investment

H&R REAL ESTATE INVESTMENT TRUST $24.16 (Toronto symbol HR.UN; Units outstanding: 181.0 million; Market cap: $4.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.8%; www.hr-reit.com) and Dundee REIT (Toronto symbol D.UN) have agreed to buy Scotia Plaza, a 68-storey office building in downtown Toronto, from Bank of Nova Scotia (see page 41) for $1.3 billion. Dundee REIT will own two-thirds of the property, and H&R will own the remaining third. Scotia Plaza contains about 2 million square feet of office and retail space across four connected buildings. Scotiabank will remain as the anchor tenant....

Activist U.S. investment firm Pershing Square Capital continues to make its presence felt at CP Rail (Canadian symbol CP). With 14.2% of the company’s shares in its hands, Pershing Square has replaced seven of the 16 directors with its own nominees. And it may also aim to install Hunter Harrison, the man who made CNR more efficient, as CEO of Canadian Pacific Railway. Pershing’s involvement is just one reason why we made CP our #1 Stock Pick for 2012. It’s one of many reasons that CP Rail remains at the top of our list of Canadian stocks....

Here’s the text of the quarterly letter I sent to our Portfolio Management clients in late May: The term “bubble” has become part of the average investor’s vocabulary. Most investors recognize that they have lived through two of them. We are headed for the end of a third bubble, and possibly a fourth. The first was the Internet stock bubble. I would say that bubble began in 1995, when Netscape came out as a new stock issue....

Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. This past week, one Inner Circle member requests Pat’s stock investing advice on a company that has a chance to profit from the growing global demand for clean water. One of the company’s biggest areas of growth could be in the highly-publicized area of “fracking” for oil and gas, where it has acquired a new water monitoring service. ...

This is the latest in a series of video interviews in which Pat McKeough gives his advice on a variety of topics. Some will deal with his overall investment philosophy, others on specific investment strategies and still others offer stock market advice related to events that are affecting the markets and the economy. This week, the Financial Post asked Pat whether investors should sell in the wake of the latest European crisis and the tremors it has sent through the market. Following up in today’s video, Pat explains why it’s not a good idea to bail out when you don’t really know the outcome.
Q: Pat, in today’s Financial Post, you were interviewed about the European economic crisis and whether investors should sell before it gets worse?...

RIOCAN REAL ESTATE INVESTMENT TRUST $27.04 (Toronto symbol REI.UN; Units outstanding: 285.0 million; Market cap: $7.7 billion; TSINetwork Rating: Average; Dividend yield: 5.1%; www.riocan.com) has a joint venture with U.S.-based Tanger Factory Outlet Centers to build between 10 and 15 discount shopping malls in major Canadian cities.

RioCan and Tanger have now agreed to team up with privately held Orlando Corp. to build factory outlet stores on the grounds of Orlando’s Heartland Town Centre mall in Mississauga, Ontario. This could lead to similar deals to develop more of Orlando’s Toronto properties.

RioCan is still our #1 safety-conscious buy for 2012.

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H&R REAL ESTATE INVESTMENT TRUST $24.19 (Toronto symbol HR.UN; Units outstanding: 180.8 million; Market cap: $4.4 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.8%; www.hr-reit.com) owns stakes in 40 office buildings, 117 industrial properties and 133 retail properties across Canada. H&R has a 99.1% occupancy rate.

In the three months ended December 31, 2011, the REIT’s revenue rose 10.9%, to $178.2 million from $160.7 million a year earlier. Cash flow rose 10.1%, to $67.8 million from $61.6 million. Cash flow per unit fell 2.4%, to $0.40 from $0.41, on more units outstanding.

The REIT recently made two major purchases in the U.S. In October 2011, it bought Two Gotham Center in New York City for $415.5 million U.S. The newly built, 22-storey tower is leased to the City of New York for 20 years.

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CANADIAN REIT $38.74 (Toronto symbol REF.UN; Units outstanding: 67.6 million; Market cap: $2.6 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.7%; www.creit.ca) owns over 190 properties, including retail, industrial and office buildings, located across Canada and in the Chicago area. These properties contain over 24 million square feet of leasable area. Its occupancy rate is 94.4%.

In the three months ended December 31, 2011, the real estate investment trust’s revenue rose 8.9%, to $90.0 million from $82.6 million a year earlier. Cash flow per unit rose 6.9%, to $0.62 from $0.58.

The REIT bought $264.5 million of properties in 2011, including its June purchase of two fully leased malls in Mississauga, Ontario, for $174.4 million. In March 2012, it bought 50% of the 310,000- square-foot Altius Centre in Calgary for $89.9 million. In April, it paid $156.0 million for 50% of Calgary Place, a 575,000-square-foot office and retail complex, also in Calgary.

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Tip of the week: There are a few good reasons to pay a little extra money for the right class of shares in the stocks you buy.

Few investors seem to have noticed that the U.S. dollar has moved up in the past month from $0.98 Cdn. to $1.03 Cdn. Obviously, there is a large random element in the difference in value between any two currencies, and shifts of up to 5% or more happen all the time. But this could be the start of a move that could last for years. It could add an additional 10% to 20% or more to the U.S. dollar premium over the Canadian dollar. The gain in the U.S. dollar reflects the fact that the economic fundamentals seem to be shifting in favour of the U.S. In the past few years, Canada has gained on the U.S. in economic desirability. The Harper government has focused on improving Canada’s trade relations, cutting the deficit and spurring economic growth. In contrast, the Obama administration has focused on expanding U.S. entitlement programs, while making plans to raise taxes and expand the reach of U.S. regulators. Obama has also subsidized money-losing alternative energy, while blocking growth in shale gas and oil. All this weighs on the economy....