The Canadian housing price index has increased steadily at a 10-year CAGR of 5.7%, largely beating out the 2.1% 10-year CAGR for the TSX Composite, and the 4.9% 10-year CAGR for the S&P 500. Investors wishing to participate in this real estate rally should exercise caution, though, especially with Real Estate Investment Trusts (REITs) that include the ones on our list today.
Alex Cutulenco | September 16, 2015: A quick look at the Canadian housing price index (Figure 1) shows an ‘up and to the right’ trend. Measured as the price change for repeat sales of single-family homes, the index rose 1.0% in August, reaching another all-time high. The index has increasedsteadily at a 10-year CAGR of 5.7%, largely beating out the 2.1% 10-year CAGR for the TSX Composite, and the 4.9% 10-year CAGR for the S&P500. Intuitively, one should question such a large gain over this timeframe and maybe hold off on a house purchase before doing extensive due diligence.
Figure 1: Teranet – National Bank House Price Index
Source: Teranet, National Bank of Canada
The trend is revealing that only Vancouver, Toronto, and Hamilton are at a peak, while other areas are experiencing slowing demands, specifically Quebec, Edmonton, and Montreal with 0.5%, 0.4% and 0.3% respective declines during the past month. Vancouver has, by far, the fastest growth in real estate, with 92.5% cumulative growth over a 10-year time span, as seen from Figure 2.
Figure 2: Large demand in the Canada’s most prominent markets
Real Estate Investment Trusts (REITs) have become a popular way for investors to play Canada’s real estate market, however those interested in commercial REITs may want to exercise caution before entering the names on our list.
Chartwell Retirement Residences (TSX: CSH.UN) – $12.12
Residential REITs
Chartwell Retirement Residences is an open-ended real estate trust. The Company indirectly owns and manages a portfolio of seniors housing communities from independent supportive living communities, through assisted living communities, to long-term care communities, all of which are located in Canada and the United States. The Company operates in three segments: Canadian Retirement Operations, Canadian Long-Term Care Operations and United States Operations. Chartwell generates revenues through categories including resident, management and other fees and lease revenue from joint ventures.
Market Cap: $2,117,237,643
P/AFFO: 16.5x
P/NAV: 2.8x
Payout Ratio: 73.2%
Allied Properties Real Estate Investment Trust (TSX: AP.UN) – $34.71
Commercial REITs
Allied Properties Real Estate Investment Trust (REIT) is a Canada-based, closed-end real estate investment trust. The Company operates in three geographical locations, which includes Eastern Canada (Montreal, Quebec City and Ottawa), Central Canada (Toronto and Kitchener), and Western Canada (Winnipeg, Calgary, Edmonton, Vancouver and Victoria). Allied’s holdings include four Toronto properties (134 Peter Street and 364 Richmond Street West, 460 King Street West and a 50% interest in 491 College Street), one Kitchener property (50% interest in The Breithaupt Block), one Montreal property (5445 de Gaspe Avenue), one Winnipeg property (138 Portage Avenue East) and one Calgary property (an 1/3 interest in 100 and 114-7th Avenue S.W.).
Market Cap: $2,658,885,719
P/AFFO: 20.4x
P/NAV: 1.1x
Payout Ratio: 77.3%
CT Real Estate Investment Trust (TSX: CRT.UN) – $12.17
Commercial REITs
CT Real Estate Investment Trust is an unincorporated, closed end real estate investment trust. The Company is engaged in the ownership and operation of commercial properties primarily located in Canada. Its portfolio comprises over 278 properties totaling more than 20 million square feet of gross leasable area (GLA), consisting primarily of retail properties located across Canada. CT’s properties portfolio comprises standalone; multi-tenant properties; distribution centers, and development properties located in Whitehorse, Castlega, Langley, Penticton, Athabasca, Saskatoon, Alexandria, Melfort, Yorkton, Steinbach and Edmonton, among others.
Market Cap: $1,088,699,387
P/AFFO: 8.2x
P/NAV: 1.1x
Payout Ratio: 44.2%
