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Keep an eye on Boardwalk REIT Add to ...

Hi Lou,

I just bought Boardwalk and since then it has gone down. I figured that a lot of people as they get on will rent instead of buying a condo. Was I wrong?

Vince

Hey Vince,

Thanks for the assignment.

Boardwalk REIT owns 225 properties with 35,277 rental units in Alberta, British Columbia, Saskatchewan, Ontario, and Quebec. Just over 50 per cent of the inventory is in Alberta. The value of the trust units have enjoyed a great ride over the last three years supported by the low interest rate environment, excellent management, and healthy demand for rental housing. The company focuses on customer service which helps keep vacancy levels low, while vertical integration of operations helps control the cost of maintenance.

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An examination of the charts will help identify the opportunities and risks associated with this real estate investment trust.

The three–year chart illustrates the solid up trend that had been in place until August of 2012. What has developed since then is sideways trading in a tight range. What has to be on your radar when considering interest rate sensitive investments is – wait for it – the direction of rates. The current forecast is that rates will move higher in late 2013 or early 2014. I think that the best course to follow is to review the charts every single day to avoid finding new lows with your money.

The six-month chart outlines the trading range with support at $62.50 and resistance at $64.50. There have been spikes above and below the range but they have generally been short lived. The MACD and RSI are turning lower suggesting that we will see a pullback within the range. At this point I don’t anticipate a lot of selling pressure that could kick-start a correction. Equity Clock, a specialized web site that tracks seasonality, has identified the time frame that begins in November and ends in September as a period of seasonal strength for Boardwalk REIT.

As to your original premise of people getting on moving into rental units instead of buying a condo unit. My view of real estate is driven by the belief that you will need shelter until the day you die. The choice of ownership or rental is driven by each individual case and needs. Your recent purchase of units in BEI.UN may have come at the top of the range but don’t let that spook you. The worst-case scenario given the information currently at hand is a retreat within the range. That’s not a guarantee so make sure you consult the charts frequently.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it to lschizas@globeandmail.com.

 

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