TSX:APR.UN - Post by User
Comment by
nini222on Dec 02, 2018 4:15pm
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Post# 29051401
RE:its time to buy APR.un
RE:its time to buy APR.unI find it's always helpful to hear the bear case when considering investments. I have no position in APR but have considered buying units under $10. Here is why I haven't:
1) Long term leases: double edged sword here, stability but also means much more sensitive to rate increases. APR has very little power to raise rents. Imagine what happens if we were to get more rate increases and the 5 year TB hits 4%? Not saying it's going to happen but if it does APR would be powerless to address it unlike say an apartment REIT that would be renewing leases at higher rents to counter raising rents.
2) Electric cars: I know it's far off, but keep something in mind that dealerships make most of their income on servicing (check out ACQ). Electric cars have much, much less servicing associated with their ownership. This risk is far out, but APR is only as strong as it's tenants. Long term leases would mean nothing if the tenant cannot pay the lease because it's business deteriorates. Again very long term risk, likley not an issue for a decade+.
3) Dealerships do close: check out how many were closed as part of GMs 2008 bankruptcy. So very high expsoure to general economic downturns.
4) Single tenant exposure, again good and bad. good if you like the 100% occupancy, bad if you don't like taking on the risk that something bad happens at Dilawri. Never say never, people thought GE was a buy and hold forever company not long ago.
5) Over-extended canadian consumer, late cycle in new car sales...might not hit APR directly but it would hurt dealerships. I mean just look at what happened to ACQ during the Alberta recession...it's not pretty...but the risk to the dealership directly is mucher higher than their landlord.
I do think APRs management has done well since IPO, payout is sustainable and they have issued equity at the right times. I don't think an 8% yield compensates me appropriately at this time but would take a closer look at a 9% to 10% yield.