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

(Market Call Minute.) This has 95% occupancy or better. Very sustainable yield. Long dated leases.

They have a very good portfolio. They are now refocused back on Alberta. REITs here are being supported because index players are buying the stock. REITs are tucked within financials, but at the end of the month they will be a separate sector (GIC).

Real estate is going to be its own GICS sector in August, away from financial services. Thinks this probably gets added to the TSX 60 along with RioCan (REI.UN-T). Trading at a 30% discount to the other large REITs, primarily because they have the Encana office building, but that looks okay now. Dividend yield of 5.75%.

Has benefited along, with the other REITs, on the flight to yield. They had an issue in terms of perception based on the Bow building in Calgary, but he feels people are now getting beyond that. Even if it doesn’t grow, this has an attractive yield. Probably still a good bet.

The GICS sector is paying a lot of attention to REITs, and this is the 2^nd largest, but it hasn’t quite got the attention. When he sees retail REITs doing very well, office REITs doing quite well, and industrial REITs doing well, this has all 3 and with the sum of the parts, it shouldn’t be trading where it is. A nice play for another 5%-10% upside, at a time when a lot of the large Caps have already been bid up. Has both US and Canadian exposure. It also has Calgary exposure, but those are only a couple of buildings that are leased out to 2022, so it is not really a risk. Dividend yield of 5.85%.

(A REIT for income purposes?) This is a commercial REIT with a lot of large commercial buildings across Canada, as well as some retail operations in the US. Dividend yield of 6.2%.

His only concern would be their Alberta properties. This is one of the most solid REITs in Canada. Wouldn’t be too concerned about the yield, but wouldn’t necessarily overweight it because of its regional exposure to Alberta.

The obvious thing is what is going on in Alberta, where they are being hit. On the other hand, they have diversified into the US in apartment buildings and away from Alberta. If you have a 2 or 3 year view, you should find this is just fine. Dividend yield of 6.7%.

This is a yield proxy with their long duration leases, and thinks it works in this environment. Have a pretty good Alberta exposure, but once you net out their long duration leases, he calculates their Alberta exposure is only 12%. Their US exposure is 25%. Trading below its 5 year averages and has decent fundamentals. He is not expecting much growth over the next couple of years.

There is great fear about its 28% exposure to Alberta properties. If you take out the long-term leases of Encana (ECA-T), TransCanada (TRP-T) and its Hess Corp in Houston, that drops to 12%. People are dreadfully afraid that something is going to go wrong with the main tenants, which he thinks is unlikely. Trading at a 16% discount to NAV, and the norm is closer to 8%. Thinks the dividend yield of 6%+ is stable. You would be well rewarded with this.

There are things he likes and things he doesn’t. Has exposure to Alberta, but the properties are preleased for 10 years. One thing he doesn’t like is that it is all over the place. It is in the US. It has office and retail. Prefers the simple stories. One of the benefits is their US assets which is in US$. Good managers. Yield of 7%+.

A very high quality REIT with a high quality management team. Defensive characteristics in many respects. Surprised to see the stock has sold off so much. Trading at a substantial discount to its replacement value, 25% discount. Has office properties, retail properties and now has some exposure in apartments and offices in the US. Very strong balance sheet and a weighted average lease term and weighted average interest rate approximate of 10 years, so it is very bond-like in nature.

They have the largest sky scraper in Calgary which is leased out for 20 years. This is another low growth, steady eddy REIT and the yield is probably going to increase. 6.7% yield.

HR.UN-T has so many asset classes. He likes companies that specialize in one or two asset classes. They have office towers in Calgary that thankfully have been leased.

Because of the fear of rising interest rates, there was a selloff in REITs, and all the large caps got thrown out with it. It is not often that you can get this one cheap. It gives you a diversified portfolio. Sold off part of their industrial in Canada and are getting fees from that. Getting a lot of US exposure which gives you currency exposure. Very cheap valuation. Dividend yield of 6.4%.