These 2 REITs Have Done Well With Global Exposure

Income investors should keep watch on Dream Global REIT (TSX:DRG.UN) and another stable international REIT.

Kay Ng

Author Bio

Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt.

Education

Bachelor of Science (BSc) in Computer Science, University of British Columbia Further studies in financial markets, finance, and financial accounting

Areas of Expertise

Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies.

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Favorite Investment Quotes

“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published July 29, 2018 11:00 am EDT

With the exception of Canadian residential real estate investment trusts (REITs), which have generally been exceptional investments within the REIT sector, Canadian REIT stocks with global exposure have typically outperformed the sector in the last few years.

Dream Global REIT (TSX:DRG.UN) has experienced some nice growth due to having a focus on key markets in Western Europe. It has a gross asset value of about $5 billion, of which 73% is in Germany, 21% is in the Netherlands, and 3% each is in Belgium and Austria.

There has been increased office demand in the key areas that Dream Global operates in; as a result, vacancy rates in the space have been on a decline since 2013.

Dream Global currently has about 94% of its portfolio in office properties and 6% in industrial properties. These asset classes have generally done better than retail properties.

Dream Global’s asset profile is primarily divided across high-quality core assets (81% of its portfolio) that generate stable and growing cash flows, value-added properties (11%) that need upgrading and could deliver strong upside potential via leasing vacant spaces, and non-core assets (5%) that don’t fit its strategy and will be sold over the next two years.

Additionally, Dream Global has 20 properties across 56 acres of land area for development, intensification, or conversion to higher-yielding assets.

office building — *Photo: AgnosticPreachersKid. Licence: https://creativecommons.org/licenses/by-sa/3.0/*

Since inception in 2011, Dream Global has greatly diversified its tenant base, which now has more than 1,800 tenants. With a weighted average lease term of almost five years, the REIT offers stable income.

Dream Global’s largest tenant, Deutsche Post, contributes about 9% of its gross rental income. The other tenants individually contribute no more than 2.4% of its gross rental income. Some of Dream Global’s other top tenants include Siemens, City of Hamburg, and Alphabet.

NorthWest Health Prop Real Est Inv Trust (TSX:NWH.UN) is another REIT that has global exposure. About 67% of its net operating income (NOI) comes from outside Canada, including Australasia, Brazil, and Germany, where there’s higher growth compared to Canada.

NorthWest Healthcare Properties REIT generates about 49% of its NOI from medical office buildings and the rest from hospitals and other healthcare facilities. The healthcare REIT is distinguished by having a weighted average lease expiry of more than 12 years and organic growth coming from more than 70% of its NOI that’s indexed to inflation.

The healthcare REIT maintains a high occupancy of more than 96% and a sustainable payout ratio of about 87%.

Investor takeaway

The stocks of Dream Global and NorthWest Healthcare Properties REIT have done well in the recent past. Interested investors with a focus on income should consider picking up shares on meaningful dips.