riocan real estate investment trust

Real Estate Investment Trusts (REITs) have moved down lately, largely due to rising interest rates. Higher real estate and construction costs could also slow the expansion plans of some REITs. We still advise against overindulging in REITs. But if you stick with the highest quality, like the REITs we recommend on this page, you should make attractive long-term returns with low risk. RIOCAN REAL ESTATE INVESTMENT TRUST $22.30 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 206 retail properties across Canada, including nine under development. These properties contain over 52.1 million square feet of leasable area....

RIOCAN REAL ESTATE INVESTMENT TRUST $25 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 208.0 million; Market cap: $5.2 billion; SI Rating: Average) will record a $150 million pre-tax charge to its earnings in the second quarter of 2007. This is a non-cash charge, so it has no effect on RioCan’s cash flows, nor on its ability to maintain its $1.32 distribution rate, which yields 5.3%. Ottawa’s new rules for income trusts come into effect in 2011, and RioCan will probably have to restructure its operations to qualify as a tax-exempt REIT. Meanwhile, however, its growth is likely to continue....

RIOCAN REAL ESTATE INVESTMENT TRUST $25 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 208.0 million; Market cap: $5.4 billion; SI Rating: Average) manages over 200 retail properties in Canada. It specializes in big-box style outdoor malls with plenty of parking space. RioCan is slowly cutting its exposure to pure retail properties. For example, it recently formed a joint venture with two seniors housing REITs to build a new mixed-use complex in Mississauga, Ontario. It’s also building a retail/residential development in Toronto. The trust recently completed the largest acquisition in its history. In February 2007, it paid $223 million for a major office/retail complex in midtown Toronto. Thanks to strong growth in the surrounding neighbourhoods, RioCan feels that the retail component of this complex (25% of total area) will become a major contributor to its future cash flow....

It’s easy to enter the retail industry, and easy to go broke in it if your business concept fails to build and maintain a loyal clientele. However, the industry provides highly rewarding investment opportunities if you stick as we do with well-established companies that have strong brands and other hidden or little appreciated assets. Canadian Tire is a good example. Its famous “Canadian Tire Money” and big new stores continue to encourage repeat visits. Loblaw has stumbled lately, but its recent setback follows a dozen years of huge gains. Investments in new inventory systems and unique food products should help it thrive again....

BANK OF NOVA SCOTIA $53 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 993.0 million; Market cap: $52.6 billion; SI Rating: Above average) continues to expand its international operations, which supply a third of its earnings. It recently agreed to acquire a 24.99% stake in Thailand’s eighth-largest bank for $240 million, which is about 24% of the $1.02 billion or $1.01 a share it earned in its most recent fiscal quarter. The bank is also opening new offices in Malaysia and Turkey. Overseas operations like these, particularly with local partners, give Bank of Nova Scotia access to high-potential markets at moderate risk. International operations also cut its exposure to the Canadian economy and its heavy reliance on natural resources. Bank of Nova Scotia is a buy....

RIOCAN REAL ESTATE INVESTMENT TRUST $26.61 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has total assets of $4.6 billion, consisting of ownership interests in a portfolio of 206 retail properties across Canada, including nine under development. These properties contain over 52.1 million square feet of leasable area. RioCan’s revenue in the three months ended December 31, 2006 was $151.2 million, up 8.8% from $138.9 million a year earlier. Cash flow per unit rose 14.7%, to $0.39 from $0.34. Portfolio occupancy is at an all-time high of 97.7%. RioCan’s annual distribution of $1.32 gives it a current yield of 5.0%. RioCan is still a buy.

Real Estate Investment Trusts (REITs) dropped in price last November when Ottawa announced that it will impose a tax on income trust distributions in 2011. However, REITs were exempt from the prosposed new tax, and all of our REIT recommendations went on to reach new all-time highs. We advise against overindulging in REITs. But if you stick with the highest quality, like the REITs we recommend on this page, you should make attractive long-term returns with low risk. RIOCAN REAL ESTATE INVESTMENT TRUST $26.61 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has total assets of $4.6 billion, consisting of ownership interests in a portfolio of 206 retail properties across Canada, including nine under development. These properties contain over 52.1 million square feet of leasable area....

RIOCAN REAL ESTATE INVESTMENT TRUST $24.49 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has total assets of $4.5 billion consisting of ownership interests in a portfolio of 204 retail properties across Canada, including 8 under development. These properties contain over 50.7 million square feet of leasable area. RioCan is Canada’s largest owner of neighbourhood shopping centres. These are enclosed malls in smaller urban centres. But where it’s showing the strongest growth is as the largest owner of ‘New Format’ malls. These are in the suburbs of larger cities, and are made up largely of ‘Big Box’ stores with lots of parking and room for new building. RioCan’s revenue in the three months ended September 30, 2006 was $160.7 million, up 7.3% from $149.8 million a year earlier. Cash flow per unit rose 29%, to $0.40 from $0.31. Portfolio occupancy is at an all-time high of 97.5%. RioCan’s annual distribution of $1.32 gives it a current yield of 5.4%....

Starting in 2011, Ottawa will impose a tax on income trust distributions that will put the income trusts on an equal tax footing with conventional taxable corporations. Trusts will pay a 31.5% tax on distributions to unit holders, so your cash flow from those trusts will fall by the same amount. However, if you hold trusts outside of registered plans such as RRSPs and RRIFs, you will not see a large change in your after-tax position — even though the distributions you receive will likely drop by 31.5%. That’s because the distributions will now be taxed as dividends and Canadians will benefit from the lower tax rates provided by the combination of the dividend tax credit and the dividend gross-up (foreigners don’t quality for the favourable dividend treatment). For example, in Ontario, investors in the top tax bracket now end up with about $536 after tax on each $1,000 of trust income. Under the new tax proposals, investors holding trusts outside of RRSPs will end up with about $532 after tax. The difference is roughly similar for the other provinces....

RIOCAN REAL ESTATE INVESTMENT TRUST $25 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) owns all or part of 203 large, outdoor suburban malls across Canada. In the three months ended September 30, 2006, RioCan earned $0.21 a unit from continuing operations, down slightly from $0.22 a year earlier, mainly due to higher interest and amortization expenses. However, cash flow per share rose 29.0%, to $0.40 from $0.31, while revenue grew 7.3%, to $160.7 million from $149.8 million. Demand by retailers for space in RioCan’s malls remains strong. In fact, the occupancy rate rose to 97.5% in the most recent quarter — a new record. National chains such as Wal-Mart and Loblaw account for 83% of RioCan’s rental revenue, which cuts RioCan’s risk....