RE:Measuring The Value of New RioCan ProjectsThe stock might appreciate to take that account when numbers come through, or when the company starts making concrete projections in terms of size and timing of AFFO per share growth To my understanding, Well is a 2022 story. A poster on Seeking Alpha had stated it is about 200 milion over the original budget, not sure if that is true, haven't dug into it yet, but there is in the short term a drag on their results when you invest into future growth, taking on debt and also the construction risk. At less than 2 percent residential, I don't think RioCan has the track record for these developments yet although they partner with some other REITs that do have it. This is surface analysis on my part, but I'm betting the short term play right now is how REITs deal with the pandemic and then recovery to mean and then after that it will be looking at which ones don't have future growth built in.
hroark7 wrote: It's amazing what you learn when you do some digging. To get an idea of what things will look like upon recovery, I'm reading an old pre-pandemic earnings report, the Q4 2019 report to be exact, and according to this, the average net rent per occupied square foot is $19.75.
It then goes on to say, "Average net rent at the Trust's active urban intensification projects is $34.79 per square foot."
So you know all those developments that CADCDN is jumping up and down about here, you're probably wondering why he's so excited. Well, that's why. If the current property portfolio is getting $19.75 and their new projects are getting $34.70. That is over 76% higher than the current portfolio! And keep in mind that the $19.75 number already includes some new properties already so the the 76% number is understated.
Let's take a look at The Well. RioCan's got 500,000 sq ft being created here that's contributing $0 to earnings right now, and is a development expensive. Once it fully opens, take that 500,000 sq ft and multiply by $34.70 (this number of course be higher in the future due to increasing rents over time) and see what you get in net new earnings.
Shopper's World is 4 million square feet. Multiply that by $34.70. Remember, this is not gross, this is NET. A fully complete Shopper's World will add $138 million per year in today's dollars to RioCan's earnings once complete. That's almost as much as the dividend cut of $152 million per year.
Shopper's World is 781,000 sq ft. So multiply that by $19.75 = $15.4 million in net earnings.
When Shopper's World goes to 4 million sq ft, multiply that by $34.70 = $138 million in net earnings.
Combine that with all the other big projects planned and it's clear to see why RioCan may not want to buy back stock. Why earn capital gains of 33% to book value or earn a 6.7% dividend yield if you can invest in development and redevelop old square footage for a 76+% return on investment, and create new square footage on top of that at $34.70 per square foot NET? At this point development is literally printing money.
In any case, you can go back to the Q4 2019 report to check my numbers, but it's all there in black and white. All you have to do is connect the dots.