REITS Report

The Yahoo REIT Office Index closed at 1395 on Friday, up 1.01% or $23 from Monday's close of 1372. The sector continues to be hot, especially due to the Equity office Properties (EOP) deal. In the past week, Vornado countered Blackstone's $38.3 billion cash bid with a $41 billion cash and structure (debt, stock, dividends, with UBS, JPM, Lehmans, Barclays and RBS Greenwhich Capital) bid. Just yesterday, EOP rejected the Vornado bid, stating that the cash bid by Blackstone was less risky for shareholders. One set back to Blackstone's bid is that it comes out to $54 a share, which is lower than the closing price of EOP shares for the past 3 days. vornado's, however, comes out to $56 a share including dividends from December. Vornado's theory is that the acquisition would be a value investment since it would be more expensive to replace each property. One flaw to this argument is that older buidlings need more maintenance and renovations than newly built buildings. EOP is in the process of gaining approval from EOP investors to finally accept the Blackstone bid. I personally think EOP should accept the Vornado bid-it is more money, it is an investment that will return more than cash, and Vornado is an experienced manager of office real estate whose stock has steadily gone up since its IPO in 1988.

Boston Properties: 126.88 up .79, .63% P/E 15.68
Toll Brothers: 35.35 up 1.22, 3.57% P/E 8.48
Vornado: 125.35 down .39, .31% P/E 37.10
EOP: 55.38 up .23, .42% P/E 1,384.50