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.
