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.