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There are some fundamental changes taking place in the REIT industry, and savvy investors can take advantage of them.

That’s the message from Samuel Sahn, managing director of portfolio management and public real estate investments at Hazelview Investments.

Many real estate investment trusts have been hit hard by the economic impact of the pandemic, especially those that focus on office space, the hospitality industry and shopping malls.

But some other types of REITs are profiting from the shift in consumer behaviour we have seen in the past year.

“More people have shifted to buying online,” Mr. Sahn said. “This is a fundamental change that is happening worldwide. The trend was already in place, and COVID accelerated the shift.”

What this means for REITs is rapidly growing demand for well-located distribution centres.

“Companies need to deliver goods quickly and efficiently,” he said. “Businesses need space in ‘last mile’ locations. We’re going to see increasing demand for such properties. REITs around the world are getting into the business of owning and operating warehouses, and we’re seeing shopping malls converting space for in-store pick up.”

Mr. Sahn identified three Canadian-based REITs that are among the leaders in taking advantage of this trend. They are:

Granite REIT (GRT.UN)

Granite was spun out from Magna International Inc. in 2011 and owns the properties on which Magna’s plants are built. Management has been diversifying to other industries since and is now focused on distribution centres, including a newly acquired facility near Toronto’s Pearson Airport.

The units were up almost 19 per cent in 2020, compared with a loss of 17.6 per cent for the S&P/TSX Capped REIT Index. The monthly distribution has been increased to 25 cents ($3 a year) to yield 3.9 per cent at Monday’s closing price of $76.77.

Summit Industrial Income REIT (SMU.UN)

This REIT invests in a portfolio of light industrial properties, with the prime focus on Ontario and Quebec. It also performed well in 2020, with a gain of 13.5 per cent for the year.

The trust’s third-quarter results showed strength across the board, with revenue up 41.4 per cent year-over-year based on portfolio growth, high stable occupancies and rent increases. Funds from operations (FFO), a key measure of operating performance for real estate companies, increased 47.2 per cent in the quarter to $24.2-million (16.8 cents a unit). During the quarter, Summit acquired nine properties totalling 746,903 square feet of gross leasable area for $180.3-million. Subsequent to that, the REIT spent $68-million to acquire a 342,830 sq. ft. single-tenant warehousing and logistics facility in Ajax, Ont., a key industrial market near Toronto.

The distribution is 4.5 cents a month (54 cents a year) to yield almost 4 per cent at Monday’s price of $13.60.

Dream Industrial REIT (DIR.UN-T)

This REIT owns and operates a portfolio of 266 industrial properties comprising approximately 26.6 million square feet of gross leasable area in key markets across North America. It also has a growing presence in strong European industrial markets. It virtually broke even in terms of unit price in 2020, but that was much better than the broad market.

Third-quarter results saw a 13.1 per cent year-over-year increase in funds from operations to $30.2-million. However, on a per-unit basis, FFO dropped by a penny to 18 cents last year.

During the quarter, the trust completed $86-million worth of acquisitions in Europe and Canada and expects to acquire more than $100-million worth of assets in Germany, the Netherlands and Ontario. The properties are 97-per-cent occupied and represent a weighted average capitalization rate (the rate of return that is expected to be generated by a real estate investment) of 5.7 per cent.

By the time all the deals have closed, the trust will have acquired more than $600-million worth of assets in fiscal 2020. These acquisitions will add more than 5.5 million sq. ft. of high quality, well-located and functional logistics space to the trust’s portfolio.

Investors receive monthly distributions of 5.833 cents (70 cents a year) for a yield of 5.5 per cent at a price of $12.77.

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