- Current Annual Distribution = $1.38
- Fund From Operations = $1.25 (Funding Gap)
- CEO Ed Sonshine vows not to cut the distribution
- RioCan has the balance sheet strength to continue paying its distribution for several years
- Rated "Hold" from 10 analysts, "Buy" from 3 analysts
I currently rate RioCan a "Hold" since the units are trading at a premium (NAV = $16) and because I am leery of a future distribution cut.
4 comments:
Won't the acquistions be accretive to FFO and bring better coverage to the dividend? NAV will go above 16$ with Cedar and a few more high quality US properties likely to come ...
I'm not as nervous as you but I'm still watching. Since REIT's have the option to remain as trusts, their payout rations can remain pretty high. This is yielding very high for me (got it at 11$) so I might buy more if it drops on a distribution cut. In a registered account I have a smaller position with a much smaller 15-20% capital gain. I might pull the triger on that one.
RioCan will have to grow into their distribution. We probably won't see any increases for a while. Dennis Mitchell of Sentry Select made some good comments on the conference call regarding this issue.
The NAV will go up over time because this acquisition is accretive.
RioCan has one of the best management teams and portfolio of retail assets in Canada.
For new money, RioCan isn't my first choice at the moment. My top pick is Allied Properties. For conservative investors I would recommend CREIT.
Alex Avery, CIBC Worl Markets:
Maintain Sector Outperformer Rating
The recent over-distribution has been a significant focus for investors. Now that RioCan has outlined details for the deployment of its large cash position, we expect the gap between the current distribution level and AFFO could close by 2011. RioCan should continue to provide superior risk-adjusted returns based on
its portfolio quality and identified acquisition pipeline.
Although the investments with Cedar Shopping Centers are a departure from RioCan’s main Canadian business strategy, opportunities in the U.S. may prove very profitable for the REIT, and currently appear very compelling while not overly material to the REIT’s overall operations. RioCan is buying Cedar shares at a potentially discounted valuation, particularly considering the effect of RioCan’s investment in relieving Cedar’s capital concerns.
We view the REIT as a core holding, providing excellent stability, liquidity and income, and rate RioCan Sector Outperformer.
RioCan, Canada's largest real estate investment trust, is buying a stake in four retail shopping centres in British Columbia and Alberta for $166-million.
Two of the properties, one in Surrey, B.C., and the other in Edmonton, will be bought in a joint ventures with CPP Investment Board and Sun Life respectively.
Once complete, RioCan will hold stakes in the Grandview Corners shopping Centre in Surrey, B.C., and the Edmonton West Retail Centre, and will be the sole owner of the Lethbridge North retail Centre in Lethbridge, Alta., and the Calgary East Retail Centre.
Dec 1, 2009 - The Canadian Press
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