Real Estate is an asset class that can provide stability, diversification, passive income, and growth to any investor’s portfolio.
A Real Estate Investment Trust (REIT) is an excellent, low-maintenance way to own a diversified real estate portfolio. REITs preserve the convenience and liquidity of traditional equities, while avoiding direct involvement with tenant management and property maintenance.
The best investors will look to REITs that focus on the number one consideration in real estate investment: location, location, location!
Toronto and the Greater Toronto Area (GTA) is North America’s fourth-largest city and has consistently ranked within the Top 10 on The Economist’s Global Liveability Ranking list.
It has the kind of white-hot real estate market you’d expect from a world-class city, with home prices rising 131% in the last decade. Additionally, a recent government report estimates population growth of 2.8 million people by 2041, bringing the total population to nearly nine million.
According to a 2018 CBRE report, Toronto is the continent’s fastest-growing tech employer. The population of programmers, engineers, and developers calling the city home has increased 50% over five years, outpacing cities like San Francisco.
A large part of this growth is driven by immigration, with 51% of the city residents born outside Canada (vs. New York City at 40%). The tech industry’s insatiable appetite for top talent has attracted major players like Microsoft, Alphabet, and Shopify to the city and surrounding area.
With this in mind, here is a millionaire maker REIT with operations concentrated in Toronto.
Allied Properties (TSX: AP.UN) is a Toronto-headquartered owner, manager, and developer of urban workspaces, and data centres. Its niche is in work environments that facilitate creativity and connectivity — attributes that tech companies love.
Allied boasts interest in 160 properties, comprising 11 million square feet of leasable space. A whopping 85% of this space is split between Canada’s three largest cities: Toronto, Montreal, and Vancouver. Toronto alone comprises 43% of gross leasable area (GLA), and ground has already been broken on major new projects.
“The Well” is a joint project under development between Allied Properties and RioCan Real Estate Investment Trust, Canada’s second-largest REIT. The development is not currently contributing to Allied’s FFO, as completion is scheduled for late 2021. It is expected to add 1.07 million square feet of office and 425,000 square feet of retail GLA from which to drive FFO growth. The anchor tenant, Shopify, has signed on for a 15-year lease in 2022 for at least 600,000 square feet.
Allied Properties is up 12.3% YTD, not including its healthy 3.5% dividend, and with a focus on tech companies in urban centres, the company is poised to continue paying investors for years to come.
We are in the fourth industrial revolution, driven by advances in technology, artificial intelligence, robotics, 5G, and quantum computing, with the GTA well positioned to benefit. As the city’s population increases, demand for places to live and work will grow, pushing demand for real estate and pressuring supply. Resulting increased occupancy rates and pricing power will reward REITs like Allied Properties and its unitholders.
