RioCan REIT is ready for future growth with the upcoming sale of its U.S. malls. The trust will not only pay down debt, but half of the proceeds will go to buy out its joint-venture partner in 35 Canadian malls. The U.S. sales will also protect monthly distributions for investors. RioCan REIT remains a buy.
RIOCAN REAL ESTATE INVESTMENT TRUST (Toronto symbol REI.UN; www.riocan.com) owns all or part of 305 shopping centres in Canada, including 16 under development.
The trust recently agreed to sell its 49 U.S. malls for $1.2 billion (Canadian). It expects to complete the sale in April 2016.
RioCan will put $510 million of the proceeds toward its recent deal to buy out its joint venture with U.S.-based Kimco Realty (New York symbol KIM). Formed in 2000, this business jointly owns and manages 35 malls in six provinces.
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Dividend stocks: RioCan REIT using proceeds to buy out joint venture partner
In December 2015, RioCan acquired Kimco’s 50% stake in 22 of these properties for $715 million. The partners aim to sell 10 of the joint venture’s other malls over the next few months. They haven’t yet made a decision about the remaining three.
RioCan will use the $725 million remaining from the sale of the 49 U.S. malls to pay down its debt of $6.7 billion, which is a high 91% of its market cap. That should cut its yearly interest costs by $18 million.
These savings will help protect monthly distributions of $0.1175 a unit, for a 6.1% annualized yield. RioCan trades at 13.8 times its likely 2016 earnings of $1.67 a unit.
hello, Pat,riocan is mainly invested in strip and shopping malls.given the languishing retail sector,it would seem vulnerable to hold riocan at this time.also, this thinking also applies to dream office real estate,though focus here is in office real estate.in both companies,safety of dividendcould be in question. comments appreciated. regards, Norm W.
Hi Norm,
We recently covered RicoCan in our daily email. Here is what we said…
RioCan will need to keep taking steps to add to the attractiveness of its properties–and maximize their value–in a time of on-line shopping and heightened retail competition.
This includes building condos above its properties (as RioCan is doing for instance at its Sheppard Centre in Toronto), as well as adding non-retail tenants: restaurants, cinemas, food stores (recurring retail), fitness facilities and so on.
We think RioCan will be successful and see it as a buy.
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RioCan REIT is ready for future growth with the upcoming sale of its U.S. malls. The trust will not only pay down debt, but half of the proceeds will go to buy out its joint-venture partner in 35 Canadian malls. The U.S. sales will also protect monthly distributions for investors. RioCan REIT remains a buy.
hello, Pat,riocan is mainly invested in strip and shopping malls.given the languishing retail sector,it would seem vulnerable to hold riocan at this time.also, this thinking also applies to dream office real estate,though focus here is in office real estate.in both companies,safety of dividendcould be in question. comments appreciated. regards, Norm W.
Hi Norm,
We recently covered RicoCan in our daily email. Here is what we said…
RioCan will need to keep taking steps to add to the attractiveness of its properties–and maximize their value–in a time of on-line shopping and heightened retail competition.
This includes building condos above its properties (as RioCan is doing for instance at its Sheppard Centre in Toronto), as well as adding non-retail tenants: restaurants, cinemas, food stores (recurring retail), fitness facilities and so on.
We think RioCan will be successful and see it as a buy.
Dream Office REIT is a stock we cover in our Stock Pickers Digest newsletter. For those readers who don’t subscribe to the publication, you can do so by clicking here.
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