RioCan Real Estate Investment (REI.UN.TO)

Real estate stocks have done poorly in the last while because of rates going up. But this is a great company and is well run. However, payout is higher than their earnings. At these levels, you are getting a good dividend yield. You are also getting good growth in a very stable type of business for your portfolio.

Is this a good time to get into REITs such as Allied Properties (AP.UN-T) and RioCan (REI.UN-T)? This is a very good and timely question. He had dramatically reduced his weight in REITs when interest rates started to move, because there is a wrong tendency to think that all REITs are like long-term bonds. These 2 are both good ways to be in a REIT sector. Don’t go into REITs in a big way, have small weighting.

Opportunity to buy at a discount. You can see the kind of internal growth they are doing. Buying more urban locations. Turning around core areas of downtowns and adding more value to the real estate than was originally intended. High quality organization but could suffer from momentum.

Held this one through the entire fall from $29. He is comfortable now being back as a buyer of REITs. This is the largest REIT and the largest retail REIT in Canada. Excellent dividend yield. Well managed.

(Top Pick Jan 30/13, Down 4.96%) One of the best REITs out there. The whole group is down because they are interest sensitive. Hang in there. Good dividend and biggest liquid one. Well managed with a bit of growth.

(Market Call Minute.) Not his favourite name, but he does own some of their preferred shares.

A safe investment in the sector. 5.7% payout is not fully funded from operations. Sees continued growth. Caution on how much exposure you have to the REIT space. Good management team. This is a very conservative pick. If interest rates go back up, there will be pressure on the stock price. The distribution would not be affected.

If you are a long-term investor and looking out over cycles of 3 to 5 years, this one has some fantastic assets. Valuation of REITs is going to fluctuate as interest rates rise, which he thinks is going to happen. Dividend is safe

REITs have corrected fairly hard after having a pretty good run for a number of years. Good management team. Good organic growth prospects from redeveloping and intensifying their properties so they have a big development program. High-quality assets focusing on the urban market, giving better rent rates. Dividend is absolutely sustainable. Great long-term buy.

(A Top Pick July 9/13. Up 2.17%.) This is one of the REITs that focused on improving its capital structure over the last 2 years, even though they made a large amount of acquisitions. This will allow them to focus on things other than acquisitions going forward.

A very high quality REIT. Represents pretty good value here as you buy this at a discount to NAV. AFFO growth expectations should be 3%-5% on a normalized basis, which he thinks will happen in the next 3-5 years. In 2008-2009, their occupancy held steady at 97%-98%, in the worst of it, because the vast majority of their real estate is in Canada’s 6 largest cities.

An excellent company and they have prepared themselves for difficult markets by getting a large portfolio of urban land that they can redevelop and maximize. He is seeing outsize same store growth from this REIT.

REITs are all going down. What’s the matter with them? There is nothing the matter with REITs except for what they are, high-yield, low growth vehicles that, come a higher interest rate environment, take a hit. Timetable for interest rates going higher might be advanced. Although rates on the bond side went up, cap rates in real estate in North America really didn’t get impacted in the same way. They look reasonably attractive, but only to pick your spot and lean into the higher rates. This is a good one, but you are certainly not going to get appreciation in the unit price.

When there was fear of interest rates going up in the US because of tapering, all the REITs got hammered and they haven’t recovered yet. When the market is slow to recognize that it was wrong, take advantage and buy them.

Money has been coming away from interest sensitives. Money is rotating from sectors with high payouts. You won’t get hurt but you could find this underperforms if equity markets are strong.