Argosy Property Trust is thinking over a possible merger with DNZ Property Fund, but says it's more focused on internalising its management contract.
Last month, Argosy's manager, the ANZ Bank subsidiary OnePath, proposed bringing the management of the trust's portfolio in-house, in return for $32.5 million.
DNZ thinks a merger could result in a significant cut to the proposed payment.
It says its proposal is still in its early stages, but a merger would create New Zealand's second largest listed property fund, worth about $1.6 billion.
DNZ claims the merged fund will have better liquidity because it would be within the top 20 companies on the NZX, and a larger portfolio would allow for cost efficiencies and better tenant management.
However Argosy Property Trust has written to investors, saying it remains focussed on internalising its management contract, as that's likely to generate the greatest value for unitholders and put it in the strongest position to consider all proposals, including the one from DNZ.
It seems to be defending the proposed $32.5 million payment, saying OnePath could have sold its management contract to someone else for a higher price but has chosen to work on a deal that will achieve the best outcome for unit holders.
Argosy expects an appraisal report on merits of the internalisation, and details about a meeting, to be sent to unitholders shortly.