riocan

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....

We advise you to use caution when investing in income trusts, and to limit your trust investments to no more than one-sixth of your total portfolio. Many income trusts, particularly those that have been assembled and sold to the public as new issues in the past few years, come with hidden risks that can eventually hurt their profits and force them to cut their distributions. When that happens, unit prices plummet. In choosing income trusts to recommend, we look beyond high current yields and weigh the quality of a trust’s assets. In trusts as in stocks, it’s crucial to make sure you are investing in an attractive business with healthy long-term prospects and the ability to survive the inevitable setbacks that periodically come to every business....