Revised bid could make Dexus top landlord

Dexus Property Group is tipped to be become the biggest office landlord in the country if its joint revised offer with the Canada Pension Plan Investment Board, said to be about $3.8 billion, was accepted by the independent directors of the Commonwealth Property Office Fund.

Dexus and CPA went into a trading halt on Friday morning after a revised cash and scrip, suggested to be at $1.21 a CPA unit, was made to CPA's board for deliberation.

Dexus already owns a 14.9 per cent put option in CPA and made a joint share and equity offer with the CPPIB for CPA at an equivalent of $1.15 a unit in October. The market value of CPA is $2.7 billion and it carries another $1 billion in debt.

But that was rejected by the chairman of independent directors of CPA, Colonial Managed Investment Ltd's Richard Haddock, as too low.

This week, CPA issued revised property valuations that increased the net tangible asset value to about $1.19, where it was before the trading halt, which increased the pressure on Dexus to sweeten its offer.

A successful bid would make Dexus the owner and manager of prime grade Australian office worth $11.5 billion, and give it a 26 per cent share of the Sydney prime grade office. Third party assets under management, via the wholesale funds, would increase to $8 billion.

John Kim, real estate analyst at CLSA, said the CPPIB was the eighth largest pension fund in the world, with $US178 billion ($188 billion) of assets including $US22 billion in real estate, and has joint ventures with global operators such as Westfield, Simon Property, Goodman, CapitaLand and Blackstone.

The trigger for the deal was in July when the manager of CPA, the Commonwealth Bank, revealed it was looking to internalise the management of its two listed REITs.