OneREIT (ONR.UN-T)

This is retail, which has seen pressure. It has done quite well. An owner of secondary, tertiary market. For example, there are some great properties in Mississauga that are very solid, but a lot of its markets are in smaller markets. It has done a strategic review and looking at whether they should put themselves up for sale, sell properties, etc. Some of their tertiary markets are quite illiquid and can be challenging. Retail is a tough game and he prefers an urban focus, larger cities and some of the street front retail.

Retail strips in what he would characterize as secondary cities. With this, you are really banking on the payout ratio declining from 90% to about 80% next year, when some of their redevelopments starts to have a positive contribution on cash flow. Leverage is relatively high. He prefers Smart REIT(SRU.UN-T) which is a little better positioned, being larger and Walmart anchored.

Tertiary retail. This is undergoing a strategic review, and he doesn’t think a lot is going to happen with this review. They do have a couple of great properties that will attract a bit more attention, but also have many that are less attractive. He doesn’t like transition stories, so he would wait on the sidelines.

(Market Call Minute.) This is tertiary markets with some development risks.

Has gone through a rebranding and cut their dividend dramatically. It was an old, old structure with a high payout in tertiary markets which created a lot of weight on it. Management cut their dividend back to a responsible level. They have some very interesting development projects. Although it is a very small REIT, they have 15% of their balance sheet under development right now. While that is a risk, it is perhaps an opportunity in tertiary markets. This could have an accelerated outcome should the economy start to improve.

The stock is undervalued. It was a good thing that they cut the dividend. It is in tertiary markets and some require significant amounts of capital to turn them around.

This is a retail REIT and most of what they own is not of the highest quality. Faced some headwinds recently. They have a number of Zeller locations that have still not been re-tenanted, so their occupancy has gone lower. Bought some assets and raised equity at what he believes is a discount to their NAV. Payout ratio continues to remain above 100%.

A good portion of the distribution is a return of capital. It is a haphazard set of assets. The management team has made the REIT much better than it was 5 years ago. But it will be hard for them to right size their balance sheet.

Lower quality malls across Canada. Does not like that they pay out more than they earn (120%). They have old Zellers that they have to re-develop. He is on the sidelines, for now.

The economy in their areas is a little strained. It is under pressure still. High payout ratio and it is also doing development. Yield should be safe but it is not an area of growth.

Did a good job of growing their portfolio, but they have not done enough to lower their payout ratio. Thinks capital raising will become more difficult for lower cap REITs. They face some really tough leasing. A number of Zellers locations were not taken up by Target.

This is a portfolio of secondary retail strip assets. Trades at a discount to NAV, but his bias is towards larger, liquid, well-capitalized names with organic growth potential. While there is some organic growth potential here, it doesn’t really meet the leverage requirements.

Sponsored by the smart center group. A fine group. But they overpay on the distribution. He is not there because of the overpayment. Not one of his favorites. A little higher in the debt area so if rates rise it could impact them.

One of the smaller retail REITs in Canada. Have done a very good job over the last 2-3 years of using their cost of capital to improve the quality of their assets as well as trying to improve their balance sheet and payout ratios. Payout ratio is still above 100% and will remain above 100% this year on adjusted funds from operations. Doesn’t believe there will be a cut in distributions, but he would like to see more sustainability in their payout ratio before getting involved.

REITs are outperforming what we see in high yield bonds. Bonds only return the coupon to the holder but REITs can grow. RMM has to focus on right sizing its balance sheet and increasing occupancy. The management team is doing that as we speak. Longer term they look good. The bond content of his portfolio is down to 30% and REITs are 10% but he is moving away from both classes into dividend paying stocks.