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Number Cruncher

Stock screens for investment ideas from professional investors. Exclusive to subscribers of Globe Unlimited.

Scotiabank skyscraper, centre. (GRAEME ROY/The Canadian Press)
Scotiabank skyscraper, centre. (GRAEME ROY/The Canadian Press)

Number Cruncher

Headwinds, tailwinds: A bird’s eye view of REITs Add to ...

What are we looking for?

What the pros are buying.

Checking out a fund’s top holdings is a good way to get investment ideas or begin your research of the fund. Today, we look at Dynamic Global Real Estate Fund at dynamic.ca.

More about the fund

The $296.4-million real estate equity fund is co-managed by Tom Dicker and Oscar Belaiche of GCIC Ltd. The fund, which focuses on North American securities, gained 11 per cent for the year ended April 30. It has also posted an 8.5-per-cent annualized return over 10 years. In April, the fund was 63 per cent invested in Canada and 25 per cent in the United States.

Mr. Dicker is “reasonably bullish” on Canadian real estate investment trusts (REITs) and corporations for at least the next year. The continuing trend of lower interest rates combined with demand for yield by an aging population “continues to be a tailwind for the sector,” he said.

But there are potential headwinds from the euro zone debt crisis and China’s slowing economy, he acknowledged. “Real estate companies are sensitive to banking crises. … It would be a cause for concern if there was a seize-up in credit markets like we saw in 2008 because REITs have to refinance mortgages on a regular basis.”

What did we find?

U.S. shopping mall giant Simon Property Group Inc. surging 30 per cent over one year.

Mr. Dicker is still upbeat on Simon Property, the world’s largest real estate company with high-end and outlet malls. “Demand for space in high-end malls continues to be strong,” he said. “Their payout ratio is only about 62 per cent. I could see the dividend going higher, which will help drive the stock.”

He also likes Dundee REIT, which this year acquired a two-thirds stake in Scotia Plaza, a trophy office tower in Toronto’s financial district. This REIT, which is 91 per cent invested in office properties, will eventually become a “pure play office REIT,” he said. “The market tends to value pure plays higher because they are easier to compare.”

Allied Properties REIT, an owner of renovated brick-and-beam office buildings, is attractive because it is expanding into traditional office towers, he said. “They have locked up a lot of land in downtown Toronto.” Allied also has a strong management team headed by chief executive officer Michael Emory, he added.

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Top Holdings of Dynamic Global Real Estate Fund at April 30, 2012

Company Symbol Price $ (June 6) 52-week high $
American Tower* AMT-N 65.79 68.52
Morguard Corp. MRC-T 90.00 96.00
First Capital Realty FCR-T 18.67 18.86
H&R Real Estate Invest. Trust HR.UN-T 24.16 24.69
Brookfield Asset Management BAM.A-T 32.69 33.18
Macerich Co.* MAC-N 57.00 62.83
Brookfield Office Properties BPO-T 16.92 19.24
Allied Properties REIT AP.UN-T 28.41 29.15
Simon Property Group* SPG-N 149.12 158.60
Dundee REIT D.UN-T 36.69 37.94

*Figures in U.S.dollars. Source: Globe Investor, GCIC Ltd.


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