Have been looking for a commercial property REIT for purposes of diversifying holdings away from multi-family. And I know Choice acquired the old Canadian REIT years ago, which I thought to be of very high-quality at the time.
Choice appears to have less risk due to its size (705 investment properties) and the loan to value ratio appears commensurate with peers.
However, there seems to be a huge number of equity units outstanding after factoring in the exchangeable units. As well, what really appears unusual for CHP.UN is that it trades at a significant premium to NAV whereas most entities in the Canadian REIT universe currently trade at a discount to NAV.
Thank you
While the outlook for commercial properties is still somewhat uncertain, CHP.UN we think would be the most solid Canadian choice within the specific sector. The units are well-priced at 12X cash flow. The distribution (5.83%) is secure and has shown consistent growth for more than a decade. The anchor tenant (L) is of course solid. These factors, plus the quality locations, as well as the age of the properties (depreciation reduces book value) would make for a possible premium over book. A premium over NAV is harder to explain, but it may be investors are simply focusing on safety within the commercial sub-sector (NAV may also be understated at times). Cash flow per unit continues to grow (slowly) and with a payout ratio of 78.7% yet we would be fairly comfortable overall here.