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One of Canada's Top REITs Calls it a Day

If You Want to Talk Performance, $10,000 Invested in 1993 Was Worth $261,000 This Week, Says Analyst in Goodbye Note to CREIT
May 11, 2018
One of Canada's oldest real estate investment trusts said goodbye to the public markets this week, and RBC Capital Markets analyst Neil Downey used the opportunity to applaud Canadian Real Estate Investment Trust for its track record.

The proof of its success is in the performance over 24 years, said Downey in a note this week titled "So long to an old friend."

CREIT, which was first listed in September 1993, delivered funds from operations per unit and compound annual growth rate of eight percent over its history. The distribution growth was five percent.

"To put this track record into perspective, a $10,000 investment in CREIT in September 1993 was worth $229,000 on December 31, 2017, and it is worth $261,000 today," said Downey.

On May 4, Choice Properties REIT and CREIT completed the plan of arrangement, which will result in Choice becoming Canada's largest REIT with an enterprise value of $16 billion.

The chief executive of CREIT is taking over the helm of the combined entity, which will have 754 properties.

"This transformational transaction provides a tremendous opportunity for growth," said Stephen Johnson, who will also serve as president of Choice, as the deal closed.

Downey said looking back at 21 years of covering the company there are some lessons to be learned.

The first is that "good governance cannot be regulated or legislated. Rather it must be part of an entity's DNA," said the analyst.

Secondly, the single most important force in the accumulation of wealth is the power of compounding over time.

His third point is that "building a good quality REIT and delivering industry-leading returns takes a lot of time, patience and operational execution (The real estate industry has a tendency to focus on the deals, which is not necessarily where the money is made over the long-term)."

The analyst's final point was a "timeless" REIT rule. "A good REIT trading below net asset value is usually a good investment," said Downey.

Garry Marr, Toronto Market Reporter  CoStar Group   

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