Were aware of the rumours but have not had any approach and do not expect one, so its business as usual, says Primegro joint MD Martin Ettin.

Fund managers wont comment. Their funds are in a bind because the yields of PUTs and PLSs rise they now average 15% with the general interest rate and make it impossible to pay for properties by issuing paper. Prime offices yield less than 13% at present. Paying cash for them will reduce dividend yields.

So they must now try to buy up other PUTs and PLSs to keep growing. And they get a double bonus cheap property because most fund market caps are at a discount to net asset value (NAV), and boosted yields because the smaller funds have higher cap rates.

The market caps of funds in the sector are low and their shares poorly traded, making them vulnerable to take over. Primegro, which traded only 7% of its issued shares last year, is particularly illiquid. Two-thirds of its shares are held by the public investment commissioner (17,5%), Sanlam (17%), Richway (15,5%), Investec and Old Mutual (11% each).

Primegro was structured at a time when property was out of favour, says Ettin, and the sectors share prices volatile: Stability was more important than liquidity then.

But the temptation to swap Primegro for shares in the three biggest PUTs could be irresistible. All three are well traded with market caps of more than R1bn. They may well strip Primegros assets, which will give them a R2,4bn retail portfolio at a 33% discount to its R8/share NAV. (Assets include Kolonnade and Brooklyn Mall, two Pretoria retail centres recently in the news when parts of them collapsed.)

Some shareholders may not see the discount as fair exchange, and Primegro management could seek a white knight to counter the bid.