Why BRE Properties Shares Surged

Why BRE Properties Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of BRE Properties soared 11% today on a report that Essex Property Trust offered to acquire the residential REIT.

So what: Citing two unidentified sources close to the matter, Bloomberg reported that Essex offered roughly $5 billion for BRE this week, representing a premium of about 22% to yesterday's close. According to one source, the offer is even higher than a $60 per share bid made by Land & Buildings and another investor group earlier this year, suggesting that there's a bit of a bidding match for BRE going on.

Now what: I'd be cautious about buying into the buyout buzz. The downside seems just too big if a deal doesn't happen, given BRE's still-hefty debt load, while Wall Street has already baked in much of the upside. Unless you'd be perfectly willing to own BRE as a long-term income investment, it's probably best to watch the process unfold from a distance.

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