March 11, 2018

Friday was a strong day for the U.S. markets with the S&P 500 up a hefty 1.7%.

Toronto was up 0.25%

Gainers included Visa up 1.9%, American Express up 2.6%, Berkshire up 3.7%, and FedEx up 3.0%.

CRH Medical retreated 4.7%.

My next update will be for the Melcor REIT.

An interesting thing about REITs that lease space to business tenants is that almost all the expenses tend to flow through to the tenants albeit some over a period of years. Most of us might be more familiar with residential rent leases where the landlord is responsible for property taxes and maintenance. With the long-term nature of business/ commercial leases and the flow through nature of almost all of the costs (not financing costs), the risk for commercial landlords including REITs is much reduced. They still do have risks in terms of vacancies and the market rent levels when leases expire but the risks would seem to be FAR lower than in the case of short-term residential leases where costs do not automatically flow through. There is also the risk of changes in interest rates and changes in market value of properties which affect commercial landlords and also residential landlords.