Dream Office REIT

D.UN-T

The run up from $24 was impressive for D.UN-T. He does not own individual real estate -- he holds XRE-T instead. He would like to see it consolidate at these levels for a while before buying.

D.UN vs DRG.UN D.UN isn't cheap at 19.2x. It's improved its asset base to higher quality, focusing on Toronto. Decent 6% growth. They've already had their big move though. DRG.UN has room to go, in contrast. It's a play on Germany and Holland. He see grow and slightly lower growth, but a much cheaper valuation than D.UN AT 14.5x. Similar balance sheets. Safe payout ratio. He prefers D.UN.

It struggled for a few years, because the industrial market hadn't taken hold, but now it's in the right place at the right time. Warehouses need to fulfill for customers, and Dream is in the right spot. External managerment's equity raises will dilute share value, which displeases him though.

Dream Office vs. Dream Industrial REIT? Dream has been on a rollercoaster the last four years: overexposed to Alberta, sold Scotia Plaza, trying to diversify within Alberta; onerous management contracts to buy out. They're a work-in-progress with better days ahead. He would lean towards the Industrial REIT, but still expensive though it's outperformed Office REIT, but he just doesn't trust it.

They are doing a second big buyback of their stock. He does not own any of the REITs because there is generally a lot of debt on their balance sheets. He would accept a buyout. It has been a well run company but the sector has some headwinds.

All the REITs are going through a bit of metamorphosis, and the industrial REITs are no different, particularly with the trade talks that have been going on. With the changing pattern of logistics of shipping and transport, a lot of these properties are in play, and a lot of investors have stepped back with the appearance of interest rates going up.

On Q3, they substantially completed most of their asset sales for $1.6 billion. The balance sheet is in much better shape. Has material exposure to the Toronto market which is very hot. Payout ratio is fine on 2018, but will be better in 2019. Through the asset sales their funds from operations dropped 8% 2017-2019. It’s a much better quality name now than it was. Really pricey trading at about 20X. This is one he would be selling Calls on.

It has struggled. They had quite a large portfolio in Alberta. It recovered over the last 6 months. He has never really liked this REIT. It still does not have the greatest assets. They cut their distribution and that caused the fall. The yield is sustainable now, however.

A bit of a work in progress. They are tethered to Alberta to a large extent. Their NAV keeps falling. Thinks they are going to cut their distribution. Expects they are going to turn themselves around to a much more pristine asset. Transitioning into a higher quality, especially in the GTA. 4.75% dividend yield. Feels it is a turn around play and you get paid to wait.

Not a name for a yield investor even though it has an attractive yield, as it is going through a lot of transitions. He has warned about owning stocks through transition periods. A great company with great management, however when you start churning the amount of assets they have, they are selling billions of dollars of assets with a hope to redeploy them. Feels the dividend could be cut again. Dividend yield of 7.5%.

He avoided it for years. It got crushed in Alberta. The biggest issue is the quality of their assets. Management has a contract that is based on growth and is excessive. Avoid it.

Focused on the office sector, and has a large Calgary and Edmonton portfolio. Recently sold $200 million of Calgary office but still have the Edmonton exposure. Also, sold their Kitchener/Waterloo exposure. They will continue to sell assets and focus on their Class A office, especially in the Toronto area. REITs in transition are always challenging. If you have held this for some time, there is no point in selling now. It has actually done quite well recently. If they cut the dividend, that will actually be very interesting, as you have a higher quality REIT with a more reasonable payout. Dividend yield of 7.6%.

He has seen significant restructuring going on, but there are better places to go if you want this space. He does not have anything in this space.

The chart looks like it is basically locked in a trading range. In this environment when everybody is looking for yield, this stock should have some support, and looks fairly safe. Slightly bullish, not outrageously bullish. He would not hold this for too long, because it is underperforming its peer group. Maybe a 6-9 or 18-month Hold is okay, but wouldn’t let the dividend lure you into holding it for too long.

Not a big fan, just because of the noise in the Calgary market. However, we are at the $16 range where it has bottomed, and he would be loath to take a hit here. There are a number of things that could be happening between now and the end of the year that could create some kind of a pickup in the stock, and he would wait for that before making any decision.

(Market Call Minute.) This is a REIT that has exposure to Alberta, and she feels they had to write down some of their properties there. There are better REITs to be in.

He is a little wary of REITs right now. Valuations are excessive. You are paying 15 to 16 times cash flow. There is a lot of risk if interest rates ever start to move higher. The Calgary real estate market is not turning around in a hurry.

A Canadian office REIT with a lot of Calgary exposure. Recently announced that they are doing a transition in the company, and immediately want to sell one 3^rd of their portfolio, doing a CapX and then selling another 3^rd, and only maintaining a 3^rd of their properties. That is a lot of moving pieces and he doesn’t know what the value of their properties actually is.

Struggling because a reasonably large percentage of their assets is in Western Canada. However, it is tough to bet against Michael Cooper, a sharp guy in the real estate space. It should be fine and he doesn’t think the dividend will get cut again. He owns the parent, Dream Unlimited (DRM-T), which is what he prefers.

There is a lot of pressure on their portfolio. They have exposure to Calgary, and that market is weak, not only because of oil, but also there was a lot of new supply coming in. When new supply is coming onto the market on the office side, they tend to lease very well because it is brand-new and looks good, so older buildings tend to perform poorly. That has been impacting this company. There is a lot of value in the name. It is trading at a huge discount to NAV. For a long-term investor who thinks things are going to recover, this could be a good buy, but he sees a lot of risks. Dividend is greater than 7%, but he thinks they will try to hang onto it.

This is a REIT that is in office space. You want to look at where they are located and where they’ve got their projects. This has a very good distribution, and it really comes down to occupancy rates.

Has been in a long-term decline due to its heavy exposure in the Alberta office market. Announced they were restructuring, slashed their dividend and were selling two thirds of the company. Just announced earnings which were in line with his expectations. When a company is going through a strategic restructuring, he tends to sit on the sidelines.

He tracks it, but does not own it. They have a lot of Western Canada exposure. Great management. Longer term they will do well, but there are challenges short term.

This is tied more directly to the Alberta economy with pressures in Edmonton and Calgary offices. It’s Ontario portfolio is fine. 14% dividend yield which he feels should be cut.

Hold on to it if you have had it for a while. It is a case of their cash flow being under pressure and they have leverage on their balance sheet. Management is smart and as long as oil is not here for 5 years, this is not the time to sell but to hold on for sunnier days.

He has disliked this story for so long. He has a problem with their management contract and their fees. They are in a space that is struggling. They have suffered because of the properties outside of Calgary. The overall assets are not great. The dividend is safe.

He has a little bit and thinks it is cheap. Trading well under NAV. It gets about 40% of its Net Operating Income from the West. There is a lot of capacity coming on in the office space, both in Toronto and Calgary. They are doing the right things on leasing. This is one that he hopes will rise after the pressures of this year come off. The company has said they are not looking at the 13% dividend as it is fine and their cash flow supports it at the moment.

Has been under pressure. It is because of the decline in the valuations for office space in Alberta. About 40% of their leasable space is in Alberta. He is not worried about a dividend cut. Real vacancy rates he thinks are much higher than published, for office space. He thinks it is 25%.

A very professional organization. It becomes difficult to value the company, however. They wrote down a Calgary office 15% as a part of their recent earnings. He is keeping an eye on Edmonton vacations and they will do a deeper dive into the company.

Stock vs. Stock. D.UN-T vs. CUF.UN-T. Both distributions are pretty safe. Interest rate rises are negatively affecting these. A lot of investors have a fear regarding Canadian Real Estate.

Stock has fallen a great deal because a lot of their properties are located in Calgary.

Primarily B level office space. Even though 30% of the portfolio is A class exposure, there is a compression in rents generally. As the A rents come down, B class tenants start to consider moving up, which puts pressure on the B’s. Good company and cash flow seems to be strong. Not really growing all that fast at this point.

Market has been overly harsh on this vehicle for some time. The 11% yield is quite high. There have been several transactions where similar properties to their GTA portfolio, especially the one they bought in 2011, are trading at significant improvements, basically 30% higher than what this company paid. There has been speculation if they will cut. They don’t really need to, but if they did they would be using that money to produce more CapX and renovations on existing office portfolios.

(Top Pick Jul. 29/14, Down 18.67%) Good quality REIT. There are some concerns about some holdings in the West.

He does now own it because of the negative pressure in Calgary office markets. He thinks the market is pricing in more rent erosion than there is. For the brave, there is a bit of an opportunity.

Great managers. His stop losses kicked in, so he has greatly reduced his positions. REITs have room to go because of the decline in interest rates by the central bank in Canada. He is going to wait to see what happens. |Still likes it. His company’s target is $31 and have it is a sector perform.

He has very little office exposure in his real estate portfolios. In the next 3-4 years you are going to see a lot of new supply come on to the market. Typically, what happens when you get these new buildings is they start really affecting rents. This one has a lot of suburban office which will be affected. It is decently valued here, but you have to be very, very patient and wait for the new supply to get absorbed into the market.