Lyle SteinMilestone Apartment REITMST.UN.TOHOLDOct 03, 2016

(A Top Pick Nov 3/17, Up 24%) These guys were trading at a pretty good discount to peers and then got bought out. It had a reasonable payout ratio. It had all the things he looks for.

(Top Pick Dec 20/16, Up 18%) He did not want them to get taken over. He thought there was more growth left. You would have got more upside over a couple of years.

(A Top Pick Jan 8/16. Up 52%.) There has been a proxy contest with this and he thinks a lot of the large shareholders are against this being taken out from Starwood.

There are plans for this to be taken over. Considering his view that REITs are fairly valued here, you might as well continue holding.

54% of their properties are in Texas and the rest in Florida. They just announced an increase in their distribution that takes effect in January. All these stocks have come off so he is accumulating more of this one. He likes the management team as they keep beating his expectations. They will continue to do well and may get bought out. They pay their distributions in US$. It is one of his larger positions. (Analysts’ Target: $22.15).

They own garden style apartments in the US. There is a difference in the US in that the turnover is a lot higher. In a given year they have about 60% turnover. The apartment sector is highly coveted by pension funds. This one should do particularly well while rents are lower than the cost of ownership.

A relatively decent name. There is going to be excess supply in 2017 which should moderate. If you look at the communities in the properties they own, they are really, really good. Excellent management team. Payout ratio is relatively low at around 60%. They have a sustainable dividend. Valuation looks pretty compelling, trading at about 20% discount to NAV. Dividend yield of 4.1%.

He is doing a lot of work on this name right now, because he does like the US theme. What is good to remember about this one is that it is at a low, low price point. It is very blue-collar rental, which he thinks is protected once the housing market picks up. He finds the price attractive.

In general REITs could get pressure from interest rate increases, but the 10% correction they got so far has made a buying opportunity in this one. MST.UN-T is a multi family REIT, with properties in the sun belt, some of the most desirable areas, and the fastest growing areas. They are a growth by acquisition story. They also deliver organic growth through rent increases. The payout ratio of about 52% leaves lots of room for increases. About 4.5% yield, having been bumped slightly after their last acquisitions.

(Top Pick Jan 8/16, Up 34.41%) A lot of head offices are moving to Texas because of the tax rate in that state. They are paying good distributions. Rentals are going up every month. It is a top holding.

A great name with a good management team and a decent balance sheet. They own garden style apartments through the US. Thinks there could be some additional upside. Apartments are a very defensive asset class, because if there is slower economic growth, there is more demand for low income housing. Home ownership in the US is at a 50 year low, mainly because credit conditions are still tight. The only concern is that there is going to be some additional supply come onto the market towards the end of 2017-2018, and rent growth will start to decelerate.

For a long-term hold of 4-5 years? A stock that gives a decent yield, and investors are hiding in it. He would definitely check valuation. The chart shows a very gentle uptrend, which looks okay. Don’t chase it if it is too expensive.

(A Top Pick May 18/16. Up 9.08%.) The return would have been even better if it had not been for a transaction they did. Decided to internalize their asset management function, which resulted in a big payment to the founders and management of the REIT. Overall, the company is doing great. They own apartments in the Southern US, and rents keep going up in the upper single digits. They are drawing very strong cash flow growth and deploying capital into acquisitions, and diversifying the portfolio. The apartment market remains very, very strong in the US.

This has been going up for a very long time. They have just internalized management. It owns a portfolio of US apartments. It is usually a good idea to Buy this on dips. It is cheap compared to its US peers.