Silver Lining For REITs

In a cautious REIT market, Dundee Capital's senior real estate analyst Frederic Blondeau tells us there is still a number of companies to keep an eye on, focusing on their growth potential without having to bring on additional capital. Multi-rez and seniors living REITs are the sub-sectors on his hit list. Frederic's Top 5?: Boardwalk (BEI-U), in the multi-rez sector, because of solid rental fundamentals, a top-tier management team and a conservative balance sheet—giving them the flexibility to support any growth initiatives. InterRent (IIP-U) is a multi-rez company that had a new management team take over its portfolio in 2009, repositioning those assets, and has now realized higher occupancy and rents—which fueled a high number of property acquisitions in 2012.

Frederic also points to Mainstreet (multi-rez; MEQ) as one to keep focused on over the next 12 months because of anticipated occupancy growth and acquisitions, and Leisureworld (LW), which Frederic says is the most appealing REIT in the seniors living sector because of its low-risk model, conservative balance sheet and the opportunity to boost cashflow because of a better-than-expected performance in RH property operations. The announcement in April that they were acquiring a portfolio of 10 properties in Ontario increased the number of beds/suites by 30%. Allied Properties (AP-U,snapped is their King St office) caps off the Top 5. Frederic points to their strong internal growth numbers, their ability to lease out what they have—and $150M in liquidity and $400M in unencumbered properties. "While the cost of equity has risen for publically listed entities," he says, "interest rates remain near all-time lows and investment spreads remain attractive."