Artis REIT, Peers Take Calgary Office Hit Amid Oil-Price Slump

  • Artis has C$387 million writedown on its Alberta portfolio
  • Canadian REITs exposed to oil-producing region hurt in 2015

Artis Real Estate Investment Trust said it took a C$387 million ($289 million) writedown on its Alberta properties, making it the latest Canadian office landlord to suffer as the country’s biggest oil-producing province is hurt by the drop in the price of crude.

The change in value for Artis properties in Alberta was led by the company’s Calgary office towers, with a C$288 million writedown for 2015 -- about C$150 million of that in the fourth quarter alone -- amid falling rents and rising vacancies, executives said on a conference call with analysts and investors Tuesday.

“The bottom line is that our Alberta real estate today is worth less than it was a year ago, so we’re not going to stand here and say to any investor that the value of Alberta real estate today is the same as a year ago,” Chief Executive Officer Armin Martens said on the call. “Market rents have come down. We’re not at the bottom of the Calgary office market yet because next year is when all the new construction is finished.”

Canadian office REITs have taken a beating amid lower demand from energy-company tenants, with occupancy and rents dropping with oil prices. Dream Office Real Estate Investment Trust, Canada’s biggest office REIT, announced last month that it plans to sell C$1.2 billion of property and reduce its payout to weather the energy downturn. H&R Real Estate Investment Trust, which has 28 percent of its operating income in Alberta, said last month that it cut the value of its assets by C$179 million in 2015, led by properties in the province.

Artis on Monday reported fourth-quarter funds from operations of 38 cents a unit, beating the 37-cent average estimate of 10 analysts in a Bloomberg survey.

Artis is seeking to sell some or all of its Alberta properties, and has retained Bank of Montreal to find an investor for the buildings, according to people with knowledge of the matter. Executives declined to comment on the conference call.

Before it's here, it's on the Bloomberg Terminal.