As Canada grapples with a housing crisis, with demand for rentals far outpacing current supply, one undervalued gem stands out: Minto Apartment Real Estate Investment Trust (TSX:MI.UN). Priced at just $12.68 per unit recently, Minto Apartment REIT units offer investors respectable and growing monthly income distributions, trade at a deep discount to their intrinsic value, and offer investors cheap exposure to Canada’s chronic housing shortage. Let’s explore why this 4.1% yield opportunity is too compelling to ignore.
Minto Apartment REIT trades for pennies on the dollar
Minto Apartment REIT currently trades at a staggering 55% discount to its most recent net asset value (NAV) of $22.73 as of March 31, 2025. In simpler terms, you’re paying about $0.45 for every dollar of high-quality residential real estate assets the trust owns. This disconnect between price and value is glaring, especially when compared to beaten-down office REIT peers like Allied Properties REIT (37.3% discount) or Artis REIT (51.2% discount).
Minto’s management isn’t sitting idle, it has repurchased $28.2 million worth of units since late 2024, taking advantage of acute mispricing and signaling confidence in the REIT stock’s upside.
Earn reliable monthly income with room to grow
Minto pays a monthly distribution of $0.04333 per unit, translating to a 4.1% annual yield. While the yield may seem modest next to higher-risk alternatives, it’s remarkably sustainable.
The REIT’s payout ratio sits at just 66.4% of normalized AFFO (adjusted funds from operations), leaving ample room for future hikes. Since its 2018 initial public offering (IPO), Minto has raised distributions annually, including a 2.9% increase in December 2024.
For passive-income seekers, this consistency is golden.
A high-quality portfolio built for growth
Minto owns 28 high-quality apartment buildings (7,598 suites) in major Canadian cities like Toronto, Vancouver, and Montreal. Occupancy rates are robust at 96.2%, with rents rising 5.3% year over year during the first quarter of 2025 (Q1 2025). Even better, the REIT’s “gain-to-lease” potential—the difference between current and market rents—sits at 11.2%, hinting at further revenue growth as leases renew in 2025 and beyond.
With a 42.6% debt-to-assets ratio and 99% fixed-rate debt at an average 3.5% interest rate, Minto Apartment REIT’s portfolio is financially insulated from rising borrowing costs. Recent moves, like selling non-core assets and acquiring a prime Vancouver property, have strengthened its balance sheet. Trustees reinvested proceeds from asset sales into unit buybacks and debt reduction, creating a virtuous cycle for shareholders.
The Minto Apartment REIT portfolio could generate positive earnings, grow the distributable cash flow, and create value for long-term-oriented investors.
Minto’s macro tailwind: Canada’s housing shortage
Canada potentially needs more than 5.5 million new homes by 2030 to restore affordability. At current construction rates, the shortfall will persist for longer. Meanwhile, immigration, though slowing temporarily, continues to funnel demand into cities where Minto Apartment REIT operates. Over half of 2024’s new permanent residents settled in the REIT’s markets, ensuring steady tenant demand.
Why the discount? And when will it close?
The Canadian stock market’s indifference toward smaller REITs has kept Minto Apartment REIT undervalued. However, catalysts are emerging that could lift the REIT beyond its $500 million market cap. Aggressive buybacks shrink the unit count, boosting per-unit metrics. A potential rebound in investor appetite for REITs, spurred by stabilizing interest rates, could also narrow the NAV gap. Even a partial revaluation to a 30% discount would imply a 50% upside on Minto Apartment REIT units from today’s price, not counting distributions or rent growth.
The Foolish bottom line
At $12.68, Minto Apartment REIT isn’t just a monthly income stock—it’s a coiled spring. Investors get paid to wait for the market to recognize the small REIT’s true value, all while it benefits from Canada’s unrelenting housing shortage. With a rock-solid balance sheet, disciplined management, and rents climbing faster than inflation, this REIT is a remarkable opportunity for patient investors.
