Canada’s falling interest rates may reduce the attractiveness of fixed-income securities like bonds and Guaranteed Investment Certificates (GICs) soon, especially compared to yields on TSX dividend stocks and real estate investment trusts (REITs).
Crombie Real Estate Investment Trust (TSX:CRR.UN) has been a steady and reliable passive-income-generating investment for years. The trust has generated more than 21% in total investment returns so far this year as investors fall in love with REITs again in 2024. The alternative passive-income source could become more valuable if the Bank of Canada joins the U.S. Federal Reserve in amplified rate cuts going forward, offering a comfortable home for your $10,000 capital investment.
Why buy Crombie REIT for passive income right now?
Crombie REIT is predominantly a retail real estate owner with a portfolio of 304 properties comprising about 19.3 million square feet of gross leasable area (GLA).
The REIT retains a loyal tenant base with occupancy rates that have historically remained steady throughout varying economic conditions. Committed occupancy levels at 96.4% by mid-year remain strong to support recurring income generation, and Crombie REIT’s investments in retail-related industrial properties and mixed-use residential properties could provide a layer of growth.
As has been the norm for several years, the trust’s same-property net operating income has steadily grown with sustained strong occupancy rates and higher rental rates on lease renewals. The REIT averaged a 9.6% rent spread on lease renewals during the second quarter of this year.
Growing rental income, supported by new leases on new property developments, supports Crombie’s distributable cash flows. The trust’s adjusted funds from operations (AFFO) should continue to rise with positive leasing spreads and as lower interest rates creep in to reduce the trust’s financing costs in the future.
Investors may earn a 5.6% distribution yield on a Crombie REIT investment annually. The distribution should be a reliable source of monthly passive-income streams as it remains seemingly safe, given an AFFO payout rate of 80.6% by June this year.
How to earn steady passive-income streams
To earn $555 a month in passive income, investors may buy 624 Crombie REIT units as tabulated below.
| Company | Recent Price | Investment Amount | Number of Units | Distribution Per Unit | Total Distribution | Frequency | Total Annual Distribution |
| Crombie REIT (TSX:CRR.UN) | $16.01 | $10,000 | 624 | $0.07417 | $46.28 | Monthly | $555.36 |
The investment could do well and accrue some capital gains as Crombie embarks on new property developments. The trust is carrying out a major development of a 291-unit residential property in Nova Scotia that may be completed during the first half of 2026 and enhance its revenue and earnings generation potential.
Most noteworthy, Crombie REIT maintains a strong balance sheet with a debt-to-gross book value ratio of 42.6%, which has significantly declined from 52.1% in 2020. Considering that REITs may technically employ debt ratios as high as 60% to fund real estate developments, Crombie REIT has more room to borrow capital for major property developments as interest rates decline and expand its mixed-use portfolio. There’s an opportunity for growth as interest rates fall in Canada.
Accretive developments may sustain stable income growth, support the REIT’s growing net asset value, support higher unit prices, and richly reward long-term-oriented passive-income investors.
