Opinions
John Zechner
H&R Real Estate Inv Trust
HR.UN-T
COMMENT
Oct 06, 2017
Stock price when the opinion was issued
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Premium contentWe reiterate, HR-UN, one of Canada's largest REITS holding $11.4 billion in assets in North America, as a TOP PICK. Its strategic plan is refocusing on growth orientated residential and industrial properties. It trades at 4x earnings and under book value. The yield is good and backed by a payout ratio under 20%. We recommend trailing up the stop-loss from $10.50 to $11.50, looking to achieve $15.75 -- upside potential of 26%. Yield 4.3%
(Analysts’ price target is $15.75)Premium contentOur PAST TOP PICK with HR.UN has triggered its stop at $11.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 9%, when combined with the previous buy recommendation.
Too diversified: retail, office, residential, US, Canada. He likes focused REITs that do just one or two things. Cut distribution. Doesn't care for management. Offloading assets at not-great prices. Significant discount to NAV, 16x AFFO. In this uncertain environment, gravitate to the highest quality.
Doing its best to diversify into multi-family residential apartments in US Sunbelt, where supply is high, so operating income will be challenged. Execution story in a difficult environment for selling or transitioning assets. A hold. Discount to NAV, but headwinds to fundamentals. Still, prefers it to AX.UN.
Great properties, but diversification means it doesn't get a great valuation from the market. Sunbelt properties are over-supplied. Owns office properties and retail. Transforming to multi-family and industrial. Trade action starting to pick up. Secure yield of about 6.7%. Growth will be a while, depends on your time horizon. Better names in the meantime.
Would recommend holding. Majority of portfolio in sunbelt states like Arizona and Texas. Would expect income to increase as more people move to warmer Southern areas. Good balance sheet that allows company to maintain dividend payouts. Expecting better times for company ahead.
Large apartment portfolio in US, as well as industrial. Selling down its office properties. As they get closer to that clean story, there should be some catalysts perhaps even this year. Dip in US building will give them an opportunity, especially in the Sunbelt. Fine on the financing side.
Diversified REIT that doesn't work very well anymore, as it tends to trade at the multiple of the least-liked sector it owns, and it has a lot of office. If you own, hold on, as today's press release indicated interest from multiple parties (and so a higher bid may come forward).
A well diversified REIT with good assets. His problem with REITs is that they get a valuation because of their payout, which is a little excessive, relative to the rest of the market. Trading at 12 to 15 times enterprise value to operating cash flow. There is no real organic growth in most of them. They are popular with investors because they pay out up to 90% of their Operating Cash flow as a yield.