RIOCAN REAL ESTATE INVESTMENT TRUST $25.37 - Toronto symbol REI.UN

RIOCAN REAL ESTATE INVESTMENT TRUST $25.37 (Toronto symbol REI.UN; Units outstanding: 300.0 million; Market cap: $7.8 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.riocan.com) is Canada’s largest real estate investment trust (REIT). It has interests in 344 shopping malls containing over 84 million square feet of leasable area. That total includes 50 U.S. malls containing over 13.7 million square feet.

RioCan recently ended its joint venture with Retail Properties of America (New York symbol RPAI). As a result, RioCan now holds 100% of eight highquality malls in Texas, including the dominant shopping centres in Austin and San Antonio.

In the quarter ended March 31, 2013, RioCan’s revenue rose 10.6%, to $281 million from $254 million a year earlier. Cash flow per unit rose 10.8%, to $0.41 from $0.37. The units yield 5.6%.

RioCan continues to see many growth opportunities in Canada and the U.S. In 2012, it spent $926 million on properties. So far this year, it has bought six more malls for a total of $437 million.

The units trade at 15.5 times RioCan’s forecast 2013 cash flow of $1.64 a unit. That’s a high multiple, but it’s still reasonable in light of the trust’s highly profitable properties and 97.0% occupancy rate. As well, national and multinational chains, like Canadian Tire, account for 86.0% of RioCan’s rental revenue. That helps cut its risk.

RioCan is a buy.

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