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Michael Brooks, Chief Executive Officer, Real Property Association of Canada
Lois Cormack, President & CEO, Sienna Seniors Living
Michael Smith, Managing Director, Global Equity Research, RBC Capital Markets
An insightful presentation on the economic fundamentals that are driving the Canadian economy at this time. What is the outlook for inflation, interest rates, employment growth and overall economic growth over the next twelve months? As the oil and resource sector remains in neutral, what are the ramifications for Western Canada? What economic engines are breathing some life into Canadian GDP growth? What do the performance of the U.S. economy and the uncertainty of government trade policies mean for Canada, e.g. tariffs, NAFTA, major increase in duty free limits? Will the outcomes of the provincial elections in Ontario and eventually Quebec and Alberta have much impact on the economic policies? What lies ahead for the remainder of this year and eventually for 2019?
What major events have occurred in the “REIT world” in the past 12 months? What are the key factors – both positive and negative – pertaining to the performance of REITs over the past year? Are REITs a good investment now?
A wide ranging discussion among portfolio managers on their views of the Canadian securitized real estate market, whether this is a good time to buy, sell or hold REIT units and REOC shares, and what are the key expectations that govern their current investment decision-making. Some comparative with the U.S. market will also be examined.
For many REITs and REOCs, development is one of their key growth strategies in today’s market. The economics of building new assets have been compelling when compared with cap rates to buy existing ones. Are development strategies the result of cap rate compression that has priced REITs out of acquisition? But with rising land and construction costs, is the pro forma starting to change and associated risk increasing? This panel will examine these and other questions in greater detail. How are REITs equipped to execute development strategies when their original structure was not designed with this capability in mind? How does management overcome these challenges? What have been the experiences of REITs to-date with new developments? What have been the “actual” returns? How are development returns being measured? What are best practices in reporting success? Should development oriented REITs become low or no dividend corporations? How have U.S. REIT experiences compared with Canadian developments? Are REITs making appropriate profit from development to compensate investors for level of risk? From where will development talent come? How can REITs balance the need for disclosure regarding new developments in order to enhance value with the need to keep many aspects private for negotiating or approval reasons?
This appears to be an interesting time in Canada for potential M&A activity in the public real estate markets. The first part of this session will be framed around what has transpired, why and what might be on the horizon. This session will also examine best practices for merger and acquisition activities. How should potential bids be approached? The conversation will move into specialty (e.g. seniors housing, hotels and hospitality, data centres) and smaller REITs. What IPOs are potentially on the horizon? Could we expect REITs focused on servicing the cannabis market? Three year Canadian REIT index total return is 5% annualized. Although the yield is not strong, “smart money” is investing and committing their capital in Canadian REITs (e.g. Blackstone, the Weston family, new funds from Slate, Starlight). What do they see that others don’t? What are their investment theses?
What defines a “best in class” REIT? Franchise value and high quality tenants? A creative and adaptive management team? Their total return strategy vs. income and cash flow strategy? Does the ideal business model of a REIT include: a consistent payout; well defined growth prospects; dividend growth potential; strong management, governance and board composition; attracting and keeping talent; and a portfolio of quality assets? Do investors focus more on AFFO, NAV growth, or risk (geographic exposure vs. little diversification vs. debt ratio vs. development)? Since REITs have been in existence in Canada for 25 years, there has been a considerable evolution in the scope and strategies of how REITs function, their management platform, and their activities as investors, developers and asset managers. This session will examine key elements of a REIT in 2018 and discuss what are the best practices that lead to a strong and successful entity in the current public market and going forward. What does the REIT of the future look like: bigger or smaller? More small cap REITs, e.g. specialist products: storage, cannabis, healthcare? Restructured, e.g. Boardwalk, Cominar, Artis, Choice, CREIT?
Why are an increasing number of REITs diversifying? This can range from refocusing from a “pure play” to owning multiple asset classes as a means to facilitate more rapid and stronger growth. Diversification can also be geographically focused or repositioning a REIT’s portfolio through divestiture of certain assets while maintaining only high quality core properties. Some have assumed a mandate to build a real estate investment vehicle, while others are creating development and operating platforms. This panel will discuss and debate some of the challenges, risks and rewards of some of these various strategic options. All the asset classes are facing varying challenges and offering different opportunities. While retail is undergoing disruption, industrial markets appear to be faring much stronger in the current economy. While office is facing the impact of WeWork and other disrupters, multi-residential appears to address a need for housing supply and offers steady yields. Should REITs and REOCs be more diversified in order to deal with all this market transformation? What should ideally be the nature of their diversification? Has there been a structural change in land values for their existing assets that they can take advantage of? What is the case in today’s market for a REIT to have greater diversification?
No companies, including REITs, are immune from shareholder activism. It is a natural evolution of a growing sector. What are activists trying to accomplish vs. the objectives of conventional investors? How does the buyside respond to them? What are examples of good vs. bad activism? Should vocal shareholders owning a small stake have a “big say”? What are the pros and cons for a REIT of having a large shareholder? Are they a friend or a foe? How do their approaches differ? What attracts the attention of activists? What should a REIT do when activists call? How should management and its Board handle the pressure? What REITs have been the subject of activists’ attention and why? How successful have activists been? What can REITs do to protect themselves from activists’ attention? Is dealing with activists any different than typical defense preparedness? Are activists’ activities good or bad for fundamental investors in REITs? What is the view of the Securities Commissions on these activities? Will activism replace fundamental/strategic investment as the primary focus of M&A practitioners?
Access to well-priced capital is critical to the growth of publicly traded companies via acquisitions, development and other activities. This session will examine the current market conditions and environment for REITs and REOCs to access debt and equity markets to meet ongoing financial needs and to be doing so in the face of rising interest rates. What are the major sources for raising capital at this time? Discussion will also focus on units/shares, preferreds, converts, mortgages, mortgage bonds, unsecured debentures and revolvers. How are REITs evaluating and creating appropriate strategies to use these capital sources? Is unsecured financing continuing to be widely available? What should be a CFO’s interest rate strategy? Are short term rollovers practical? How should capital be allocated in this market? Should capital be recycled rather than raising equity? How can external capital be accessed without doing an issue? Do the capital and investor markets favour larger real estate entities or do they simply want the existing ones to get bigger? What are appropriate credit metrics? Are people following them?
A wide ranging discussion with the CEOs of the two inaugural Canadian REITs about the evolution of this market over the past 25 years. The conversation will comment on:
The pricing of office, industrial, retail and multi-unit residential assets across Canada have generally reached some record high levels in many markets. At the same time, it has stalled among most retail assets and to some degree in Alberta, Saskatchewan and Atlantic Canada. This panel discussion will examine asset classes in geographic markets across Canada to identify what are the most significant challenges, risks and opportunities. Where are we in the cycle by province/gateway city and by each property class. What are NOI growth expectations in various property types, especially in the rental housing market. How does a REIT executive make the ultimate decision of whether to buy, to sell or to pursue development as a viable alternative? Among other questions that will be examined: Where are cap rates heading? How are you responding to interest rates and bond yields? Do valuations and fundamentals still make sense? Given pricing and availability of product, is this a time to be a seller or a buyer? What are the biggest value determinants in various markets now? What is happening to property values and liquidity in secondary markets? Could they offer better opportunities on a risk adjusted basis? Do fluctuating housing markets really matter to REITs? Has there been a structural change in land usage that will affect valuations? Who will benefit from this?
A panel of senior executives from a cross-section of different types of investment entities will discuss some of their mandates and priorities for 2019. What are the differences between the issues faced by a REIT vs. a pension fund or lifeco vs. a private equity fund in pricing properties and accessing investment capital at this time? What are the respective investors’ priorities for the coming year? Which property classes will be most favoured, in which markets, and why? What are the challenges to buy or sell assets in this market? Who is leading pricing: securitized real estate, institutional or private investors? There appears to be a major shift to alternative asset classes among institutional investors. Will this be good or bad for the REIT sector? If pension funds and lifecos develop private structures, then large capital flows will be in competition. Some pension funds have done joint ventures with REITS. How has this worked out? Will shifts in appetite for real estate by institutional and private equity investors affect Canadian REITs or Canadian direct investment markets? Small to mid-caps: relationships with privates or institutional investors. Under various scenarios, who will likely prosper the most, e.g. REIT, private equity, institutional investor or private capital?
No other real estate property class is attracting as much attention today as retail. Everyone has watched Canadian, U.S. and European retailers opening stores, closing them or looking for fresh approaches to their formats. Will the turmoil in the U.S. retail market move into Canada? How are super regional malls performing vs. smaller enclosed malls vs. power centres vs. grocery anchored centres? There are some dire forecasts for the future of older malls as changing demographics and buying habits negatively affect poorer quality properties. How are rent growth, occupancy levels, and intensification opportunities comparatively for each different type of retail format? How is online shopping impacting the Canadian market where landlords have been leaders in restructuring many of their properties? What has been the outcome of the Target and Sears vacancies to-date? How are brick and mortar stores co-existing with online shopping? Are the e-commerce strategies of major retail owners correct by acquiring more industrial assets or introducing a mixed-use development on a portion of their retail site? What are national retailers doing to remain buoyant in this competitive market? This session will examine these and other trends and some facts and fallacies pertaining to the Canadian retail real estate market.
An insightful examination of the challenges, trends, and issues facing Canadian REITs and REOCs, and what CEOs are doing to deliver strong performance and growth. The following are some of the questions that will be examined: