HomeCo Daily Needs REIT Has Rental Upside From Population Growth, but Also Recession Risks

HomeCo Daily Needs REIT is underweight its target of 50% neighbourhood malls, and 20% health and services, and overweight the target 30% large-format. We expect neighbourhood mall and health exposure to increase toward the target, via development and tenant remixing, as population growth in HomeCo’s catchments makes neighbourhood malls more feasible. The REIT faces cyclical risks in the event of a recession, but should achieve good long-term rental growth as its large-format sites mature, and it grows exposure to neighbourhood tenants.