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SUBJECT: I98.....ROTF...fishies take hit again Posted By: Culturevulture
Post Time: 9/10/02 23:11
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REIT on
11:42 EST Friday, Aug 30, 2002
Rob Carrick
TORONTO (GlobeinvestorGOLD) -- And now for something completely dull, real estate investment trusts.
REITs just don’t have the attention-grabbing qualities of some of the other types of income trusts available to investors these days, including ones based on a sardine-canning operation, a burger chain and garbage hauling. Still, there are a couple of very good reasons to look at REITs as a way to add trusts to your portfolio.
Buying a REIT allows you to profit from the profits generated by a collection of real estate properties in a particular sector. For example, RioCan Real Estate Investment Trust specializes in retail shopping malls, H&R Real Estate Investment Trust holds office buildings, Canadian Hotel Income Properties is one of several players in the hotel area and Residential Equities REIT owns urban apartment buildings.
The appeal of REIT investing right now is that the commercial real estate market in Canada is reasonably healthy, even if office vacancy rates are still climbing in some cities. Conditions should only improve as the economy gains strength, a fact that would help offset the negative influence that rising interest rates would have on the trust market as a whole.
REITs are also among the more stable, less risky types of income trusts, and this is reflected in their yields. RioCan and H&R, the largest REITs in Canada by market capitalization, both have yields in the area of 8.6 per cent, which is at the lower end of yields in the whole trust sector. A higher yield suggests a greater level of risk in a security. You’ll also find REITs among the largest income trusts as measured by market capitalization. Globeinvestor Gold shows RioCan to be the third-largest REIT by market cap at $2.03-billion, with H&R and Retirement Residences REIT ranking 11th and 12th at close to $1-billion.
There are certainly opportunities for capital gains with REITs, especially if the commercial real estate market firms. REITs can also bite, though. Obviously, a repeat of the early 1990s real-estate bust would be disastrous for the sector (REITs didn’t come to prominence until the mid-1990s). As well, REITs aren’t impervious to other market trends. The sector was roughed up somewhat in the turbulent stock market environment of 1998, and then was ignored in 1999 and early 2000 as investors focused on tech.
Several REITs have since come back into favour, posting quite decent price increases. For example, RioCan units are up a total 36 per cent over the past three years.
If you’re interested in REITs, a good way to increase your knowledge level is to read a booklet published by the Canadian Institute of Public and Private Real Estate Companies called The Canadian REIT Guide. You can download it on the CIPPREC Web site at: https://www.cipprec.ca/research_education/canadianREIT_guide.htm.. Also available on this Web site is a useful list of REITs along with links their respective Web sites. It’s an ideal place to start your investigation into one of the more substantial corners of the income trust world.
Rob Carrick has been writing about personal
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