Investment Q&A

Q: Hi, between these two: O (reality income co) and its spin-off company ONL, which one is a better investment today? I am a long-term holder. Thank you!

Q: Hi 5i , I am interested in adding an REIT with focus on large warehouses and I wonder if there are any you would recommend? Also REIT ETF's interest me . Thank you for any input you have

Q: your thoughts on recent quarter and where there going in future?

Q: Would you rank these Reits as most likely to see distribution increases and share appreciation in the relatively near future. Are Reits attractive for income now?

Q: Following up on the question earlier Tuesday, please comment on the announced acquisition of Yew Grove REIT by Slate. Quite large (75% of SOT's market cap) and SOT describes it as transformative. I would imagine significant debt and/or an equity offering will be needed. Challenges of managing an offshore entity versus sticking closer to home?

Q: Hi, I saw an article about Brookefield almost defaulting on one of their properties in Chicago..I dont see why they would let that happen? They are flushed with funds and have a very good credit rating. Do you know anymore about this story? Thanks.

Regards,

Shyam

Q: Do you think there will be a higher bid for COR? Thanks to your recommendation, I bought it in my RRSP a few years ago. It's currently above the takeover price, and I'm just wondering if it's worth holding onto.

Thank you for all that you do.

Q: Hi. What is your opinion on the suitability of Slate Office REIT for income in the higher risk portion of a portfolio? Is the dividend sustainable? thx

Q: Good afternoon!
This is one of Dorr Capital's funds that invest in mortgages (assumedly higher risk), and are speculating (pun intended!) a return of 7.5% annually, with distributions monthly.
The management fee is 1.25% (Series "A") or .85% (Series "F"). There is a cost to redeem on 30 days notice of 2% if in 1 year or 1% if in the second year.
I don't think this is much of a good idea, but was wondering:
1) Your thoughts on this specific investment?
2) Would there be any equities you could steer me towards that do this type of investment but without the management fees or the slow redemptions?
Thanks!
PaulK

Q: Can you comment on their recent acquisition? What’s your Updated view since your last comments and does this follow along with the theme that with housing becoming more unaffordable for some does this “trailer park/mobile home” space make sense for investment. It seems to according to Financial Post article

https://www.google.ca/amp/s/financialpost.com/real-estate/trailer-parks-could-hold-the-answer-to-canadas-national-housing-crisis/wcm/757f8662-6526-490c-bca4-d962c6e6c8b1/amp/

Your thoughts?

Q: Hi Peter & 5i,

Just a comment. I always find your answers to ROC (Return of Capital) perplexing to me. 5i seems to view ROC as almost a completely negative situation and that you are almost always receiving your own money back. That is just not the case. Today's response to a question from Albert regarding the ROC with regards to CAR.UN and REIT'S highlighted this situation even more. I like a stock (CAR.UN) that has went from $30 in 2016 and is $60 in 2021 and that 63.8% of the distribution during those 5 years has been ROC. Multiple great things to like in a non-registered account from a total return basis and a tax scenario.

The technical details for ROC and REIT's can be highlighted in this response from John Heinzl of the Globe and Mail. It is one of the best answers that I've seen.

Please post as Public if you think it can help with the ROC understanding.

This is the question posed to John Heinzl - I have a question about calculating the yields of real estate investment trusts. Many REITs distribute significant amounts of return of capital. It has never made sense to me to include getting my own money back when calculating my yield. Do posted yields need to be adjusted by deducting the ROC to get a more realistic idea of what one is receiving?

Answer - Return of capital doesn’t necessarily mean you are “getting your own money back.” In general, ROC is defined as the portion of a distribution that does not consist of dividends, interest, realized capital gains or other income. In some cases – for example, a high-yielding mutual fund that distributes so much ROC that its net asset value erodes over time – you are indeed getting paid with a portion of your original capital.

But with REITs, it’s not that simple. ROC typically arises when a REIT’s distributions exceed its taxable income. This isn’t necessarily a problem, however, because income is affected by accounting items, such as depreciation, that don’t reduce cash available for distributions. In other words, when you receive ROC, you are getting cash generated by the business, not some sleight-of-hand trick by the REIT.

For investors, ROC has one big advantage: It is not taxed immediately. Rather, ROC is subtracted from the investor’s adjusted cost base, which gives rise to a larger capital gain – or smaller capital loss – when the units are eventually sold. For REITs that distribute large amounts of ROC, it can significantly reduce the tax burden in non-registered accounts.

Interested in a particular REIT? Most REIT websites provide a detailed annual breakdown of the tax characteristics of their distributions. In addition to distributing ROC, REITs typically pay out capital gains (50 per cent of which is taxable), other income (which is fully taxable) and in some cases, dividends (which benefit from the dividend tax credit).

One final note: When assessing their operating performance, many REITs focus on real estate cash-flow measures, such as funds from operations (FFO) and the more stringent adjusted funds from operations (AFFO). These measures are also useful for determining a REIT’s payout ratio and assessing the sustainability of its distributions.

Q: American Tower pick-up COR but premium doesn't look that great .

Dan

Q: Which would you prefer SIA.un or Charwell and why.

Q: Thoughts on the Opendoor quarter? Do you think this type of technology/business model has a bright future? Would you rather an equal weighting of all three of these names (say 2% each) or is there a clear leader in which it might be more prudent to take a single larger 5% position?

I feel that the real estate sector could become much more efficient and liquid especially with a large player or consolidator that increases competition and should lead to lower transaction costs. Real estate agencies and the (until somewhat recently) gatekept MLS feel like a 'dinosaur' of an industry ripe for tech-based disruption. What are your thoughts about this? Thanks.

Q: I have shifted some funds from Cap and inter-rent reits to Boardwalk. My thinking is that alberta seems poised for more rent growth near-midterm with the recovery in AB and a still depressed relative valuation at BEI. What do you think of this move? And what did you think of boardwalks recent results? Thanks

Q: Why was CARs distribution in 2020 56% ROC? Is this related to their tax status?

Q: What are your recommendations for the best US and Canadian REITS for a 5-10 year hold?

Q: On your latest report on Tricon you mention an NAV of 478 M, or 2.83 per share. I am a little puzzled, on their Q2 report they report a net equity of USD of just over 2B for just over 200M shares, wouldn't that make a NAV of aprox. US $10. Please help me understand this.
Thank you.

Q: What did you think of their q3 results? Seems like the company is benefiting from exposure to the strong texas market. How does the valuation/growth compare to to other alternatives? Thanks

Q: How was their q3? Did it beat expectations? What do you think of this reit relative to alternatives?