REITs are on sale

RYAN   By Guest Blogger Ryan Lewenza

.

Often our clients can provide great insight on the economy and markets. Case in point, a client quipped to me once that he finds it amusing how people will rush out to the malls in great numbers and haste to buy some 50 inch flat screen TV or a new pair of khakis during marked down sales events, but when the stock market goes on sale, crickets!

I spoke to this in a recent blog post on investor behaviour. During bear markets stocks fall dramatically, thus “going on sale”, but it’s hard to convince investors that these events often represent the best long-term buying opportunities. I believe one of these opportunities is surfacing in Canadian real estate investment trusts or REITs.

Since the market peak on February 20th, REITs have been hit hard, declining over 30%, far worse than the TSX at -20%. With the global pandemic effectively shutting down the global economy, investors are concerned that many of the REITs will be negatively impacted and that dividend payments could be cut. Commercial building REITs have also received a thrashing as many expect this pandemic to cause more people to work from home. While I agree with these concerns, I believe REITs remain a core long-term holding and the recent weakness is creating an opportunity.

Canadian REIT Returns since Feb 20th

Source: Stockcharts.com, Turner Investments

First, the long-term strong performance of REITs is undeniable. The 10-year cumulative return of the S&P/TSX REIT Index ETF is 100%, almost double that of the TSX at 58%. And this doesn’t even include the dividends, which is one of the main reasons you buy REITs.

REIT Returns since 2010

Source: Stockcharts.com, Turner Investments

Speaking of which, with the big drop over the last few months, the REIT Index dividend yield has spiked from a 10-year low of 4% in January to now near a 10-year high of 6.5%. The concern is that many of these REITs will cut the dividends and I would not be surprised to see this happen to a few of them, but that’s why you buy ETFs. Spread the exposure across a number of different industries and companies.

REIT Yield Has Risen to 6.5%

Source: Stockcharts.com, Turner Investments

One critical driver of REITs are interest rates and I illustrate this relationship below. As interest rates have declined over the last 10 years, REIT prices have continued to rise. This negative correlation simply means low interest rates are generally good for REITs. This stems from two key reasons. First, REITs utilize debt to run their businesses and grow, so low interest rates result in lower borrowing costs. Second, REITs and their dividends look more attractive when interest rates are low, which we expect to continue for some years. I continue to believe that interest rates will stay low for long, which supports REITs in a number of ways.

REITs are negatively correlated with interest rates

Source: Stockcharts.com, Turner Investments

Finally, with the sell-off in prices, valuations for the sector are looking attractive. There’s a few different ways to look at REIT valuations – prices to funds from operations (P/FFO) and prices to net asset value (P/NAV). On a price to NAV basis, the Raymond James REIT analyst calculates P/NAV at a record 33% discount, even worse during the financial crisis when they traded at a 25% discount. Admittedly, the near-term outlook is uncertain but a lot of that looks priced in already. Yes things look cloudy in the short-term, but people are going to shop again and go into the office.

Canadian REIT Sector P/NAV

Source: Raymond James Ltd.

Life is highly uncertain right now, which can help obscure the long-term value of assets. But I believe there is value surfacing in the REIT sector. Timing this stuff can always be difficult in the short-term, but longer term, value usually delivers good returns for patient investors. Until then, clip those great dividend yields.

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

 

130 comments ↓

#1 TurnerNation on 04.25.20 at 2:19 pm

Ontario’s massive debt. For a while here I’ve been suggesting ON would slowly wind down rural services pushing people into cities.
Now that seems even more likely.

The global government wants people off the land, away from sustainability and the food supply, herded into cities.
There’s no real news only predictive programming.
Why has Globe and Mail been pumping out articles on Smart Cities past few weeks?
Google’s Toronto Smart City is the test bed. Citizens’ lives will be run via its artificial intelligence and Internet of things/5G.

As land/SFH defaults occur the Crown’s bankers will snap up the land. Already we are barred from all Crown land. Parks and National and Provincial parks are off limits.
Some people guess that even towns and cities are in the process of declaring bankruptcy but the courts are closed. We must Wait and see.

Globalist web sites states they will make most of the Earth off limits to people for biodiversity.
The world is under lockdown for this land grab. Nothing more. There is a news blackout. Only Covid – Crown – Coronation.

Globalists also wish to De- Industrialize the first world countries. How to do this?
Step one: kill demand.
Done and done. Most everything is shut down and idled.

All those empty businesses in cities will become condos. Nothing I’ve told you is secret. It’s all there in black and white.
This is an economic take down and land grab.

****This is only my opinion based on the way things are going

#2 crowdedelevatorfartz on 04.25.20 at 2:21 pm

Interesting outlook.
I guess no matter how bad the economy, people need a place to live and a place to work.
REIT’s it is !

#3 Irish Stew on 04.25.20 at 2:22 pm

Warren Buffet’s theory – “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

#4 Hana on 04.25.20 at 2:29 pm

Great post Ryan as always. Thank you.
What percentage of reit you recommend for portfolio?
Is it ok to keep xre or vre etf in non registered account?

#5 Flop... on 04.25.20 at 2:35 pm

Well, at the very least, we finally found out why Trump prefers bleach blondes…

M45BC

#6 david lau on 04.25.20 at 2:37 pm

Great post on Reits Ryan.
I very much agree and it’s among a core holding in my portfolio. Question for you- how much of a payout ratio is acceptable for Reits? I notice a lot of them go beyond 100% which often is a red flag amongst other business sectors, which often encourage a max payout ratio of 80%. love to hear your answer!

#7 not 1st on 04.25.20 at 2:38 pm

So what if condo and apt towers empty and office buildings shutter because people want to work from home and malls and retail spaces are dead because everybody uses Amazon?

I would say those factors are bearish for REITS, unless some of these have portfolios weighted away from those properties?

Oleary just said on CNBC that companies are starting to dump expensive office and retail now that the work from home experiment has been conducted.

https://www.youtube.com/watch?v=Elw3XiHvQOM

#8 PSL on 04.25.20 at 2:38 pm

What’s hilarious is you don’t realise chart 2 is a total return chart. Reit returns since 2010 have almost completely been in the form of dividend and almost ZERO capital appreciation .. funny you don’t know that.

#9 Bytor the Snow Dog on 04.25.20 at 2:45 pm

Website is stalling again. If this is a repost please delete it.

#224 Jimmy on 04.25.20 at 1:31 pm sez, in two posts, thus repeating herself:

“#202 Bytor the Snow Dog on 04.25.20 at 10:39 am

Strange how the World’s Dumbest President in somehow smart enough to live in your heads 24/7/365.
———-

So which tastes better to you?

Lysol or Kool-Aid?

You’ve obviously indulged significantly.

Saying this in the kindest way possible….Please seek professional care!

#225 Jimmy on 04.25.20 at 1:59 pm
#202 Bytor the Snow Dog on 04.25.20 at 10:39 am

Strange how the World’s Dumbest President in somehow smart enough to live in your heads 24/7/365.
————-

Kool-Aid or Lysol… which one did you prefer?”

=====================================

You know what happens when you assume, right “Jimmy”? You make an ass of u.

Not me.

Now “Jimmy” you assumed that I am a Trump supporter when that fact is not in evidence. However my observation that he lives in many people’s heads 24/7/365 is correct, as proven by your post.

Oh, and she lost, dear.

#10 Lost...but not leased on 04.25.20 at 2:47 pm

Phyrrzzzttt !

#11 THE DEBT LOVER on 04.25.20 at 2:49 pm

The JOY’s of DEBT.

“REITs utilize DEBT to run their businesses and grow, so low interest rates results in lower borrowing costs.”

Use if to your advantage and Profit from it!!

#12 looking up on 04.25.20 at 2:53 pm

Great article Ryan,

One question, as REITS are a collection of commercial, residential etc. real estate, why is there a 30% or so in REITS while physical property prices have remained virtually unchanged?

Can any one answer this?

Any one, any one….

#13 not 1st on 04.25.20 at 2:54 pm

The big news circulating the interwebs is lefty docudrama writer Michael Moore torpedoing the green movement once and for all. Worth a watch and eye opening at the same time, but deep down we all knew it.

Wonder if Trudeau will have enough gas in the tank to restart the green scam after all is said and done.

https://www.youtube.com/watch?v=Zk11vI-7czE

#14 KNOW IT ALL on 04.25.20 at 2:55 pm

Wait…… so REIT’s borrow large sums of money from banks and lenders to buy and rent out space then take the cashflow from tenants to pay investors dividends.

And yet the REITs are still highly indebted.

Kinda PONZI scheme we got going on here??

#15 svender on 04.25.20 at 2:56 pm

Stocks and REITs aren’t on sale, they are simply worth less now. Their expected return has dropped. A better analogy would be buying damaged goods.

#16 Dustin on 04.25.20 at 3:00 pm

Thanks Ryan, I always look forward to your more technical Saturday special, I learn alot from them. Do the managers at iShares sell off the bad ones and buy good ones when they “re-balance”? Is it just a mix of the 100 biggest REITs or something like that, like the S&P 500 just being the 500 biggest companies in the states.

#17 Emile on 04.25.20 at 3:04 pm

Thanks Ryan; you’re preaching to the choir on this one!

#18 technical analysis? on 04.25.20 at 3:05 pm

“And this doesn’t even include the dividends, which is one of the main reasons you buy REITs.”

_______________________________________

try and be a little more careful with your work. your chart and returns INCLUDE dividends. the XRE has posted almost ZERO capital gains since 2010. it’s been completely dividends that have provided you with any type of gain.

#19 Figure it Out on 04.25.20 at 3:10 pm

You like REITs, you believe in ETFs, you think some REITs may cut their payouts.

Well,
Pick a cap weighted ETF, with half its value in the top four holdings? Might want to drill down and form a view on whether those four will cut… Or ask whether the management fee is worth it for such a concentrated ETF.
– or –
Pick an equal weight ETF, and overweight the minnows?

– and –

Ask yourself why the biggest pure real estate play listed on the TSX isn’t in any of the ETFs?

All the while saying to yourself that value is supposed to deliver returns for the patient investor… but the impatient investor can go through a lot of computer monitors while he waits.

#20 MF on 04.25.20 at 3:22 pm

#210 Penny Henny on 04.25.20 at 11:31 am

“That is why we have to open everything up sooner rather than later. Let’s build some herd immunity during the summer months so this way when flu season (winter) arrives we won’t be taxing the health care system as much.
Basically lets spread this out so the hospitals don’t get overwhelmed as was the original plan before the govt mutated that plan into ‘wait for a vaccine’.”

-Okay you go first then. Make sure you volunteer to be infected so you can start “herd” immunity.

MF

#21 Don Guillermo on 04.25.20 at 3:27 pm

Thankfully the great state of Hawaii has come up with a “feminist economic recovery plan” that we can all use as a model to quickly get things back on track.

https://www.thelily.com/this-state-says-they-have-a-feminist-economic-recovery-plan-heres-what-that-looks-like/

Also eMay tweeted today that Michael Moore’s new documentary “Planet of the Humans” will be very dangerous. She’s right – very dangerous to her credibility

#22 espressobob on 04.25.20 at 3:30 pm

REITs have been a sweetheart over the years. Picked me up some more earlier this week.

All that yield along with dividend ETFs, well let’s just say all those monthly distributions never gets old.

#23 Michael King on 04.25.20 at 3:36 pm

Long time reader of the blog and your essays are always insightful and helpful. Our Vancouver based advisor (who will go unnamed lest my comment be deleted as it happened before) is of the opinion that there is too much optimism among investors. I agree. The current crash has its origins in a pandemic not sub-prime mortgages etc. Unlike 2008-2009, the Fed dumping liquidity into developed world economies, while necessary(!), is only a stopgap. Investors should be cautious and not consider this a buying opportunity. In my opinion, the bottom is months away. I said it before, a Dow 15000 and S&P 500 1500 is possible. Until there is a medical breakthrough we are and will continue to be in a dire situation.

#24 Westcdn on 04.25.20 at 3:37 pm

I am tired of being lectured by a entitled SJW former drama teacher. He is behaving like a sock puppet but I was outvoted so obviously my opinion is in the minority. I am starting to see CYA activity in media. People with cushy positions in life will fight to justify their position. I remember a guy who told me success depends on you looking in the mirror and repeating I am great until you believe it. Let’s face it; most experts are average people with specialized knowledge – what could possibly go wrong? Power is intoxicating and money is only a measuring device.

It is not always true you get wealthy by working harder and smarter. I observed it is more by finding people that will work hard for you. People are gold, not money – treat them well if you can. This largess by governments worries me. The debasement of currency has never worked. The Roman tax collectors refused empire currency as payment for taxes at the end and they were mean. Then there is John Law – https://en.wikipedia.org/wiki/John_Law_(economist)

The economy is about productive people and you do NOT incentive them to do less or ignore risk of their choices. The trouble I have with public servants is too many have exceeded their Peter Principal level. Then, for me, is the problem of useful idiots and the reduction of the sense of honour. It is no wonder that nepotism and cronyism is an issue that harms society.

I will stop the rant now. The people who renovated the house beside me have put it up for sale (Calgary). It really is a new build, out and in, but I think they are in for a severe haircut. Speaking of a haircut, I am analyzing my stock market mistakes. First my biggest loss comes from an airline company – CHR. I am trying to figure what to do with them. I like the management but I don’t expect the industry to ever recover 100%+. Business travel was too large a portion of industry income and as Billybob pointed out, steerage passengers were worth less than the cargo in the hold. This company will probably survive because their business model did not depend on business class passengers or international travel. I will be watching their debt load closely and hold for now.

I am really tempted to buy Puts on EFTs but I don’t know enough yet. I buy cumulative preferred shares of companies that have a book share value less than 1, an EPS less than 10, pay common share dividends and the preferred shareholder equity is less than 20%. They are out there but the illiquidity has hurt. Nonetheless they have recovered the best and gold is serving me well. I am encouraged by my Option trading but I think it is more luck than skill at this stage and I apply the reverse preferred share philosophy on them. Reits I will just hold until I get a better read – I don’t want a return of capital from a loser.

#25 VICTORIA TEA PARTY on 04.25.20 at 3:41 pm

ETFS RETURN OF CAPITAL

I noticed today that my BMO ETFS, and other closed end mutual funds EIT.UN and XTR ae indicating return of capital.

Does this mean that future dividends will be paid out of my capital, thus diminishing the value of my holdings, or is this just a one time event and I’ll continue receiving my divvies based on the businesses that the funds represent?

Thanks.

#26 Circle Squared on 04.25.20 at 3:41 pm

Ryan, please help explain as I’m confused – it sounds like one can be bearish on real estate prices (yesterday’s post) yet bullish on REITs? Contradictory no?

#27 conan on 04.25.20 at 3:44 pm

If we can not shake Covid 19, no one will want to live /work in the older multi story buildings, with ancient HVAC.
That will be bad for many REITS.

#28 DM on 04.25.20 at 3:46 pm

A quick Elliot Wave analysis of XRE shows that the stock is likely to drop to $9-10 area, worst case – $5-6, before it starts a recovery. Current rally is probably a bull trap.

#29 Ryan Lewenza on 04.25.20 at 3:54 pm

Hana “ Great post Ryan as always. Thank you.
What percentage of reit you recommend for portfolio?
Is it ok to keep xre or vre etf in non registered account?”

5% of the portfolio is a good weight. And they are fine for non-reg accounts given you get to utilize the dividend tax credit. – Ryan L

#30 Do we have all the facts on 04.25.20 at 3:56 pm

One consequence of Covid 19 is that shopping on line has increased and many tenants within retail based REITS will find it difficult to survive without assistance. The future of bricks and mortar seems very uncertain right now.

It is difficult to imagine that office based REITS will not suffer some loss of revenue as businesses assess their future need for office space. The past two months have created a new paradigm as tens of thousands of workers have adjusted to working at home and video conferencing

It is too early to tell what the long term impact of Covid 19 on hotel based REITS might be but the short term impact will be nothing short of brutal. Will travel bounce back to pre Covid 19 levels or will a decline in the Canadian economy result in lower occupancy rates as large conferences are postponed.

I agree that there are many REITS with balance sheets that can weather a short storm but I would tread lightly until there is more certainty on when the lockdown will end and what percentage of the Canadian economy survives.

This is definitely a time to seek professional advice before taking action.

#31 Ryan Lewenza on 04.25.20 at 4:01 pm

david lau “ Great post on Reits Ryan. I very much agree and it’s among a core holding in my portfolio. Question for you- how much of a payout ratio is acceptable for Reits? I notice a lot of them go beyond 100% which often is a red flag amongst other business sectors, which often encourage a max payout ratio of 80%. love to hear your answer!

It depends a lot on the REIT and the steadiness of their revenues but generally speaking a max payout ratio of 70-80% is preferred. If revenues are steady and the REIT has a good balance sheet then you could justify a payout ratio above that level. – Ryan L

#32 Tim123 on 04.25.20 at 4:10 pm

REITs are certainly an asset that I am looking at. I am avoiding Reit ETFs because I want to buy REITS with the best balance sheets and best properties and do not want to get bad ones that will not survive. The downside of doing this is that it is a lot of work and takes a lot of time to do this. Anyways, I trade the US markets in stocks and options because there is a lot more variety. It is a good idea to look at REITS right now because of the low interest rate environment. I have to agree with you that most people are scared to invest when markets are down

#33 Bedhead on 04.25.20 at 4:32 pm

I would not run out to buy a TV that might drop in price again in a day or may not return in value before the next level of technology emerged – essentially making my TV obsolete. I don’t disagree with your point – only with your analogy.

#34 Doghouse Dweller on 04.25.20 at 4:39 pm

#25 VICTORIA TEA PARTY

No the return of capital is not a one time thing. Its part and parcel of
the peddled juicy payouts from many types of funds.
Paying you with your own money, the marvels of modern finance !

#35 Dr V on 04.25.20 at 4:40 pm

12 – looking up – don’t compare owning residential real estate to renting/leasing commercial, industrial or residential. The cost of leasing commercial/industrial is
tied to the revenue the business can generate from it,
which is often related to the area of the unit for that type of activity. The residential buildings which REITs
may own are larger-scale rentals where again
anticipated revenue and costs dictate price. REITs are a
business, not a hormonal FOMO purchase.

#36 Tom from Mississauga on 04.25.20 at 4:41 pm

H&R collected only 50% of retail rent but almost all office rent. Oxford property and Riocan had similar experience. Amazon, Shopify and the virus is crushing retail. Office will come back so staff can be supervised, lead and trained. Multi-family tenants will miss rent, price adjust but still ok. This is a stock pickers market for REITs. I like TNT.UN.

#37 Fused on 04.25.20 at 4:44 pm

#24 Westcdn
I would recommend Option Volatility and Pricing by Sheldon Natenberg, look into Optionalpha , Tastytrade for more information/tutorials.

#38 Camille on 04.25.20 at 4:47 pm

Thank you Ryan for your analysis and recommendations. I would at least top up holdings in REIT to desired dollar or percent holdings.
Someday when you’re feeling really brave, informed, and generous, pleasure provide your readers with an analysis on preferreds, and where they go in a low rate environment. They pay but are beat up even more? Are they like a treasury bond fund, with future declining returns?
Regards.

#39 SnowOwl on 04.25.20 at 4:48 pm

Hi, Ryan,
I really appreciate your insight, always looking forward to you contribution to the blog.
I think you can probably help a lot of the Canadian readers who reside stateside:
What would be your recommendation for a REIT ETF to buy now and hold forever?
What do you think of the Vanguard Real Estate ETF (VNQ)? Would you recommend going international with (VNQI)?
Thanks, much appreciated indeed.

#40 Tom from Mississauga on 04.25.20 at 4:58 pm

XRE is going to double bottom

#41 the Jaguar on 04.25.20 at 5:08 pm

All these charts make my head spin. I decided to actually pull up my investments to see what has been going on with them. Last time I looked it was January 10th. Surprisingly there has only been a minor dent in values. Not sure how that happened, but for sure I had nothing to do with it given my lack of interest or expertise. Guess my guardian angel has come through once again for me. That, and I have always ‘stayed invested’ if for no other reason I was pursuing other interests. Kind of lame, I suppose.
Any blog dogs interested in the subject of the future of oil might find Michael Moore’s new documentary ‘Planet of Humans’ interesting as it drains the swamp of the many weasel types with regard to renewable energy and fossil fuels. Highly recommended. You can watch it for free on You Tube via this link:

https://www.youtube.com/watch?v=Zk11vI-7czE

#42 Leo Trollstoy on 04.25.20 at 5:27 pm

”Life is highly uncertain right now, which can help obscure the long-term value of assets.”

As opposed to Life being certain all the other times? Lol

#43 JSS on 04.25.20 at 5:47 pm

Ryan, do you feel that the energy sector is also a long term winner similar to REIT’s? Companies like suncor, CNRL, imperial oil come to mind. They are also dividend payers. Thanks!

#44 Blue Angel on 04.25.20 at 5:48 pm

reit’s aren’t to low, it’s the tsx that is still too high!

#45 Nonplused on 04.25.20 at 5:49 pm

Meme of the day:

“Things shouldn’t go back to normal. Normal wasn’t working.”

#46 Politico on 04.25.20 at 6:00 pm

#5 Flop… on 04.25.20 at 2:35 pm
Well, at the very least, we finally found out why Trump prefers bleach blondes…

M45BC

———————–

Trump was standing in front of a graphic that clearly showed a spray bottle, not a needle. He either misspoke or got confused. He has since clarified that he does not suggest injecting disinfectants but using them on surfaces and your hands might help (although someone should tell him we already have hand sanitizer for that).

The good news is that this is how natural selection works. I am sure there are websites out there promoting the very same thing.

#47 Oscar on 04.25.20 at 6:13 pm

Great post Ryan and I agree with your thesis. In the last month REIT etfs that have predominantly large retail landlords with tenants such as Walmart, Canadian Tire, Sobeys, Loblaw, Dollar stores etc have done very well. All of these tenants are very successful in the current pandemic environment and are well positioned as the economy opens up.

#48 Yuus bin Haad on 04.25.20 at 6:22 pm

Don’t forget kids: 5% REITs in your “boring” account, but definitely not in your “fun” account

#49 Ryan Lewenza on 04.25.20 at 6:25 pm

Dustin “Thanks Ryan, I always look forward to your more technical Saturday special, I learn alot from them. Do the managers at iShares sell off the bad ones and buy good ones when they “re-balance”? Is it just a mix of the 100 biggest REITs or something like that, like the S&P 500 just being the 500 biggest companies in the states.”

XRE just tracks the S&P/TSX REIT Index. The S&P Dow Jones Indices determine which REITs will be included in the index. So when they add/remove a REIT in the index, iShares just mimics this by adding/removing the same REIT. So iShares doesn’t determine which REITs are in the ETF. – Ryan L

#50 REITs on 04.25.20 at 6:36 pm

Thanks Ryan
First things, Garth tell Dorothy if she’s not already aware Father Brown season eight started this week in BC. Might be the same in NS

Second interesting you recommend REITs but the past few days come and gloms on real-estate

Third if REITs are correlated to interest rates are interest rates not going to raise next year?

Forth I think with the many bankruptcies and people working from home commercial properties might be put under stress?

But then again T2 is backstopping them as well.

THanks again!

#51 COW MAN on 04.25.20 at 6:58 pm

Amigos:

Just watch what happens to residential property taxes when the large commercial, retail and office buildings go vacant, or lose value. Those buildings are all factored for property taxes by a multiple of the residential mill rate. When vacant they go back to the residential mill rate. There will be tax revenue crisis in urban centres.

#52 Flop... on 04.25.20 at 6:59 pm

#39 the Jaguar on 04.25.20 at 5:08 pm

. Highly recommended. You can watch it for free on You Tube via this link:

https://www.youtube.com/watch?v=Zk11vI-7czE

//////////////////////////

Well, all the bars and restaurants are closed, so I won’t be spending the night on the tiles.

If my wife and I are not out on the town, we normally spend Saturday night watching some Dateline or 48 Hours Mystery, which I call “Stabby, stabby.

Very romantic.

Probably why we don’t have kids, too busy watching someone get killed.

Will watch this one tonight in between someone running for their lives and Saturday Night Live, social distance edition.

The laughs are further apart…

M45BC

#53 Reximus on 04.25.20 at 7:07 pm

“”Globalist web sites states they will make most of the Earth off limits to people for biodiversity.
The world is under lockdown for this land grab. Nothing more. There is a news blackout. Only Covid – Crown – Coronation. “”

Welcome to the site, Alex Jones

#54 JacqueShellacque on 04.25.20 at 7:12 pm

Interesting as always Ryan, thanks for the analysis. This got me to thinking about what actually constitutes where I’m down from March 1st or so to this point (all holdings index ETFs), and a quick back of the envelope calculation shows about 40% of the dollar amount is accounted for by REITs and preferreds (both Canada and US on the preferreds). I get that for the dividends alone it would be fine to top back up to 5% for REITs (what I’d been carrying before per your earlier advice). What seems less certain to me though are the prospects for preferreds. I feel comfortable for the long-term prospects of my US prefs, but Canadian pref ETFs seem to be loaded with energy offerings that seem pretty dicey at the moment. It seems there are 3 factors: the dividend, the capital gain, and the affect of interest rates. It would be great to see you give preferreds the full treatment next Saturday.

#55 Drinking on 04.25.20 at 7:12 pm

As a number of poster said; cannot see great value in office buildings due to this pandemic but warehouse storage, smaller commercial buildings will be hot in demand in the future. I have not cashed out of REITs; taking the chance and see what happens. Gulp!

Just incase, I started digging a hole for a bunker!

#56 Oscar on 04.25.20 at 7:16 pm

#220 bubu on 04.25.20 at 12:45 pm
Romania was in the same situation… week economy, high unemployment, etc… when the $CAD will be 30c USD you will see… Canada’s rating is already at high risk…

Been there, done that.. I payed my apartment which was 45 salaries before taxes with a paycheck in 3 years after I bought it…”
————————————————————

If this replayed itself in Canada, all the indebted home owners who borrowed their brains out will pay off their homes with a paycheck in 3 years hence. Inflation transfers wealth from lenders to debtors. Deflation does the opposite. Which scenario do you think indebted Canadians would rather have?

#57 Reximus on 04.25.20 at 7:19 pm

sounds like kim jong un is just pining for the fjords

#58 Uncle Al Sinclari on 04.25.20 at 7:25 pm

#204 the Jaguar on 04.25.20 at 11:01 am
Story featured in National Post this morning on plans to build new skyscrapers such as the 95 story ‘SkyTower’ in downtown Toronto complete with glass curtain walls. Apparently one of many on the ‘drawing board’.
A few days ago Garth asked ‘have we lost our way’?
Based on this development I would say absolutely so. Total insanity.
—————————————————————–

Psst, don’t tell this to IHCDT9. He will go bannanas on how could people want to live in Toronto, blah,blah, blah. Guess these devleoper that are willing to commit mega millions to these projects have a different view on the demand in Toronto than Mr. Hinterland and his pontifications…

#59 Lead Paint on 04.25.20 at 7:46 pm

#5 Flop… on 04.25.20 at 2:35 pm

Flop I chuckled out loud ! You get a gold star today.

#60 Billy Carter on 04.25.20 at 8:00 pm

Ryan I think you are wrong that REIT distributions are treated as dividends.

#61 Stalla Banx on 04.25.20 at 8:17 pm

Could this be the flash point for WW3
https://news.yahoo.com/india-opens-bridge-himalayas-setting-094034989.html

Border incursions up 50% in the last year in this disputed terrain.

Previous world wars have been started by less inflammatory events, such as the assassination of archduke ferdinand and the false flag poland-german flashpoint.

The last time India-China duked it out in 62, India was a Russian ally and lost. Now India is a part of the US-Japan-Nato alliance and containment of China, so even a small skirmish could easily escalate.

#62 Uncle Al Sinclair on 04.25.20 at 8:49 pm

Hey IHCDT9, take a break from baking cookies and read this article in the National Post. Then ask yourself why 80 new skyscrapers are being built in Toronto. Guess they didn’t read your reasons for Toronto being a dump…
—————————————————-

https://business.financialpost.com/real-estate/property-post/vertical-city-80-new-skyscrapers-planned-in-toronto-as-demand-climbs

#63 short horses on 04.25.20 at 8:57 pm

Thanks for the post, Ryan. You’ve mentioned in one of your comments (#28) that REITs are good in a non-registered account because of the dividend tax credit. Does this include ETFs or is it particular individual REITs?

I had previously developed the impression that REIT distributions tended to be things other than qualified dividends and most of it would be taxed out our marginal rates.

#64 TrendIsYourFriend on 04.25.20 at 9:12 pm

Yes, REITs should be part of registered account portfolio.

I always use “_xyz.to” on stockcharts.com for any ticker with 1% or more dividend, as that will give me capital gains part of the story.

So, 2nd chart above is total return = (capital gains) + (dividends)
If you take _XRE.TO 10 year weekly, you will see that 2020 crash erased all capital gains aspect of the etf, almost – 10 years ago $12.xx and today $14.xx
http://stockcharts.com/h-sc/ui?s=_XRE.TO&p=W&yr=10&mn=0&dy=0&id=p00722874386

If one belives world will not end, buying xre at 14, or 11 few weeks ago, isn’t that bad.
It can certainly go and test March lows, but it may not. Buying in increments is a reasonable strategy.
I took a few names, INO/UN has for example almost doubled from my entry, my stop order is in place, if it drops I am out for a profit (1/4 of my position size) and will look for new entry, if it continues, I will add to it.
I also took xre at $13 ish, being ETF it is my bigger position than ino/un, stop loss in place, let’s see what happens.

#65 Blog dog Du Jour on 04.25.20 at 9:23 pm

Things that occurred to me,

I’ll never vote libtard again I mean ever
How can I move to Sweden
The healthiest are punished to rescue the morbid sickest
JT is buying votes

Planet of the Humans is simply presenting the facts. Nothing comes close to replacing oil and there is no free lunch. Alternatives have very serious ecological costs as well.

#66 Sail Away on 04.25.20 at 9:39 pm

Re: tax treatment of REIT distributions:

https://www.dividendearner.com/reit-taxation/

#67 Sail Away on 04.25.20 at 9:52 pm

I feel a little bad. The neighbour’s kid and friends (in their 20’s) have been shooting a CO2 pistol in the backyard for the last month or so. They’re not great at handling a gun and when a BB pinged off my house today, I went over and shut them down.

Too heavy-handed? Don’t know. I don’t want my dogs, cats, local deer or nesting birds shot…

#68 crowdedelevatorfartz on 04.25.20 at 10:03 pm

@#55 Reximus
“sounds like kim jong un is just pining for the fjords…”

++++
geez, Just when I thought all the news was totally bleak….
The Great Leader takes a bow to bump everyone’s spirits.

I dont think I’d like to be the North Korean doctor that was in charge of that heart operation…..

https://www.dailymail.co.uk/news/article-8256791/China-sends-medics-North-Korea-amid-claims-Japanese-media-Kim-Jong-vegetative-state.html

#69 Kilt on 04.25.20 at 10:03 pm

REITs were overvalued prior to pullback.
Navs get adjusted and payouts get cut. Then they dont seem like such a value play.

Kilt

#70 stealth on 04.25.20 at 10:20 pm

Ryan

Can you clarify your response to
#28 Ryan Lewenza on 04.25.20 at 3:54 pm stating REIT suitability for non-reg accounts and dividend advantage?

Same echo is in the following 2 postings:
#61 short horses
#58 Billy Carter on 04.25.20 at 8:00 pm

In short REITS such as XRE (pure disclaimed example, not advice) distributes most in the form of Other Income and Some in Capital Gains, none in eligible dividends.

Thank you.

#71 Dan on 04.25.20 at 10:28 pm

Can someone recommend a well managed low MER Global REIT fund? Thanks! I have buying Mawer funds lately but they don’t have a REIT one. Thanks!

#72 Idiocy on 04.25.20 at 10:54 pm

Must read article in today’s Globe and Mail;

https://www.theglobeandmail.com/opinion/article-we-are-giving-up-our-freedoms-in-the-fight-against-covid-19-the/

Read the comments attached below the article – quite illuminating.

Some Canadians still have their critical thinking abilities intact. Sadly, too few to avoid an authoritarian / full on socialist outcome I fear.

#73 45north on 04.25.20 at 10:57 pm

not 1st

Planet of the Humans

Worth a watch, but we all knew it.

https://www.youtube.com/watch?v=Zk11vI-7czE

I knew it – or at least thought it

#74 Idiocy on 04.25.20 at 11:10 pm

to comment #62 Trend is your friend

You are not “investing” in the REIT INO.UN that had a market cap of less than CAD $ 100 million and a yield over 20 % (from what I can divine was your purchase price).

You are speculating / gambling with these kind of metrics.

REI.Un , HR.UN and others own single buildings with a larger value than that market cap.

#75 John in Mtl on 04.25.20 at 11:16 pm

Dunno why everybody is talking about Michael Moore’s “Planet of the Humans” all of a sudden,

it was already being abundantly talked about way back in october 2019!

#76 Idiocy on 04.25.20 at 11:18 pm

to comment # 60 Uncle Al

operative word:

planned

plans change, especially when the financial commitment to building those structures thus far are very low.

suggestion: go buy every pre-build you can if you are so convinced – can’t lose at $ 1000 + sq / ft – right ?

#77 TurnerNation on 04.25.20 at 11:24 pm

#50 Flop… this is the future. From Peru a short vid how they do social distancing. The armed man directing it all at :20 in is a nice touch.
This is not a health practice, it is a prison practice. Life as we know it is over.

https://twitter.com/BeachMilk/status/1253961947386728448?s=20

#78 red_falcon on 04.25.20 at 11:38 pm

Reit’s may be on sale, but that doesn’t mean you should buy them. I bought Riocan a year after the 2009 financial crisis for 15 dollars. yield was like over 10% and great as that was.. i couldn’t help look at other stocks and found over time Riocan didn’t pay distributions that increased every year (just one time in 10 years!!). Never again. If a stock or Reit increase it’s dividend/distribution every year, don’t even think of buying it. The case stands for not buying Reits, otherwise you’ll buy and cry out Eeeks!

#79 j.morris on 04.25.20 at 11:38 pm

American Tower Corp [NYSE:AMT-N] one of the largest global REITs, is a key beneficiary of accelerated 5G-roll-out. Maintains a portfolio of over 170,000 communications sites. Earnings report April 29,

#80 looking up on 04.25.20 at 11:39 pm

#33 Dr V

Buying Toronto residential for investment is a mystery to me. An outrageously priced asset with crappy yield.

I don’t get it.

Still the REITS should emulate the price of commercial real estate which they don’t appear to do. ie commercial real estate really hasn’t corrected in price yet.

#81 The Real Mark on 04.26.20 at 12:22 am

“If this replayed itself in Canada, all the indebted home owners who borrowed their brains out will pay off their homes with a paycheck in 3 years hence. Inflation transfers wealth from lenders to debtors. Deflation does the opposite. Which scenario do you think indebted Canadians would rather have?”

Not when most of the debt is floating rate. Which it is in Canada as ~40% of houses are financed using rates that can adjust almost immediately, and the other 60% have adjustment periods of between 2-3 years on average.

That’s why RE at excessive valuation multiples is so darn dangerous in Canada and is prone to a vicious liquidation cycle that will ultimately culminate in a reversion to nearly all-cash-only valuations.

Also, the markets rarely give the masses what they want. Especially the highly leveraged.

#82 Dr V on 04.26.20 at 1:20 am

39 Jag / 65 Sail – thank you for those links. Good health to all.

#83 Shahid Ali on 04.26.20 at 1:27 am

DELETED

#84 Dr V on 04.26.20 at 1:45 am

39 jag – after a few minutes I found this site which has the types of energy consumed in BC (see figure 7)

https://www.cer-rec.gc.ca/nrg/ntgrtd/mrkt/nrgsstmprfls/bc-eng.html

I was surprised at the large amount of Nat gas (more than electric) and biomass used

#85 Not So New Guy on 04.26.20 at 2:08 am

It looks like NK Kim has caught the soviet flu (not to be confused with the wuhan flu). Anybody born before 1980 would understand what I mean

#86 Javid Latchkey on 04.26.20 at 2:17 am

Yesterday I read an advisory article in a national media by a well known finance guy talking about this whole crap-fest. What I disagreed with was the statement that ‘you should sell whats gone down least”to raise cash.

That’s exactly the mentality that caused good issues to be thrown out with the ‘raise cash now panic’ bathwater fiasco in the first place. That strategy is causing so many portfolio’s to continue to
flounder as the better issues regain their standing.

If you’re in a panic to raise cash you were in all the wrong investments in the first place. Simply put, the stock market is no place for amateurs. Advisors who replaced cash holdings with HELOC strategies were dread wrong. Cash is King, always was.

Its understandable that a lot of youngsters never learned, and a lot of oldsters weren’t old enough to remember recessions gone by when everything, including the best quality bonds, went down the toilet. Its only old cockroaches like me who lived through decades of hardships with cash burned into their DNA.

Selling the best and keeping the worst? What kind of advice is that? Rebalancing By Dummies ? Having said that I don’t think all is equal in terms of REITs. The national economy will not find the same footing as before the Great Trudeau Globalist Re-Set Disaster.

He is wiping out thousands of businesses every day. A huge percentage of the closed shops will never reopen, and there isn’t the national strength to reopen them. Trudeau just announced another globalist attack on independence that will kill hundreds of thousands more SME.

His ‘attestation’ that certain individual rights are agreed to be taken away in order to get government loan assistance. If you don’t agree with Trudeau’s New Globalist Dictate you will see your business and your rights die on the sour vine of globalist ideology. Certain ‘non-diverse’ communities are under attack, not unlike certain industries. Other ‘diverse’ religions and community beliefs are being waived through. You decide why.

Who is going to replace the entrepreneurs who’ve seen generational money wiped out? Where is it all going to come from? Would you want to own a REIT with devastated tower tenants in an industry Trudeau is directly trying to kill? No you wouldn’t. REITs are stocks, pick through each one carefully. Its no time to buy the index. those days are gone.

Will Trudeau’s Favorite’s replace all the SME’s he kills? The numbers aren’t onside with that. REITS? The jury is out on that industry. This is no normal recession and there will be no chartist recovery. While Canadian businesses are under attack by both COVID and Trudeau’s political masters you should horde cash.

Two famous voices in Canada raised the idea of ‘social unrest’ yesterday in national media. Normally these voices are coached in correctness. I consider the shocking suggestion of unrest coming from such influencers to be a sign of a much larger issue at hand.

If you’re looking to the past to ascertain a future outcome you may want to put your history cap on and search for ‘revolution’.

#87 crowdedelevatorfartz on 04.26.20 at 4:07 am

@#59 Stalled banks
“Previous world wars have been started by less inflammatory events,”

++++

India and China in the Himalayas?
Nah, those low level skirmishes have been going on for 5 decades.

Bigger potential for a flare up….
South China Sea and China claims to “own it”?
Building man made islands and then declaring sovereignty, oil and fishing rights ….?

https://www.scmp.com/news/china/diplomacy/article/3081275/beijing-could-face-aseans-wrath-over-naming-and-claiming-south

Vietnam, the Philippines, Indonesia, Taiwan, Japan, etc etc etc are all dealing with a resurgent Chinese navy and a leadership that wants to “take back whats theirs” after 200 years of humiliation….
Doesnt leave a lot of room for negotiation.

The US Navy has sent ships on “freedom of navigation” runs through the Taiwan Straights much to China’s annoyance.
But maybe it will be a US (Coast Guard?) ship that gets accidentally sunk to start WWIII.

https://asiatimes.com/2019/10/us-coast-guard-churns-south-china-sea-tensions/

All this political posturing while the Great Barrier Reef around Australia cooks under the summer sun.

https://www.theguardian.com/environment/2020/apr/07/great-barrier-reefs-third-mass-bleaching-in-five-years-the-most-widespread-ever

#88 SnowOwl on 04.26.20 at 7:37 am

So, nobody has an opinion on the long term viability of VNQ?

#89 Wrk.dover on 04.26.20 at 7:58 am

The solar installations Moore’s movie dismantles, are akin to the propeller aircraft that were replaced by passenger jet aircraft.

Solar electricity ain’t dead yet!

The latest panels on the market, about a metre by two metres, put out 400 Watts, while very recently they were putting out 250 Watts with those dimensions.

LG panels sport a 25 year warrantee, and put out 50% on gloomy days.

The people loving the new doc, hated Moore’s previous works. Because he tilts truth in his favor?

But yeah, not a movie to watch on a first date with a SJW college girl…..

#90 Idiocy on 04.26.20 at 8:17 am

to comment # 62 Sail Away

You did the right thing – and btw … what ages are they?

I had a BB gun at age 8 and was taught / knew better than to shoot at anything but fixed targets – too much chance of blinding animals or humans with stray shots or richochets.

If they are not handling the gun responsibly and not shooting only at a fixed target within their own property then they are reckless and their activities need to be stopped. Pretty sure it is now illegal.

In fact, if you want to be tough about it, I am pretty sure the police will confiscate the gun if you have the spent BBs that struck your house or the shooters are too young.

And I am neither gun nut or anti-gun, just responsible.

#91 Idiocy on 04.26.20 at 8:23 am

to comment # 34 Tom from Miss.

Have to look at what % of the total portfolio is in retail / malls.

For H&R, they got 56 % of their retail segment rents , which is 34 % of total holdings IIRC. On their office got almost all rents, so total hit much less than you portray.

Do your research on REITS – they are all different.

#92 BrianT on 04.26.20 at 8:53 am

#86Javid-YES-it doesn’t get much media coverage here but Canada is being directed down the same road as France-a managed decline. Canadians attack the USA/Trump etc. without realizing that our ties to the USA are the only thing keeping us above water.

#93 Penny Henny on 04.26.20 at 8:54 am

Fartzy, you visiting Calgary?

https://www.theweathernetwork.com/ca/news/article/heres-whats-causing-that-sweet-scent-of-corpses-wafting-through-calgary-vegetation-stormwater-ponds

#94 not 1st on 04.26.20 at 9:12 am

DELETED

#95 FYI on 04.26.20 at 9:35 am

@#72 Idiocy on 04.25.20 at 10:54 pm
Must read article in today’s Globe and Mail;

https://www.theglobeandmail.com/opinion/article-we-are-giving-up-our-freedoms-in-the-fight-against-covid-19-the/

Read the comments attached below the article – quite illuminating.

Some Canadians still have their critical thinking abilities intact. Sadly, too few to avoid an authoritarian / full on socialist outcome I fear.
________________________

same way we did after 911.

#96 huh? on 04.26.20 at 9:39 am

@#63 Blog dog Du Jour on 04.25.20 at 9:23 pm
Things that occurred to me,

I’ll never vote libtard again I mean ever
How can I move to Sweden
The healthiest are punished to rescue the morbid sickest
JT is buying votes
___________________________

guy won’t vote liberal but wants to move to Sweden?
LMAO

#97 Sold Out on 04.26.20 at 9:48 am

#66 Sail Away on 04.25.20 at 9:52 pm
I feel a little bad. The neighbour’s kid and friends (in their 20’s) have been shooting a CO2 pistol in the backyard for the last month or so. They’re not great at handling a gun and when a BB pinged off my house today, I went over and shut them down.

Too heavy-handed? Don’t know. I don’t want my dogs, cats, local deer or nesting birds shot…

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Not in the slightest. BBs can be propelled with enough velocity to penetrate a human chest wall and pericardium, if conditions are right. Treated a dead guy who probably thought that little gun was just a toy.

#98 akashic record on 04.26.20 at 9:52 am

Interesting related article about the “mall short” CMBX6, played by Icahn and others.

https://www.zerohedge.com/markets/its-08-all-over-again-carl-icahn-warns-investors-be-extremely-careful

This suggests that REITs with more office vs mall exposures are preferred.

#99 not 1st on 04.26.20 at 9:57 am

REITs are holding a bunch of the people that don’t have $200 in their pockets and banks are holding those REITs with large debts with the same broke people probably also customers of the same bank. Malls and office towers have been overbuilt for some time especially in the US.

As far as I am concerned after watching this lock down crash, the only stocks that are rock solid are utilities and probably food related companies.

#100 Dharma Bum on 04.26.20 at 10:09 am

Generally speaking, you need to seriously minimize any Canadian holdings (in all sectors), and significantly increase US and some global/international holdings.

Canada’s economy is a one trick pony, and that pony is soon headed to the dog food processing plant.

WE have become a nation of blindly obedient lazy politically correct obsessed SJW welfare addicts, and so-called “leaders” like Trudeau are pandering to these types.

Canada is not open for business.

#101 Sail Away on 04.26.20 at 10:16 am

#90 Idiocy on 04.26.20 at 8:17 am
to comment # 62 Sail Away

You did the right thing – and btw … what ages are they?

—————–

Oh, they’re adults in their 20s.

#102 Gazprom Manager on 04.26.20 at 10:25 am

Oil prices will eventually return to triple digits.

https://oilprice.com/Energy/Oil-Prices/How-Oil-Prices-Could-Go-To-100.html

America will ignite a global war and create an oil shortage.

Gee, thanks for letting us know. – Garth

#103 MF on 04.26.20 at 10:34 am

100 Dharma Bum on 04.26.20 at 10:09

Meh go back into the comments to 2012,13,14 etc. and you’ll come across thousands of posts that the looney is going to be 50 cents, the tsx is done, massive inflation and so on.

None of it came true, and none of it will.

We will see a massive change yes, real estate is done and there will be other adjustments but this isn’t the end of the world.

I don’t know what your talking about when you mention Politically correct SJW’s. That sounds like a silly emotional outburst more than anything resembling reality.

MF

#104 Ryan Lewenza on 04.26.20 at 10:46 am

red_falcon “Reit’s may be on sale, but that doesn’t mean you should buy them. I bought Riocan a year after the 2009 financial crisis for 15 dollars. yield was like over 10% and great as that was.. i couldn’t help look at other stocks and found over time Riocan didn’t pay distributions that increased every year (just one time in 10 years!!). Never again. If a stock or Reit increase it’s dividend/distribution every year, don’t even think of buying it. The case stands for not buying Reits, otherwise you’ll buy and cry out Eeeks!”

Purchasing one underperforming REIT is your basis for for not investing in the whole REIT sector?? First, that’s why you buy a broad-based REIT ETF since it’s hard to know which one’s will under/outperform over the long-run. Second, I don’t follow your reasoning that you should not invest in a stock or REIT that increases the dividend every year. It’s the opposite in fact. Companies that can consistently grow their dividends is generally a sign of a solid and well managed company. Take the CAD banks, some utilities, telecom, consumer staples etc. My research shows dividend growers, those that consistently grow their dividends, deliver the best long-term returns. – Ryan L

#105 Penny Henny on 04.26.20 at 10:59 am

#20 MF on 04.25.20 at 3:22 pm
#210 Penny Henny on 04.25.20 at 11:31 am

“That is why we have to open everything up sooner rather than later. Let’s build some herd immunity during the summer months so this way when flu season (winter) arrives we won’t be taxing the health care system as much.
Basically lets spread this out so the hospitals don’t get overwhelmed as was the original plan before the govt mutated that plan into ‘wait for a vaccine’.”

-Okay you go first then. Make sure you volunteer to be infected so you can start “herd” immunity.

MF
/////////////

Yeah I’m fine with that.
You’re going to get it sooner or later so either you deal with that fact or you live your life in fear.
Pick your poison MF

#106 crossbordershopper on 04.26.20 at 11:02 am

not a big fan of public traded Canadian reits. yields are up from before but risk far outplays the yield.
Canadian investors are willing to accept a 3% yield with a 30% drop in stock price every day,
reits are just a little less, a little higher yield same risk.
still don’t understand why people take risks for a 3% yield, when you can get a 2.5% introductory offer every day from every financial institution, yes its taxable(get rrsp, tfsa) but ZZERO volatility.
can someone tell me the math, if I have no worry no volatility, and a 2.5% yield, what volatility and risk do I get if I am shooting for the moon, like 7% a year. up and down 20% for a couple extra points in the end.
I just wanted to know the math, if you get prefs paying 5% fine, still volatile, blue chip common, volatile, junk bonds and corporate, volatile, credit risk,
I thought mortgage bonds, you know 8% for buddy and his second mortgage was pretty safe, when a million Canadians all of a sudden don’t feel like paying their mortgage. OMG.
man, just take the 2.5% move your money around from one institution to another, and be safe and secure with no trouble, this whole money management is wrong if your not going for big returns stay home. its not worth the trouble.
I was thinking that all business owners are older, if they all pack it in early after the virus issue ends, there will be no business anywhere, and no customers.
sell Canada, and buy US $, yes even with trillions in debt I will still vote for the us $, I think Canada dollar is headed for 62.5 cents.

#107 Ryan Lewenza on 04.26.20 at 11:04 am

stealth “Ryan, Can you clarify your response to
#28 Ryan Lewenza on 04.25.20 at 3:54 pm stating REIT suitability for non-reg accounts and dividend advantage?

Same echo is in the following 2 postings:
#61 short horses
#58 Billy Carter on 04.25.20 at 8:00 pm

In short REITS such as XRE (pure disclaimed example, not advice) distributes most in the form of Other Income and Some in Capital Gains, none in eligible dividends.

Thank you.”

Yes I should have been more clear on this. REIT distributions are broken up into a few different types, each of which is taxed differently. At the end of the year the REIT will provide a detailed breakdown of the annual distributions. The distributions can be straight income, return of capital, and capital gains. The income component is taxed at your marginal tax rate while the capital gains component is taxed at the lower capital gains rate and the ROC reduces your ACB. So some components of the distribution are tax efficient while the income component is taxed at ones marginal tax rate. Hopefully that clears up the confusion. – Ryan L

#108 Sail Away on 04.26.20 at 11:04 am

#103 MF on 04.26.20 at 10:34 am
100 Dharma Bum on 04.26.20 at 10:09

Meh go back into the comments to 2012,13,14 etc. and you’ll come across thousands of posts that the looney is going to be 50 cents, the tsx is done, massive inflation and so on.

None of it came true, and none of it will.

——————–

Maybe you’re not noticing, but this is indeed happening, just not immediately.

We moved here in 2006 when CAD/USD was at par. Since then, slowly and consistently, the CAD has lost value and now would require a 42% increase to reattain par. TSX has done much worse relative to US markets.

Oh, it’s happening. You’re just the slowly boiling frog who doesn’t notice. Think about that before you disagree.

#109 Ryan Lewenza on 04.26.20 at 11:11 am

Billy Carter “Ryan I think you are wrong that REIT distributions are treated as dividends.”

See my comment #105 where I clarified my earlier response. – Ryan L

#110 Dr V on 04.26.20 at 11:11 am

80 looking up – Tom’s comment at 34 gives us some numbers for the recent rents collected by REITs. With those drops, one can expect a drop in the share price.
Are the drops properly reflected, or has the share price over/undershot? Ryan says REITs are on sale, but blogger idiocy 91 recommends caution. I will talk to my advisor next week.

Now as far as the underlying asset, we don’t know how long this slow/shutdown will last. Are we back to normal in a couple of months? Or never? It will take some time for the RE market to figure that one out.

We know that many lease rates are set on a sq ft basis. Will that number change significantly, or will some businesses now operate on a reduced scale – ie
smaller area but preserve that sq ft cost?

#111 Wrk.dover on 04.26.20 at 11:18 am

Another point about how Michael Moore cherry picks:

He states oil is burning as back up while solar panels produce, in case a cloud shows up.

In my ‘hood there is a river with a series of four hydro dams. They just turn the tap a little to compensate.
Private home grid tie solar lets the utility keep the water reservoir a little more toward full.

#112 MF on 04.26.20 at 11:25 am

#107 Penny Henny on 04.26.20 at 10:59 am

Good for you. But you don’t get to make that choice for everyone else.

I’ll actually pass. There is not enough evidence to suggest herd immunity will actually be acquired with COVID:

https://www.cbc.ca/news/politics/herd-immunity-should-not-be-supported-tam-says-1.5545332

PS: if someone is going to attack Tam I think she’s actually correct, and doing her job well.

MF

#113 MF on 04.26.20 at 11:30 am

#110 Sail Away on 04.26.20 at 11:04 am

“Oh, it’s happening. You’re just the slowly boiling frog who doesn’t notice. Think about that before you disagree.”

Nice little analogy, but complete BS of course.

We were at 62 cents American in the early 2000’s. I never said that cannot happen again, I said the claims that we will face catastrophe are none sense.

Action – reaction. With CAD at 62, and an American economy booming (your words), then I wouldn’t expect it to stay there long.

MF

#114 Catalyst on 04.26.20 at 11:44 am

Hi Ryan,

While I agree with your general thesis and long term view on reits (i picked up BPY, SRU recently as I had no reits in my portfolio) there is definitely elevated risk in some of these. For example, smart centres has many investments in condo developments across the GTA. If condo prices are seriously impaired this will impair the value of these developments.

Secondly, the payout ratio of reits is generally in the 90-100% range and yielding about 7% right now. Why would you not own a bank with a 40% payout ratio and 7% yield like CM or BNS?

#115 crowdedelevatorfartz on 04.26.20 at 11:58 am

@#90 SnowOwl
“So, nobody has an opinion on the long term viability of VNQ?”
++++

We’re just “self distancing” …….

#116 Grunt on 04.26.20 at 12:02 pm

I had to replace my flatscreen during COVID. In 2012 I spent >$1K on an early non-smart LED. I naively thought LED might last forever like the lights. A web search suggests the average flatscreen lasts 5-8 years.

I went to Walmart and picked the cheapest flatscreen that met my requirements. At $368 or about a third of what I payed previously.

Just buy the cheapest model that meets your requirements. Fold the back seat and bring it home yourself. Don’t trust home delivery from an internet sale. Or if you do enjoy all the dents and punctured holes in the case.

If you have an old CRT or plasma tv that still works I would keep it until it dies.

As far as Toronto’s skyline is concerned. I still believe most of it will end in the harbour as infill. We won’t see it in our lifetimes. Give it a hundred years. Most of it – particularly condos – will have to come down due to age regardless of lifestyle & working changes.

#117 crowdedelevatorfartz on 04.26.20 at 12:08 pm

@#68 Sail away
“They’re not great at handling a gun and when a BB pinged off my house today, I went over and shut them down.”
++++
Dont feel bad. You saved them, and you, from their own stupidity.

#118 Sail Away on 04.26.20 at 12:10 pm

#115 MF on 04.26.20 at 11:30 am
#110 Sail Away on 04.26.20 at 11:04 am

“Oh, it’s happening. You’re just the slowly boiling frog who doesn’t notice. Think about that before you disagree.”

—————

Nice little analogy, but complete BS of course.

We were at 62 cents American in the early 2000’s. I never said that cannot happen again, I said the claims that we will face catastrophe are none sense.

Action – reaction. With CAD at 62, and an American economy booming (your words), then I wouldn’t expect it to stay there long.

—————-

Or just go ahead and disagree immediately.

Our US holdings have returned over double our CDN holdings between exchange and appreciation since 2009. Hard numbers.

We all must base our choices on something. I generally choose logic over ideology.

#119 Piano_Man87 on 04.26.20 at 12:23 pm

Incidentally, I topped up my ZRE as part of my annual investing/rebalancing on Friday. I told my Dad about it – an active “blue chip stock only” type investor, who tries to time the market.

Him – “You know you just bought a bunch of empty office towers in Calgary, and closed Jamba Juice’s, right?”

Oof.

#120 crowdedelevatorfartz on 04.26.20 at 12:26 pm

@#115 MF

It’ll be interesting to see how low the Canuck buck can fall.
I’m thinking we’ll see historic numbers.
If you’re a raw materials supplier then all will be roses. A cheap buck will make our commodities competitive on world markets.
But if you’re importing finished goods…… aiiii yaaaa….chinese smartphones and tvs are waaaaay too expensive.

I currently have lots of material stock from the US and moved considerable cash reserves into a US business account a few months ago.
But right now? $20k US = $29k Can.
If the buck tanks further…. and how can it not…. with Trudeau being the profligate poser that he is….blissfully shoveling billions out of the back of a train boxcar as it crosses Canada back and forth, day after day.

There’s gonna be price increases at precisely the wrong time for my customers….this recession/depression will be long , hard and bitter.
It will make what the Boomers went through in the 70’s and 80’s look like a cakewalk.
Finally Millennials will have something “tougher” to brag to their grandkids about.

#121 Penny Henny on 04.26.20 at 12:38 pm

#114 MF on 04.26.20 at 11:25 am

https://www.cbc.ca/news/politics/herd-immunity-should-not-be-supported-tam-says-1.5545332

PS: if someone is going to attack Tam I think she’s actually correct, and doing her job well.

MF
////////////////

You think Tam is doing a good job.
Hmmm,
coming from you why am I not surprised

#122 crowdedelevatorfartz on 04.26.20 at 12:42 pm

Gee, mobile testing stations!
What a Novelle idea!
Perhaps the army could do it instead of washing bedpans in Retirement homes.

https://www.reuters.com/article/us-health-coronavirus-britain-testing/britain-sends-out-mobile-units-to-boost-coronavirus-testing-idUSKCN2270W8

Testing the general population on a large scale to see where the problems are……or aren’t…..

….and 6 weeks in….. our govt hands out more billions in cash……and the few and far between testing facilities are sitting empty waiting for…….. the govt to actually change its mind and ….. start testing the general pop?

#123 Yukon Elvis on 04.26.20 at 12:43 pm

#116 Catalyst on 04.26.20 at 11:44 am

Secondly, the payout ratio of reits is generally in the 90-100% range and yielding about 7% right now. Why would you not own a bank with a 40% payout ratio and 7% yield like CM or BNS?
…………………….

Nailed it. Back up the truck.

#124 Damifino on 04.26.20 at 12:57 pm

#109 Ryan Lewenza

The income component is taxed at your marginal tax rate while the capital gains component is taxed at the lower capital gains rate and the ROC reduces your ACB. So some components of the distribution are tax efficient while the income component is taxed at ones marginal tax rate. Hopefully that clears up the confusion. – Ryan
——————————–

It does. And it also nicely illustrates why I hire one professional to manage my assets and another to do my tax return.

#125 not 1st on 04.26.20 at 1:11 pm

Garth, why did you delete my video? There was nothing controversial in there. That’s 2 doctors on the ground in CA and they go over everything in detail about covid including the stats. Its a very enlightening video and they take some real hardball questions from the media.

I know its not a virus blog but it has intersected with our economy and worth discussing. Those doctors are claiming there are millions upon millions of people who had this and if we keep testing and finding more and then locking down it will be a perpetual chicken and egg exercise with our economy toasted because of it.

And we are actually damaging our immune system by locking away and delaying the inevitable herd immunity that has to happen eventually.

I will post again in your sunday blog. Hopefully you let it stand. thx

That video has been deleted four times and will be done so again. This is not a virus-immuno blog nor an appropriate platform for the ramblings of two unknown docs from California. – Garth

#126 SnowOwl on 04.26.20 at 2:22 pm

@#117 crowdedelevatorfartz
VTI it is then.

#127 joblo on 04.26.20 at 8:58 pm

#39 the Jaguar on 04.26.20 at 3:48 pm
Might be a smart move,
Lieberals have no plan, just keep shoveling bucks buying votes.
Lieberal Small Business Minister is a joke.

CONFIRMED: Trudeau has NO plan to REOPEN THE ECONOMY | Michelle Rempel Garner | MRG
https://youtu.be/fqFXWxdP_gQ

#128 Doug in London on 04.26.20 at 10:41 pm

I see a wide variety of comments here, including some negative ones like how the Elliot Wave analysis of XRE shows that the stock is likely to drop to $9-10 area, worst case – $5-6, before it starts a recovery. Current rally is probably a bull trap.

When reading the negative ones I’m sucked into the time tunnel and shot back to 2013. Say, has anyone heard that new tune Harlem by New Politics? How about We’re all in this together by Sam Roberts? That would be a good theme song for some day if or when a pandemic occurs. Has anyone seen that David Bowie exhibit at the Art Gallery of Ontario that’s on now? I reminisce about 2013 because that’s the last time REITs were on sale and similarly I read a lot of negative comments about what a terrible investment they were back then. Also in 2013 I followed the example of Rick Mercer and Jann Arden and tried the CN Tower Edgewalk. What a great view up there!

#129 JonBoy on 04.27.20 at 1:32 pm

#99 Sold Out on 04.26.20 at 9:48 am

Not in the slightest. BBs can be propelled with enough velocity to penetrate a human chest wall and pericardium, if conditions are right. Treated a dead guy who probably thought that little gun was just a toy.

There are BB “guns” and then there are BB guns (actual firearms that require a PAL to own and operate).

Chances are your dead patient was hit by something much more powerful than those kids were using. An adult BB gun (1000+ fps muzzle velocity) is quite a bit different than your typical BB guns that shoot under 500 fps (many under 350 fps)…

Kinetic energy is proportional to the square of velocity, so a little bit more speed gives a lot more energy.

A basic kid-focused BB gun, at a moderate distance, can easily take out an eye but it won’t penetrate the skin, much less go all the way to (and penetrate) the heart…

#130 Scott A Hunter on 04.28.20 at 12:51 pm

Thanks for the post Ryan,

Are there any specific ETFs that you prefer? What are your thought on Vanguard’s VRE.TO ?

I’m looking to buy in my non registered since it qualifies for Canadian dividend tax credit.