At press time, Public Storage commenced an unsolicited stock-for-stock purchase offer of the second-largest self-storage REIT, Shurgard Storage Centers Inc. (NYSE: SHU). Public Storage offered 0.8 shares of its common stock for each outstanding Shurgard share, or $52.48 per share based upon Public Storage's most recent closing price before the Aug. 1 announcement of $65.60.

Public Storage CEO Ronald Havner, Jr. said in a company release announcing the offer that this deal provides Shurgard shareholders an "immediate premium for their shares and the opportunity to participate in the upside potential of the combined company."

Shurgard executives say that the company is not for sale and that Public Storage's offer would not be in the best interest of its shareholders.

"Our board of directors carefully evaluated this proposal and unanimously rejected it. We believe our current strategic plan provides superior, compelling long-term value to our shareholders, and the proposal by Public Storage is clearly an opportunistic attempt to deprive our shareholders from fully realizing that long-term value," Shurgard Chairman and CEO Charles Barbo said in a company release.

This is not the first time the two companies have gone down this road, most recently in 2000, but were unable to strike a deal. Analysts following the merger attempt say that Public Storage likely went public with the negotiations to add pressure to Shurgard management to negotiate a deal. However, if Shurgard remains adamant against selling it is unlikely that a takeover would happen.

"While the offer may eventually ignite interest from shareholders that could compel Shurgard's board to rethink their rejection, history tells us not to be so optimistic," according to Wachovia Capital Markets Director of Real Estate & Lodging Equity Research Jeff Donnelly. "For all practical purposes a hostile takeover of a REIT is extraordinarily difficult, if not near impossible. Ownership restrictions that are a condition for qualification as a REIT (that no fewer than five shareholders can own 50 percent or more of the REIT) preclude a hostile takeover."

The most recent failed REIT takeover attempt was the joint attempt by Simon Property Group (NYSE: SPG) and The Westfield Group (ASX: WDC) to acquire Taubman Centers (NYSE: TCO) in 2003.