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Opinions Derek Warren
Dream Global REITDRG.UN.TODON'T BUYJul 08, 2016
Stock price when the opinion was issued
As of Dec 11, 2019. Market Open.
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Jaime CarrascoHis favourite REIT, because most of the cash flow is coming from Europe, and he wants to generate more cash outside Canada. (Analysts' price target: $15.54)
Jaime CarrascoInovalis (INO.UN-T) or Dream Global (DRG.UN-T)? There is probably too much duplication to own both. Management has done a very, very good job since the IPO. They’ve grown through acquisition and have diversified. They own an institutional quality portfolio, and thinks they have an opportunity to grow in continental Europe. Their assets are primarily in Germany. Instead of buying Canadian names that have exposure to Europe, he is actually going directly into Europe and buying some names.
It is a decent name if you own it. It is tough to switch out of it. He has preferred names including a top pick today. Management promised to diversify the portfolio and they did a good job of that. The payout ratio is high so this is why he is cautious on it. There are risks in the devaluation of the Euro. He does not think they will have to cut the dividend.
Does BREXIT affect this? Yes. Temporarily you are no longer allowed to withdraw money from your real estate property fund in the UK, which is why you should own a REIT fund. This REIT offers exposure to the German market. There are a lot of moving pieces. You have to assume that a lot of businesses are going to leave London and going to go to Germany, probably Frankfurt. This has about 15% real estate in Frankfurt, but they are 95% occupied. Plus, there is going to be a 2-3 year lag. All this sounds good in theory, but you are planning for something that is 3 years out. This is overpaying on its distribution which is something he is not crazy about.