# growth in REITS expected???



## xcaret (Feb 13, 2010)

I have been reading a little about REITS,I started thinking of income trust funds ,but with these having to change in Jan.2011 I don't like investing in them.I am wondering if theres any rush expected for investors to sell the income trusts shares and buy REITS. I have not seen any mention if it so far. It seems to me that with income trusts becoming corporations ,the alternative would be REITS. If this is the likley case ,then would this drive the price of REITS up? 
I'm new to this stuff .I'm a long term investor but have not bought anything for over 20 years ,just holding .I'm getting ready to retire and looking for better than the bank GIC's etc.
Neil


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## OptsyEagle (Nov 29, 2009)

_"It seems to me that with income trusts becoming corporations ,the alternative would be REITS. If this is the likley case ,then would this drive the price of REITS up?" _

This phenomenum, if it ever existed, would have been completed in 2006 and perhaps a little in 2007. The income trust tax is old news. Investors are forward thinkers and the new tax would have been calculated for each trust within weeks of the announcement and any new strategies would have been implemented around then.

If anything, you might find buying the income trusts to be more of the opportunity. To take advantage of all those retail investors, that have not learned this important lesson and have undervalued those businesses by not buying them in 2009 and 2010 (thinking in error, that they had more to fall from the tax news).


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## Sampson (Apr 3, 2009)

xcaret said:


> I am wondering if theres any rush expected for investors to sell the income trusts shares and buy REITS.


I think to a large extent, this has already happened.

Most income trusts took a very large hit after the initial announcement of the change in tax status, and have not recovered to pre-crash valuations as most other equities have.

And the run up in REITS over the past 8 months, despite depressed rental rates and increased vacancies - and in many people's opinions, slight over-valuation probably means many people have already flocked to REITS.

IMHO


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## Cal (Jun 17, 2009)

And alot of the income trusts that convert to corp's will still payout, just in the form of a dividend, instead of a distribution, although the payouts are to be determined, as they have until Jan. 1, 2011 to convert.


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## moneymusing (Apr 3, 2009)

It's amazing how many people will flock to REITs when they already have hundreds of thousands of dollars invested in the real estate market through their homes. 

Of course, we don't all see it that way, and REITs give you monthly income which is cool. I think that royalty trusts are also exempted from the new tax laws coming into effect. This might be another idea for those looking for income trust income but diversifying out of real estate.


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## Sampson (Apr 3, 2009)

moneymusing said:


> It's amazing how many people will flock to REITs when they already have hundreds of thousands of dollars invested in the real estate market through their homes.


While I'm certain most people don't think of it this way, and probably should, I'm not convinced that 'over-exposure' to real estate is a bad thing. Real estate appreciation (both value and rental income generation) has historically kept up with inflation, with bouts of significant appreciation (now).

Having exposure to an asset that is not eroded by inflation is one of the main reasons I don't hold 100% in fixed income, whether CDs or bonds. Knowing that my home value will earn something in-between my stocks and bonds is quite comforting.

Again, take this with a grain of slat, because everyone is talking bubble now anyway.


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## MoneyGal (Apr 24, 2009)

I do think of my real estate as a hedge against inflation, and nothing more. For my actual investing, I do mostly couch potato, with some allocation to oil and gas (because I am really comfortable in that sector). 

I said I don't want any more concentration in real estate: another way I could have said the same thing is "I am not satisfied with only hedging inflation."


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## Berubeland (Sep 6, 2009)

When you buy a REIT you are buying a piece of commercial real estate which is appraised and valued entirely differently then residential real estate. It also holds it's value a lot more then residential real estate. Many REIT's also own different kind of buildings in different geographic ares.

What you are saying is like saying that people should not own Ford stock because they already have a car.


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## MoneyGal (Apr 24, 2009)

Yeah. I don't only own my principal residence; I own other property as well.


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## jennifer22 (Jan 5, 2013)

REITS is good option because dividends are higher than those of common stocks and its also a long term investment and gives big profit if choose Properly. There are wide variety of REITs & we have to learn & choose best of them for maximum benefit.


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## Eclectic12 (Oct 20, 2010)

xcaret said:


> I have been reading a little about REITS,I started thinking of income trust funds ,but with these having to change in Jan.2011 I don't like investing in them.
> 
> I am wondering if there's any rush expected for investors to sell the income trusts shares and buy REITS. I have not seen any mention if it so far. It seems to me that with income trusts becoming corporations ,the alternative would be REITS. If this is the likley case ,then would this drive the price of REITS up? ...


You are overlooking a couple of things.

First - nothing is changing for a REIT so they aren't changing (ex. RioCan REI-UN). The ones that are changing weren't real estate - they were businesses like oil, restaurants, power generation etc.

Secondly - some trusts decided the change wasn't worth the cost, stayed a trust and are paying the new taxes (ex. Boston Pizza Royalties Income Fund BPF-UN) and are paying more taxes so that the cash distributions have reduced.

Third - shifting from a trust that converted to a corporation to a REIT just about always means changing the underlying business and the investor's assest allocations. For example, if one had money in PenGrowth Energy, shifts it to a REIT such as RioCan - that means the investor has moved from oil/gas into real estate business. 

Fourth - the changes were announced in 2006 so any big shifts have already happened as the institutions etc. have already made their plans and moved their money.

Fifth - when some investors discovered the bookkeeping that RoC requires, many were happy their trust converted to a corporation and the bookkeeping was not going to be required in future years.


The bottom line seems to me that less money than you are thinking was moved and it was done a long time ago so any effects have no since been priced into the REIT unit prices.


Cheers


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## Eclectic12 (Oct 20, 2010)

Cal said:


> And alot of the income trusts that convert to corp's will still payout, just in the form of a dividend, instead of a distribution, although the payouts are to be determined, as they have until Jan. 1, 2011 to convert.


I'm not sure this is true ... certainly the trusts had until Jan 1st, 2011 to convert before the new taxes kicked in.

However, there was at least one trust I recall in 2010 that was saying they planned to use up their tax pools first and then convert sometime in 2014. Since I don't own it, I haven't checked to see if that's still the plan.


Cheers


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## zylon (Oct 27, 2010)

What the hell
am I in a time warp?


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## Eclectic12 (Oct 20, 2010)

jennifer22 said:


> REITS is good option because dividends are higher than those of common stocks and its also a long term investment and gives big profit if choose Properly. There are wide variety of REITs & we have to learn & choose best of them for maximum benefit.


Actually, REITs pay cash distributions made up of many different types of income, dividends may be one of them. The key thing is that most pay Return of Capital (RoC) which reduces the Adjusted Cost Base (ACB), where if the ACB falls negative, the RoC portion is reported as a capital gain in that tax year (even though the units have not been sold).

Some investors prefer to hold REITs in their RRSP or TFSA so that they don't have to keep up with the bookkeeping.

Here is a Globe & Mail article or you can check out the CMF taxation section:
http://www.theglobeandmail.com/glob...our-head-around-reit-taxation/article5575073/


As a side note - some ETFs and Mutual Funds also pay RoC so there's more areas to watch out for the bookkeeping. 

Cheers


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## doctrine (Sep 30, 2011)

The income trust issue has already been well sorted out. That being said, REITs are incredibly popular and that has pushed down the yields considerably. RioCan has just a 5% yield, and it's primarily RoC and interest income, making it less ideal for taxable accounts. There are some smaller REITs with more typical yields in the 7-8% range but you do take more risk. 5% is hardly an unusually high yield, showing you how popular REITs are. RioCan is so popular that its payout ratio is higher than 100%, giving it an effective price to cash flow greater than 20; it's paying out everything and you still can only get a 5% yield.


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## Eclectic12 (Oct 20, 2010)

Aren't we all in a time warp? :chuncky:


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## Eclectic12 (Oct 20, 2010)

doctrine said:


> The income trust issue has already been well sorted out. That being said, REITs are incredibly popular and that has pushed down the yields considerably. RioCan has just a 5% yield, and it's primarily RoC and interest income, making it less ideal for taxable accounts...


True ... though with more people paying attention to the OAC clawbacks, some are looking for more RoC to be paid to minimise the effect on OAS.


Cheers


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## zylon (Oct 27, 2010)

Eclectic12 said:


> Aren't we all in a time warp? :chuncky:


Haha! yup, that would explain a few things;
belguy's time-piece being frozen, for one. :hopelessness:


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## HaroldCrump (Jun 10, 2009)

Guys, jennifer22 replied to a thread from over 2 years ago.
Last post was Feb 2010.
So yes, this is a time warp.


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## andrewf (Mar 1, 2010)

doctrine said:


> The income trust issue has already been well sorted out. That being said, REITs are incredibly popular and that has pushed down the yields considerably. RioCan has just a 5% yield, and it's primarily RoC and interest income, making it less ideal for taxable accounts. There are some smaller REITs with more typical yields in the 7-8% range but you do take more risk. 5% is hardly an unusually high yield, showing you how popular REITs are. RioCan is so popular that its payout ratio is higher than 100%, giving it an effective price to cash flow greater than 20; it's paying out everything and you still can only get a 5% yield.


Yes, REITs are getting pretty richly valued.


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## namelessone (Sep 28, 2012)

jennifer22 said:


> REITS is good option because dividends are higher than those of common stocks and its also a long term investment and gives big profit if choose Properly. There are wide variety of REITs & we have to learn & choose best of them for maximum benefit.



5% yield +3% growth = 8% return. Hardly big profits.


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## fatcat (Nov 11, 2009)

don't forget that reit's should also act a fairly good inflation hedges
especially apartment and residential reits 
that's one of the reasons i like them as well
i have riocan among others and as the article says, they make taxes fairly easy to get through


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## Eclectic12 (Oct 20, 2010)

^^^^

Once you are used to it and have a good system in place, it's not as bad as it first seems. It is tedious but not bad.

Where it can be a nightmare (which happened to me) is where you are not aware, the info needed becomes difficult to find due to buyouts, mergers etc. and several year's worth need to be done quickly as you've just sold.


Cheers


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## Belguy (May 24, 2010)

Here are some emerging market plays using Mapletree REIT's.

http://www.mapletree.com.sg/Our-Business/Capital-Management-and-Investment/REITs.aspx

Any thoughts?


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## HaroldCrump (Jun 10, 2009)

How do you plan to buy these tickers, Belguy?
These are all listed on the Singapore Exchange


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## humble_pie (Jun 7, 2009)

from his tiny carpet

you know, the one he takes out from under his bed now & then so he can fly away w Alice

it's a small antique persian something like my avatar


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## Belguy (May 24, 2010)

Why can't we buy stocks listed on the Singapore exchange if we can buy stocks listed on other exchanges such as the NYSE etc.?:confused2::confused2:


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## liquidfinance (Jan 28, 2011)

You can buy through TD

Not cheap though at $99 per trade. :eek2:

http://www.tdwaterhouse.ca/products...ing/commissions-fees/index.jsp#global-trading


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## gibor365 (Apr 1, 2011)

What your portfolio allocation to REIT? Mine is about 7% of the portfolio and planing to add from new TFSA contribution


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## gibor365 (Apr 1, 2011)

doctrine said:


> RioCan is so popular that its payout ratio is higher than 100%, giving it an effective price to cash flow greater than 20; it's paying out everything and you still can only get a 5% yield.


How did you get more than 100%? As per TDW REI.UN Div/Share $1.38 and EPS $3.88


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## andrewf (Mar 1, 2010)

EPS is irrelevant for REITs. You need to look at Funds From Operations, which is available in their financial statements.


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## gibor365 (Apr 1, 2011)

andrewf said:


> EPS is irrelevant for REITs. You need to look at Funds From Operations, which is available in their financial statements.


Do you know any link that will provide AFFO for all canadian REITs?


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## HaroldCrump (Jun 10, 2009)

gibor said:


> Do you know any link that will provide AFFO for all canadian REITs?


Every REIT's quarterly and annual earnings release contain that information.


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## mrPPincer (Nov 21, 2011)

gibor said:


> Do you know any link that will provide AFFO for all canadian REITs?


dunno if you use TDWH but their research tools provide all that info and more; that's what I used when I was deciding what reits to buy.


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## gibor365 (Apr 1, 2011)

Can you please explain how to calculate payout ratio using FFO?
For example for REI.UN FFO (sum of last 4 quarters) is 401,670 - (I couldn't find AFFO)
Outstanding shares 297.3M
Div/share 1.38
So, what will be payout ratio?


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## doctrine (Sep 30, 2011)

$401M in FFO divided by 297.3M shares = $1.35/share in FFO. With $1.38 in distributions, their payout ratio is 102%. Very expensive (price to ffo of 20) - especially for a company that doesn't grow cash flow per share that quickly. The last dividend hike was in 2008. What are people paying a multiple of 20 for?


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## andrewf (Mar 1, 2010)

In their financial statement they show FFO per unit, and distributions/FFO (essentially payout ratio).


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## HaroldCrump (Jun 10, 2009)

gibor said:


> Can you please explain how to calculate payout ratio using FFO?


Page 27 of the latest quarterly report at:
http://investor.riocan.com/files/documents_financial/2012/Q3/Q32012 MDNA_FINAL_v001_e78nfk.pdf


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## My Own Advisor (Sep 24, 2012)

REI.UN is expensive now, like most REITs. The time to buy was 2009. Loving the capital appreciation since then, and, dividends around 5%.


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## gibor365 (Apr 1, 2011)

found an article about canadian REITs
http://www.theglobeandmail.com/glob...eits-with-strong-safe-payouts/article4543392/

the most attractive looks INN.UN, but I'd be very scared to put money in it


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## gibor365 (Apr 1, 2011)

After brief look , my potential candidates: D, AX, CWT, HR . Need to check more financials.... I like dividend growth HR.UN ., they raise it by 4-5% every Q


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## gibor365 (Apr 1, 2011)

Checked data for D, AX, CWT, HR, CUF and it's practically the same , FFO payout ratio in range 90-98% , and price/ffo in 14-16


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## My Own Advisor (Sep 24, 2012)

HR.UN has been great for the last few years. I suspect as long as interest rates stay very low (like they are now), most REITs will continue to perform well.


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## Eder (Feb 16, 2011)

gibor said:


> Checked data for D, AX, CWT, HR, CUF and it's practically the same , FFO payout ratio in range 90-98% , and price/ffo in 14-16


If you check out the REIT's management it will help to make up your mind. Google/wiki etc is your friend here. I wouldn't trust analysis by BNN analysts...pretty much every stock in the TSX has a few TOP PICKS on it haha.


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## My Own Advisor (Sep 24, 2012)

Agreed, forget analysts...


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## gibor365 (Apr 1, 2011)

The cheapest right now are CUF, AX and HR. CUF and AX have better P/FFO about 14 and better FFO payout, also they have the highest yield. HR less yield, but increasing divi.
CUF got hit less hard than other REITs in 2007 meltdown. so, on my list: 1. CUF, 2.AX, 3. HR


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## leeder (Jan 28, 2012)

I bought some HR recently for my TFSA recently just because it look cheap in comparison to many of the other REITs. What do you guys think of Granite REIT? It converted into a REIT a week or so ago. I was really looking hard at this, but the price went up a tad higher than my liking. Otherwise, their numbers overall look fairly reasonable. Thoughts?


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