The best real estate stocks to own for decades

Canadian Apartment Properties Real Estate Investment Trust (TSX: CAR.UN), also known as CAPREIT, has done an excellent job of growing the portfolio and diversifying the portfolio. In 2020, CAPREIT acquired 3,262 residential housing and pre-fabricated housing (MHC) sites well located in the company’s target markets for a total purchase price of $ 820.2 million.

Canada’s Largest Multi-Family Residential Real Estate Investment Trust

Additionally, CAPREIT’s total portfolio grew to 63,790 suites and sites with a fair value of $ 15.0 billion by year-end, maintaining the company’s position as the largest trust in the world. multifamily residential real estate investment (REIT) in Canada. At the end of 2019 and through 2020, CAPREIT completed the repurchase of 12 of the Company’s 15 operating leases in the Greater Toronto Area at a total cost of $ 173.3 million.

Unlock the potential of new future development opportunities

Additionally, CAPREIT acted on these buybacks earlier than expected resulting in a 31% reduction from the agreed price for the properties. The transition to fee simple ownership for these properties adds significant new financing capacity, a significant increase in net asset value and unlocks the potential for new future development opportunities. All of these factors are great for CAPREIT.

Proven asset allocation strategy

In addition, CAPREIT’s asset allocation strategy is working well. Going forward, CAPREIT appears poised to continue to implement the company’s proven asset allocation strategy in three targeted areas. CAPREIT’s primary focus is on continued growth in the apartment industry in Canada, expanding the company’s portfolio of primarily value-added properties in the mid-segment which the company purchases at well under 50% of the cost of replacement.

High and stable occupancy rates and affordable rental rates

In addition, CAPREIT has proven the company’s ability to invest in these assets to increase value, resulting in stable cash flow, thanks to a high and stable occupancy rate and affordable rental rates. . On average, CAPREIT rents corporate apartments for around $ 1.60 per square foot, far less than the $ 3.00 to $ 5.00 per square foot found in rental condominium markets and construction of new apartments.

Low capital and maintenance requirements

CAPREIT’s second growth area is the Canadian business of MHC. Incomes are very stable, and with residents owning homes, capital and maintenance requirements are drastically reduced. MHC’s properties also offer another level of diversification by increasing CAPREIT’s presence in rural and smaller markets. CAPREIT appears to be exploring the possibilities of further increasing the revenue of this business.

Generate large and growing distribution and fee income

In addition, CAPREIT’s third goal is Europe, where the company generates large and growing dividend, distribution and fee income from the company’s investments. Dividends and distributions in 2020 totaled $ 32.9 million, while CAPREIT’s property management fee income increased 5.2% to $ 22.1 million for the year.

Opportunities for future growth and increased value

As the only professionally managed operating platform in Europe, the opportunities for future growth and value enhancement are significant. However, CAPREIT plans to target the company’s exposure to the European market at around 15%. Investors, however, can always gain more exposure by owning a stake in CAPREIT’s European operating platform.

Overall, CAPREIT looks like one of the best real estate stocks to hold for the long term.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .

The Motley Fool has no position in any of the stocks mentioned.

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