Canadian Apartment Properties (CAR.UN.TO)

A good company, but doesn’t know if it is the best company to own at the moment. He doesn’t see Canadian rates going up, just afraid there will be some contagion if US rates go up. One of the better areas to be invested in, in real estate, during a rising rate environment space is multifamily, which can raise rates faster than anybody else.

One of the few REITs where he could sell every single building today if he wanted to. The kind of security that investors should be thinking of, when looking at houses trading relative to NAV. There are so many people around the world who would love to own a stable, Ontario focused apartment portfolio. Dividend yield of 4.05%.

They continue to put up the goods. A very, very well diversified property. Likes management and the distribution. The only offset is that it is one of the more expensive REITs, but he thinks it is justified. He would prefer to pay more for a good company than less for a bad company.

Lagged for a couple of years, but is now deemed as a defensive asset class. Most of their holdings are in Ontario. Spent a lot of CapX to refurbish their old buildings and are buying new ones. In a good spot and will probably continue to outperform the market.

He is a big shareholder in this. One of the best performing Canadian REITs year to date, primarily because it is Eastern Canadian focused, and is low income housing. In an environment where there is economic uncertainty, and you are worried about the health of the economy or the consumer in aggregate, there should be more demand for low income Housing. An interesting switch would be to consider going into Boardwalk (BEI.UN-T) instead, because he thinks they will benefit as oil prices recover.

The company has lagged for a long time because it never had access to the Alberta market. They are in Ontario, Quebec, BC and only a little bit of Alberta. In Ontario they can now raise rents 2.5%. It should continue to outperform. They are in a good spot.

He continues to like the story and the prospects for 2016. He thinks of it as a defensive holding. They spent a lot of money on their properties over the last few years and can now generate above guideline rent increases. Dividends and valuation should continue to grow.

If investing in Canada, apartments right now are a great place to be, especially in Ontario. This has the shortest lease terms, so inflation is not a problem. On a risk adjusted basis, this becomes one of the most attractive investments. Decent price. Yield of 4.5%.

This is a value pick. The Ontario apartment market is one of the most highly desired assets. Any pension fund would very much like to accumulate a portfolio of GTA apartment buildings. It sold off after its Montreal acquisition. He has been accumulating. It is one of the safest value picks at this time. This is a great place to hide, waiting for the FED call.

There was concern early on that REITs do not do well in a higher anticipated rate increase market. This company has been a go to name in apartments, and there have been some questions about what is going to happen in the apartment sector. Rental rates are not as strong in Alberta as they are in the rest of the country. This REIT is a quality name. He is looking at it.

(Market Call Minute.) If this is rental properties, that is rather interesting. In North America there has been a big switch to rentals.

The real estate sector is one of the top 5 on a weekly data and in the top 7 of the monthly data. That is a really good stat. Chart shows a long upward trend that has been bounced off many times, indicating buyers are very, very interested there. There is also a wedge formation and you want to see it break out. Thinks it is a really good risk from here and recommends it.

They have the best margins in the business.

Interest sensitives tend to be okay over the summer. He looks at REITs as probably being a little oversold right now and probably an okay place to be over the summer. This one hasn’t broken the last low. They may not go up a lot over the summer, but you will earn the dividend and probably not see a lot of downside. After the summer you will have to decide whether you want to continue holding. (See Top Picks.)

A nice little company and the dividend is pretty safe. He models an all-in comp annual growth rate at about 6.3%, which is about 300 basis points above its 5 year average. Payout ratio is 75%, so your 4% dividend is safe. Lower commodities are helping them. His price target is $29.75. Trading at about 18.5X adjusted funds from operations, versus the 5-year average of around 17.5. You want to be adding this on a pullback.