December 10, 2018

Primaris Retail Real Estate Investment Trust (PMZ)

The Primaris Retail Real Estate Investment Trust (PMZ), is much like a smaller version of its main competitors RioCan REIT (REI) and Calloway REIT (CWT).  Although, with a market capitalization of almost $1.7 billion, most people would not call the Canadian landlord “small.”  The REIT has done a great job of buying up assets across several Canadian regions.  The trust currently has 44% of its holdings located in Ontario, 13% in Quebec, 1% in New Brunswick, 14% in British Columbia, 16% in Alberta, 9% in Saskatchewan, and 3% in Manitoba.  This diversity is ideal for Canadian REITs because each region of Canada depends on vastly different economic models, and industries to survive.  This can mean titanic shifts in real estate values in some markets, while stagnation in others.  By developing properties right across the country the REIT guarantees itself exposure to all of these markets, and that bodes well for stability.  Primaris REIT’s (PMZ) biggest tenants are Hudson’s Bay Company, Sears, Target, Shoppers Drug Mart, Forzani, Canadian Tire, Bell Canada, and Loblaws.  This tenant list shows a strong retail pull for the REIT’s major properties.  It is also appealing to investors who are looking to park their money in safe investments right now.

 

The most recent news from Primaris REIT (PMZ) is that it was solidifying its position in Canada’s most competitive real estate markets this week with a major acquisition.  The REIT purchased five retail properties from Ivanhoe Cambridge last week.  The portfolio of properties is located in the Montreal and Greater Toronto Area regions.  The two most notable assets to change hands were Oakville Place, and Burlington Mall.  The price tag on the five properties was a hefty $572 million.  Together, they added 2.5 million square feet of leasable space to Primaris.  The deal was done with an average capitalization rate of 6.35%.

 

Primaris REIT (PMZ) also offers investors an attractive dividend reinvestment plan (DRIP).  The basic premise behind this financial tool is that unitholders can choose to automatically have their cash distributions (dividends) used to buy more units of the REIT.  Investors that show this much confidence in Primaris will be entitled to a 3% discount off of the current market price.  This is a great way to avoid those pesky brokerage commissions that can eat into returns.  Only Canadian residents can take advantage of this DRIP offer.

 

Primaris REIT (PMZ) is a fine investment.  It is currently trading near $21-per unit and this is near its 52-week high.  It has been a very stable REIT, with a 52-week low of only $18.27.  Its annual dividend is $1.22, giving it a dividend yield of 5.9%.  While I think investors will do fine with Primaris, I think there are better REIT opportunities on the market, and if you’re looking for a retail-specific REIT, RioCan (REI) would likely be my first choice.