Do you go to an office to work every weekday or know someone that does? Well, the boss most likely pays rent to a landlord for use of that office. You can actually receive office rental income today by buying shares in office real estate investment trusts (REITs). It’s simple and easy compared to buying office properties yourself and having to solicit trustworthy tenants.

You’re in luck. Office REITs have experienced a dip and they’re priced on the cheap compared with their 52-week range. In other words, they’re on sale. But which one should you buy?

First, here’s an overview:

REIT Market cap Price per share Yield Distribution growth in past 10 years Valuation
Allied Properties 2.8 billion $36.2 4% 24.8% fair
Dream Office 2.6 billion $24.3 9.2% 1.8% cheap
Slate Office 106 million $7.04 10.7% N/A cheap

Allied Properties

Allied Properties REIT (TSX:AP.UN) mainly owns and manages Class I office properties that are compelling to tenants because those properties are close to central business districts, are well served by public transportation, and have significantly lower gross occupancy costs than space in office towers (up to 50% lower).

Allied Properties costs $36.20 per share with a 4% yield. Since 2012 it has shown consistent growth in its funds from operations per unit, growing it by at least 6-8% per year. From 2004 to 2014 Allied Properties’s distribution increased by 24.8%.

When looking at its recent trading history from 2011, its shares are priced fairly today at a multiple of 16.8. Any further dips indicate a strong buy for its high-quality shares.

Dream Office REIT

Dream Office REIT (TSX:D.UN) is one of Canada’s biggest pure-play office REITs. Its tenants includes municipal, provincial, and federal governments as well as Canada’s major banks, and small- to medium-sized businesses across Canada.

It has over 2,200 tenants, with 17.5% of its total rental revenue coming from the government and government agencies that provide stable, quality cash flows.

At $24.30 per share, it yields 9.2%. If it trades at its historically level at a multiple of 10.5, it should reach close to $30 a share, or a possible 23% upside.

Slate Office REIT

Slate Office REIT (TSX:SOT.UN) must be getting some attention with Fortis Inc. buying 15.5% of the REIT. Other than that, its juicy 10.7% yield satisfies the appetite of income-hungry investors.

Slate targets non-core office properties are priced at significant discounts and have stable operating fundamentals and strong tenant profiles. These non-core assets are often overlooked by the big investors, so Slate doesn’t compete with them directly.

Slate Asset Management L.P. just started managing the REIT in November 2014, but we’re already seeing results. In December 2014 it already acquired seven office properties in the Greater Toronto Area.

I believe Slate is going through a transformation to becoming a pure-play Office REIT. So, its historical trading multiples won’t be of much use here, but from the REIT’s property acquisition criteria, I see it as a value play with growth potential.

A word of caution

All REITs will likely be negatively affected by increasing interest rates. On another note, REITs pay out distributions that are unlike dividends. To avoid headache at tax-reporting time, buy and hold them in a TFSA or RRSP.


For high quality and growth, go for Allied Properties. For the highest yield and growth opportunity, go for Slate Office. Remember to set a limit order with expiry dates as far out as possible because you might not get all shares filled immediately. For a high yield with scale, go for Dream Office.

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Fool contributor Kay Ng owns shares of Dream Office, and Slate Office.