RE:Comments on this negative articleGail is right. Lou just continues to put a spin on things. Numbers don't lie. Look at the chart on page 9 of Summit's 2003 Annual Report.
In her appearances on ROBTV the past 12-18 months or so, Gail has been pretty negative on all REITs except IPC REIT and Boardwalk REIT. She has predicted a correction in REIT prices for a while. I think she has a lot of experience following these companies and I actually value her comments. She said that Summit has spent over a billion on acquisitions, and achieved little to show for it. Lou's had over 5 years and over a billion bucks to get Summit rolling. (Summit 2003 Annual Report has dist per unit at $1.53 for 2000-03, throw in 04 and you get 5 years of a flat dist. On page 9, the chart shows 1999 RDI per unit of $1.59 and 2003 RDI/unit of $1.62 --- half a decade and only 3 pennies of RDI/unit growth!!!) It's still pretty dead. Perhaps by 2010 and with another billion the distributions will start to grow. I don't understand why Lou Maroun has not been able to do better. If you look at retail (REI), office/industrial (HR/REF/CUF), residential (CAR/REE) these guys were buying like crazy during the early 2000's and raising the dist every single year. Lou was also buying like crazy but Summit's dist stayed flat and the other metrics have gone up at a snail's pace. HR REIT continues to move into the US for retail and industrial properties with long leases. Lou is retreating. Tom Hofstedter sees expanding in the US as a must for his REIT. Lou wants to focus on Canada and sell off the US assets. I think that it's clearly a case of bad management: overpaying for properties, putting the dist up cripplingly high, go to the US/retreat to Canada, spend gazillions at cap rates that are at record lows to try to turn it around, over five years of flat dists/RDI to show for a period where you more than doubled Real Property Investments and Gross Square Feet, etc.
Try to hunt down real estate conferences, symposiums, etc on the net that have the CEOs on audio archive. Listen to what the successful ones' strategies are and listen to what the pretenders spout.
In a recent conference with Eddie Sonshine and others, Lou said that Summit needs to get big. That he wants it to be the largest industrial land lord in Canada's biggest cities. That industrial real estate is a commodity. That they need size and scale. Later on, Eddie reflected how his retail REIT is not a commodity, and that location, demographics, etc is very important to Riocan.
Many new REITs have come out and how easily they have outperformed if not blown the doors off Summit. Allied, Borealis, Calloway, Northern Properties, O&Y, IPC,... Across the board, REIT managers of Class I, B, and A office, enclosed retail, power centres, residential/apartments, have bought properties and raised distributions while keeping reasonable payout ratios. The past 3 or 4 years have been a great time for real estate of all kinds. If the best that Lou could do in that environment was just to stay still, then the REIT needs a new CEO. IMHO. Also note that Summit's oldie cohorts HR, REF, REI, CAR, etc put in great performances so there is no excuse for Summit. If it's not bad management, then maybe industrial is a bad asset class. And Lou wants more of it.
The “financial highlights” chart in Summit’s Third Quarter 2004 Results news release show PER UNIT numbers for RDI flat (plus $0.008) and DI down $0.028 over nine months versus 2003. Of course Real Estate Investments and Weighted Average Units Outstanding were up. Double digit increases, 13% and 10.48%. If someone said to Lou “GO BIG OR GO HOME.” I think he should’ve chose the later. RBC estimates Summit AFFO/unit for 05 will be $1.52. This means that after paying estimated capex, maintenance, etc. Summit will still be “borrowing” to pay the distribution, much like RRR did.
Perhaps you shouldn't take Gail's word. Call up Lou Maroun and ask him to walk you through the 1999,2000,2001,2002,2003 years in the chart on page 9 of Summit's 2003 Annual Report. Ask him about the lack of growth in RDI and distributions in Summit against comparable REITs over the last 5,6 years or so.