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What will REITs do in 2012?

3 February 2012

Welcome to our final post in our miniseries about REITs! Over the last two weeks we’ve taken a break from home equity loans and second mortgages (at least on Mondays and Fridays) to talk about  the lesser-known Canadian investment that can have some great returns. We’ve looked at just what exactly a REIT is, the different types of REITs available in Canada and last time, we looked at how you can choose the REIT that’s right for you. Today to wrap it all up, we’re going to take a look at the only question left to ask – how will REITs do in 2012?

It’s a big question, especially if you’re thinking that this is the year to give REITs a try for the first time. Luckily, the outlook for this type of investment is great for the coming year, with some REITs getting an extra-worthy mention. REITs in general should give investors an ROI of at least 15% to 25% this coming year, says Alex Avery, an analyst at CIBC World Markets. Mr. Avery doesn’t go into specifics, but does say, “We see a confluence of factors that present a very favourable environment for Canadian property and REIT investments.”

You can see that he’s most likely right with just a quick look at how the REIT market did last year, especially when compared with other investing markets and other nations. At home, the REIT Index showed a total return of 22%, unlike the stock market which had total returns decreased by 9% over the year. That’s just slightly less than the returns REITs showed in 2010 when returns were up by 23%; and it’s certainly a lot less than the 55% on returns Canadian REITs had in 2010. Still, it goes to show that this will be the third straight year that REITs perform better than other, more traditional markets.

So, which REITs should you invest in?

According to Brad Cutsey, an analyst at Dundee Capital Markets, there are six Canadian REITs that are going to do especially well this year. Those are: H&R REIT; InterRent REIT; Canadian REIT; Allied Properties REIT; Boardwalk REIT; and Northern Property REIT. Of these companies InterRent has the lowest payout at 45%, while Allied Properties has a payout much higher at 81%. All of them though have enough cash to keep them on the positive (and growing) side of things for a long time, and they’re all located in real estate markets that are doing very well. Some others that are also worth a look according to Mr. Cutsey? RioCan REIT, Calloway REIT, First Capital Realty Inc., and Brookfield Offices Property Canada.


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