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Some smaller REITs are well-positioned to be taken over. (Alexei Popkov/Getty Images/iStockphoto)
Some smaller REITs are well-positioned to be taken over. (Alexei Popkov/Getty Images/iStockphoto)

Schizas’ Mailbag

BTB REIT shares building a tight base Add to ...

Hey Lou,

Would appreciate your thoughts on BTB REIT. I bought units this summer just before they issued new units at $4.65. It is now down below $4.50.

I’m new at this and am not sure if I should stay or put the money somewhere else.


Hey Don,

Thanks for the assignment.

Congratulations on making the decision to put your money to work. The best investment you will ever make is improving your financial literacy. Ask questions, seek advice and keep this thought in mind. Just because you don’t understand it doesn’t mean you have to buy it.

BTB Real Estate Investment Trust owns 69 properties worth close to $520-million. The portfolio consists of mid level office, industrial, and commercial facilities more than 70 per cent of which are located in Quebec. The yield on the distributions of the trust is 9.02 per cent. In today’s environment that generous a payout would immediately call for further due diligence. The payout ratio for the first nine months of the year improved from 101 per cent to 84 per cent.

What this tells me is that in order to buy new properties to meet their target of holding $1-billion in properties they have to issue new units. The financing you mentioned was for 3,764,000 units and raised $17,502,600.

An examination of the charts will identify the trend, support, and resistance related to BTB.UN

The three-year chart indicates that BTB.UN had enjoyed a nice advance from November of 2011 through August of 2012. Since the summer of last year the units have been essentially building a base in a tight range with support at $4.00 and resistance at $4.50. An old saying in the investment game is the bigger the base the better the case for an investment.

The six-month chart provides a number of interesting signals that you should become familiar with. The MACD indicated that sellers were taking control of the market in the beginning of July. The MACD and the RSI both generated buy signals as the units hit the September lows near $4.00. Currently the units are holding support along the 200-day moving average and the momentum indicators are neutral.

If you bought BTB.UN for the income it generates then you have to accept the risk associated with a small player in the REIT space. As with all investments you need to maintain surveillance and make decisions on a timely basis. With the information generated from the charts I would suggest that BTB.UN is a hold.

Make it a profitable day and happy capitalism!

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

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Follow on Twitter: @louschizas

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