Poison pills can taste good

Just when I think I have a handle on all the holdings in my portfolio, Artis REIT, which I've held since last summer, put out a curious press release yesterday. And frankly, I'm not sure how to react.

Artis Real Estate Investment Trust (TSX: AX.UN) (“Artis REIT”) announced today that it has adopted a unitholders’ rights plan...The Rights Plan was not adopted by Artis REIT in response to any specific proposal to acquire control of Artis REIT and the board of trustees is not aware of any such proposal…Should a non-permitted acquisition occur, each right would entitled the holder of Units to purchase additional Units at a fifty (50%) percent discount to the market price at the time.

To my eyes, this basically amounts to management playing defense against a takeover by building in a poison pill that would water down any hostile bidders' stake. Which begs the obvious question: why is management worried about a takeover?

Indeed, from a shareholder's point of view, takeovers are generally good. You either sell your units to the bidder for a premium price, or the deal is rejected as management promises to come up with something better.

I've been very pleased with the holding since I've bought it, and I must admit this news has sort of thrown me for a loop. On the one hand, it's sagged a little of late along with all REITs due to concerns over rising rates. But analysts still love it.

I'm not really sure how to react. Your thoughts? Does the fact that management has come out with a defence plan for an unsolicited takeover bid I didn't even know was in the offing seem like a good thing or a bad thing in your book?

It's times like this my lack of finance knowledge can be a bad thing.

New name, (hopefully) same results

One of my best purchases of 2006 would have to be the 220 units of Westfield REIT I added to my RRSP in August.

I was thinking of getting REIT exposure in general and was leaning towards the iShares REIT ETF (XRE on the TSX) when I came across Westfield. I liked Westfield's focus on office properties in Western Canada both as a way to gain real estate exposure in my portfolio, but also as an indirect play on Alberta's booming economy. As it turns out, both would have been solid investments (Westfield's gone from $13.91 to $16, a 14.8% increase, while XRE has gone from $14.35 to $16.80, a 17.1% increase before distributions.) I probably will move to the ETF eventually, but I really like Westfield's prospects in the short term, and as such I like its odds of beating the index for the next little while. The fact that they give me a slight discount for reinvesting my distributions into new units is a bonus at this point.

News came out yesterday that Westfield is changing it's name to Artis REIT effective February 15th.

I don't particularly know or care what's prompted the name change. They could call themselves World's Crappiest REIT at this point -- as long as the fundamentals are there and the financial results are pointing in the right direction, I'll stay invested.

DISCLOSURE: As if it weren't obvious, I own units in Westfield