Thursday, June 07, 2007

REIT Spells Rental Rip Off

There are renters in Alberta to be exploited yet through rent gouging.

Alberta's CEO Ed Stelmach refused to bring in rent controls as advocated by his appointed public committee on housing, because it might impact the 'free market'.

His in-action on the rental crisis in Alberta has influenced the market, in favour of the REIT's and against the interests of those he is elected by the worker/consumer/taxpayer/citizen.

Globe ad Mail, Print Edition 05/06/07 Page B4

Dundee Real Estate Investment Trust is selling two-thirds of its properties to a division of General Electric Co. for $1.5-billion, amid a wave of consolidation of Canadian real estate trusts and assets.

The trust decided to sell its Eastern Canadian assets in the belief that properties in Western cities such as Calgary, Edmonton and Vancouver will continue to perform well. For example, Dundee expects to raise rents in Calgary by about 50 per cent when they expire, compared with 20 per cent for the current portfolio over all.
Dundee is the second largest REIT owning and profiting from apartment and real estate investment, behind Boardwalk. And like other REIT's they are busy transforming exiting apartments into Condo's they can sell off in the Alberta's hot market.

This is the Income Trust business transforming itself once again back into a private capital enterprise.

Income Trusts are a ponzi scheme where upon private capital moves into the public market, profits in barely legal schemes in that market, and then when it is no longer to their advantage they return again to the shadow world of private equity hedge funds.

Just how questionable these schemes are can be told in the Dundee offer which changed in the headlines in a few hours. Prior to the article above an earlier edition of the Globe and Mail carried this headline;
GE buys properties from Dundee REIT for $2.4-billion

Which is a lot more than $1.5 Billion apparently finally settled on. Which may explain this;
Investors question Dundee's asset sale


REIT watch

June 4 closeWeekly change

Y-to-d total return
Dundee$39.96 4.10%5.80%

REITS success relies upon their making steady earnings distributions to their shareholders. Those earnings are made off the back of renters.

And it is clear that thanks to Ed Stelmach the Canadian REIT's look at Alberta as the sole base for their business in Canada. Which is scary for working families in Alberta as we have found out this past year.

The changes made by Stelmach in only allowing a rent increase once annually, with no cap on its size means that the REITs look forward to even bigger profits next year when they can charge 50% mark ups on their rent like they did this year.

The smart real estate money is heading West, which is not to say that GE fumbled the ball by snapping up Dundee REIT’s Central and Eastern Canadian investment properties for $2.4-billion, including debt, but rather Dundee’s decision to keep its bricks and mortar located primarily in Alberta.

For that reason, Desjardins Securities analyst Jeff Roberts is recommending Alberta-centric real estate stocks like Melcor Developments Ltd., Mainstreet Equity Corp., Genesis Land Development Corp. and Boardwalk REIT, all “top pick” rated.

For investors who like distributions and dividends, his “top picks” include Boardwalk REIT, with a 34 per cent total 12-month expected return; Calloway REIT, offering a 33 per cent total return; and First Capital Realty Inc., 26 per cent.
This is the so called free market, which you can regulate, the Alberta Government as usual just doesn't want to be bothered because after all they are partners with business. And business calls the shots in their partnership.

So no one should be surprised when Dundee REIT looks forward to raising rents 50% next year, thats the regulation the Ed Stelmach created for them.


Income Trusts


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Feynman and Coulter's Love Child said...

Nobody has ever said you can't take a perfectly good free market and regulate it (or, in this case, place heavy controls on an already highly-regulated market).

What is said is that this is a bad idea, something that all your fear mongering and conspiracy theorizing doesn't erase.

Nobody should be surprised if the rents go up 50% because that's what the current market conditions bear. Likewise, don't be too surprised to learn rents are only going up 15%, or 25%, or not at all if a Dion election win or democratic Venezualan coup take place.

Also don't be too surprised if, say, lending rates shoot up and you start seeing a bunch of housing prices drop down.

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