Management fee is paid in units is dilutive, reason being outstanding share increase is permanent while quarter DPU increase is temporary. A simple way to explain the effect is that the REITs need to earn more in next quarter to maintain the same DPU. The situation is worse if the REIT manager receive shares in one hand and sell it at the other hand. Below is list that REIT manager which received fee in units and
...If you are a REITs investor, you would notice that almost all REIT outstanding shares increase over time. The commoncontributor to this increase is due to payment of fees in units instead of cash, this is usually in small volume. Share placement by either private placement, preferential offer or rights issue is another major contributor to share increase in which usually involve big volume. There are also other contributors like scrip dividend and convertible shares.