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Canadian Apartment Properties Real Estate Investment Trust (CAR.UN)
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Granite Real Estate Investment Trust (GRT.UN)
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Dream Industrial Real Estate Investment Trust (DIR.UN)
Why has the sector dropped so much in value? What conditions need to exist for them to recover their value.
Is the income at risk of decreasing?
The REITs space has come under pressure as interest rates have risen over the past few years. High and rising interest rates are problematic for REITs for a few main reasons: The first is it makes acquiring new properties more difficult, as the cost of borrowing increases, the second is it burdens their profits as existing debt becomes more expensive, and thirdly it devalues properties on their balance sheet as capital rates rise (higher cap rates decrease property values).
Decreasing rates should help increase the balance sheets and the acquisitive strategies of REITs. In addition, we could also see REITs' valuations expand if rates decline, as investors seek yield in the form of equities/REITs once again. Several REITs have the capacity to continue servicing their distributions, and we do not see imminent distribution cuts on high-quality REITs such as DIR.UN, GRT.UN, CAR.UN, and others.