Dream Global REIT (DRG.UN.TO)

(Market Call Minute.) German office exposure. A little complicated and a little disappointing on the last quarter. Avoid for now.

An interesting story, but when talking about global assets he likes to keep his REIT assets pretty close. When you get into Europe it can be difficult to understand the rules. Also he hasn’t been in the office REITs recently.

Real estate outside of North America. It used to be the German Post Office. Management recognized single tenant concentration risk. They now have exposure elsewhere in Germany and other parts of Europe. The yield is attractive and sustainable.

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.

(A Top Pick May 1/15. Down 2.34%.) Reduced his holdings. He likes to hold this and the Australian REIT to diversify his REIT exposure globally. This one has a lot of very good properties in Germany, and it’s all commercial. Germany is at the bottom, and this is a good place to be adding to. Dividend yield of 8.8%.

(Market Call Minute.) Owns global commercial real estate assets in Europe. Management has done a good job of diversifying the portfolio. He would buy this because it represents deep value, but you have to be patient and be mindful of currency fluctuation.

If you don’t like Canada, German has a growing economy. It should outperform. He does not know their management.

Doing some interesting deals and continuing to be Germany focused. Thinks they have decided not to expand at this point when there is enough to do in the market they already have. The nice thing about Germany is that it is an improving economy and is stable. There were a number of funds that were exiting that market for regulatory reasons, so there was an abundance of supply which drove prices down, and they were able to buy cheaper, and debt costs were below 2%, so the spread in financing is very good.

This one is also office properties, but is Germany and other parts of Europe. It is trading at a 25-30% discount to NAV and so it is a good time to buy it, except that there is probably softness in the Euro in the future and occupancies issues that will be solved within 24 months. He does not think they will have to cut the dividend.

Owns a little bit of this. Some of the initial concerns he had at the IPO have dissipated. The company has grown through acquisition. Thinks we have seen the worst of the euro depreciation relative to the Cdn$. Expects they will end up with pretty good rent growth. Dividend yield of 8.8%.

(A Top Pick Sept 16/14. Up 13.85%.) This is entirely in Germany. Have been buying up Grade A office properties all over Germany. If you want to play on the German economy, which is the strongest in Europe,

This is a large entity that focuses on German office buildings.

They are locking in huge spreads, because they are borrowing money from European institutions at very low rates. Doesn’t think you can really isolate the interest rate risk. Where you will get the benefit is if the euro eventually appreciates. Thinks the fundamentals are pretty sound. Management has done a great job in reducing their single tenant exposure. Payout ratio is fine. This is a pretty good entry point, but it would not be his favourite European REIT.

He sold out 3 weeks ago and redeployed back in Canada because of valuation and to bring the money back home.

Primarily in Germany. Have really surprised the market in the way they have been able to accumulate high quality real estate. Their borrowing rates have been very, very low.