riocan real estate investment trust

RIOCAN REAL ESTATE INVESTMENT TRUST $27.87 (Toronto symbol REI.UN; Units outstanding: 285.0 million; Market cap: $8.0 billion; TSINetwork Rating: Average; Dividend yield: 5.0%; www.riocan.com) planned to spend $600 million on acquisitions in 2012. That’s equal to 8% of its $7.9-billion market cap. The trust spent $1 billion on acquisitions in 2011. However, RioCan will likely spend less than it planned this year, due to the rising cost of properties in Canada’s big cities. Instead, the trust plans to upgrade its existing malls. Right now, it is focusing on projects in Toronto and Calgary. The trust continues to pay monthly distributions of $0.115 a unit, for a 5.0% annualized yield. In light of its improving outlook, RioCan aims to raise its payout in 2013....

RIOCAN REAL ESTATE INVESTMENT TRUST $26.57 (Toronto symbol REI.UN; Units outstanding: 285.0 million; Market cap: $7.6 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) is Canada’s largest REIT. It has interests in 333 shopping malls in Canada, including 10 under development. These properties contain over 91 million square feet of leasable area.

RioCan also owns stakes in 46 malls in the U.S. through joint ventures. In addition, it owns 14% of Cedar Shopping Centers, a U.S. REIT whose malls are mainly in the northeastern U.S.

In the quarter ended March 31, 2012, RioCan’s revenue rose 15.6%, to $274 million from $237 million a year earlier. Cash flow per unit rose 5.7%, to $0.37 from $0.35. The units yield 5.2%.

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ENCANA CORP., $20.37, Toronto symbol ECA, continues to produce more oil and natural gas liquids (NGLs), such as ethane, propane and butane. NGLs tend to be priced at the same level as crude oil. The company is shifting toward oil and NGLs because low natural gas prices are cutting profits at its regular gas business, which supplied 95% of its overall production in the first quarter of 2012. Encana does not plan to cut its natural gas production. This week, Encana announced that it will spend an extra $600 million (all amounts except share price in U.S. dollars) on its oil and NGL properties this year. The company had originally planned to spend $2.9 billion on all of its capital projects in 2012....

RIOCAN REAL ESTATE INVESTMENT TRUST $26.57 (Toronto symbol REI.UN; Units outstanding: 285.0 million; Market cap: $7.6 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) is Canada’s largest REIT. It has interests in 333 shopping malls in Canada, including 10 under development. These properties contain over 91 million square feet of leasable area. RioCan also owns stakes in 46 malls in the U.S. through joint ventures. In addition, it owns 14% of Cedar Shopping Centers, a U.S. REIT whose malls are mainly in the northeastern U.S. In the quarter ended March 31, 2012, RioCan’s revenue rose 15.6%, to $274 million from $237 million a year earlier. Cash flow per unit rose 5.7%, to $0.37 from $0.35. The units yield 5.2%....

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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RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 280.8 million; Market cap: $7.6 billion; Priceto- sales ratio: 5.0; Dividend yield: 5.1%; TSINetwork Rating: Average; www.riocan.com) reports that its cash flow rose 14.4% in the three months ended March 31, 2012, to $103 million from $90 million a year earlier. Cash flow per unit rose 5.7%, to $0.37 from $0.35, on more units outstanding. Revenue rose 15.6%, to $274 million from $237 million.

The trust continues to acquire and open new shopping malls and expand existing ones. This was the main reason for the improved results. RioCan’s occupancy rate is a high 96.9%. Moreover, well-established national chains, such as Wal-Mart and Metro, supply 85.7% of its revenue.

RioCan is a buy.

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ENBRIDGE INC. $40 (Toronto symbol ENB; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 785.0 million; Market cap: $31.4 billion; Price-to-sales ratio: 1.6; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.enbridge.com) owns 100% of Enbridge Gas New Brunswick Inc. (EGNB), which distributes natural gas to 11,000 customers in that province. Enbridge is now expanding EGNB’s system to connect to an additional 30,000 clients. However, the New Brunswick government recently enacted new regulations that limit the rates that EGNB can charge its customers. That makes it harder for Enbridge to recoup the funds that it has already invested in this business. As a result, the company will write down this investment by $262 million. That’s equal to 24% of the $1.1 billion, or $1.48 a share, that Enbridge earned in 2011. Enbridge is still a buy....

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.

CANADIAN PACIFIC RAILWAY LTD., $75.67, Toronto symbol CP, is starting to benefit from its recent efficiency improvements. As well, more of its trains are running on time, thanks to the warmer-than-usual winter. In the three months ended March 31, 2012, CP’s average train speed rose 27% from a year earlier. It also had 28% more railcars in service, and terminal dwell (the time to load and unload railcars) fell 27%. As a result, CP now believes that it earned $0.80 to $0.83 a share in the quarter. That’s a lot better than the consensus estimate of $0.65 a share....

RIOCAN REAL ESTATE INVESTMENT TRUST $27.12 (Toronto symbol REI.UN; Units outstanding: 267.0 million; Market cap: $6.9 billion; TSINetwork Rating: Average; Dividend yield: 5.1%; www.riocan.com) reported revenue of $988 million in 2011, up 12.0% from $882 million in 2010. That’s mainly due to the 38 new malls the trust bought during the year. (In all, RioCan purchased $1.1 billion of new properties in 2011.) Cash flow per unit rose 7.5%, to $1.43 from $1.33.

RioCan yields 5.1%. It paid out 96.5% of its cash flow in 2011. However, 22% of its investors prefer to receive new units instead of cash. On this basis, the actual payout was just 74.8% of its cash flow.

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

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