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Independent Directors Reject AMP Takeover Offer

Capital Properties New Zealand Limited
Level 11, The Bayleys Building
Cnr Brandon Street & Lambton Quay
PO Box 1690, Wellington
New Zealand

10 October 2005

Independent Directors Reject AMP Property Portfolio Takeover Offer for Capital Properties

The Independent Directors’ Committee of Capital Properties New Zealand Limited (“Capital Properties”) is recommending shareholders reject the $1.42 a share takeover offer made by AMP Property Portfolio Investments Limited (“AMP Property Portfolio”).

The Independent Directors’ Committee supports the view of the Independent Advisers, Deloitte, that the offer is “not fair” to shareholders.

The Deloitte report published today as part of Capital Properties’ Target Company Statement states fair value lies in a range of $1.48 to $1.73 a share, with a mid point valuation of $1.60 a share.

“The Independent Directors unanimously recommend that shareholders do not accept the offer,” said Mr Frankham, the Chairman of the Independent Directors’ Committee. The Independent Directors who hold shares are not selling their own shareholdings into the current offer.

“The Independent Directors consider that the Deloitte valuation could be viewed as conservative, particularly with respect to their valuation inputs on future growth and the cost of capital.”

Mr Frankham said Capital Properties had a strong competitive position. It was the largest provider of office accommodation to the Government sector, primarily in Wellington where it owned around 60 per cent of the office space leased to the government in the Thorndon precinct.

“Capital Properties is in a strong position to maximize value by meeting demand from government tenants for space in its existing buildings and also in its new and refurbished buildings."

The company has two development sites in the Thorndon precinct:

- Negotiations are underway on a new long term lease agreement with the Ministry of Justice as the anchor tenant in Capital Properties’ Vogel Integrated Campus development proposal. This follows Capital Properties’ appointment by the Ministry of Justice as its preferred supplier for the Ministry’s national office requirements.

- Preliminary discussions are being held with a major Government ministry for the creation of a large integrated office complex centered on the Bowen State Building and Charles Fergusson Building.

In addition, Capital Properties is evaluating options for Defence House in Stout Street following the completion of the New Defence building it is developing in Mulgrave Street.

“These opportunities have the potential to add significant further value for Capital Properties shareholders,” Mr Frankham said.

He added that “Capital Properties’ strategy of internal management delivers benefits for shareholders. This structure enhances returns to shareholders by freeing Capital Properties’ cashflow of the burden of paying management fees to an external management company. This saving flows directly to our shareholders."

Deloitte used a discounted cash flow valuation method to establish the fair value range of Capital Properties shares. This assumed an after tax weighted average cost of capital of 7.8 per cent.

The Deloitte fair value range took into consideration a revaluation of Capital Properties portfolio undertaken as at 30 September 2005 in response to the AMP Portfolio Investments
offer. The value of Capital Properties’ portfolio increased by 8.6% or $46 million, principally as a result of increasing commercial office rents and strong demand from investors driving up values. The revaluation has led to an increase in Capital Properties net tangible assets from $1.29 to $1.48 a share.

The Target Company Statement, including the Independent Adviser’s Report and recommendation from the Independent Directors not to sell, should be in the hands of Capital Properties 14,500 shareholders within a week. In the meantime the documents can be accessed on the company’s website,

“Though flagged in the Deloitte report as a possible counter-bidder, 19.24% shareholder Kiwi Income Property Trust has not yet signalled its intentions”, Mr Frankham said.

“We recommend that shareholders do not accept the AMP offer. We will communicate again with shareholders if the situation changes as a result of any increased or new offer,” Mr Frankham said.


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