Nearly a year after Canadian real estate investment trusts' values were in free-fall, the sector is finally seeing a resurgence.
Almost four full months into 2014, industry stalwarts such as RioCan REIT have seen their their values jump more than 10 per cent, and certain trusts are finally tapping the markets again for new funds.
The rebound reflects a sudden change of heart from investors, who dumped REITs en masse last summer after Ben Bernanke suggested that the Federal Reserve would start to curb its massive bond buying program. Over the course of four months, RioCan's units slumped 20 per cent.
But now the country's largest real-estate trust, along with others such as H&R REIT and Dundee Industrial REIT, are on a tear, watching their values rebound sharply.
Because valuations are climbing, REITs are becoming more comfortable with the prospect of issuing equity, now that dilution isn't as big a concern as it once was. In the past few weeks, Milestone Apartments REIT and HealthLease Properties REIT have successfully raised funds, selling roughly $70-million worth of new units each. And investors have been happy to buy them, prompting HealthLease to increase the size of its offering.
Aside from bought deals, CAP REIT also recently announced that it will spin its Irish properties out into a new trust that is currently looking to raise €200-million ($304.3-million). No one is saying that deal flow is bound to come roaring back, because there is the possibility that that the REITs won't need to raise much more money. They tend to do so when buying new properties, and new deals are becoming rather pricey. Plus some REITs still haven't gained much traction in the market, with Dundee REIT and Allied Properties up roughly only 3 per cent each this year.
However, the bounce-back in the sector is real, opening some windows that were shut for what felt like ages.