Canada REIT Investing Guide
the REIT investing in Canada. The REIT (Real Estate Investment Trust) is the "flow-through entity that owns the income-producing real estate" — the "REIT distributes the majority of the taxable income to the unitholders". The Canadian REIT market includes the "retail REITs (the RioCan, the SmartCentres, the Choice Properties)", the "residential REITs (the CAPREIT, the Boardwalk, the Minto)", the "office REITs (the Allied, the Dream Office, the Cominar)", the "industrial REITs (the Granite, the Dream Industrial, the Summit)", and the "healthcare REITs (the NorthWest Healthcare, the Chartwell, the Sienna)". The average distribution yield is 4% to 8% (the "monthly or the quarterly distributions"). The distribution tax treatment: the "taxable dividends", the "capital gains", the return of capital (ROC), and the "foreign income". The ROC is the "non-taxable distribution that reduces the adjusted cost base (ACB)" — the "ROC is taxed as the capital gain when the REIT units are sold or when the ACB reaches zero".
Major Canadian REITs
- RioCan REIT (REI.UN): The "largest Canadian REIT" — the "retail and the mixed-use properties" — the "distribution yield: 5.5% to 6.5%" — the "portfolio: 200+ properties across Canada".
- CAPREIT (CAR.UN): The "largest residential REIT in Canada" — the "apartment buildings in the Ontario, the Quebec, the BC, and the Alberta" — the "distribution yield: 3.0% to 4.0%".
- Allied Properties REIT (AP.UN): The "urban office and the mixed-use properties" — the "focus on the creative office space in the Toronto, the Montreal, and the Vancouver" — the "distribution yield: 4.5% to 5.5%".
- Granite REIT (GRT.UN): The "industrial and the logistics properties" — the "portfolio focused on the e-commerce and the warehouse properties" — the "distribution yield: 4.0% to 5.0%".
- Choice Properties REIT (CHP.UN): The "Loblaw-owned REIT" — the "grocery-anchored retail properties" — the "distribution yield: 5.0% to 6.0%".
REIT Distribution Taxation
- Taxable dividends: The "portion of the distribution that is paid from the REIT's taxable income" — the "taxed as the eligible dividends (eligible dividend tax credit applies)".
- Capital gains: The "portion of the distribution that is paid from the REIT's realized capital gains" — the "taxed at the 50% inclusion rate".
- Return of capital (ROC): The "portion of the distribution that is NOT from the REIT's income" — the "represents the return of the unitholder's original investment". The "ROC is NOT taxed in the year received" — the "ROC reduces the ACB of the REIT units". When the "ACB reaches zero, the future ROC is taxed as the capital gain".
- Foreign income: The "US and the international property income" — the "subject to the foreign withholding tax" — the "foreign tax credit may apply".
REIT ETFs
- XRE (iShares Canadian REIT Index ETF): The "market-cap weighted REIT index" — the "MER 0.61%" — the "distribution yield: 4.5% to 5.5%".
- ZRE (BMO Equal Weight REITs Index ETF): The "equal-weight REIT index" — the "MER 0.61%" — the "distribution yield: 4.5% to 5.5%".
- VRE (Vanguard Canadian REIT Index ETF): The "market-cap weighted" — the "MER 0.39%" — the "distribution yield: 4.5% to 5.5%".
For the direct real estate investing and the property tax, see our Property Tax Guide →. For the dividend investing and the eligible dividends, see our Dividend Investing Guide →.