Managing REIT portfolio

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oppositeset
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Managing REIT portfolio

Post by oppositeset »

Hey guys

I have locked-in rrsp account which I'm not going to use for 23 years.

I'm going to invest all in mawer funds other then a small portion that I want to do hands on investing on.
Is it a good idea to use say 10% of account and invest in REITS myself. Mostly I will buy 5 REITs and just rebalance once a year. Is it a good idea ?
2of3aintbad
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Re: Managing REIT portfolio

Post by 2of3aintbad »

My spouse and I hold REITs in our RRSPs, but in anticipation of monthly income for minimum RRIF withdrawals soon. If you are 23 years from retirement, I'm not sure why you would want that monthly income now. I also do not try to pick just a few (5 in your case) but instead hold all the REITs in the ZRE ETF. There is no particular reason to think that REITs will be an outperforming sector over the next 23 years, but for us it does not matter since we are interested only in the income in the near future.

Having said that, individual REITs are volatile enough that they can be traded and sometimes are take over candidates, so you could do worse.
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AltaRed
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Re: Managing REIT portfolio

Post by AltaRed »

The REIT ETFs seem to have high(er) MERs than warranted so I'd suggest that if the OP is hung up on having REITs, pick 3-5 high quality ones with low payout ratios (% of AFFO) and relatively low leverage... and IMO, are not beholden to one major tenant (others will disagree). I'd also stay away from retail, office, recreational (hotel, resort) ones. Brick and mortar retail is being sorely tested, and both office and recreational are highly cyclic.

That said, I agree with the previous poster that I don't really think much of REITs pre-retirement. Why not just go 'all in' with Mawer? Or is there some testosterone at work making the OP have an itchy finger to do some trading??
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oppositeset
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Re: Managing REIT portfolio

Post by oppositeset »

AltaRed wrote: 09 Apr 2017 20:36 The REIT ETFs seem to have high(er) MERs than warranted so I'd suggest that if the OP is hung up on having REITs, pick 3-5 high quality ones with low payout ratios (% of AFFO) and relatively low leverage... and IMO, are not beholden to one major tenant (others will disagree). I'd also stay away from retail, office, recreational (hotel, resort) ones. Brick and mortar retail is being sorely tested, and both office and recreational are highly cyclic.

That said, I agree with the previous poster that I don't really think much of REITs pre-retirement. Why not just go 'all in' with Mawer? Or is there some testosterone at work making the OP have an itchy finger to do some trading??
Haha you got it my friend. It's the itchiness to login to my account and place a trade every now and then. If you look at historical returns of XRE, it has done really well.
I was thinking that if a REIT yields say 6% and it is reinvested you are pretty much consistently getting a 8-10 % return. Is my thinking flawed here ?
I was planning on buying Riocan, H&R, chartwell, pure industrial and Canadian apartment REIT to start
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Re: Managing REIT portfolio

Post by AltaRed »

I'd put REITs in the same range as the rest of the market, circa 6% norminal. Don't count on 6% yields for any length of time (for high quality REITs). I like your choices except RioCan and possibly H&R. Consider REF.UN as a 'conservative' alternative to take the place of both.
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Re: Managing REIT portfolio

Post by biggreydog »

Killam, Canadian Apartment, Northview Apartment and H&R are on my roster, expressing my personal bias toward the diverse apartment-based holders. I'm definitely shy of anything heavily mall-based given what would appear to be strong current trends against this asset class. Why fight the trend when the residential REITS are very strong in their own right.
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Re: Managing REIT portfolio

Post by oppositeset »

Thanks alot guys

Biggerydog do you hold any industrial REIT too or not ?
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Re: Managing REIT portfolio

Post by biggreydog »

No, I do not. I feel a strong bias to the residential sector at this time, with H&R in there for geographic and class diversity as they have a broad and very large portfolio that also pays us well.

The best apartment-based REITs pay us well, and are comparatively stable. In my view, everyone needs to live somewhere and purchasing in our two major "real estate crazy" cities is now out of reach. Apartments as an asset class are robust and in demand for purchase. I know the sector quite well on a personal investment level too. The REIT payouts are highly supportable in my opinion and their is opportunity for capital growth, but I not relying on it.
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Re: Managing REIT portfolio

Post by AltaRed »

I agree 'most' residential REITs are probably the most reliable and secure given everyone has to live somewhere. However, they are likely to underperform a bit as a sector since prices for 'doors' have been bid up by the players, i.e. cap rates have been declining and that has to affect ultimate returns.

That said, I also own AAR.UN and I think there is lots of room to run in this sector as more and more consumer goods are transacted online and (distribution) warehousing demand should continue to increase. They are to some degree the flip side of retail brick and mortar REITs.
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Re: Managing REIT portfolio

Post by 8Toretirement »

I hold REIT's prior to retirement for diversification and cash flow. I like to see cash in as many investments as possible as prices invariably go up and down. I don't hold a REIT ETF has many Canadian REIT's are carry too much debt and have high payout ratios which has increased the prevalence of using AFFO for the calculation of payout ratios. For this reason I don't like bad funds folded into the ETF's to increase yield.

In my view REIT's are currently expensive. I only hold two REIT's after scouring their books; CAR.UN and AAR.UN, but I wouldn't buy either at these levels.
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Re: Managing REIT portfolio

Post by Sumaco »

I generally like the REITs for the income stream which I reinvest in whatever is not in favour or vogue. I have several Canadian REIT's (REF.UN, BOX.UN, CAR.UN, CHP.UN, SUR.UN) and 2 USA in the healthcare space (Welltower & Ventas) adding up to about 8% of our portfolio. I was considering investing in a global REIT ETF either from iShares or Vanguard (the US listings) for diversification. As with most investments abroad the payments are highly variable on a quarterly basis but it gets me out of North America.

Bonds are pretty much generating less then GIC's these days which is why I am considering global real estate instead for the longer haul.
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Re: Managing REIT portfolio

Post by Hogwild »

Northview has finally started to pull out of its slump. Up from its recent low of $18.70, it hit $22.65 today, close to its price just before the merger/acquisition was announced. If oil stabilizes here, I think it has a little room to grow in terms of share price. Distribution yield is listed on TMXMoney as 7.233%. I've been holding since early 2015. Does anyone think that apartment REITs will find more success due to all the talk in the media about housing bubbles in TO and VAN?
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Re: Managing REIT portfolio

Post by biggreydog »

Yes, that's my take on it regarding the apartment REITs which could push them up. I am not looking for growth, I invest for income from a very large portfolio. However, I owned the REITS in early 2016 before the craziness went to the current level. I had this longer term thesis "for-residential" and "against-malls/other" two years ago and executed on it with the REIT portion of my portfolio.
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Re: Managing REIT portfolio

Post by Hogwild »

Interesting. I'm still holding some SmartREIT, and I keep wondering if/when there will be a big slowdown in retail malls due to online shopping. I know, I know...you will always want to look in person at certain items like cars, clothing and jewelry, but really, that's not much condolence.

As prices become more and more competitive online, how will bricks and mortar retail operations compete so well? They say they'll rent some of that space in malls etc. to other organizations (dental offices, amusement-type places, etc.) but think of the space per square foot? Research in the US is suggesting that malls are a dying breed.
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Re: Managing REIT portfolio

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The USA is the most retailed country in the world, in terms of sq ft per capita. Canada is a somewhat distant second, but well above most other developed countries. It stands to reason then that the USA retail space will hollow out first and faster than Canada and others. However, it is ridiculous how much retail space exists in most? Canadian cities. In particular, I just have to look around the Central Okanagan and wonder how half of the stores (most in strip malls) can breakeven. Locally, we could cut retail space by 50% and still be overwhelmed.
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Re: Managing REIT portfolio

Post by kcowan »

In West Vancouver, most retail space is released after 18-24 months after the retailer goes bankrupt. Some of the names stay in business but I doubt that these specific locations are winners. I worry that retail REITs are just an accumulation of these spaces and are vulnerable to a turndown.
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Re: Managing REIT portfolio

Post by InvestorNewb »

My RRSP is in US dollars and almost the full amount is invested in Vanguard's REIT ETF (VNQ). Why bother with the hassle of picking individual REITs when you can buy the whole basket for 0.12%?
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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Re: Managing REIT portfolio

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InvestorNewb wrote: 17 Apr 2017 09:20 My RRSP is in US dollars and almost the full amount is invested in Vanguard's REIT ETF (VNQ). Why bother with the hassle of picking individual REITs when you can buy the whole basket for 0.12%?
Some people, myself included, think US REIT's (VNQ) are overvalued. See, inter alia, Altared's post above.
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Re: Managing REIT portfolio

Post by Hogwild »

I stumbled across a great article about Retail space in the US, and it may shed some light on how that might affect US retails REITs or CDN REITs holding US retail properties. One of the big takeaways is, you guessed it, Amazon and online shopping taking a lot of market share. Many are also doing research online before they buy, reducing browsing and increasing expectations of low prices in retail stores.

Several other reasons are given for the retail closures and changes. Some of them might surprise you, such as, for example,
which foods are trending on Instagram.

What in the World Is Causing the Retail Meltdown of 2017?
https://www.theatlantic.com/business/ar ... 17/522384/

Very interesting reading.
Last edited by Hogwild on 22 Apr 2017 11:27, edited 1 time in total.
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Re: Managing REIT portfolio

Post by CROCKD »

Re US retail space see this blog http://deadmalls.com/
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Re: Managing REIT portfolio

Post by Hogwild »

Yet another release of lousy numbers for Northview. I think it may be time for me to dump my Northview shares. What REIT to replace it with....maybe Sienna or Medical Facilities. The latter doesn't seem to have had its share price appreciate in over 3 years, though.
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Re: Managing REIT portfolio

Post by TomB19 »

If I had a 23 year investment horizon, I'd study value investing techniques and carefully migrate to equities. It's a lot of work but the returns over 23 years will be a multiple.

It could easily allow for retirement in 15 years, instead of 23, but it takes work and a lot of time to do the proper research.
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