How much are you paying your REIT manager?

Goola Warden and Thiveyen Kathirrasan
Goola Warden and Thiveyen Kathirrasan5/31/2022 08:32 PM GMT+08  • 7 min read
How much are you paying your REIT manager?
REITs fees show that managers and sponsors are aligned with investors except for one REIT's manager
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

On May 23, unitholders of Mapletree Commercial Trust (MCT) voted overwhelmingly in an extraordinary resolution to change its fee structure to that of Mapletree North Asia Commercial Trust (MNACT), which MCT is acquiring. MCT’s current fee structure constitutes a base fee of 0.25% per annum of the value of MCT’s deposited property and an annual performance fee of 4% of its Net Property Income (NPI).

With the proposed new fee structure, the management fee for MCT’s manager after the merger with MNACT comprises a base fee of 10% of Distributable Income (DI) per annum and performance fee of 25% of the y-o-y growth in DPU per annum. Under the current fee structure, MCT’s manager would be entitled to a performance fee regardless of DPU growth as it is based on a percentage of NPI. The revised management fee structure, which is pegged to DI and DPU growth, enables closer alignment of interests with unitholders of the merged entity by incentivising sustainable DI and DPU growth. “MCT unitholders should note that the new fee structure will result in lower management fees for the merged entity as a percentage of total assets,” the merger announcement says.

Indeed, while base fee rises significantly, this is more than offset by a fall in performance fees. Based on its illustration in Table 1, the combined MCT-MNACT entity, to be renamed Mapletree Pan-Asia Commercial Trust (MPACT), DPU would have to rise by 20% for its new performance fee to match its current performance fee. This may be a tall order in the short term.

For more insights on corporate trends...
Sign In or Create an account to access our premium content.
Subscription Entitlements:
Less than $9 per month
Unlimited access to latest and premium articles
3 Simultaneous logins across all devices
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)
×
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.
Unlock unlimited access to premium articles with less than $9 per month. Subscribe Now