April 23, 2021

Allied Properties Real Estate Investment Trust AP-U



The Allied Properties Real Estate Investment Trust (AP) is a Canadian REIT that specializes in acquiring and upgrading Class I office properties in the urban areas of Tornto, Montreal, Winnipeg, Quebec City, Kitchener, Calgary, Vancouver, Victoria, and Edmonton, although the Western properties are fairly new acquisitions.  Allied REIT started out as a focused REIT in the Greater Toronto Area and Montreal markets.  Of its approximately 40 million square feet of office inventory, 16 million are in Toronto and 13 million are in Quebec.  The trust now appears ready to branch out and strengthen its beachhead in Western Canada.  This will likely prove to be a profitable venture for Allied REIT (AP) given the huge growth factor that Alberta, Saskatchewan, and to a lesser extent British Columbia and Manitoba now possess.  The Allied Properties Real Estate Investment Trust is one of the larger REITs in Canada, with a current market capitalization of about $1.22 billion.  Like most REITs on the market Allied (AP) seeks to improve value for unit holders through strategic acquisitions of new properties, and maximizing resources through sound management.


In the past six years Allied REIT has adapted its strategic focus from buying fully redeveloped Class 1 office properties (to meet this standard most office buildings have to be completely renovated at a substantial cost), to purchasing properties with the intent of upgrading them themselves.  By purchasing properties that are only partially redeveloped, and have plenty of surrounding space, Allied (AP) has given themselves an opportunity to greatly increase the value of their acquisitions through sound management.  With substantial experience within this sector (and growing everyday) the management team for Allied REIT sees the strategic shift as a way to diversify their holdings, and have more control over the finished product that they present to tenants.


Allied REIT (AP) has had a busy year in 2011.  They have spent roughly $350 million in order to acquire 19 separate properties.  It is important to note that 13 of these properties were in Western Canada, where Allied had been lacking a substantial presence.  They also sought to bolster their Toronto holdings with an additional 5 properties.  Calgary was the main target of the spending spree, as Allied (AP) purchased nine Class 1 office properties in the city.  Western offices now account for 13% of Allied’s total leasable space, and will offset the geographical density of their GTA holdings.


Allied REIT (AP) is currently selling at around $24-per unit (REITs are solid in units, like a mutual fund, because they are a trust and a not a corporation that you would buy shares in).  This is near the REIT’s 52-week high, but the trust has not been very volatile, as its 52-week low is $20.68.  Allied’s annual dividend of $1.32 gives it a dividend yield of 5.40%.  There is no doubt that Allied will continue to be a stable dividend-producer for its shareholders.  Its Class 1 office properties will always have high tenancy rates, and hold a lot of value.  That being said, if you’re in the market for higher dividend yields, there are better options within Canada’s real estate investment trust market.