PRO Real Estate Investment 8 Convertible Unsecured Subod Debentures T.PRV.DB

CIBC Initiating Coverage

[ndiamond]

Our Conclusion As of January 15, we initiate coverage of PRO REIT with an Outperformer rating and a $6.25 price target. We believe the REIT’s progress towards becoming an industrial pure-play is underappreciated and units still trade at the diversified holdco discount. Even as repositioning has slowed given the quiet transaction environment, we see attractive growth in its Eastern Canada industrial markets. We believe valuation can improve as exposure to office and retail declines. At ~20% below NAV and an ~8.7% yield, valuation is attractive. Experienced and internalized management, and little to no development or refinancing risk, round out our positive view

Price Target (Base Case): C$6.25 Our base case of $6.25 reflects a ~5% discount to our current NAV and equates to 12.5x 2024E FFO.

Upside Scenario: C$7.50 Our upside case of $7.50 reflects our NAV with NOI growth that exceeds our forecast by +2.5% and a 25 bps cap rate decrease on the property portfolio


I have continued to add to my position over the past month.   My largest holding of any REIT.