Fortune, Mapletree, Frasers Are Among Best-Value Singapore REITs

  • UOB analysts rank REITs comparing fees to assets and growth
  • Performance fees don’t neccesarily align investor interests

Fortune REIT, Mapletree Commercial Trust and Frasers Commercial Trust are among the best-value real estate investment trusts in Singapore, according to UOB Kay Hian Pvt.

UOB ranked the city-state’s REITs by comparing management fees to assets under management and dividend and net asset growth. Fortune REIT topped the rankings with a ratio of 0.03, followed by Mapletree Commercial at 0.05. (See table below)

“Setting the bar too high in aligning unitholders’ and REIT manager’s interests, in terms of performance fees, may not always yield the intended results,” UOB analysts Vikrant Pandey and Derek Chang said in a note to clients on Tuesday.

Rather REIT managers may be incentivized to rely on acquisition and sale fees, particularly as industry headwinds or operational difficulties diminish the likelihood of reaching the high standards set to obtain performance-driven fees, they said.

“REIT managers have been in the limelight since the start of the year, ranging from unitholders’ outrage at Sabana REIT’s controversial proposed acquisitions to raised eyebrows over Keppel REIT’s rental reversion methodology restatement,” analysts Vikrant Pandey and Derek Chang at UOB Kay Hian Pte in Singapore said in a note to clients.

Investors in Sabana Shari’ah Compliant Industrial Real Estate Investment Trust will vote this month on whether to fire the REIT’s managers because of lacklustre performance. Keppel in January disclosed discrepancies in how it calculated changes in rent upon the renewal of leases in the first nine months of 2016.

Sabana REIT has one of the most unitholder-friendly policies, with performances fees payable only if annual dividend growth reaches 10 percent. However, the dividend has declined in three of the past five years, Pandey said.

Below is a list of REITs with the lowest fees as a ratio of assets under management to growth.

REITFee/AUMGrowthFee/AUM:Growth
Fortune REIT0.3812.10.03
Mapletree Commercial0.418.10.05
Frasers Commercial0.597.80.08
Frasers Centrepoint0.547.10.08
CapitaLand Retail China0.444.00.11
CapitaLand Commercial0.353.00.12

Source: UOB Kay Hian.
Note: Excludes REITs listed in past three years.

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