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New Plymouth Centre City Shopping Centre Purchase

18 October 2004


Capital Properties New Zealand Limited announces purchase of Centre City Shopping Centre in New Plymouth.


Capital Properties New Zealand Limited announced today that it has entered into an unconditional contract with Durran Holdings Ltd to acquire the Centre City Shopping Centre in New Plymouth.

The purchase price of $32 million provides an initial yield on passing net income of 10.8%. Settlement is scheduled for 18 February 2005. The purchase will be funded with bank debt. As a result, bank debt to total assets will increase from 16% to 22%.

The Centre City acquisition will increase the proportion of Capital Properties rental income from retail from 8% to 15%.

Capital Properties Chief Executive Chris Gudgeon says extensive due diligence investigations were carried out over a 5 week period during which time Capital were able to develop their future plans for the centre.

Originally constructed in 1988, Centre City comprises a fully enclosed three level shopping centre with a net lettable area of 15,100 square metres and multilevel carparking for 720 cars. The centre is anchored by a Farmers department store and a Pak'n Save supermarket and contains 44 specialty retail tenancies. Situated on Gill Street on the New Plymouth foreshore, the centre complements the main retail strip on Devon Street and forms part of a compact retail core in the heart of New Plymouth township.

Capital Properties has commenced discussions with Farmers on a proposal which would see Farmers expand into part of the Pak'n Save tenancy upon Pak'n Save's relocation to a new stand alone location on Leach Street now under construction and due to open in mid 2006. Pak'n Save's lease in Centre City expires in November 2006.

"The floor area requirements for major department stores and supermarkets have increased significantly since Centre City was originally constructed " Chris Gudgeon says.

"The departure of Pak'n Save provides an opportunity for Farmers to expand from their current size of 4,260 sq.m. to around 5,700 sq.m. in an improved retail format. It also creates the opportunity for us to bring a mini major into the 1,700 sq.m. of remaining space from the Pak'n Save tenancy and to make improvements to the specialty retail plan and merchandise mix."

Capital Properties Chaiman Colin Beyer commented: "The Wellington government office sector will always remain our main focus and this is where we will still derive nearly 50% of our rental revenue. However we have identified the retail sector as one which can provide attractive investment returns and our investment in Centre City is consistent with this view. We see New Plymouth as the commercial centre of a regional economy with a strong dairy farming base and a growing energy sector and we are quite happy to own the province's only large enclosed specialty retail centre."

Further Background

Centre City is New Plymouth's only sizeable integrated enclosed shopping centre. Enclosed mall space per capita in New Plymouth is approximately 0.23 sq.m per capita. By comparison Christchurch (probably New Zealand's highest rate) has enclosed shopping centres providing 0.8 sq.m. per capita. The international average is between 0.5-0.9 sq.m. per capita.

Capital Properties reconfiguration intentions for Centre City have the following essential elements:

* Expanding Farmers on Level 2 into Pak'nSave tenancy on Level 3 directly above.

* Leasing balance of Pak'nSave tenancy to a mini-major.

* Making improvements to the retail plan on levels 1 & 2 and increasing the total area of specialty retail.

* Undertaking redecoration and upgrade work.

Capital Properties expect that the cost of this work will be approximately $6 million and that it will generate a resulting improvement in net income and value.

This plan has been developed with in conjunction with Buchan Architects and retail consultants, HG Livingstones.

Capital Properties intend to enter into a management contract with HG Livingstones to manage the centre. HG Livingstones currently manage 22 shopping centres around New Zealand.


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