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Kiwi Income manager mulls Commonwealth Bank proposal to internalise contract

Wednesday 24th July 2013

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The manager of Kiwi Income Property Trust says it has received a proposal from ultimate parent Commonwealth Bank of Australia to internalise its management contract.

Kiwi Income Properties Ltd is a unit of Australia's Colonial First State Property, which is in turn owned by the Australian lender. The manager reaped a $3 million performance fee from Kiwi Income Property Trust last year.

The manager has hired First NZ Capital as adviser and formed a sub-committee of independent directors to consider the proposal. The committee is seeking further information from the bank over what it called "a non-binding, indicative, incomplete and conditional proposal."

The trust's property portfolio includes Auckland's Sylvia Park Shopping Centre. If it internalises the management contract it would join a growing number of listed property investors that have sought to slash costs by bringing the role in-house.

In 2011, Argosy Property Trust spent $21.6 million internalising its management contract, which had been held by ANZ Bank's OnePath unit. The bank turned down an opportunity to do the same with Vital Healthcare, selling that contract to a Canadian firm.

Kiwi Income Property Trust units were last unchanged at $1.125 and have declined 2 percent this year.

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