More Targets Canaccord Genuity analyst Mark Rothschild expects Summit Industrial Income REIT to continue benefitting from rising rental rates for industrial space in its core markets.
Now seeing an “attractive” entry point following in-line first-quarter results, he raised his recommendation to “buy” from “hold.”
“Industrial fundamentals remain exceptionally robust in Summit Industrial Income REIT’s (Summit) core markets of the GTA (50 per cent of gross leasable area) and Montreal (22 per cent of GLA), and there has been additional upward pressure on rental rates” he said. “In the quarter, the REIT achieved leasing spreads of, on average, 51.5 per cent and, with quarterly results, announced a 3-per-cent increase in the monthly distribution.”
“Year-to-date, Summit’s units have returned negative 17.6 per cent, and the implied cap rate has risen 50 bps from 3.6 per cent at the beginning of the year to 4.1 per cent currently. Industrial fundamentals remain extremely strong in Canada at just 1.6-per-cent availability, compared to 4.9 per cent in the U.S., according to CBRE, and given the high demand and low supply of industrial space, the gap between in-place and market rent across Summit’s portfolio is exceptionally high and leasing spreads are wide. Therefore, we believe the REIT is well positioned for strong FFO and NAV growth for several years.”
Reiterating his bullish view, Mr. Rothschild maintained a $22 target for Summit Industrial units. The average is $24.50.
Others making target changes include:
* CIBC’s Sumayya Syed’s to $22.50 from $24 with a “neutral” rating.
* Desjardins Securities’ Michael Markidis to $24 from $25 with a “buy” rating.