Finance and strategy committee chairman Richard Walls said the purchase of the Bunnings site, late last year, was financed by the sale of endowment property, which, by law, must be reinvested in property.
The Porirua site is the second the council property unit has bought outside the city.
The other investment was a light industrial three-building complex in Christchurch, which had three tenants, and was bought in 2004, council acting property manager Rhonda Abercrombie said.
In the past five years, the council had been doing a "sell-down" of leasehold land, with the money to be invested in land with a higher return.
The Wall Street development in Dunedin was an example of that, and the council was "always on the lookout" for opportunities, Mrs Abercrombie said.
The dividend from the council's property portfolio was $3.8 million in 2006, or about $95 a household.
Mrs Abercrombie said the expected dividend was down to $3 million for the 2008-09 year because of the cost of developing the Wall Street mall in George St, a development expected to open on March 7.
The dividend prediction for the 2009-10 year was $4.4 million, and for 2010-11 $4.6 million.
When the city of Dunedin was created in the 1800s, large tracts of land were set aside to be held by the city's administration.
That land is run commercially by the council to bring ratepayers an annual dividend, and is protected by government legislation that restricts the council to using it to offset annual expenditure, and prevents it from cashing in on the assets.
Under council criteria, purchase or construction of new property must have a clear economic purpose, the portfolio must be balanced and diverse, and there must be a variety of risk classifications within it.
Mrs Abercrombie said the property portfolio sell-down began in 2003.
Of 300 properties, only 25 remained in which lessees had not taken the opportunity of buying.
Money from the sales went to the property investment fund.
The council finished the last financial year with $8 million deficit, $1.2 million greater than budgeted.
Finance and corporate support general manager Athol Stephens said unfavourable cash variances included the cost of protection for St Clair beach, at $1.4 million, and a loss of water revenue because of lower revenue from large consumers, costing $1 million.
Considering the size of the council's budget, the result was "pretty close", Mr Stephens told yesterday's finance and strategy meeting.
