Ian FungAllied Properties REITAP.UN.TOBUYFeb 21, 2020

Challenging story, balance sheet pressure. Question is were moves taken enough to right the ship? Answer is out of management's hands. Needs to sell assets to get leverage back to manageable levels (and investment-grade rating retained). 

Just raised equity at $10, which means market's saying that's fair value. Higher risk name. Really needs to execute. For those with higher risk tolerance, you can hold for now.

Last week, First Capital REIT was purchased for over NAV (somewhat surprising). Allied trades at huge gap to NAV. Worth a lot more than it's trading at today. Number of missteps. Assets are very, very good. Takeover is well within the realm of possibility.

Cut dividend, big corporate changes. His team is watching it. Pretty washed out at $10, with a lot of great assets. Hard for the economy to keep forging ahead with all the problems going on. 

Looking pretty positive for a long-term idea, chart's coming up off the bottom. Yield is 6.4%.

They thought it was a contrarian turnaround play on a return to office. Dividend cut, shares diluted. Lost confidence in leadership. They sold a month ago.

From Covid to CUSMA, office properties have had a tough go. Good properties. Really negative growth for next couple of years. Cheap, but he wouldn't put new $$ in it. Yield is 7.3%.

Office has been tough, avoid. Cheap. Fairly good Class 1 real estate in Toronto and Montreal. Vacancy levels challenged. Cut dividend. Risk to balance sheet from leverage. Not really getting paid to wait. He needs to see assets monetized and divested.

His horse in the race is PMZ.UN.

Announced big write down on office properties, also announced big capital raise (will dilute existing shareholders). Just that added dilution will bring earnings down. Earnings can bounce back, but now more shareholders are claiming those earnings, so upside is limited. Unless you need the income, don't consider investing.

He owns 2 REITs:  BEI.UN and MEQ.

Bumpy ride. Cut distribution by close to 60% to shore up balance sheet. Trophy assets. Office recovery has been slow, but seeing signs of life (such as with Ontario government mandate). When occupancy returns, operating leverage is tremendous. Trades at 0.4-0.5x book value. He's going to stay patient.

Committed the cardinal sin of dividend investing by cutting the dividend. His firm knew this was a risk. The cut resets the financial sustainability while they wait for occupancy to improve, and it will. More compelling to own shares now than a year ago.

Cut dividend more than expected, by 60%. Hard to say if they did it because the fundamentals are getting worse, or just to be conservative. Stock rallied on the news, which is a good sign -- investors are relieved that balance sheet will get better. No forward guidance given. Exacerbated by tax-loss selling. 

Pretty cheap. Not a lot of downside from here, though won't go anywhere for the next month. Key is they need to see some occupancy gains beyond 90%.

They told the market they won't meet their occupancy goals by end of this year or next. Shares plunged the past month. A dividend cut is coming, likely December.

Reported last week. Management commented that it would consider cut to distribution to save cashflow. Some analysts are even baking in a 50% cut. Target of 90% occupancy pushed out, currently around mid-80s. Very levered. Refinancing costs have gone up. Yield is 13%, and above 10% is the caution level.

It'll take a long time for office to recover, especially in some of the areas this company's in. If you're looking for an income stock, perhaps move on to something more sustainable.

80-85% office, some retail, and some parking. Across Canada, but mostly Toronto and Montreal. Trades at about half its book value. Believes dividend secure after speaking with management and stress-testing financials. Occupancy's running ~85%. Good dividend while they wait for shares to rerate. Yield is 9.56%.

Attracted by the dividend yield, over 10% when she looked at it a year ago. Likes the downtown locations of its unique assets. Not convinced the worst is over for office space. Back-to-the-office momentum doesn't really encompass Allied's tenants. 

Expectations for the last quarter are really high; more than likely they won't be met, guidance will come down, and so will the stock.

Return-to-office mandate picking up. Stock's benefited due to that sentiment, but hasn't translated to operations. Now trading ~10% above consensus NAV. He looks to buy stocks trading at discount to NAV. Fundamental supply/demand picture still not great. Doesn't believe on track to meet occupancy or debt target by year's end. 

Better office opportunities elsewhere, perhaps in the US.