ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $36.94 - Toronto symbol AP.UN

ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST $36.94 (Toronto symbol AP.UN; Units outstanding: 77.6 million; Market cap: $2.9 billion; TSINetwork Rating: Extra Risk; Dividend yield: 4.0%; www.alliedreit.com) owns 142 office buildings, mostly in major Canadian cities. These mainly Class I properties contain over 9.5 million square feet of leasable area. Class I refers to 19th- and early-20th-century light industrial buildings that have been converted to retail space. They usually feature exposed beams, interior brick and hardwood floors.

Allied spent $400 million on properties in 2012, $182.4 million in 2013 and $234.9 million in 2014. In the first quarter of 2015, it added two more for $31.8 million.

The trust’s new buildings helped raise its revenue by 11.5% in the three months ended March 31, 2015, to $85.8 million from $77.0 million a year earlier. Cash flow rose 12.6%, to $39.4 million from $35.0 million. Cash flow per unit was unchanged at $0.51 on more units outstanding.

In July 2012, Allied entered into a joint venture with RioCan REIT (see left) to buy buildings in urban areas that the partners can “intensify” to increase revenue and cash flow, mainly by adding tenants. So far, they have completed three developments and have two more underway, all in Toronto.

The units trade at 16.9 times Allied’s forecast 2015 cash flow of $2.19 a unit. They yield 4.0%.

Allied Properties REIT is a buy.

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