Killam Apartment REIT T.KMP.UN

Can someone explain this

[WDMBell]

REITS are dropping like a rock and yet rental rates are increasing and suites are becoming scarce.  How does this make any sense?!?

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-its-a-dog-eat-dog-world-as-housing-cool-down-helps-ignite-rental/

[DanielDarden123]

Herd mentality is a powerful force in the human race especially when fear is a factor. Most people prefer to buy when they are comfortable, however, prices are much higher then. Logic tells us that when homes are unaffordable then renting is the only shelter option. Theoretically, the cap rate should  rise with rising rates but that is offset by rising and stable income.

[Maxmoe]

The answer to your question is found on the balance sheet. Kmp has $2 billion in debt. Every 1% increase in interest rates eats up $20 million in profit/cash flow. So that's about 3 months worth of dividends. And that's for a 1% increase. A 4% increase would be $80 million which is more than the annual dividend. The current dividend is very unlikely to be cut, but the jump in rates will

[DanielDarden123]

Your analysis would be more useful if you made the necessary and important distinction between floating rate debt and fixed mortgage debt. If you check the balance sheet you will realize that most is fixed and does not escalate with a rate increase but rather is renegotiated at the end of the term. That is not considered in your calculation and is therefore misleading. Yes, interest rates affect

[SusanBolland]

exactly ... Most Canadian REITS have their debt locked in for 5 plus years.... so there wont be any change to their interest costs....  and by the time the mortgages come up for renewal the central banks will be lowering interest rates to "help" us out of the recession they just put us in by raising rates... LOL

[Maxmoe]

What a magoo. I offered a plausible explanation to a question. You offered a poorly constructed weak criticism with no alternative explanation to said simple question.  The market, investors, and this one in particular, is forward looking and not literally, like a toddler. Outside that simplistic world, in reality, all that debt comes due and will roll over at higher interest rates unless