Riocan Real Estate Investment Trust $25.02 - Toronto symbol REI.UN

RIOCAN REAL ESTATE INVESTMENT TRUST $25.02 (Toronto symbol REI.UN; Units outstanding: 320.4 million; Market cap: $7.9 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.riocan.com) is Canada’s largest real estate investment trust. In the three months ended September 30, 2015, RioCan’s cash flow rose 5.0%, to $140.2 million from $133.6 million a year earlier. Per-unit cash flow gained 2.3%, to $0.44 from $0.43, on more units outstanding. The trust has now agreed to sell its 49 U.S. malls for $1.2 billion (Canadian). It expects to complete the sale in April 2016. RioCan will put $510 million of the proceeds toward its recent deal to buy out its joint venture with U.S.-based Kimco Realty (New York symbol KIM). Formed in 2000, this business owns and manages 35 malls in six provinces. Under the deal, RioCan will acquire Kimco’s 50% stake in 22 of these properties for $715 million. The partners then plan to sell 10 other properties. They haven’t yet made a decision about the last three, which consist of stores vacated by Target in 2015. The 22 properties RioCan will fully own fit well with its plans to increase its exposure to Canada’s six largest markets: Toronto, Montreal, Ottawa, Calgary, Edmonton and Vancouver. RioCan trades at 14.1 times its forecast 2016 cash flow of $1.78 a unit. That’s reasonable in light of the REIT’s highly profitable properties and its 94.0% occupancy rate. The units yield 5.6%. RioCan is a buy.

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