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The Vanguard REIT Index ETF (VNQ) was trading as low as $19.95 in March 2009. The index is currently trading at $66.61, or 233.9% above the low made in March 2009.

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In this article I will feature two REITs that have seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.

  2. The stock is sold by no insiders in the month of intensive purchasing.

  3. At least two purchasers increase their holdings by more than 10%.

1. Canadian Real Estate Investment Trust (OTC:CRXIF) operates as a closed-end real estate investment trust in Canada.

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Insider buying by insider (last 30 days)

  • Canadian Real Estate Investment Trust [CREIT] purchased 122,682 shares on June 3-14.
  • James Fisher purchased 1,000 shares on June 18, and currently holds 6,738 shares or less than 0.1% of the company. James Fisher is the Chairman of the Board and sits as an ex-officio member of each of the Board Committees.
  • Andrew Hoffman purchased 1,000 shares on June 19, and currently holds 1,500 shares or less than 0.1% of the company. Andrew Hoffman serves as a director of the company.

Insider buying by calendar month

Here is a table of Canadian Real Estate Investment Trust's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
June 2013124,6820
May 20135,5620
April 201300
March 20137720
February 201341,1900
January 201300

The month of June has seen the most insider buying this year.

Financials

The company reported the first-quarter financial results on May 2, with the following highlights:

Revenue$91.4 million
Net income$19.5 million
Cash$15.8 million
Debt$1.7 billion

Outlook

During the first quarter of 2013, CREIT added $4.6 million of income-producing property due to the completion of several development projects and the acquisition of a retail asset located in Calgary, Alberta.

CREIT has significant acquisition capacity and will continue to execute on external growth initiatives when appropriate opportunities are available. Subsequent to quarter end, CREIT announced $181.5 million of income-producing property acquisitions including a 50% managing interest in two retail centres in Quebec City, Quebec and a 100% interest in a retail centre in Moncton, New Brunswick. These assets are strong, dominant, unenclosed centres in their respective markets, which currently have an average occupancy of 99.9%. Closing is scheduled to occur prior to the end of the second quarter of 2013.

CREIT's development program is continuing to progress. Notably, Phase I of CREIT's Milton Distribution Facility (85% owned by CREIT) in the Greater Toronto Area West market is expected to be completed in the second quarter of 2013. Phase I consists of 635,000 square feet (at 100%) of rentable area and it is fully leased to Lowe's Canada on a long-term basis. This transaction was awarded the National Association of Industrial and Office Properties [NAIOP] Real Estate Excellence award for the Industrial Lease Deal of the Year.

CREIT produced growth in FFO per Unit of 6% in the first quarter of 2013 over the same period in 2012. Considering the future income growth potential of the recently announced acquisitions, the development program and the income potential inherent in the current vacant industrial and office space, management is optimistic that CREIT's operating performance for the balance of 2013 will continue to show growth above its 2012 results.

Competition

CREIT competes for suitable real property investments with other real estate investment trusts, corporations, pension funds and other institutional investors (both Canadian and foreign) which are presently seeking, or which may seek in the future, real property investments similar to those desired by CREIT. Many of these investors have greater financial resources than CREIT, or operate without the Trust's investment restrictions, or according to more flexible conditions. An increase in the availability of investment capital and an increase in demand for real property investments should increase competition for real property investments, thereby increasing purchase prices and reducing the yields from such investments. Conversely, a decline in the availability of investment capital should produce a decline in demand for real property investments, which would lead to decreasing purchase prices and higher yields from such investments.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. The stock is trading at a P/E ratio of 35.64 and the stock has a dividend yield of 4.06%. The company has a book value of $24.84 per share. I have a neutral bias for the stock currently based on the relatively high P/B ratio of 1.67.

2. Summit Industrial Income REIT (SMU-UN.V) is an open-ended mutual fund real estate investment trust focused on growing and managing a portfolio of light industrial properties across Canada.

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Insider buying by insider (last 30 days)

  • Paul Dykeman purchased 45,000 shares on May 31 - June 7, and currently controls 282,082 shares or 1.6% of the company. Paul Dykeman is Chief Financial Officer of Summit REIT.
  • Louis Maroun purchased 178,000 shares on May 29 - June 7, and currently controls 876,054 shares or 4.9% of the company. Louis Maroun is Chairman of the Board of Trustees.
  • Thomas Tadeson purchased 7,650 shares on May 24, and currently holds 57,650 shares or 0.3% of the company. Thomas Tadeson is a senior officer of the company.

Insider buying by calendar month

Here is a table of Summit REIT's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
June 2013103,7930
May 2013133,8500
April 201300
March 201300
February 2013524,1420

There have been 761,785 shares purchased and zero shares sold by the insiders since February.

Financials

The company reported the first-quarter financial results on May 22, with the following highlights:

Revenue$2.7 million
Net income$1.2 million
Cash$0.9 million
Debt$140.6 million

Outlook

Summit's management believes that property values in the Canadian light industrial sector, which have risen over the last few quarters, will experience further modest increases in 2013. Light industrial real estate, particularly when packaged in large portfolios, continues to be in very high demand and attracts premium valuations. Institutional, public and private investors, recognizing good value in this sector in relation to global markets and alternative investments, were particularly active buyers in 2012. The low cost of capital, coupled with an increasingly competitive investment climate, will continue to influence valuations in 2013. Interest rates, which are expected to remain stable at historically low levels, will contribute to modest upward pressure on valuations in light of the very strong demand for this asset class.

Summit II's goal in 2013 is to invest approximately $300 million in expanding its portfolio through acquisitions and expansions. Furthermore, Summit II expects to expand direct access to potential acquisitions through mezzanine financing agreements with third‐party developers, providing Summit II with rights to acquire these development projects upon completion, and by broadening its ties to the external development community.

Competition

The real estate business is competitive. Numerous other developers, managers and owners of office properties will compete with Summit II in seeking tenants. Some property owners with properties located in the same markets as Summit II's properties may be better capitalized and may be stronger financially and hence better able to withstand an economic downturn. The existence of developers, managers and owners in such markets and competition for Summit II's tenants could have a negative effect on Summit II's ability to lease space in its properties in such markets and on the rents charged or concessions granted, which could have an adverse effect on Summit II's financial condition and results of operation and decrease the amount of cash available for distribution to unitholders.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. The stock is trading at a P/E ratio of 19.97 and the stock has a dividend yield of 8.17%. The company has a book value of $6.17 per share. I believe the stock could be a good pick below the book value.

Source: 2 REITs With Recent Intensive Insider Buying