MIRVAC GROUP - Annual Report 2022

Mirvac Property Trust

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MIRVAC PROPERTY TRUST AND ITS CONTROLLED ENTITIES

Annual Report For the year ended 30 June 2022

The consolidated entity comprises Mirvac Property Trust (ARSN 086 780 645) and its controlled entities.

Index	Page
Directors' report	2
Auditor’s independence declaration	7
Consolidated financial statements	8
Consolidated statement of comprehensive income	9
Consolidated statement of financial position	10
Consolidated statement of changes in equity	11
Consolidated statement of cash flows	12
Notes to the consolidated financial statements	13
Directors' declaration	37
Independent auditor’s report to the stapled unitholders of Mirvac Property Trust	38

Mirvac Property Trust and its controlled entities Directors’ report For the year ended 30 June 2022

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DIRECTORS’ REPORT

The Directors of Mirvac Funds Limited (ABN 70 002 561 640, AFSL 233121), the Responsible Entity of Mirvac Property Trust (MPT or Trust), present their report, together with the consolidated report of MPT (ARSN 086 780 645) and its controlled entities (consolidated entity) for the year ended 30 June 2022.

MPT and its controlled entities together with Mirvac Limited and its controlled entities form the stapled entity, Mirvac Group (Mirvac or Group).

Responsible Entity

The Responsible Entity of the Trust is Mirvac Funds Limited, an entity incorporated in New South Wales. The immediate parent entity of the Responsible Entity is Mirvac Woolloomooloo Pty Limited (ABN 44 001 162 205), incorporated in New South Wales, and its ultimate parent entity is Mirvac Limited (ABN 92 003 280 699), incorporated in New South Wales.

Directors

The following persons were Directors of Mirvac Funds Limited during the whole of the year and up to the date of this report, unless otherwise stated:

John Mulcahy
Susan Lloyd-Hurwitz
Christine Bartlett
Damien Frawley (appointed 1 December 2021)
Jane Hewitt
James M. Millar AM
Samantha Mostyn AO
Peter Nash
Robert Sindel

Principal activities

The principal continuing activities of the consolidated entity consist of property investment for the purpose of deriving rental income and investments in unlisted funds. There has been no significant change in the principal activities of the consolidated entity during the year.

REVIEW OF OPERATIONS AND ACTIVITIES

FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS

This financial year began under COVID-19 induced lockdowns, in particular in Sydney and Melbourne, which caused significant disruptions to operations across our business, largely concentrated to our CBD-based office and retail assets. This was followed by extreme wet weather along the eastern seaboard during the second half of the financial year, which impacted project delivery and led to the flooding of Toombul in Brisbane. In a macro context, global geopolitical instability had and continues to have a systemic impact on supply chains and energy costs, leading to accelerated inflation and central banks rapidly tightening monetary policies. Despite these headwinds, we delivered a strong set of financial results in FY22.

Key financial highlights for the year ended 30 June 2022:

profit attributable to the stapled unitholders of MPT of $712 million (2021: $798 million);
operating cash inflow of $427 million (2021: $438 million);
distributions of $402 million (2021: $390 million), representing 10.2 cents per stapled unit (2021: 9.9 cents per stapled unit); and
net tangible assets per stapled unit of $2.40, up from $2.32 (June 2021).

Refer to the consolidated statement of financial position and notes to the consolidated financial statements, for the consolidated entity’s value of assets and basis used to value its assets.

Mirvac Property Trust and its controlled entities Directors’ report For the year ended 30 June 2022

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REVIEW OF OPERATIONS AND ACTIVITIES (continued)

FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS (continued)

Key capital management highlights for the year ended 30 June 2022:

The consolidated entity’s capital structure is monitored at the Mirvac Group level. Our approach to capital management in FY22 ensured we maintained ample liquidity and financial flexibility to manage the continuing impacts of COVID-19. Our capital position remains strong, despite the volatility in markets, and we are continuing to deploy capital to advance our record development pipeline for the benefit of securityholders. Key outcomes of our capital management focus in FY22 included:

A- and A3 credit rating with stable outlooks from Fitch Ratings and Moody’s Investor Services maintained;
a well diversified maturity profile which has delivered a weighted average debt maturity of 5.6 years, with only $220 million of debt facilities due for repayment in next 12 months;
$1.4 billion of cash and undrawn debt facilities at 30 June 2022; and
gearing at the lower end of our preferred range of 20-30 per cent.

Key operational highlights for the year ended 30 June 2022:

Key drivers of our operational results were:

investment property revaluations provided an uplift of $348 million for the 12 months to 30 June 2022;
like for like growth across the portfolio supported by a full year of NOI for 477 Collins St, Melbourne and South Eveleigh Building 2;
cash collections improvement to 97 per cent across the portfolio, combined with lower COVID-19 rent relief; offset by
lost NOI due to the disposal of non-core assets including Cherrybrook Village, Tramsheds and Quay West Car Park.

Outlookand risks[1]

Our high quality, well located portfolio of assets remained resilient, despite the headwinds caused by COVID-19. Extended lockdowns in the first half of the year impacted our CBD retail assets in particular, however, we saw an uptick in sales and leasing activity as conditions normalised over the second half of the year, supported by the reopening of international and domestic borders, along with strong employment growth. As a result, solid occupancy and a long WALE were maintained, while limited lease expiries across each asset class have positioned us well for the future.

Office:

Momentum within Australia’s major markets continues to improve as we learn to live with COVID-19. Leasing volumes were increasing, and in aggregate, businesses that made leasing decisions through the pandemic have taken more space than they have vacated, and this space has generally been taken in higher quality assets, supporting our view that the flight to quality theme will continue. Our portfolio, which is 99 per cent weighted to prime assets and has an average age of 9.8 years, is well placed to benefit from this trend.

Industrial:

Operating fundamentals remain positive in the industrial sector, with strong occupier demand and tight vacancy resulting in positive rental growth. Capital demand remains firm, with recent transactional evidence supporting a tightening of capitalisation rates across our industrial portfolio over the past 12 months. Our industrial portfolio which is 100 per cent occupied and located in Sydney, is expected to benefit from the market rent growth and continued capital demand for high quality, well located industrial assets.

Retail:

Convenience based and out-of-trade retail assets continued to show an improvement over the second half of the financial year, supported by a more stable operating environment. CBD based retail remains a challenge and has been slower to recover from the impact of COVID-19 restrictions, with foot traffic remaining well below pre-COVID-19 levels. Our urban based retail assets are well placed to benefit from the resumption of migration, as well as the normalisation of trading conditions.

1 These statements are future looking and based on our reasonable assumptions at the time they were made. They include possible outlooks for our operating environments, but are subject to external factors outside of the consolidated entity’s control.

Mirvac Property Trust and its controlled entities Directors’ report For the year ended 30 June 2022

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REVIEW OF OPERATIONS AND ACTIVITIES (continued)

Significant changes in the state of affairs

Details of the state of affairs of the consolidated entity are disclosed within the Review of Operations and Activities section above.

Interests in the Trust

	2022	2021
	No. units	No. units
	m	m
Total ordinary stapled units issued 3,942 3,936 Stapled units issued under Long-Term Incentive Plan (LTI) and Employee Incentive Scheme (EIS) 1 1
Total stapled units issued 3,943 3,937

Refer to note E2 to the consolidated financial statements for the consolidated entity’s movements in stapled units during the financial year. This includes any stapled units issued and withdrawn during the financial year.

Instruments held by Directors

Particulars of Directors’ interests in the stapled securities of Mirvac or a related body corporate, are as follows:

		Performance	Interests in securities of
	Mirvac stapled	rights/rights to acquire	related entities or related
Director	securities	stapled securities	bodies corporate
John Mulcahy	105,172	-	-
Susan Lloyd-Hurwitz	5,065,291	2,055,781	-
Christine Bartlett	80,172	-	-
Damien Frawley1	-	-	-
Jane Hewitt	70,000	-	-
James M. Millar AM	55,172	-	-
Samantha Mostyn AO	74,045	-	-
Peter Nash	82,720	-	-
Robert Sindel	90,198	-	-

1 Damien Frawley was appointed as Director on 1 December 2021.

Refer to note H3 to the consolidated financial statements for detailed information regarding Directors’ and key management personnel’s interest in the stapled securities of Mirvac including any options granted and exercised over unissued stapled securities.

Fees paid to the Responsible Entity or its associates

Fees paid to the Responsible Entity out of Trust property during the year were $28 million (2021: $20 million). Fees charged by the Responsible Entity represent recovery of costs. No fees were paid out of Trust property to the Directors of the Responsible Entity during the year. Fees paid to the Responsible Entity and its associates out of Trust property during the year are disclosed in note H4 to the consolidated financial statements.

Mirvac Property Trust and its controlled entities Directors’ report For the year ended 30 June 2022

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REVIEW OF OPERATIONS AND ACTIVITIES (continued)

Net current asset deficiency

As at 30 June 2022, the Trust was in a net current liability position of $345 million (2021: $171 million). The Trust repays its borrowings with excess cash, but had access to $609 million of unused borrowing facilities at 30 June 2022 (2021: $616 million). Accordingly, the Directors of the Responsible Entity expect that the Trust will have sufficient cash flows to meet all financial obligations as and when they fall due.

Matters subsequent to the end of the year

No events have occurred since the end of the year that have significantly affected or may significantly affect the consolidated entity’s operations, the results of those operations, or state of affairs in future years.

Environmental regulations

The consolidated entity and its business operations are subject to compliance with both Commonwealth and State environment protection legislation. The Board is satisfied that adequate policies and procedures are in place to ensure the consolidated entity’s compliance with the applicable legislation. In addition, the consolidated entity is also subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007 and Building Energy Efficiency Disclosure Act 2010 . The consolidated entity is not aware of any incidents that have resulted in material non-compliance with environmental regulations during the financial year.

More information on Mirvac’s sustainability strategy, actions and performance for the year ended 30 June 2022 can be found in the 30 June 2022 Annual Report of the Mirvac Group.

Non-audit services

From time to time, the consolidated entity may engage its external auditor, PricewaterhouseCoopers, to perform services additional to their statutory audit duties. Details of the amounts paid or payable to PricewaterhouseCoopers for audit and non-audit services provided during the year ended 30 June 2022 are set out in note H5 to the consolidated financial statements.

In accordance with the advice received from the Audit, Risk & Compliance Committee (ARCC), the Board is satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

all non-audit services were reviewed by the ARCC to ensure they did not affect the impartiality and objectivity of the auditor; and
none of the services undermined the general principles relating to auditor independence as set out in Accounting Professional & Ethical Standards 110 Code of Ethics for Professional Accountants , including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Trust, acting as advocate for the Trust or jointly sharing economic risk and rewards.

Insurance of officers

During the year, the Responsible Entity has not indemnified, or entered into any agreement indemnifying against a liability, any person who is or who has been an officer of the Responsible Entity of the Trust. No insurance premiums are paid for out of the assets of the Trust in regards to insurance cover provided to Mirvac Funds Limited.

Mirvac Property Trust and its controlled entities Directors’ report For the year ended 30 June 2022

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REVIEW OF OPERATIONS AND ACTIVITIES (continued)

Auditor’s independence declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 7 and forms part of the Directors’ report.

Rounding of amounts

The amounts in the financial statements have been rounded off to the nearest million (m) dollars in accordance with the ASIC Corporations Instrument 2016/191.

This statement is made in accordance with a resolution of the Directors.

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Susan Lloyd-Hurwitz Director

Sydney 11 August 2022

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Auditor’s Independence Declaration

As lead auditor for the audit of Mirvac Property Trust for the year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been:

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

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

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Voula Papageorgiou Partner PricewaterhouseCoopers

Sydney 11 August 2022

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

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

Liability limited by a scheme approved under Professional Standards Legislation.

Mirvac Property Trust and its controlled entities Consolidated financial statements For the year ended 30 June 2022

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CONSOLIDATED FINANCIAL STATEMENTS

	Consolidated statement of comprehensive income 9
	Consolidated statement of financial position 10
	Consolidated statement of changes in equity 11
	Consolidated statement of cash flows 12

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

A BASIS OF PREPARATION
13
F OPERATING ASSETS AND LIABILITIES
F1 Receivables
28
B RESULTS FOR THE YEAR
F2 Other financial assets
29
B1 Segment information
15
F3 Intangible assets
29
B2 Revenue
15
F4 Payables
31
B3 Expenses
16
F5 Provisions
31
B4 Events occurring after the end of the
year
16
B5 Income tax
16
G CONSOLIDATED ENTITY STRUCTURE
G1 Controlled entities
31
C
INVESTMENT ASSETS
G2 Parent entity
32
C1 Investment properties
17
G3 Business combinations
33
C2 Investments in joint ventures
21
H OTHER DISCLOSURES
D CAPITAL STRUCTURE AND RISKS
H1 Contingent liabilities
33
D1 Capital management
22
H2 Earnings per stapled unit
33
D2 Borrowings and liquidity
23
H3 Key management personnel
34
D3 Cash flow information
23
H4 Related parties
36
D4 Financial risk management
D5 Fair value measurement of financial
instruments
24
25
H5 Auditors’ remuneration
36
E EQUITY
E1 Distributions
27
E2 Contributed equity
27
E3 Reserves
27

These financial statements cover the financial statements for the consolidated entity consisting of Mirvac Property Trust and its controlled entities. The financial statements are presented in Australian currency.

The Responsible Entity of Mirvac Property Trust is Mirvac Funds Limited (ABN 70 002 561 640, AFSL 233121), a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are:

Mirvac Funds Limited

Level 28 200 George Street Sydney NSW 2000.

A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ report on pages 2 to 6, both of which are not part of these financial statements.

The financial statements were authorised for issue by the Directors on 11 August 2022. The Directors have the power to amend and reissue the financial statements.

Through the use of the internet, the Trust has ensured that its corporate reporting is timely and complete. All press releases, financial reports and other information are available in the Investor Centre section on the Group’s website.

Mirvac Property Trust and its controlled entities Consolidated statement of comprehensive income For the year ended 30 June 2022

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	Note	2022 $m	2021 $m
Revenue B2 704 687 Other income Net revaluation gain from investment properties C1 348 405 Share of net profit of joint ventures C2 57 33 Gain on financial instruments B2 4 8 Net gain on sale of assets 1 2
Total other income 410 448
Total revenue and other income 1,114 1,135
Investment property expenses and outgoings B3 205 189 Amortisation expenses 68 59 Impairment loss on receivables B3 31 2 Finance costs B3 61 64 Responsible Entity fees H4 28 20 Other expenses 9 3
Profit before income tax 712 798
Income tax expense B5 - -
Profit for the year attributable to stapled unitholders 712 798
Other comprehensive income that may be reclassified to profit or loss
Other comprehensive income for the year - -
Total comprehensive income for the year attributable to stapled unitholders 712 798
Earnings per stapled unit attributable to stapled unitholders Cents Cents Basic earnings per stapled unit H2 18.1 20.3 Diluted earnings per stapled unit H2 18.1 20.3

The above consolidated statement of comprehensive income (SoCI) should be read in conjunction with the accompanying notes.

Mirvac Property Trust and its controlled entities Consolidated statement of financial position As at 30 June 2022

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	Note	2022 $m	2021 $m
Current assets
Cash and cash equivalents 34 31 Receivables F1 24 8 Other assets 18 18 Assets held for sale C1 - 133
Total current assets 76 190
Non-current assets Investment properties C1 10,341 10,652 Investments in joint ventures C2 1,299 470 Other financial assets F2 62 75 Intangible assets F3 43 43
Total non-current assets 11,745 11,240
Total assets 11,821 11,430
Current liabilities Payables F4 220 160 Provisions F5 201 201
Total current liabilities 421 361
Non-current liabilities Lease liabilities 7 7 Borrowings D2 1,891 1,884
Total non-current liabilities 1,898 1,891
Total liabilities 2,319 2,252
Net assets 9,502 9,178
Equity Contributed equity E2 5,388 5,374 Reserves E3 5 5 Retained earnings 4,109 3,799
Total equity attributable to the stapled unitholders 9,502 9,178

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

Mirvac Property Trust and its controlled entities Consolidated statement of changes in equity For the year ended 30 June 2022

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	Attributable to stapled unitholders	Attributable to stapled unitholders	Attributable to stapled unitholders	Attributable to stapled unitholders
	Contributed equity	Reserves	Retained earnings	Total equity
	$m	$m	$m	$m
Balance 30 June 2020	5,367 5 3,391 8,763
Profit for the year Other comprehensive income for theyear	- - 798 798 - - - -
Total comprehensive income for the year	- - 798 798
Transactions with owners in their capacity as owners Unit-based payments Expense recognised – Employee Exemption Plan (EEP) E2 Long-term incentives (LTI) vested E2 Reversal of costs of issuing equity E2 Distributions E1	1 - - 1 5 - - 5 1 - - 1 - - (390) (390)
Total transactions with owners in their capacity as owners	7 - (390) (383)
Balance 30 June 2021	5,374 5 3,799 9,178
Profit for the year Other comprehensive income for the year	- - 712 712 - - - -
Total comprehensive income for the year	- - 712 712
Transactions with owners in their capacity as owners Unit-based payments Expense recognised – EEP E2 LTI vested E2 Distributions E1	1 - - 1 13 - - 13 - - (402) (402)
Total transactions with owners in their capacity as owners	14 - (402) (388)
Balance 30 June 2022	5,388 5 4,109 9,502

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

Mirvac Property Trust and its controlled entities Consolidated statement of cash flows For the year ended 30 June 2022

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	Note	2022 $m	2021 $m
Cash flows from operating activities Receipts from customers (inclusive of GST) 654 692 Payments to suppliers (inclusive of GST) (211) (213)
443 479 Distributions received from joint ventures 50 28 Distributions received 1 1 Interest paid B3 (67) (70)
Net cash inflows from operating activities D3 427 438
Cash flows from investing activities Payments for investment properties (213) (335) Proceeds from sale of investment properties 401 85 Contributions to joint ventures (246) (1) Deconsolidation of cash and cash equivalents upon disposal of controlled entity (2) - Return of capital from investments 17 -
Net cash outflows from investing activities (43) (251)
Cash flows from financing activities Proceeds from loans from entities related to Responsible Entity 814 577 Repayments of loans to entities related to Responsible Entity (807) (459) Proceeds from issue of stapled units 14 6 Distributionspaid (402) (307)
Net cash outflows from financing activities (381) (183)
Net increase in cash and cash equivalents 3 4 Cash and cash equivalents at the beginning of the year 31 27
Cash and cash equivalents at the end of the year 34 31

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

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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A BASIS OF PREPARATION

Mirvac Group – stapled securities

A Mirvac Group stapled security comprises one Mirvac Limited share ‘stapled’ to one unit in the Trust to create a single listed security traded on the Australian Securities Exchange (ASX). The stapled securities cannot be traded or dealt with separately. Mirvac Limited (the deemed parent entity) and Mirvac Funds Limited (as Responsible Entity for MPT) have common directors and operate as Mirvac Group. Mirvac Limited and MPT have a Deed of Cooperation to recharge each other on a cost recovery basis, where permitted by law, to maintain the best interests of Mirvac as a whole.

The stapled security structure will cease to operate on the first of:

Mirvac Limited or MPT resolving by special resolution in a general meeting, and in accordance with its Constitution, to terminate the stapled security structure; or
Mirvac Limited or MPT commencing winding up.

The ASX reserves the right (but without limiting its absolute discretion) to remove entities with stapled securities from the official list if their securities cease to be stapled together, or either entity issues any equity securities of the same class that are not stapled.

Mirvac Limited and MPT remain separate legal entities in accordance with the Corporations Act 2001. For accounting purposes, Mirvac Limited has been deemed the parent entity of Mirvac Group.

Statement of compliance

These consolidated financial statements are general purpose financial statements. They have been prepared in accordance with Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board, the Corporations Act 2001 and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Net current asset deficiency

As of 30 June 2022, the consolidated entity was in a net current liability position of $345 million (June 2021: $171 million) but had undrawn capacity under its debt facilities of $609 million (June 2021: $616 million) maturing in December 2023. As of 30 June 2022, the consolidated entity had capital commitments of $91 million (June 2021: $45 million).

Basis of preparation

The consolidated entity is a for-profit entity for the purpose of preparing the financial statements.

These financial statements have been prepared on a going concern basis, using historical cost conventions except for:

investment properties, investment properties under construction and other financial assets and financial liabilities that have been measured at fair value;
assets held for sale that are measured at lower of carrying value and fair value less costs to sell.

All figures in the financial statements are presented in Australian dollars and have been rounded off to the nearest million (m) dollars in accordance with ASIC Corporations Instrument 2016/191, unless otherwise indicated.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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Basis of preparation (continued)

Macro Environment Impacts

As a property group involved in property investment and investment management, the consolidated entity is subject to macroeconomic factors throughout the business cycle, which have the potential to impact a number of its financial and non-financial metrics.

Impact of global conflict on the consolidated entity

The magnitude and complexity of the consequences of the Russian-Ukraine conflict remain highly uncertain, driving geopolitical fragmentation, ongoing sanctions and diversified supply chains. Key areas of exposure relate to economic sanctions, oil and gas supplies, and impacts on global indices. While the consolidated entity does not have direct exposure to the conflict or region, market data continues to be highly volatile and uncertain, with any escalation likely to have an impact on global markets and additional pressures on supply chains.

Supply chain pressure

Disruptions linked to COVID-19 lockdowns in China, the Russia - Ukraine conflict, severe weather events, lack of migration and new variants of COVID-19, continue to exacerbate supply constraints, labour/skills shortages and construction materials price increases. The consolidated entity’s longstanding experience and capabilities are well placed to see through the supply challenges. A number of initiatives are also in place to analyse, assess and flex across suppliers, timing and lead times for supplies.

Inflation rising and interest rates increasing

Higher cost price inflation has led to negative real wage growth in 2022. This combined with heightened geopolitical tensions and increasing interest rates has lowered consumer sentiment. A faster than expected economic recovery from COVID-19, and stronger inflationary pressures have brought forward interest rate hikes, with the Reserve Bank of Australia raising the cash rate by 125 bps from May to July 2022.

The consolidated entity’s capital management is well placed to steer through the tide of rising interest rates, with gearing maintained at the lower end of the target range of between 20 - 30%. A large portion of the debt is at fixed or hedged rates, and the consolidated entity’s credit rating maintained.

Retail spending is expected to curb away from discretionary spend as the uncertainty around increasing interest rates and rising living costs (fuel, food and so on) tighten household wallets.

The above factors have been considered in the preparation of the financial statements though they have not had a material impact to date.

Comparative information

Where necessary, comparative information has been restated to conform to the current year’s disclosures and are presentational in nature. These had no impact to the reported net assets or profit for the year ended 30 June 2022.

Critical accounting estimates and judgements

The preparation of financial statements requires estimation and judgement. The areas involving a higher degree of estimation or judgement are discussed in the following notes:

	Note		Note
Investment properties C1 Fair value measurement of financial instruments D4 Investments in joint ventures C2 Goodwill F3

New and amended standards adopted by the Trust

Amended standards and interpretations adopted by the consolidated entity for the year ended 30 June 2022 have not had a significant impact on the current period or any prior period and are not likely to have a significant impact in future periods. These are listed below:

AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 [AASB 4, AASB 7, AASB 9, AASB 16 & AASB 139]
AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19 Related Rent Concessions Beyond 30 June 2021 [AASB 16]

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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B RESULTS FOR THE YEAR

This section explains the results and performance of the consolidated entity, including detailed breakdowns and analysis.

B1 SEGMENT INFORMATION

The consolidated entity is a single segment for reporting to the Executive Leadership Team (ELT). The ELT is the chief operating decision maker of the consolidated entity.

The consolidated entity operates predominantly in Australia. No single customer in the current or prior year provided more than 10 per cent of the consolidated entity’s revenue.

B2 REVENUE

The consolidated entity’s revenue is principally property rental revenue. Property rental revenue comes from holding properties as investment properties and earning rental yields over time.

Revenue is measured at the fair value of the consideration received or receivable, net of returns, trade allowances and duties and taxes paid. The consolidated entity recognises revenue for the following revenue stream:

Investment property rental revenue

The consolidated entity invests in properties for rental yields and capital appreciation. Rental revenue from investment properties is recognised on a straight-line basis over the lease term, net of any incentives. Modifications to the leases are accounted for as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease payments for the new lease. The consolidated entity also provides services to the lessees which primarily consist of general building management and operations in accordance with their lease agreements. Service income, representing the recovery of associated costs from the lessees, is recognised over time when the services are provided.

	2022 $m	2021 $m
Revenue
Lease revenue 580 578 Service revenue 99 107 Otherpropertyrental revenue 9 -
Total property rental revenue 688 685
Other revenue 16 2
Total revenue 704 687
Gain on financial instruments Net revaluationgain on units in unlisted funds 4 8
Totalgain on financial instruments 4 8

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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B3 EXPENSES

Investment property expenses and outgoings

Investment property expenses relate to those costs which are required to be incurred to allow for the occupation and maintenance of investment properties in order to continue to earn rental revenue. Expenses include statutory levies, insurance and other property outgoings and are recognised on an accruals basis.

	2022 $m	2021 $m
Profit before income tax includes the following specific expenses: Statutory levies 38 39 Insurance 4 4 Outgoings 31 16 Otherpropertyexpenses 132 130
Total investmentproperty expenses and outgoings 205 189
Interest paid 67 70 Borrowingcosts capitalised (6) (6)
Total finance costs 61 64
Loss allowance on trade debtors 31 2
Total impairment loss on receivables 31 2

B4 EVENTS OCCURRING AFTER THE END OF THE YEAR

B5 INCOME TAX

The consolidated entity’s profit is earned by trusts which are not subject to taxation. Income from the trusts is instead attributed to unitholders who pay income tax at their marginal tax rates.

Tax allowances for depreciation are distributed to the stapled unitholders as a tax deferred component of the distribution.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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C INVESTMENT ASSETS

…………………………………………………………………………………………………

This section includes investment properties and investments in joint ventures. They represent the core assets of the business and drive the value of the consolidated entity.

C1 INVESTMENT PROPERTIES

The consolidated entity holds a property portfolio for long-term rental yields and capital appreciation. Depending on the specific arrangements for each property, they are classified as investment properties or properties held through joint ventures.

Investment properties

Investment properties are properties owned by the consolidated entity. Investment properties include investment properties under construction, which will become investment properties once construction is completed.

The consolidated entity accounts for its investment properties at fair value and revaluations are recognised as other income. The fair value movements are non-cash and do not affect the consolidated entity’s distributable income.

Judgement in fair value estimation

Fair value is the price that would be received to sell an asset in an orderly transaction between market participants. For all investment property that is measured at fair value, the existing use of the property is considered the highest and best use.

The consolidated entity assesses its property portfolio for climate related risks and resilience where appropriate in determining the fair value of investment properties.

The fair value of properties are calculated using a combination of market sales comparisons, discounted cash flows and capitalisation rates.

To assist with calculating reliable estimates, the consolidated entity uses independent valuers on a rotational basis. A minimum of 25 per cent of the portfolio is independently valued every six months, with management internally estimating the fair value of the remaining properties using estimation techniques by suitably qualified personnel. In response to COVID-19, the consolidated entity increased the level of independent valuations across its segments, particularly across the markets and asset types it invests in where the impacts from COVID-19 have been more significant. As at 30 June 2022, the consolidated entity undertook independent valuations covering 31 per cent of its investment property portfolio by value, excluding IPUC.

The fair values are a best estimate but may differ to the actual sales price if the properties were to be sold. The key judgements for each valuation method are explained below:

Direct comparison approach: Utilises recent sales of comparable properties, adjusted for any differences, including the nature, location, town planning/zoning, flooding and environmental impediments.

Discounted cash flow (DCF): Projects a series of cash flows over the property’s life and a terminal value, discounted using a discount rate to give the present value.The projected cash flows incorporate expected rental income (based on contracts or market rates), operating costs, lease incentives, lease fees, capital expenditure, and a terminal value from selling the property. The terminal value is calculated by applying the terminal yield to the net market income. The discount rate is a market rate reflecting the risk associated with the cash flows, the nature, location and tenancy profile of the property relative to comparable investment properties and other asset classes.

Capitalisation rate: The rate or yield at which the annual net income from an investment is capitalised to ascertain its capital value at a given date. The annual net income is based on contracted rents, market rents, operating costs and future income on vacant space. The capitalisation rate reflects the nature, location and tenancy profile of the property together with current market evidence and sales of comparable properties.

Investment properties under construction: There generally is not an active market for investment properties under construction, so fair value is measured using DCF or residual valuations. DCF valuations for investment properties under construction are as described above, but also consider the costs and risks of completing construction and letting the property.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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C1 INVESTMENT PROPERTIES (continued)

Residual: Estimates the value of the completed project, less the remaining development costs, which include construction, finance costs and an allowance for the developer’s risk and profit. This valuation is then discounted back to the present value.

Ground leases

On initial recognition, a lease liability reflecting the leasehold arrangements of investment properties is separately disclosed in the consolidated SoFP and the carrying value of the investment properties is adjusted (i.e. increased) so that the net of these two amounts equals the fair value of the investment properties. The lease liabilities are calculated as the net present value of the future lease payments discounted at the incremental borrowing rate.

At 30 June 2022, $7 million of lease liabilities for ground leases has been recognised in the consolidated SoFP (2021: $7 million).

Lease liabilities are subsequently measured by:

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

Some ground leases contain variable payment terms that are linked to sales generated. Variable lease payments that depend on sales are recognised in the consolidated SoCI in the period in which the condition that triggers those payments occurs. Interest on the lease liabilities and any variable lease payments not included in the measurement of the lease liabilities are recognised in the consolidated SoCI in the period to which they relate.

Lease incentives

The carrying amount of investment properties includes lease incentives provided to tenants. Lease incentives are deferred and recognised on a straight-line basis over the lease term as a reduction of net property income.

Derecognition of investment properties

Investment properties are reclassified from non-current to current assets held for sale when they satisfy the conditions under AASB 5 Non-current Assets Held for Sale and Discontinued Operations.

For reclassification to occur, the disposal of the investment property must be highly probable with an exchanged contract and settlement pending. Once control of an investment property transfers to a purchaser, usually upon settlement, the consolidated entity will derecognise the book value of the investment property with any resultant gain or loss recognised in the consolidated SoFP.

Commitments

At 30 June 2022, capital commitments on the consolidated entity’s investment property portfolio were $91 million (2021: $45 million). There were no investment properties pledged as security by the consolidated entity (2021: nil).

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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C1 INVESTMENT PROPERTIES (continued)

Movements in investment properties

	2022	2021
	Total	Total
	$m	$m
Balance 1 July 10,652 10,187 Expenditure capitalised 298 346 Acquisitions 610 49 Disposals (880) (82) Transfer to held for sale - (133) Net revaluation gain from fair value adjustments 348 405 Transfer to joint ventures (579) - Amortisation expenses (108) (120)
Balance 30 June 10,341 10,652

Total investment properties 10,176 10,359
Total investment properties under construction 165 293

Fair value measurement and valuation basis

The basis of valuation of investment properties is fair value. Fair values are based on market values, being the price that would be received to sell an asset in an orderly transaction between market participants at the reporting date.

Investment properties are measured as Level 3 financial instruments. Refer to note D5 for explanation of the levels of fair value measurement. The following are the unobservable inputs used in determining the fair value measurement of investment properties. Movement in any of the unobservable inputs is likely to have an impact on the fair value of investment property. The higher the net market income or 10-year compound annual growth rate, the higher the fair value. The higher the capitalisation rate, terminal yield or discount rate, the lower the fair value.

The key inputs and sensitivity to changes are explained below.

	Unobservable inputs	Details
	Capitalisation rate	The rate at which net market income is capitalised to determine the value of a property.
	Discount rate	The rate of return used to convert a monetary sum, payable or receivable in the future, into present value. This should reflect the opportunity cost of capital, that is, the required rate of return the capital can earn if put to other uses having regard to a similar risk profile.
	Terminal yield	The capitalisation rate used to convert income into an indication of the anticipated value of the property at the end of the holding period when carrying out a discounted cash flow calculation.
	Market rent and growth rate	The rent at which a tenancy could be leased in the market including rental growth in future years at the date of valuation. Market rent includes gross rent and net rent. Gross rent is where outgoings are incorporated in the rent being paid. Net market rent is where the owner recovers outgoings from the tenant on a pro-rata basis.
	Market rate	The market rate per square metre uses recent transactional evidence of comparable properties to determine the fair value of the investment property under the direct comparison method.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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C1 INVESTMENT PROPERTIES (continued)

The DCF, capitalisation rate, residual valuation and direct comparison methods all use unobservable inputs in determining fair value; ranges of the inputs are included below per asset class:

Sector			Inputs used to measure fair value	Inputs used to measure fair value	Inputs used to measure fair value	Inputs used to measure fair value	Inputs used to measure fair value
	Level 3 fair value	Net market income	10-year compound annual growth rate	Capitalisation rate	Market rate	Terminal yield	Discount rate
	$m	$/sqm	%	%	$/sqm	%	%
2022
Office	6,445 365.0 – 1,199.0 2.60 – 4.20 4.50 – 6.75 - 4.75 – 7.00 6.00 – 7.25
Industrial	1,242 110.0 – 410.0 3.27 – 3.32 3.50 – 5.00 - 3.75 – 5.25 4.88 – 6.25
Retail	2,654 314.0 – 1,127.0 1.87 – 4.13 4.75 – 8.75 865 – 1,612 5.00 – 9.00 6.00 – 9.50
Total	10,341 - - - - - -
2021
Office	6,804 312.0 – 1,519.0 2.50 – 3.80 4.38 – 6.75 - 4.50 – 7.25 5.85 – 7.25 1,025 104.0 – 407.0 2.82 – 3.02 4.00 – 5.75 - 4.50 – 6.00 5.25 – 6.75 2,823 311.0 – 1,121.0 2.30 – 3.84 4.75– 8.75 - 5.00 – 9.00 6.25 - 9.50 10,652 - - - - - -
Industrial
Retail
Total

Sensitivity analysis

Due to the rapidly changing economic climate and the judgement required to assess the fair value of the consolidated entity’s investment properties, a sensitivity analysis has been undertaken to further stress test the assessment of fair value as at 30 June 2022.

The following sensitivity analysis is based on upward and downward movement scenarios of 25 bps and 50 bps on the movement of capitalisation rates, discount rates, and terminal yields per asset class compared to the capitalisation rates, discount rates, and terminal yields adopted by the consolidated entity as at 30 June 2022. These are considered to be the key unobservable inputs that would be expected to have the most material impact on the fair values adopted if they moved. Valuations use a blended capitalisation rate and DCF approach whereby the current market income and the cash flow of the investment property are considered to determine the final fair value. Varying the capitalisation rates alone will only impact the valuation derived through capitalisation method and has no impact on the DCF analysis. A change in discount rate and terminal capitalisation rate will only impact the DCF valuation. Accordingly, all three metrics need to be moved proportionately to ensure a consistent methodology when performing the sensitivity analysis.

Presented below is the outcome of the sensitivity analysis as the decrement or increment to the fair value of each asset class of the consolidated entity’s investment property portfolio (including Office JV but excluding IPUC and development assets) should the unobservable inputs increase or decrease by 25 bps or 50 bps. For example, an increase of 25 bps of the capitalisation rate, discount rate and terminal yield in the consolidated entity’s Office portfolio would have resulted in a decrement of $398m in addition to the fair value presented as at 30 June 2022.

Investment properties at fair value assessed using DCF, market capitalisation and capitalisaiton rate	Capitalisation rate, discount rate and terminal yield movement by
	25 bps $m 25 bps $m 50 bps $m 50 bps $m
Office Industrial Retail	(398) 390 (784) 773 (73) 82 (138) 175 (119) 115 (229) 258
Total	(590) 587 (1,151) 1,206

For investment properties at fair value assessed using the direct comparison approach, a sensitivity analysis was performed. Using an increase of 10 per cent in the rate per square metre and a decrease of 10 per cent in the rate per square metre, the impact to the fair value presented as at 30 June 2022 was not material.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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C1 INVESTMENT PROPERTIES (continued)

Future committed operating lease receipts

Property rental revenue is accounted for as operating leases. The revenue and expenses are recognised in the consolidated SoCI on a straight-line basis over the lease term. Payments for operating leases are made net of any lease incentives. Future receipts are shown as undiscounted contractual cash flows.

	2022 $m	2021 $m
Future operating lease receipts as a lessor Within one year 503 473 Between one and five years 1,649 1,629 Later than five years 1,512 1,442
Total future operating lease receipts as a lessor 3,664 3,544

C2 INVESTMENTS IN JOINT VENTURES

A joint venture (JV) is an arrangement where the Trust has joint control over the activities and joint rights to the net assets. Refer to note G1 for details on how the Trust decides if it controls an entity.

The Trust initially records its JVs at the cost of the investment and subsequently accounts for them using the equity method. Under the equity method, the Trust’s share of the JVs’ profit or loss is added to/deducted from the carrying amount each year. Distributions received or receivable are recognised by reducing the carrying amount of the JVs.

All JVs are established or incorporated in Australia.

The table below provides summarised financial information for those JVs that are significant to the Trust. The information below reflects the total amounts presented in the financial statements of the relevant JVs and not the Trust’s share. The information has been amended to reflect any unrealised gains or losses on transactions between the Trust and its JVs.

Mirvac 8 Chifley Trust Mirvac (Old Treasury) Trust The George Street Trust1 Mirvac Locomotive Trust	Mirvac 8 Chifley Trust Mirvac (Old Treasury) Trust The George Street Trust1 Mirvac Locomotive Trust	Total
2022 2021 2022 2021 2022 2021 2022 2021		2022 2021
$m $m $m $m $m $m $m $m		$m $m
Principal activities Property investment Property investment Property investment Property investment Summarised SoFP Cash and cash equivalents 7 2 6 6 4 - 4 - Other current assets 1 - 1 1 12 - 3 - Total current assets 8 2 7 7 16 - 7 -		21 8 17 1
	2 7 7 16 - 7 -	38 9
Total non-current assets 462	458 497 487 1,159 - 471 -	2,589 945
Other current liabilities 7	7 7 7 18 - 7 -	39 14
Total current liabilities 7	7 7 7 18 - 7 -	39 14
Total non-current liabilities -	- - - - - - -	- -
Net assets 463	453 497 487 1,157 - 471 -	2,588 940
Trust’s share of net assets (%) 50	50 50 50 50.1 - 51 -
Trust’s share of net assets ($m) 232	227 248 243 579 - 240 -	1,299 470
Carrying amount in consolidated SoFP 232	227 248 243 579 - 240 -	1,299 470

This entity was previously a controlled entity of the Trust, however control was lost during the year and is now accounted for as a JV. Refer to note G3.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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C2 INVESTMENTS IN JOINT VENTURES (continued)

	Mirvac 8 Chifley Trust Mirvac (Old Treasury) Trust The George Street Trust1 Mirvac Locomotive Trust	Total
	2022 2021 2022 2021 2022 2021 2022 2021	2022 2021
	$m $m $m $m $m $m $m $m	$m $m
Summarised SoCI Revenue 23 32 42 42 50 - 20 -		135 74
Profit after tax 20 7 38 59 42 - 14 -		114 66
Total comprehensive income/(loss) 20 7 38 59 42 - 14 -		114 66
Trust’s share of profit/(loss) after tax(%) 50 50 50 50 50.1 - 51 -
Trust’s share of profit/(loss) after tax($m) 10 3 19 30 21 - 7 -		57 33
Distributions 24 13 29 13 19 - 8 -		80 26

This entity was previously a controlled entity of the Trust, however control was lost during the year and is now accounted for as a JV. Refer to note G3.

Capital expenditure commitments

At 30 June 2022, the consolidated entity had $1 million of capital commitments approved but not yet provided for regarding its share of JVs (2021: nil).

D CAPITAL STRUCTURE AND RISKS

This section outlines the market, credit and liquidity risks that the consolidated entity is exposed to, and how it manages these risks. Capital comprises unitholders’ equity and net debt (borrowings less cash).

D1 CAPITAL MANAGEMENT

The consolidated entity’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can provide returns to unitholders and aim to address the market, credit and liquidity risks while also meeting the Group’s strategic objectives.

The consolidated entity’s capital structure is monitored at the Group level. The Group seeks to maintain an investment grade credit rating of BBB+ to reduce the cost of capital and diversify its sources of debt capital. The Group’s target gearing ratio is between 20 and 30 per cent.

If the Group wishes to change its gearing ratio, it could adjust its dividends/distributions, issue new equity (or buy back securities), or sell property to repay borrowings.

At 30 June 2022, the Group was in compliance with all debt covenants.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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D2 BORROWINGS AND LIQUIDITY

The consolidated entity borrows using loans from related parties.

The consolidated entity has one loan facility from a related party. The total facility limit as at 30 June 2022 is $2,500 million (2021: $2,500 million) and can be drawn in Australian or US dollars. The facility expires on 18 December 2023. Interest accrues at the related party’s cost of financing from their borrowing facilities, calculated including associated derivative financial instruments.

At 30 June 2022, the consolidated entity had $609 million of undrawn facilities available (2021: $616 million).

		2022	2022	2022	2022	2022		2021	2021	2021	2021	2021
	Floating interest rate	Fixed interest maturing in:				Total	Floating interest rate	Fixed interest maturing in:				Total
		Less than 1 year	1 to 2 years	2 to 5 years	Over 5 years			Less than 1 year	1 to 2 years	2 to 5 years	Over 5 years
	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m	$m
Loans from related party	1,891	- - - - 1,891 1,884						- - - - 1,884

Borrowings are initially recognised at fair value, net of transaction costs. Borrowings are subsequently measured at amortised cost using the effective interest rate method. The fair value of borrowings is considered to approximate their carrying amount as the interest rates are variable.

D3 CASH FLOW INFORMATION

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash at bank and short-term deposits at call.

Reconciliation of profit to operating cash flow

	2022 $m	2021 $m
Profit for the year attributable to stapled unitholders 712 798 Net revaluation gain from investment properties and investment properties under construction (348) (405) Amortisation expenses 119 120 Impairment loss on receivables recognised 31 1 Lease incentives and straight-lining of lease revenue (79) (79) Net gain on financial instruments (4) (8) Net gain on sale of assets (1) (2) Share of net profit of JVs net of distributions received (5) (7) Change in operating assets and liabilities 2 20
Net cash inflows from operating activities 427 438

Net Debt Reconciliation

	Current lease liabilities	Non- current lease liabilities	Non- current borrowings	Total liabilities	Cash and cash equivalents	Total
	$m	$m	$m	$m	$m	$m
Balance 1 July 2020 - (7) (1,766) (1,773) 27 (1,746) Net cash flow movements - - (118) (118) 4 (114)
Balance 30 June 2021 - (7) (1,884) (1,891) 31 (1,860)
Net cash flow movements - - (7) (7) 3 (4)
Balance 30 June 2022 - (7) (1,891) (1,898) 34 (1,864)

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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D4 FINANCIAL RISK MANAGEMENT

The consolidated entity’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The consolidated entity seeks to minimise the potential impact of these financial risks on financial performance, for example, by using derivative financial instruments to protect against interest rate and foreign exchange risk.

Financial risk management is carried out by a central treasury department (Mirvac Group Treasury) under policies approved by the Board. The Board provides overall risk management principles and policies covering specific areas. Mirvac Group Treasury identifies, evaluates, reports and manages financial risks in close cooperation with the consolidated entity in accordance with Board policy.

A summary of the Group’s key risks identified, exposures and management of exposures is detailed in the table below:

Risk	Definition	Exposures arising from	Management of exposures
Market risk - interest rate The risk that the fair value or cash flows of financial instruments will fluctuate due to changes in market interest rates Borrowings issued at fixed rates and variable rates Derivatives  Interest rate derivatives manage cash flow interest rate risk by converting floating rate borrowings to fixed or capped rates with a target of 55 per cent.  Mirvac does not manage the fair value risk for debt instruments from interest rates, as it does not have an impact on the cash flows paid by the business. Market risk - foreign exchange The risk that the fair value of a financial commitment, asset or liability will fluctuate due to changes in foreign exchange rates Bonds denominated in other currencies Receipts and payments that are denominated in other currencies  Cross currency interest rate swaps to convert non- Australian dollar borrowings to Australian dollar exposures. These cross currency interest rate swaps have been designated as cash flow hedges with the movements in fair value recognised while they are still in an effective hedge relationship.  Foreign currency borrowings as a natural hedge for foreign operations. Credit risk The risk that a counterparty will not make payments to Mirvac as they fall due  Cash and cash equivalents  Receivables  Derivative financial assets  Other financial assets  Setting credit limits and obtaining collateral as security (where appropriate).  Diversified trading spread across large financial institutions with investment grade credit ratings.  Regularly monitoring the exposure to each counterparty and their credit ratings.  Refer to note F1 for details on credit risk exposure on receivables. The Group deems the exposure to credit risk as not significant for all other classes of financial assets and liabilities. Liquidity risk The risk that Mirvac will not be able to meet its obligations as they fall due  Payables  Borrowings  Derivative financial liabilities  Regular forecasts of the Group’s liquidity requirements. Surplus funds are only invested in highly liquid instruments.  Availability of cash, marketable securities and committed credit facilities.  Ability to raise funds through issue of new securities through placements or Distribution Reinvestment Plan.

Market risk - interest rate risk

In relation to the Group, borrowings issued at variable rates expose Mirvac to cash flow interest rate risk. Borrowings issued at fixed rates expose Mirvac to fair value interest rate risk. Mirvac manages its cash flow interest rate risk by using interest rate derivatives, thereby maintaining fixed rate exposures within the policy range. Such interest rate derivatives have the economic effect of converting borrowings from floating rates to fixed or capped rates, or vice versa.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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D4 FINANCIAL RISK MANAGEMENT (continued)

Sensitivity analysis

This sensitivity analysis shows the impact on profit after tax and equity if Australian interest rates changed by 100 basis points.

Given the recent significant upward shift in the interest rate environment that the consolidated entity is operating and with official interest rates at the beginning of a tightening cycle, a 100 bps movement is deemed an appropriate sensitivity to consider for 30 June 2022.

Total impact on profit after tax and equity	2022	2022	2021	2021
	100 bps	100 bps	25 bps	25 bps
	$m	$m	$m	$m
Changes in: Australian interest rates	$19 m decrease $19 m increase $5 m decrease $5 m increase

Based on current exposures, there is no material foreign exchange sensitivity in the consolidated entity.

Liquidity risk

Maturity of financial liabilities

The consolidated entity’s maturity of financial liabilities is provided in the following table. The amounts disclosed in the table are the contractual undiscounted cash flows:

	2022	2022	2021	2021
	Maturing in:		Maturing in:
	Less than 1 year 1 to 2 years 2 to 5 years Over 5 years	Total	Less than 1 year 1 to 2 years 2 to 5 years Over 5 years	Total
	$m $m $m $m	$m	$m $m $m $m	$m
Payables Borrowings Lease liabilities	220 - - - 220 160 - - - 160 137 1,963 - - 2,100 65 74 1,923 - 2,062 - - - 7 7 - - - 7 7
	357 1,963 - 7 2,327 225 74 1,923 7 2,229

D5 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS

The consolidated entity measures various financial assets and liabilities at fair value ,which in some cases, may be subjective and depend on the inputs used in the calculations. The different levels of measurement are described below:

 Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: not traded in an active market but calculated with significant inputs coming from observable market data; and
Level 3: significant inputs to the calculation that are not based on observable market data (unobservable inputs).

The consolidated entity holds no Level 1 or Level 2 financial instruments.

The methods and assumptions used to estimate the fair value of financial instruments are as follows:

Other financial assets

Other financial assets include units in unlisted funds and loan notes. The carrying value of other financial assets is equal to the fair value; refer to note F2 for further details.

Units in unlisted funds are traded in inactive markets. The fair value of investments not traded in an active market is determined by the unit price as advised by the fund’s trustee. The fair value of the security is determined based on the value of the fund’s underlying assets. The fund’s assets are subject to regular external valuations, which are based on discounted net cash inflows from expected future income and/or comparable sales of similar assets. Appropriate discount rates determined by the external valuer are used to determine the present value of the net cash inflows based on a market interest rate adjusted for the risk premium specific to each asset. The fair value is determined using valuation techniques that are not supported by prices from an observable market. This means the fair value recognised in the consolidated financial statements could change significantly if the underlying assumptions made in estimating the fair values were significantly changed.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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D5 FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS (continued)

The following table summarises the financial instruments measured and recognised at fair value on a recurring a basis:

Note	2022	2022	2022		2021	2021	2021	2021
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
	$m	$m	$m	$m	$m	$m	$m	$m
Financial assets carried at fair value Units in unlisted funds F2	- - 62			62 - - 75 75
	- - 62			62 - - 75 75

The following table presents a reconciliation of the carrying value of Level 3 instruments (excluding investment properties which are shown in note C1):

	2022	2021
	Units in unlisted funds $m	Units in unlisted funds $m
Balance 1 July Acquisitions Net revaluation gain on financial instruments Return of capital	75 66
	- 1
	4 8
	(17) -
Balance 30 June	62 75

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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E EQUITY

This section includes distributions, unitholders’ equity and reserves. It represents how the consolidated entity raised equity from unitholders in order to finance activities both now and in the future. …

……………………

E1 DISTRIBUTIONS

Half-yearly ordinary distributions paid/payable per stapled security were as follows:

	Distribution	Date	Total amount
	cents	paid/payable	$m
Distributions for the year ended 30 June 2022
31 December 2021	5.10	28 Feb 2022	201
30 June 2022	5.10	31 Aug 2022	201
Total distribution	10.20		402
Distributions for the year ended 30 June 2021
31 December 2020	4.80	1 Mar 2021	189
30 June 2021	5.10	31 Aug2021	201
Total distribution	9.90		390

E2 CONTRIBUTED EQUITY

Ordinary units are classified as equity. Each ordinary unit entitles the holder to receive distributions when declared, and one vote per unit at securityholders’ meetings on polls and proceeds on wind up of the Trust, in proportion to the number of units held.

When new units or options are issued, the directly attributable incremental costs are deducted from equity.

Movements in paid up equity

	2022	2022	2021	2021
	No. units	Units $m	No. units	Units $m
Balance 1 July Stapled units issued under EEP Long-term performance plan, LTI and EIS stapled units converted, sold, vested or forfeited Reversal of costs of issuing equity Balance 30 June	3,936 5,374 3,933 5,367 1 1 1 1 5 13 2 5 - - - 1 3,942 5,388 3,936 5,374

The number of stapled units issued as listed on the ASX at 30 June 2022 was 3,943 million (2021: 3,937 million), which includes 1 million of stapled units issued under the LTI and EIS (2021: 1 million). Units issued to employees under the Mirvac LTI and EIS are accounted for as options and are recognised by the Group in the security-based payments reserve, not in contributed equity.

E3 RESERVES

Non-controlling interests (NCI) reserve

The NCI reserve was used to record the discount received on acquiring the NCI in Mirvac Real Estate Investment Trust, a controlled entity of the consolidated entity, in December 2009.

	Capital reserve $m	NCI reserve $m	Total reserves $m
Balance 30 June 2021 (1) 6 5
Balance 30 June 2022 (1) 6 5

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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F OPERATING ASSETS AND LIABILITIES

F1 RECEIVABLES

Receivables are initially recognised at fair value. Receivables are subsequently measured at amortised cost using the effective interest rate method, less loss allowance if required. Due to the short-term nature of current receivables, their carrying amount (less loss allowance) is assumed to be the same as their fair value.

The Expected Credit Loss (ECL) of receivables is reviewed on an ongoing basis. The consolidated entity applies the simplified approach to measuring ECL as appropriate based on the different characteristics of each financial asset class. To measure the ECL, management has grouped together the consolidated entity’s receivables based on shared credit risk characteristics and the days past due. The consolidated entity uses judgement in making assumptions about risk of default and ECL rates and the inputs to the impairment calculation, based on the consolidated entity’s past history, existing market conditions and future looking estimates at the end of each reporting period. Receivables that are known to be uncollectable are written off.

	2022	2022	2022	2021	2021	2021
	Gross	Loss allowance	Net	Gross	Loss allowance	Net
	$m	$m	$m	$m	$m	$m
Trade receivables 17 (17) - 26 (20) 6 Accrued income 24 - 24 2 - 2
Total receivables 41 (17) 24 28 (20) 8

Ageing

		Days past due	Days past due	Days past due	Days past due	Days past due
	Not past due	1 - 30	31 - 60	61 - 90	91 - 120	Over 120	Total
2022
Total receivables 24 1 1 2 2 11 41
Loss allowance - (1) (1) (2) (2) (11) (17)
Balance 30 June 2022 24 - - - - - 24
2021 Total receivables 2 5 4 3 2 12 28 Loss allowance - - (3) (3) (2) (12) (20)
Balance 30 June 2021 2 5 1 - - - 8

Loss allowance

	2022 $m	2021 $m
Balance 1 July (20) (37) Loss allowance recognised (31) (2) Amounts utilised for write-off of receivables 34 19
Balance 30 June (17) (20)

The consolidated entity does not have any significant credit risk exposure to a single customer. The consolidated entity holds $136 million of tenant collateral (2021: $142 million), primarily in the form of bank guarantees. The terms and conditions of the collateral are outlined in the lease agreements, however generally as a lessor, the consolidated entity has the right to call upon the collateral if a lessee breaches their lease. Refer to note D4 for further details on the consolidated entity’s exposure to, and management of, credit risk.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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F2 OTHER FINANCIAL ASSETS

Units in unlisted funds

The Trust may hold units in unlisted funds that do not give the Trust control, as explained in note G1.These units are accounted for at fair value. Distributions received are recognised in revenue and any changes in fair value are recognised in the gain or loss on foreign exchange and financial instruments in the consolidated SoCI.

Units in unlisted funds are traded in inactive markets and therefore the fair value is estimated based on the value of the underlying assets held by the funds. The underlying assets of the funds are valued by external valuers based on market sales comparison and/or discounted cash flows. Refer to note C1 for details of these valuation methods.

Fair value of other financial assets is determined by giving consideration to the unit prices and net assets of the underlying funds. These are largely driven by the fair values of investment properties held by the funds.

	2022 $m	2021 $m
Non-current Units in unlisted funds 62 75
Total non-current other financial assets 62 75

F3 INTANGIBLE ASSETS

Goodwill

	2022 $m	2021 $m
Balance 1 July 43 43
Balance 30 June 43 43

Impairment testing

Goodwill acquired in a business combination is tested annually for impairment. Goodwill is impaired if the recoverable amount, calculated as the higher of the value in use and the fair value less costs to sell, is less than its carrying amount. For the purpose of assessing impairment, assets are grouped at the lowest levels for which goodwill is monitored for internal management purposes and allocated to cash generating units (CGU). The estimation of the recoverable amount of goodwill depends on the nature of the CGU. For the consolidated entity CGU, the value in use is the discounted present value of estimated cash flows that the CGU will generate, which primarily comprise of the consolidated entity’s investment properties in Office, Industrial and Retail operating segments.

AASB 136 Impairment of Assets recommends that cash flow projections should cover a maximum period of 5 years, unless a longer period can be justified. As the cash flow projections used for budgeting and forecasting are based on long-term, predictable and quantifiable leases, with renewal assumptions based on sector and industry experience, management is comfortable that a 10-year cash flow projection is more appropriate. The cash flow projections are based on management approved forecasts covering an initial period of 5 years, and the subsequent 5 years are based on a growth rate of 3.0%-3.5% p.a.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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F3 INTANGIBLE ASSETS (continued)

Impairment testing (continued)

The key assumptions used to determine the forecast cash flows include net market rent, capital expenditure, growth rate, discount rate and market conditions.

discount rate and market	conditions.	conditions.	conditions.	conditions.	conditions.
Net market rent	The rent at which a tenancy could be leased in the market including outgoings recovery.
Other cash flows	These cash flows are minimal in comparison to the rental cash flows but form part of the IIP CGU.
Capital expenditure	The amount of additional investment required to upgrade or maintain the Group’s investment properties.
Growth rate	The rate at which cash flows will grow over time. The growth rate has been adjusted to reflect current market conditions and does not exceed the long-term average growth rate. The cash flow projections are based on management approved forecasts covering an initial period of 5 years and the subsequent 5 years are based on a growth rate of 3.0%-3.5% p.a.
Cash flow period	AASB 136_Impairment of Assets_recommends that cash flow projections should cover a maximum period of 5 years, unless a longer period can be justified. As the cash flow projections used for budgeting and forecasting are based on long-term, predictable and quantifiable leases, with renewal assumptions based on asset class and industry experience, management is comfortable that a 10 year cash flow projection is appropriate.
Terminal growth rate	The constant rate that cash flows are expected to grow at into perpetuity, which was 2.5% as at 30 June 2022.
Pre-tax discount rate	The rate of return used to convert cash flows into present value; these are specific to the risks of each of the cash flows within the consolidated entity. This includes using the weighted investment property portfolio discount rate, which was 6.1% as at 30 June 2022.

		Growth rate	Discount rate	Growth rate	Discount rate
		30 June 20221	30 June 2022	30 June 20211	30 June 2021
		% pa	% pa	% pa	% pa
Mirvac Property Trust 3.0-3.5 6.1 3.0 5.9

Weighted average growth rate used to extrapolate cashflows beyond the initial management approved 5-year forecast period.

Sensitivity

If the cash flow projections used in the value in use calculations increased or decreased the pre-tax discount rate by 0.5%, and the terminal growth rate or growth rate were increased or decreased by 0.5% and 1.0% respectively, the consolidated entity would have sufficient headroom and this would not result in an impairment.

Based on information available, and market conditions as at 30 June 2022 and up to the date of this report, management have considered that a reasonably foreseeable change in the other assumptions used in the goodwill assessment would not result in an impairment to the value of goodwill as at 30 June 2022 (2021: nil).

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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F4 PAYABLES

Payables are measured at amortised costs. Due to the short-term nature of current payables, their carrying amount is assumed to be the same as their fair value. For the majority of non-current payables, the carrying amount is also not significantly different to their fair value.

Trade payables due more than 12 months after year end are classified as non-current.

	Note	2022 $m	2021 $m
Current Trade payables 3 2 Rent in advance 25 27 Other accruals 113 102 Other creditors 3 - Amounts due to entities related to Responsible Entity H4 76 29
Total current payables 220 160

F5 PROVISIONS

A provision is made for the amount of any distribution declared at or before the end of the year but not distributed by the end of the year. Refer to note E1 for further details.

	2022 $m	2021 $m
Distributions payable Balance 1 July 201 118 Interim and final distributions declared 402 390 Payments made (402) (307)
Balance 30 June 201 201

G CONSOLIDATED ENTITY STRUCTURE

This section provides information on how the consolidated entity’s structure affects its financial position and performance.

G1 CONTROLLED ENTITIES

Controlled entities

The consolidated financial statements of the consolidated entity incorporate the assets, liabilities and results of all controlled entities. Controlled entities are all entities over which the consolidated entity has power to direct the activities of the entity and an exposure to and ability to influence its variable returns from its involvement with the entity.

Controlled entities are fully consolidated from the date control is obtained until the date that control ceases. Inter-entity transactions and balances are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the assets transferred.

Structured entities

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity. The consolidated entity considers that all funds and trusts in which it currently has an investment, or from which it currently earns income, to be structured entities. Depending on the consolidated entity’s power to direct the activities of the entity and its exposure to and ability to influence its own returns, it may consolidate the entity. In other cases, it may sponsor or have some form of exposure to a structured entity, but not consolidate it.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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G1 CONTROLLED ENTITIES (continued)

Structured entities (continued)

If the consolidated entity does not control a structured entity but has joint control over the activities and joint rights to the net assets, it is treated as a joint venture. Refer to note C2.

Funds and trusts

The consolidated entity invests in a number of funds and trusts which invest in real estate as investment properties. The investees finance their operations through borrowings and through equity issues. The consolidated entity determines whether it controls or has significant influence over these funds and trusts as discussed above.

The following entities were wholly owned and established in Australia and controlled by MPT as at the current year end:

10-20 Bond Street Trust	Mirvac Broadway Sub-Trust	Mirvac Property Trust No.7
367 Collins Street Trust	Mirvac Capital Partners 1 Trust	Mirvac Real Estate Investment Trust
367 Collins Street No. 2 Trust	Mirvac Collins Street No.1 Sub-Trust	Mirvac Retail Head Trust
380 St Kilda Road Trust1	Mirvac Commercial No.3 Sub Trust	Mirvac Retail Sub-Trust No. 1
477 Collins Street No. 1 Trust	Mirvac Commercial Trust1	Mirvac Retail Sub-Trust No. 2
Australian Office Partnership Trust	Mirvac Group Funding No.2 Pty Limited	Mirvac Retail Sub-Trust No. 3
Eveleigh Trust	Mirvac Group Funding No.3 Pty Limited	Mirvac Retail Sub-Trust No. 4
James Fielding Trust	Mirvac Hoxton Park Trust	Mirvac Rhodes Sub-Trust
Joynton North Property Trust	Mirvac Industrial No. 1 Sub-Trust	Mirvac Rydalmere Trust No. 1
Joynton Properties Trust	Mirvac Kensington Trust	Mirvac Rydalmere Trust No. 2
Meridian Investment Trust No. 1	Mirvac Kirrawee Trust No.1	Mirvac Smail Street Trust
Meridian Investment Trust No. 2	Mirvac Kirrawee Trust No.2	Mirvac Toombul Trust No. 1
Meridian Investment Trust No. 3	Mirvac La Trobe Office Trust	Mirvac Toombul Trust No. 2
Meridian Investment Trust No. 4	Mirvac Living Trust	Old Treasury Holding Trust
Meridian Investment Trust No. 5	Mirvac Padstow Trust No.1	Springfield Regional Shopping Centre Trust
Meridian Investment Trust No. 6	Mirvac Parramatta Sub-Trust No. 1
Mirvac 90 Collins Street Trust	Mirvac Pitt Street Trust
Mirvac Allendale Square Trust	Mirvac Property Trust No.3
Mirvac Ann Street Trust	Mirvac Property Trust No.4
Mirvac Bay St Trust	Mirvac Property Trust No.5
Mirvac Bourke Street No.1 Sub-Trust	Mirvac Property Trust No.6

One unit on issue held by Mirvac Limited as custodian for MPT.

G2 PARENT ENTITY

The financial information for the parent entity, MPT, has been prepared on the same basis as the consolidated financial statements.

Parent entity	2022 $m	2021 $m
Current assets 139 266 Total assets 10,760 10,078 Current liabilities 1,046 905 Total liabilities 2,766 2,623
Equity Contributed equity 5,388 5,373 Reserves 8 8 Retained earnings 2,598 2,074
Total equity 7,994 7,455
Profit for the year 927 676
Total comprehensive income for the year 927 676

As outlined in note D2, MPT is a borrower under a loan facility from a related party of the Group. This related party mainly sources MPT’s funding needs from external debt facilities. MPT is party to a guarantee deed poll to guarantee the external debt of the related party.

At 30 June 2022, the parent entity did not provide any other guarantees (2021: nil) or have any contingent liabilities (2021: nil). The parent entity had $12 million of capital commitments approved but not yet provided (2021: nil).

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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G3 BUSINESS COMBINATIONS

Disposal of controlled entity

On 26 August 2021, the consolidated entity exercised its pre-emptive right as existing co-owner of The George Street Trust to acquire the remaining 50% of the investment property at 200 George Street, Sydney, NSW. On the same day following this purchase, the consolidated entity disposed of 49.9% of its units in The George Street Trust, the controlled entity owning the investment property. Following the sale, the consolidated entity lost control of The George Street Trust and reclassified its remaining 50.1% interest as an investment in a joint venture.

The consideration received from the sale of the 49.9% interest in The George Street Trust was $609 million. The consolidated entity did not outlay cash for the 50% purchase of the property, with proceeds from the sale of the controlled entity being directed to satisfy payment to the vendor of 50% interest of the property. The net cash outflow, being the cash disposed of following deconsolidation was $2 million. The carrying value of the net assets at the time of disposal approximated the consideration received, resulting in no gain or loss on the sale recognised in the consolidated SoCI.

H OTHER DISCLOSURES

This section provides additional required disclosures that are not covered in the previous sections.

H1 CONTINGENT LIABILITIES

A contingent liability is a possible obligation that may become payable depending on a future event or a present obligation that is not probably to require payment/cannot be reliably measured. A provision is not recognised for contingent liabilities.

The consolidated entity had contingent liabilities at 30 June 2022 in respect of the following:

		2022 $000	2021 $000
	Health and safety claims 119 160

The consolidated entity has no contingent liabilities relating to JVs (2021: nil).

H2 EARNINGS PER STAPLED UNIT

Basic earnings per stapled unit (EPU) is calculated by dividing:

 the profit attributable to stapled unitholders; by

 the weighted average number of ordinary units (WANOU) outstanding during the year.

Diluted EPU adjusts the WANOU to take into account the dilutive potential of ordinary securities from security-based payments.

	2022	2021
Earnings per stapled unit
Basic EPU (cents)	18.1	20.3
Diluted EPU (cents)	18.1	20.3
Profit for the year attributable to stapled unitholders ($m) used to calculate basic and
diluted EPU	712	798
WANOU used in calculating basic EPU (m)	3,941	3,936
WANOU used in calculating diluted EPU (m)	3,942	3,937

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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H3 KEY MANAGEMENT PERSONNEL

Key management personnel compensation

Key management personnel (KMP) are employed by an entity controlled by Mirvac Limited. Payments made from the consolidated entity to Mirvac Limited and its controlled entities do not include any amounts directly attributable to the compensation of KMP. The total payments made to Mirvac Limited and its controlled entities are shown in note H4.

Equity instrument disclosures relating to KMP

Securityholdings

As at 30 June 2022, the number of ordinary securities in Mirvac held during the year by each Executive KMP, including their personally related parties, is set out below:

Balance 1 July 2021 Changes Balance 30 June 2022 Value 30 June 2022 $ Minimum securityholding guideline $ Date securityholding to be attained1 Executive KMP Susan Lloyd-Hurwitz 5,020,678 44,613 5,065,291 10,029,276 2,250,000 June 2021 Brett Draffen 845,000 195,077 1,040,077 2,059,352 950,000 June 2021 Campbell Hanan 420,344 70,000 490,344 970,881 950,000 June 2021 Stuart Penklis2 215,727 126,548 342,275 677,705 800,000 May 2022 Courtenay Smith3 - 45,218 45,218 89,532 800,000 March 2026	Balance 1 July 2021	Changes	Balance 30 June 2022	Value 30 June 2022 $	Minimum securityholding guideline $	Date securityholding to be attained1

1 Minimum securityholding requirement and attainment date is based on the new requirements effective from FY19.

2 Stuart Penklis had met the minimum securityholding guideline based on security price during the year, and is expected to meet the guideline with future vesting and security price growth.

3 Courtenay Smith has five years from the date she commenced in March 2021 to build up her securityholding to the expected level.

Options

No options (i.e. a right to acquire a security upon payment of an exercise price) were granted as remuneration during the year ended 30 June 2022 and no unvested or unexercised options are held by Executive KMP as at 30 June 2022.

Performance rights held during the year

The number of performance rights in Mirvac held during the year by each Executive KMP, including their personally-related parties, is set out below:

		Long-term Incentives (LTI)	Long-term Incentives (LTI)	Deferred Short-term Incentives (STI)	Deferred Short-term Incentives (STI)
	Balance 1 July 2021	Rights issued	Rights vested/forfeited relating to performance period ended 30 June 2022	Rights issued	Rights vested/ forfeited	Balance 30 June 2022
Executive KMP Susan Lloyd-Hurwitz 1,850,357 857,224 (770,547) 181,145 (62,398) 2,055,781 Brett Draffen 719,501 325,745 (292,808) 114,725 (40,077) 827,086 Campbell Hanan 381,704 180,969 (136,986) 100,384 (29,931) 496,140 Stuart Penklis 347,790 152,395 (136,986) 84,534 (29,931) 417,802 Courtenay Smith 180,872 152,395 - 19,738 (45,218) 307,787

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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H3 KEY MANAGEMENT PERSONNEL (continued)

Equity instrument disclosures relating to KMP (continued)

Details of the movement in the number and value of performance rights held by Executive KMP during the year are set out below:

						Vested	Vested	Vested	Lapsed	Lapsed	Lapsed
Executive KMP	Plan	Grant date	Number of rights granted	Value at grant date1	Vesting date	Number of rights	% of total grant	Value of rights	Number of rights	% of total gra nt	Value of rights
Susan Lloyd- Hurwitz STI 30 Sep 19 62,398 176,996 30 Sep 21 62,398 100% 176,996 - 0% - LTP 2 Dec 19 770,547 1,684,444 30 Jun 22 308,219 40% 716,936 462,328 60% 967,508 LTP 3 Dec 20 1,017,412 1,649,225 30 Jun 23 - - - - STI 31 Aug 21 90,573 273,735 31 Aug 22 - - - - STI 31 Aug 21 90,572 265,156 31 Aug 22 - - - - LTP 30 Nov 21 857,224 1,475,296 30 Jun 24 - - - -
Total 2,888,726 5,524,852 370,617 893,932 462,328 967,508
Brett Draffen STI 30 Sep 19 40,077 113,681 30 Sep 21 40,077 100% 113,681 - 0% - LTP 2 Dec 19 292,808 640,089 30 Jun 22 117,123 40% 272,435 175,685 60% 367,654 LTP 3 Dec 20 386,616 626,705 30 Jun 23 - - - - STI 31 Aug 21 57,363 173,366 31 Aug 22 - - - - STI 31 Aug 21 57,362 167,931 31 Aug 22 - - - - LTP 30 Nov 21 325,745 560,612 30 Jun 24 - - - -
Total 1,159,971 2,282,384 157,200 386,116 175,685 367,654
Campbell Hanan STI 30 Sep 19 29,931 84,901 30 Sep 21 29,931 100% 84,901 - 0% - LTP 2 Dec 19 136,986 299,457 30 Jun 22 54,794 40% 127,454 82,192 60% 172,003 LTP 3 Dec 20 214,787 348,170 30 Jun 23 - - - - STI 31 Aug 21 50,192 151,693 31 Aug 22 - - - - STI 31 Aug 21 50,192 146,941 31 Aug 22 - - - - LTP 30 Nov 21 180,969 311,451 30 Jun 24 - - - -
Total 663,057 1,342,613 84,725 212,355 82,192 172,003
Stuart Penklis STI 30 Sep 19 29,931 84,901 30 Sep 21 29,931 100% 84,901 - 0% - LTP 2 Dec 19 136,986 299,457 30 Jun 22 54,794 40% 127,454 82,192 60% 172,003 LTP 3 Dec 20 180,873 293,195 30 Jun 23 - - - - STI 31 Aug 21 42,267 127,742 31 Aug 22 - - - - STI 31 Aug 21 42,267 123,740 31 Aug 22 - - - - LTP 30 Nov 21 152,395 262,274 30 Jun 24 - - - -
Total 584,719 1,191,309 84,725 212,355 82,192 172,003
Courtenay Smith STI 26 Mar 21 45,218 106,579 8 Mar 22 45,218 100% 106,579 - 0% - STI 26 Mar 21 45,218 103,233 8 Mar 23 - - - - LTP 26 Mar 21 90,436 127,515 30 Jun 23 - - - - STI 31 Aug 21 9,869 29,827 31 Aug 22 - - - - STI 31 Aug 21 9,869 28,892 31 Aug 22 - - - - LTP 30 Nov 21 152,395 262,274 30 Jun 24 - - - -
Total 353,005 658,320 45,218 106,579 - -
1. The calculation of the value of performance rights used the fair value as determined at the time of grant. For the LTP grants subject to Return On Invested Capital (ROIC) performance, the initial accounting treatment assumes 75 per cent vesting, which is reflected in the above valuation.

Mirvac Property Trust and its controlled entities Notes to the consolidated financial statements For the year ended 30 June 2022

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H4 RELATED PARTIES

The Responsible Entity

The Responsible Entity of the Trust is Mirvac Funds Limited, an entity incorporated in New South Wales and ultimately controlled by Mirvac Limited.

As outlined in the Explanatory Memorandum dated 4 May 1999, Mirvac Funds Limited charges MPT Responsible Entity fees on a cost recovery basis. Fees charged by Mirvac Funds Limited for the year ended 30 June 2022 were $28 million (2021: $20 million).

Transactions with related parties

	Note	2022 $000	2021 $000
Property rental revenue from entities related to Responsible Entity 8,197 13,434 Fees paid to Responsible Entity (28,484) (19,965) Interest paid to entities related to Responsible Entity (66,802) (69,809) Property management fee expense paid to entities related to Responsible Entity (18,046) (18,881) Capital expenditure paid to entities related to Responsible Entity (113,417) (172,389) Sale/(Purchase) of investment property from/to related party 169,833 (48,500) Amounts due to entities related to Responsible Entity F4 75,545 28,716 Loans from entities related to Responsible Entity D2 1,891,000 1,884,000

Capital expenditure paid to related parties is on a cost recovery basis, all other transactions with related parties were made on commercial terms and conditions.

Transactions between Mirvac and its JVs were made on commercial terms and conditions. Distributions received from JVs were on the same terms and conditions that applied to other unitholders.

H5 AUDITOR’S REMUNERATION

	2022	20211
	$000	$000
Audit services Audit and review of financial reports Other assurance services	712 233	821 271
Total auditor’s remuneration	945	1,092

2021 audit fee revised to reflect additional billing relating to the 30 June 2021 audit not agreed at the date of signing.

Mirvac Property Trust and its controlled entities Directors’ declaration For the year ended 30 June 2022

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In the Directors’ opinion:

(a) the financial statements and notes set out on pages 8 to 36 are in accordance with the Corporations Act 2001 , including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable.

The basis of preparation note confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

The Directors have been given the declarations by the Chief Executive Officer/Managing Director and the Chief Financial Officer required by section 295A of the Corporations Act 2001 .

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

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Susan Lloyd-Hurwitz Director

Sydney 11 August 2022

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Independent auditor’s report

To the stapled securityholders of Mirvac Property Trust

Report on the audit of the financial report

Our opinion

In our opinion:

The accompanying financial report of Mirvac Property Trust (the Registered Scheme, MPT or Trust) and its controlled entities (together the consolidated entity) is in accordance with the Corporations Act 2001 , including:

(a) giving a true and fair view of the consolidated entity's financial position as at 30 June 2022 and of its financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

What we have audited

The consolidated entity financial report comprises:

the consolidated statement of financial position as at 30 June 2022
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information
the Directors’ declaration.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the consolidated entity in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

PricewaterhouseCoopers, ABN 52 780 433 757 One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001 T: +61 2 8266 0000, F: +61 2 8266 9999

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

Liability limited by a scheme approved under Professional Standards Legislation.

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Our audit approach

An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the consolidated entity, its accounting processes and controls and the industry in which it operates.

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Materiality

For the purpose of our audit we used overall consolidated entity materiality of $22.98 million, which represents approximately 5% of the profit before tax of the consolidated entity adjusted for certain items as outlined below.

We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole.

Audit scope Key audit matters

Our audit focused on where the consolidated entity made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events.

Amongst other relevant topics, we communicated the following key audit matters to the Audit and Risk Committee:

● Fair value of investment properties

The consolidated entity owns and manages investment property assets across Sydney, Melbourne, Brisbane, Perth and Canberra. The accounting processes are structured around a consolidated entity finance function at its head office in Sydney.

These are further described in the Key audit matters section of our report.

We chose profit before tax (as adjusted) of the consolidated entity because, in our view, it is the benchmark against which the performance of the consolidated entity is most commonly measured.

Profit before tax is adjusted for fair value movements in investment property, unlisted equity investments and other significant non-cash items.

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We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context.

Key audit matter

Fair value of investment properties (Refer to note C1) $10,341m

Investment properties are recognised at fair value. The consolidated entity’s estimate of fair value of investment properties includes assumptions about unobservable inputs including future market and economic conditions which are inherently subject to the risk of change. The faster than expected economic recovery from COVID-19, supply chain issues and global conflicts have led to stronger inflationary pressures and a rapidly changing economic environment in which interest rate hikes have been brought forward. This has increased the level of judgement and uncertainty in the assumptions used in determining the fair value of investment properties as described in note C1.

At each reporting period, the Directors determine the fair value of the consolidated entity’s investment property portfolio having regard to the consolidated entity’s valuation policy which requires all properties to be externally valued by valuation experts at least once every two years. In the period between external valuations the Directors’ valuation is supported by internal valuation models.

Fair value of investment properties was a key audit matter because:

Investment property balances are financially significant in the Consolidated Statement of Financial Position.
The impact of changes in the fair value of investment properties can have a significant effect on the consolidated entity’s total comprehensive income.
Investment property valuations are inherently subjective due to the use of

How our audit addressed the key audit matter

We evaluated the design of the consolidated entity’s relevant controls over the investment property valuation process and assessed whether a sample of these controls operated effectively throughout the year including:

The consolidated entity’s compliance with its policy to externally value all properties at least once in the last two years and to rotate valuation firms.
The approval of the adopted fair values for all individual properties by the Directors.

We evaluated the appropriateness of the valuation methodologies used against the requirements of Australian Accounting Standards.

We agreed the fair values of all properties to the external valuation or internal valuation model (together, the ‘valuations’) and assessed the competency, capability and objectivity of the relevant external or internal valuer.

We read recent independent property market reports to develop our understanding of the prevailing market conditions in which the consolidated entity invests.

We engaged PwC valuation experts to join our discussions with several valuation firms to obtain an understanding and assess the appropriateness of the methodology used.

We met with management to discuss the specifics of the property portfolio including, amongst other things, any significant leasing activity, capital expenditure and vacancies impacting the portfolio.

We evaluated the completeness and accuracy of tenancy schedules used in the valuations on a sample basis to evaluate whether the relevant leasing information had been correctly input. We performed a risk assessment over the consolidated entity’s

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*Key audit matter*	*Key audit matter*	*How our audit addressed the key audit matter*
	unobservable inputs in the valuation	investment property portfolio to determine those
	methodology.	properties at greater risk of fair value being materially
●	Fair values are highly sensitive to changes in key assumptions.	misstated. Our risk assessment was informed by our understanding of each property, consideration of the results of the consolidated entity’s estimate of fair value
		and our understanding of current market conditions.
		For those properties which were assessed as being at
		greater risk, we performed procedures to assess the
		appropriateness of key assumptions used in the
		consolidated entity’s assessment of fair value. In our
		audit procedures over the valuations we:
		● Obtained the valuation and held discussions
		with management to develop an
		understanding of the basis for assumptions
		used.
		● Assessed the appropriateness of the
		methodology adopted and the mathematical
		accuracy of the valuations.
		● Assessed the appropriateness of the
		significant assumptions in the valuation
		including capitalisation rate, discount rate
		market rents used in the valuation by
		comparing them against market data for
		comparable properties.
		● Assessed the appropriateness of rental
		income data used in the valuation against
		rental income recorded in the general ledger in
		FY22 for each property.
		We also assessed the reasonableness of the
		consolidated entity’s disclosures against the
		requirements of Australian Accounting Standards.

Other information

The directors of the Responsible Entity are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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Responsibilities of the directors of the Responsible Entity for the financial report

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

In preparing the financial report, the directors of the Responsible Entity are responsible for assessing the ability of the consolidated entity to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors of the Responsible Entity either intends to liquidate the consolidated entity or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report.

Responsibilities

The directors of the Responsible Entity are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

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PricewaterhouseCoopers

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Voula Papageorgiou Partner

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Joe Sheeran Partner

Sydney 11 August 2022

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AI assistant

MIRVAC GROUP — Annual Report 2022

65328_rns_2022-08-10_dc98f5c1-49de-4e3a-b436-1136f8311bbf.pdf

MIRVAC PROPERTY TRUST AND ITS CONTROLLED ENTITIES

Annual Report For the year ended 30 June 2022

DIRECTORS’ REPORT

Responsible Entity

Directors

Principal activities

REVIEW OF OPERATIONS AND ACTIVITIES

FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS

Key financial highlights for the year ended 30 June 2022:

REVIEW OF OPERATIONS AND ACTIVITIES (continued)

FINANCIAL, CAPITAL MANAGEMENT AND OPERATIONAL HIGHLIGHTS (continued)

Key capital management highlights for the year ended 30 June 2022:

Key operational highlights for the year ended 30 June 2022:

Outlookand risks[1]

Office:

Industrial:

Retail:

REVIEW OF OPERATIONS AND ACTIVITIES (continued)

Significant changes in the state of affairs

Interests in the Trust

Instruments held by Directors

Fees paid to the Responsible Entity or its associates

REVIEW OF OPERATIONS AND ACTIVITIES (continued)

Net current asset deficiency

Matters subsequent to the end of the year

Environmental regulations

Non-audit services

Insurance of officers

REVIEW OF OPERATIONS AND ACTIVITIES (continued)

Auditor’s independence declaration

Rounding of amounts

Auditor’s Independence Declaration

CONTENTS

CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Mirvac Funds Limited

Mirvac Property Trust and its controlled entities Consolidated statement of comprehensive income For the year ended 30 June 2022

Mirvac Property Trust and its controlled entities Consolidated statement of financial position As at 30 June 2022

Mirvac Property Trust and its controlled entities Consolidated statement of changes in equity For the year ended 30 June 2022

Mirvac Property Trust and its controlled entities Consolidated statement of cash flows For the year ended 30 June 2022

A BASIS OF PREPARATION

Mirvac Group – stapled securities

Statement of compliance

Net current asset deficiency

Basis of preparation

Basis of preparation (continued)

Macro Environment Impacts

Impact of global conflict on the consolidated entity

Supply chain pressure

Inflation rising and interest rates increasing

Comparative information

Critical accounting estimates and judgements

New and amended standards adopted by the Trust

B RESULTS FOR THE YEAR

B1 SEGMENT INFORMATION

B2 REVENUE

Investment property rental revenue

B3 EXPENSES

Investment property expenses and outgoings

B4 EVENTS OCCURRING AFTER THE END OF THE YEAR

B5 INCOME TAX

C INVESTMENT ASSETS

…………………………………………………………………………………………………

C1 INVESTMENT PROPERTIES

Investment properties

Judgement in fair value estimation

C1 INVESTMENT PROPERTIES (continued)

Ground leases

Lease incentives

Derecognition of investment properties

Commitments

C1 INVESTMENT PROPERTIES (continued)

Movements in investment properties

Fair value measurement and valuation basis

C1 INVESTMENT PROPERTIES (continued)

Sensitivity analysis

C1 INVESTMENT PROPERTIES (continued)

MIRVAC GROUP Annual Report 2022