ING Buyout of Summit REIT

Published September 11th, 2006 in Canadian Markets Tags: Australia, Canada, Canadian, income trust, income trusts, Industrial, ING, real estate, REIT, Summit.

After the close of the market on August 30th, right out of the blue Summit announced that it was being taken over by ING for their ING Industrial REIT Fund (Australia). The buyout offer is for an 18% premium to the market close which is quite respectable. ING is buying the whole thing but will only keep half and sell the other half to other institutional holders.

So what does this mean? For one, the real estate market (especially REITs) is becoming more and more global. Money flows to where the opportunities are regardless of national or geographic boundaries. Second, it means that Canadian REITs are in play since they are cheap. This is not really news to me since I considered the small and shallow nature of our REIT markets to be a handicap when it came to valuation. And lastly, it means that when there is a foreign buyer involved, people on the inside can actually manage to keep their yaps shut.

Summit REIT.png

To see what I mean by the last point, check out the price action prior to the announcement (purple oval). There was no discernable pattern, either in price or volume, that there was a deal in the works. Summit was trading as it usually does - rather sluggishly. Tragically this is an all too rare occurance in Canada where almost everyone and their uncle know about a deal before it goes down.