Dream Industrial REIT (DIR.UN.TO)

Likes their properties and is one he would definitely add to. One that he would be nibbling away at by only putting a 3^rd in and then gauging it. This is only because it is industrial. Thinks there is money coming into the real estate environment. Dividend yield of just over 10%.

If you are waiting for data that shows the industrial market in Western Canada is weak, it hasn’t happened yet. Even though this has a high yield, it is fully covered and is a very cheap stock. The market is having difficulty understanding a proper value to put on industrial properties in Western Canada. The Ontario assets have a very visible cash flow and cap rate and are looking very cheap. The name has been painted with an Alberta brush, which is not entirely fair. Very inexpensive and has a very high, yet sustainable yield. This is going to be a rocky ride. 9.9% yield.

This is his favourite part of the empire. People believe this is more cyclical than it really is. Historically industrial real estate is quite stable. You will continue to see very solid results from them so this is not a bad entry point.

There have been a few REITs recently that have been really hit quite hard, and the yields have gone up and valuations have gone down. Looking at the situation in the market overall, for the most part payout ratios are pretty good, occupancy is pretty high and the debt/loan value is not that bad. This is the situation with this company. Stock hasn’t done a whole lot, but it is far more attractive than it was. Nothing really wrong with the company, so he really can’t explain what is going on with the stock, but thinks the sector is more of a factor than the stock itself. This is a good one for income, and he wouldn’t get too excited about it for capital gains. 8.9% dividend is still within his comfort range.

Real estate has really been driven by institutional investors such as pensions and insurance companies that have a specific defined need for cash flow. In a 1%-2% world, they want some predictability, and have been buying up all kinds of real estate type assets. The sector can be vulnerable to rising interest rates, but probably less so in Canada. He thinks you will see a fairly secure return from real estate over the next little while.

There is a hate on the Dream collection, but in this case it is not warranted. Their western properties have actually done quite well. You get stability, slow growth, and higher yield because it is in the industrial space.

A lower Cdn$ is going to help the industrial sector in Canada, and he likes the industrial asset class. Supply growth has been relatively moderate at less than 1.5% of total available supply during the last few years. That gives very good supply fundamentals, also supported by e-commerce trends. This name is trading at a deep discount to NAV. Management has done a pretty decent job. The only concern is that there is some Western Canadian exposure, so the slowdown you are seeing in Calgary, due to low commodity prices, could negatively impair the results coming out of that region, which hopefully would be more than offset by strength in eastern Canada. This REIT is supported by long-term secular growth trends that should result in pretty decent dividend growth going forward.

A very interesting stock, in that it is small bay industrial, multi-tenant, lower ceiling, older stock, but is really well located. There is not as much demand for that property, however it is so well located with the amount of traffic in our major cities, that he thinks this is actually a really good opportunity to be buying into this company. Very high yield at 8.97%. Buy it for the income and hold it for a long period of time.

He likes the industrial market in the GTA. Their properties are older, but in good locations. It is about 18-20% below NAV. You get an attractive yield. Don’t sell at this point. Keep a long term horizon. There is a demand for the properties they have.

A little better positioned than Pure Industrial REIT (AAR.UN-T), and the valuation is slightly cheaper. Even though they got bumps in their overall rents, it is still a very, very tough business. You would want to own this at the beginning of a cycle because you have a lot of alpha. With a recovery of a real estate market this would do quite well. This is a sector that he would not be in now.

Prefers Pure Industrial REIT. DIR.UN-T are externally managed which means they are motivated to pull the trigger on acquisitions rather than looking at quality. Pure Industrial is internally managed and just got added to the index.

Real estate is based on leverage. They live off the funding (3% right now). Their leverage is 50-60% of their assets. As their costs go up you get some back in rent increases, but really it is all about the balance sheet, so your dividend would not reflect higher rents exactly. He doesn’t like this one. Industrial is a tough asset class. He thinks there are better management teams also.

(Top Pick Sep 24/13, Up 24.23%) Likes the industrial space and this one but he had too many industrial names.

He sold out of it and moved to another name in the Top Picks. He likes the industrial markets, there is good momentum and the yield in this one is safe.

Dream International, Dream REIT and lots of assets going all over the place. He would prefer a more conservative stance. He doesn’t want to get involved because the restructuring hasn’t really gone on and they just hid the problems under the mat.