Mergers and acquisitions have kicked off in the beaten down listed property sector, with Aspen Group (ASX:APZ) making a bid for fellow affordable accommodation developer Eureka Group Holdings Limited (ASX:EGH) that would create a $500 million company it says would help transform the industry. The move highlights the potential of real estate investment trusts as takeover targets after the beating they have taken from higher bond rates, as investors remain interested in residential stocks. The play would boost growth options for a combined company and help form a low-cost accommodation group across housing, lifestyle and living park estates amid the housing crisis.

Aspen believes a merger with Eureka would bring significant benefits to both sets of shareholders, and that the two groups have the potential to be worth more together than as stand-alone entities. Aspen already provides quality accommodation on budget terms for residential, lifestyle and park living. Eureka focuses on affordable rental accommodation for independent seniors and disability pensioners, which is part of Aspen's target market, although there are differences between the companies.

The success of the takeover will partly hinge on the attitude of fund manager Cooper Investors, which has a 19% stake in the target and about 10% of Aspen.