# Why a sudden drop in REITs today?



## YYC650 (Oct 29, 2011)

Many of the REITs were down 2 to 3% today. I didn't see specific news to indicate why. Anyone hear why?


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## Pickering (Jun 24, 2011)

TSX is down 20 points and I had my worst daily loss in close to 5 years ?

Not only Reits but got clobbered in TRP, IPL.un, Gibson , Emera and on and on. Even the re-set preferred down big time. Only green stock was a small Venture gold producer.

What is going on and so many big players be down 1-2-3 % and TSX is only down 20 points.

What am I missing


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## My Own Advisor (Sep 24, 2012)

No idea. 

If they drop a bunch more, buy.


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## Spudd (Oct 11, 2011)

I read somewhere that there are rumours the fed is going to raise rates, which people speculate will be bad for REITs, hence the drop. 

http://www.theglobeandmail.com/glob...eo-sells-as-bond-yields-rise/article12109631/

From the Washington Post: http://www.washingtonpost.com/busin...f29f48-c86c-11e2-9cd9-3b9a22a4000a_story.html
Real estate investment trusts, or REITs, another investment favored by investors seeking income, have also been hit as Treasury yields climb. Vanguard’s exchange-traded REIT fund has fallen for five straight days, cutting its gains this year to 10.9 percent from 19.7 percent.


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## doctrine (Sep 30, 2011)

There has been some interesting divergence in the last while. Today, I've got some stocks up 5%, some down 3%. Real estate stocks were hit too though, like BPO and FCR.


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## andrewf (Mar 1, 2010)

My guess is the market was surprised that the BoC maintained their tightening bias.


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## PuckiTwo (Oct 26, 2011)

Our portfolio was 1.38 per cent down today. Pipelines biggest losers, reits as well.


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## GoldStone (Mar 6, 2011)

It's called "the end of QE trade". US bonds prices have been falling for a month now. Bond yields (the inverse of price) have been climbing. As bond yields rise, yield investments such as REITs, utilities, pipelines become less attractive.

http://allstarcharts.com/the-end-of-qe-trade/


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## GoldStone (Mar 6, 2011)

YTD chart of SPY vs. XLU

SPY = S&P500 ETF
XLU = Utilities ETF

Note how utilities sector keeled over in May, as bond yields started rising. VNQ (REITs ETF) did the same recently. The market is pricing in the end of QE.


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## HaroldCrump (Jun 10, 2009)

^ What GoldStone and Spudd said.

That was the _ostensible_ reason.
In reality, QE is not that straightforward to unwind.


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## GoldStone (Mar 6, 2011)

HaroldCrump said:


> In reality, QE is not that straightforward to unwind.


The market can reprice bonds without waiting for QE to unwind.


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## Squash500 (May 16, 2009)

Thanks to the OP for starting this thread. I'm personally very over-exposed to the XRE. IMHO I can't panic as I'm using the XRE for monthly income to help pay my living expenses. I somehow have to ignore the negative fluctuations in price of the XRE and just focus on the monthly income.


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## YYC650 (Oct 29, 2011)

GoldStone said:


> It's called "the end of QE trade". US bonds prices have been falling for a month now. Bond yields (the inverse of price) have been climbing. As bond yields rise, yield investments such as REITs, utilities, pipelines become less attractive.


Makes sense, thanks.


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## Squash500 (May 16, 2009)

GoldStone said:


> It's called "the end of QE trade". US bonds prices have been falling for a month now. Bond yields (the inverse of price) have been climbing. As bond yields rise, yield investments such as REITs, utilities, pipelines become less attractive.
> 
> http://allstarcharts.com/the-end-of-qe-trade/


 Thanks for posting this article GoldStone. IMHO as bond yields rise...purchasing individual bonds and bond ETFS becomes more attractive....as the price to buy these individual bonds or bond etfs becomes lower. With that being said....the slight increase in bond yields IMHO isn't exactly earth shattering---LOL.


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## james4beach (Nov 15, 2012)

Pickering said:


> Not only Reits but got clobbered in TRP, IPL.un, Gibson , Emera and on and on. Even the re-set preferred down big time. Only green stock was a small Venture gold producer.


Most of these declines were barely 2%. If that really feels like a clobbering to you (I don't know if you were exaggerating) then I would suggest you are way, way over exposed or over leveraged. These are stocks, and they will be volatile. You may go through a period where they could decline 30% or more... all I'm saying here is that if a 2% drop causes you pain, trust me, you have too much exposure


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## james4beach (Nov 15, 2012)

Take a look at the American ETFs and you'll see that the Canadian action is just mirroring the US move.

Check out IYR (REITs) and XLU (utilities), two charts that are looking the same. Selling off for several days, on high volume. I would say it's a reaction to the sharp increase in interest rates (10 year treasury yields are shooting up).

Yield-chasers ("income investors") must remember that all these things, including dividend stocks, are sensitive to interest rates. Anyway that's my best guess for what's going on.


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## james4beach (Nov 15, 2012)

Funny, I just connected the dots on something I posted yesterday in another thread.

Here is one possible reason for the sudden selloff in these high-yielders. The more I think about it, the combination of rising bond yields plus the payout ratio issue I posted in that thread... would really create a climate where one would want to sell REITs, utilities, dividend guys

http://canadianmoneyforum.com/showt...rket-signal-S-amp-P-500-dividend-payout-ratio


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## cainvest (May 1, 2013)

We also have the Bank of Canada change up on June 3rd, that might put some extra stress on this situation.


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## bayview (Nov 6, 2011)

Profit taking in Reits is happening worldwide - not only in North American markets. As Goldie has shared - fear of QE ending was the trigger. The Reit sector has been the best performing last year and year to date ( almost) in some markets. Reaping some profits is understandable. Safe haven like Utilities have taken a beating too since Bernake blurted about possible end to QE.

It is an endless, nonetheless interesting debate, whether end of QE portends a bear stock market ahead or a mere hiccup. 

Confirmation of the end of zero interest rate policy will ensure massive bailouts in high div yielding stocks including Reits and bonds, precious metals despite a huge correction in Gold & Silver year to date, strengthening of the USD....

The rest of this year is certainly going to be more interesting and more volatile than the last 5 months!


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## HaroldCrump (Jun 10, 2009)

GoldStone said:


> The market can reprice bonds without waiting for QE to unwind.


True, but that is a pretty ugly situation on multiple levels.
If the Fed is continuing a policy of QE for lowering mid term and long term rates by open market purchases, and the market is trying to push up yields, it is basically a clash of two formidable forces - the Fed vs. the bond market.
It has ramifications for global currency balances too.

The Fed either has to agree to stop QE and let the market be the market, or the market has to say to itself : _don't fight the Fed_, which is what the market has been saying thus far.

Rising yields on US govt. debt has far-reaching fiscal implications as well.
The US Treasury cannot afford to have 5% yields on 10 year debt notes.


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## blin10 (Jun 27, 2011)

yah somebody is unloading a lot of quality stocks...


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## HaroldCrump (Jun 10, 2009)

While everyone is dumping utilities, Buffet is buying.
http://www.forbes.com/sites/stevesc...kshires-midamerican-to-buy-utility-nv-energy/

Pretty standard for him - buy when others are selling.


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> While everyone is dumping utilities, Buffet is buying.
> http://www.forbes.com/sites/stevesc...kshires-midamerican-to-buy-utility-nv-energy/
> 
> Pretty standard for him - buy when others are selling.


right harold ... forget qe, forget cyclicals, forget defensives ... buy good companies ... 

are to we now believe that reits and utilities are bad things to own ?

what if this is a headfake and 3rd quarter earnings are crap ?

you will want to be in reits and utilities


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## andrewf (Mar 1, 2010)

The Fed clearly expects to take a bath on its bond portfolio. That's kinda the point of QE. It's okay, because the Fed has made huge profits on the portfolio so far.


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## Erome (Jan 11, 2011)

I picked up a bunch today ay 17.00.

I'm guessing that it won't fall much further, and it may bounce back a bit.

XRE is a good long term hold anyways right? Buy some when its cheap.. hold it... buy some more when its cheap... hold it, DRIP it, etc...


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## james4beach (Nov 15, 2012)

Erome said:


> XRE is a good long term hold anyways right? Buy some when its cheap.. hold it... buy some more when its cheap... hold it, DRIP it, etc...


Unless the Canadian real estate market tanks, in which case you're screwed.


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## andrewf (Mar 1, 2010)

I don't think residential real estate (SFHs) will have a direct impact on REITs. Some REITs may suffer, like retail, with a slowdown in consumer spending.

I think REITs are more vulnerable to changes in interest rates.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Unless the Canadian real estate market tanks, in which case you're screwed.


Or one can try to lower one's ACB by buying cheap.

Though ...



andrewf said:


> I don't think residential real estate (SFHs) will have a direct impact on REITs. Some REITs may suffer, like retail, with a slowdown in consumer spending.
> 
> I think REITs are more vulnerable to changes in interest rates.


It's hard to tell ... certainly I'd expect a Senior's Residence REIT isn't going to be bothered much by either factor (unless the seniors were depending on REITs that cut distributions to pay their expenses :biggrin: ).


The rest have a lot of variables at play so it is tough to figure out what the impacts could be.


Cheers


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## james4beach (Nov 15, 2012)

If there was a housing crash, I certainly would buy REITs!

Then again if there was a housing crash I'd probably buy a real home. At current prices, I can't afford a home --- which also by the way is why I expect prices will eventually plummet. Another alternative is that incomes will skyrocket and home prices stay stable... which of those options seems more likely?


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## andrewf (Mar 1, 2010)

All REITs are affected by interest rates rising because they are essentially leveraged real estate portfolios. You make the spread between the cap rate and the interest expense.


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> All REITs are affected by interest rates rising because they are essentially leveraged real estate portfolios. You make the spread between the cap rate and the interest expense.


+1. TD Securities often puts out a report on Canadian REIT yields graphed against 10-year GoC bond yields going back to the early 1990s. Barring some exceptions like the 2008-09 market, Canadian REIT yields were highly correlated with bond yields.


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## HaroldCrump (Jun 10, 2009)

Further on the above, the risk with REITs and rising rates is not just the capital loss expected on the unit price.
Distributions can also be cut because the cost of capital for the REIT goes up.


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> Further on the above, the risk with REITs and rising rates is not just the capital loss expected on the unit price.
> Distributions can also be cut because the cost of capital for the REIT goes up.


right, it costs more to raise funds for operations and the costs are passed along to renters which makes them (reits) fairly good hedges against inflation assuming the lease expiration calendar is favorable within the reit ... isn't this correct ?


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## doctrine (Sep 30, 2011)

They will pass costs on but it takes time. Sometimes leases extend for 20 years. They usually have steady and predictable increases; I don't think those contracts have a lot of flexibility to raise rents just because interest costs go up. So, a short term increase in borrowing costs could hurt, depending on the loans they have.


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## fatcat (Nov 11, 2009)

doctrine said:


> They will pass costs on but it takes time. Sometimes leases extend for 20 years. They usually have steady and predictable increases; I don't think those contracts have a lot of flexibility to raise rents just because interest costs go up. So, a short term increase in borrowing costs could hurt, depending on the loans they have.


agreed and part of the skill in evaluating reits is putting in the time and effort to parse out their vacancy rates and schedule of lease expirations among other things ... (these are skills i do not possess nor plan to acquire i might add)


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## lonewolf (Jun 12, 2012)

[ I don't think those contracts have a lot of flexibility to raise rents just because interest costs go up. 

Doctrine

Spot on the market determines the amount of rent renters will pay.


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## rknigh2 (Jun 5, 2012)

The problem is that good companies are propped up from bond money right now. As the bond yields increase and money flows out of the dividend payers, you may take a 20% haircut (7 years worth of dividend payments). Like it or not, the "safe" stocks are trading at historic multiple highs.


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## andrewf (Mar 1, 2010)

Neither REITs nor renters have much pricing power. Landlords can't just raise rents with incurring increased vacancy.


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## HaroldCrump (Jun 10, 2009)

The glut in the condo market is going to keep the rents for apartment REITs low, even if mortgage rates tick up slightly.
As for commercial REITs, unless there is a significant up-tick of manufacturing and commercial activity, they can't raise lease rates either.

The only places where rents are upwardly elastic are the growing markets such as China, Brazil, etc.

One could seek out international REITs focused on those geographical regions, although there are other issues to consider (such as currency risk, lack of diversification, with-holding taxes, etc.)


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## Squash500 (May 16, 2009)

I decided to hold on to my position in XRE. If I would have held the individual stocks in the XRE....like Riocan and Calloway etc then IMHO I would have probably bailed out of these individual stocks. I feel more comfortable holding the ETFS...as opposed to individual stocks because the daily % drops in the ETFS aren't usually as bad as the individual stocks.


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> The glut in the condo market is going to keep the rents for apartment REITs low, even if mortgage rates tick up slightly.
> As for commercial REITs, unless there is a significant up-tick of manufacturing and commercial activity, they can't raise lease rates either.
> 
> The only places where rents are upwardly elastic are the growing markets such as China, Brazil, etc.
> ...


harold, except the assumption here is that reit's are dropping because interest rates are rising which "presumes" a healthy economy and thus landlord's will pass along costs and raise rents for new tenants ... leases expire and new leases are written at higher rates ... if that is not the case and the economy is too weak to support rent raises then presumably we are seeing disinflation and reit's share price will hold up ... (to a degree the equation is locked, this is why they are good inflation hedges, or CAN be good inflation hedges is better perhaps)



> *Analysis: To hedge inflation, property trusts are the new gold*
> (Reuters) - As central banks print cash to boost moribund economies, investors in Asia wanting to hedge against rising prices are dumping gold and doubling down on property.
> 
> They are driven by the search for yield as surprisingly benign inflation dims the appeal of bullion, but it's a risky play given lofty valuations for real estate.
> ...


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## blin10 (Jun 27, 2011)

Squash500 said:


> I decided to hold on to my position in XRE. If I would have held the individual stocks in the XRE....like Riocan and Calloway etc then IMHO I would have probably bailed out of these individual stocks. I feel more comfortable holding the ETFS...as opposed to individual stocks *because the daily % drops in the ETFS aren't usually as bad as the individual stocks.*


and daily gains are a lot higher in individual stocks vs etfs...


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## Squash500 (May 16, 2009)

blin10 said:


> and daily gains are a lot higher in individual stocks vs etfs...


 I totally agree with you...that it's a total trade off.


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## blin10 (Jun 27, 2011)

Squash500 said:


> I totally agree with you...that it's a total trade off.


go track xre vs rei.un in past 5 years, xre up 20%, rei up 26%, keep in mind rei pays a lot more in divis as well...


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## mrPPincer (Nov 21, 2011)

REITs down again today, and by more than 12% YTD, maybe starting to look like a good time to buy if you're below your allocation.

Still too early for me, I went from 9.7% RE to 10.6% RE on my last purchase (too early as it turns out),
holdings need to drop below the 10% level before I buy again; still at 10.1% now.

Not having held bonds for years now, and not planning to until after we see a significant raise in interest rates, 
I like to think of REITs as a bond replacement with some built-in inflation protection as alluded to upthread.


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## fatcat (Nov 11, 2009)

mrPPincer said:


> I like to think of REITs as a bond replacement with some built-in inflation protection as alluded to upthread.


i posted this in another thread http://seekingalpha.com/article/1513...beat-inflation ... it's an opinion piece that makes a good case for reits as inflation protection yet still performing well in deflationary markets ... my reits are getting creamed like everyone ... my big loser is car.un which puzzles me since house prices are holding strong (relatively) which would make apartment reits attractive


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## mrPPincer (Nov 21, 2011)

I just look at it that I'm getting the monthly DRIPS at better prices while they're down.


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## My Own Advisor (Sep 24, 2012)

Same MrPPincer


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## Synergy (Mar 18, 2013)

When will the carnage end! Taking a chunk out of my TFSA. I wish I could add more but the account is fully invested. Divy's are adding up though...


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## james4beach (Nov 15, 2012)

Bond market is having a big effect on REIT valuations, I think.

As bonds are still very weak (interest rates rising) this partially explains why REITs continue to drop


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## fatcat (Nov 11, 2009)

my reits are up almost .75%


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## james4beach (Nov 15, 2012)

mrPPincer said:


> Not having held bonds for years now, and not planning to until after we see a significant raise in interest rates,
> I like to think of REITs as a bond replacement with some built-in inflation protection as alluded to upthread.


I think there may be a problem with this reasoning.

So you're expecting interest rates to go up, which is why you don't hold bonds right now - right?
But you hold REITs which are also sensitive to interest rates. Especially if the Canadian RE market is overheated, in which case higher mortgage rates will definitely knock it down.


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## HaroldCrump (Jun 10, 2009)

Synergy said:


> When will the carnage end!


IMO, this may only be the beginning of the "carnage".
There are several factors creating a perfect storm, such as - rising long term bond yields, lower cap rates (even in the US because of rising property prices), and the Yen carry trade unraveling.
I also wonder if the recent move to securitize future rent rolls by Blackrock and Deutsche Bank might be re-directing some capital away from REITs.
Those securities will be REIT substitutes.


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## Synergy (Mar 18, 2013)

james4beach said:


> Bond market is having a big effect on REIT valuations, I think.
> 
> As bonds are still very weak (interest rates rising) this partially explains why REITs continue to drop


I'd have to agree. D.UN appears to be getting hit a little harder, perhaps because of their exposure to the Toronto and Calagary markets where's there's a lot of new construction happening. But, interest rates appear to be the driving force behind the global sell-off over the past few months. I just have a hard time seeing it justified on a valuation basis...


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## james4beach (Nov 15, 2012)

Leaving aside the effect of higher interest rates on the housing market (which I think is a big negative on RE prices) --

Here's a little personal example of how rising interest rates can hurt REIT & high yield share prices. REITs and utilities, for instance, "compete" with bonds and GICs for attracting money. When bond yields started going higher in May, I sold my XUT position to free up the money and started shopping around for bonds and GICs. I sold utilities but the same idea applies to selling REITs.

Say with XRE for example, currently with 5.04% TTM - 0.6% = *4.4% yield* after fees, it constantly has to compete against rates in the bond market. Someone may look at the situation today and think, well, I can either get 4.4% in REITs (which are quite risky) or get a little over 3% in provincial bonds, which are quite safe. Which is more attractive on a risk adjusted basis?


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## blin10 (Jun 27, 2011)

"Here's a little personal example of how rising interest rates can hurt REIT & high yield share prices.", and here's how higher interest rates can benefit reits:

higher interest -> economy is doing better -> more companies opening up or expanding -> more tenants -> increased monthly rent


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## fatcat (Nov 11, 2009)

blin10 said:


> "Here's a little personal example of how rising interest rates can hurt REIT & high yield share prices.", and here's how higher interest rates can benefit reits:
> 
> higher interest -> economy is doing better -> more companies opening up or expanding -> more tenants -> increased monthly rent


correct and with a well managed reit and good lease rollover it will work as an inflation hedge ... in a rising rate environment the provincial bonds offer a poor risk-adjusted investment and have no protection against inflation, just like gic's

where are you getting your inflation coverage james ?


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## Synergy (Mar 18, 2013)

blin10 said:


> "Here's a little personal example of how rising interest rates can hurt REIT & high yield share prices.", and here's how higher interest rates can benefit reits:
> 
> higher interest -> economy is doing better -> more companies opening up or expanding -> more tenants -> increased monthly rent


That's what I've always thought and one reason why I felt REITS where a good investment despite talk about rising interest rates. I'm just somewhat surprised by the extent of the recent correction.


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## My Own Advisor (Sep 24, 2012)

I wish they'd go lower....I need some more CWT.UN.


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## liquidfinance (Jan 28, 2011)

GICS off little or non existent inflation protection. 


Take 5 yrs at 2.6% a marginal tax rate of 30% and inflation at 2%.

The real return after tax on that 2.6% is now a mere 1.82% Against 2% inflation your losing money. I would rather risk the money with the REITS at the moment. RioCan is almost at 6% and seemed to release a pretty decent set of results. 

It comes down the whether or not you need the money. So if you need it in 5 years and want to at least maintain it's value then a GIC may be the correct option. If you can DCA I fail to see how you could go wrong with some REITS in your portfolio. Just don't expect a quick capital gain.


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## james4beach (Nov 15, 2012)

Well I'm open minded to both views. Let me see if I understand your scenario.

Economy remains strong or even strengthens further, meaning inflation expectations are high, thus bond yields go up. REITs attract more money because of ability to keep up with inflation (rising RE) and bring in good income with high occupancy rates. Do I have this right?

I agree with that line of reasoning, except I don't think bonds are selling off due to strong economic expectations. If it was a strong economy driving bond yields higher, I would agree.


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## james4beach (Nov 15, 2012)

liquidfinance said:


> The real return after tax on that 2.6% is now a mere 1.82% Against 2% inflation your losing money. I would rather risk the money with the REITS at the moment. RioCan is almost at 6% and seemed to release a pretty decent set of results.


OK but just remember that when the US housing market crashed, their REIT index (IYR) declined -70%. GICs offer a guaranteed rate of return. There is always a possibility, no matter how remote, that the Canadian housing market crashes and leveraged REITs de-leverage in a poor credit environment.



> If you can DCA *I fail to see how you could go wrong* with some REITS in your portfolio


Well you could go wrong by doubling down repeatedly through a -70% crash, as happened a few years ago. That would probably wipe you out.


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## Mall Guy (Sep 14, 2011)

+1 . . . and HR + REI . . .


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## gibor365 (Apr 1, 2011)

james4beach said:


> OK but just remember that when the US housing market crashed, their REIT index (IYR) declined -70%. GICs offer a guaranteed rate of return. There is always a possibility, no matter how remote, that the Canadian housing market crashes and leveraged REITs de-leverage in a poor credit environment.
> Well you could go wrong by doubling down repeatedly through a -70% crash, as happened a few years ago. That would probably wipe you out.


Not familiar at all with US REIT....but did their biggest REITs cut or reduced dividends?
I checked some big Canadian REITs and for many many years they maintained their dividends...


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## blin10 (Jun 27, 2011)

don't be surprised if they will go down even more, when big money start shorting it's usually for a while... but at one point reits yield will be too much to hold short, they will have to cover one day.... it's not like gold, where nobody knows what the value of it is, with reits you know 100% what it is... 



Synergy said:


> That's what I've always thought and one reason why I felt REITS where a good investment despite talk about rising interest rates. I'm just somewhat surprised by the extent of the recent correction.


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## doctrine (Sep 30, 2011)

I think the current prices are good value, although certainly not amazing value. I was very reluctant to add to RE for much of the last year but at current prices, most REITs are good for a portion of any portfolio.


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## james4beach (Nov 15, 2012)

gibor said:


> Not familiar at all with US REIT....but did their biggest REITs cut or reduced dividends?
> I checked some big Canadian REITs and for many many years they maintained their dividends...


Not totally sure what happened with American ones. Some of them were mortgage REITs and their distributions certainly were cut as the mortgage securities they held went bad and started defaulting.

IYR is probably a good proxy to look at, analog to looking at XRE in Canada
http://us.ishares.com/product_info/fund/overview/IYR.htm

Yes it does look like IYR had a significant drop in distributions starting in 2009


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## mrPPincer (Nov 21, 2011)

James thanks for the critique, with your unique perspectives on the risks involved with fixed income products & equities I think you bring a valued voice to these forums and I always pay attention to what you have to say.
Here's my thoughts.



james4beach said:


> I think there may be a problem with this reasoning.


Now that I think of it, a more accurate way of saying it would be a bond *fund* replacement, since I've never actually held any individual bonds, only bond funds in the past.

Equities that one could argue are more bond-like, such as REITs and utilities, have dropped significantly (more than I was expecting) as the market has demanded more yield, and I expect we'll see more pain to come, but as you've mentioned in other threads, by buying individual bonds and holding them to maturity you are never affected in real terms by the price fluctuations of those holdings.
One can't do that with bond funds, or REITs.



james4beach said:


> So you're expecting interest rates to go up, which is why you don't hold bonds right now - right?


I think there's very little room for rates to go down much further, has been that way for a while now, and I also think that it's inevitable that rates will change, so yes it's fair to say I expect them to go up and that's why I'm keeping my 11.75% (at present) fixed income in HISAs and not in TDB909. (doubtful I'd go back to TDB909 again because I now feel the MER is too high for a fixed income product, so I'll decide what to use instead later when the time comes).

The reason I don't hold individual bonds right now, or GICs, besides the fact that I don't see them paying a premium over HISAs, is that I like having all that cash available at a moment's notice in the event of another 2008/09 type crash, and for regular rebalancing to a disciplined but sliding asset allocation, going towards 20% cash if equities were to approximately double in market value from my 10% position, and going towards 0% cash in another 50% decline from where I'm at 10% cash.



james4beach said:


> But you hold REITs which are also sensitive to interest rates.


A year and a half ago I decided to allocate 10% to REITs for their less than 100% correlation to other equities, and because I wanted something more fixed-income-like to go with my then 10% cash position. There's not a lot good to choose from for the traditional fixed income portion of the portfolio these days, but I'm age 50 and semi-retired so 10% is starting to seem a little low.
I also purchased shares in a utility more recently (two if I include Telus), and that has taken a hit in share price too as bond yields went up.

On the plus side, when I first got into REITs last year, two thirds of my REIT allocation was VNQ, and including dividends, that one is still up 13.18% from cost, so overall I'm still in the green, for now at least.
But if I think of them as something to hold forever, and if they maintain or raise their dividends with inflation, I can theoretically ignore the fluctuations in share price except when it come time to buy some more, just as you do with bonds & GICs (in theory.. in reality the volatility is still disturbing to me).



james4beach said:


> Especially if the Canadian RE market is overheated, in which case higher mortgage rates will definitely knock it down.


Higher mortgage rates should cool down residential RE, I think prices have been correcting a bit in my area already.
I'm not sure how much retail/commercial/industrial/office-space RE pricing will be affected by rising mortgage rates. Their bottom line will certainly be affected by a higher cost of money, but I think that could be balanced out somewhat by other factors like higher occupancy rates or inflation driving lease rates higher.

--

At present I'm below allocation by enough to pick up shares in another REIT, but holding off because I'm waiting for the Vanguard FTSE Canada All Cap to become available, at which time I'll sell VCE in the TFSA and do any REIT buying in there. I'm thinking the All Cap will go in the non-registered for now.


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## Synergy (Mar 18, 2013)

Despite strong earnings (Q2) from some of the REITS, they continue to get pounded. I would have never thought interest rates would have had such an effect in such a short period of time...lesson learnt. I have a feeling we are on our way down to a 20-25% correction in this sector.


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## fatcat (Nov 11, 2009)

this is from a chat on the globe yesterday with a fellow who manages sentry's reit fund ...



> In Canada *we are trading at close to a 10% discount to NAV (historically the sector trades at around a 5% premium)* and at close to historical free cash flow multiples (15x) but the sector is still delivering above average free cash flow growth of 5%. WIth free cash flow growth expected to stay steady we feel these valuation levels look attractive.


it's worth a look: http://www.theglobeandmail.com/glob...-in-the-battered-reit-sector/article13711886/

the takeaway ? ... reits are priced attractively at the moment

my own belief is that this beat down is the big money guys (large funds pulling out of the canadian sector which has been paying better than the us sector) anticipating the fed pulling back in september and a further rise in rates


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## Synergy (Mar 18, 2013)

Thanks for the info fatcat. I've been considering on averaging down on a few of my positions. Holding back to see what happens when the Fed initiates a taper - perhaps it will be all priced-in by then but so far I'm glad I've waited this long. Interesting learning experience nonetheless...


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## liquidfinance (Jan 28, 2011)

This article is in The Globe and goes along with the consensus of rising interest rates being the issue. 

http://bit.ly/16lJm3c


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## fatcat (Nov 11, 2009)

one begins to wonder if a pullback by the fed can ever get priced in ...

since the fed is the giant teat that we all suckle and the thought of it getting pulled away makes us a want to throw a fit and threaten to hold our breath until mommy brings it back


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## doctrine (Sep 30, 2011)

I think the correction in REIT prices is such that a rebalancing is worthwhile into the sector. However, it has to be done with the mind that the sector could fall further.. RioCan traded at $19-20 for much of 2010 for example, which implies a potential 20% further loss, although I'd say any loss beyond that would likely be corrected quickly.


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## My Own Advisor (Sep 24, 2012)

That's when I bought REI.UN, I recall around $19. I don't see it going below $20 or $21 but I've been wrong before!


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## daddybigbucks (Jan 30, 2011)

doctrine said:


> I think the correction in REIT prices is such that a rebalancing is worthwhile into the sector. However, it has to be done with the mind that the sector could fall further.. RioCan traded at $19-20 for much of 2010 for example, which implies a potential 20% further loss, although I'd say any loss beyond that would likely be corrected quickly.


would you think a rebalance of dividends yield would be in the works as well?
I guess if interest rates are rising, then that would take a chunk out of profits.


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## doctrine (Sep 30, 2011)

I haven't seen any REIT results that had significantly higher interest rates for the quarter ending 30 June. I do think there is shorting going on, with some companies hedging bond bets by shorting real estate companies, regardless of the actual impact. Any actual impact would be slowly seen over years but hasn't started yet as far as I have seen. Some REITs have been raising distributions still (Northern Property yesterday).


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## HaroldCrump (Jun 10, 2009)

doctrine said:


> I haven't seen any REIT results that had significantly higher interest rates for the quarter ending 30 June.


The effect of rising rates will not have an impact yet.
It will take several quarters.
Even a 100 bps rise in 10 year rates should not cause most of the Canadian REITs to cut distributions, at least not the good quality ones.
But then, I am sure there are REITs that are over-leveraged, indulging in financial engineering, or have a high AFFO payout ratio (close to or above 100%).

To discover which REITs will be most impacted, you have to look at their average mortgage term remaining and what rates they have locked in for those terms.
Also, have to look at the rent escalations built into their lease contracts to determine their ability to pass on the costs.

In the last few weeks, there have been a few REITs that issued 5 year convertible debt instead of equity to fund their operations and acquisitions.

I'd say Canadian REITs are going to be neutral for the next 2 to 3 years time frame - there won't be too many distribution hikes, or any capital appreciation.
There could also be M&A.
The 10 yr. rate is at 3.02% this morning. If that gets around the 5% range, then yes, some REITs will start to experience heat under their seats.


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## andrewf (Mar 1, 2010)

You don't need people to short a stock for the price to fall. And share prices are entirely about expectations about the future, not current operating results. It does not matter that current financial reports do not show a rise in rates--the market is expecting that to happen in the future.


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## investordude (Dec 14, 2012)

man my ZRE EFT is getting hammered. Thinking of selling and buying into it later...


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## Homerhomer (Oct 18, 2010)

investordude said:


> man my ZRE EFT is getting hammered. Thinking of selling and buying into it later...


Do you really think that selling at 52 week low is a good idea? How can you be sure that you will be buying them cheaper later on?

I just added to Riocan this morning, bought Dundee Reit couple of weeks ago. If they continue to go down I will be adding if I have cash available, their distributions are safe and I am happy to collect 5-7% while I sit on them.


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## daddybigbucks (Jan 30, 2011)

doctrine said:


> . Some REITs have been raising distributions still (Northern Property yesterday).


AND they are initiating stock buyback plans (Northern property as well) but they are doing it with company money. I dont see any insider buying for the last couple months.

i'm kinda torn on the REIT. I would love to have alot but not sure how deep they will fall, so ill just keep limping in every couple weeks.


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## physik3r (Sep 10, 2012)

What are people's thoughts on some exposure to american REIT? eg. VNQ

Things are looking fairly rosy down there and it doesn't sound like interest rates are going anywhere in the near future..


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## HaroldCrump (Jun 10, 2009)

physik3r said:


> Things are looking fairly rosy down there and it doesn't sound like interest rates are going anywhere in the near future..


It is not the overnight rate set by the Fed that matters.
It is the long bond rates (the 10 year and 30 year) rates that matter.
Both for the mortgage cost of the REIT, as well as the relative valuation of the REIT units in the market.


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## Jungle (Feb 17, 2010)

Been watching reits, have not started a position yet but I know this could be a falling knife for a bit now.


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## james4beach (Nov 15, 2012)

REITs in both USA and Canada are overvalued, in my opinion. They've been bid up over several years in a pseudo-bond trade, with declining interest rates (I'm looking at the 10 year bond yield).

So far interest rates as a % change, are up a whopping 60% this year. If this keeps going like this, I think REITs will fall a lot. Again this is largely because they have been purchased as a bond-like investment in a declining interest rate environment.


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## daddybigbucks (Jan 30, 2011)

james4beach said:


> REITs in both USA and Canada are overvalued, in my opinion. They've been bid up over several years in a pseudo-bond trade, with declining interest rates (I'm looking at the 10 year bond yield).
> 
> So far interest rates as a % change, are up a whopping 60% this year. If this keeps going like this, I think REITs will fall a lot. Again this is largely because they have been purchased as a bond-like investment in a declining interest rate environment.


true, but i would think their contracts would be preventative about this or they will just raise rates.


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## fatcat (Nov 11, 2009)

i can't remember where i read it but it was an article about bay street being at a loss over the big selloff in reits and one of the explanations was that it was largely a retail product and this was susceptible to the big mo (i.e momentum or perhaps mass hysteria)

i feel like there is so much conviction of rates rising that fear will put more downward pressure on reits

i am exiting to sit on the sidelines on this one for awhile


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## My Own Advisor (Sep 24, 2012)

Can't REITs hike their their rents (when rates rise)?


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## HaroldCrump (Jun 10, 2009)

My Own Advisor said:


> Can't REITs hike their their rents (when rates rise)?


Some can, some can't.
It depends on the lease agreement, not so much the REIT.
All/most REITs will have properties with various rate escalation terms, such as automatic % increases, increases pegged to the CPI, fixed rents for a term (say 5 yrs.), etc.


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## Synergy (Mar 18, 2013)

My Own Advisor said:


> Can't REITs hike their their rents (when rates rise)?


As long as rates rise modestly / slowly over time REITs can theoretically offset higher interest rates with higher rents, but they have to wait until the leases roll-over. Each REIT will then be effected somewhat differently by rising rates...

So far I've seen a significant correction in REIT's and no sign of a rebound despite strong Q2's and some of the companies continuing to raise dividends. The fear of interest rates continuing to rise is not going away any time soon so I'm having a hard time seeing how the REIT market will be able to turn things around in the near term. If you have the money and space within your accounts, averaging down may be a viable option. Personally, I'd rather not increase my weighting in REIT's above 7-8% of my portfolio so I'll wait and see....


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## My Own Advisor (Sep 24, 2012)

I'm keeping my weight in REITs the same, not buying anything new. I have enough REI.UN, HR.UN and XRE. I would like to increase my position in BPO though.


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## andrewf (Mar 1, 2010)

Rents are determined by supply and demand for space, which is only loosing influenced by rates. So higher rates do not necessarily mean higher rents. It tends to mean lower property values (due to higher discount rate applied to future rents).


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## Synergy (Mar 18, 2013)

andrewf said:


> Rents are determined by supply and demand for space, which is only loosing influenced by rates. So higher rates do not necessarily mean higher rents. It tends to mean lower property values (due to higher discount rate applied to future rents).


I agree, there's no guarantee that landlords will be able to raise rents to keep up with rising rates. However, if the economy is improving (potential for demand to increase) and supply (new construction) doesn't increase significantly, rents could theoretically keep pace with raising rates, inflation, etc. 

I don't think I really understand how property values will be negatively affected in a rising rate environment...?


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## HaroldCrump (Jun 10, 2009)

Do not automatically assume that rising bond yields (not the overnight rate) by default implies improving business conditions, and thus higher demand for office/commercial/industrial rental space.
Bond yields can rise for several reasons, incl. central bank machinations...err, I mean "policy".
It is possible for yields to tick higher while demand for commercial space falls.

Also, interest rates are global (i.e. bond yields are relative to the currencies) but real estate demand is local to a country/sector.


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> Do not automatically assume that rising bond yields (not the overnight rate) by default implies improving business conditions, and thus higher demand for office/commercial/industrial rental space.
> Bond yields can rise for several reasons, incl. central bank machinations...err, I mean "policy".
> It is possible for yields to tick higher while demand for commercial space falls.
> 
> Also, interest rates are global (i.e. bond yields are relative to the currencies) but real estate demand is local to a country/sector.


+1 from me ... it seems to me that this makes reit's hard to value


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## andrewf (Mar 1, 2010)

A piece of property is theoretically worth the present value of implied rent. As discount rates (aka interest rates) rise, the present value of rents declines. That's the theory anyway.

I agree that it's a mistake to assume that rising rates implies a strong economy.


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## Synergy (Mar 18, 2013)

andrewf said:


> A piece of property is theoretically worth the present value of implied rent. As discount rates (aka interest rates) rise, the present value of rents declines. That's the theory anyway.
> 
> I agree that it's a mistake to assume that rising rates implies a strong economy.


That makes sense, thanks for clarifying. I didn't mean to imply that rising rates ='s a strong economy. I just felt that an improving economy would likely benefit REIT's in the long run...even if rates slowly creep up. In the short term we are however seeing how REIT's can be negatively impacted by rising bond yields...


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## Eclectic12 (Oct 20, 2010)

Synergy said:


> ... I just felt that an improving economy would likely benefit REIT's in the long run...even if rates slowly creep up. In the short term we are however seeing how REIT's can be negatively impacted by rising bond yields...


The trick is what is driving the interest rate and what is the impact on the business that is paying the rent.

If the business locked in for ten years plus and is a Walmart that can adjust (i.e. squeese suppliers), they are probably not going anywhere, short of some drastic, area-wide impact (think GM going bankrupt & an oversupply of Walmarts in Windsor as a hypothetical example or maybe a mining town that Walmart just built in & the mine closes).

If the business is a joe schmo local optician who's been running at a loss for a while, at some point - paying the penalty to break the rental agreement and move (or go bankrupt) might happen anyway.


Cheers


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## Spidey (May 11, 2009)

Sure REIT's have gained in value over the last few years and it may be natural for some to take profits. But if you look at the long term charts, many REITs are at approximately the same value as they were in 2006. Most economists agree that there will be further interest rate increases but most also agree that they will be muted - perhaps in the range of a quarter percent to a half percent annually for the next couple of years. The prime rate is currently around 3%. Prime rate in 2006 was about 5.75% (ranged 5.25%-6%). Many REITs have had dividend increases since 2006 so based on a price/CF basis they are currently trading at a discount to what they were trading at 7 years ago. And to top it off, interest rates are increasing due to a strengthening economy - which should mean more people shopping at shopping centers, increased demand for office space and stability in residential rentals.


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## doctrine (Sep 30, 2011)

A lot of REITs are trading below book value. You could argue that book value would decline if interest rates went through the roof, although I think the odds of that are low. I think the 20% correction is an opportunity to rebalance back to your REIT/real estate weighting, although not time to back the truck up like in 2009; that is another 20% lower, and there would be REITs with 10% yields at that point; even RioCan would be above 7%.


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## james4beach (Nov 15, 2012)

While I'm fundamentally bearish on REITs I acknowledge (as doctrine) says that if someone wants REIT exposure in their portfolio they could use this opportunity to rebalance.

As I wrote in this post earlier I think that if someone has to buy something then you might as well buy when out of favour rather than when super popular.

Today this would point you to the following out-of-favour sectors: bonds, precious metals & miners, utilities, REITs, emerging markets. Personally I am adding to my bonds allocation.

Again just clarifying, I won't be buying REITs because I don't "have to" buy them and I don't want them at these prices.


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## Oldroe (Sep 18, 2009)

I bought in the 2009 crash. Sell not likely I own 1 square inch of the most expensive real estate in every city/town in Canada. I spent my distributions bank stock.

Never one to stick my head in sand.


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## HaroldCrump (Jun 10, 2009)

Why are you talking like Master Yoda?


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## liquidfinance (Jan 28, 2011)

Dundee yielding almost 8% now. Some juicy yields. Just where will the sell of take us?


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## Eder (Feb 16, 2011)

I'm thinking (actually hoping) we get deals by end of September...I'm waiting for $20 RioCan....$15 First Capital Realty...I think I won't buy more HR though. (I already own all 3 REIT's for years and won't sell)


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## mrPPincer (Nov 21, 2011)

Rebalanced reit allocation last thursday, picked up a little more di.un, I fully expect we'll see better prices going forward, but any future reit money will go into more mainsteam products; I have as much as I care to risk in that one now (375 shares plus drips).


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## Cal (Jun 17, 2009)

I wish these valuations were here in January, then I could add more REI.UN units to my TFSA.


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## snowbeavers (Mar 19, 2013)

Rebalanced REITs yesterday and enjoying the discounted rate. Hoping it continues to fall so I can buy more!


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## liquidfinance (Jan 28, 2011)

Cal said:


> I wish these valuations were here in January, then I could add more REI.UN units to my TFSA.


Fingers crossed they will be here for January. Maybe another 20% discount for the january Sales each::chuncky:


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## Oldroe (Sep 18, 2009)

Stick your head in sand is bonds.


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## dime (Jun 20, 2013)

Reits look oversold for a few reasons. In the latest Canaccord REIT review, the average is 11.7% discount to NAV. They give an average forecast total return of 22%. 

The average yield is 6% -- about what you'd get from US high yield corporate credit ETFs with the same duration and yield. But those have higher credit risk with BB or lower credit rating. But the REITS are mostly rated rated investment grade at BBB or better. 

REITS being rate sensitive will perform somewhat like bonds. I saw on the the Canaccord Reit review there is a column for REIT debt at the average rate % and "Weighted Average Years to Maturity". The average is around 5 years. Perhaps an investment guru on the forum could tell us if this means a REIT ETF might have an effective duration of 5 years, similar to a bond ETF that might have an effective duration of 5 years?


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## andrewf (Mar 1, 2010)

Not a bond guru, but REITs are _short_ bonds (like being short BBB corporate bond fund with 5 year duration). The reason why they behave a bit like bonds is that rents are a stream of payments, a bit like bonds. Because they're levered, it's like a bond portfolio harvesting a spread between riskier bonds and what they can borrow at.


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## Oldroe (Sep 18, 2009)

Yes I understand bonds. And in a financial crisis they are just as useless as any other investment.


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## sylyconvalley (Apr 22, 2013)

hmmm.
i would not know what to do with an REIT but u guys are definitely catching my attn.

the usual stuff for me .... not going to hold ... at all.
looking for some very odd ones in the American mkt.
stay tuned.
would like an opinion if i actually venture a trade in this brand new arena for me.
as always GL


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## HaroldCrump (Jun 10, 2009)

SV, there are many types of REITs.
Basically as many types of REITs as there are types of real estate properties.
Office buildings, shopping malls, industrial complexes, residential apartments, SFH housing, even toll roads, bridges, shipyards, etc.

The US has obviously many more types of real estate securities than Canada does.
But, at the same time, there is a lot more "financial engineering" going on in the US as well.
i.e. companies playing games with yield spreads, over leveraging, securitizing rent rolls, etc.
So you have to be _more_ careful in the US market than in Canada.

At this time, given what is going on with bond yields, if you do want to get into REITs, I suggest only high quality, large cap, diversified REITs like RioCan, Dundee, Brookfield Asset Management, BPO, and a few others.
Pref. in the residential apartments or office buildings sector.

But if you are not going to hold, then there is no point in buying REITs, really.
REITs are not exactly day trading securities.

If you want to play the direction of bond yields, I am sure there are other ways....


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## sylyconvalley (Apr 22, 2013)

HaroldCrump said:


> SV, there are many types of REITs.
> Basically as many types of REITs as there are types of real estate properties.
> Office buildings, shopping malls, industrial complexes, residential apartments, SFH housing, even toll roads, bridges, shipyards, etc.
> 
> ...



thks for the explanation Harold.
by the way on the other thread about inflation , i actually DO agree with ya that inflation is here.
it is not in the books.
my bad.
cheers mate.


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## My Own Advisor (Sep 24, 2012)

"Yes I understand bonds. And in a financial crisis they are just as useless as any other investment."

Good comment.


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## donald (Apr 18, 2011)

Look @ ACC in the us space(i own it)strong company,they own high quality student housing across america-campus(largest player in the arena and growing,solid balance sheet and a attractive yield)It has come down quite a bit and i *think* it is attractive at these levels.
Parents don't scrimp on the education of there children and student housing is included in this,i think they have a competitive advantage and i like the niche sector of real-estate they are involved in.Play on both real-estate and american universities.


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## sylyconvalley (Apr 22, 2013)

HaroldCrump said:


> SV, there are many types of REITs.
> Basically as many types of REITs as there are types of real estate properties.
> Office buildings, shopping malls, industrial complexes, residential apartments, SFH housing, even toll roads, bridges, shipyards, etc.
> 
> ...


Harold.
what do u think of ARR?
about to make a move.. not short term... maybe 2-3 months.
TIA


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## HaroldCrump (Jun 10, 2009)

sylyconvalley said:


> Harold.
> what do u think of ARR?
> about to make a move.. not short term... maybe 2-3 months.
> TIA


ARR does not hold any properties at all.
They are a financial engineering firm, making money by borrowing short and lending long.
I suppose they still qualify as a REIT, but they are not operating the usual REIT business.

Are you considering them as a play on the rising yield curve? i.e. ZIRP short term rates and rising long term rates in the bond market?
That phenomenon should benefit firms like ARR.

I buy REITs for the income, not for short term interest rate arbitrage.

Also, you should probably look into their financials a little bit.
A 21% yield is rather, umm, _unusual_, shall we say.

They have cut their distributions 30% this year.
They have been cutting distributions by about 10% every 3 months this year.
Caution is warranted, I'd say.

If you want to play the rising bond yields, why not just buy an inverse 10 yr. or 30 yr. bond ETF?


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## sylyconvalley (Apr 22, 2013)

HaroldCrump said:


> ARR does not hold any properties at all.
> They are a financial engineering firm, making money by borrowing short and lending long.
> I suppose they still qualify as a REIT, but they are not operating the usual REIT business.
> 
> ...




thank you for the insight HC.
If i go in will be a spec play for sure.
i am watching how those things trade online.
nevertheless thks for the quick lesson on REIT'S:encouragement:
by the way a Brazilian builder is getting oversold.
GFA
spec play also


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## Cal (Jun 17, 2009)

http://www.theglobeandmail.com/glob...ising-reit-returns-evaporate/article13770135/


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## liquidfinance (Jan 28, 2011)

The sale continues.


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## daddybigbucks (Jan 30, 2011)

Cal said:


> http://www.theglobeandmail.com/glob...ising-reit-returns-evaporate/article13770135/


That seems to be the prevailing opinion.
I see interest rates starting to rise, then (as usual) some calamity happens and they need to stimulate spending so they drop the interest rates again.
Banks have found a way to make money even without interest rates.

I'm not going to look this gift horse in the mouth.

ps. I really wonder what happened during the Trudeau years that made the interest rates go up to 18%!


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## sags (May 15, 2010)

daddybigbucks said:


> I really wonder what happened during the Trudeau years that made the interest rates go up to 18%!


If I remember correctly, rampant government spending created raging inflation. Interest rates went up, wages went up.......and wage and price controls were introduced.

Today we have the rampant government spending, but there is no inflation.........at least officially.

It seems a corner was turned somewhere....so government printing has no ill affects..other than increasing asset wealth for the wealthy.


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## fraser (May 15, 2010)

We saw homes for sale with mortgages as high as 21.5 during that period. We bought a home in Vancouver when the rates were 17.75 and decreasing rapidly. It seems that we have the opposite today.


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## james4beach (Nov 15, 2012)

daddybigbucks said:


> then (as usual) some calamity happens and they need to stimulate spending so they drop the interest rates again.


Central banks control the overnight policy rate, but they can't directly control bond interest rates. They try to (Federal Reserve does this with QE) but they can not directly control those rates.

It's possible for instance for the Bank of Canada to cut rates, yet bond and mortgage rates could keep going higher.


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## Synergy (Mar 18, 2013)

liquidfinance said:


> The sale continues.


For what it's worth, Andy Nasr (Portfolio Manager at Middlefield Capital) on BNN last night suggested that there may be another 5-10% downside before the sector (REIT's) reach a "bottom".


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## AltaRed (Jun 8, 2009)

Synergy said:


> For what it's worth, Andy Nasr (Portfolio Manager at Middlefield Capital) on BNN last night suggested that there may be another 5-10% downside before the sector (REIT's) reach a "bottom".


I could see another 10% as being highly probable, not might be. It could be more over the next 2 years depending on how fast and how far bond yields go up. And that does not assume another financial crisis (look at some 5 and 10 year charts of REITs, HR.UN and REI.UN for example). I would like to increase my REIT exposure too, but I think that will sometime next year.


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## Synergy (Mar 18, 2013)

Anyone else think we may have seen a bottom in the REIT markets, at least for now?? - Thanks to the Feds...


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## blin10 (Jun 27, 2011)

for now I think so, but who knows long term... i unloaded some shares today that i picked up right at the lows just to be safe, still got a ton left


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## fatcat (Nov 11, 2009)

i dipped my toe in with a little FCR
who knows when any bottom has been reached but i think the interest rate shock is ebbing
and it looks like we are going to go sideways for quite a while so yield is good

i was hoping to get some usa consumer staples with a pullback of qe but they are holding up very strong


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## Hawkdog (Oct 26, 2012)

Damn, i was trying to get a few XRE shares at $15 this week, missed that boat.
Nice move by TPH this week.


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## mrPPincer (Nov 21, 2011)

I took a profit on some of my VNQ today while it was up.
Bought some more VWO while it was down.

My allocation in the interest rate sensitive stocks (including utitlities) has been making me nervous lately.
I decided to lump my existing Emera in with my reits & lower the total allocation back to 10% (including EMA) before the euphoria wears off and people start to remember that rates have to go up sooner or later.

Also raised emerging mkt allocation from 5% to 7% and lowered the european exposure a bit in selling some e-series


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## daddybigbucks (Jan 30, 2011)

I'm not ready to take profits yet.
I have gained 15% on my REIT since buying a couple months ago, but i think they can reach 2012 highs again.

After 2009-2012 rise, i vowed to start accumulating REIT whenever there was a drop.

I think the only thing that can really hurt the REIT is a housing price correction (which alot of people say we are due for).
But i think there should be warning signs if that is going to happen. (ie steadily climbing interest rates)


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## My Own Advisor (Sep 24, 2012)

Tempted to buy some O:US for RRSP. Price seems good.


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