Dream Office REIT (D.UN.TO)

Has been in a long-term decline due to its heavy exposure in the Alberta office market. Announced they were restructuring, slashed their dividend and were selling two thirds of the company. Just announced earnings which were in line with his expectations. When a company is going through a strategic restructuring, he tends to sit on the sidelines.

He tracks it, but does not own it. They have a lot of Western Canada exposure. Great management. Longer term they will do well, but there are challenges short term.

This is tied more directly to the Alberta economy with pressures in Edmonton and Calgary offices. It’s Ontario portfolio is fine. 14% dividend yield which he feels should be cut.

Hold on to it if you have had it for a while. It is a case of their cash flow being under pressure and they have leverage on their balance sheet. Management is smart and as long as oil is not here for 5 years, this is not the time to sell but to hold on for sunnier days.

He has disliked this story for so long. He has a problem with their management contract and their fees. They are in a space that is struggling. They have suffered because of the properties outside of Calgary. The overall assets are not great. The dividend is safe.

He has a little bit and thinks it is cheap. Trading well under NAV. It gets about 40% of its Net Operating Income from the West. There is a lot of capacity coming on in the office space, both in Toronto and Calgary. They are doing the right things on leasing. This is one that he hopes will rise after the pressures of this year come off. The company has said they are not looking at the 13% dividend as it is fine and their cash flow supports it at the moment.

Has been under pressure. It is because of the decline in the valuations for office space in Alberta. About 40% of their leasable space is in Alberta. He is not worried about a dividend cut. Real vacancy rates he thinks are much higher than published, for office space. He thinks it is 25%.

A very professional organization. It becomes difficult to value the company, however. They wrote down a Calgary office 15% as a part of their recent earnings. He is keeping an eye on Edmonton vacations and they will do a deeper dive into the company.

Stock vs. Stock. D.UN-T vs. CUF.UN-T. Both distributions are pretty safe. Interest rate rises are negatively affecting these. A lot of investors have a fear regarding Canadian Real Estate.

Stock has fallen a great deal because a lot of their properties are located in Calgary.

Primarily B level office space. Even though 30% of the portfolio is A class exposure, there is a compression in rents generally. As the A rents come down, B class tenants start to consider moving up, which puts pressure on the B’s. Good company and cash flow seems to be strong. Not really growing all that fast at this point.

Market has been overly harsh on this vehicle for some time. The 11% yield is quite high. There have been several transactions where similar properties to their GTA portfolio, especially the one they bought in 2011, are trading at significant improvements, basically 30% higher than what this company paid. There has been speculation if they will cut. They don’t really need to, but if they did they would be using that money to produce more CapX and renovations on existing office portfolios.

(Top Pick Jul. 29/14, Down 18.67%) Good quality REIT. There are some concerns about some holdings in the West.

He does now own it because of the negative pressure in Calgary office markets. He thinks the market is pricing in more rent erosion than there is. For the brave, there is a bit of an opportunity.

Great managers. His stop losses kicked in, so he has greatly reduced his positions. REITs have room to go because of the decline in interest rates by the central bank in Canada. He is going to wait to see what happens. |Still likes it. His company’s target is $31 and have it is a sector perform.