Choice Properties REIT (CHP.UN.TO)

The easy money has been made with the support of global QE. Now, you have to stick to the true winners, so go stock-specific. Choice Properties is good for that, the Loblaw-sponsored REIT with Loblaw as the main tenant that acquired CREIT earlier this year. The synergy is amazing. This will shape real estate in Canada whereby tenants will colllaborate with landlords as collaborators who together who find the best use of space to benefit both parties.

Choice or Riocan to sell? He sold Choice recently. It disapointed him. This was Loblaw that spun into a REIT. Choice just merged with CREIT which has seaoned management. He doesn't like Choice--it's decayed more than the REIT sector. It'll be a work in progress for a while. He would sell Riocan and hold Choice, because Choice has come off so much.

They are in the midst of acquiring another REIT. They are diversifying away from Loblaw’s. He likes the combined entity. He is currently short because of the spread on the acquisition.

A spin-off from Loblaw; most properties are Loblaw locations. The interesting is the merger with another REIT. Good thing is the wider exposure to other sectors, but the bad thing is losing focus from the grocery retail sector. Overall, the merger is a good thing--it's a more liquid company. Over time, should see higher multiples.

The anchor tenants, in a large majority of their properties is Loblaws. Where he might be a little more hesitant in a real estate investment trust that has mall-based retailers, it is quite unlikely that grocery shopping will have the same problems. This would be one of the safer REITs. He is quite constructive on equity markets, so has been moving away from REITs with a view that the economy is strengthening and interest rates moving higher. If you have to own a real estate investment trust, this is a reasonable choice, but he would recommend you don’t concentrate too much in REITs or bond proxies generally.

This has a lot of the real estate that Loblaws and Shoppers occupies. A great bond proxy. Versus other retail REITs, you are probably not going to get as much growth, however you are going to get pretty good stability. Loblaws owns a considerable chunk of this REIT. There is better growth in other REITs.

It is the real estate arm of L-T. The parent owns about 80% of the REIT. This is L-T with less volatility and a higher yield. It is a high quality REIT. The problem at the time of the IPO was the agreements with L-T that limited rent increases. He does not know about the properties that Shoppers is on.

Has been really impressed with this. They have done a fantastic job. There has been more growth in this portfolio than he would have imagined. A very stable name. 5% yield.

Doesn’t think there is any problem with this REIT. Good backing and good tenant. Probably less growth. He is uncomfortable with the whole REIT sector’s valuations. It is completely dependent on the interest rate move. You get the high yield when you pay out 90% of your earnings to the unit holders.

(Market Call Minute.) Has admired how well this is done, but has done too well.

This is anchored by Loblaw’s (L-T). A very stable business with good, long term leases. There is some rent growth and some potential development built in. Think of this as a bond. In an environment where people want less cyclical commercial real estate exposure, they’ll often go to something like this. He likes it as a very stable, long term hold.

Tenants are 95% Loblaw’s anchored. Stable asset. It hasn’t done much since the IPO. There is nothing wrong with it. There is always that inherent conflict where so much of it is owned by Loblaw’s. He finds this a conflict.

Has one tenant, so is that good or not? The other issue is, should it trade at a premium or a discount. He does not like REITs at this particular stage, because they are so rate sensitive and we are in an environment where he thinks rates are going to back up. He is lightening up on REITs.

Spun out from Loblaw’s (L-T) real estate. The majority of Loblaw’s real estate is now in this REIT and they are an 80% holder. If looking for a long-term sustainable yield with moderate growth, this is probably appropriate from an investment standpoint. He is not a big fan of single tenant REITs. Not sure how the portfolio will look 10 years from now. Prefers to see higher free cash flow growth.

Very stable cash flow and 99% occupied. There will be slow growth, but it is stable. Prefers Canadian Tire.