PROREIT: A Steady Dividend and Industrial Growth Machine in Secondary Markets

In a world of economic uncertainty, investors crave stability. PRO Real Estate Investment Trust (PROREIT) (TSX: PRV.UN) offers both: a consistent dividend stream and a growth-oriented strategy focused on industrial real estate in secondary markets. With a track record of disciplined capital allocation and a portfolio increasingly tilted toward high-demand industrial assets, PROREIT is positioned to deliver resilient returns. Here’s why this REIT deserves a closer look—and why now could be the time to act.

Dividend Consistency: A Foundation of Trust

PROREIT’s dividend policy is a beacon of stability. Since late 2023, the REIT has maintained a monthly distribution of $0.0375 per unit, translating to an annualized yield of 4.7% at current prices. This consistency is underpinned by strong fundamentals:

• AFFO Coverage: For fiscal 2024, the AFFO payout ratio (Basic) was 94.6%, comfortably within a sustainable range. While this rose slightly to 96.1% in Q4 due to higher leasing costs, the payout remains well-covered.
• January 2025 Distribution: The $0.0375 payment was reaffirmed in January 2025, signaling confidence in cash flow generation.

This reliability makes PROREIT a compelling option for income-focused investors, particularly in a low-interest-rate environment.

Industrial Acquisitions: Fueling Growth in Secondary Markets

PROREIT’s growth engine is its relentless focus on industrial real estate in secondary markets—regions like Winnipeg, Halifax, and Atlantic Canada where demand is surging but competition is less intense. Recent moves underscore this strategy:

The Winnipeg Acquisition: A Game-Changer

In early 2025, PROREIT agreed to acquire six industrial properties in Winnipeg totaling 678,000 sq. ft. for $96.5 million. Key details include:
- Financing: A $63M secured credit facility (fixed at ~4.4%) and $40M raised via equity issuance to Parkit Enterprise Inc., a strategic partner.
- Portfolio Impact: Industrial assets will now represent 88% of GLA and 83% of base rent, advancing PROREIT’s goal of hitting 90% industrial base rent by 2027.
- Strategic Partnership: Parkit gains a board seat, deepening PROREIT’s ties to industrial developers and unlocking future deal flow.

This deal exemplifies PROREIT’s ability to execute accretive growth: same-property NOI for industrial assets rose 5.9% year-over-year in Q1 2025, while leasing spreads averaged 34%+, far exceeding inflation.

Why Secondary Markets Are the Sweet Spot

PROREIT’s focus on secondary markets isn’t accidental. These regions offer:
1. Strong Demand: Industrial vacancy rates in PROREIT’s portfolio (e.g., 2.9% for small-bay warehouses) are below Canada’s national average of 4.5%.
2. Lower Competition: Secondary markets see fewer institutional players, allowing PROREIT to acquire undervalued assets.
3. Tenant Stability: PROREIT’s occupancy rate remains 97.7%, with leases averaging 4.5 years to maturity, ensuring predictable cash flows.

Moreover, secondary markets like Halifax (contributing 52.6% of base rent) are benefiting from supply chain relocations and e-commerce expansion. With rent growth in Atlantic Canada at 19.4% year-over-year, this is a trend that’s far from peaking.

A Resilient Balance Sheet, Ready for Growth

PROREIT’s financial discipline ensures it can weather storms:
- Debt Metrics: Total debt is 49.3% of assets, well below the 60% threshold that often triggers investor concern. The Adjusted Debt to EBITDA ratio improved to 9.0x in Q1 2025, signaling flexibility to borrow more if needed.
- Capital Recycling: In Q1 alone, PROREIT sold $12.4M of non-core assets, redirecting capital to industrial growth. Over the past year, it has sold $71.2M of non-strategic properties, fueling debt reduction and acquisitions.
- Interest Rate Management: With a weighted average interest rate of 3.91%, PROREIT is insulated from rising rates compared to peers.

This balance sheet strength allows PROREIT to pursue its $2 billion asset target without over-leveraging.

Risks to Consider—and Why They’re Manageable

No investment is risk-free. Key concerns include:
1. Interest Rate Pressure: While PROREIT’s current rates are low, future refinancing costs could rise. However, its fixed-rate mortgages and conservative leverage mitigate this.
2. Leasing Costs: Higher tenant improvement costs in 2024 pressured AFFO slightly. PROREIT’s focus on long-term leases (e.g., a 15-year deal in Ontario) reduces turnover costs.

The Bottom Line: A Rare Combination of Safety and Growth

PROREIT offers investors a rare blend:
- A consistent dividend backed by a 94% AFFO payout ratio.
- Strategic industrial growth in underserved secondary markets, with 88% of GLA now industrial and rising.
- A resilient balance sheet that leaves room to scale further.

At a P/FFO ratio of 10.5x (well below the sector average of 12-15x), PROREIT is priced for growth. With its Winnipeg deal set to close in Q2 2025 and a pipeline of accretive acquisitions, this is a REIT poised to outperform.

Action to Take: With a dividend yield of 4.7% and a growth catalyst in place, PROREIT is a buy for income investors and growth seekers alike. Don’t miss the chance to profit from Canada’s industrial boom—before others catch on.

Investment thesis supported by PROREIT’s Q1 2025 results and strategic updates.