Artis REIT president and CEO Armin Martens. (Courtesy Artis)

Management of Winnipeg-based Artis Real Estate Investment Trust say it is well down a path toward divesting up to a billion dollars in non-core assets by as early as the end of 2019.

Artis (AX-UN-T) told investors and analysts in its first-quarter financial update Friday its initiatives, launched in November, will see it further develop and fortify its industrial holdings. It is also shifting a larger proportion of its holdings to U.S. properties due to the Canadian asset sales.

President and CEO Armin Martens also said the board has formed a special committee of five independent trustees to review and consider strategic alternatives in addition to the initiatives announced in November.

“It’s all about maximizing unitholder value,” he said.

Artis has a portfolio worth about $5.36 billion with office, retail and industrial properties in five Canadian provinces and six U.S. states.

27 properties currently in sale process

“There’s a lot of wood to chop here, but we’ve done it before and we’re doing it again,” said Martens. “Thus far, about 20 listing agreements have been signed (and) five properties sold for about $200 million.

“Seven more (properties are) under conditional contract for about $330 million and active negotiations (are) taking place on several more properties.”

He said Artis expects to sell more than $600 million in properties this year and might reach deals in principle on all of the assets it plans to move by the end of the year. Artis initially set a two- to three-year schedule to reach its divestment target.

“We should be well ahead of schedule in getting that done,” said Jim Green, the REIT’s CFO.

Green said the divestment is part of a strategy to increase both cash flow and to shore up share prices.

Between November and March 31, Artis bought back 9.1 million units at a cost of just under $94 million, Green said.

Artis eyes larger U.S. presence, fewer office assets 

By the end of the first quarter of this year, the REIT was weighted 53.7 per cent in Canada and 46.3 per cent in the U.S. Artis envisions eventually being weighted up to 55 per cent in the U.S. by selling non-core assets, mostly in Canada.

“On an asset class basis, it is 53.1 per cent in office, 20.1 per cent in retail and 26.8 per cent in industrial,” Green said.

Eventually, Artis hopes to get that balance to 45 per cent office, 40 per cent industrial and 15 per cent retail.

Green underscored that Artis’ Calgary holdings have become a smaller and more manageable component of the REIT’s overall holdings.

“For Q1, it’s down to 6.1 per cent of our net operating income. It’s nice to see that shrinking to a manageable level,” he said, noting the office sector in Calgary is “always a very difficult market.”

Active development pipeline

Green said Artis remains active in new construction with about $202 million invested in projects under development. That includes a mixed-use tower in Winnipeg and new industrial spaces in Houston, Phoenix and Denver.

The REIT also has several planning projects not yet at the construction stage. “These projects are progressing well through the development stages,” Green said.

Martens said Artis currently holds about $2 billion in industrial properties, $3 billion in office and $1 billion in retail.

“In terms of what we’re selling, it’s office and retail and no industrial at all,” he said. “We want to grow industrial on the development side.”