Prior to taking the helm of the Bank of Canada, Stephen Poloz previously served as the CEO of Export Development Canada, the government’s export credit agency. As such, the new central bank chief is focusing his attention on Canada’s exports, with the expectation that rising exports will restore growth to the country’s flagging economy by spurring a new cycle of business investment.

Of course, much of this growth is dependent on the trajectory of the US economy, as Canada’s neighbor to the south also happens to be its largest trading partner. Despite the challenges to both economies, Canada’s exports show some signs of a nascent rebound.

According to Statistics Canada (StatCan), Canada’s merchandise exports grew 1.4 percent in June, to CAD39.6 billion, outpacing a rise in imports of 0.6 percent, to CAD40 billion. Exports to the US increased by 1.5 percent, to CAD29.4 billion, accounting for 74.2 percent of Canada’s total exports. The European Union is Canada’s next largest trading partner, and exports to the Continent were up 17.9 percent to CAD3.1 billion, though that result was still down 9.1 percent from a year ago.

This activity helped significantly narrow the country’s trade deficit, which stood at CAD469 million at the end of June versus CAD781 million a month earlier. It also beat the consensus forecast by roughly CAD40 million, as economists had expected weakening demand resulting from the US budget sequester.

Unfortunately, the good news was somewhat offset by a sharp revision to the aforementioned May figure. The trade deficit for that month more than doubled from the initial report of CAD330 million to the new CAD781 million figure. That could mean exports will be a slight drag on second-quarter gross domestic product (GDP). Even so, the quarter showed a narrowing trend, with the trade deficit dropping substantially since April, when it hit CAD1.2 billion.

The last time Canada posted a trade surplus was in December 2011, when it hit CAD2.4 billion. Prior to that, however, surpluses had been spotty, with just 12 individual months in which trade surpluses were recorded in the nearly five years since the Great Recession began. When it comes to the US, however, Canada currently enjoys a trade surplus of CAD3.8 billion.

June’s export activity was strongest in the mining and auto sectors, which accounted for 12.1 percent and 14.6 percent of total export volume by dollar value, respectively.

Although commodities such as metal and non-metallic minerals are fetching lower prices, that was more than offset by higher volumes from precious metals and precious metal alloys, which rose 32 percent, while unwrought nickel and nickel alloys jumped 47.6 percent. Overall, exports in this area climbed 11.6 percent, to CAD4.8 billion.

The auto market was also a major contributor, with exports of motor vehicles and parts rising 5.5 percent, to CAD5.8 billion, thanks to exports of passenger cars and light trucks, which were up 8.4 percent. Unlike commodities, the auto sector enjoyed both higher volumes (up 4.5 percent) and higher prices (up 0.9 percent).

The aircraft and transportation space had the highest gain in percentage terms, with exports rising 24.2 percent, to CAD1.7 billion, though the sector’s share of the total export value was just 4.3 percent. Exports of aircraft jumped 59.6 percent, to CAD825 million.

And despite historic flooding in Canada’s energy-rich province of Alberta, energy exports declined by just 1.4 percent, to CAD8.7 billion. Energy remains the single biggest component of the country’s international trade, accounting for 22.1 percent of total exports. Economists at CIBC World Markets note that this performance suggests the flooding’s effect on June GDP could be lower than expected and have, therefore, raised their second-quarter forecast for GDP growth to 1.6 percent from their earlier forecast of 1.4 percent.

The general takeaway from June’s trade report is that these export data bode well for Canada’ economic performance during the second half of the year, though again much of that seems to hinge on continued improvement in the US.

The Roundup

Artis REIT’s (TSX: AX-U, OTC: ARESF) second-quarter funds from operations (FFO), the relevant measure of profits for a real estate investment trust (REIT), narrowly beat analyst estimates by 0.3 percent, the third consecutive quarter in which there was at least a modest upside surprise. During the quarter, overall FFO grew 31.8 percent, to CAD43.9 million, versus CAD33.3 million a year ago. Meanwhile, diluted FFO per unit grew 12.9 percent, to CAD0.35, compared to CAD0.31 a year ago.

Bay Street analysts all reaffirmed their ratings following the earnings release, and the mix of ratings for the REIT now stands at seven “buys,” three “holds,” and no “sells.” The consensus 12-month price target is CAD17.38, which is 22.9 percent above the current unit price.

Analysts expect sequential growth in FFO per unit to be flat for the remainder of the year, though full-year 2013 FFO is expected to grow 10 percent from the prior year. Growth is expected to decelerate in 2014, with FFO per unit rising just 2.1 percent year over year.

Management has pursued a strategy of external growth combined with gradual improvement of its operating metrics. The REIT’s commercial properties are diversified across the industrial, retail and office asset classes, and it principally operates in Western Canada, Ontario and the US.

Artis’ portfolio currently consists of 232 commercial properties, with a total of 24.4 million square feet of gross leasable area (GLA). The resource-rich province of Alberta accounts for 38.6 percent of net operating income (NOI), with Ontario accounting for the next largest share of NOI, at 13.7 percent.

While Artis’ US properties currently account for just 20.5 percent of NOI, management believes that it has a brief window of opportunity to acquire properties in the US that offer higher yields than those in Canada. In pursuing a greater presence in the US, the REIT could boost its US holdings to 30 percent of NOI, while pursuing a fundamentally more conservative approach than it does with its Canadian properties. For instance, it will acquire newer properties, with superior tenant creditworthiness and greater lease durations.

Although industrial properties account for 47.4 percent of GLA, their share of NOI is just 24.2 percent. Office properties account for 34 percent of GLA, but the majority of NOI, at 50.4 percent, while retail accounts for 18.6 percent of GLA and 25.4 percent of NOI.

Much of the REIT’s growth is derived from acquisitions. While same-property net operating income (NOI) increased 3.1 percent versus a year ago, NOI across all properties, including acquisitions, jumped 25 percent, to CAD71.7 million.

During the quarter, Artis renewed the leases on almost 600,000 square feet of leasable area, at a rent that was 10 percent higher than a year ago. For the six-month period ended June 30, the REIT renewed a total of 1.3 million square feet, with an increase in rent of 8.6 percent. Over the long term, management projects that its office properties will be the strongest contributor to incremental rental revenue.

Artis further expanded its portfolio by acquiring eight income-producing commercial properties in the US and Canada for CAD237.9 million during the quarter, while also buying the remaining 50 percent interest in the Cara Foods Building in Ontario for CAD102.8 million. Finally, the company purchased land for development near Winnipeg as well as the Twin Cities metro area in Minnesota, for a total of CAD9.9 million.

For the six-month period ended June 30, Artis acquired a total of CAD381.7 million in investment properties. No dispositions were made during the quarter.

To finance these acquisitions, Artis typically uses a mix of debt and equity, so it continues to make secondary issuances, including an equity offering of 10.4 million units during the second quarter that raised CAD172.5 million. And in late July, the REIT received gross proceeds of CAD80 million from the issuance of preferred stock.

Since we added Artis to the Conservative Portfolio in early September 2007, the CAD1.8 billion REIT has increased its units outstanding nearly fivefold, from 26.9 million at the end of the third quarter of 2007 to 132.3 million at the end of the latest quarter.

FFO per unit (diluted) has grown from CAD1.38 for full-year 2007 to CAD1.40 for the trailing four quarters. From 2010-11, FFO per unit had fallen significantly below the threshold at the outset of our holding period, so the REIT’s results have finally caught up with all its secondary issuances.

Over that same period, the value of its property portfolio has grown almost sixfold, from CAD784.7 million to CAD4.7 billion. The weighted average term of the REIT’s mortgages is 4.6 years, while the weighted average interest rate is 4.1 percent.

Since the end of the first quarter, the occupancy rate declined by seven-tenths of a percentage point, to 95.1 percent, though that rate rises to 96.6 percent when including future commitments.

Over the past two quarters, mortgage debt to gross book value declined 1.9 percentage points, to 45.4 percent, while total debt to gross book value declined 1.3 percentage points, to 49.2 percent. This was due to a 12.2 percent rise in gross book value, to CAD4.9 billion, which more than offset a 7.7 percent increase in debt.

In addition to proceeds from debt and equity issuances, Artis had CAD42.7 million in cash on its balance sheet at quarter-end, as well as CAD70 million available from its credit revolver.

Like many of its REIT peers, ARTIS has sold off over the past three months since hitting a year-to-date high of CAD17.03 on April 30. The selloff began in earnest in late May, and then reasserted itself toward the end of July. Its units currently trade just 0.3 percent above their 52-week low.

Artis REIT has a monthly distribution of CAD0.09, for a current yield of 7.6 percent. Management has not boosted the distribution since May 2008. The payout ratio based on FFO improved to 77.1 percent versus 87.1 percent a year ago. Artis REIT remains a buy below USD16 in the Conservative Portfolio.

Here’s where to find our analyses for Portfolio Holdings that have reported earnings for the second quarter of 2013:

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–August Portfolio Update
• Artis REIT (TSX: AX-U, OTC: ARESF)–Aug. 13 Maple Leaf Memo
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Aug. 22 (estimate)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–August Portfolio Update
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF)–Aug. 8 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Aug. 7 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Aug. 8 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–August Portfolio Update
• Dundee REIT (TSX: D-U, OTC: DRETF)–Aug. 8 (confirmed)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Aug. 13 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Aug. 8 (confirmed)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–August Portfolio Update
• Northern Property REIT (TSX: NPR, OTC: NPRUF)–Aug. 13 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–Aug. 9 (confirmed)
• RioCan REIT (TSX: REI, OTC: RIOCF)–August Portfolio Update
• Shaw Communications Inc (TSX: SJR/A, NYSE: SJR)–July Portfolio Update
• Student Transportation Inc (TSX: STB, NSDQ: STB)–Sept. 25 (estimate)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–August Portfolio Update

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN OTC: ACAZF)–August Portfolio Update
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Aug. 14 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–August “In Focus”
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–August Portfolio Update
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Aug. 8 (confirmed)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–Aug. 8 (confirmed)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–Aug. 9 (confirmed)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–Aug. 8 (confirmed)
• Lightstream Resources Ltd (TSX: LTS, OTC: LSTMF)–August “In Focus”
• Newalta Corp (TSX: NAL, OTC: NWLTF)–August Portfolio Update
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–August Portfolio Update
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–August Portfolio Update
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Aug. 22 (estimate)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–August “In Focus”
• Wajax Corp (TSX: WJX, OTC: WJXFF)–Aug. 9 (confirmed)