Allied Announces Second-Quarter Results
TORONTO, July 29, 2025 (GLOBE NEWSWIRE) -- Allied Properties Real Estate Investment Trust ("Allied") (TSX: "AP.UN") today announced results for the three months ended June 30, 2025. "Operations in the second quarter were encouraging in all respects," said Cecilia Williams, President & CEO. "Our leased area increased slightly, our average net rent per square foot held steady, our non-core property sales accelerated, and our balance-sheet management progressed."
Operations
Allied's portfolio is comprised of three urban workspace formats -- Allied Heritage, Allied Modern and Allied Flex. Utilization of, and demand for, Allied's workspace continued to strengthen in the second quarter. Allied conducted 317 lease tours in its rental portfolio in the quarter. Its occupied and leased area at the end of the quarter was 84.9% and 87.2%, respectively. Allied renewed 54% of the leases maturing in the quarter, bringing renewals in the first half of the year to 69%, just below its normal range of 70% to 75%.
Allied leased a total of 588,373 square feet of GLA in the second quarter, 546,437 square feet in its rental portfolio and 41,936 square feet in its development portfolio. Of the 546,437 square feet Allied leased in its rental portfolio, 224,651 square feet were vacant, 190,904 square feet were maturing in the quarter and 130,882 square feet were maturing after the quarter. 74,584 square feet of the vacant space leased in the quarter involved expansion by existing users.
Average in-place net rent per occupied square foot ended the second quarter at $25.32, up 1.0% from the end of the comparable quarter. Allied increased rent levels on renewal in the second quarter (up 3.1% ending-to-starting base rent and up 13.2% average-to-average base rent).
Portfolio Optimization and Non-Core Property Sales
"We're in the final stages of completing the large, multi-city development pipeline we initiated in 2012," said Michael Emory, Founder and Executive Chair. "Efforts to monetize 150 West Georgia are now fully underway. At M4, Netflix and other tenants are building out their space, with rent scheduled to commence early next year. At KING Toronto, an international retailer will anchor the all-important commercial component with 28,291 square feet below grade and 4,587 square feet at grade. While KING Toronto has faced numerous obstacles, Allied and Westbank have overcome them and expect to complete the development exactly as designed by the end of next year."
Allied expanded its business in 2024 by acquiring a larger than expected interest in three completed developments -- 400 West Georgia in Vancouver, 19 Duncan in Toronto and Calgary House. At the time, 63,772 square feet of office space at 400 West Georgia was unleased, the 464 residential units at 19 Duncan were unleased and 26 of the 326 residential units at Calgary House were unleased.
Allied is now finalizing a long-term lease for the remaining office space at 400 West Georgia (63,772 square feet) with an established knowledge-based organization. It has also now leased 222 of the 464 residential units at 19 Duncan. Calgary House is approaching full occupancy. At the end of the second quarter, 312 of the 326 residential units were leased.
Last year, Allied effectively funded a portion of the equity component of 400 West Georgia and 19 Duncan by selling seven non-core properties -- four in Montréal, one in Toronto, one in Ottawa and one in Calgary -- for $229 million. This year, Allied intends to sell additional non-core properties for at least $300 million. In doing so, it will effectively fund the equity component of 400 West Georgia and 19 Duncan to a leverage-appropriate level and, in the process, strengthen its debt metrics overall.
In the second quarter, Allied closed the sale of a non-core property in Edmonton and put nine non-core properties under sale contract, six in Montréal, one in Toronto and two in Vancouver, all for aggregate proceeds of approximately $200 million. The remaining closings are expected to occur in the latter half of 2025. Allied expects to sell additional non-core properties in Montréal, Toronto and Calgary over the remainder of the year, primarily to users and entrepreneurial purchasers. Allied remains highly confident with respect to its sales target for this year.
Balance-Sheet Management
Allied remains fully committed to maintaining and improving its access to the debt capital markets and will continue to manage its balance sheet accordingly. At the end of the second quarter, Allied
had $167.7 million drawn on its $800 million unsecured revolving operating facility, affording considerable liquidity going forward,
maintained short-term, variable rate debt at a negligible level in relation to total debt,
had a total debt ratio* of 44.0% and
had net debt as a multiple of annualized adjusted EBITDA* of 11.9x.
As of today's date, Allied has $120 million drawn on its $800 million unsecured revolving operating facility. Allied expects to have nothing drawn on its facility by year-end.
Outlook
Allied continues to experience steady demand for urban workspace, urban rental-residential space and urban amenity space, as well as strong and quantifiable engagement among users of space in its portfolio generally. Management expects this to underpin growth in Same Asset NOI* in 2025 of approximately 2%. With the higher overall interest cost flowing from the 2024 acquisitions, Management expects FFO* and AFFO* per unit to contract in 2025 by approximately 4%.
Allied's specific operating goals for year-end 2025 are as follows:
to have reached occupied and leased area of at least 90%;
to have sold lower-yielding, non-core properties at or above IFRS value in Montréal, Toronto, Calgary, Edmonton and Vancouver for at least $300 million with allocation of proceeds to debt repayment;
to have fully monetized its loan receivable secured by 150 West Georgia Street in Vancouver with allocation of proceeds to debt repayment; and
to have net debt as a multiple of annualized adjusted EBITDA* below 10x.
While currently on target with respect to its operating goals for 2025, Management cautions that the uncertain macroeconomic environment may impede Allied's ability to achieve its operating goals within the estimated timeframe. __________________________* This is a non-GAAP measure. FFO per unit and AFFO per unit exclude condominium-related items, financing prepayment costs, and the mark-to-market adjustment on unit-based compensation. Refer to the Non-GAAP Measures section below.
Financial Measures
The following tables summarize GAAP financial measures for the three and six months ended June 30, 2025, and 2024:
For the three months ended June 30
(in thousands except for % amounts)
2025
2024
Change
% Change
Rental revenue
$
145,045
$
146,750
$
(1,705
)
(1.2
)%
Property operating costs
$
(65,095
)
$
(64,359
)
$
(736
)
(1.1
)%
Operating income
$
79,950
$
82,391
$
(2,441
)
(3.0
)%
Interest income
$
10,699
$
9,615
$
1,084
11.3
%
Interest expense
$
(32,817
)
$
(29,932
)
$
(2,885
)
(9.6
)%
General and administrative expenses (1)
$
(5,975
)
$
(7,320
)
$
1,345
18.4
%
Condominium marketing expenses
$
(5
)
$
(65
)
$
60
92.3
%
Amortization of other assets
$
(360
)
$
(382
)
$
22
5.8
%
Transaction costs
$
(660
)
$
—
$
(660
)
(100.0
)%
Net income from joint venture
$
—
$
535
$
(535
)
(100.0
)%
Fair value loss on investment properties and investment properties held for sale
$
(129,734
)
$
(44,983
)
$
(84,751
)
(188.4
)%
Fair value gain (loss) on Exchangeable LP Units
$
(9,093
)
$
27,870
$
(36,963
)
(132.6
)%
Fair value gain (loss) on derivative instruments
$
2,782
$
(3,490
)
$
6,272
179.7
%
Impairment of residential inventory
$
(9,527
)
$
(6,177
)
$
(3,350
)
(54.2
)%
Net income (loss) and comprehensive income (loss)
$
(94,740
)
$
28,062
$
(122,802
)
(437.6
)%
(1) For the three months ended June 30, 2025, salaries and benefits expenses includes a fair value expense of $28 (June 30, 2024 - $1,329) on unit-based compensation plans. The mark-to-market adjustment on unit-based compensation is added back in the calculation of FFO as defined in REALPAC's "Funds From Operations (FFO) & Adjusted Funds From Operations (AFFO) for IFRS" issued in January 2022.
For the six months ended June 30
(in thousands except for % amounts)
2025
2024
Change
% Change
Rental revenue
$
295,681
$
290,327
$
5,354
1.8
%
Property operating costs
$
(134,496
)
$
(129,465
)
$
(5,031
)
(3.9
)%
Operating income
$
161,185
$
160,862
$
323
0.2
%
Interest income
$
20,794
$
24,374
$
(3,580
)
(14.7
)%
Interest expense
$
(63,501
)
$
(53,363
)
$
(10,138
)
(19.0
)%
General and administrative expenses (1)
$
(12,681
)
$
(13,818
)
$
1,137
8.2
%
Condominium marketing expenses
$
(13
)
$
(100
)
$
87
87.0
%
Amortization of other assets
$
(733
)
$
(760
)
$
27
3.6
%
Transaction costs
$
(660
)
$
—
$
(660
)
100.0
%
Net income from joint venture
$
—
$
1,287
$
(1,287
)
(100.0
)%
Fair value loss on investment properties and investment properties held for sale
$
(293,833
)
$
(164,175
)
$
(129,658
)
(79.0
)%
Fair value gain (loss) on Exchangeable LP Units
$
(118
)
$
57,511
$
(57,629
)
(100.2
)%
Fair value gain (loss) on derivative instruments
$
(3,313
)
$
3,658
$
(6,971
)
(190.6
)%
Impairment of residential inventory
$
(9,527
)
$
(6,177
)
$
(3,350
)
(54.2
)%
Net income (loss) and comprehensive income (loss)
$
(202,400
)
$
9,299
$
(211,699
)
(2,276.6
)%
(1) For the six months ended June 30, 2025, salaries and benefits expenses includes a fair value expense of $451 (June 30, 2024 - $939) on unit-based compensation plans. The mark-to-market adjustment on unit-based compensation is added back in the calculation of FFO as defined in REALPAC's "Funds From Operations (FFO) & Adjusted Funds From Operations (AFFO) for IFRS" issued in January 2022.
The following table summarizes other financial measures as at June 30, 2025, and 2024:
As at June 30
(in thousands except for per unit and % amounts)
2025
2024
Change
% Change
Investment properties (1)
$
9,297,966
$
9,777,747
$
(479,781
)
(4.9
)%
Unencumbered investment properties (2)
$
8,168,766
$
8,506,667
$
(337,901
)
(4.0
)%
Total Assets (1)
$
10,415,874
$
10,981,068
$
(565,194
)
(5.1
)%
Cost of PUD as a % of GBV (2)
6.8
%
11.4
%
—
(4.6
)%
NAV per unit (3)
$
38.97
$
44.43
$
(5.46
)
(12.3
)%
Debt (1)
$
4,565,645
$
4,272,514
$
293,131
6.9
%
Total indebtedness ratio (2)
44.0
%
39.1
%
—
4.9
%
Annualized Adjusted EBITDA (2)
$
377,328
$
383,112
$
(5,784
)
(1.5
)%
Net debt as a multiple of Annualized Adjusted EBITDA (2)
11.9x
10.9x
1.0x
—
Interest coverage ratio including interest capitalized and excluding financing prepayment costs - three months trailing (2)
2.2x
2.3x
(0.1x)
—
Interest coverage ratio including interest capitalized and excluding financing prepayment costs - twelve months trailing (2)
2.2x
2.6x
(0.4x)
—
(1) This measure is presented on a GAAP basis.(2) This is a non-GAAP measure. Refer to the Non-GAAP Measures section below. (3) Net asset value per unit ("NAV per unit") is calculated as total equity plus the value of the class B limited partnership units of Allied Properties Exchangeable Limited Partnership ("Exchangeable LP Units") as at the corresponding period ended, divided by the actual number of Units and Exchangeable LP Units. The rationale for including the value of Exchangeable LP Units is because they are economically equivalent to Units, receive distributions equal to the distributions paid on the Units and are exchangeable, at the holder's option, for Units.
Non-GAAP Measures
Management uses financial measures based on IFRS® Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards" or "GAAP") and non-GAAP measures to assess Allied's performance. Non-GAAP measures do not have any standardized meaning prescribed under IFRS Accounting Standards, and therefore, should not be construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS Accounting Standards. Refer to the Non-GAAP Measures section on page 17 of the MD&A as at June 30, 2025, available on www.sedarplus.ca, for an explanation of the composition of the non-GAAP measures used in this press release and their usefulness for readers in assessing Allied's performance. Such explanation is incorporated by reference herein.
The following table summarizes non-GAAP financial measures for the three and six months ended June 30, 2025, and 2024:
For the three months ended June 30
(in thousands except for per unit and % amounts)
2025
2024
Change
% Change
Adjusted EBITDA
$
94,332
$
95,778
$
(1,446
)
(1.5
)%
Same Asset NOI - rental portfolio
$
82,211
$
81,339
$
872
1.1
%
Same Asset NOI - total portfolio
$
86,894
$
85,610
$
1,284
1.5
%
FFO
$
68,999
$
72,089
$
(3,090
)
(4.3
)%
FFO per unit (diluted)
$
0.494
$
0.516
$
(0.022
)
(4.3
)%
FFO payout ratio
91.2
%
87.2
%
—
4.0
%
AFFO
$
63,477
$
65,218
$
(1,741
)
(2.7
)%
AFFO per unit (diluted)
$
0.454
$
0.467
$
(0.013
)
(2.8
)%
AFFO payout ratio
99.1
%
96.4
%
—
2.7
%
All amounts below are excluding condominium-related items, financing prepayment costs, and the mark-to-market adjustment on unit-based compensation:
FFO
$
69,198
$
73,483
$
(4,285
)
