George Doyle
Globe editors have posted this research report with permission of Canaccord Genuity. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:
For Canadian REITs, 2015 was a volatile year that started off strong and turned negative through the spring. While many REITs had positive returns, the overall sector was down 4.6 per cent, and REITs with significant exposure to Alberta posted the lowest returns.
Assuming no material change in long-term interest rates or widening of credit spreads, we expect Canadian REITs to perform well in 2016, and we are forecasting total returns of, on average, 19 per cent. Of concern to us, the Canadian economy could soften further, and while interest rates would likely remain low, this could lead to a widening of credit spreads and lower values for equities.
For 2016, our best ideas present a mix of value and growth opportunities and cross different asset classes. All of our top picks are currently trading at significant discounts to NAV, which we believe supports unit prices even if internal growth is weaker than expected. For the most part, our top picks own high quality and well-located portfolios and should achieve stronger NOI growth over time. In addition, should the economy soften further, these portfolios should, for the most part, prove more defensive.
Large caps
- Brookfield Property Partners L.P.
- First Capital Realty Inc.
Small-to-mid caps
- Dream Industrial REIT
- Pure Industrial Real Estate Trust
- Pure Multi-Family REIT LP
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