H&R REIT (Toronto symbol HR.UN; www.hr-reit.com) owns stakes in 42 office buildings, 112 industrial properties and 164 shopping malls across Canada. The trust has a 98.2% occupancy rate.
In March 2013, H&R finished building The Bow, a $1.33-billion, two-million-square-foot office complex in Calgary. Encana Corp. has already leased the entire building for 25 years.
In April 2013, H&R completed the purchase of 27 properties from Primaris REIT for about $3.1 billion. These assets include the 567,000-square-foot Dufferin Mall in Toronto’s west end, which has huge redevelopment potential. Eight of the 27 properties now have Target stores as their main tenants.
In the three months ended September 30, 2013, the REIT’s revenue rose 52.9%, to $305.8 million from $200.0 million a year earlier. The gain mostly came from the addition of the Primaris properties.
Cash flow rose 63.8%, to $129.1 million from $72.4 million. However, cash flow per unit gained just 12.5%, to $0.45 from $0.40, after H&R issued more units to help fund the Primaris acquisition.
The REIT pays a monthly distribution of $0.1125 per unit. That gives it a 6.4% yield.
Canadian REIT raised distribution twice in 2013
CANADIAN REIT (Toronto symbol REF.UN; www.creit.ca) owns 194 properties, including retail, industrial and office buildings, across Canada and in Chicago. These holdings contain over 19.7 million square feet of leasable area. The trust’s occupancy rate is 94.9%.
In the three months ended September 30, 2013, Canadian REIT’s revenue rose 6.8%, to $94.3 million from $88.3 million a year earlier.
Canadian REIT added $197.6 million worth of new buildings in the first three quarters of 2013. That followed property purchases totalling $401.9 million in 2012, including a 50% stake in Calgary Place, a 575,000-square-foot office and retail complex, for $156.0 million.
In May, the trust raised its distribution for the second time in 2013. Canadian REIT now pays $0.1375 monthly, up 6.6% from $0.129. That gives it a 3.8% yield.
The REIT’s broad diversification cuts its risk. It has 37% of its assets in Alberta, followed by Ontario, 26%; Atlantic Canada, 15%; Quebec, 11%; B.C., 9%; the Prairies, 1%; and the U.S., 1%. Shopping malls account for 55% of its properties, followed by industrial (24%) and office (21%).
In the latest issue of Canadian Wealth Advisor, we look at the outlook for these two growing Canadian trusts and especially the cash flow projections for each REIT. We conclude with our clear buy-hold-sell advice on both of these REITs.
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Talk continues in the media about a possible real estate bubble in Canada. Does this make you less inclined to invest in REITs? Or do you believe that REITs with a large portfolio of commercial properties would not be compromised by a decline in residential real estate values? For that matter, do you think fears of a real estate bubble are valid?
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