Pat McKeough responds to many requests from members of his Inner Circle for specific investing advice as well as questions on investment strategy and the economy. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for members of Pat’s Inner Circle.

This week an Inner Circle member asked us about a real estate investment trust with a unique geographical focus. Northern Property REIT has a strong niche as a manager of residential properties in Canada’s north, with half of its revenue coming from Nunavut and the Northwest Territories. Pat examines the trust’s business and financial outlook and balances the risks and rewards of the REIT’s focus on the north.

Q: Thank you, Pat and your team, for your advice over the years. What is your view of Northern Property REIT?

A: Northern Property REIT, (symbol NPR.UN on Toronto; www.npreit.com), is a real estate investment trust that focuses on managing multi-family residential properties, such as apartments and townhomes, in Canada’s north.

The REIT gets 25% of its revenue from Nunavut and 25% from the Northwest Territories. Alberta is next, at 20%, followed by B.C. (16%) and Newfoundland (12%).

Northern’s housing portfolio is divided into three segments: multi-family residential (including apartments, townhomes and single-family rental units), at 74% of revenue; “execu-suites” (furnished apartments for short-term lease), 9%; and commercial real estate, 17%.

REIT yields 5.4% while paying out smaller share of distributable income to unitholders

Northern Property REIT is the largest residential landlord in the Northwest Territories, Nunavut and Newfoundland and Labrador, where many of its apartments are leased to governments and corporations. It’s also a significant residential landlord in northern Alberta and B.C.

In three months ended September 30, 2013, the REIT’s revenue rose 12.0%, to $45.6 million from $40.7 million a year earlier. Cash flow per unit gained 18.2%, to $0.65 from $0.55.

The REIT yields 5.4%. In the latest quarter, it paid out 59.5% of its distributable income to unitholders, down from 68.9% a year ago.

In the Inner Circle Q&A, Pat looks at the prospects for Northern Property REIT, weighing the benefits of spreading economic development against the potential risks of a lengthy resource downturn or a drop in government funding for northern development. He concludes with his clear buy-hold-sell advice on this real estate investment trust.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members

When you invest in a REIT, do you base your choice on the kind of properties it has—residential, commercial, industrial or retail—or the location of those properties? Or is the yield your main consideration? Do you have any REITs that have been especially good investments for you?