April 20, 2014

Whiterock Real Estate Investment Trust (WRK)

The Whiterock Real Estate Investment Trust (WRK) is a Canadian REIT that is focused primarily on building a portfolio of assets within the Greater Toronto Area (GTA).  They have established themselves as a lead player within the region, and have steadily acquired high-quality office space, retail properties, and industrial holdings.  While Whiterock does own some properties across eight Canadian provinces, and a couple of American states, they are concentrated within the GTA, and the majority of their 78 properties are located there.  Over the last couple of years their major acquisitions have all been within the Southern Ontario region.  Like all Canadian REITs, Whiterock (WRK) aims to return value to their unit holders by owning and operating profitable real estate properties and using the beneficial tax structure as an income trust to efficiently distribute profits on a monthly basis.  The main feature that separates Whiterock from other REITs on the market, is its concentration within the Toronto market.  Although they are diversified real estate investment trust by definition, the majority of their capital expenditures has been aimed at high-quality office, industrial and retail properties that are in close proximity to Toronto.

 

The most recent news for Whiterock (WRK) was their recent purchase of a large office complex located near the Pearson International Airport.  The two-tower property cost the fund approximately $32 million.  In addition to the acquisition, Whiterock was able to refinance much of their mortgage costs for their new property, and other holdings, at much more beneficial rates.  Jason Underwood, the Chief Executive Officer of Whiterock (WRK) cheerily stated that, “We are especially pleased that this property, strategically located in close proximity to our existing Airway Centre property, adds to our growing market share in the GTA West/Pearson Airport corridor.  We continue to successfully execute on our disciplined and accretive growth strategy, building long-term value for our unitholders.”  The property is roughly 171,000 square feet, located on 4.6 acres, with 533 parking spaces.  It is already 95% leased, with solid long-term agreements in place for the majority of tenants.

 

The other major acquisition for the Trust was a Sobeys-anchored shopping centre in Tillsonburg, Ontario (about 50 km SE of London) for about $7.7 million.  The property is 8.7 acres, and the centre consists of just over 47,000 square feet.  The property is 100% leased, with around 90% of the available retail space being rented by Sobeys, which has a remaining lease of 12 years.  Mr. Underwood claimed that, “The acquisition of the Sobeys long-term leased shopping centre is consistent with our goal of acquiring high-quality, stable, and secure long-term rental cash flows.”

 

If you believe that manufacturing and business hub of Canada will continue to see growth and prosperity, then the Whiterock Real Estate Investment Trust (WRK) is a great way to invest in this trend.  The Trust currently has a great yield of 8.8%, and they have been aggressive on the acquisition front.  Personally, I’m not sure I want to take a large position in a REIT that is so focused on one area.  Especially when it has been speculated throughout the industry that the GTA maybe in for a bit of a real estate pullback after decades of inflation.

TransGlobe Apartment Real Investment Trust (TGA-U)

The TransGlobe Apartment Real Investment Trust (TGA-U) is perhaps the most profitable of all the residential-based income trusts in Canada.  If you are unfamiliar with the difference between an income trust and a corporation, the main distinction is that a corporation has to pay a business tax on the money it makes before either taking that money and re-investing it in the company, or paying it out shareholders in the form dividends.  Income trusts on the other hand, get to distribute their profits before they pay any taxes.  This allows owners (called unit holders as opposed to shareholders) to enjoy much higher yields than the vast majority of corporations could ever dream of offering.  As of January 1st, 2011, real estate is the only sector within Canada that is allowed to take advantage of these tax rules, and TransGlobe has definitely used these rules to their boost their returns.

 

TransGlobe (TGA-U) now owns almost 22,000 residential suites across Canada, spread out across about 150 properties.  They are very geographically diversified, and are very focused on finding the best deals in the residential market.  Their portfolio contains high-quality apartments and townhouses that are located in high-demand urban centres.  They are primarily based out of Alberta, Ontario, Quebec, New Brunswick and Nova Scotia.  TransGlobe’s growth strategy revolves around expanding their footprint in markets where they have already established a proverbial beachhead.  By acquiring properties where a management and administrative infrastructure is already in place, TransGlobe (TGA-U) can maximize profits and value for unit holders.

 

A good recent example of the execution of this growth strategy is the Sept.16, 2011 acquisition of 23 apartment properties in Eastern Canada totalling almost 1300 suites.  The holdings are located in and around the regional hubs of Dartmouth, Halifax, Moncton, and Fredericton.  These purchases were the perfect addition to the existing properties the trust already owns in the area.  Transglobe paid approximately $65 million for the portfolio of properties.  Kelly Hanczyk, the CEO of TransGlobe (TGA-U), commented, “We are pleased to be strengthening our presence in Nova Scotia and New Brunswick; strong rental markets with solid upside potential… We expect to generate strong increases in cash flow over time as we benefit from the significant operating synergies available by consolidating this new portfolio into our existing and highly effective property management infrastructure.

 

When it comes to comparing Canadian REITs, the most important comparison point is the dividend yield because of the appeal as an income-producing investment vehicle.  While TransGlobe (TGA-U) will likely see its share of capital appreciation, there is little doubt that its most attractive feature is its extraordinary 6.8% dividend yield.  It is currently trading at around $11 per share and has shown little volatility over the last few years.  The market capitalization of the trust is just over $400 million.  There is no news on the horizon about the Canadian government changing its stance towards the advantageous tax treatment of REITs, so I would argue that this competitive advantage should mean stable monthly dividend checks for the foreseeable future.  Instead of purchasing a single revenue-producing real estate property, why not invest your real estate-exposure dollars in the hottest urban markets across all of Canada?

Temple Real Estate Investment Trust (TR)

The Temple Real Estate Investment Trust (TR) is a REIT that is focused exclusively on buying hotel properties across Canada.  Temple REIT has three main objectives: to generate stable and growing cash distributions on a tax-efficient basis (like all REITs), to enhance the value of assets and maximize long-term unit value through the active management of its assets, and to expand the asset base and increase distributable income through the acquisition of additional properties.  Temple REIT (TR) is still a fairly young trust.  It began publically trading on the Toronto Stock Exchange on October 3, 2006.  The first property the trust purchased was the Temple Gardens Mineral Spa in Moose Jaw, Saskatchewan (connected to Casino Moose Jaw).  It is a full-service hotel and spa. As of December 31, 2008 the REIT had nine hotel properties (1,170 total rooms) and currently has a fairly small market capitalization of just under $59 million.  The total assets under management of the trust stand at over $200 million.

 

What investing in Temple REIT (TR) really amounts to right now, is an interesting bet on the Fort McMurray oil fields.  The REIT has basically cornered the market on this oil boom town in Northern Alberta.  In the relatively small city, Temple owns five hotel properties that offer a total of 500 rooms.  While this is a potentially lucrative market to corner (the city had the highest household income in Canada last year – by far), it is also a somewhat risky investment because of the all the extraneous threats beyond what Temple REIT (TR) can control.  For example, if the price of oil goes way down (which it has been thanks to new fracking technology and a worldwide economic slump), then Fort McMurray would be hugely affected thanks to its one-industry reliance on oil and natural gas.  On the other hand, the amount of money that passes through “Fort Mac” as it is affectionately known, make those properties worth a substantial amount of money at the moment.

 

Temple REIT does have some high-scale holdings outside of Fort McMurray, including their most recent acquisition of a 218-room hotel and conference centre in Red Deer, Alberta.  Management has labelled this venture as an excellent opportunity to invest money in the property and substantially increase its earning potential.  The trust also owns the Chateau Nova in Yellowknife, Northwest Territories.  This is a unique property, with a true Northern flavour, as it includes Papa Jim’s Roadhouse restaurant, a full service lounge, spa services, conference rooms, and a fitness centre.  Temple REIT (TR) also owns the Best Western in Lloydminster, Alberta.

 

This REIT is a very interesting niche real estate play.  Their heavy focus in Fort McMurray literally means the trust could boom or bust.  I like their strategy of targeting small cities in secondary markets where there is much less competition.  The small market capitalization scares me a little though from a stability perspective.  Temple REIT (TR) closed at $4.55, and that is very close to its 52-week high.  It currently has a dividend ratio of 9%.  There is definitely a part of me that wonders if this trust wouldn’t make a great acquisition target for some of the larger Canadian REITs out there.  If that were to happen, it might leave unitholders in an enviable position.

 

Scott’s Real Estate Investment Trust (SRQ)

The Scott’s Real Estate Investment Trust (SRQ) is perhaps the best kept secret in the Canadian REIT market.  It is currently offering an astounding dividend yield of 13.4% (when you compare this to the returns on bonds right now, the realization of just how substantial this return on investment is, starts to sink in).  Scott’s REIT has achieved success by dominating a unique niche within the Canadian landlord sector.  The trust specializes in small-box retail properties that often have 1-4 tenants.  Scott’s REIT (SRQ) is still fairly small in terms of market capitalization (just over $44 million), but it does have over $270 million worth of assets and its growth record has been outstanding.  Acquisitions remain a top priority as the REIT seeks to grow its unique brand.  As a side note, Scott’s REIT (SRQ) also has the most unique motto among the ones I have analyzed.  It states, “For Scott’s REIT and our unitholders, small-box means BIG returns.”

 

Scott’s REIT has some notable achievements for a trust that has limited assets compared to those of many of its competitors.  Their management has distinguished themselves as far as finding a real estate development model that is extremely sound and profitable.  The trust boasts an occupancy rate of almost 96% and a high return of capital ratio.  Unlike many REITs that are heavily focused in a certain geographic region, Scott’s REIT (SRQ) is located in eight provinces across Canada.  The REIT has attracted many well-known and profitable brands to their banner, including KFC, Taco Bell, Shoppers Drug mart, Rexall Pharma, Laurentian Bank, Tim Hortons, Staples and Subway.  Management estimates that approximately 88% of their properties are located in “desirable primary and secondary markets.”  Their real estate niche has a solid base of tenants in a variety of industries including banks, pharmacies, retail, and restaurants.  This format appears to be very profitable and Scott’s REIT (SRQ) is the only business I have found that concentrates exclusively on this market.

 

The most recent news concerning the real estate investment trust is acquisition of nine retail properties from subsidiaries of the Shoppers Drug Mart Corporation (SC).  The $33 million price tag makes it the largest single transaction is the history of the trust and it represents a solid ongoing relationship with the retail drug store giant.  The acquisition sees the REIT expand by almost 150,000 square feet.  The properties are located in Ontario and Saskatchewan and will all be immediately leased out as Shopper Drug Mart locations.  John Bitoye, the CEO of Scott’s REIT stated, “These retail properties – tenanted by Canada’s popular health, beauty and convenience retailer – are a fantastic addition to our portfolio as we further diversify our tenant base and provide maximum value to our unitholders.”

 

Scott’s REIT (SRQ) is currently listed at $6.35-per share.  This is approximately right in the middle of its 52-week trading range.  I really like the uniqueness of their business model, and I think the trust represents a great way to diversify away from the mega-retail REITs that are currently ruling the Canadian scene.  Even if that lofty dividend ratio is unsustainable, it has plenty of room to scale back and still be extremely competitive.

 

The Retrocom Mid-Market Real Estate Investment Trust (RMM)

The Retrocom Mid-Market Real Estate Investment Trust (RMM) is a medium-sized REIT with some great growth prospects.  The company is focused almost exclusively in the retail sector in terms of gross revenue (their top 20 tenants – mostly “big box” retailers – represented over 40% of revenues in 2010).  One of their key goals is to become geographically diversified across Canada.  As of right now, the Trust owns 34 retail properties that are spread out amongst eight provinces and the Yukon Territory.  The Trust puts major emphasis on the point that Canada is so large, that if economic troubles hit one region, there are always other regions to take up the slack.  Retrocom has almost 5.5 million square feet of leasable area, and an 85.2% occupancy rate.  Along with their retail holdings, they do have 836 individual tenancies, but their recent acquisitions don’t suggest they are looking to get further exposure to the residential sector.  Retrocom Reit (RMM) was created in December of 2003.  The Trust’s initial purchases (after a $110 million IPO) were 26 retail, 1 office, 2 light-industrial properties.

 

Retrocom (RMM) did not always perform up to their current standards.  After going public, the Trust had to cut it’s distributions by 20%.  This was not popular with investors, especially considering the preferential tax treatment that real estate investment trusts receive within Canada and the solid overall economy performance at the time.  This turmoil led the Trust to conduct a strategic review that led to several executives being let go and a complete focus on profit-intensive retail properties.  In 2006 Retrocom (RMM) sold 38% of its shares to a developer named SmartCentres that specializes in landlord deals with notable retailers such as Zellers and Wal-Mart. “[SmartCentres partnership] represents the beginning of a long-term strategic relationship, which as only more recently served as the catalyst for Retrocom REIT’s transformation,” stated Neil Downey, an analyst for RBC.  He went on to add, “Interestingly, the ties between the two firms were strengthened further in August 2010, as Retrocom moved its head office to SmartCentres’ building in Vaughn, Ontario.”

 

In a recent Globe and Mail report, it was speculated that the Trust is in a great position to capitalize on several big box retailers moving to cities across Canada.  Retrocom’s (RMM) units are up 15% in 2011, and are 60% higher than they were in 2010.  The Fund hopes to see an immediate boost as eight of their properties are anchored by Zellers stores that will soon be converted into the iconic American giant – Target.  Mr. Downey’s analysis of this change was, “Should Target choose to assume a large percentage of these leases, the prospects for increase/higher quality cash flow would be a potential catalyst behind a higher unit price.”  Clearly the new partnership with SmartCentres has paid off for the formerly troubled REIT.  The future now looks bright for Retrocom REIT (RMM) both in terms of its substantial yield of 9.2%, and its growth prospects going forward.  The company is trading at about $4.75 per-unit on the TSX right now, with a market capitalization of $162 million.

 

RioCan Real Estate Investment Trust (REI)

RioCan Real Estate Investment Trust (REI) is the largest real estate investment trust (REIT) in Canada.  It has a total capitalization of over $11 billion and owns 305 retail properties that add up to a massive 73 million square feet of leasable space.  The REIT is primarily focused on acquiring and maximizing the value of large retail shopping centres that have well-known anchor tenants.  They are the largest owner of retail properties in Canada.  RioCan REIT (REI) is also a great way for Canadian investors to get exposure to the US real estate market.  This is due to the fact that RioCan has invested in several shopping centres (35 at last count) within the dense American Northeast.  In addition to their directly purchased properties in the USA, RioCan REIT (REI) also has bought a 14% interest in Cedar Shopping Centers, Inc., which is an American REIT that is focuses on the sector of supermarket-anchored retail centres, and drugstores on the Northeastern seaboard.  These American holdings are fairly unique amongst Canadian REITs.  RioCan is proud to boast great tenancy rates across its many properties, and its average rate is 97.5%.

 

RioCan REIT (REI) works with nearly all the major brands and retailers in North America.  Its biggest tenants in terms of revenues are Famous Players/Cineplex/Galaxy Cinemas, Wal-Mart, Metro, Canadian Tire/Mark’s Work Warehouse, Winners/Marshalls, Loblaws, Staples/Business Depot, Target Corporation (with several new Canadian locations, Harvey’s/Swiss Chalet/Kelsey’s/Montana’s, and Reitmans/Penningtons/Addition-Ellie/Thyme Maternity.  With great companies like these anchoring their retail properties, RioCan has a proven ability to create solid business partnerships.  These connections ultimately mean improving value for unitholders, and more attractive climates for potential tenants across Canada.

 

The most recent news out of RioCan REIT’s (REI) headquarters is the fact that the trust has become Target Corporations largest Canadian partner since the conglomerate announced last week it will be expanding into 105 Canadian locations over the next two years.  TD analyst Sam Dimiani stated he believed the transaction was a positive one when he wrote, “All in all, we believe RioCan negotiated a reasonable and attractive deal with Target.”  The Minnesota-based retailer will be taking over 21 of RioCan’s 34 Zellers locations over this initial expansion period.  More extensive expansion maybe forthcoming and RioCan (REI) has already begun talks concerning another five possible locations.  The deal is a major sign of strength to unitholders, and guarantees an enviable business partner for the next 10 years.  Target has already expressed interests in improving many of the properties are their own cost, which is a great bonus for the REIT.

 

RioCan (REI) has such an attractive portfolio of properties it is tough to find fault with the trust.  It’s current price of $25-per share is a little high, and its average (relative to its competition in the Canadian Real Estate Investment Trust Sector) dividend yield of 5.5% leaves much to be desired.  That being said, an investment opportunity that is this stable, diversified, and has this strong management track record, is never a bad purchase.

Canadian Real Estate Investment Trust (REF)

The Canadian Real Estate Investment Trust (REF) or CREIT owns more than 160 properties across Canada.  Together, they total over 22 million square feet of retail space, split up among three main asset classes (retail, commercial, and residential).  CREIT’s core strategy is to acquire properties that are located near major urban centres.  This allows them to team up with ideal tenants, keep high occupancy rates, and enjoy a consistent stream of rental income.  One of the most unique parts about the Canadian Real Estate Investment Trust (REF) is that they are the oldest REIT in Canada (they began listing on the Toronto Stock Exchange in September 1993).  This long-term experience is something none of their competitors can match.

 

CREIT just announced the recent purchase of a large new portfolio of industrial properties in the Mississauga, Ontario area.  The package contains seventeen single-tenant buildings, and two-multi tenant buildings that are primarily used for warehousing and other industrial needs.  Together, the properties give CREIT (REF) over 700,000 square feet in additional space, on over 36 acres of land.  The new holdings are close to the Pearson International Airport, in a strong industrial zone.  The properties had been marketed as part of a larger bundle, but CREIT was able to arrange for a partner that offered to take the properties that did not fit with the trust’s overall strategy.  After all the financial negotiations took place, the 19 properties cost CREIT (REF) approximately $57.5 million.  “This is a natural addition to CREIT’s industrial portfolio in the Greater Toronto area.  These properties are well-located within the strong Mississauga industrial market.  The current occupancy is 99.6% and the acquisition cost is well below the current replacement cost.  This portfolio should deliver a reliable and growing rental income stream over a long-term investment horizon,” stated Adam Paul, the Vice President of Investments for CREIT (REF).

 

The recent news was not all good for the Canadian Real Estate Investment Trust.  Their balance sheet revealed a 30% loss of profits over the third quarter.  Earnings went from just over $30 million earlier in the year, to $21.5 million over the three months ending September 30.  The President and CEO of CREIT (REF), Stephen Johnson, sought to shore up investors’ fears by stating that he was, “Very satisfied,” with the company’s third quarter.  He went onto state that, “We have a strong balance sheet with significant liquidity and we continue to generate and retain meaningful cash flow from operations,” as well as, “We are actively looking to acquire, at appropriate pricing, high-quality real estate assets to add to our portfolio.”

 

While the Canadian Real Estate Investment Trust does offer a substantial track record, I have a tough time recommending a REIT that is currently paying out unit-holders at a dividend rate of 4.10% when many of its competitors are over double this figure.  The most recent news of a substantial earnings drop also leaves me with several real questions.

 

Primaris Retail Real Estate Investment Trust (PMZ)

The Primaris Retail Real Estate Investment Trust (PMZ), is much like a smaller version of its main competitors RioCan REIT (REI) and Calloway REIT (CWT).  Although, with a market capitalization of almost $1.7 billion, most people would not call the Canadian landlord “small.”  The REIT has done a great job of buying up assets across several Canadian regions.  The trust currently has 44% of its holdings located in Ontario, 13% in Quebec, 1% in New Brunswick, 14% in British Columbia, 16% in Alberta, 9% in Saskatchewan, and 3% in Manitoba.  This diversity is ideal for Canadian REITs because each region of Canada depends on vastly different economic models, and industries to survive.  This can mean titanic shifts in real estate values in some markets, while stagnation in others.  By developing properties right across the country the REIT guarantees itself exposure to all of these markets, and that bodes well for stability.  Primaris REIT’s (PMZ) biggest tenants are Hudson’s Bay Company, Sears, Target, Shoppers Drug Mart, Forzani, Canadian Tire, Bell Canada, and Loblaws.  This tenant list shows a strong retail pull for the REIT’s major properties.  It is also appealing to investors who are looking to park their money in safe investments right now.

 

The most recent news from Primaris REIT (PMZ) is that it was solidifying its position in Canada’s most competitive real estate markets this week with a major acquisition.  The REIT purchased five retail properties from Ivanhoe Cambridge last week.  The portfolio of properties is located in the Montreal and Greater Toronto Area regions.  The two most notable assets to change hands were Oakville Place, and Burlington Mall.  The price tag on the five properties was a hefty $572 million.  Together, they added 2.5 million square feet of leasable space to Primaris.  The deal was done with an average capitalization rate of 6.35%.

 

Primaris REIT (PMZ) also offers investors an attractive dividend reinvestment plan (DRIP).  The basic premise behind this financial tool is that unitholders can choose to automatically have their cash distributions (dividends) used to buy more units of the REIT.  Investors that show this much confidence in Primaris will be entitled to a 3% discount off of the current market price.  This is a great way to avoid those pesky brokerage commissions that can eat into returns.  Only Canadian residents can take advantage of this DRIP offer.

 

Primaris REIT (PMZ) is a fine investment.  It is currently trading near $21-per unit and this is near its 52-week high.  It has been a very stable REIT, with a 52-week low of only $18.27.  Its annual dividend is $1.22, giving it a dividend yield of 5.9%.  While I think investors will do fine with Primaris, I think there are better REIT opportunities on the market, and if you’re looking for a retail-specific REIT, RioCan (REI) would likely be my first choice.

 

 

NorthWest Healthcare Properties Real Estate Investment Trust (NWH)

The NorthWest Healthcare Properties Real Estate Investment Trust (NWH) first went public on March 25, 2010.  It fills an interesting niche within the Canadian REIT market.  The trust is made up properties in the medical office building and healthcare real estate sector.  Its holdings number over 55 properties, which make it the largest non-government Canadian owner in this sector.  The leasable space owned by the REIT totals 3.9 million square feet.  The board behind the NorthWest Healthcare Properties Real Estate Investment Trust (NWH) has an extensive background in healthcare properties, and their goal is to apply this expertise in dominating a sector that has typically been owned by smaller, private investors.  Their interests are well aligned with those of the unit holders since they own approximately 30% of the REIT.  NWH REIT is pretty well diversified, serving over 1,300 tenants across six provinces.  The main focus of the trust is in Calgary, Edmonton, Toronto, Montreal, Quebec City, and Halifax.  The total assets of the NorthWest Healthcare Properties REIT (NWH) total around $900 million.

 

The most recent acquisition by the REIT was the purchase of Canamera Medical Centre located in Cambridge, Ontario.  The Centre is a large, 82,500 square foot medical office complex and was recently constructed.  It is already fully leased to several different healthcare related business including Family Health team, a large dentist group, several doctors, an orthodontics clinic, a pharmacy, a diagnostic imaging clinic, and a laboratory.  The price of the acquisition came in at around $15 million.  Strategically, this purchase helps cement the NorthWest Healthcare REIT (NWH) as a force within the sector and province of Ontario where the REIT now owns 23 properties.  The trust also finished up the paperwork on its main summer acquisitions of the Hys Centre and Tawa Centre in Edmonton (taking advantage of great interest rates within the province).

 

The core long-term strategy of the NorthWest Healthcare REIT is a solid one.  It is built on the premise that an aging population, that will live longer than any before it, will be in greater need of medical services than ever before.  There is no-doubting that the key demographics support the strategy that this REIT (NWH) is pursuing.  By grouping their properties near major service centres, there is a strong possibility that the trust could come to control a large market share within the niche, and profitability could grow exponentially.  Given the expertise and experience in evidence concerning the makeup of the board, I think that lease rates will stay extremely high among all of their conservatively managed holdings.  Right now NWT is trading at about $11.36-per unit, with a 52-week high of $12.51, and a 52-week low of $10.80.  It has a fairly small market capitalization of around $400 million (not surprising given how new the REIT is).  The current annual dividend of $.80 gives the REIT a respectable dividend ratio of 7.10%.  The NorthWest Healthcare REIT (NWH) is also proud to announce their new Distribution Reinvestment Plan (DRIP which allows unit holders to automatically reinvest their dividends into the REIT at a 3% discount.  This is an effective way of growing a large position, and eliminates costly brokerage fees.

Northern Property Real Estate Investment Trust (NPR-U)

The Northern Property Real Estate Investment Trust (NPR-U) is a trust that has a unique focus on Northern and rural real estate.  It was started in 2002, and has grown to a net asset value of almost a billion dollars.  They have large residential holdings in Alberta, a growing presence in British Columbia, and they are my far the biggest landlord in the Northwest Territories, Nunavut, and Newfoundland.  While the majority of the NPR’s assets are in various residential units (multi-family, senior’s housing, furnished luxury suites etc.) they have acquired some commercial properties with an eye towards maximizing profit margins by looking at government employees all over Canada’s vast North.

 

The Northern Property Real Estate Investment Trust (NPR-U) or “NPRREIT” is a unique product among Canadian REITs.  Whereas most REITs, and really anyone in real estate to any large extent, concentrate on high population centers, NPRREIT has decided to focus on rural areas.  In its own way, it might be one of the most diversified REITs out there because it has so many different properties all over Canada.  Northern is definitely joined at the hip with Canada’s various commodity sectors.  One of its main strategies is to buy property with a large potential for future growth based on a natural resource (oil, natural gas, copper, timber, etc.) that is found there.  When you factor in the high demand for decent housing that highly-paid government employees often bring to small rural towns, there is often a fairly affluent client base, with a lot of excess income due to the lack of expensive recreational pursuits.  Northern Property REIT (NRP-U) is able to cash in on these circumstances in large part because there is little competition for them.  When you compare that business model to the intense urban competition most trusts deal with, it is an interesting way to diversity your real estate holdings.

 

NPR lists its main objectives as:

 

1) To acquire residential properties with longer term leases to governments and larger corporations.

2) To provide unit holders with consistent, growing equity, value, increased liquidity, and monthly distributions on a tax efficient basis.

3) To operate our properties, and seek out new markets for growth.

4) To acquire energy efficient, low maintenance, quality properties.

 

I really like the clear focus that Northern Property REIT (NPR-U) has on competitive advantages within its market.  Long term leases involving government and large corporations bode well for a stable cash flow.  Its most recent acquisitions were a diverse set of purchases in residential units from Nanaimo, BC, Iqaluit, Nunavut, and Jasper, Alberta.  The REIT is trading close to $30 a unit right now, with a 52-week low of $25 and a high of $31.50.  It has a very attractive price-to-earnings ratio of 11.35, and its annual dividend (distributed monthly) is $1.53, giving the trust a yield of 5.2%.