Hot Picks: Three REITs positioned for further growth

Improving occupancy, accelerating rental growth and stabilizing housing activity are creating opportunities across several real estate subsectors. Retail, seniors housing and self-storage operators could all benefit from strengthening fundamentals and earnings growth over the coming years.

BNN Bloomberg spoke with Lorne Kalmar, real estate analyst at Desjardins, about opportunities he sees in Primaris REIT, Chartwell Retirement Residences and StorageVault Canada.

Key Takeaways

• Retail REITs may see meaningful earnings growth as occupancy recovers and former Hudson’s Bay locations are backfilled.
• Accelerating market rents are emerging as the next major growth driver for seniors housing operators following occupancy recovery.
• Canada’s aging population continues to provide a long-term demand tailwind for retirement residences.
• Self-storage demand is becoming less dependent on housing market weakness as traditional demand drivers regain importance.
• Improving housing activity could provide an additional boost to occupancy and earnings growth for self-storage operators.

Read the full transcript below:

ROGER: Time for Hot Picks, and today we are eyeing three REITs our next guest believes hold potential for meaningful growth. For more on his top picks, let’s welcome Lorne Kalmar, real estate analyst at Desjardins. Lorne, thanks, as always, for joining us.

LORNE: Thank you for having me back, Roger. Always a pleasure.

ROGER: All right, let’s get right to it. Primaris, first one that shows up for you. Tell us a little bit about it.

LORNE: Yeah, so I had asked forgiveness from the producer because it was a name we highlighted last time I was on here a couple of months ago. Notwithstanding the tremendous run that the stock has had — it is up about 40 per cent on a total return basis year to date — the thesis really hasn’t changed in any meaningful way. It still remains one of the few REITs under coverage where you have a number of earnings catalysts, as well as capital allocation catalysts, combined with a very favourable valuation. So, with that in mind, we think it’s a unique opportunity for investors to get both sides of the coin here, have their cake and eat it too, if you will.

ROGER: What are some of the biggest strengths for it?

LORNE: So, right now, Q1 reported as of March 31. We believe that represents trough occupancy, and to PMZ’s credit, they’ve done a great job improving occupancy since being spun out in 2022. It peaked at about 94.5 per cent in Q4 of 2024 and then, as I’m sure many of your viewers are aware, the HBC bankruptcy materially impacted the occupancy figure negatively.

With that now fully realized, we believe that we are now at trough, and we think there’s a lot of good momentum on the HBC backfill side. There’s about 1.3 million square feet in the Primaris portfolio that was related to the now-defunct retailer, and they’re actually hosting an investor day tomorrow where we’re expecting a pretty meaningful update on that front. Management has communicated that that backfill should represent about $17 million of annualized NOI, so a pretty meaningful number there.

The other side on the NOI front is the improvement in recovery ratios, cost recovery ratios. Those are well below historical averages. Average would be about 95 per cent. They’re sitting just under 80 per cent right now. Management estimates that for every one per cent that improves, that adds about $2.5 million to NOI, and that equates to about $40 million.

So, you take that in conjunction with the backfill of the HBC space, and the one thing I didn’t yet mention is the improvement in CRU occupancy, which are the smaller retail units within the malls, anything under 15,000 square feet. We add that all together and get $70 million-plus of incremental annual NOI, and that compares to, at least in our forecast for 2026, about $400 million of NOI. So, pretty meaningful upside there.

ROGER: Okay. Any concerns about the FFO per unit decline that they saw in Q1?

LORNE: No. I think what we are seeing in 2026 actually, this is kind of going to be a — I don’t want to call it a kitchen-sink kind of year — but it’s the first year where they will have the full impact of the HBC bankruptcy, which wasn’t overly significant in terms of NOI, but nevertheless. They’re also coming off a pretty strong year last year. They put up nine per cent FFO growth last year, so you’ve got a difficult comp.

I think all that sets up for next year. You have the HBC leases come back, occupancy improve, recovery ratios improve. We’re forecasting nine per cent FFO growth in 2027, which would be tops among the retail names under coverage.

ROGER: Okay, let’s get to Chartwell Retirement. People keep getting older here, don’t they?

LORNE: I don’t know if you’ve figured out a way to stop it, but if you have, you can share. That seems to be one trend that, no matter what, no one seems to escape, and we think that Chartwell is very, very well positioned to capitalize on it.

We were in meetings and someone had asked me what the biggest negative surprise of the year was year to date, and I would say it had been the underperformance of the seniors sector. I think Chartwell, as recently as a few weeks ago, was basically flat on the year.

We’ve seen the occupancy recovery story play out. They’re now at around 95 per cent, give or take. But the next leg of the story, which is going to be very meaningful, is going to be the acceleration of market rents.

We did some rough math, just looking at the average turnover in the portfolio, where we expect renewal spreads to be, where we expect turnover spreads to be, and we think conservatively you can get to high-single-digit blended rent growth for at least the next five years, if not longer.

Because, to your point, no one’s figured out how to stop getting older, and as I like to say, we are in the first inning here of the baby boomer demographic entering retirement-home age. You’ve got the oldest baby boomers turning 80 this year, and I think the boomer generation runs from 1946 to 1964, so you’ve got a lot of runway there.

ROGER: All right. Any concerns about the debt loads with Chartwell?

LORNE: Sorry, I missed that.

ROGER: Any concerns with the debt load that Chartwell is carrying?

LORNE: No, not at all. Actually, I think we’ve seen, with the growth in EBITDA, that has naturally trended down. I think on a leverage basis, net debt to EBITDA, they’re around seven times, which from a Canadian context would actually be pretty favourable. And we think, like I said, with the growth in EBITDA, the outsized growth expected in EBITDA, that should continue to trend down naturally.

ROGER: All right, and StorageVault is the last one we want to get to.

LORNE: Yeah, so that was one that was negatively impacted by the slowdown in the Canadian housing market on the home-volume side, and it had a bit of a tough go historically.

It had been a very strong earnings grower. Double-digit FFO growth was basically the standard for them, and as housing volumes slowed, so too did organic growth and, obviously, your FFO growth.

What we’ve seen, though, is in the last few quarters, with the pace of declines on a year-over-year basis in housing volumes slowing, the headwind that it presented is now much less significant, and we’re back to seeing the traditional drivers of self-storage demand.

There are their six Ds — and don’t test me on them — but these are structural, inelastic demand drivers that are now back to being the key driver of growth here. We’ve seen it. They’ve been back in their target range of four to six per cent organic growth for the last four or five quarters.

We think that as we see housing volumes begin to accelerate — and it doesn’t have to be super meaningful, we don’t need record numbers — but as we see that accelerate, and the last two months have been pretty good on that front, we see some meaningful upside on the earnings-growth side that we don’t think is being reflected in the current valuation.

ROGER: All right, we have to wrap it up there, Lorne. But thanks, as always, for joining us.

LORNE: Always a pleasure. Thank you.

ROGER: Lorne Kalmar, real estate analyst at Desjardins.

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This BNN Bloomberg summary and transcript of the June 24, 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.