Commentary: Canadian commercial real estate now a reliable money-maker

Segment benefits from steady growth and continuous infusion of high-quality capital

Commentary: Canadian commercial real estate now a reliable money-maker
Amid steady growth and a generous influx of capital, the Canadian commercial real estate segment now stands as one of the most dependable markets to put one’s funds on, according to an industry observer.

In a recent piece for The Motley Fool Canada, Jacob Donnelly wrote that real estate investment trusts focusing on commercial properties provide money-making opportunities while also being high-quality dividend stocks (as they are subject to special tax treatment).

Donnelly noted that a good choice would be Dream Office Real Estate Investment Trust (TSX:D.UN), which has bounced back spectacularly from a less-than-stellar 2016.

“I believe it presents a unique opportunity to pick up discounted shares. To combat the market not valuing the company appropriately, management has been working on selling non-core assets,” Donnelly explained.

“From a dividend perspective, the company yields 7.57%, which is good for $0.12 in monthly cash flow. You can then use that monthly distribution to buy more shares or diversify into other dividend opportunities.”

Another option in this vein is Allied Properties Real Estate Investment (TSX:AP.UN), which benefits from a less tumultuous history compared to Dream Office (in large part due to its focus on strong markets such as Toronto and Montreal).

“Because of this strong holding in Montreal and Toronto, it has a network occupancy rate of 92.6%. This means that only 7.4% of its leasable square footage remains empty. This is thanks to the quality of tenant, but also the diversity. Its top 10 tenants only account for 18% of the total leasable space; this ensures that if one goes bust, it doesn’t have a significant impact on the business,” Donnelly wrote.

“The yield on Allied Properties is only 3.97%, but you can expect $0.38 per share per quarter. And with the occupancy rate increasing and new properties being added to the portfolio, I expect that management will give it a boost in the coming years.”

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