Should other REITs follow Croesus Retail Trust’s plan to internalise manager?
17 Jun 2016, 04:45 pm
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SINGAPORE (June 17): Croesus Retail Trust’s plan to internalise its manager could be a landmark development in the local property securitisation field, and provide a model for other property trusts that are not part of a property development group to garner a broader investor following.

The deal, in essence, is for CRT to acquire its trustee-manager Croesus Retail Asset Management for $50 million.

“An internally managed REIT or business trust could have stronger corporate governance as unitholders will have the ability to vote in or out directors under an ordinary resolution,” says Religare analyst Pang Tiwee.

All Singapore-listed real estate investment trusts and business trusts that hold property assets are currently externally managed.

The widespread perception is that the managers are ultimately more interested in the value of their management company rather than the REITs they are managing.

One of the reasons cited by CRT for internalising its manager is that its share price is undervalued despite making accretive acquisitions and growing DPU since IPO. CRT is trading at a yield of around 9% and 0.89 times its book value.

The merits of an internalised management for REITs that lack a pipeline of assets from their sponsors seem clear, according to Pang.

What are some other REITs that could consider this path of action?

Find out in ‘Croesus Retail Trust’s internalisation of manager could boost its valuation’ in The Edge Singapore (week of June 20 – 26), available at newsstands now.

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