Opinions
Andy Nasr
RioCan Real Estate Investment
REI.UN-T
BUY
Nov 29, 2017
Stock price when the opinion was issued
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Biggest proxy for the Canadian REIT market. Great assets, executes well. Over time, their strategic decisions get sideswiped. Occupancy issues, but they're improving. Dynamic for retail is not great, AMZN stole many lunches. Canadian consumer is tapped out, interest rates still high.
You'll probably be OK, but he'd buy a couple of names ahead of this one. He owns SRU.UN instead, anchored by WMT.
Distribution very safe due to proactive cutting during pandemic. Achievable net operating growth of 3%, last quarter was 3.7%. Despite rising rates, with population growth, limited new supply, and limited retail bankruptcies, setup generally good for shopping centres in Canada. In a good spot.
Short term, he's constructive, likely more upside, a yield beneficiary. Medium term, might be one of the largest REITs in Canada, but one one of the smaller investors compared to pension plans, for example. Buying and developing assets is complex, expensive, and fraught with uncertainty. Fragile profile, despite good yield and recent rally.
Attractive level, high double-digit discount to NAV. Great portfolio. Multi-family residential portfolio is growing, may start selling it off and reallocating capital to retail or to share buybacks. Overhang: $600M worth of condos closing in next 3 years. Risk/reward is in your favour to buy here.
Still a REIT giant. Leads in the retail-focused, mixed-property use. Definitely impacted by The Bay situation. Retail weakness over next 6-12 months could be an issue.
Saw 96% retail occupancy in Q4, and 1.5% rental growth. Pressure from e-commerce. Issued debt in January to bolster balance sheet, debt is still manageable. Rate cuts could continue to spark leasing demand. Yield is 6%, cash machine for income lovers. Still reliable.
Feels you can’t go wrong with this. It is invested in strip centres, not shopping malls. Typically, anchor tenants are grocery stores, banks, etc. which cater to peoples’ every day needs. It is quite sizable and has a decent balance sheet. The concern with REITs is strictly sentiment, as they are considered interest rate sensitive. With this one, he sees a pretty well capitalized company. They have some debt, but are reinvesting in the business. They are looking at redeploying the capital into some development or intensification project which should ultimately cause the net asset value to increase. Dividend yield of 5.6%.