Allied Properties REIT takes $500-million writedown on Canadian office properties – Financial Post

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A Canadian office landlord marked down the value of its holdings by nearly $500 million as the persistence of remote work and high interest rates weigh on the market for commercial property.

Allied Properties Real Estate Investment Trust reported a net loss for the final three months of last year as it was forced to adjust the value of its properties across Toronto, Montreal, Calgary and Vancouver, according to results released Wednesday. Occupancy at its properties fell to 86 per cent from around 90 per cent the year before, and nearly 95 per cent before the pandemic, it said.

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Shares dropped 8.2 per cent to $17.92 at 9:53 a.m. in Toronto, the biggest decline since the start of the pandemic in March 2020.

The office landlord specializes in repurposing old downtown industrial and warehouse space for tenants in industries including the technology sector, and analysts have been bullish on the stock as one of the most likely to weather the storm hitting the office sector.

But it hasn’t been immune to the adverse trends. Last year, the REIT sold a pair of Toronto data centres it owned for $1.35 billion to shore up its balance sheet as borrowing costs climbed to a 20-year high and the outlook for office demand became more uncertain.

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Sentiment on the sector is still cloudy. Just this week, banks in the U.S. and Japan reported losses tied to commercial real estate. But Allied said its writedowns last quarter came as operating income rose from a year earlier on higher rents. The company also continues to invest in new developments that include residential and retail components to diversify its asset base. Allied now values its unencumbered investment properties at $8.8 billion.

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