(Bloomberg) — A Canadian office landlord marked down the value of its holdings by nearly C$500 million ($371 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% from around 90% the year before, and nearly 95% before the pandemic, it said.
Shares dropped 8.2% to C$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 centers it owned for C$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 US 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 C$8.8 billion.
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