A proposal to vastly expand NZX listed property minnow NPT via a deal with the giant Kiwi Property Group goes to the vote tomorrow at 11am in Auckland.

The special meeting of shareholders in the business previously called National Property Trust will be held on level 11 of the Deloitte Centre, 80 Queen St, also the BNZ's headquarters.

NPT has a market capitalisation of just $100 million while Kiwi's market cap is $1.8 billion.

The deal has three aspects, all proposed by NPT's board:


• For $230m, NPT would buy Kiwi's North City Shopping Centre in Porirua and its earthquake-strengthened Majestic Centre in Wellington's CBD. That would more than double NPT's size;

• Kiwi would take a 19.9 per cent stake in NPT via the issue of new shares;

• NPT would sell its management rights to Kiwi for just $6 million.

The NZ Shareholders Association said this month it would vote its discretionary proxies in favour of the proposal because it removes uncertainty about NPT's future.

But not everyone is a fan.

NZX listed Augusta Capital Group, with 18.85 per cent, and Salt Funds Management with 13.7 per cent, see the deal as an unacceptable transfer of value from NPT shareholders to Kiwi.

Mark Francis, Augusta's managing director, told the New Zealand stock exchange on April 7: "Having now carefully assessed the Kiwi Property proposal being recommended by the NPT board, we remain firmly of a view that it is not in the interest of NPT shareholders.

"While we respect Kiwi Property, the current proposal is heavily skewed in their favour, falling well short of what we consider to be fair and reasonable for NPT shareholders.

"Augusta intends to vote against the Kiwi Property proposal and is aware of a number of other shareholders who have indicated their intention to vote against the Kiwi Property Proposal. We would encourage all NPT shareholders to seek independent specialist advice concerning its merits before casting their vote.

"We believe the current board is completely out of touch with its shareholders in recommending this deal, and Augusta Capital will also be voting for change through resolutions two to six, to remove two of the current board members, noting that the previous chairman has already stepped down," Francis said.

Yet Craig Tyson, ANZ equity investment manager, backs the deal, largely because it is such a big leap forward for NPT.

"The board of NPT has proposed a deal with Kiwi Property Group which involves raising equity to buy two Wellington assets from KPG at a 2.5 per cent discount to valuation ($235.8m) and which more than doubles NPT's size.

"Kiwi will also pay to externalise the management contract and receive NPT shares to the value of $48m as part of the price ($230m).

"NPT has historically traded at a large discount to its net tangible asset value and the sector. A large part of this discount relates to NPT's small size which results in a high management expense ratio and low share price liquidity.

"Investors in NPT need to decide whether they want NPT to remain sub-scale and therefore likely to continue to perform poorly or address the scale issue by buying property and raising equity," Tyson said.

"In addition, and probably more importantly, KPG has significant retail leasing and development experience which we think is vital to unlock the value in NPT's largest asset, Eastgate Shopping Centre in Christchurch.

"KPG is also the largest and arguably best quality property company in New Zealand and they will be aligned with shareholders, by virtue of their 20 per cent shareholding, to deliver performance for NPT shareholders.

"It would be disappointing to miss an opportunity to fix NPT's size issue. The KPG proposal gets NPT to a reasonable size quickly, provides a future for NPT and its shareholders, and provides earnings accretion to boot. We have seen a number of proposals for NPT over the years but the KPG deal is the best one by some margin and is the only one currently on the table," Tyson said.

ANZ Investments holds 15.3 per cent of NPT and 8.9 per cent of Kiwi.