I'm mindful of your answers to recent questions about AP.UN (lukewarm response at best) but I do wonder;
Employers are said to be insisting more and more that employees get up, get showered, get dressed and get in to work at the office.
Pre-pandemic AP.UN was in the $50.00 range, and even in the midst of COVID it didn't drop as low as it is now - presently units are selling for $20 just as they were a decade ago. If it's accurate that working from home is on downslope, is there an upside for AP.UN that's not reflected in its current price - was it worth $50/unit in early 2020, or was that unsustainable even without COVID - and do you see any scenario where it might get back to, say, 2/3rds of its early 2020 value?
And just generally speaking - do you think office REITs are out of the woods if current trends continue (and if interest rates come down over the next year or so)?
Thanks,
Peter
While we agree that work from home is declining, it is still massive compared to pre-Covid days, and this is reflected in historically high office vacancy rates. We might not compare the Covid price of AP.UN to today's. For one, we think investors fully expected everyone to just go back to work (initially). They are not (at least more than expected are staying home). But the big spike in interest rates is the other changed factor. Higher rates impact the company directly, and indirectly, as investors seek safer yields elsewhere. AP currently has vacancy in the 13% range and a payout ratio of 84%. Neither of these metrics are 'great'. Lower interest rates would help the stock, but we think investors would also want to see improvements in these metrics as well (they are related, of course). To get to $33, though, may be a stretch, as that would be a 50%+ gain. Certainly it is 'possible' over time, but we think interest rates would have to drop significantly (3% range?) and operations would have to show substantial improvement. It is cheap, and the recent asset sale improves the balance sheet, but we would still like to see more catalysts here to get more interested.