The Commonwealth Bank of Australia's exit from its $20 billion property funds empire is picking up pace after it struck a management rights deal late on Friday with the leading suitor for the Commonwealth Property Office Fund.
The deal will see bank sell the office fund's management for $41 million to Dexus Property Group, which, with partner Canada Pension Plan Investment Board, last week sweetened its bid for the office fund for the second time to put it ahead of a rival play by GPT Group.
The bank's other listed trust, the CFS Retail Property Trust Group, also reported its property valuations on Friday, potentially clearing the way for that fund to raise equity to buy its management rights from the bank for about $550 million. The retail property trust's portfolio is valued at $8.7 billion and the new vehicle will also hold the management of the bank's wholesale property funds.
Dexus said it had entered into an exclusive, binding facilitation agreement with the bank, to help it take control of the Commonwealth Property Office Fund once it held a 50.1 per cent stake.
The target trust holds a $3.7 billion portfolio of office towers and there are few other takeover opportunities.
Dexus chief executive Darren Steinberg said the agreement enabled it to access the bank's "considerable knowledge" in any handover. He appears confident after the office and industrial property specialist and its Canadian partner put an additional $130 million of cash on the table last Wednesday.
But GPT was quick to note that the management rights agreement might result in even greater stamp duty imposts for both parties. It is preparing to lodge its own bidder's statement.
Although GPT has so far ruled out paying the bank for the trust's management rights -- a stance that has won support among trust investors -- it is expected to make some payments if it is the successful bidder. The Michael Cameron-led diversified group is viewed as having greater bidding capacity than rival Dexus.
One key issue for both bidders is the bank's rights as lessee in Commonwealth Property Office Fund properties where it may hold rights to buy the buildings.
These rights cover a key Sydney development, 5 Martin Place, a Melbourne tower, 385 Bourke Street, as well as bank operations in Homebush and Parramatta.
CBA may give Dexus the right to buy any of the buildings if the trust is instead bought by GPT.