PRIMARIS RETAIL REAL ESTATE INVESTMENT TRUST $21.65 (Toronto symbol PMZ.UN; Units outstanding: 81.0 million; Market cap: $1.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 5.6%; www.primarisreit.com) owns large malls in medium-sized Canadian cities and suburban areas. In all, the trust owns 32 properties that contain 13.5 million square feet of leasable area.
Primaris has 44% of its properties in Ontario, followed by Alberta, 16%; B.C., 14%; Quebec, 13%; Saskatchewan, 9%; Manitoba, 3% and New Brunswick, 1%. Primaris has a 97.1% occupancy rate.
In the three months ended December 31, 2011, acquisitions pushed up Primaris’s revenue by 23.5%, to $104.1 million from $84.2 million. Cash flow rose 16.2%, to $34.7 million from $29.8 million. Cash flow per unit fell 3.2%, to $0.42 from $0.434, on more units outstanding. The trust yields 5.6%.
Primaris aims to keep growing by acquisition, but it takes a cautious approach. For example, in June 2011, it raised $260.6 million in a unit issue to help pay for five malls it bought from Ivanhoe Cambridge. The $572-million deal was Primaris’s largest purchase to date, but the malls are spread out across the country: three are in Ontario, one is in Alberta and one is in Quebec. That cuts Primaris’s risk.
Primaris’s strong cash flow and high-quality tenants could make it a takeover candidate. That’s not reason enough alone to buy the REIT, but it adds to its appeal.
Primaris Retail REIT is a buy.
