Comparing Reit fees: two cases of anomalies

A RECENT report by ING Bank did not sit well with the managers of Keppel Reit and Suntec Reit because it showed them to be grossly overpaid. This was not a research report, but an independent financial adviser's report done by bankers to give an opinion to CapitaLand Mall Trust (CMT) unitholders. CMT was proposing to amend its fee structure, and needed unitholders' approval.

In wanting to show that the proposed fee structure of CMT is in line with market norms, ING selected some Reits to compare with and plotted their management fees as a percentage of performance metrics such as gross revenue and net property income (NPI).

The result is that the bar charts of Keppel Reit and Suntec Reit soared far higher than the others on both counts, such that while the focus of the report was not on them, it inevitably drew attention to them and led readers to wonder if these managers were indeed so overpaid.