Slate Office REIT (SOT.UN-T)

Disappointing. In Canada, US, and Ireland. Grew with too much leverage and got caught offside. Cut distribution twice. Cashflows under pressure. Small size, high debt profile. Avoid.

Unsure on future of office space demand. Management team of company well respected. Does not own stock in company. Well regarded within industry.

A small Canadian office focused REIT in North America managed by the Slate Group. They announced a big distribution cut to re-invest the money into the portfolio. He thinks this is a chronic issue in the space and thinks they did the right thing. From here the downside is relatively protected. The discount to NAV can close in the next two years, but he is not sure what the catalyst would be. He would stay on the sidelines.

Problem is that whenever it gets to $8, like clockwork, they do an equity financing, and the stock gets whacked. Good managers, who own a lot of stock. Long-term, bulking up on acquisitions makes sense. Not a bad stock, but frustrating. Yield above 9%.

He likes it. Sees strong growth and a positive outlook. He wants a REIT to generate cash flow, and this one is paying nearly 10%--that he feels is sustainable. Has an $8.50 target.

He used to own this, got tired of them constantly raising money whenever the stock price went up. The balance sheet is healthy, the payout ratio is good, and the dividend is very generous (8.3%). He thinks several investors got sick of it recently, and that’s why the price has dropped.

As a group, REITs trade a lot like the bond market. The selloff in the Canadian bond market in the last 6 weeks, puts pressure on utilities, REITs and consumer staples. In general, he is Short the REIT sector. This has a 9.4% dividend yield while the peer group is less than 5%.

A suburban office REIT with properties in the Maritimes as well as some in the GTA, but always in the suburban setting. Good management. He is not a big fan of suburban office. The dividend of 7%+ is safe.