A Member of Pat McKeough’s Inner Circle recently asked for his advice on Canadian Apartment Properties REIT, a REIT that specializes in Canadian multi-unit residential properties with additional holdings in the Netherlands.
Pat likes the firm’s dominant market position, solid yield, and impressive financial performance. The focus on high-demand urban markets and its ability to capitalize on favorable rental market trends position it well for continued growth.
Canadian Apartment Properties REIT (Symbol CAR.UN on Toronto; www.capreit.ca) owns multi-unit residential properties, including apartments and townhomes.
All together, CAPREIT owns 48,696 apartment suites and townhomes across Canada and the Netherlands.
In total, 48.5% of the CAPREIT’s residential suites are in Ontario, followed by 16.3% in Quebec, 16.3% in B.C., 6.6% in Nova Scotia, 3.8% in Alberta, 0.5% in Prince Edward Island, 0.3% in Saskatchewan, and 7.7% in the Netherlands.
The REIT’s overall occupancy rate is 97.2%.
CAPREIT launched in February 1997, when it acquired six multi-unit residential apartment buildings. On May 21, 1997, in connection with the closing of its initial public offering (IPO), it acquired an additional six multi-unit residential apartment buildings and 117 townhomes.
As part of a major expansion, in June 2004, CAPREIT acquired TSX-listed Residential Equities REIT for about $1 billion. The acquisition created one of Canada’s largest REITs, with 24,238 rental apartments and townhomes in major Canadian urban centres.
Canadian Apartment Properties REIT: Quarterly results are strong as strategic initiatives deliver results
For the three months ended December 31, 2024, CAPREIT’s revenue rose 1.5%, to $276.4 million from $272.2 million a year earlier. Cash flow increased 2.1%, to $104.3 million from $102.2 million. However, cash flow per unit rose 3.3%, to $0.622 from $0.602, on fewer units outstanding due to buybacks. That more than offset the number of new units issued to pay for acquisitions.
CAPREIT continued to execute its strategic initiatives during the quarter.
In the three months ended December 31, 2024, CAPREIT acquired three properties with 314 suites in Canada for $152.3 million. For the year ended December 31, 2024, CAPREIT acquired
10 properties with 1,286 suites in Canada for a $669.7 million).
The REIT’s outlook is positive. It should continue to benefit from the current strong rental demand now lifting rents to all-time highs. Today’s apartment shortages in part reflect the impact of high interest rates, which have discouraged many renters from making the leap to homeownership. While high interest rates have also impacted the unit prices of debt-heavy REITs, residential REITs have remained an industry bright spot.
Also, CAPREIT has successfully implemented cost-saving measures around energy use and buying supplies and equipment.
The trust will continue to grow by acquisition, and that adds risk. Its European expansion also adds risk, but CAPREIT believes the European multi-residential market will continue to benefit from high occupancy rates, rising rents and strong cash flow growth. The REIT also thinks that demand for professional property management in the European multi-residential segment could grow significantly.
CAPREIT is raising its monthly distribution by 3.3% with the March 2025 payment, to $0.12916 from $0.125. The units now yield 3.9%.
Recommendation in Pat’s Inner Circle: Canadian Apartment Properties REIT is okay to hold.
