Investing.com -- Scotiabank expects Canadian real estate investment trusts to deliver a mixed set of third-quarter results, with office-focused names positioned for stronger growth in recurring funds from operations as the bank sees uneven performance across the sector.
The bank's estimates are, on average, 30 basis points below consensus for third-quarter 2026 funds from operations per unit (FFOPU), but 30 basis points above consensus for 2027, according to its October 22 research note. The divergence suggests near-term results could be softer than market expectations, even as Scotiabank sees a stronger outlook for next year.
Scotiabank expects the office subsector to record the sharpest acceleration in year-over-year recurring FFOPU growth in the third quarter compared with the second quarter. Dream Industrial REIT is forecast to lead with an acceleration of 77%, followed by BSR REIT at 15% and Parkit Enterprise at 10%.
However, the bank expects growth to decelerate at several other trusts, including Morguard, Sienna Senior Living and RioCan, highlighting the uneven outlook across Canadian real estate companies.
Looking at absolute year-over-year FFOPU growth, Scotiabank identified Parkit Enterprise Inc (TSXV:PKT) as the strongest among the five names highlighted, with expected growth of 30%. Chartwell Retirement Residences Unit (TSX:CSH_u) follows at 15%, while Primaris REIT is forecast to grow 10%, Granite REIT 9% and StorageVault Canada 7%.
Scotiabank also sees notable differences between individual companies and its consensus estimates. The bank is above consensus for Morguard and Primaris REIT, but below consensus for Sienna Senior Living Inc (TSX:SIA), Gold, Kennady and Parkit Enterprise.
StorageVault Canada was scheduled to begin the third-quarter reporting season on October 21 after market close. In a separate company-specific assessment, Scotiabank said StorageVault's adjusted FFOPS was largely in line with expectations, but slower same-store net operating income growth could weigh on its shares and prompt downward revisions to 2027 consensus funds-from-operations estimates.
Overall, Scotiabank's outlook points to a mixed reporting season, with stronger expected growth at selected office-related names offset by weaker trends elsewhere. The bank's estimates suggest investors should distinguish between trusts with accelerating recurring cash flow and those facing slowing growth or potential estimate cuts.
Original Article
Scotiabank sees mixed Canadian REIT earnings outlook, favours select office names
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