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realestate investment funds/trusts
May 10, 2010
2:02 am
kilarney
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does anyone have any opinions of experience with these property based funds? They advertize good returns with very low risk. Are there any hidden charges or catches to them? They say its like owning and renting a property out without the hassle. Is that true?

May 10, 2010
4:08 pm
andras
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They are essentially like stocks, with attendant risks, but there are some high yielding ones. My favourite is Whiterock WRK.UN on the TSX. The yield is about 11%. Great Management. Here is Canaccords latest comment on them.

Whiterock REIT (WRK.UN : TSX : $15.01) - Buy - Target: C$16.50
Shant Poladian
Comment: Q1 a bit light but per-unit results back on the upswing; maintain BUY rating and $16.50 target price

Whiterock REIT reported Q1/10 diluted FFO/unit of $0.40 vs. $0.47 in Q1/09, which is below our $0.43 estimate but above consensus at $0.38. The sequential improvement from $0.37 in Q4/09 reflects the accretive impact of recent acquisitions. We are not surprised with the wide variance between our estimate, consensus and the actual reported results owing to the high volume of transactional activity (deleveraging and acquisitions) during Q1/10. Portfolio stats were soft in Q1, but should improve through the year. Same-store cash NOI declined by 1% in Q1/10 over Q1/09, mainly attributable to lower occupancy during the quarter. Q1/10 occupancy came in at 95.3%, sequentially down 90 bps from Q4/09, and down 180 bps from Q1/09. The sequential drop in occupancy is mainly a result of vacancies in Moncton, NB, and Nisku, AB. The Nisku vacancies have been fully re-leased subsequent to Q1/10 and will begin contributing to NOI in 2H/10 (along with the re-leasing at 655 Bay St and 193 Malpeque).
Risk profile continues to diminish as deleveraging is now visible and FFO/unit growth is on the upswing. Deleveraging drove D/GBV to 64% in Q1/10 from ~73% for most of 2009. Although leverage is still higher than peers', it approaches 61% if we treat the in-the-money converts as equity (series F is being converted into units at a rapid pace). Over time we'd like to see total leverage in the high 50s, which doesn't seem as far off as it did for most of Whiterock's public history. At quarter-end liquidity was strong at $50 million, leaving room for additional investments. We continue to like the steps the REIT has been taking with respect to the following factors: (i) deleveraging; (ii) high-quality acquisitions; (iii) a near-sustainable AFFO payout ratio. We believe management will be successful in growing the company into a high-quality mid-cap REIT in the foreseeable future. Our C$16.50 target price is based on a modest premium to our $15.25 pre-tax NAV estimate using a 7.50%
portfolio cap rate.

May 13, 2010
2:09 am
kilarney
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some info suggests that it is not a good time to buy into a REIT since we may be seeing interest rates rise and these funds have gone thru a good return with historically low mortgage rates. Maybe wait a bit to see what happens?

May 4, 2022
10:12 am
AllanB
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Sorry old thread.

Why are Reit stocks falling more than some other dividend payers what will happen if they lose their flow through tax exempt status won't they restructure to similar value but instead of paying as much income they'll become capital gain plays.

I'm all for cooling off real estate if that helps.

May 4, 2022
11:31 am
savemoresaveoften
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AllanB said
Sorry old thread.

Why are Reit stocks falling more than some other dividend payers what will happen if they lose their flow through tax exempt status won't they restructure to similar value but instead of paying as much income they'll become capital gain plays.

I'm all for cooling off real estate if that helps.  

Rising interest rate makes a REIT's dividend less attractive, and on top increase their funding cost, so a double whammy.

May 12, 2022
10:32 am
AllanB
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Could the Reits go bust with higher rates or a legislative change in structure. How much can they withstand? Are they safe investments

May 12, 2022
5:56 pm
savemoresaveoften
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AllanB said
Could the Reits go bust with higher rates or a legislative change in structure. How much can they withstand? Are they safe investments  

There wont be a legislative change in structure, period.

May 15, 2022
7:10 pm
AllanB
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savemoresaveoften said

There wont be a legislative change in structure, period.  

How do you know?

June 12, 2022
2:11 pm
AllanB
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Why are reits selling off

June 12, 2022
3:13 pm
Dean
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AllanB said

Why are reits selling off  

For a short summary, see Post #5

Historically, most of the REITs have been a good investment. But during rising interest rates, they tend to head south.

In theory, when interest rates have peaked, the REITs will have bottomed out ... and that would be a good time to buy in.

Keep some cash ready sf-smile

    Dean

sf-cool " Live Long And Prosper " sf-cool

June 12, 2022
5:08 pm
AltaRed
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While all REITs are subject to higher debt servicing costs as interest rates rise and mortgages are re-negotiated, REITs are also diversified among a variety of sectors from the travel industry (hotels et al) to industrial (warehousing) to retail (Walmart et al) to rental housing (CAR.UN). They will all react somewhat differently in an economic downturn.... some types of retail and travel likely the worst when consumers need to cut back.

A number of REITs have undertaken a fair bit of re-financing to lengthen their terms in anticipation of higher interest rates. It may be some of them are getting oversold.

As mentioned previously, there isn't a chance the legal structure will change. It's essentially the same as individuals do with investment real estate. Not that long ago First Capital Realty actually converted from a corporate structure to a pass through trust because it was not getting enough love from investors.

REITs are a decent sector for retirees to have a portion of their portfolio, to receive relatively reliable monthly yield in distributions (they are not dividends in legal parlance).

June 13, 2022
8:29 pm
AllanB
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Reits pay out all their income so they have little reserve. When they borrow do they have to invest right away in property. Some may use borrowed funds to pay distributions. Property valuations are dropping. What if corporate bond rates freeze up again or remain high for a longer period they may have to cut their distributions.

June 15, 2022
8:30 pm
AllanB
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According to Cibc Reit analyst David Wilkinson "Rising rates immaterial for real estate sector profitability (even if they say double)"

https://www.theglobeandmail.com/investing/markets/inside-the-market/article-rising-rates-immaterial-to-real-estate-sector-profitability-cibc/

Really? Interest rates don't matter to Reits. What could go wrong? Maybe they're expecting the fed to buy corporate bonds again or encourage pension funds to pick up the slack. The analyst also recommends Brookfield with $175 billion in debt

June 15, 2022
8:50 pm
AltaRed
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The gist of the article is that REITs have done a good job the last few years in lengthening out their mortgage terms and thus won't see too much of an impact, at least in the short 1-3 year period. They've all made decisions during the pandemic to take advantage of low rates and lock them in.

Lastly, unit prices are trading at supposed significant discounts to NAV though NAV in itself is a rather fuzzy determination. Some NAV assessments can be rather subjective....which is why they almost always trade to a discount to NAV.

June 15, 2022
9:45 pm
HermanH
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What's a NAV assessment?

June 16, 2022
5:19 am
Bill
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Net asset value determination/estimate.

June 16, 2022
9:26 am
AllanB
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I guess the analyst got it wrong them Reits are sellin' off today with broader market. NAV revaluation

June 16, 2022
10:00 am
Dean
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AllanB said

I guess the analyst got it wrong them Reits are sellin' off today with broader market. NAV revaluation  

In times like these (market correction / Bear market) the Bad and the Good get dragged down together.

Big Time buying opportunities comin' up soon ... it'll be a Bargain Basement Extravaganza Sale ❗

Cash is King right now. sf-cool

    Dean

sf-cool " Live Long And Prosper " sf-cool

June 16, 2022
10:07 am
canadian.100
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AllanB said
I guess the analyst got it wrong them Reits are sellin' off today with broader market. NAV revaluation  

In a broad market sell-off it is not unusual for everything to take a hit - rising inflation and interest rates cause stress to investors. Many investors are quite nervous about a likely recession, they panic and sell their holdings rather than hold until recovery. I believe there will be a recession with continuing high inflation. We may be in this for years.....Our leaders have no solutions.

We still lose with 4% GICs when inflation is already 7% or possibly more for June.

June 18, 2022
3:01 pm
RetirEd
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...and some investors, having taken a haircut on other assets, have to sell off the good stuff to cover their margins...
RetirEd

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