Real estate investment trusts, or REITs, own and operate a portfolio of income-generating properties. Typically, REITs distribute the majority of the rental income to shareholders as dividends. Investing in REITs diversifies your equity portfolio and allows you to begin a passive income stream at a low cost.
However, REITs need to generate sufficient income to maintain their interest payments and dividend payout, while investing in property development and acquisition. In this article, I have identified one Canadian REIT that could be the safest income play on the TSX. Let’s see why.
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Is this Canadian REIT a good buy?
Valued at a market cap of $4.84 billion, Granite REIT (TSX:GRT.UN) delivered strong operational performance in 2024. The industrial property owner increased funds from operations (FFO) per unit by 9.5% to $5.44 per share while adjusted FFO climbed 8.0% to $4.86 per share, marking the 14th consecutive year of distribution increases. Management raised the annual payout 3.03% to $3.40 per unit while maintaining a conservative 68% adjusted FFO payout ratio.
The REIT ended 2024 with 138 income-producing properties plus five development sites totalling 63.3 million square feet across five countries with 95% occupancy.
Property values reached $9.4 billion with a weighted average lease term of 5.7 years. Granite reduced exposure to anchor tenant Magna to just 19% of gross leasable area from 93% in 2012, while expanding the distribution and e-commerce segment to 48.8 million square feet, representing 77% of portfolio value.
Same-property net operating income on a constant currency basis grew 5.9% last year while the net leverage ratio stood at 32%, providing $1.1 billion in available liquidity.
In 2024, management renewed 10 million square feet at a 15% average rent increase with a strong 92% renewal rate. The REIT completed three expansion projects totalling 0.5 million square feet for $107 million at an average 6.8% yield on cost while issuing $800 million in debentures to refinance near-term maturities.
The company repurchased $121.3 million worth of units through June while maintaining its BBB investment grade rating and advancing sustainability initiatives, including 49.8 megawatts of operational solar capacity across 17 properties.
Granite REIT delivered results that exceeded expectations in the second quarter of 2025, though currency headwinds temporarily masked its operational momentum. The REIT posted funds from operations of $1.39 per unit, a 5.3% increase compared to the same period last year.
The trust executed 1.3 million square feet of lease renewals during the period, a 40% weighted average increase on leases that expired in 2025. The leasing team also secured 1.1 million square feet of new leases expected to generate over $10.5 million in gross rent during their first year. One standout deal in Atlanta saw rental rates jump 58% above the previous tenant’s rate.
What’s next for the TSX REIT?
Management raised its full-year guidance based on this momentum, now projecting FFO per unit between $5.75 and $5.90, representing 6% to 9% growth over 2024. The company also increased its same-property net operating income forecast to a range of 5% to 6.5% on a constant currency basis, up from the previous estimate of 4.5% to 6%.
Granite continued to buy back units during the quarter, repurchasing 2.2 million units year to date at an average cost of $67.01 for total consideration of roughly $145 million. These buybacks have proven accretive to per-unit metrics even as the company drew $91 million on its credit facility to fund the purchases. The REIT expects to pay down this balance throughout the remainder of 2025 using free cash flow from operations.
The trust temporarily saw its net leverage ratio increase to 36% from 32% in the previous quarter, because five properties classified as held for sale were excluded from asset values. Management expects leverage metrics to normalize once these dispositions close.
Granite REIT is expected to pay shareholders an annual dividend per share of $3.40, up from $3.30 in 2024. These payouts are forecast to increase to $3.61 per share in 2027, enhancing the effective yield to 4.5% from 4.3%.
