Croesus Retail Trust proposes to internalise manager

Cost savings are expected to raise DPU.

Croesus Retail Asset Management announced that it will be seeking the approval of Croesus Retail Trust (CRT) unitholders to internalise the trustee-manager, including its wholly-owned subsidiary, Croesus Retail Asset Management Co., Ltd.

According to a report by RHB, the move aims to internalise the trustee-manager’s functions such that overall management and day-to-day operations of CRT are brought “in-house.” RHB notes that following the internalisation, positive cost savings leading to a marginal uptick in DPU can be expected.

“For FY15, assuming the internalisation was completed; DPU for CRT is projected to increase by 1% from SGD7.94 cents to SGD8.02 cents,” states RHB.

Further, CRT will also be able to pursue new acquisitions of properties competitively at a reduced cost to shareholders. This is due to excess cash from payment of the acquisition fee to the Trustee Manager being declared as dividends for the benefit of unitholders.

“The key members of the CRT group has also agreed to enter into service agreements with the Trustee-Manager lasting till a date ranging from 2018 to 2020 depending on which key personal,” RHB asserts.

In relation to the internalisation, CRT will also be issuing 25,641,026 to 32,722,285 preference shares at no lower than $0.7293 per share. This is a 10% discount to the VWAP of trades done on 10 June 2016, fully underwritten by Citigroup Global Markets Pte Ltd. RHB asserts that this will raise expected proceeds of $20m to $22.1m, with majority of the funds raised to be partly used to finance the proposed internalisation.