Toronto's The Well was jointly developed by Allied Properties REIT and RioCan REIT.
Allied Properties Real Estate Investment Trust AP-UN-T has raised $560-million in an equity offering that will help the property owner pay down debt, but at the expense of diluting the REIT’s existing investors.
Toronto-based Allied, one of the country’s largest office building owners, announced late Wednesday it sold 40 million units at $10 each to public investors. The $400-million offering exceeded the company’s $350-million target, set earlier this week.
Allied also sold $160-million of units to the Alberta Investment Management Corp. (AIMCo) at the same price. On Tuesday, the REIT said AIMCo would invest at least $150-million.
Allied Properties units tumble after REIT launches surprise share sale to address debt woes
In a conference call on Wednesday, Allied executives said they decided to raise money to pay down loans and avoid a credit rating downgrade, knowing they were diluting existing unit holders. Allied announced this week that it missed targets on occupancy rates and property sales last year.
Prior to launching the financing late Tuesday, Allied units closed at $14.05, but dropped sharply to close at $10.14 on Wednesday. The sale of new units diluted existing owners by roughly 25 per cent.
Allied units ended Thursday at $9.16 on the Toronto Stock Exchange, down more than 9.6 per cent from the previous day’s close, prior to announcement of the larger-than-expected financing.
Allied owes lenders $4.7-billion, including a $600-million debenture that came due Thursday. The company plans to sell up to $500-million of residential and office buildings by the end of 2026 and use the cash to pay down debt.
On Wednesday, credit rating agency Morningstar DBRS put Allied under review. In a release, Morningstar DBRS said if Allied failed to sell properties and complete the equity offering, “there could be further negative implications to the credit rating.”
The investment dealer arms of Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Royal Bank of Canada led the REIT’s equity offering.