PriceSensitive

Canadian Apartment Properties REIT raises $740M through asset sale

Market News, Real Estate
TSX:CAR.UN
15 July 2024 11:16 (EST)
A housing community surrounded by trees.

(Source: Adobe Stock)

Canadian Apartment Properties REIT (TSX:CAR.UN) will sell its C$740 million manufactured home community portfolio to TPG Real Estate.

Consideration for the portfolio, which holds 12,138 residential lots across 75 communities throughout Canada, will be delivered through C$600 million in cash and an interest-only vendor take-back loan of C$140 million bearing interest at a rate of 3 per cent per year.

CAPREIT will allocate the proceeds to:

The companies expect to close the transaction in Q4 2024.

Leadership insights

“We look forward to a smooth and successful transition with TPG Real Estate. TPG Real Estate has advised CAPREIT that, as a longstanding investor in the Canadian real estate sector, it intends to partner with the existing team to manage and grow the manufactured home community portfolio going forward,” Mark Kenney, president and chief executive officer of Canadian Apartment Properties REIT, said in a statement.

“We intend to use the net proceeds from this strategic sale to strengthen our balance sheet, enhance our liquidity and further fuel our high-grading capital allocation strategy,” added Julian Schonfeldt, chief investment officer of Canadian Apartment Properties REIT. “This pivotal transaction is not only providing CAPREIT with a significant amount of capital, but it also increases management’s focus as a pure-play apartment REIT. We’re excited to be simplifying our story and dedicating our resources to our core business, where our competitive advantages are strongest.”

Does Canadian Apartment Properties REIT look like a good investment?

From a high level, an investment in CAPREIT grants you exposure to a value-conscious management team committed to doing right by shareholders.

Management has proven this by buying back stock at a discount to net asset value, keeping debt controlled (slide 34, 37), making acquisitions at a discount to replacement costs, and making sales at a premium to net asset value, while earning an extremely high 98.4 per cent occupancy rate as of March 31, 2024, and executing strategic moves towards the REIT’s long-term future.

Case in point, the company shifted its focus from revenue growth to earnings growth in 2023, and has since recycled hundreds of millions in non-core assets to high-quality, recently constructed rental apartment properties in Canada, purposefully acting as opposed to reacting to the high interest rate environment. 

Shares include a 3.1 per cent dividend that remained stable throughout the pandemic and are currently trading at a discount to net asset value, which the company estimates at C$55 as of Q1 2024. This discrepancy may widen should the market continue to turn a blind eye, as it has over the past six years, to CAPREIT’s tireless pursuit of value.

Continue your due diligence by reading the REIT’s latest investor presentation.

About Canadian Apartment Properties REIT

Canadian Apartment Properties REIT is Canada’s largest publicly traded provider of quality rental housing. As of March 31, 2024, the REIT owns approximately 64,200 residential apartment suites, townhomes and manufactured home community sites across Canada and the Netherlands valued at C$16.7 billion.

Shares of Canadian Apartment Properties REIT (TSX:CAR.UN) are up by 0.19 per cent, trading at C$47.40 per share as of 10:50 am ET. The stock has been range-bound between approximately C$50 and C$60 since 2018, mostly because of the pandemic and high inflation, but has rewarded shareholders with about a 100 per cent return over the past decade.

Join the discussion: Find out what everybody’s saying about this real estate stock on the Canadian Apartment Properties REIT Bullboard and check out Stockhouse’s stock forums and message boards.

The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.

(Top photo: Adobe Stock)


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