Late to the party compared to the U.S., Canadian Real Estate
Investment Trusts (REITs) were first established in 1993. Unlike U.S.
REITs, which are corporations, Canadian REITs are unincorporated
investment trusts. Otherwise, U.S. and Canadian REITs (pronounced “reets”)
are similar.
Differences U.S. vs. Canadian REITs
Both U.S. and Canadian REITS do not pay federal income taxes as long
as they distribute a specified percentage of net taxable income to
shareholders. However, the minimum percentage is 90% for U.S. REITs,
but 100% for Canadian REITS.
Because Canadian REITs are not incorporated, in theory, unitholders
are liable for their debts and other liabilities. However, most REITs
take steps to shield unitholders from REIT liabilities.
The Canadian government limits foreign ownership of REITs to 49%. If
that limit is exceeded, the trustees decide which foreign owners must
dispose of their shares.
While U.S. REITs typically pay quarterly dividends, most Canadian
REITs pay monthly.
Tax Issues
The Canadian government requires that REITs withhold 15% of
shareholder distributions defined as return on capital. The tax
withholding applies to REITs held in tax-sheltered as well as regular
accounts. U.S. citizens may claim a foreign tax credit up to $300 for
single tax payers and $800 for married couples filing jointly. Those
limits apply to the total of all foreign dividends received during a
year, not to each REIT. For amounts above those limits, U.S. taxpayers
must file IRS Form 1116. The credit received from Form 1116 depends in
each filer’s tax situation.
Return of capital distributions are not subject to withholding.
However, since REITs typically don’t classify distributions as return
of capital until the following year, U.S. holders must apply
for a refund from the Canada Revenue Agency.
The withholding issue aside, Canadian REITs offer a significant
advantage to U.S. investors in that distributions are subject the
maximum 15% capital gains tax rate, not the ordinary income rate that
applies to dividends received from U.S. REITs.
Real Estate Operating Companies
A few publicly traded Canadian real estate operators are organized as
Real Estate Operating Companies (REOCs) instead of REITs. The
advantage to the REOC is that it is not required to pay out all of its
taxable income to shareholders. That gives the REOC more flexibility
in terms of allocating its resources.
Here are
the publicly traded Canadian REITs and REOCs, listed in order of
dividend yields.
|
Ticker |
Name |
Description |
Div Yld |
|
INO.UN |
Inovalis REIT |
REIT - Europe Commericial |
10.8% |
|
TNT. UN |
True North Commerial REIT |
REIT - Commercial |
9.3% |
|
SOT.UN |
Slate Office |
REIT - Community Shopping Centers |
8.0% |
|
BTM.UN |
BTB REIT |
REIT - Diversified |
7.6% |
|
PRV.UN |
PRO REIT |
REIT - Commercial |
6.5% |
|
SRU.UN |
SmartCentres REIT |
REIT - Retail |
6.3% |
|
NXR.UN |
Nexus REIT |
REIT - Diversified |
5.4% |
|
CRR.UN |
Crombie Real Estate Investment Trust |
REIT - Office, Retail & Mixed Use |
5.3% |
|
CSH.UN |
Chartwell Retirement Housing REIT |
REIT - Senior Housing Communities |
5.1% |
|
CHP.UN |
Choice Properties |
REIT - Retail |
5.0% |
|
CUF.UN |
Cominar Real Estate Investment Trust |
REIT - Office, Industrial, & Retail |
5.0% |
|
DIR.UN |
Dream Industrial REIT |
REIT- Industrial |
5.0% |
|
AX.UN |
Artis Real Estate Investment Trust |
REIT - Office, Industrial, & Retail |
4.9% |
|
CRT.UN |
CT
REIT |
REIT - Retail |
4.9% |
|
REI.UN |
RioCan Real Estate Investment Trust |
REIT - Community Shopping Centers |
4.6% |
|
AP.UN |
Allied Properties REIT |
REIT - Urban Office Properties |
4.5% |
|
MRT.UN |
Morguard Real Estate Inv. |
REIT - Office, Retail & Mixed Use |
4.5% |
|
D.UN |
Dream Office REIT |
REIT - Office |
4.3% |
|
HR.UN |
H&R Real Estate Investment Trust |
REIT - Office, Industrial, & Retail |
4.2% |
|
KMP |
Killam Apartment |
REOC - Multi-Family & Mfg. Homes |
3.7% |
|
GRT.UN |
Granite Real Estate |
REIT - Diversified |
3.5% |
|
CAR.UN |
Canadian Apartment Properties |
REIT - Residential |
3.0% |
|
FCR.UN |
First Capital Realty Inc. |
REOC - Community Shopping Centers |
2.9% |
|
SMU.UN |
Summit Industrial Income |
REIT - Industrial |
2.9% |
|
IIP.UN |
InterRent REIT |
REIT- Residential |
2.6% |
|
MI.UN |
Minto Apartment REIT |
REIT - Residential |
2.6% |
|
BEI.UN |
Boardwalk REIT |
REIT - Multi-Family Residential |
2.2% |
