December 10, 2018

InnVest Real Estate Investment Trust (INN)

The InnVest Real Estate Investment Trust (INN) has a few office and retail properties under management, but by far the main focus of the REIT has been acquiring hotel real estate.  In fact, they have become specialists within this field.  Innvest (INN) currently owns one of the largest hotel portfolios in Canada, consisting of 145 separate properties, with nearly 20,000 rooms available.  One of the REIT’s main partners is Choice Hotels Canada Inc., which is an extremely large franchisor of hotels in the great white north and franchises such notable brand names as Comfort Inn, QualitySuites, and Quality hotels.  Innvest’s hotels are currently managed by four companies in the hotel management business: Hilton Canada Co., Fairmount Hotels & Resorts, Delta Hotels Limited, and Westmont Hospitality Management Canada Limited.  Although some critics would point out that Innvest REIT’s (INN) holdings are not diversified in terms of property type, they do have assets that cover a broad range of tastes and trends in that their 144 hotels span the entire accommodation continuum.  The REIT has multiple different brands that offer varying degrees of luxury and pricing options.  Since Innvest REIT (INN) started in 2002, they have seen the number of properties they own jump from 114 to the current mark of 145, but more tellingly, they have grown the number of rooms under management by over 65%.

 

The geographical diversity of the hotel properties also bodes well for the trust going forward.  Innvest REIT owns 3,535 rooms in Western Canada, 8,413 rooms in Ontario, 4,242 rooms in Quebec, and 2,696 rooms in Atlantic Canada.  When you combine this with the broad range of experiences that the company has focused on providing, you have a business model that other hotel REITs will have to aspire to.

 

Innvest (INN) recently released their second quarter results for the year.  Kenneth Gibson, Innvest’s President and CEO stated that, “Second quarter results highlight continued improvement in demand to our portfolio. This was particularly encouraging given challenging circumstances during the quarter which included the federal election and its impact on government-related travel in April, weak leisure demand due to poor weather and high gasoline prices, and revenue displacement caused by renovations. These factors, in addition to the prior period benefit from the G8 and G20 meetings held in the Toronto area, limited year-over-year growth in funds from operations and distributable income.”  He went on to say that, “Our strategy through the first half of the year was focused on driving occupancy to the portfolio. We expect rate growth to follow during the busier summer season, aided by recent renovations at two of our largest hotels.”  Hotel revenues were down slightly relative to last year’s 2nd quarter at .4%.  That being said, Innvest’s (INN) net income was in the black by $2 million, which is reassuring to investors after last year’s net loss of $41.3 million.

 

There is little doubt that Innvest REIT (INN) has been hit hard by the global economic downturn.  When you focus on a luxury-driven industry such as hotel accommodation, there are going to by some rough patches in the road (compared to say consumer staples).  The current price on Innvest is $4.33-per unit.  This is down substantially off of a 52-week of $7.29.  With a current price-to-earnings ratio of 2.43, and a dividend yield of 11.70%, I believe this REIT is currently severely undervalued, and will see substantial growth in the mid-term.

 

H&R Real Estate Investment Trust (HR)

The H&R Real Estate Investment Trust (HR) is known for having one of the largest American exposures of any Canadian REIT.  Their portfolio includes 133 retail properties, 117 industrial, and 38 office.  Altogether, these holdings represent 42 million square feet of leasable space, and a net book value of over $5.4 billion.  H&R was created in 1996, and has seen steady growth since that point.  It has returned an average of 15% to investors since its creation.  The REIT has consistently kept its payout ratio in the low 60s, which is very conservative when compared to competitors.  H&R (HR) is fairly well diversified within North America, with 47% of their assets in Ontario, 16% in Alberta, 7% in Quebec, 22% in the USA, and 8% other.  Some of their most notable tenants include: Bell Canada Inc., TCPL, Bell Mobility, Telus Communications, Royal Bank of Canada, Public Works of Canada, Nestle, Americredit, Telemedia, Sony Pictures Entertainment, CIBC, Ontario Realty Corporation, Canadian Tire, Versacold Logistics Canada Inc., Purolator Courier Limited, Nestle USA, Finning International Inc., Sysco Food Services of Canada, Rona Inc., Lowe’s, Shell Oil Products, Home Depot, Wal-Mart, Marsh Supermarkets Inc, Nike, Canadian Tire, Famous Players, Walgreens, Sobey’s, and Shoppers Drug Mart.

 

The crown jewel in the H&R holdings is, “The Bow,” in Calgary, Alberta.  It is a massive 2 million square foot office complex that is completely pre-leased (mostly to Encana Corporation).  The expected first year rent alone will be nearly $100 million.  Together with the Telus Tower and the TransCanada tower, this gives H&R (HR) a dominating presence in one of Canada’s fasting growing cities.  The REIT calls it a “strategic cluster.”

 

The most recent large announcement for H&R (HR) was the completion of their huge American acquisition in New York.  This office tower in Long Island City, New York is known as “Two Gotham Center.”  It is 22 stories tall, and includes 661,000 leasable square feet.  It cost the REIT just over $415 million, and is 100% pre-leased to the City of New York.  The Globe and Mail reports that Two Gotham Center, “Presents a beautifully curving, 325-foot façade of gleaming glass, with efficient and generous floor plates of 34,500 square feet. The property’s cutting edge green technology will significantly reduce operating costs and is anticipated to earn a prestigious LEED Silver certification. One of the defining features of this property is its awe inspiring views of the East River and the Midtown Manhattan.”  The property is ideally located to take advantage of New York’s public transportation grid, and represents a unique investment opportunity for a Canadian investor looking to get exposure to the New York real estate market.

 

There is little doubt that H&R (HR) is one of flashier REITs on the Canadian market.  It has an extensive portfolio of unique buildings, and a large market capitalization of well over $3.3 billion.  Its enviable track record and conservative payout ratio bode well for investors going forward.  The American exposure H&R is experienced with may allow them to make substantial gains during this real estate downturn in the USA.  That being said, I think the market has overpriced this REIT for the moment at over $21-per unit.  At this price, H&R has a middling dividend yield of 4.9%, and I think there are likely several lower-profile REITs out there that represent better investing opportunities; although, I would definitely keep an eye on the REIT going forward and would not hesitate to take a large position if that dividend yield crept up into the 6.5-7% range.

 

Homburg Canada (HCR) Real Estate Investment Trust (REIT)

The Homburg Canada (HCR) Real Estate Investment Trust (REIT) is very typical of the Canadian Real Estate Investment Trust industry.  It owns a variety of properties under a Trust structure.  For those that are unaware of why there are so many Trusts in the Canadian real estate world, the reason is that trusts get preferential tax treatment relative to corporations.  Whereas corporations and the vast majority of businesses have to pay a business tax before they either re-invest profits, or distribute them to shareholders, trusts get to distribute profits before this business tax stage (thus avoiding it entirely in the eyes of most unit holders).  This option used to be available to all sectors of the Canadian economy, by the tax loophole was eliminated for most Canadian companies as of January 1st, 2011.  Homburg has a portfolio that contains 127 properties and has roughly 8 million square feet of commercially leasable area.  Eighty-four of these are income-producing commercial properties in the retail and office space divisions, while 43 are multi-family residential properties (1,725 units) that are located across Eastern Canada.  Homburg (HCR) is based out of three separate centers in Montreal, Halifax and Calgary and employs over 200 people across Canada.

 

Like most of the real estate investment funds across Canada, Homburg has three principal objectives.  The first is to provide unit holders with a study dividend income that is distributed in an extremely tax-efficient manner.  The second is to enhance the value of assets through proactive management.  The final objective is to expand the Trust’s asset base through internal growth strategies and accretive acquisitions.  This straight forward setup is what makes REITs so profitable and such an attractive investment for investors looking for yield.

 

Recently, Homburg (HCR) has added to the retail portion of their portfolio by purchasing multiple shopping properties in Quebec and Ontario.  The Trust has also been active on the other side of the ledger as well, as they continue to sell off some of their isolated residential holdings.  Homburg paid about $115 million for the 29 separate shopping centres, while netting $65 million from the sale of 42 residential buildings.  The Homburg REIT (HCR) now owns 728,000 square feet of retail floor space.  Amongst these holdings are the notable commercial properties of Montreal’s CN Central Station, Scotia Centre in Calgary, and the Bathurst Mall in New Brunswick.  The corporate gian Jean Coutu group is the main tenant in 24 of the 29 shopping centres and figures to add prominently to the value of these properties.  Other tenants include mega-brands such as Metro, Shoppers Drug Mart, Dollarama and IGA.  Mr. Beckerleg, the Preident and CEO of the Trust stated, “With this acquisition, the REIT continues to grow its retail footprint in Quebec, and particularly in Montreal.”  It has become fairly clear at this point that the company is headed in a more retail-oriented direction, perhaps fearing a bit of a collapse in several urban-residential markets.

 

The Homburg Real Estate Investment Trust (HCR) is trading at about $12 a share.  It’s annual dividend of $.95, gives the trust a 7.6% dividend yield.  While I do not believe that the Homburg REIT is overly flawed (indeed, its partnership with Jean Coutu suggest otherwise) I would have a hard time recommending it against some of the other diversified REITs in Canada.  I’d personally like to wait to see what the Trust’s holdings will look like in a couple years after they go through this residential-to-retail conversion that they are currently undergoing, before taking a large position.

 

Dundee Real Estate Investment Trust (D-U)

The Dundee Real Estate Investment Trust (D-U) is one of the favourite investment trusts in Canada.  Although it is classified as a “diversified” REIT, it is really only diversified in terms of geography.  Dundee does provides unit holders with income from Canada’s many different regions, but the properties they own are definitely focused in the area of urban and suburban, office and industrial buildings, and are disproportionately balanced towards Toronto.  They believe that these sectors offer investors the most consistent returns on their investment dollars.  Dundee’s portfolio contains hardly any residential holdings.  All together, the Trust owns over 16 million square feet of leasable commercial real estate across Canada.  Like most Canadian REITs, Dundee (D-U) seeks to acquire commercial properties that will pay long-term income streams.  The goal is then to pass these profits on to unit holders, while taking advantage of Canada’s special tax status for real estate investment trusts.

 

Dundee recently wrapped up the purchase of several downtown office buildings throughout Toronto.  In total, the Trust purchased 29 separate buildings from Blackstone Real Estate Advisors LP and Slate Properties Inc, for almost $850 million.  Many of the buildings are strategically located in Toronto’s gamed financial district.  Blackstone was looking to unload the assets along with most of their other Canadian holdings.  It has been speculated that some of buildings (which were sold as a package deal) will not fit with Dundee’s (D-U) overall plans, and therefore will be flipped in order to lower the net acquisition price by over $100 million.  Bruce Traversy, a Senior Vic President at the Trust stated, “The linchpin of the whole portfolio is the position in downtown Toronto.”  While some investors have been scared off by the Toronto market, and the recent struggles on the city’s manufacturing sector, Dundee appears to be unfazed.  The portfolio of properties has an occupancy rate above 90% and the average less term is a healthy 4 years.  This was the largest acquisition of office real estate by any Canadian REIT on record.  When combined with Dundee’s (D-U), record-setting commercial real estate sale in 2007, Dundee has established itself as a premier landlord within the Greater Toronto Area, and Canada in general.

 

Dundee (D-U) looks like a great way to invest in Canadian commercial real estate.  They have recently re-financed much of their debt with TD, and the bank reported that the Trust had a very conservative debt profile.  With roughly $600 million in mortgage debt, at an average interest rate of 4.9%.  The REIT has a debt-to-enterprise value of 50% and has claimed that it intends to keep the value between 48% and 54%.  I believe this leverage is fairly healthy for a Trust the size of Dundee (D-U).  Right now the Dundee REIT is trading around $31.50.  It has a market cap of about $1.75 billion, and an annual dividend of $2.20.  This gives the Trust a yield of 7% and a Price-to-Earnings ratio of 20.23.  Dundee (D-U) also offers a great Dividend Re-Investment Plan (DRIP).  When unit holders choose to have your dividends automatically reinvested in the REIT they receive a 4% discount on the public unit price.  While the DRIP plan is very appealing, I hesitate to invest in a Trust that is so dependant on downtown Toronto.

 

Calloway Real Estate Investment Trust (CWT)

Calloway Real Estate Investment Trust (CWT) is one of the largest REITs in Canada with roughly $5.9 billion in assets.  They have a large full-time staff of 105 people.  Calloway owns 129 properties across Canada, and most of them are large-scale retail centres.  They currently have about 25.3 million square feet of leasable area, and approximately 4.4 million square feet of future development potential.  The REIT is unique in the volume of international retailers that are listed amongst their clients, and they are clearly comfortable brokering deals with major companies.  Calloway REIT’s (CWT) most valuable anchor tenant is non-other than the international conglomerate Wal-Mart.  The trust’s vision is, “To provide a value-oriented shopping experience to Canadian consumers.”  Its main competitor would likely be the RioCan REIT (REI).

 

The advantage Calloway REIT (CWT) has over many of the REITs in Canada is the massive pull of its client list.  The premium brand names that populate the retail centres that Calloway specializes in generate a positive cycle of building value for the properties within Calloway’s (CWT) portfolio.  Some examples of the REITs clients (with the number of locations in brackets) are Best Buy (11), The Brick (8), Canadian Tire (4), Dollarama (24), Future Shop (20), Home Outfitters (12), Loblaws (4, Lowe’s (2), Mark’s Work Wearhouse (51), Michaels (14), Reitmans (53), Reno Depot (2), Rona (3), Sobeys (13), Sport Chek (8), Staples (25), Walmart (73), Winners (27),  and Zellers (4).

 

Calloway REIT (CWT) is also very diversified geographically within Canada.  Like many real estate investment trusts, they do have slightly concentrated holdings in Ontario (66) but Calloway also owns a number of retail centres in Western Canada, Quebec, and the Maritimes.  This indicates a large amount of stability to investors.

 

Recently, Calloway announced that two of their four Zellers locations would be converted into Target stores as a result of their recent merger.  The two lucky locations will be Hopedale Mall in Oakville, Ontario, and the Laurentian Power Centre in Kitchener, Ontario.  With the incredible amount of popularity and fresh consumer product lines that Target is bringing to Canadian markets, these conversions will increase the value of Calloway’s properties substantially.  Al Mawani, the President and CEO of Calloway stated that, “The introduction of Target stores to these Centres will further strengthen Calloway’s high caliber portfolio of tenants,” he went on to add, “Callow expects the increased tenant demand to enhance cash flow in these Centres and facilitate future intensification plans.

 

While a REIT that specializes in retail space that is anchored by some of the most efficiently run brands and businesses in the world is an appealing prospect, I am slightly concerned about Callaway’s (CWT) relatively low dividend yield of 5.9%.  You could argue that this stable yield is more impressive than the high yields being offered by several REITs who have holes in their balance sheet, but I would like to see the current price (around $26.00-per unit) fall a little bit before I committed to a large position within the REIT.  Calloway (CWT) is trading near its 52-week high right now, and if it were anywhere near its 52-week low of $18-per share, I would not hesitate to strongly recommend it.

Crombie Real Estate Investment Trust (CRR)

The Crombie Real Estate Investment Trust (CRR) is the largest land owner in Atlantic Canada.  Their headquarters is located in Stellarton, Nova Scotia.  While their strong presence in Atlantic Canada is what defines the REIT, it also has holdings in Quebec, Ontario, Saskatchewan and Alberta.  Crombie specializes in managing shopping centres that vary in size and location, and the REIT also has some office building properties as well.  As of June, 2011 the breakdown of the properties owned by Crombie REIT (CRR) was 76.9% retail, 14.3% mixed-use, and 8.8% Office.  One unique aspect of Crombie is that they have several strong partnerships with grocery stores and drug stores.  This enables their retail venues to piggyback off of the stable consumer base these stores bring to the table.  This strategy has proved to be especially effective given the tough years most retail-based companies have had due to the global economic downturn.  The dependence of Canadians on drugstores is an interesting cultural trait.  Crombie reports that Canadian consumers spend about 22% of their income on staple goods and services compared to an average of 14% for their American counterparts.  This translates into valuable retail properties available for Crombie REIT (CRR) to market.  The crown jewel in the Crombie portfolio is the Avalon Mall in St. John’s, Newfoundland.  It is continuously ranked as one of Canada’s 15 best-performing shopping centres.

 

Most recently, Crombie REIT (CRR) was pleased to announce that they had reached a tentative agreement in regards to the seven Zellers locations it currently owns.  The retail giant Target has announced that they will select four of these locations to be converted into Target outlets.  “We are very pleased to be working with Target Corporation to open two Target stores in our portfolio and adding an additional Walmart store,” stated Donald Chow, the Crombie REIT CEO.  Obviously these international conglomerates will bring a steady flow of new consumers to the already successful locations owned by Crombie (CRR).  Chow went on to say, “We are pleased to add these properties to our portfolio as they support our strategy of pursuing high quality growth at a reasonable price.  These properties also support our objective of realizing greater growth in Quebec, Ontario, and Western Canada.”

 

While Crombie REIT (CRR) may initially look as if it is situated advantageously in regards to a suddenly booming maritime economy (thanks in large part to offshore oil drilling) , as well as with its connection to the new “hot” retail player on the Canadian scene (Target).  I personally blanche at the 6.8% dividend that is currently being offered.  While a 6.8% dividend is not to be immediately dismissed in this economy, it does not stack up well with several of Crombie’s competitors.  It is currently rated a “hold” amongst most major analysts.  Crombie (CRR) is currently trading at about $13.12 per unit, and this is near its 52-week high.  The REIT has a mid-sized market capitalization of $473 million.

 

Cominar Real Estate Investment Trust (CUF)

The Cominar Real Estate Investment Trust (CUF) is an extremely focused Investment Trust that is the largest commercial property owner in Quebec.  While Cominar does own a few properties in the maritime provinces, and Ottawa, Ontario, the vast majority of their holdings are located in La Belle Province.  They have about 270 properties under management at this time, with 55 each in office and retail, and around 160 industrial and mixed-use buildings.  Together, the properties total roughly 21 million square feed of real-estate space.  Cominar (CUF) was founded in 1965 by Mr. Jules Dallaire, who was a Quebec City entrepreneur.  He got his start building residential apartment buildings in Quebec City.  Between 1965 and 1998 Cominar came to dominate the real estate scene in Quebec City, with 3.1 million square feet of leasable space spread out amongst office, retail, and industrial properties.  In 1998 Cominar (CUF) became one of the first companies to switch over the Real Estate Investment Trust tax structure.  Their familiarity with large scale real estate investments and acquisitions was an immediate asset and has aided their expansion.

 

Likely the most important business transaction the Cominar REIT has been involved in, was the complete buyout of the Alexis Nihon Real Estate Investment Trust on June 1, 2007.  The purchase netted Cominar (CUF) 28 industrial properties, and 19 office properties.  Alexis’ portfolio added 6.1 million square feet of leasable space to Cominar’s holdings, at a price tag of about $575 million.

 

So far in 2011, Cominar REIT (CUF) has had three major acquisitions.  The first is an industrial property located in Moncton, New Brunswick.  It is 11,000 square feet, and was purchased for $1.2 million.  Its occupancy is at 100%.  The second addition was an office property in Saint John, New Brunswick.  It is a relatively large property at 41,000 square feet, and was purchased for $6.5 million.  The final acquisition for Cominar was a commercial property in Halifax Nova Scotia.  Its occupancy rate is 100%, and this property cost about $5.5 million.  Together these purchases obviously prove that Cominar (CUF) is committed to expanding their foothold in Atlantic Canada, and growing outside of their Quebec base.

 

Cominar is an interesting option for investors looking to get exposure to Eastern Canadian real estate.  I think whether or not you would like to invest in the REIT ultimately comes down to what you think the prospects are for Quebec industry, and the greater Atlantic area.  Personally, there are other parts of Canada I would rather be invested in, and there are many Canadian Real Estate Investment Trusts that will give investors a much broader and well-diversified portfolio of properties.  Cominar does offer a nice 5% discount to unit holders through their Distribution Reinvestment Plan.  Cominar (CUF) is currently trading at around $21.50.  They have a fairly large market capitalization at $1.4 billion, and their annual dividend of $1.44 gives the REIT a yield of 6.7%.  While this is a fine revenue stream for investors, there are much more appealing income-producing REIT options currently on the market.

 

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.

Boardwalk Real Estate Investment Trust (BEI)

The Boardwalk Real Estate Investment Trust (BEI) is the largest public owner/operator of multi-family rental units in Canada.  Boardwalk’s portfolio includes properties in Alberta, British Columbia, Saskatchewan, Ontario and Quebec.  All together the REIT owns over 230 properties that total well over 35,000 units, and 30 million feet square of income-producing assets.  Like the rest of the real estate investment trust market in Canada, the Boardwalk REIT seeks to provide value to investors by providing outstanding dividend income that takes advantage of Canadian tax laws.  These tax loopholes allow REITs to provide their unit holders with profits before they are subjected to business taxes.  They are also constantly on the outlook to expand their portfolio in the most advantageous way possible, taking into consideration the substantial asset base they already have in place in order to provide maximum long-term value to shareholders.

 

For many investors the Boardwalk Real Estate Investment Trust (BEI) represents the perfect low-maintenance way to get exposure to the real estate market.  In the past, in order to diversify into the real estate sector most investors had to look at purchasing a rental property.  While this is still an attractive option to some, for many the time commitment involved with being a landlord is beyond the scope of what they are prepared to perform.  Another factor that a potential real estate investor has to take into consideration is the reality that when you buy a rental property you are locked into that specific area in terms of your real estate exposure.  By comparison, when you look at the Boardwalk REIT, your investment dollars are immediately diversified across housing units that span all of Canada.  I believe this is fundamentally a less volatile, and much easier way of getting into the real estate market.

 

At Boardwalk’s (BEI) most recent press conference, the Trust announced that it would be providing discounted rental units to individuals who were displaced by the terrible fire in Slave Lake, Alberta.  “We are pleased to work directly with both Alberta housing and Capital Region Housing Corporation to contribute housing for victims who have lost their homes in Slave Lake as a result of the unimaginable tragedy that has taken place,” said Sam Kolias, the CEO of Boardwalk REIT (BEI).  He went on to say that, “We commend the Province of Alberta for their prompt response to this unprecedented emergency situation.”

 

Boardwalk is probably the most popular purely residential REIT.  It has an extremely large market capitalization of over $2.5 billion.  Right now the Trust is trading between $50 and $51.  Its $1.80 annual dividend gives the Trust a 3.6% yield.  This is a great option if you want exposure to the greater Canadian residential market, but in terms of an overall investment, I would probably recommend one of the more diversified REITs that offer much higher return on your investment in the form of attractive dividend yields.

Allied Properties Real Estate Investment Trust AP-U

 

 

The Allied Properties Real Estate Investment Trust (AP) is a Canadian REIT that specializes in acquiring and upgrading Class I office properties in the urban areas of Tornto, Montreal, Winnipeg, Quebec City, Kitchener, Calgary, Vancouver, Victoria, and Edmonton, although the Western properties are fairly new acquisitions.  Allied REIT started out as a focused REIT in the Greater Toronto Area and Montreal markets.  Of its approximately 40 million square feet of office inventory, 16 million are in Toronto and 13 million are in Quebec.  The trust now appears ready to branch out and strengthen its beachhead in Western Canada.  This will likely prove to be a profitable venture for Allied REIT (AP) given the huge growth factor that Alberta, Saskatchewan, and to a lesser extent British Columbia and Manitoba now possess.  The Allied Properties Real Estate Investment Trust is one of the larger REITs in Canada, with a current market capitalization of about $1.22 billion.  Like most REITs on the market Allied (AP) seeks to improve value for unit holders through strategic acquisitions of new properties, and maximizing resources through sound management.

 

In the past six years Allied REIT has adapted its strategic focus from buying fully redeveloped Class 1 office properties (to meet this standard most office buildings have to be completely renovated at a substantial cost), to purchasing properties with the intent of upgrading them themselves.  By purchasing properties that are only partially redeveloped, and have plenty of surrounding space, Allied (AP) has given themselves an opportunity to greatly increase the value of their acquisitions through sound management.  With substantial experience within this sector (and growing everyday) the management team for Allied REIT sees the strategic shift as a way to diversify their holdings, and have more control over the finished product that they present to tenants.

 

Allied REIT (AP) has had a busy year in 2011.  They have spent roughly $350 million in order to acquire 19 separate properties.  It is important to note that 13 of these properties were in Western Canada, where Allied had been lacking a substantial presence.  They also sought to bolster their Toronto holdings with an additional 5 properties.  Calgary was the main target of the spending spree, as Allied (AP) purchased nine Class 1 office properties in the city.  Western offices now account for 13% of Allied’s total leasable space, and will offset the geographical density of their GTA holdings.

 

Allied REIT (AP) is currently selling at around $24-per unit (REITs are solid in units, like a mutual fund, because they are a trust and a not a corporation that you would buy shares in).  This is near the REIT’s 52-week high, but the trust has not been very volatile, as its 52-week low is $20.68.  Allied’s annual dividend of $1.32 gives it a dividend yield of 5.40%.  There is no doubt that Allied will continue to be a stable dividend-producer for its shareholders.  Its Class 1 office properties will always have high tenancy rates, and hold a lot of value.  That being said, if you’re in the market for higher dividend yields, there are better options within Canada’s real estate investment trust market.