Whiterock REIT (WRK.UN - TSX)
April 23, 2009
REITinvestor.ca lowers target and remains cautious on Whiterock REIT with a neutral #3 Ranking.
REITinvestor.ca, a private subscriber-based independent rating & ranking service, has maintained its neutral #3 ranking of WRK.UN, and today lowered its target price to $14.00 from $16.00
Today Whiterock REIT announced that it has entered into an agreement with a syndicate of underwriters who will purchase 680,000 units at $14.80 per unit with total proceeds of approximately $10M. The syndicate has an additional 10% over allotment option for 30 days following the expected closing in mid May. Whiterock intends to use the proceeds for debt repayment and other trust purposes.
REITinvestor.ca estimates that while the $10M if applied to reduce bank indebtedness would increase short-term liquidity, there remains a real risk that distributions will need to be cut by 25% -50% within the next 24 months as payout well exceeds distributable income.. REITinvestor.ca is of the opinion that the current unit distribution is unsustainable at $3.366/an.
With current yield is excess of 22% at today trading price of $15/ unit. REITinvestor.ca does not see much upside to the units at the present time despite the high yield.
REITinvestor.ca also notes that over the next 3 years, Whiterock REIT has $55M in convertible debentures coming due all with low interest rates and convertible at $10.20 - $13.75.
WRK.UN units closed on April 22 at $16.00 per unit on the TSX. For more information, visit REITinvestor.ca.
DISCLOSURE: REITinvestor.ca maintains its own investment fund and has not position in WRK.UN.
REITinvestor.ca does not provide investment advice nor does it recommend the purchase or sale of securities, including any REIT units it covers. Please consult your personal professional advisor before investing.