Income Trusts
this Friday is the monthly shareclub meeting, for this meeting I am going to do a presentation on Income trusts. Except for a one page on the Saxon High Income (Saxon funds are no load and have a low MER 1.25% and all their funds are top quartile, small but good funds run by two good managers. available in Canada). Also two pages on REITS.
Enerplus I believe now trades in the US and Arc Energy will also soon trade in the US, would buy oil trusts on a pull back of oil to the low $20s. anyways here is the information.
The following charts assume a 2002 oil price of $20 US, and natural gas prices of
$2.50US 2002, and $3US for $2003.
my estimates are for 2002 average oil price of $22-$25US, and natural gas price of
$3.50-$4US for 2002 and $4.50US for 2003
So these numbers may be on the low side, still when looking at an investment always
good to look at the worse case scenario.
This also does not take into account drilling success and the bringing on of new
production.
Distributions for a 10% increase in the oil and gas prices
Company % per unit $ per unit
Pengrowth 21% .33
NCE petrofund 15% .25
Enerplus 14% .38
Shiningbank 14% .20
Freehold 12% .12
NAL oil and gas 10% .10
Arc energy 6% .10
Primewest 5% .05
Average 12%
Distributions for a 10% increase in oil prices
Company % per unit $ per unit
Pengrowth 15% .23
Enerplus 9% .25
NCE petrofund 9% .15
Freehold 9% .09
NAL oil and gas 6% .07
Shiningbank 5% .07
Arc energy 4% .06
Primewest 3% .03
Average 8%
Distributions for a 10% increase in gas prices
Company % per unit $ per unit
Shiningbank 9% .13
Pengrowth 6% .10
NCE petrofund 6% .09
Enerplus 5 % .12
NAL oil and gas 4% .04
Arc energy 3% .04
Freehold 2% .02
Primewest 1% .01
Average 4%
Premium to Net Asset Value based on $20 USoil and $2.50 gas
Comapany Price outlook
Freehold 33%
Enerplus 57%
NCE petrofund 59%
Pengrowth 60%
Arc Energy 72%
NAL oil and Gas 92%
Primewest 95%
Shiningbank 130%
average 75%
Forcast 2002 Year end debt to 2003 cash flow
company X
Freehold .9X
Nal oil and gas 1.1
Enerplus 2.1
Arc Energy 2.3
NCE petrofund 2.4
PrimeWest 2.6
Pengrowth 2.8
Shiningbank 3.0
average 2.2
Real Estate Income Trusts (REITS)
Riocan
NAV (net asset value) $10.10 Jan2002
2001 div $1.08 2002 $1.10 2003 $1.12-$1.16
Payout ratio has fallen from 96% to 92%.
Total Area (sq. ft): 22,862,517
Total Number of Tenants: 3,476
Occupancy: 95.4%
Geographic Distribution (based on revenue)
Number of Properties
Ontario 67.4% 99
Alberta 10.2% 13
Quebec 9.4% 17
British Columbia 4.9% 8
Saskatchewan 4.0% 4
New Brunswick 2.0% 5
P.E.I. 1.2% 1
Manitoba 0.8% 1
100.0%
148
Anchor & National Tenants Percentage of Area: 77.5% Percentage of Gross
Revenue: 76.9%
Top Sources of Revenue by Tenant Tenant Pecentage of
Gross
Revenue Weighted Average Remaining
Lease Term (yrs)
1. Wal-Mart 5.6% 15.1 2. Zellers 5.2% 12.5 3. A & P 5.1% 11.3 4. Famous Players 4.1% 19.1 5. Loblaws Co. 3.8% 8.9
6. M?tro-Richelieu 2.6% 7.0
7. Winners 2.2% 8.1
8. Staples 2.0% 12.5
9. Shoppers Drug Mart1.8% 7.6
10. Indigo Books 1.6% 6.6
Total 34.1% Lease ExpiriesYear2002 2003 2004 2005 2006
Square Feet 811,278 1,451,9231,885,381
2,072,546
1,979,690
Percentage 3.5% 6.4% 8.2% 9.1% 8.7%
HR Real Estate investment trust
NAV $13.45 Feb 2002
2001 div $1.16 2002 div 1.18-$1.20 2003 $1.20-$1.25
HR payout ratio should decline to 85% in 2002 down from 89%
occupancy is at 98%, and should stay high with only 2.8% of space scheduled for
renewal in 2002. Much of the space that is coming up for renewal is below average
market leases.
H&R REIT holds 26 office properties, 67 single-tenant industrial properties,
12 retail properties and 5 development projects, principally in the Greater Toronto Area.
TransCanada Pipelines, Bell Canada Inc., Royal Bank of Canada, Nestle, NCR Canada,
Telemedia, American International Group, Bell Mobility, Public Works of Canada
Purolator Courier, Nortel Networks, Asea Brown Boveri, Finning International
Wal-Mart, Rona Inc., Chapters, Nike, Canadian Tire, Escada, Metro Richlieu, Famous
Players Bell Mobility
At current prices would slowly add HR and Riocan to a reit portfolio. Would buy more
aggressively on a pull back of around 5-10%.
When a product does well, Bay Street and Wall Street try to sell more of the product.
In the 1990s you saw dozens of .com, and other tech plays now you will see more
income trusts and hedge funds in 2002/2003. Some will be worth considering and most
will be pure garbage.
At the start of the year there was 63 income trusts this number is growing. There have
been over 14 income trusts that have come to market since January 1, 2002. Income
trusts such as Advanced Fiber Tech. AFT.un, Sun Gro (peat moss) GRO.un, Artic Glacier
Income fund AG.un, Boralex Income fund BPT.un (actually a small but decent power
producer, would like a higher yield), A@W Revenue Royalties income fund (anyone
want a Teenburger) AW.un. Plus a half dozen closed end funds that invest in these
income trusts, if you look at these look at the manager, and the MER you are being
charged, anything over 1.50% is an automatic pass.
There will be more income trusts for starved income investors. At least 8 are in the
pipeline for April and May. With another 25 at least to come public before the end of the
year. This number will be much higher if the market for income trusts hold up.
Here are some fun suggestions for Bay Street on some they could make into Income
trusts:
parking lot trusts, funeral park trusts, country store trusts (sure laugh but many of these
small stores bring in 25% ROI), Golf courses (many of the bigger golf coarses sell
property and condos, seems like a REIT to me), water treatment plant Reits (local
municipalties have to pay for improved water treatment systems somewhere, why not
here, and who does not need water), toll roads, bridges, ect.
The Income trusts I currently own are Riocan, HR, Cdn Hotels, and Arc Energy. Would
look at Freehold and Cdn. oil Sands on a pull back of oil to the low $20s. Under $24.
Income trusts can provide a consistant income stream to a portfolio. Through the use of
Income trusts, dividends, and options (next meeting) you can have a steady source of
cash coming into the portfolio. Not a bad idea in these or any other market conditions.
Thanks
this Friday is the monthly shareclub meeting, for this meeting I am going to do a presentation on Income trusts. Except for a one page on the Saxon High Income (Saxon funds are no load and have a low MER 1.25% and all their funds are top quartile, small but good funds run by two good managers. available in Canada). Also two pages on REITS.
Enerplus I believe now trades in the US and Arc Energy will also soon trade in the US, would buy oil trusts on a pull back of oil to the low $20s. anyways here is the information.
The following charts assume a 2002 oil price of $20 US, and natural gas prices of
$2.50US 2002, and $3US for $2003.
my estimates are for 2002 average oil price of $22-$25US, and natural gas price of
$3.50-$4US for 2002 and $4.50US for 2003
So these numbers may be on the low side, still when looking at an investment always
good to look at the worse case scenario.
This also does not take into account drilling success and the bringing on of new
production.
Distributions for a 10% increase in the oil and gas prices
Company % per unit $ per unit
Pengrowth 21% .33
NCE petrofund 15% .25
Enerplus 14% .38
Shiningbank 14% .20
Freehold 12% .12
NAL oil and gas 10% .10
Arc energy 6% .10
Primewest 5% .05
Average 12%
Distributions for a 10% increase in oil prices
Company % per unit $ per unit
Pengrowth 15% .23
Enerplus 9% .25
NCE petrofund 9% .15
Freehold 9% .09
NAL oil and gas 6% .07
Shiningbank 5% .07
Arc energy 4% .06
Primewest 3% .03
Average 8%
Distributions for a 10% increase in gas prices
Company % per unit $ per unit
Shiningbank 9% .13
Pengrowth 6% .10
NCE petrofund 6% .09
Enerplus 5 % .12
NAL oil and gas 4% .04
Arc energy 3% .04
Freehold 2% .02
Primewest 1% .01
Average 4%
Premium to Net Asset Value based on $20 USoil and $2.50 gas
Comapany Price outlook
Freehold 33%
Enerplus 57%
NCE petrofund 59%
Pengrowth 60%
Arc Energy 72%
NAL oil and Gas 92%
Primewest 95%
Shiningbank 130%
average 75%
Forcast 2002 Year end debt to 2003 cash flow
company X
Freehold .9X
Nal oil and gas 1.1
Enerplus 2.1
Arc Energy 2.3
NCE petrofund 2.4
PrimeWest 2.6
Pengrowth 2.8
Shiningbank 3.0
average 2.2
Real Estate Income Trusts (REITS)
Riocan
NAV (net asset value) $10.10 Jan2002
2001 div $1.08 2002 $1.10 2003 $1.12-$1.16
Payout ratio has fallen from 96% to 92%.
Total Area (sq. ft): 22,862,517
Total Number of Tenants: 3,476
Occupancy: 95.4%
Geographic Distribution (based on revenue)
Number of Properties
Ontario 67.4% 99
Alberta 10.2% 13
Quebec 9.4% 17
British Columbia 4.9% 8
Saskatchewan 4.0% 4
New Brunswick 2.0% 5
P.E.I. 1.2% 1
Manitoba 0.8% 1
100.0%
148
Anchor & National Tenants Percentage of Area: 77.5% Percentage of Gross
Revenue: 76.9%
Top Sources of Revenue by Tenant Tenant Pecentage of
Gross
Revenue Weighted Average Remaining
Lease Term (yrs)
1. Wal-Mart 5.6% 15.1 2. Zellers 5.2% 12.5 3. A & P 5.1% 11.3 4. Famous Players 4.1% 19.1 5. Loblaws Co. 3.8% 8.9
6. M?tro-Richelieu 2.6% 7.0
7. Winners 2.2% 8.1
8. Staples 2.0% 12.5
9. Shoppers Drug Mart1.8% 7.6
10. Indigo Books 1.6% 6.6
Total 34.1% Lease ExpiriesYear2002 2003 2004 2005 2006
Square Feet 811,278 1,451,9231,885,381
2,072,546
1,979,690
Percentage 3.5% 6.4% 8.2% 9.1% 8.7%
HR Real Estate investment trust
NAV $13.45 Feb 2002
2001 div $1.16 2002 div 1.18-$1.20 2003 $1.20-$1.25
HR payout ratio should decline to 85% in 2002 down from 89%
occupancy is at 98%, and should stay high with only 2.8% of space scheduled for
renewal in 2002. Much of the space that is coming up for renewal is below average
market leases.
H&R REIT holds 26 office properties, 67 single-tenant industrial properties,
12 retail properties and 5 development projects, principally in the Greater Toronto Area.
TransCanada Pipelines, Bell Canada Inc., Royal Bank of Canada, Nestle, NCR Canada,
Telemedia, American International Group, Bell Mobility, Public Works of Canada
Purolator Courier, Nortel Networks, Asea Brown Boveri, Finning International
Wal-Mart, Rona Inc., Chapters, Nike, Canadian Tire, Escada, Metro Richlieu, Famous
Players Bell Mobility
At current prices would slowly add HR and Riocan to a reit portfolio. Would buy more
aggressively on a pull back of around 5-10%.
When a product does well, Bay Street and Wall Street try to sell more of the product.
In the 1990s you saw dozens of .com, and other tech plays now you will see more
income trusts and hedge funds in 2002/2003. Some will be worth considering and most
will be pure garbage.
At the start of the year there was 63 income trusts this number is growing. There have
been over 14 income trusts that have come to market since January 1, 2002. Income
trusts such as Advanced Fiber Tech. AFT.un, Sun Gro (peat moss) GRO.un, Artic Glacier
Income fund AG.un, Boralex Income fund BPT.un (actually a small but decent power
producer, would like a higher yield), A@W Revenue Royalties income fund (anyone
want a Teenburger) AW.un. Plus a half dozen closed end funds that invest in these
income trusts, if you look at these look at the manager, and the MER you are being
charged, anything over 1.50% is an automatic pass.
There will be more income trusts for starved income investors. At least 8 are in the
pipeline for April and May. With another 25 at least to come public before the end of the
year. This number will be much higher if the market for income trusts hold up.
Here are some fun suggestions for Bay Street on some they could make into Income
trusts:
parking lot trusts, funeral park trusts, country store trusts (sure laugh but many of these
small stores bring in 25% ROI), Golf courses (many of the bigger golf coarses sell
property and condos, seems like a REIT to me), water treatment plant Reits (local
municipalties have to pay for improved water treatment systems somewhere, why not
here, and who does not need water), toll roads, bridges, ect.
The Income trusts I currently own are Riocan, HR, Cdn Hotels, and Arc Energy. Would
look at Freehold and Cdn. oil Sands on a pull back of oil to the low $20s. Under $24.
Income trusts can provide a consistant income stream to a portfolio. Through the use of
Income trusts, dividends, and options (next meeting) you can have a steady source of
cash coming into the portfolio. Not a bad idea in these or any other market conditions.
Thanks
