Canadian business owners who own a significant amount of property could be overlooking an untapped resource for growth: the land their business stands on and the buildings in which their business operates.
Within the real estate industry in Canada, few options exist to help owners realize the full worth of their property assets. Establishing a real estate investment trust (REIT) has the potential to help you unlock value in your business.
What is a REIT?
A REIT is a structure that (if formed as a mutual fund trust1) allows many investors (domestic and international) to invest in real estate in a tax-efficient manner. It can be publicly listed on a securities exchange or privately held, and is RRSP-eligible for unitholders.
A public REIT can offer more liquidity for unitholders, allowing them to buy and sell units on the open market. While a private REIT may not provide the same level of liquidity, it can be less expensive to establish, subject to fewer regulatory and reporting requirements, and is not restricted in the types of real estate activities they can invest in (i.e. condo developments, hotels, retirement housing, etc.).
How can establishing a REIT help a business?
Over the last few years, a number of Canadian companies have created a REIT as part of a larger business strategy, including Dilawri Group, which established Automotive Properties REIT in 2015; Canadian Tire Corporation, which established CT REIT in 2013; and Loblaw Companies Limited, which established Choice Properties REIT in 2012.