Canadian Apartment Properties or CAPREIT is a growth-oriented investment trust. The REIT invests in residential properties, including apartment buildings, townhouses, and land lease communities located near major urban cities across Canada. It is the largest Canadian REIT by market capitalization value.
As Canada’s largest multi-family residential REIT, Canadian Apartment Properties owns interests in more than 67,600 residential apartment suites, townhomes, and manufactured housing community sites across Canada, the Netherlands, and Ireland. Canadian Apartment has a good mix of properties across affordable, mid-tier and luxury sectors which offer diversification of income. CAPREIT is best known for its quality portfolio.
By geography, Ontario accounts for 51% of the REIT’s total NOI, followed by Quebec (17.7%) and British Columbia (11.9%), Alberta (4.9%), etc. CAPREIT is in a good position to capitalize on strong rental growth with an overall occupancy rate of 98.2%.
- Opportunity Score: 43
- Ticker: TSE:CAR.UN
- Sector: Real Estate
- Industry: REIT - Residential
- Market Cap: 10.64B
- P/E: 11.18
- Dividend Yield: 2.24%
- Payout Ratio (TTM): 25.00%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 1/10
- Dividend Income Fit: 2/10
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Revenue Growth & Market Exposure
CAPREIT’s portfolio of properties is highly diversified by geography and types. It has been increasing its foothold in luxury and mid-tier demographic segments and is also maintaining a solid footing in the manufactured home communities market. These properties add a good diversity to the REIT’s income.
The luxury segment provides for higher returns while the home communities market adds to stable and secure income. CAPREIT is well-positioned in Canada’s largest markets like GTA, Greater Montreal Region, and Greater Vancouver Region.
With decades of proven experience in the residential rental business, the REIT has developed a deep understanding of its clients’ needs and focuses on providing safe and comfortable homes to its residents. As a result, Canadian Apartment Properties has successfully generated high occupancies with growing monthly rentals. The REIT maintains a strong portfolio occupancy rate of more than 98%.
Canadian Apartment is growing organically and through acquisitions. It is focusing on portfolio growth and property developments to modernize its asset base across Canada and Europe. Canadian Apartment deploys a good strategy of strengthening its portfolio through the acquisition of new and modern properties, as well as making accretive developments to existing properties. Total acquisitions in the last year amounted to $690 million comprising 2,847 suites and sites located in Canada, and $130 million in the Netherlands.
Despite the pandemic, CAPREIT delivered revenue growth of 13% due to portfolio growth and increased rents. It witnessed organic growth with the same property NOI up 3.9% in the last year. CAPREIT collected 99% of the rents as of February 2021. Overall, NAV also increased to $14.98 billion, and both active monthly rents (AMR) and monthly residential rents increased by 3% and 1.3%, respectively in 2020.
Canadian Apartment Properties is a Canadian Dividend Aristocrat. The REIT maintained its distribution throughout the pandemic. It successfully grew its FFO by ~5% in the last decade and it grew its distributions by more than 3% CAGR in the last five years. Its annual yield stands at 2.5% and it has a conservative dividend payout ratio of 25% which grants enough room for future growth. CAPREIT most recently raised its distributions by 3.8%.
The REIT has a sound track record of delivering profitable growth and growing monthly cash distributions per unit by 93% since 1997. It has successfully generated solid accretive growth maintaining conservative payout ratios over the years. Stable and predictable cash flows in the form of rental income should support future growth in distributions.
Growth in property portfolio in strategic markets is a key to success for REITs. CAPREIT continues to invest in innovative technologies to improve the resident experience, enable better market research, enhance its operating platforms, and reduce operating costs. The management believes that annual occupancies can be maintained in the 97%-99% range over the long term and the trend of gradual increases to the AMR should continue in the future. It also anticipates its NFFO payout ratio to range between 60% and 70% over the long term. CAPREIT delivered an NFFO growth of 14.7%, while NFFO per unit also increased by 6.3% in the last year.
A low payout ratio, a large portfolio of properties, and a strong balance sheet should support future growth and increasing distributions for Canadian Apartment REIT.
Canadian Apartment REIT competes with some of the best Canadian REITs such as InterRent REIT, Northview Apartment REIT, Boardwalk REIT, Morguard North American Residential REIT in the residential REIT market. The real estate market in Canada is competitive and Canadian Apartment Properties also competes with other developers, managers, and owners of properties.
|TSE:BEI.UN||BEI.UN||Boardwalk REIT||Real Estate||REIT - Residential||0.35||44.33||2.06||0.00||0.00||-4.86||0.0226||0.0000||12||1.00||0.0000||1||2||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||2.26|
|TSE:CAR.UN||CAR.UN||Canadian Apartment Properties REIT||Real Estate||REIT - Residential||0.43||61.66||10.64||11.18||11.18||5.51||0.0224||0.2500||12||1.38||0.0472||1||2||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||2.24|
|TSE:IIP.UN||IIP.UN||InterRent REIT||Real Estate||REIT - Residential||0.52||17.87||2.49||11.57||11.57||1.54||0.0182||0.1970||12||0.33||0.1059||1||2||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||1.82|
|TSE:KMP.UN||KMP.UN||Killam Apartment REIT||Real Estate||REIT - Residential||0.49||20.85||2.29||16.27||16.27||1.28||0.0326||0.4720||12||0.68||0.0522||1||3||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||3.26|
|TSE:MI.UN||MI.UN||Minto Apartment REIT||Real Estate||REIT - Residential||0.48||24.15||0.88||0.00||0.00||0.00||0.0188||0.0000||12||0.46||0.0188||1||2||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||1.88|
|TSE:MRG.UN||MRG.UN||Morguard North American Residential REIT||Real Estate||REIT - Residential||0.41||17.35||0.68||9.92||9.92||1.75||0.0403||0.2520||12||0.70||0.0716||1||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.03|
Canadian Apartments’ focus on the residential real estate market helps it to achieve solid income growth in a portfolio with stable occupancy. It is well-positioned to benefit from premium rents because of its presence in lucrative areas. The fundamentals of the Canadian housing market remain strong in the long term. CAPREIT anticipates seeing stronger growth and performance once the pandemic eases in 2021. Quality portfolio, strategic locations, and growing monthly rentals should help the REIT continue its distribution streak well within the future.