Canada\u2019s largest office real estate investment trust (REIT) slashed its monthly payout by 60 per cent on Monday, in a widely expected move. The reduction comes as Toronto-based Allied Properties says asset sales will continue in 2026, amid attempts to lower its debt.<\/p>\n
Allied units (AP-UN.TO<\/a>) rose as much as 2.5 per cent near the start of trading on Monday. They gained as much as 30 per cent this fall, as the developer signalled stronger times ahead for leasing its office-focused portfolio of buildings. However, the rally was short-lived, and units are now about a dollar above their 52-week low.<\/p>\n \u201cWith a view to reducing indebtedness and associated interest expense going forward, the trustees of Allied have decided to reduce the monthly distribution to unit-holders in December of 2025 and throughout 2026 by 60 per cent to $0.06 per unit per month ($0.72 per unit annualized),\u201d Allied stated in a news release on Monday.<\/p>\n As of Sept. 30, Allied\u2019s debt stood at $4.62 billion, according to regulatory filings. The company said on Monday that a series of bond offerings this year and in 2024 have improved its overall debt position.<\/p>\n \u201cWe view the 60 per cent distribution cut as a necessary step in the process of balance sheet repair,\u201d RBC Capital Markets analyst Pammi Bir wrote in a note to clients. \u201cWe believe a cut was largely anticipated, albeit with uncertainty on the magnitude.\u201d<\/p>\n Bir maintains a \u201csector perform\u201d rating on Allied units, with a $16 price target.<\/p>\n \u201cBottom line, while painful for unit-holders, the reduction in distributions improves financial flexibility to reinvest in the business and ultimately support a recovery in valuation over time.\u201d<\/p>\n More to follow.<\/p>\n Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on X @jefflagerquist<\/a>.<\/p>\n