Category Archives: Save Taxes

Which Account to Best Buy REITs In?

Where is the Best Place to Buy REITs?

REITs or real estate investment trusts allow you to easily invest in real estate for rental income. You can buy residential REITs, retail REITs, healthcare REITs, office REITs, etc. Generally, REITs pay out high income called distributions. However, they are different from stocks that pay out dividends.

Investors generally buy REITs for their high income. But investors need to consider where to buy high-yield REITs to avoid as much tax as possible for the high income. That is, to buy in a non-registered, TFSA, or RRSP account. First, we need to gain a better understanding of REIT distributions.

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How are REIT Distributions Different from Stock Dividends?

REIT distributions may consist of other income, foreign non-business income, capital gains, and return of capital. Other income and foreign non-business income are taxed at your marginal tax rate, while capital gains are taxed at half your marginal tax rate.

However, the return of capital portion is not taxed until the adjusted cost basis goes to negative. If you buy a Canadian REIT in a non-registered (taxable) account, the T3 you receive will help you determine how much to deduct from the adjusted cost basis for the year.

Where to buy Canadian REITs?

Because the return of capital part of the distribution reduces the adjusted cost basis, investors should consider buying REITs with a big percentage of return of capital in the distribution in the non-registered account. Read More

Plaza Retail REIT: Stock Analysis

This article was last updated on June 29, 2016.

About Plaza Retail REIT

Plaza Retail REIT logo

Plaza Retail REIT (TSX:PLZ.UN) is based in Fredericton, New Brunswick in Eastern Canada. It rents out retail properties such as strip plazas, single-use properties, and enclosed malls. Plaza’s unique business strategy drives its business via value-add opportunities to develop and redevelop retail real estate mainly in Eastern Canada.

Plaza Retail maybe a new name to you because it is a small REIT with a market capitalization of $473 million. On the Plaza Retail website, it states “Management owns a significant stake in the company.” So, the management’s interests are aligned with unitholders’ interests.

The REIT pays out monthly distributions that can be reinvested at a 3% discount if you enroll in the divistribution reinvestment plan. At $4.87 per unit, it yields 5.34% .

Retail Properties

At the end of Q1 2016, the REIT had interests in 302 properties, totaling 7.1 million square feet. Over half (exactly 51.9%) of Plaza Retail’s gross leasable area (GLA) is in Québec and New Brunswick. That said, as shown in the “Summary of Properties”, the GLA between the two provinces were diversified across 147 properties.

Plaza Retail REIT gross leasable area breakdown

Source data: Plaza Retail REIT Q1 2016 Report – p2

Plaza Retail REIT Properties Summary

Source: Plaza Retail REIT Q1 2016 Report – p2

Plaza Retail primarily leases to national retailers (90.5% of tenancy mix) with a focus on the consumer staples sector. So, the Target exit from Canada and the Future Shops to Best Buy rebranding has had little impact on Plaza Retail. Read More