SmartCentres REIT is Canada’s largest developer and operator of unenclosed shopping centers. It engages in the acquisition, development, leasing, management and construction of properties. SmartCentres’ growing platform includes value-oriented shopping centers and destination outlets. The REIT currently has 3,100 tenants and more than 34 million square feet of leasable space available across 150 locations across Canada. These shopping centers are at prime locations within or near most of Canada’s fastest growing communities and experience high traffic and visibility. More than 100 of the centers are Walmart anchored shopping centers.
SmartCentres has long enjoyed a reputation for consistent performance, making it one of Canada’s premier real estate investment trusts. Over the years, SmartCentres has developed a strong focus on retail development and operation. Its expertise has grown to include a variety of urban, mixed-use, residential and industrial developments, in its portfolio.Investment Data
- Opportunity Score: 60
- Ticker: TSE:SRU.UN
- Sector: Real Estate
- Industry: REIT - Retail
- Market Cap: 3.06B
- P/E: 12.18
- Dividend Yield: 8.76%
- Dividend Payout Ratio: 106.34%
- Chowder Score: Members Only
- Dividend Growth: Members Only
Revenue Growth & Market Exposure
SmartCentres REIT has a strong and diversified portfolio worth $9.7 billion spanning 34.4 million square feet. Total assets have registered a growth of ~31% CAGR since 2002. Its portfolio comprises of 157 properties across Canada with 98% average occupancy and an average age of 15 years. These properties either comprise of grocery or pharmacy stores. SmartCentres’ property portfolio is marked by a stable retail income, long lease terms and high-quality tenant base comprising of leading retail names like Walmart, Canadian Tire Corporation, Marshalls, Loblaw, Sobeys, Lowe’s, etc. Top six of SmartCentres’ tenants contribute to more than 40% of its annual rentals. Walmart, itself has an average remaining lease term of 6.1 years with multiple renewal options of up to 80 years. Average remaining lease term excluding Walmart is 4.5 years.
The REIT currently has 256 development projects comprising of apartment, office, seniors’ residence, self-storage facility, hotel, condominium projects. Out of these, 34 projects are underway while 71 are active currently. SmartCentres is projecting $3-$3.6 billion in value creation from these development projects in the future.
SmartCentres continues entering into new partnerships and JVs for future development opportunities. It is expected to announce two new seniors’ projects with Revera in the Greater Toronto Area, five SmartShop JV projects, more than four apartments and condos projects by February 2020. SmartCentres REIT is best positioned for intensification with strong tenant relationships, flexible structures, and easy access. The REIT has identified 94 properties with intensification opportunities. It has developed 60 million square feet of area since 1989. SmartCentres’ existing portfolio, worth $9.7 billion, and $12 billion in planned intensification projects should fuel future growth.
This Canadian Aristocrat REIT has a strong track record of growing annual shareholders return. The REIT has returned close to 15% to its shareholders since its IPO. Monthly payments and an average 5.6% dividend yield make SmartCentres one of the most attractive dividend stocks on the market. The REIT has successfully grown its payouts at the rate of 3% CAGR in the last three years, while its FFO growth has registered 7.2% CAGR during the same time. SmartCentres is a Dividend Aristocrat and it last increased its dividend by 2.9%.
SmartCentres has a conservative capital structure and stable cash flows. It has announced annual dividend increases in each of the years beginning 2014. Its payout ratio stands near 80% and all of its dividends are fully funded from operating cash flow. Over the years, SmartCentres has successfully registered a growth in both rental revenues (6.8% CAGR since 2014) and FFO per unit (4% CAGR since 2014).
The REIT is smartly diversifying into city centers and multi-use properties as the retail segment continues to face the perils of digital shopping. More than 50% (134 properties) of the current development projects comprise of rental apartments and condos, followed by self-storage units (~18%), senior living (~18%), and offices and hotels (~5%). A large base of assets, strategic relationship with dependable tenants and long-term leases grants enough cash flow visibility. An income producing portfolio with industry leading occupancy and an exceptional pipeline of mixed-use growth initiatives should aid growth and support dividend hikes in the future.
Canada is an attractive and highly competitive real estate market for developers given its booming economic and retail environment. SmartCentres REIT competes with other investors, managers, and owners of properties. RioCan, Plaza Retail REIT, CT REIT, Slate Retail REIT, Choice Properties REIT are few of the leading REITs in the retail space in Canada. Given SmartCentres intense development projects, it is favorably placed to capitalize on urban mixed-use development and multi-residential rental opportunities.
|TSE:AP.UN||AP.UN||Allied Properties REIT||Real Estate||REIT - Office||0.68||41.54||5.11||6.64||6.64||6.25||0.0397||0.2640||12||1.65||0.0615||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||3.97|
|TSE:AX.UN||AX.UN||Artis REIT||Real Estate||REIT - Diversified||0.71||7.52||1.02||0.00||0.00||-0.25||0.0718||1.0000||12||0.54||0.0718||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||7.18|
|TSE:BEI.UN||BEI.UN||Boardwalk REIT||Real Estate||REIT - Residential||0.47||30.50||1.42||0.00||0.00||-0.14||0.0328||1.0000||12||1.00||0.0000||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||3.28|
|TSE:CAR.UN||CAR.UN||Canadian Apartment Properties REIT||Real Estate||REIT - Residential||0.64||48.25||8.23||7.33||7.33||6.58||0.0286||0.2097||12||1.38||0.0484||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||2.86|
|TSE:CHP.UN||CHP.UN||Choice Properties REIT||Real Estate||REIT - Retail||0.67||13.03||4.05||13.87||13.87||0.94||0.0568||0.7872||12||0.74||0.1010||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||5.68|
|TSE:CRR.UN||CRR.UN||Crombie REIT||Real Estate||REIT - Diversified||0.65||13.15||1.23||19.47||19.47||0.68||0.0677||1.3089||12||0.89||0.0675||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||6.77|
|TSE:CRT.UN||CRT.UN||CT REIT||Real Estate||REIT - Retail||0.35||13.89||1.44||35.29||35.29||0.39||0.0567||2.0191||12||0.79||0.0888||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||5.67|
|TSE:CSH.UN||CSH.UN||Chartwell Retirement Residences||Real Estate||REIT - Healthcare Facilities||0.46||9.30||2.00||0.00||0.00||-0.01||0.0658||1.0000||12||0.61||0.0359||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||6.58|
|TSE:CUF.UN||CUF.UN||Cominar REIT||Real Estate||REIT - Diversified||0.53||8.20||1.50||3.23||3.23||2.54||0.0878||0.2835||12||0.72||0.0000||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||8.78|
|TSE:D.UN||D.UN||Dream Office REIT||Real Estate||REIT - Office||0.72||20.50||1.14||7.51||7.51||2.73||0.0488||0.3663||12||1.00||0.0000||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.88|
|TSE:DIR.UN||DIR.UN||Dream Industrial||Real Estate||REIT - Industrial||0.73||10.82||1.65||6.76||6.76||1.60||0.0647||0.4375||12||0.70||0.0647||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||6.47|
|TSE:GRT.UN||GRT.UN||Granite REIT||Real Estate||REIT - Industrial||0.51||70.84||3.80||9.34||9.34||7.58||0.0410||0.3831||12||2.90||0.0941||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||4.10|
|TSE:HR.UN||HR.UN||H&R REIT||Real Estate||REIT - Diversified||0.70||10.13||2.90||0.00||0.00||-2.36||0.0687||1.0000||12||0.70||0.0645||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||6.87|
|TSE:IIP.UN||IIP.UN||InterRent REIT||Real Estate||REIT - Residential||0.57||14.41||1.98||4.73||4.73||3.05||0.0215||0.1016||12||0.31||0.0941||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||2.15|
|TSE:KMP.UN||KMP.UN||Killam Apartment REIT||Real Estate||REIT - Residential||0.68||17.40||1.70||6.15||6.15||2.83||0.0391||0.2403||12||0.68||0.0520||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||3.91|
|TSE:NVU.UN||NVU.UN||Northview Apartment REIT||Real Estate||REIT - Residential||0.53||34.95||2.35||9.13||9.13||3.83||0.0466||0.4255||12||1.63||0.0466||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.66|
|TSE:NWH.UN||NWH.UN||Northwest Healthcare Properties REIT||Real Estate||REIT - Healthcare Facilities||0.74||11.05||1.94||11.20||11.20||0.99||0.0724||0.8081||12||0.80||0.0724||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||7.24|
|TSE:REI.UN||REI.UN||RioCan||Real Estate||REIT - Retail||0.55||15.51||4.93||7.01||7.01||2.21||0.0928||0.6516||12||1.44||0.0971||12||12||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||9.28|
|TSE:SMU.UN||SMU.UN||Summit Industrial Income REIT||Real Estate||REIT - Industrial||0.64||11.43||1.57||8.45||8.45||1.35||0.0472||0.4000||12||0.54||0.0561||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||4.72|
|TSE:SRU.UN||SRU.UN||SmartCentres REIT||Real Estate||REIT - Retail||0.60||21.13||3.06||12.18||12.18||1.74||0.0876||1.0634||12||1.85||0.1006||12||12||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||8.76|
SmartCentres stands a good chance to benefit from the growing opportunities to increase rental income and annual profit from condos and townhouses through intensification of its owned properties across Canada. A strong customer focus also contributes to SmartCentres’ continued traffic flows, high occupancy and growth. A compelling dividend yield, monthly distributions and a long dividend payment track record makes it a stable choice for investors.
As one of the few Canadian Aristocrat REIT, SmartCentres should at least help investors keep up with inflation with the 2% annual dividend growth it is providing.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.