Allied Properties REIT (AP.un) focuses on Class "I"
(brick and beam) office properties. Allied has a portfolio of more than 5.9 million square feet primarily in downtown Toronto, with a growing presence in Montreal and to a lesser extent in Winnipeg, Quebec City and Kitchener.
With the bulk of its portfolio situated just east and west of the downtown Toronto core, Allied offers its tenants unique brick and beam office space. Allied's niche focus differentiates it from more traditional office landlords. Class I office space appeals to service-oriented businesses, independent professionals and partnerships who are attracted by desirable locations close to the financial core, lower rental rates and distinctive physical characteristics. Most of the office buildings in Allied's portfolio also have highly sought after street front retail (especially in trendy neighbourhoods such as King West).
The REIT has a conservative balance sheet, a strong interest coverage ratio, and a low payout ratio relative to its peers. Allied’s low cost of capital in combination with high cap rates available in Class I properties makes for highly accretive acquisition opportunities.
Allied is not on most investors radar screens. This is primarily due to the fact that the REIT has a small market cap (~$800 million) and is not a member of either the S&P/TSX Composite Index or the REIT Index. It is only a matter of time before more investors discover this hidden gem amongst the Canadian REITs.