If you're looking to build a fixed-income portfolio, adding Real Estate Investment Trusts (REITs) should be at the top of your list. REITs have a history of being at the top of best-performing asset classes – consistently outperforming even the S&P 500 and most mutual funds. REIT ETFs are an inexpensive way to gain exposure to this lucrative market.
To start investing in REITs, all you need is a brokerage account and to put in the hard work to research the best investment options. If you're not up to the task, you can use a robo advisor instead. There are many robo advisors out there, but only one that consistently outperforms all others: Wealthsimple. With its no-minimum starting investment, highly-rated app, low fees, and open access to financial advisors on-demand, it's no wonder Wealthsimple remains Canada's best robo advisor.
What Are REITs?
Real Estate Investment Trusts (REITs) are funds that invest in real estate by owning, financing, or managing income-generating properties. They can achieve this in two ways, by investing directly in properties and earning recurrent income in the form of rental payments, – or by loaning funds to real estate developers. In this case, the earnings come from interest on these loans.
How Can You Pick A Reit?
Here are three key factors to consider when buying them.
- Good Management: Examine the company's management, track record, and compensation. The manager's ability to select appropriate investments and methods is strongly related to financial success and asset appreciation. It will also be working for your best interests if its payment is based on performance.
- Diversified Investments: You need to make sure it's a well-diversified REIT. You don't want to be heavily invested in just commercial real estate if the occupancy rate of your portfolio is causing problems. Diversification usually implies that the trust has access to capital and has development plans.
- High Earnings: Before investing in it, check out a REIT's funds from operations and cash available for distribution or dividends. They assess its overall success and how much money is sent to investors.
Here are the best real estate investment trusts Canada has to offer.
Best Retail REITs In Canada
#1 SmartCentres REIT (SRU)
|Number of Properties||114 (3,500+ tenants)|
|12 Month Yield||6.0%|
|Leasable Space||35 million sq. feet|
|Assets Under Management||$12 billion|
SmartCentres Real Estate Investment Trust is one of the largest REITs in Canada, with a diversified portfolio of 174 strategically located homes in cities all around the country. SmartCentres has $11.5 billion in assets and owns 3,500 acres of income-producing, value-oriented retail and first-class office space with 97.6 percent occupancy.
SmartCentres is always looking for new retail locations. Currently, Project 512, a $15.2 billion development plan, is their main focus. This program includes rental flats, condominiums, retirement homes, and hotels.
#2 Plaza Retail Real Estate (PLZ)
|Number of Properties||257|
|12 Month Yield||5.93%|
|Leasable Space||1.1 million sq. feet|
|Assets Under Management||$1.1 billion|
Plaza Retail Real Estate is a multinational real estate corporation that focuses on Ontario, Quebec, and Atlantic Canada. The majority of Plaza's portfolio comprises open-air malls and retail stores.
Plaza concentrates on developing and reinvesting in rental properties without reducing its unitholders' value. With over $1.1 billion in total assets, Plaza provides excellent returns and has a very strong presence in eastern Canada.
#3 Crombie REIT (CRR)
|Number of Properties||284|
|12 Month Yield||5.1%|
|Leasable Space||18.1 million sq. feet|
|Assets Under Management||$5.3 billion|
Crombie REIT prides itself in the fact that, since its inception in 1964, it has provided solid returns on its investments through commercial, retail, and residential developments and has helped build and engage with the communities.
Recently, Crombie completed their first residential project in Vancouver's West End, The Zephyr. It features over 300 luxury rental units, with excellent views of downtown Vancouver, the North Shore mountains, and the English Bay, in partnership with a well-established development firm, Westbank. Some of the largest commercial chains working with them are Scotiabank, BC Liquor Store, and Safeway Stores.
#4 First Capital Realty (FCR)
|Number of Properties||146|
|12 Month Yield||2.3%|
|Leasable Space||22.5 million sq. feet|
|Assets Under Management||$10.1 billion|
First Capital Realty invests in the future of Canada by developing active city neighbourhoods that provide value for businesses and communities. They own interests in 146 communities with a leasable area of 22.5 million square feet and a total value of $10.1 billion.
First Capital has worked to increase sustainability and is among the few REITs that prioritize green, eco-friendly buildings; over 80% of its portfolio is BOMA Best certified. It complies with various Environmental, Social and Governance programs and expects to achieve net-zero emissions by 2050.
#5 BTB REIT (BTB)
|Number of Properties||75|
|12 Month Yield||7.50%|
|Leasable Space||6.0 million sq. feet|
|Assets Under Management||$1.13 billion|
BTB is a large investment trust listed on the Toronto Stock Exchange, with properties in western and eastern Canada. BTB has 75 properties in its portfolio, with a total leasable area of 6 million square feet and a total asset value of more than $1 billion.
BTB anticipates pursuing a dual-market strategy coupled with income-yielding office, retail, and industrial properties represents an interesting strategy for investors. So, it focuses on both primary and secondary markets and the retail and industrial sectors.
#6 PRO Real Estate Investment Trust (PRV)
|Number of Properties||120|
|12 Month Yield||6.6%|
|Leasable Space||6.6 million sq. feet|
|Assets Under Management||$4 billion|
Founded in 2013, PRO Real Estate Investment Trust is a Canadian REIT with a strong presence across ten Canadian provinces. Its portfolio consists of commercial and industrial properties, and it boasts a very high occupancy rate of 98.4% across all assets.
Pro Reit is directed by a seasoned management team with expertise in the real estate industry and capital markets. With over 70 years of experience in property acquisition, management, and financing, the team has completed more than $4 billion in commercial real estate transactions.
#7 Granite Real Estate (GRT)
|Number of Properties||135|
|12 Month Yield||3.2%|
|Leasable Space||55.9 million sq. feet|
|Assets Under Management||–|
Granite REIT is a Canadian real estate investment trust that owns, develops, and manages industrial properties across North America and Europe. Their portfolio comprises more than 135 properties with 55.9 million square feet of leased space.
Granite REIT aims to deliver the greatest possible return for its investors while creating consistent and increasing cash flow. Granite REIT (GRT) trades on the New York Stock Exchange and the Toronto Stock Exchange.
#8 Nexus Real Estate Investment (NXR)
|Number of Properties||107|
|12 Month Yield||4.8%|
|Leasable Space||12 million sq. feet|
|Assets Under Management||$2.1 billion|
Nexus Industrial REIT is a Canadian real estate investment trust focused on acquiring and owning industrial properties. Nexus Real Estate Investment Trust's units are listed on the Toronto Stock Exchange.
Nexus is always looking for ways to grow, and it currently has a unique and profitable relationship with a large real estate investment company, RFA Capital, and will continue to expand across Canada and other countries, including other North American markets.
#9 Cominar Real Estate Investment (CUF)
|Number of Properties||77|
|12 Month Yield||1.8%|
|Leasable Space||11.8 million sq. feet|
|Assets Under Management||$5.7 billion|
Cominar is a Canadian REIT that owns and manages a portfolio of Quebec's office, retail, and residential properties. Their objective is to create living spaces that are appropriate for people's needs, and they accomplish this by designing living areas that are suited to their unique requirements.
Cominar prioritizes quality and client satisfaction and prides itself on the fact that it responds quickly to service calls for cleaning or cleaning services, maintenance and repairs, and emergency assistance.
#10 Morguard Real Estate (MRT)
|Number of Properties||46|
|12 Month Yield||4.5%|
|Leasable Space||8.3 million sq. feet|
|Assets Under Management||$2.5 billion|
Morguard is a Canada-only Real Estate Investment Trust. It is listed on the Toronto Stock Exchange (TSX). Its primary goal is to invest in a Canadian real estate portfolio of good quality assets, then actively manage the portfolio to generate steady returns for Unitholders through a reliable and increasing cash flow.
The portfolio's main focus is on well-located, high-quality corporate office properties in the largest cities, regional-local and community shopping malls, and several industrial properties.
#11 Morguard North American Residential (MRG)
|Number of Properties||43|
|12 Month Yield||4.1%|
|Assets Under Management||$3.5 billion|
Morguard North American Residential REIT is a separate REIT from the previous one but with strong connections. Also listed on the TSX, this REIT was established to own a diversified portfolio of residential rental properties in Canada and the United States. The company's primary goals are to increase the value of its portfolio and provide tax-efficient dividends to Unitholders.
Since its inception in 2012, MRG has more than doubled its portfolio size to over 12,000 suites at 43 multi-suite residential properties in North America. The real estate portfolio comprises 27 US residential communities spread throughout the US and 16 Canadian residential apartments and communities located in Alberta and Ontario.
#12 Minto Apartment Real Estate Investment (MI)
|Number of Properties||29|
|12 Month Yield||2.2%|
|Assets Under Management||1.1 billion|
Minto Apartment REIT is a Canadian real estate investment trust that owns and manages a collection of 29 multi-residential rental homes spread throughout the country. It has a strong presence in Toronto, Ottawa, and Edmonton, where it owns urban residential properties with very high occupancy rates.
Minto Apartment REIT's main focus is long-term investments in urban centers, and it accomplishes this with a management team with a long record of success. In the past three years, they have invested over $78 million in various up-and-coming properties.
#13 Melcor Developments LTD (MRD)
|Number of Properties||59|
|12 Month Yield||2.8%|
|Leasable Space||7.5 million sq. feet|
|Assets Under Management||$2.3 million|
Melcor is a real estate asset management and development firm that converts raw land into high-quality finished products, including both residential and commercial built forms, from beginning to end.
Melcor Developments designs and builds high-tech industrial, retail, and suburban office spaces. As of 2021, they've developed over 2 million commercial projects and are among the most prolific developers in Alberta and Edmonton, and they operate over 7.5 million square feet in leasable space. They take a more holistic approach than other REITs; This approach includes building communities where people live, offices where they work, retail centers and shops, and golf courses where they play.
#14 Automotive Properties (APR)
|Number of Properties||72|
|12 Month Yield||5.7%|
|Leasable Space||2.7 million sq. feet|
|Assets Under Management||$3.8 billion|
The Automotive Properties REIT is a real estate investment trust that invests in income-producing automobile dealership properties in important Canadian cities.
In 2021, the automotive retail sector in Canada generated sales of $176 billion, accounting for approximately 25% of all retail sales across Canada. APR seeks to capitalize on this and maintain its track record of strong revenues and profit margins.
This REIT is considered a defensive class since they represent a significant and critical element of the car companies' brand and distribution system.
#15 NorthWest Healthcare Properties (NWH)
|Number of Properties||192|
|12 Month Yield||5.4%|
|Leasable Space||16.2 million sq. feet|
|Assets Under Management||$5.3 billion|
NorthWest Healthcare develops important facilities dedicated to healthcare; from research to delivery of services, it is a vital part of many communities.
Founded in 2004, NorthWest has partners across the top healthcare providers and operates almost 200 healthcare properties. Despite having a stronger presence in Canada and North America, it also has investments in Australia, Brazil, Germany, the Netherlands, and the UK, for 16.2 million square feet of leasable area.
It is the largest non-governmental operator of medical office buildings and healthcare facilities in Canada, with over 56 properties.
#16 Chartwell Retirement Residences (CSH)
|Number of Properties||200|
|12 Month Yield||4.9%|
|Assets Under Management||$2.67 billion|
Chartwell is an open-ended real estate trust that owns and operates a full range of senior housing communities, from independent supportive living to long-term care.
Chartwell is Canada's largest senior living company, with over 200 excellent retirement communities in four provinces, including properties under development.
Before Investing In REITs
As with any investment, you should do your homework before investing in a REIT. REIT income is made up of dividend payments and capital gains, so REITs must develop their revenue and earnings steadily for their dividends to rise over time.
Here are three factors to consider when investing in REITs:
- Who Is Managing The Fund: Check out the management's track record, as well as how it's compensated. The manager's capacity to choose the appropriate investments and strategies is related to its profitability and asset appreciation. It will be working for your best interests if its compensation is performance-based.
- How Diversified Is The Fund: You should buy a well-diversified REIT if you want to minimize your risk of losing money in real estate markets. So, you don't want commercial real estate just because occupancy rates are declining; diversification generally entails having access to adequate capital to finance future growth initiatives and properly leverage the trust for greater returns.
- How Much Is Paid To Investors: Look at a REIT's adjusted funds from operations and cash available for distribution or dividends before you invest in it. They evaluate the company's performance and how much money is sent to investors.
If you're looking to build a fixed-income portfolio, adding Real Estate Investment Trusts should be at the top of your list. REITs have a history of being at the top of best-performing asset classes – consistently outperforming even the S&P 500. REIT ETFs are an inexpensive way to gain exposure to this market.
To start investing in REITs, all you need is a brokerage account – or better yet, a robo advisor. There are many robo advisors out there, but only one that consistently outperforms all others: Wealthsimple. With its no-minimum starting investment, highly-rated app, low fees, and open access to financial advisors on-demand, it's no wonder Wealthsimple remains Canada's best robo advisor.
Real Estate Investment Trusts FAQs
Are REITs taxable?
Yes, REITs (Real Estate Investment Trusts) are generally taxable in Canada. REITs are considered to be “flow-through entities,” meaning they do not pay taxes on their earnings at the corporate level but instead distribute most of their earnings to their investors in the form of dividends. As a result, the dividends investors receive are typically taxable as income in Canada.
However, there are some tax advantages to investing in REITs in Canada. For example, Canada offers special tax treatment on certain types of Canadian REITs that distribute a portion of their income to investors as “return of capital,” which is not immediately taxable. Instead, the return of capital reduces the adjusted cost base of the investment, which can result in a lower capital gains tax when the investment is eventually sold.
It's important to note that the tax implications of investing in REITs can vary depending on a variety of factors, including the type of REIT, the investor's tax situation, and the province in which the investor resides. It's always a good idea to consult with a tax professional or financial advisor before investing in REITs or any other type of investment.
Are REITs safe?
As stated previously, the most effective REITs will still thrive during a recession. We still caution against over-investing in REITs. However, if you stick to high-quality trusts, they can be a great way to add low-risk value to your portfolio.
Are private REITs safe?
It depends, but we recommend you stay away. A private REIT is a real estate investment trust that isn't listed on a stock exchange, unlike a traditional REIT. As a result, private REITs don't have to disclose all information accessible with publicly traded assets.
As a result, the partnership of private real estate investment trusts usually emphasizes this advantage—since it avoids what it considers to be the volatility and speculation inherent in a broader market pullback.
However, private REITs lack scrutiny from nosy intruders and analysts who will discover and draw attention to any hidden dangers and issues the REIT faces. Overall, we believe investors should avoid private REITs. Instead, stick with publicly-traded REITs that get all the attention from investors and regulators.