A Kiwi Income Property Trust institutional investor fears that if 75 per cent of voting unit-holders don't back internalisation next week, a lucrative management contract could be snapped up by a third party.

Craig Tyson, equity investment manager of ANZ New Zealand Investments which owns 8 per cent of Kiwi on behalf of investors in its funds, said if that happened, the first opportunity in 20 years for Kiwi unit-holders to fully align management with unit-holders could be lost.

He told of at least one interested party circling Kiwi, whose unit-holders will vote next week on the $70.6 million internalisation deal, buying the management from Commonwealth Bank of Australia.

Mark Ford, Kiwi's chairman and an independent director, said the internalisation was expected to result in pre-tax net expenditure savings of about $8 million annually.


Kiwi owns properties valued in September at $2.1 billion, including Auckland's Sylvia Park Shopping Mall, Vero Centre and the new ASB North Wharf, Wellington's big Majestic Centre, Northlands Shopping Centre at Papanui in Christchurch.

Tyson said any external business after Kiwi's management contract would have to spend at least $70.6 million plus get a blocking stake in the trust of at least 10 per cent to 15 per cent so might have to spend more than $200 million.

Chris Byrne, of Craigs Investment Partners, upgraded his Kiwi recommendation from hold to buy after the internalisation proposal was announced, saying it would be strongly positive for unit-holders, being earnings and value accretive and would increase the alignment of interests between unit-holders and management.

Tyson said he preferred internalised vehicles because they removed the conflict of interest between the manager who just wants to grow the assets under management and the unit-holders who mainly want an increasing dividend stream.

He praised the Kiwi deal.