Kiwi income property trust seeks regulatory action
Kiwi income property trust seeks regulatory action REGARDING CAPITAL PROPERTIES proposal to sell management rights
Kiwi Income Property Trust (Trust) advised today that it has applied to the New Zealand Exchange Limited (NZX) for a ruling in relation to the announcement by Capital Properties New Zealand Limited (CNZ) that it is seeking proposals for the purchase of management rights over the company’s property assets. The Trust considers that any such disposal would change the essential nature of the business of CNZ and as such requires shareholder approval.
The Trust and its associates hold 19.9% of the CNZ shares on issue.
Chief Executive of the Manager of the Trust, Angus McNaughton, said CNZ had consistently promoted its internal management structure as a highlight for investors and the key reason for its claimed lower cost structure.
“While moving to an external management structure may result in a one-off payment to CNZ’s shareholders, it is also likely to result in lower future distributions. It represents a fundamental change to the nature of CNZ’s business and as such should be put to all shareholders for approval.”
As recently as 19 November 2004 CNZ’s Chairman, Colin Beyer noted that one of CNZ’s highlights was its “low management costs with internalised management and the absence of an external management contract”. Despite this statement, less than a week later CNZ announced a complete reversal of its “internal management philosophy” by seeking expressions of interest to acquire the rights to externally manage its property portfolio.
Mr McNaughton said the CNZ announcement, made one week after the Trust acquired its cornerstone CNZ shareholding, appeared to be a defensive response designed to protect CNZ from a takeover. If the management rights are sold, the prospects of a takeover offer in the future will also be substantially reduced. If CNZ truly consider the sale of the management rights will create value for its shareholders then it is questionable why it was not crystallised some time ago.
The Trust is therefore requesting that all shareholders are provided with sufficient information to assess the impact of such a fundamental change in the basis of CNZ’s management on the value of the company. All shareholders should be fully informed and then given the opportunity to vote at a general meeting to approve such a change to the company’s business.
In a separate action the Trust has written to the Takeovers Panel asking it to consider whether the proposed sale of the management rights infringes the Takeovers Code which prohibits directors of companies using defensive tactics to frustrate a takeover or potential takeover offer. The Trust believes that the primary motivation for the decision to sell the management rights is to lower the attractiveness of CNZ as a takeover target, thereby reducing the potential for CNZ shareholders to have the opportunity to receive a takeover offer in the future.
The Trust also notes CNZ’s announcement regarding its property values earlier today. Less than a month ago CNZ shares were trading on the basis that the company had net tangible assets (NTA) of $0.94 per share. In its interim report released earlier this month CNZ noted that it expected its NTA to increase to approximately $1.07 per share. Less than two weeks later, CNZ has announced that its NTA has risen to $1.19 per share. Mr McNaughton said that CNZ shareholders were entitled to question why CNZ Board and Management allowed trading of CNZ shares to occur on the basis of inaccurate information.