Dream Global REIT (DRG.UN.TO)

He wanted to diversify some of his REIT exposure to outside of Canada. Most of the properties they own are in Germany, one of the countries that he thinks is going to do quite well. Great company and well-managed. Dividend yield of 7.86%.

This is a call on Germany. It is more of an economic call. Dream Global went heavy into the German market. At the time, some of the transactions were wont to criticize. They now hold quite a good portfolio of assets. Most of the reports on this are very positive. He thinks it can continue to do well, as basically you are seeing German properties trade at more expensive values.

German real estate. He didn’t buy initially because of the single tenant risk but they now have diversified away from that single tenant risk. His remaining concern is that the German leases are getting renewed at lower rents. It is still decent value here.

It is more of a European growth call than an interest rate call. Mostly Germany. Don’t worry about the dividend. With a 3-5 years outlook you should be okay if your outlook on Germany is okay.

Dream Office (D.UN-T) or Dream Global (DRG.UN-T). Which would you Sell? This is offices that are mostly in Germany and in Europe. You have to balance out where you feel the growth is going to be. If you
believe that Germany is going to keep progressing, that would be the one he would keep. Europe now is anyone's game. They have found a large partner in the South Korean Pension Fund that is buying portions of their office buildings, giving them the cash that way, so they are still able to buy accretively. The debt they are getting is 2%-2.5%, which enables the accretion even more. The dividend is safe. If you are looking for growth, he would stick
with this one.

This is a portfolio of German property that it bought from Deutsche Post. It has used the cash it raised to buy good quality office buildings to complement that. A Korean pension plan has bought a half share in 7 of the office buildings for €120 million. Payout ratio of about 91% of adjusted funds from operations. Yield of 8.85%. A good play on the German economy.

Has an external management structure. Invests 100% in Germany. German post office is only 30% of their portfolio now. It is going to be somewhat difficult to replicate what they did over the last couple of years. The payout ratio is currently above 100%.

Real estate properties in Germany, mostly office. Has performed very well, but wouldn’t rush in right now. Thinks there are some leasing opportunities that may provide a bit of a pullback in the stock. One of their core tenants is looking to be putting back some space to them, and the market is waiting for this. That will happen in the 3^rd quarter.

This is going to be somewhat challenged in Europe. When the company originally IPO’d, he didn’t really participate because he thought there was a lot of single tenant risk as the portfolio was too heavily concentrated in one geography. They’ve done a very good job of diversifying since then, but his issue remains that it trades at a discount to NAV. Likes companies with good organic growth potential, where they have the ability to develop or intensify their properties.

Germany is next door to Poland who is next door to Ukraine. The yield is compelling. A top performing REIT. Likes it as a yield play and it is safe. After the next gain you might want to take profit, but the fundamentals of the company are fine.

(A Top Pick April 16/13. Down 2.25%.) Sold his holdings about 6 months ago when he had a concern about interest rates moving higher. Still feels it is a well-run REIT. Has a lot of properties in Europe which is more of a play on what is going on over there.

Late cycle IPO and has a growth by acquisition model. Didn’t buy because there was tenant concentration in German post office. Management has done a great job of diversifying away from this. Now his problem is that acquisitions are more expensive because of Canadian dollar weakness. 8.8% yield.

It is mostly in the German market and he rates it as a sector perform. He is cautious because of the German exposure. He has been under weighting this sector because of the interest sensitivity. He is reducing exposure on the REIT side. He is not ready to start adding yet.

European economy, especially German, economy is improving. They have some leasing issues so if main tenants give back space then it could affect their NAV. Above average yield above 8%. Diversifies your portfolio.

Compared to its peers, it has more risks associated with it. Largely due in part to its AFFO payout ratio which is in excess of 100%. The payout ratio doesn’t appear to be sustainable. Also, as compared to its peers, it is difficult to see a competitive advantage.