Bullboard - Stock Discussion Forum Canadian Apartment Properties Real Estate Investment Trust T.CAR.UN

Alternate Symbol(s): CDPYF

Canadian Apartment Properties Real Estate Investment Trust is a Canada-based provider of rental housing. The Company owns and manages interests in multiunit residential rental properties, including apartments, townhomes and manufactured home communities (MHC), principally located in and near urban centers across Canada. The Company owns approximately 64,300 residential apartment suites, town... see more

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Canadian Apartment Properties Real Estate Investment Trust > REIT Sector

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Post by retiredcf on May 21, 2020 7:55am

REIT Sector

Canadian Real Estate Outlook After Q1/20 Earnings

Apartments, Industrial, and Office Faring Well
Retail and Seniors Housing Feeling the Brunt of the Pandemic

Q1/20 Review

Q1/20 earnings season for the REITs/REOCs wrapped up last week. As expected, the major focus was on COVID-19 and the impact it is having on REIT rent collections and cash flows, as well as the outlook for the different asset classes (Exhibit 1). Our NAV estimates fell marginally with Q1 releases, and are now down 9%* from pre-COVID-19 levels. Through Q1 reporting, we increased our target prices for Industrials and Apartments, while Office target prices were largely flat. Target prices for the Retail, Diversified, and Seniors names fell 0.8%, 4.8%, and 6.5%, respectively.

Apartment REITs fared the best through April and continue to see positive trends in May, with rent collections largely in line with historical norms (particularly those outside Alberta/Saskatchewan), and only a small number of tenants (<0.5-3%) entering deferral programs.
Industrial REITs also fared well, with collections only marginally below typical levels, and the majority of the non-collections concentrated among smaller tenants. We expect the sector as a whole to benefit from the acceleration of trends in the way consumers shop and businesses manage their inventory and supply chain.
Office REITs reported April collections above 90%, with the majority of uncollected/deferred rents being attributed to ground-floor retailers or smaller start-ups. Most management teams are seeing May collections trending similar to April. As economies across the globe begin to reopen, several large companies (e.g. Goldman Sachs, JP Morgan, Google, Twitter, OpenText) have announced a variety of reopening plans, ranging from rotational/flex arrangements and additional satellite/suburban locations, to permitting work-from- home permanently.
As expected, the retail sector fared the worst through April (and May thus far), as government-mandated shutdowns of non-essential businesses affected tenants' ability to meet their rent obligations. Enclosed malls saw the lowest rent collections. Additionally, the impact of the closures pushed some of the weakest retailers into bankruptcy, including J Crew, JC Penney, Neiman Marcus, and Reitmans. Although we expect several difficult months ahead for the industry, we are encouraged by reopening of economies across Canada. On a positive note, some national retailers who (to our surprise) had previously withheld rents, are now making payments (link).
The near-term focus in seniors housing is on occupancy for retirement homes, which in April fared better than expected (-110bps to -170bps) versus our -200bps expectation. Cost escalation remains a concern, although we believe that government programs should be in place to help defray some of the increases. LTC homes continue to be funded on a 100% basis.