Real Estate Investment Trusts (REITs) are popular investment tools worldwide. In Canada, they have grown in popularity over the years, since they began to gain traction with the first REIT trading on the Toronto Stock Exchange in 1993. They offer a way for the average individual investor to gain exposure to large-scale, institutional-quality real estate assets that they might not otherwise be able to access. Investors who are considering buying real estate may want to consider investing in REITs.
Read on to learn more about the different types of REITs and how you can use them to reach your financial goals.
What is a REIT?
A REIT is an investment vehicle that owns and manages a portfolio of income-producing real estate properties.
Most REITs specialize in a specific sector and offer investors exposure to one type of asset class, such as apartment complexes, hotels, offices, retail centres, and warehouses. For example, Skyline offers REITs focused on multi-residential real estate properties, warehousing and logistics-focused industrial properties, and grocery and pharmacy-anchored retail properties.
REITs offer investors an enticing alternative to owning real estate by allowing them to invest in properties without having to worry about maintenance, utilities, collecting rent payments, and other hassles associated with property management. REITs pool funds from individual investors and use those funds to build a portfolio of real estate investments. When you invest in a REIT, you purchase units of that portfolio. Most REITs have their own management teams that oversee day-to-day operations, management, and maintenance at the properties.
What are the different types of REITs?
There are three main types of REITs:
Equity REITs are the most common type of REIT. They own and operate income-producing real estate, such as apartment buildings, office buildings, shopping centres, etc. Income from an equity REIT primarily comes from rent payments.
Mortgage REITs invest in mortgages and mortgage-backed securities. Income from a mortgage REIT comes from collecting interest on the loaned money.
Hybrid REITs are a combination of equity and mortgage REITs. They are less common than the other two types of REIT.
The best choice for investment will depend on an individual investor’s needs and financial goals.
What are the benefits of REIT investing?
There are many benefits to investing in a REIT, although these may differ depending on the type of REIT. Some of the main benefits of REIT investing include:
Portfolio Diversification: REITs can help diversify an investment portfolio by exposing investors to a variety of real estate assets in different geographical areas.
Income generation: REITs can offer investors an opportunity to receive passive income. For example, Skyline’s REIT investments offer monthly distributions, and investors have enjoyed historically steady performance.
Real assets: When you invest in a REIT, you are investing in a portfolio of physical assets, which means that the REIT’s valuation is more closely tied to the value of the asset itself. This also means that investors can benefit from capital appreciation as the value of the properties within the portfolio increases.
Protection from volatility: Since real estate is classified as an alternative investment, it does not fall into the conventional categories of stocks, bonds, or cash assets. This may help protect your portfolio during times of market volatility and can help hedge against inflation.
Tax efficiency: One of the key benefits of REITs is the tax efficiency of their distributions. All, or a portion, of distributions to investors may be classified as Capital Gains or Return of Capital, rather than income. As well, many REITs offer the ability to invest through your Registered Retirement Savings Plan, Registered Retirement Income Fund, or Tax-Free Savings Account, among other registered accounts, allowing for further potential tax savings.
How to Invest in a Real Estate Investment Trust
How you invest in a REIT will depend on the type of REIT that you are interested in.
Publicly traded REITs are listed on the public stock exchange and can be purchased through an investment broker, just like stocks. Investors can buy shares in publicly traded REITs the same way they would buy shares in any other public company.
Public non-listed REITs are not listed or publicly traded on the stock market. They can only be bought through a broker or financial advisor who participates in the non-traded REIT’s offering.
Private REITs are not traded on the stock market. They are usually limited to accredited and institutional investors and can be purchased through financial advisors or Exempt Market Dealers. Private REITs usually have much higher minimum investment requirements.
Before you invest in any REIT, it is important to understand the minimum investment requirements. This includes factors like income, net worth, minimum investment amounts, etc. For example, Skyline’s private REITs are open to accredited investors.
Skyline’s Private REIT Offerings
Skyline currently offers three private REITs that aim to provide the best possible returns for investors.
Skyline Apartment REIT is a portfolio of professionally managed multi-residential real estate properties in Canada’s secondary and tertiary markets. The REIT aims to provide steady returns and investment appreciation to its investors.
Skyline Industrial REIT comprises a diverse portfolio of 100% Canadian industrial properties along major transportation routes, with a focus on warehousing, distribution, and logistics real estate. Through strategic property acquisition and management, the REIT aims to generate consistent and growing cash distributions, as well as provide tax efficiency.
Skyline Retail REIT is a portfolio of diversified, 100% Canadian retail properties, with a focus on properties anchored by “everyday essential” services such as grocery and pharmacy. With an experienced management team, this investment product operates with historically high occupancy and looks for opportunities for organic growth, all resulting in historically stable investment performance.
Skyline’s private alternative investments have been providing investors with stable returns since their respective inception dates. To learn more about REIT investing and how it may help you reach your individual investment goals, Contact a Skyline representative today.
Conclusion
Whether you are looking to diversify your portfolio, generate additional income, or want to protect against market volatility, REITs can be a great alternative for those looking to invest in real estate.
As with any investment, it is important to do your due diligence when deciding whether a REIT can complement your existing investment portfolio and align with your investment goals.
About Skyline Group of Companies
Skyline Group of Companies (“Skyline”) is a fully integrated asset acquisition, management, development, and investment entity.
It is comprised of companies that provide services in real estate management and development, as well as clean energy management and development.
Skyline currently manages more than $8.23 billion across its real estate and clean energy platforms.
With approximately 1,000 employees across Canada, Skyline works to provide safe, clean, and comfortable places for tenants to call home, great places to do business, sustainable solutions for a greener future, and an engaging experience for its investors.
View Skyline’s 20th Anniversary celebration video to see how Skyline is grounded in real estate, powered by people, and growing for the future.
For more information about Skyline Group of Companies, please visit SkylineGroupOfCompanies.ca.
For media inquiries, please contact:
Cindy BeverlyVice President, Marketing & Communications
Skyline Group of Companies
5 Douglas Street, Suite 301
Guelph, ON N1H 2S8
519.826.0439 x602