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Allied Properties Real Estate Investment Trust units AP-UN-T dropped by 27 per cent early Wednesday after the property owner surprised investors with a $500-million equity offering earmarked for paying down debt.
The price of Allied units fell to $10.20, down from Tuesday’s close of $14.05, as the REIT announced what chief executive officer Cecilia Williams called an “action plan” to strengthen the balance sheet in a “challenging” leasing market.
In a conference call on Wednesday, Ms. Williams said the REIT’s executives decided to sell units and dilute existing owners to improve the company’s long term growth prospects.
On Tuesday, Allied had a $1.9-billion market capitalization on the Toronto Stock Exchange, implying $500-million equity offering will dilute existing investors by 26 per cent.
Allied owes lenders approximately $4.7-billion. Proceeds from the sale of units will be used to pay down the company’s line of credit, which will be tapped to fund payment of a $600-million debenture that comes due on February 12.
Allied, one of the country’s publicly traded largest office building owners, announced late Tuesday it planned to raise $350-million by selling units in a marketed equity offering.
The REIT will raise an additional $150-million by selling units to the Alberta Investment Management Corp. (AIMCo) in a private placement.
The AIMCo transaction will only go forward if Allied completes the public sale of units, which is being led by the investment dealers arms of Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Royal Bank of Canada.
Allied and its banks are now conducting a marketing campaign that will set the price of the units being sold by the REIT.
Allied said in a press release: “There can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering.”
