Every Monday we feature “A Stock to Sell” as our daily post. With every stock or investment we recommend as a sell, we give you a full explanation of why we advise against investing in it at this time. In today’s article we have two sells, both from an industry which has a great deal of promise for the future, but hurdles to overcome in the present.
Partners Real Estate Investment Trust (symbol PAR.UN on Toronto; www.partnersreit.com) owns 36 shopping centres in B.C., Alberta, Manitoba, Ontario and Quebec. In all, these properties contain 2.5 million square feet of leasable space. The trust’s occupancy rate is 96.0%.
Partners’ malls are mostly in smaller cities, such as London, Ontario, and Selkirk, Manitoba. Its largest tenants include Shoppers Drug Mart, Wal-Mart, Metro, the Quebec government, Sears, Rona and Loblaw.
The units dropped sharply in August 2014, from over $5 to $4, when the trust cut its monthly distribution by 50.0%, to $0.02083 from $0.04167. The units now yield 6.8%.
The cut was necessary because Partners paid out 134% of its cash flow as distributions in the second quarter of 2014. That fell to 84% in the third quarter, after the reduction took effect.
Confident conservative investing at a time of uncertainty
Pat McKeough recommends Canada’s best REITs in the pages of Canadian Wealth Advisor. It’s all part of his approach to smart conservative investing. Your investments are safer when the market is down—and you’re in a stronger position to profit when the markets move up.
Pat’s safety-first philosophy is simple and always effective. With the strongest dividend-paying stocks, best REITs and the most reliable ETFs, you can achieve surprisingly powerful results through income and capital gains. And you never need to take big risks.
Revenue and cash flow both down in the latest quarter
In September 2014, Partners sold three Ontario properties for $34.9 million and used the proceeds to pay down debt.
In the three months ended September 30, 2014, the trust’s revenue fell slightly, to $14.51 million from $14.53 million a year earlier. Cash flow per unit declined 9.1%, to $0.10 from $0.11.
The REIT’s small number of properties and focus on small cities adds a lot of risk, although that’s somewhat offset by the major chains that make up more than 50% of its tenants. Meanwhile, Partners’ growth prospects are limited.
We don’t recommend Partners REIT. If you own the shares, we think you should sell.
Tomorrow we report on a very successful REIT that continues to have excellent growth prospects.
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