Research Snippet Conclusion for Pe and Debt Issuance Strategy

Macro-Economic Outlook:

CANADA:

The Canadian economy gained 1.1 percent on quarter in the three months to June of 2017, following a 0.9 percent growth in the previous period. It is the highest growth rate since the third quarter of 2011, mainly boosted by household consumption and exports of goods.

In the 5-year term, the Canada GDP Growth Rate is projected to trend around 0.60 percent in 2020, according tradingeconomics.com.

The unemployment rate in Canada fell to 6.2 percent in August of 2017 from 6.3 percent in July, beating market expectations of 6.3 percent. It reached a new low since October of 2008, the month prior to the 2008-2009 labor-market downturn.

The Bank of Canada unexpectedly raised its benchmark overnight rate by 25 bps to 1 percent at its September 6th, 2017 meeting, surprising markets who expected no changes. It is the second consecutive rise in borrowing cost as recent economic data have been stronger than expected, supporting the Bank’s view that growth in Canada is becoming more broadly-based and self-sustaining.

CHINA:

An extremely high growth in credit after 2009 has led the country to take on more economic and financial risks. The government is trying to use fiscal and monetary measures to cool down the economy.

Financial Overview:

Given the Fact that there have been a lot of forest fires in B.C. this year and reports suggesting that this might be an annual occurrence for years to come, we think the expected revenue numbers for the following years of Lumber corporation should be reevaluated.

The company has an influx of a lot of cash in the first half of 2017. We assume that this cash came from selling its Assets which they had in a considerable amount or due to the maturity of the bonds that they held in their CFI or a combination of both. The company now and in the future, is in a better position to contribute cash injection to its defined benefit pension plan since the contribution does not have any material impact on its solvency ratios thus leaving its credit rating unchanged.

Following are our assumptions for the company’s financial overview:

[pic 1]

Real Estate:

Since Lumber Corp. is expecting the Revenues to increase in 2018 and 2019, the company is betting on the Real estate market to have a positive return in the future as, “Demand for LBC’s core products is tied to North America’s real

estate and public infrastructure industries.”

Having a well-diversified portfolio with Private Equity, Real estate and Infrastructure will provide the fund the necessary return premium because of their illiquid nature. The long-term horizon of the pension fund matches the long term holding period of such illiquid assets to provide greater return than traditional listed asset classes.

Canadian Real Estate has been experiencing some tough winds due to new regulations everyday by the government to cool off its rising prices. Places like Toronto and Vancouver have been attracting a lot of talent lately with a lot of demand for homes and Retail space. Alberta’s higher than expected recovery from the 2015 Due to oil slump makes us believe that there still are good opportunities to be found that would be quite profitable in the long term. Opportunities in the Industrial and Office spaces in in the US seems quite high due to the current administration’s will to bring jobs back home. There is still high appetite in India’s Real estate with the Demonetization and a streamlined Tax system in place that increases transparency and consumer confidence.

Real Estate investment by sector:                               Investment by geography: