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Canadian Apartment Properties Real Estate Investment Trust (CAR.UN)
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Choice Properties Real Estate Investment Trust (CHP.UN)
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Dream Industrial Real Estate Investment Trust (DIR.UN)
Q: I have most of our Reits in our TFSA accounts, which I understand really should be for more growth stocks. If I take a position with CHP.UN and put it in our margin account, do you know how much would be Dividend and how much is other income that is taxed differently? Does it make that much difference?
Reits have been out of favour recently and coming to year lows. Do you see this as a buying opportunity, or are you cautionary? Do you see more potential downside?
Thanks so much!
Reits have been out of favour recently and coming to year lows. Do you see this as a buying opportunity, or are you cautionary? Do you see more potential downside?
Thanks so much!
5i Research Answer:
We would be generally positive on the REIT sector with a bit of caution. Rates are moving lower, but a weak economy can still hurt sentiment, and lower immigration could possible slow growth in the residential sector. REITs pass on income and tax consequences of such to unit holders. It can vary each year. For CHP, last year 84.3% was considered income and the balance capital gains, with a fraction return of capital (ROC). Rarely will it be dividend income. If a REIT has a large ROC component in can make a difference as this shifts the tax burden to capital gains (low tax) versus income (high). For such REITs then a non-registered account is typically the best account.