Artis REIT (TSX: AX.UN) is one of the largest diversified commercial real estate investment trusts in Canada, and is an unincorporated closed-end real estate investment trust created under, and governed by, the laws of the Province of Manitoba.
Artis’ common units trade on the Toronto Stock Exchange under the symbol AX.UN and the REIT’s preferred units trade under the symbols AX.PR.E and AX.PR.I. Artis’ common units also trade in the United States on the OTCQX Best Market (“OTCQX”), under the symbol ARESF.
Artis owns a portfolio of industrial, office and retail properties in Canada and the United States. At September 30, 2022, the REIT’s portfolio comprised 152 commercial properties totaling approximately 18.1 million square feet of gross leasable area.
Artis’ vision is to become a best-in-class real estate asset management and investment platform focused on growing net asset value per unit and distributions for its investors through value investing.
BUSINESS TRANSFORMATION PLAN
In March 2021, Artis unveiled a detailed strategy (the “Business Transformation Plan”) to achieve its vision and to create Canada’s pre-eminent asset management and investment platform, focused on value investing in real estate.
The goal of the Business Transformation Plan is to generate meaningful long-term growth in NAV per unit and distributions by monetizing assets, strengthening the balance sheet and scaling-up through value investing. Artis will concentrate its ownership in the highest and best return opportunities in an effort to maximize long-term value for unitholders.
As part of the Business Transformation Plan, Artis will be agnostic as to how it owns real estate and will embrace opportunism and the inefficiencies that the public markets provide, leveraging and capitalizing on opportunities that exist today or will surface in the future.
The Business Transformation Plan includes three key elements, as outlined below.
Strengthening the Balance Sheet
This first element of the Business Transformation Plan is to strengthen the balance sheet through accretive dispositions, unit repurchases and debt reduction.
The first step is unlocking value through the monetization of certain assets. This will be achieved by evaluating and completing the sale of a portion of its industrial, office and retail assets in an opportunistic and disciplined manner, with the goal of maximizing value on a tax-efficient basis.
In addition, Artis is focused on maintaining low leverage and debt metrics within the investment grade credit rating parameters defined by DBRS Morningstar (“DBRS”). The REIT’s senior unsecured debentures have a DBRS rating of BBB (low) and the REIT’s preferred trust units have a DBRS rating at Pfd-3 (low), both with Stable trends.
Driving Organic Growth
The next element of the Business Transformation Plan is to create value for Artis’ unitholders through identifying operational efficiencies, increasing occupancy and in-place rents, and the completion of new development projects.
Focusing on Value Investing
The third element of the Business Transformation Plan is to focus on value investing. This includes redeploying capital into new investments including value-added assets, undervalued publicly traded real estate securities and any other real estate investment opportunities. In particular, Artis is focused on identifying investments that are undervalued with potential to produce above average risk-adjusted returns over the medium-to-long term. Artis will seek to unlock value in its portfolio companies through active management, which may include pursuing board representation and engaging constructively with boards and management teams of its portfolio companies to effectuate long-term value creation. Artis may serve as a catalyst for privatizations, merger and acquisition opportunities, strategic transformations, and operational and governance improvements for its portfolio companies, with a focus on maximizing value for the owners of Artis.
The REIT’s near-term focus continues to be on publicly listed Canadian real estate entities.
Artis REIT’s Management Team
Artis REIT’s management team has extensive experience in construction, development, and management of commercial and other properties in Canada and the United States.
Artis REIT is fully-internalized and operates its own asset management and property management functions. These functions are responsible for the day-to-day management of the REIT’s portfolio as well as administrative services.