Minto Apartment Real Estate Investment Trust T.MI.UN

RE:TD Small-cap Model Portfolio

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More details. GLTA

As we highlighted on Tuesday, we believe that the recent reversal and decline in the real rate could lead to a rotation back to the REITs, which have largely underperformed throughout the pandemic. This would follow what we previously witnessed through extended declining real rate environments in late-2018- early-2020 and 2009-2012. Through those periods, REITs outperformed both the S&P/TSX Composite and versus the banks (Exhibit 1). Canadian bond yields have also moved lower over the past several weeks on slowing economic data. As we show in Exhibit 2, declining Canadian bond yields have typically favoured the REITs over the banks.

Among the REITs, we prefer residential (i.e. apartment). Following their underperformance over the past year, residential REITs have begun to demonstrate relative price strength more recently versus the S&P/TSX REIT sector. With pandemic-induced trends reversing, we believe that residential REITs could continue to rerate higher. As a result, we increased our position earlier this week to InterRent and are again adding to our residential REIT exposure through Minto. Minto has been an underperformer versus the other Canadian residential REITs. However, given the high correlation among them, we believe that the recent recovery in the residential REITs, such as InterRent and Killam Apartment REIT (KMP.UT-T) could pull the underperforming Minto higher. Minto presently yields 3.1%.

The addition of Minto increases our Real Estate sector overweight to 14.3% versus the S&P/TSX Small Cap Index at 8.3%.