Artis REIT Bolsters Toronto Office Market with Renewed Commitment
Updated: Aug 4
Samir Manji, the Chief Executive of Winnipeg-based Artis REIT and Vancouver-based Sandpiper Group, recently came to a truce with retail landlord First Capital in his ongoing battle to get on the board. At the same time, Manji told unitholders that Artis would continue investing in Dream Office REIT despite rising vacancy rates in Toronto's office market.
Artis and Sandpiper now hold a 14% stake in Dream Office—a Toronto-based public company with 28 investment properties mainly located in Toronto with a current occupancy rate of 84.4%. Last year, Artis opted to sell some of their office properties located outside of downtown Toronto so they could invest more into Dream Office.
Manji believes that Dream Office's units are currently trading at an approximately 50% discount from their net asset value (IFRS NAV) and sees value in Dream Office’s portfolio, specifically within the downtown Toronto office market. He also highlighted the 26.6 million units of Dream Industrial REIT that Dream Office has on its balance sheet as another key factor. Over the last year, these units have traded as high as $28.65, but have since gone down by approximately 50%.
Manji believes Michael Cooper—Dream Office's CEO and largest unitholder—can maximize unitholder value and provide benefits for investors who buy into Dream Office's stock now.
Rising Vacancy Rate
Two years ago Artis set out to create a business transformation plan that would see the company sell some of its assets and become more of an investor in publicly traded entities. This plan is starting to be realized, most notably in the recent partnership with First Capital REIT.
Artis chairman Armin Mahmoudi Manji recently engaged in a settlement battle with First Capital over four board members he wanted appointed to the REIT. As part of this agreement, Manji has reiterated his belief that First Capital owns some of the most attractive and valuable real estate assets in Canada.
In an open letter to unitholders released as part of the annual report Wednesday, Manji stated: "Together with Sandpiper as joint actors, Artis owns approximately 9% of the outstanding units of First Capital. We look forward to collaborating with the board of First Capital in 2023 as they take steps to unlock and maximize value for all of First Capital’s unitholders."
The retail landlord's shares are currently trading at around $7.50, down 43% from their pre-pandemic highs due to pandemic related uncertainties. However, leasing activity is expected to remain steady driven by tenants implementing their back-to-work strategies according JLL’s latest market report for downtown Toronto office space. It remains to be seen whether or not Artis will succeed in its endeavour and unlock value for investors by 2023, but it appears that it is heading in the right direction.