REIT question (Canada)

[meghan88]

Just over a year ago when I was still using a financial advisor, he had me sink 35K into D.UN (Dream Office REIT).  It tanked so badly (lost more than 50%) that I dumped him, but held onto D.UN.  The drop was due mainly to the perception about its holdings in the Alberta real estate market.

It was so out of favour at one point that the distribution yield was over 14% annually.

On Feb 18, they came out with a new strategic plan that included cutting the distribution from 2.24 per unit to 1.50 per unit.

Bad news, right?  Apparently not.  In three days, the unit price jumped from under $15.00 to $19.50.

The full story is here:  http://www.dream.ca/office/wp-content/uploads/sites/4/2016/02/Dream-Office-Q4-2015-PR.pdf

Can someone please explain it to me like I'm a 2-year old?  As it stands, counting previous distributions, I'm still down $7200 at today's prices.  And if I count on distributions to eventually get me back to square one (never mind match inflation or (heaven forbid) make a profit), I'm looking at holding it for another 4 years.  Had distributions remained the same, I'd be looking at less than 3 years.

[daverobev]

You're asking why this specifically has gone up? Probably two things - the markets have recovered a little lately, and the large investors were probably getting worried about the huge dividend. When a company cuts, sometimes the price goes down ("oh noes! they're borken!!"), but often the price goes up ("ok, management aren't stupid - they are being sensible/conserving cash/paying down debt").

Going forward, if you're not wedded to D, but do want to keep some REIT stuff going on, you may want to sell (yay, cap loss), and buy something like VRE (Vanguard REIT ETF Canada). If you want to keep D, go for it.

LOTS of stuff is down since last year.

[meghan88]

You're asking why this specifically has gone up? Probably two things - the markets have recovered a little lately, and the large investors were probably getting worried about the huge dividend. When a company cuts, sometimes the price goes down ("oh noes! they're borken!!"), but often the price goes up ("ok, management aren't stupid - they are being sensible/conserving cash/paying down debt").

Thanks!  Yes, I was asking how the market saw fit to bid this up in such a frenzy.  Makes sense.  They are also selling some properties.  I just found it unbelievable that the price could shoot up by more than 30% in 3 days after a distribution cut.  I'd expect that from a speculative junior stock but not a well-established REIT that hadn't cut its distributions in decades - not even in 2008.

I am not wedded to D, not am I particularly interested in REITS in general.  I was holding onto it in order to avoid selling at an incredibly stupid time, and I at least managed to do that, or so it seems (for now).

But long term, I'm trying to dump everything I hold right now and get into VXC, XIC and VAB.  For cash, I keep it in a Hubert high interest savings account that pays 1.75% interest.

I managed to dump two Dynamic mutual funds last week (DYN 2370 and DYN 087) that returned only 3% and 6% total over three years (so 1-2% a year).  The MERs on those funds were 2.28 and 2.72 respectively.

[YoungInvestor]

With d.un, the dividend yield was roughly 100% of 2016 affo, and the Drip wasn't completely offset by the ncib. The cancellation of the DRIP s as well as the new strategy of selling non-core assets and realizing their market value is very enticing (NAV excluding their Alberta assets is roughly 27$/share, 32 with Alberta).

I'm glad I bought in at around 18 when it was on its way down, but it was certainly a bit scary when it was around 14-15$/ share. Management has made a great call there.