Martin Lee @ Sg
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Sale of Unit by Suntec REIT’s Manager

There was an article in the Straits Times which mentioned that minority shareholders were upset with the bulk sale of Suntec REIT’s units by their manager.

Minority shareholders are upset that this unloading is depressing the share price of Suntec REIT.

How it came about is because the manager is paid 80% of its management fees by the issuance of Suntec REIT units.

Mr Yeo See Kiat, chief executive officer of ARA Trust Management (Suntec), the manager of Suntec REIT, said the units were sold to fund the operations of the REIT manager, such as rent and salaries.

Last year, the manager was paid S$36.1 million, out of which S$28.3 million came in the form of 22.1 million new units in Suntec REIT. This works out to be an average price of S$1.28 per Suntec REIT unit.

I had a chuckle when I read this statement by Mr Yeo, “‘The manager is happy to receive our fees in cash but by receiving 80% of our fees in units, our interests are aligned with our unitholders.”

I would think alignment of the interests only works if the manager had kept all or most of their units. As it is, ARA Trust Management (Suntec) sold almost all of the units that they had received as part of the management fee.

It only held 893 units at the middle of last month, having sold more than 20 million units in the open market. So much for alignment of interests.

However, the parent company, ARA Asset Management, does hold 34 million units in Suntec REIT. This is a long term stake which they mentioned they will not sell.

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1 comment
Mr X says 9 years ago

The alignment part is obvious corporate relations talk on the CEO’s part, commically contradictory, but ultimately of no consequence.

While I can understand the frustrations of existing unitholders over the stagnant unit prices, it makes no sense to charge that a 5-6k lots sell off of management units every 3 months is the cause of percieved unsatisfactory price performance. These units hardly amount to a single day’s trading volume. Institutuional buying & selling discretions would have a larger magnitude on pricing.

Unitholders would be better off querying the potential hangover effects of ORQ/MBFC income support expiry, details of Suntec City’s makeover and/or debt renewal risks in the next few years while the fund undergoes a delicate transformation of its jewel assets.

I believe investors should be more concerned with these issues than wasting time over such trivial matters.

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