KIT trustee-manager proposes to peg base, performance fees to distributions

THE trustee-manager of Keppel Infrastructure Trust (KIT) A7RU has proposed new base fee and performance fee structures pegged to distributable income and distribution per unit (DPU) growth respectively.

The move will help the trustee-manager better align its interests with the business trust's unitholders and support KIT's growth plans, it said in a bourse filing on Monday (Mar 28).

The trustee-manager is proposing its base fee be amended to 10 per cent per annum of KIT's distributable income, versus its existing base management fee of S$2 million per annum.

If approved, the proposed base fee will be implemented progressively over the financial year ending Dec 31, 2022, to reflect the progressive building-up of KIT's portfolio of assets by the trustee-manager and allow it more time to build up its resources.

Meanwhile, it has proposed an adjustment of its performance fee to 25 per cent per annum of any increase in DPU, multiplied by the weighted average number of issued units, instead of the present 4.5 per cent performance fee pegged to the trust's income. The performance fee will only take effect from Q3 2022 onwards and be fully implemented in FY2023.

The trustee-manager's acquisition and divestment fee will remain unchanged at 0.5 per cent or 1 per cent of the acquired investment's enterprise value, and 0.5 per cent of the divested investment's enterprise value.

The proposed adjustments have been deemed by an independent financial adviser to be on "normal commercial terms and not prejudicial to the interests" of KIT and minority unitholders.

As such, the trustee-manager's audit and risk committee, along with directors who are considered independent from the matter, recommend unitholders vote in favour of the proposed base fee and performance fee supplement.

The new proposed fee structures will give the trustee-manager more resources to manage KIT's portfolio, bolstering its ability to "optimise and create greater value". It will also enhance the trustee-manager's ability to drive growth through new acquisitions and investments.

The trustee-manager noted that the proposed fee structure is widely adopted by Singapore real estate investment trusts (Reits) listed in the last 5 years. The fee quanta, as a percentage of assets under management, market capitalisation and revenue, are within the market range charged by selected business trusts, it said.

Jopy Chiang, chief executive of the trustee-manager, said the revised fee structure is the result of an extensive exercise that includes peer benchmarking and considers the alignment with unitholders' interests.

He said the company will broaden its global reach and expand its talent pool in investment origination, deal execution and portfolio management.

"To this end, we are looking to establish offices in key overseas markets to create new synergies and increase deal flow, which will allow us to scale up faster and accelerate KIT's growth plans," he added.

The trustee-manager's workforce has grown to 22 employees as at Dec 31, 2021, from 7 staff since its listing in 2010, along with its portfolio, which has grown to S$4.6 billion as at end-February 2022 from S$760 million at its listing.

The trustee-manager will seek unitholder approval for the proposed base and performance fee amendments at an extraordinary general meeting to be held on Apr 19.

Units of KIT closed 0.9 per cent or S$0.005 lower at S$0.56 on Monday.