Calloway Real Estate Investment Trust

I know several people in their 80’s. When you get to a certain age, you worry about getting old. Some in their 80’s that I know have bright minds and have energy. Some I know have dull minds and lack energy. I am talking about both men and women.

The ones that are bright, socialize, have something to do and they keep moving. They do some activity often swimming. One person I know is still working. The ones that are not like than seem to socialize less and less, seem to do nothing much and do not move much.

I am lucky because I have a circle of friends and we keep quite active. My personal favorites are dinner parties and going out for lunch, but I also go to parties and go out for dinners, go to Art shows, have a meetup group and to a local pub for a drink. I am working on this blog presently, but have some other projects also, like looking after my family tree and scanning old pictures to really go picture digital. I exercise and jog during the week. I read a lot and go for a lot of walks. I leave my home every day, even if it is just to go to my local Starbucks for a coffee. Being active is for me is probably easy as I live downtown.

Is anyone else thinking about this?

Now, on to what I want to talk about today. I follow two REITs that I do not own. I follow this one of Calloway Real Estate Investment Trust (TSX-CWT.UN) and H & R Real Estate Trust (TSX-HR.UN). However, H & R has not published the financial statements for 2011, so I see no point in doing another review of this stock at this point. My last review was in December 2011. For this review click >here and here for parts 1 and 2.

Calloway Real Estate Investment Trust (TSX-CWT.UN) has a current decent dividend of 5.6%, but the last time they raised the dividend was 2008. The 5 year median Distribution Payout Ratios for Cash Flow is 102% and the one for the end of 2011 is 104%. This is high. The 5 year median DPR based on Fund from Operations and Adjusted Fund from Operations are better at 90% and 94%, respectively.

I know a lot of analysts look at FFO and AFFO figures, but I think that the DPR re Cash Flow is the most important. I do not see any increase in Distributions occurring until the DPR re Cash Flow is better. I see no analyst that feels this will happen over the next couple of years.

The growth in distributions over the past 5 and 10 years was 1% and 3.8% respectively. With inflation running around 2%, this growth in distributions is not keeping up. Personally, I would expect that REITs distributions should increase around the rate of inflation.

For this REIT also there has been a huge increase in units outstanding. Over the past 5 and 10 years, units have increased at the rate of 6.5% and 75% per year, respectively. Yes, I did mean 75% per year over the past 10 years. It is very important to look at growth per unit rather than growth if you are a unitholder.

Growth in revenue per share is mediocre at just over 5% per year over the past 5 and 10 years. AFFO growth is not so hot at 1% and 3.5% per year over the past 5 and 10 years. For FFO, the 5 and 10 year growth is 0% and 15.5% per year, respectively. However, note that there has been a lot of changed to FFO or Distributable Income calculations over the past 10 years, so it is hard to say how good the 10 year growth figure is.

The EPS jumped this year by 1474%, and yes, I do mean over 1,000%. The 5 year growth is at 46% per year because of this. Analysts seem to think that EPS will continue to grow. Interestingly, the 10 year growth is just 3.4% because this company had better EPS in the past. Cash Flow has grown at 7% and 28.8%. However, Cash Flow was unusually low 10 years ago. If I look at 11 years of growth I get 8% per year, which is probably more realistic.

Book Value jumped in 2011 by 30%, which probably due to the new accounting rules. Even at that, the 5 year growth in Book Value is just 1% per year. The 10 year growth is a lot better at 20% per year.

The current Asset/Liability Ratio or Debt Ratio is 1.75 and therefore good. It is better than the 5 year median ratio of 1.55. The current Debt/Equity Ratio and Shareholders Equity Ratios are 2.75 and 1.58 and are ok. They are close to the 5 year median ratios.

The Return on Equity is ok at 9.6% for the end of 2011, but the 5 year median ROE at 2.7% is very low. There is no difference with the ROE based on comprehensive income.

This stock is mentioned in a market call article by Dennis Mitchell.

For this company, I do not see the distributions going up anytime soon as analysts do not expect much in the way of increasing cash flow in the near future. The company is paying out too much in distributions compared to the cash flow. They are in the 5th year of no increase in distributions. On Monday, I will take about what the analyst say about this stock and what my spreadsheet says about the current stock price.

Calloway REIT is the largest owner of large-format unenclosed retail properties in Canada. Its web site is here Calloway. See my spreadsheet at cwt.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.