Seems breaking away from BNB is more than...

Seems breaking away from BNB is more than possible....

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http://www.businessspectator.com.au/bs.nsf/Article/BB-fund-breaks-free-HW4KK?OpenDocument&src=srch

Babcock & Brown Communities, the listed retirement home owner and operator, is poised to become the first of Babcock & Brown’s listed specialist funds to bring its management in-house.

The final details of the move will not be released until tomorrow, but it will have significant implications not just for the Babcock & Brown stable, but also other listed funds operated by Macquarie Group, Challenger Financial Services and others.

Babcock & Brown Communities was poised to announce its earnings results and the conclusions of a strategic review today, but the announcements have been delayed for 24 hours as the final details are concluded.

Babcock & Brown Communities retained ABN Amro in late June to look at options to narrow the gap between its own estimates of net asset value and the market price of its securities, which have slumped to a recent low of 34.5c against its price of around $1.05 a year ago when it was created out of the restructure of the Primelife businesses.

Babcock & Brown stood to gain a base management fee of around $4.6 million in fiscal 2008, but because the entire fee was conditional on meeting distribution targets to shareholders, which were not met, the fee was waived.

However, base fees for 2009 and 2010 of around $5 million are not wholly conditional on meeting dividend distributions and Babcock & Brown Communities would have been required to pay at least 50 per cent of those fees even if shareholders received no dividends.

Babcock & Brown was also entitled to a 10 year exclusive advisory and origination fee. The advisory fee was equivalent to between 1 and 5 per cent of the value of any asset purchased, while the origination fee was 1.5 per cent of the asset value.

For instance, when Babcock & Brown Communities announced the purchase of Fini villages last year for $269 million, it included some $10.8 million in transaction costs. Babcock & Brown’s share, if it took advisory and origination costs, would have been at least $6.8 million. Babcock & Brown Communities also bought Conform Health Group for $160 million, a purchase that might have delivered Babcock & Brown fees of $4.8 million according to the details of its management agreement.

What will be keenly analysed, if the management is indeed internalised, is how the two parties have overcome the apparently water-tight 10 year management agreement, which could also be extended to 25 years without shareholder approval. Investors and funds will looking on with interest.