Reduction In Management Fees Announced
Kiwi Income Property Trust Manager Announces A Reduction In Management Fees
Kiwi Income Properties Limited, the Manager of Kiwi Income Property Trust, announced today details of a significant change to its fund management fee structure.
The new structure, which represents an overall reduction in fees, will comprise a base fee of 0.55% of average gross assets and a performance fee calculated on unit holder returns above 10%. The total management fee payable, including both the base and performance fees, will be capped at 0.70% of average gross assets. The performance fee will be calculated and paid half yearly.
Currently fees are 0.85% of average gross assets up to $750 million plus 0.65% of average gross assets over $750 million, giving a blended rate for current assets of approximately 0.78%. The new fee structure represents a significant reduction in fees. Depending on the level of unit holder returns and average gross assets, the annual saving to the Trust will be between $0.9 - $2.7 million.
The following table illustrates the potential savings available to the Trust, under three scenarios.
Under the revised structure, no performance fee will be payable unless the Trust delivers a return to unit holders over a 10% threshold. If the 10% threshold is exceeded, a performance fee will be payable on the basis of 10% of the outperformance over the threshold, up to a cap of 0.15% of average gross assets. Any under or over performance will be carried forward for two years and taken into account in the calculation of future performance fees.
Chairman of the Manager, Sean Wareing, said the revised fee structure would result in a better alignment between the interests of unit holders and the Manager.
“The new structure benefits unit holders by linking management fees directly to the returns they receive. It also results in a lower overall fee, even if the Trust delivers an outstanding performance.”
To further align interests, it is proposed that the performance fee be paid to the Manager in Kiwi Income Property Trust units, subject to the approval of unit holders at the next unit holder meeting.
Mr Wareing said that an independent review of the proposed fee structure undertaken by Deloitte was supportive of the new regime and confirmed it as positive for unit holders.
The Deloitte review found that unit holders will be substantially better off under the proposed structure. The review concluded that:
§ ‘the base fee of 0.55% is at the lower end of the range of base fees charged by New Zealand listed property entities’;
§ ‘the cap results in the performance fee being significantly lower than the potential performance fees that may be paid by other New Zealand listed property entities’; and
§ ‘the maximum fund management fee payable under the proposed fee structure is at the lower end of the potential fund management fees paid by New Zealand listed property entities’.
Mr Wareing said that the Deloitte review also commented on fees paid by the Trust for the provision of property management services and highlighted that the Trust’s property management fees are lower than the majority of its peers.
The Deloitte report found that: ‘Unlike many of the comparable listed property entities, [the Manager] does not charge any fees in respect of rent reviews, acquisitions or disposals of properties. As a result, it is likely that the overall property management fees charged would be at the lower end of the range of fees charged by comparable entities’.
Mr Wareing said the independent review supported the new fee regime and confirmed that, taken together, the Trust’s new fund management fee and its property management fee structures are very competitive with those of its listed peers.
Kiwi Income Properties Limited will continue to waive the management fee associated with the Trust’s 19.4% investment in Capital Properties New Zealand.
The new fund management fee will be effective from 1 April 2005.
For further information please contact:
Kiwi Income Properties Limited
DDI: 64 9 357 9332
Mob: 021 946 157
About Kiwi Income Property Trust
Kiwi Income Property Trust’s objective is to maximise returns for its unit holders through the careful acquisition, development and professional management of its property portfolio. The Trust is listed on the New Zealand Stock Exchange and is ranked 15th by market capitalisation on the NZSX50.
The Trust has a portfolio of 20 properties and has total assets of $1.2bn.
The Trust’s key office assets are located in CBD locations and comprise:
National Bank Centre Auckland
Vodafone House Auckland
AUT Faculty of Arts Building Auckland
Majestic Centre Wellington
BP House Wellington
PricewaterhouseCoopers Centre Christchurch
The Trust’s key retail assets comprise:
Northlands Shopping Centre Christchurch
Centre Place Shopping Centre Hamilton
Downtown Plaza Shopping Centre Hamilton
North City Shopping Centre Porirua
The Plaza Shopping Centre Palmerston North
Kiwi Income Property Trust’s website address is www.kipt.co.nz