# Pure Industrial REIT



## john.cray (Dec 7, 2016)

Hello everyone,

I couldn't find a dedicated topic for this REIT so I decided to open one quickly here.

I am a holder of AAR.UN and this morning saw that there's news of potential sale of the REIT.



> PURE INDUSTRIAL REAL ESTATE TRUST ENTERS INTO DEFINITIVE AGREEMENT TO BE ACQUIRED BY BLACKSTONE FOR $8.10 IN CASH PER UNIT IN A $3.8 BILLION TRANSACTION


http://www.piret.ca/investor-info/n...l-estate-trust-enters-definitive-agreement-be

So I wonder what happens now and was hoping that someone who has been through a similar acquisition can share scenarios and best course of action.

Particular question on my mind is: What happens to shares that I own - do I have to sell or do they get converted to shares of the acquiring company?

Regards


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## AltaRed (Jun 8, 2009)

In this case, it is an 'all cash' deal, so when it closes, you will see $8.10/share in your account for every share you own. It is that simple. 

Course you will also get to vote as a shareholder on the deal in the first place.

I also own this one and with the take-out, I will have more than doubled my money in a relatively short number of years. The challenge now is cap gains and what to buy in its place.


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## john.cray (Dec 7, 2016)

AltaRed said:


> In this case, it is an 'all cash' deal, so when it closes, you will see $8.10/share in your account for every share you own. It is that simple.
> 
> Course you will also get to vote as a shareholder on the deal in the first place.
> 
> I also own this one and with the take-out, I will have more than doubled my money in a relatively short number of years. The challenge now is cap gains and what to buy in its place.


Thanks for the answer. I hold this one in my TFSA, so no gains concern.

Does it mean that if I don't care about the vote I might as well just sell my shares for $8.10 on the open market right now and find a substitute? Is there no chance of a higher price?

The bummer is that I quite liked this REIT, so with this deal there's no way to continue holding it any more is there? If I buy shares of the acquiring company then I guess I'll get something else than what I found in this reit, so I need to find a substitute, correct? Do you have anything in mind AltaRed?


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## Eclectic12 (Oct 20, 2010)

Where the offer is all cash ... the decisions are:

a) vote for or against the offer?

b) if the offer is approved, hold until the units are removed from the account with $8.10 cash credited to the account per unit.


Sometimes the hope of other bidders means the units trade higher than the offer before the deal is approved, sometimes a bidder means the offer is updated to a higher price (say $9) and sometimes the units keep trading at $8.10 or slightly below it until the deal is approved/cash is paid.


If held in a taxable account, because the deal is stock for cash, there will be no option to defer the capital gains taxes until the replacement stock is sold. For example, in the recent swap of POT for NTR - the default option was as if POT was sold then NTR was bought but contacting the broker to select the tax deferral option would have skipped the CG despite a swap happening.

Whether one sells the units before the deal goes through or whether one waits for the deal approval then receives the cash - there will be the capital gains (or loss) to report on one's tax return from this transaction.


Cheers


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## Eclectic12 (Oct 20, 2010)

john.cray said:


> Thanks for the answer. I hold this one in my TFSA, so no gains concern ...


Then no CG or cost calculations will apply.




john.cray said:


> ... Does it mean that if I don't care about the vote I might as well just sell my shares for $8.10 on the open market right now and find a substitute? Is there no chance of a higher price?


Depends on the vote plus whether there is a hope of a higher bidder and at rare times, if a big shareholder/the media are kicking up a fuss about how the offer is too low.

It looks like a friendly takeover so there may not be much chance of another bidder or rumour of one.




john.cray said:


> ... The bummer is that I quite liked this REIT, so with this deal there's no way to continue holding it any more is there?


You can hold it right up to when the deal is approved then a bit later the cash for units swap happens, assuming the deal is approved. I have seen some offers go through four or more extensions before being approved while others have had extensions where with each extension, the $$ are increased a bit.

If the deal falls through then you can hold until you decide to sell it. I don't recall many deals falling through where management from both companies are in favour of the deal.




john.cray said:


> ...If I buy shares of the acquiring company then I guess I'll get something else than what I found in this reit, so I need to find a substitute, correct?


You would have to check what the buying company has and whether you like or dislike the results.


Cheers


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## john.cray (Dec 7, 2016)

Thank you taking the time to answer those. I appreciate your input.



Eclectic12 said:


> Depends on the vote plus whether there is a hope of a higher bidder and at rare times, if a big shareholder/the media are kicking up a fuss about how the offer is too low.
> It looks like a friendly takeover so there may not be much chance of another bidder or rumour of one.


That's what I figured.


Out of curiosity I looked at Level 2 right now and interestingly I could see more than 1M shares on both the bid and the ask. The spread was $8.09 - $8.10. That made sense to me, and I thought that maybe the acquiring company is now flooding the market with offers of $8.10/share. Is that what really happens in the meantime?

Right now though, the volume has dropped and the spread is $8.08 - $8.09. So that makes me think that today's jump of the price to $8.10 is not due to the acquiring company putting any $8.10 offers on the market but instead shareholders exchanging at this price?


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## Eclectic12 (Oct 20, 2010)

Unless the offering company thinks they may need to acquire more shares to swing the vote ... I am not sure what advantage or why they would bypass what is going to be sent to every shareholder to vote on.

The offers I have received in the past had a set date for the vote and an expiry date for the offer ... so maybe this is a bit different.


Cheers


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## john.cray (Dec 7, 2016)

Eclectic12 said:


> Unless the offering company thinks they may need to acquire more shares to swing the vote ... I am not sure what advantage or why they would bypass what is going to be sent to every shareholder to vote on.
> 
> The offers I have received in the past had a set date for the vote and an expiry date for the offer ... so maybe this is a bit different.
> 
> ...


OK, so it's likely just regular shareholders trading at that level. But, why anyone want to buy a share for $8.10 if there's an offer from the acquiring company for $8.10? The expectation that there might be an even better offer coming?


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## Eclectic12 (Oct 20, 2010)

The hope of a higher offer is the only reason I'd pay the offer price. It seems too risky for a friendly offer though.


Cheers


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## andrewf (Mar 1, 2010)

john.cray said:


> Thank you taking the time to answer those. I appreciate your input.
> 
> 
> 
> ...


There are hedge funds that play merger arbitrage.


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## AltaRed (Jun 8, 2009)

A) If the shares trade above $8.10, it is likely because: 1) there is some hope of a higher bid, or 2) investors grabbing a monthly dividend in the meantime.

B) If the shares trade lower than $8.10, it is likely because there may be some risk that the deal does not go through and/or investors just want to grab their cash now for a better investment opportunity at the moment.

My take is investor trading will be pretty tight around the $8.10 level, give or take a cent or so. There is a 21% premium in the offer and Blackstone has a FOFR on the deal so they can match it -- that is usually enough to ward off other sharks. If Blackstone walks, there is a hefty 'walk away' fee. If PIRET walks, they owe Blackstone a break up fee. Not much chance of this derailing with this being a friendly offer.

I would have preferred keeping this stock but I will take the $11,000 profit I made in one day and look elsewhere. I will let my shares ride to 'close date' to collect the monthly dividends along the way unless: a) it trades up to the $8.12+ level and then I will proactively sell on the open market, and/or b) I see another 'sudden' opportunity for the money and will sell at $8.10 on the open market.

There is another industrial REIT out there, WIR.U, (WPT Industrial REIT) but it is mostly US based and I have no idea what its fundamentals are....yet. There may be others.


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## m3s (Apr 3, 2010)

I replaced RioCan with this about a year ago. Seems like a good move but I had high hopes for this one. Now I have to find something else and already heavy in cash


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## john.cray (Dec 7, 2016)

Thank you all for your comments. Interesting and very educational for me, hopefully for others too.

Regards,
JC


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## Beaver101 (Nov 14, 2011)

This is good news but then same problem what to replace with?


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## mopar44o (Aug 11, 2017)

Glad I stumbled on this thread it answered most of my questions. I really liked the assets of this one its to bad. Was great in my kids resp. I have to see if I kept my notes while researching this one and its competitors I looked at. 

What date does the deal close again? If I have extra cash I might just park it here and collect the dividend until the deal goes through. Likely a safe move.


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## AltaRed (Jun 8, 2009)

The material on the PIRET website says they expect a 2Q closing. Whether that means April, May or June depends I guess on Blackstone due diligence and the PIRET shareholder meeting.


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## john.cray (Dec 7, 2016)

mopar44o said:


> Glad I stumbled on this thread it answered most of my questions. I really liked the assets of this one its to bad. Was great in my kids resp. I have to see if I kept my notes while researching this one and its competitors I looked at.
> 
> What date does the deal close again? If I have extra cash I might just park it here and collect the dividend until the deal goes through. Likely a safe move.


In my mind, one downside of keeping the money as is until the deal closes is that you'd be missing out on potential growth of this money if located in a better place (say an alternative REIT).
On the other hand I was looking that if I want to exit the position now and not wait for the deal to close I'll probably have to accept a slightly lower price. Last closed at $8.08. I also assume that you don't pay commission when they give you the cash and liquidate your shares so another cost to consider. All in all, not too much.


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## mopar44o (Aug 11, 2017)

john.cray said:


> In my mind, one downside of keeping the money as is until the deal closes is that you'd be missing out on potential growth of this money if located in a better place (say an alternative REIT).
> On the other hand I was looking that if I want to exit the position now and not wait for the deal to close I'll probably have to accept a slightly lower price. Last closed at $8.08. I also assume that you don't pay commission when they give you the cash and liquidate your shares so another cost to consider. All in all, not too much.


True. But at least you're still collecting the dividend. I don't have a huge position here in my Kids RESP anyways. I'll probably wait till it gets cashed out and buy WPT I'm thinking. Looking at the other Industrial reits I don't like many of their customers and their leases are locked up as long it seems.


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## SixesAndSevens (Dec 4, 2009)

i have this as well for many years.
i am not selling.
will hold until deal is closed and receive the proceeds in cash.
why pay $9.99 in commissions unnecessarily.
where else to get such good yield with no chance of capital loss?

if Blackstone walks away i hope piret distributes the penalty as a special dividend.
i bought this at $3.80 many years ago.
i am okay if this drop back to $6.50 where it was before the offer.


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