Canadian REIT research

I’ve finished the analysis on Canadian REIT and will start with US
reit soon. The reason why I choose the Canadian market is for the
stability of their real estate market as well as the fact that it is a
resource based economy. Which means that it should only go up from now
on. Most Canadian REIT uses fixed rate long term mortgages instead of
the variable rates that are rampant in most US REIT. Some Canadian
REIT uses derivative contracts and have been booking losses left and
right during this recession. I expect to see the same result once I
dig deeper into US REIT.

The REIT play is to establish a safe place to park cash while
generating monthly income. Therefore the criteria for selection are
set as follows: Return of > 5% preferably in the high 7%. Stable
predictable operation as well as low debt to income ratio.

With that, an initial scan eliminated most REIT and narrowed my search
down to 4. First the loser.

CAR.UN: Stay away. Their derivative play is costing them a lot as they
struggle to close down its position this year. Suggesting a wild
cowboy mentality in management.

The winners:
NPR.UN: A multi family rental unit based REIT with the focus in
Alberta. Expect to see it soar as oil become king again, but stay away
for the winter decrease in gas price. Its rental revenue covers its
mortgage payment with surpluses.Return 7.5%

CRR.UN: A retail based REIT with the focus in Nova Scotia.
Particularly Sobeyes, a grocery chain who occupies most of its space.
The risk in having only one clientele is offset by the fact that
grocery stores will most likely thrive in this environment. With banks
targeting shopper’s need for groceries and giving out incentives,
expect to see increased grocery spending. Rent covers mortgage
payments. Return 9.57%

REF.UN: A retail/office/industrial REIT with the focus in Alberta and
Ontario. Alberta focuses in oil while Ontario focuses in car
manufacturing. As both sector pickup due to the recent
administration’s stimulus, expect to see this get back on its feet
after 2010. Return 11.55% Current rental income falls slightly short
of mortgage payments, other financial magic with real income covers
the shortfall.

I am personally going for a mix of REF.UN and CRR.UN with a later play
in NPR.UN around winter time.