# AX.UN - Why appreciating so much?



## kaleb0 (Apr 26, 2011)

So, about a year ago I made a small position with the commercial/industrial REIT - Artis REIT (AX.UN). Distributions have been good, yielding 7%-8%, and lately share price appreciation has added substantially onto that.

As I've learned more about investing (I'm really new at this, admittedly it's more like an expensive hobby than anything) I'm now incredibly nervous of this stock as their fundamentals are horrible:

(Today's snapshot)










Yet, recently their share price has rallied substantially..










I'm at a total loss as to why they're rallying higher still. They just finished up an offering where they raised something like $60M through new equity, and they are (from what I'm seeing?) not cash-flow positive. Am I missing something? Should I be selling this or should I hold on to it and continue to enjoy the nice monthly distributions which are probably unsustainable?

What am I not seeing?


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## phrenk (Mar 14, 2011)

I hold Whiterock REIT, very similar to Artis REIT, but much smaller.

Both REITs have increased in a similar pattern for the past 3-6 months, and although the increase might seem spectacular, it is not.

AX's dividend yield is still 7.25%, much higher than the more mature REITS (Dundee, Riocan). The increase could be due to increase M&A activity in the REIT industry (see Cominar's hostile bid on Canmarc) - on a personal note, Dundee REIT is very active right now, i wouldn't be suprised if they did something in the next 3 months, the stock market rally or investors wanting higher yield than instruments yielding below 4% annually.

If i were you, i would keep AX.UN, just like i'm holding WRK.UN, purely for the benefit of a 7-8% annual dividend. Should the dividend yield compress to 6% due to increased share price, i would seriously consider selling my position, but that shouldn't happen for the next 2 years.


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## humble_pie (Jun 7, 2009)

*small obscure hi-yielding reits*

i believe phrenk may have sniffed it out when he mentioned mergers & acquisitions.

another hi-yieldlng obscure reit is btb.un. This one has already been the object of cominar's lustful desires, but the engagement was called off. Some think monsieur dallaire may return to woo btb once again.

like others whose sh price has crept up noticeably, btb holds commercial properties. No residential or hotel properties.


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## HaroldCrump (Jun 10, 2009)

I have a position in AX REIT as well and it has been a great performer for me.
I bought well below current valuation so coupled with the yield, I can't complain.

As for why it is running up so much, I think it is finally correcting upwards.
This company has been held down because of their US exposure, esp. in very sagging markets like MN.
I have seen analysts revise their price targets upwards starting from mid of last year so the stock is finally catching up.

Also, their payout ratio as a % of AFFO is falling, which is good news.
At one point they were well over 110% and are now at or just below 100%.

This is all good news, but having said that, there are still significant risks outstanding here.
They have a lot of debt, payout ratio is still too high, their US investments are yet to start producing attractive returns and they have too much external management.

I am holding but would not buy at current levels.


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## kaleb0 (Apr 26, 2011)

Well, it just broke through the $15 mark (currently trading at $15.02) for the first time today in the entire time I've held it. Something is definitely up I think. I'm not complaining, only wishing I had taken a larger position in it a year back


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## Mall Guy (Sep 14, 2011)

Link below to Seeking Alpha's 5 part series on CDN REITs


http://seekingalpha.com/article/318973-analyzing-canadian-reits-part-v-retail


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## phrenk (Mar 14, 2011)

Speak of the devil, Dundee just announced this morning the acquisition of Whiterock REIT.


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