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Shoppers emerge from a Target store in Boston

CHITOSE SUZUKI

Want to know what's going to happen next in Canada's ever-changing real estate market?



You may want to check in with RBC Dominion Securities analyst Neil Downey, who this month issued five predictions for the coming year. Do it soon though - three of his five predictions have already come true.



Here's a look at what he said in a note on Jan. 12, and what has happened since.

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The prediction: "Target will finally come to Canada - The penetration of new entrant U.S. and international retailers into Canada shows no signs of slowing. And, we believe 2011 could be the year in which Target finally comes to Canada, possibly leading a U.S. retailer consortium (think Target, Kohl's, Wal-Mart, others) into a deal to step into the Zellers footprint."



The news: "Less than three years after Richard Baker bought a struggling Hudson's Bay Co. from the widow of its former owner, the New York investor is set to pocket close to $2-billion in a deal that accelerates Target Corp.'s entry into Canada." ( With Target, Canada’s retail landscape set for massive makeover , Jan. 13 Globe and Mail)



***

The prediction: "A REIT will finally issue a preferred unit. We believe one or more REITs may attempt to issue this once talked-about, yet not yet tested pseudo-equity, pseudo-perpetual-debt-like instrument. Let's see how the market digests it."



The news: "RioCan Real Estate Investment Trust is seizing the opportunity to get whatever financing it can to fund its acquisition plan and to also re-finance some outstanding debt. On Monday the REIT hit the market with both rate reset preferred shares and senior unsecured debt." ( RioCan adds acquisition cash, re-finances, Jan. 18 Globe and Mail)



***

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The prediction: "CMBS origination will return to Canada. Having taken a three-year hiatus, yet now also carrying an enviable track record of very low delinquencies, we think the conditions could be right for several 'brand-name,' financially strong sponsors (i.e., large cap REITs and REOCs) to work together to get this market originating product once again."



The news: "Canada's moribund commercial mortgage-backed securities market is awakening from a three-year slumber. Two major real estate companies are tapping the market for $206-million in the first deal of its kind since 2007, signaling that investors are returning to a sector they had abandoned over worries about the health of the country's commercial real estate market." ( Mortgage deal revives stalled securities market , Jan. 27 Globe and Mail)



***



The prediction: "2011 will finish with more TSX-listed REITs than it begins with. At the outset of 2011 there were 28 TSX-listed REITs. We do not see a lot of opportunity for M&A to reduce this number, at least not in the near term. We do see the possibility of several IPOs this year, as well as the graduation of one or more listings from the TSX-Venture exchange."



The news: Watch for it.

***

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The prediction: "Equity raising activity will decline. 2010 deal volume totalled $5.1-billion, the biggest year on record since 2007. We think transaction markets will remain active and one or more IPOs could prove a wildcard in the capital raising figures. Overall, however, we think it will be difficult to match 2010's a deal-a-week pace (56 transactions in total)."



The news: Watch for it.

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