H&R REIT $23.38 (Toronto symbol HR.UN; Units outstanding: 271.4 million; Market cap: $6.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.8%; 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 units trade at 12.7 times H&R’s forecast 2014 cash flow of $1.84 a unit. The REIT pays a monthly distribution of $0.1125 a unit for a 5.8% yield.
H&R REIT is a buy.
