canadian reit

Despite the recession, top-quality real estate investment trusts (REITs) continue to have high occupancy and steady lease rates. As well, today’s low interest rates will help many REITs refinance their mortgages more cheaply, or fund expansion. We still advise against overindulging in REITs. But if you stick with those with strong cash flows and sound balance sheets, like the three we recommend on this page, you should make attractive long-term returns with relatively low risk. RIOCAN REAL ESTATE INVESTMENT TRUST $15.28 (Toronto symbol REI.UN; Units outstanding: 233.1 million; Market cap: $3.6 billion; SI Rating: Average) is Canada’s largest REIT. It has interests in a portfolio of 247 shopping malls across Canada, including 13 under development. In all, these contain over 59 million square feet of leasable area. RioCan’s occupancy rate stands at 97.5%....

Sentry Select Diversified Income Fund, $2.17, symbol SDT.UN on Toronto (Shares outstanding: 219.7 million; Market cap: $476.8 million), is a closed-end mutual fund that mainly invests in royalty trusts, income trusts and real estate investment trusts (REITs). The fund also invests in high-yielding common shares. Earlier this year, the fund changed its name to Sentry Select Diversified Income Fund. (It was formerly Sentry Select Diversified Income Trust.) The change is meant to reflect management’s intention to keep buying dividend-paying common stocks, while cutting the fund’s income trust holdings. About 19% of the roughly 90 investments Sentry holds are common stocks, and the rest are mostly trusts. Sentry is doing this in response to Ottawa’s plan to start taxing trust distributions in 2011. In many circumstances, the new tax will eliminate the tax advantage income trust distributions hold over dividends....

ISHARES CDN REIT SECTOR INDEX FUND $7.22 (Toronto symbol XRE; buy or sell through a broker) holds the 11 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT is limited to 25% of this index’s value. RioCan REIT makes up 23.3% of the index’s total value; Canadian REIT, 14.1%; Boardwalk REIT, 11.3%; H&R REIT, 10.9%; Canadian Apartment Properties REIT, 9.6%; Calloway REIT, 7.2%; Primaris Retail REIT, 6.1%; Cominar REIT, 5.2%; Chartwell Seniors Housing REIT, 4.9%; Extendicare REIT, 3.2%; and InnVest REIT, 2.2%. We’re glad to see that the top holding is RioCan, one of our favourite REITs. In fact, the top three holdings are among our recommendations. Note that iShares CDN REIT holds a couple of REITs we don’t recommend....

CANADIAN REIT $20.90 (Toronto symbol REF.UN; Units outstanding: 61.1 million; Market cap: $1.3 billion; SI Rating: Extra Risk) owns a portfolio of more than 160 income properties, consisting of retail, industrial and office properties across Canada and in the Chicago, Illinois, area. Occupancy is at 96.5%. Revenue in the three months ended September 30, 2008, was $79.6 million, up 10.0% from $72.3 million a year earlier. Cash flow per unit rose 7.4%, to $0.58 from $0.54. The units yield 6.5%. CREIT buys properties in prime locations, usually near major cities, that attract strong tenants, maintain high occupancy rates and deliver a reliable stream of rental income....

Top-quality REITs continue to have high occupancy rates and steady lease rates despite the economic slowdown. As well, lower interest rates will help REITs refinance mortgages at lower cost, or fund their expansion plans. We still advise against overindulging in REITs. But if you stick with REITs with strong cash flow and sound balance sheets, like the ones we recommend on this page, you should make attractive long-term returns with relatively low risk. RIOCAN REAL ESTATE INVESTMENT TRUST $14.30 (Toronto symbol REI.UN; Units outstanding: 221.2 million; Market cap: $3.2 billion; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 238 retail malls across Canada, including 14 under development. These contain over 58 million square feet of leasable area. Portfolio occupancy stands at 97.0%....

CANADIAN REIT $28 (Toronto symbol REF.UN; SI Rating: Extra Risk) has acquired eight retail properties from Canadian Tire for $137.3 million. Canadian Tire has subsequently leased all of the properties for an initial term of 15 years at current market rental rates. The acquisition includes one property in each of British Columbia, Ontario and Nova Scotia, plus three in Alberta and two in Quebec. CREIT focuses on acquiring properties in prime locations, usually near major metropolitan centres. That attracts strong tenants, maintains high occupancy rates and delivers a reliable stream of rental income....

ISHARES CDN REIT SECTOR INDEX FUND $13.36 (Toronto symbol XRE; buy or sell through a broker) holds the 12 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT in the value of the S&P/TSX Capped REIT Index is limited to 25%. RioCan REIT makes up 25% of the index’s value; H&R REIT, 14.9%; Canadian REIT, 10.1%; Boardwalk REIT, 9.0%; Calloway REIT, 8.1%; Canadian Apartment Properties REIT, 6.3%; Primaris Retail REIT, 5.9%; Cominar REIT, 4.6%; Chartwell Seniors Housing REIT, 4.2%; Innvest REIT, 4.0%; Extendicare REIT, 2.7%; and Dundee REIT, 2.6%. We’re glad to see that the top holding is RioCan, one of our favorite REITs. In fact, the top three holdings are among our recommendations. Note that iShares CDN REIT holds a couple of REITs we don’t recommend....

CANADIAN REIT $29.30 (Toronto symbol REF.UN; SI Rating: Extra Risk) owns a portfolio of more than 150 income properties consisting of retail, industrial and office properties across Canada and in the Chicago, Illinois area. Occupacy is at 96.7%. CREIT’s revenue in the three months ended June 30, 2008 was $73.1 million, up 10.2% from $66.4 million a year earlier. Cash flow per unit rose 5.7%, to $0.56 from $0.53. The units yield 4.6%. CREIT focuses on acquiring properties in prime locations, usually near major metropolitan centres, that attract strong tenants, maintain high occupancy rates and deliver a reliable stream of rental income....

Real Estate Investment Trusts (REITs) have moved up lately, but are still down from last year’s highs. That’s mainly due to fears that slowing consumer spending will hurt cash flows. However, top-quality REITs continue to have high occupancy rates and rising lease rates. As well, lower interest rates will help REITs fund their expansion plans.

We still advise against overindulging in Real Estate Investment Trusts. But if you stick with the highest quality, like the Real Estate Investment Trusts we recommend on this page, you should make attractive long-term returns with relatively low risk.

RIOCAN REAL ESTATE INVESTMENT TRUST $21.51 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT (Real Estate Investment Trust). RioCan has ownership interests in a portfolio of 227 retail properties across Canada, including 15 under development. These properties contain over 59 million square feet of leasable area. Portfolio occupancy stands at 97.0%.

RioCan’s revenue in the three months ended June 30, 2008 was $169.9 million, up 7.1% from $158.3 million a year earlier. Cash flow per unit rose 5.3%, to $0.40 from $0.38. RioCan’s annual distribution of $1.35 gives the units a yield of 6.2%.

RioCan is still a buy.

...

GUARDIAN MONTHLY HIGH INCOME II FUND $15 (CWA Rating: Income) (GGOF Guardian Group of Funds, Commerce Court West, Suite 4100, P.O. Box 201, Toronto, Ontario M5L 1E8. 1-800-668-5613; Web site: www.ggof.com. Available from brokers) continues to emphasize more stable real estate investment trusts (REITs), and high-quality, long-lived resource trusts. We still think you should diversify carefully with trusts. Emphasize those with stable cash flows, a low need for capital expenditures and mature business operations. The $887.4 million fund’s top holdings are: Canadian Oil Sands Trust, RioCan REIT, Canadian REIT, ARC Energy, Cominar REIT, Yellow Pages Income Fund, BFI Canada Income Fund, Vermilion Energy Trust, Bonavista Energy Trust, Enerplus Resources Fund and Crescent Point Energy Trust....