Still Sliding

Does this count as two market blips or just one with a breather in the middle? It looks like it'll be a while before I can really do a comparison of market drops for the year. There sure have been a lot of them.
It looks like pretty much everything is down across the board. Since I tossed together my own index and seeded it with values from sept 23, it's down 6.01%, the s&p tsx capped reit index is down 5.95%, so I'm not doing any better, though it's only been a few trading days, and both those are ignoring yield. Not that it really means anything right now other than I seem to be matching the day to day market fluctuations. No clue if I'll do better in the long run, though off hand, I have better yield by 0.9%. Though that doesn't matter either since I can easily be out grown 0.9%. It's tempting to update my spreadsheet and see if there's a better way I can allocate the cash I'm assuming I can save up by the end of next year. Who knows, maybe this will actually wind up being more than a recreational exercise.
Also reminds me that I haven't written down anything about how I decided on actual share amounts. Maybe I should decide on a methodology for how I'm going to use the data to actually go about investing. Though that'll have to wait for another night. Late and tired, and being depressed doesn't help either.

March grinds to a halt

I think that's the end of my overtime. It's time to get ready for work again and I am completely drained. Definitely one of the hazards of working too much. I don't know if one week will be enough to get me back at it again, but there's also a holiday coming up this month and I have to file GST. I think that does it for my overtime this year.
So close to the end too, but I can't ignore my limitations.

Reflections on MK1 REIT Index

I wonder what a table looks like if I just paste it in here?
Value Growth sum
name price current distribution current yield 2008 2007 2006 2005 average Quintiles
allied properties 19.1 1.32 6.91% 4.76% 2.94% 3.76% 3.47% 3.74% 10.65% 3
artis 14.28 1.08 7.56% 2.27% 0.00% 0.57% 0.57% 0.85% 8.42% 2
boardwalk 34.05 1.8 5.29% 12.53% 8.11% 17.43% 1.94% 10.00% 15.29% 5
canadian apartment properties 16.2 1.08 6.67% 0.00% 0.00% 0.00% 0.00% 0.00% 6.67% 1
crombie 10.65 0.8904 8.36% 4.51% 4.41% 1.49% 3.47% 11.83% 4
cominar 21.13 1.44 6.81% 6.19% 10.78% 2.00% 0.00% 4.74% 11.56% 4
calloway 19.15 1.548 8.08% 0.00% 3.20% 3.48% 15.05% 5.43% 13.51% 5
dundee 30.1 2.196 7.30% 0.00% 0.00% 0.00% 0.00% 0.00% 7.30% 2
huntingdon 1.27 0.2796 22.02% 0.00% 0.00% 0.00% 0.00% 0.00% 22.02% 5
H&R 14.87 1.44 9.68% 5.08% 2.70% 2.30% 4.82% 3.72% 13.41% 5
interrent 2.15 0.2604 12.11% -31.55% -31.55% -19.43% 1
lanesborough 5.2 0.564 10.85% 0.00% 0.00% 0.64% 0.00% 0.16% 11.01% 4
morguard 12.15 0.9 7.41% 0.00% 0.00% 0.00% 0.00% 0.00% 7.41% 2
norther properties 23 1.4796 6.43% 0.00% 7.22% 5.50% 4.61% 4.33% 10.77% 3
primaris 16.26 1.2192 7.50% 3.67% 3.16% 0.00% 5.56% 3.10% 10.59% 3
canadian realestate investment trust 28.15 1.3596 4.83% 2.26% 2.59% 1.22% 1.62% 1.92% 6.75% 1
riocan 20.16 1.35 6.70% 0.00% 2.27% 2.33% 2.38% 1.74% 8.44% 2
retrocom 3.5 0.45 12.86% -25.00% 0.00% -26.79% -20.02% -17.95% -5.10% 1
scotts 5.92 0.8496 14.35% 0.00% 0.00% 0.00% 0.00% 0.00% 14.35% 5
whiterock 9.51 1.122 11.80% -0.53% 0.00% 0.86% 0.00% 0.08% 11.88% 4

That's messy to the point of nonsensical. If you can somehow comprehend it, what's interesting about this? To start with my top picks on this method are Boardwalk, Calloway, Huntingdon, H&R, and Scott's. Three of those, I'm ok with. Boardwalk has show good growth and I know they're a big player where residential real estate is concerned. H&R is number two by market cap, so obviously a lot of other people feel that it's worth putting a lot of money into. Calloway as I recall is Walmart's largest landlord in Canada. Very solid anchor tenant. Huntingdon is one that I don't feel comfortable holding a major position in. It scores high on yield, but that's because investors are fleeing. That's something my methodology doesn't work well on, so some tweaking is to be required. I can manually ax it from the list, though that leaves me wondering what to do with H&R, which has taken a considerable slide lately ever since the collapse of Lehman Brothers.
The last name on there is one that I think I like. Scott's, while having a high yield, looks actually stable. It's down considerably from 12 months ago, but it spent the past 5 months hovering around $6. We're in the middle of a major dip in the markets and it is still around $6. There was also a big dip in July, it held steady at around $6. So unlike huntingdon, this doesn't appear to be the result of a distress sale. Latest headlines say that they're making acquisitions and their Q2 earnings report says revenue is up 23% and payout ratio is improving. This might actually be a good name to run with, as the methodology suggests. Granted, they have yet to increase distributions since starting.
In the next tier of stuff, there's Crombie, Cominar, Lanesborough and Whiterock. Four names I don't hear much about. Half of them have shown some growth, the other half hasn't. This raises the question of whether or not all of these are stable/growing. I'll just assume the growing ones are actually growing and cut down the amount of work I need to do. This of course brings to mind another question, if I need to look into almost every company in the list, why bother indexing? Isn't indexing supposed to make things easier? Well, I need to know that my methodology works.
When I look into lanesborough, the first headline on their website is that they're back in the black, which is a cause for concern for me. I like to know why they were loosing money. I also know nothing about what they do, but why they're loosing money has yanked my attention first. The news release claims that a large percentage of their properties are under construction or under lease. A closer look reveals that yes, there are properties that are under construction and some with some very low occupancy rates. It also shows that revenues are increasing quickly. I also see that they're paying out more in distributions than their fund flow from operations. This troubles me. For now, I'm just going to wait and see what happens with it. When converting from play money to real money, this will probably be one of the last ones I buy.
So, what about whiterock? According to the fact sheet on their website, FFO surpassed the distribution rate sometime in Q4 last year. They're landlords to a lot of government offices. Also claim to be making accretive acquisitions and they have access to credit with TD. It's nice having a quick sheet to look at that doesn't force me to wade through financial statements that I still find somewhat cryptic. Though I am looking at them anyway and while I don't feel confident in my ability to read them, things seem decent. I'm hesitant to say they look good, but mainly due to I'm still not entirely convinced I'm fully understanding everything.
Since time is precious, for now I'll refrain from looking up every other name on the list. It's not real money anyway and I can look into things further when I actually have the money to invest.
Another interesting thing to note, Riocan is actually near the bottom of the heap, which I'm not sure I'm ok with. If I had to guess why, I'd assume it's because it's considered a safer place and fewer people have decided to sell off their holdings. Thus it isn't as good of a deal as other reits right now, however remains a high quality investment. Of course, this is all just the uneducated speculation of a first time investor.
Of course, there's still one more next step, translating percentages into actual lots of units. I don't really like the idea of having a lot of odd lots of everything. After that, there's the saving up of money followed by the actual buying of stuff.

Playing with My Own Index

I decided to make my own REIT index since it seems like a good way to get some more income and I wasn't really happy with my current options in that sector. The iShares ETF tracking the S&P TSX REIT index gets a lot of talk for a lot of things. One is for having very few securities, 12 reits and t-bills. The other is for having roughly 25% of it's funds in Riocan and what used to be about 15% in H&R, or about 40% in two securities. Granted, it's not the number of ticker symbols you have in your fund, it's really about what they represent. I can justify having a large position in Riocan simply because it's hard for me to think of a place I lived where they didn't have a very nice looking property nearby and they were always pretty much fully rented out. H&R is also another big name, though they don't proudly post their name on every property they own. In terms of spreading investment dollars amoungst sqft, the two of them do a fairly good job.
One critism that I don't hear all that often is that its holdings aren't adjusted to remove what may not be considered REITs anymore after the big "let's kill off the income trusts" tax change. There's some worry going on over whether or not things like senior's housing and hotels where much of the money comes from the services provided as opposed to the lending of the property. I would like to stick to what is definately going to still be considered a REIT afterwards and still an income trust/mutual fund investment trust.
So, why build my own index? Well, I'm not going to deny that fun is one of the reasons. Also, while those two REITs might spread money over large amounts of rental area, they do not spread money around different management styles, and acquisition philosophies. They're also still only two ticker symbols, so I should be able to reduce volitility with a larger basket. Granted in the bigger picture it's like saying that you don't feel the waves as much, but you're still stuck in the current. So in hopes of getting better returns, I started going about deciding how I'll setup my indext.
XRE is based off an index that uses market share weighting. I am interested in returns and it tends to be a bit of a pain to calculate total returns. Complexity is not something that I'm interested in, keeping things simple is one of the general philosophies of indexing. I decided on a simple scoring process involving yield plus a four year average growth rate. The general idea being if I had a two percent higher yield, I can simply reinvest the difference and wind up with two percent better growth rate, so the two are really interchangable, at least in a taxless world. Four years was kind of an arbitrary decision. The current year is included and counts as a full year even though it's not over, this advantages reits that don't wait till the end of the year to adjust distributions. It's a fudge I'm ok living with. Also many REITs are less than four years old. So I did a simple average of whatever the distribution growth rate was over the age of the REIT. Notably absent is any capital appreciation. I'm less concerned about capital appreciation than I am income. So I now have a MK1 Return Rated REIT index.
It's also getting late, so I'll stop now and leave this post nicely about what I did and follow up tomorrow with a post on what my spreadsheet suggests I do.

Market Dips Year to Date

Heh, I was plotting a post about how different sectors performed in the various market drops so far. Though after looking at today's closing market figures and I must say this one isn't over yet. While I haven't really looked at the data yet, but I think there's been a change. I'll see what I find when it's over.

Here we go again

One of the things I absolutely hate about elections is the promise of tax credits and deductions. The previous government brought in quite a few and I'm already hearing a lot of praise for a credit for closing costs for first time home buyers. There are already enough of them. I want simpler taxes across the board for everyone.

Real-estate risk/Random speculation

What do you get when you combine lack of experience with a lack of formal background into the subject?  Well, I'm not sure, though some thoughts going through my mind since I originally decided that I like REITs and would like to have a significant portion of my portfolio in them.  I can see the damend for office space dropping as financial services shrink.  This will probably result the price of office heavy REITs falling/yield increasing, along with slower growth rates and possibly a small decrease in distributions in the short term.  Part of me expects that things will become oversold and open up opertunities to invest.

I can't really see industrial property moving very quickly.  Yeah, we're loosing car plants, which means that all the connected stuff is going to suffer a bit.  I'm tempted to whimsically remark that all the parts for anything these days come out of China anyway so it'll stay contained.  In all practicality though, it's a bit of a toss up in my mind over whether or not closures will out pace exsisting escallation clauses in the continued leases.

Retail, I have a hard time seeing a decline in high quality retail properties, however, I don't think they'll grow as fast as they would otherwise.

Finally, with regards to residential properties, I'd expect population trends to change slowly.  Granted, rents are probably going to have to come down, or stay the same when unemployment goes up.  I don't expect a major hit.

So in summary, these are the rantings of someone who knows nothing, spent next to no time studying the situation and absolutely no track record.  I expect overall slower growth, and offices will take a significant beating, but there'll be an overshoot period where they'll represent a good buy.