Emira reduces managing costs

Posted On Friday, 16 July 2010 02:00 Published by eProp Commercial Property News
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Emira Property Fund has reached an agreement with its external manager, Strategic Real Estate Managers, to pay it a monthly fee based on actual operating costs.

James TempletonListed property unit trust Emira Property Fund, in a first for SA, yesterday announced it had reached an agreement with its external manager, Strategic Real Estate Managers, to pay it a monthly fee based on actual operating costs.

This would prohibit the administrator from earning a profit from administering the fund and enhance earnings for Emira’s participatory interest holders.

Emira CEO James Templeton said better earnings could be made because management costs would be substantially reduced.

Under the agreement, Strategic Real Estate Managers will in future charge Emira a fee based only on the actual costs of administering its assets.

Mr Templeton said this was the first time in SA that such an agreement had been concluded between a property fund created under the Collective Investment Schemes Control Act and the manager appointed to manage the fund.

“There have been cases where listed property loan stock companies have acquired 100% of the interests in their management companies, but this is the first time that a property unit trust has attempted to sterilise the fee payable to its manager once and for all,” he said.

Mr Templeton said the agreement would see the manager administer the fund, once the cancellation fee had been paid, on a costs basis only.

Investors in listed property funds have frequently argued that conflicts of interests arise between external managers of listed property funds, who seek to squeeze as much profit as possible from managing assets, and shareholders, whose interests are to get the best possible returns from their investment in the fund.

The transaction had been approved in principle by the Financial Services Board, pending approval of the amendment by Emira’s participatory interest holders, and final authorisation by the Registrar of Collective Investment Schemes.

To compensate Strategic Real Estate Managers for foregoing its future profits derived from the administration of Emira’s assets, a once-off cancellation fee of R197,4m would be paid to it on approval of the amendment. It was proposed that the once-off cancellation fee would be made to Strategic Real Estate Managers in two tranches — an initial payment of R129,15m and a further contingent payment of R68,25m.

Last modified on Wednesday, 22 January 2014 20:12

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