Artis Real Estate Investment Pref Shs Series E T.AX.PR.E

A lot to do about not so much!

[DZtrader]

I have been taking in all the vast array of comments of late, some thoughtful and some completely void of much common sense (go figure). At this point, I think it best to temper expectations a bit and avoid some major disappointment. First off, I think it highly unlikely (not impossible) that the reit gets dealt in whole or majority, I just think it delusional to think otherwise. I really don't even know why there has been such a barrage of commentary about massive asset sales. To be clear, if it were me and I was running a reit, I don't want to be a seller at all in this environment or this market, I want to be a buyer in this environment and in this market. That avenue however has been shut off to this reit as a result of ill timed moves and excessive short term turnover on existing debt and stress of variable rate date. To this extent to me it makes far more sense to sell absolutely as little as can be to acheive what we need to get through the next while. I get the anticipation of this strategic review in particular if you have leveraged yourself so deep that you can't breathe, but bare in mind this is a REVIEW to determine best route forward for the reit.

At the risk of sounding pessimistic, I am not anticipating a good quarter, in fact I have a feeling we will have an underwhelming quarter and it is going to add further pressure. With regards to rates and the Fed et al, don't put a lot of creedance in what one particular poster here is flapping about. It is self serving, inacurrate and uninformed drivel. Rate hikes are essentially done here, have been for a bit now. Correct me if I am wrong but the Fed has only moved two quarter point hikes in the last FOUR meetings isn't it? As noted in last couple of posts, they are done hiking but will maintain hawkish bias because they have to. Don't confuse the Fed's "target rate" and actual bond market, lots of factors moving the actual bond market. It is unsustainable to have continued with the Central Bank ZIRP for ever, most realzie this. In fact we now are at about the long term average rates of call it 5%. Business will adjust. Bare in mind, if inflation keeps coming in, and rates remain the same, that in itself is tightening without moving,  not to mention balance sheet reduction. I know it is hard to imagine but we are soon going to be closer to cutting rates than we are to raising, just watch. When things start to tip, they are going to tip a bit quicker than most think, signs are there, just look. We are not priced for this tip, we are still very much priced for what everyone is looking for, the "soft landing". It will be interersting to see where we land, there are so many variables right now that we are all guessing. I have been getting more and more defensive of late and will likely continue in this direction. I think sell into strength makes sense right now with selective buy into weakness. I have more and more cash going into money market, even teaser high yeild bank accounts for six months at 6.25% right now and wait it out, how can you loose? Still seasonally weak period for a bit yet.

In any event, don't be surprised if there is not much said about the review for awhile yet. I could be mistaken but believe they suggested they would not be making comment until such time as something was solid or review was complete.

Be good,

DZ

[SNAKEYBOY]

No, the review is NOT "a REVIEW to determine best route forward for the reit". It's a review with the focus of closing the trading gap.  Contrary to what you said "you want to be a buyer in this environment" ... maybe the buyer of artis or strategic partners feel the same way  and looking for a modest discount at $11 to 12 with upside on the other side of the

[DZtrader]

Whatever you say. Respectfully, will just pass on commentary and engaging in your thoughts. Best of luck.

[Catchtherally]

It doesn't say closing the trading gap specifically. it says  The Board formed a Special Committee to initiate a strategic review to evaluate alternatives that may be available to the REIT to unlock and maximize value for unitholders. seems pretty generic and could mean anything.  If I recall he does mention in the conference call the signicant discount the stock is trading

[ScroogeMcDuck1]

I agree. They have many assets for sale and have stated they are keeping core assters that drive dividends and growth.   Doesn't seem like panic to liquidate the entire company, more like tinkering.   I agree however that Manji is personally invested reputationally and likely open to drastic changes.   The range of outcomes are large.   But getting saved and unit prices

[ScroogeMcDuck1]

DZ, i read your post twice and totally agree with it.   Can you tell me that as we go into recession which will cause lower rates, are reits usually doing well from the rate drop or bad from the economic hit?   

[Frankie10]

I think a recession will cause the central bank to drop rates, and yes, I believe Artis will perform well in a low interest rate / recession environment given the % of variable/unhedged debt ~25%), and long weighted average lease term (~6 years?)... Assets with long WALTs will cashflow and the cost of capital will instantly fall. I sense a lot of stress. Many here need to chill out. So much

[babybunny]

I largely agree with the prescription in your last paragraph, Frankie.  This is in line with Manji's mandate to actively exploit the difference between private market valuations and (implied) public market valuations -- a gap that remains huge even as asset values has fallen. If anything, I would like Artis to be even more aggressive with asset sales.  Industrial assets in

[DZtrader]

Hey Bunny and thanks for the note, your comments are always taken in high regard. "Sitting on our hands" may be a bit overstated. While I won't argue your thesis being richly accretive to NAV, because yes it should be (although it hasn't shown up per say to this point). To me it just seems like perhaps more short term thinking. Sell what we need right now,  no questions to

[babybunny]

Thanks for your thoughts on this DZ, likewise always welcome and respected.  Sorry for going a bit too far in my characterization of your position ... at least we both agree asset sales are needed to tame the debt crisis.   As for repurchases, the reason I want them has nothing to do with the short term unit price; rather, the purpose is to steadily increase NAV per unit so when

[DZtrader]

Let me start by saying that anyone that can read my posts twice, should be commended, thanks. The answer to your question, essentially, is both. It goes without say that the reit sector tends to be rate sensative, Artis in particular should benefit greatly from declining rates, all things being equal. The rub is how deep and how prolonged of a recession and how much impact on revenue, more

[SNAKEYBOY]

Artis has lots of options with ~250m in iris/public securities, a desirable 900m industrial portfolio, decent retail assets ~ 800m, ~150m resedential,  and 1.5b in office.  The current market cap is 700m while the equity value should be 1b more.  There cap rates are modest, 6.x% and 7.2% for office.  Thats why there's enough room in the SP to  NAV to workout a deal for