Canadian Apartment Properties or CAPREIT is a growth-oriented investment trust. The REIT invests in residential real estate, including apartment buildings, townhouses and leases near major cities across Canada. It is the largest Canadian REIT by market capitalization value.
As Canada’s largest multi-family REIT, Canadian Apartment Properties has interests in more than 67,600 apartment suites, townhouses and prefabricated housing locations in Canada, the Netherlands and Ireland. Canadian Apartment offers a good mix of affordable, mid-market, and luxury properties that offer income diversification. CAPREIT is known for its quality portfolio.
Geographically, Ontario accounts for 51% of the REIT’s total NOI, followed by Quebec (17.7%) and British Columbia (11.9%), Alberta (4.9%) etc. CAPREIT is in a good position to get from to benefit from strong rental growth an overall occupancy of 98.2%.
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Sales growth and market exposure
CAPREIT’s real estate portfolio is highly diversified in terms of geography and types. The company has built its position in the luxury and midsize demographic segments and has a solid presence in the manufactured shared apartment market as well. These traits contribute to a good diversity in REIT income.
The luxury segment ensures higher returns, while the home community market contributes to a stable and secure income. CAPREIT is well positioned in Canada’s largest markets such as GTA, Greater Montreal Region and Greater Vancouver Region.
With decades of experience renting residential real estate, the REIT has developed a deep understanding of its clients’ needs and is focused on providing a safe and comfortable home for its residents. As a result, Canadian Apartment Properties has successfully achieved high occupancy with increasing monthly rents. The REIT maintains a strong portfolio utilization of more than 98%.
Canadian Apartment is growing organically and through acquisitions. It focuses on portfolio growth and real estate development to modernize its asset base in Canada and Europe. Canadian Apartment has a good strategy of strengthening its portfolio by acquiring new and modern properties as well as developing existing properties. Total acquisitions last year were $ 690 million, including 2,847 suites and locations in Canada and $ 130 million in the Netherlands.
Despite the pandemic, CAPREIT achieved sales growth of 13% due to portfolio growth and higher rents. It posted organic growth with the same real estate NOI of 3.9% last year. CAPREIT collected 99% of the rents in February 2021. Overall, net asset value also rose to $ 14.98 billion, and both active monthly rents (AMR) and monthly home rents rose 3% and 1.3%, respectively, in 2020.
Canadian Apartment Properties is a Canadian dividend aristocrat. The REIT kept its spread throughout the pandemic. In the last ten years, the FFO has successfully increased by ~ 5% and in the last five years the distributions have increased by more than 3% CAGR. The annual return is 2.5% and the conservative payout ratio is 25%, which offers enough room for future growth. CAPREIT recently increased its distributions by 3.8%.
The REIT has a solid track record of growing profitably since 1997 and increasing monthly cash payouts per share by 93%. It has successfully achieved solid growth over the years while maintaining conservative payout ratios. Stable and predictable cash flows in the form of rental income should support future dividend growth.
The growth of the real estate portfolio in strategic markets is a key to success for REITs. CAPREIT continues to invest in innovative technologies to improve residents’ experience, enable better market research, improve operating platforms and reduce operating costs. Management believes that annual occupancy can be maintained in the 97% to 99% range over the long term and the trend towards incremental increases in AMR should continue into the future. The NFFO payout ratio is expected to be between 60% and 70% in the long term. CAPREIT achieved NFFO growth of 14.7%, while NFFO per unit also grew 6.3% last year.
A low payout ratio, large real estate portfolio and strong balance sheet should support future growth and rising payouts for Canadian Apartment REIT.
The Canadian Apartment REIT competes in the residential REIT market with some of the best Canadian REITs such as InterRent REIT, Northview Apartment REIT, Boardwalk REIT and Morguard North American Residential REIT. The real estate market in Canada is competitive and Canadian Apartment Properties also competes with other real estate developers, managers and owners.
Canadian Apartments’ focus on the residential real estate market helps deliver solid income growth in a portfolio with stable occupancy. Because of its presence in lucrative areas, it is well positioned to benefit from premium rents. Canadian property market fundamentals remain strong over the long term. CAPREIT expects stronger growth and performance once the pandemic subsides in 2021. A quality portfolio, strategic locations and growing monthly rents should help the REIT to continue its sales streak in the future.
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