A Reit in the north

  Lanesboro Reit posted their second quarter results on August 18.They are not widely followed because they do not have a huge amount of assets and much of their assets are in the Canadian  north.They trade at about $1.15 per share now but have traded at $1.50 per share recently;they sold some non-core assets in 2013       and made a good gain.This quarter they made a net loss of $.21 million before extraordinary items while net operating income decreased by $.16 million compared to Q2 2013.Their occupancy rates are rising but still below industry standards.But they did make some gains on the financing side.In particular, they received  a $9 million repayment of two mortgage loans on Clarington Senior's residence in central Ontario.
    Financial details
   The main item here is the repayment of two mortgage loans for $9 million.They also increased a mortgage on one property and got proceeds of $1.6 million.Also they refinanced a $16 million loan that was subject to a covenant breach and got a better interest rate.They have no loans that are in breach of loan covenants and this brings a better interest rate on all mortgage loans.They also got an extension on their series G Debentures.Lastly they expect their warrants will be exercised in 2015 and will use proceeds to pay off more debt.
  Conclusion
   It has many properties in the Fort Mcmurray tar sands area.Incomes are not yet stable here and Lanesboro has suffered low occupancy rates in the past.Occupancy rates are up but rental rates have fallen somewhat.They need to raise rental rates and occupancy and the increase in the price of heavy oil should help  by stabilizing incomes.It did have a small loss this quarter but the financing gains help to offset.The second half should be slightly better but they need to diversify their portfolio perhaps into Edmonton or Fort St.John in British Columbia.Still they are more solid than many small Reits as their shareholder equity is about $120 million and total assets of about $475 million.The price should stay in a range  this half between $1.00 to $1.25 per share.However they would make an excellent takeover candidate for a bigger operator like Holloway Lodging or Interrent Reit if it can be obtained at the right price.With their financing situation improved Lanesboro will be a little more expensive this quarter.