riocan

The Successful Investor Hotline. Friday, December 14, 2012 Dear client,...

WestJet (see left) was trading at $14.10 when we made it our #1 Stock of the Year for 2011. It was a year late getting started, but it’s now hitting new highs. Alimentation Couche-Tard $49.82, symbol ATD.B on Toronto, was our #1 pick for 2012 in Stock Pickers Digest at $30.55. Its shares are now up 63.1%. Canadian Pacific $98.57, symbol CP on Toronto, was our 2012 #1 pick for The Successful Investor at $69. It’s up 42.9%....

ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $31.60 (Toronto symbol AP.UN; Units outstanding: 60.0 million; Market cap: $1.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.2%; www.alliedpropertiesreit.com) owns 119 office buildings, mostly in major Canadian cities. These mainly Class I properties contain over 8.3 million square feet of leasable area.

Class I refers to 19th- and early-20th-century light industrial buildings that have been converted to office and retail space. They usually feature exposed beams, interior brick and hardwood floors.

In 2011, the trust bought 22 properties for $456 million. In the first half of 2012, it bought 14 buildings for $175.0 million. Allied has an occupancy rate of 92.3%.

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ISHARES CDN REIT SECTOR INDEX FUND $16.40 (Toronto symbol XRE; buy or sell through brokers; ca.ishares.com) holds the 13 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of each REIT is limited to 25% of the ETF’s value. iShares CDN REIT’s expenses are 0.60% of its assets. The fund yields 4.5%. The ETF’s largest holding is RioCan REIT at 20.8%, followed by H&R REIT (11.6%), Dundee REIT (9.1%),Canadian REIT (7.4%), Calloway REIT (7.3%), Cominar REIT (6.7%), Boardwalk REIT (6.6%), Canadian Apartment REIT (6.0%), Primaris Retail REIT (5.5%), Allied Properties REIT (4.9%), Chartwell Seniors REIT(4.6%), Artis REIT (4.6%), Northern Property REIT (2.6%) and Crombie REIT (2.0%)....

RIOCAN REAL ESTATE INVESTMENT TRUST $26.69 (Toronto symbol REI.UN; Units outstanding: 296.3 million; Market cap: $7.9 billion; TSINetwork Rating: Average; Dividend yield: 5.2%; www.riocan.com) recently formed a 50/50 joint venture with ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $30.71 (Toronto symbol AP.UN; Units outstanding: 60.0 million; Market cap: $1.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www.alliedpropertiesreit.com). RioCan, Allied and privately held Diamond Corp. have now agreed to buy the headquarters of The Globe and Mail newspaper in downtown Toronto. RioCan and Allied will each own 40%, while Diamond will hold 20%. The three partners plan to redevelop the site into a complex with residential, retail and office units. RioCan will manage thestores, and Allied will operate the office portion....

p>RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 298.6 million; Market cap: $8.1 billion; Price-to-sales ratio: 5.0; Dividend yield: 5.1%; TSINetwork Rating: Average; www.riocan.com) has completed its deal to buy full control of 21 shopping malls in the U.S. from Cedar Shopping Centers, Inc. (New York symbol CDR).Previously, RioCan had an 80% stake in these malls through a joint venture with Cedar. It now owns 49 malls in the U.S., and 289 in Canada. RioCan paid $39.0 million U.S. for these properties. To put that price in context, it earned $125 million (Canadian) in the three months ended September 30, 2012. That’s down 25.6% from $168 million a year earlier. Earnings per unit fell 33.3%, to $0.42 from $0.63, on more units outstanding.

However, the best way to assess a real estate investment trust’s operating performance is to look at its cash flow. That’s because it excludes nonrecurring items, like gains on the sale of real estate. RioCan’s cash flow rose 18.6% in the quarter, to a record $115 million from $97 million. Cash flow per unit rose 8.1%, to $0.40 from $0.37.

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LOBLAW COMPANIES LTD., $33.10, Toronto symbol L, has signed a new long-term deal with Towers Watson, a private firm that helps Canadian companies manage their employees’ health benefits. Under the agreement, Loblaw’s in-store pharmacies will offer special discounts to Towers Watson’s clients, which together employ over 30,000 people. These discounts should draw more shoppers to Loblaw’s stores and more than offset the lost revenue. Roughly half of Loblaw’s 1,000 supermarkets now have in-store pharmacies. Meanwhile, the company earned $222 million, or $0.79 a share, in the three months ended October 6, 2012. That’s down 5.9% from $236 million, or $0.84 a share, a year earlier. Even with the decline, the latest earnings beat the consensus estimate of $0.78 a share....

RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 298.6 million; Market cap: $8.1 billion; Price-to-sales ratio: 5.0; Dividend yield: 5.1%; TSINetwork Rating: Average; www.riocan.com) has completed its deal to buy full control of 21 shopping malls in the U.S. from Cedar Shopping Centers, Inc. (New York symbol CDR).Previously, RioCan had an 80% stake in these malls through a joint venture with Cedar. It now owns 49 malls in the U.S., and 289 in Canada. RioCan paid $39.0 million U.S. for these properties. To put that price in context, it earned $125 million (Canadian) in the three months ended September 30, 2012. That’s down 25.6% from $168 million a year earlier. Earnings per unit fell 33.3%, to $0.42 from $0.63, on more units outstanding. However, the best way to assess a real estate investment trust’s operating performance is to look at its cash flow. That’s because it excludes nonrecurring items, like gains on the sale of real estate. RioCan’s cash flow rose 18.6% in the quarter, to a record $115 million from $97 million. Cash flow per unit rose 8.1%, to $0.40 from $0.37....

TORSTAR CORP., $8.15, Toronto symbol TS.B, fell 8% this week after it reported lower-than-expected earnings. The company continues to see weak advertising demand at its newspapers, including its flagship paper, The Toronto Star. Strong competition and unfavourable foreign exchange rates are also hurting profits at its Harlequin book publishing subsidiary. As a result, Torstar’s earnings fell 44.1% in the three months ended September 30, 2012, to $14.1 million, or $0.18 a share, from $25.2 million, or $0.32 a share, a year earlier....

ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $31.60 (Toronto symbol AP.UN; Units outstanding: 60.0 million; Market cap: $1.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.2%; www.alliedpropertiesreit.com) owns 119 office buildings, mostly in major Canadian cities. These mainly Class I properties contain over 8.3 million square feet of leasable area. Class I refers to 19th- and early-20th-century light industrial buildings that have been converted to office and retail space. They usually feature exposed beams, interior brick and hardwood floors. In 2011, the trust bought 22 properties for $456 million. In the first half of 2012, it bought 14 buildings for $175.0 million. Allied has an occupancy rate of 92.3%....