Allied Properties Real Estate Investment Trust (REIT) has experienced a significant decline in unit values. On Wednesday, the units plummeted by 27% due to the announcement of a $500-million equity sale aimed at addressing the company’s debt. This sudden move surprised investors as the unit price dropped from $14.05 on Tuesday to $10.20.
Details of the Equity Offering
CEO Cecilia Williams described this initiative as an “action plan” to fortify the company’s balance sheet amid a challenging leasing landscape. The REIT’s executives opted for this equity sale despite its potential to dilute existing shareholders.
Market Impact and Financial Implications
Allied Properties had a market capitalization of $1.9 billion on the Toronto Stock Exchange before the announcement. The equity offering will cause a dilution of about 26% for current investors, as approximately $500 million is planned for generation through the sale.
Debt Management Strategy
The funds raised will go toward paying down the company’s significant debt, currently standing at around $4.7 billion. A portion of the proceeds will specifically target the payment for a $600-million debenture due on February 12.
Equity Sale Breakdown
- Total planned equity offering: $500 million
- Public offering amount: $350 million
- Private placement with AIMCo: $150 million (conditional on public sale completion)
Sale Process and Market Activity
The equity offering is being led by investment dealers from Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and Royal Bank of Canada. Currently, Allied and its banking partners are conducting a marketing campaign to establish the sale price of the units.
Investment Risks and Future Outlook
Allied cautioned that there is no assurance regarding the timing or completion of the offering. The terms might change as market conditions evolve. Investors currently face uncertainty in the real estate sector due to the proposed dilution and the broader economic factors influencing leasing activities.
