Higher-for-longer rates means it might be a good time to buy these REITs: CIBC analyst
CIBC analyst Dean Wilkinson published his monthly report arguing that now might be a profitable time to buy REITs despite higher for longer interest rates,
“Higher for longer continues to seem the path of least resistance when it comes to the rate environment over the near to medium term … the market appears to be more macro rate driven at the moment than anything else, a dynamic we have seen play out over the past decade at times of heightened uncertainty. If history is any indicator (and keeping very much at the forefront that past performance is no guarantee of anything at all), the current levels of the REIT sector may prove to be an attractive entry point for patient investors while collecting an above-average yield … If we assume the current rate environment persisted through most REITs’ debt ladders, the impact to FFO [funds from operations] would imply roughly a [P/FFO] multiple closer to prior-period lows (in the 11-13 times range) vs. the current 9.5 times”.
Mr. Wilkinson has an “outperformer” rating on Automotive Properties REIT, Brookfield Corporation, BSR REIT, Chartwell Retirement Residences, Crombie REIT, Dream Industrial REIT, Dream Residential REIT, European Residential REIT, First Capital REIT, Granite REIT, H&R REIT, Killam Apartment REIT, Minto Apartment REIT, Morguard North American REIT, Primaris REIT, RioCan REIT, SmartCentres REIT and Tricon Residential Inc.