December 10, 2018

Northern Property Real Estate Investment Trust (NPR-U)

The Northern Property Real Estate Investment Trust (NPR-U) is a trust that has a unique focus on Northern and rural real estate.  It was started in 2002, and has grown to a net asset value of almost a billion dollars.  They have large residential holdings in Alberta, a growing presence in British Columbia, and they are my far the biggest landlord in the Northwest Territories, Nunavut, and Newfoundland.  While the majority of the NPR’s assets are in various residential units (multi-family, senior’s housing, furnished luxury suites etc.) they have acquired some commercial properties with an eye towards maximizing profit margins by looking at government employees all over Canada’s vast North.

 

The Northern Property Real Estate Investment Trust (NPR-U) or “NPRREIT” is a unique product among Canadian REITs.  Whereas most REITs, and really anyone in real estate to any large extent, concentrate on high population centers, NPRREIT has decided to focus on rural areas.  In its own way, it might be one of the most diversified REITs out there because it has so many different properties all over Canada.  Northern is definitely joined at the hip with Canada’s various commodity sectors.  One of its main strategies is to buy property with a large potential for future growth based on a natural resource (oil, natural gas, copper, timber, etc.) that is found there.  When you factor in the high demand for decent housing that highly-paid government employees often bring to small rural towns, there is often a fairly affluent client base, with a lot of excess income due to the lack of expensive recreational pursuits.  Northern Property REIT (NRP-U) is able to cash in on these circumstances in large part because there is little competition for them.  When you compare that business model to the intense urban competition most trusts deal with, it is an interesting way to diversity your real estate holdings.

 

NPR lists its main objectives as:

 

1) To acquire residential properties with longer term leases to governments and larger corporations.

2) To provide unit holders with consistent, growing equity, value, increased liquidity, and monthly distributions on a tax efficient basis.

3) To operate our properties, and seek out new markets for growth.

4) To acquire energy efficient, low maintenance, quality properties.

 

I really like the clear focus that Northern Property REIT (NPR-U) has on competitive advantages within its market.  Long term leases involving government and large corporations bode well for a stable cash flow.  Its most recent acquisitions were a diverse set of purchases in residential units from Nanaimo, BC, Iqaluit, Nunavut, and Jasper, Alberta.  The REIT is trading close to $30 a unit right now, with a 52-week low of $25 and a high of $31.50.  It has a very attractive price-to-earnings ratio of 11.35, and its annual dividend (distributed monthly) is $1.53, giving the trust a yield of 5.2%.