The hunger for real estate investment trusts may not end with retailers.
South of the U.S. border, a roster of American telco and media companies are experimenting to extract value.
About a week ago, CBS Corp. announced plans to spin its outdoor North American assets (billboards) into a REIT, and Cincinnati Bell Inc. just spun out its data centre division into a REIT.
Who in Canada has, or will likely have, similar assets? BCE Inc.
As analyst Adam Shine at National Bank Financial noted, BCE recently cut a $185-million cheque for a 30 per cent stake in Q9 Networks when a consortium acquired it for $1.1-billion in 2012, and its acquisition of Astral Media, should it be approved, will add outdoor media assets.
The fact that BCE has similar assets doesn't necessarily mean it will follow the Americans. In fact, at the time of the Astral acquisition announcement George Cope said he had no intention of selling off the outdoor assets because they were a solid business. Plus, BCE doesn't have the sole authority to spin out Q9's data centres.
Still: "Although we're not holding our breath for the telco, cable or media companies we cover to convert certain operations into REITs, as we're seeing and hearing some do in the United States, we think it's worth acknowledging, if not repeating, that some of their component parts are worth several multiples more than the values assigned to their core operations or overall platforms," Mr. Shine said.
And keep in mind that in Canada we've already seen data centres in a REIT. Allied Properties owns two of them in downtown Toronto.
At the very least, the trend is certainly something to keep watching, particularly in the U.S. where companies from all sectors have been looking at the REIT structure. Late last year, timber producers to prison groups opted for the structure as a way to dodge taxes. Who knows what kinds of REITs you could see next.
(Tim Kiladze is a Globe and Mail Capital Markets Reporter.)