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Dream Office Real Estate Investment Trust (D.UN)
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Extendicare Inc. (EXE)
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Melcor Real Estate Investment Trust (MR.UN)
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European Residential Real Estate Investment Trust (ERE.UN)
Q: Recently an analyst specializing on REITs said "We believe the ability for select names to maintain current distribution levels is ‘below average’, including Dream Office REIT, European Residential REIT, Extendicare Inc.,, Melcor REIT, Northwest Healthcare Properties REIT, etc. "
Does this mean there is a strong possibility that the distributions will be cut for the above noted REITs ?
Thank you as always for your insight.
Does this mean there is a strong possibility that the distributions will be cut for the above noted REITs ?
Thank you as always for your insight.
5i Research Answer:
That is certainly how we would interpret that analyst's specific comments. Note, NWH has already cut its distribution (Sept 22). All REITs are sensitive to interest rates, both fundamentally (higher interest charges) and sentiment-wise. D.UN's payout ratio is still low, near 50%. EXE's is well over 100% and the dividend is vulnerable. ERE.U is less than 25% but its small size adds risk. MR.UN is a tiny REIT which adds risk, and the payout ratio is about 60%. None of these are immune to a cut, but their yields do reflect this risk right now.