Bernadette Murphy, a senior account manager at Equithy, explains that real estate investment trusts, commonly known as REITs, can provide investors with impressive yields. In investment, diversification is the name of the game, so it shouldn’t come as a surprise that many people consider real estate investments. After all, it’s among the most reliable asset classes in the market. In the event of an economic downturn, investors could get consistent capital appreciation coupled with steady rental income.
That being said, there are quite a few downsides to being a landlord, such as rent control, repairs, and assessing candidates before renting the home. When looking at these factors, purchasing a property can seem like a hassle. In this situation, Bernadette Murphy of Equithy recommends a similar asset class, referred to as real estate investment trusts.
REITs Act Similar To ETFs
These are pooled investment vehicles that act in a similar way to ETFs or exchange-traded funds, except that it involves investing in property portfolios. Although these trusts are companies, they’re legally structured as funds.
Moreover, investors who purchase ownership stakes in these funds will be buying units rather than shares. Even so, they offer immense income potential, and in some cases, they can provide capital growth. Equithy’s Bernadette Murphy reviews two notable Canadian REITs that could provide impressive capital growth and a steady source of passive income.
Northwest Healthcare Properties REIT
As the name implies, this Canadian REIT specifically leases commercial spaces to healthcare providers. Some examples of its clientele include administrative offices, clinics, and others. If you look at the real estate sector, this is a fairly stable niche.
Because healthcare is mostly government-funded in Canada and the European Union, healthcare providers have impressive revenue stability. This translates to stable revenue for the Northwestern Healthcare Properties REIT, which is represented by the ticker symbol TSX: NWH.UN.
This makes one wonder how the REIT is performing with such an advantage. To this, the answer by Bernadette Murphy of Equithy replies, ‘quite well.’ In the last five years, the REIT has seen growth in its book value, EBITDA, and, most importantly, revenue.
Its book value has gone up by 22 percent; the EBITDA has increased by 5.4 percent, while revenue has surged by 6.5 percent. That’s definitely impressive, and considering how the REIT is continuing to invest in US properties, these values may grow even further.
Represented by the ticker symbol TSX: REI.UN, Riocan is a Canada-based mixed-use REIT that specializes in trophy properties. Currently, its portfolio includes various major landmarks, such as the Coliseum in Ottawa and The Well in Toronto.
For investors who are wondering how the REIT is performing these days, it’s somewhat unclear. Riocan’s revenue has gone up modestly, and compared to the last five years, earnings are down. Nevertheless, it did well in its most recent quarter, says Equithy senior account manager Bernadette Murphy.
It made around $274 million in rental revenue, which is a 0.9 percent year-over-year increase. Then, boasts a 59.3 payout ratio, a 4.8 percent increase in funds from operations, which is at $0.44, and a 3.4 percent year-over-year increase in NOI.