In a separate Scotiabank report, REIT analyst Mario Saric surveyed the apartment subsector and finds one REIT oversold,
“Rentals.ca released August Rental data yesterday, with est. up 0.7 per cent month-over-month (i.e., August vs. July) asking rent vs flat in July vs. June with notable regional discrepancies. Ex. two smaller markets with huge quoted increases (Gatineau and Nanaimo), asking rents were likely flattish again in August. That said, the data volatility is hard to ignore, with some of the most challenged markets in July becoming the best in August and vice-versa, a concern shared by some of the Apartment REITs at our REIT Conference last week … From a REIT perspective, we estimate MI markets saw avg. 0.2 per cent m/m asking rent growth, with IIP flattish (similar to Q2), and CAR, BEI, and KMP markets all down 0.8-0.9 per cent m/m, reversing July gains (only partially for KMP). Interestingly, the est. market asking rent growth was inversely correlated with avg. in-place portfolio rent (i.e., MI and IIP have the highest; KMP and BEI the lowest) … Net-net, we think Apartment REITs look more reasonably valued following the recent run and amidst potentially increasing headline risk (Federal immigration policies heading into an Election) and potential flattening market rents in certain regions. We also think the degree of IIP underperformance is excessive”