I have several Canadian REIT's, all recommended to me by you know who. Questioned about one in particular in regard to their debt, he said "they have it under control". Well its down 94%. My gut was squeamish, voice in back of head was shrieking. I doubt it will recover, but I keep what is left of it as a constant reminder to listen to my gut and that voice in the back of my head. Big debt is a disaster waiting to happen.
On the authoritarian tendencies of Presidents, they all run into road blocks that frustrate them and as the most powerful person in the world, they try and run them over. The question is, to what end? Few people know how broad the censorship state became under Biden unless they were one of the ones being silenced. I'm one of those. I even had posts deleted for pointing out facts on government web sites. My Tinder dates suddenly started saying they googled me and could find almost nothing about me. Odd, I've written articles with hundreds of thousands of reads that have comments from world leaders in weather forecasting and even a lead author from the IPCC apologizing for a glaring mistake he made in AR5 that I had pointed out. So I googled myself. Unless I use a search engine other than google, I cannot even find the articles that I wrote. That should frighten people. Right now it looks like Trump, with a heavy assist from Musk, are ripping apart that censorship complex. That's an authoritarian tendency I can live with.
Thanks Paul for scratching below the surface on Canadian REITs. Their low Debt/Assets ratios never made sense to me with such a high Debt/EBITDA ratios.
One question I have is about the point you made for them possibly inflating their cap rates to make their debt/asset ratios look lower. How do their reported cap rates compare to US peers? I assume there has to be a big gap in cap rates to have such a disparity between Debt/Asset vs Debt/EBITDA ratios. Do you see such gap?
I don't focus much on cap rates except for current acquisitions. Trapping Value, a Canadian, often comments about his view of the cap rates for some Canadian REIT. I have not done a comparative study.
Canadian Reits have gotten away with high leverage for a long time because unlike the US GFC in 2007 Canada has not experience a recession since 1992! As long as interest rates were falling year over year they could still grow using leverage. Now that rates have somewhat returned to historical norms these Reits are struggling to grow and vulnerable to a recession. Worse is they are struggling to reduce their debt ratios. Riocan and SmartCentres are both great companies with wonderful assets, cashflows and development pipelines that are caught in this scenario.
Hey Paul good to get your updates. I've been crushed with consulting work the last couple of weeks and have slacked off on published articles. I've been helping one company prepare a reservoir drill-in fluid-distinct from a top-hole drilling fluid, for Aker BP in Norway. One requires a fluidsdoc and the other not so much. If we are successful this company will have a new product line to offer incorporating a base fluid with a wide moat. Then with another client I was teaching a class of young Ph.D chemists the intricacies of reservoir drill-in fluid design. They told me after the first day I was making their heads hurt. That may be a good sign. Either way it looks like they will need a fluidsdoc for the forseeable future. For now its back to putting out writeups. Cheers bud!
Hey Dave, glad you are busy and making those heads hurt. The students I've been exposed to were really damaged, intellectually, by how we handled the pandemic.
I have several Canadian REIT's, all recommended to me by you know who. Questioned about one in particular in regard to their debt, he said "they have it under control". Well its down 94%. My gut was squeamish, voice in back of head was shrieking. I doubt it will recover, but I keep what is left of it as a constant reminder to listen to my gut and that voice in the back of my head. Big debt is a disaster waiting to happen.
On the authoritarian tendencies of Presidents, they all run into road blocks that frustrate them and as the most powerful person in the world, they try and run them over. The question is, to what end? Few people know how broad the censorship state became under Biden unless they were one of the ones being silenced. I'm one of those. I even had posts deleted for pointing out facts on government web sites. My Tinder dates suddenly started saying they googled me and could find almost nothing about me. Odd, I've written articles with hundreds of thousands of reads that have comments from world leaders in weather forecasting and even a lead author from the IPCC apologizing for a glaring mistake he made in AR5 that I had pointed out. So I googled myself. Unless I use a search engine other than google, I cannot even find the articles that I wrote. That should frighten people. Right now it looks like Trump, with a heavy assist from Musk, are ripping apart that censorship complex. That's an authoritarian tendency I can live with.
Thanks Paul for scratching below the surface on Canadian REITs. Their low Debt/Assets ratios never made sense to me with such a high Debt/EBITDA ratios.
One question I have is about the point you made for them possibly inflating their cap rates to make their debt/asset ratios look lower. How do their reported cap rates compare to US peers? I assume there has to be a big gap in cap rates to have such a disparity between Debt/Asset vs Debt/EBITDA ratios. Do you see such gap?
Does IFRS vs GAAP accounting contribute to this?
I don't focus much on cap rates except for current acquisitions. Trapping Value, a Canadian, often comments about his view of the cap rates for some Canadian REIT. I have not done a comparative study.
Canadian Reits have gotten away with high leverage for a long time because unlike the US GFC in 2007 Canada has not experience a recession since 1992! As long as interest rates were falling year over year they could still grow using leverage. Now that rates have somewhat returned to historical norms these Reits are struggling to grow and vulnerable to a recession. Worse is they are struggling to reduce their debt ratios. Riocan and SmartCentres are both great companies with wonderful assets, cashflows and development pipelines that are caught in this scenario.
Thanks for that nice summary. Hard to see how this ends soon.
Truth in cash flows...I love it!!
Hey Paul good to get your updates. I've been crushed with consulting work the last couple of weeks and have slacked off on published articles. I've been helping one company prepare a reservoir drill-in fluid-distinct from a top-hole drilling fluid, for Aker BP in Norway. One requires a fluidsdoc and the other not so much. If we are successful this company will have a new product line to offer incorporating a base fluid with a wide moat. Then with another client I was teaching a class of young Ph.D chemists the intricacies of reservoir drill-in fluid design. They told me after the first day I was making their heads hurt. That may be a good sign. Either way it looks like they will need a fluidsdoc for the forseeable future. For now its back to putting out writeups. Cheers bud!
Hey Dave, glad you are busy and making those heads hurt. The students I've been exposed to were really damaged, intellectually, by how we handled the pandemic.
Good luck with drilling for dollars!
Cheers!