For investors looking to gain real estate exposure, real estate investment trusts (REITs) can be a great option. These trusts are set up to pay a vast majority of their net income to holders, providing considerable and consistent passive-income streams. And since they’re publicly traded, they’re a lot more liquid to hold, making for better investments for those with shorter-term time horizons.
Here are three of my top picks in this space in the Canadian real estate market right now.
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Dream Industrial REIT
Dream Industrial REIT (TSX:DIR.UN) is an open-ended, unincorporated REIT. The company holds an investment portfolio comprising industrial properties situated in the prime regions of Canada and the United States of America. The primary objective of Dream Industrial REIT is to acquire and develop its portfolio to make stable cash distributions for investors.
In 2024, Dream Industrial concluded the disposition of $70 million of assets at prices that exceeded current carrying values. Moreover, in the second quarter of 2024, Dream Industrial conditionally leased more than 500,000 square feet in several development projects, further advancing its portfolio of cash-generating assets.
With $0.25 in funds from operation (FFO) per share, Dream Industrial ended the second quarter (Q2) with its payout ratio below 70%, paying out $0.058 per share monthly to its shareholders. A sustainable payout ratio puts Dream Industrial in an incredible position to strengthen its balance sheet and maintain operational flexibility.
Killam Apartment REIT
Killam Apartment REIT (TSX:KMP.UN) is an open-ended mutual fund trust specializing in acquiring, managing and developing manufactured home communities and multi-residential apartment buildings. The major business segments of the trust are apartment, MHC, and commercial.
FFO for the three recently finished lease-up developments were stable at $0.30 per unit in Q2-2024 as compared to Q2-2023. Furthermore, it has had notable success with leasing all of the properties, notably Civic 66 and The Governor, where it has complete lease-up. Strong FFO growth is anticipated in the second half of the year and through 2025 as a result of these best-in-class innovations.
Killam’s strategy to enhance value and profitability focuses on three priorities. First, it is increasing earnings from existing operations. Second, it is expanding the portfolio and diversifying geographically through accretive acquisitions, targeting newer properties and dispositions of non-core assets. Lastly, it is developing high-quality properties in its core markets.
Canadian Apartment Properties REIT
Canadian Apartment Properties REIT (TSX:CAR.UN) is among the top of all stable investments for several reasons. The trust has gained a reputation as one of the trusted investments due to its market capitalization being approximately $8.6 billion, with a strategic focus on residential properties.
It is why the company has shown resistance and stability in the real estate market. The operating margin of the REIT amounts to 61.6%, which speaks to good income from its properties. It also reached an impressive quarterly revenue increase of 5.4% year over year in recent earnings, reflecting the high demand in Canada for quality rental units.
Moreover, investors should like the price-to-book ratio of relatively low value at 0.9, depicting that those stocks could be undervalued against their net asset value. Hence, it was a good investment for holders with long-term horizons.
