March 23, 2019

Canadian Apartment Properties Real Estate Invest Trust (CAPREIT)

The Canadian Apartment Properties Real Estate Invest Trust (CAPREIT), is traded under the ticker symbol of CAR-U on the Toronto Stock Exchange (TSX).  The trust is one of the biggest residential landlords in Canada.  It owns an interest in almost 31,000 residential units in urban centers all across Canada.  Unit holders in the trust benefit from the tax advantages that Real Estate Investment Trusts (or REITs as they are more commonly referred to) have in Canada.  Up until January 1st, 2011, income trusts of all kinds benefitted from tax rules that allowed trusts to essentially pay out distributions to shareholders before being taxed.  This was obviously a huge competitive advantage and led to an explosion of investment trusts across all Canadian industries and sectors as they offered fantastic yields.  Beginning in 2011 the Harper government decided to tax these income trusts in a more traditional manner (consequently most of the trusts restructured into the conventional corporation model), but they allowed trusts that purchased real estate to keep these tax advantages.  The reasoning behind this decision was to encourage construction and investment within Canada.

 

The most recent news for CAPREIT is that on July 21st, 2011 the mega-landlord finalized a deal that seen them purchase a luxury apartment complex in Laval, Quebec.  The location has two 24-storey buildings, a single 17-storey one for good measure.  In total there are 811 suites and 6,500 square feet of commercial space.  The commercial space is currently occupied by all manner of amenities that benefit from the densely populated building that they share space with.  The purchase price was roughly $70 million.  The acquisition is typical of the large-scale residential properties that the Canadian Apartment Properties REIT (CAR-U) covets across Canada.

 

In addition, management of CAPREIT also announced that they had purchased a large interest in a luxury apartment in downtown Toronto.  The location offered specific advantages to the trust as it already has a controlling interest in many properties located nearby.  The price tag on this expenditure was just over $31 million, and further cements the Canadian Apartment Properties REIT as a major force in urban residential housing in Canada’s largest centre.  President and CEO Thomas Schwartz noted, “A key element of our value-enhancing strategies is to cluster properties together in order to fully capitalize on our existing onsite management structure,” when asked to comment on the recent purchases.  He went on to state that, “Theses acquisitions also enhance the quality and geographic diversification of our property portfolio.”

 

The Canadian Apartment Properties REIT (CAR-U) is focused a little more on growth, as opposed to maximizing unit-holder dividends at this point in time.  While their yield is still a respectable 5%, it is not quite as high as that of their competitors.  Their current share price is fluctuating between $20 and $22, and they have a massive market capitalization of over $1.6 billion.