Crombie Real Estate Investment Trust

It holds mostly retail that contains Sobeys and is 40% in the east coast. Empire owns 40% of this. Last week's Q2 results were below expectations due to high debt. Rent collection was 93% in July, which is positive. New buildings will be mixed-use, which is positive but COVID has delayed and made the costs higher. They have a good pipeline and Empire's backing are pluses, but she sees better opportunities in other sectors. She likes this REIT, though, and sees it as a steady eddy.

Thinks it will be fine, despite Amazon. Debt still a bit high. Q2 was solid, occupancy at 96%. Substantial growth pipeline. Modelling 3.2% growth rate 2017-19. Payout ratio is 82%. Distribution is about 6.7%. Pretty cheap, 12.2x next year. Yield sensitive, so if rates go up, it won’t do the heavy lifting for your portfolio. You can own it here.

It's getting swept up in the same issue as its peers, like Riocan and Choice Properties--all high-quality REITs that hold retail. In the U.S. there's been a mass sell-off of retail. All such REITs have been swept up in this sell-off and are trading at discounts to NAV. Recently, these REITs have rebounded though. All are selling assets and reinvesting that cash in their core locations. This includes Crombie. But these are long-term projects. Steady over the long-term to own, though don't expect a spike anytime soon.

He owns the debenture not the REIT. He likes the company and management. They are the real estate arm of Sobey’s, which has struggled after the Safeway acquisition. There is little chance for the dividend to be cut because of the class of tenants. However, there is not much room for growth. It is a defensive REIT that will just likely pay the distribution. Yield 7%.

This is the real estate arm of Empire, and the major tenant is Sobey’s, which is struggling. About 30% of their rental is from Sobey’s. A strong, defensive style REIT, because it is generally anchored by non-cyclical retail outlets. You are going to clip your 6.5%, but doesn’t think you’re going to make anything more than that. This is not a growth story. He owns their debt.

It did not get caught up in the troubles at Sobeys. They bought some real estate from Safeway after accusation by EMP-T. He was nervous about being Amazoned (AMZN-Q). REITs historically have difficulty in rising interest rate environments. He sold although there is nothing wrong with it.

Chart shows a bit of a base followed by a bit of a break out. What can happen after you get a break out is that you get a bit of a test down to the old break out. If it does bounce off that and moves up, it could be a very good stock.

Because Sobey’s is the main tenant, there is a lot of looking at the Empire stock right now. That has put pressure on the real estate. The concern is that the Empire Group, in order to raise money to fix their grocery business, will sell the rest of their real estate down into Crombie, which would mean a very large equity issue. Because of that, he is not there right now. He is waiting to see what happens.

The volatility is a reflection of the broader real estate sector. It has to do with the threat of rising interest rates. They can benefit from underlying growth in Sobeys. This REIT is not very affected by EMP-T’s difficulties in integrating Safeway.