Like all merger and acquisition speculation, the potential DEXUS Property move on Commonwealth Property Office Fund (CPA) has ignited a new round of theories about what will follow.
DEXUS has bought the option over a 14.9 per cent interest in CPA, after the manager of the fund, Commonwealth Bank, revealed it was looking to privatise those rights.
That sparked theories the trusts, including CFS Retail, were now in play as potential takeover targets.
As the real estate investment trust sector heads into the 2012-13 reporting season, the main focus will be the deteriorating office market, patchy retail - food up and apparel flat - and a stable industrial sector.
With more than half the REITs exposed to the Sydney and Melbourne office markets, analysts have raised concerns about the impact on earnings from rising vacancies in the coming year.
DEXUS has made its intention clear - it wants to be the biggest office landlord in the country. Buying CPA, which owns a large portfolio, including a half share of the under-construction 5 Martin Place, will go a long way in helping DEXUS achieve its goal.
Among other takeover possibilities, Charter Hall Group could look at CFS Retail, and this would be done with the blessing of property developer John Gandel, who owns a stake in both REITS.
There are suggestions Simon Property Group of the US is interested in CFS, although analysts are not too convinced.
Some say this could prompt Westfield to weigh in, particularly to snare a share of the Chadstone shopping centre in Melbourne.
There is also talk Stockland could buy Australand, although CapitaLand, which owns 59 per cent of Australand, has said it intends to remain on the register.
GPT Group, which missed Australand, is said to be looking at a new target, possibly FKP Property.
New FKP chief executive Geoff Grady has said he is continuing with the strategy of closing the gap between FKP's security price and its stated net tangible asset value.
Under the plan, FKP intends to streamline and focus the business on its retirement operations, and continue to explore opportunities to realise its property development projects. That could involve a demerger or separation of its retirement and development/trust businesses, some of which could be of interest to Stockland, a 14.3 per cent shareholder, or GPT.
Stockland chief executive Mark Stienert has said the retirement business is an important part of the group. Its full-year results will be out on Tuesday, following GPT's on Monday. FKP's results will be out on August 21.
It is also believed Investa Office Fund was a target, given it is 2 per cent-owned by Morgan Stanley and therefore has a wide-open register.
Goldman Sachs analysts said merger and acquisition talk aside, they were looking for "solid" office asset comparative net operating income from the coming reporting season.
But there is a rising risk that lease incentives, shopping centre leasing spreads and rental declines will hurt retail landlords and REITs restructuring debt costs. Goldman analysts said growth in earnings per share would probably slow down in 2013-14 compared with the previous year, as office fundamentals weakened and the impact of lower interest rates on debt stabilised.
"As we move into 2014, we anticipate normalised growth of about 6 per cent driven by debt cost reductions, slight improvement in residential markets with potentially further upside from acquisitions," they said.