NTT DC Reit proposes DPU-linked performance fee for manager

[SINGAPORE] The manager of NTT DC Reit is proposing changes to its management fee structure that it expects will better align with the interests of the unitholders of the real estate investment trust (Reit).

The move is set to grow distributions and overall total returns for unitholders as it ensures that higher fees are earned only upon achieving stronger DPU growth, the manager said in a statement on Thursday (Oct 8).

It is looking to link its performance fee directly to year-on-year growth in the distribution per unit (DPU).

This will be split into two tiers: 0.1 per cent per annum of the deposited property when DPU growth exceeds 3 per cent but is below 5 per cent; or 0.2 per cent per annum of the deposited property when DPU growth is at least 5 per cent.

No performance fee will be payable if year-on-year DPU growth is 3 per cent or less.

Currently, the performance fee is based on the Reit’s net property income.

The manager is also proposing to revise the issue price of the management fee that is paid in the form of the Reit’s units. The units will be issued at the net asset value (NAV) per unit, instead of the prevailing market price, when the price is at or below the NAV per unit.

This will also mitigate the potential dilution arising from the issuance of units, the manager said.

As a further sign of commitment to strengthen the alignment of interest with unitholders, the manager said it would waive its entitlement to a performance fee for its financial year 2026/2027 if the actual DPU achieved in the year is less than US$0.078.

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It will also cap its entitlement to performance fees in FY26/27 to US$3.726 million.

Yutaka Torigoe, chief executive of the Reit manager, said: “We believe DPU growth is a more robust measure of performance, as it better captures the combined impact of operating performance, capital management, financing decisions and cost discipline.

“The changes will align our remuneration more closely with sustainable DPU growth and long-term value creation.”

Units of NTT DC Reit closed 0.5 per cent or US$0.005 lower at US$0.935 before the announcement.