Derek Warren
Asst Vice President at Lincluden Investment Mgmnt
Member since: Jun '13 · 776 Opinions
Rating Card
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| 3.26 | 32 19.88% | 43 26.71% | 37 22.98% | 37 22.98% | 12 7.45% | ||
| 1 Month | 2.16 | 0 0.00% | 6 16.67% | 20 55.56% | 10 27.78% | 0 0.00% | |
| 6 Months | 3.45 | 3 9.09% | 13 39.39% | 8 24.24% | 9 27.27% | 0 0.00% | |
| 12 Months | 3.73 | 6 18.18% | 14 42.42% | 6 18.18% | 6 18.18% | 1 3.03% | |
| 2 Years | 3.51 | 13 40.63% | 5 15.63% | 3 9.38% | 10 31.25% | 1 3.13% | |
| 5 Years | 3.44 | 10 37.04% | 5 18.52% | 0 0.00% | 2 7.41% | 10 37.04% |
Stock Opinions by Derek Warren
As we all know markets in general have seen a lot of volatility, a lot of which is due to our friends down south. But we've noticed a normalization over the last little while, and REITs are becoming normal again ;)
It was nice when interest rates were almost at zero and the value of real estate was spiking. But that's not what you really want. Real estate is supposed to be a store of income; you get your monthly rent cheques passed through and the REITs manage the real estate for you. You get 6-7% yield and a couple percent of growth, bringing you close to 10%, and you can count on that year over year.
With the correction and repricing that's happened, yields are now back to normalized levels. In spite of the things that are happening in the economy, he's seeing things being quite stable in the real estate market at this time.
He's always monitoring the sub-sectors. The retail space was very challenged during Covid. There's been a purge, where the weakest tenants have gone. Everything's back open and running, and filled with better tenants. There hasn't been any new retail built, yet we added a huge population boom to the country through immigration. So we're seeing things actually doing quite well in that sector, and it's showing up in the numbers.
Yes, we really saw that in the apartment markets. Upon seeing the immigration numbers dip, a lot of American investors fled. His team actually likes apartments a lot here. The immigration blip will normalize, and residentials are a really great entry point here.
Not very focused geographically, so all those moving parts are hard to maintain. Likes some changes they've made with management and the balance sheet, so he's watching it now. One of largest tenants in Australia has gone bankrupt, which could affect 5-10% of earnings. It's a wait and see.
Great name. Industrial segment is one of the more economically sensitive spots. A lot of it counts on shipping, manufacturing, AMZN goods, etc. On-again, off-again tariffs are creating both fear and opportunity. Stock's come off too much, the situation's not that bad. Still have a good industry here in Canada, which might actually be growing as we go back to "Buy Canada".
The risk is a recession, which is very hard to predict. If there is one, this name would be hurt a bit more. If you think we're going to skate through, then now is the time to pick this up.
True that main tenant WMT typically doesn't have to pay large annual increases in rent, but it does attract other tenants and that's who pays the rent increases. Entering new leases with WMT as it expands. The very large parking lots can be converted to other uses. Great potential to collect the yield and wait for that potential to be realized.
More of a GTA focus, plus some European assets. So we're relying on the economy once again. There was that huge boom in industrial during Covid, rents peaked, supply came on, and rents dropped. Likes it here, as it's still growing very well; lots of leases turning over in next couple of years at double current rates. He's hoping for no recession in Canada; but if he's wrong, industrials will feel more pain.
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.
Not a surprise, we all knew it was going to happen. HBC paid very low rent in its legacy spaces, sometimes according to 100-year leases. There is upside if you can remove HBC as a tenant. REI.UN and PMZ.UN are the two most affected; especially REI.UN, due to the structure it put in place years ago.
There has been news that some 28 of these leases may be purchased. Lease conditions do say that if you purchase the lease, you have to operate the same kind of store. Canadian Tire has shown interest. Might be like a painful surgery that you have to go through, but end up being in better shape when it's all done.
The thing about The Bay space is that it's fine when it's on 2 floors. Once it gets to 3 floors, especially when that third floor isn't connected to the rest of the mall, it becomes challenging. In those cases, the real value may be in tearing it down and building something else.
Right now, he's excited about the apartment market again. The reduction in immigration and international students has put pressure on this segment. But in a way, things were too high. It's all lovely as a landlord when you can charge $4-5k a month for an apartment, but it's not really sustainable.
There will be a refreshing change here as rents come down, because people can breathe a sigh of relief and finally be able to get rid of their roomates :) Or get their own place. Or move out of their parents' basement. The secret, especially in rent-controlled markets such as Ontario, is that the rent value is one thing, but to raise rents you need people to move. And people stopped moving. They just hunkered down because they couldn't afford to move. So rents that may have been below market get to reset to the market price.
That's why he's bullish on apartment REITs right now, especially on the more affordable zones across Canada.
