Leaside Stock Index

First the bad news: First two stocks did badly

chart-for-Leaside-StockRioCan (REI-UN.TO) and First Capital Realty (FCR.TO) are two of Canada’s largest real estate owners. Together they own 362,000 square feet of Leaside retail and office space including Leaside Village, 1670 Bayview, 180 Laird, RioCan Leaside, Sunnybrook Plaza and 1860 Bayview, home of a future Whole Foods store. As you can see they’ve got their hands in a lot of pies.

If you shop at any of these locations you’re directly contributing to their financial success. Following my “everyday investing” mantra, you might want to get some of that back by owning one of their stocks. Should you own both? You could. However, for the purposes of this article I’m going to tell you which of the two I think is the better stock to own. In the long-term they both make good investments.

First, let me tell you the bad news. Both stocks performed poorly in 2013 (RioCan and First Capital Realty’s total returns were -5.1 percent and 1.4 percent  respectively) when compared with the S&P/TSX Capped Composite Index Fund (XIC.TO), which delivered a total return of 12.5 percent. So far in 2014 the results haven’t been much better but it’s still very early.

The good news is that they’re both great stocks to own if you’re an income investor. In 2013, RioCan paid out $1.41 in distributions to its shareholders representing a current yield of 5.6 percent . First Capital Realty paid out $0.84 for a yield of 4.9 percent . Even if their stock prices don’t move in 2014 you’ll still end up with a good 5 percent  return. In essence you’re being paid to wait for capital appreciation.

What distinguishes the two companies, who compete in many of the same markets, is that RioCan has 9 million square feet of retail space in the U.S. to go with its 44 million square feet in Canada. In 2009, RioCan CEO Edward Sonshine moved to take advantage of commercial real estate bargains in the U.S. It was a smart move that’s paid off.

First Capital, on the other hand, has 24.3 million square feet of gross leasable area, all of it here in Canada.

Financially, these two companies have very similar balance sheets in terms of debt to total assets, etc. They’re both rock solid.

For me, what makes RioCan the better stock is its Jan. 29 announcement made in conjunction with joint venture partners Allied Properties REIT (AP-UN.TO) and Diamond Corp. that will see the development of seven and a half acres at Front and Spadina that used to belong to the Globe and Mail into a mixed-use neighbourhood (dubbed The Well) of retail, office and residential properties.

RioCan owns 40 percent of the joint venture, Allied another 40 percent and Diamond the remaining 20 percent.

Toronto Councillor Adam Vaughan says of The Well, “It’s a project that breaks the mold of your typical downtown development project… It really is proactive, community-based planning at its best.”

This kind of project doesn’t happen without visionary management. For this reason I believe RioCan is the better stock — but just.


All 20 stocks in the Leaside Stock Index had a terrible January, none worse than Best Buy, which saw its stock drop 41 percent on poor holiday revenue. Leaside’s already been affected by this as the Future Shop in RioCan’s Leaside Centre shut permanently on Jan. 24. Look for the LSI to bounce back nicely in February and March.