RE:RE:Trying to Become another Brookfield is not the Right AnswerThat is very well explained, and that is in fact how I understand
one version of a potential spinout could work. There are however a significant number of other permutations and combinations. If it works like you have laid it out, that would be a fairly benign outcome, and yes the aggregated share prices would be higher right now, but if all of a sudden say Industrials tanks for some reason then that stand alone is going to take a much bigger hit to SP than the company would on a roll up basis. I get the arguement that the other segments may continue to go up and more than offset the one hit, but they also may not. The actual real estate I own personally, certainly isn't all in one class. There is farm land, Industrial and residential rental. Over 40 years I have seen big swings in what segment and market was doing well. I like my REIT portfolios constructed the same way. Different strokes for different folks, but there are already lots of pure play REITs. I don't own those ones.
RetiredCEO wrote: I think you may be misunderstanding how the Spin Offs will actually make you Capital Gains, and have no effect on diversification. The idea of the Spin Offs is not to sell the divisions. To make it simple, and using all divisions as equal weight, if you own 4 shares today in 1 company, you will own 4 shares tomorrow in 4 companies. The company stucture does not get more complicated. It gets simplified into 4 pure companies. But, the discount to NAV will be less, and the combined distribution of those 4 companies will be higher than you are being paid today.
Because the discount to NAV is reduced through spin offs, instead of your 1 unit trading at $15, your 4 units combined will trade at $20+. You have the same diversification, but its held in 4 separate REITs. That is the only difference.
In regard to selling off hot sectors, if Industrial is worth $5, but someone wants to give you $8, take it. If someone wants to give me $80,000 for my $50,000 truck, I will. Then just buy something else to replace it. Its also possible they could take that $8/unit (not saying this would be the number, I believe that's too high, but no one knows. Just using round numbers.) and do a one time special return of capital distribution to unit holders. Not likely, but that would be a wake up call. Their strategic initiative is to recognize NAV, and a ROC distribution makes sense for this announced strategic initiative. They won't sell below NAV, and a sale above NAV could add significant upward NAV to HR. Think upping NAV from $22 to $25. They mentioned in the earnings call a buyer had a strategic reason to pay over what the division is worth. Let them over pay. Everything is for sale, at the right price.
DeanEdmonton wrote: A REITs job is to own quality properties that it rents out and then distributes the cashflow to shareholders. They are our proxy so we don't need to own and manage property ourselves. I don't own Brookfield because it is so heavily financially engineered that no one can understand the real structure. I hold H&R specifically becasue it is a diversified REIT, relatively simple in structure, with quality properties in a wide range of class A markets. If they futz around and mess that up I will need to go looking for a diversified play to replace them. The whole point of being diversified is some proeprty classes will be hot and others cold at different times. Selling off all the hot category markets is not helping and I can tolerate the hit to SP vs NAV for that diversification. Just keep the dividend stream coming and growing.