Great article. I'm all in on the Space: Nexus, H&R, Dream Office, Dream Residential, Dream Unlimited, Northview Residential, Artis to name a few. Small positions in MPCT & MRT for now but I think both of those names might move a lot when they do bust loose. Want to start buying back into Plaza which I discarded given elevated yield and falling payout ratio. Really the space is overly compelling right now. Gotta do something about IIP too... 5.7% implied cap rate is pretty crazy given recent evidence of sales in the lowest of 4s on old buildings.
Hi Koneko - noticed a possible error in the "Canadian REITs Comparison" chart. Slate Grocery is listed as having a 25% discount to NAV but a 9% premium to EV. I don't think it's possible to have both a NAV discount and EV premium, and my calculations seem to imply a 12% discount to EV based on the $14.65 unit price in the chart.
Thank you! Yes, you are right and the calculation has been corrected.
SGR is a bother because financial statements are in US$, most equity trading is in the liquid C$ ticker SGR.UN, and the company publishes an adjusted NAV greater than book value. The spreadsheet error was due to using the adjusted NAV, but not making a comparable adjustment to EV.
The NAV adjustment is for deferred tax liability on US assets. I think it's reasonable because peers do not accrue any liability for tax on appreciation of Canadian assets, even though it would be due. H&R discloses a similar NAV adjustment. Granite has a deferred tax liability, but does not disclose any "NAV". To apply the same methodology for all, I adjusted the NAV for GRT and then corrected the EV calc for both HR and GRT.
Hi Koneko, great write up on the space. I also find MRC interesting it's looks incredibly cheap and seems conservatively run. Given the accounting intricacies of MRC, DRM, which both share parent subsidariary relationships and a combination of multiple business segments. how would you best value the shares? Would you be more concerned with FFO despite these companies not being REITs or would a traditional DCF model work best here?
Also about the Canadian REITs Comparison, Slate Grocery has a NAV discount of ~1100%, it seems to have skewed the sector NAV discount to 99%. I think a median would work better instead of an average in that case. Unless of course that was a typo.
Thanks! The SGR NAV was a total error - thanks for pointing it out - should be corrected now.
I see MRC as an NAV play, like DRM, and MRD. MRC trades at a deep NAV discount, but you also want to see NAV growth over time. I tried to highlight that in my MRD profile - the stock price makes it look like a value trap, but that company has continued to build value. With MRC it's more complicated because it has not done a great job of managing the assets it has acquired cheaply.
Great article. I'm all in on the Space: Nexus, H&R, Dream Office, Dream Residential, Dream Unlimited, Northview Residential, Artis to name a few. Small positions in MPCT & MRT for now but I think both of those names might move a lot when they do bust loose. Want to start buying back into Plaza which I discarded given elevated yield and falling payout ratio. Really the space is overly compelling right now. Gotta do something about IIP too... 5.7% implied cap rate is pretty crazy given recent evidence of sales in the lowest of 4s on old buildings.
Hi Koneko - noticed a possible error in the "Canadian REITs Comparison" chart. Slate Grocery is listed as having a 25% discount to NAV but a 9% premium to EV. I don't think it's possible to have both a NAV discount and EV premium, and my calculations seem to imply a 12% discount to EV based on the $14.65 unit price in the chart.
Thank you! Yes, you are right and the calculation has been corrected.
SGR is a bother because financial statements are in US$, most equity trading is in the liquid C$ ticker SGR.UN, and the company publishes an adjusted NAV greater than book value. The spreadsheet error was due to using the adjusted NAV, but not making a comparable adjustment to EV.
The NAV adjustment is for deferred tax liability on US assets. I think it's reasonable because peers do not accrue any liability for tax on appreciation of Canadian assets, even though it would be due. H&R discloses a similar NAV adjustment. Granite has a deferred tax liability, but does not disclose any "NAV". To apply the same methodology for all, I adjusted the NAV for GRT and then corrected the EV calc for both HR and GRT.
Hi Koneko, great write up on the space. I also find MRC interesting it's looks incredibly cheap and seems conservatively run. Given the accounting intricacies of MRC, DRM, which both share parent subsidariary relationships and a combination of multiple business segments. how would you best value the shares? Would you be more concerned with FFO despite these companies not being REITs or would a traditional DCF model work best here?
Also about the Canadian REITs Comparison, Slate Grocery has a NAV discount of ~1100%, it seems to have skewed the sector NAV discount to 99%. I think a median would work better instead of an average in that case. Unless of course that was a typo.
Great read thanks for your continued efforts.
Thanks! The SGR NAV was a total error - thanks for pointing it out - should be corrected now.
I see MRC as an NAV play, like DRM, and MRD. MRC trades at a deep NAV discount, but you also want to see NAV growth over time. I tried to highlight that in my MRD profile - the stock price makes it look like a value trap, but that company has continued to build value. With MRC it's more complicated because it has not done a great job of managing the assets it has acquired cheaply.
Any opinions on Dream Imapct? Thank you for a great article.
Thanks. I'll probably post an article next week on Dream Impact with several new insights.
What is the tax treatment for NON-residents of dividends and capital gains, in case of Canadian REITs?
Awesome thank you!