Joshua Varghese Canadian Apartment Properties CAR.UN-T BUY Oct 08, 2024

In his balanced portfolio to provide income rather than growth. Not the greatest ride for REITs the last few years. Not seeing the pickup in turnover needed in multi-family residential, people need to leave so you can get higher rents. Lots of buildings are under rent control. Yet maintenance costs keep going up.

Cleaned up balance sheet, sold some assets. Future depends on more turnover, which won't happen until interest rates are at a more attractive level (which encourages more people to start buying houses).

It is in a sideways, tradable pattern and tried to break out but failed. It is stuck in a range so trade on the pullback.

Generally, caution is warranted in apartments. Stocks are now coming into interesting levels. Great population growth, but could turn negative next year. Very good portfolio. Selling older buildings and buying new from developers. So cashflow growth should improve -- buildings won't need such extensive repairs, plus new buildings are not subject to rent control.

Sale of manufactured housing communities business will give them lots of cash. Look for share buybacks. Long term, feels good about multi-family residential. Just sit through the mid-term volatility.

The REIT world is very interest-rate sensitive, as is your house. Watch your real estate exposure across your net worth. If you didn't own a house, an excellent play. Low vacancy, largest Canadian provider.

It's at the bottom of the trading range. He's watching it. It last bottomed in 2023 then bounced off. Many REITs like this are rangebound which bounce up and down. He likes such stocks--you know the top and bottom of a stock. CAR.UN may be reaching a bounce. Maybe. If you own it, hang on and see.

Tilts toward the higher-end of the market, seeing more softness than others. Highest exposure to GTA, where there are pockets of new supply. Rental growth stalled in Toronto; investors are more likely to chase markets with more growth such as BEI.UN or KMP.UN.

REITs are very correlated to interest rate expectations. Last year, he took a close look at this and was not enthused. Immigration is gone, no longer a tailwind, and its dividend is merely okay. Long-term, office REITs have the best outlook in REITs.

Given Trump, you need defense like this. Low immigration and rent control weighed on CAR.UN. In a recession, people will be evicted, and in a better economy, those vacated units will be priced higher. A sustainable business model. Now, the price is attractive. 

One of her 2 picks in the space, as warehouse and residential growth outshine retail REITs.

CHP.UN is far more defensive. Great portfolio, with about 20% in industrial warehouse space (a sector he's quite bullish on). If you want defense, this is your better bet.

With CAR.UN, you have to think about affordability and how defensive is the tenant base and the cashflow from that base. Great portfolio, with higher concentration in Ontario -- something to keep in mind if you're concerned about tariffs and loss of manufacturing jobs in southwestern Ontario. See his Top Picks.