riocan

The federal government’s tax on income-trust distributions has now been in effect for a little more than six months, since January 1, 2011. However, Ottawa feels the income-trust business structure is still appropriate for real estate investment trusts (REITs), so it has exempted REITs from the new tax. That’s great news for Canadian income seekers. What’s more, as we predicted in our Canadian Wealth Advisor newsletter, most REITs have moved up in the past year—including our recommendations. That’s because REITs’ high yields have attracted a lot of investor attention as trusts converted to corporations, or cut their distributions in response to the new tax....

RIOCAN REAL ESTATE INVESTMENT TRUST $25.90 (Toronto symbol REI.UN; Units outstanding: 248.4 million; Market cap: $6.8 billion; TSINetwork Rating: Average; Dividend yield: 5.3%; www.riocan.com) reports that U.S.-based Target Corp. now plans to convert 21 of the 34 Zellers stores in RioCan’s malls to the Target banner. Target will make a decision on the rest later this year. Any locations it doesn’t convert will operate as Zellers stores until their leases expire. The Target stores should help draw more shoppers to RioCan’s malls. More customer traffic would make it easier to charge higher rents to other tenants....

ISHARES CDN REIT SECTOR INDEX FUND $14.98 (Toronto symbol XRE; buy or sell through a broker; ca.ishares.com) holds the 13 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT is limited to 25% of iShares CDN REIT Sector Index Fund’s value. iShares CDN REIT’s expenses are just 0.55% of its assets....

RIOCAN REAL ESTATE INVESTMENT TRUST $25 (Toronto symbol REI.UN; Units outstanding: 262.1 million; Market cap: $6.7 billion; Price-to-sales ratio: 7.2; Dividend yield: 5.6%; TSINetwork Rating: Average; www.riocan.com) stands to gain from the acquisition of the Zellers department-store chain by U.S.-based Target Corp. (New York symbol TGT). Target plans to convert 21 of the 34 Zellers stores in RioCan’s malls to the Target banner. It will make a decision on the rest later this year. If Target decides not to convert the remaining stores, they will operate as Zellers stores until their leases expire. The Target stores should help draw more shoppers to RioCan’s malls. As a result, it would receive higher revenue from leases that are based on a percentage of a tenant’s sales. More customer traffic would also make it easier to charge higher rents....

CANADIAN REIT $33.46 (Toronto symbol REF.UN; Units outstanding: 66.5 million; Market cap: $2.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.3%; www.creit.ca) owns over 160 properties, including retail, industrial and office buildings located across Canada and in the Chicago area. These properties contain over 22 million square feet of leasable area. Its occupancy rate is 94.2%. In the three months ended March 31, 2010, the real estate investment trust’s revenue fell slightly, to $81.3 million from $81.7 million a year earlier. Cash flow per unit fell 7.1%, to $0.52 from $0.56. Canadian REIT provides high-interest loans to developers who are building properties that it might take an interest in. It is now making fewer of these loans; that was the main reason for the lower results. Instead, the REIT is focusing on buying lower-risk properties that will provide long-term cash flows. For example, it recently agreed to buy two fully leased malls in Mississauga, Ontario, for $171.0 million....

Three of Canada’s big-five banks, BANK OF NOVA SCOTIA, $58.49, Toronto symbol BNS, CANADIAN IMPERIAL BANK OF COMMERCE, $84.40, Toronto symbol CM, and TORONTO-DOMINION BANK, $84.15, Toronto symbol TD, have joined a new consortium called Maple Group Acquisition Corp. Other members of this group include National Bank and five major pension funds. Maple wants to buy a controlling interest in TMX Group Inc. (Toronto symbol X), which operates the Toronto Stock Exchange, the TSX Venture Exchange and the Montreal Exchange. In February 2011, TMX accepted a takeover offer from the London Stock Exchange Group. Under the terms of that offer, TMX shareholders would own 45% of the combined company, which would be the world’s second-largest stock exchange by market cap....

RIOCAN REAL ESTATE INVESTMENT TRUST $25.21 (Toronto symbol REI.UN; Units outstanding: 259.8 million; Market cap: $6.6 billion; TSINetwork Rating: Average; Dividend yield: 5.5%; www.riocan.com) spent $91.9 million buying new Canadian properties in the first quarter of this year. The trust has also agreed to buy two more properties in Canada for $41 million, plus four U.S. properties for $95 million U.S. These are big purchases for RioCan, which earned $303.0 million, or $1.23 a unit, in 2010. However, these malls have national retailers, such as Home Depot and Costco, as anchor tenants. That cuts the risk of these purchases. RioCan is a buy.

Real estate investment trusts (REITs) resemble income trusts, but with a key difference: REITs invest in income-producing real estate, such as office buildings and hotels. High-quality real estate investment trusts can make attractive, lower-risk additions to your portfolio. Even so, we continue to advise against overindulging in REITs. But if you’re thinking of investing in some of Canada’s top REITs, here are 2 reasons why now is a great time to do so:...

PLEASE NOTE: Our next Hotline will go out on Friday, April 15, 2011. TECK RESOURCES LTD., $55.06, Toronto symbol TCK.B, rose 8% this week after the company reached a new deal with the union at its Elkview metallurgical coal mine in B.C. The deal should end a two-month strike. Elkview is the second-largest of Teck’s six coal mines in B.C., so settling this dispute will help the company take advantage of rising demand for its coal by steelmakers in Asia. As well, the company continues to benefit from higher copper prices. It should also see higher demand for its coal and zinc as Japan rebuilds following last month’s earthquake and tsunami....

RioCan Real Estate Investment Trust, symbol REI.UN on Toronto, operates 297 retail properties in Canada, mainly outdoor shopping malls. It also owns 31 malls in the U.S. through joint ventures, including its partnership with Cedar Shopping Centers Inc. (New York symbol CDR). RioCan owns 80% of the joint venture with Cedar, and 14% of Cedar itself. In 2010, the real estate investment trust’s revenue rose 17.0%, to $887.0 million from $758.0 million in 2009. The real estate investment trust’s earnings jumped 166.0%, to $303.0 million from $113.9 million in 2009. Earnings per unit rose 151.0%, to $1.23 from $0.49, on more units outstanding. The increase was mostly due to a one-time non-cash reversal of future income tax charges. In 2010, RioCan acquired 19 properties in Canada and 29 in the U.S. for a total of $986 million....