The loss of FHT Australia Trust’s (FHTAT) managed investment trust (MIT) status was beyond the control of Frasers Hospitality Trust ACV (FHT)’s managers. The managers of FHT made the announcement as part of its response to questions from the Securities Investors Association (Singapore) or SIAS. FHTAT is the wholly-owned subsidiary of FH-REIT. FHT is made up of Frasers Hospitality Real Estate Investment Trust (FH-REIT) and Frasers Hospitality Business Trust (FH-BT).
The responses came after FHT announced that FHTAT lost its MIT status on Oct 9.
To qualify as a withholding MIT, FH-REIT cannot have a non-Australian resident having a stake of 10% or higher in FH-REIT at any time during the income year.
However, the completion of the share swap between InterBev Investment Limited (IBIL) and TCC Assets (TCCAL) meant that IBIL doesn’t have an interest in Frasers Property TQ5 (FPL) while TCCAL’s effective stake in FPL increased to around 86.89%. The increase in TCCAL’s stake in FPL resulted in FH-REIT’s failure to qualify as a withholding MIT.
In its Oct 9 statement, the REIT managers already stressed that the corporate action in relation to entities above FH-REIT’s unitholder’s level was beyond the control of the REIT and the REIT manager.
On Oct 28, the REIT managers also clarified that there was always the risk of a potential loss of MIT status since FHT’s initial public offering (IPO) in 2014 as there were no stipulated limits on how many units an investor may acquire.
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However, FHT had been monitoring the percentage of foreign individuals’ stakes for each income period and provided updates in its half- and full-year financial results on MIT.
The REIT managers added that there was no certainty in the loss of the REIT’s MIT status until the successful completion of the share swap on Sept 20. Furthermore, they were in no position to make an announcement on FH-REIT’s MIT status until they had “quantified and assessed” the financial impact for FY2024 ended Sept 30.
As the REIT manager and its parent company, FPL also hold stapled securities in FHT, they are “similarly impacted” by the loss of the MIT status and as such, it would “not be reasonable” for the REIT manager to waive its fees as mentioned by SIAS.
Units in FHT closed flat at 43 cents on Oct 28. The REIT will report its FY2024 results on the morning of Nov 7.
