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1 GENERAL (CONT’D)
(ii)
H-REIT Manager’s fees (cont’d)
For the provision of ongoing management services to H-REIT, the H-REIT Manager is entitled to receive an
annual management fee in the form of a base fee and a performance fee as stipulated above. Collectively,
these fees form the recurrent and substantial portion of the H-REIT Manager’s total remuneration as
consideration for an extensive service scope which includes, but is not limited to the functions of investment
management, active asset management, capital and risk management, financing, and investor relations
rendered by the H-REIT Manager.
H-REIT Manager’s base fee is based on a percentage of the value of H-REIT’s Deposited Property as the
scope of H-REIT Manager’s duties is commensurate with the size of the asset portfolio of H-REIT and the
H-REIT Manager should be compensated for performing its core functions. In addition, the H-REIT Manager
has accepted the majority of its base fees in Stapled Securities and this will serve to align the interests of the
H-REIT Manager with that of Stapled Security Holders as the H-REIT Manager will assume a vested interest
in the performance of the H-REIT Group. The base fee payable to the H-REIT Manager has been assessed
by the board of directors of H-REIT (the "
H-REIT Board
") and the H-REIT Board believes that the base fee
is reasonable and in line with market practices.
The performance fee payable to the H-REIT Manager is based on a percentage of the H-REIT Group’s net
property income. The fee methodology is highly transparent and reflective of the alignment of interest
between the H-REIT Manager and Stapled Security Holders in driving higher income yields over the long
term through proactive management, asset enhancement/repositioning initiatives and cost efficiencies.
Accordingly, the H-REIT Board is of the view that the performance fee will incentivise the H-REIT Manager
to take a holistic and balanced approach towards seeking growth opportunities and encourage the H-REIT
Manager to act in the interests of Stapled Security Holders to enhance the net property income and
consequently the long-term value of assets. With effect from 1 January 2016, the performance fee payable
will be made on an annual basis in arrears, subsequent to the end of the financial year.
• Acquisition fee of 1% of the acquisition price and a divestment fee of 0.5% of the sale price on all future
acquisitions or disposals of properties respectively. Such fees are for services rendered towards the strategic
acquisition or disposal of any property by H-REIT in deriving long term returns for its Stapled Security
Holders. Both the acquisition fee and divestment fee are payable in the form of Stapled Securities and/
or cash as the H-REIT Manager may elect, and in such proportion as may be determined by the H-REIT
Manager. In the event that the H-REIT Manager receives an acquisition fee in connection with a transaction
with a related party, any such acquisition fee shall be paid in the form of Stapled Securities issued at the
market price.
The acquisition fee is based on a percentage of the purchase consideration for any real estate purchased
directly or indirectly by H-REIT. The divestment fee payable to H-REIT Manager is based on a percentage
of the sale consideration for any real estate sold directly or indirectly by H-REIT. The acquisition fee and
divestment fee recognises the time, effort and cost spent by the H-REIT Manager in the sourcing, evaluation
and execution of potential opportunities to acquire or divest properties, so as to continue delivering
long-term sustainable income or realise capital value gains for Stapled Security Holders respectively.
As the H-REIT Manager has to provide these services over and above the overall management of the H-REIT
Group, the H-REIT Manager should be compensated fairly to reflect the additional efforts expended and
the costs incurred in such transactions. The H-REIT Board has also considered and is of the view that such
fees are reasonable and in line with market practices.
(iii)
H-REIT Trustee’s fee
Pursuant to the H-REIT Trust Deed, the H-REIT Trustee’s fee shall not exceed 0.1% per annum of the value of
H-REIT’s Deposited Property (subject to a minimum of $10,000 per month) or such higher percentage as may
be fixed by an extraordinary resolution of a meeting of holders of the H-REIT units. The H-REIT Trustee’s fee is
payable out of H-REIT’s Deposited Property on a monthly basis, in arrears. The H-REIT Trustee is also entitled to
reimbursement of expenses incurred in the performance of its duties under the H-REIT Trust Deed.
Based on the current agreement between the H-REIT Manager and the H-REIT Trustee, the H-REIT Trustee’s fee
is charged on a scaled basis of up to 0.02% per annum of the value of H-REIT’s Deposited Property (subject to
a minimum of $10,000 per month).
NOTES TO THE FINANCIAL STATEMENTS
