RioCan Real Estate Investment Trust (TSX:REI.UN) has been on a downward trend for the past six months, and investors are wondering if the pullback is a good opportunity to buy.

Let’s take a look at the current situation to see if RioCan deserves to be in your portfolio right now.

Replacing Target

RioCan took a hit earlier this year when Target Canada decided to shut down its operations.

RioCan quickly found new tenants for seven of the locations and has new agreements in place or is at advanced stages of negotiations for 32 new leases at the vacated locations. The company is still marketing an additional 406,000 square feet of space.

The 32 new tenants cover 94% of the total rental revenue lost through Target’s departure. RioCan has received a $92 million payment from Target Canada’s parent company, which easily covers the $75 million RioCan is spending to redevelop the space being rented by the 32 new tenants.

In the long run, it looks like Target’s exit could be a net positive for RioCan and its investors.

Economic concerns

Worries about a faltering Canadian economy are hitting the REIT sector. RioCan operates shopping centres located in prime locations. Many of its anchor tenants are well-established names that sell recession-resistant products such as groceries, medication, discount items, and everyday household goods.

An economic slowdown might hit some retailers, but the core of RioCan’s clients should be able to weather the storm.

New developments

RioCan recently launched a plan to build residential units at some of its top retail locations. If the project takes off, investors could see a nice boost to cash flow in the coming years.

Cash flow and earnings

RioCan continues to deliver solid results. The company reported Q3 2015 funds from operations of $140.2 million, up 5% from the same period in 2014. Net earnings for the quarter were $0.44 per unit.

Demand remains strong for its properties and the company renewed 1.3 million square feet of space in Q3 at an average rent increase of 8.6%.

Distribution

RioCan pays a monthly distribution of 11.75 cents per share that yields about 5.7%. The payout ratio is less than 90%.

Should you buy?

RioCan is doing a good job of filling the space vacated by Target. The company is also considering a sale of its U.S. properties, which would give RioCan additional cash to pay down debt or invest in new assets.

At this point, the shares are probably oversold and the distribution should be safe. If you are searching for an income pick to add to your portfolio, RioCan looks like a solid choice.

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Fool contributor Andrew Walker has no position in any stocks mentioned.