Smart REIT: Is it the Best Retail REIT?

Smart REIT (TSX:SRU.UN) is one of the biggest retail REITs in the country — but is it the best?

The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Retail is currently undergoing a significant transformation where traditional brick-and-mortar stores are losing sales to e-commerce businesses such as Amazon.com, Inc. It’s enough to make you wonder if this is the death of traditional retail, something Fool.ca contributor Matt Smith pondered in a recent article.

No, retail isn’t dying; the deck is merely being reshuffled, and while there are winners and losers in this transformation, brick-and-mortar retail lives on at properties owned by retail REITs such as Smart REIT (TSX:SRU.UN) and many others.

Just as investors question if it’s smart to be putting money into retail businesses at the moment, these same investors ought to be asking themselves if retail real estate is a good idea. After all, if a retailer goes bust, the landlords are often the ones left holding the bag.

Smart REIT is one of seven TSX-listed retail REITs. It currently yields 5.2%, which puts it at the low end of the group. However, what it doesn’t provide in yield, it more than makes up for it in quality and size.

Canadian retail REITs

Company Yield Market Cap
Smart REIT 5.2% $4.2B
CT Real Estate Investment Trust (TSX:CRT.UN) 4.7% $1.3B
Choice Properties Real Estate Investment Trust

(TSX:CHP.UN)

5.1% $1.3B
RioCan Real Estate Investment Trust 

(TSX:REI.UN)

5.3% $8.6B
OneREIT

(TSX:ONR.UN)

7.9% $294.3M
Plaza Retail REIT

(TSX:PLZ.UN)

5.5% $498.9M
Slate Retail REIT

(TSX:SRT.UN)

7.3% $561.2M

Source: Google Finance

First, before discussing why I think Smart REIT is a good move, let me explain why some of the REITs might not be as attractive to investors.

CT Real Estate Investment Trust

Canadian Tire Corporation Limited (TSX:CTC.A) owns 85.1% of its units. By holding Canadian Tire directly, you benefit from the retail growth (it’s one of the few retailers doing well), Canadian Tire Financial Services, and the real estate investment trust. Canadian Tire’s dividend yield is only 1.6%, but you would have achieved an annualized total return of 17.1% over the past three years — 362 basis points better than the REIT.

Choice Properties Real Estate Investment Trust 

Choice is the REIT spin-off of Loblaw Companies Ltd. (TSX:L). Again, I’d be inclined to invest in Loblaw, which owns 82.7% of the REIT.

RioCan Real Estate Investment Trust

RioCan is the largest REIT in Canada. It has some interesting joint-venture partnerships, including one with Hudson Bay Co. It’s got a good CEO in Ed Sonshine and is moving into more urban, mixed-use developments. I recently recommended that investors consider First Capital Realty Inc. (TSX:FCR) rather than RioCan. However, if you must own a retail REIT other than Smart REIT, it’s a good choice.

OneREIT 

It owns 57 properties in eight provinces and one territory, leasing seven million square feet of space to 908 tenants. Its biggest property is Creekside Crossing in Mississauga, Ontario. The outdoor mall is 430,000 square feet with Walmart, Costco, and the LCBO as major tenants. Most of its properties are located in smaller towns in various parts of the country. At a 7.9% yield, income investors will have interest. However, its market cap is less than 10% of Smart REIT’s, making it slightly riskier.

Why Smart REIT?

Smart REIT is branching out from big-box malls into mixed-use developments in major cities across Canada. It’s currently developing 100 acres of the 400-acre Vaughan Metropolitan Centre in Vaughan, Ontario, in partnership with Penguin Investments.

The Vaughan Metropolitan Centre is one of the biggest developments in Canada in recent years; Smart’s portion includes a Class A office building tenanted by KPMG, 10 million square feet of residential, and two million square feet of retail. It’s by far the most dynamic project in the company’s history.

Since going public in 2002, Smart REIT’s averaged a 13.1% annual return by growing its total assets on a compounded basis by 36.8% per year. Walmart and grocery stores anchor most of its shopping centres, keeping occupancy rates above 98% since 2005, while providing reliable rental revenue.

Smart REIT is focused on the golden triangle between Toronto, Ottawa, and Montreal. Its 5.2% yield is plenty.

In my opinion, Smart REIT is the best retail REIT in this country.

Should you invest $1,000 in Choice Properties Real Estate Investment Trust right now?

Before you buy stock in Choice Properties Real Estate Investment Trust, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Choice Properties Real Estate Investment Trust wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Will Ashworth has no position in any stocks mentioned. David Gardner owns shares of Amazon. The Motley Fool owns shares of Amazon and Costco.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

A shopper makes purchases from an online store.
Tech Stocks

Buy the Dip on the Return of Recession Stocks?

If a recession comes back, there are some stocks that could fair well afterwards. And this is one of the…

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Retirement

Here’s the Average Canadian TFSA and RRSP at Age 60

Many Canadian retirees have tens of thousands invested in ETFs like the iShares S&P/TSX 60 Index Fund (TSX:XIU).

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Here’s Exactly How a $20,000 TFSA Could Potentially Grow to $200,000

Index funds like the iShares S&P/TSX Capped Composite Index (TSX:XIC) are tax free in a TFSA.

Read more »

dividend growth for passive income
Investing

5 Canadian Growth Stocks to Buy and Hold for the Next 15 Years

These Canadian stocks have tremendous long-term growth potential, making them five of the best investments you can buy and hold…

Read more »

Man holds Canadian dollars in differing amounts
Stocks for Beginners

Cash Is King? Think Again During Today’s Market Dip

Sure, cash is great, but during a market dip investors may want to consider using some of the cash to…

Read more »

grow money, wealth build
Stocks for Beginners

How I’d Build a $15,000 Portfolio for Income and Growth With Canadian Value Stocks

Looking for some Canadian value stocks to buy without breaking the bank? Here's a trio to consider buying this month.

Read more »

Dividend Stocks

How I’d Invest $6,000 in Canadian Real Estate Stocks to Build Lasting Wealth

Canadian REITs on sale! See how grocery-anchored retail properties offering 9% yields could turn $6,000 into lasting wealth despite US…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Investing

3 Canadian Value Stocks I’d Hold in My TFSA Through Market Volatility

Given their healthy growth prospects and discounted stock prices, these three value stocks would be ideal additions to your TFSA.

Read more »