Canada’s largest owner of rental apartments, Boardwalk Inc. of Calgary, has become a real estate investment trust, joining a recent rush of real estate companies into the fast-growing REIT sector.

The Boardwalk move makes sense as the company, which owns 39,000 apartments in hundreds of buildings from Montreal and Toronto to Alberta, seeks funding for future acquisitions in an increasingly competitive residential market.

The North American REIT (NAREIT) Index posted a total return of 38.5 percent last year, outperforming the S&P 500 and the Dow Jones Industrial Average for the fourth straight year.

Boardwalk Equities will convert to an income trust by the end of the first quarter of this year, according to chief executive officer Sam Kolias.

Kolias his brother Van, who own a 31 percent stake in the company, may divest a “significant portion” of their holding for tax and other reasons prior to the conversion, he confirmed.

Kolias said the reorganization will give Boardwalk greater access to public markets to fund property purchases and lower the cost of capital.

For the third quarter ended Sept. 30, 2003, Boardwalk reported revenues of $68.7 million and funds from operations, a key performance measurement for real estate companies, of $19.7 million. Total rental revenues for the first nine months of last year were $201.1 million, up 13.24 percent from the same period in 2002.

The company is in negotiations to acquire a number of properties, mainly in Quebec.

Meanwhile other new Canadian REITs, such as Calloway REIT and Northern Properties REIT, continue on an aggressive buying pace.

Calgary-based Calloway REIT has snapped up 21 retail shopping malls in the past few months in Ontario, Manitoba, Alberta and British Columbia. The deal was done with First Pro Shopping Centres in two phases, with the second package purchase of 12 centers expected to close in mid-February.

The unit price for Calloway REIT have shot up from around $10 per unit last year to $14 per unit, according to Mike Storey, president and chief executive officer of Calloway.

Northern Property Real Estate Investment Trust recently acquired 138 apartment units in Fort McMurray, Alberta – yes that is around $95,000 per apartment. It was an all-cash deal of $12.5 million and features a forecasted capitalization rate of 10.9 percent.

Northern Property REIT invests primarily in residential rental properties located in the north, with government or corporate leases in place. In Nunavut, where NP REIT is the largest landlord, the typical rent for a two-bedroom apartment is $1,200 a month, the highest in Canada.

For those who can’t buy real estate, REITs offer a good way to get into the market with investments as low as $2,000, based on the price per unit. 

Canadian Real Estate Investment Trusts are public companies, all listed on the Toronto Stock Exchange, that finance, develop and/or buy and operate real estate properties. Their “units” can easily be bought and sold, and this liquidity is a big plus over owning real estate outright. REITs also give investors a chance to invest in different forms of real estate, since their money is pooled with many others to buy properties, from apartments and industrial parks to malls and hotels. However, there are REITs that specialize in a single sector, such as rental housing or shopping malls. 

What makes REITs especially attractive is that much of the income is tax-sheltered. The tax savings come largely from depreciation on the property, known as capital cost allowance (CCA), that flows through to unit holders. When an investor sells units, he or she will have to repay some of those tax savings. Nevertheless, REITs are seen as an effective investment for those looking for high-yield, partially tax-sheltered income.

Frank O’Brien can be reached at


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