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Shareholder Letter Re AMP Offer

_13 October 2005

Dear Shareholder,

You will have just received, or will shortly receive, Capital Properties' target company statement in response to the takeover offer from AMP Property Portfolio Investments Limited ("AMP Property Portfolio") for your shares in the company. In summary:

- The independent directors of Capital Properties ("Independent Directors") are unanimous in their view that the offer price is not fair to Capital Properties shareholders.

- The independent adviser approved by the Takeovers Panel in relation to the offer (Deloitte) has also expressed the opinion that the offer price is not fair to Capital Properties shareholders.

The takeover offer by AMP Property Portfolio has resulted in close scrutiny of Capital Properties' valuable prospects and has led to a re-rating of the company by investors. Considerable interest has been generated by the offer, the independent adviser's report and the Independent Directors' recommendation.

I would like to take this opportunity to detail the reasons for this interest.

Capital Properties has a unique portfolio of properties that cannot be replicated. Its strengths are:

- A position as the leading landlord to the government sector in Wellington and in particular the Thorndon precinct which is a preferred location for government departments.

-Three major development sites in the Thorndon precinct providing opportunities for capital and revenue growth:

- Defence Building – under construction, completion scheduled early 2007;

- Vogel Integrated Campus – negotiations under way with potential anchor tenant the Ministry of Justice; and

- Bowen Integrated Campus – discussions underway with a major Government department.
- Redevelopment prospects for existing properties when tenants move to new offices provided by Capital Properties.

Further, because of the growing demand for office accommodation generally, rents are rising, which is generating further income for the company and an increase in the valuation of its portfolio. The keen interest in quality commercial property from offshore buyers is further driving up property values.

These two trends have been recognised in a revaluation of Capital Properties' portfolio at the end of September 2005 carried out by respected property valuers Jones Lang LaSalle, Colliers International and C B Richard Ellis. The valuers reported a $46.3 million increase in the value of the portfolio which resulted in a 19c cent a share lift in net tangible asset backing to $1.48 a share.

The independent advisers, Deloitte, have stated that in their opinion the AMP Property Portfolio offer is "not fair" to shareholders. Their assessment is that the fair value range is $1.48 to $1.73 a share, with a midpoint valuation of $1.60. As a result of this, the property market strength referred to above and the development opportunities available to the company, the Independent Directors' Committee appointed to assess the AMP Property Portfolio takeover offer recommends that shareholders reject the present offer.

The Independent Directors note that others, including some major sharebrokers, share the view that the AMP Property Portfolio offer is inadequate. At the date of this letter the share price is trading above the AMP Property Portfolio offer price.

A key role of the Independent Directors' Committee is to make a recommendation to shareholders with respect to any takeover offer. AMP Property Portfolio has been critical of the Deloitte report and the recommendation of the Independent Directors. We reject those criticisms. The Independent Directors will respond to AMP Property Portfolio comments in due course.

Until there are further developments, the Independent Directors recommend that you do not accept the current AMP Property Portfolio offer at $1.42 per share. In the meantime it is not in your interests to take any action in connection with the AMP Property Portfolio offer.

We will keep you informed of any developments that lead us to review our recommendation.

Yours sincerely

Tony Frankham
Capital Properties New Zealand Limited


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