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Why Invest in an Apartment REIT in Particular?



Apartments are considered the least risky class of real estate investment.  This is because:

  • There are many individual tenants so your risk to any specific tenant is low
  • Apartments are a "basic needs" industry. Everyone must live somewhere, but they don´t have to shop (retail), start new companies (office and industrial) or go on vacation (hotels)
  • As a basic needs industry, the Government of Canada, through CMHC, will guarantee mortgages to apartment buildings (for an insurance premium) to ensure that the people of Canada have access to safe, affordable housing by having a stable housing industry.  Few other industries in the country have this guarantee available and it is a core pillar of support and stability for apartment building investors.  As an apartment REIT investor, you directly benefit from these  government guaranteed mortgages
  • Apartments tend not to be heavily correlated with the underlying economy.  When the economy is soft, the basic need for housing doesn´t go away.  In many cases rental housing demand increases because people are less confident to buy a home and will rent.  This is not to suggest that the economy doesn´t matter for apartment investors, but the risks from the economy are much lower with a well diversified apartment portfolio than many other classes of real estate
  • Because of the above, apartments tend to be the most stable real estate class, with the best access to long term, reasonable cost debt that keeps this class of real estate as a "desired" investment.  This keeps investors interested in buying and holding them for the long term, with the result that apartment prices tend to be much less volatile than the prices of other class of real estate like offices, retail, industrial and hotel properties and are sought after in good and bad markets
  • They don´t build many apartments anymore.  One of the main reasons is that developers can make more money by building condominiums to sell to homeowners.  The existing apartment stock is aging but the population of Canada continues to rise and people need quality, well managed places to live but the supply is limited.
  • Apartments can be bought at a significant discount to their replacement cost. Very often, apartments can be bought at 60 percent of replacement cost and renovated at significantly less cost than buying new.

Centurion Apartment REIT only invests in the multi-residential rental apartment market in Canada. It doesn´t invest in other property classes like office, industrial, retail or hotels