Killam Properties Inc (KMP.UN.TO)

They made a large acquisition in Ontario. It was accretive. The share price has not participated in the lift, however. The problem is their difficulties out East. He would prefer to invest in apartments out West, not out East. It is fine, but it is not one of his favourites.

Apartments REIT in Atlantic Canada. Their cost of capital has not been attractive in this environment. They had high expenses based on Nat Gas prices. It trades at a discount to NAV because of negative sentiment. It is difficult to find an apartment REIT with this high a discount. A couple of quarters of free cash flow growth would change market sentiment.

Never bought it back because they were always light on their revenue. It was about ship building contracts, but it did not benefit the company. Prefers the west where it is growing, vs. the east where it is not growing. Management is not the best at what they do.

(Top Pick Sep 24/13, Down 0.18%) He likes it, but the fundamentals did not do so well. Weather was a big factor. He would like to see a way to execute on their strategy.

Owner/operator/ developer of apartments. One of the keys for them is to drive rental growth and manage operating costs. The high price of gas in the Atlantic provinces has been their problem and how it hit operating expenses. Trading at a substantial discount to their NAV. People are worried that a ship building contract through the government will not be as beneficial to KMP as previously thought.

Had some challenges. On the taper tantrum last year, as rates spiked, all the REITs, etc. got hit. Also, has a large exposure on the East Coast where they are responsible for utilities. As gas prices spiked, they got hit. Recently bought this as she thinks there is something special going to be happening on the East coast with energy and their own pipelines, LNG plant and shipbuilding. Still a sloppy real estate market in Halifax, but she sees good things happening out there.

Very affected by the weather, and earnings were very disappointing. Thinks this next quarter is a “show me” time, and that they’ll deliver.

Attractive. Predominantly based in Halifax. Has been under a little bit of pressure because of an oversupply situation in the Halifax market. Expects that market will continue to be soft for the rest of the year, but should start to strengthen. Have high quality properties and are very well-positioned. Dividend looks very stable. Probably a takeout target at some point.

Was a disappointment because of weather. Costs were up. Long term it is a good investment. Catalysts? Wants to be best in class. An interesting opportunity. Could be a couple of quarters out for a real catalyst.

Sold most of it. Reluctant to sell it here. It got beat up and is at a discount to NAV. They are challenged by an increase in supply of apartments in eastern Canada. Would buy here and dividend is safe.

Owner, operator and developer of apartment assets, with the majority being in the eastern provinces. Recently hit with higher natural gas prices, which depressed the cash flow. Also, got hit with some occupancy losses last year, which they have remedied. Net operating income will probably come in at 1%-2%, but there is the risk of operating expenses and then being able to manage it from a hedging perspective and how high natural gas prices actually go. Doesn’t expect much move in occupancy levels. His company is the largest shareholder. Believes the short-term hiccups are not reflective of the longer-term value. Trading close to a 12%-13% discount to NAV of about $11. Not adding to his position as he is finding better opportunities elsewhere.

Apartments are more highly levered so are more sensitive to interest rate changes. There are opportunities as the Economy picks up.

Most of this is out East and the play there was the shipbuilding that is coming, which will create a lot of need for apartments. That has been stalled and there is a lot of competitive pressure out East. Trades at 14X AFFO, which is not absurd. Prefers Boardwalk (BEI.UN-T) whose assets are a lot better.

Likes apartment REITs in general. Supply/demand fundamentals are good and tend to have very high occupancy and are relatively stable. This company’s properties are predominantly on the East Coast and that market has been a little bit softer because of a new supply that has come into the market. As they get closer to the beginning of the shipbuilding contract, she feels they are going to see some increasing occupancy, which bodes well. Good acquisition candidate. She is being cautious on REITs until she sees where interest rates are going.

Owns a small amount and would be more interested in picking away at $10. If you own, Hold because you are going to get your mid single-digit yield. Largest owner of apartments in Atlantic Canada. Going to benefit from improved economic activity. A non-regulated market so will be able to charge whatever they want for rent when the market improves.