Listed landlord Kiwi Income Property Trust will make a full takeover attempt on the $500 million Capital Properties via a share-unit swap, an analyst predicts .
Tuesday, March 1st 2005, 5:29AM
by The Landlord
Blair Cooper of Smith Barney, a division of Citigroup Global Markets, said Capital shareholders would have their investment swapped for scrip in Kiwi.
He also investigated Capital's proposed sale of its management contract, which some have valued at about $50 million. He found shareholders could get less money in dividends if the sale went ahead.
Cooper ranked Capital as a stock to sell. It was "simply too expensive" and had a big downside because of the proposed management sale, his report said.
"The prospects of such a sale unlocking material value for Capital shareholders is low. "We note that every dollar paid to the manager over and above the current cost base will reduce the sustainable dividend and could be expected to result in a decrease in share price.
"Shareholders are simply exchanging an up-front payment for a reduction in dividends over the life of the management contract."
The recommendation to sell the stock reflected a belief that Capital's shares looked expensive on fundamental and historical measures, Cooper wrote.
