Likes the Canadian apartment sector because, typically in a rising interest rate environment, apartment REITs typically outperform their counterparts in the industrial/retail/office markets. Length of apartment REITs leases are typically shorter He expects there will be an increase in interest rates in the next 12 to 24 months.
A big strategies for companies like this is to continue to grow through acquisition. Acquisition is on the premise of them having a cost of capital advantage over other apartment REITs. At the stock price of $3-$4, cost of capital is not great enough to give them outstanding advantage over other apartment REITs. Doesn’t think this will be stagnant forever and they will be up to make acquisitions. Very skilled team. Would prefer others.
Chart shows this has taken quite a dip in the last while. Changes in management because of production mishaps. Need to look at these from both a production standpoint and a commodity standpoint. Have a constrained balance sheet and not a lot of room to raise CapX for growth. More linked to oil than to gas and he feels that in 2013, oil will average around $95 per barrel which will be very positive for them.
Quite active in the bay area of San Francisco. Have also been active in southern Florida and are looking to expand to the Carolinas and other areas in the US. A company that is doing one of the few arbitrages left in US real estate. They are able to buy US residential rental properties with no leverage and get a return on their capital in the high teens.
Economy. Fiscal side in the equation in the US is quite restrained. Moving forward, we are probably going to see more policies that lean on the side of austerity rather than stimulative policies. The only leverage the US government has right now is monetary policy. It looks like we should get higher interest rate in 2013 but moving forward, he thinks rates will be fairly flat. Dividend stocks, income related investments, REITs will be a good place to be and will provide a decent rate of return, but investors have to get used to a lower total return than what they have seen over the last 3-4 years.