A Member of Pat McKeough’s Inner Circle recently asked for his advice on a commercial property REIT that primarily holds retail investments across Canada.
Pat notes that the company’s latest quarterly revenue jumped 29.7% and cash flow 38.8%. He also likes the 8.6% yield and that the stock trades at just 13.1 times its cash flow. However, this growth has come through acquisitions, which carry risk.
Q: Pat, what are your thoughts on PRV.UN? Yield looks good at 9%, but is it safe in the long term?
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PRO Real Estate Investment Trust (Symbol PRV.UN on Toronto; www.proreit.com), lets you tap a portfolio of 92 commercial properties across Canada with a total leasable area of over 4.4 million square feet. PROREIT, as it’s also called, has a high overall occupancy rate of 98.2%.
On May 7, 2019, the REIT’s stock market listing moved up to the Toronto exchange from the Toronto Venture Exchange. It also consolidated its shares on a 1-for-3 basis.
Established in March 2013, the trust holds 92 properties, largely focused on commercial—49 shopping malls, 10 office buildings and 33 industrial and mixed-use buildings. Of those properties, 38 are in the Maritime provinces, 16 in Quebec, 26 in Western Canada and 12 in Ontario.
The REIT continues to grow by acquisition: it recently acquired seven properties for $97.8 million, representing a total of 696,000 square feet of leasable area. The properties include a boutique office tower in Ottawa’s central business district and a Class-A, mixed-used industrial property located in Kanata, Ontario. The remaining five are light industrial properties in Halifax, Nova Scotia.
Inner Circle: Acquisitions fuel strong revenue and cash flow growth
The trust believes that the addition of these properties will improve its portfolio balance by increasing its exposure to the Ontario market and helping lower its overall exposure to retail with the addition of more industrial and office buildings.
In the quarter ended September 30, 2019, PROREIT’s rental revenue jumped 29.7%, to $13.2 million from $10.2 million a year earlier. The gains were mostly due to acquisitions. Cash flow climbed 38.8%, to $5.07 million from $3.65 million. Cash flow per unit fell 1.5%, to $0.1386 from $0.1407, on more units outstanding due to acquisitions.
The REIT’s units trade at a reasonable 13.1 times its cash flow per share based on the latest quarter. The trust has a very high 8.6% yield, and while not guaranteed, it appears sustainable.
Recommendation in Pat’s Inner Circle: PRO Real Estate Investment Trust is a hold.
Comments
Michael
you have not failed me yet. keep up the good work. MIKE
hello tsi : i would like to see a list of all canadian companies that you cover and be able to click on it and see your comments . i don’t know how find what i want on your site . its not investor friendly to me
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you have not failed me yet. keep up the good work. MIKE
Thanks, Mike. It’s always nice to hear from a satisfied customer.
hello tsi : i would like to see a list of all canadian companies that you cover and be able to click on it and see your comments . i don’t know how find what i want on your site . its not investor friendly to me
Thanks for your suggestion. I’ll pass it on to our Editorial team.