3 Cheap REITs With 9%+ Yields

If you’re looking for tax-free monthly income, consider discounted REITs such as Dream Industrial Real Estate Invest Trst (TSX:DIR.UN) and Northview Apartment REIT (TSX:NVU.UN). Simply hold them in a TFSA.

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Real estate investment trusts (REITs) typically own and manage hundreds of properties. Tenants pay them rent. Investors who hold their units gets monthly income as if they’re receiving rent.

Here are three REITs that are priced at discounts to their book values and yield at least 9%.

Industrial REIT with a 9.7% yield

Dream Industrial Real Estate Invest Trst (TSX:DIR.UN) owns industrial properties. In a little over three years since its initial public offering (IPO), its assets have grown from $0.7 billion to $1.7 billion.

Two-thirds of its portfolio is multi-tenant, offering opportunities for rental growth. Additionally, its net operating income is diversified because no tenant contributes over 3.6%.

Dream Industrial has balance across building types: 42% of GLA is in warehouse and distribution, 39% is in flex industrial, and 19% is in light manufacturing.

The REIT has fallen 13% in the past year probably because 24% of its assets are in Alberta. However, these assets maintained a high occupancy rate of 97% in the third quarter, indicating that the oil-price plummet has had little effect on its occupancy thus far. Comparatively, its overall portfolio occupancy is 94.6%.

Dream Industrial’s book value has increased every year since its IPO. At 7.23 per unit, the REIT is 35% off from its book value. The REIT’s adjusted funds from operations (AFFO) payout ratio has reduced to 85% in the third quarter of 2015 from 2012’s 94%. Additionally, Dream Industrial forecasts AFFO to grow 4% by the end of this year, so its distribution of 9.7% is safe.

Office REIT with a 9.1% yield

Dream Global REIT (TSX:DRG.UN) owns and operates German office property assets worth $2.6 billion. The REIT focuses its investments in seven major cities that include Berlin, Hamburg, Munich, and Frankfurt.

Germany is a good place to invest because it is the Eurozone’s largest economy and the world’s fourth-largest economy. It also posts one of the lowest unemployment rates in the Eurozone.

Dream Global has fallen about 15% from its high this year. At $8.75 per unit, the REIT is 21% off from its book value and yields 9.1%.

Its occupancy rate of 86.8% at the end of September has improved from 2014’s occupancy rate of 85.3%. Considering that average in-place rents have increased by 7% since the fourth quarter of 2014, its distribution is safer than it was in 2014.

Residential REIT with a 9.3% yield

Northview Apartment REIT (TSX:NVU.UN) owns residential assets. Generally, this is a recession-resilient asset class. However, many of its assets are in resource-rich provinces.

The REIT has made an effort to diversify by acquiring residential assets in other provinces, mainly Ontario, New Brunswick, and Nova Scotia. However, the market didn’t see that as a positive. Its shares fell 26% in the past year.

At $17.50 per unit, Northview is now 31% off from its book value and yields 9.3%.

So far, the REIT is committed to paying its distribution. It has increased the distribution eight times since 2002 and has never cut it. Northview’s conservative payout ratio of about 70% helps keep its distribution safe.


In the short term, these REITs are unlikely to pop in price. Their 9% yields are diversified and won’t overlap in a portfolio. However, if I only had enough money to buy one, I’d go with Dream Industrial, which seems to be exceptionally resilient to low oil prices despite its Albertan exposure.

REITs pay out distributions that are unlike dividends. Interested investors should consult their tax advisors to find out the most appropriate account to invest in. However, by buying them in a TFSA, you can receive tax-free monthly income.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of DREAM GLOBAL REIT and Northview Apartment REIT.

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