You have written about Plaza Retail REIT (PLZ-UN-T) previously as it is a reliable income stock. Their quarterly comments say everything is great, yet the distribution hasn’t changed in eight years. Also, the REIT exited the development business so there’s no growth there, and the founders are seniors so a succession plan would be comforting. The board needs some spark to generate investor interest. Comments?
Let me clarify a few things off the top.
First, Plaza is a step ahead of you on the succession issue. In January, co-founder Michael Zakuta, 65, was succeeded as president and chief executive officer by Jason Parravano, 37. Mr. Zakuta, who led Plaza for nearly 20 years, has stayed on as a trustee.
Second, Plaza hasn’t exited the development business altogether. Rather, it is prioritizing redevelopments and intensifications of existing properties over greenfield projects because of “elevated construction costs and retailers preferring established locations,” Tal Woolley, an analyst with CIBC Markets, said in a recent note.
Third, it’s true that Plaza hasn’t increased its distribution since the beginning of 2018. But it’s important to note that Plaza, unlike many REITs, didn’t cut its distribution during the pandemic. Given the REIT’s already generous distribution yield of about 7 per cent, the board likely feels there are better uses for its capital than shovelling even more cash to unitholders.
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As a Plaza investor myself, I share your frustration with the stagnant unit price, which has oscillated around the $4 level for the past several years. The units closed Friday at $4.03 on the Toronto Stock Exchange. Still, I’m planning to hold on given Plaza’s attractive yield and improving fundamentals.
In its third-quarter results released on Nov. 12, Fredericton-based Plaza said funds from operations (FFO) – a cash flow measure used in real estate – rose 8.6 per cent from a year earlier to $12.4-million, reflecting acquisitions, intensification projects and higher net operating income from existing properties. Committed occupancy – which includes leased space where tenants haven’t yet moved in – was a healthy 97.9 per cent, “underscoring the resilience and demand for our essential-needs retail assets,” Mr. Parravano said in the earnings release.
With about $1.1-billion in assets, Plaza is a relatively small REIT that owns interests in roughly 200 properties in Ontario, Quebec and Atlantic Canada. Its largely open-air shopping centres and small-box stores are leased primarily to national retailers such as Loblaw Cos. Ltd. and Shoppers Drug Mart (accounting for 25.8 per cent of base rent as of May, 2025), Dollarama Inc. (6.1 per cent), TJX Companies Inc., which operates Winners, Marshalls and HomeSense (4.4 per cent), Sobeys Inc. (3.7 per cent) and Canadian Tire Corp. Ltd. (3.7 per cent). Fast-food chains account for another 9 per cent.
Most of Plaza’s tenants are all well-established, creditworthy retailers that sell everyday products, insulating the REIT to some extent from macroeconomic swings. Plaza is also enjoying a tailwind from rising rents on lease renewals, with spreads well into the teens on a percentage basis, Plaza said.
Apparently, Plaza never got the memo that bricks-and-mortar stores are dying.
“Demand remains strong, especially from grocery, discount, and [fast-food] banners. With occupancy high and limited new development, these healthy [leasing] spreads should continue,” CIBC’s Mr. Woolley said.
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Plaza has also been busy recycling capital. So far in 2025, it has sold about 19 non-core properties, with proceeds used to pay down debt, acquire partners’ stakes in certain assets and fund intensification and redevelopment projects.
As for the distribution, I’m not holding my breath for a hike, but I’m also not concerned about a potential cut. The payout ratio based on FFO was 63.1 per cent for the three months ended Sept. 30, or 91 per cent using the more stringent adjusted funds from operations (AFFO).
Reflecting its small size, Plaza also has limited coverage by analysts, which helps to explain why the REIT isn’t more widely known. Of the five analysts who follow the REIT, there are three buy recommendations and two holds, with an average 12-month price target of $4.61, according to LSEG data.
Bottom line: Plaza isn’t the sort of security that is going to produce big capital gains. What it does offer is an above-average yield underpinned by a stable distribution, with the potential for modest capital growth over the long run. As always, do your own due diligence before investing in any security, and maintain a diversified portfolio to control your risk.
E-mail your questions to jheinzl@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.