CPA turns up the heat on suitors

Commonwealth Property Office Fund has increased pressure on suitor DEXUS Property to lift its offer after reporting a rise in asset values, driven by an improved leasing outlook.

In its September quarter update, CPA fund manager Charles Moore said the revaluation of six assets in the portfolio led to a 1¢ uplift in the net tangible asset backing per unit (NTA) to $1.16.

He said in the challenging leasing market, the fund's strategic activity, particularly in Melbourne, had led to an upgraded distribution guidance of 1.5 per cent to 6.65¢ per unit for the year to June 30 next.

The trust has renewed Telstra's lease at 222 Lonsdale Street, Melbourne, for 21,730 square metres for five years from July.

The new NTA was 1¢ higher than the cash-and-share offer, with an overall value of $3.7 billion, made by DEXUS and the Canada Pension Plan Investment Board in July, which was rejected by managers of CPA, the Commonwealth Managed Investments Ltd's independent directors.

CPA has been trading at $1.21 and brokers say an offer higher than that could be made by DEXUS, which also has an equity interest over 14.9 per cent of CPA.

On Tuesday, the chief executive of DEXUS, Darren Steinberg, said he remained "patient and disciplined" with the indicative offer.

Mr Moore said that after due diligence CMIL's board determined the proposal did not provide a compelling value proposition.

In the quarter, CPA reduced financial year lease expiries from 14 per cent of the portfolio to 9.5 per cent with terms agreed on a further 3.8 per cent.