The three cautionary notices of listed property funds Bonatla, Arnold Properties and iFour have set the property loan stock sector of the JSE Securities Exchange SA on an action-packed path.

Issued almost simultaneously on the 16th of this month, the cautionary announcements have sparked speculation that the three companies were considering a merger which would create one of the largest property loanstock companies on the JSE.

The speculation comes amid increasing pressure onto the listed property funds to improve size, quality and liquidity and the sector consolidation could do half the job. Management of the three property funds declined to comment yesterday citing the cautionary notices.

While such a consideration has not been officially tabled to shareholders of the three companies, there are already signs it will face big obstacles if and when it is declared a formal proposal.

The founder director and major shareholder of Bonatla, Nicky Vontas does not believe the speculated consideration is a good idea. 'My fiduciary duty is to provide shareholders with value unlocking opportunities which are not visible in this speculation,' says Vontas.

Vontas' reservations stems mainly from a heavy discount of Bonatla's market value to net asset value. This could mean that Bonatlas' assets would be given away at more than 50% discount if any merger-related deal was struck with the group's market value in mind. 'I put my own money at the early stages of Bonatla, and would not give it away at 50% discount,' said Vontas.

He said his reservations were fuelled by the fact that the other two property funds have no track record. He said the unit prices of iFour and Arnold had not been sufficiently exposed to the vagaries of the market compared to Bonatla which has been listed for more than five years.

He said it seemed that the consideration of such a merger was yield based. He said he would prefer a merger supported by both yields and net asset value factors.

This consideration also brings into the picture one mover and shaker of the listed property sector, Redefine Income Fund, which holds a significant stake in Arnold.

Redefine's CEO Peter Penhall declined to comment, saying it was premature to say anything because there was nothing official on the table.

Observers said Redefine's stance on the consideration would be one of the key factors. The fear was that Redefine, which had been very active in the past few months, might have its own plans.

Bonatla's unit price closed at 40c yesterday having touched levels just above 100c two years ago.

Arnold Properties' units closed unchanged at 160c while iFour's units lost 3c to end the day at 407c.