Opinions Andy Nasr
Dream Office REITD.UN.TOCOMMENTJan 09, 2015
Andy NasrStock price when the opinion was issued
As of Jun 08, 2026. Market Open.
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Very concentrated portfolio in downtown Toronto, catering to smaller users. A call on the office market recovery, and the recovery is happening. Inexpensive. If one particular asset can boost leases, stock could do quite well. If not, you're only getting the yield of ~6% (which is good, but has been reduced).
It has been a tough environment for REITs in general, although industrial REITs have been holding up better than the rest. DIR.UN has a strong free cash flow yield, it offers a distribution yield of 5.4%, and has a high occupancy rate of 96%. Its FFO/debt ratio has been climbing over the years, signalling its funds from operations have been growing relative to its debt load. We would be comfortable buying DIR.UN for a long-term hold.
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Investors really do not like commercial office companies right now. D.UN has an 80% in-place occupancy rate, down from year end (0.8%) and down 1.5% from last year's comparable quarter. It is priced well, but there are risks here, and its small size adds risk as well. We would see it as a higher-risk hold.
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In very different sectors. Both trade at wide discount to NAV. Neither has catalysts on horizon. CSH.UN at risk of cutting distribution, which is not being covered due to lower occupancy. CSH trustees see growth coming, but can it recover occupancy levels lost during Covid? He's watching that, as it's hard to invest in the face of a possible cut. D.UN is in an extremely tough sector. Office space, globally, has suffered with work from home. Office sector is not dead, but vacancy rates are in high teens and climbing. A good operator, Dream still owns good office buildings, especially in Toronto.
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This really hasn’t been a name for him. Has sold off a lot and he has always had a tone of caution when talking about this, because of the big increase in office supply. This REIT gets negatively impacted by nice new shiny buildings popping up in major city centres like Toronto and Calgary which tends to depress vacancy on a short-term basis. Have had several tenants that have announced their intention to exit when their leases are up, so they have been busy trying to re-tenant some vacant space. Longer-term they should be fine with occupancy moving back to the low 90%s. Payout ratio is a little bit high in the mid-90%s. Biggest risk currently is in re-tenanting some of that vacant space and what they are paying for it. Currently this is exceptional value and very cheap. The only knock on it is that it is externally managed, but you are getting a good dividend. If you are long term oriented, it is a decent name. (See Top Picks.)