First Capital Realty (FCR.TO)

A large owner-operator of shopping malls. 4.2% dividend. It's been sideways. It's an income vehicle and a slow grower. You own this for stable income. He doesn't see a retail "apocalypse." Safe dividend, maybe an increase, and a good
operator. This won't scream up in price anytime soon. It's stable. Prefers Riocan REIT.

Not a sell, though he owns the bonds. A retail story, but more defensive with liquor, drug, and grocery stores. Higher rates, and did a questionable issuance. Into new green development. Likes the company and its assets. But not the time to own it.

Management quite good, They develop space for condos and stores. Trades at a premium. Yield is not as high as other REITs, but yield of 4% is actually not bad.

This is an urban everyday needs portfolio. Very resilient. He models 3.8% growth from 2016 to 2018. This is not cheap, trading at around 19X, it is still trading slightly below its five-year average. 81% payout ratio, so you are going to get paid the 4.3% distribution. Its balance sheet is very good. Thinks you could buy this closer to $18.50 or $19 if you get an opportunity.

Doesn’t own any REITs at this time, but if he were to own one, this would be the one. Likes the way they are running the company and the acquisitions they’ve made. They are in the prime areas where it is difficult to get real estate anymore. They have a serious footprint in Yorkville which arguably, price per square foot, is the most valuable real estate in Toronto.

A very well-capitalized Real Estate Operating Company, with a lot of retail properties across Canada. Focused in urban major city centres and are buying up real estate in good locations, in close proximity to where people live, which benefits from a combination of an increase in population growth and an increase in incomes. About 20% of properties are anchored by grocery stores. Has a good development pipeline and an exceptional balance sheet. 70% of assets are unencumbered, which gives a lot of flexibility in the event of higher rates or an economic downturn. Dividend yield of 4.1%.

He owns the bonds. They have fantastic assets, and believe in not only growing their bottom line versus acquisitions, but also in the intensification story, such as core cities like Toronto. Their risk money is re-developing projects such as Yorkville, Lawrence or Liberty Square. Believes it is trading at a 20% discount to its NAV.

Feels the 3 top picks have probably lagged the market unfairly. This has lagged for a number of reasons. There is a bit of a concern on the retail market in general, but he would argue that their locations are highly resilient. They’ve had their guidance lowered a little because of some of the acquisitions they did, some developments cost a fair bit of money. However, long term, this is going to work out very well. Thinks management has got the message that they need to provide more FFO per share growth over the next couple of quarters. The previous CEO has been selling which has put some pressure on the stock, but has nothing to do with the valuation of the company. Dividend yield of 4.2%. (Analysts’ price target is $23.)

Generally the sector has underperformed. The largest shareholder has done a secondary offering of their shares. The feeling is that they will keep selling down. But this is a fantastic company. They are incredibly defensive. They execute well. He is closer to looking at buying it. Net operating income should really pop over the next couple of years.

Ranks in the top 3^rd of his database. A fairly slow growing company. Earnings growth is forecast to be negative, going from $1.03 in 2016 to $.86 in 2017. Free cash flow is a minus 3% on a 4^th quarter trailing basis. Using enterprise value to EBITDA, it trades at 22X 4^th quarter trailing and is down 2.6%. Dividend yield of 4.2%.

A retail REIT basically focused on Canada’s wealthiest neighbourhoods. They are always focused on the best locations, the best corners. Retail is facing some difficulties, but retailers are not just going to close up all their stores; the best stores in the best locations are going to continue to do well. This offers growth. Because of retail pressures, the stock has sold off giving an interesting opportunity. A compelling return over the next year. Dividend yield of 4.11%. (Analysts’ price target is $23.63.)

Retail focused, but it owns a lot of Yorkville and assets in areas of high income. They came out with a perfect quarter, raised guidance, and the stock dropped 5%, so he was buying aggressively that day. This is a rare opportunity to buy a very high quality high end retail at a very reasonable price. Yield of 4.31%. (Analysts’ price target is $23.81.)

A high-quality, urban focused REIT. Has a good growth rate of around 5% for the next couple of years. 81% payout ratio, so the dividend is safe. The balance sheet is pretty good, better than average. Debt to FMV is around 46%. Just raised some equity to fund a Montréal and Toronto acquisition, which looks accretive. Pretty expensive, trading at about 21X. He would consider selling some Call options a couple of times a year, obligating yourself to sell it at $22-$23 giving you some really good cash flow. 4% dividend yield.

They are not taxable yet so they don’t have to be a REIT. The real estate market is not great right now: Target left, rising rates, anything related to Alberta. FCR-T is defensive. They are great managers. A lot of properties are anchored by Shoppers or grocery stores. They de-levered their balance sheet a few years ago. They are benefiting from intensification in large cities.

Great company and great assets. Management team is focused on improving cash flow per share, while previous management was focused on building NAV. The slight difference is that one was focused on building quality real estate and the other is a bit more yield focused. Thinks the combination is generating a lot of attention again, as it has underperformed for some time. Very high quality, so this is one he doesn’t Sell, although may trim occasionally. 4.5% dividend yield.