Derek Warren, assistant vice president at Lincluden Investment Management

Focus: North American REITs
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MARKET OUTLOOK
The REIT market has generated solid returns year to date, despite the fear of rising rates. As a sector, REITs appear fairly valued. However, we see pockets of opportunity, especially in the retail sector. While retailers indeed are facing pressure, we feel these fears have been overdone in REIT shares, especially in the U.S. There continues to be very strong demand for Canadian commercial properties, and we would not be surprised to see more M&A activity in the space. Income-focused investors in particular should be looking at the REIT sector as many names are trading at very attractive yields. The Alberta property sector continues to show strain and we are sitting (mostly) on the sidelines for now.  

TOP PICKS

Derek Warren - Top Picks

Derek Warren of Lincluden Investment Management shares his top picks: First Capital Realty, Acadia Realty, and Cominar REIT.

CORE: FIRST CAPITAL REALTY (FCR.TO)
This high-quality collection of retail properties in some of the top urban markets of Canada has sold off due to general retail concerns and a recent sale by a large shareholder. Investors should use this weakness as an opportunity to purchase this combination of good management and solid real estate. Last purchased in March 2017 at approximately $20.

VALUE: ACADIA REALTY (AKR.N)
As retailers across the U.S. are reducing their store counts, U.S. retail REITs have been very weak and are now trading at discounts to net asset value. Acadia is focused primarily on urban street-front retail in Brooklyn, Manhattan, Chicago, etc. and as such is a very defensive way to gain access to the hottest retail in North America. Last purchased earlier this month at approximately $30.

YIELD: COMINAR REIT (CUF_u.TO)
This Quebec-focused diversified REIT has been in the penalty box for some time as management pursued a growth strategy. The Quebec economy is performing well, and management is focused on operations. Management is committed to maintaining the 10-per-cent yield. While not without operational risks, the next few years should see increased stability, and yield investors should be rewarded. Last purchased in October 2016 at approximately $15.
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
FCR N N Y
AKR N N Y
CUF_u N N Y


PAST PICKS: FEBRUARY 3, 2016

Derek Warren - Past Picks

Derek Warren of Lincluden Investment Management reviews his past picks: Brookfield Property Partners, Tricon and Pure Multi-Family REIT.

CORE: BROOKFIELD PROPERTY PARTNERS (BPY_u.TO)

  • Then: $28.87
  • Now: $30.50
  • Return: +5.64%
  • TR: +12.52%

VALUE: TRICON CAPITAL GROUP (TCN.TO)

  • Then: $8.36
  • Now: $11.17
  • Return: +33.61%
  • TR: +38.36%

INCOME: PURE MULTI-FAMILY REIT (RUF_u.V)

  • Then: $6.63
  • Now: $8.97
  • Return: +35.29%
  • TR: +45.64%

TOTAL RETURN AVERAGE: +32.17%
 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
BPY_u N N Y
TCN N N Y
RUF_u N N Y


FUND PROFILE: CIBC CANADIAN REAL ESTATE MUTUAL FUND

PERFORMANCE AS OF APRIL 13, 2017:

  • 1 month: Fund 3.9%*, Index** 4.8%
  • 1 year: Fund 8.9%*, Index** 11.1%
  • 3 years: Fund 8.7%*, Index** 6.9%

* Total returns, dividends not reinvested, net of fees
** S&P/TSX Capped REIT Index as of April 13, 2017


TOP HOLDINGS AND WEIGHTINGS

  1. Canadian Apartment REIT: 7.4%
  2. RioCan REIT: 6.0%
  3. Smart REIT: 5.4%
  4. Killam Apartment REIT: 5.2%
  5. First Capital Realty: 5.0%


TWITTER: @DerekOenophile
WEBSITE: www.lincluden.com