Increasing confidence inside the Canadian property market prompted an even more bullish outlook by REIT analysts at TD Securities.
Sam Damiani as well as the colleagues raised their target prices on several names awaiting private property market valuations will remain high and investors will still be attracted to the sector.
This is founded on the expectation that rates will remain low for extended, commodity prices and also the Canadian dollar will stabilize, these types of near record-low valuations for REITs.
With the loonie having risen roughly 10 % within the early-2016 low, Damiani told clients that U.S. and European REIT investors are beginning to place more income to the Canadian REIT sector.
Couple by using a recovery in oil prices as well as the resiliency of property fundamentals in Alberta, as well as the analyst thinks a renewed sense of confidence is starting to emerge.
Another benefit is the progression of a brand new GICS sector legitimate estate, which Damiani believes increases knowledge of REITs for a lot of institutional investors in Canada. He believes they have been overshadowed with the larger banks and insurers within the financial GICS sector.
“We still see a disconnect between private market valuations combined with the implied trading valuations of Canadian REIT, the analyst said, noting that growing amounts of foreign capital ought to keep property prices elevated.
Several recent office property deals demonstrated record pricing, including Royal Centre in Vancouver, in addition to TD Centre, 70 York Street, and 1200 Bay Street in Toronto.
So while Canadian REITs have been getting a pleasant run since January, their valuations remain near record lows, exchanging a typical 10 % discount to net asset value, round the historical average of 5 percent.
Damiani noted that current valuations suggest the 10-year bond yield will surge to 4.1 per cent, earnings will fall approximately 15 %, or both.
The analyst upgraded Killam Apartment REIT to purchase from hold his price target to $13 from $12.
A volume of other names also saw increases, using the target on RioCan RETI at the forefront with an 11 percent gain to $30 from $27.
