riocan

BANK OF NOVA SCOTIA $51.41 (Toronto symbol BNS: SI Rating: Above average) earned $980 million in its second fiscal quarter ended April 30, 2008, down 5.8% from $1.04 billion a year earlier. Per-share earnings fell 5.8%, to $0.97 from $1.03. The declines were largely due to higher provisions for loan losses, which jumped to $153 million from an unusually low $20 million in the year-earlier quarter. Revenue rose 3.2%, to $3.2 billion from $3.1 billion, partly due to acquisitions. The bank has increased its quarterly dividend 4.3%, from $0.47 a share to $0.49. The new annual rate of $1.96 yields 3.8%. Bank of Nova Scotia is a buy....

GUARDIAN MONTHLY HIGH INCOME II FUND $15 (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 $887.4 million fund’s top holdings are: Canadian Oil Sands Trust, RioCan REIT, Canadian REIT, ARC Energy, Cominar REIT, Yellow Pages Income Fund, BFI Canada Income Fund, Vermilion Energy Trust, Bonavista Energy Trust, Enerplus Resources Fund and Crescent Point Energy Trust....

RioCan Real Estate Investment Trust $22 (Toronto symbol REI.UN Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 212.0 million; Market cap: $4.7 billion; SI Rating: Average) is Canada’s largest real estate investment trust. It owns 214 retail properties, including 12 under development, comprising an aggregate of almost 55 million square feet. RioCan specializes in “New Format” shopping centres. These are large, outdoor malls made up of “Big Box” stores in the suburbs of larger cities. They feature plenty of room for parking and future expansion. RioCan also operates smaller outdoor shopping centres, as well as enclosed malls in urban areas. The trust’s revenue rose from $474.5 million in 2003 to $719.9 million in 2007. Its earnings fell from $1.03 a unit (total $174.4 million) in 2003 to $0.69 a unit ($134.9 million) in 2005, but rose to $0.83 a unit ($163.8 million) in 2006. In 2007, a non-cash charge of $144 million related to changes in the way Ottawa taxes REITs cut earnings to $0.16 a unit ($32.4 million). If you exclude this adjustment, RioCan would have earned$0.85 a unit in 2007. Cash flow per unit grew from $1.26 in 2003 to $1.51 in 2007....

Real Estate Investment Trusts (REITs) are among the most stable of the royalty and investment trusts. That’s because they own non-depleting assets, and can lock in lease rates and financing costs for long terms. The best REITs have good management, well-located properties and balance sheets strong enough to weather an economic downturn. They have high-quality tenants, and carefully match their debt with their leases. They also have room to build or expand on existing properties. We don’t think you should overindulge in REITs. But if you stick with the highest-quality issues, like RioCan, you’ll likely make steady returns with low risk....

BANK OF NOVA SCOTIA $49.75, Toronto symbol BNS, earned $980 million in its second fiscal quarter ended April 30, 2008, down 5.8% from $1.04 billion a year earlier. Per-share earnings fell 5.8%, to $0.97 from $1.03. The declines were largely due to higher provisions for loan losses, which jumped to $153 million from an unusually low $20 million in the year-earlier quarter. Revenue rose 3.2%, to $3.2 billion from $3.1 billion, partly due to acquisitions. The bank has increased its quarterly dividend 4.3%, from $0.47 a share to $0.49. The new annual rate of $1.96 yields 3.9%. Bank of Nova Scotia is a buy....

RIOCAN REAL ESTATE INVESTMENT TRUST $21 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 210.9 million; Market cap: $4.4 billion; SI Rating: Average) has signed a long-term leasing deal with Lowe’s, the second-largest home improvement chain in the United States after Home Depot. Lowe’s will initially operate two stores in RioCan’s Toronto area malls. It aims to open more than 20 new stores in Canada over the next few years. RioCan did not provide financial details. However, high-quality tenants such as Lowe’s will help RioCan maintain its $1.35 distribution rate (6.4% yield). RioCan is a buy.

ISHARES CDN REIT SECTOR INDEX FUND $13.65 (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, 15.1%; Canadian REIT, 9.4%; Boardwalk REIT, 8.9%; Calloway REIT, 8.1%; Canadian Apartment Properties REIT, 6.0%; Primaris Retail REIT, 6.0%; Chartwell Seniors Housing REIT, 5.0%; Innvest REIT, 4.2%; Cominar REIT, 4.3%; Extendicare REIT, 4.1%; and Dundee REIT, 2.7%. We’re glad to see that the top holding is RioCan, one of our favorite REITs. In fact, three of the top six holdings are among our recommendations. Note that iShares CDN REIT holds a couple of REITs we don’t recommend....

RIOCAN REAL ESTATE INVESTMENT TRUST $21.43 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 214 retail properties across Canada, including 14 under development. These properties contain over 55 million square feet of leasable area. Portfolio occupancy stands at 97.6%. RioCan’s revenue in the three months ended December 31, 2007 was $165.2 million, up 9.3% from $151.2 million a year earlier. Cash flow per unit rose 7.7%, to $0.42 from $0.39. RioCan’s annual distribution of $1.35 gives the units a yield of 6.3%. RioCan is still a buy.

Real Estate Investment Trusts (REITs) are down from last year’s highs, largely 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 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 relatively low risk. RIOCAN REAL ESTATE INVESTMENT TRUST $21.43 (Toronto symbol REI.UN; SI Rating: Average) is Canada’s largest REIT. RioCan has ownership interests in a portfolio of 214 retail properties across Canada, including 14 under development. These properties contain over 55 million square feet of leasable area. Portfolio occupancy stands at 97.6%....

RIOCAN REAL ESTATE INVESTMENT TRUST $22 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 209.5 million; Market cap: $4.6 billion; SI Rating: Average) moved down in January on investor concerns that problems in credit markets would hinder its expansion, and that a slower economy might hurt its cash flows. However, interest rates have dropped, and occupancy and leasing rates remain high at REITs in Canada. RioCan’s total occupancy is 97.6%, and anchor tenants account for 82.6% of its rental revenue. RioCan is also designing mixed-used properties that combine retail stores with residential units. New developments like this help it expand in built-up areas, and diversify its revenue streams. That should help it maintain monthly distributions of $0.1125 a unit (for a yield of 6.1%). RioCan is a buy.