riocan real estate investment trust

CRESCENT POINT ENERGY CORP. $35.67 (Toronto symbol CPG; Shares outstanding: 159.3 million; Market cap: $5.7 billion; SI Rating: Extra Risk) has made a couple of big acquisitions in Saskatchewan. The company has bought privately held Wave Energy for about $665.3 million in stock. It has also purchased producing assets from Provident Energy Trust for $258.5 million in cash. Crescent Point plans to issue new shares, and put the $230-million proceeds toward paying for the Provident assets. In total, these acquisitions add about 16% to Crescent Point’s production. They should also raise its cash flow per share....

CANADIAN PACIFIC RAILWAY LTD., $47.90, Toronto symbol CP, reported higher profits for its latest quarter, as a gain on the sale of an investment helped it overcome a 24% drop in freight volumes caused by the recession. In the three months ended June 30, 2009, CP’s earnings rose 1.7%, to $157.3 million from $154.7 million a year earlier. Earnings per share fell 7.0%, to $0.93 from $1.00, on more outstanding shares. (In February, CP sold 13.9 million shares at $36.75 each. That increased the total outstanding by about 9%). The latest earnings included a $68.7-million gain on CP’s sale of part of its stake in the Detroit River Tunnel Partnership, which operates a rail tunnel between Detroit and Windsor, Ontario. CP now owns 16.5% of this business, down from 50%. The sale freed up cash that CP used to pay down debt, while preserving its right to keep operating the tunnel. CP’s $4-billion long-term debt is now a manageable 49% of its $8.2 billion market cap....

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%. In the three months ended March 31, 2009, RioCan posted revenue of $191.1 million, up 4.2% from $183.4 million a year earlier. Cash flow per unit was unchanged, at $0.32. RioCan’s annual distribution of $1.38 gives the units a 9.0% yield. RioCan recently raised $150 million by issuing new units at $14.50 each. The trust didn’t need to raise capital, but will now have the funds to buy other companies, likely at low prices, as opportunities arise....

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%....

PETRO-CANADA, $48.43, Toronto symbol PCA, rose 5% on Thursday after its shareholders voted 96% in favour of the proposed takeover offer from SUNCOR ENERGY INC., $38.47, Toronto symbol SU. Suncor shareholders have also approved the merger by 98%. The deal gives Petro-Canada shareholders 1.28 common shares of the new company for each share they own, while Suncor investors will get one share of the merged company for each of their Suncor shares. Suncor shareholders will own 60% of the combined company, while Petro-Canada shareholders will own the remaining 40%. (The new company will operate under the Suncor name.) Competition regulators still have to approve the merger. However, the deal should close by the end of the third quarter....

RIOCAN REAL ESTATE INVESTMENT TRUST $13.51 (Toronto symbol REI.UN; Units outstanding: 222.1 million; Market cap: $3.0 billion; SI Rating: Average) is Canada’s largest real estate investment trust (REIT). RioCan has issued $180 million worth of new bonds. The trust will use the proceeds to retire $55 million of bonds that are due this year. That will leave it with $125 million, which it may use to buy properties or further develop its real estate holdings. For example, it recently bought six shopping centres in Montreal for $67.5 million. These malls have grocery stores as anchor tenants, which cuts their risk during a recession. In 2008, RioCan earned $146.9 million, or $0.67 a unit....

BOMBARDIER INC., Toronto symbols BBD.A, $3.39, and BBD.B, $3.32, has received a firm order for 20 of its new CSeries regional jets from Lease Corporation International Aviation (New Buildings) Limited. Lease Corporation is an Irish company that leases aircraft to Singapore Airlines, British Airways and other major airlines. The deal is worth $1.4 billion, and Bombardier will probably begin delivering the planes in 2014. (All amounts except share price in U.S. dollars) Moreover, Lease Corporation has an option to buy 20 more jets, though it will probably wait until it has received most of the initial order before it exercises the option. To put this contract in perspective, Bombardier earned $1 billion, or $0.56 a share, in the fiscal year ended January 31, 2009. That’s more than twice the $479 million, or $0.26 a share, it earned the previous year. The year-earlier figures exclude the writedown of an investment....

RIOCAN REAL ESTATE INVESTMENT TRUST $12 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 222 million; Market cap: $2.7 billion; Price-to-sales ratio: 3.7; SI Rating: Average) is Canada’s largest real estate investment trust (REIT). It owns 241 retail properties, including 16 under development. RioCan specializes in “Big Box” outdoor malls. Most are in suburban areas where land costs are generally lower than in more developed towns and cities. RioCan’s exposure to the retail industry increases its risk, particularly during a recession. However, its anchor tenants, like Wal-Mart, Cineplex and Metro, tend to do well when the economy is slow. In 2008, RioCan’s revenue rose 6.1%, to $763.8 million from $719.9 million in 2007. Earnings soared 354%, to $146.9 million from $32.4 million. However, this was mainly because RioCan’s 2007 earnings included a $144-million, non-cash charge related to a change in the way Ottawa taxes REITs. In April 2008, RioCan also issued $144 million of new units to pay down debt. As a result, earnings per unit rose 318.8%, to $0.67 from $0.16. Cash flow per unit fell 2%, to $1.48 from $1.51....

RIOCAN REAL ESTATE INVESTMENT TRUST $14 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 221 million; Market cap: $3.1 billion; Price-to-sales ratio: 4.4; SI Rating: Average) is building a new, mixed-use residential/commercial complex in downtown Toronto. Home Depot had agreed to be the anchor tenant, but has decided to break its lease. This could force RioCan to slow work on this property, but the trust should have little trouble finding a replacement tenant. Home Deport also probably paid a termination fee of $11.5 million, which is equal to 28% of the $41.6 million, or $0.19 a unit, that RioCan earned in the three months ended September 30, 2008. RioCan is a buy.

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%. RioCan’s revenue in the three months ended September 30, 2008, was $185.5 million, up 7.6% from $172.5 million a year earlier. Cash flow per unit rose 2.8%, to $0.37 from $0.36. RioCan’s annual distribution of $1.38 gives the units a yield of 9.7%. RioCan recently agreed to buy six shopping centres in Montreal for $67.5 million. The properties are over 99% occupied, and have an average lease term of 14.5 years....