riocan

RIOCAN REAL ESTATE INVESTMENT TRUST $20.25 (Toronto symbol REI.UN; SI Rating: Average) has increased its monthly distributions by 2.2%, from $0.1125 a unit to $0.115. The new annual rate of $1.38 yields 6.8%. RioCan is a buy. ARC ENERGY TRUST $22.55 (Toronto symbol AET.UN; SI Rating: Extra risk) has rescinded one of its recent monthly distribution increases in light of lower oil and gas prices. It now yields 12.8%....

GUARDIAN MONTHLY HIGH INCOME II FUND $12.83 (CWA Rating: Income) (GGOF Guardian Group of Funds, Commerce Court West, Suite 4100, P.O. Box 201, Toronto, Ontario M5L 1E8. 1-800-668-5613; Web site: www.ggof.com. Available from brokers) continues to emphasize more stable real estate investment trusts (REITs), and high-quality, long-lived resource trusts. We still think you should diversify carefully with trusts. Emphasize those with stable cash flows, a low need for capital expenditures and mature business operations. The $884.8 million fund’s top holdings are: Crescent Point Energy Trust, Canadian Oil Sands Trust, RioCan REIT, ARC Energy, Cominar REIT, Yellow Pages Income Fund, BFI Canada Income Fund, Vermilion Energy Trust, Bonavista Energy Trust and Enerplus Resources Fund....

TERANET INCOME FUND $11.47, Toronto symbol TF.UN, is now the target of a hostile $11.00-a-unit takeover offer from the Ontario Municipal Employees Retirement System. As part of the deal that established Teranet as a public company in June, 2006, the Ontario government capped the amount a single investor can own at 25%. So, any takeover would require government approval. (Teranet has an exclusive license from the Ontario government to operate the province’s electronic land registry system until 2017.) Despite this hurdle, Teranet’s units are trading above the offer price. That suggests that investors feel a higher offer is likely....

ISHARES CDN REIT SECTOR INDEX FUND $13.36 (Toronto symbol XRE; buy or sell through a broker) holds the 12 Canadian real estate investment trusts (REITs) in the S&P/TSX Capped REIT Index. The weight of any one REIT in the value of the S&P/TSX Capped REIT Index is limited to 25%. RioCan REIT makes up 25% of the index’s value; H&R REIT, 14.9%; Canadian REIT, 10.1%; Boardwalk REIT, 9.0%; Calloway REIT, 8.1%; Canadian Apartment Properties REIT, 6.3%; Primaris Retail REIT, 5.9%; Cominar REIT, 4.6%; Chartwell Seniors Housing REIT, 4.2%; Innvest REIT, 4.0%; Extendicare REIT, 2.7%; and Dundee REIT, 2.6%. We’re glad to see that the top holding is RioCan, one of our favorite REITs. In fact, the top three holdings are among our recommendations. Note that iShares CDN REIT holds a couple of REITs we don’t recommend....

RIOCAN REAL ESTATE INVESTMENT TRUST $21.51 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 227 retail properties across Canada, including 15 under development. These properties contain over 59 million square feet of leasable area. Portfolio occupancy stands at 97.0%. RioCan’s revenue in the three months ended June 30, 2008 was $169.9 million, up 7.1% from $158.3 million a year earlier. Cash flow per unit rose 5.3%, to $0.40 from $0.38. RioCan’s annual distribution of $1.35 gives the units a yield of 6.2%. RioCan is still a buy.

Real Estate Investment Trusts (REITs) have moved up lately, but are still down from last year’s highs. That’s mainly due to fears that slowing consumer spending will hurt cash flows. However, top-quality REITs continue to have high occupancy rates and rising lease rates. As well, lower interest rates will help REITs fund their expansion plans.

We still advise against overindulging in Real Estate Investment Trusts. But if you stick with the highest quality, like the Real Estate Investment Trusts we recommend on this page, you should make attractive long-term returns with relatively low risk.

RIOCAN REAL ESTATE INVESTMENT TRUST $21.51 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT (Real Estate Investment Trust). RioCan has ownership interests in a portfolio of 227 retail properties across Canada, including 15 under development. These properties contain over 59 million square feet of leasable area. Portfolio occupancy stands at 97.0%.

RioCan’s revenue in the three months ended June 30, 2008 was $169.9 million, up 7.1% from $158.3 million a year earlier. Cash flow per unit rose 5.3%, to $0.40 from $0.38. RioCan’s annual distribution of $1.35 gives the units a yield of 6.2%.

RioCan is still a buy.

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TECK COMINCO LTD. $45.00, Toronto symbol TCK.B, has agreed to buy the 80.1% of FORDING CANADIAN COAL TRUST $89.90, Toronto symbol FDG.UN, that it does not already own. Fording unitholders will receive $82.00 U.S. in cash and 0.245 of a Teck class B subordinate voting share per unit. Fording’s units are trading about 5% below the implied value of the offer of $95.07, which indicates that a higher bid is unlikely. Teck’s offer is worth about $14.1 billion, including $1.5 billion in new shares. The purchase price is a high 67% of Teck’s market cap of $21 billion. However, Fording’s main asset is the Elk Valley coal project in British Columbia, which Teck currently manages. That eliminates the possibility of an unpleasant surprise. As well, full control of Fording will immediately add to both earnings and cash flow. Teck aims to complete the takeover by the end of October. Teck is a buy. Fording investors should hold, and tender their units to get the full amount without paying brokerage fees....

RIOCAN REAL ESTATE INVESTMENT TRUST $21 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 212.0 million; Market cap: $4.5 billion; SI Rating: Average) has formed a second joint venture with U.S.-based real estate developer Kimco Realty Corp....

ARBOR MEMORIAL SERVICES INC. $27 (Toronto symbol ABO.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 10.7 million; Market cap: $288.9 million; SI Rating: Average) owns 41 cemeteries, 27 crematoria, four reception centres located on cemetery premises and 90 funeral homes in eight provinces. In its second fiscal quarter ended April 30, 2008, Arbor earned $0.60 a share, down 9.1% from $0.66 a year earlier. Revenue fell 1.5%, to $58.4 million from $59.3 million. Arbor is a buy for aggressive investors. RIOCAN REAL ESTATE INVESTMENT TRUST $21 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 212.0 million; Market cap: $4.5 billion; SI Rating: Average) has formed a second joint venture with U.S.-based real estate developer Kimco Realty Corp. This new 50-50 partnership has agreed to buy 10 retail shopping centres in central and eastern Canada. RioCan will manage these properties....

CANADIAN IMPERIAL BANK OF COMMERCE $58.24, Toronto symbol CM, moved down this week after Moody’s Investors Service downgraded the credit ratings of several bond insurers. These insurers provide CIBC and other banks with guarantees on securities they hold, such as bonds backed by U.S. subprime mortgages. The downgrades could lead to fresh writedowns of about $1 billion. In the three months ended April 30, 2008, CIBC lost $1.1 billion or $3.00 a share, mainly due to a $1.7 billion (after-tax) writedown of illiquid securities. However, CIBC still has enough capital to conduct its operations and satisfy regulatory requirements. Even the $3.48 dividend seems secure, and it yields 6.0%. CIBC is a buy....