The global pandemic hit the real estate market early and hard. The combination of retail lockdowns combined with work-from home quickly spread throughout major cities around the globe and created unprecedented uncertainty for the sector.

As lockdowns were implemented, the Vanguard Real Estate Index Fund ETF VNQ saw an immediate drop of 25% between February and March 2020.

Although real estate had fallen in value as an asset, True North Commercial REIT TNT.UN has managed to maintain an occupancy rate of over 97% and collect 99% rents during lockdowns.

True North, a real-estate investment trust, has a portfolio that consists entirely of office properties. There are 45 properties in the portfolio, totaling 4.7 millions square feet. 97% of these properties have a WALT of 4.7 years. 76% of True North’s revenue comes from government or strong credit-rated tenants.

Management’s goal has been to create stable, predictable cash flows that are supported by high-quality tenants in urban areas.

It offers investors an attractive, safe and secure investment option with a yield of around 8% at the time of writing. This stock has my full support. (See TNT.UN stock charts on TipRanks)

Office Real Estate Industry Outlook

The COVID-19 lockdowns have negatively impacted many industries, office real estate being one of them.

The common question is whether the work-from-home model will survive this crisis. According to PwC, 66% of Canadian respondents would rather work full-time in an office or work part time from their home.

The findings reflect that the market will come back, since people in general like to socialize and are suffering from “zoom fatigue.” PwC’s findings state that working from home can be productive, but is questionable in terms of long-term sustainability.

COVID-19 Impact, Durability

Throughout the pandemic, the REIT has performed surprisingly well, with 99.5% of contractual rents in Q1 and Q2 of 2021 being collected. The high quality tenant base that is either based in the public sector and/or well-capitalized is responsible for this.

Certain tenants require financial aid through programs like the Canada Emergency Rent Subsidy and Canadian Emergency Commercial Rent Assistance.

This program is now available until October 23. Only six tenants, that comprise a mere 0.03% of the REIT’s gross leasable area, participate in CERS.

CERS has six tenants. In 2019, the same property’s net operating income was $60.9m, and $59.7m in 2020. The pandemic impacted approximately nine months.

Again, this shows the remarkable durability of this office-based investment trust in real estate investing trust despite a worldwide pandemic.

Well Capitalized and Solid Financing Plan

The REIT remains well capitalized, at 57.4% indebtedness to gross book value (GBV), with an interest coverage ratio of just under 3.

Total assets amount to $1.4 billion. The average weighted interest rate is 3.4%, and the mortgage term is 3.6 years. It also has an at-the-market (ATM) equity program that allows it to sell $50 million worth of units to the public at management’s discretion.

These net proceeds will be used to finance future property acquisitions as well as other general purposes. The trust has $62.5 million in total liquidity as of June 30, 2021.

Bottom Line

True North Commercial REIT presents a relatively safe investment opportunity, with a tidy dividend.

Although it is entirely an office portfolio, its unique tenant base with mainly government and credit-rated clients allow it to be “pandemic proof.”

This is evident by its extremely low vacancy rate, and lack of government assistance needed by tenants.

Disclosure: Sean Tascatan did not hold any positions at the time this article was published.

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