RioCan Real Estate Investment Trust

Looking for Income?
Friday November 17, 2000
The Investors Centre

Foremost on most investors minds are the lures of big capital gains. This is what created the technology bubble last year and for the most part this year. If you got in early into the bubble, you probably made some money, if you didn’t, the picture doesn’t look so rosy, at least for now. In this crazy market many investors tend to forget that diversifying one’s portfolio can be a good thing. Yes, income investments are not necessarily only for "old investors". This is where a REIT can come in.

What is a REIT? Traditionally a REIT (Real Estate Investment Trust) is a company that buys, develops, manages and sells real estate assets. REITs allow investors to invest in a professionally-managed portfolio of real estate properties. REITs qualify as pass-through entities, companies who are able distribute the majority of income cash flows to investors without taxation at the corporate level, providing that certain conditions are met. As pass-through entities, whose main function is to pass profits on to investors, a REIT's business activities are generally restricted to generation of property rental income. Another major advantage of a REIT investment is its liquidity, as compared to traditional private real estate ownership which are not very easy to liquidate in a negative real estate market. One reason for the liquid nature of REIT investments is that its shares are primarily traded on major exchanges, making it easier to buy and sell REIT shares than to buy and sell properties in private markets. One disadvantage of a REIT investment is that its valuation can be heavily influenced by changing interest rates and changes in the real estate market.

In Canada, the largest REIT by market capitalization is RioCan Real Estate Investment Trust . RioCan is a Canadian owned and operated REIT trading on the TSE and is one of many reasonably safe income investments that an investor can add to their portfolio. Its real estate holdings consist primarily of retail locations with some well know retail companies as its tenants; Chapters, Famous Players, and Wal-Mart, just to name a few.

RioCan is the most visible of the REITs in Canada, not simply because of its size but also because of its depth. In keeping with the times, RioCan has used it’s strong revenue stream and balance sheet to branch out into other real estate related ventures. Early this year, RioCan in partnership with Brightspark and CIBC World Markets announced the creation of uCorporation. Although yet to be launched, uCorporation’s (www.ucorporation.com) mission is "to bridge real world retail strengths with the speed and convenience of the online experience". Given the strength of RioCan’s "bricks and mortar" retail spaces, the addition of the online space will add another dimension to the relationship RioCan has with its tenants.

So if you are looking for a place to put your cash holdings which beats the returns on a standard bank saving account, RioCan with it’s annual yield of 11% may be the place for you. As a professionally run REIT with a dash of technology, RioCan is proving that income investments are not so passé.  

 Snapshot (REI.UN:TSE)

RioCan Real Estate Investment Trust
The Exchange Tower Suite 700, P.O. Box 378
130 King Street West
Toronto, Ontario M5X 1E2
Tel: (416) 866-3033; 1-800-465-2733
Fax: (416) 866-8567

Website: www.riocan.com

Management:
CEO - Edward Sonshine, Q.C.
COO - Frederic Waks
CFO - Robert Wolf
Chairman of the Board - Paul Godfrey, CEO Toronto Blue Jays
VP Real Estate- Donald MacKinnon
VP Operations - Danny Kissoon
VP Investments - Katy Ritcey
VP Leasing - Jeff Ross

Riocan REIT key numbers:

52-week range: $7.50-$9.55
Shares O/S:138.0M Assets: $2.2B Trailing 12 mos EPS: $1.02

Property Occupancy:Retail - 96.1% Office 87.9%

Property geographical revenue breakdown: Ontario - 68.9%, Alberta -11.9%, Quebec 8.7%, Others 10.5%

Top Tenants: A & P, Zellers, Wal-Mart, Famous Players, Loblaws, Shoppers Drug Mart, Safeway, Staples, Chapters

Mutual Funds Holding RioCan REIT: CI Signature High Income Fund, CIBC Monthly Income Fund,Elliott & Page Monthly High Income Fund, Merrill Lynch Canada Income Trust Fund