riocan real estate investment trust

POTASH CORP. OF SASKATCHEWAN, $157.06, Toronto symbol POT, jumped 35% this week after Australia-based BHP Billiton Ltd. (New York symbol BHP) launched a hostile takeover bid for the company. (BHP is the world’s largest mining company, and a recommendation of our Wall Street Stock Forecaster newsletter.) Potash Corp. is the world’s largest fertilizer producer. It has six potash mines in Saskatchewan and one in New Brunswick. Five of its mines have reserves of between 60 and 97 years. BHP is developing a potash mine near Potash Corp.’s operations in Saskatchewan, so a takeover of Potash Corp. would let it cut some costs. In October 2009, rumours of a takeover bid by BHP helped push up Potash Corp.’s shares to around $106 from $93....

ENCANA CORP., $32.22, Toronto symbol ECA, fell 4% after the company reported lower-than-expected earnings. In the three months ended June 30, 2010, Encana earned $81 million, or $0.11 a share (all amounts except share price in U.S. dollars). These figures exclude a $340-million loss on hedging contracts that the company uses to lock in selling prices for its natural gas, and a $246-million foreign-exchange loss. On this basis, the latest earnings fell well short of the consensus estimate of $0.22 a share. They were also down 82.8% from the company’s year-earlier earnings of $472 million, or $0.63 a share. Cash flow per share fell 13.2%, to $1.65 from $1.90. Revenue rose 10.2%, to $1.5 billion from $1.3 billion. (Note: The year-earlier figures assume that the break-up of the old EnCana Corp. into the new Encana and Cenovus Energy Inc. took place at the start of 2009 instead of December 1, 2009.)...

RIOCAN REAL ESTATE INVESTMENT TRUST $19.32 (Toronto symbol REI.UN; Units outstanding: 242.9 million; Market cap: $4.7 billion; SI Rating: Average; Dividend yield: 7.1%) is Canada’s largest REIT. RioCan has interests in 265 shopping malls across Canada, including 12 under development. In all, these properties contain over 60 million square feet of leasable area. The trust has a 97.0% occupancy rate. In the three months ended March 31, 2010, RioCan’s revenue was $214.6 million. That’s up 12.3% from $191.1 million a year earlier. Cash flow per unit rose 12.5%, to $0.36 from $0.32. The trust paid higher interest costs during the quarter, but contributions from newly acquired shopping centres and gains on property sales helped offset these expenses. The trust’s units yield 7.1%. In 2009, RioCan formed a joint venture withCedar Shopping Centers, Inc. (New York symbol CDR). Cedar owns shopping centres in the northeastern and mid-Atlantic regions of the U.S. RioCan owns 80% of this joint venture. As part of the original deal, it received common shares and warrants in Cedar. RioCan recently exercised these warrants. That gave it a 14% stake in Cedar....

Most real estate investment trusts (REITs), including our recommendations, are exempt from Ottawa’s new tax on income-trust distributions, which comes into effect on January 1, 2011. As a result, these REITs should attract more investor interest in the second half of 2010, as the tax prompts more trusts to convert to corporations and cut their distributions. RIOCAN REAL ESTATE INVESTMENT TRUST $19.32 (Toronto symbol REI.UN; Units outstanding: 242.9 million; Market cap: $4.7 billion; SI Rating: Average; Dividend yield: 7.1%) is Canada’s largest REIT. RioCan has interests in 265 shopping malls across Canada, including 12 under development. In all, these properties contain over 60 million square feet of leasable area. The trust has a 97.0% occupancy rate. In the three months ended March 31, 2010, RioCan’s revenue was $214.6 million. That’s up 12.3% from $191.1 million a year earlier. Cash flow per unit rose 12.5%, to $0.36 from $0.32. The trust paid higher interest costs during the quarter, but contributions from newly acquired shopping centres and gains on property sales helped offset these expenses. The trust’s units yield 7.1%....

RIOCAN REAL ESTATE INVESTMENT TRUST $18 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 243.2 million; Market cap: $4.4 billion; Price-to-sales ratio: 5.7; Dividend yield: 7.7%; SI Rating: Average) continues to expand in the U.S. The trust recently formed a joint venture with Inland Western Retail Real Estate Trust, Inc. RioCan will own 80% of the new company, which will own eight malls in the Texas cities of Dallas, Houston and Austin. This investment will cost RioCan $138 million U.S., including $85.6 million U.S. of existing mortgages, which RioCan will assume. To put the price in context, RioCan earned $113.9 million (Canadian), or $0.49 a unit, in 2009. Like RioCan’s recent purchase of seven shopping centres in the northeastern U.S., grocery stores and pharmacies are the anchor tenants of these malls. That cuts the risk of this investment....

RIOCAN REAL ESTATE INVESTMENT TRUST $20 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 243.2 million; Market cap: $4.9 billion; Price-to-sales ratio: 6.2; Dividend yield: 6.9%; SI Rating: Average) is Canada’s largest real estate investment trust (REIT). RioCan has properties in all 10 provinces. The trust specializes in large outdoor malls, and owns 261 retail properties, 12 of which are under development. Most are in suburban areas, where land is generally cheaper than in towns and cities. Since it became a REIT in the early 1990s, RioCan has focused on developing and leasing retail space in Canada. However, it recently expanded to the U.S. through a new joint venture with Cedar Shopping Centers, Inc. (New York symbol CDR). RioCan paid $181 million U.S. for 80% of this joint venture, which will own seven shopping centres in the northeastern U.S. RioCan also received 14.3% of Cedar as part of the deal. ...

CGI GROUP INC., $15.04, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. These services help its customers automate certain routine functions, such as accounting and buying supplies. That lets CGI’s clients focus on their main businesses, and improve their efficiency. The company continues to renew existing contracts and win new ones. CGI added $1.1 billion of new orders in its second quarter, which ended March 31, 2010. Its backlog is now $11.4 billion, or 3.1 times its annual revenue. Even with the jump in new orders, CGI’s revenue fell 4.0% in the latest quarter, to $910.4 million from $948.3 million a year earlier. CGI gets roughly 40% of its revenue from outside of Canada, mainly the U.S., so the higher Canadian dollar hurt its revenue. Without the negative impact of exchange rates, revenue would have risen 3.5%....

Calloway Real Estate Investment Trust, $21.56, symbol CWT.UN on Toronto (Units outstanding: 85.2 million; Market cap: $1.8 billion), owns, develops and operates big-box outdoor malls across Canada. These malls feature large stores that are usually part of a chain. In all, Calloway owns 125 shopping centres and two office buildings, with 22.8 million square feet of leasable area. Its malls are located in the suburbs of larger cities, and have lots of room for parking and additional building. The trust gets 58% of its revenue from Ontario, 14% from Quebec, 10% from B.C., 5% from Manitoba, 4% from Saskatchewan, 3% from Newfoundland, 3% from Alberta, 1% from Nova Scotia, 1% from New Brunswick and 1% from Prince Edward Island....

Even though today’s house prices are high, mortgage interest costs are near historic lows. And owning your own home has a number of advantages. For example, owning your house is a great tax shelter. That’s because gains on your principal residence are exempt from capital-gains taxes. However, this tax benefit only applies to your principal residence. You must still pay tax on gains on the sale of a recreational property, such as a cottage or a ski chalet. But these properties generally appreciate at a much slower rate than, say, a home in a major urban centre. ...

Most real estate investment trusts (REITs), including our recommendations, are exempt from Ottawa’s income-trust tax, which comes into effect on January 1, 2011. As a result, these REITs should attract investor interest this year, as many income trusts convert to corporations and cut their distributions. Even so, we advise against overindulging in REITs. But if you stick with REITs that have steady cash flows and sound balance sheets, like the two we recommend on this page, you should earn attractive long-term returns at relatively low risk. RIOCAN REAL ESTATE INVESTMENT TRUST $18.73 (Toronto symbol REI.UN; Units outstanding: 241.8 million; Market cap: $4.5 billion; SI Rating: Average; Dividend yield: 7.4%) is Canada’s largest REIT. RioCan has interests in 258 shopping malls across Canada, including 12 under development. In all, these properties contain over 60 million square feet of leasable area. The trust has a 97.4% occupancy rate....