Derek Warren, assistant vice president at Lincluden Investment Management
FOCUS: REITs

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MARKET OUTLOOK
After a solid year end and start to the year, REITs have come back to roughly fair value. We are expecting an unremarkable earnings season as there is little room for rent growth across the sector. Interest rate pressures continue to be the wild card. We would look to a pullback before adding new money to the sector. We are cautious on the retail REITs, however some of this is already reflected in the stocks. The market continues to like Industrial REITs, though this trade is extended. We like Apartment REITs here, especially smaller names. We continue to avoid Alberta exposure for now. In the U.S., the pressures on retailers are affecting the mall and shopping centre REITs, and these names are looking interesting. We continue to monitor the breadth of the U.S. economic recovery.

TOP PICKS

Derek Warren - Top Picks

Derek Warren of Lincluden Investment Management shares his top picks: First Capital Realty as a core holding, Killam Aparment REIT as a value holding and Northview REIT as an income holding.

Core: FIRST CAPITAL REALTY (FCR.TO)
This high quality retail portfolio should prove defensive, while also providing a superior growth profile. First Capital focuses on urban developments in Canada’s strongest markets, would continue to add on any weakness. Last purchased mid-November 2016 in the $19.50 - $20 range,

Value: KILLAM APARTMENT REIT (KMP_u.TO)
With a solid apartment portfolio in Maritime Canada, Killam has one of the newest portfolios in Canada, and continues to grow in Ontario and also Alberta. Trading at a discount to its peers, Killam offers good value and solid growth going forward.  Yield is 5 per cent. Last purchased mid-January $12 range.

Income: Northview REIT (NVU_u.TO)
This apartment REIT has exposure to smaller northern and western markets that are commodity focused, and also a significant portfolio of Ontario, Quebec and Maritime assets.  While 2017 continues to be a transition year, earnings growth should slowly return into 2018.  In the meantime investors are paid a generous 8 per cent yield. (Last purchase October ’16 equity deal at $21.15).

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
FCR N N Y
KMP N N Y
NVU N N Y


PAST PICKS: DECEMBER 18, 2015

Derek Warren - Past Picks

Derek Warren of Lincluden Investment Management reviews his past picks: Canadian Apartment Properties REIT as a core holding, Pure Industrial REIT as an income holding, and H&R REIT as a value holding.

Core: CANADIAN APARTMENT PROPERTIES REIT (CAR_u.TO)
Still a core holding, though at higher range of price.

  • Then: $27.23
  • Now: $31.81
  • Return: +16.81%
  • TR: +22.55%

Income: PURE INDUSTRIAL REIT (AAR_u.TO)
Keeps doing all the right things. 

  • Then: $4.32
  • Now: $5.74
  • Return: +32.87%
  • TR: +42.72%

Value: H&R REIT (HR_u.TO)
No longer deep value, but still diversified hold.

  • Then: $20.10
  • Now: $22.78
  • Return: +13.33%
  • TR: +21.32%

TOTAL RETURN AVERAGE: +28.86%

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
CAR N N Y
AAR N N Y
HR N N Y

FUND PROFILE: CIBC CANADIAN REAL ESTATE MUTUAL FUND

PERFORMANCE AS OF JANUARY 31, 2017

  • 1 month: Fund 1.0%, Index* 1.1%
  • 1 year: Fund 15.3%, Index* 19.5%
  • 3 year: Fund 8.8%, Index* 7.4%

*Total Return net of fees, dividends not re-invested, Index: S&P/TSX Capped REIT Index)

TOP HOLDINGS AND WEIGHTINGS

  1. CANADIAN APARTMENT PROPERTIES REIT: 7.1%
  2. SMART REIT: 7.0%
  3. PURE MULTI-FAMILY REIT: 5.6%
  4. RIOCAN REIT: 5.1%
  5. KILLAM APARTMENT REIT: 5.0%

TWITTER: @derekoenophile
WEBSITE: www.lincluden.com