Smart REIT (TSX:SRU.UN) has become one of Canada’s largest retail REITs by hitching its wagon to a powerful main tenant -- Walmart. The world’s largest retailer is the anchor (or shadow anchor) store for 108 of Smart’s 141 current locations, contributing about 30% of Smart’s total revenue. Smart’s total portfolio consists of 31.3 million square feet.
This dependence has been a good thing. Despite many tenants competing directly with the world’s largest retailer, they’re still attracted to the foot traffic Wal-Mart generates. Smart also has a very new portfolio, with the its average building only being about 10 years old. These two factors combine to keep the company’s occupancy rate above 98%, which is far better than any of its competitors.
The company is also expanding past retail. It’s currently building a multi-use facility in Vaughan, Ontario, and has announced plans to build two residential towers in the Montreal area. It also spent $62 million to acquire a multi-use facility in Pointe Claire, Quebec.
Smart shares sold off in November on fears a Donald Trump presidency would lead to higher interest rates. This has created an opportunity for investors to buy shares that pay a 5.3% dividend.
The dividend is secure, too. The payout ratio is approximately 80% of adjusted funds from operations, which is about average for the sector. Smart has increased its distribution each of the last three years.
While the death of the shopping mall continues to get a lot of attention in the United States, Canada’s largest retail REITs are doing much better.
