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Globe editors have posted this research report with permission of Dundee Capital Markets. This should not be construed as an endorsement of the report's recommendations. For more on The Globe's disclaimers please read here. The following is excerpted from the report:

Although we expect Q4/15 to be in-line with expectations, the quarter's data on fundamentals will be critical to 2016-17's estimates. With our macroeconomic scenario playing out, notably in regards to the longer than anticipated period of low interest rates (and negative interest rates possibly coming to Canada), Q4 results come at a crucial moment of the economic and real estate cycles. We continue to expect Multi-Family, Senior Living and Industrial sub-sectors to outperform Office and Retail sectors, especially from REITs with top management teams like our three favourite names, all BUY rated: IIP.UN (Top Pick), RUF.UN and AAR.UN. We remain extremely cautious on commercial real estate in Alberta. Although so far in 2016 the bond and gold markets are doing relatively well, REITs correlation with the TSX continue to create bottom-up buying opportunity, notably within low qualitative beta sub-sectors.

Canadian Listed REIT/REOCs valuation levels relatively compelling. At the moment, REIT/REOCs investors seem to have shifted focus from interest to Canadian real estate fundamentals. That being said, the margin of safety currently imbedded in Canadian REITs is relatively high by both historic and U.S. standards.

We believe international diversification should remain at the core of investors' strategy. Given still significant inherent risks to the Canadian economy and the Canadian dollar, we would favour international diversification through Canada-listed REITs.

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