Automotive Properties Real Estate Investment Trust (APR.UN.TO)

The Dilawri Group make up 48% of net operating income, a big concentration by one tenant which is risky and is not attractive. Pays over a 7% dividend. APR is trying to diversify and this could be positive.

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. They invest in income-producing automotive dealerships. If there is an increase in demand for cars, the dealerships will pay rent and more dealerships will open up. DEmand for cars has only slightly increased, and it is more a supply constraint right now. Will continue to do well with auto dealerships having sufficient cash for rent. Unlock Premium - Try 5i Free

He feels pretty comfortable adding to this name. A certain number of automotive properties are counter cyclical. The dealerships tend to be profitable unless you get into a recession. He thinks auto sales will remain fairly stable.

(A Top Pick Jan 13/16. Up 30%.) This company buys the land under auto dealerships and then leases it back to them. These are triple net leases, meaning that the dealership pays for everything, taxes and maintenance. There is a 1.5% escalator clause for every year. The company has made 2 acquisitions since last year. It is paying just under 7.5%, so a good income generating investment.

This is his preferred REIT right now. They specialize in owning the real estate of car dealerships. They are triple net leases, meaning that they don’t pay anything, the dealership pays the taxes, maintenance and utilities. This REIT collects rent from the dealership. They’re financing these out 5+ years, and this is yielding almost 9% right now.

Owns about 26 car dealerships in Canada. Have moved the land under some of those dealerships into this REIT. The land is on triple net leases, meaning the car dealership, not the REIT, pays the taxes, maintenance and utilities, and the REIT gets the income from that. Leases are 11 years at a minimum with an annual 1.5% rent escalator. Their debt to interest payments is around 3.5%, and the majority of their debt does not come due until after 2020. Dividend yield of 8.96%.

Basically car dealerships. They don’t own the dealerships, but lease to the companies that own them. This is new, so he is giving them a little bit of time to season. He will give it a couple of quarters. If you own, it is a new IPO, so you shouldn’t be selling it.

Canada’s newest REIT. He does not think there is a big reason for fear, but was unhappy with the debt level. He is waiting it out to see how it performs. They have top notch management. This is very similar to ACQ-T, but you own the real estate of the dealerships. 10.6% yield.