Maple Leaf Memo
The House of Commons Standing Committee on Finance has released a report, “Taxing Income Trusts: Reconcilable or Irreconcilable Differences, in the wake of special hearings called to review the evidence for Jim Flaherty’s proposal to tax distributions to shareholders at rates comparable to corporate rates.”
The report is essentially a lengthy summary of witness testimony during the hearings, leading to one main proposal: either reduce the 31.5 percent distribution tax to 10 percent or extend the grace period from four to 10 years.
Here’s the gist of the 66 pages; the more intrepid among you can access the full report in PDF format here.
The committee asked Flaherty and his staff to submit documentation supporting the bill and also invited Canadians impacted by the proposed legislation to submit both written and oral presentations.
Flaherty pushed his argument that too much tax avoidance was occurring and that this was impacting investment decisions. He also suggested that income trusts’ foreign investors were enjoying a windfall at the expense of Canadian taxpayers. (US-based unitholders do pay at a lower rate, but they don’t enjoy the benefits of that taxation, nor do they impact the roads, bridges or any infrastructure, social or otherwise.)
The minister pegged–based on sound and consistent methodology–federal revenue lost at CD500 million a year. “Tax leakage,” he called it.
The Canadian Association of Income Funds (CAIF) described the tax leakage estimate as grossly exaggerated and not supported by fact or data. CAIF even pointed to evidence suggesting federal revenue would increase, as tax levels paid by individuals would be higher than most corporations pay.
Flaherty also said he wouldn’t adopt a stance similar to the US position on oil and gas trusts and noted that the tax-leakage impact of extending the grace period to 10 years would be CD3 billion. Many witnesses countered earlier comments regarding how both the US and Australia had shut down flow-through entities in their countries. The facts showed that there were exemptions for oil and gas, refining, mining, fertilizers and real estate and that companies were allowed up to a decade to transition.
The Finance Committee made three recommendations. It calls for the release of the data and methodology used to reach a conclusion of tax leakage. Second, the report advocates a separate vote on the income trust tax issue, as opposed to including it in a federal budget bill. Finally, the Finance Committee concluded that overwhelming evidence pointed to better alternatives; Canada should consider either a 10 percent tax or an extension of the transition period from four to 10 years. The report supports the notion of a moratorium on new trust issues.
The appendix to the report includes reviews by each of the Conservatives, the Liberals, the New Democratic Party (NDP) and the Bloc Quebecois. The Conservatives and the NDP are rumored to be preparing their own report to counter the Finance Committee’s conclusions.
…Election Fire
Flaherty switched course again.
Responding to one of the Finance Committee’s recommendations, the finance minister said he’ll likely include legislation to make the proposed taxation of income trusts permanent in Canada’s upcoming federal budget, due March 19.
Parliament is now on March recess for two weeks and reconvenes the very day on which the budget will be introduced (or tabled, in Canadian legislative parlance). Flaherty hinted but didn’t commit to actually adding the income trust proposal to the budget before breaking for recess.
The Liberals and the Bloc Quebecois will either support the tax or defeat the entire budget and force an election. Flaherty had said before that he preferred introducing the income trust tax measure separately, and his latest flip-flop angered an opposition that wants to address the issue on its own merits.
Finance Critic John McCallum said the Liberals “would be loathe to support a budget, however good it was, that contained this income trust policy,” but he held off on committing to toppling the government before the budget can be reviewed. McCallum did say the recommendations of the Finance Committee would become part of the Liberal platform in the next election.
That could happen within weeks.
Brent Fullard, president of the Canadian Association of Income Trust Investors (CAITI), has advised members to write to members of Parliament during the break. And he notes that the Conservatives and the NDP are making the trust tax happen–let them have it. But also let the Liberals and the Bloc Quebecois know they’re doing the right thing. General contact information is available here.
CAITI has also launched a nationwide billboard campaign across most major Canadian cities.
Let’s let Fullard have the final say today:
The income trust issue has now evolved into much larger issue involving some of the key foundations of a free democratic society, namely transparency and accountability. This very government, this so-called New Government, promised it would do things differently. Whoever expected that they would take us in this sullied direction? It is for this reason that I would ask each of you to invite all those who are in your immediate circle of family and acquaintances to consider joining CAITI. As you know we have two categories of membership for individuals, Concerned Canadian Members and Investor Members. Membership fees are optional for 2007, and $30.00 for those who opt to pay. Many have chosen to pay additional amounts to help fund our activities. These and all payments are totally discretionary and most welcomed. We have now added a Pay Pal payment feature and a toll free number for joining which is 1-877-494-3430.
Visit the CAITI Web site, and join.
The RoundupEarnings season is well on, but several prominent trusts have yet to report. Algonquin Power Income Fund will release numbers Wednesday and discuss them on Thursday, but Atlantic Power Corp won’t report until the end of March.
We’ll continue to keep you updated on the stragglers, and look for in-depth analysis for Portfolio companies that have reported in the March issue of Canadian Edge, due to hit your e-mail inbox this Friday.
Oil & Gas
Freehold Royalty Trust’s (FRU.UN, FRHLF) fourth quarter and full-year 2006 results more than justified its sell rating. The trust suffered a 5 percent reduction in barrels of oil equivalent (BOE) produced per day, and the average price for the product Freehold did get to market fell 25 percent. Operating netback and funds from operations (FFO) fell at similar rates during the quarter, all of which explain why the dividend is under pressure. The big picture isn’t much brighter: Probed plus probable reserves declined 8 percent to 28 million BOE; reserve additions of 1.5 million BOE made up for just 49 percent of annual production. Freehold’s reserve life index (RLI) is 9.6 years. Sell Freehold Royalty Trust.
NAL Oil & Gas Trust’s (NAE.UN, NOIGF) fourth quarter numbers suffered under the weight of lower natural gas prices and restructuring charges. Net earnings for 2006 fell 39 percent from CD98.5 million to CD60.2 million. NAL pointed to a 23 percent drop in natural gas prices and a CD27.2 million one-time charge to explain a 33 percent drop in fourth quarter profits, from CD30.8 million a year ago to CD20.5 million. Gross revenue was CD75.7 million in the fourth quarter, down from CD95.6 million the year before, and 2006 revenue was CD310.8 million, down from CD314 million in 2005. Sell NAL Oil & Gas Trust.
Pengrowth Energy Trust’s (PGF.UN, NYSE: PGH) profit shrank to CD3.3 million in the fourth quarter, down from CD116.7 million in the fourth quarter of 2005, on rising costs and falling energy prices. For the quarter ended December 31, net income per unit dropped to 1 cent Canadian from 73 cents Canadian. Oil and gas sales amounted to CD350.9 million, down from CD353.9 million the same quarter a year earlier. Pengrowth reported a full-year 2006 profit of CD262.3 million, down from CD326.3 million in 2005, on CD1.21 billion in sales. Pengrowth sold more volume in 2006 but at lower prices. 2007 production is forecast to be 83,000 to 87,500 BOE per day, with expenses expected to reach CD13 per BOE. Pengrowth Energy Trust is a hold.
Penn West Energy Trust’s (PWT.UN, NYSE: PWE) midsummer 2006 acquisition of Petrofund led to a 4 percent boost in fourth quarter revenue to CD578.5 million, but earnings fell by 49 percent on lower natural gas prices and higher depletion charges. Net income was CD122.9 million, down from CD241.1 million. On a per-unit basis, net income was down 70 percent from CD1.46 to 44 cents Canadian. Full-year net income was CD665.6 million, or CD3.27 per unit, down 15 percent from CD577.2 million, or CD3.48 per unit, in 2005. Revenue was up 9 percent to CD2.1 billion from CD1.92 billion.
Production averaged 129,915 BOE per day in the fourth quarter, up from 98,205 BOE per day a year earlier; 45 percent of fourth quarter 2006 production was natural gas. Penn West spent CD159 million on capital programs, drilling 52 net wells in the fourth quarter with a 96 percent success rate. The distribution looks safe through the balance of 2007. Buy Penn West Energy Trust up to USD33.
Progress Energy Trust (PGX.UN, PGXFF) said it cut its distribution to make more cash available to invest in the business; the trust announced Monday that it’s agreed to buy a closely held natural gas producer with operations in British Columbia and Alberta for CD526. Progress said it’s already agreed to sell some of assets to ProEx Energy. Excluding those properties, Progress is paying CD390.3 million for assets that produce 6,400 BOE per day and have proved plus probable reserves of about 17 million BOE. The acquisition includes 250,000 acres land.
Reserve growth in 2006 was achieved entirely through the drill bit and replaced 191 percent of production on a proved plus probable basis and 135 percent on a proved basis. Year-end 2006 reserves increased 10 percent to 64.9 million BOE on a proved plus probable basis and to 48.2 million BOE on a proved basis. Progress reported finding, development and acquisition (FD&A) costs of CD10.79 per BOE proved plus probable and CD15.34 per BOE proved. Progress’ three-year average FD&A cost is CD10.63 per BOE proved plus probable and CD12.85 per BOE proved.
The trust’s recycle ratio was 2.6 times based on its 2006 operating netback of CD32.28 per BOE divided by its proved plus probable FD&A of CD12.39. Progress’ RLI increased 11 percent to 9.8 years from 8.8 years proved plus probable and to 7.3 years from 6.9 years proved. Hold Progress Energy Trust.
Shiningbank Energy Income Fund (SHN.UN, SBKEF) reported that net earnings fell 96 percent to CD1.99 million in the fourth quarter; production volumes were up 10 percent, but realized prices were down and expenses increased. Shiningbank generated net earnings of CD50 million during the fourth quarter of 2005–during a period of record-high oil and gas prices. Total revenue in the 2006 fourth quarter fell to CD107.7 million, down from CD144.5 million. Natural gas accounted for CD74.2 million, or 69 percent, of revenues in the fourth quarter, down from CD118 million, or 82 percent of total revenues, in the fourth quarter of 2005. Distributions to unitholders fell to CD52.4 million, down 15 percent from CD61.4 million a year ago. On a per-unit basis, distributions dropped 32 percent to 61 cents Canadian from 90 cents Canadian.
For 2006, Shiningbank earned CD65.8 million in 2006, down 42 percent from CD114.2 million in 2005. Revenues fell 5 percent to CD400.8 million. It’s been down so long that it’s hard to see the upside. But Shiningbank rates a hold based on solid assets and management and the fact that natural gas prices will rebound.
True Energy Trust (TUI.UN, TUIJF) reported a 2006 net loss of CD233.6 million on noncash charges it took in the fourth quarter to reflect the decreased value of some of its plant, equipment and acquired businesses as a result of planned changes to federal income tax policy for trusts. The annual loss amounted to CD4.95 per diluted trust unit and compared with a net profit of CD13.9 million, or 55 cents Canadian per unit, in 2005.
True’s revenue was CD220.9 million, up from CD161.7 million in 2005. Cash flow from operations rose to CD90.4 million from CD87.1 million in 2005. Revenue in the fourth quarter of 2006 was CD77.25 million, up from CD61 million in the fourth quarter of 2005. Sell True Energy.
Vermilion Energy Trust (VET.UN, VETMF) generated FFO of CD89.6 million (CD1.27 per unit) in the fourth quarter of 2006, bringing full-year 2006 FFO to USD342.5 million (CD4.86 per unit) compared to USD278.2 million (CD4.08 per unit) in 2005. Average daily production for 2006 of 27,401 BOE represented a 9 percent increase over 2005 levels. Production in the fourth quarter was up to 29,452 BOE per day compared to 28,411 in the third quarter.
Vermilion completed work on processing facilities, gathering systems and pipeline connections for coal-bed methane and shallow gas in central Alberta that will add approximately 800 BOE per day of natural gas during the first quarter of 2007. Vermilion acquired approximately 3,900 BOE per day of light, sweet oil production in France, where Vermilion is the largest oil producer. The trust also moved forward with plans to drill the Aquitaine Maritime prospect offshore France and should drill in the third quarter of 2007.
Vermilion replaced more than 200 percent of 2006 production through drilling and acquisitions. It expanded capacity at existing facilities, a wise bit of spending that helped in 2006 and will accommodate forward growth. Vermilion’s net debt at year-end 2006 was approximately CD355 million, resulting in a debt to trailing cash flow of approximately one times. The trust’s proved plus probable RLI at the end of 2006 increased to 11.5 from 11.4 years at the end of 2005. Vermilion Energy Trust is a buy up to USD30.
Electric Power
Boralex Power Income Fund (BPT.UN, BLXJF) may be bought out by current 23 percent-owner Boralex for an estimated CD450 million after the income fund put itself up for sale. The fund’s board of trustees said March 2 that it’s seeking proposals to sell or merge the fund, following a January 12 decision to review ways to enhance shareholder value. Boralex responded by saying that it will consider buying the remaining fund units it doesn’t own. A large unitholder itself, Boralex would benefit if another buyer showed interest and paid a decent premium. Boralex Power Income Fund has a solid base of assets generating reasonably predictable cash flow, so it could be attractive to other suitors. Buy Boralex Power Income Fund up to USD9.
Gas & Propane
AltaGas Income Trust (ALA.UN, ATGFF) reported 2006 net income of CD114.5 million (CD2.06 per unit), a 27 percent increase from 2005. The trust earned CD27.3 million (49 cents Canadian per unit) during the fourth quarter, up from CD26.4 million (48 cents Canadian per unit) in the same 2005 period. AltaGas realized higher prices on lower transmission costs and benefited from higher natural gas liquids fractionation spreads, increased processing volume and lower debt-service costs, trends that generally describe 2006 for the company.
AltaGas boosted its distribution twice during 2006 for a total increase of 6.3 percent. Net income surpassed distribution growth, and the trust looks prepared to sustain its results. Total debt as of Dec. 31, 2006, was CD265.5 million, down from CD269 million as of the end of 2005. Total debt-to-capitalization was 33.4 percent, down from 36 percent. AltaGas is a buy up to USD26.
Keyera Facilities (KEY.UN, KEYUF) generated a 12 percent boost in net income to CD68.1 million for 2006. Full-year distributable cash flow came in at CD99.7 million, CD1.65 per unit figure, down slightly from CD1.67 in 2005. Distributable cash for the fourth quarter was CD27.7 million (45.7 cents Canadian per unit), up 13 percent from the same 2005 period.
Keyera’s two facilities segments grew 9 percent during 2006, driven primarily by 35 percent growth in the natural gas liquids infrastructure business. Planned maintenance work depressed numbers from the gathering and processing segment but was off just 2 percent. Marketing proved a drag as tighter margins in the third and fourth quarters led to a 36 percent contraction from 2005’s record numbers. There will continue to be a great deal of drilling activity in the Western Canadian Sedimentary Basin in coming decades, and this trust is well positioned to take advantage. Buy Keyera Facilities up to USD18.
Trinidad Energy Services Income Trust (TDG.UN, TDGNF) posted a sharp increase in fourth quarter profit on acquisition-driven revenue increases. Trinidad earned CD31.3 million (37 cents Canadian per unit) during the fourth quarter, up from CD19.4 million (29 cents Canadian per unit) for the same 2005 period. Additions to Trinidad’s drilling fleet in Canada and the US lifted revenue to CD161.9 million from CD106.4 million. For 2006, Trinidad reported a CD123.7 million profit, up from CD47.4 million, and CD579.9 million in revenue, up from CD288.3 million. Buy Trinidad Energy Services Income Trust up to USD14.
Wellco Energy Services Trust (WLL.UN, WLLUF) expanded its operations into the Fort McMurray, Alberta, area during the fourth quarter of 2006 and the first quarter of 2007, its first foray into the engine of Canadian economic growth. Wellco generated record revenues in 2006 of CD110.7 million, an increase of 31 percent from 2005. Net earnings for the 12 months ended Dec. 31, 2006, were CD8.6 million (49 cents Canadian per unit) diluted, a decrease of 40 percent due to an impairment of goodwill writedown. Net earnings before the writedown were CD17.2 million (98 cents Canadian per unit).
Operational success was driven by four acquisitions completed during the year. For fiscal 2006, CD77.1 million, or 70 percent of Wellco’s total revenue, was derived from drilling services, compared to CD63.1 million, or 75 percent, for 2005. The production services segment contributed CD33.6 million in revenue, or 30 percent, of total revenue for fiscal 2006, up from CD21.3 million and 25 percent in 2005. Wellco Energy Services Trust is a hold.
Business Trusts
Arctic Glacier Income Fund (AG.UN, AGUNF) has gone Hollywood: Its operating unit has acquired Union Ice LP, the largest producer of 300-pound block ice on the West Coast and the primary source for block ice, snow scenes, ice sculptures and other ice products for the television and movie industries. Union Ice is the second-largest ice company in California, with annual revenues of approximately USD10 million, and it operates two plants in the greater Los Angeles area. Arctic Glacier entered the California market in May 2006 with the acquisition of California Ice, the leading independent manufacturer and distributor of packaged ice in the state. Buy Arctic Glacier Income Fund up to USD11.
Cinram International Income Fund (CRW.UN, CRWFF) posted fourth quarter earnings of CD161.8 million, an increase of 32 percent from CD122.1 million in 2005. Fourth quarter DVD revenue was up 3 percent to CD351.5 million from CD339.8 million in 2005 based on strong movie titles from its major customers. The proportion of revenue from DVDs increased to 57 percent from 52 percent in 2005 because of the erosion in fourth quarter compact disc sales. For the year ended Dec. 31, 2006, DVD revenue was down 6 percent to CD1 billion from CD1.1 billion in 2005. High customer concentration made Cinram susceptible to the bad decisions of just a few studio executives, and it hurt in 2006. Earnings declined to CD377.2 million from CD390.9 million. Revenue for the year of CD1.9 billion was down from CD2.1 billion in 2005. Hold Cinram International Income Fund.
Clearwater Seafoods Income Fund (CLR.UN, CWFOF) boosted sales in its more-profitable species, benefiting from particularly strong conditions for scallops, but foreign exchange activity sucked CD19 from sales and margins. Gross profit improved 20 percent to CD86.7 from CD72.2 million in 2005. Fourth quarter 2006 sales and gross profit were CD84.1 million and CD19.6 million, respectively, up from CD84.2 million and CD18.7 million in 2005. Net earnings for 2006 were CD1.5 million versus CD19.9 million in 2005.
Excluding the impact of CD23 million of noncash foreign exchange losses in 2006 and CD3.6 million of noncash gains in 2005, net earnings improved from CD16.3 million to CD24.5 million. Distributable cash for 2006 increased to CD42.4 million, up 56 percent from 2005. Clearwater reinstated distributions at a rate of 60 cents Canadian per unit per year and paid out CD15.8 million during 2006. Clearwater Seafoods Income Fund is a sell.
Davis & Henderson Income Fund (DHF.UN, DHIFF) boosted its monthly distribution 3.1 percent to 13.2 cents Canadian a share, beginning with the March payment. The company reported that fourth quarter net income fell to 37.5 cents Canadian a share from 39.5 cents on higher amortization expenses related to an acquisition. Davis & Henderson Income Fund is a buy up to USD14.
GMP Capital Trust (GMP.UN, GMCPF) reported net income of CD30.6 million (48 cents Canadian per unit) for the three months ended Dec. 31, 2006, up from CD13.5 million (23 cents Canadian per unit) in the two months ended Dec. 31, 2005. Expenses more than doubled to CD68.9 million in the quarter because of higher compensation and benefits costs.
GMP changed its fiscal year-end to December 31 from October 31 when it converted into an income trust in late 2005. Net income was CD120 million for 2006 on a 40 percent rise in revenue to CD357.3 million. GMP is looking to expand into other investment banking sectors to diversify away from mining and energy, which accounted for just less than 60 percent of investment banking revenue in the fourth quarter. For the full year, mining and oil and gas represented 77 percent of investment banking revenue. Hold GMP Capital Trust.
Home Equity Income Trust (HEQ.UN), which pays cash distributions earned from a portfolio of reverse mortgages originated by Canadian Home Income Plan (CHIP), reported that its mortgage portfolio grew by 15 percent to CD611.9 million during 2006, while loan originations grew by 18 percent to a record CD104.6 million. Net income increased 47 percent to CD7.3 million. Origination and administrative costs were within the trust’s stated target ranges.
Net income per unit increased 36 percent to 54 cents Canadian. Distributable cash per unit was CD1.19, an increase of 7 percent over 2005. The payout ratio stood at 89.8 percent as of the end of 2006. Home Equity recently signed origination referral agreements with Dundee Wealth Management and CIBC. Hold Home Equity Income Trust.
Oceanex Income Fund (OAX.UN, OCNXF) reported operating income of CD2.7 million for the fourth quarter of 2006, after a noncash loss of CD0.8 million on disposal of the Cicero, compared to CD2.4 million for the same period last year. Net income for the quarter was CD2.6 million (30 cents Canadian per unit) up from CD2.5 million (29 cents Canadian per unit). For 2006, operating income was CD8.3 million, down slightly from CD8.4 million in 2005. Net income was CD8.8 million (CD1.01 per unit), down from CD9.1 million (CD1.04 per unit) in 2005.
Volume for the quarter was 21,781 TEUs (twenty-foot equivalent unit)–324 TEUs, or 1.5 percent, more than the same period last year despite two fewer sailings. Revenue was up 1.3 percent to CD32 million. Operating expenses for the quarter were CD24.6 million, down 3.5 percent from the comparable 2005 period. Revenue for the year was CD124.3 million, an increase of CD5.8 million, or 4.9 percent, from 2005.
Operating expenses for 2006 were CD99.2 million, up 2.4 percent from 2005. Net income was CD8.8 million, down from CD9.1 million in 2005. Cash flow from operations was CD8.6 million, down from CD15.1 million in 2005, chiefly because of changes in noncash working capital items and the payment in 2006 of 2005 dry dock accruals. Oceanex Income Fund is a buy up to USD13.
TransForce Income Fund (TIF.UN, TIFUF) reported a 9 percent increase in fourth quarter revenue to CD456.8 million from CD418.8 million and a 12 percent boost in operating income to CD65.8 million from CD59 million. Cash flow from operating activities was CD55.9 million in the fourth quarter, compared with CD56.5 million in the same quarter of 2005. TransForce generated CD34.7 million in distributable cash, up 8 percent from a year ago.
TransForce increased its regular monthly distribution from CD0.1275 per unit to CD0.1325 per unit, effective with the distribution payable on April 13, 2007, to unitholders of record on March 30, 2007. The annual distribution rate is now CD1.59 per unit. For the year ended Dec. 31, 2006, TransForce increased revenues to CD1.8 billion, up 21 percent from CD1.5 billion in 2005. That set a company record, as did its CD241.7 million in operating income, up 24 percent from 2005. Cash flow from operating activities for the full fiscal year increased 20 percent to CD208.2 million compared with CD174.2 million in 2005. TransForce increased regular distributable cash for the year by 21 percent to CD150.3 million from CD124.6 million in 2005. The payout ratio, based on regular distributions, was 81.9 percent in 2006, up from 78.8 percent. Hold TransForce Income Fund.
Tree Island Wire Income Fund (TIL.UN, TWIRF) reported a loss of more than CD1 million for the fourth quarter of 2006 after turning a CD1.5 million profit in the year-ago period and cutting its distribution 33 percent. A slumping US housing market and increased foreign competition cut into revenue, forcing the cut to 8.3 cents Canadian per unit per month, or CD1 on an annual basis. Revenue for the fourth quarter fell to CD50.4 million from CD70.9 million in the 2005 period. Tree Island Wire Income Fund is a hold.
Real Estate Trusts
H&R REIT (HR.UN, HRREF) reported a fourth quarter net profit of CD20.6 million (18 cents Canadian per unit), down from CD23.5 million (23 cents Canadian per unit) for same 2005 period. H&R came to an agreement in February with EnCana to develop the Canadian energy giant’s office project. Rentals from income properties rose 21 percent to CD150.6 million because of the trust’s ongoing acquisition program.
In February, H&R paid CD70 million for the land of EnCana’s future headquarters in downtown Calgary, Alberta, that it will also develop. The 59-story building, scheduled for completion in the fall of 2011, is budgeted at CD1.1 billion and will be the tallest Canadian office building west of Toronto. H&R REIT is a buy up to USD22.
Legacy Hotels REIT (LGY.UN, LEGYF) is studying the possibility of putting itself up for sale. Legacy, which owns a portfolio of 25 hotels operated under the Fairmont and Delta brands, said its board has formed a special committee of five independent trustees to advise the board as a whole. Fairmont Hotels & Resorts, Legacy’s largest unitholder and the operator of all its hotels, is supportive of the process. Fairmont was taken private last year by Kingdom Hotels Int’l and Colony Capital in a deal valued at about CD4.5 billion. Kingdom Hotels, owned by Prince Alwaleed of Saudi Arabia, is also a partner in a group that’s planning to buy Four Seasons Hotels and take it private.
Legacy hasn’t set a deadline for completing the review, and it may decide to stick with the current business plan. Legacy recently reported its first annual profit since 2002. Legacy Hotels REIT is a hold.
Primaris Retail REIT (PMZ.UN, PMZFF) produced a 24.8 percent increase in net operating income for the fourth quarter of 2006 from the comparable 2005 period. FFO for the three months ended Dec. 31, 2006, was CD19.5 million, up from CD17.3 million for the fourth quarter of 2005. FFO for 2006 rose to CD71 million (CD1.37 per unit) from CD54.5 million (CD1.36 per unit) in 2005.
The distribution payout ratio for 2006 ticked up to 83.4 percent from 81.5 percent. Primaris made several acquisitions during 2006 that contributed to the solid results, and it’s poised to build on the year’s gains. Primaris Retail REIT is a buy up to USD17.