# What am I missing re Boardwalk REIT???



## Spidey (May 11, 2009)

Boardwalk seems to be highly recommended by some analysts. (I know you're all going to tell me not to follow "expert" recommendations but I have to start my research from somewhere.)

Anyway, I've been going through the balance sheets on TSX. Boardwalk has $2350.43 million of liabilities for only $8.49 million of shareholder equity. The price to book is 184.63 and P/CF is 34.80.

Compare this to CWT.UN where there is $2621.24 million of liabilities for $1436.89 million of shareholders equity and the P/B is 0.87 and the P/CF is 5.9.

So again. What am I missing with Boardwalk? Is there something particular to this type of REIT that permits these type of debt to equity levels?


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## takingprofits (Apr 13, 2009)

Boardwalk receives CMHC financing at a low rate. Other REITs - those that are not in residential properties - are not eligiable and their financing costs are usually higher as a result. There is/was also the concern that they would actually be able to refinance in this environment. Boardwalk does not have that concern because they can use CMHC.


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## RI.ca (Apr 28, 2009)

REITinvestor.ca issues a positive #2 Ranking and estimates Boardwalk REIT’s distribution continues to be safe. 3-month target remains $29.00 / unit.

Boardwalk REIT (BEI.UN - TSX) May 14, 2009 REITinvestor.ca issues a positive #2 Ranking and estimates Boardwalk REIT’s distribution continues to be safe. 3-month target remains $29.00 / unit. REITinvestor.ca, a private subscriber-based independent rating and ranking service, today issues a positive #2 ranking for Boardwalk REIT, and believes that the current distribution of $0.15month ($1.80 annualized) is safe for the remainder of 2009. Following a review of Boardwalks REIT’s Q1-09 Report, REITinvestor.ca is holding its 3-month target steady at $29.00 for BEI.UN. Of particular note to REITinvestor.ca: Management reported that distributions for Q2 have been confirmed without change. Management estimates that additional proceeds of $140M will be gained on refinancing activity for the rest of 2009. Management is determined to raise as much cash as possible through refinancing and disposition of certain non-core assets, with the intention of capitalizing on available low mortgage rates. Management has modified its apartment marketing strategy to lower rents in order to maintain high occupancy, rather than hold rents up in the face of weakening demand in certain markets. Nevertheless, we note that average rents across the entire portfolio have increased approximately 5% from Q1-08 to Q1-09. Cash-on-hand as of March 31, 2009 increased to $169M in Q1-09 and overall liquidity to total remains excellent, at over 16%. BEI.UN units closed on Tuesday, May 13 at $27.75 per unit. For more information, visit REITinvestor.ca 

DISCLOSURE: REITinvestor.ca maintains its own investment fund and does not currently hold units of BEI.UN. REITinvestor.ca does not provide investment advice, nor does it recommend the purchase or sale of securities including any REIT units it covers. Please consult your personal professional advisor before investing.


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## Spidey (May 11, 2009)

Your explanations are helping and thanks for the information, but my poor pea brain is still having trouble comprehending this. I'm sure CMHC financing is worth something buy is it worth that much??

According to TSX.com, Boardwalk (BEI.UN) is trading at 188 times book value. That means we are paying 188 times the the net market value of the buildings and assets!! If you were buying a rental property would you ever pay 188 times the value of the building?

Contrast that with Calloway (CWT.UN) where the book value is 0.87. That means we are paying 13% less than the net value of the assets. Paying 13% less than real estate is worth sounds better than paying 188 times the value of real estate.

I'm sure I must be missing something crucial in this scenario, but I've learned in finance that its better to ask questions and look foolish than to invest in something that you don't understand. Can anyone explain it? This would be a good one for Norm R., if he's out there. However, of course, I would like to hear from anyone who can offer a more thorough explanation.


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## takingprofits (Apr 13, 2009)

I am sure that there are others here that know a lot more about REITs than I do but my understanding is that REITs are not judged by the market value of the properties under management. They are judged by applying a multiple to the Funds from Operations.


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## CanadianCapitalist (Mar 31, 2009)

Spidey said:


> I'm sure I must be missing something crucial in this scenario, but I've learned in finance that its better to ask questions and look foolish than to invest in something that you don't understand. Can anyone explain it? This would be a good one for Norm R., if he's out there. However, of course, I would like to hear from anyone who can offer a more thorough explanation.


I don't follow Boardwalk but the book value may be wildly different from net asset value. NAV is a more meaningful measure for REITs because it is an estimate of how much the properties are worth per share. You can obtain NAV estimates through reports available in some brokerage accounts. TDW, for instance, publishes NAV estimates from its analysts. Unfortunately, I don't have an account, so I am unable to look it up for you.


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## RI.ca (Apr 28, 2009)

We have the NAV's for all the REITs in the ratings & rankings section. 
They are updated each day to reflect any changes.


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## Spidey (May 11, 2009)

CanadianCapitalist said:


> I don't follow Boardwalk but the book value may be wildly different from net asset value. NAV is a more meaningful measure for REITs because it is an estimate of how much the properties are worth per share. You can obtain NAV estimates through reports available in some brokerage accounts. TDW, for instance, publishes NAV estimates from its analysts. Unfortunately, I don't have an account, so I am unable to look it up for you.



Thanks for your response. I must admit that I don't know the difference between net asset value and book value -- I always thought the two terms were synonymous.

TSX reports BEI.UN to have *2,358.92* million in total assets and *2,350.43* in total liabilities. *To me that means that when one buys BEI.UN they are buying virtually no net assets.* What is basically being bought is an income stream. Am I wrong?


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## RI.ca (Apr 28, 2009)

The calculation for the net asset value is the real estate market value of the revenue. You use the recent sales to develop a cap rate, and then use this cap rate in the formula below. 

NAV= Net operating income / an applied market cap rate. (You adjust for cash on hand, properties under development and other factors) (The cap rate is determined by comparitive market sales, making it somewhat subjective because you have to determine the quality of the asset and the source of the income). To get your NAV per unit price you have to subtract total debt, and divide by number of units. 

BEI has a NAV/Unit value of $32.00 according to REITinvestor.ca. 


Gross book value is the depreciated value of what they paid.


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## Spidey (May 11, 2009)

Here is the Wikipedia definition of net asset value:

Net asset value (NAV) is a term used to describe the value of an entity's assets less the value of its liabilities. The term is most commonly used in relation to open-ended funds, though it may also be used as a synonym for the book value of a business.


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## RI.ca (Apr 28, 2009)

It is difficult to find clear and simplified definitions of REIT term on the internet. For the most part they are either too vague or too complexe for average investors.


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## takingprofits (Apr 13, 2009)

RI.ca said:


> BEI has a NAV/Unit value of $32.00 according to REITinvestor.ca.


Scotia is a bit higher with a NAV of $34.00 as of May 21


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## Spidey (May 11, 2009)

Thanks for the responses. I think I'm getting a little clearer picture. Book value in regard to REITS includes depreciation and likely doesn't represent market value whereas net asset value does. However, the ratios for BEI.UN still seems grossly different from other REITS. I've ordered a book on REITs, so hopefully I'll get a better handle on this.


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## lister (Apr 3, 2009)

Spidey said:


> I've ordered a book on REITs, so hopefully I'll get a better handle on this.


Which book is that, if you don't mind my asking?


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## Spidey (May 11, 2009)

The book is called, "Investing in REITS" by Ralph L. Block.


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## canehdianman (Apr 7, 2009)

I felt the same way a month ago (or so), when I decided to buy a REIT for my TFSA.

I looked at Boardwalk and a few others, but in the end, Calloway had the most attractive dividend coupled with potential upside.

mind you, it's up over 30% since then (with a monthly distribution thrown in for good measure), but I think it's still a solid investment.

A lot (most?) of their malls are anchored by a Wal-mart which are the definition of recession proof.


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## lister (Apr 3, 2009)

Spidey said:


> The book is called, "Investing in REITS" by Ralph L. Block.


Thanks!


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