RioCan's Overdistribution Has Analysts Concerned

| About: Riocan Real (RIOCF)

Desjardins Securities analyst Jeff Roberts is concerned that the country’s largest real estate investment trust is paying out more cash than it is taking in. Mr. Roberts says distributions at retail giant RioCan REIT (OTCPK:RIOCF) are unlikely to rise soon given the current economic environment.

The said analyst in a note to clients:

We remain concerned with RioCan’s potential performance during the current difficult retail and credit environment and the overdistribution of its adjusted funds from operations.

Mr. Roberts reduced his estimates for adjusted funds from operations (AFFO) in 2009 to C$1.25 per unit and for 2010 to C$1.28 per unit. He noted the REIT is now distributing C$1.38 per unit.

“RioCan will be overdistributing AFFO for the forseeable future which should put off future distribution increases indefinitely,” the analyst said, based on the C$1.38 per unit rate.

Neil Downey, an analyst with RBC also cut his estimates for AFFO by C$.05 per unit. He put AFFO at C$1.31 for this year and C$1.33 for 2010.

“We continue to review RioCan’s units as a core holding for income and long-term value appreciation,” Mr. Downey said in a note to clients.