TOP PICK
Land lease communities where you buy a prefabricated factory house and put it on their land. They charge you rent, operating costs and realty taxes. 2.9% yield. Sees it trading at 30% discount to its NAV. He is looking for capital gains.
TOP PICK
Apartments. Grown from 300 units to 6500 units with a net equity contribution of $10 million. Focus on mid-market properties, above “Ma and Pa” but below institutions. Properties are beat up and need physical or operational improvements, which they do, and then take their equity out. NAV of $16-$18 and have $15 million of unencumbered properties. Sees it trading at 40% discount to its NAV.
DON'T BUY
Specialized area. Nursing care. 75% operations in the US, very volatile market with Medicare and Medicaid. Formulas change and a very litigious environment. Would favour a Canadian business such as Leisureworld Senior Care (LW-T) instead.
BUY
Senior care. Recent IPO. 9% dividend yield so you get the dividend tax credit. A much less risky way to play the nursing care space.
TOP PICK
Just raised $40 million. They are a consolidator of the childcare industry in Canada and are buying at 6X EBITDA with the real estate. Sees a 5-10 times return on investment. Outstanding world-class management.
COMMENT
Strong management team. Western Canadian-based commercial. Diversified. High growth. Attractive yield and relatively attractive valuation because of their exposure to the Calgary office market, which is a soft spot in real estate.
COMMENT
REITs. Since this is the only area that will not be affected by the legislative changes on trusts, money has been flowing into this area and should continue to do so.
BUY
Focused in the retail arena. Have a lot of Wal-Mart anchored centres. Good management. Very high stability. Reasonable yield at 7.2%. Concerns on debt refinancing have been put to bed with the recent new equity issue.
COMMENT
Basically a bet on Fort McMurray. Heavy concentration of decent quality apartments there. Had high-cost debt and in the process of selling assets to cover this. Lots of upside leverage if Fort McMurray comes back, which he thinks it is. High risk/high reward. No distribution at this point. (He owns some warrants, but no equity.)
COMMENT
Extremely high-quality REIT. Strong management but not as aligned as he would like. Prefers management that owns a lot of units and are internal. Reasonable yield with the prospect of a distribution increase over the next 12-24 months. Trading in the range of its NAV.
COMMENT
Had a heavy weighting to Fort McMurray so it suffered but is on the rebound now. If you feel strongly that that region should continue to do well, there could be some upside. 15.6% yield that would indicate some caution is needed. (Owns some of the debt.)
TOP PICK
(A Top Pick Sept 2/09. Down 9%.) Australia market has been weaker than anticipated. Flooding in western Canada postpones profitability. Dominant player in agriculture in Canada and Australia.
TOP PICK
Dominant player in the Canadian oil patch. Still digesting the Petrocan assets. What happens to energy will be reflected in this company. Operating problems affected the stock price. Expecting cash flows to go up significantly for the next few years.
TOP PICK
Punished severely for their exposure to Portugal assets but a lot of that has been written off. Have some very desirable assets in Canada. Cash flow positive.
PAST TOP PICK
(A Top Pick Sept 2/09. Down 11%.) A lot of stimulus spending for road construction/bridges didn’t happen as expected. Making acquisitions in the environmental engineering area, which will be their future. Very well positioned North American engineering company without any of the construction risks.