Post by
Defiance2050 on Sep 15, 2024 9:08pm
Multiples and Valuations
Real estate is one of the few hard assets where there is a bigger market in the private sector then publically listed. My train of thought on real estate is look at how the much larger private market is going and what the trends are. Industrial especially in Ontario is undersupplied (similar to apartments); lack of vacant land, land prices and zoning restrictions prevent a growth of new properties.
Over 80% of each sector is privately owned if not more. Historically all sectors traded slightly above NAV with apartments and industrial having a larger premium due to valuation growth.
Similar to the market in 2020 there was a significant spread between the valuations of what the assets are selling for an what real estate companies trade at.
I am own enough shares and didn't add much Nexus this year.
Of trades I made large gains on included near 2020 and 2024 lows of DRM (holding company discount was larger than it should be), apartments which as a sector was trading at over a 20% discount and industrials which had a similar discount.
Even with 52 week highs there is still room to grow especially given how the stock market as a whole has been. Stocks have been trading above previous valuation multiples and if that applied to real estate the 2024 gains would probably double.
Nexus has a couple items that will take some time but eventually be reflected.
There are below market rents (especially on Ontario properties) and with how the stock market seems to value is the current earning profile versus, market conditions minus a proper time discount.
Eventually it is getting close to being 100% industrial which will make a difference. At a certain point more funds especially indexes will include Nexus.
Do your own do dilligence, have your own methods of thinking and try not to be too late to the trend of either entering or exiting a position.