riocan real estate investment trust

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....

When Ottawa moved to put income trusts on an equal footing with corporations, it exempted REITs. We’ve recommended these two REITs for some time, mainly because of the quality of their assets. We continue to view both as buys. 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....

RIOCAN REAL ESTATE INVESTMENT TRUST $25, has raised its monthly cash distribution 2.3%, from $0.1075 a unit to $0.11. The new annual rate of $1.32 yields 5.3%. Buy. LEGACY HOTELS REAL ESTATE INVESTMENT TRUST $9.40 has agreed to buy a 398-room hotel in Calgary for $53.5 million. It will also spend a further $4 million on renovations. To put that in context, Legacy earned $13.3 million or $0.15 a unit in the second quarter of 2006. But the Calgary market is growing fast, and this purchase should add to its future cash flow. Best Buy. HART STORES INC. $5.30, earned $0.14 a share in its second fiscal quarter ended July 29, 2006, up 27.3% from $0.11 a year earlier. Sales grew 12.6%, to $39.4 million from $35.0 million, thanks to the strong performance of its five new Ontario junior department stores. It plans to open three more stores in Ontario in the third quarter. That would give Hart a total of 76 stores, including 10 in Ontario. Buy....

High quality Real Estate Investment Trusts, or REITs, are among the most stable of the royalty and investment trusts. That’s because they own nondepleting assets, and can lock in lease rates and financing costs for long terms. Investors are also aware of the takeover prospects for REITs these days. That’s not reason enough alone to buy them, but it’s a plus. The REITs we recommend hold top-quality assets. In contrast, many other types of trusts hold lowquality assets in volatile industries such as resources and commodities, sugar production or restaurants. These trusts expose holders to hidden business risks that could have a sudden, devastating effect on their cash flow and yields....

RIOCAN REAL ESTATE INVESTMENT TRUST $23 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Average) earned $0.20 a unit (total $39.6 million) from continuing operations in the three months ended June 30, 2006, up 11.1% from $0.18 a unit ($36.1 million) a year earlier. However, the year-earlier quarter included $5.0 million in writedowns and other charges. Cash flow per unit grew 2.9%, to $0.35 from $0.34, while revenue rose 2.7%, to $155.4 million from $151.3 million. RioCan’s big box style shopping malls continue to attract long-term tenants. Its occupancy rate in the most recent quarter rose to a record 97.3%. National chains and anchor tenants accounted for 83% of its rental revenue, which cuts its risk....

In evaluating investments, many investors focus on what we’d call ‘investment outputs’, such as earnings, dividends, cash flow, return on equity, sales growth and so on. These are all important, of course, but you shouldn’t focus on them to the exclusion of what you might call ‘investment inputs’, such as the factors we use in assigning our Successful Investor quality ratings. Investment inputs are harder to work with than investment outputs, since it takes a judgment call to determine their risk or value. To give you a better idea of what we mean, here’s a list of a dozen investment inputs that we look at before recommending an income trust:...

RIOCAN REAL ESTATE INVESTMENT TRUST $22.86 (Toronto symbol REI.UN; SI Rating: Average) has agreed to form a joint venture with a U.S.-based finance company that will invest up to $500 million in real-estate assets. Like a similar fund that RioCan headed up in 2003, this one will focus on distressed retail properties that it can refurbish and sell for a profit. RioCan will commit $50 million to the new fund. Investing in turnaround properties through private funds like these gives RioCan a chance to earn higher returns compared to its traditional retail properties, at minimal risk. In addition, RioCan also earns fees for managing the new assets. RioCan already has alliances to acquire and manage properties with Kimco Realty, Ontario Municipal Employees Retirement System (OMERS), and the Canada Pension Plan Investment Board....

RIOCAN REAL ESTATE INVESTMENT TRUST $23.07 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has total assets of $4.2 billion consisting of ownership interests in a portfolio of 201 retail properties across Canada, including 14 under development. These properties contain over 50 million square feet of gross 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, 2005 was $149.8 million, up 8.6% from $138 million a year earlier. Cash flow per unit fell 3.3%, to $0.29 from $0.30. RioCan’s annual distribution of $1.29 gives it a current yield of 5.6%....

RIOCAN REAL ESTATE INVESTMENT TRUST $23 (Toronto symbol REI.UN; SI Rating: Average) owns or invests in over 200 retail properties in Canada, mainly large, outdoor suburban malls. Ontario and Quebec account for roughly 80% of its revenue. In the three months ended September 30, 2005, RioCan earned $0.22 a unit (total $41.8 million) from continuing operations, up 4.8% from $0.21 a unit ($39.1 million) a year earlier. Cash flow rose 2.6%, to $56.1 million from $54.7 million. But cash flow per unit fell to $0.29 from $0.30 due to more units outstanding. Revenue grew 8.6%, to $149.8 million from $138.0 million. In the past few years, RioCan has steadily sold older or smaller properties so it can focus on properties with greater earning potential, such as “Big Box"-style stores. Thanks to this strategy, the trust has leased nearly 97% of its available space. National chains like Loblaw, Wal-Mart and Canadian Tire accounted for 81.5% of RioCan’s rental revenue at September 30, 2005, up from 80.7% at the end of 2004....