The real estate sector has arguably created the most millionaires over the past five decades. In addition to diversification, investors can generate a stable stream of passive income by holding these cash-generating assets.
But investing in real estate is capital-intensive, given that the average home price in Canada is close to $700,000. This number will be significantly higher in cities such as Toronto and Vancouver, suggesting that the average homeowner will have to take on substantial debt to fund the purchase. Moreover, real estate investors will have to allocate additional resources to fund maintenance costs, taxes, and vacancy periods.
Alternatively, Canadians can gain exposure to the real estate sector by investing in real estate investment trusts (REITs). Typically, REITs own and operate a portfolio of real estate properties, which further reduces investment risk. Further, REITs distribute most of their net income to unit holders as dividends, making them attractive to income-seeking shareholders.
One top Canadian REIT you can buy right now is Granite Real Estate Investment Trust (TSX:GRT.UN). Valued at a market cap of $4.8 billion, Granite REIT has more than tripled investor returns over the past decade, after adjusting for dividend reinvestments. Despite these stellar returns, the REIT offers you a forward yield of 4.3% in 2025.
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Is this TSX REIT a good buy?
Granite acquires, develops, owns, and manages logistics, warehouse, and industrial properties in North America and Europe. It owns 141 properties totalling 60.6 million square feet of gross leasable area.
In Q2 2025, Granite REIT grew its funds from operations or FFO per unit by 5.3% to $1.39. In the June quarter, it completed 1.3 million square feet of renewals for 2026 expiries and 1.1 million square feet of new leases, expected to contribute over $10.5 million in first-year gross rent.
Management renewed roughly 80% of 2025 expiries at a weighted-average increase exceeding 40%, with a standout Atlanta lease achieving a 58% increase in rental rate. The company raised its constant-currency same-property net operating income guidance to 5% to 6.5% from 4.5% to 6%.
Granite increased FFO per unit guidance to $5.75 to $5.90, representing 6% to 9% growth over 2024, while lifting AFFO per unit guidance to $4.90 to $5.05. Management expects occupancy to range between 96.5% and 97% by year-end, roughly 100 basis points above first-quarter expectations.
The REIT announced plans to classify five assets as held for sale, totalling approximately $310.5 million, generating $14.8 million in annualized revenue, as part of its capital recycling strategy.
New opportunities
The company completed a Florida acquisition in the Miami market during the quarter and is actively pursuing new opportunities totalling $65 million across Europe and the United States.
Management emphasized capital deployment in select core markets while maintaining conservative leverage ratios. Granite has repurchased 2.2 million units year-to-date at an average cost of $67.01, taking advantage of the discount to net asset value.
Net leverage increased to 36% from 32%, primarily due to the classification of assets as held for sale, which reduced investment property values while drawing on the credit facility to fund acquisitions and buybacks.
The REIT expects leverage ratios to normalize following asset sales and intends to reduce the $91 million outstanding balance on its credit facility throughout 2025 with operating cash flow.
Is the Canadian REIT still undervalued?
Granite REIT’s growth story is far from over, given that it is forecast to increase revenue from $569 million in 2014 to $678 million in 2027. Comparatively, adjusted earnings are forecast to expand from $5.22 per share in 2025 to $6.62 per share in 2027.
If the TSX stock is priced at 13 times forward earnings, which is reasonable, it should gain 10% over the next 18 months. After adjusting for dividends, cumulative returns could be closer to 16%. The REIT is also projected to grow its annual dividend per share from $3.30 in 2025 to $3.61 in 2027.
