DUNDEE REIT $36.11 (Toronto symbol D.UN; TSINetwork Rating: Speculative) (416-365-3535; www.dundeereit.com; Shares outstanding: 97.7 million; Market cap: $3.7 billion; Dividend yield: 6.1%) owns and manages 22.9 million square feet of office and retail space. The trust has a 95.1% occupancy rate.
In the three months ended December 31, 2012, Dundee REIT’s revenue jumped 51.3%, to $192.0 million from $126.9 million a year earlier. In 2012, Dundee made $2.6 billion of acquisitions and added 9.9 million square feet of office space. These properties supplied most of the revenue increase.
Cash flow jumped 41.4%, to $58.1 million from $41.0 million. However, cash flow per unit fell 8.1%, to $0.57 from $0.62, on more units outstanding (the trust issued new units to pay for the acquired properties).
Geographic diversification is a plus
The trust’s growth-by-acquisition strategy adds risk, but it is steadily diversifying its holdings outside western Canada by purchasing more properties in other parts of the country. At the start of 2010, about 70% of Dundee’s properties were in western Canada. That’s now down to less than 35%.
Dundee recently sold its 77 industrial properties to newly created Dundee Industrial REIT, $10.80, symbol DIR.UN on Toronto. In return, Dundee REIT received $575.9 million, including a 44.1% interest in Dundee Industrial REIT. Dundee REIT is now focused on office buildings.
The trust has also raised its monthly distribution by 2.2%, to $0.187 from $0.183, for a 6.1% yield.
Dundee REIT is a buy.
