The TSX-listed Canadian REITs we’ve discovered have a debt-to-asset ratio less 40%, meaning they are more likely to employ non-dilutive debt rather than equity
SmallCapPower | February 24, 2020: Real Estate Investment Trusts need to manage their debt-to-assets to maintain an optimal capital structure. The debt ratio is the portion of a REIT’s assets financed by debt. Total debt includes short- and long-term liabilities, but excludes certain liabilities, such as accounts payable and negative goodwill. When a REIT’s debt-to-asset ratio is lowered it means that the REIT can increase leverage to increase Return on Equity. Today we have picked out four TSX-listed Canadian REITs with low debt-to-asset ratios, which have also seen their unit prices rally year to date.
*Share prices as at February 20, 2020, data obtained from S&P Capital IQ
**The average debt-to-asset ratio, of our sample of 25 TSX-listed REITs is 50%
Dream Office Real Estate Investment Trust (TSX:D.UN) – $35.62
Dream Office REIT is a commercial landlord focused on office properties across primary urban markets in Canada, with a portfolio totaling ~6.1M sq. ft as of Q3/19. The REIT’s largest geographic exposure is the Greater Toronto Area (~89% of portfolio fair value at Q3/19). Dream Office has completed its strategic disposition plan that began in Q1/16 and reduced its overall portfolio size as well as exposure to non-core markets. The REIT’s strategy has since shifted towards intensifications and redevelopments in core markets, particularly the GTA, where it seeks to increase mixed-use density.
- Market Cap: $2,004.5M
- 7-Day Return: +6.7%
- YTD-Return: +17.6%
- 90-Day Average Trading Volume: 142,510
- Debt-to-Assets: 39.5%
Allied Properties Real Estate Investment Trust (TSX:AP.UN) – $60.00
Allied Properties Real Estate Investment Trust is an owner, manager, and developer of distinctive urban workspaces in major cities in Canada. The Company also focuses on network-dense urban data centres in Toronto that form Canada’s hub for global connectivity. Allied Properties announced recently that it had closed a $400M tranche of senior unsecured debt at a 3.17% coupon rate. This follows an announcement of an acquisition of a 700,000 sq. ft Class 1 complex marketed for TAMI (tech, advertising, media and information) users near Montreal at the end of January.
- Market Cap: $7,370.3M
- 7-Day Return: +1.7%
- YTD-Return: +15.4%
- 90-Day Average Trading Volume: 283,330
- Debt-to-Assets: 31.0%
Granite Real Estate Investment Trust (TSX:GRT.UN) – $74.86
Granite Real Estate Investment Trust is a Canada-based REIT engaged in the acquisition, development, ownership, and management of industrial, warehouse, and logistics properties in North America and Europe. As of July, Granite owns over 80 rental income properties, representing ~34M square feet of leasable area.
- Market Cap: $4,046.3M
- 7-Day Return: +1.1%
- YTD-Return: +13.5%
- 90-Day Average Trading Volume: 148,040
- Debt-to-Assets: 31.8%
Canadian Apartment Properties Real Estate Investment Trust
(TSX:CAR.UN) – $59.69
Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) is one of Canada’s largest residential landlords. CAPREIT is a growth-oriented investment trust owning interests in approximately 63,478 suites and sites across Canada, the Netherlands and Ireland. It owns, directly in Canada and indirectly in Netherlands through its investment in European Residential Real Estate Investment Trust (ERES), a total of 59,844 residential units, comprising 48,167 residential suites and 72 manufactured home communities comprising 11,677 sites located in and near urban centers.
- Market Cap: $10,148.2M
- 7-Day Return: +0.9%
- YTD-Return: +11.9%
- 90-Day Average Trading Volume: 512,660
- Debt-to-Assets: 38.6%
Disclosure: Neither the author nor his family own shares in any of the companies mentioned above.
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