RioCan Real Estate Investment (REI.UN.TO)

He's starting to warm up to retail REITs. It's really out of favour these days. Buy now and it will go sideways for 12 months before it ticks up. Take the dividend now before the stock rises later. He is comparing Riocan to Brookfield who usually buys properties early and are usually right. He wouldn't shy away from Riocan here.

He sold his position in RioCan and sees two headwinds: (a) risking interest rates and (b) competition for retail business from online retailing. RioCan is chiefly an operator of shopping malls and centers, and stores are going dark because of competition. Space vacated by Target and Sears has been hard to fill. He thinks that residential REITs such as apartment REITs offer better value.

Currently doesn’t own any REIT. Owned Riocan and sold a little while ago. It’s still largely retail and that’s been under pressure lately. The main problems with REIT is rising interest rates. If you’re going to own a REIT you’re better to look for one that has a lot of growth and not the yield.

They came under pressure in the last few years because of their exposure to retail and the sentiment around retail couldn’t be any worse. He thinks it is very difficult for them going forward to grow with their traditional assets. They prefer SmartCentres Real Estate Investment Trst (SRU.UN-T) which has 25% tied to Walmart. It is more agile being smaller.

Anything that is a yield proxy has been tough. Their growth profile is 3-4% vs 4-6% for the retail peers. The good news is that is trading 12% below their estimated net asset value. Trading at 15.3 times price to FFO which is the lowest it has been in a long time. This is a name really unexciting, but lots has to go wrong for this not to work.

He doesn’t own it. Real Estate hasn’t been a part of his portfolio for clients for some time. As rates move higher yield on names like this become less attractive. There are some vacancies that worries him.

Well-run. Currently, they're getting out of suburban shopping malls to focus on large, urban centres, but they can't sell things on an accretive basis to pay down debt. It's a great story, but the costs are enormous--over a long time--to redevelop their properties in urban centres.

He holds no real estate. You're owning this for a roughly 6% yield which is likely safe. But he is concerned with large, empty storefronts in Toronto. REI's 200-day moving average is trending lower as interest rates move higher.

He sees this company as being in the penalty box although he sees them as the best diversified REIT in the retail shopping mall space. However, if you are scared of the market downturn, it is trading at a multiple at the top of the sector. He also has an issue with the Sears shutdowns. This will not be a double, you are only hoping to capture your 6% yield and a couple percent per year capital appreciation. He would focus on other ones.

He feels they are in good markets and management is smart. You have to understand the risks and don’t buy just on yield.

It is a great one in that he had owned it for 12 or 13 years then sold it recently. They are a victim of their being big. He is worried about rates and about AMZN-Q. There is not much they can do to changes the arc of their growth so go somewhere else.

A "buying opportunity" or a "run for the hills"? This is an interesting study. Had thought that since Pure Industrial (AAR.UN-T) got picked up, investors might look at this one which has a nice dividend, well covered and well run, and think it might be the next REIT that got picked up.

Canada's largest retail REIT. They’ve been having some difficulty, which is reflected in the stock price. He wouldn't worry about the distribution. The issue would be what can they do to grow. He would classify this as a weak hold. You are going to get squeezed a little by higher rates and a slower economy.

This has been struggling, simply because it is a large REIT with retailers. Prefers owning the REIT bonds because you get the safety of payment, and if the stock market falls 20%, the bonds would probably go higher. If you buy the REIT, you are taking on equity risk, which you never want as an equity investor. Also, this company's dividend hasn't moved in the last 6 years, so the growth rate over the last 6 years has been zero. Over the last 15 years, the growth rate has been 2% per year. This is not a great investment.

(A Top Pick Nov 1/16. Down 1%.) Being flat has been the story of REITs for the last little while. He still likes this, but currently prefers some other REITs.