1 Canadian REIT I’d Buy if Rate Cuts Return

CAPREIT looks beaten down today, but a rate-cut cycle could help its discount to NAV close quickly.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 30, 9:00 am EDT

| More on: CAR.UN

Key Points

CAPREIT is Canada’s largest apartment REIT, with high occupancy and steady rent growth in an essential housing market.
FFO per unit is still growing and the payout ratio is reasonable, suggesting the distribution is better supported now.
The units trade far below reported NAV, and buybacks signal management believes the market is mis-pricing the assets.

10 stocks we like better than Canadian Apartment Properties Real Estate Investment Trust

Rate cuts can change the story for Canadian REITs quickly. When borrowing costs fall, refinancing becomes less painful, property values can recover, and monthly distributions start looking more attractive again. When that happens, real estate investment trusts (REITs) struggle. Investors could earn decent income from safer fixed-income options, while landlords dealt with higher debt costs. If that pressure starts to ease, apartment REITs could stand out.

the word REIT is an acronym for real estate investment trust — Source: Getty Images

CAR

That’s why Canadian Apartment Properties REIT (TSX:CAR.UN) looks like one of the better REITs to watch. CAPREIT stock is Canada’s largest publicly traded provider of rental housing. It owns apartment suites and townhomes across Canada, with some exposure to the Netherlands. As of March 31, 2026, CAPREIT owned about 45,400 apartment suites and townhomes, excluding roughly 200 suites classified as held for sale. Its portfolio had a fair value of about $14.5 billion, excluding another $100 million of assets held for sale.

Recent news also shows management trying to sharpen the business. In the first quarter of 2026, CAPREIT stock sold properties in Charlottetown and the Netherlands for gross proceeds of $101.4 million. It also agreed to buy the remaining units of European Residential REIT it didn’t already own, with the transaction closing on May 1, 2026, for $98.7 million. That gives CAPREIT more control over its European exposure.

Into earnings

The latest earnings showed a steadier operating business than the headline numbers suggested. In the first quarter of 2026, operating revenue came in at $247.9 million, down from $253.3 million a year earlier. Total net operating income (NOI) slipped to $155 million from $158 million, largely because of dispositions. That doesn’t sound thrilling, but the same-property numbers looked better.

Same-property NOI rose to $146.3 million from $143.6 million. Funds from operations (FFO) per unit increased 1.7% to $0.595 from $0.585. That’s the number I’d focus on. CAPREIT stock managed to grow FFO per unit even as total revenue slipped. Its FFO payout ratio also improved slightly to 65.1%, giving the distribution a reasonable cushion.

Numbers don’t lie

Valuation makes the stock even more interesting. CAPREIT stock reported diluted NAV per unit of $54.79 as of March 31, 2026. Yet the units recently traded around $33! That suggests investors can buy the trust at a steep discount to stated asset value. If rate cuts return and investors regain confidence in REITs, that discount could narrow.

The trust has also been buying back its own units. In the first quarter, it purchased and cancelled about 800,000 trust units at a weighted average price of $36.78, for a total cost of $29 million. The outlook now depends on three things: rental demand, financing costs, and capital allocation. CAPREIT’s Canadian same-property occupancy stood at 97.1% at the end of the first quarter. Same-property occupied average monthly rent rose 2.9% year over year to $1,726 from $1,677. Canadian same-property NOI rose 2%, and the Canadian same-property NOI margin expanded to 62.2%. Those numbers show the core apartment business still has some internal growth.

Foolish takeaway

There are risks, of course. CAPREIT stock reported a headline net loss of $182.5 million in the first quarter, mostly because of fair value losses on investment properties. Leverage also needs watching. Rate cuts may also arrive more slowly than investors hope. Property values could stay under pressure, and rent growth may cool further.

Still, CAPREIT stock has the right ingredients for a rate-cut recovery. It owns essential housing, keeps occupancy high, pays a covered distribution, buys back units below NAV, and trades at a large discount to stated asset value. If rate cuts return, CAPREIT stock looks like one Canadian REIT worth buying before investors warm back up to the sector.