Pure Industrial Real Estatetrust Trust (AAR.UN.TO)

Likes the industrial asset class. This happens to be a REIT that has grown hand over fist through acquisitions. You are getting a very good yield. Trading at a modest value to NAV. Payout ratio is hovering around 85%. Expects there will be more growth through acquisition, but more importantly, some organic growth, especially as industrial activity picks up in Eastern Canada. The decline in the Cdn$ should help manufacturing. As a result of that, we should start to see industrial rents increase. They have remained relatively lacklustre for the past few years. The good news is we have seen very little new supply. Supply growth in the industrial sector has only averaged about 1% in the last 4 years, which means that landlords should have a lot of pricing power once the economic momentum terms.

They have changed their strategy over the last couple of years. Now they are making large acquisitions of portfolios and you get the good, the bad and the ugly.

Industrial. Mostly Ontario and Alberta properties with a cap rate of 6.75. The stock is very inexpensive. Their properties have a courier that handles all the Amazon shipments.

Largest industrial REIT in Canada. Assets across the country. Recently purchased a portfolio in the US that is leased to FedEx. He has a strong confidence in management. They will grow free cash flow per share. Trading at a 3-4% discount to NAV.

Likes the REIT sector. He thinks we will see a decline in the REIT sector followed by a rebound. Likes this one because there is more on the industrial side than the commercial side. You have to look at geographical locations of the REITs, and he would rather have the ones that are sitting in Western Canada. 6.8% yield.

Portfolio is of higher quality, very good lease terms and very good relationships. Yield is a little bit low, but don’t be fooled by that. It’s lower because it is a stronger company, and has been priced better. With the little bit of recent price weakness it is an interesting opportunity. 6.7% yield.

Likes the industrial space. It is one of the property classes that have the best fundamentals. There is still incremental demand going into that space so she expects to see occupancy going up as well as rental rates.

An industrial REIT. The great thing about this is that their field ratio is really conservative, and doesn’t field more than 80% of its AFFO. It is very good at transacting and acquiring and getting bigger and bigger. His concern is that he doesn’t know if they add incremental value to their assets that they purchase, which should be done in the early cycles. Also, in this late stage, he does not want to own industrial, which tends to be a very cyclical market. Would prefer apartment REITs.

Industrial Market. He is keen. 2014 is the year for industrial. Rents are just starting to go up in the GTA. This is a good opportunity.

(A Top Pick April 23/13. Up 0.7%.) The whole sector has gone through a rough patch because of fears of interest rates backing up. Also, 3 senior management have left.

(Market Call Minute) Industrial building should see an uptick.

The industrial sector in Canada from a REIT perspective has grown dramatically over the last 3-4 years. From his perspective, this is the name you would want to own to get industrial exposure. This has an internalized management team that has proven that over time they have been able to allocate capital effectively so as to grow free cash flow over time. Has a sustainable distribution payout ratio and high quality assets. A big proportion of their assets are exposed to markets like BC where it is difficult to purchase industrial. Also, have exposure to Ontario. Feels the low Cdn$ is going to help manufacturing, which will flow into industrial assets.

(Market Call Minute) There is going to be consolidation in the industrial real estate space. It is one to own.

A Core position for him. Very excited about the industrial market here in Canada. These are the first businesses that will benefit. Pure play connected to economic growth with very safe yield of 7% and a couple of percent in growth going forward.

This is an income play. He is a big fan of the industrial market right now. Has seen a very large trend going on. Basically the Canadian industrial market is linked most directly to the US economy. US economy is improving at the same time that our dollar is weakening. So you have enough strength for the oil markets in Western Canada. Yet the weaker Cdn$ is actually helping bring back manufacturing into Ontario and Québec. This gives the opportunity for rent growth.