RBC Summary Observations, top picks after RBC’s REIT conference
RBC Capital Markets analyst Jimmy Shan reported the highlights of the firm’s recent real estate conference,
“Many questions centered around the impact of the Federal government’s announcement to reduce non-permanent residents (including foreign students), which seemed to have been the main driver of underperformance of the multi-res sector since March. Responses were generally: 1) skepticism of whether the Federal government will actually hit the 5-per-cent target given conflicting policies and motivation; 2) market has overreacted – there is still pent-up demand from prior demand/supply imbalance; 3) foreign student impact should be limited, especially given that the key target were the smaller colleges. 2. Market rent growth moderation: Investors were generally sniffing out whether we are starting to see market rent softness and whether we are starting to hit affordability issues. Responses were generally that softness may be occurring at the top end of the market or in markets that saw significant growth last year. More affordable markets (Nova Scotia, Alberta) remain strong. The resounding message by most was that there is a significant mark-to-market rent opportunity within their portfolio such that even if market rent growth moderates, there is still a good runway for revenue growth. 3. Acquisitions: Investment market remains quiet, with few institutional bids, and there remains a gap between buyer and seller expectations”
RBC analysts have outperform ratings on Boardwalk REIT, BSR REIT, Flagship Communities REIT, Interrent REIT, Killam Apartment REIT, Minto Apartment REIT, Morguard Residential REIT, Chartwell Retirement REIT, Allied Properties REIT, Dream Industrial REIT, Granite REIT, First Capital REIT, RioCan REIT, Smartcentres REIT, and Storagevault Canada Inc.