Power plays may stall expansion

Outsiders think that the battle for control at the government landlord Capital Properties may hamper the company's ability to expand.

They believe that few investors will back any new capital-raising if AMP and Kiwi Income Property Trust - which hold stakes of 15.9 per cent and 19.9 per cent respectively - do not declare their intentions.

It is thought Kiwi is planning a takeover of Capital Properties, and AMP bought its stake as a blocking move, possibly seeking a higher offer price.

Observers question how much the duo can leave their ownership issues in limbo.

"Will Capital be able to operate or seek to raise fresh equity or raise debt with this ownership situation?" asked one adviser.

"Who will blink first here? "Ultimately, they will have to decide. One of them will have to be incredibly bold and make a compelling takeover offer for the company, or they will have to work together to find a solution."

AMP and Kiwi are seeking a greater say on the Capital board at the company's annual meeting on Wednesday in Wellington.

Capital chairman Colin Beyer and director Tim Saunders are stepping down and one of those slots has been filled by Kiwi-nominated accountant Tony Frankham, fresh from sorting out the ownership struggle at plastics maker Vertex.

But Kiwi also wants its co-founder and a former management company owner, Richard Didsbury, to join the board. Didsbury sits on Kiwi's management company board.

AMP has proposed Murray Gribben, its own head of alternative assets.

The $1.2 billion Kiwi is run by Angus McNaughton and Stephen Costley runs the $540 million-plus unlisted AMP vehicle.

Some observers question whether the two will be forced to strike a deal to resolve the issues.

But others believe that any collusion between the two - who collectively control 35.8 per cent - would deem them associated parties and therefore breach Takeovers Code rules.

One possible scenario being mooted is a breakup of Capital's portfolio, whereby the investors take some of the properties most appropriate for their own portfolios.

Another is a tradeoff, whereby one gets some properties it wants while the other increases its stake.

Behind the scenes, those associated with Kiwi have accused AMP of over-paying for its stake. In turn, AMP's allies have pointed the finger at Kiwi for being over-committed, having already begun the $538 million Sylvia Park development in Auckland without a joint venture partner.

Kiwi is now part-way through its $143 million debt-raising exercise.

But Kiwi's major institutional investors have protested to its management entity about the risks associated with Sylvia Park and the Capital purchase, questioning the trust's direction and the projected yields from its development work.

ING, Brook Asset Management, BT Funds Management and Walker Capital Management have all made their concerns public.