Comments on: Canadian REITs: No Longer a Bargain

By: Happy Returns

Happy Returns — Sat, 13 Feb 2010 02:12:21 +0000

If REITs have run their course and one agrees that the Canadian real estate sector is a bubble waiting to burst, does it make sense to invest in a REIT that shorts Canadian Real Estate? Is there such a REIT?

By: Canadian Personal Finance Blog » Blog Archive » Random Thoughts: Without Inflating it

Fri, 22 Jan 2010 06:41:37 +0000

[...] Canadian Capitalist commented on Canadian REITs: No Longer a Bargain one day I’ll have to ask him to give me a tutorial on REITs because I don’t think I [...]

By: A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com

A Lap Of The Blogs : WhereDoesAllMyMoneyGo.com — Fri, 22 Jan 2010 04:29:04 +0000

[...] Canadian Capitalist notes that Canadian REITS may no longer be bargains. [...]

By: A. Cutler

A. Cutler — Wed, 20 Jan 2010 16:54:28 +0000

In general we agree that the entire TSX REIT sector is over valued today. However, there remain some good holds. At present our RI.ca FUND remains overweight short, especially the hotel REITS as we await Q4 and EOY reports.

As for RioCan, (we do not hold a position in) currently their payout ratio greatly exceeds Distributions. Yet this is nothing new and perfectly acceptable for development oriented retail REIT. However, they will be challenged to structure themselves to qualify as a REIT come 2011. Nevertheless, RioCan remains one of, if not the best managed REITs in North America and their ability to continue to meet distributions is far from in doubt.

A bigger question will be the effect of higher interest rates later in 2010?

By: ThinkDividends

ThinkDividends — Tue, 19 Jan 2010 19:51:44 +0000

No more bargins in REITs… RioCan trades at a large premium to NAV because it is the go-to name for large institutional investors… Take a look at Canadian REIT (REF.un). This is the most conservatively managed REIT in Canada. The current yield is 5%, but it should be noted that they have the lowest payout ratio.

By: Thicken My Wallet » Blog Archive » Will income trust conversions lead to yield chasing?

Tue, 19 Jan 2010 08:48:11 +0000

[...] The natural substitute is to move to a REIT (generally exempt from the new tax regime) but REITs are not value plays (at least in Canada; on the income side, Canadian REITs are paying out 94% of AFFO meaning do not [...]

By: Canadian Capitalist

Canadian Capitalist — Tue, 19 Jan 2010 05:18:10 +0000

@Phil: There has been some speculation among analysts that RioCan might cut its distributions because its DPU has been exceeding its AFFO for a few years now and this state of affairs isn’t likely to change in the near future. For 2010, REI.UN’s AFFO is estimated to be $1.17 per unit whereas its DPU is $1.38. So, I agree with your point that looking at distributions might not be the whole story. Regardless, I share your bearish sentiment though I keep a 5% allocation to REITs.

I heard somewhere that a bull market is named for the way a bull attacks — goring someone by its horns upwards and a bear attacks by slashing downwards. Not sure if there is any truth to that or its just an urban legend.

By: Financial Cents

Financial Cents — Tue, 19 Jan 2010 02:20:22 +0000

I was thinking of using REI.UN for part of my TFSA this year, but now I’m not so sure. Seems this and other REITs are valued kinda high. This also makes XRE a non-buy for me in the TFSA.

@Phil, I agree – seems many REITs are paying out more than they earn – over 100%. How on earth is this sustainable?

The Big Six banks are all, usually, between 40% and 55%.

By: Phil S

Phil S — Tue, 19 Jan 2010 02:00:04 +0000

Similar to a P/E ratio for a stock, I personally measure REITs in terms of Price to FFO (Funds From Operation). Using a Price to FFO ratio, many REITs are overvalued, not necessarily because of a runup in price, but rather due to a dip in their FFO. There are a lot of REITs which are now distributing at or above 100% in terms of their payout ratio, which means that their distributions may not be sustainable if the recession keeps dragging down their earnings (or FFO).

So, it seems to me as though investors have priced REITs like they are anticipating a V-shaped bounce back in the economy. Nobody has a good crystal ball, but for me, I’m not so sure that our economy will rebound so sharply.

I should change my name on this blog to something related to being Bearish. Does anybody know where the market analogies to the Bull and Bear even comes from? That might make a good trivia question someday…

By: Tweets that mention Canadian REITs: No Longer a Bargain | Canadian Capitalist -- Topsy.com

Mon, 18 Jan 2010 23:17:26 +0000

[...] This post was mentioned on Twitter by Canadian Capitalist, The Best Sale Prices. The Best Sale Prices said: Canadian REITs: No Longer a Bargain | Canadian Capitalist http://bit.ly/7tPzZH [...]