In March we recapped the REITs Q4 earnings season, highlighting a regional focus seemed the best way to position among the apartment REITs to mitigate immigration headwinds.

The trade has played out to some degree, with Boardwalk (BEI-U, Alberta exposure) and Killam (KMP-U, Atlantic exposure) faring better than names with heavy Ontario exposure like Minto (MI-U) and CAPREIT (CAR-U).

Fundamentally we’ve started to see some divergence as well, as Q1 results show better same-property NOI growth at Boardwalk and Killam…

… higher rent growth…

… and more favourable occupancy trends.

Oil prices change our view on the trade

In isolation, the underlying regional thesis still holds, but a less energy friendly government and a 15% drop in crude oil prices since April introduces a new wrinkle to the trade. Given Boardwalk’s Alberta exposure, oil prices tend to drive share price.

They also drive fundamentals over a longer period, with both rents and occupancy grinding lower for multiple years after the 2015 oil slump.

At a time where new housing supply is picking up…

… and provincial unemployment remains elevated…

… we’d reduce exposure to Boardwalk until a recovery in oil prices takes place.