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Gold/Mining/Energy : Canadian REITS, Trusts & Dividend Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Wong who wrote (62)	3/22/1998 9:17:00 AM
From: Labrador	Read Replies (1) \| Respond to of 11633

Legacy Hotel REIT -- a critical analysis. I took a look at Legacy Hotels. Obviously the person who recommended the stock has a vested interest -- namely he paid full list price for the stock which is now trading at about a 15% discount. So take his recommendation for what it is worth. There is an interesting (yet critical) articles on Income Trusts published in the Canada Newswire (Nov. 11, 1997) -- unfortunately I cannot post it here. By the way, I have done a little editorialing of the below summary with my thoughts. The gist of this article summarizes the opinions for Burgundy Asset Mgmt, Ltd. There view is that in many income REITs the shareholders have all the downside which shielding management from accountability. They point to Legacy Hotels as the typical illustration of the problem. In the Legacy situation, the management is outside of the REIT. The management charges 3% of the revenue of the hotel (very high in my view), an advisory fee on the undepreciated value of the assets (note "undepreciated" -- would not want that fee to go down would they?), a fee based on the transaction size of any new hotel purchases, and an incentive fee based on any increase in the REIT's operating income. Note that the only part of management's pay which is in line with the what the REIT's shareholders care about is the incentive fee which is tied to income. So it appears, my friends, that if you want to give a large slug of any upside on this REIT to the 1/3 shareholder, but keep all the downside, Legacy is the REIT for you. Oh by the way, if you dont like the arrangement that CP (the seller of the property and manager who gets the fees) cut with the REIT, can the 2/3 (majority) public shareholders change the deal and kick out CP? Now folks what do you think? The nominating committee of the trustees for the REIT is controlled by CP, so if you are disenchanted sell your shares, but dont think about changing the arrangement. By the way, most of the U.S. REITs are now structured with management inside the REIT to hold the management accountable to the shareholders and align their interests with the shareholders. What do you think about this?