Canadian REITs offer an appealing investment option as they don’t require in-depth knowledge or direct management of properties, as is typically required in real estate development. A Real Estate Investment Trust (REIT) investment in Canada has the potential to generate substantial wealth for property owners. With interest rates remaining elevated and considerable market uncertainty, many Canadian REITs, including some of the top performers, are still trading at low valuations.
Owning rental properties comes with significant stress, a large time commitment, and often requires substantial capital. Managing a real estate business demands full attention, involving property maintenance, tenant marketing, and other essential activities crucial for success. While the REIT holds income-producing assets, it is also involved in expanding and managing loans. If the management team performs poorly in these areas, it can negatively impact the stock. Therefore, investing in a REIT means placing your trust in the management team and the stock market, rather than directly in the real estate market itself.
What is the Best REIT in Canada?
- NXR.UN: Nexus Industrial REIT
- APR.UN: Automotive Properties Real Estate Investment Trust
- BEI.UN: Boardwalk Real Estate Investment Trust
- REI.UN: RioCan Real Estate Investment Trust
- KMP.UN: Killam Apartment REIT
- SRU.UN: SmartCentres Real Estate Investment Trust
- DIR.UN: Dream Industrial Real Estate Investment Trust
- PLZ.UN: Plaza Retail REIT
- CAR.UN: Canadian Apartment Properties Real Estate Investment Trust
- CRT.UN: CT Real Estate Investment Trust
| Ticker | Name | Market Cap | Beta | P/E | Yield | 5Y |
|---|---|---|---|---|---|---|
| APR.UN | Automotive Properties Real Estate Investment Trust | $531,263,000 | 0.92 | 5.39 | 7.37% | 5.84% |
| BEI.UN | Boardwalk Real Estate Investment Trust | $3,810,000,000 | 1.65 | 6.38 | 1.64% | 15.40% |
| CAR.UN | Canadian Apartment Properties Real Estate Investment Trust | $7,501,000,000 | 1.21 | N/A | 3.26% | 1.34% |
| CRT.UN | CT Real Estate Investment Trust | $3,438,000,000 | 0.99 | 14.90 | 6.11% | 3.95% |
| DIR.UN | Dream Industrial Real Estate Investment Trust | $3,651,000,000 | 1.26 | 18.36 | 5.52% | 6.37% |
| KMP.UN | Killam Apartment REIT | $2,199,000,000 | 1.04 | 8.59 | 3.76% | 1.30% |
| NXR.UN | Nexus Industrial REIT | $790,353,000 | 1.41 | 4.84 | 7.54% | 4.75% |
| PLZ.UN | Plaza Retail REIT | $421,576,000 | 1.01 | 10.50 | 7.41% | 3.93% |
| REI.UN | RioCan Real Estate Investment Trust | $5,051,000,000 | 1.29 | 98.88 | 6.60% | -2.41% |
| SRU.UN | SmartCentres Real Estate Investment Trust | $4,181,000,000 | 1.23 | 8.61 | 7.53% | -1.50% |
10. CT Real Estate Investment Trust
CT Real Estate Investment Trust is an unincorporated, closed-end real estate investment trust formed to own income-producing commercial properties located primarily in Canada. Its portfolio is comprised of over 370 properties totalling more than 30 million square feet of GLA, consisting primarily of net lease single-tenant retail properties located across Canada. Canadian Tire Corporation, Limited, is CT Real Estate Investment Trust’s most significant tenant.
9. Canadian Apartment Properties Real Estate Investment Trust
CAPREIT is Canada’s largest publicly traded provider of quality rental housing. As at December 31, 2023, CAPREIT owns approximately 64,300 residential apartment suites, townhomes and manufactured home community sites that are well-located across Canada and the Netherlands, with approximately $16.5 billion of investment properties in Canada and Europe.
8. Plaza Retail REIT
Plaza is an open-ended real estate investment trust and is a leading retail property owner and developer, focused on Ontario, Quebec and Atlantic Canada. Plaza’s portfolio at June 30, 2023 includes interests in 234 properties totaling approximately 8.8 million square feet across Canada and additional lands held for development. Plaza’s portfolio largely consists of open-air centres and stand-alone small box retail outlets and is predominantly occupied by national tenants.
7. Dream Industrial Real Estate Investment Trust
Dream Industrial REIT is an unincorporated, open-ended real estate investment trust. As at December 31, 2023, we own, manage and operate a global portfolio of well-located, diversified industrial properties comprising 327 assets totalling approximately 71.4 million square feet of GLA in key markets across Canada, Europe and the U.S. Our goal is to deliver strong total returns to our unitholders through secure distributions as well as growth in net asset value and cash flow per unit underpinned by our high-quality portfolio and an investment grade balance sheet.
6. SmartCentres Real Estate Investment Trust
SmartCentres is one of Canada’s largest fully integrated REITs, with a best-in-class and growing mixed-use portfolio featuring 191 strategically located properties in communities across the country. SmartCentres has approximately $12.0 billion in assets and owns 35.0 million square feet of income value-oriented retail and first-class office properties with 98.5% in place and committed occupancy, on 3,500 acres of owned land across Canada.
5. Killam Apartment REIT
Killam Apartment REIT, based in Halifax, Nova Scotia, is one of Canada’s largest residential real estate investment trusts, owning, operating, managing and developing a $4.9 billion portfolio of apartments and manufactured home communities. Killam’s strategy to enhance value and profitability focuses on three priorities:
- Increasing earnings from existing operations
- Expanding the portfolio and diversifying geographically through accretive acquisitions, with an emphasis on newer properties
- Developing high-quality properties in its core markets.
4. RioCan Real Estate Investment Trust
RioCan is one of Canada’s largest real estate investment trusts. RioCan owns, manages and develops retail-focused, increasingly mixed-use properties in prime, high-density transit-oriented areas where Canadians want to shop, live and work. As of December 31, 2023, our portfolio comprises 188 properties with an aggregate net leasable area of approximately 32.6 million square feet (at RioCan’s interest) including office, residential rental and 9 development properties.
3. Boardwalk Real Estate Investment Trust
Boardwalk REIT strives to be Canada’s friendliest community provider and is a leading owner/operator of multi-family rental communities. Providing homes in more than 200 communities, with over 33,000 residential suites totalling over 29 million net rentable square feet, Boardwalk has a proven long-term track record of building better communities, where love always lives. Boardwalk Living, Boardwalk Communities, and Boardwalk Lifestyle cater to a large diverse demographic and have evolved to capture the life cycle of all Resident Members. Boardwalk’s disciplined approach to capital allocation, acquisition, development, purposeful re-positioning, and management of apartment communities allows the Trust to provide its brand of community across Canada creating exceptional Resident Member experiences. Differentiated by its peak performance culture, Boardwalk is committed to delivering exceptional service, product quality and experience to our Resident Members who reward us with high retention and market-leading operating results, which in turn, lead to higher free cash flow and investment returns, stable monthly distributions, and value creation for all our stakeholders.
2. Automotive Properties Real Estate Investment Trust
Automotive Properties REIT is an internally managed, unincorporated, open-ended real estate investment trust focused on owning and acquiring primarily income-producing automotive dealership properties located in Canada. The REIT’s portfolio currently consists of 77 income-producing commercial properties, representing approximately 2.9 million square feet of gross leasable area, in metropolitan markets across British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Québec. Automotive Properties REIT is the only public vehicle in Canada focused on consolidating automotive dealership real estate properties.
1. Nexus Industrial REIT
Nexus Insutrial REIT has a quality portfolio of industrial, office and retail properties in Canada, with a focus on acquiring and owning industrial properties. Nexus is constantly pursuing prudent growth opportunities to increase scale through transactions accretive to the REIT’s adjusted funds from operation (AFFO) per unit. Nexus will continue to grow across Canada and other jurisdictions, potentially including select American markets, where opportunities exist.
Nexus is a growth-oriented real estate investment trust focused on increasing unitholder value through acquiring industrial properties located in primary and secondary markets in Canada, and the ownership and management of its portfolio of properties. The REIT currently owns a portfolio of 116 properties (including two properties held for development in which the REIT has an 80% interest) comprising approximately 12.4 million square feet of gross leasable area. The REIT has approximately 93,038,000 voting units issued and outstanding, including approximately 68,427,000 REIT Units and approximately 24,611,000 Class B LP Units of subsidiary limited partnerships of Nexus, which are convertible to REIT Units on a one-to-one basis.
What is a REIT?
REITs closely resemble a mutual fund or ETF in which funds from multiple investors are aggregated to acquire a diversified portfolio of various stocks and bonds. However, in the context of a REIT, the pooled funds are utilized to acquire and oversee lucrative real estate investments. A REIT is a company responsible for owning, managing, operating, or financing income-generating real estate properties. Like mutual funds, REITs gather capital from investors and deploy it to acquire or possess properties within the company’s ownership.
REITs commonly offer higher dividend yields compared to regular dividend-paying stocks. The business structure of REITs allows for a significant portion of income, ranging from 80-95% after expenses, to be distributed directly to shareholders without incurring corporate-level taxation.
As a consequence, dividends from REITs are typically classified as ineligible dividends and do not qualify for the Dividend Tax Credit. In non-registered accounts, these distributions are often treated as a combination of regular income and capital gains, subject to corresponding taxes. It is advisable to hold them within tax-advantaged accounts such as a TFSA or RRSP.
Why Invest in REITs?
The largest REITs that pay or can potentially pay significant dividends usually possess and manage many properties spread across the country and have different types of real estate properties. Whether commercial or residential, it’s this sort of diversity in real estate that helps minimize property depreciation in some areas.
What are the Different Types of REITs in Canada?
- Data Centre: they specialize in spaces that aren’t offered to human customers, but to house data centres. Data centre REITs manage temperature-regulated commercial storage spaces that also have uninterruptible power supplies. The spaces are offered to companies that need to store large amounts of data via cloud computing and therefore need large physical servers.
- Diversified: manage a diverse portfolio comprised of many kinds of real estate, which can be a mix of residential, commercial, and industrial spaces. Diversified REITs can sometimes focus on one market, such as a city or a district of a city, and some may diversify further by locale.
- Equity: own and manage real estate that produces their own income by leasing commercial or residential space to tenants. Equity REITs can include a portfolio consisting of apartment buildings, condominiums, office buildings, and commercial properties like malls and warehouses.
- Healthcare: health care facilities or real estate related to the healthcare industry. This REIT can include hospitals, medical offices, senior housing or senior care communities, outpatient facilities, and medical research labs.
- Hospitality: own and manage a portfolio of hotels and resorts. This REIT makes its income mainly through room and conference space rentals. The main caveat of hospitality REITs is that they’re considered to be the most vulnerable to economic conditions and need a strong economy to perform well.
- Industrial: large-scale industrial activities like food manufacturing, food preservation, and food processing. Storage facilities for perishable and non-perishable items are included in industrial REITs, so it’s no surprise that cannabis-growing facilities are under this category as well. Industrial REITs are currently enjoying an uptick in business due to the spike of e-commerce companies that require a lot of storage for their goods. It’s not all about storage or production though, as industrial REITs can also include flexible office spaces.
- Infrastructure: oil pipelines, cell towers, fibre-optic cables, cell towers, and other assets.
- Mortgage: source of mortgages and loans and lend money to real estate developers.
- Office: leased spaces can include luxurious skyscrapers or high-rises, or basic tuition offices in the community college of a small town. Office REITs can have a portfolio of spaces focused on a specific city or region, while others have portfolios arranged by job type.
- Private: These REITs do not trade on public exchanges and are only offered to high-net-worth investors.
- Public: publicly traded on major stock exchanges like the TSX and NYSE and can be purchased via a brokerage account. These REITs are not traded on public exchanges but may be traded through online platforms, commonly called real estate crowdfunding platforms.
- Residential: living space intended for tenants and includes apartments, condominiums, and houses. These REITs are deemed to be very stable, as the increase in population means increased demand for more living spaces.
- Retail: shopping centres, malls, and freestanding retail stores. While brick-and-mortar retailers in these REITs have been adversely affected by the pandemic, other stores need retail space, especially groceries and pharmacies.
- Self-storage: storage facilities that are leased out to individuals and businesses. Of these REIT types, self-storage REITs are the best performers. Demand for self-storage facilities is high, they are cheap to build and maintain, so it’s easier to earn high margins.
- Specialty: skydiving arenas, casinos, trampoline parks, and farmlands.
How Do You Pick the Best REITs?
Real estate investing offers so many different REITs to choose from. So how do savvy investors know or decide what are the best REITs to invest in? The simple rule is to invest in REITs that generate the highest returns.
- Earnings: Before you buy into a REIT, have a look at its funds from operations (FFO) and how much cash it can give as dividends. Earnings can indicate a REIT’s overall performance and how much money is transferred to investors. Don’t rely solely on the REIT’s regular income numbers as these take property depreciation into account. Regular earnings are only useful if you’ve studied the other two signs. The REIT may be having unusual returns due to real estate market conditions or management’s luck in picking investments.
- Diversification: Real estate markets fluctuate depending on location and property type, so it’s a sound strategy to buy a properly diversified REIT. Don’t get a REIT overly focused on commercial real estate because a drop in occupancy rates can lead to portfolio problems. A REIT with sufficient diversification can mean that the trust has enough capital to fund future growth initiatives and leverage itself for higher returns.
- Management: Take time to see what the REIT’s management team is like; check their track record and how they’re compensated. The profitability and asset appreciation of a REIT are closely related to the manager’s ability to pick the right investments and strategies. If the compensation of a REIT’s management is performance-based, then that can work to your advantage as well.
