Merger and acquisition activity in the real estate investment trust sector has moved up a notch with Challenger Life making a $243 million offer for the remainder of Challenger Diversified Property Trust. The suitor already owns 58.7 per cent of CDI and has offered $2.74 per unit in cash for the remaining shares.

CDI market value is $586 million.

Under the offer, the payment will be reduced by the amount of any distribution per unit to which CDI unit holders become entitled to during the offer.

Challenger said on Friday the $2.74 offer exceeded the latest published value of CDI's net tangible assets, which was $2.71 per unit at December 31 last year.

Challenger Life chief executive Richard Howes said his group ''will not increase the consideration under the offer''.

''Challenger Life manages a cash flow-matched portfolio, and its desire to increase its property investments is a result of seeking longer-dated asset cash flows due to significant growth in lifetime annuity sales,'' he said.

''The offer to acquire the units in CDI that it does not currently own is part of a broader Challenger Life investment strategy to review the mix and optimise its property portfolio.''

The ''internalisation'' of CDI has been long mooted by analysts and is expected to prompt other groups such as Morgan Stanley to look at making a move on its listed associate, Investa Office.

In a widely anticipated move, Stockland bought a 19.9 per cent strategic stake in Australand at a price of $3.78 per share.

Brokers at CLSA predict Stockland will soon make a bid for the entire company, ''ideally with a partner to purchase the office portfolio''.

Investa Office Fund has been tipped as a possible player in any offer for Australand.