UPDATE 1-Artis REIT targets expansion in Toronto area

* Artis says to buy two properties in Toronto

* Total acquisition costs of C$116.5 million

* Acquisitions to be financed with cash, mortgages

By Pav Jordan

TORONTO, Aug 4 (Reuters) - Artis Real Estate Investment Trust (AX_u.TO) (AX_u.TO) is moving east, buying C$116.5 million ($114 million) worth of Toronto real estate after years of focusing nearly exclusively on Western Canada.

Winnipeg, Manitoba-based Artis is part of a wave of Canadian real estate investment trusts targeting acquisitions this year, betting on Canada's economic recovery and renewed demand for office space.

"As the gross book value of our asset base approaches the C$2 billion mark, we believe it is prudent to diversify our portfolio beyond our core Western Canadian market," Armin Martens, CEO of Artis REIT, said in statement.

The Toronto area "is a large and vibrant investment market and expanding our focus to include this market enables Artis to pursue more accretive investment opportunities for the benefit of our unitholders."

Artis said it would buy the Concorde Corporate Centre in northeastern Toronto for C$87 million. It plans to finance the purchase with cash on hand and with an anticipated C$58 million of new mortgage financing.

It said it would buy Cancross Court in Mississauga, on the western fringe of greater Toronto, for C$29.5 million. The purchase is to be financed with cash on hand and the proceeds of an anticipated $18.3 million of new mortgage financing.

Artis also confirmed it had renewed the C$60 million revolving term credit facility, which matures Sept 28.

Artis is a Canadian real estate investment trust with 9.6 million square feet of leasable area in 111 properties. Leasable area by asset class is about 29.5 percent retail, 32.6 percent office, and 37.9 percent industrial.

The portfolio is 31.5 percent in Manitoba, 6.7 percent in Saskatchewan, 46.6 percent in Alberta, 14 percent in British Columbia and 1.2 percent in the United States.

Artis went to market in February to raise some C$50 million in an equity financing, taking advantage of strong valuations for REITs which offer investors higher returns than that on Canada's benchmark 10-year bond CA10YT=RR, currently at about 3.1 percent.

REITs were a popular investment vehicle in Canada from 2000 through 2005, after the tech bubble burst and investors sought hard assets. The steady payouts also attracted many yield-hungry investors.

Units of Artis rose 0.43 percent in Toronto to C$21.18.

($1=$1.02 Canadian)

(Reporting by Pav Jordan; Editing by Frank McGurty)