Stock price when the opinion was issued
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.
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.
We think REI will be able to manage HBC's exit. The valuation is quite low at 9X cash flow, and, all things considered, the units have held up relatively well, down 6% YTD and up 2% in 52 weeks. The distribution was raised in February and payout is a decent 60%. We would not expect much from the sector, considering economic conditions, and minimal growth is expected (consensus). Still, this seems reflected in the valuation, and any good news would likely be quite positive to the stock. We would consider it 'OK', for income, overall. We are just not so sure this is a 'good' time to buy. 'Accumulate' slowly might be a better strategy.
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Cash flow per unit of 49c beat estimates of 45c; leasing spreads improved and same property net operating income rose. But it did take a $209M writedown on Hudson Bay and trimmed its guidance because of it (by 4c per unit). This hit offset benefits from its residential sector. The stock is down less than 1% which we would not consider abnormal.
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