Dream Office Investment Trust, Canada’s biggest office REIT, jumped the most in additional than seven years after it said hello would sell about $1.2 billion of property and reduce its payout to weather the power downturn.
Dream Office rallied as much as 14 percent to $18.60 in Toronto, probably the most since December 2008. The REIT is down 51 per cent since 2013, surpassing the 14 percent drop in the Bloomberg Canadian REIT Index, as the collapse within the price of crude reduced demand for its Alberta real estate.
The Toronto-based company reported fourth-quarter results Thursday and announced an objective to sell non-core assets by 2018. Additionally, it cut its distribution to $1.50 from $2.24 and boosted its credit facility to $800 million from $355 million, allowing it to pay down debt, purchase current or future properties, or buy back shares.
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“Today, we present a personal equity-like strategy and build a leaner, more resilient and valuable company for the unitholders,” Michael Cooper, chairman from the company, said within the statement. “When the plan is complete, Dream Office REIT may have some of the best assets in Canada, based on an industry-leading balance sheet and ample liquidity for growth.”
The disposition, about one-sixth from the company’s portfolio, can come from assets in Toronto’s suburbs, Ottawa, Vancouver and Saskatchewan. It forecasts net proceeds of about $700 million, or at best $6 per unit, in the sales, taking advantage of increased local and foreign interest in the nation’s property, particularly outside the oil patch.
Dream is already discussing the sale of $300 million in properties, based on the statement.
2007 Redux?
Dream Office said it made a similar relocate 2007, once the company sold enough to come back $1.6 billion to shareholders.
“While cutting the distribution may initially lead to trading volatility, our view is the fact that capital retention for the purpose of investment and repositioning of properties is wise in the current market/office environment,” Matt Kornack, analyst at National Bank Financial, said in a note to clients.
Toronto-Dominion Bank raised the REIT to a strong buy from buy.
Bloomberg.com
