ESR-REIT (formerly Cambridge Industrial Trust)

[AlphaQuant]

bit funny:

quarterly results:
gross revenue: 24.5mio
NPI: 20.8mio
Performance Fee: 13.8mio
"Performance fees are calculable every half-year to 30 June and 31 December. For the 6 month period ended 30 June 2013, the total return of CIT’s Trust Index has exceeded the total return of the Benchmark Index by 16.9%, resulting in a fee of approximately S$27.7 million.
The Manager has voluntarily and irrevocably elected a once off fee waiver to reduce the performance fee payable for the half year to approximately S$13.9 million, being 50% of the Manager’s entitlement under the Trust Deed."

Distribution comes entirely from the capital returns from their disposals. It's amazing how high their performance fees can go when half year fees can potentially be > a quarter of revenue.

[KopiKat]

bit funny:

quarterly results:
gross revenue: 24.5mio
NPI: 20.8mio
Performance Fee: 13.8mio
"Performance fees are calculable every half-year to 30 June and 31 December. For the 6 month period ended 30 June 2013, the total return of CIT’s Trust Index has exceeded the total return of the Benchmark Index by 16.9%, resulting in a fee of approximately S$27.7 million.
The Manager has voluntarily and irrevocably elected a once off fee waiver to reduce the performance fee payable for the half year to approximately S$13.9 million, being 50% of the Manager’s entitlement under the Trust Deed."

Distribution comes entirely from the capital returns from their disposals. It's amazing how high their performance fees can go when half year fees can potentially be > a quarter of revenue.

Woah... This must rank them in the same class of "Top Performers" as MIIF & CitySpring...

Fortunately (?), they did place a cap on the payout quantum and this will be done over 3 years. Pg 14 of Financials,

As the payment for the total of the manager’s fees and performance the fees are capped at 0.4% of the CIT’s total deposited property value per half year under the Trust Deed, the amount payable for the half year ended 30 June 2013 is approximately S$2.1 million. The amount in excess of the fee cap of approximately S$11.8 million will be carried forward for payment in the future half year periods, and is expected to be paid over the next three years.

[AlphaQuant]

Took a look at the details of the formula for the management fees.
It looks rather innocuous and aligned to the unitholder's interest at first sight; i think the killer is the high absolute number when the fees==
a) 5% * X * market cap for Tier 1 and
b) 15% * Y *market cap for Tier 2
and given that the market cap right now is 1224mio*0.745=912mio

so performance fee = 0.2*(0.169-0.02)*912= 27mio thereabouts.
The larger the REIT gets (no. of units*price), the higher the fees.

******************
Management Fees — Performance Fee
A Performance Fee, where the total return (comprising
capital gains and accumulated distributions and
assuming all distributions are re-invested in CIT) of the
Units (expressed as the Trust Index) in any Half Year
exceeds the total return (comprising capital gains and
accumulated distributions and assuming re-investment
of all distributions) of the Benchmark Index.
The Performance Fee is calculated in two tiers as
follows:
• a Tier 1 Performance Fee equal to 5.0% of the
amount by which the total return of the Trust Index
exceeds the total return of the Benchmark Index,
multiplied by the Equity Market Capitalisation of
CIT; and
• a Tier 2 Performance Fee which is applicable only
where the total return of the Trust Index is in
excess of 2.0% per annum (1.0% for each Half
Year) above the total return of the Benchmark
Index. This tier of the fee is calculated at 15.0% of
the amount by which the total return of the Trust
Index is in excess of 2.0% per annum above the
total return of the Benchmark Index, multiplied by
the Equity Market Capitalisation of CIT.

where the Benchmark Index refers to:
a performance tracking index comprising all of the real estate investment trusts contained in the
FTSE AllCap Singapore universe (but excluding CIT) provided by FTSE or another index provider
with similar capabilities

[KopiKat]

Templeton reduced their holding from 7.08% to 6.99% on 31-Jul in today's SGX Annc.

Due to the huge Performance Fee as highlighted by 'AlphaQuant', I have also suggested to my family and friends to avoid this REIT. Better safe than sorry...

[Greenrookie]

Took a look at the details of the formula for the management fees.
It looks rather innocuous and aligned to the unitholder's interest at first sight; i think the killer is the high absolute number when the fees==
a) 5% * X * market cap for Tier 1 and
b) 15% * Y *market cap for Tier 2
and given that the market cap right now is 1224mio*0.745=912mio

so performance fee = 0.2*(0.169-0.02)*912= 27mio thereabouts.
The larger the REIT gets (no. of units*price), the higher the fees.

******************
Management Fees — Performance Fee
A Performance Fee, where the total return (comprising
capital gains and accumulated distributions and
assuming all distributions are re-invested in CIT) of the
Units (expressed as the Trust Index) in any Half Year
exceeds the total return (comprising capital gains and
accumulated distributions and assuming re-investment
of all distributions) of the Benchmark Index.
The Performance Fee is calculated in two tiers as
follows:
• a Tier 1 Performance Fee equal to 5.0% of the
amount by which the total return of the Trust Index
exceeds the total return of the Benchmark Index,
multiplied by the Equity Market Capitalisation of
CIT; and
• a Tier 2 Performance Fee which is applicable only
where the total return of the Trust Index is in
excess of 2.0% per annum (1.0% for each Half
Year) above the total return of the Benchmark
Index. This tier of the fee is calculated at 15.0% of
the amount by which the total return of the Trust
Index is in excess of 2.0% per annum above the
total return of the Benchmark Index, multiplied by
the Equity Market Capitalisation of CIT.

where the Benchmark Index refers to:
a performance tracking index comprising all of the real estate investment trusts contained in the
FTSE AllCap Singapore universe (but excluding CIT) provided by FTSE or another index provider
with similar capabilities

What does beating the benchmark index returns mean? It mean the price of Cambridge units rose faster than the index returns? returns include distribution too?

Seems a bit too complicated to me.

Sabana's management fees seem more straight forward and unitholder friendly:

The Manager is entitled, under the Trust Deed, to a management fee comprising:
k a base fee of 0.5% per annum of the value of the Deposited Property; and
k a performance fee of 0.5% per annum of the Net Property Income in each relevant year,
provided Sabana Shari’ah Compliant REIT achieves at least 10.0% in annual growth in
DPU over the previous financial year1 (calculated after accounting for the performance
fee (if any) for that financial year and after adjusting, at the discretion of the Manager, for
any new Units arising from the conversion or exercise of any instruments convertible into
Units which are outstanding at the time of calculation, and any rights or bonus issue,
consolidation, subdivision or buy-back of Units).

Although I have difficulty understanding how the CMF work

(Not vested in both)

[AlphaQuant]

What does beating the benchmark index returns mean? It mean the price of Cambridge units rose faster than the index returns? returns include distribution too?

For CIT currently, the definition of the Benchmark Index is:
a performance tracking index comprising all of the real estate investment trusts contained in the
FTSE AllCap Singapore universe (but excluding CIT) provided by FTSE.

The performance includes DPU, as well as the capital gains from the stock price, so in a way unitholders should be happy for CIT to outperform the index. The catch in this case, unfortunately, is the formula of X*market cap which turns out to be a huge number as time goes on since market cap rises esp with increased no. of units.

[egghead]

My feel is that the comparison should be with industrial REIT only to be comparable.

[NTL]

If they are taking performance fees for outperforming the index, then shouldn't they take a cut when they under perform?

[Greenrookie]

My feel is that the comparison should be with industrial REIT only to be comparable.

Totally agreed, industrial reits will have a heads up when yield is compared to malls reits. Also, CIT is still a "mickey mouse" reit which is relatively easier to pump up DPU by 1-2 big acquisitions, as compared to A-reits which need to either buy a super big industrial properties or buy many of them to make an impact on DPU.

Thought the KPI is highly beneficiary to management then to shareholders, especially with the big cut.

[orangetea]

Templeton reduced their holding from 7.08% to 6.99% on 31-Jul in today's [URL="http://infopub.sgx.com/FileOpen/Disclosureofinterest_FranklinResourcesInc_revisedForm3_2Aug2013.ashx?App=Announcement&FileID=250788"]SGX Annc[/URL].

Due to the huge Performance Fee as highlighted by 'AlphaQuant', I have also suggested to my family and friends to avoid this REIT. Better safe than sorry...

Just an observation... Looks like rebalancing portfolio

Franklin / Templeton, a substantial shareholder..

Jul31 Divest some cambridge (currently 6.99% from 7.08%) - $819,360/1,200 lots

Aug20 Divest some cambridge (currently 6.99% from 7.05%) - $466,760/700 lots

Aug21 invested more ara asset mgmt (curently 6.04% from 5.99%) - $724,248/420 lots

While retaining substantial share holder status