ING UK Real Estate Income Trust (IRET) confirmed today it is internalising the management of the listed fund to remove potential uncertainties arising from the sale of the Dutch fund manager, as revealed by Property Week.

IRET announced today it had given notice of the termination to ING Real Estate investment Management (ING REIM), to be replaced with a new investment management subisidiary.

It said the decision was so IRET could “internalise” its investment management process

Michael Morris, the current fund manager, has agreed to oversee the internalisation – and will be appointed chief executive of the new subsidiary once it is established.

IRET said that, though it had been “very satisfied” with ING REIM’s performance, it believed  “it is in the best interests of IRET’s shareholders to progress plans to internalise the management of the business and remove potential uncertainties over any future corporate activity surrounding the manager.”

It also said there were further benefits from the internalisation:

• An aligned management team structure focussed solely on the assets of the company
• A significant cost saving over the short to medium term, anticipated to be in the region of £400,000 a year which will further enhance the company’s dividend cover.
• Attracting a wider group of investors than it does currently as many major institutional investors will only invest in internally managed funds/companies.
• To achieve one of the most efficient cost bases in the Guernsey registered real estate investment company sector.

Nick Thompson, chairman of the company, said: “Since ING announced its strategic review in 2010, we have considered a number of options and the conclusion we have reached is that the most appropriate course of action is to focus on the management of our existing portfolio by internalising the investment management team whilst continuing to manage our balance sheet and our cash resources to deliver the best value for shareholders.

“We have been happy with the performance of ING REIM and the management team led by Michael Morris, and are pleased that Michael has agreed to project manage the internalisation process and subsequently become Chief Executive of the management business.  

“This will ensure the company continues to benefit from his in depth knowledge of the assets and his experience of managing the Company’s financing structure.

“Given current market conditions, we remain confident that the portfolio will continue to deliver a high quality income return and believe that the internalised management structure will ensure that opportunities continue to be seized to extract value through asset management, supporting capital growth over the medium to long term.”

US REIT Vornado Realty Trust and private equity firm KKR are understood to be two of the parties still involved in the bidding for ING REIM, as well as a final American bidder.