Canaccord Top Pick Though Canadian real estate investment trusts remain “well positioned for strong financial performance,” Canaccord Genuity’s Mark Rothschild and Christopher Koutsikaloudis warn they are unlikely to maintain the pace of gains seen in 2021.
After the S&P/TSX Capped REIT Index generated a total return of 35 per cent last year, exceeding the TSX Composite Index’s return of 25 per cent, the equity analysts are projecting an average increase of 14 per cent for the next 12 months.
“Our outlook for 2022 is based on the expectation of rising interest rates, continued fund flows into real estate and no material change in operating fundamentals,” they said. “While there is some uncertainty regarding the longer-term outlook for some asset classes, we expect that fundamentals for most property types will remain stable or improve in 2022. Residential and industrial REITs should continue to deliver the strongest operating performance, although we are also confident in the ability of high-quality retail REITs to achieve modest organic growth while advancing development projects.”
In a research note released Thursday, the analysts said their top picks for the year “include REITs in sectors benefitting from strong fundamentals and for which current valuations are attractive relative to peers and private market values.”
They named Brookfield Asset Management Inc. as their top pick. Mr. Rothschild has a “buy” rating and US$69 target. The average target on the Street is US$68.29.
“Brookfield Asset Management (BAM) is a global alternative asset manager with a focus on property, renewable energy, infrastructure, and private equity. In addition, BAM meaningfully expanded its credit platform through the acquisition of Oaktree in 2019. More recently, Brookfield has added new areas of focus including insurance, growth investing (technology), transition funds and secondaries. Raising larger funds has led to substantial growth in management fees, carried interest, and cash flow. Along with the new areas of focus, we expect continued growth in both assets under management and cash flow,” he said.
At the same time, Mr. Rothschild upgraded InterRent Real Estate Investment Trust to “buy” from “hold” with a $19.50 target. The average on the Street is $20.
The analysts also made a series of target changes:
- European Residential Real Estate Investment Trust (“buy”) to $5.75 from $5.25. Average: $5.46.
- Killam Apartment Real Estate Investment Trust (KMP.UN-T, “buy”) to $26.50 from $25.50. Average: $25.79.
- Choice Properties Real Estate Investment Trust ( “buy”) to $16.50 from $16. Average: $15.94.
- First Capital Real Estate Investment Trust ( “buy”) to $22 from $21. Average: $21.50.
- RioCan Real Estate Investment Trust ( “hold”) to $25 from $24.50. Average: $25
- StorageVault Canada Inc. ( “buy”) to $8 from $7.25. Average: $7.43.
- Tricon Residential Inc. ( “buy”) to $16.75 from $16.25. Average: $20.
- Dream Unlimited Corp. ( “buy”) to $46 from $40. Average: $40.67.
- BSR Real Estate Investment Trust (, “buy”) to US$20.50 from US$19. Average: US$20.02.
- Granite Real Estate Investment Trust ( “buy”) to $115 from $110. Average: $108.30.
- Dream Industrial Real Estate Investment Trust (DIR.UN-T, “buy”) to $21 from $19.50. Average: $19.22.
- American Hotel Income Properties REIT LP (HOT.UN-T, “buy”) to US$5 from US$6. Average: US$4.31.