After raising $230 million, this trust plans to add more residential units through redevelopment and new projects
It also seeks to pay down debt while growing investor distributions incrementally.
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RIOCAN REAL ESTATE INVESTMENT TRUST (Toronto symbol REI.UN; www.riocan.com) continues to focus on six major urban markets: Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver. It’s also adding more residential units to cut its exposure to more-cyclical retail tenants. That adds value for safety-conscious investors.
Under its overall plan, RioCan will now sell 50% of its Elmvale Acres shopping mall in Ottawa to Killam Apartment REIT for $3.7 million. The two firms will redevelop the mall into a mixed-use project with 168 residential units.
In another key deal, RioCan and Boardwalk REIT will also jointly develop a new tower with 470 residential units next to RioCan’s Sandalwood Square shopping mall in Mississauga, Ontario.
Under the new strategy, RioCan has completed several acquisitions in the past few months. Those include spending $331 million to buy the 50% of the Yonge Sheppard Centre in north Toronto that it didn’t already own. It now holds 100% of this urban mixed-use property with almost one million square feet of residential, retail, and office space.
To help pay for that purchase, RioCan has now sold 8.9 million units at $25.75 each, for total proceeds of $230.1 million. The additional units increased the total outstanding by 3%. That won’t have a significant impact on the interest of existing investors.
In fact, the cash will help RioCan pay down its total debt of $6.2 billion (as of June 30, 2019). That’s a high 74% of its $8.4 billion market cap (the total value of all outstanding units). However, the trust staggers the maturities of these mortgages and debentures so that it only has to pay back a manageable portion each year. That cuts your risk.
In the past five years, your RioCan distributions have grown at an average annual rate of 0.4%.
It is nice to see a bit more insight in this article, better than the more superficial treatment often reflected in TSI content from Pat. For example, in January Riocan and Choice REITs are proposed and (superficially) compared as having similar strong dividends. In fact Riocan is profitable and paying out a portion of earnings whereas Choice is running at a loss and digging a financial hole by continuing to give shareholders unfunded returns. Enbridge is also recommended as a buy in spite of the fact that it is trading at a 52 week high and has been paying out dividends higher than earnings since 2016. More thoughtful content like this from Jim would be very much appreciated. Thanks Jim!
Learn everything you need to know in
'7 Winning Strategies for Dividend Investors'
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It is nice to see a bit more insight in this article, better than the more superficial treatment often reflected in TSI content from Pat. For example, in January Riocan and Choice REITs are proposed and (superficially) compared as having similar strong dividends. In fact Riocan is profitable and paying out a portion of earnings whereas Choice is running at a loss and digging a financial hole by continuing to give shareholders unfunded returns. Enbridge is also recommended as a buy in spite of the fact that it is trading at a 52 week high and has been paying out dividends higher than earnings since 2016. More thoughtful content like this from Jim would be very much appreciated. Thanks Jim!
Thanks for your feedback.