HR.UN has had a fine year to date

Earlier this year, I made a small purchase of H&R Real Estate Investment Trust (REIT) for half of my 2010 TFSA contribution. I don’t normally watch my TFSA investments, but after casually looking at where HR.UN is today, I must say they’ve had a pretty fine year.

Recall H&R REIT is a TSX-listed, open-ended Real Estate Investment Trust. H&R holds interests in 33 office properties, 118 single-tenant industrial properties, 124 retail properties and 3 development projects, principally in the Greater Toronto Area. Locally in my hometown, H&R REIT owns the Place Bell/Bell Place in Ottawa. It is leased to tenants such as Bell Canada, Public Works of Canada, Accenture and Gowling Lafleur Henderson LLP.

HR.UN has been paying distributions since 1997 and there’s nothing to suggest distributions will be reduced anytime soon. In fact, they increased distributions this summer – H&R nows pay investors $0.07 per unit per month (up from $0.06 earlier this year). Annualized distributions are now at $0.84, creating a tidy yield over 4.5%. Since my purchase in March 2010, H&R REIT is up about 20%.

Are REITs skyrocketing in price because of the brave new world income trusts will face in a few months?
Are REITs like H&R undervalued and folks are snapping them up?
Are REITs overvalued and everyone is doing what they normally do, buying when prices are higher?

To be honest, I don’t know. What I do know is that for many years, HR.UN has been a core holding of many REIT ETFs, such as XRE and given I would need to pay an MER to own XRE, I’d rather pay no fee and own part of the company outright.

Tenants in H&R REIT properties aren’t going anywhere soon, therefore neither am I. The longer I stay a financial tenant of HR.UN, I’m convinced, the longer I will get paid for it.

What are your thoughts about REITs?

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