Core Viewpoint - The article expresses skepticism about Allied Properties' performance, particularly due to declining occupancy rates and high debt levels, suggesting that the company is not positioned well for recovery in the current market environment [2][20]. Occupancy Trends - Allied Properties is experiencing a significant decline in occupancy rates, with Toronto's occupancy at 85.99% compared to the market occupancy of 82.7% [3][4]. - The occupancy rate has decreased from 2021, with market occupancy dropping nearly 1 percentage point over multiple quarters [4][7]. - Kitchener has the lowest occupancy rate at 75.9%, significantly down from 96.7% in Q1-2021 [4][6]. Financial Performance - Allied's financials indicate a net debt to adjusted EBITDA ratio of 9.4x and a total indebtedness ratio of 35.9%, with an interest coverage ratio of 2.6x [12][14]. - The company maintains a weighted average capitalization rate below 5% on office properties, despite a 6% drop in overall occupancy [14][15]. Debt Management - The company has a good debt maturity profile but faces substantial refinancing needs in the next two years [18]. - There is a concern that the debt to EBITDA ratio may approach 10.0x in Q2-2024, which is above the target range of 8x [19][20]. Strategic Focus - The article suggests that Allied Properties needs to prioritize increasing occupancy and reducing leverage to improve its market position [20]. - The current 11% yield is attracting the wrong type of investors, and the company must address its occupancy and debt issues before a potential market panic [20][21].
Allied Properties: 11% Yield Is Not Enticing