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FirstService Corporation (FSV)
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Dream Industrial Real Estate Investment Trust (DIR.UN)
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Real Matters Inc. (REAL)
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Dye & Durham Limited (DND)
I currently hold DND and REAL, which I had purchased approx. 1year ago. My Thesis for both of these stocks is that once interest rates begin to fall both stocks both could experience positive stock movement to the upside given the current need for housing and all the pent up demand in the US/Canada.
I have read your report on dropping coverage of DND and your answers to questions on REAL. It would appear that your main concern is on their debt levels and that there are better opportunities elsewhere for an investors capital. Is that correct?
Do you have any actual concerns with the business models of both these companies itself? What are your views on the real estate market in general?
Apologize for the multiple questions. Please deduct as many credits as needed.
Thanks in advance!
Greg C.
Aside from the dependence on the macro environment, there is exposure to the real estate market. In addition, these companies’ competitive position and capital allocation have been quite questionable recently. For example, DND issued equity at a low price to pay down debt, meaningfully diluting shareholder value, while it also previously repurchased shares at a much higher price. In addition, the debt level is pretty high. On the other hand, REAL’s downturn has been quite quite intense and has prolonged longer than previously expected. Though REAL still has cash, allowing it to get through the downturn, it may take longer than expected to recover from here.
Real estate markets may already have see the trough in terms of market activities, and could start to recover from these levels. We think it could be a good time to get some exposure to the real estate market through either high-quality REITs or a real estate company in the value chain that has a meaningful competitive position like FSV or DIR.UN.