The shuttering of all Target stores and the electronics retail chain Future Shop shows that retailers in Canada face challenging times. Investors have noticed, and Canadian real estate investment trusts (REITs) specializing in quality grocery-store-anchored shopping malls have paid the price—though that also means some of these REITs are now on sale.

One example is Choice Properties Real Estate Investment Trust (TSX: CHP.UN), a spin-off of Loblaw Companies Limited that went public in July 2013. The REIT manages and develops stand-alone grocery properties and grocery-anchored shopping centers.

Booked For Years

Choice Properties has a lot of space that’s booked for years. It owns 475 properties totaling 40 million square feet across Canada. At the end of 2014, the portfolio was almost fully leased, with Loblaw, a prime Canadian food retailer, the largest tenant representing 91% of the annual base rent. The weighted-average lease term to maturity on the Loblaw leases was 12.7 years, and the first lease doesn’t run out until 2023.

Loblaw and its various high-profile banners, including Real Canadian Superstore, provide key anchor stores to attract tenants for the balance of the retail space. At the end of last year, 3.8 million square feet was leased to other tenants with an average maturity of 5.2 years.

Top Management

Choice’s chairman is Galen Weston, who is also the executive chairman of Loblaw and brings a wealth of retail management experience to the REIT.

The CEO is John Morrison, an experienced retail property expert who served as CEO of Primaris Real Estate Investment Trust, which H&R Real Estate Investment Trust acquired in 2013. Morrison is also a past trustee for the International Council of Shopping Centres and served on the executive committee as divisional vice president for Canada.

Choice and Loblaw have a long-term contractual arrangement in place that allows Choice a variety of important rights.

It includes the right of first offer on any property that Loblaw wants to sell, the right to acquire shopping space that Loblaw considers buying and the right to participate in future shopping-center developments that will involve Loblaw operations.

Although Choice’s public track record is relatively short, its performance has been steady, with the dividend per unit increasing 4% during the past 18 months.

Stable Growth

Choice’s goal is to provide unitholders with stable, growing monthly cash distributions and also to expand the number of stores through acquisitions and re-developing buildings already owned.

The long-term contracts are a double-edged sword. Although they provide stability, they limit profit growth. Some growth, however, should come from the $415 million Choice expects to invest over the next two to three years to develop up to 1.4 million square feet of additional leasing space at yields of 7% to 8%.

Strong Ownership

Loblaw and its parent company, George Weston Limited, jointly control about 88% of the publicly listed units in Choice, a vote of confidence in the enterprise, which has high credit ratings.

And the company can easily pay its debts. Choice’s debt to total assets amounted to a manageable 44% at the end of 2014.

Total Return

Choice trades at a discount to its Canadian peers using all the standard valuation measures including price to adjusted profits and price to net asset value. In fact, Choice trades at a discount to the market value of its properties.

The dividend yield for 2015 is estimated at 5.8%.

Given a payout ratio of 86%, the young REIT has plenty of leeway to sustain and to increase the monthly dividend.

With its high-quality tenant base, long lease terms and an attractive yield with cash flow to increase it, Choice is a top member of the Dividend Champions Portfolio and a Buy up to USD $10.