Croesus Retail Trust (CRT), which holds shopping malls in Japan, is looking to bring its trustee-manager "in-house".
The move, which will be the first of its kind here, involves the CRT acquiring Croesus Retail Asset Management for 4.1 billion yen (S$50 million). That will bring the overall management and day-to- day operations of CRT in-house, creating "a stronger alignment of interests" between the trustee-manager and unitholders, it said in a statement on Sunday.
The $50 million price represents a discount of between 2.4 and 8.9 per cent of the valuation of the trustee-manager.
Mr David Lim, chairman and independent director of Croesus Retail Asset Management, said the internalisation process will leave CRT "better positioned to maximise value for its unitholders through cost savings and a stronger alignment of interests".
The trustee-manager noted that the exercise is expected to reap savings by eliminating management fees while helping boost potential distributions to unitholders.
It said CRT's pro forma distribution per unit (DPU) in the 2015 financial year would increase from about 7.94 cents to about 8.02 cents, had the internalisation been completed on July 1, 2014.
An internally managed trustee- manager would also lower transaction costs from investments or divestments.
"CRT will also be able to undertake new acquisitions of properties competitively at a reduced cost to unitholders as any excess cash from the payment of the acquisition fee to the trustee-manager will be declared as dividends for the benefit of unitholders," it added.
DBS Vickers Securities analyst Derek Tan said the proposal is a "good step in the right direction" and may also prompt smaller Reits to consider similar moves.
"The smaller Reits are struggling to deliver growth given this climate. Through this internalisation process, it could mean that unitholders get a kicker from lower expenses," Mr Tan noted.
NRA Capital research head Liu Jin Shu added: "It is the most appropriate move if the Reit is able to obtain a higher return by internalising the manager, as opposed to investing the consideration in a new asset."
CIMB will advise the trustee- manager's independent directors and the audit and risk committee on the proposed internalisation.
The transaction is expected to be partly funded by the issuance of new units that will raise about $20 million to $22.1 million. Unitholders will be offered one preferential unit for every 22 units held as at the date on which the transfer books close.
The new units will be issued at a price of at least $0.7293 - not more than a 10 per cent discount on the volume-weighted average price for trades done last Friday. The units closed at 81.5 cents on Friday.
The rest of the purchase price will be part-funded by proceeds from the fixed rate notes issued previously, as well as CRT's existing cash balances of about $10 million.
An extraordinary general meeting will be held to seek unitholder approval on the proposal and to provide more details on the preferential offering.
Wong Siew Ying