# Bad time to add REITs?



## lewin (Jan 10, 2011)

Hi all,

I'm thinking about shifting my asset allocation and thought I would put it to the crowd of experts here. Context: My wife and I are in our late 20's with stable employment.

In our long term portfolio we have:

40% Canadian equity
20% US Equity
20% International
20% Canadian bonds

For a while I have been thinking of trimming the Canadian equity to 30% and replacing that with 10% REITs (ZRE or XRE). We don't own a house so we have no other real estate exposure. I'm making our big annual purchase this week so it's decision time. 

My concern is that REITs had a 15% run up last year while equities dropped almost 10%. So my gut says buying REITs now is probably chasing performance. I'm not usually a big believer in timing the market but the huge difference in last year's performance gives me pause. I can make the shift completely with new money, so it's not like I'm selling low... but it feels like I might be buying high.

Any thoughts are appreciated.


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## jamesbe (May 8, 2010)

I made huge gains on my REITS last year so although I'm no expert I agree with your analysis they may just be near the top.


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## Square Root (Jan 30, 2010)

i would agree that they may be near a mid term peak.


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## jamesbe (May 8, 2010)

Or not LOL. D.UN up 2.3% right now -- could have made a quick buck from yesterday.


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## Eder (Feb 16, 2011)

Last year at about this time the consensus was most REIT's were overvalued after large gains during 2010.


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## DavidJD (Sep 27, 2009)

What about the yield? Even if they hold steady (which is not a bad thing at times!) you still collect a div and those can increase if the REIT Is doing so well.

If you plan to hold for a long time, timing the buy is somewhat important, but still a guess. 

I personally think they have some more to go and some offer discounted DRIPS. 

I call this 'turbo compounding' and is quite enjoyable seeing 3-5% discount on your new units, which increase your dividend then next month, which increase the number of units, which...


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## Mandor (Jan 4, 2012)

I'm on the same boat. 20k sitting as cash in TFSA waiting to jump on REITS when I see a little spike down. That doesnt seem to be happening though.

But what else to put in TFSA? Bond yields are nonsense, HISA not better, GIC rates ridiculous. Might as well leave it in cash for faster reaction time to catch that spike when it happens, if it ever does.


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## jamesbe (May 8, 2010)

You could wait forever. May as well jump in at some point. I didn't over think it in August and my $20k is now $22k... I lost on some and won on some.


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## Spudd (Oct 11, 2011)

Not all of them are at their tops. I bought some INN.UN in late November. It's down about 50% from its 52-week high. Its current yield is 8.5% and it's been kicking *** over the past couple of days.


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## doctrine (Sep 30, 2011)

You can't predict the future. Add 10% REITs. They are somewhat uncorrelated to the rest of the market. Perhaps everything will tread water and you'll collect the distributions. Perhaps equities will go up and REITs will go down. Then you can enjoy your equity gains, and add more to the REITs, because eventually they will have a chance to go up.


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## Eder (Feb 16, 2011)

Spudd said:


> Not all of them are at their tops. I bought some INN.UN in late November. It's down about 50% from its 52-week high. Its current yield is 8.5% and it's been kicking *** over the past couple of days.


Its none of my business but I sold this one 6 months ago...it's pretty scary even though the touts like it.


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## Spudd (Oct 11, 2011)

I'm keeping an eye on it, I won't let it drop below my stop point. But so far so good!


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## Ihatetaxes (May 5, 2010)

lewin said:


> Hi all,
> 
> I'm thinking about shifting my asset allocation and thought I would put it to the crowd of experts here. Context: My wife and I are in our late 20's with stable employment.
> 
> ...


I'm just impressed someone in their late 20's has their act together enough to be thinking this way and investing this way! Kudos!

I am looking for more REITs and had a bid in yesterday on adding more REI that wasn't filled as my price target was too low. Maybe in the next few days though.


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## gibor365 (Apr 1, 2011)

Ihatetaxes said:


> I'm just impressed someone in their late 20's has their act together enough to be thinking this way and investing this way! Kudos!
> 
> I am looking for more REITs and had a bid in yesterday on adding more REI that wasn't filled as my price target was too low. Maybe in the next few days though.


I'm trying on small dips to add REIT ETFs: ZRE(equal weight) and XRE (capped).


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## londoncalling (Sep 17, 2011)

Eder said:


> Its none of my business but I sold this one 6 months ago...it's pretty scary even though the touts like it.


I own INN.UN.TO. Sadly I bought it about a month or two before the changes to stapled units. I recently averaged down in the last couple of months in hopes that seasonality will give it a boost. If this happens I will scale back my position. If not I will hold it for a longer time frame and collect distributions. Like other trusts that had to convert to corps their share price took a year or two to recover. I can afford to wait as that news has already been priced in as well as the cut to distributions. I guess we'll see. As a result of owning INN my returns on REITs was pulled down into the negatives. Sadly I also own EXE which got beat down with gov't interference in US revenues for this company. REITs currently make up about 18% of my equity portfolio. I also have holdings in Crombie, Riocan and Dundee. I am definitely overweighted in this regard but typically use dividends, distributions and new money to rebalance so I won't be selling for the sake of rebalancing. I would like to see this number back to around 12% over the next year preferably from gains in other positions and not a downwards movement in REITS


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## Mall Guy (Sep 14, 2011)

OP - you might be looking at REITs after their nice little run (so dollar average into them), but if you stick to the quality names you are not chasing performance. Quality Canadian REITs are fundamentally in good shape . . . none of the "extended and pretend" financing that was/is going on in the U.S. sector. ZRE yields 6%, REI yields 5.25%, D.UN at 6.6% . . . solid . . . none of the big names cut their distribution during the 2008 financial meltdown (don't know what to say about INN . . . leading or lagging indicator . . . but they weren't getting rewarded for the yield, plus government interference, and are putting the money back into their properties . . . talk of being taken private???).

I am heavy weighted in REITs, and like the names that own the grocery anchored shopping centres . . . banks, booze and drug store . . . people gotta eat !


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## gibor365 (Apr 1, 2011)

Mall Guy said:


> I am heavy weighted in REITs, and like the names that own the grocery anchored shopping centres . . . banks, booze and drug store . . . people gotta eat !


The problem with individual REIT stock, that I like about 10-12 of them , but cannot buy all of them, this is why I mostly invest in all banch of them via XRE and mostly ZRE (even thoigh I have small position in PMZ.UN)


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## Mall Guy (Sep 14, 2011)

Yup, I get that, not saying either EFT is bad, just saying stay away from the sub-grades (chasing yield) . . . and you can put your own XRE together in a couple of trades, add as you like, or keep it simple . . . I'm comfortable owning the names . . . probably like XRE better then ZRE . . . but that's because of a couple of the holdings in Z (pretty small %, and others like those names) . . . both good. Real estate offers wealth creation and inflation protection, just ask the richest people in Canada (the US, Hong Kong, China, etc.)


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## lewin (Jan 10, 2011)

Ihatetaxes said:


> I'm just impressed someone in their late 20's has their act together enough to be thinking this way and investing this way! Kudos!


Thanks! Our portfolio is small but I love learning about this stuff, to the point that it distracts me from my real job. I thank my lucky stars that I came across so much DIY stuff (e.g., here and at the couch potato site) early in our savings career, and not down the road after giving 3% to Investors Group for thirty years.


...thanks everybody, you've all been so helpful. REIT's might be at a high value now but these reasons convince me to go ahead: (1) I have been meaning to add a REIT component for a year now; (2) if I wait it could mean waiting forever; (3) even if there are few capital gains, there are good distributions; and (4) the reduced correlation with other asset classes was the reason I've intended to buy these in the first place.


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## SW20 MR2 (Dec 18, 2010)

What is the optimal way to hold the REIT ETFs? I know that it's best to hold individual REITs in registered accounts, but does this apply to the ETFs as well?


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## HaroldCrump (Jun 10, 2009)

SW20 MR2 said:


> What is the optimal way to hold the REIT ETFs? I know that it's best to hold individual REITs in registered accounts, but does this apply to the ETFs as well?


Yes


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## gibor365 (Apr 1, 2011)

lewin said:


> Thanks! Our portfolio is small but I love learning about this stuff, to the point that it distracts me from my real job. I thank my lucky stars that I came across so much DIY stuff (e.g., here and at the couch potato site) early in our savings career, and not down the road after giving 3% to Investors Group for thirty years.
> 
> 
> ...thanks everybody, you've all been so helpful. REIT's might be at a high value now but these reasons convince me to go ahead: (1) I have been meaning to add a REIT component for a year now; (2) if I wait it could mean waiting forever; (3) even if there are few capital gains, there are good distributions; and (4) the reduced correlation with other asset classes was the reason I've intended to buy these in the first place.


You don't have to buy XRE or ZRE in one shot, but instead buy 1/3 of your intended money, than add more on dips.
I don't know size of your portfolio, but with $5-10 fees per trade you can buy in portions of couple of thousands


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## newbi (Aug 19, 2009)

hey guys, just wondering where can i find the dividend history for these REIT's? especially REI and XRE?

Thanks for any help


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## gibor365 (Apr 1, 2011)

newbi said:


> hey guys, just wondering where can i find the dividend history for these REIT's? especially REI and XRE?
> 
> Thanks for any help


Go to TWD and view chart for 5 or 10 years, select dividend as an indicator.
When you point mouse on 'D' you will see $ amt of every dividend


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## leoc2 (Dec 28, 2010)

gibor said:


> Go to TWD and view chart for 5 or 10 years, select dividend as an indicator.
> When you point mouse on 'D' you will see $ amt of every dividend


Google Finance Charts works the same way.


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## londoncalling (Sep 17, 2011)

Oddly enough INN jumped 9% today. I am sure it will lose some of those gains tomorrow but I do find the good news exciting. Time to check into why.


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## londoncalling (Sep 17, 2011)

I was unable to find anything that would indicate a reason for such a jump. Most of the buy volume today was by Scotia. Volume was above the daily average as well so that is good news. Does anybody else own this stock? I have notice a big push for REITs in general, and this stock also, as of late by analysts. If its just noise that's pushing it higher that's fine by me as long as it continues to climb.


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## jamesbe (May 8, 2010)

Wow did Dundee every shoot up the last few days!!


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## Mall Guy (Sep 14, 2011)

I own INN (and like many, am underwater - perhaps we should all get free room nights!). Happy to see it up, agree it will lose ground, but there doesn't seem to be any more talk of a further distribution cut. 

Most of the REITs rallied, I think in just got dragged along . . . hoping it keeps getting dragged . . . it's outside my area and I am just guilty of chasing a little yield . . . oh, and an analyst I know was pumping as a good point of entry . . . they are still long term bullish (with risk).

Maybe everyone could stay at their brands and we can get RevPAR up !


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## newbi (Aug 19, 2009)

gibor said:


> Go to TWD and view chart for 5 or 10 years, select dividend as an indicator.
> When you point mouse on 'D' you will see $ amt of every dividend


Thanks guys! this is very helpful


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## londoncalling (Sep 17, 2011)

An additional note to the recent climb of REITS in general. In regard to seasonality REITs are entering a period of strength.


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## doctrine (Sep 30, 2011)

A note of caution to all that REITs can and have adjusted downwards severely. Could drop 20% in a year quite easily. Like any other asset, only buy if the price is right. I'm a little nervous that most have seemed to jump up to 10% in the last month.


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## londoncalling (Sep 17, 2011)

Anybody hold or follow Morguard REIT? I know AFFO is a better metric than EPS for payout but I see an EPS of 2.09 with a div of 90 cents. A current P/E of 7.89 (forward 12.04) or P/CF12.36 is not unreasonable for a 5.5% yield relative to other yields. The P/B is sitting at 0.83. Are they over estimating their property values? Margins have grown the past 3 quarters. Shares outstanding are decreasing each year due to a buyback in 09. Still retained earnings (and EPS are in decline). They have increased their debt but as a result have increased their assets which I see as an ok move in this interest environment. With such a small payout ratio are the chances of an increase to distibrutions likely? What am I missing?


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## Financial Cents (Jul 22, 2010)

Personally, I wouldn't be buying large amounts of REITs right now. You're buying high.


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## yingxuy (Jan 18, 2012)

Today most of the purchases by the Nova Scotia. And higher than the average daily turnover is good news. Others do their own stock? I have noticed that for the average real estate investment trusts big push, this stock is also analyst post.


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## Jester23 (Jan 19, 2012)

rookie question, but how are you able to see who were the purchasers?


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## pwm (Jan 19, 2012)

*Not a bad time to buy REITs*

I just maxed out my TFSAs and bought $10,000 of ZRE. That takes my REIT holdings in all accounts to 4.4%, and I'll be taking that to around 6% when I buy some more XRE in my taxable account soon. I only hold XRE & ZRE, no individual REITs. It is a fact that they are at 52 week highs, but that does not concern me. I'm retired and living on my pensions and investment income, and I'm a buy and hold investor. With interest rates not going up for a long time, I think they will continue to prosper. I think everone should have a portion of their portfolio in REITs.


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## Mall Guy (Sep 14, 2011)

yingxuy said:


> Today most of the purchases by the Nova Scotia. And higher than the average daily turnover is good news. Others do their own stock? I have noticed that for the average real estate investment trusts big push, this stock is also analyst post.


Just curious, what Nova Scotia REITs are you referring to ?


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## Dmoney (Apr 28, 2011)

Mall Guy said:


> Just curious, what Nova Scotia REITs are you referring to ?


From that post *that's* what you're curious about? Couldn't decipher a word.

Could be Crombie or Killam possibly?


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## Mall Guy (Sep 14, 2011)

Dmoney said:


> From that post *that's* what you're curious about? Couldn't decipher a word.
> 
> Could be Crombie or Killam possibly?


'Aye bye' just trying to engage the new feller there in some conversation . . . they like that down east . . .


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## Dmoney (Apr 28, 2011)

Speaking of Nova Scotia, I'm interested in seeing who's going to buy scotia bank's HQ.


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## Mall Guy (Sep 14, 2011)

Dmoney said:


> Speaking of Nova Scotia, I'm interested in seeing who's going to buy scotia bank's HQ.


Best guess . . . bidding war between big pension, including international players in partnership with a CDN pension plan or maybe KingSett Capital, BPO, BOX.UN, etc. Either way, it will trade at an unprecedented cap rate . . . more aggressive than FCR purchase of Hazelton Lanes or Riocan/KingSett's purchase of the Yonge Sheppard Centre (speculation is it might trade around a mid to low 4% cap rate!). Can you say trophy property !!!

However, I must point out that the Bank of Nova Scotia's official head office is located in a historic building in Halifax. . . they simple do all the head office thingies in Toronto . . . _"Scotiabank began operating in Halifax, Nova Scotia in 1832. Now, more than 179 years later, with its head office in Halifax, and executive offices in Toronto, Ontario, the Bank is one of North America's premier financial institutions and Canada's most international bank"_.


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