Tag Archives: investing terminology

What is a Real Estate Investment Trust (REIT)?

A real estate investment trust (REIT) is a company that owns, and in most cases, operates income-producing real estate. REITs own many types of commercial real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers and hotels. Some REITs also engage in financing real estate. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.   REITs can be classified as equity, mortgage, or a hybrid and may be publicly listed or privately held.  REITs are typically held for income and capital appreciation.

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The key statistics to examine in a REIT are net asset value (NAV), funds from operations (FFO), and adjusted funds from operations (AFFO).

List of Canadian REITs (as of January 11, 2015):

Diversified commercial REITs

  • Agellan Commercial REIT (TSX: ACR.UN)
  • Artis REIT (TSX: AX.UN)
  • BTB REIT (TSX: BTB.UN)
  • Cominar REIT (TSX: CUF.UN)
  • CREIT (Canadian REIT) (TSX: REF.UN)
  • Crombie REIT (TSX: CRR.UN)
  • Dream Global REIT (TSX: DI.UN)
  • FAM REIT (TSX: F.UN)
  • Granite REIT(TSX: GRT.UN)
  • H&R REIT (TSX: HR.UN)
  • Inovalis REIT (TSX: INO.UN)
  • Lanesborough REIT (TSX: LRT.UN)
  • Maplewood International REIT (TSX: MWI.UN)
  • Melcor REIT (TSX: MR.UN)
  • Morguard REIT (TSX: MRT.UN)
  • Northern Property REIT (TSX: NPR.UN)
  • Partners REIT (TSX: PAR.UN)
  • Pro REIT (TSX: PRV.UN)
  • True North Commercial REIT (TSX: TNT.UN)

Shopping malls / Retail outlet REITs

  • Calloway REIT (TSX: CWT.UN)
  • Choice Properties REIT (TSX: CHP.UN)
  • CT REIT (TSX: CRT.UN)
  • Partners REIT (TSX: PAR.UN)
  • Retrocom REIT (TSX: RMM.UN)
  • RioCan REIT (TSX: REI.UN)
  • Slate Retail REIT (TSX: SRT.UN)

Office REITs

  • Allied Properties (TSX: AP.UN)
  • Dream Office REIT (TSX: D.UN)

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Residential REITs

  • Boardwalk REIT (TSX: BEI.UN)
  • CAP REIT (TSX: CAR.UN)
  • InterRent REIT (TSX: IIP.UN)
  • Milestone Apartments REIT (TSX: MST.UN)
  • Morguard North American Residential (TSX: MRG.UN)
  • Pure Multi-Family REIT LP (TSX: RUF.UN)
  • True North Apartment REIT (TSX: TN.UN)

Healthcare REITs

  • Chartwell Retirement Residences REIT (TSX: CSH.UN)
  • HealthLease Properties REIT (TSX: HLP.UN)
  • NorthWest Healthcare Properties REIT (TSX: NWH.UN)
  • NorthWest International Healthcare Properties REIT (TSX: MOB.UN)

Industrial REITs

  • Edgefront REIT (TSX: ED.UN)
  • Dream Industrial REIT (TSX: DIR.UN)
  • Pure Industrial REIT (TSX: AAR.UN)
  • Summit Industrial Income REIT (TSX: SMU.UN)
  • WPT Industrial REIT (TSX: WIR.U)

Hotels REITs

  • American Hotel Income Properties REIT (TSX: HOT.UN)
  • InnVest REIT (TSX: INN.UN)

Disclaimer: You should consult with your Investment Adviser before making any investment decisions.

What is a Call Option?

A call option is an option contract in which the holder (buyer) has the right (but not the obligation) to buy a specified quantity of a security at a specified price (strike price) within a fixed period of time (until its expiration).

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For the writer (seller) of a call option, it represents an obligation to sell the underlying security at the strike price if the option is exercised. The call option writer is paid a premium for taking on the risk associated with the obligation.  For writers, there are two strategies:

Covered Calls

The short call is covered if the call option writer owns the underlying security. The covered call is a popular option strategy that enables the stock owner to generate additional income from their stock holdings thru periodic selling of call options.

Naked (Uncovered) Calls

When the option trader write calls without owning the underlying security, the investor is shorting the calls naked. Naked short selling of calls is a highly risky option strategy and is not recommended for the novice trader.

 

What is a Viager?

A Viager or a “Reverse Annuity Mortgage” is a real estate agreement seen in France where property is sold on a reverse annuity basis.

A property owner would sell their property to a purchaser in exchange for a down payment and regular cash installments for the rest of their life, while continuing to live in the house.  When the person dies the property is surrendered to the purchaser. [sam id=”5″ codes=”true”]The use of a viager may not be beneficial for all sellers. Someone who has a relatively short life expectancy would probably gain more benefit from selling the property outright and placing the proceeds into some sort of interest-bearing account. Depending on current tax laws, this would allow the seller to defer taxes until the funds are withdrawn from the account, keeping the amount of taxes paid annually within reason. At the same time, the seller would be in a position to leave behind some type of inheritance for his or her heirs, or funds that could be used to settle end-of-life expenses.

The advantage of a viager agreement is it allows elderly people to benefit from the sale of their homes while retaining its use.  The downside is that if the person dies shortly after entering the arrangement, then the buyer gets the property for a fraction of the value of the property.

What Is An ETF?

An ETF is an “exchange-traded fund”. Exchange Traded Funds (ETFs) are funds that track indexes like the NASDAQ-100 Index and the S&P 500. ETFs can also track commodities and specific industries or asset types.

ETF shares trade exactly like stocks. Unlike index mutual funds, which are priced only after market closings, ETFs are priced and traded continuously throughout the trading day. They can be bought on margin, sold short, or held for the long-term, exactly like common stock. Yet because their value is based on an underlying index or basket of securities, ETFs enjoy the additional benefits of broader diversification than shares in single companies, as well as what many investors perceive as the greater flexibility that goes with investing in entire markets, sectors, regions, or asset types.

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Three things to consider if you are going to sell your investments at a loss

Do you have investments in a non-registered account that have dropped in value? If you do, it may make sense to sell some of these depreciated stocks by using a strategy called tax-loss selling.

Tax-loss selling involves selling securities with accrued capital losses before the end of the year. The capital losses would first be applied against any realized capital gains which would reduce your net capital gains and potentially your tax bill.  If your capital losses exceed your capital gains, the net losses may be carried back to a previous year to trigger a refund.

Here are three things to consider if you are going to use a tax-loss selling strategy:

1.  The Deadline

The last day you have to sell an investment at a loss for the 2014 tax year is Wednesday December 24, 2014.  Most securities take 3 days to settle, so anything sold after this date would be reported for the 2015 tax year instead.

2.  Capital losses cannot be superficial

The Canada Revenue Agency (CRA) does not allow for superficial or artificial capital losses.   If you you sell an investment, you or an affiliated legal entity (such as your RRSP, your spouse, and your spouse’s RRSP) cannot purchase the identical investment 30 days prior, or 30 days following, your capital loss.  That is, you or your spouse cannot buy or sell the same investment 30 days before or after your planned capital loss.

3.  It’s not just about reducing your taxes

Tax-loss selling may save you money, but any decision to sell should be based on your overall portfolio strategy.  There may be a valid reason to hold onto a “losing” investment, such as the dividends it continues to produce for you or the potential for a rebound.  Whatever the case may be, just remember it’s not just about the taxes.


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Disclaimer: You should consult with your Investment Adviser before making any investment decisions.

OMG! It’s Quadruple Witching Day today! What does this mean?

Why Quadruple? 

Because it is the expiration day of various 1) stock index futures, 2) stock index options, 3) stock options and 4) single stock futures.

All contracts for stock options expire on the 3rd Friday of each month.  Once every quarter (on the 3rd Friday of March, June, September and December) all four asset classes expire on the same day.  Since futures and options investors must close out of their positions on those days, there is usually increased trading volume on both the stock and options markets.

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Why Witching?

Historically, the expiration of futures and options contracts occurred not only on the same day, but at the same time.  This, more often than not, resulted in a period of greater than normal market volatility which became known as the “witching hour.

Due to this increased volume and volatility, many investors approach the markets with caution on quadruple witching days.