You may recall we had Michael Emory in our Uncommon Sense Investor studio about six weeks ago.
The founder, President and CEO of Allied Properties REIT covered a number of topics during our conversation including his belief that a large, permanent shift to people working from home is not forthcoming and “overblown” as a trend.
The units of Allied are down about 15 per cent to a two-year low since then as investors continue to fret that commercial real estate will continue to suffer as the impact of the pandemic lingers.
However, analysts at Goldman Sachs are far more optimistic starting coverage of Allied with a “buy” rating and putting a price target on the units that imply upside of more than 40 per cent from the current price of $36.50, as of this writing.
Allied recently announced a private placement in which it is selling 4.1 million units at $37 each for proceeds of more than $153 million.
I contacted Michael Emory for an update on the business and he said, “Real estate remains out of favour generally, but I think that may be beginning to change as real-world data starts to flow in.”
In the meantime, here’s a bullet point list of why Goldman thinks Allied is a “unique” REIT, courtesy of Bloomberg News:
- The negative and more long-lasting impact of working from home
has been priced into Allied‘s share price and is overdone.
- Its focus on development and upgrade potential (shift from
office space to data center or industrial to office) is another
driver of earnings.
- Expects companies will return to the office over time in order
to promote collaboration and train new team additions.
- “Vertical transportation“ like elevators less relevant for
Allied’s users due to the smaller size of most of its properties.
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