This Retail REIT Could Be a Quiet Growth Engine

Gain insights into the cyclical nature of REITs and their performance in relation to the evolving Canadian real estate market.

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

Social Media Profiles

Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published October 22, 2025 4:30 pm EDT

The real estate market can be tricky in the short term and rewarding in the long term. The sector is cyclical and dependent on economic growth. The Canadian real estate market saw a crackdown after the pandemic as house prices inflated significantly, making housing unaffordable. The Bank of Canada had to intervene and cut interest rates, which led to a sharp fall in house prices. Several REITs’ unit prices fell significantly in April 2022 when the interest rate hike began.

man shops in a drugstore — Source: Getty Images

Real estate segments

Meanwhile, commercial real estate collapsed during the pandemic as several offices shifted to a hybrid model and reduced their leasing space. Hospital real estate made a remarkable gain but later slowed its growth. One retail segment that stood strong and continued to grow steadily was the retail sector. Even in retail, a few segments outperformed, such as grocers, pharmacists, and other essential services like banks. Discretionary retailers saw a V-shaped recovery pre- and post-pandemic.

This retail REIT works like an engine

The main attraction of real estate is its rent. It is a quiet growth engine as rent increases every year through renewals and new leases. And if the REIT makes enhancements to the property, it can demand a higher rent.

However, the biggest challenge is finding a long-term tenant with a good credit score, which can assure the REIT of occupancy and timely rent. Another challenge is expensive land acquisitions and developments with no assurance of full occupancy.

CT REIT (TSX: CRT.UN) overcomes both challenges because of its unique business structure. Its single largest tenant is Canadian Tire (TSX: CTC.A), which is also its parent company. Canadian Tire has gas stations and department stores where it sells automotive goods, sports and outdoor equipment, home products, and more, bringing in sales all year round.

Canadian Tire spun off its real estate business into CT REIT. The REIT gets more than 90% occupancy from the parent itself, and Canadian Tire can convert a portion of its rent expense into dividend income.

When Canadian Tire wants to open a new store, CT REIT has the first choice to reject it. CT REIT is assured that any new store it builds or an existing Canadian Tire store it acquires from a third party will have strong occupancy. This special benefit gives CT REIT an edge over others. It does not need to spend on brokerage and marketing to find a tenant. Neither does it have to worry about the timely payment of rent.

This retail REIT has been growing quietly

CT REIT passes on the benefit it gets from this arrangement with Canadian Tire to unitholders in the form of growing distributions. Most REITs don’t grow their distributions annually as they face volatility in occupancy, which they overcome by charging higher rent on renewals and new leases. The higher rent helps them cover the cost of marketing and the real estate agent’s commission. Canadian Tire has a weighted average lease term of 7.5 years. CT REIT grows rent by 1.5% annually for its parent.

CT REIT has been growing its distributions at an average annual rate of 3% for the last 12 years, despite the pandemic. This shows its resilience and quiet growth that comes from Canadian Tire. The REIT also offers a dividend reinvestment plan (DRIP) that helps compound distributions.

It is one of the rare REITs that has a combination of monthly payout, annual distribution growth, and a DRIP. This combination is rare, as most DRIP stocks have quarterly payouts, and most dividend growth stocks do not offer a DRIP.

Investor takeaway

You could consider buying CT REIT anytime for inflation-adjusted passive income. It can give you asset-class diversification for your passive income portfolio.