RIOCAN REAL ESTATE INVESTMENT TRUST (Toronto symbol REI.UN; www.riocan.com) is Canada’s largest real estate investment trust (REIT), with interests in 340 shopping malls containing over 82 million square feet of leasable area. That total includes 47 U.S. malls with over 13 million square feet.
In the three months ended March 31, 2014, RioCan’s revenue increased 6.4%, to $299 million from $281 million a year earlier. Cash flow per unit rose 2.4%, to $0.42 from $0.41, on more units outstanding.
RioCan continues to see growth opportunities in Canada and the U.S. In 2013, it spent $849 million on 32 properties. In the first quarter of 2014, it bought two more for a total of $21 million.
RioCan is also making better use of its existing space. For example, the trust is adding office and residential units to its malls, which is cheaper than buying new properties. This also helps RioCan’s retail tenants, because residents will probably prefer to shop at stores closer to where they live. National and multinational chains, like Canadian Tire, supply 86.4% of RioCan’s rental revenue.
RioCan pays a monthly distribution of $0.120 which yields 5.2%.
Last year’s acquisition of Primaris REIT main contributor to H&R’s rise in revenue
H&R REIT (Toronto symbol HR.UN; www.hr-reit.com) owns stakes in 41 office buildings, 112 industrial properties and 168 shopping malls across Canada. The trust has a 97.9% 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 leased the entire building for 25 years.
In April 2013, H&R completed the purchase of 27 properties from Primaris REIT for $3.1 billion. These assets include the 567,000-square-foot Dufferin Mall in Toronto’s west end.
In the quarter ended March 31, 2014, H&R’s revenue rose 40.1%, to $311.9 million from $222.6 million a year earlier. The Primaris properties contributed most of the gain.
Cash flow rose 50.2%, to $135.2 million from $90.0 million. However, cash flow per unit gained just 4.4%, to $0.47 from $0.45, after H&R issued more units to help fund the Primaris acquisition.
The REIT pays a monthly distribution of $0.1125 a unit for a 5.8% yield.
In the latest issue of Canadian Wealth Advisor, we look at RioCan REIT’s prospects for continuing its ambitious acquisition policy. We also consider the cash flow forecast for H&R REIT in light of the Primaris acquisition. We conclude with our clear buy-hold-sell advice on these two REITs.
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Which category of REIT do you think has the greatest growth prospects—“shopping mall” REITs, residential REITs, or those that focus on office buildings and industrial properties? Why?
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RIOCAN REAL ESTATE INVESTMENT TRUST (Toronto symbol REI.UN; www.riocan.com) is Canada’s largest real estate investment trust (REIT), with interests in 340 shopping malls containing over 82 million square feet of leasable area. That total includes 47 U.S. malls with over 13 million square feet.
The retail REIT have the best future