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Canadian Apartment Properties Real Estate Investment Trust (CAR.UN)
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Dream Industrial Real Estate Investment Trust (DIR.UN)
Q: 5i has been positive on CAR.un for a long time. You are not alone. It seems to be a long term favourite of many if not most REIT analysts. I have held it since 2019 and am down about 9%. It is about $15 below its 2022 high and is trading at 2018 levels. I bought it for income. Other residential REITs have a superior distribution Every day I look at it and say to myself "why am I holding this." What do you see in the future of CAR.un that makes it a buy or even a hold? If I cash out, what would be your next best favoutite with a better distribution?
5i Research Answer:
REITs are quite difficult right now due to how weak the housing market has performed and recent news that the Government of Canada will slow immigration. We like CAR.UN because it has a high occupancy rate at 98%, we see it as one of the larger distributions amongst residential REITs at 12.5c monthly, and it has significant scale across Canada. In the future, when rates come down we can see CAR.UN potentially expanding its portfolio which could help grow distributions and NAV. Additionally, an improved real estate environment could help increase its rental revenue and earn a more attractive rent spreads. Another REIT we like in a different space is DIR.UN, which has more of an industrials focus.