Canadian Apartment REIT: Bull Case Remains Firmly Intact

Core Thesis - The investment thesis for Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) is based on compelling valuation and strong tailwinds that offset interest rate pressures, leading to a Buy rating after 18 months of being on the sidelines [2][27] - CAPREIT has delivered a total return of 10.79%, approximately double that of the iShares S&P/TSX Capped REIT ETF [2] Q1-2024 Performance - In Q1-2024, CAPREIT reported an occupancy rate of 98.4% and a stable overall NAV, with net operating income (NOI) increasing by 7.3% [7][9] - The occupied average monthly rent rose by 6.5% to $1,539, while NOI margins improved to 61.9% [9][10] Rental Dynamics - The weighted average increase in rents on suite turnovers was 23.2%, indicating strong demand despite modest increases on lease renewals due to rent control [14][19] - The gap between in-place rents and market rents provides a clear growth trajectory for CAPREIT, with expectations of same property NOI growth of at least 5% annually [20] Market Context - Canada is experiencing rapid population growth through immigration, contributing to a challenging housing market with limited new construction [20][22] - Despite the difficult market conditions, CAPREIT is positioned as a strong investment opportunity, with a well-balanced mortgage portfolio and a debt maturity profile that is less problematic than a year ago [22][23] Future Outlook - The expectation is for CAPREIT's stock price to reach at least $60 over the next five years, even without further interest rate cuts, making it an appealing long-term investment [27]