SmartCentres REIT is one of Canada’s largest fully integrated REITs. It engages in the acquisition, development, leasing, management and construction of real estate properties. The REIT currently has 3,400 tenants and 33.8 million square feet of leasable space available across Canada.
The REIT 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. It owns and manages interests in shopping centres, residential rental buildings, retirement homes, office buildings and self-storage facilities.
These properties are at prime locations within or near most of Canada’s fastest growing communities and experience high traffic and visibility. More than 70% of its portfolio are Walmart anchored shopping centers.
- Opportunity Score: 56
- Ticker: TSE:SRU.UN
- Sector: Real Estate
- Industry: REIT - Retail
- Market Cap: 4.37B
- P/E: 73.35
- Dividend Yield: 6.13%
- Payout Ratio (TTM): 370.80%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 1/10
- Dividend Income Fit: 6/10
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Revenue Growth & Market Exposure
SmartCentres REIT has a strong and diversified portfolio of 167 properties across Canada ranging from shopping to city centres, worth $10.7 billion spanning 34.1 million square feet. Its total assets have registered a growth of ~29% CAGR since 2002. The REIT’s portfolio sports a 97.3% average occupancy and an average age of 15 years.
SmartCentres’ property portfolio is marked by a stable retail income, long lease terms and high-quality tenant base consisting of leading retail names like Walmart, Canadian Tire, Home Depot, Costco, Rona and Loblaws, Dollar Tree, Metro, etc. Its average remaining lease term stood at 4.6 years at the end of December 2020. More than 50% of SmartCentres’ rent is derived from strong, creditworthy and essential service providers. Walmart, itself accounts for more than 25% of SmartCentres’ revenue.
SmartCentres continues entering into new partnerships and JVs for future development opportunities. SmartCentres REIT is best positioned for intensification with strong tenant relationships, flexible structures, and easy access.
The current COVID-19 pandemic has resulted in the closure of few tenants. But given its focus on value-oriented as well as large, well-capitalized national retailers and strong merchants, SmartCentres’ occupancy rates remained practically unaffected. Walmart remains one of the best performing consumer defensive stocks during the pandemic. The REIT’s 284 development projects should support value creation and fund recurring income initiatives in the future. SmartCentres is projecting $3.2B to $3.6B potential value creation from these intensification projects.
SmartCentres REIT has a strong track record of growing annual shareholders return. The REIT has returned over 12% to its shareholders since its IPO. Monthly payments and an average 6.8% 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 has registered a growth of over 7% CAGR during the same time. SmartCentres is a Canadian Dividend Aristocrat and its current distribution represents $1.85 per unit on an annualized basis. It is also authorized to repurchase more than 12 million of its units till March 2022.
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 87% 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 and FFO per unit. A large base of assets, strategic relationship with dependable tenants and long-term leases grants enough cash flow visibility.
The REIT is smartly diversifying into city centers and multi-use properties as the retail segment continues to face the perils of digital shopping. SmartCentres is developing mixed-use communities on its existing retail properties and has identified 284 mixed-use development initiatives to be developed on 95 of its existing properties in this regard.
This initiative is expected to add ~32.5 million square feet of mixed-use rental space, condominium and townhome developments to its existing portfolio of retail space. Moreover, Walmart is expected to continue as the dominant anchor tenant in SmartCentres’ retail portfolio and should generate high traffic levels over the long-term.
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||0.55||45.57||5.80||17.69||17.69||2.58||0.0373||0.6460||12||1.70||0.0599||1||4||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||3.73|
|TSE:AX.UN||AX.UN||Artis REIT||Real Estate||REIT - Diversified||0.47||11.77||1.53||8.63||8.63||1.36||0.0510||0.4190||12||0.60||0.0510||1||5||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||5.10|
|TSE:BEI.UN||BEI.UN||Boardwalk REIT||Real Estate||REIT - Residential||0.35||44.33||2.06||0.00||0.00||-4.86||0.0226||0.0000||12||1.00||0.0000||1||2||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||2.26|
|TSE:CAR.UN||CAR.UN||Canadian Apartment Properties REIT||Real Estate||REIT - Residential||0.43||61.66||10.64||11.18||11.18||5.51||0.0224||0.2500||12||1.38||0.0472||1||2||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||2.24|
|TSE:CHP.UN||CHP.UN||Choice Properties REIT||Real Estate||REIT - Retail||0.45||14.61||4.78||44.00||44.00||0.33||0.0507||1.0250||12||0.74||0.0552||1||5||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||5.07|
|TSE:CRR.UN||CRR.UN||Crombie REIT||Real Estate||REIT - Diversified||0.24||18.36||1.78||0.00||0.00||-0.40||0.0485||0.0000||12||0.89||0.0483||1||5||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.85|
|TSE:CRT.UN||CRT.UN||CT REIT||Real Estate||REIT - Retail||0.28||16.98||1.79||56.60||56.60||0.30||0.0494||0.8540||12||0.84||0.0846||1||5||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||4.94|
|TSE:CSH.UN||CSH.UN||Chartwell Retirement Residences||Real Estate||REIT - Healthcare Facilities||0.32||13.21||2.86||0.00||0.00||-0.01||0.0463||0.0000||12||0.61||0.0390||1||5||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||4.63|
|TSE:CUF.UN||CUF.UN||Cominar REIT||Real Estate||REIT - Diversified||0.39||11.22||2.05||0.00||0.00||-1.77||0.0321||0.0000||12||0.36||0.0000||1||3||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||3.21|
|TSE:D.UN||D.UN||Dream Office REIT||Real Estate||REIT - Office||0.58||22.22||1.13||10.92||10.92||2.03||0.0450||0.4270||12||1.00||0.0000||1||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.50|
|TSE:FCR.UN||FCR.UN||First Capital REIT||Real Estate||REIT - Retail||0.43||17.99||3.95||40.99||40.99||0.44||0.0240||1.7790||12||0.43||0.0240||1||2||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||2.40|
|TSE:GRT.UN||GRT.UN||Granite REIT||Real Estate||REIT - Industrial||0.44||86.89||5.36||8.85||8.85||9.82||0.0345||0.2980||12||3.00||0.0754||1||3||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||3.45|
|TSE:HR.UN||HR.UN||H&R REIT||Real Estate||REIT - Diversified||0.48||16.56||4.75||8.56||8.56||1.93||0.0417||0.3860||12||0.69||0.0000||1||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.17|
|TSE:IIP.UN||IIP.UN||InterRent REIT||Real Estate||REIT - Residential||0.52||17.87||2.49||11.57||11.57||1.54||0.0182||0.1970||12||0.33||0.1059||1||2||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||1.82|
|TSE:KMP.UN||KMP.UN||Killam Apartment REIT||Real Estate||REIT - Residential||0.49||20.85||2.29||16.27||16.27||1.28||0.0326||0.4720||12||0.68||0.0522||1||3||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||3.26|
|TSE:NWH.UN||NWH.UN||Northwest Healthcare Properties REIT||Real Estate||REIT - Healthcare Facilities||0.53||12.96||2.79||10.40||10.40||1.25||0.0618||0.5660||12||0.80||0.0617||1||6||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||6.18|
|TSE:REI.UN||REI.UN||RioCan||Real Estate||REIT - Retail||0.53||22.47||7.13||0.00||0.00||-0.19||0.0427||0.0000||12||0.96||0.0469||1||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1||4.27|
|TSE:SMU.UN||SMU.UN||Summit Industrial Income REIT||Real Estate||REIT - Industrial||0.34||19.01||3.20||10.21||10.21||1.86||0.0297||0.2810||12||0.56||0.0000||1||3||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||2.97|
|TSE:SRU.UN||SRU.UN||SmartCentres REIT||Real Estate||REIT - Retail||0.56||30.21||4.37||73.35||73.35||0.41||0.0613||3.7080||12||1.85||0.0792||1||6||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1||6.13|
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, a robust development pipeline and Walmart-anchored 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 an attractive choice for investors.