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Boardwalk Real Estate Investment Trust, which slashed its monthly payout just three months ago, believes it is now making a comeback. Many investors are on board with its new-found optimism, but it's hard to see much upside in this turnaround story.

The REIT's challenges are clear: Boardwalk owns and manages residential rental properties primarily in oil-sensitive Western Canada, where occupancy levels have fallen sharply. Cash flow has dwindled in recent years, and the unit price is down more than 35 per cent since 2014.

But when Boardwalk released its fourth-quarter financial results earlier this week, its management referred to 2017 as a "transitional year," implying conditions are set to improve. Management also gave upbeat guidance for the year ahead: Cash flow, they believe, is set to rise as much as 11 per cent from last year.

Many investors want to believe in this sunnier outlook: They drove Boardwalk's unit price up 9.1 per cent on Monday. But anyone jumping into this rally is making a bet the REIT can expand beyond its base in Western Canada, and that the recovering price of crude oil and other commodities can continue. All for a paltry yield of just 2.2 per cent.

Is it worth the risk?

The REIT owns more than 33,000 suites. More than 74 per cent of these are located in Alberta and Saskatchewan – a source of stable cash when the region was booming, but a hurdle when the price of crude sank 75 per cent between 2014 and 2016.

The REIT may have hit rock bottom in the third quarter of 2017: Occupancy levels fell to a low of 92.7 per cent, down from more than 98 per cent prior to the oil bust. Since vacant suites make no money, the REIT's funds from operations – or FFO, a key cash-flow metric used by REITs, which helps guide payouts to investors – fell to 53 cents a unit, down from 90 cents in the third quarter of 2014.

As a result of this nose-diving cash flow, Boardwalk's cash distribution as a percentage of FFO rose to unsustainable levels, so the REIT cut back its annualized distribution in November to $1 a unit from $2.25.

Boardwalk has a recovery plan, though. Recognizing its focus on Western Canada has a downside when commodity prices go haywire, it has reallocated resources – largely the money that used to flow to investors – toward expanding its national footprint. Its goal is to raise its exposure beyond Alberta and Saskatchewan to 50 per cent, from about 26 per cent currently, over the next 10 to 15 years.

It has also taken advantage of the soft rental market by renovating existing suites to make them more appealing to consumers and attract higher rents. Much of this work has been completed, and management now expects that a financial headwind will become a tailwind.

Management noted that the occupancy rate for January rose to 95.7 per cent – the fifth consecutive month of improvement and a step toward the near-term goal of a 97-per-cent occupancy rate by spring.

Some financial numbers are also encouraging: Revenue from existing suites rose 0.9 per cent over the previous quarter, the first uptick since the middle of 2015. Perhaps best of all, the REIT's fourth-quarter FFO of 53 cents a unit – though unchanged from the previous quarter and down from 84 cents in the fourth quarter of 2014 – exceeded analysts' expectations by a couple of pennies and likely fuelled Monday's rally.

Is this the start of a turnaround for Boardwalk? Perhaps, but it's difficult to see much upside for investors yet. The slight uptick in revenue from occupied suites is a good start, but hardly looks like a bullish underpinning.

An improving economy in Western Canada, buttressed by rebounding commodity prices, will no doubt help. But the price of crude oil is about 40 per cent below its price in 2014, which implies these aren't exactly boom times. Current investors are getting paid a 2.2-per-cent yield as they await better days. Thanks, but it looks like a weak reason for sticking around.

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