Allied Properties Real Estate Investment Trust T.AP.UN

Scotia comments

[incomedreamer11]

In-Line Announced Special Distribution

OUR TAKE: Neutral. Allied announced a special distribution of $5.00 per unit in units + a $0.48 per unit cash distribution. The distributions are associated with the $1.45B UDC portfolio sale and is payable to u/h’s of record on December 29th (cash distribution to be paid on January 15th). Assuming a 50% marginal tax rate, our estimated ~$1.50 per unit in cash taxes is consistent with our October 30th note, where we highlighted lower 2023E FFOPU guidance may result in a tax at the lower-end of our $1.50-$2.00 range (note, the range = estimated tax, not total special distribution). Please refer to our December 5th note for potential unit price catalysts. The recent H&R Office sale has helped too.

Positive thesis is intact. While taxable accounts may consider a more tactical approach in the next two weeks, we still believe upside exceeds downside for AP in 2024, despite a 27% move post Q3 results (vs. +19% for CAD REITs and +43% for U.S. Office REITs). This is particularly true in a “soft landing”, the probability of which is gaining momentum in the broader markets. Despite the recent rally, AP remains one of only 3 REITs (H&R and D) that trades at an above-historical-avg. AFFO and implied cap spread to 10YR GOC