Research Roundup: CIBC picks biggest winners from REIT M&A boom; Scotiabank updates TSX targets

CIBC highlighted more than C$21B of REIT M&A over the past two years, with First Capital REIT's pending acquisition by Choice Properties and Kingsett Capital likely redirecting capital toward similar retail REITs such as RioCan, Primaris, SmartCentres and Crombie. Scotiabank raised its TSX outlook, citing 2026 year-end target upside of 8% to 33.7k and 2027 potential around 40k, while warning that a prolonged Strait of Hormuz closure and an oil spike above US$150 could hurt growth. RBC said federal grid, nuclear and AI initiatives should benefit names including Hydro One, TransAlta, Capital Power, TC Energy, Brookfield Renewables, Brookfield Infrastructure, Hammond Power Solutions and ATCO.

Analysis

The important read-through is that capital is not just chasing “cheap” REITs; it is selectively bidding for embedded control over scarce retail land banks and tenancy mix. That creates a self-reinforcing loop: every takeout raises the private-market floor for the remaining names with similar format exposure, but it also leaves behind a smaller set of harder-to-buy assets where governance/control structures matter more than valuation. In other words, the dispersion trade inside Canadian retail REITs should widen before it narrows, with the market paying up for liquid proxies to the scarce asset class.

The second-order effect is on public-market funding costs. If the sector starts pricing in a persistent private-market bid, equity issuance becomes more viable for the strongest platforms, while weaker balance sheets become acquisition bait rather than organic growth stories. That favors larger, cleaner operators with rollover optionality and penalizes names that depend on cap-rate compression to justify redevelopment pipelines.

For utilities and infrastructure, the policy backdrop is more important than the headlines imply: grid modernization, nuclear, and AI all point toward a multi-year step-up in domestic power demand and transmission capex. The market is likely underestimating how quickly “AI strategy” translates into physical bottlenecks—transformers, switchgear, interconnection, and baseload reliability—so equipment suppliers and regulated wires should see backlog duration improve before the power generators fully re-rate. The risk is execution: permitting and provincial coordination can delay monetization, so this is a 12-36 month theme rather than a quick trade.

The macro wildcard remains energy shock transmission. A sharp oil spike would initially help TSX index earnings, but it would also compress consumer discretionary, transport, and rate-sensitive multiple expansion, creating a less benign mix than headline EPS upgrades suggest. The market may be overweighting the support to resource earnings and underweighting the valuation drag if inflation re-accelerates faster than growth supports earnings revisions.

Key Decisions for Investors

• Go long RioCan (REI.UN.TO) vs. a basket of lower-quality retail REITs over 3-6 months; use the M&A impulse as a catalyst for multiple re-rating, with downside protected by recurring private-market bid risk.
• Favor Primaris (PMZ.UN.TO) as a smaller-cap relative long only on pullbacks; the cleaner way to express the retail consolidation theme is via names with asset overlap but less takeover complexity, while capping position size because liquidity can dry up quickly.
• Initiate a long TAC / short high-duration infrastructure proxy pair over 6-12 months; policy-driven power demand and grid spend should improve earnings visibility for hydro/renewables with domestic operating leverage, while the short leg hedges broader multiple compression if rates back up.
• Build a starter long in HPS.A.TO on weakness for a 12-24 month horizon; transformer and electrical-equipment bottlenecks are the most underappreciated way to monetize the AI/grid theme, with backlog and pricing power as the key upside convexity.
• Keep TRP as a relative long only if LNG/pipeline volatility is contained; the setup is more about optionality on Canadian gas and power infrastructure spend than a straight beta trade, so pair against a more cyclical energy name if oil volatility rises.