North American commercial retail real estate companies have seen steadily improving results, through leasing and occupancy rates. They reported stronger third quarter 2010 results (including 9 month results), with dividend increases starting to be seen. In addition, debt levels have also decreased, while the stronger corporations and REITs have continued mall expansion (new developments) & acquisitions.
Calloway Real Estate Investment Trust
– Calloway REIT [tse:CWT.UN], one of the largest owners of big-box shopping malls in Canada announced its Q3 2010 portfolio occupancy rate increased to 99.2%, while 279,500 sq ft of expiring leases were renewed with an average rent increase of 8.4%. The REIT also acquired two shopping centers during the quarter and completed some developments. Funds from Operations totaled $43.4 million in the third quarter, an increase of $4.1 million or 10.5% from 2009. The year-over-year results were positively impacted mainly by completed acquisitions and developments generating additional rental income.
– Calloway’s property consists mainly of big-box shopping malls recognized by their use of the SmartCentre penguins and include:
• Westgate SmartCentre [Mississauga, Ontario]
• Vaughan SmartCentre [Vaughan, Ontario]
• Woodbridge SmartCentre [Woodbridge, Ontario]
• Markham Woodside SmartCentre [Markham, Ontario]
• Barrie South SmartCentre [Barrie, Ontario]
• Ottawa South SmartCentre [Ottawa, Ontario]
• Laval West SmartCentre [Laval, Quebec]
• New Westminister SmartCentre [New Westminister, British Columbia]
• Winnipeg Southwest SmartCentre [Winnipeg, Manitoba]
– Major tenants include Walmart, Chapters, Home Depot, Future Shop, Best Buy, Home Outfitters, Fortinos, Real Canadian Superstore, Bank of Montreal, TD Bank, Price Choppers, etc.
Riocan Real Estate Investment Trust
– Riocan REIT [tse:REI.UN], Canada’s largest real estate investment trust (REIT) by market value, and one of North America’s largest retail land owners, saw its Funds From Operations (FFO) increase by 28% in the first 9 months of 2010. For the third quarter, FFO increased 25% to $89.3 million compared to the third quarter from a year ago. The occupancy rate in Canada was approximately 97.0% which remained relatively from second quarter (June 30, 2010). The US occupancy rate increased to approximately 98.1% from 96.2% in the second quarter. Approximately 941,000 sq ft were renewed during the 3Q 2010 at an average rent increase of 9.3% per sq ft (including anchor tenants) and 12.6% (excluding fixed rent options). In the third quarter Riocan continued to its acquisitions with sixteen properties (6 in Canada and 10 in the US). Edward Sonshine, Q.C., President & CEO said ” We continue to capture interest savings on maturing debt and are seeing material organic growth within the portfolio.”
– Riocan is well known for their financial strength, portfolio stability, as well as conservative nature. Properties consist of big-box shopping malls, commercial and mixed residential properties across Canada and the United States. Riocan’s US partners also include property developers/owners Kimco Realty Corp (KIM) and Cedar Shopping Centers, Inc (CDR). Some of the company’s recognizable Canadian properties include:
• Empress Walk [Yonge St, North York]
• 1717 Avenue Road [Avenue Rd & Fairlawn Ave, Toronto] (Riocan/Tribute)
• Queen and Portland Lofts [Queen St West & Portland St, Toronto] (Riocan/Tribute)
• RioCan Yonge Eglinton Centre [Toronto, Ontario]
• RioCan Hall [John St & Richmond St, Toronto]
• RioCan Centre Vaughan [Vaughan, Ontario]
• Colossus Centre [Woodbridge, Ontario]
• Trinity Common [Brampton, Ontario]
• Riocan Centre Burloak [Oakville, Ontario]
• RioCan Durham Centre [Ajax, Ontario]
• Meadowlands Power Centre [Ancaster, Ontario]
• Niagara Square [Niagara Falls, Onatario]
• Chapman Mills Marketplace [Ottawa, Ontario]
• Kanata Centrum Shopping Centre [Kantana, Ontario]
• Riocan Kirland Centre [Kirkland, Quebec]
• Mega-Centre LeBourgneuf [Quebec City, Quebec]
• Quartiers 10/30 [Brossard, Quebec]
• Edmonton West Retail Centre, South Edmonton Common, [Edmonton, Alberta]
• Riocan Beacon Hill, RioCan Shawnessy [Calgary, Alberta]
• Grandview Corners [Surrey, British Columbia]
• Wheeler Park [Moncton, New Brunswick]
– Major tenants include large brand name retailers including Costco, Walmart, Loblaws, Sobey’s Home Depot, Lowes, Best Buy, Home Outfitters, Cineplex, Canadian Tire, Starbucks, Jean Coutu, TD Bank, Bank of Montreal, Royal Bank of Canada, Bank of Nova Scotia, Desjardins, etc.
Simon Property Group, Inc.
– Simon Property Group [SPG], the largest US mall owner recently announced strong Q3 2010 results with FFO increasing to $503.6 million from $473.1 million in the prior year period. Chairman and CEO David Simon said “I am very pleased with our quarterly results and with today’s significant dividend increase”. Simon raised its dividend 33% from $0.60 to $0.80. “Operating performance was strong as our US regional mall and Premium Outlet portfolio generated comparable property net operating income growth of 3.6% in the third quarter. Our tenants also experienced a strong 10.6% increase in sales in the quarter as compared to the third quarter of 2009.”
– Simon Property Group, known for their reputation as being one of most financially stable retail landlords, owns and operates regional malls including Premium Outlets and The Mills, and community/lifestyle centers in the US. They also have international properties across North America (US, Mexico), Europe (France, Italy and Poland) and Asia (Japan, South Korea).
– Major tenants include Nordstrom, Macy’s, JCPenney, Sears, Adidas, Coach, Lacoste, Burberry, Giorgio Armani, Nike, Prada, Saks Fifth Avenue Off 5th, Salvatore Ferragamo, Yves Saint Laurent Rive Gauche, Zegna, etc.
Kimco Realty Corp
– Kimco Realty Corp [KIM], one of North America’s largest operator and owner of neighborhood big-box shopping centers, raised its quarterly dividend 12.5% to $0.18 from $0.16 a share after reporting stronger third quarter earnings. Kimco reported a 2.2% increase in US same property net operating income (NOI) compared to the third quarter of 2009, and a slightly lower FFO of $110.5 million compared to Q3 2009 of $112.5 million. The company had a 92.7% occupancy in its entire portfolio, and 92.3% in the US portfolio. For the quarter, 637 new leases, renewals, and options were signed, totaling 1.6 million sq ft. Kimco also expanded by acquiring a shopping center in Jacksonville (Florida) for $35.6 million.
– Kimco owns interests in 948 shopping centers across the US, Puerto Rico, Canada, Mexico, and South America.
– Major tenants include, Walmart, Bed Bath & Beyond, Staples, Target, Barnes & Noble, Babies R Us, Macy’s Furniture, Marshalls, Office Depot, Modell’s, TGI Friday’s, etc.
– Macerich [MAC] is one of the largest regional mall operators & developers in the United States, and is also a close industry partner of Cadillac Fairview (one of Canada’s largest landlords owned by the Ontario Teacher’s Pension Plan). The company recently reported that 3rd quarter occupancy increased to 92.6%, up from 91.0% last year. The company signed 305,000 sq ft of leases with releasing spreads increasing 15.7% for the quarter. Arthur Coppola chairman and chief executive officer of Macerich stated “We had significant tenant sales gains and portfolio occupancy gains, positive same center NOI growth, and positive releasing spreads. We successfully completed a number of very attractive refinancings and continue to benefit from a very strong capital market.”
– Macerich, known to be one of the more innovative property developers has a recognizable portfolio of malls which include California’s The Village at Vintage Faire in Modesto, The Oaks in Thousand Oaks, and Santa Monica Place near LA. Other noteable malls include Scottsdale Fashion Square in Arizona, Tysons Corner Center in Northern Virginia, Queens Center in New York, etc.
– Major tenants include Nordstrom, Bloomingdale’s, Tiffany & Co, Louis Vuitton, Barneys New York, Arthur, Cartier, Bvlgari, Nike, CB2, Ted Baker, Betsey Johnson, Disney, Hugo Boss, Burberry, Apple Store, Sephora, Coach, Coldwater Creek, Bass Pro Shops, Forever21, Kohl’s, Republic of Couture, Ilori, Love Culture, Michael Brandon, Shuz, True Religon, etc.
REAL ESTATE INVESTMENT TRUST (REIT) INDEX RETURNS TO DATE
The Dow Jones Equity All REIT Total Return Index has risen approximately 19% this year as of yesterday’s close.
• iShares Dow Jones US Real Estate (ETF) [IYR] has risen 15% since the beginning of the year.
FTSE NAREIT US Equity REITs index has risen risen approximately 15% since the beginning of the year as of yesterday’s close (and was 24% one week ago).
• iShares FTSE NAREIT Real Est 50 Ind (ETF) [FTY] has risen 15% year to date as of yesterday’s close (24% one week ago).
The FTSE NAREIT Retail sector return was 25% as of yesterday’s close (and was 31% one week ago).
• iShares FTSE NAREIT Retail Capp (ETF) [RTL] was 24% (28% last week).
Note: Investors can invest in the indices/indexes by purchasing the corresponding ETF.
For example: the iShares ETF of the corresponding index.
NAREIT domestic returns:
Disclosure: I hold shares of Riocan REIT, Calloway REIT, and The Macerich Co.
Thanks and Happy Investing! –