David BaskinGranite REITGRT.UN.TOTOP PICKJul 10, 2023

High-quality. 25% is leased to auto-part maker MG. Great job navigating tariff noise, geopolitics, and inflation. Warehouse activity had really slowed, but leasing now bouncing back. 

Now trying to orient its portfolio to Tier 1 markets. Midpoint of its valuation range. You'll do well riding out warehouse recovery into 2027.

Owns lots of industrial properties, both around GTA and in the Florida-Texas belt that's growing rapidly. His best idea for the space.

Big factor in property is interest rates. Concern of higher interest rates in autumn, but he thinks that's unlikely. US is about to have a new Fed chair, with the express view of keeping interest rates lower.

It reports tomorrow. REITs have been performing well because interest rates are falling, and they were trading at a deep discount to NAV. For GRT, there was a concern that industrial warehouses were overbuilt during the pandemic. However, they have a clean balance sheet. Still likes it for the dividend.

Thinks rates are going to be in a choppy, sideways trading range. This should remove a headwind for REITs, which have been big underperformers. His firm's REIT analyst is bullish on the space. Javed likes the space too. No one's interested in REITs or talking about them.

Ultimately, thinks we're heading into an era where inflation is going to be more persistent. REITs actually do pretty well in terms of protecting your portfolio in terms of inflation. He's cautious on bonds longer term, so REITs are an area to put $$ to work for dividend income.

Likes the setup here. Seeing a lot of US and Canadian REITs turn up. Timely, and should continue to work into 2027.

Magna is their biggest tenant among a good tenant base. So, their cash flow is solid. But there are vacancies in the U.S., particularly the Midwest, bu Granite has done a good job of filling those vacancies. The stock is fairly valued now. 

Industrial real estate. 26% of net operating income comes from Magna down from the original 100%. Magna is now actually signing longer-term contracts. US-based business accounts for 50%. 

Tariffs caused uncertainty, but now starting to see an inflection point and pace of vacancies is slowing. Increased guidance for rest of 2025. Pickup in leasing activity improves pricing and margins. Trades ~20% discount to NAV. Yield is 4.39%.

Offers growth, focusing on industrials and e-commerce. A good growth runway.

Unique feature of large bays and international tenants, rather than smaller businesses. Europe, US, and Canada. Under extra pressure because of leases to MG; he sees no real risk there, as MG is very well run with low debt, actual exposure is ~3%. Industrial market has been punished unreasonably, good value for future.

26% of net operating income is from MG, so being impacted by tariffs. He calls this a second-derivative target of tariffs. Shares are trading as though MG is going to move its operations to the US, but he doesn't think it's equipped to do so.

Good assets. Headwinds: 1) MG is its largest tenant (at over 25% exposure), 2) midwest focus in US, where new supply has come on, so it's having a tough time filling up vacancies. Wait for a better entry point.

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

Canada's largest industrial REIT with properties in Canada, Europe and Asia. Increasing rents has helped the business, however, rents have appeared to plateaued lately. Concerns that large revenue stream from Magna will be at risk from tariffs. Would buy more shares upon stock price weakness. Strong business overall. 

Solid balance sheet, so it's pretty defensive. Vacancy crept in last year, taking longer to lease due to economic uncertainty. Tariffs are the #1 question, and Magna is a large tenant. Same tariff issues with Europe. A show-me story. See his Top Picks.

Sounds counterintuitive, but WFG and trees are going to be beneficiaries. US still needs them, just going to pay higher prices.

GRT.UN is a good name. PKI works well here. Materials sector, with a name like NTR. 

There's even a part of the TSX that does well with a falling CAD, as earnings get amplified.

Has done well in the past. It trades at a premium vs. peers. Instead, she owns Chartwell and CAP REIT.