Allied Properties REIT (AP.UN.TO)

Is this a good time to get into REITs such as Allied Properties (AP.UN-T) and RioCan (REI.UN-T)? This is a very good and timely question. He had dramatically reduced his weight in REITs when interest rates started to move, because there is a wrong tendency to think that all REITs are like long-term bonds. These 2 are both good ways to be in a REIT sector. Don’t go into REITs in a big way, have small weighting.

Very high quality organization. Development potential. Income. Growth, And stock has come off recently. An opportunity to pick it up at a very good price. Growth will be through internal development. Turning factories into restaurants.

It is flat for the year, which is one of the better performances. 4.4% yield. Brick and beam old factories on the fringes of downtown Toronto and Montreal, now expanding out west. Growing its funds from operations and just raised its distribution. AFFO is up about 17% this year. They own the big Internet Hubs for Canada.

(A Top Pick July 9/13. Up 7.81%.) Great performer compared to its peers. Management has done a great job in the last 3 years in bringing down leverage. In an environment where the market capital’s might be more challenging, this REIT is going to do very well. There is internal growth coming from the in place portfolio. You also are going to see developments and redevelopments coming online over the next couple of years.

(Market Call Minute.) Highest quality REIT in Canada on a property level. Good growth prospects. The best growth in any Canadian REIT possible.

Have been showing 7% organic growth, which is fantastic. Very well managed. They are in Calgary, Montréal, Toronto, Vancouver and Winnipeg. A long-term Hold at any time. 4.1% yield.

(A top pick June 17/13. Down 2.53%.) Market is down 5.25% so he is happy with his 2.53%. Fantastic company. You’re looking at a diversified asset base. Very safe on distributions. This company will generate strong same-store growth. Great balance sheet. 4.3% yield. Buy on weakness.

Has done a great job in bringing down its payout ratio which is now sitting at about 80%. Have been one of the best REITs over the last 2 years at taking advantage of the environment of open capital markets. Raised equity, brought down leverage and purchased acquisitions that have been accretive to free cash flow. In addition they have created intensification in development opportunities that are going to add to free cash flow. They are not going to the capital markets to cooperate with them in order to generate free cash flow growth.

Clean balance sheet. Stability to withstand little corrections like this. 4.2% yield. He expects them to grow this. It is a premium REIT. They can grow their earnings and dividend over time.

Likes because of the development potential. Unique asset class. Thinks the stock is currently undervalued.

Any particular REIT with great growth potential and the possibility of an increasing dividend? He is constructive on REITs. You are not going to get too many home runs from here but you are going to get nice singles. Good combination of dividends and capital appreciation. The one that he thinks looks best still is Allied Properties (AP.UN-T). Has a compund annual growth rate of almost 14% and will do it with really strong internal growth, acquisitions and refinancing debt. Sees continued dividend growth of 3%-5%.

First class office properties. High quality name. Balance sheet and payout ratio are best among peers. Occupancies have stabilized so that rent increases have passed through to tenants. The acquisition program will continue.

Becoming a core holding for a lot of institutional investors. Very solid management. They are the only acquirer, manager, developer, owner of class 1 real estate across Canada. Probably worth about $35.

This has been one of the better performers of the year. Benefited from intensification. They are in the brick and beam core center of the major cities. Has been a very stable performer. Would like to get it at a lower price.

A lot of investors are getting a little bit nervous of the sector but he thinks there is probably still more to go. As rates continue to go lower or stay low, it is enormously accretive in terms of free cash flow. Feels that this company has probably 5 years of 10% annual growth due to their unique development pipeline and the trend towards urbanization. Trading at a wider multiple than the group but it is merited. Balance sheet is in really good shape and their ratio is very low and they’ll probably be boosting their distribution.