What to look for when identifying REIT opportunities

With performance in the Canadian stock market being so closely linked to the unpredictable energy sector, it is little wonder that domestic investors are seeking out alternative investment opportunities.  With the low return landscape expected to run for some time in the public market, investors are scrambling to every corner of the market in an attempt to generate yield.

Although real estate-based investments have become increasingly popular in recent times, most investors don’t have the time (or inclination) to own and manage a portfolio of properties. It’s for that reason that more Canadian investors are placing their funds into real estate investment trusts (REITs). But what should an investor consider when identifying a REIT in which to invest.

“One of the things we advise investors to think about is whether they would be best suited to a private or public REIT opportunity,” says Jason Roque, CEO at Equiton. “With a public REIT, you are tied to the emotions of the stock market, but a private REIT is able to better reflect the reality of the real estate marketplace, which is obviously very strong in Canada. Private REITs also tend to provide potentially better risk-adjusted returns over the long-term.”

Roque also advises potential investors to research the REIT’s management team. Management experience is critically important and, just like in any company, a REIT is only as good as the people running the business. 

Governance is another important factor that savvy investors should look into before they make a commitment. “You should take the time to find out what kind of investor protection the fund has,” Roque says. “For example, our REIT has a board of directors and trustees, the majority of whom are independent. They are there to represent the investors outside of the management team; they give investors the peace of mind that their best interests are being taken care of.”