A Smart Investment in Real Estate – Smart REIT

A Smart REIT for Retirement

To be successful at investing we have to think like burglars and always be on the lookout for windows of opportunity. One such opportunity comes in the form of buying real estate. Owning a rental property is a great way to earn some extra income. But a more stable and passive way to invest in property is to own REITs, which are companies that hold many different properties and typically pay monthly distributions to their unit holders. One of these companies is called Smart REIT. And last week I contributed $3,000 to my RRSP and purchased 111 units of SmartREIT at $29 each + $9.99 for commission. 😀 It currently pays a fetching 5.5% annual dividend, and I plan to hold this name indefinitely for my retirement income needs.

SmartREIT (SRU.UN) used to be called Calloway REIT, but earlier this year it acquired SmartCentres in a $1.16 billion deal and changed its name. The take-over was to acquire 24 shopping centres, mainly in Ontario and Quebec, making the new company one of the largest REITs in the country with 149 properties under management and $8.3 billion of total assets.

A large part of a successful real estate business is finding high quality tenants. A quick look at the top 10 tenants for this company, based on gross rental revenues, shows that Smart REIT is working with some excellent renters with very traditional business models and high profitability.

Smart REIT’s properties have approximately 99% occupancy right now and the weighted average lease term is 7.5 years. And with some of the most recognizable retail chains in Canada, this real estate trust can expect to earn growing, or at least consistent rental incomes for many years to come. 🙂

I had originally purchased some units of Calloway a few years ago, but I decided to buy more recently so I would have enough units to DRIP. Smart REIT is currently trading at 17.3x price to earnings, and 1.2x price to book. It’s probably not the best time to jump in right now because the valuation isn’t really cheap. But it has 5 consecutive years of revenue growth and it remains attractive when compared to other large REITs.

If the plan is to hold a stock for retirement purposes then I don’t mind paying full value for it today. As Warren Buffett once said, “it’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.” Real estate in the commercial and retail landscape is a terrific asset that’s inflation protected, earns a stable income, and more resistant to recessions than other parts of the market. No matter how good or bad the economy gets people will always want to buy cheaper goods and services. Since many workers like myself don’t have a defined benefit pension, the next best thing for us is to consistently acquire high-quality investments such as Smart REIT and build up a personal pension fund over time. 😉

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