Hot Picks: Three REIT picks seen offering growth at discounts

Select real estate investment trusts are gaining attention as improving fundamentals and sector consolidation drive renewed investor interest.

BNN Bloomberg spoke with Lorne Kalmar, real estate analyst at Desjardins, about three real estate plays he says are positioned for upside, supported by earnings growth, redevelopment programs and discounted valuations.

Key Takeaways

• Primaris is viewed as a top pick, supported by strong occupancy trends, rent growth potential and a leading balance sheet, while trading at a steep discount to NAV.
• Sector consolidation, including recent retail REIT deals, could help bring generalist investors back and support broader valuation recovery.
• Sienna offers a tactical opportunity tied to accelerating earnings and redevelopment of long-term care assets, particularly in the GTA.
• Government-backed funding increases are unlocking long-term care redevelopment projects, improving growth prospects across the sector.
• RioCan is expected to benefit from ongoing business simplification and sector consolidation, with valuation upside as core earnings become clearer.

Read the full transcript below:

ANDREW: On Hot Picks today, we are looking into REITs. Let’s say hello to Lorne Kalmar, real estate analyst at Desjardins. Great to see you. Thank you very much for joining us. There’s lots of buzz in the REIT space right now. Your first idea is Primaris, PMZ.UN. What attracts you here?

LORNE: Thank you, and good morning, Andrew. Thanks for having me on. I would say Primaris is probably our top pick in the entire space. For those who don’t know, Primaris owns about 30 enclosed malls. Previously, malls had been in the category of persona non grata, but as we’ve come out of the pandemic, the story around malls has significantly improved.

Primaris has significantly altered the composition of its portfolio via acquisitions, largely of pension fund-owned malls. Ultimately, what you have now is a REIT with a peer-leading organic growth profile and a peer-leading earnings growth profile. You have a company with an extensive acquisition opportunity set and significant upside through the sale or monetization of excess density at some of these malls.

You’ve got a REIT with a peer-leading balance sheet — the best in our coverage universe — with net debt to EBITDA of about six times. You’ve also got a well-respected and well-rounded management team. They recently bolstered their bench with the addition of a new CIO.

Despite all of this, the units are still trading at what I would call a bargain discount. They are trading at the lowest FFO multiple of any large-cap REIT in our coverage, at about a 30 to 35 per cent discount to NAV. We think the combination of earnings and growth catalysts, along with the valuation discount, presents a unique opportunity to generate outsized returns.

ANDREW: And I guess the retail REIT space — investors were inspired to look at it more closely with the takeover of First Capital by KingSett and Choice Properties.

LORNE: I have to be a little careful with what I say, as we are research-restricted since we advised on the deal. But taking a step back, it’s obviously positive to see a transaction. This deal was done above NAV, which we haven’t really seen in recent REIT deals.

One of the key catalysts we’ve been waiting for is to bring generalist investors back into the space — both Canadian and U.S. investors. That’s what will really move the needle, so we’re hopeful this deal helps achieve that.

ANDREW: Your next idea is Sienna Senior Living. Now, I know we can’t get into all the technicalities, but is this actually a REIT?

LORNE: Fair point — it is technically not a REIT, it’s a corporation. But it owns retirement homes and long-term care homes, so it falls under our real estate coverage.

Sienna and Chartwell are the two main players. The key difference is Chartwell is a pure-play retirement operator, while Sienna is roughly a 50/50 split between retirement and long-term care.

ANDREW: Right, and it has a yield north of four per cent, so it behaves similarly to a REIT.

LORNE: Yes, in that regard, absolutely. The cash flows are fairly stable. The long-term care business is almost more like infrastructure — government-funded, near full occupancy, and revenue growth typically tracks inflation.

This sector was hit exceptionally hard during the pandemic, but governments have since worked to reset funding back to historical norms. Today, it’s returned to more of a bond-like asset class.

What makes long-term care particularly interesting now is redevelopment. Many older homes built in the 1960s and 1970s are no longer serviceable. In Ontario, there is a program to build or redevelop about 58,000 beds, with roughly half focused on replacing older stock.

Previously, funding was insufficient in high-cost regions like the GTA, but last year funding was significantly increased, which has led to more projects moving forward. Sienna has about 2,000 Class C beds, with roughly 80 per cent located in the GTA, so this presents a meaningful opportunity. They recently announced their first GTA redevelopment project of about 450 beds.

ANDREW: And finally, RioCan. We’re back to retail REITs. What’s the attraction here?

LORNE: RioCan has had its challenges. There were concerns around condos, a wave of bankruptcies in 2024, and the Hudson’s Bay situation.

But looking ahead to 2026 and beyond, the company is positioned to get back to basics. They are selling out of multifamily assets, and the Hudson’s Bay exposure is largely behind them. They’ve addressed most of the affected locations.

They’ve also introduced a core FFO metric, which excludes condo sales, apartment assets and Hudson’s Bay impacts. That gives investors a clearer picture of the underlying earnings power of the core business.

We see a path to continued simplification over the next 12 to 18 months. At that point, RioCan would be the only large-cap retail REIT in Canada without a major sponsor following recent consolidation, which presents a unique opportunity.

Like Primaris, it still trades at a discount — not as large, but still meaningful relative to peers and historical averages. If execution continues, we think that valuation gap can close, offering upside.

ANDREW: Thank you very much. Really appreciate it.

LORNE: My pleasure. Thank you for having me.

ANDREW: Lorne Kalmar, real estate analyst at Desjardins.

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This BNN Bloomberg summary and transcript of the April 23, 2026 interview with Lorne Kalmar are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.