Artis REIT may not be selling but its Calgary office buildings are dropping in value

Artis Investment Trust may not be commenting about reports its trying to sell property in Calgary, however it did confirm its holdings in the oilpatch count a lot less money they was once.

The Winnipeg-based REIT said Tuesday it will be taking a $288-million writedown on its Calgary office portfolio, a move which comes amid rumours it is trying to sell a number of its properties in Western Canada.

Sources indicate the company has already established hardly any interest in its office holdings in the price that was given to the marketplace. A company spokesperson didn’t return calls.

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In a research note, Raymond James analyst Ken Avalos noted the REIT’s Calgary office occupancy was down 3.1 percentage points in the fourth quarter from a year, reaching 83 percent. He noted leases with rents commencing in 2016 will bring committed occupancy to 91 per cent in 2016.

“Artis has about 580 million square feet rolling in their Calgary office portfolio over the next 2 yrs, ” said the analyst, adding that may occupancy could drop to 68 per cent, net operating could fall $10 million and the pay out ratio could increase by five percent.

Overall, Avalos says the REIT’s Calgary office portfolio taken into account 15 percent of net operating income in the fourth quarter, or about $50 million annualized..

He says the entire Artis portfolio is worth $5.1 billion even while the market values it a $4.6 billion according to its unit price.

“Despite the headwinds, there is substantial value within the stock given the sentiment on Calgary office at the moment,” says Avalos. “We’d be buyers of the stock at these levels.”

gmarr@nationalpost.com
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