DNZ continued to seek engagement with the independent directors of Argosy, but in the near-term, the Argosy board had indicated its focus was the completion of its internalisation before looking at strategic initiatives.
It was proposed that Argosy unit holders would pay the manager $32.5 million for the management rights which would be funded from asset sales, he said.
"The management contract price looks to be in the ball park based on recent New Zealand transactions, but it is on the high side."
DNZ had approached Argosy with a merger alternative to Argosy's proposal to internalise, proposing that unit holders received DNZ shares at an agreed ratio.
Management rights of Argosy would be terminated or internalised as part of the transaction, Mr Conroy said.
The DNZ proposal put added pressure on Argosy owner ANZ Bank and the Argosy independent directors. Potentially, it was increased leverage for shareholders to pursue a termination or for ANZ to drop its price for internalisation.
With combined assets of around $1.6 billion, a merged vehicle would be one of the largest in the sector.
Having a large internally managed vehicle would be an interesting contrast in the market and the merged structure would have the benefits of cost synergies and improved liquidity, he said.
"The Argosy portfolio looks more appealing strategically.
"It is considerably larger, has a much higher weighting to Auckland, a lower weighting to Wellington and higher weighting to industrial property which is a very tightly held and well-positioned asset class in Auckland."
Those benefits of the Argosy portfolio would be diluted from a straight merging of the portfolios, Mr Conroy said.
Unless Argosy investors were given a premium price for their portfolio when the merger pricing was struck, DNZ shareholders looked like they had more to gain.
Overall, the New Zealand listed property sector had a strong month in May with a 4% gain overall, ahead of a steady 0.9% gross return from the NZX-50, he said.
In the past 12 months, listed property was up by 23.2% versus the 17.4% from the NZX-50.
"In recent months, there have been stronger levels of tenant inquiry and activity. Banking conditions have improved, which points towards a modest recovery this year."
Yield remains the key focus with low prevailing interest rates and although the 2012 full-year dividends would be reduced due to tax changes, the dividend yields remained attractive, Mr Conroy said.
