Javed Mirza Allied Properties REIT AP.UN-T WAIT Jan 31, 2025

Office has suffered since the pandemic, supply/demand are out of balance everywhere. Occupancy has slipped to lowest level in 2 years. Leverage is quite high, while net operating income is down this quarter. An execution story. Some wonder if distribution can be sustained.

Lots of "brick and beam" properties, very beautiful. Redevelopment of those heritage buildings is much more difficult. Smaller square footage actually hurt them more from Covid, as many decided they didn't even need an office. Rental dynamics have changed since Covid.

Dark horse candidate. Former market darling. Trades at 0.4x book value. Office and retail in Toronto. 6M square feet of space in Montreal; 3M across Vancouver, Calgary, Ottawa and Kitchener. 17% compound growth rate total return since IPO, until their Covid fall. Yield is 10%, very sustainable.

In his dividend growers mandate. Very high dividend yield, over 10%, and is sustainable (though may not grow in near term). Debt to capital ratio ~40%, selling non-core properties. Closing deals will add cash this year. Vacancy rates should stabilize. Private market value is significantly higher. Needs patience.

Doing the best it can, but fundamentals have been really difficult. Vacancy rates are quite high. Sold off data centre assets to build up balance sheet, but then acquired more assets. Distribution coverage not what it once was. Yield is ~10%.

Would recommend holding shares. Payout ratio is high, but appears to be able to manage. Occupancy numbers will be interesting to watch. As Toronto grows, will be good for business. Just takes time. 

Not entirely clear to him what future of back-to-the-office is. Not sure we'll have the same office boom we did pre-Covid. Lower 10-year yield in Canada is helpful, but other sectors in the space are preferable.

Continues to like it here. About 80-85% is office, rest is retail and parking. Occupancy around 85%, versus 96-97% pre-Covid. In his dividend growers mandate, though it may not for the foreseeable future. Shedding non-core assets. Trades ~40 cents on the dollar of book value, should attract a re-rating.

Recent results reflect a challenged operating environment. Q4 earnings below expectations. FFO was down 13% YOY. Interest rate headwinds, negative internal growth, earnings headwind. Goal of 90% occupancy by year's end is ambitious, especially with new supply in the key market of Toronto.
 
Payout ratio hovering around 100%; but when you adjust for non-cash revenues, distribution is not covered. Company's adamant in not cutting dividend, willing to borrow to cover it. That's not a formula for success. So don't buy it for the yield.