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Top Picks from Derek Warren: Chartwell Retirement Residences, Plaza Retail REIT, and American Hotel Income Properties

Tags: Market Call

Derek Warren, portfolio manager at Lincluden Investment Management

Focus: REITs

MARKET OUTLOOK:

The North American REIT markets are trading at significant discounts to the net asset values of their properties, and are offering investors highly attractive yields. In Canada a combination of oil weakness and recession fears have caused a selloff in Alberta focused and retail REITs, however in the midst of the broad sell off we see investors reacting irrationally. There are now many high quality organizations offering what we feel to be highly attractive risk adjusted returns with sustainable yields meaning you are paid to wait for the recovery. In the U.S. the correction seems motivated by external shocks that are providing investors the opportunity to buy into a strengthening economy and healthy property market. While caution is always warranted in times of market correction, we see quality real estate at steep historical discounts and attractive yields, leading us to recommend buying REITs.

Top Picks:

Core: Chartwell Retirement Residences (CSH_u.TO)

This owner/operator of seniors living residences is in our view the top operator of seniors living homes in Canada. There has been significant M&A in this sector, each at a more exorbitant price, yet Chartwell is still below its highs. If a takeover does not occur you still own a top company in a growing sector.

Value: Plaza Retail REIT (PLZ_u.TO)

Plaza continues to execute within its area of core expertise which is the development (and redevelopment) of smaller grocery anchored strip in secondary markets. Management is well aligned, and the company has a history of internally funded NAV growth and increasing dividends.

Income: American Hotel Income Properties (HOT_u.TO)

The U.S. hotel market is very hot, as can be expected in an improving economy, and American Hotel Income Properties (AHIP) participates in this strength while providing a 9 percent yield. AHIP owns a combination of fixed contract hotels for railway workers that provides an underlying support to income, along with a solid portfolio of limited service hotels that can benefit from the improving U.S. economy.

Disclosure:

Personal

Family

Portfolio/Fund

CSH_U

N

N

Y

PLZ_U

N

N

Y

HOT_U

N

N

Y

Past Picks: September 5, 2014

Core: Granite REIT (GRT_u.TO)

  • Then: $41.05
  • Now: $37.69
  • Return: -8.19%
  • TR: -3.04%

Value: Pure Industrial REIT (AAR_u.TO)

  • Then: $4.60
  • Now: $4.43
  • Return: -3.70%
  • TR: +2.90%

Yield: WPT Industrial REIT (WIR_u.TO)

  • Then: $10.10
  • Now: $12.00
  • Return: +18.81%
  • TR: +26.28%

Disclosure:

Personal

Family

Portfolio/Fund

GRT_U

N

N

Y

AAR_U

N

N

Y

WIR_U

N

N

Y


 

 

 

 

 

 

Total Return Average: +8.71%

Fund Profile

CIBC Canadian Real Estate Mutual Fund

Performance as of: September 4, 2015

1 Month: Fund -4.54%, Index* -6.20%

1 Year: Fund 3.01%, Index* -5.37%

3 Year: Fund 3.85%, Index* 0.74%

* Index: S&P/TSX Capped REIT Index

* Total returns net of fees

Top 5 holdings and weightings:

Brookfield Asset Management - 8.52%

RioCan REIT - 6.65%

Smart REIT - 5.64%

Brookfield Property Partners - 4.93%

Pure Multi-Family REIT - 4.76%

Twitter: @derekoenophile

Website: www.lincluden.com

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