Supermarket Income REIT slashes fees for shareholders
Supermarket Income REIT has slashed its fees in a bid to align management’s interest with shareholders.
The trust will now charge fees based on its stock price rather than on underlying assets.
Since the trust trades 21 per cent below the value of its underlying assets, fees will drop by around 20 per cent, according to calculations from Panmure Liberum.
The change could save shareholders £2m a year in fees.
The trust’s shares rose one per cent on the news. Still, shares in Supermarket Income are still down a whopping 32 per cent over the last five years. The UK commercial property sector is unchanged over the same period.
The fee cut will take effect on 1 July 2025, but even with the wait, Numis analyst Andrew Rees said this was a “notably positive move for shareholders.”
REIT fees
Underlying assets have historically been the default basis for calculating management fees among externally managed REITs, with the notable exception of LXi REIT, which was bought out by Londonmetric at the start of this year.
As most REITs have been trading on persistently wide discounts to underlying assets, fee structures based on asset value have highlighted “an inherent mismatch of outcomes between management teams and shareholders”, added Rees.
The news came amid the war waged against the board of PRS REIT by shareholders, who have accused management of failing to meet the interests of investors.
Marcus Phayre-Mudge, fund manager at TR Property Investment Trust, said that the move represented the trust “proactively addressing the increasing demand for external management contracts that better align with shareholder interests”.
“Since shareholders benefit from share price total returns rather than [underlying asset]-based returns, it’s only right that the manager’s compensation is tied to the same metric,” he added. “We urge other boards to review their own investment adviser contracts and, where needed, adopt similar improvements.”
“We have worked closely with the Investment Adviser to identify ways to deliver both material cost savings and even closer alignment with the interests of the company and its shareholders,” said Supermarket Income REIT chair Nick Hewson.
“Once documented, these initiatives are expected to enhance earnings and are an important step towards our goal of having one of the lowest EPRA cost ratios in the UK REIT sector.”