Killam Properties Inc (KMP.UN.TO)

(A Top Pick June 17/16. Up 8%.) He could see good growth at a reasonable price and trading at a multiple that was in line with the market, and yet at a higher growth rate. It was levered to Halifax which had turned the corner. There is probably more to go on this one. Leverage on the balance sheet is still a little high.

Apartment REITs have done very well lately. He likes this a lot, because it has always traded at a discount to its peer group. It’s always tended to have a little higher leverage. Buying more properties in Ontario as well as reducing the debt on its balance sheet, and yet it has not received the multiple pick up. A great story for a re-rating.

In the Maritimes, but they have been developing in Ontario, and have recently been expanding into Alberta as well. He likes the apartment REITs. They have all kind of run, however this one is at a significant discount and doing very well. It has been lowering its debt. They still have a convertible outstanding that should be paid off, so he does expect an equity offering sometime in the next 6 months or so. Dividend yield of 4.87%. (Analysts’ price target is $13.80.)

(A Top Pick Jan 21/16. Up 22.33%.) Had thought the Halifax fundamentals might be turning the corner, which they have. Still trades at a discount to their apartment peers and they are growing faster. Apartment REITs are an asset class you can own in a rising interest rate environment.

(A Top Pick Jan 21/16. Up 22.52%.) He chose this because it was very cheap at the time. He was looking for catalysts Halifax occupancy to turn and for them to change from a corporation into a REIT, giving them more liquidity. He still likes the name and the growth rate. It is cheap for its rate of growth. Debt load is improving. Still a Buy.

This has an in-line valuation relative to their peers, yet it is growing at around 8% FFO over the next couple of years. A good growth at a reasonable price. Dividend yield of 4.89%.

This was trading at a discount for some time, because it didn’t have exposure to the strong “Calgary” market and their debt was a little bit high. They brought their debt down and they still don’t have exposure to Calgary, which is a good thing now. There is some good growth in Halifax now. Also, has some Ontario exposure. A little concerned about supply in Halifax coming on, but the reality is, this does not deserve to trade at the discount that it has in the past. Thinks it should be a $14 stock. Dividend yield of 4.78%.

A really good growth name at a reasonable price. Has had a big run since January, but there is more to go. He models that it grows 10% annually for the next couple of years. That growth rate is much better than the sector average of around 4%, and yet this is trading at an in-line multiple of around 16X. The 4.87% dividend is supported by 76% payout ratio that is steadily improving.

Owns a little. Canadian REITs have bounced off the bottom during the last couple of months, in part because of higher oil prices and higher commodity prices. That has benefited the entire sector. This operates in an area where rents are not regulated.

Just reported and beat on some metrics. This is the right time to own this company. It is focused out East where vacancy rates are dropping and there is stability. They seem to have executed on what they promised in the last several years. Thinks it is on the cheap side. Trading at about 11X price to AFFO. Yield of 5.6%.

Eastern and Ontario focused apartments. Declining commodity costs are a bit of a tailwind. Lower refinancing rates, probably over the next couple of years, is a bit of a tailwind. Sees reasonable growth of about 7% over the next couple of years. Trading below its five-year average. Dividend yield of 5.86%.

Halifax is showing interesting signs of turning the corner. The company just had their earnings yesterday and are growing at about a 6X multiple versus the average of about 4.5. Nice dividend of about 5.8% supported by about a 90% payout ratio, that he sees declining. They are a corporation right now, but are reorganizing into a REIT and he sees that as a catalyst. A nice little name that isn’t going to hurt you. He sees $11.50 as their NAV.

Sell Killam Properties and buy Pure Multi Family REIT? He likes this at these levels. It sold off quite significantly. The largest owner of apartment properties in Atlantic Canada. Pure Multi Family is largely a portfolio of apartment buildings in Texas. These are 2 very, very different entities. In Atlantic Canada there are no rent controls, and given that there are some signs that the economy should eventually improve, especially when there is a ship building contract and more favourable supply/demand fundamentals, he feels that this should do quite well over time. Management is keenly focused on development and trying to rebalance its portfolio, so that 50% of its operating income comes from Atlantic Canada and 50% comes from Ontario and Western Canada. As it diversifies you should get a little bit more cash flow stability and dividend growth. Prefers this one out of the 2.

This has been range bound. Occupancy has been pretty sloppy for the last 12 quarters, but actually picked up last quarter, which was good. He is seeing net property income growing 3%-3.5% over the next couple of years. Expects they can do about 11% AFFO growth. Trading around 16X which is in line. Expects this is probably a very good GARP candidate. Likes the way it is turning here. 5% dividend yield.

For a long term hold, this is a great name. It has been frustrating in the short term and has been quite stagnant for some time. He feels that some of this is in regards to the Maritimes itself. They are continuing to expand in the Maritimes but have done a little bit of work outside.