Richard CroftVanguard REIT ETFVNQCOMMENTApr 23, 2010

A contrarian call. There remain gems in the rubble of commercial real estate.

A contrarian call. Up 3.4% in May. She just bought Prologis. Certainly, will improve when rates decline.

VNQ is always a good option, with a yield of high 2%, gives broad diversification.

He is talking about US REITS generally and using the Vanguard REIT ETF to show the pattern across the industry. The EFT was trading in a consolidation range ($80-85’s) all of last year, then there was a sharp drop. The ETF has been retracing but the price (now $75.88) is not close to where it fell from. He thinks he is seeing smart money coming in to take advantage of panicked selling. The average yield is high (6% to 10%). For this ETF, he would set a stop at $72. These stocks are not bond alternatives, but bond mutual funds have given zero return over the past three years (interest minus drop in the share value minus fees = zero). REITS have more risk than bonds but they are lower risk at this time because they have dropped significantly.

He likes this. There is a big problem in REITs right now with all the struggles of the big box retailers in Canada. In the US, this one is a very big ETF, and is extremely well diversified.

Very well diversified with a mixed bag of healthcare, retail, commercial, residential. He wouldn’t be uncomfortable buying this. The fees are very low.

It does imitate the MSCI US REIT index. You are getting in quite late in the game if you get in at this time. There is so much good news that it might be time for a pullback.

US house prices are just hitting bottom and resales have picked up along with new home building over the last couple of months. US REITs are best positioned to benefit at this time. A number of Canadian REITs have raised money in recent weeks to go into the US.