3 Canadian REITs For Plummeting Interest Rates

The recent coronavirus-related plunge in global stock markets has created appealing yields for many Canadian REITs

Harvi Sadhra, Hashtag Investing | March 23, 2020 | SmallCapPower: The equity markets are in a downward spiral and are trading near multi-year lows. The coronavirus pandemic has spooked investors as consumer demand is expected to decline considerably over the next two quarters at least.

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This has resulted in a sustained selloff, driving indexes lower by 30%. Governments are stepping in to stimulate the economy and have reduced interest rates to record lows in order to boost demand. So, while stock markets have plunged and bonds generating low yields, is it time to look at alternate asset classes?

One industry that will likely benefit from low interest rates are Real Estate Investment Trusts (REITs). Investing in REITs can help generate a regular stream of income and result in capital appreciation over the long term. REITs need to distribute at least 90% of their net income to shareholders, which make them preferred investments for income investors.

Today we look at three REITs that should be on the radars of Canadian investors.

A grocery-anchored REIT

Currently, the global population is focused on social distancing and self-quarantine methods. They are unlikely to visit malls, shopping centers or restaurants in these turbulent times. However, you need to survive, which means you cannot entirely avoid visiting grocery stores, supermarkets or convenience stores.

Slate Retail REIT (TSX:SRT.UN) is a Canada-based, open-ended real estate investment trust. The REIT focuses on acquiring, owning and leasing a portfolio of diversified revenue-producing commercial real estate properties in the United States, with an emphasis on grocery-anchored retail properties.

Slate owns 76 grocery anchored retail commercial properties located in the United States, comprising over 9.9 million square feet of gross leasable area (GLA). The REIT’s properties are located in approximately 20 states with a presence in over 20 metropolitan statistical areas (MSAs).

The REIT has a high-quality and growing U.S. retail portfolio, providing investors with an exposure to pre-eminent food retailers in the growing economy south of the border. On March 10, 2020, it announced the acquisition of seven properties comprising 623,770 square-feet of GLA.

Slate REIT has an existing occupancy of 92% with leasing upside. It currently owns and operates approximately US$1.3 billion of assets that are located throughout the country. Its diversified portfolio and quality tenant covenants provide a strong basis to continue to grow unitholder distributions and the flexibility to capitalize on opportunities that drive value appreciation.

This REIT has lost over 50% in market value and is trading at a market cap of $260.4 million. This decline has increased Slate’s forward dividend yield to a juicy 9.22%. This means a $10,000 investment in Slate Retail REIT will generate $922 in annual dividend payments.

A healthcare REIT

Similar to grocery, healthcare is an essential expense and this industry is somewhat recession proof. Investors looking for exposure to the healthcare sector should consider NorthWest Healthcare Properties Real Estate Investment Trust (TSX:NWH.UN).

This REIT is a Canada-based, open-ended real estate investment trust. The Company operates a portfolio of healthcare real estate assets, comprised of interests in approximately 149 properties located throughout major markets in Canada, Brazil, Germany, Australia, and New Zealand.

It owns and manages medical office buildings and healthcare facilities from coast to coast, including Calgary, Edmonton, Toronto, Montreal, Quebec City and Halifax. Its properties are a mix of professional office, laboratory, clinical, and pharmaceutical space.

Earlier this year, NWH reached an agreement with a global institutional investor to form a new $3.0 billion joint venture to pursue healthcare real estate acquisitions initially in Germany and the Netherlands with infrastructure-like characteristics including long WALE, triple net leases with inflation linked annual rental growth.

NWH also announced the acquisition of six high-quality private hospitals in the United Kingdom for $167 million. This acquisition presents NWH with a unique opportunity to enter the UK private hospital market by acquiring a high-quality portfolio that is 100% leased by BMI, which is one of the leading private hospital operators in the region, with a portfolio of 52 private hospitals.

These acquisitions are expected drive the REIT’s revenue from $366 million in 2019 to $435 million in 2021, according to consensus estimates. NWH has lost over 48% in market value and is trading at a market cap of $1.06 billion. This decline has increased Northwest’s forward dividend yield to an eye-catching 11.6%. This means a $10,000 investment in NWH REIT will generate $1,160 in annual dividend payments.

Chartwell Retirement Residences

Canada has a rapidly-aging population, which makes Chartwell Retirement Residences (TSX:CSH.UN) REIT a relatively secure bet. The Company is engaged in the ownership, operations and management of retirement and long-term care communities in Canada.

It operates through two segments: Retirement Operations and Long Term Care Operations. The Retirement Operations segment includes approximately 162 communities that it owns and operates in Canada.

The retirement communities provide services to age-qualified residents. The Long Term Care Operations segment includes approximately 24 communities in Ontario. It offers various options, such as independent living, independent supportive living, assisted living, memory living and long-term care.

It offers active living programs, such as LiveNow and Recreation. Its LiveNow programming includes six dimensions of wellness: physical, social, intellectual, emotional, spiritual and vocational pursuits. Recreation includes physical activities and social activities.

This REIT has lost over 56% in market value and is trading at a market cap of $1.46 billion. This decline has increased the stock’s forward dividend yield to a 7.33%. This means a $10,000 investment in Chartwell Retirement Residences will generate $733 in annual dividend payments.

This is a guest contribution by Harvi Sadhra, CEO and Founder of Hashtag Investing. Hashtag Investing is an exclusive community for stock investors to get real-time feedback and to discover compelling stocks and strategies anytime.

Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.

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