Sell H&R REIT (TSX: HR-U, OTC: HRUFF) and buy RioCan REIT (TSX:REI-U, OTC: RIOCF).
November brought the long-awaited announcement that RioCan resolved its dispute with Target Corp., which was settled for $132 million. The settlement related to 18 disclaimed leases which were guaranteed by Target, the U.S. parent of the now defunct Target Canada. RioCan also indicated significant progress with the re-leasing of the space vacated by Target Canada as described in the Maple Leaf Memo of Nov. 26.
The high quality portfolio of RioCan now offers a yield of 5.5%, with the prospect of 3% to 5% dividend growth per year over the next few years. A full report on RioCan will be published in the December issue of the Canadian Edge.
In order not to increase our overall weight in real estate unit trusts and to make space for RioCan in the Dividend Champion portfolio, we decided to sell H&R REIT. RioCan has a slightly lower yield but a stronger balance sheet, a higher quality portfolio and in our view better growth prospects.
Chief Investment Strategist