U.S. APARTMENT INVESTING FOR CANADIANS
Investments in U.S. Real Estate Income Trusts (REITs) provide the diversification of U.S. dollar
denominated assets and at times, tax advantaged income and distributions.
Investments in U.S. Real Estate Income
Trusts (REITs) provide the diversi;cation of
U.S. dollar denominated assets and at times,
tax advantaged income and distributions.
;ere are public and private US REITs
operating in di;erent segments of real estate–
o;ce, industrial, retail and apartments. US
apartment REITs are becoming increasing
popular due to declining US homeownership
rates following the “great recession” and
increased renter demand as millennials enter
their prime rental years.
;ere are both publicly traded and privately
o;ered US apartment REITs. Private REITs are
gaining in popularity as they have the advantage
of being redeemed at a more stable price – a
price that is directly related to the value of the
underlying real estate. Public REIT pricing
experiences market price volatility as share values
can be a;ected by changing market sentiments
as opposed to changes in real estate value.
Most private REITs available to Canadian
investors invest in Canadian real estate. For
private Canadian apartment REITs this can
create problems ;nding good investments
given how few rental apartments have been
built in Canada over the past 30 years.
In general, the United States apartment
market is 30 times larger than the Canadian
market with approximately 300,000 new
apartments being delivered annually over the
past 30 years as compared to the Canadian
market which has been hard pressed to
average 10,000 new apartments per year over
the same time frame. In fact, most Canadian
rental apartments were built over 30 years
ago, before clothes washers and dryers were
common in suite amenities and this product
now su;ers from “functional obsolescence”
and cannot obtain top rents, even when fully
renovated. Conversely, US apartment stock
has grown dramatically since 1985 when in
suite laundry became the norm and US older
product can therefore be renovated to a much
higher standard and much higher rents.
Consider that in the United States Avalon-
Bay Communities and Equity Residential,
the two largest public apartment REITs both
have market caps of close to $25 billion
USD and approximately 85,000 apartments
each. ;e largest public Canadian apartment
REIT is CAPREIT with a market cap of
approximately $4.3 billion Canadian dollars.
;is demonstrates the size and scale of the
American apartment REIT market and speaks
to the much larger investment opportunity
that is provided south of the border.
Investment in US apartments via a private
REIT is available to Canadian investors.
RISE Properties Trust is a private Canadian
REIT focused on apartments in Seattle,
Washington. RISE has one of the most
experienced management teams in the industry
with over 80 years of buying, renovating and
managing apartments in Seattle and other US
markets. RISE has a vertically integrated
platform, with acquisitions, due diligence,
property management and asset management
all handled “in house”. Management owns
almost 20% of the REIT, suggesting strong
alignment of interests with investors.
RISE has achieved excellent returns with a
5-year annual compounded rate of return of
approximately 16.5% and distribution increases
of 120% since the fund’s inception in 2012.
MARKET INSIGHTS PETER J. FIGURA, MBA, DIRECTOR OF SALES, RISE PROPERTIES
Peter J. Figura, MBA, Director of Sales