The Kiwi Income Property Trust's manager is proposing to bring the contract to manage its property portfolio in house at a cost to investors of about $70.6 million.
The owner of the management contract, the Commonwealth Bank of Australia, says internalising the contract for New Zealand's second largest property trust will save investors about $8 million dollars a year before tax.
The deal means Kiwi will join a growing number of listed property investors that are internalising their management contracts to cut costs.
An analyst at Craigs Investment Partners, Chris Byrne, says it's a good deal for investors because the trust couldn't buy a building which would return the same 12% as buying the contract.
Mr Byrne says investors can probably thank the current board for securing the deal rather than selling the management contract to a third party, as Commonwealth Bank has just done with an Australian trust.
The Commonwealth Bank says that its independent directors unanimously support the proposal and are recommending investors vote in favour.
Kiwi Income Property Trust chairman Mark Ford says that his board has commissioned an independent report on the proposal by Deloitte, and investors are scheduled to vote on the proposal at a meeting on 12 December.
Meanwhile, the trust has reported its first-half net profit has more than doubled to nearly $61.9 million, largely reflecting valuation changes. Distributable income rose 11.6% percent to nearly $33.7 million in the six months to September compared with the same six months last year.
The chief executive of the trust's manager, Chris Gudgeon, says the highlight of the six months was completing ASB Bank's new head office at North Wharf in Auckland.
Mr Gudgeon says other progress includes re-opening 11 stores at the Northlands shopping centre in Christchurch and completing 486 new leases and rent reviews which provided average rental growth of 2.6%.
