RIOCAN REAL ESTATE INVESTMENT TRUST $26.84 (Toronto symbol REI.UN; Units outstanding: 325.2 million; Market cap: $8.7 billion; TSINetwork Rating: Average; Dividend yield: 5.3%; ww.riocan.com) is Canada’s largest real estate investment trust.
For the three months ended September 30, 2016, the REIT spent $451 million to acquire new properties. That’s mainly why its revenue rose 6.9% in the quarter, to $282.2 million from $263.9 million a year earlier.
Cash flow increased 1.0%, to $127.2 million from $126.0 million a year earlier. Due to more units outstanding, cash flow per unit was unchanged at $0.39.
To counter the negative impact online shopping has had on mall traffic, RioCan continues to redevelop some of its retail properties to include office and residential space. The trust has also begun to seek out mall tenants that sell experiences instead of goods. That includes cinemas and fitness clubs. As well, it will add more food stores, which should increase repeat visits to its shopping centres.
RioCan trades at 18.0 times its forecast 2017 cash flow of $1.49 a unit. That’s reasonable in light of the REIT’s highly profitable properties. The units yield 5.3%.
RioCan is a buy.
ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $35.65 (Toronto symbol AP.UN; Units outstanding: 84.7 million; Market cap: $3.0 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www. alliedreit.com) owns 155 office buildings, mainly in major Canadian cities. Most of those properties are classified as Class I buildings, and together they comprise over 11.8 million square feet of leasable area.
Class I refers to 19thand early-20th-century industrial buildings that are now used as office space. They often have exposed beams and brick walls, and hardwood floors.
Allied increased its acquisition activity in 2016: for the first nine months of the year, it spent $376.7 million on seven properties in major Canadian cities, including Calgary, Toronto and Montreal. In 2015, it spend $164.8 million. Those new buildings helped to raise the trust’s revenue by 6.0% in the quarter ended September 30, 2016, to $96.3 million from $90.9 million a year earlier. Cash flow rose slightly, to $35.9 million. Cash flow per unit fell 4.3%, to $0.44 from $0.46. That was because Allied issued more shares as part of its recent acquisitions.
With the January 2017 payment, the REIT raised its monthly distribution by 2.0%, to $0.1275 from $0.125. The annualized distribution of $1.53 per unit yields 4.3%. Allied trades at 17.3 times the REIT’s forecast 2017 cash flow of $2.06 a unit.
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