Nearly a billion dollars of new property acquisitions have helped boost revenue 10.9% at Allied Properties REIT in the most recent quarter.
The shift to remote work poses a risk to the company’s office property model but offices can be converted to mixed-use properties if this trend proves to be a permanent one.
The shares trade for 10.6 times its 2023 forecast cash flow.
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ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST (Toronto symbol AP.UN; www.alliedreit.com) owns 200 office buildings and 13 properties under development, mainly in major Canadian cities.
Allied last raised your monthly distribution with the January 2023 payment. Investors now receive $0.15 a unit, up 2.9% from $0.1458. The new annual rate of $1.80 a unit yields a high 8.8%.
The REIT also paid a special distribution of $5.48 per unit, comprised of $0.48 in cash and $5.00 in additional units, on December 29, 2023.
The purpose of this special distribution is to transfer a portion of the capital gain realized by Allied during the 12-month period ending December 31, 2023, from the sale of its UDC portfolio in downtown Toronto. The sale of the portfolio resulted in a significant increase in taxable income for fiscal 2023, requiring Allied to declare and pay a special distribution to all unitholders.
Dividend Stocks: Revenue is up for Allied Properties REIT after new acquisitions across Canada
The cash portion of the special distribution is intended to assist unitholders in funding any additional tax liability that may arise in connection with the special distribution.
Immediately following the special distribution, the REIT consolidated the outstanding such that each unitholder holds the same number of units as held immediately prior to the special distribution. The remaining portion of the special distribution will be paid in cash on January 15, 2024.
The amount of the special distribution payable in units will increase the aggregate adjusted cost base of each unitholders’ consolidated units by such an amount. That means investors will pay lower capital gains taxes when they eventually sell their units of Allied REIT. We recommend unitholders consult a tax specialist for advice on how to report this distribution on their income tax returns.
Allied has raised its annual distribution rate by an average 2.4% for the past five years. The REIT has an Above Average TSI Dividend Sustainability rating.
Recommendation in Dividend Advisor: Allied Properties REIT is a buy.
Comments
Shiv
The stock price has dropped from $46 in March 2022 to $25 in March 2023. Please explain the reason for this significant drop in stock price and what the company is doing to address the issue(s) that caused the drop.
Prices of many REITs, like Allied Properties REIT, are down lately from their 2022 highs party due to investor worries that interest rates may keep rising.
Traditionally, REITs, Utilities and so on are said to suffer when interest rates rise—for example, they have a lot of debt, and higher rates make it more expensive to raise money and refinance existing debt. As well, their shares, which typically offer high yields, compete with fixed-income instruments for investor interest.
However, most Canadian REITs—including Allied Properties REIT–have already taken advantage of today’s low interest rates to refinance a lot of their debt at fixed rates. This helps protect them against increases in interest rates.
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The stock price has dropped from $46 in March 2022 to $25 in March 2023. Please explain the reason for this significant drop in stock price and what the company is doing to address the issue(s) that caused the drop.
Prices of many REITs, like Allied Properties REIT, are down lately from their 2022 highs party due to investor worries that interest rates may keep rising.
Traditionally, REITs, Utilities and so on are said to suffer when interest rates rise—for example, they have a lot of debt, and higher rates make it more expensive to raise money and refinance existing debt. As well, their shares, which typically offer high yields, compete with fixed-income instruments for investor interest.
However, most Canadian REITs—including Allied Properties REIT–have already taken advantage of today’s low interest rates to refinance a lot of their debt at fixed rates. This helps protect them against increases in interest rates.
Now that the pandemic appears to be over can I be put back to the mailed hard copy? Irv Newson