9	289.4	2.2%
Non-FFO items:
Valuation increase	130.8	456.7	(71.4%)
Financial instruments mark to market and net foreign exchange loss	(82.3)	(8.9)	824.7%
Other items (1)	8.2	(8.7)	N/A
Net profit for the half year after tax	352.6	728.5	(51.6%)
FFO per ordinary stapled security (cents)	16.36	16.04	2.0%
Funds from Operations (FFO)	295.9	289.4	2.2%
Maintenance capex	(30.8)	(26.7)	15.4%
Lease incentives	(23.0)	(29.8)	(22.8%)
Adjusted Funds from Operations (AFFO)	242.1	232.9	4.0%
Distribution paid and payable	253.9	227.6	11.6%
Distribution per ordinary stapled security (cents)	13.11	12.61	4.0%

(1) Other items include net impairment expenses, amortisation of intangibles, AASB 16 Leases non-FFO adjustment and related tax impact.

Operating result

GPT delivered FFO of \$295.9 million for the half year ended 30 June 2019, an increase of 2.2 per cent on the prior comparable period. This translated into FFO per security of 16.36 cents, up 2.0 per cent. The result was particularly driven by strong operating income from high quality Australian office and logistics properties.

GPT's statutory net profit after tax is \$352.6 million, a decrease of 51.6 per cent on the prior comparable period, due to lower property valuation increases of \$130.8 million (Jun 2018: \$456.7 million) and a higher negative mark to market of financial instruments of \$82.3 million (Jun 2018: negative of \$8.9 million) driven by lower market swap interest rates.

Distribution

For the half year ended 30 June 2019, a distribution of 13.11 cents, up 4.0 per cent on the 30 June 2018 distribution of 12.61 cents, was declared on 18 June 2019 and is expected to be paid on 30 August 2019. The payout ratio for the half year ended 30 June 2019 is 104.9 per cent of AFFO (Jun 2018: 97.7 per cent).

DIRECTORS' REPORT

For the half year ended 30 June 2019

GPT has maintained strong metrics across its core portfolios as shown in the table below. In this table and throughout this Operating and Financial Review, quoted property metrics have been adjusted to include the proforma impact of property acquisitions that occurred post half year end but before the date of this report, as if they had occurred on 30 June 2019. This is done in order to provide more relevant information for users. Metrics that have been adjusted for these transactions are notated throughout with an asterix (*). The acquisitions adjusted for are reported in the subsequent events note and are as follows:

• Acquisition of two logistics assets in Erskine Park, New South Wales for consideration of \$113.0 million on 3 July 2019;
• Acquisition of a land parcel in Western Sydney for consideration of \$18.9 million on 25 July 2019;
• Acquisition of a land parcel in Truganina, Victoria for consideration of \$35.8 million on 30 July 2019; and
• Acquisition of a 25% interest in Darling Park 1 & 2 and Cockle Bay Wharf for consideration of \$531.3 million on 6 August 2019.

	Overall Portfolios	Retail Portfolio	Office Portfolio	Logistics Portfolio
Value of Portfolio	\$14.36* billion portfolio including GPT's equity interest in the GPT Wholesale Shopping Centre Fund and GPT Wholesale Office Fund (31 Dec 2018: \$14.02 billion)	\$6.25 billion portfolio including GPT's equity interest in the GPT Wholesale Shopping Centre Fund (31 Dec 2018: \$6.20 billion)	\$5.85* billion portfolio including GPT's equity interest in the GPT Wholesale Office Fund (31 Dec 2018: \$5.93 billion)	\$2.26* billion portfolio (31 Dec 2018: \$1.89 billion)
Occupancy	95.7%*	99.5%	97.1%*	93.4%*
	(31 Dec 2018: 97.8%)	(31 Dec 2018: 99.6%)	(31 Dec 2018: 97.1%)	(31 Dec 2018: 97.2%)
Weighted average lease	4.9 years*	4.0 years	5.0 years*	7.4 years*
expiry (WALE)	(31 Dec 2018: 4.9 years)	(31 Dec 2018: 4.0 years)	(31 Dec 2018: 5.2 years)	(31 Dec 2018: 7.1 years)
Structured rental reviews		74% of specialty tenants subject to average increases of 4.8% (30 Jun 2018: 74% subject to average increases of 4.7%)	85% of tenants subject to average increases of 3.9% (30 Jun 2018: 91% subject to average increases of 3.9%)	91% of tenants subject to average increases of 3.3% (30 Jun 2018: 91% subject to average increases of 3.3%)
Comparable income	3.5%	1.4%	6.5%	2.2%
growth	(30 Jun 2018: 3.7%)	(30 Jun 2018: 2.3%)	(30 Jun 2018: 5.5%)	(30 Jun 2018: 3.6%)
Weighted average	4.99%*	4.86%	4.94%*	5.54%*
capitalisation rate	(31 Dec 2018: 5.02%)	(31 Dec 2018: 4.88%)	(31 Dec 2018: 4.95%)	(31 Dec 2018: 5.78%)

Retail

(i) Operations net income

The retail portfolio recorded a negative revaluation of \$35.4 million (-0.6 per cent) in the first half of 2019, including GPT's equity interest in the GPT Wholesale Shopping Centre Fund (GWSCF). Positive revaluations attributed to Sunshine Plaza and Westfield Penrith were partially offset by Casuarina Square, with the asset written down 16 per cent, due to a combination of softening in valuation metrics and further deterioration in net income reflecting the challenging Northern Territory economy.

Like for like income growth of 1.4 per cent (including interest in GWSCF) was constrained, largely due to the underperformance of Casuarina Square. In addition, fixed rental escalations across the portfolio over the 6 month period have been partially offset by an increase in downtime associated with actively re-mixing the retail offer to drive sales productivity.

Retail sales growth has continued to moderate in the first half of 2019, with weighted total centre sales up 1.0 per cent and total specialty sales up 0.7 per cent.

(ii) Development net income

In March 2019, the second stage of the \$432 million (GPT share: \$216 million) expansion of Sunshine Plaza was completed. The 34,000sqm expansion incorporated a new David Jones, Big W, international mini majors, a refurbished Myer and an additional 100 specialty stores.

Office

(i) Operations net income

The office portfolio achieved a net revaluation uplift of \$114.8 million in the first half of 2019, including GPT's equity interest in the GPT Wholesale Office Fund (GWOF), predominately as a result of market rental growth. The positive revaluation has been driven by the Group's Melbourne and Sydney assets, in particular Melbourne Central Tower, 181 William/550 Bourke Street, Melbourne and Australia Square, Sydney.

Like for like income growth of 6.5 per cent was achieved as a result of higher occupancy during the period and structured rental reviews. The assets which were the main contributors to income growth were Melbourne Central Tower, Melbourne, Governor Phillip Tower & Governor Macquarie Tower and 2 Park Street, Sydney together with GPT's interest in GWOF.

(ii) Development net income

Construction is progressing on the new 26,400sqm tower at 32 Smith Street, Parramatta following the acquisition of the site in 2017. The pre-committed tenant for the new tower is QBE, who will occupy approximately 51 per cent of the building. Practical completion is due in late 2020.

A number of repositioning projects are underway in Melbourne at 100 Queen Street, Melbourne Central Tower, 550 Bourke Street and 530 Collins Street.

*Prepared on pro forma basis which adjusts for the post half year end acquisitions set out on page 4 as if they had occurred on 30 June 2019.

DIRECTORS' REPORT

For the half year ended 30 June 2019

Logistics

(i) Operations net income

The logistics portfolio achieved a net revaluation uplift of \$51.4 million in the first half of 2019. This uplift is attributed to continued investor demand for quality logistics assets which led to a firming of investment metrics combined with positive leasing outcomes. The weighted average lease expiry has been extended to 7.4 years* and like for like income growth of 2.2 per cent has been achieved. Occupancy at the end of the period was lower due to two expiries in Melbourne, one of which is now leased. During the period, a portfolio of three assets was acquired in Western Sydney for \$111 million (including transaction costs) and in early July an additional two facilities in Erskine Park, Sydney were acquired for \$113 million (including transaction costs).

(ii) Development net income

Development net income reduced as a result of lower development profits than what was achieved in the prior corresponding period.

The Group continued to develop logistics facilities to increase the portfolio quality and scale. A 30,100sqm facility at 50 Old Wallgrove Road, Eastern Creek reached practical completion in January 2019 and is fully leased to ACR Supply Partners until 2027.

Work continues to develop out and replenish the logistics land bank. This includes the acquisition of land in Truganina, Victoria. One parcel of 8 hectares settled in November 2018, with an adjoining 15 hectare parcel acquired in July 2019 on delayed settlement terms. The combined site provides the opportunity to develop 140,000sqm of new logistics facilities. The first speculative facility of 26,400sqm is due for completion in December 2019.

In Brisbane, construction is underway across two facilities at Berrinba. A 20,500sqm facility has been pre-committed to an international logistics company, with a speculative facility of 14,400sqm being constructed on the adjacent land. Following the completion of these facilities, the remaining site can provide a further 39,000sqm of logistics space.

A fund through for a new 50,000sqm facility on a 10 year lease has also been committed in Western Sydney, while at Yennora a 4,800sqm pre-leased development is due for completion in 2020.

Funds management

As at and for the half year ended 30 June 2019	GWOF	GWSCF	Total
Assets under management	\$8.5b	\$4.8b	\$13.3b
Number of Assets	18	8	26
GPT Interest	23.14%	28.50%
GPT Investment	\$1,573.0m	\$987.6m	\$2,560.6m
One year Equity IRR (post-fees)	9.7%	1.3%
Income from Funds	\$37.2m	\$22.5m	\$59.7m
Funds Management fee income	\$19.6m	\$10.9m	\$30.5m

GWOF

GWOF's total assets increased to \$8.5 billion, up \$1.0 billion from 30 June 2018 and the fund delivered a one year equity IRR of 9.7 per cent. The management fee income earned from GWOF for the half year ended 30 June 2019 increased by \$1.9 million as compared to 30 June 2018 due to the increase in the asset value of the portfolio.

As a result of GPT not participating in GWOF's Distribution Reinvestment Plan (DRP) or equity raising, GPT's ownership reduced to 23.14 per cent (Dec 2018: 23.83 per cent).

GWSCF

The fund delivered a one year equity IRR of 1.3 per cent. GWSCF's total assets decreased to \$4.8 billion, down \$0.1 billion from 30 June 2018, primarily driven by the sale of Homemaker City, Maribyrnong in December 2018 and asset devaluations. Management fee income earned from GWSCF remained steady at \$10.9 million.

As a result of GPT not participating in GWSCF's DRP, GPT's ownership reduced to 28.50 per cent (Dec 2018: 28.57 per cent).

Management expenses

Corporate overheads increased to \$14.4 million (Jun 2018: \$14.0 million) due to increases in regulatory fees, Directors and Officers insurance and safety costs. Total management and administration expenses across all segments slightly increased to \$33.6 million (Jun 2018: \$32.5 million) resulting in a management expense ratio of 30 basis points for 2019 on a rolling annual basis (Jun 2018: 29 basis points).

DIRECTORS' REPORT

For the half year ended 30 June 2019

Financial position

	Statutory	Statutory
	Net	Net
	Assets	Assets	Statutory
	30 Jun 19	31 Dec 18	Change
	\$M	\$M	%
Portfolio assets
Retail	6,364.5	6,299.2	1.0%
Office	5,314.7	5,921.9	(10.3%)
Logistics	2,130.2	1,958.8	8.8%
Total portfolio assets	13,809.4	14,179.9	(2.6%)
Financing and corporate assets	827.3	598.1	38.3%
Total assets	14,636.7	14,778.0	(1.0%)
Borrowings	3,084.6	4,114.9	(25.0%)
Other liabilities	573.1	562.5	1.9%
Total liabilities	3,657.7	4,677.4	(21.8%)
Net assets	10,979.0	10,100.6	8.7%
Total number of ordinary stapled securities (million)	1,936.7	1,804.9	7.3%
NTA (\$ per security)	5.66	5.58	1.4%

Balance sheet

• Total portfolio assets decreased by 2.6 per cent primarily due to divestment of MLC Centre partially offset by Logistics acquisitions, development capital expenditure and positive property revaluations.
• Total borrowings decreased due to repayments using proceeds from the institutional placement in June 2019 and divestment of MLC Centre partially offset by drawdowns for acquisitions, development capital expenditure and fair value adjustments of \$145.5 million to the carrying value of foreign currency debt.
• GPT undertook an \$800 million institutional placement in June 2019 to fund the acquisition of 25 per cent of Darling Park 1 & 2 and Cockle Bay Wharf, as well as several other growth opportunities the Group is pursuing. As a result, 131.8 million securities were issued as part of the placement.
• The Group raised US\$400 million (A\$558.9 million) through a US private placement which settled on 25 July 2019, and undertook a Security Purchase Plan (SPP) which raised \$66.8 million and settled on 15 July 2019. Had these transactions occurred on 30 June 2019, together with the post half year end acquisitions set out on page 4, total assets as set out in the table above would have increased to \$15,319.1 million and borrowings to \$3,700.2 million.

Capital management

	Pro forma (1)	Statutory	Statutory	Statutory
	30 Jun 19	30 Jun 19	30 Jun 18	Change
Cost of debt	3.8%	3.8%	4.3%	Down by 50bps
	Pro forma (1)	Statutory	Statutory	Statutory
	30 Jun 19	30 Jun 19	31 Dec 18	Change
Net gearing	22.0%	18.7%	26.3%	Down by 760bps
Weighted average debt maturity	8.2 years	7.3 years	6.3 years	Up 1.0 years
Interest rate hedging	75%	93%	83%	Up 10%
S&P / Moody's credit rating	A stable / A2 stable	A stable / A2 stable	A stable / A2 stable	Unchanged

GPT continues to maintain a strong focus on capital management.

Key highlights for the half year include:

• Net gearing(2) reduced to 18.7 per cent (31 December 2018: 26.3 per cent). This was a result of the \$800 million equity raising, the MLC centre divestment and portfolio revaluation gains partially offset by development capital expenditure and Logistics acquisitions during the period;
• The Group undertook a US\$400 million (A\$558.9 million) US Private Placement (USPP) debt issuance for an average of 12.9 year term at an average margin of 170 basis points over 3 month BBSW. Settlement occurred on 25 July 2019;
• Weighted average cost of debt for the half year is 3.8 per cent, down from 4.3 per cent in the June 2018 half year;
• Available liquidity through cash and undrawn facilities is \$1,436 million(1) (31 December 2018: \$1,059.5 million);
• In conjunction with the sale of MLC Centre, a review of GPT's capital management strategy was undertaken resulting in a restructure and termination of hedges and GPT reducing its level of interest rate hedging; and
• Net tangible assets reduced by \$82.4 million due to mark to market movements on derivatives and borrowings as a result of lower market swap interest rates.
• (1) Pro forma information has been adjusted for the US\$400 million (A\$558.9 million) USPP settled on 25 July 2019, the \$66.8 million SPP settled on 15 July 2019 and post half year end acquisitions set out on page 4 as if they had occurred on 30 June 2019.
• (2) Calculated net of cash and the cross currency derivative positions hedging the foreign bonds, lease liabilities in relation to investment properties and excludes the rightof-use assets in relation to leases.

DIRECTORS' REPORT

For the half year ended 30 June 2019

Cash flows

The cash balance as at 30 June 2019 decreased to \$56.3 million (31 Dec 2018: \$58.7 million).

The following table shows the reconciliation from FFO to the cash flow from the operating activities:

	30 Jun 19	30 Jun 18	Change
For the half year ended	\$M	\$M	%
FFO	295.9	289.4	2.2%
Less: non-cash items included in FFO	(16.7)	(18.7)	(10.7%)
Add: net movement in inventory (excluding impairment reversal)	21.9	11.8	85.6%
Movements in working capital and reserves	(32.3)	(40.1)	(19.5%)
Net cash inflows from operating activities	268.8	242.4	10.9%
Less: net movement in inventory (excluding impairment reversal)	(21.9)	(11.8)	85.6%
Less: maintenance capex	(30.8)	(26.7)	15.4%
Less: lease incentives (excluding rent free)	(13.4)	(19.1)	(29.8%)
Free cash flow	202.7	184.8	9.7%

The Non-IFRS information included above has not been specifically reviewed in accordance with Australian Auditing Standards, but has been derived from note 1 and note 8 of the accompanying financial statements.

Prospects

(i) Group

GPT retains a portfolio of high quality assets with high occupancy levels and structured rental growth. As at 30 June 2019, the Group's balance sheet is in a strong position, with a smooth, long debt expiry profile and net gearing below the Group's target gearing range of 25 to 35 per cent due to the sale of MLC and the equity raise during the period.

(ii) Retail

Retail sales growth has continued to moderate in the first half of 2019, with weighted total centre sales up 1.0 per cent and total specialty sales up 0.7 per cent. GPT's assets are predominantly located in NSW and Victoria which continue to experience solid economic and population growth. The Group continues to invest in its retail assets to provide engaging places for customers, to attract best in class retailers which will result in delivering consistent long term returns. The expansion of Melbourne Central and Rouse Hill will be opportunities for GPT to deliver leading examples on how retail assets need to evolve and adapt to meet the changing needs of today's retail consumer.

(iii) Office

GPT is progressing its future development pipeline in Sydney and Melbourne. Stage 1 Development Approval has been achieved for the proposed new office tower and retail precinct of up to 73,000sqm at Darling Park in Sydney. In Melbourne, the Group is seeking a pre-commitment tenant for a proposed 20,000sqm office tower at Melbourne Central.

The Eastern Seaboard CBD office markets continued to experience favourable conditions during the past 12 months with contracting vacancy levels, solid rental growth and stable to tightening capitalisation rates. Sydney and Melbourne have low vacancy rates at 4.1 per cent and 3.8 per cent respectively as at June 2019, whilst Brisbane's vacancy rate has contracted significantly during the past 12 months from 14.4 per cent to 11.0 per cent. Vacancy rates are forecast to increase over the short to medium term, however are expected to remain below the long-term average vacancy levels.

(iv) Logistics

GPT is executing its strategy to increase its portfolio weighting to the Logistics sector through the acquisition of investment assets and development land. The Sydney and Melbourne industrial markets have continued to benefit from strong occupier demand, underpinned by solid State economies, infrastructure spending and ongoing demand shifts driving the requirement for supply-chain improvements via new logistics facilities. This has resulted in declining vacancy which in turn has driven growth in land values and rents.

(v) Funds management

GPT has a large funds management platform which has experienced significant growth in the value of assets under management over the past five years. The funds management team will continue to actively manage the existing portfolios, with new acquisitions, divestments and developments in line with the relevant investment objectives of each fund.

(vi) Guidance for 2019

In 2019 GPT expects to deliver 2.5 per cent growth in FFO per ordinary security and 4 per cent growth in distribution per ordinary security. Achieving this target is subject to risks including those detailed in the following section.

Risks

The Board is ultimately accountable for corporate governance and the appropriate management of risk. The Board determines the risk appetite and oversees the risk profile to ensure activities are consistent with GPT's strategy and values. The Sustainability and Risk Committee and the Audit Committee support the Board and are responsible for overseeing and reviewing the effectiveness of the risk management framework. The Sustainability and Risk Committee, the Audit Committee and through them, the Board, receive reports on GPT's risk management practices and control systems including the effectiveness of GPT's management of its material business risks.

GPT has an active enterprise-wide risk management framework. Within this framework the Board has adopted a policy setting out the principles, objectives and approach established to maintain GPT's commitment to integrated risk management. GPT requires effective risk management as a core capability and consequently all employees are expected to be managers of risk. GPT's risk management approach incorporates culture, people, processes and systems to enable the organisation to realise potential opportunities whilst managing adverse effects. The approach is consistent with AS/NZS ISO 31000:2018: Risk Management.

DIRECTORS' REPORT

For the half year ended 30 June 2019

The key components of the approach include the following:

• The GPT Board, Leadership Team, employees and contractors all understand their risk management accountabilities, promote the risk awareness and risk management culture and apply risk processes to achieve the organisation's objectives;
• Specialist risk management experts provide guidance and advice to the broader team;
• Risks are identified and assessed in a timely and consistent manner;
• Controls are appropriately designed, operating effectively and assessed;
• Material operational risks and critical controls are monitored and reported to provide transparency and assurance that the risk profile is aligned with GPT's risk appetite, strategy and values; and
• Macro-economic factors that may impact the business are considered and monitored.

The Board considers the most significant risks to which GPT is exposed and reviews the monitoring of risk exposures which may arise over the short, medium and long term. The following table sets out material operational risks and issues, the potential impact to GPT and the ways in which the business mitigate these risks:

Risk Category	Risk / Issue	Potential Impact	Mitigation
Investment mandate	Investments do not perform in line with forecast	• Lower FFO and distributions • Lower NTA • Credit ratings downgrade • Breach of debt covenants	• Robust investment approval process • Formal due diligence process • Active asset management • Experienced internal management capability • Diversified multi-asset portfolio
	Adverse changes in market conditions	• Lower FFO and distributions • Lower NTA • Credit ratings downgrade • Breach of debt covenants	• Strategic capital allocation process • Multi-asset portfolio diversified across sectors and geographic markets • Regular monitoring of Risk Metrics and review of Risk Appetite to ensure it is appropriate for current market conditions • Scenario and business stress testing
Development	Developments do not perform in line with forecast	• Lower FFO and distributions • Lower NTA • Credit ratings downgrade • Breach of debt covenants	• Robust investment approval process • Oversight by Project Control Group • Experienced internal management capability • Multi-asset portfolio diversified across sectors and geographic markets • Limit to proportion of portfolio under development at any time • Limits to individual contractor exposure • Where appropriate minimum leasing pre-commitments are in place prior to construction commencement
Leasing	Portfolio occupancy deteriorates	• Lower FFO and distributions • Lower NTA • Credit ratings downgrade • Breach of debt covenants	• Large and diversified tenant base • Limit single tenant exposure • Ongoing investment to maintain quality of property portfolio • Experienced leasing team • Pro-actively forward solve lease expiry
Capital management, including macro economic factors	Re-financing and liquidity risk	• Limits ability to meet debt maturities • Limits ability to execute strategy • Credit ratings downgrade • Failure to continue as a going concern	• Diversity of funding sources and spreading of debt maturities with a long weighted average debt term • Maintaining a minimum liquidity buffer in cash and surplus committed credit facilities for the forward rolling twelve month period
	Interest rate risk – higher interest rate cost than forecast	• Lower FFO and distributions • Breach of debt covenants	• Interest rate exposures are actively hedged • Minimum of 60% interest rate hedging for forward 12 month period
Health and safety	Incidents causing injury to employees, visitors, tenants, contractors and other stakeholders	• Harm to employees, visitors, tenants, contractors and other stakeholders • Criminal / civil proceedings and resultant reputation damage • Financial impact of remediation and restoration	• Health and Safety management system including appropriate policies and procedures for managing safety • Training and education of employees and induction of contractors • Engagement of specialist safety consultants to assist in identifying risks and appropriate mitigation actions

DIRECTORS' REPORT

For the half year ended 30 June 2019

Risk Category	Risk / Issue	Potential Impact	Mitigation
People and culture	Inability to attract, retain and develop talented people and provide an inclusive workplace Inability to maintain a high performing, ethical, and values based workplace Unauthorised breach of internal policies Failure to provide a safe working environment free of harassment, bullying and discrimination This includes the consideration of risk culture and specifically conduct risk	• Limits the ability to achieve business objectives in line with GPT's values • Impact on employee wellbeing	• Regular Employee Engagement Survey helps monitor health of culture • Annual performance management process setting objectives to promote clarity and accountability • Diversity & inclusion policies, guidelines and training • Monitoring of risk culture and conduct risk • Discretionary incentive system and clawback policy • Benchmarking and setting competitive remuneration • Development and succession planning • Awareness of GPT Values and Code of Conduct • Consequence framework for breaches of internal policy • Whistleblower Policy
Environmental and social sustainability	Inability to operate in a manner that does not compromise the health of ecosystems and meets accepted social norms This includes consideration of climate change, energy intensity, community wellbeing and supply chain integrity	• Negative impact to the communities, the environment and the ecosystems in which GPT operates • Limits the ability to deliver the business objectives and strategy • Criminal / civil proceedings and resultant reputation damage • Financial impact of remediation and restoration	• Formalised Environment and Sustainability management system including policies and procedures for managing environmental and social sustainability risks • Climate related risks and potential financial impacts are assessed within GPT's enterprise-wide risk management framework
Information security	Risk of loss of data, breach of confidentiality, regulatory breach (privacy) and/or reputational impact including as a result from a cyber attack	• Limits the ability to deliver the business objectives and strategy • Criminal / civil proceedings and resultant reputation damage • Financial impact of remediation and restoration	• Technology risk management framework including third party risk management procedures around cyber security • Privacy policy, guidelines and procedures

2. TASK FORCE ON CLIMATE RELATED FINANCIAL DISCLOSURE

In May 2019, GPT commenced work on creating a series of climate risk disclosures aligned to the Taskforce for Climate-related Financial Disclosure (TCFD) recommendations. GPT has appointed EY to advise and assist GPT to deliver these disclosures for the full year 2019 reporting in February 2020.

3. EVENTS SUBSEQUENT TO REPORTING DATE

• On 3 July 2019, GPT acquired two logistics assets in Erskine Park, New South Wales for consideration of \$113.0 million.
• GPT undertook a Security Purchase Plan (SPP) on 26 June 2019. The SPP closed on 15 July 2019 and a total of \$66.8 million was raised.
• In April 2019, the Group priced a US\$400 million (A\$558.9 million) US Private Placements (USPP). Settlement occurred on 25 July 2019.
• On 25 July 2019, GPT acquired a parcel of land in Western Sydney for consideration of \$18.9 million.
• On 30 July 2019, GPT acquired a parcel of land in Truganina, Victoria for consideration of \$35.8 million.
• On 6 August 2019, GPT acquired a 25% interest in Darling Park 1 & 2 and Cockle Bay Wharf for consideration of \$531.3 million.

Other than the above, the Directors are not aware of any matter or circumstances occurring since 30 June 2019 that has significantly or may significantly affect the operations of GPT, the results of those operations or the state of affairs of GPT in the subsequent financial years.

4. DIRECTORS

The Directors of GPT Management Holdings Limited and GPT RE Limited at any time during or since the end of the half year are:

(i) Chairman - Non-Executive Director Vickki McFadden (appointed 1 March 2018, Chairman from 2 May 2018)

(ii) Chief Executive Officer and Managing Director

Bob Johnston (appointed September 2015)

Auditor's Independence Declaration

As lead auditor for the review of General Property Trust for the half-year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been:

• (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
• (b) no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of General Property Trust and the entities it controlled during the period.

Susan Horlin Sydney Partner 12 August 2019 PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Half year ended 30 June 2019

		30 Jun 19	30 Jun 18
	Note	\$M	\$M
Revenue
Rent from investment properties		320.9	313.7
Property and fund management fees		40.0	39.5
Development revenue		33.7	22.4
Development management fees		1.8	2.8
		396.4	378.4
Other income Fair value gain on investment properties		135.8	264.3
Share of after tax profit of equity accounted investments		111.1	301.7
Interest revenue		0.6	0.7
Gain on financial liability at amortised cost		1.3	1.2
Total revenue and other income		248.8 645.2	567.9 946.3
Expenses
Property expenses and outgoings Management and other administration costs		85.2 32.0	78.1 32.0
Development costs		33.0	20.9
Depreciation expense		1.0	1.1
Amortisation expense		2.3	2.6
Impairment (reversal)/expense		(11.1)	11.4
Finance costs Net loss on fair value movements of derivatives		60.4 72.0	59.5 9.0
Net impact of foreign currency borrowings and associated hedging loss		11.6	0.7
Total expenses		286.4	215.3
Profit before income tax expense		358.8	731.0
Income tax expense	9(a)	6.2	3.9
Profit after income tax expense		352.6	727.1
Profit from discontinued operations		-	1.4
Net profit for the half year		352.6	728.5
Other comprehensive income
Items that may be reclassified to profit or loss, net of tax
Movement in hedging reserve	10(b)	(5.7)	8.0
Movement in fair value of cash flow hedges	10(b)	5.6	(0.6)
Movement in net foreign exchange translation reserve Total other comprehensive income	10(b)	- (0.1)	(1.7) 5.7
Total comprehensive income for the half year		352.5	734.2
Total comprehensive income for the half year from continuing operations		352.5	734.5
Total comprehensive loss for the half year from discontinued operations		-	(0.3)
Net profit attributable to:
- Securityholders of the Trust		332.7	716.9
- Securityholders of other entities stapled to the Trust		19.9	11.6
Total comprehensive income attributable to:
- Securityholders of the Trust		332.6	724.3
- Securityholders of other entities stapled to the Trust		19.9	9.9
Basic earnings per unit attributable to ordinary securityholders of the Trust
Earnings per unit (cents per unit) - profit from continuing operations	5(a)	18.4	39.7
Basic earnings per stapled security attributable to ordinary stapled securityholders of the GPT Group
Earnings per stapled security (cents per stapled security) - profit from continuing operations	5(b)	19.5	40.3

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2019

		30 Jun 19	31 Dec 18
	Note	\$M	\$M
ASSETS
Current assets
Cash and cash equivalents		56.3	58.7
Trade receivables	4(a)	48.3	51.4
Other receivables	4(b)		52.5
		71.7
Inventories Derivative assets	6 14(b)	26.9	31.0 1.5
		-
Prepayments		10.6	12.8
Other assets		8.5	22.8
Current tax assets	9(b)	6.7	0.8
Total current assets		229.0	231.5
Non-current assets
Investment properties	2	9,752.8	10,128.8
Equity accounted investments	3	3,939.8	3,905.9
Intangible assets	5	26.8	26.8
Inventories	6	89.0	113.3
Property, plant and equipment		11.6	12.7
Derivative assets	14(b)	517.6	338.9
Right-of-use asset			-
		51.6
Deferred tax assets	9(c)	18.5	20.1
Total non-current assets		14,407.7	14,546.5
Total assets		14,636.7	14,778.0
LIABILITIES
Current liabilities
Payables	7	378.1	411.0
Borrowings	7	299.5	516.0
Derivative liabilities	14(b)	5.6	4.0
Lease liabilities - other property leases		6.5	-
Provisions	8	28.2	26.2
Total current liabilities		717.9	957.2
Non-current liabilities
Borrowings	7	2,785.1	3,598.9
Derivative liabilities	14(b)	96.4	120.2
Lease liabilities - ground leases of investment properties	2	6.5	-
Lease liabilities - other property leases		50.7	-
Provisions	8	1.1	1.1
Total non-current liabilities		2,939.8	3,720.2
			4,677.4
Total liabilities		3,657.7
Net assets		10,979.0	10,100.6
EQUITY
Securityholders of the Trust (parent entity)
Contributed equity	4	8,607.3	7,825.7
Reserves	10(b)	(33.6)	(33.5)
Retained earnings	10(c)	2,870.3	2,790.0
Total equity of the Trust securityholders		11,444.0	10,582.2
Securityholders of other entities stapled to the Trust
Contributed equity	4	331.5	325.9
Reserves	10(b)	27.3	37.9
Accumulated losses	10(c)	(823.8)	(845.4)
Total equity of other stapled securityholders		(465.0)	(481.6)
Total equity		10,979.0	10,100.6

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Half year ended 30 June 2019

		General Property Trust Other entities stapled to the General Property Trust
		Contributed	Reserves	Retained earnings	Total	Contributed	Reserves	Accumulated	Total	Total
	Note	equity \$M	\$M	\$M	\$M	equity \$M	\$M	losses \$M	\$M	equity \$M
Equity attributable to Securityholders
At 1 January 2018		7,814.8	(40.6)	1,828.4	9,602.6	325.7	57.0	(879.4)	(496.7)	9,105.9
Movement in foreign exchange translation reserve	10(b)	-	-	-	-	-	(1.7)	-	(1.7)	(1.7)
Movement in hedging reserve	10(b)	-	8.0	-	8.0	-	-	-	-	8.0
Movement in fair value of cash flow hedges	10(b)	-	(0.6)	-	(0.6)	-	-	-	-	(0.6)
Other comprehensive income for the half year		-	7.4	-	7.4	-	(1.7)	-	(1.7)	5.7
Profit for the half year		-	-	716.9	716.9	-	-	11.6	11.6	728.5
Total comprehensive income for the half year		-	7.4	716.9	724.3	-	(1.7)	11.6	9.9	734.2
Transactions with Securityholders in their capacity as Securityholders
Issue of stapled securities	4	10.9	-	-	10.9	0.2	-	-	0.2	11.1
Movement in employee incentive scheme reserve net of tax	10(b)	-	-	-	-	-	(1.8)	-	(1.8)	(1.8)
Issue of treasury securities for employees		-	-	-	-	-	(4.2)	-	(4.2)	(4.2)
Distributions paid and payable	6	-	-	(227.6)	(227.6)	-	-	-	-	(227.6)
At 30 June 2018		7,825.7	(33.2)	2,317.7	10,110.2	325.9	49.3	(867.8)	(492.6)	9,617.6
Equity attributable to Securityholders
At 31 December 2018		7,825.7	(33.5)	2,790.0	10,582.2	325.9	37.9	(845.4)	(481.6)	10,100.6
Adoption of new accounting standard (1)		-	-	1.5	1.5	-	-	1.7	1.7	3.2
At 1 January 2019		7,825.7	(33.5)	2,791.5	10,583.7	325.9	37.9	(843.7)	(479.9)	10,103.8
Movement in foreign exchange translation reserve	10(b)	-	-	-	-	-	-	-	-	-
Movement in hedging reserve	10(b)	-	(5.7)	-	(5.7)	-	-	-	-	(5.7)
Movement in fair value of cash flow hedges	10(b)	-	5.6	-	5.6	-	-	-	-	5.6
Other comprehensive income for the half year		-	(0.1)	-	(0.1)	-	-	-	-	(0.1)
Profit for the half year		-	-	332.7	332.7	-	-	19.9	19.9	352.6
Total comprehensive income for the year		-	(0.1)	332.7	332.6	-	-	19.9	19.9	352.5
Transactions with Securityholders in their capacity as Securityholders
Issue of stapled securities	4	781.6	-	-	781.6	5.6	-	-	5.6	787.2
Movement in employee incentive scheme reserve net of tax	10(b)	-	-	-	-	-	(5.8)	-	(5.8)	(5.8)
Purchase of treasury securities for employees	10(c)	-	-	-	-		(4.8)	-	(4.8)	(4.8)
Distributions paid and payable	6	-	-	(253.9)	(253.9)	-	-	-	-	(253.9)
At 30 June 2019		8,607.3	(33.6)	2,870.3	11,444.0	331.5	27.3	(823.8)	(465.0)	10,979.0

(1) Refer to Note 13 for details.

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CASH FLOWS

Half year ended 30 June 2019

		30 Jun 19	30 Jun 18
	Note	\$M	\$M
Cash flows from operating activities
Receipts in the course of operations (inclusive of GST)		401.9	383.4
Payments in the course of operations (inclusive of GST)		(163.9)	(152.5)
Proceeds from sale of inventories		33.7	20.9
Payments for inventories		(11.1)	(7.4)
Distributions received from equity accounted investments		80.6	72.5
Interest received		0.9	0.7
Income taxes paid		(6.5)	(15.0)
Finance costs paid		(66.8)	(60.2)
Net cash inflows from operating activities	8	268.8	242.4
Cash flows from investing activities
Payments for acquisition of investment properties		(127.6)	(78.3)
Payments for operating capital expenditure on investment properties		(44.8)	(32.7)
Payments for development capital expenditure on investment properties		(131.2)	(114.9)
Proceeds from disposal of assets (net of transaction costs)		795.6	-
Payments for property, plant and equipment		(0.5)	(4.1)
Payments for intangibles		(2.9)	(0.8)
Investment in equity accounted investments		(1.8)	(2.0)
Capital return from joint venture		-	1.9
Net cash inflows/(outflows) from investing activities		486.8	(230.9)
Cash flows from financing activities
Proceeds from issue of stapled securities net of transaction costs		788.0	-
Proceeds from borrowings		1,261.7	952.4
Repayment of borrowings		(2,438.6)	(744.3)
Payment for termination and restructure of derivatives		(137.2)	-
Distributions paid to securityholders		(231.9)	(221.6)
Net cash outflows from financing activities		(758.0)	(13.5)
Net decrease in cash and cash equivalents		(2.4)	(2.0)
Cash and cash equivalents at the beginning of the half year		58.7	49.9
Cash and cash equivalents at the end of the half year		56.3	47.9

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

These are the consolidated financial statements of the consolidated entity, GPT Group (GPT), which consists of General Property Trust (the Trust), GPT Management Holdings Limited (the Company) and their controlled entities.

The notes to these financial statements have been organised into sections to help users find and understand the information they need to know. Additional information has also been provided where it is helpful to understand GPT's performance.

The notes to the financial statements are organised into the following sections:

Note 1 - Result for the half year: focuses on results and performance of GPT.

Notes 2 to 3 - Operating assets and liabilities: provides information on the assets and liabilities used to generate GPT's trading performance.

Notes 4 to 7 - Capital structure: outlines how GPT manages its capital structure and various financial risks.

Notes 8 to 14 - Other disclosure items: provides information on other items that must be disclosed to comply with Australian Accounting Standards and other regulatory pronouncements.

Key judgements and estimates

In applying GPT's accounting policies, management has made a number of judgements, estimates and assumptions regarding future events.

The following judgements, estimates and assumptions have the potential to have a material impact on the financial statements:

Area of judgements and estimates	Assumptions underlying
Management rights with indefinite life	Impairment trigger and recoverable amounts
IT development and software	Impairment trigger and recoverable amounts
Inventories	Lower of cost and net realisable value
Deferred tax assets	Recoverability
Security based payments	Fair value
Investment properties	Fair value
Derivatives	Fair value
Investment in equity accounted investments	Assessment of control versus significant influence
Lease liabilities	Lease term and incremental borrowing rate
Trade receivables	Measurement of expected credit loss

RESULT FOR THE HALF YEAR

1. SEGMENT INFORMATION

GPT's operating segments are described in the table below. The chief operating decision makers monitor the performance of the business on the basis of Funds from Operations (FFO) for each segment. FFO represents GPT's underlying and recurring earnings from its operations, and is determined by adjusting the statutory net profit after tax for items which are non-cash, unrealised or capital in nature. FFO has been determined based on guidelines established by the Property Council of Australia.

Segment	Types of products and services which generate the segment result
Retail	Ownership, development (including mixed use) and management of predominantly regional and sub-regional shopping centres as well as GPT's equity investment in GPT Wholesale Shopping Centre Fund.
Office	Ownership, development (including mixed use) and management of prime CBD office properties with some associated retail space as well as GPT's equity investment in GPT Wholesale Office Fund.
Logistics	Ownership, development (including mixed use) and management of logistics assets.
Funds Management	Management of two Australian wholesale property funds in the retail and office sectors.
Corporate	Cash and other assets and borrowings and associated hedges plus resulting net finance costs, management operating costs and income tax expense.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

(a) Segment financial information

30 June 2019

The segment financial information provided to the chief operating decision makers for the half year ended 30 June 2019 is set out below:

Financial performance by segment

		Retail	Office	Logistics	Funds Management	Corporate	Total
	Note	\$M	\$M	\$M	\$M	\$M	\$M
Rent from investment properties	b(ii)	184.5	131.8	69.4	-	-	385.7
Property expenses and outgoings	b(iii)	(52.1)	(28.6)	(12.1)	-	-	(92.8)
Income from Funds	b(iv)	22.5	37.2	-	-	-	59.7
Fee income		7.4	2.0	0.1	30.5	-	40.0
Management & administrative expenses	b(v)	(4.3)	(4.7)	(0.5)	(7.8)	(14.4)	(31.7)
Operations Net Income		158.0	137.7	56.9	22.7	(14.4)	360.9
Development management fees		0.5	1.3	-	-	-	1.8
Development revenue	b(vi)	-	-	33.7	-	-	33.7
Development costs	b(vii)	(0.1)	-	(33.0)	-	-	(33.1)
Development management expenses	b(v)	(1.1)	(0.3)	(0.5)	-	-	(1.9)
Development Net Income		(0.7)	1.0	0.2	-	-	0.5
Interest income		-	-	-	-	0.6	0.6
Finance costs	b(viii)	-	-	-	-	(60.1)	(60.1)
Net Finance Costs		-	-	-	-	(59.5)	(59.5)
Segment Result Before Tax		157.3	138.7	57.1	22.7	(73.9)	301.9
Income tax expense	b(ix)	-	-	-	-	(6.0)	(6.0)
Funds from Operations (FFO)	b(i)	157.3	138.7	57.1	22.7	(79.9)	295.9

Reconciliation of segment assets and liabilities to the Statement of Financial Position

Current Assets
Current assets	16.5	-	10.4	-	202.1	229.0
Total Current Assets	16.5	-	10.4	-	202.1	229.0
Non-Current Assets
Investment properties	5,241.7	2,413.3	2,097.8	-	-	9,752.8
Equity accounted investments	1,029.0	2,900.8	-	-	10.0	3,939.8
Inventories	67.1	-	21.9	-	-	89.0
Other non-current assets	10.2	0.6	0.1	-	615.2	626.1
Total Non-Current Assets	6,348.0	5,314.7	2,119.8	-	625.2	14,407.7
Total Assets	6,364.5	5,314.7	2,130.2	-	827.3	14,636.7
Current and non-current liabilities	6.5	-	-	-	3,651.2	3,657.7
Total Liabilities	6.5	-	-	-	3,651.2	3,657.7
Net Assets	6,358.0	5,314.7	2,130.2	-	(2,823.9)	10,979.0

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

30 June 2018

The segment financial information provided to the chief operating decision makers for the half year ended 30 June 2018 is set out below:

Financial performance by segment

Funds Retail Office Logistics Corporate Management	Total
Note \$M \$M \$M \$M \$M	\$M
Rent from investment properties b(ii) 182.2 121.1 63.2 - -	366.5
Property expenses and outgoings b(iii) (50.6) (23.1) (10.7) - -	(84.4)
Income from Funds b(iv) 22.9 35.3 - - -	58.2
Fee income 7.5 3.3 0.1 28.6 -	39.5
Management & administrative expenses b(v) (5.2) (3.7) (0.8) (7.5) (14.0)	(31.2)
Operations Net Income 156.8 132.9 51.8 21.1 (14.0)	348.6
Development management fees 1.1 0.9 0.8 - -	2.8
Development revenue b(vi) 0.6 - 32.1 - -	32.7
Development costs b(vii) 0.2 - (26.8) - -	(26.6)
Development management expenses b(v) (0.9) (0.3) (0.1) - -	(1.3)
Development Net Income 1.0 0.6 6.0 - -	7.6
Interest income - - - - 0.7	0.7
Finance costs b(viii) (59.5) - - - -	(59.5)
Net Finance Costs - - - - (58.8)	(58.8)
Segment Result Before Tax 157.8 133.5 57.8 21.1 (72.8)	297.4
Income tax expense b(ix) (8.0) - - - -	(8.0)
Funds from Operations (FFO) b(i) 157.8 133.5 57.8 21.1 (80.8)	289.4

Reconciliation of segment assets and liabilities to the Statement of Financial Position – as at 31 December 2018

Current Assets
Current assets	16.9	-	14.1	-	200.5	231.5
Total Current Assets	16.9	-	14.1	-	200.5	231.5
Non-Current Assets
Investment properties	5,154.9	3,080.5	1,893.4	-	-	10,128.8
Equity accounted investments	1,055.1	2,840.8	-	-	10.0	3,905.9
Inventories	62.1	-	51.2	-	-	113.3
Other non-current assets	10.2	0.6	0.1	-	387.6	398.5
Total Non-Current Assets	6,282.3	5,921.9	1,944.7	-	397.6	14,546.5
Total Assets	6,299.2	5,921.9	1,958.8	-	598.1	14,778.0
Current and non-current liabilities	-	-	-	-	4,677.4	4,677.4
Total Liabilities	-	-	-	-	4,677.4	4,677.4
Net Assets	6,299.2	5,921.9	1,958.8	-	(4,079.3)	10,100.6

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

(b) Reconciliation of segment result to the statement of comprehensive income

	30 Jun 19	30 Jun 18
	\$M	\$M
(i) FFO to Net profit for the half year
Segment result
FFO	295.9	289.4
Adjustments
Fair value gain on investment properties	135.8	264.3
Fair value gain and other adjustments to equity accounted investments	18.7	207.5
Amortisation of lease incentives and costs	(26.7)	(23.5)
Straightlining of rental income	3.0	8.4
Total valuation increase	130.8	456.7
Net loss on fair value movement of derivatives	(72.0)	(9.0)
Net impact of foreign currency borrowings and associated hedging loss	(11.6)	(0.7)
Net foreign exchange loss	-	(0.4)
Gain on financial liability at amortised cost	1.3	1.2
Total financial instruments mark to market and net foreign exchange loss	(82.3)	(8.9)
Impairment reversal/(expense)	11.1	(11.4)
Net foreign exchange translation adjustment	-	1.8
Other items	(2.9)	0.9
Total other items	8.2	(8.7)
Consolidated Statement of Comprehensive Income
Net profit for the half year	352.6	728.5
(ii) Rent from investment properties
Segment result
Rent from investment properties	385.7	366.5
Less: share of rent from investment properties in equity accounted investments	(40.4)	(37.7)
Eliminations of intra-group lease payments	(0.7)	-
Adjustments
Amortisation of lease incentives and costs	(26.7)	(23.5)
Straightlining of rental income	3.0	8.4
Consolidated Statement of Comprehensive Income
Rent from investment properties	320.9	313.7
(iii) Property expenses and outgoings
Segment result Property expenses and outgoings		(84.4)
Less: share of property expenses and outgoings in equity accounted investments	(92.8) 7.6	6.3
Consolidated Statement of Comprehensive Income
Property expenses and outgoings	(85.2)	(78.1)
(iv) Share of after tax profit of equity accounted investments
Segment result
Income from Funds	59.7	58.2
Share of rent from investment properties in equity accounted investments	40.4	37.7
Share of property expenses and outgoings in equity accounted investments	(7.6)	(6.3)
Share of profit from associate	-	4.0
Development (costs) / revenue - equity accounted investments	(0.1)	0.6
Adjustments
Fair value gain and other adjustments to equity accounted investments	18.7	207.5
Consolidated Statement of Comprehensive Income
Share of after tax profit of equity accounted investments	111.1	301.7
(v) Management and administration expenses
Segment result
Operations	(31.7)	(31.2)
Development	(1.9)	(1.3)
Eliminations of intra-group lease payments	0.7	-
Transfer to Finance costs - leases	0.3	-
Less: depreciation expense	1.0	1.1
Adjustments
Other	(0.4)	(0.6)
Consolidated Statement of Comprehensive Income
Management and administration expenses	(32.0)	(32.0)

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

	30 Jun 19 \$M	30 Jun 18 \$M
(vi) Development revenue
Segment result
Development revenue	33.7	32.7
Less: share of after tax profit of equity accounted investments	-	(0.6)
Less: development revenue - equity accounted investments	-	(9.7)
Consolidated Statement of Comprehensive Income
Development revenue	33.7	22.4
(vii) Development costs
Segment result
Development costs	(33.1)	(26.6)
Less: share of after tax loss of equity accounted investments	0.1	-
Less: development costs - equity accounted investments	-	5.7
Consolidated Statement of Comprehensive Income
Development costs	(33.0)	(20.9)
(viii) Finance costs
Segment result
Finance costs - borrowings	(60.1)	(59.5)
Finance costs - leases	(0.3)	-
Consolidated Statement of Comprehensive Income
Finance costs	(60.4)	(59.5)
(ix) Income tax expense
Segment result
Income tax expense	(6.0)	(8.0)
Adjustment
Tax impact of reconciling items from segment result to net profit for the half year	(0.2)	4.1
Consolidated Statement of Comprehensive Income
Income tax expense	(6.2)	(3.9)

OPERATING ASSETS AND LIABILITIES

2. INVESTMENT PROPERTIES

		Investment properties	Lease liabilities	Fair value	Fair value 31 Dec 18
		30 Jun 19	30 Jun 19	30 Jun 19
	Note	\$M	\$M	\$M	\$M
Retail	(a)	5,241.7	(6.5)	5,235.2	5,154.9
Office	(b)	2,319.3	-	2,319.3	3,018.5
Logistics	(c)	2,011.9	-	2,011.9	1,773.6
Properties under development	(d)	179.9	-	179.9	181.8
Total investment properties	(e)	9,752.8	(6.5)	9,746.3	10,128.8

			Investment	Lease			Latest
	Ownership		properties	liabilities	Fair value	Fair value	independent
	interest (1)	Acquisition	30 Jun 19	30 Jun 19	30 Jun 19	31 Dec 18	valuation
	%	date	\$M	\$M	\$M	\$M	date	Valuer
(a) Retail
Casuarina Square, NT	50.0	Oct 1973	258.3	-	258.3	300.8	Jun 2019	Savills Australia
Charlestown Square, NSW	100.0	Dec 1977	980.0	-	980.0	969.3	Jun 2018	Cushman & Wakefield
Pacific Highway, Charlestown, NSW	100.0	Oct 2002 / Jul 2003	8.0	-	8.0	8.0	Jun 2018	Cushman & Wakefield
Highpoint Shopping Centre, VIC	16.7	Aug 2009	428.3	-	428.3	435.0	Jun 2019	CB Richard Ellis Pty Ltd
Westfield Penrith, NSW	50.0	Jun 1971	733.0	-	733.0	716.3	Jun 2018	M3 Property
Sunshine Plaza, QLD		** 50.0 Dec 1992 / Sep 2004	632.9	(2.1)	630.8	564.0	Jun 2019	CB Richard Ellis Pty Ltd
Plaza Parade, QLD	50.0	Jun 1999	13.3	-	13.3	13.3	Jun 2019	CB Richard Ellis Pty Ltd
Rouse Hill Town Centre, NSW	100.0	Dec 2005	642.3	-	642.3	635.2	Dec 2018	CB Richard Ellis Pty Ltd
Melbourne Central, VIC - retail portion (2)		100.0 May 1999 / May 2001	1,545.6	(4.4)	1,541.2	1,513.0	Dec 2018	Savills Australia
Total Retail			5,241.7	(6.5)	5,235.2	5,154.9

(1) Freehold, unless otherwise marked with an * which denotes leasehold and ** denotes a combination of freehold and leasehold respectively.

(2) Melbourne Central: 70.7% Retail and 29.3% Office (31 Dec 2018: 71.5% Retail and 28.5% Office). Melbourne Central - Retail Includes 100% of Melbourne Central car park and 100% of 202 Little Lonsdale Street.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

			Investment	Lease			Latest
	Ownership		properties	liabilities	Fair value	Fair value	independent
	interest (1)	Acquisition	30 Jun 19	30 Jun 19	30 Jun 19	31 Dec 18	valuation
	%	date	\$M	\$M	\$M	\$M	date	Valuer
(b) Office
Australia Square, Sydney, NSW	50.0	Sep 1981	575.5	-	575.5	557.5	Jun 2019	CB Richard Ellis Pty Ltd
MLC Centre, Sydney, NSW (3)	50.0	Apr 1987	-	-	-	775.0	-	-
One One One Eagle Street, Brisbane, QLD	33.3	Apr 1984	301.3	-	301.3	300.0	Jun 2019	Colliers International
Melbourne Central, VIC - office portion (2)		100.0 May 1999 / May 2001	640.7	-	640.7	603.0	Jun 2019	CB Richard Ellis Pty Ltd
181 William & 550 Bourke Streets, Melbourne, VIC	50.0	Oct 2014	395.5	-	395.5	380.0	Jun 2019	Savills Australia
60 Station Street, Parramatta, NSW	100.0	Sep 2018	278.1	-	278.1	278.0	Dec 2018	Colliers International
4 Murray Rose Avenue, Sydney Olympic Park, NSW	* 100.0	May 2002	128.2	-	128.2	125.0	Dec 2018	Cushman & Wakefield
Total Office			2,319.3	-	2,319.3	3,018.5
(c) Logistics
Citiwest Industrial Estate, Altona North, VIC	100.0	Aug 1994	91.6	-	91.6	90.0	Dec 2018	Savills Australia
Quad 1, Sydney Olympic Park, NSW	* 100.0	Jun 2001	28.8	-	28.8	28.0	Jun 2019	Colliers International
Quad 4, Sydney Olympic Park, NSW	* 100.0	Jun 2004	62.5	-	62.5	58.0	Jun 2019	Colliers International
Sydney Olympic Park Town Centre, NSW	* 100.0	Jun 2001 - Apr 2013	122.9	-	122.9	121.5	Dec 2018	Jones Lang LaSalle
Rosehill Business Park, Camellia, NSW	100.0	May 1998	86.7	-	86.7	86.0	Dec 2018	Savills Australia
16-34 Templar Road, Erskine Park, NSW	100.0	Jun 2008	69.5	-	69.5	65.0	Jun 2019	Colliers International
67-75 Templar Road, Erskine Park, NSW	100.0	Jun 2008	26.0	-	26.0	26.0	Jun 2019	CB Richard Ellis Pty Ltd
Austrak Business Park, Somerton, VIC	50.0	Oct 2003	182.4	-	182.4	182.4	Dec 2018	Jones Lang LaSalle
4 Holker Street, Newington, NSW	100.0	Mar 2006	35.5	-	35.5	35.5	Dec 2018	Jones Lang LaSalle
372-374 Victoria Street, Wetherill Park, NSW	100.0	Jul 2006	27.1	-	27.1	26.5	Dec 2018	M3 Property
18-24 Abbott Road, Seven Hills, NSW	100.0	Oct 2006	41.6	-	41.6	39.3	Jun 2019	Savills Australia
Citiport Business Park, Port Melbourne, VIC	100.0	Mar 2012	89.5	-	89.5	82.5	Jun 2019	Jones Lang LaSalle
83 Derby Street, Silverwater, NSW	100.0	Aug 2012	40.2	-	40.2	40.0	Dec 2018	Savills Australia
10 Interchange Drive, Eastern Creek, NSW	100.0	Aug 2012	33.4	-	33.4	33.3	Jun 2019	Colliers International
407 Pembroke Road, Minto, NSW	50.0	Oct 2008	31.8	-	31.8	30.5	Jun 2019	CB Richard Ellis Pty Ltd
38 Pine Road, Yennora, NSW	100.0	Nov 2013	62.8	-	62.8	61.0	Jun 2019	Colliers International
16-28 Quarry Road, Yatala, QLD	100.0	Nov 2013	45.3	-	45.3	44.8	Jun 2019	Savills Australia
59 Forest Way, Karawatha, QLD	100.0	Dec 2012	120.0	-	120.0	114.0	Jun 2019	Savills Australia
29-55 Lockwood Road, Erskine Park, NSW	100.0	Jun 2008	113.5	-	113.5	104.5	Jun 2019	Colliers International
36-52 Templar Road, Erskine Park, NSW	100.0	Jun 2008	112.0	-	112.0	107.0	Jun 2019	Savills Australia
54-70 Templar Road, Erskine Park, NSW	100.0	Jun 2008	162.0	-	162.0	152.0	Jun 2019	CB Richard Ellis Pty Ltd
1A Huntingwood Drive, Huntingwood, NSW	100.0	Oct 2016	46.8	-	46.8	46.0	Jun 2019	Savills Australia
1B Huntingwood Drive, Huntingwood, NSW	100.0	Oct 2016	26.5	-	26.5	25.5	Jun 2019	Savills Australia
55 Whitelaw Place, Wacol, QLD 54 Eastern Creek Drive, Eastern Creek, NSW	100.0 100.0	Dec 2016 Apr 2016	16.5	-	16.5	16.5 51.8	Dec 2018 Jun 2019	Savills Australia CB Richard Ellis Pty Ltd
50 Old Wallgrove Road, Eastern Creek, NSW (4)	100.0	Jun 2016	52.0 70.4	- -	52.0 70.4	-	Jun 2019	Savills Australia
Sunshine Business Estate, Sunshine, VIC	100.0	Jan 2018	79.0	-	79.0	78.0	Jun 2019	CB Richard Ellis Pty Ltd
396 Mount Derrimut Road, Derrimut, VIC	100.0	Nov 2018	12.9	-	12.9	12.4	Jun 2019	Savills Australia
399 Boundary Road, Truganina, VIC	100.0	Dec 2018	17.7	-	17.7	15.6	Jun 2019	Savills Australia
30-32 Bessemer Street, Blacktown, NSW (5)	100.0	May 2019	41.5	-	41.5	-	Jun 2019	M3 Property
104 Vanessa Street, Kingsgrove, NSW (6)	100.0	May 2019	24.0	-	24.0	-	Jun 2019	M3 Property
64 Biloea Street, Villawood, NSW (7)	100.0	May 2019	39.5	-	39.5	-	Jun 2019	M3 Property
Total Logistics			2,011.9	-	2,011.9	1,773.6
(d) Properties under development 32 Smith, Parramatta, NSW	100.0	Mar 2017	94.0	-	94.0	62.0	Jun 2019	Colliers International
407 Pembroke Rd, Minto, NSW	50.0	Oct 2008	5.8	-	5.8	5.8	Jun 2019	CB Richard Ellis Pty Ltd
Austrak Business Park, Somerton, VIC	50.0	Oct 2003	33.4	-	33.4	32.8	Dec 2018	Jones Lang LaSalle
50 Old Wallgrove Road, Eastern Creek, NSW (4)	100.0	Jun 2016	-	-	-	60.2	-	-
21 Shiny Drive, Truganina, VIC	100.0	Nov 2018	16.4	-	16.4	11.0	Nov 2018	Jones Lang LaSalle
2, 6 & 10 Prosperity Street, Truganina, VIC	100.0	Nov 2018	10.2	-	10.2	10.0	Nov 2018	Jones Lang LaSalle
Wembley Business Park, Berrinba, QLD (8)	100.0	Jun 2019	20.1	-	20.1	-	Apr 2019	Savills Australia
Total Properties under development			179.9	-	179.9	181.8

(1) Freehold, unless otherwise marked with an * which denotes leasehold and ** denotes a combination of freehold and leasehold respectively.

(2) Melbourne Central: 70.7% Retail and 29.3% Office (31 Dec 2018: 71.5% Retail and 28.5% Office). Melbourne Central - Retail Includes 100% of Melbourne Central car park and 100% of 202 Little Lonsdale Street.

(3) On 1 April 2019 GPT sold its 50% interest in MLC Centre, Sydney for consideration of \$800 million.

(4) Following practical completion in January 2019, 50 Old Wallgrove Road, Eastern Creek has been reclassified from properties under development to investment property in the Logistics portfolio.

(5) On 31 May 2019 GPT acquired a 100% interest in 30-32 Bessemer Street, Blacktown for total consideration of \$43.9 million (including transaction costs of \$2.4 million).

(6) On 31 May 2019 GPT acquired a 100% interest in 104 Vanessa Street, Kingsgrove for total consideration of \$25.4 million (including transaction costs of \$1.4 million).

(7) On 31 May 2019 GPT acquired a 100% interest in 64 Biloea Street, Villawood for total consideration of \$41.7 million (including transaction costs of \$2.2 million).

(8) In May 2019, GPT transferred land from inventory to properties under development at carrying value, being \$18.8 million.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

(e) Reconciliation

				Properties	For the	For the
				under		6 months to 12 months to
	Retail	Office	Logistics	development	30 Jun 19	31 Dec 18
	\$M	\$M	\$M	\$M	\$M	\$M
Carrying amount at the beginning of the half year	5,154.9	3,018.5	1,773.6	181.8	10,128.8	8,745.7
Additions - operating capital expenditure	16.9	9.2	3.3	-	29.4	47.9
Additions - development capital expenditure	58.0	17.1	8.7	33.3	117.1	273.1
Additions - interest capitalised (1)	2.3	0.2	0.1	2.4	5.0	13.7
Asset acquisitions	-	-	111.0	-	111.0	423.3
Transfers from properties under development	-	-	60.2	(60.2)	-	-
Transfer from/(to) inventory	-	-	-	18.8	18.8	(9.0)
Ground leases of investment properties	6.5	-	-	-	6.5	-
Disposals	-	(795.6)	-	-	(795.6)	(12.0)
Fair value adjustments	0.7	78.5	52.8	3.8	135.8	637.2
Lease incentives (includes rent free)	5.7	7.1	3.3	-	16.1	41.6
Leasing costs	2.2	1.0	0.4	-	3.6	7.9
Amortisation of lease incentives and costs	(6.0)	(16.2)	(4.5)	-	(26.7)	(46.1)
Straightlining of leases	0.5	(0.5)	3.0	-	3.0	5.5
Carrying amount at the end of the half year	5,241.7	2,319.3	2,011.9	179.9	9,752.8	10,128.8

(1) A capitalisation interest rate of 3.8% (31 December 2018: 4.2%) has been applied when capitalising interest on qualifying assets.

3. EQUITY ACCOUNTED INVESTMENTS

		30 Jun 19	31 Dec 18
	Note	\$M	\$M
Investments in joint ventures	(a)(i)	1,369.2	1,358.2
Investments in associates	(a)(ii)	2,570.6	2,547.7
Total equity accounted investments		3,939.8	3,905.9

Details of equity accounted investments

Name	Principal Activity		Ownership Interest
		30 Jun 19	31 Dec 18	30 Jun 19	31 Dec 18
		%	%	\$M	\$M
(i) Joint ventures
2 Park Street Trust (1)	Investment property	50.00	50.00	765.9	763.1
1 Farrer Place Trust (1)	Investment property	50.00	50.00	561.8	553.6
Horton Trust	Investment property	50.00	50.00	30.1	30.1
Lendlease GPT (Rouse Hill) Pty Limited (1) (2)	Property development	50.00	50.00	11.3	11.3
Erskine Park Joint Venture	Property development	50.00	50.00	-	-
DPT Operator Pty Limited	Management	50.00	50.00	0.1	0.1
Total investment in joint venture entities				1,369.2	1,358.2
(ii) Associates
GPT Wholesale Office Fund (1) (3)	Investment property	23.14	23.83	1,573.0	1,524.0
GPT Wholesale Shopping Centre Fund (1) (4)	Investment property	28.50	28.57	987.6	1,013.7
GPT Funds Management Limited	Funds management	100.00	100.00	10.0	10.0
Total investments in associates				2,570.6	2,547.7

(1) The entity has a 30 June balance date.

(2) GPT has a 50% interest in Lendlease GPT (Rouse Hill) Pty Limited, a joint venture developing residential and commercial land at Rouse Hill, in partnership with Urban Growth and the NSW Department of Planning.

(3) Ownership has decreased as a result of GPT not participating in the Distribution Reinvestment Plans (DRPs) and equity raising which occurred during the half year.

(4) Ownership has decreased as a result of GPT not participating in the DRPs during the half year.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

CAPITAL STRUCTURE

4. EQUITY

		Trust	Other entities	Total
			stapled to the
			Trust
	Number	\$M	\$M	\$M
Ordinary stapled securities
Opening securities on issue at 1 January 2018	1,801,640,882	7,814.8	325.7	8,140.5
Securities issued - Long Term Incentive Plan	2,332,026	6.6	0.1	6.7
Securities issued - Deferred Short Term Incentive Plan	875,344	4.1	0.1	4.2
Securities issued - Broad Based Employee Security Ownership Plan	42,174	0.2	-	0.2
Closing securities on issue and contributed equity at 30 June 2018	1,804,890,426	7,825.7	325.9	8,151.6
Opening securities on issue at 1 January 2019	1,804,890,426	7,825.7	325.9	8,151.6
Securities issued - institutional placement (1)	131,795,717	794.3	5.7	800.0
Transaction costs	-	(12.7)	(0.1)	(12.8)
Closing securities on issue and contributed equity at 30 June 2019	1,936,686,143	8,607.3	331.5	8,938.8

(1) On 18 June 2019, GPT undertook an institutional placement at an offer price of \$6.07 per stapled security. A total of \$800 million was raised with total transaction costs of \$12.8 million.

5. EARNINGS PER STAPLED SECURITY

	30 Jun 19 Cents	30 Jun 19 Cents	30 Jun 18 Cents	30 Jun 18 Cents
(a) Attributable to ordinary securityholders of the Trust	Basic	Diluted	Basic	Diluted
Basic and diluted earnings per security - profit from continuing operations	18.4	18.4	39.7	39.6
Basic and diluted earnings per security - profit from discontinued operations	-	-	0.1	0.1
Total basic and diluted earnings per security attributable to ordinary securityholders of the Trust	18.4	18.4	39.8	39.7
(b) Attributable to ordinary stapled securityholders of the GPT Group
Basic and diluted earnings per security - profit from continuing operations	19.5	19.5	40.3	40.3
Basic and diluted earnings per security - profit from discontinued operations	-	-	0.1	0.1
Total basic and diluted earnings per security attributable to stapled securityholders of The GPT Group	19.5	19.5	40.4	40.4

The earnings and weighted average number of ordinary securities (WANOS) used in the calculations of basic and diluted earnings per ordinary stapled security are as follows:

(c) Reconciliation of earnings used in calculating earnings per ordinary stapled security	\$M	\$M	\$M	\$M
Net profit from continuing operations attributable to the securityholders of the Trust	332.7	332.7	715.5	715.5
Net profit from discontinued operations attributable to the securityholders of the Trust	-	-	1.4	1.4
Basic and diluted earnings of the Trust	332.7	332.7	716.9	716.9
Basic and diluted earnings of the Company	19.9	19.9	11.6	11.6
Basic and diluted earnings of The GPT Group	352.6	352.6	728.5	728.5
(d) WANOS	Millions	Millions	Millions	Millions
WANOS used as the denominator in calculating basic earnings per ordinary stapled security	1,808.5	1,808.5	1,803.9	1,803.9
Performance security rights at weighted average basis (1)	1.8	1.8		2.5
WANOS used as the denominator in calculating diluted earnings per ordinary stapled security	1,810.3	1,810.3	1,803.9	1,806.4

(1) Performance security rights granted under the employee incentive schemes are only included in dilutive earnings per ordinary stapled security where the performance hurdles are met as at the half year end.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

6. DISTRIBUTIONS PAID AND PAYABLE

Distributions are paid to GPT securityholders half yearly.

	Cents per stapled security	Total amount \$M
Distributions paid / payable
2019
6 month period ended 30 June 2019 (1)	13.11	253.9
Total distributions paid / payable for the half year	13.11	253.9
2018
6 month period ended 30 June 2018	12.61	227.6
Total distributions paid / payable for the half year	12.61	227.6

(1) June 2019 half yearly distribution of 13.11 cents per stapled security was declared on 18 June 2019 and is expected to be paid on 30 August 2019 based on a record date of 28 June 2019.

7. BORROWINGS

	30 Jun 19 \$M	31 Dec 18 \$M
Current borrowings at amortised cost - unsecured	299.5	427.5
Current borrowings at amortised cost - secured	-	88.5
Current borrowings	299.5	516.0
Non-current borrowings at amortised cost - unsecured	1,061.3	2,101.4
Non-current borrowings at fair value through profit and loss - unsecured (1)	1,630.7	1,484.9
Non-current borrowings at amortised cost - secured	93.1	12.6
Non-current borrowings	2,785.1	3,598.9
Total borrowings (2)(4) - carrying amount	3,084.6	4,114.9
Total borrowings (3)(4) - fair value	3,174.3	4,170.0

• (1) Cumulative fair value adjustments are shown in the table below.
• (2) Including unamortised establishment costs, fair value and other adjustments.
• (3) For the majority of the borrowings, the carrying amount is a reasonable approximation of fair value. Where material difference arises, the fair value is calculated using market observable inputs (level 2) and unobservable inputs (level 3). This excludes unamortised establishment costs.
• (4) On 18 April 2019 (inception date), GPT priced a US\$400 million (A\$558.9 million) USPP with deferred settlement of proceeds in July 2019. On the inception date, GPT entered into cross currency interest rate swaps and designated a hedge relationship between the hedged item and the hedging instrument. As at 30 June 2019, a fair value loss on the deferred settlement of the USPP of \$34.8 million has been recognised within borrowings.

All borrowings with maturities greater than 12 months after reporting date are classified as non-current liabilities.

When the terms of a financial liability are modified, AASB 9 Financial Instruments requires an entity to perform an assessment to determine whether the modified terms are substantially different from the existing financial liability. Where a modification is substantial, it will be accounted for as an extinguishment of the original financial liability and a recognition of a new financial liability. Where the modification does not result in extinguishment, the difference between the existing carrying amount of the financial liability and the modified cash flows discounted at the original effective interest rate is recognised in the Consolidated Statement of Comprehensive Income as gain / loss on modification of financial liability. GPT management have assessed the modification of terms requirements within AASB 9 Financial Instruments and have concluded that these do not have a material impact for the Group.

The following table outlines the cumulative amount of fair value hedge adjustments that are included in the carrying amount of borrowings in the Consolidated Statement of Financial Position:

	30 Jun 19	31 Dec 18
	\$M	\$M
Nominal amount	1,221.8	1,221.8
Unamortised borrowing costs	(4.0)	(4.3)
Amortised cost	1,217.8	1,217.5
Cumulative fair value hedge adjustments	412.9	267.4
Carrying amount	1,630.7	1,484.9

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

The following table shows the carrying amount and nominal amount of each component of borrowings and derivative financial instruments categorised by hedge type.

	30 Jun 19					31 Dec 18
	Nominal amount(3)	Assets	Liabilities (1)(3)	Movement	Nominal amount		Assets Liabilities (1)	Movement (2)
	\$M	\$M	\$M	\$M	\$M	\$M	\$M	\$M
Borrowings by hedge designation Fair value hedges	(1,715.7)	-	(1,634.7)	(145.5)	(1,221.8)	-	(1,489.2)	(206.2)
Cross currency derivatives by hedge designation
Fair value hedges net position	1,715.7	97.2	-	121.3	1,221.8	(21.1)	(3.0)	(26.6)
Cash flow hedges net position	1,221.8	301.5	-	12.8	1,221.8	286.5	2.2	148.9
		398.7	-	134.1		265.4	(0.8)	122.3

(1) Excludes unamortised establishment costs.

(2) Movement for the full year.

(3) Borrowings nominal amount includes USPP proceeds of \$493.9 million which settled on 25 July 2019 and designated in fair value hedges. Liabilities include only the \$34.8 million fair value loss on deferred settlement of the USPP and will also include the nominal proceeds of \$493.9 million (in addition to \$65.0 million USPP denominated in Australian Dollars) from 25 July 2019.

The maturity profile of borrowings as at 30 June 2019 is provided below:

	Total	Used	Unused
	facility (1)(2)(3)	facility (1)	facility (2)(3)
	\$M	\$M	\$M
Due within one year	299.5	299.5	-
Due between one and five years	2,234.1	588.3	1,645.8
Due after five years	1,862.2	1,762.2	100.0
	4,395.8	2,650.0	1,745.8
Cash and cash equivalents			56.3
Total financing resources available at the end of the half year			1,802.1
Less: commercial paper (4)			(299.5)
Less: cash and cash equivalents held for the AFSL			(10.0)
Total financing resources available at the end of the half year			1,492.6

(1) Excluding unamortised establishment costs, fair value and other adjustments and \$16 million bank guarantee facility and its \$2.6 million utilisation. This reflects the contractual cashflows payable on maturity of the borrowings taking into account historical exchange rates under cross currency swaps entered into to hedge the foreign currency denominated borrowings.

(2) Drawings on GPT's uncommitted commercial paper program are in addition to GPT's committed facilities and are classified as current borrowings. These drawings may be refinanced by non-current unsecured undrawn bank loan facilities.

(3) Excluding \$558.9 million of USPP which was executed in May 2019 with a delayed settlement on 25 July 2019.

(4) GPT's commercial paper program is an uncommitted line with a maturity period of generally three months or less and is therefore excluded from available liquidity.

(a) Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. GPT's primary interest rate risk arises from borrowings.

GPT manages its interest rate risk on a portfolio basis in accordance with the Group's risk management strategy. GPT hedges its interest rate risk using fixed rate debt and a variety of derivative instruments including pay and receive: fixed to floating swaps, floating to fixed swaps, floating to floating swaps and option based derivatives. Regular coupons under these instruments are reported in finance costs in the Consolidated Statement of Comprehensive Income along with the interest cost on borrowings to which it relates. Fair value movements (including amortisation of upfront payment including premiums) of these instruments are recorded in the net gain / loss on fair value movements of derivatives in the Consolidated Statement of Comprehensive Income.

Finance costs include interest on borrowings and regular coupons paid or received under derivative instruments hedging GPT's interest rate risk on a portfolio basis, amortisation of discounts or premiums relating to borrowings and amortisation of ancillary costs incurred in connection with the arrangement of borrowings. Finance costs are expensed as incurred unless they relate to a qualifying asset.

(b) Debt covenants

GPT's borrowings are subject to a range of covenants, according to the specific purpose and nature of the loans. Most bank facilities include one or more of the following covenants:

• Gearing: total debt must not exceed 50% of adjusted total tangible assets; and

• Interest coverage: the ratio of earnings before interest and taxes (EBIT) to finance costs on borrowings is not to be less than 2 times.

A breach of these covenants may trigger consequences ranging from rectifying and/or repricing to repayment of outstanding amounts. GPT performed a review of debt covenants at 30 June 2019 and no breaches were identified.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

OTHER DISCLOSURE ITEMS

8. CASH FLOW INFORMATION

Reconciliation of net profit for the half year to net cash inflows from operating activities:

	30 Jun 19 \$M	30 Jun 18 \$M
Net profit for the half year	352.6	728.5
Fair value gain on investment properties	(135.8)	(264.3)
Fair value loss on derivatives	72.0	9.0
Net impact of foreign currency borrowings and associated hedging loss	11.6	0.7
Gain on financial liability at amortised cost	(1.3)	(1.2)
Impairment (reversal)/expense	(11.1)	11.4
Share of after tax profit of equity accounted investments (net of distributions)	(32.4)	(220.6)
Loss on disposal of assets	-	(1.8)
Depreciation and amortisation	3.3	3.7
Non-cash revenue / expense adjustments	17.9	6.7
Profit on sale of inventories	(0.7)	(1.7)
Proceeds from sale of inventories	33.7	20.9
Payment for inventories	(11.1)	(7.4)
Movements in working capital and reserves	(32.1)	(44.2)
Net foreign exchange loss	-	0.4
Other	2.2	2.3
Net cash inflows from operating activities	268.8	242.4

9. LEASE REVENUE

	30 Jun 2019				30 Jun 2018
Segment Result	Retail	Office	Logistics	Total	Retail	Office	Logistics	Total
Lease revenue	142.8	75.5	64.5	282.8	140.8	68.8	58.5	268.1
Recovery of operating costs	41.1	16.5	4.9	62.5	40.4	15.6	4.7	60.7
Share of rent from investment properties in equity accounted investments	0.6	39.8	-	40.4	1.0	36.7	-	37.7
	184.5	131.8	69.4	385.7	182.2	121.1	63.2	366.5
Less:
Share of rent from investment properties in equity
accounted investments	(0.6)	(39.8)	-	(40.4)	(1.0)	(36.7)	-	(37.7)
Amortisation of lease incentives and costs	(6.0)	(16.2)	(4.5)	(26.7)	(6.7)	(12.7)	(4.1)	(23.5)
Straightlining of leases	0.5	(0.5)	3.0	3.0	7.0	(0.3)	1.7	8.4
Eliminations of intra-group lease payments				(0.7)				-
Consolidated Statement of Comprehensive Income
Rent from investment properties	178.4	75.3	67.9	320.9	181.5	71.4	60.8	313.7

Rent from investment properties

Rent from investment properties is recognised and measured in accordance with AASB 16 Leases. In addition to revenue generated directly from the lease, rent from investment properties includes non-lease revenue earned from tenants, predominately in relation to recovery of asset operating costs, which is recognised and measured under AASB 15 Revenue from Contracts with Customers.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

10. COMMITMENTS

(a) Capital expenditure commitments

Commitments arising from contracts principally relating to the purchase and development of investment properties contracted for at balance date but not recognised in the Consolidated Statement of Financial Position:

	30 Jun 19	31 Dec 18
	\$M	\$M
Retail	29.6	52.7
Office	68.6	44.9
Logistics	8.8	14.6
Properties under development	181.8	177.7
Corporate	9.0	4.9
Total capital expenditure commitments	297.8	294.8
(b) Capital commitments relating to equity accounted investments GPT's share of equity accounted investments' capital commitments at balance date are set out below:

	30 Jun 19 \$M	31 Dec 18 \$M
Capital expenditure	141.3	108.2
Total joint ventures and associates' commitments	141.3	108.2

11. FAIR VALUE DISCLOSURES

Information about how the fair value of financial instruments is calculated and other information required by the accounting standards, including the valuation process, critical assumptions underlying the valuations and information on sensitivity are disclosed in the following table:

Class of	Fair value	Valuation	Inputs used to	Unobservable inputs	Unobservable inputs
assets / liabilities	hierarchy (1)	technique	measure fair value	30 June 2019	31 Dec 2018
Derivative financial	Level 2	Discounted cash	Interest rates
instruments		flow (DCF) (adjusted	Basis
		for counterparty	CPI	Not applicable - all inputs are market observable inputs
		credit worthiness)	Volatility
			Foreign exchange rates
Foreign currency borrowings	Level 2	DCF	Interest rates		Not applicable - all inputs are market observable
			Foreign exchange rates		inputs

(1) Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - 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 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Counterparty credit worthiness	Credit value adjustments are applied to derivatives assets based on that counterparty's credit risk using the observable credit default swaps curve as a benchmark for credit risk.
	Debit value adjustments are applied to derivatives liabilities based on GPT's credit risk using GPT's credit default swaps curve as a benchmark for credit risk.

(b) Movements in level 3 financial instruments

The following table presents the changes in level 3 instruments for recurring fair value measurements. GPT's policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

	Derivative y secur liabilities
	\$M \$M
Opening balance 1 January 2018 -	(5.1)	(5.1)
Fair value movements in profit or loss -	5.1	5.1
Closing balance 31 December 2018 -	-	-
Opening balance 1 January 2019 -	-	-
Fair value movements in profit or loss -	-	-
Closing balance 30 June 2019 -	-	-

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

12. ACCOUNTING POLICIES

(a) Basis of preparation

The financial report has been prepared:

• in accordance with the requirements of the Trust's Constitution, Corporations Act 2001 and Australian Accounting Standard AASB 134 Interim Financial Reporting;
• in accordance with the recognition and measurement requirements of the International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB);
• on a going concern basis in the belief that GPT will realise its assets and settle its liabilities and commitments in the normal course of business and for at least the amounts stated in the financial statements. The net deficiency of current assets over current liabilities at 30 June 2019 of \$488.9 million arises as a result of the inclusion of the provision for distribution payable to stapled securityholders and borrowings due within 12 months. GPT has access to cash and undrawn financing facilities of \$1,492.6 million as set out in note 7;
• under the historical cost convention, as modified by the revaluation for financial assets and liabilities and investment properties at fair value through the Consolidated Statement of Comprehensive Income;
• using consistent accounting policies with adjustments to bring into line any dissimilar accounting policies being adopted by the controlled entities, associates or joint ventures; and
• in Australian dollars with all values rounded in the nearest hundred thousand dollars in accordance with ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191, unless otherwise stated.

This interim financial report does not include all the notes of the type normally included within the annual financial report. Therefore, it is recommended this report be read in conjunction with the annual financial report for the year ended 31 December 2018 and any public announcements made by GPT during the interim period in accordance with the continuous disclosure requirements of the ASX Listing Rules. Comparatives in the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position and notes to the financial statements have been restated to the current year presentation. There was no effect on the profit for the year.

In accordance with Australian Accounting Standards, the stapled entity reflects the consolidated entity. Equity attributable to other stapled entities is a form of non-controlling interest and, in the consolidated entity column, represents the contributed equity of the Company.

As a result of the stapling, investors in GPT will receive payments from each component of the stapled security comprising distributions from the Trust and dividends from the Company.

The interim financial report was approved by the Board of Directors on 12 August 2019.

(b) Significant accounting policies

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period with the exception of the adoption of AASB 16 Leases and other new and amended standards and interpretations commencing 1 January 2019 which have been adopted where applicable.

New and amended accounting standards and interpretations commencing 1 January 2019

GPT has adopted AASB 16 at 1 January 2019. AASB 16 replaces AASB 117 Leases and is effective for reporting periods on or after 1 January 2019. The impact on the GPT's previously reported financial position at 31 December 2018, as a result of the adoption of AASB 16 and its application is detailed in note 13.

(c) New accounting standards and interpretations issued but not yet applied

There are no new standards or amendments to standards relevant to the Consolidated Entity.

13. ADOPTION OF NEW ACCOUNTING STANDARDS

AASB 16 Leases

GPT has adopted AASB 16 retrospectively from 1 January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 January 2019.

Payments associated with short term leases and leases of low value assets are recognised on a straight-line basis as an expense in the Consolidated Statement of Comprehensive Income. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.

Lease liabilities are initially measured at the present value of the lease payments discounted using the interest rate implicit in the lease. If that rate cannot be determined, GPT's incremental borrowing rate is used. The incremental borrowing rate is calculated by interpolating or extrapolating secondary market yields on the Group's domestic medium term notes (MTNs) for a term equivalent to the lease. If there are no MTNs that mature within a reasonable proximity of the lease term, indicative pricing of where GPT can price a new debt capital market issue for a comparative term will be used in the calculation.

Lease liabilities are subsequently measured by:

• increasing the carrying amount to reflect interest on the lease liability;
• reducing the carrying amount to reflect the lease payments made; and
• remeasuring the carrying amount to reflect any reassessment or lease modifications.

Interest on the lease liability and any variable lease payments not included in the measurement of the lease liability are recognised in the Consolidated Statement of Comprehensive Income in the period in which they relate.

NOTES TO THE FINANCIAL STATEMENTS

Half year ended 30 June 2019

Right-of-use assets are measured at cost less depreciation and impairment and adjusted for any remeasurement of the lease liability. The cost of the asset include:

• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs; and
• restoration cost.

Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term, unless they meet the definition of an investment property. Right-of-use assets which meet the definition of an investment property form part of the investment property balance and are measured at fair value in accordance with AASB 140 Investment Property (refer note 2 and below section on ground leases).

GPT determines the lease term as the non-cancellable period of a lease together with both:

• the periods covered by an option to extend the lease if it is reasonably certain to exercise that option; and
• periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option.

Management considers all the facts and circumstances that create an economic incentive to exercise an extension option or not exercise a termination option. This assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee. During the half year the financial effect of revising lease terms was an increase in recognised liabilities and right-of-use assets of \$23.1 million.

GPT tests right-of-use assets for impairment where there is an indicator that the asset may be impaired. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

GPT's right-of-use assets are all property leases.

Ground Leases

On adoption of AASB 16 on 1 January 2019, a lease liability reflecting the leasehold arrangements of investment properties needs to be separately disclosed in the Consolidated Statement of Financial Position and the carrying value of the investment properties will be adjusted (ie. grossed up) so that the net of these two amounts equals the fair value of the investment properties. The lease liabilities are calculated as the net present value of the future lease payments discounted at the incremental borrowing rate. The weighted average incremental borrowing rate as of 1 January 2019 was 4.8%. At 30 June 2019, \$6.5 million of lease liabilities for ground leases at Melbourne Central Retail and Sunshine Plaza has been recognised in the Consolidated Statement of Financial Position.

Adjustments recognised on adoption of AASB 16 Leases

On adoption of AASB 16, the GPT recognised lease liabilities in relation to leases which had previously been classified as operating leases under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the GPT's weighted average incremental borrowing rate as of 1 January 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3.7%.

The difference between the operating lease commitments disclosed at 31 December 2018 discounted using the incremental borrowing rate as 1 January 2019 and the balance of the lease liabilities recognised at 1 January 2019 reflects:

• the exclusion of leases committed to but for which the term had not yet commenced;
• the removal of contracts reassessed as service agreements; and
• adjustments as a result of different treatment of extension and termination options.

Right-of-use assets were measured on a retrospective basis as if the new rules had always been applied. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

Practical expedients applied

In applying AASB 16 for the first time, GPT has used the following practical expedients permitted by the standard:

• the use of a single discount rate to the portfolio of property leases where they have reasonably similar characteristics;
• reliance on previous assessments on whether leases are onerous; and
• the exclusion of initial direct costs for the measurement of the right-of-use assets at the date of initial application.

GPT has also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying AASB 117 and Interpretation 4 Determining whether an Arrangement contains a Lease.

14. EVENTS SUBSEQUENT TO REPORTING DATE

• On 3 July 2019, GPT acquired two logistics assets in Erskine Park, New South Wales for consideration of \$113.0 million.
• GPT undertook a Security Purchase Plan (SPP) on 26 June 2019. The SPP closed on 15 July 2019 and a total of \$66.8 million was raised.
• In April 2019, the Group priced a US\$400 million (A\$558.9 million) US Private Placements (USPP). Settlement occurred on 25 July 2019.
• On 25 July 2019, GPT acquired a parcel of land in Western Sydney for consideration of \$18.9 million.
• On 30 July 2019, GPT acquired a parcel of land in Truganina, Victoria for consideration of \$35.8 million.
• On 6 August 2019, GPT acquired a 25% interest in Darling Park 1 & 2 and Cockle Bay Wharf for consideration of \$531.3 million.

Other than the above, the Directors are not aware of any matter or circumstances occurring since 30 June 2019 that has significantly or may significantly affect the operations of GPT, the results of those operations or the state of affairs of GPT in the subsequent financial years.

Independent auditor's review report to the unitholders of General Property Trust

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of General Property Trust (the Registered Scheme), which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, selected other explanatory notes and the directors of the Responsible Entity's declaration for The GPT Group (the Group). The Group comprises the Registered Scheme and the entities it controlled during that half-year.

Directors of the Responsible Entity's responsibility for the half-year financial report

The directors of the Responsible Entity of the Registered Scheme are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors of the Responsible Entity determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Australian Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the Group's financial position as at 30 June 2019 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of General Property Trust, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001.

PricewaterhouseCoopers, ABN 52 780 433 757

One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au

Level 11, 1PSQ, 169 Macquarie Street, Parramatta NSW 2150, PO Box 1155 Parramatta NSW 2124 T: +61 2 9659 2476, F: +61 2 8266 9999, www.pwc.com.au

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of General Property Trust is not in accordance with the Corporations Act 2001 including:

• 1. giving a true and fair view of the Group's financial position as at 30 June 2019 and of its performance for the half-year ended on that date;
• 1. complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

PricewaterhouseCoopers

Partner

Susan Horlin Sydney 12 August 2019