For anyone looking to gain exposure to real estate, investing in REITs, or real estate investment trusts, is a solid option. Basically, a REIT owns and manages a portfolio of income-generating properties. It uses the capital of shareholders to acquire properties and offers them benefits via dividend payouts.
But similar to every other asset class, investing in REITs also carries certain risks. You can lose money when the value of your REIT units declines due to weak fundamentals, macroeconomic headwinds, and more.
Alternatively, REIT investing will allow you to derive a stable and predictable stream of passive income over time. Here, we’ll look at three top REITs Canadian investors can buy right now.
A small-cap REIT valued at $361 million by market cap, BTB REIT (TSX:BTB.UN) offers investors a tasty dividend yield of 7%. It has returned 132% to investors in the last 10 years after adjusting for dividends.
BTB ploughed in over $180 million to acquire properties in Canada last year. Additionally, its same-property net operating income rose by 6.9% year over year in Q4 of 2021 on the back of higher occupancy rates and an increase in average lease renewal rates.
The company ended the quarter with 75 properties with six million square feet of net leasable area and an asset value of over $1 billion. Its rental income in 2021 surpassed $100 million, increasing 7.9% year over year. Comparatively, net operating income surged by 10% to $56 million last year.
Morguard North American REIT
Morguard North American REIT (TSX:MRG.UN) is one of the largest REITs in Canada. Valued at a market cap of $1.07 billion, Morguard offers investors a forward yield of 3.6%.
In Q4 of 2021, the company completed the refinancing of four Canadian properties that allowed it to derive gross mortgage proceeds of $194.2 million at an interest rate of 2.72% and a weighted average term of 10.5 years.
As of February 2022, the REIT’s rental income collection exceeded 99% through 2021 in Canada and the United States. The average monthly rent in 2021 was 2.3% higher compared to the year-ago period. However, occupancy declined from 94.9% at the end of 2020 to 93.6% in 2021.
Automotive Properties REIT
The final stock on my list is Automotive Properties REIT (TSX:APR.UN), which is valued at $700 million by market cap. Its forward yield stands at a juicy 5.6%. The REIT focuses on owning and acquiring income-producing automotive dealership properties in Canada.
In Q4 of 2021, Automotive Properties REIT collected 100% of its Q4 of 2021 contractual base rent due under its leases and rent-deferral agreements with tenants. It continued to generate growth in revenue, NOI, and AFFO (adjusted funds from operations) per unit, driven by organic growth from rent increases and property acquisitions.
The company’s management team emphasized it has seen acquisition opportunities in the market and has deployed $65 million on acquisitions in Q1 of 2022.
The Foolish takeaway
REITs provide you with an easy way to invest in real estate without actually having to buy property. However, you still need to make strategic decisions in terms of the type of REIT you want to buy and hold for the long term.