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Signs for turbulence for buoyant Capital Properties

Friday 1st August 2003

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Capital Properties picked an unfortunate time for its float but the company has worked hard to make up for it since. Listing shareholders, however, are still in the red and there are signs the recent burst of good news may be coming to an end.

CNZ was formed from state-owned Government Property Services, which had nine buildings with government tenants. The shares bombed straight away, falling as low as 45c, but started to climb again when the company took over Shortland Properties, with a portfolio of high-quality buildings in the capital and in Auckland.

CNZ has ridden the general upsurge in commercial property prices and cashed in on its strong share price this year to raise $44.1 million in a rights issue.

The proceeds will be used to pay off debt, reducing gearing (the ratio of debt to total assets including capital notes) to 47%.

CNZ says this will allow it to look for new properties and developments and will help refinance the $109 million notes which come due in April 2005.

One note of caution is the continued migration of private sector firms to Auckland.

At present the gap is being filled by an expanding government sector but that, one hopes, can't last for ever.

Another is lease expiries in 2005 and 2006 which, according to research by sharebroker ABN Amro Craigs, represent 17% and 23% of the rent roll respectively.

ABN nonetheless expects profits to continue rising.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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