Michelle

30 Mar 2020

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Are there management fees for individual reits?

What are the various costs that come with REITs? Are there any hidden costs that I should know about?

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Elijah Lee

30 Mar 2020

Senior Financial Services Manager at Phillip Securities (Jurong East)

Yes.

Such management fees usually include some form of base fee (think of it as your basic salary) and performance related fees (think of this component as your bonus)

Base fees are usually based on metrics such as distributable income, or valuation of the property

Performance fees can be pegged to gross revenue, DPU growth, NPI, etc.

There can also be an acquisition fee or divestment which is paid when the REIT acquires or sells a property.

What you want to look out for will be the structure of the fee. For example, if it is based on property valuation, then it's very easy to grow base fees via acquiring new property as this increases the size of the REIT overall, but doesn't mean that the REIT will do better as a result of the new acquisiton.

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Hariz Arthur Maloy

30 Mar 2020

Independent Financial Advisor at Promiseland Independent

Oh absolutely. Usually in the region of 3-9%.

https://dollarsandsense.sg/reit-management-fees...

REITs are extremely expensive to hold. Much more expensive as compared to actively managed equity funds or even some hedge funds.

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I own individual REITs and recently came across the Syfe REIT ETF which consists of some REITs that I do not have. Should I put funds into the ETF or buy the individual REITs?

Why is it in up markets fund managers are high beta, but in down markets sharpe ratios turn negative and then fees cause excess loss beyond ETFs? Does active management work when paying such high fees?

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