Dream Global REIT (DRG.UN.TO)

Great way for Canadian investors to get European exposure without buying EU stock. Cap rates are much higher there than in Canada. He likes it. A decent REIT to own, although it will take time for them to get capital. We can expect a translation lift due to currency fluctuation.

One of his concerns is that they have some leasing issues that will be coming up in the next year with their German portfolio. One of their main tenants is Deutsche Post and have often been given back leases as the Post business has changed over time. If they are able to lease up the properties that are coming due and some of the other space, then you are fine. If not, then the NAV drops and there is downside risk. Very good yield of 8.9%.

German real estate. Supposed to grow aggressively. But now it is over paying slightly but dividend is not a risk. You’ve seen tax loss selling affect this name.

(Top Pick Dec 11/12, Down 17.76%) They have been issuing stock. It is a pure play on the strongest economy in Europe.

Came to the market a couple of years ago and focused on acquiring office properties in Germany. A unique Canadian REIT that invests solely outside of Canada. Have done a good job of decreasing their exposure to Deutsche Post, which was their largest tenant on the IPO. This has come down to about 40% of their portfolio. Trading at a slight discount to its NAV. This will give you a sustainable yield but there will be a fair bit of uncertainty regarding some of the lease terminations and their ability to fill the vacancies and this will be in the determination of their growth going forward. 9.1% dividend yield.

REITs have to pay out 90% of cash flow, which is how they get around paying corporate tax and that gets transferred to unit holders. One of the main reasons he did not participate in this is because of the tax consequences. This is structured as a REIT and they came up with a pretty creative solution to get around paying corporate taxes, specifically in Europe. He is not sure how sustainable it is.

A group of office buildings in Germany. If you are investing in Europe, UK is the best, Germany would be 2^nd and France 3^rd. Stock is cheap right now, but if you really want to reduce your risks wait a bit until you see some improving occupancy. Have been going through some issues as their core portfolio is based on a group of post office offices, which have had some return of leases. 9.2% yield.

All of its assets are in Germany and you have a juicy yield. Not all of their assets are of the quality that he likes to see but they have been culling this slowly. He was very pleased with their new acquisitions. He would look for a little bit of a pull back, so that you can get in cheaper. Yield of 8%.

His REIT exposure is fairly low. His income portfolios a year ago would have been 22%-23% of the portfolio but today, is only about 6%. In particular, he focused on industrial REITs and more interested in Canada and US than anywhere else. Wouldn’t be too concerned about their holdings in Germany as Germany’s economy is pretty strong, but he would prefer to stay closer to home. This one has not been a strong performer and he prefers looking for those securities within a sector that are holding up better than the rest through a downturn, because they will generally lead on the other side.

This is a bit of an adventure because it is a Canadian company in Germany. It’s very big client is the Deutsche Post. It’s in the midst of negotiating leases and seems to be doing all right. Quite complex. Thinks it will do well but don’t expect it to set itself on fire as REITs have tended to be off in the market.

(Market Call Minute) Owns a bit. Good long term hold. Will have to do an equity issue to decrease payout ratio.

There are other places besides here to get a return. REITs are challenged.

Have some really solid properties in Germany, however you are not only dealing with the currency perspective, but also with possible interest rate increases. Canadian REIT sector took a hit because of rising interest rates and this could be a danger in this case as well. Also, the valuation is still not incredibly cheap.

With this you are investing in international markets, specifically in Germany. Started with a lot of Deutsche Post leases. Many of those will be coming up and they typically are passing some over so there is some vacancy risks there. In the meantime, they have been acquiring some very good real estate in Germany as well. Doesn’t expect much growth for the next 12 months, but with a high yield of 8.7%, you don’t really need a lot.

Office buildings in Europe, primarily in Germany. He initially avoided the IPO because of significant tenant concentration in the form of Deutsche Post. They’ve since done a very good job of diversifying through several acquisitions. Feels there is a lot of room for growth in Europe. Acquiring at very attractive spreads (property yields relative to cost of financing) which should drive pretty significant cash flow accretion and appreciation over time. However they have to deal with foreign exchange, which has negatively impacted the stock so it is one of the only REITs in Canada where you seen the NAV decline, which will overhang the shares going forward. 8.3% dividend which he thinks is sustainable based on the acquisitions they have made.