Canadian Apartment Properties, or CAPREIT, is a growth-oriented investment trust. The REIT invests in residential properties, including apartment buildings, townhouses and land lease communities located in close proximity to major urban cities across Canada. It is the largest Canadian REIT by market capitalization value.
As Canada’s largest multi-family residential REIT, Canadian Apartment owns interests in more than 51,000 residential units, comprising 44,000+ residential suites and 32 manufactured home communities. It also has land lease sites located near major urban areas across Canada and The Netherlands. Canadian Apartment has a good mix of properties across affordable, mid-tier and luxury sectors which offer diversification of income. CAPREIT is best known for its quality portfolio.
By geography, Ontario accounts for 51% of the company’s total NOI, followed by Quebec (17.7%) and British Columbia (11.9%), Alberta (4.9%), etc. The REIT is in a good position to capitalize on strong rental growth with an average monthly rent of $1,078 and an occupancy rate of 99%.Investment Data
- Opportunity Score: 63
- Ticker: TSE:CAR.UN
- Sector: Real Estate
- Industry: REIT - Residential
- Market Cap: 8.66B
- P/E: 6.52
- Dividend Yield: 2.55
- Dividend Payout Ratio: 16.49
- FFO Payout Ratio: Dividend Snapshot Members Only
- FCF Payout Ratio: Dividend Snapshot Members Only
- Chowder Score: Dividend Snapshot Members Only
- Piotroski-F Score: Dividend Snapshot Members Only
- 3, 5, 10-year Revenue Growth: Dividend Snapshot Members Only
- 3, 5, 10-year Dividend Growth: Dividend Snapshot Members Only
Revenue Growth & Market Exposure
CAPREIT’s portfolio of properties is highly diversified by geography and types. It has been increasing its foothold in luxury and mid-tier demographic segments and is also maintaining a solid footing in the manufactured home communities market. These properties add a good diversity to the REIT’s income. The luxury segment provides for higher returns while the home communities market adds to stable and secure income.
With decades of proven experience in the residential rental business, the REIT has developed a deep understanding of its clients’ needs and focuses on providing safe and comfortable homes to its residents. As a result, Canadian Apartment has successfully generated high occupancies with growing monthly rentals. The REIT maintains a strong portfolio occupancy rate of 98.9%. Canadian Apartment benefited from higher rental guidelines in Ontario and British Columbia.
Canadian Apartment is growing organically and through acquisitions. It is focusing on portfolio growth and property developments to modernize its asset base across Canada and Europe. Canadian Apartment deploys a good strategy of strengthening its portfolio through the acquisition of new and modern properties, as well as making accretive developments to existing properties.
Canadian Apartment Properties has increased its ownership in Irish Residential Properties REIT (IRES) to 18% from 15.7% last year. It purchased over 1700 suites and sites in 2018 itself. In addition, Canadian Apartment also sells off older, non-core properties from time-to-time to maintain its portfolio balance. The REIT is also planning to add more than 10,000 rental suites in Vancouver and Toronto over the long term, which are high demand growth areas.
Canadian Apartment Properties successfully grew its normalized FFO by 15.5% last year and has a conservative NFFO payout ratio of 65%. Its annual yield stands at 2.7% and it grew its distributions at 2.9% CAGR over the last five years. CAPREIT most recently raised its distributions by 3.8%.
The REIT has a sound track record of delivering profitable growth and growing cash distributions since 1997 and has made 15 increases over the past 21 years. It has successfully generated solid accretive growth maintaining conservative payout ratios over the years. Stable and predictable cash flows in the form of rental income should support future growth in distributions.
Growth in property portfolio in strategic markets is a key to success for REITs and CAPREIT is at the top of its game currently. It is also investing in innovative technologies to improve the resident experience, enable better market research, enhance its operating platforms, and reduce operating costs. The management believes that annual occupancies can be maintained in the 97%-99% range over the long term and trend of gradual increases to the active monthly rents (AMR) should continue in the future. It also anticipates its NFFO payout ratio to range in between 65% and 75% over the long term.
A REIT strives to provide its unitholders with long-term, stable and predictable monthly cash distributions. Industry leading organic growth rates and investment in property portfolio should support future growth and increasing distributions for Canadian Apartment REIT.
Canadian Apartment REIT competes with the likes of InterRent REIT TSE:IIP.UN, Northview Apartment REIT TSE:NVU.UN, Boardwalk REIT TSE:BEI.UN, Morguard North American Residential REIT TSE:MRG.UN in the residential REIT market. The real estate market in Canada is competitive and Canadian Apartment also competes with other developers, managers, and owners of properties.
|KMP.UN||Killam Apartment REIT||Real Estate||REIT - Residential||75||19.43||1.88||8.73||0.00||2.22||3.40||29.67||12||0.66||4.69||NO||NO||NO||1|
|MRG.UN||Morguard North American Residential REIT||Real Estate||REIT - Residential||69||18.80||0.73||6.55||8.39||2.87||3.61||23.65||12||0.68||5.64||NO||NO||NO||1|
|IIP.UN||InterRent REIT||Real Estate||REIT - Residential||66||15.94||1.93||11.03||0.00||1.44||1.82||20.07||12||0.29||9.07||NO||YES||NO||1|
|CAR.UN||Canadian Apartment Properties REIT||Real Estate||REIT - Residential||63||54.16||8.66||6.52||0.00||8.37||2.55||16.49||12||1.38||4.52||NO||YES||NO||1|
|NVU.UN||Northview Apartment REIT||Real Estate||REIT - Residential||52||28.91||1.99||6.23||9.87||4.64||5.64||35.13||12||1.63||5.64||NO||NO||NO||1|
|BEI.UN||Boardwalk REIT||Real Estate||REIT - Residential||50||43.59||2.22||23.06||16.14||2.82||2.30||35.49||12||1.00||0.00||NO||NO||NO||1|
REITs are an attractive option for income seeking investors as they are required to distribute a large percentage of their earnings as dividends. Canadian Apartments’ focus on the residential real estate market helps it to achieve solid income growth in a portfolio with stable occupancy. It is well positioned to benefit from premium rents because of its presence in lucrative areas. Quality portfolio, strategic locations, and growing monthly rentals should help the REIT continue its distribution streak well within the future.
One of the largest REIT by market capitalization and yet, one of the lowest dividend yielding REIT. However, it is one of the few REIT dividend growers which can help your income keep up with inflation. It is also one of three REIT Canadian Dividend Aristocrat showing at least 5 years of dividend growth. The flip side is that most residential REITs also have a dividend yield on the low end as you can see from the competition.
I do not currently hold REITs as I am not focused solely on income and if I was, this one would be a low income REIT and not matching my retirement filters. So far, I am not sure REITs would make the cut in my portfolio.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.