Derek Warren

REITs. REITs have been more stable than the broad market because of the income component. A lot of that has been aided by lower interest rates over the last 10 years. Returns for the next 10 years will not be as strong as the previous 10. There will be a little more volatility, so you want to Buy dips and Sell peaks. Focus on your yield and you will get that plus a little bit.

This is retail, which has seen pressure. It has done quite well. An owner of secondary, tertiary market. For example, there are some great properties in Mississauga that are very solid, but a lot of its markets are in smaller markets. It has done a strategic review and looking at whether they should put themselves up for sale, sell properties, etc. Some of their tertiary markets are quite illiquid and can be challenging. Retail is a tough game and he prefers an urban focus, larger cities and some of the street front retail.

Apartment REITs have done very well lately. He likes this a lot, because it has always traded at a discount to its peer group. It’s always tended to have a little higher leverage. Buying more properties in Ontario as well as reducing the debt on its balance sheet, and yet it has not received the multiple pick up. A great story for a re-rating.

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.

Is the yield sustainable? Its properties are not prime, but they are renovating them. The stock is trading at less than 5X earnings, ridiculously cheap. Over this last quarter, it has shown some sharp declines. The current yield is over 11%. The yield is safe, because they have the money to pay it out, but they could cut it. He is holding this as a long-term hold. Over time, this property could be liquidated and value will matter at some point.

Retail focused in smaller markets and an expert in their field. A great company, and is looking very attractive at these prices. They have a nice development they are doing in Newfoundland, which he thinks is going to be a home run.

Holds Canadian Tire real estate as well as some of the properties. A great company. They have good growth built into their leases and a very good real estate management team. This has been flat for about a year, and is starting to look more attractive. They continue to do very well on their earnings. Many retailers have faced issues, but this is not one of them. However, if that happens, you will end up with buildings in very, very small towns.

A big fan of management and their story. People are getting older and need someone to take very good care of them, and this is a very good operator. The real estate component looks very attractive as well. The stock is fairly valued, perhaps a little bit rich, but he continues to hold at these levels. If there was a significant real estate correction, this company would be affected along with others in senior residences. 3.7% dividend yield.

(A Top Pick Feb 3/16. Up 13%.) A great company, and still cheap, trading at a significant discount. When you buy this, you are buying a collection of very high quality real estate assets around the world.

(A Top Pick Feb 3/16. Up 46%.) This got a little extra kick because of the Milestone REIT transaction. Milestone was a similar REIT, Texas apartments, and a transaction created a lot of interest in this company. It is no longer a fair value stock as it is trading closer to value now. 4.2% dividend yield.

(A Top Pick Feb 3/16. Up 38%.) They’ve recently done an interesting transaction where they are taking over a US REIT, Silver Bay Realty, which invests in all aspects of the US housing industry. Silver Bay was a single-family rental, and this gives them scale. He really likes that deal.

An investment in this is an investment in Québec, so you have to be favourable to the Québec marketplace, which he is. One of the struggles he has with this is that when you are a small REIT, you can have high debts or a high yield ratio. In this case, it has both. However, they know the real estate market very well. If you think the Québec economy is going to continue to improve, this is a good way to do it. Dividend yield of 8.6%.

This has gone through significant transactions over the last 2 years, going from the “everything” Reit in apartments, to really focusing on the coastal market. He prefers Camden Property Trust (CPT-N). The US apartment REITs have been flat, and there is a bit of concern that people will be buying houses instead of renting. This is fine for a Hold, but he wouldn’t hold your breath thinking it is going to leap up to new highs.

Industrial markets are really hot. There is a lot of growth in rents and a lot of demand from tenants. A lot of this is coming from a push of the e-commerce world, where they need more logistics, more FedExes, etc. It will also start affecting smaller centres such as this company has, as people try to have same day delivery. The yield is very sustainable and the balance sheet is okay. Over the next couple of quarters, he is looking to see a little bit more of the transition improving economics of the revenue and rent lines. A good name. Dividend yield of 8.3%.

A really interesting organization. You are buying healthcare assets, such as hospitals and medical treatment centres in multiple markets such as Brazil, Germany, New Zealand and Canada. That really diversifies your risk. He doesn’t own it because as a real estate guy he has trouble valuing properties in those kind of diverse markets, without really understanding what is happening in healthcare, etc. 7.3% dividend yield.