Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

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.

Story continues below advertisement

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.

Story continues below advertisement

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.

Story continues below advertisement

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.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies