4 Top-Performing Canadian REITs with the Best AFFO Growth

The TSX-listed REITs on our list have the highest forward AFFO growth rates among Canada-listed peers and have AFFO payout ratios under 90%, meaning they have room to increase distributions to unitholders

SmallCapPower | December 18, 2019: A common metric used by investors to measure a REIT’s performance and dividend-paying capacity is Adjusted Funds from Operations (AFFO). REITs with high AFFO growth rates are attractive because it means that they are generating more cash from rental properties, which can be used to increase distributions to unitholders. Today we have identified four REITs that have the highest forward AFFO growth rates and AFFO payout ratios below 90%, meaning that there is room for a potential increase in distributions to unitholders. For reference, the average ‘F18 to ‘F21 AFFO annualized growth rate of our sample of 25 TSX-listed REITs is 5.2%.

*Share price data as at December 13, 2019, data obtained from S&P Capital IQ
**Forward AFFO data based on median consensus estimates provided by S&P Capital IQ
*** AFFO = net income + depreciation – gains on asset sales – maintenance capex – straight line rents

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Boardwalk Real Estate Investment Trust (TSX:BEI.UN) – $45.62
REITs

Boardwalk Real Estate Investment Trust is a Canada-based REIT. The Company acquires and manages multi-family residential projects primarily throughout western Canada. Boardwalk REIT owns and operates more than 200 communities with over 33,000 residential units totaling over 28 million net rentable sq. ft. Boardwalk aims to provide unitholders with sustainable monthly cash distributions and increase the value of its trust units through selective acquisitions, dispositions, development, and effective management of its residential multi-family communities.

  • Market Cap: $2,119.0M
  • YTD-Return: +21.3%
  • 90-Day Average Trading Volume: 149,140
  • F2018A AFFO/Share: $1.71
  • F2021E AFFO/Share: $2.41
  • AFFO/Share ‘F18 -‘F21 CAGR: +12.1%
  • F2021E AFFO Payout Ratio: +46.3%

InterRent Real Estate Investment Trust (TSX:IIP.UN) – $15.38
REITs

InterRent REIT is a growth-oriented real estate investment trust that focuses on investing in multi-family residential properties across Canada. InterRent owns 50 properties in Ontario and Quebec that comprise 8,600 units. InterRent’s strategy is to expand its portfolio primarily within markets that have exhibited stable market vacancies, sufficient suites available to attain the critical mass necessary to implement an efficient portfolio management structure and, offer opportunities for accretive acquisitions.

  • Market Cap: $1,865.0M
  • YTD-Return: +17.4%
  • 90-Day Average Trading Volume: 334,840
  • F2018A AFFO/Share: $0.38
  • F2021E AFFO/Share: $0.52
  • AFFO/Share ‘F18 -‘F21 CAGR:+11.0%
  • F2021E AFFO Payout Ratio: +61.7%

Granite Real Estate Investment Trust (TSX:GRT.UN) – $66.44
REITs

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. On November 5, Granite Real Estate Investment Trust announced its results for Q3/19. These results featured total revenue of $68.8M, a 2% increase from the previous quarter. The Company also posted net income of $114.5M, an increase of 16% from the previous quarter.

  • Market Cap: $3,591.3M
  • YTD-Return: +25.2%
  • 90-Day Average Trading Volume: 161,160
  • F2018A AFFO/Share: $2.98
  • F2021E AFFO/Share: $3.77
  • AFFO/Share ‘F18 -‘F21 CAGR: +8.2%
  • F2021E AFFO Payout Ratio: +78.4%

Summit Industrial Income REIT (TSX:SMU.UN) – $12.03
REITs

Summit Industrial focuses on operating in the light industrial sector of the Canadian real estate industry. For reference, light industrial properties are typically one-story properties that are located in or close to major cities. Examples of the type of tenants that lease its properties are warehousing and storage, light assembly and shipping, call centres and technical support, professional services and various other similar uses. The Company has 108 industrial properties with 13.6 million sq. ft of gross leasable area and an occupancy rate of 99.4%.

  • Market Cap: $1,647.0M
  • YTD-Return: +26.7%
  • 90-Day Average Trading Volume: 401,730
  • F2018A AFFO/Share: $0.50
  • F2021E AFFO/Share: $0.63
  • AFFO/Share ‘F18 -‘F21 CAGR: +8.0%
  • F2021E AFFO Payout Ratio: +89.6%

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

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