Loss of Australian unit’s managed investment trust status beyond Fraser Hospitality’s control, says Reit manager

AS THE share swap between Frasers Property and Thai Beverage (ThaiBev) was a corporate action taken by entities above the level of the unitholders of Frasers Hospitality Reit, the loss of managed investment trust status for Frasers Hospitality Trust’s (FHT) Australian unit was “beyond the control” of the manager of Frasers Hospitality Reit.

The manager of the real estate investment trust (Reit) added that it and parent company Frasers Property also hold stapled securities and are similarly impacted by the loss of the unit’s managed investment trust status.

“Consequently, it would not be reasonable for the Reit manager to waive its fees,” it said on Oct 27.

The manager was responding to questions from the Securities Investors Association (Singapore), or Sias, on whether FHT will consider waiving or refunding the tax amount from the manager fees, following the higher tax burden that FHT stapled securityholders potentially face due to the share swap agreement.

Some of these securityholders had reached out to Sias for help.

They had expressed concerns that the share swap exercise meant that FHT’s Australian unit, FHT Australia Trust, would not meet a key criteria to maintain its status as a managed investment trust. This could potentially increase the trust’s tax burden from 15 per cent to 37.5 per cent for its Australia assets.

On whether FHT was aware that the tax issue would happen before the sponsor’s restructuring took place, the manager said that FHT’s sponsor, Frasers Property, was not a party to the share swap transaction.

“Management became aware of the share swap when ThaiBev issued its announcement on Jul 18, 2024,” said the Reit manager in its response.

The manager also noted that there are no stipulated limits on how many stapled securities an investor may acquire. Thus, there has always been the risk of losing managed investment trust status for FHT Australia Trust.

“Consequently, any foreign (non-Australian) individual investor could potentially acquire more than 10 per cent (of interest), resulting in the loss of managed investment trust status,” explained the manager.

It added that there was no certainty regarding the loss of the status until after the completion of the share swap on Sep 20. The trust could only inform stapled securityholders about the loss after it had quantified and assessed the financial impact of it for FY2024, the manager added.

On whether FHT’s board will carry out a strategic review in light of the change in ownership, the Reit manager said that such reviews are conducted regularly by the managers’ board to ensure that FHT is aligned with its long-term objectives, and that the managers act in the best interests of stapled securityholders.

It added that FHT is also open to a dialogue with Sias and will continue to facilitate engagements between FHT and securityholders.