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.

Have transformed themselves over the last year from an asset as well as management perspective. They brought down occupancy and lease terms a bit. The Primaris portfolio they acquired should drive growth. Their assets are internally managed now, which has attracted more investors.

One of the largest apartment owners in Canada with most assets in Ontario. Strong results over the last 6-8 quarters. Capital spent is now starting to bear fruits. They reduced their payout ratio although leverage has stayed stable. He sold because he prefers Boardwalk (BEI.UN-T) due to stronger assets and no international properties.

Smaller retail REIT, mostly in Atlantic Canada until they purchased an Ontario REIT. They had to increase leverage and payout ratio to do the acquisition. They are not as attractive as in the past. They may sell of non-core assets from the acquisition in order to reduce leverage.

Were railway type hotels so most of the occupancy was known. Over the last year they purchased limited service hotels and now only 50% are rail crew hotels. It should expose you more to the US economy. He chooses higher quality US lodging REITs.

Largest industrial REIT in Canada. Assets across the country. Recently purchased a portfolio in the US that is leased to FedEx. He has a strong confidence in management. They will grow free cash flow per share. Trading at a 3-4% discount to NAV.

Filed for bankruptcy coming out of the financial crisis but they are fine now. Have done a great job of shedding non-core assets that aren`t involved in retail as well as to ensure debt structure is laddered. Will benefit from the strength in the US consumer.

A smaller cap apartment REIT that trades well below NAV. Management team is well aligned. Stock was taken down by weather issues.

REITs. 2013 was a difficult period for REITs. Coming out of a financial crisis investors were looking towards stability, income, visible cash flow growth and their REITs benefited from that. In 2013 risk appetites increased and people looked towards businesses that were more economically sensitive so the allocation of capital moved away from sectors like real estate. Coming out of the talk of fed tapering and the reaction of interest rates, it made investors reassess their real estate holdings. What they wanted to get from their holdings was some sort of buffer with respect to a rise in interest rates. Wanted to make sure the internal growth from the real estate businesses they were buying was high enough, such as occupancy, rent increases and redevelopment, were going to drive the average free cash flow growth. Those REITs that are poised to deliver above-average free cash flow growth have performed better than those doing below free cash flow growth. Feels 2014 is going to be a little bit different.

Interest Rates. His view is that while you saw a sharp rise in interest rates in 2013, going forward the share prices are going to be somewhat more difficult to see. There are some headwinds to US economic growth as well as global economic growth. Right now we are seeing many emerging markets decelerating with respect to growth. Also, the fed is very acutely aware of the US housing market. They realize that any material rise in interest rates is going to affect applications for mortgages or the secondary home price increases that we have seen in the last 12 months or so. In the last 6 months of 2013, we did see home price growth slow including mortgage applications.

Predominantly office REIT. Got hit over the last 6 months or so because they have done a fair bit of acquisition, raised equity to do so and in combination with that there are some fears about supply in the office markets, most notably in Calgary and Toronto. This drove the units down in comparison with some of their peers. Have actually improved their asset quality over the last 2-3 years, have lowered leverage and their payout ratio is very sustainable. Trading at about a 10%-12% discount to NAV. 7.8% yield.

An apartment REIT with majority of assets in south-western Ontario and Ottawa. Has a firm belief that management is going to drive value over time, both through acquisitions and redevelopment and repositioning of assets they have in their portfolio. Recent quarter was somewhat of a disappointment relative to the consensus numbers because of the repositioning of one of their key assets they purchased in Ottawa. With low leverage and a low payout ratio and a management team that is well aligned in the incremental growth you are going to get from redevelopment from some of the assets, he sees this as a core holding. Dividend yield of 3.6% and there is room for distribution increases from free cash flow growth.

Owner of very high-end retirement homes across Canada. Trading around the 10%-12% discount to what the assets are worth. Fall of this stock price has befuddled many in the investment community. The only thing he can think of is that they have come out with some increased disclosure looking through to some of the assets where they own partial equity ownership and the leverage looked a little bit higher than most people anticipated. Also, they have a large proportion of their assets in lease-up, whereby they are not fully stabilized so some investors might be a little bit concerned as to whether those assets are going to be stabilized sooner rather than later. He has confidence in this company.

Owner of diversified assets such as office, industrial and retail. Probably trading close to a 10% discount to its NAV. A unique story now because they have internalized asset management which was previously an issue. Also, announced a large buyback of shares because they believe their units are undervalued. He would look at how they are able to create value going forward. This is going to provide you with a stable yield and 2%-3% of free cash flow growth. To drive any outperformance versus the REIT sector, it is going to need to undertake either further acquisitions or joint ventures. Doesn’t think their capital price right now is going to allow them to raise equity. Have been talking about joint ventures to raise equity.

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.

Orange Capital purchased over 10% and attempted to implement some changes with regards to internalizing asset management down the road, as well as finding a new CEO and changing the terms of the property management agreement. These are all positive things. With ownership of hotels, this has historically been more volatile when it comes to cash flow compared to other REITs. Had to cut the distribution a couple of times. Believes the current distribution is sustainable as long as the fundamentals in the lodging sector hold up. Before purchasing, he would like to see execution in many of the things that have come out with respect to the strategic plan. Thinks the yield is sustainable.

(A Top Pick April 4/13. Up 0.65%.) Owns, operates and develops apartment communities in the US. Apartment assets have done well from a free cash flow perspective, but unfortunately, they face the headwinds of increased supply as well as the fear from many investors that people that are renting are going to start moving into single-family homes. From his perspective, this is one of the highest quality apartment owners in the US. Have a large development pipeline which is going to differentiate themselves from their peers and will allow them to deliver above average free cash flow growth going forward.

(A Top Pick April 4/13. Up 5.04%.) Continues to like. Doesn’t feel they have gotten enough credit with respect to what they have done to the balance sheet and payout ratio. Management unfortunately has been faced with a “we’ll wait and see” from most investors. They are now starting to come into the name. It will re-rate to a higher multiple from his perspective. About 20% invested in the US.

(A Top Pick April 4/13. Down 1.9%.) An apartment REIT with most of their assets in Alberta. With the small percent it was down over the last year, it has probably outperformed both the index and many of its apartment peers. Still likes. Solid management that have been very disciplined with capital.

Owner, operator and developer of apartment assets, with the majority being in the eastern provinces. Recently hit with higher natural gas prices, which depressed the cash flow. Also, got hit with some occupancy losses last year, which they have remedied. Net operating income will probably come in at 1%-2%, but there is the risk of operating expenses and then being able to manage it from a hedging perspective and how high natural gas prices actually go. Doesn’t expect much move in occupancy levels. His company is the largest shareholder. Believes the short-term hiccups are not reflective of the longer-term value. Trading close to a 12%-13% discount to NAV of about $11. Not adding to his position as he is finding better opportunities elsewhere.

Spun out from Loblaw’s (L-T) real estate. The majority of Loblaw’s real estate is now in this REIT and they are an 80% holder. If looking for a long-term sustainable yield with moderate growth, this is probably appropriate from an investment standpoint. He is not a big fan of single tenant REITs. Not sure how the portfolio will look 10 years from now. Prefers to see higher free cash flow growth.

Focused on medical office buildings and regular office buildings that cater to healthcare type tenants. Have fallen over the last 6 months along with the sector, but they face some unique issues. Haven’t been able to get to their stabilized level of occupancy. Management have indicated that they believe they can get to 93%, but have only reached 91%. Also, the Canadian office market is seeing some increased supply. He is concerned about competition. Trading at a substantial discount (15%) to their NAV. 8.3% yield will continue to be sustainable. Any investor that is looking for value and has patience could consider this as an investment.

The industrial sector in Canada from a REIT perspective has grown dramatically over the last 3-4 years. From his perspective, this is the name you would want to own to get industrial exposure. This has an internalized management team that has proven that over time they have been able to allocate capital effectively so as to grow free cash flow over time. Has a sustainable distribution payout ratio and high quality assets. A big proportion of their assets are exposed to markets like BC where it is difficult to purchase industrial. Also, have exposure to Ontario. Feels the low Cdn$ is going to help manufacturing, which will flow into industrial assets.

How do you feel online purchases will affect this REIT? Great question. It is one he has been fielding more recently when people are asking about retail. Focus for many retail landlords across North America is now on the quality of their assets and the amount of foot traffic those assets see on a daily basis. That is consistently being tracked and it is being seen that the lower quality assets, especially in the US, are suffering. Especially the ones that are selling discretionary goods. Stores like Sears, JCPenney, Best Buy are lowering their footprint. They are focusing their stores on higher quality assets. This REIT’s strategy has been to focus on Canada’s 6 major markets, VETCOM (Vancouver, Edmonton, Toronto, Calgary, Ottawa and Montréal). By focusing on those urban markets in having 70% of their assets in those markets, they believe population growth and high quality locations are going to drive people to these retail assets. There will be a proportion of people that start to shop online. In Europe, e-commerce is a much bigger issue. Doesn’t believe this company’s distribution is at risk over the next 5 years. 5.3% yield.

US mortgage REITs? Had a tough 2013 which is really predicated on the fact that interest rates headed higher and their business model is driven by borrowing short term at very low rates and buying mortgages that are lending out longer-term at higher rates and generating a spread. As that spread compresses, your earnings get hit and in turn, your dividends are going to get hit. Have performed better year to date because there has been a stabilization in the 10 year bond yield and interest rates in general and people are able to forecast earnings better going forward. They were trading close to .85X of their BV as a whole, but are now trading about 5%-15% higher year to date. This is because they overshot to the downside. Book Values fell, but the units fell much further. Going forward, he expects much more volatility in the sector. Until he sees more stability, he is not going to be allocating any capital there.

If the annual payout rate has gone up 4.75% and if the auto sector takes a large hit, will this be affected drastically? This is his concern as well. This REIT represents an entity that has a majority of its assets leased on a single tenant basis to Magna International (MG-T). Any difficulty in Magna flows right through to the REIT. While it may not directly flow through on day 1 on news headlines, you have to believe that the underlying real estate is going to have a use further than what Magna has for it. The company has planned to reduce their exposure over the next 3-4 years to about 50% of their total assets. They are also in a great position, from a leveraged standpoint. They have the ability to grow by using debt and debt capital markets are wide open now have very attractive pricing. They can go out and buy industrial assets and diversify. Payout ratio is at a sustainable level. From his perspective, the single tenant risk is too high.

Likes management and what they have done to the business. This has been one of the REITs that has taken advantage of the climate that we saw coming out of the financial crisis with the demand for REITs. They have right sized the business when it comes to the quality of the assets, the balance sheet and their payout ratio. Looking at the business from what it was 5-6 years ago, it is a completely different business. A few years ago they had to cut the distribution twice because it was not sustainable. Had to get out of a mezzanine lending business for developments that were being done in the retirement space. Improved the quality of their assets by selling a portion of their portfolio. They do have some work to do in decreasing their leverage. Above average free cash flow growth forecast going into 2014. Dividend yield of 5.25%.

World’s largest owner, operator and developer of industrial assets. Majority of assets continue to be in the US, which is growing at a clip much higher than any other developed country. Benefiting that, there has been very little in the way of new supply of industrial real estate in the US. As well, they operate in some of the core coastal markets as well as the core markets where there are transportation hubs and delivery hubs. They are seeing occupancy and rental increases. The most important thing going forward is that they have right sized the business from a balance sheet and payout ratio as well. Dividend yield of 3.24%.

One of the highest quality real estate businesses that he owns. Have moved to more of an unsecured debt structure, which allows a large proportion of their assets to be unencumbered. Also, brought down their payout ratio which allows them to give consistent dividend increases. The most important thing to him is the “value add”. There is a large development and redevelopment program that is underappreciated by the market. Dividend yield of 4.76%.

Markets. There is more uncertainty regarding interest rates and the sensitivity of REITs. Over the last few months, sectors like this have corrected a fair bit on reaction to what the fed is saying along with economic indicators. In September, when the Fed decided not to taper back its bond purchases, the REITs rallied. Since that time, we have sort of been in a position where investors are wondering exactly what the Fed is going to do, when they are going to taper back their bond purchases and the effect it is going to have on interest rates. More important to him is when the overnight rate is raised and he doesn’t anticipate this is going to occurs until 2015. Doesn’t think that the employment indicators or inflation are going to allow the Fed to increase interest rate anytime soon. Housing market is also on the FED’s mind and any material increase in interest-rate is going to affect the housing recovery in the US. He is focused on the sustainable capital structures and REITs that are going to be able to generate internally generated free cash flow growth going into the future without a reliance on the capital market.