# RioCan REIT (REI.UN)



## Freedom45

What's everyone's feeling with the current pricing of RioCan?

What will the next six months to a year bring? Interest rates? Possible dividend increase? How much?

It's pretty close to it's 52 week ceiling at the moment, but I'm considering allocating a portion of my cash to this...

Thoughts?


----------



## Jungle

To expensive for me and I am killing myself now for not buying it at $17 last year. 

PS, did you write the book Freedom 45?


----------



## gibor365

It's down 2.5 for the week.... maybe a good entry point


----------



## Freedom45

No, I cannot claim that I did...haha

It is however my retirement goal...


----------



## Eder

I'd rather buy RioCan at present price than some pile of crap on a dip...


----------



## Sherlock

I bought about 5k worth a few weeks ago for my TFSA.

They are considering a distribution increase soon:
http://www.reuters.com/article/2011/05/19/riocan-idUSL4E7GJ26E20110519


----------



## Cal

I don't expect them to consider increasing it until 2012. 

FP had it as 'RioCan Real Estate Investment Trust's growth prospects might be enough to support an increase in its monthly distribution next year, Canada's largest landlord of retail space said on Thursday. '

Their distribution has held steady at 11.5 cents since October, 2008. 

Funds from operations in the first quarter rose to $90-million, up from $78-million.

Personally I think it is overpriced, however in todays yield seeking market, it wouldn't surprise me it the price slowly rose to $30 a share, this time next year.


----------



## Financial Cents

I started buying REI.UN around $20. I have it synthetically DRIPping in my RRSP.

I can't see the REI.UN price going down anytime soon, sure, price is higher than before but at least investors could take advantage of upcoming distribution increases over the next few years. 

Then people will only be saying, geez, I should have bought a few shares @ $25 instead of $30.


----------



## Echo

I bought this one at $14.75 (July '09) and it is unlikely I would buy in at this point. They've made a lot of investments in the U.S. and on developing a big shopping centre outside of Calgary. I think they will be strengthening their balance sheet for a while after spending a bunch of money the past few years. Don't know what that means for a distribution increase.


----------



## Calgary_Girl

I first bought Riocan at around $20 in 2006 and have been reinvesting with the DRIP ever since. Here's what some Analysts are saying about Riocan: 

http://www.stockchase.com/Company-sl--slq-ID-slv-RioCan--Real--Estate--Investment.php


----------



## Freedom45

Jumped in this morning at $25.35. Plan to hold for a while, and will DCA down if the opportunity arises...


----------



## daddybigbucks

I jumped in this morning as well with a low bid i put in last night.

Its a small holding but will keep watching and buying on dips as well if i like the way it performs.


----------



## Financial Cents

Calgary Girl - do you keep your RioCan unregistered or registered? Curious


----------



## Cal

From a paperwork standpoint, it is so convenient to hold REI.UN in a registered account.


----------



## rassmy

I love this stock, I bought it back in 2009 at 14$, I am still enjoying the monthly distribution and DRIP'ing. it is well diversified and it will be growing fast -- Marshalls is coming to the Canadian market and this is good for RicoCan.


----------



## Sampson

rassmy said:


> Marshalls is coming to the Canadian market and this is good for RicoCan.


Winners and Home Sense have already been aroud and RioCan has a lock on those stores.

The more significant news is the locations Target has announced for their first stores. RioCan has a lock on the majority of those also.


----------



## Financial Cents

@Sampson - I read about that too. I think REI.UN is going to take off in a few years. I predict it will be a $35 stock by 2013 with the U.S. big-department-store invasion coming north of the 49th very soon. 

This is good and bad news for me. As an owner, great the long-term outlook for the company. The bad news? As an owner, I won't get to buy this guy as cheaply via my DRIP


----------



## CanadianCapitalist

I doubt RioCan will hit $35 any time soon. For one thing, it is fairly expensive today on many measures. It's NAV is estimated at $20. Units are trading at $25. It is yielding 5.5% or so, a spread of 2% or so over 10 year bonds. That spread is a bit below average (I don't have the numbers with me but I believe 2.5% spread is average).


----------



## Sampson

I agree with you CC.

Target taking over the leases doesn't mean more growth for RioCan, just sustainability. I don't own it directly (only through ETFs) and don't follow too closely, so I don't know of new developments they are planning, but that's the only way for this company's stock price to keep moving upwards to $35.


----------



## webber22

Riocan was in the doghouse not that long ago. With another crisis sure to come, it will be back down to $12 in no time


----------



## Eder

webber22 said:


> Riocan was in the doghouse not that long ago. With another crisis sure to come, it will be back down to $12 in no time


I dont get this...commercial real estate is no where near a bubble...atm RioCan is expanding in the US rapidly, buying cheap real estate like they are supposed to. They are taking advantage of todays low interest rates. They do all their business in the US or Canada. I like this company.


----------



## KaeJS

Eder said:


> I dont get this...commercial real estate is no where near a bubble...atm RioCan is expanding in the US rapidly, buying cheap real estate like they are supposed to. They are taking advantage of todays low interest rates. They do all their business in the US or Canada. I like this company.


Correct.

But its not how *you* perceive things to be. It's how the _market_ perceives them to be.

I like the company, too. And I am holding.


----------



## Financial Cents

@KaeJS - love REI.UN as well. I hold it in my RRSP. You?

BTW - thanks for your message, you're right, I responded and I corrected what I wanted to say, re: CLF. Thanks for catching that KaeJS.


----------



## Oilers82

Just bought in at $24.70 the other day. Buy and hold for the long-term...


----------



## ddkay

It's not how the *market* perceives things to be, it's how the _government_ perceives things to be ;]


----------



## Freedom45

Getting close to it's 52 week high. 

Anyone jumping ship and locking in some gains, or is everyone looking ahead to new highs, while taking the monthly income?


----------



## andrewf

I rebalanced XRE back down to my target allocation at the end of June.

I don't see a reason to sell Riocan at this point.


----------



## KaeJS

I'm on the fence about it.

I have thought for about a week on whether or not I want to sell RioCan.

I feel like getting out around this price can gaurantee a re-entry at just under $26.

However, I will probably just hold it...

If I owned 1000 shares, I'd sell. But, I only own 100.


----------



## larry81

Thanks in large part to RioCan, my XRE holding have a 18% return rate for 10 months of holding


----------



## Soils4Peace

Long term hold for me. I bought Riocan when it was Counsel Real Estate Fund.


----------



## Dmoney

RioCan is just buying everything now. No attention to quality, and I'm skeptical as to whether or not the acquisitions are accretive. Although with interest rates where they are, it's hard not to make money. Only thing that will bring R/E down is BoC announcing several rate hikes in quick succession. Dodged the bullet today, will probably begin to rise shortly.


----------



## Argonaut

RioCan is a great stock, perfect for a buy and hold. Ed Sonshine is one of the better CEO's in Canada. The worst that could happen is that you hold it through some rough periods but continue to collect a nice yield. The best that could happen is that it continues on that beautiful steady uptrend and you get the distributions to boot. They've made their moves at the perfect time, in my opinion. Once interest rates go up they'll be set from their previous deals and just sit back collecting the rent.


----------



## KaeJS

Wow.

There was some seriously ridiculous buying/selling going on with RioCan from 3:55 to 4:00pm.

Anyone else see it/notice it?

down 0.15, then up +0.10 one second later, then down 0.10 the next second.

This thing was up and down like an elevator.


----------



## DrMatt

Bought 1000 shares at ~$11 in jan 2009... Sold it at ~$19 in jan 2010 to pay off the investment loan... Kinda wish I still owned it at that price... Bought back in a few months later at ~22... Not selling those shares anytime soon. Although I do try the occasional covered call in the $26 range so could get stopped out... If I do I'll probably buy back in on a drop... Monthly dividends are awesome!!


----------



## KaeJS

DrMatt said:


> Monthly *dividends* are awesome!!


If only they were dividends...

Too bad they are distributions.


----------



## larry81

KaeJS said:


> If only they were dividends...
> 
> Too bad they are distributions.


Thats why i hold REIT in my TFSA


----------



## KaeJS

larry81 said:


> Thats why i hold REIT in my TFSA


Nice. 

Ah, what would we do without TFSA's?


----------



## Uranium101

KaeJS said:


> Nice.
> 
> Ah, what would we do without TFSA's?


The distribution contains mostly of three types of income: return of capital, interest, and dividends. Return of capital is not taxable, interest is taxed at 100%, and dividends is around 15% at Federal level. Most of the distributions you get contain mostly return of capital.

I still remembered back in the days when I used to invest in dividends/interest/distribution stocks, I came across income trusts/funds.
Sometimes you might see up to 100% of the distribution is all return of capital.

The reason why these REI traded at huge premium is because investors are moving their money into safe haven. And the borrowing cost for REI is cheap now. If you look at most of the REI share dilution, you will see where they came up with all those distributions.

These income trusts/funds were designed for retirees, and it should be held by retirees. Not for young people like me.


----------



## Jungle

I think the time to buy this stock was over a year ago.


----------



## slacker

Jungle said:


> I think the time to buy this stock was over a year ago.


But is it time to sell? or hold?


----------



## AltaRed

Uranium101 said:


> The distribution contains mostly of three types of income: return of capital, interest, and dividends. Return of capital is not taxable, interest is taxed at 100%, and dividends is around 15% at Federal level. Most of the distributions you get contain mostly return of capital.


If an investor holds it long enough in a taxable account, ACB could go to zero. I wonder what happens after that point?


----------



## Uranium101

AltaRed said:


> If an investor holds it long enough in a taxable account, ACB could go to zero. I wonder what happens after that point?


that means your return is what the share price is worth.
however, taking inflation into account and the taxes you paid on dividends/interest (mostly interest), you be the judge if your investment in REIT is worth it or not.

Share dilution is never a good thing, REIT or no REIT.


----------



## HaroldCrump

Uranium101 said:


> Share dilution is never a good thing, REIT or no REIT.


True in most cases, however, keep in mind that REITs often issue new units to finance the purchase of new properties.
As long as the new acquisitions are accretive to the cash flow (and ideally net earnings, too), issuing new units makes sense.
It is better to issue new units rather than take on a huge pile of debt to finance the acquisition.


----------



## Oilers82

larry81 said:


> Thats why i hold REIT in my TFSA


me too. Lovin' my REI.UN in my TFSA


----------



## slacker

TFSA's are great for anything that generates distributions. Unlike a taxable account, where you get taxable events for every distribution. (not to mention much less tax paperwork at the end of the year)

I'm really starting to dislike monthly distributions ETF's in my taxable account.


----------



## Jon_Snow

Okay, I'm convinced - gonna get me some REI.UN.


----------



## Financial Cents

I'm a fan of REI.UN and HR.UN. Just keep those REITs in registered accounts.


----------



## KaeJS

Hey folks, I just wanted to bump this thread.

I sold my RioCan back in December for $26/share as it was in a non-registered account and I had to get rid of it before 2012 started and I wanted to just claim my CG and not receive a January distribution.

I have been a bad little boy and I have not contributed my $5k for 2012 to my TFSA.

At this price, would anyone still be a buyer of RioCan?

As I don't currently have any RE exposure, I'm looking to get some. Would it be wise to purchase $5,000 worth of RioCan and get about 185 shares?

$27 just seems a bit high, that's all..


----------



## Argonaut

I have 170 shares myself, most of which bought at $22. But if I'm a holder I'm a buyer. On the other hand RioCan hasn't raised its distribution in a long time, and it often issues more shares. However they have been using extra cash and leverage to expand into the US which likely is a good long term move. REF.UN is the other big name, and they always seem to outperform in price appreciation, with an annual boost to the dividend as well.


----------



## Spidey

I loaded up on Riocan and Calloway during the 2008 crash. I've since added several other REIT names on dips. I consider these long-term holds and other than TD bank the only non-index equities that I have no intention of trading.


----------



## mrPPincer

KaeJS said:


> At this price, would anyone still be a buyer of RioCan?


Yes I did pick up 235 shares a couple weeks ago to hold long term.
The cost @ $26.9, I am content with because I sold the equivalent amount of equity in td e-funds on the same day.
Unfortunately enough shares for a drip of one full share is worth more than 5K, so getting it into TFSA in one piece could be slightly problematic.


----------



## HaroldCrump

Given the M&A activity in this space, your better bet is to try and figure out which REIT is likely to be acquired vs. being the acquirer.
RioCan is likely to be the acquirer.
This year, I have had two of my REITs acquired with approx. 20% premium in each case.
I've also had one of my REITs take the other side of the trade i.e. the acquirer.


----------



## KaeJS

Harold, although the acquirer drops in value in the short term, isn't it better to be an acquirer over the long term?

Wouldn't it be best to try and own both the acquirer AND the acquired?


----------



## PMREdmonton

KaeJs, it all depends on whether the acquirer can make use of economies of scale to make the acquisition profitable as a whole and in line with their other holdings given the premium they have to pay to take them out (around a 19% premium these days).

I think most REITs are overvalued right now and AFFOs are unusually high right now because of the low interest rates.

For the same reason I am leery of bonds (government or high grade corporate, especially) I am also leery of REITs. They are feeding at the ZIRP trough. Once that is pulled away I wouldn't be surprised if there weren't a 20% correction across the board.

I have mostly been spending my REIT dollars on American mortgage REITs like NLY and AGNC. However, I will probably start to move my money out in early 2014 ahead of the Feds changes in interest rates. These companies basically buy mortgage loans which come from Fannie Mae and Freddie Mac so the loans are guaranteed by the Fed. They borrow short and then buy long-term government bonds with leverage to generate their returns on the interest rate differential. This works great in falling rate environments or low rate environments but in rising rate environments with low bond rates they could take substantial losses if they don't time things properly to mitigate risk. In this regard, NLY would the investment of choice as they invented the field and have been through this before after the dotcom bust. Right now yields of 14-18% are seen across the board in this field and they all tend to be low beta. The big risk is if you time them wrong you could have substantial capital losses.


Anyhow, just food for thought.


----------



## HaroldCrump

KaeJS said:


> Harold, although the acquirer drops in value in the short term, isn't it better to be an acquirer over the long term?


Answer is that it depends.
If you are invested in the acquired, you get an immediate premium return on your capital, you can get out, and find something else.
If you are invested in the acquirer, then you have to assume that the management did their DD and made the right choice with the acquisition.
Over time it may (or may not) work out.
You are right that the immediate market reaction to an acquisition is usually a dip in the stk price of the acquirer, but it is only temporary.

For instance, Dundee REIT dipped for what, maybe a % or so on the day they acquired Whiterock.



> Wouldn't it be best to try and own both the acquirer AND the acquired?


Yes, of course.
And as this space is shrinking, that situation will get more and more likely.


----------



## doctrine

REITs will correct on occasion. They can drop 15-20% in a year easily, and then its buying time. The rule I am going to use is if they look like a great deal, I'll buy. If not, I'll hold. I have several real estate companies and I'm happy to hold but I just can't buy more at the moment, they're all up 15-25% in the last year alone.


----------



## runeash

Sorry why would it be problematic. I thought any DRIP shares in TFSA would not go against the limit. I transfer my TFSA >5K and got REI and enrolled in DRIP, so the next payment I think May 6/7th in shares would be used against my 5K limit?



mrPPincer said:


> Yes I did pick up 235 shares a couple weeks ago to hold long term.
> The cost @ $26.9, I am content with because I sold the equivalent amount of equity in td e-funds on the same day.
> Unfortunately enough shares for a drip of one full share is worth more than 5K, so getting it into TFSA in one piece could be slightly problematic.


----------



## Spudd

@runeash, what he means is that you can only contribute 5K per year to your TFSA so if you want more than 5K in one stock, you would have to sell something else you already have in the TFSA in order to get more than 5K in that stock (or wait until next year to contribute another 5K). 

You are correct that DRIP shares in TFSA don't count as contributions.


----------



## mrPPincer

Yeah, I bought it outside my TFSA so I'll have to wait until 2014 to move it all over, or sell something, which I don't want to do.


----------



## Eclectic12

mrPPincer said:


> Yeah, I bought it outside my TFSA so I'll have to wait until 2014 to move it all over, or sell something, which I don't want to do.


Or ... if you think it will keep gaining value, transfer in parts. In the past, I've transferred half of a position, picking the lowest price from the day's trading range.

One thing to watch for on the last transfer to the TFSA is if you are signed up for DRIPs. Transfer on the wrong date and you'll have a few units that will show up later in the taxable account.


Cheers


----------



## Freedom45

What's everyones thoughts on the current valuation of Riocan? The offering earlier this week has knocked the price down a bit. Considering rolling some of my dividend cash into more shares.


----------



## SteveO

is there a reason why did they a public offering ($175 million) and didnt just borrow the money? They are going to have to pay a divident on those new shares (~5%). Im a little annoyed at the offering knocking the price down.


----------



## Argonaut

I agree, I would rather have them borrow the money. They must be able to borrow at cheaper than 5% for the new dividends. Looking at their balance sheet, they have a debt to assets of 43% and a debt to capitalization of 38%. I don't think that seems very high, but perhaps they have some guidelines about staying under a certain leverage. RioCan has been my "worst" performer this year at 5% +dividends so I'm keeping an eye on it. Not unhappy though.


----------



## Cal

The 3.1% discount on the dripped shares is nice too.


----------



## Argonaut

You have to have almost seven grand in RioCan to drip a share nowadays though. Share price has gone up and dividend has not.


----------



## Young&Ambitious

Argonaut said:


> I agree, I would rather have them borrow the money. They must be able to borrow at cheaper than 5% for the new dividends. Looking at their balance sheet, they have a debt to assets of 43% and a debt to capitalization of 38%. I don't think that seems very high, but perhaps they have some guidelines about staying under a certain leverage.


Interesting. Generally speaking, corporate finance perspective prefers debt to equity for a public company (assuming the company can service the debt..) because the debt is leveraged thereby increasing company value while not affecting the ownership equity % current shareholders. I would take this as a cautionary signal IMO.


----------



## doctrine

The distribution has been 11.5 cents since September 2008. The stock price has gone from about $20 in 2008 to as high as $28 now with no increase.. or a yield of 6.9% to a yield of 4.9%. Being there are plenty of REITs at much higher yields with relatively similar security, I would not be a buyer.


----------



## Mall Guy

Okay, hold the phone. . . yes secondary offerings are marginally dilutive to existing shareholders, but $200 M ($175 M plus the $26 M over allotment) gives them +/- $500 M in acquisition room while maintaining a conservative debt/equity ratio (40-50%). Their average WACC is likely around 4%, so any acquisition over 5% will be accretive day one. If you look at recent acquisition activity, this new equity will be employed ASAP - Georgian Mall in Barrie, and the take out of the JV with Cedar in the US (+/- $440 M). Creit has been greatly rewarded for its low debt and low payout ratio. 

Funny how we now complain about 4 and 5% money . . . smart move to take the equity when its cheap and plentiful, there was a time not so long ago that the both the debt and equity markets shut down completely ! 

Back the truck up while the equity market is still open. . . or you can go buy your 1% GICs !


----------



## Jaberwock

Riocan was one of the first companies I bought when I started investing for myself. Back then it was 8 bucks and has returned much more than that in dividends alone. It has been one my best investments.

Over the years, I have gradually increased my shareholding, trying to buy on dips. However, right now, the price seems to be getting a bit high, the dividend yield has dropped below 5%, and the payout ratio has topped 100%. 

I am considering selling and moving the money to another REIT which has a lower payout ratio and higher yield.


----------



## doctrine

Seems to me, that if your business model is borrowing money at 4.5% for real estate with a 5.5% capex, you have a 1% margin. That's not low risk in my books.


----------



## andrewf

Well, it's more like buying 5.5% cap rate, half financed with debt at 4.5%, the other half with equity.

REITs are a little like long term bonds, so when interest rates rise, expect REITs to suffer (double whammy of higher borrowing costs and higher discount rate of future cash flows).


----------



## Loon

I've seen this drop 12% since I bought it early last year. Is this a good time to add to my position?


----------



## 1sImage

Yes i've been buying all the way down. 3150 shares paying $370/m


----------



## blin10

same been loading up on a way down, along with HR


----------



## daddybigbucks

blin10 said:


> same been loading up on a way down, along with HR


same here with NPR.un.
getting a little nervous but dividend was increased and quarterly looks good.
not sure why the .UN are falling out of favour.


----------



## liquidfinance

I'm looking to get back into this one soon. I currently hold CUF and along with the other REITS the trend is down.


----------



## andrewf

It has nothing to do with 'falling out of favour'. It's all about bond yields.


----------



## Cal

Dripping in my TFSA, getting an extra share per month now, since the unit price is lower.


----------



## My Own Advisor

DRIPping in RRSP, would like to have it in my TFSA though. Oh well, eventually it will DRIP in TFSA and depending upon price, sell in RRSP to buy more U.S. equities.


----------



## Freedom45

Recently bolstered my position. Still happy to hold a long position on it.


----------



## 1sImage

little bump today, hopefully it's positive news forthcoming.


----------



## doctrine

All REITs and real estate companies bumped today, it's not RioCan specific.


----------



## yyz

They have been fairly active buying back shares

http://www.canadianinsider.com/node/7?menu_tickersearch=REI+|+Riocan+REIT


----------



## GoldStone

doctrine said:


> All REITs and real estate companies bumped today, it's not RioCan specific.


All interest rate sensitive companies bumped today on Summers news, it's not real estate specific. :wink:


----------



## 1sImage

Added 1000 more shares this morning.


----------



## Mall Guy

doctrine said:


> All REITs and real estate companies bumped today, it's not RioCan specific.


Could be the shopping centre conference in Toronto this week (ICSC), so lots of media attention . . . Primaris now branded as a Division of H & R REIT. G2 was the keynote speaker at the lunch (Choice REIT), and Amanda Lang moderated an REIT CEO panel . . .


----------



## Ihatetaxes

Good news and a great bump up today!! http://online.wsj.com/article/PR-CO-20140213-909502.html


----------



## My Own Advisor

1sImage said:


> Added 1000 more shares this morning.


Wow.


----------



## My Own Advisor

Ihatetaxes said:


> Good news and a great bump up today!! http://online.wsj.com/article/PR-CO-20140213-909502.html


Makes me wonder if all the nay-sayers (including many talking heads) who said to investors to avoid REITs recently, will be eating crow in another few years as these guys climb back to realize new record highs.

Time will tell...


----------



## gibor365

My Own Advisor said:


> Wow.


Added a little bit yesterday


----------



## My Own Advisor

Big fan of REITs and prices now. DRIPping a few of them cheaply...


----------



## 1sImage

Good bump in the last few days!!


----------



## OurBigFatWallet

@My Own Advisor any thoughts on the recent jump for Rio? seems to have come out of nowhere. Not that I'm complaining


----------



## rossco12

They announced a 12% increase in operating funds. I'm into 100 shares @ 25.15. It had been on the watchlist forever and I will continue to accumulate on the dips.


----------



## Andrew

Bought a bunch of this sucker at sub $24 a couple months ago. Yeehaw.


----------



## My Own Advisor

OurBigFatWallet said:


> @My Own Advisor any thoughts on the recent jump for Rio? seems to have come out of nowhere. Not that I'm complaining


No real thoughts...other than maybe investors are seeing the light and REITs, like REI.UN, D.UN, CWT.UN, HR. UN, etc. are relatively cheap


----------



## dubmac

I sold my ECA and bought REI a few months ago at 25.07. Probably should have waited a month before selling ECA - but pleased to see that REI is more green than red.


----------



## Pluto

I wouldn't buy any reits right now. I doubt if it will surpass it's high of last April in this economic/ stock market cycle. if it does, it will be brief. When the yield gets down to around the 5% area, there is little appreciation potential, and lots of depreciation potential. 

A couple of people posted about buying back in 2008-9 when prices were much lower. One or two said they intend to hold, and buy more later when prices were lower. These are the guys who are going to clean up and make decent money. My opinion is one should only add when the yield is 6-7% or better. 

The economic, market, and business news is always good as markets are topping out. REITS are a bellwether type of security. Their declines from last April are foreshadowing trouble in the markets. We know for a fact that markets and the economy is cyclical. We know for a fact that during the down portion of the cycle, these securities can be bought at fire sale prices, with good yields. We also know that their prices snap back smartly after a downturn. 

There are some allusions in this thread to "It's different this time". It isn't different. There is always things like acquisitions, distribution increases, and the like to distract us from the reality of market and economic cycles. 

It's a no brainer to buy when the market/economic news is bad, and stop buying when economic news is good. Then, hold if you must, and commence buying again when the news is bad. 

Back to the hockey game.


----------



## Mortgage u/w

So is this stock a buy or not yet? took a dip and now back on the rise.


----------



## Synergy

I thought it was a good buy when it dipped to $24. Hard to say how the sector will do when / if rates start to rise again. We could be waiting a while to figure that one out! It's not screaming buy to me at these levels but I plan to continue to hold.


----------



## Sherlock

For me riocan is a long term hold, I bought it several years ago.

Riocan is not going anywhere, it's a safe place to put your money and expect a reasonable return.

I regret not buying more a few months ago when it dipped.


----------



## OurBigFatWallet

I have the same strategy for Rio. It's a long term hold and I expect a decent return from it. As long as people keep buying 'stuff' there will always be a demand for large commercial shopping centres


----------



## Kaitlyn

OurBigFatWallet said:


> I have the same strategy for Rio. It's a long term hold and I expect a decent return from it. As long as people keep buying 'stuff' there will always be a demand for large commercial shopping centres


Online shopping is only growing!


----------



## OurBigFatWallet

Kaitlyn said:


> Online shopping is only growing!


Online shopping has increased about 45% in the past 5 years. Rio has increased 101% in the past 5 years. I think there's room for both


----------



## My Own Advisor

5% yield with some upside. I'll take it thanks very much. Happily DRIPping more shares every month.


----------



## gmx

I'm looking to buy some REI (and possibly REF if the price goes down). This is my first reit and am still trying to navigate the metrics (will try to look/figure out a nav tonite). Anyone have any opinions on a good entry point for REI?


----------



## fisher14

It's dropped a little over the past week. I'm also looking to add an reit to my portfolio. What about hr.un? They offer a higher yield and seem to not have as much commercial rentals. 

Have you bought yet? Also interested in hearing others thoughts on riocan.


----------



## OurBigFatWallet

I like Rio and Ive owned for a couple years. Here in Calgary they are all over the place. With all the new developments going on their focus here has been large commercial shopping areas that they lease out to individual stores. Huge growth in that area (well, here anyways). I think if interest rates were to rise then all REITs (including Rio) could take a hit but I don't see that happening any time soon. 

I noticed its been dropping lately. If it drops any more I will definitely be buying more.


----------



## Cal

Riocan owns some really good locations....that have good land value.


----------



## gmx

Bought a small position with some extra money I had in my TFSA. Of course, it dropped more a couple of days after I bought


----------



## My Own Advisor

Cal said:


> Riocan owns some really good locations....that have good land value.


Agreed Cal, I've always liked this one and happy to DRIP it.


----------



## Tawcan

My Own Advisor said:


> Agreed Cal, I've always liked this one and happy to DRIP it.


Doing exactly the same as well.


----------



## OurBigFatWallet

gmx said:


> Bought a small position with some extra money I had in my TFSA. Of course, it dropped more a couple of days after I bought


I still like Rio even though its been down a bit lately and my plan is to buy more if it keeps dropping. Great properties and well-run


----------



## Cal

The 'safe' money keeps driving the price up lately....don't they know I want to add to my TFSA.


----------



## HaroldCrump

With so many retailers shutting doors and leaving (Target, Mexx, Jones New York, Sony, etc.), there has to be some impact on these retail REITs.
Normally, such stocks would go down under these circumstances.
But yield chasing is overriding all such fundamental concerns.


----------



## Homerhomer

retail business id a concern for sure, but Riocan is transitioning into apartment rental as well, they can see that retail space alone is not going to cut it anymore.


----------



## HaroldCrump

The apartment REIT space in Canada is already quite crowded with the likes of Morguard, CAR, True North, Brookfield, and a few others.
Then there are private chain landlords like Kaneff, and a couple of others.
Cap rates are quite low, too.

It's good RioCan is entering this space (more competition for the consumers), but I am not sure there is much juice left to squeeze in this market.


----------



## My Own Advisor

RioCan to takeover some of the smaller players Harold?


----------



## Homerhomer

HaroldCrump said:


> The apartment REIT space in Canada is already quite crowded with the likes of Morguard, CAR, True North, Brookfield, and a few others.
> Then there are private chain landlords like Kaneff, and a couple of others.
> Cap rates are quite low, too.
> 
> It's good RioCan is entering this space (more competition for the consumers), but I am not sure there is much juice left to squeeze in this market.


all valid points, but the management of the company has great track record and I like what they have been doing over the last few years:
1) bought many US properties when they were dirt cheap and are already reaping benefits of it
2) their apartment rental expansion is mostly in the mix use segment by adding the rental space in the retail area they already own, by that squeezing more from what they already own, and hopefully directing more traffic into their retail space by having apartments in the proximity
3) shedding off less profitable assets in non core markets.

I like what they are doing, but can't argue the fact that retail space is facing significant challenges.


----------



## Getafix

What do you think guys, is it a good time to get in to REI.UN today? Down by about 1%.


----------



## cdnceo

Oversold? Paying >5.25% div now.


----------



## 0xCC

Historically 5.25% is not that high for a REIT in general even for a big one like RioCan.

Personally I'd like to see a yield near 6% (or another 10% or so drop in unit price).


----------



## mrPPincer

RioCan over the last 18 months has been trying to decide whether or not to ditch it's US holdings.

http://www.cbc.ca/news/business/riocan-real-estate-mulling-sale-of-u-s-portfolio-1.3175809


----------



## jaybee

^ Riocan CEO, Ed Sonshine was interviewed on BNN today. It sounded very much like he was in favour of selling the US assets. The US properties were bought when the dollar was at par, and that alone should pay off for shareholders.


----------



## OurBigFatWallet

Any thoughts on Artis vs RioCan? I own Rio but haven't had a chance to look at Artis up close yet, I just noticed it's lower than usual right now


----------



## My Own Advisor

jaybee said:


> ^ Riocan CEO, Ed Sonshine was interviewed on BNN today. It sounded very much like he was in favour of selling the US assets. The US properties were bought when the dollar was at par, and that alone should pay off for shareholders.


+1


----------



## humble_pie

mr Sonshine got a lot of attention because the amounts he's proposing to sell out of USD & exchange for CAD are huge.

yes he'll receive something like 1.32 CAD for each USD.

the problem i see next is Where is he going to invest those $1.32s? canadian real estate is priced sky-high. Other than energy & mining, canadian stocks are nosebleed.

mr Sonshine wouldn't be planning to take a flyer in badly beaten-down oil & gold stocks, would he? that would be too rash for a dyed-in-the-wool RE man, wouldn't it?

it's an exercise one goes through regularly these days. Is-it-time-to-sell-USD-&-harvest-the-big-currency-gain. My own answer, just for myself, is No. There are still good opportunities in US stocks.


----------



## AltaRed

Pure speculation but I think RioCan would more likely put the cash into accelerated re-development of their shopping plazas into mixed use residential/commercial. They have a huge underexploited land base and are only now starting to take advantage of it. That said, it will mean reduced cash flow for some time as the re-developments take place. Will investors be patient for that, or will they bail for a few years until the incremental cash flow starts to take effect.

An alernative would be to buy out another smallish REIT, especially one trading at a material discount to NAV, and overhaul it.


----------



## 1980z28

Will look at picking up maybe a couple of shares


----------



## janus10

Downgraded by CIBC today.


----------



## 1980z28

500 at 25.70

Will get another 500


----------



## 0xCC

Anyone have any idea what is going on with the REITs this morning? The pre-market bid/ask is dropping like a rock.

REI.UN closed yesterday at 23.18, before 9:00 this morning the bid/ask was 23.00 and in the last 15 minutes or so it has dropped to 22.85. Wait, now it is at 22.66. Smart REIT closed at 29.90 and the bid/ask is 29.25 for that stock.

I know that the pre-market bid/ask doesn't really mean anything but when it is that far off the previous close it seems like there will probably be some quick moves when the market opens.

Edit: Now the bid/ask is back to 22.85 (from 22.66) for REI.UN at 9:22. What will the open bring? 

Edit2: At 9:25, the bid/ask is down to 22.70.

And it opens at 22.85. SRU.UN opened at 29.54. Weird start to the day...


----------



## treva84

0xCC said:


> Anyone have any idea what is going on with the REITs this morning? The pre-market bid/ask is dropping like a rock.
> 
> REI.UN closed yesterday at 23.18, before 9:00 this morning the bid/ask was 23.00 and in the last 15 minutes or so it has dropped to 22.85. Wait, now it is at 22.66. Smart REIT closed at 29.90 and the bid/ask is 29.25 for that stock.
> 
> I know that the pre-market bid/ask doesn't really mean anything but when it is that far off the previous close it seems like there will probably be some quick moves when the market opens.
> 
> Edit: Now the bid/ask is back to 22.85 (from 22.66) for REI.UN at 9:22. What will the open bring?
> 
> Edit2: At 9:25, the bid/ask is down to 22.70.
> 
> And it opens at 22.85. SRU.UN opened at 29.54. Weird start to the day...


Perhaps a combination of interest rate fear with mortgage rates going up plus general pessimism given what's happening in China?


----------



## 0xCC

Yeah, it seems like it is general market weakness related to mostly China worries and maybe mortgage rates for REITs in particular. I was just surprised at how the pre-market bid/ask was moving. I usually look at the pre-market bid/ask as a bunch of gamesmanship but the moves in the REITs this morning was quite energetic...

I ended up getting an order executed at the open for REI.UN at 22.85. I'm happy with that (so far).


----------



## Karlhungus

Got in at $22.90, what are peoples long term view of Riocan? Seems like a solid company, having never cut dividends.


----------



## Synergy

Karlhungus said:


> Got in at $22.90, what are peoples long term view of Riocan? Seems like a solid company, having never cut dividends.


I'm tempted to sell. I'm not overly optimistic on the sector and I don't need the income. REI and CSH are the only 2 REITs remaining in my portfolio.


----------



## Karlhungus

Can you DRIP this stock in a TFSA?


----------



## Freedom45

Long term position for me. If it gets much lower, I'll add some cash and average down a bit.


----------



## My Own Advisor

Karlhungus said:


> Can you DRIP this stock in a TFSA?


Yes. Full shares, not partial shares.


----------



## gibor365

Planning to add my REI.UN and AX.UN holding tomorrow


----------



## logical

This stock is consolidating for quite some time after a major downtrend? Can anyone shed some light about the reason of the downtrend?


----------



## Argonaut

REITs in general have gotten hit in the last six months or so. Fears of interest rates bottoming out and property values peaking.

I wouldn't want to be in this name in general, the shopping mall business is not forward-looking. Would be surprised to see much in the way of dividend increases or capital growth long term.


----------



## AltaRed

Per post #128


> I think RioCan would more likely put the cash into accelerated re-development of their shopping plazas into mixed use residential/commercial. They have a huge underexploited land base and are only now starting to take advantage of it. That said, it will mean reduced cash flow for some time as the re-developments take place. Will investors be patient for that, or will they bail for a few years until the incremental cash flow starts to take effect.


The question is whether investors will be satisfied with RioCan's current business model of re-developing their valuable shopping centre lands into multi-use residential/commercial/retail, the patience to see these things through a few at a time, and whether they can re-develop at the pace they wish, i.e. municpal delays/refusals of re-zoning and development permitting. There are probably better REIT opportunities out there but I would: a) not count RioCan out on steady conservative re-purposing of their lands, and b) provide a steady reliable distribution for decades to come. I wouldn't write them off without spending some quality time looking at their financials and business strategy on their website.

Disclosure: I have held this one for a long time and continue to hold.......for now.


----------



## CanuckBull

AltaRed said:


> Per post #128
> 
> The question is whether investors will be satisfied with RioCan's current business model of re-developing their valuable shopping centre lands into multi-use residential/commercial/retail, the patience to see these things through a few at a time, and whether they can re-develop at the pace they wish, i.e. municpal delays/refusals of re-zoning and development permitting. There are probably better REIT opportunities out there but I would: a) not count RioCan out on steady conservative re-purposing of their lands, and b) provide a steady reliable distribution for decades to come. I wouldn't write them off without spending some quality time looking at their financials and business strategy on their website.


I hold a little bit REI.UN too. I like their steady dividend payouts, even when they were negative on EPS. But the point in above threads about the need to change strategy to residential housing to offset the effects of e-commerce is true, and if RIOCAN could execute this plan in a timely and effective manner, makes me wonder.....


----------



## Spidey

I own a basket or REITs including RioCan. While it is true that online shopping is taking a big bite out of retail, I don't think that the "on location" shopping experience will ever die. Personally, I've found online good for items with little variability like a book or electronic part but when style and fit are involved online can be frustrating. From my online experience, I've found that online item's apparent size and color is often deceiving.

A second point is that real estate will always eventually find its highest and best use and this is what appears to be happening with Riocan's redevelopment strategies. These REITs own prime land in urban locations and with Canada's population expected to double in the next 50 years, that land should continue to increase in value and have income potential from one form or another. REITs are run by savvy real-estate managers, who tend to be heavily invested themselves and will usually eventually find a way to extract the maximum profit from their holdings. 

That being said, RioCan is not my favorite REIT, I have much larger holdings in SRU.UN and CAR.UN.


----------



## OnlyMyOpinion

Well managed companies will reinvent themselves and stay relevant. 
There are a couple of REIT examples that come to mind:
SMART is building Metroplitan Centre, a retail/residential complex in Vaughn at the terminus of the planned Spandina subway extension. 
BEI and REI have partnered for a condo/retail development at Brentwood, on Calgary's NW LRT line.
REI has some rundown old mall real estate in Oshawa that almost certainly will be repurposed (i.e. include residential) in the future.
BEI has been buying new units in Calgary at prices as good or better than they would pay to build themselves, part of their plan to bring 'new blood' into their rental stock.
These outfits have very long term perspectives. 
I continue to believe that having a slice of diversified REIT holdings as a small % of your portfolio is worthwhile, particularly if you are tilted towards income.


----------



## andrewf

CanuckBull said:


> I hold a little bit REI.UN too. I like their steady dividend payouts, even when they were negative on EPS. But the point in above threads about the need to change strategy to residential housing to offset the effects of e-commerce is true, and if RIOCAN could execute this plan in a timely and effective manner, makes me wonder.....


I think you are just misunderstanding how REITs work. EPS is not terribly relevant with REITs, since it doesn't reflect the true health of a REIT due to accounting rules. Investors are better served looking at Funds From Operations (FFO). REITs can in theory have negative EPS indefinitely and still be healthy.


----------



## CanuckBull

Spidey said:


> I own a basket or REITs including RioCan. While it is true that online shopping is taking a big bite out of retail, I don't think that the "on location" shopping experience will ever die. Personally, I've found online good for items with little variability like a book or electronic part but when style and fit are involved online can be frustrating. From my online experience, I've found that online item's apparent size and color is often deceiving.
> 
> A second point is that real estate will always eventually find its highest and best use and this is what appears to be happening with Riocan's redevelopment strategies. These REITs own prime land in urban locations and with Canada's population expected to double in the next 50 years, that land should continue to increase in value and have income potential from one form or another. REITs are run by savvy real-estate managers, who tend to be heavily invested themselves and will usually eventually find a way to extract the maximum profit from their holdings.
> 
> That being said, RioCan is not my favorite REIT, I have much larger holdings in SRU.UN and CAR.UN.


Well said Spidey. I also do believe Real Estate will prevail in the long run. As they say "God stopped making land a long time ago" !! and prime land always finds its best use as soon as things pick up.


----------



## CanuckBull

OnlyMyOpinion said:


> Well managed companies will reinvent themselves and stay relevant.
> There are a couple of REIT examples that come to mind:
> SMART is building Metroplitan Centre, a retail/residential complex in Vaughn at the terminus of the planned Spandina subway extension.
> BEI and REI have partnered for a condo/retail development at Brentwood, on Calgary's NW LRT line.
> REI has some rundown old mall real estate in Oshawa that almost certainly will be repurposed (i.e. include residential) in the future.
> BEI has been buying new units in Calgary at prices as good or better than they would pay to build themselves, part of their plan to bring 'new blood' into their rental stock.
> These outfits have very long term perspectives.
> I continue to believe that having a slice of diversified REIT holdings as a small % of your portfolio is worthwhile, particularly if you are tilted towards income.


Agreed. I already have a rental property so I could say I'm heavily invested in it, but I also like the REITs dividend payouts.


----------



## CanuckBull

andrewf said:


> I think you are just misunderstanding how REITs work. EPS is not terribly relevant with REITs, since it doesn't reflect the true health of a REIT due to accounting rules. Investors are better served looking at Funds From Operations (FFO). REITs can in theory have negative EPS indefinitely and still be healthy.


I think I feel better now! LOL Thanks for the input. I will look into SRU.UN and CAR.UN to see how they stand against RioCan.


----------



## CanuckBull

Spidey said:


> That being said, RioCan is not my favorite REIT, I have much larger holdings in SRU.UN and CAR.UN.


Spidey, how do you compare SRU, CAR and RioCan in terms of stability, long term holdings?


----------



## AltaRed

Per Andrew, FFO and AFFO (cash flow after recurring maintenance/upgrade expense to maintain properties) are the relevant metrics for valuation purposes, e.g. payout as a percentage of FFO/AFFO. Anything less than 50% is exceptional and less than 70% is still very good. REITs I am familiar with like RioCan, Creit, CAR and BEI have conservative numbers, including mortgage debt as a percentage of NAV and will be around for the long haul. They, along with Pure Industrial REIT form the basis of my REIT holdings. Chartwell is on my list too but I regret not having bought it in June 2015. I am looking for 20-30 years of highly sustainable distributions that grow proportionately with inflation (assets I hopefully never have to monior much at all for the rest of my life).

Like Spidey though, RioCan is not my favourite the past 5 years or so as it was slow to respond to redevelopment of its prime real estate. It is engaged though in making the conversions. The Brentwood JV with Boardwalk is an example of an extremely good fit, each very good in its knowledge of retail/commercial (RioCan) and rental residential (Boardwalk). I look forward to more of the same.

I am not at all fond of the REITs that have disproportionately large portions of their business tied to one anchor, e.g. Sobeys, WalMart, et al. If the anchor tenant falls on hard times, so will the REIT. I won't own them.


----------



## CanuckBull

AltaRed said:


> Per Andrew, FFO and AFFO (cash flow after recurring maintenance/upgrade expense to maintain properties) are the relevant metrics for valuation purposes, e.g. payout as a percentage of FFO/AFFO. Anything less than 50% is exceptional and less than 70% is still very good. REITs I am familiar with like RioCan, Creit, CAR and BEI have conservative numbers, including mortgage debt as a percentage of NAV and will be around for the long haul. They, along with Pure Industrial REIT form the basis of my REIT holdings. Chartwell is on my list too but I regret not having bought it in June 2015. I am looking for 20-30 years of highly sustainable distributions that grow proportionately with inflation (assets I hopefully never have to monior much at all for the rest of my life).
> 
> Like Spidey though, RioCan is not my favourite the past 5 years or so as it was slow to respond to redevelopment of its prime real estate. It is engaged though in making the conversions. The Brentwood JV with Boardwalk is an example of an extremely good fit, each very good in its knowledge of retail/commercial (RioCan) and rental residential (Boardwalk). I look forward to more of the same.
> 
> I am not at all fond of the REITs that have disproportionately large portions of their business tied to one anchor, e.g. Sobeys, WalMart, et al. If the anchor tenant falls on hard times, so will the REIT. I won't own them.


AltaRed, how would you rank SRU, CAR, RioCan, Creit, BEI, CSH, Brentwood from the most long run sustainable in returns ranked 1.... and what percentage of a portfolio do you believe is the best approach? %10?


----------



## AltaRed

Brentwood is a re-development area in Calgary oriented around a rapid transit station.....replacing the old shopping centre/mall that was there. It is not a REIT itself.

Most REITs each have their own attributes, pros and cons, albeit I think rental residential is the place to be over a long period of time. There is ALWAYS a third of the population or so that rent and maybe REITs have half that business. In which case, I'd pick CAR first (good current valuation and somewhat balanced across Canada with emphasis on Ontario), then CSH (retirement) second but it is expensive, and Boardwalk third (albeit Boardwalk has a great valuation relative to NAV but depressed due to its AB/SK focus). Creit is likely most conservative of the bunch...steady eddy so to speak (no one talks much about it). You have to spend time looking at their portfolios and their MD&A in their quarterly resuts to see where you want to be.

Boardwalk just released its results and got hammered by 6% or so on its price in one day, but I strongly believe investors will be sorry for not being there. At one time, its market price was in the mid/high $60 range back in 2014 or so, and while the NAV of its properties has come down some due to the vacancy rate in AB/SK, NAV is still around $60 and market price is circa $45. That is a huge discount to NAV (typically rarely under 80% of NAV and the AB market is firming up a bottom. IMO, a great entry point....but may take another 1-2 years for it to really start to shine again. Most investors would go with positive momentum instead, e.g. CAR.

I don't think anyone needs a specific allocation to Reits until they are in late stages of accumulation and setting themselves up for a retirement income stream. Reits are a good diversification from dividend paying stocks, best held in registered accounts due to the complexity in their reporting income, and for a retirement portfolio, perhaps a 10% allocation. I've been retired over 10 years now and have built my Reit allocation from zero 15 years ago to almost 10% today. If I could buy CSH at a decent price, I'd add it to the portfolio and then stop any further additions.


----------



## agent99

We have owned Riocan in a taxable account since 2004. Paid about $14.80, so it has more or less doubled plus good cash flow from distributions. A good part of those distributions were ROC, so our cost base is now something like $8.50. As a result, if we were to sell, we would have quite a high capital gain. Always a "problem" if held in taxable account. I am more or less happy to leave it where it is and continue to collect the distributions. 

I am not concerned about affect of on-line shopping. Many of Riocans tenants should not be much affected. Home Improvement stores, restaurants, Canadian Tire stores, etc. List here.


----------



## Spidey

CanuckBull said:


> Spidey, how do you compare SRU, CAR and RioCan in terms of stability, long term holdings?


There are probably better people to analyze this than me. Smart is more weighted by Walmart than Riocan - apparently 72% of Smart's properties are anchored by Walmart whereas Riocan is more diversified with their anchor tenants. So from a diversification perspective that may make Smart more vulnerable but on the other hand, that tended to be one of the reasons that I favor Smart. I tend to believe that Walmart is less vulnerable to competitive pressures than, say, The Bay. As for CAR.UN it is a fairly different animal, specializing in apartment properties. With a growing population, apartments will always be in demand so this one is possibly the most stable provided it is picked up for the right price.


----------



## OnlyMyOpinion

Spidey said:


> ... Smart is more weighted by Walmart than Riocan - apparently 72% of Smart's properties are anchored by Walmart..


That would be by property count. Other metrics: WMT is 40% of sq footage, and 25% of income for SRU.
RioCan is more diversified. It's top 10 (which includes WMT at #3) represent 33% of its revenue, while SRU's top 10 (which has the same top 3) represent 49% of revenue. Differences can be seen as good or bad, i.e. fewer but stronger tenants. REI's occupany rate is 95.3% while SRU's is 98.3%. SRU has performed a bit better over time but both are good companies IMO.
.


----------



## CanuckBull

OnlyMyOpinion said:


> That would be by property count. Other metrics: WMT is 40% of sq footage, and 25% of income for SRU.
> RioCan is more diversified. It's top 10 (which includes WMT at #3) represent 33% of its revenue, while SRU's top 10 (which has the same top 3) represent 49% of revenue. Differences can be seen as good or bad, i.e. fewer but stronger tenants. REI's occupany rate is 95.3% while SRU's is 98.3%. SRU has performed a bit better over time but both are good companies IMO.
> .


I think I will keep my %10 exposure to REITs and with what I learned above, Ill keep my little left of RiocCan but will buy more CAR and only in my registered accounts. prices are quite high right now. with slightest interest hike, they will probably drop. That's when I will buy more and maybe throw in some CSH too. I used to have it in 2011 when hovering around $7 but sold for some capital gain which was a mistake...
I think the digital age and the new generations will do a lot more online shopping. year over year %8 steady online retail growth will eventually hurt the big box stores. They are already short staffed across the board. Eventually we will definitely see more big box stores go out of business....or change strategy to online sales and with a smaller foot print. Investing in residential business makes a lot more sense to me.


----------



## CanuckBull

How to you see ARTIS TSE:AX.UN? %8.44 yield, 
mostly Industrial/Office/Retail wit US/Canadian exposure. I'm still towards CAR.UN but AX yield of %8.44 and the steady dividends is very attractive. Easy to fall for....lol


----------



## AltaRed

Don't get sucked in by yield. IMO, there is no way a REIT can pay out that kind of distribution sustainabiy UNLESS its market price is way...way low relative to NAV. Cap rates on real estate don't exceed 5-6% (in most things) any more so a distribution exceeding that number can either be a red flag of unstainability, or a 'deep value' opportunity due to being in a tough market area and is unloved by the market.


----------



## OnlyMyOpinion

I don't own AX.
It looks like their 2016 results should come out ~end of February. You can either be a gambler ahead of that and hope that they come in with better numbers than the market expects, or wait until after and see if results point to a prudent investment. 
I don't like the fact that they have pref units ahead of the common.


----------



## AltaRed

AFAIK, pref units are always ahead of common equity.


----------



## CanuckBull

AltaRed said:


> Don't get sucked in by yield. IMO, there is no way a REIT can pay out that kind of distribution sustainabiy UNLESS its market price is way...way low relative to NAV. Cap rates on real estate don't exceed 5-6% (in most things) any more so a distribution exceeding that number can either be a red flag of unstainability, or a 'deep value' opportunity due to being in a tough market area and is unloved by the market.


Your right. Cap rates usually don't go that high. they may do %7 to %7.5 here and there but in general its %5 or lower in todays market. 
While looking into some stats on these stocks, I saw AAR.UN (Pure Industrial Real Estate Trust) which has started working with the Weed Industry by providing warehousing, etc !!! read an article claiming its a good way to get exposed to the new legalized Weed market.....not something I will put my money on but I can see 10 years from now, they may even beat the tobacco stocks....


----------



## AltaRed

FWIW, I have been happy with my investment in AAR.UN. The way I see it, more and more warehousing will be required as more and more consumer spending goes online, etc, etc. IMO, it is like holding infrastructure such as pipelines and midstream processors rather than the O&G companies themselves.


----------



## andrewf

REITs can have higher yields than their underlying cap rates using debt. Financial engineering, really.


----------



## AltaRed

andrewf said:


> REITs can have higher yields than their underlying cap rates using debt. Financial engineering, really.


Yes, but that is a significant flag, an indication that it could be that leverage is too high...which lowers cap rate (operating income/market value) and thus FFO/AFFO available for distributions even more. Be wary. Highly leveraged REITs will be whacked much harder in a significant interest rate increase.


----------



## CanuckBull

AltaRed said:


> FWIW, I have been happy with my investment in AAR.UN. The way I see it, more and more warehousing will be required as more and more consumer spending goes online, etc, etc. IMO, it is like holding infrastructure such as pipelines and midstream processors rather than the O&G companies themselves.


Do you think its a good idea to replace REI with AAR and go with AAR + CAR for %10 of a portfolio? online retail is growing by %8-9 year over year and once the new destructive generation reach puberty and start shopping, its gonna jump double digits...

Wondering why Google Finance doesn't show their history after 2012...


----------



## gibor365

AltaRed said:


> Highly leveraged REITs will be whacked much harder in a significant interest rate increase.


This is why REITs use interest rates swap
for example SRT.UN
Prior to Interest Rate Swap After Interest Rate Swap
Change in interest rates (bps) (1) AFFO AFFO payout ratio AFFO AFFO payout ratio
(50) $ 9,754 71.7% $ 8,949 78.1%
(25) 9,480 73.7% 8,862 78.9%
— 9,205 75.9% 8,775 79.7%
25 8,930 78.3% 8,687 80.5%
50 8,656 80.8% 8,600 81.3%
100 8,106 86.2% 8,426 83.0%
200 $ 7,008 99.7% $ 8,077 86.5%

http://www.slateam.com/assets/attachments/Q3FY16-SRT-MDA-r70-1102-FINAL.pdf
page 24


----------



## OnlyMyOpinion

AltaRed said:


> AFAIK, pref units are always ahead of common equity.


Poor wording on my part. What I meant was that I don't like the fact that they have prefs. 
They're not that common with REIT's (although I know REI has some).


----------



## john.cray

Is anybody adding to their REI.UN holding today?

Mine is down 6.5% since I purchased them and I have some spare cash in TFSA accounts. I am tempted to add to the position in order to bring it to target. I see a lot of the REITs are suffering though, probably due to the recent interest rate hike. In addition RioCan has been mentioned in the news regarding Sears Canada stores shutdown. They defended very well though saying that Sears only attributed very little to their income.

Anyway, I was curious what others are doing?


----------



## AltaRed

While the retail sector sentiment remains negative, I believe revenue impacts to RioCan are over blown. They are re-developing a number of their assets and partnering with others on multi-purpose developments. It's the double whammy of retail malaise and increasing mortgage rates that could drive its unit prices down further. I've held RioCan 'forever' and witnessed a number of price cycles. For sure I would NOT be selling here.


----------



## Oldroe

Every real estate agent has deals going sour in the GTA.

Even banks on signed deals are making people come up with more money. Lot's of people are going to end up with 2 houses.

I'm aware that these are residual deals, also concerned with mid size company's doing poorly, Oil.

Think I will just ride along will be buying more REI just think a better spot will be coming..


----------



## bgc_fan

So the latest news is Riocan is selling off 100 properties outside six core cities: Montreal, Toronto, Ottawa, Edmonton, Calgary, and Vancouver.

They plan on suspending DRIPS while conducting a share buyback program, though they will still have distributions.

So, think that will change things? Basically they are reducing their holdings by a third.

http://www.bnn.ca/riocan-plans-to-sell-100-properties-worth-2b-by-2020-1.872824


----------



## AltaRed

It's a bolder move to re-position their portfolio more quickly than through organic incrementalization of re-development based on current cash flow trends. A lot of their less important holdings are in smaller 'sleepy' cities and these plazas are not going anywhere. Cap rates are probably going nowhere either so it is time to shake up the portfolio. Just from the charts, it is obvious the market was not liking what RioCan was (or better said, NOT) doing. 

They need to inject serious money into redevelopment of their major holdings and that needs serious cash. Better to get it from crystallizing parts of the portfolio than try to go to equity markets for the money when unit market prices are 'depressed'. Share buybacks at prices at a good discount to NAV will help reduce their payout ratio too and it is stupid to have a DRIP when you are trying to reduce float. I suspect the market will like it once they start monetizing some of their 'crap' and start announcing more redevelopments of the likes of Brentwood in Calgary (multi-purpose retail/commercial/residential) in a JV with Boardwalk. Brentwood is a desirable hub on the LRT, across from U of C, and on the City's list to develop around certain LRT stations.

Added: It is likely going to take a few years for the momentum to build (results) and unit prices to recover substantially.


----------



## kelaa

There was a slight recovery on the announcement of the NCIB share buyback. But since then, it has slid below $25 again, even on the news that they will raise their distributions for next year by 2.1%. I'm okay with it as a REIT/income holding.


----------



## AltaRed

This name will float around in cyberspace until their 'new' strategy delivers some results. Maybe sometime in 2019?


----------



## john.cray

AltaRed said:


> This name will float around in cyberspace until their 'new' strategy delivers some results. Maybe sometime in 2019?


Are you referring to the use of the new mixed-use properties (i.e. condo/mall combos) they are working on? What is your expectation until then?

I am thinking of adding a bit around $24.50-ish.


----------



## AltaRed

Results from xixed use developments for sure, but those will take longer than 2019 to bear fruit. I am thinking more about disposal of non-core assets, etc. that they have announced, and how they then re-deploy that capital into mixed use developments. The market wants to see actual money flow to know the strategy is being implemented, and done well. This is a long term turn of the supertanker.


----------



## kelaa

I for one don't really understand why so many people value bonds or bond funds that return say 3%, when you have solid companies like Riocan that can pay 5 to 5.5 % (cannot count on share growth too much). I think there might be an over emphasis by many on "capital preservation". Looking at the security from a dividend investor / cash flow perspective, I don't have any problems price stagnation.


----------



## john.cray

AltaRed said:


> Results from xixed use developments for sure, but those will take longer than 2019 to bear fruit. I am thinking more about disposal of non-core assets, etc. that they have announced, and how they then re-deploy that capital into mixed use developments. The market wants to see actual money flow to know the strategy is being implemented, and done well. This is a long term turn of the supertanker.


Right. It's a big mammoth. It's still a core holding for yourself, correct?

For me that's the only REIT (out of 6) that I have, which lost capital value (total is still positive). I know the retail/mall narrative and the overall pessimistic outlook but I think I will still stick with them for as a long term holding in TFSA. I think the feeling is a bit overblown. Do you share my view?


----------



## AltaRed

Anything with a heavy component in bricks and mortar retail is unpopular these days.... whether justified by results or not. True RioCan had some hits with Target and Sears, but not nearly as much as the big mall owners. They will languish for awhile because of brick and mortar headwinds but they have many excellent locations that can (and will be) re-developed. They could be back at $30 in a few years. RioCan will remain a long term hold for me (and not only because my ACB is <$10). 

I am currently underwater on Boardwalk but that too will pass in a year (or two at most), especially with the amount of management ownership and the shaking out of the AB/SK residential rental market. I am a big winner with my Pure Industrial REIT holding...which may falter someday when everyone blows their brains out overbuilding warehouse space. It is what it is for long term holders of stocks.

Added later: Over time, I will shed units of this REIT as I need to tap into capital to fund my lifestyle. I tend to be opportunistic on what equity I pick to tap capital from. REI won't be one of them until it is likely back in the $27+ range.


----------



## Oldroe

I was listening to the boss on some show.

98% tenant is strong. Kind of makes the end of bricks and mortar doubtful.


----------



## Koogie

Oldroe said:


> I was listening to the boss on some show.98% tenant is strong. Kind of makes the end of bricks and mortar doubtful.


He probably would have said the same thing a couple years ago about Sears and 4 years ago about Target. It's his job.Having said that, I own REI and SRU. So... yeah, I believe in retail still (although I am getting shaky on SRU).


----------



## spdr1812

I just swapped Cominar ( after ticking over 14-ish ) for HR , was looking @ Rio but went with HR instead . Hoping the drop after releasing the " review " might give it some upside .


----------



## GalacticPineapple

Koogie said:


> He probably would have said the same thing a couple years ago about Sears and 4 years ago about Target. It's his job.Having said that, I own REI and SRU. So... yeah, I believe in retail still (although I am getting shaky on SRU).


Retail won't die but crappy old-school retailers will.


----------



## Karlhungus

Whats up with riocan these days? Seems to have taken a bit of a dive since christmas. Fear of rising interest rates? ANyone buying at these prices ?


----------



## My Own Advisor

I continue to DRIP it myself in my brokerage, no intentions of selling. I don't understand the mass exodus from this stock. It's not like people will not be shopping ever again at a box store.


----------



## doctrine

RIOCAN cuts its distribution by 1/3rd.

This is not terribly surprising, but again disappointing to hear a CEO spend the entire pandemic touting up how sustainable their dividend was while their businesses in retail stores go bankrupt and/or online.

I'm also not sure how a company whose stated business model is investing significantly in properties to upgrade and expand mixed-use development is going to do so while paying out close to 100% of its funds from operations for at least a decade, even pre-pandemic. This only works if your real estate asset base only increases in value and doesn't decrease in a recession. And then the CEO denies it is a problem for almost 9 months.

Whoops. Including development expenditures, their cash needs are over 200% of their funds from operations in an environment with at least a 5-10% drop in property operating income. That party has ended.


----------



## AltaRed

It is worthwhile spending time on the Q3 Report to Unitholders Pages 25-29 on FFO and ACFO. The reduction in distribution will bring payout ratios down to historical values. Maintenance capital is discussed on Page 43 (the main difference between FFO and ACFO) with development spending discusse in the pages thereafter, and funding specifically on Page 47. It is not difficult to understand.


> The Trust has been funding and will continue to fund its development pipeline primarily through proceeds from asset pruning (dispositions), sales proceeds from residential inventory developments or air rights sales, strategic development partnerships as well as retained earnings or excess cash flows after maintenance capital expenditures and distributions have been paid


 They will also likely mortgage where appropriate but have kept D/E ratio under 50%. Capital structure is on Page 58. It pays to work through that and subsequent pages including key ratios on Page 69 before jumping to conclusions.


----------



## Eder

Heres the thing though...management stated the dividend would be maintained...I know in my case I decided to buy based on my respect for management and relatively cheap price, which I attributed to Covid and was willing to wait while cashing a nice dividend. 12 days later out of the blue they blow my research out of the water. Happily in my case I was able to sell at a small profit but am quite rattled about this.

It makes me wondering about some other holding...ie Enbridge...will they do something out of the blue the same after a year of stating the dividend is safe & growing.

There seems no accountability here. At the very least Sonshine should quit.


----------



## AltaRed

I agree it does nothing about credibility making statements like that when there were still far too many unknowns in May, but May 2020 feels like a year ago now. He didn't even have Q2 data in hand, never mind Q3 data which he probably thought would have rebounded even more significantly (Page 69) from Q2 than it did. He will wear that one for some time, if he survives it.

Still, I am convinced this is a good hold given the status of their re-development inventory primarily in the GTA. It is truly outstanding. Even if you don't necessarily agree with their NAV of ~$24.50/unit, current unit market price is at an unprecedented discount to book. Appraisal value would be even higher given the appreciation of land all these years. I am holding for the capital appreciation that is yet to come.


----------



## MrBlackhill

Seems like the market didn't go bearish on the news. At least for today. I don't think it'll drop.



Eder said:


> It makes me wondering about some other holding...ie Enbridge...will they do something out of the blue the same after a year of stating the dividend is safe & growing.


I know that ENB has been a great performer for a long time, but I currently don't understand what's going on. I mean, I'd be bearish or maybe I'm missing a point. ENB is giving $3.24 dividends while having $0.96 EPS (ttm), a D/E of 99% (mrq) and a current ratio of 0.55 (mrq). Is it the reason why it's been drifting sideways since 2016?


----------



## Eder

I will buy back if the share price takes its appropriate 20% drubbing...I do like their properties and long term plans. Their NAV of $24+ seems pretty optimistic if WFH, online shopping etc is sticky though.

In the mean time I'll put my 20k into more Choice REIT which seems to me to be more above board.


----------



## Gotime

MrBlackhill said:


> Seems like the market didn't go bearish on the news. At least for today. I don't think it'll drop.
> 
> I know that ENB has been a great performer for a long time, but I currently don't understand what's going on. I mean, I'd be bearish or maybe I'm missing a point. ENB is giving $3.24 dividends while having $0.96 EPS (ttm), a D/E of 99% (mrq) and a current ratio of 0.55 (mrq). Is it the reason why it's been drifting sideways since 2016?


I hold some ENB right now and it's still one of my least favorite holdings. If it gets anywhere near $48-50 sometime soon, I am out. It was reliable 2000-2010, amazing 2010-15, and trending down since then even before covid. Since they know that the dividend is the only thing keeping people interested in a stock with little big long-term growth opportunity, they will do their best not to cut it for now.

Look at stocks like keyera as well. Down down since 2014. Or Suncor, whose pre-covid price wasn't any better than at various points in the last 15 years. When these hit 80-90% of pre-covid values, I am not interested. Just not enough earnings or growth potential to outweigh the sector risk and overall trend down

All of this makes REI looks totally fine to me! A 2/3 dividend for a 2/3 value stock... no problem. It has good upside heading into the summer. I doubled down on my small position yesterday morning and ended up slightly green on REI for the day after the price picked back up.


----------



## Money172375

Anyone follow this closely? I’m down about 20%. Bought before Covid.


----------



## dubmac

I'm down 12% on this one. 
I never expected much growth from it - but I also didn't expect what happened over the past year - either! 
I learned that if i want REIT's in my pf, I'll buy ZRE - not individual companies like REI.UN. I'll likely move out when it turns green


----------



## AltaRed

REITs like REI.UN got hammered with its retail component but it is doing all the right things to right the ship. It will look a lot better by Fall/Winter 2021 and it is spending a lot of capital to re-develop prime locations in key cities, especially GTA. Whether that is worth waiting for, I don't know. 

I am a 15+ year holder of this REIT and will continue to hold for now. It's not on the top of my list to dispose of for when I need to sell assets to supplement cash flow needs but it is in the top 5 to consider.


----------

