H&R Real Estate Inv Trust (HR.UN.TO)

(Top Pick Feb 04’13, Down 3.59%) Has been a challenged space since May/June last year. He continues to want a presence due to cash flow potential. The cash flow will be very steady going forward.

Has a complicated share structure and he can’t understand exactly what they are doing or what is going on. This is one of the highest quality REITs in Canada. Have great, great assets. Stock has yet to recover from its summer swoon. He can see this trading 10%-15% higher.

(A Top Pick Oct 18/12. Up 2.34%.) 5% bond maturing 12/1/18. These are all going to be low single digit returns and this is part of his “rolling down the yield curve” concept where you get your money back.

Convertible bond. What is your best suggestion for one in the 5-year maturity range, with reasonable yield and liquidity? Hard to find a reasonably priced convertible bond any more. Found one that doesn’t meet all his criteria. This is the H&R (HR.UN-T) 5.9% maturing June 30/20. Trades at a yield of just under 5% so it is reasonably attractive as a bond in its own right. However, the common yield is more than that. You’ll never get your money back by buying the convertible as opposed to buying the common.

Great company with good real estate. Had an external management contract that some people find distasteful. That was eliminated. He is looking forward to getting full disclosure on the next couple of quarters on how their retail portfolio is performing. At these levels it is getting very attractive, but he would still like to see the numbers.

(A Top Pick Jan 7/13. Down 5.12%.) Feels that most of the damage on REITs has been done. Rates are now almost 3% in the US and feels that going forward rates will slowly increase. This is a very high quality commercial REIT. Expanded their retail division a bit in terms of retail property. Blue-chip tenants.

Continues to like it, subject to how the interest rate scene unfolds. Have expanded recently. What they pay on mortgages are well below what the rental rates are. Capacity for dividend increases.

The whole sector has come down. It is a good company. Three double digit returns over last three years. Branched out into shopping malls. Large shopping malls. A good time to get in. Encourages people to add to positions.

(Market Call Minute) Might have some better growth because of industrial compared to other REITs.

More interest-rate sensitive because of the nature of their assets. Very high quality but focused predominantly on the office market. Because of the long-term, contractual nature of their clients, there are less rental rate step ups.

He is kind of neutral on this. Maybe buying it in the $21’s and selling it in the $22’s. When you stack it all up, their growth rate is 3.2%, which is not bad, valuation at 13.6% is average and 89% payout ratio is not bad. Also, their balance sheet is not bad. Thinks it is fair value here. If you own, get paid your cash flow and sell some Calls against it. 6.3% yield.

Likes this. Unfortunately the unit price has come under pressure recently. This happens to coincide with concerns about tapering and 10 year treasury yields going up. This is a good buying opportunity. Trades at a significant discount to NAV. One of the cheapest large cap REITs in North America. You will continue to get dividend and dividend growth. Have a very high quality portfolio.

Owns but is significantly underweight to his index. Have gone through a number of transitions through the last few years. Development issues in the Bow have all been cleaned up. Had the external management internalized at a cost of $200 million. The only weak market in Canada right now is the office market in Calgary and they are exposed to that. Diversified enough and experienced enough that he has not Sold his positions. If there is a broad movement back into REITs, this one will take off because people have to buy it.

REIT space has been highly difficult because of the increase in long-term interest rates but this one has suffered more than most. Has a 12 month target of $24. Was hurt a little bit when some institutions liked the buyback of management contracts, but felt the number of units received was a little excessive. Feels that is dissipating now and it is certainly at a very reasonable level. You’ll get modest distribution increases, but overall double-digit returns.

This is typical of the REIT group. They were market leaders and basically broke down this summer after the US talks in May/June. One group he does not want to be in. There may be a couple that he would not mind, but in general they are showing lower highs and lower lows. Doesn’t look good.