I'd like to learn about REITs

[Liberty]

Hi all,

 

I have the impression that Canadian real estate has a good chance of getting into trouble within a few years, and I figure that REITs might be a good place to look for bargains when that happens. Problem is, I don't know much about how to evaluate REITs, so I've decide to try to learn enough so that I'm ready to act if an opportunity presents itself (or I might decide not to touch this stuff once I know more about it).

 

Anyway, I'd love some pointers on what matters when trying to evaluate a REIT, which are the most important metrics. Is it even possible to get a good sense of quality from the numbers, or do you absolutely need to have deep on-the-ground knowledge of the local RE markets in which they operate?

 

At a quick glance I think RioCan and H&R look better than the others I've seen, but I know this doesn't mean much since I don't know if I'm looking at the right things...

[mikazo]

I had the exact same thinking recently and started learning about REITs. I found the following two articles to be pretty useful:

 

http://www.investopedia.com/articles/04/112204.asp

 

http://www.investopedia.com/articles/03/013103.asp

 

From what I understand, Adjusted Funds From Operations (AFFO) is the equivalent of free cash flow. I've been digging through the annual reports of a few Canadian REITs looking for AFFO numbers and various other tidbits. I've come up with a spreadsheet that I might share later on.

 

The two REITs that I've been most interested in are First Capital Realty (FCR.TO) and Dundee REIT (D.UN). I might start Investment Idea topics for those if I become interested enough.