Barlow’s Research Roundup: TD analyst sees buying opportunity in REITs

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Top picks in REITs

TD Cowen analyst Sam Damiani published top picks in REIT sector,

“Higher bond yields have reset REIT valuations while fundamentals remain constructive across most sectors. We forecast 1-per-cent year-over-year AFFO/unit [adjusted funds from operations] growth in Q3 with re-acceleration starting in Q1/27, despite the modest interest cost headwinds that have arisen. With the sector’s P/ NAV falling to 83 per cent from the recent 93-per-cent year-to-date high, we believe the pullback has created an opportunity for investors to add exposure. Modest AFFO/unit growth expected to re-accelerate in 2027. We forecast 1.2-per-cent year-over-year AFFO/ unit growth in Q3/26, with growth ranging widely from a low of down 51 per cent (Office) to up 14 per cent (Seniors/ Healthcare). While we see growth re-accelerating in 2027, higher interest rates present a modest downside forecast risk. Our sensitivity analysis show a 50bps increase in refinancing rates versus our current assumptions would cause an avg 2% AFFO/unit reduction by 2028 . Higher bond yields could also place upward pressure on cap rates, creating some downside risk to our NAV estimates. Recent rise in bond yields has weighed on REIT valuations. Since late June, the 50 basis points rise in the 10-year GoC yield has coincided with a 7-per-cent decline in the REIT Index vs up 5 per cent for the TSX … Majority of target prices lowered. Reflecting the move higher in interest rates, we are lowering TPs for 22 names under coverage by an average of 6 per cent. The largest reductions were in Office (down 30 per cent) and Residential (down 7 per cent). Seniors/Healthcare is now our top sector preference, following its recent underperformance. Top picks: larger cap – CSH.un, REI.un, SIA, PMZ.un, DIR.un, GRT.un, BEI.un; Smaller cap – DRM, MRG.un, MHC-u”.

Energy infrastructure

RBC Capital Markets analyst Robert Kwan highlights global interest in Canada’s energy infrastructure sector,

“The supportive energy environment and positive policy announcements (e.g., Productivity Mega Deduction) provide a favourable setup for Canadian energy infrastructure businesses, and this setup has continued to generate global investor interest in the stocks. … we believe the market will focus on the prospects to extend and increase growth rates through ‘core’ projects with return profiles that are consistent with existing growth projects. We see the upside potential for growth to be broad-based, with benefits for power, utilities and midstream infrastructure.

“Higher for longer energy price environment should continue to create opportunities to generate extra cash flow. Companies that benefit from elevated energy commodity prices and wide/volatile spreads could benefit from a tailwind into the end of the year. These companies have the potential to generate extra cash flow to fund growth projects as well as supporting upward estimate revisions into year-end … AltaGas (ALA): We have raised our EBITDA estimate in Q3/26 to $340 million (up from $300 million), to reflect stronger-than-expected LPG [liquefied petroleum gas] export volumes and price margins … Tidewater Midstream (TWM) and Tidewater Renewables (LCFS): For Q3/26, our EBITDA estimates for LCFS of $40 million (up from $32 million) and TWM of $78 million (up from $58 million) reflect higher-than-expected commodity prices and refining margins ... TransAlta (TA): We have raised our EBITDA estimate in Q3/26 to $245 million (up from $233 million), to primarily reflect a higher level of emission credit recognition during the quarter”

Scotia on REITs

Scotiabank analysts Mario Saric and Himanshu Gupta attempted to identify the winners in the domestic REIT market,

“We think the winners = Montreal Office and Retail (Q2 winners = Senior Housing and Suburban Office), while Apartments and Industrial were laggards. Other geographic winners = Halifax and Edmonton (Q2 = Calgary and Edmonton), while laggards = London/Windsor and Victoria (Exhibit 7). Downtown Montreal Office fell 25bp [in terms of cap rate – net operating income divided by property value] (think AP) alongside Montreal Retail -18bp (CHP, SRU, PMZ and REI), while London/Windsor Industrial (think NXR) +44bp drove the Industrial increase. We feel Q3 CBRE commentary was more cautious than Q2 on rates (10-year GoC +62bp q/q; market pricing BoC hikes), albeit the debt sentiment remained constructive. In Q3, higher rates featured in the commentary (market expects 75bp-100bp of short-term rate increases over the next 12 months). Lender appetite for Office is selective but recovering and lenders favour Multifamily, grocery-anchored Retail and well-located Industrial while land/condo inventory loans remain challenging. Lenders focused on balancing optimism (i.e., improving fundamentals, record investment volume) with higher-rate risk”.

Bluesky post of the day

Yesterday’s outperformance of the equal-weighted index ranks among the largest in history. @soberlook $RSP $SPY thedailyshot.com/sub...

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— Mike Zaccardi, CFA, CMT (@mikezaccardi.bsky.social) October 23, 2026 at 7:13 AM

Diversion

“The Search for the Next James Bond Is Down to Four Actors” - Gizmodo