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

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.

Excess of 5% dividend. Very blue chip client list of people in their buildings. Strong cash flow. Interest rates came back down. Other sectors like telecoms and banks have done quite well because people are again seeking yield. We should see some catch up in the REITs. Could increase dividend within a year.

6.2% dividend. Likes it. Took a hit because of recent acquisition. Pressure from rising rates has stopped. A good long term hold.

Scaled back REITs a while ago because they were selling off. Many REITs trade with interest rates. They found a base in September. He has a low weighting of 6% and focuses on economically sensitive REITs such as industrial. But they are not a bad investment here.

When could REITs recover? Almost immediately. If the fears of immediately rising interest rates have gone for the time being, then REITs will recover. H&R internalized the management contract, which annoyed some people so the stock has been under pressure. He would add it for new income oriented accounts.

A good, long-term hold. Nature of their leases is to have them longer than most, so some of their office buildings have 20 year leases. Payout ratio is quite low so that they can still do certain kinds of development or add-on projects. This is why the yield is low. Recently took over Primarus and he is a little more concerned on stocks that are in transition. 6.36% yield

Sold off with all the REITs. Well diversified and in the US. Discount to the rest of the space due to external management company that has gone away now, and that will give a lift to the price. 5+% growth in the stock price expected.

(A Top Pick September 5/12. Down 13.01%.) Still likes this. Has been disappointing, but this is been driven by rising rates. Very high quality REIT. Tenants are blue-chip. Have long lease terms.

REITs in general have been sold off quite a bit recently. This company has gone through a re-organization where the management team had their management contract bought out by the Corporation. Felt that the price paid was exceptionally high for the length of time that it existed. Stock is in the penalty box. Good yield and they have good properties and good assets. $24 in the next year would be reasonable but you have 2 headwinds. 1.) If the economy continues to improve, rates are going to continue to creep higher. 2.) Management is going to have to do a really good job of convincing people and regaining their confidence and trust.

A good example of a REIT that won’t be affected by increases in interest rates because average debt term is 10 years or more. A good entry point. Sold off because of interest rates.

This has corrected and is very attractive here. Very high quality portfolio of commercial real estate. Just bought Primerus, which is more retail oriented. Excellent clients contribute to the majority of their cash flow. Very long on term to maturity on their mortgage portfolio, which is what you want when rates are rising. Average interest rate on their mortgage portfolio is close to 5%.

Acquired Primerus REIT with a couple of other bidders so that created a retail platform for them. There was a conundrum as Primerus is internally managed while H&R is externally managed. Decided to internalize management on the entire REIT which resulted in a large payment to the management company. Wasn’t thrilled with this. This is a sound, quality name and cheap at these levels. Probably worth $25-$26.

One of Canada’s largest REITs and just announced that they are internalizing their management. A bit of a shock in that they are paying themselves well over $200 million. He is not really excited about this. The problem with this REIT is that management continually comes up with these types of surprises. Well diversified REIT with a good portfolio and high quality assets. Will probably underperform for a few months. He is underweight this stock. 6.3% dividend yield.

(Market Call Minute.) You are in the REIT sector which is very interest-rate sensitive and this doesn’t have a ton of growth, although they are protected by their triple net leases.

Probably the most attractively valued large cap REIT in Canada. Trades at about 13X AFFO and a significant discount to NAV. Payout ratio is very low. Balance sheet is relatively clean. You don’t have to worry about where they are going to get the money to fund their dividend or where cash flow growth is going to come from. Stock sold off because of concerns that rates are going up. If you are an income oriented investor and relying on dividends, this will be just fine. Yield of 6.38%.