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Opinions Andy Nasr
Pure Industrial Real Estatetrust TrustAAR.UN.TOCOMMENTJan 09, 2015
Andy NasrStock price when the opinion was issued
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Industrial properties. It is more cyclical and more tied to the business cycle. As business gets better, it will likely be able to raise rents. It has now pulled back to the 150-day moving average, which is a good place to buy it. Dividend yield of 4.8% is pretty attractive.
He likes this company. Real estate has headwinds, but this company has a tailwind because it is industrial. Also, they are buying assets in the US which has extensive corridors with a population base where there would be some desired locations to own in the Midwest and in secondary cities. Yield is around 5%. They are pretty good at what they do. He would like to own this, but at the right price.
A sector that sold off a few years ago, as people were thinking that with less manufacturing there was less industry. Since then we have had a major change in how people shop. There is a lot of online shopping, and this company’s holdings have become hubs for a lot of storage for businesses. One of the leaders in this space, and probably one of the best names in the industrial space.
The trend that has been pushing names like this up, is the e-commerce trend. This is a fantastic company, a little pricey right now. It has done a great job of aligning itself with FedEx. There is going to be a point where that exhausts itself, which is when you can expect the price to pull back. However, there is no reason why you would want to sell a company that is doing so well and was such a good future going forward. It has brought its debt down and its earnings are very steady, and it could be very much a perpetual hold.
Derek WarrenThings have changed. E-Commerce and pot have benefited them. It has done extremely well. He is interested in the name. Management has done a good job of getting growth there. Their biggest risk is that their biggest customer is a significant portion of their business.
Barry SchwartzHe is a large shareholder. He is continuing to hold it but is concerned about supply. REITs have staggered debt maturities.
Andy Nasr(A Top Pick Dec 18/15. Up 42.72%.) One of the largest tenants is FedEx. Management has done an excellent job of diversifying themselves, even over the sub, subcategories within industrials. They have also recognized that it is important to reduce overall leverage.
Derek WarrenHe really likes this. They have exposure both in Canada and the US. Recycling some capital and increasing their US exposure. Management has done a pretty decent job considering where they started with their IPO several years ago. Fairly well diversified.
Andy NasrHe likes the industrial sector. In traditional retail you have the Amazon affect. Industrial is the easiest to build. As you see more and more business being done on line you should see this one benefitting. They did a nice job of carving out a niche and should be able to deliver decent dividend growth.
Andy NasrA very high quality income. You are getting a good yield of 6.13%. They have US assets, so you are getting some US exposure. High quality industrial assets will continue to benefit from our US partners. Also, they have a lot of logistics type of tenants, such as FedEx. (Analysts’ price target is $5.91.)
Derek WarrenHas been a very successful REIT and the portfolio is pretty good quality, compared to others. What he likes about the industrial market in Canada is that it has been fairly disciplined across the board, and CAP rates have not compressed as much is the retail sector. Also, you are not seeing the overcapacity that you are seeing in office REITs. This is no longer a screaming buy.
This has popped recently and is outperforming the market, and is the best way to play e-commerce. He continues to like this.
Derek Warren
Likes the industrial sector in general. There has been very little supply growth. Has averaged less than 1.5% in the last few years, so you don’t have to really worry about that excess supply. Also, the lower Cdn$ should benefit the manufacturing sector in eastern Canada, which should create more industrial demand. Broadly speaking, if you look at the industrial subsector within real estate, occupancy has been in the mid-90s. If you see occupancy get pushed up above the mid-90s, then you should really see significant rent growth, and accompanying this will be cash flow growth, and hopefully a dividend bump. Balance sheet is in good shape. This tends to be more of a growth by acquisition REIT, so down the road you can see some some equity issue to gobble up some more assets.