Property: Aussie help for Colonised Kiwi

By Campbell McIlroy

Friday 22nd February 2002

Kiwi Income Property Trust will not be moving to Australia but the capital for Auckland's Sylvia Park development will come from across the ditch, Colonial First State Property general manager Geoff McWilliam says.

Weeks of speculation were put to rest last week when Colonial announced it had signed a deal to buy Kiwi Income Properties Ltd, the management company for the Kiwi Income Property Trust.

What remains unanswered is what happens now.

The question is just as relevant for Kiwi as it is for New Zealand-listed Colonial First State Property Trust and Newmarket Property Trust, which are now all controlled by Colonial.

The companies Colonial now controls make up 38.75% of the NZSE property index by weighting.

Mr McWilliam was tightlipped over any specifics to do with the companies but provided a solid indication of what wouldn't happen.

He said he had a negative view on listing in Australia or creating a transtasman vehicle.

"We had to get relevant in the New Zealand market or get out. We believe we can grow Kiwi to be one of New Zealand's top 20 companies."

The big question for Kiwi is still how it will fund the proposed $400 million develop-
ment of Sylvia Park.

Kiwi director Ross Green said the trust needed capital and access to capital.

"Where are we going to get $400 million out of the local market to fund Sylvia Park?" Mr Green said.

And Mr McWilliam: "Even in Australia projects are getting too big for one entity. We've got 19 joint ventures at the moment. We've got a track record of being able to bring about capital projects in the appropriate form."

So it would seem fair to speculate that Sylvia Park will be some form of joint venture with capital coming from Australia.

But, pressed on the issue, Mr McWilliam said it was too early to say.

"It's a project definitely worthy of support but we have to look at some of the issues on how exactly we fund it."

Colonial certainly does bring considerable treasury experience to the table with over $1.8 billion of debt to manage across all its funds.

Mr McWilliam even suggested Colonial could add about 1% to Kiwi's return through good debt management alone.

As always the devil will be in the detail but both men were quick to add that projects of this scale were not put together overnight and there was a great deal of work to be done yet.

Likewise there is also a lot of work to be done on Newmarket Property Trust, which Mr McWilliam said had been drifting for some time.

At last year's annual meeting he undertook to come back with a strategy for the company in April.

When asked what that strategy would be, a simple "watch this space" was all he would volunteer.

Market speculation has suggested Colonial might look at merging Colonial First State Property Trust and Newmarket into one entity.

Mr McWilliam and Mr Green said any proposal would have to pass muster with the unitholders in each of the individual trusts.

Mr McWilliam added that each trust had its own strategy and Colonial was focused on sticking to it.

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