From todays Globe and Mail Though he thinks it remains too early to take a stance on the Office sector, iA Capital Markets analyst Frdric Blondeau revised his estimates for
Slate Office REIT (
SOT-UN-T ) on Tuesday, citing “improving momentum.”
“Management recently mentioned being encouraged by the momentum seen across SOT’s portfolio, considering Atlantic Canada as a leading indicator for the rest of the REIT’s Canadian markets,” he said. “Activity is also picking up in Ontario. Chicago is benefitting from the recovery essentially seen at the national level.
“We note that SOT’s operational risk is relatively subdued at this stage. Approximately 60 per cent of the REIT’s income is generated from government and credit rated tenancies with a WALT of 5.3 years. More important, only 2.9 per cent of the GLA remains to be renewed in 2021.
Mr. Blondeau said Slate’s management is expected a rebound in new office leasing demand in the second half of the year, projecting its portfolio occupancy to improve to 90-92 per cent from 83.5 per cent currently.
“Indications are that it remains early in the recovery process for SOT’s Ontario portfolio,” he noted. “That said, management mentioned that leasing activity in the GTA has gained momentum, while pent-up demand is significant. 60K sq. ft.+ of leasing was completed within the REIT’s GTA portfolio in Q1, while management expects activity to pick up on the back of the vaccine roll-out and the start of the return to office for end users. In addition, post-Q1, the REIT has completed an additional 55K sq. ft. of leasing within the GTA, inclusive of a 40K sq. ft. renewal in the west end of Toronto.”
Maintaining a “hold” rating, Mr. Blondeau raised his target for the REIT’s units to $4.60 from $4.25. The average is $4.68.