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Half Year Result For The 6 Months To 30 September

Capital Properties New Zealand Limited

3 November 2005


Capital Properties New Zealand Limited today announced a net surplus after tax of $10.02 million for the six months ended 30 September 2005. This represents an increase of 10.2% compared to the net surplus after tax of $9.1 million for the same period last year.

After tax earnings rose to 4.2 cents per share compared to 3.8 cents for the previous corresponding period, representing an increase of 8.9%.

The improved net surplus after tax for the period under review is due mainly to growth in net rental income arising from growth in market rentals, reduced vacancy and the inclusion of Centre City Shopping Centre, acquired in December 2004.

It is expected that the gross dividend from earnings for the full year to 31 March 2006 will be 10 cents per share, as previously forecast.

Capital Properties also recorded a net revaluation gain of $49.7 million over the six month period, based on independent valuations completed as at the end of September 2005 and further partial recognition of the development margin for Defence House, now currently under construction. The portfolio net annualised income yield is 8.3%, occupancy levels are 99.4% and the weighted average lease term is 4.29 years.

Net tangible assets per share as reported in the financial statements increased to $1.49 as at 30 September 2005, compared with $1.29 six months earlier.

The six months under review have seen several significant achievements by the Company including its selection by the Ministry of Justice as the preferred supplier of its National Office accommodation requirements in Wellington and the negotiation of several significant lease agreements with major government tenants also in Wellington.

In the period under review, AMP Property Portfolio Investments Ltd made a takeover offer for all the ordinary shares in Capital Properties it did not already hold. The consideration currently offered by AMP Property Portfolio is $1.48 for each Capital Properties ordinary share.

Financial Highlights

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Balance Sheet

Over the six month period to 30 September 2005, shareholders funds have increased by $52.6 million to $358.4 million, representing 58% of total assets.

As at 30 September 2005 capital notes now finance 13% of total assets. Bank debt, which stands at $177.9 million, now finances 29% of total assets.

On 15 April 2005, $57 million of capital notes having that election date were repaid and $34.1 million were extended at a reduced coupon rate of 8%, such that the total principal amount of capital notes on issue now stand at $76.9 million.

Leasing Activity

Highlights during the first six months of the current financial period included:

* Capital Properties has been selected by the Ministry of Justice as the preferred supplier of their National Office accommodation requirements in Wellington. Capital Properties was one of a number of parties that submitted proposals to the Ministry.

Capital Properties' proposal involves the construction of a new building with a rentable area of approximately 16,000 sq.m. integrated with the adjacent existing Vogel building to create a complex with a total rentable area of approximately 34,000 sq.m. The refurbishment and expansion of the Vogel Building, located in Thorndon and owned by Capital Properties, is part of this proposal. The proposal remains subject to board approval and will require the successful completion of negotiations and documentation in respect of key commercial aspects including lease commitments, the construction contract and resource consent.

The Ministry of Justice currently occupies office premises in two Capital Properties buildings; the Charles Fergusson Building and Vogel Building, and a number of other buildings in central Wellington.

* Capital Properties has concluded amended lease arrangements with the Ministry of Social Development for 20,682 sq.m. of space in the Charles Fergusson Tower & Annex and Bowen State Building. The arrangements provide that the initial lease expiry for all Ministry of Social Development leases will become 17 March 2010, with one right to extend the lease for a further 6 years.

This agreement has the effect of extending the weighted average lease term for the Charles Fergusson Tower & Annex from 2.05 years to 4.57 years, and the Bowen State Building from 1.60 years to 3.27 years. The forthcoming rent review dates for the leases remain unchanged.

* A new 12 year lease term for 3,575 square metres of space with the Ministry of Transport in Novell House in Wellington has been agreed. Following the commencement of the lease in March 2006, Novell House will be fully leased with a weighted average lease term of about 6.6 years.

* The Forsyth Barr Tower in Auckland's Shortland Street is now fully occupied following agreement of a new 12 year lease with Vero New Zealand Limited. The new lease, which expires on December 2017, is for 1216 square metres of space on the level six podium floor. The weighted average lease term for the building is now 5.2 years.

* The Inland Revenue Department has renewed the lease for 2,085 square metres over two levels in Oracle Tower, Auckland. The lease renewal is for a term expiring February 2009.

* The Inland Revenue Department has also exercised its lease renewal rights for 5,239 square metres of space in the Freyberg Building in Thorndon, Wellington. The lease renewal is for a 3 year term from 1 October 2005.

Takeover offer from AMP Property Portfolio Investments Ltd

In the period under review, AMP Property Portfolio Investments Ltd made a takeover offer for all the ordinary shares in Capital Properties it did not already hold. The offer is subject to a number of conditions, including that acceptances be received in respect of that number of Capital Properties ordinary shares which, when taken together with those already held or controlled by AMP Property Portfolio, will confer on AMP Property Portfolio more than 50% of the voting rights in Capital Properties.

On 28 October 2005, AMP Property Portfolio announced that it was increasing the consideration under its full takeover offer from $1.42 to $1.48 per share.

Tony Frankham, chairman of the independent directors' committee of Capital Properties, noted that the increased price was at the very bottom of the fair value range determined by Deloitte, the independent adviser appointed by the committee to report on the merits of the offer. "Deloitte expressed the opinion that the fair value range for Capital Properties shares was $1.48 to $1.73 per share, with a mid point of $1.60", Mr Frankham said.

Mr Frankham said that the independent directors' committee would consider the revised offer and provide a further recommendation to shareholders. "In the meantime, it is not recommended that shareholders take any action in relation to this revised offer", he said.

The Independent Directors are expected to announce their recommendation to shareholders concerning the increased offer later today.


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