These undervalued REITs are among the best deals that the enterprising investor can get at present, The Motley Fool Canada reported.
Improved occupancy rates will kindle apartment-centric trusts like Canadian Apartment Properties REIT next year.
“Apartments are the most stable form of real estate, and the vacancy rates of energy-related markets have been surprisingly low at under 2%. We can expect the energy-related apartment vacancy rates to decrease even further as the price of oil starts to rally to higher levels,” The Motley Fool analysis stated.
“Canadian Apartment Properties REIT has a very strong balance sheet and a solid dividend that’s one of the safest in the industry. It’s worthwhile to note that the company did not cut its dividend during the financial crisis, and dividend raises have been consistent after 2012 thanks to growing free cash flow.”
On the other hand, Smart REIT’s fresh entry into the apartment segment will augment its focus on shopping centres, even though the stock itself has suffered from a major sell-off.
“Shopping-centre-focused REITs are relatively stable but offer more growth upside than their apartment-focused counterparts. Smart REIT has over $8.6 billion worth of assets with 72% of its properties anchored by Wal-Mart Stores, Inc.”
“Having Wal-Mart as a tenant is a huge advantage that Smart REIT has over its competitors since the retail giant draws in a tonne of traffic, which also benefits its other tenants in the shopping centre,” the analysis explained. “Buy the stock and collect the bountiful 5.4% dividend yield, and hang on as it starts rebounding in the new year.”
“The average age of its retail properties is 12.6 years, which is among the youngest in the industry. This means that maintenance and expenditure costs will be a lot lower than its competitors.”
Canadian Apartment Properties REIT (TSX:CAR.UN) and Smart REIT (TSX:SRU.UN) are currently going for generous bargains, with the side benefit of being positioned as strong performers in 2017.