The Best Canadian REITs to Buy in December 2024

ByMathieu Litalien Published On:

Many investors don’t know the first thing about Canadian real estate investment trusts (REITs).

Most new investors these days strictly focus on learning how to buy stocks. But real estate exposure is also essential, and a real estate investment trust is an excellent way to make that happen.

The real estate problem in North America:

Real estate assets, particularly residential properties, are not easy to acquire. Most first-time buyers get into apartments or townhouses because they’re a little cheaper. But it still requires a down payment, which many Canadians don’t have.

And, in surging markets like British Columbia or Ontario, rising prices are making it impossible for Canadians to enter the market.

How do you avoid the need for a down payment and expose yourself to the residential, commercial, office, and even industrial real estate sectors with potentially less than $10?

Buy real estate investment trusts.

What is a real estate investment trust, and how does it expose you to the real estate markets?

A real estate investment trust, or REIT, is primarily modelled after a mutual fund. The business model is to pool investor capital together and manage anything from townhouse suites to industrial buildings for investors.

The low capital investment from investors allows them to gain exposure to a multitude of properties, generating cash flow for investors, typically resulting in a high dividend yield.

These trusts offer high dividend yields primarily because of their business structure. They must pay out practically all of their income after expenses to investors. Typically you’ll see a REIT payout 85-95% of its income back to shareholders.

As a result, share prices and the annual growth rates of REITs are not prone to significant movement. If you just started investing in 2020, the spread of covid-19 wreaked havoc on the REIT sector, so there were undoubtedly capital gains to be made in their recovery.

But now that share prices have recovered, it’s essential we don’t think of these trusts as growth stocks, but instead, as reliable income payers that are known for consistent growth of their distributions. Because it must pay out most of its profits back to shareholders, it’s hard for the company to drive strong capital growth.

What should you look for in a REIT?

First, let’s talk about earnings for Canadian REITs. Net income is meaningless in the REIT world. That’s because a REIT’s management must revalue the portfolio every quarter.

Now and again, the values of buildings change, which shows up in the net earnings number. That impacts the bottom line but not the accurate picture of profitability.

Best valuation metric to use instead to find the best REIT

Instead, as valuation metrics for a Canadian real estate investment trust, investors should use the following:

  • funds from operations (FFO)
  • adjusted funds from operations (AFFO)
  • capitalization rates (cap rates)

FFO is a REIT’s earnings, while AFFO roughly translates into free cash flow.

The cap rate tells how much you are paying for the buildings the REIT owns. It is found by dividing a REIT’s net operating income (NOI, think of it as EBITDA) by its enterprise value (market cap plus net debt).

You mustn’t use the dividend payout ratio with REITs

To judge the security of the distribution (REITs pay distributions, not dividends, again you can think of them as the same), an investor should look at the payout ratio based on AFFO, though FFO will work too.

Anything below 80% is considered ultra-safe, while anything above 95% is cause for concern.

Top REITs in Canada have a diverse tenant base

Much like having your rental property, these real estate investment trusts have to collect rent from tenants.

As a result, you want a diverse tenant base that includes companies with a long-standing reputation for rent payments and high occupancy rates.

A REIT that can maintain excellent occupancy rates should be held to a higher standard, especially during a broader market pullback, as we witnessed in 2020.

The best Canadian REITs have strong debt-to-asset ratios

Most Canadian REITs hang out at a 50% debt-to-assets ratio. Many are lower, but that’s usually because the REIT plans to borrow to fund expansion plans. The higher ones typically try to pay down debt, which a REIT usually does by selling non-core assets or issuing units.

Now that we’ve gotten that primer out of the way, let’s take a closer look at 6 of the best Canadian REITs, the kinds of companies that should provide a combination of stable distributions and some impressive capital gains.

Can you buy REIT ETFs?

Yes, there are a multitude of REIT ETFs in Canada. We have an article covering nearly all of the best Canadian REIT ETFs, which you can read here.

The most popular REIT ETFs in the country will be the BMO Equal Weight REITS Index ETF (TSE:ZRE) and the Vanguard Capped REIT ETF (TSE:VRE).

Key Takeaways

  • REITs offer high dividend yields primarily because of their business structure, which requires that they distribute the majority of their income to investors. 
  • Share prices and the annual growth rates of REITs are not prone to significant movement, but they’re still reliable income payers known for the consistent growth of their distributions.
  • Specific REITs are vulnerable to trends associated with the industries in which most of their tenants are concentrated, such as e-commerce, office work, or retail.
  • Top Canadian REITs have a diverse tenant base, strong debt-to-asset ratios, and high occupancy rates.

The Top REITs in Canada for 2025 and Beyond

  • CT REIT (TSE:CRT.UN)
  • Automotive Properties REIT (TSE:APR.UN)
  • Dream Industrial REIT (TSE:DIR.UN)
  • Allied Properties REIT (TSE:AP.UN)
  • Canadian Apartments REIT (TSE:CAR.UN)

CT REIT (TSE:CRT.UN)

CT Real Estate Investment Trust (TSE:CRT.UN) is an unincorporated real estate investment trust that invests in retail properties across Canada. The important portion of properties are located in Ontario, followed by Quebec and Western Canada. The trust generates the vast majority of revenue from leasing its properties to Canadian Tire Corporation, which operates the Canadian Tire retail stores. The trust’s portfolio consists of properties anchored by a Canadian Tire retail store, in addition to retail properties not anchored by Canadian Tire, distribution centres, and mixed-use commercial property.

  • Assets are primarily Canadian Tire retail stores, with the retailer realizing EPS levels even greater than it posted pre-COVID.
  • It has a weighted average lease term of 8 years, and 99% of its outstanding debt is interest only. 
  • As of the time of this writing, it has a 99.4% occupancy rate. 
  • Added 424,000 square feet to its portfolio in 2024.
  • Has one of the lowest debt-to-asset ratios of all REITS in Canada at 0.2 and an FFO-to-interest coverage ratio of 2.7.
  • Inflation. Inflation has been steadily going down throughout 2024 but unexpectedly increased in October 2024, which results in upward interest rate pressures. 
  • Canadian economy. Continued declines in Canadian productivity, along with a potential trade war with the US, will put continued pressure on the Canadian dollar and economy. This will also result in negative consumer spending pressure.
  • Fiscal Policy. The Federal Government continues to run massive deficits, which creates inflationary pressures. 
  • Foreign-exchange. The rapidly decreasing value of the Canadian dollar to USD has made Canadian REITs more attractive.
  • Slow economic growth. The Canadian economy continues to face headwinds related to low productivity, a potential US trade war, and rising unemployment. This could negatively impact Canadian Tire’s forward outlook and reduce plans for future stores or result in store closures. 
  • Interest rates. The Bank of Canada may slow interest reductions due to fiscal policies and the unexpected inflation increase in October 2024. 
  • Immigration: The Federal Government has dramatically reduced the number of new immigrants into Canada for 2025 and beyond. This may decrease retail sales and the retail labour pool, resulting in declining sales and increased costs.

Automotive Properties REIT (TSX:APR.UN)

Automotive Properties Real Estate Investment Trust (TSX:APR.UN) is an unincorporated open-ended real estate investment trust focused on investing in high-quality Canadian automotive properties tenanted by automotive dealership groups and automotive brands ranging from mass-market to ultra-luxury. The company holds a portfolio of best-in-class properties located in strategic Canadian urban markets across Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, and Quebec. The primary objectives of the REIT are to provide Unitholders with stable, sustainable and growing cash distributions, and to enhance and expand the REIT’s asset portfolio in order to maximize Unitholder value.

  • Its payout ratio is reasonable, and it distributes 86% of funds from operations.
  • The rental revenue is supported by CPI and fixed rent increases.
  • Their portfolio of assets goes beyond consumer vehicle dealerships and includes heavy equipment dealerships such as John Deere.
  • Has a geographically distributed asset portfolio.
  • Added 270,000 square feet of gross leasable feet in 2024.
  • A healthy debt-to-asset ratio of 0.45.
  • Free cash flow increased by 3.8% in 2024.
  • Inflation. Inflation has been steadily going down throughout 2024 but unexpectedly increased in October 2024, which results in upward interest rate pressures. 
  • Canadian economy. Continued declines in Canadian productivity, along with a potential trade war with the US, will put continued pressure on the Canadian dollar and economy.
  • Fiscal Policy. The Federal Government continues to run massive deficits, which creates inflationary pressures. 
  • Foreign-exchange. The rapidly decreasing value of the Canadian dollar to USD has made Canadian REITs more attractive.
  • Slow economic growth. The Canadian economy faces headwinds, which may decrease consumer automotive spending. This may result in slower automotive dealership expansion. 
  • Interest rates. The Bank of Canada may slow interest reductions due to fiscal policies and the unexpected inflation increase in October 2024. This would reduce the operating funds available for distribution. 
  • Limited Tenent Diversification. A significant portion of the REIT’s rental income is derived from a limited number of tenants. Financial difficulties resulting in lease terminations by major tenants could adversely affect cash flow and occupancy rates.

Dream Industrial REIT (TSE:DIR.UN)

Dream Industrial Real Estate Investment Trust (TSE:DIR.UN) is an unincorporated, open-ended real estate investment trust. Its portfolio comprises industrial properties located in key markets across Canada, Europe and the USA. Its objective is to build upon and grow its portfolio and to provide stable and sustainable cash distributions to its unitholders. Geographically the business is organized into Ontario, Quebec, Western Canada, Europe and the USA. Substantial revenue is derived from the European portfolio.

  • In-place and committed occupancy rate of 95.5%.
  • Its portfolio includes assets in Europe, making it less exposed to the Canadian market. 
  • 2024 EPS dropped due to fair value losses on their investments and temporary vacancies.
  • A healthy debt-to-asset ratio of 0.35, giving them the capacity to acquire more properties in 2025. 
  • Free cash flow increased by 13.4% in 2024.
  • Foreign-exchange. The rapidly decreasing value of the Canadian dollar to USD has made Canadian REITs more attractive. Additionally, with assets in Europe, Dream is exposed to Euro to CAD fluctuations.
  • Inflation. Inflation has been steadily going down throughout 2024 but unexpectedly increased in October 2024, which results in upward interest rate pressures. 
  • Canadian economy. Continued declines in Canadian productivity, along with a potential trade war with the US, will put continued pressure on the Canadian dollar and economy.
  • Fiscal Policy. The Federal Government continues to run massive deficits, which creates inflationary pressures.
  • Slow economic growth. The Canadian economy faces headwinds, which may decrease e-commerce spending. This may result in a reduction in warehouse leases and planned expansions. 
  • Interest rates. The Bank of Canada may slow interest reductions due to fiscal policies and the unexpected inflation increase in October 2024. This would reduce the operating funds available for distribution. 
  • Tenant credit risk. Many of their tenants are smaller companies that don’t have credit ratings or sizable balance sheets.
  • Single Asset Type. They only invest in industrial real estate, making them susceptible to fluctuations in this market. 
  • Foreign Exchange Risk. They only operate within the European Union and are subject to negative currency fluctuations.

Allied Properties REIT (TSE:AP.UN)

Allied Properties Real Estate Investment Trust (TSE:AP.UN) is a real estate investment trust engaged in the development, management, and ownership of primarily urban office environments across Canada’s major cities. Most of the total square footage in the company’s real estate portfolio is located in Toronto and Montreal. Allied Properties derives nearly all of its income in the form of rental revenue from tenants in its properties. The majority of this revenue comes from its assets located in Central Canada. Allied Properties’ major tenants include IT, banking, government, marketing, and telecommunications firms. The company also controls a number of telecommunications/IT and retail properties within its real estate portfolio.

  • Is highly exposed to urban office real estate.
  • It is making concerted efforts to sell non-core assets to help reduce debt, streamline its portfolio of assets, and maintain distributions. Its 2024 sales proceeds totaled $230MM, exceeding its goal of $200MM.
  • Its debt-to-asset ratio is 40%, which is still quite healthy.
  • Using its adjusted EBITDA, its Interest Coverage Ratio is a healthy 3x. 
  • Despite substantial economic headwinds, it has increased or kept its distribution level over the past four years.
  • While they continue to see the fair value of their assets decreasing, their operating income has increased for the past three years.
  • Its portfolio is entirely based in Canada, making it highly exposed to the Canadian economy; however, its assets are geographically dispersed within Canada.
  • Foreign-exchange. The rapidly decreasing value of the Canadian dollar to USD has made Canadian REITs more attractive. 
  • Occupancy Rates. Lower or decreasing occupancy rates negatively impact revenue and operating income.
  • Remote work. Large corporations have largely moved to a hybrid work-from-home and office model. However, there is a growing business sentiment that workers should work entirely in the office. 
  • Inflation. Inflation has been steadily going down throughout 2024 but unexpectedly increased in October 2024, which results in upward interest rate pressures. 
  • Canadian economy. Continued declines in Canadian productivity, along with a potential trade war with the US, will put continued pressure on the Canadian dollar and economy.
  • Fiscal Policy. The Federal Government continues to run massive deficits, which creates inflationary pressures.
  • Slow economic growth. The Canadian economy faces headwinds, which may decrease hiring and job losses, resulting in lower demand for office space.
  • Remote work. If more companies embrace a full work-from-home or hybrid model, this would negatively impact revenues and asset values.
  • Interest rates. The Bank of Canada may slow interest reductions due to fiscal policies and the unexpected inflation increase in October 2024. This would reduce the operating funds available for distribution. 
  • Asset fair value adjustments. The REIT may be forced to further reduce the fair value of its asset portfolio in 2025.

Canadian Apartment Properties REIT (CAR.UN)

Canadian Apartment Properties Real Estate Investment Trust (CAR.UN), or CAPREIT, is a real estate investment trust primarily engaged in the acquisition and leasing of multiunit residential rental properties located near major urban centers across Canada. The company’s real estate portfolio is mainly composed of apartments and townhouses situated near public amenities. Most of CAPREIT’s holdings are aimed towards the midtier and luxury markets in terms of demographic segments. The company derives nearly all of its income in the form of rental revenue from leasing its properties to tenants. The majority of this revenue comes from assets located in the Greater Toronto and Greater Montreal regions. The buildings in these areas also contain the majority of CAPREIT’s total housing units.

  • A diversified portfolio of assets in Canada and the Netherlands. 
  • They have grown their dividend for the past 12 years. 
  • Largest Canadian REIT by market cap. at $7.6 billion at the time of this article. 
  • Its EPS TTM is 2.07%, which is materially higher than the -2.43 and 0.08 reported in 2023 and 2024, respectively. 
  • An impressive occupancy rate of approximately 98%.
  • Its Debt-to-Asset ratio is a healthy 0.41. 
  • Added 8 new apartments to its portfolio, totaling $478MM.
  • Fair value assessments of its properties resulted in nearly a billion-dollar hit to earnings in 2023. As the Canadian economy recovers, they may benefit from increasing fair value assessments.
  • Foreign-exchange. The rapidly decreasing value of the Canadian dollar to USD has made Canadian REITs more attractive. 
  • Occupancy Rates. Lower or decreasing occupancy rates negatively impact revenue and operating income.
  • Remote work. With companies offering fully remote work, people are choosing to live in smaller cities and towns. 
  • Inflation. Inflation has been steadily going down throughout 2024 but unexpectedly increased in October 2024, which results in upward interest rate pressures. 
  • Canadian economy. Continued declines in Canadian productivity, along with a potential trade war with the US, will put continued pressure on the Canadian dollar and economy.
  • Fiscal Policy. The Federal Government continues to run massive deficits, which creates inflationary pressures.
  • Slow economic growth. The Canadian economy faces headwinds, which may decrease hiring and job losses, which could result in lower occupancy rates.
  • Immigration. Canada is reducing the number of new immigrants, post-secondary students, temporary workers, and asylum applicants, which will reduce the available tenant rental pool.
  • Remote work. This may put pressure on this REIT with its apartments primarily in large cities.
  • Interest rates. The Bank of Canada may slow interest reductions due to fiscal policies and the unexpected inflation increase in October 2024. This would reduce the operating funds available for distribution. 
  • Asset fair value adjustments. The REIT may be forced to further reduce the fair value of its asset portfolio in 2024 and 2025.
  • Foreign Exchange Risk. While they only operate within the European Union outside of Canada, they are subject to negative fluctuations in both currencies.