Allied Announces Third-Quarter Results

Article content

TORONTO, Oct. 29, 2025 (GLOBE NEWSWIRE) — Allied Properties Real Estate Investment Trust (“Allied”) (TSX: “AP.UN”) today announced results for the three months ended September 30, 2025. “We continued the strengthening of our debt profile and moved steadily toward completion of our developments and non-core property sales in the third quarter,” said Cecilia Williams, President & CEO. “Although urban office fundamentals are improving in Canada’s major cities, our occupied and leased areas didn’t increase at the pace we expected in the quarter. Along with elevated interest expense, the slower pace of lease finalization put downward pressure on our results.”

Article content

Article content

Operations

Article content

Article content

Article content

Allied’s portfolio is comprised of three urban workspace formats — Allied Heritage, Allied Modern and Allied Flex. By the end of the third quarter, Allied had leased more vacant space in Montréal and Vancouver and in the Allied Modern segment of its portfolio. Velocity is increasing discernably in Toronto and the Allied Heritage segment, but the pace has been slower than expected over the course of the year, with the result that Allied will not achieve targeted occupancy of 90% by year-end.

Article content

Allied conducted 241 lease tours in its rental portfolio in the third quarter. While below the number of tours in the prior quarter, the average size of the requirement per tour more than doubled compared to the prior quarter.

Article content

Allied’s occupied and leased area at the end of the quarter was 84% and 87.4%, respectively. Allied renewed 62% of the leases maturing in the quarter, bringing renewals for the nine-month period ended September 30 to 69%, just below its normal range of 70% to 75%. Notably, Google renewed its lease of 194,842 square feet at The Breithaupt Block (97,421 square feet at Allied’s share), a large Allied Heritage complex in Kitchener.

Article content

Article content

Allied leased a total of 881,628 square feet of GLA in the third quarter, 795,969 square feet in its rental portfolio and 85,659 square feet in its development portfolio. Of the 795,969 square feet Allied leased in its rental portfolio, 214,767 square feet were vacant, 250,374 square feet were maturing in the quarter and 330,828 square feet were maturing after the quarter.

Article content

187,153 square feet of the space leased in the quarter involved expansion by existing users. 324,063 square feet of the space leased in the quarter involved new users to the portfolio.

Article content

Average in-place net rent per occupied square foot ended the third quarter at $25.19, down slightly from the end of the comparable quarter. Allied increased rent levels on renewal in the third quarter (up 1.5% ending-to-starting base rent and up 8.8% average-to-average base rent).

Article content

Portfolio Optimization

Article content

To date, Allied has closed the sale of a non-core property in each of Edmonton, Vancouver and Montréal for aggregate proceeds of $46 million. Allied now has four non-core properties under firm contract scheduled to close by mid-November of this year — one in Vancouver, two in Montréal and one in Toronto — for aggregate proceeds of $55 million. Allied is also finalizing sale documentation for another three properties in Montréal expected to close in December of this year for aggregate proceeds of $85 million. On closing, Management will consider the sale process in Montréal and Vancouver complete.

Article content

Allied recently modified and augmented its non-core sales initiative in Toronto and Calgary. Allied now holds four non-core office properties for sale in Toronto and one in Calgary and anticipates aggregate proceeds of approximately $84 million on closing the sale of these properties. Having made better than expected progress in finalizing the construction and lease-up of Toronto House and the lease-up of Calgary House, Management has added these properties to its non-core sales initiative. Toronto House has recently received unsolicited expressions of interest from qualified buyers and, with Calgary House, has the potential to more than double the aggregate proceeds from Allied’s non-core sales initiative. Closings of Toronto House and Calgary House are targeted to occur by the end of the second quarter of 2026. On closing, Management will consider Allied’s non-core sales initiative to be complete.

Article content

Balance-Sheet Management

Article content

Allied’s overriding strategic objective for 2025 was to continue the re-fortification of its balance sheet. To that end, Allied raised $1.3 billion from the bond market and used the proceeds to retire

Article content

Article content

(i) a $200 million unsecured debenture,

Article content

(ii) a $400 million term loan, 

Article content

(iii) $150 million of a $250 million term loan scheduled to expire early next year (with the residual $100 million being extended for two years with a favourable interest-rate swap),

Article content

(iv) all short-term, variable-rate construction loans other than the construction loan on KING Toronto, which is self-liquidating through the sale of condominium units, and

Article content

(v) amounts drawn on its unsecured revolving operating facility this year, primarily to fund the final ground-up development completions.

Article content

Allied also replaced its unsecured revolving operating facility with a new facility provided by six major Canadian financial institutions on the same financial terms and expiring on September 29, 2028.

Article content

At the end of the third quarter, Allied

Article content

(i) had $51 million drawn on its new $800 million unsecured revolving operating facility, along with cash of $63 million, affording considerable liquidity going forward,

Article content

(ii) maintained short-term, variable rate debt at a negligible level in relation to total debt,

Article content

Article content

(iii) extended the weighted average term of its debt to 3.4 years,

Article content

(iv) had a total debt ratio* of 45%, and

Article content

(v) had net debt as a multiple of annualized adjusted EBITDA* of 12.3x.

Article content

Allied expects to have a minimal amount drawn on its facility by year-end, along with cash proceeds from the sale of non-core assets.

Article content

Allied’s debt and interest expense has been higher than expected this year for two reasons:

Article content

(i) while on target, Allied’s non-core sales will close later than expected, with the result that debt reduction (and corresponding reduction in interest expense) will occur later than expected; and

Article content

(ii) Allied borrowed more than initially expected to complete the final ground-up developments in its development pipeline. 

Article content

Allied continues to make progress in monetizing its loan receivable secured by 150 West Georgia in Vancouver, the proceeds of which will be used to reduce debt. With entitlement and power-allocation for a large-scale AI data centre now in place, the property is marketable for development and operation by others. While Allied expects a monetizing transaction to be negotiated before year-end, it will most likely close in the first half of 2026.

Article content

Allied remains fully committed to having net debt to annualized adjusted EBITDA below 10x and to the ongoing improvement of its access to the debt capital markets. As a result of the later than expected closing of non-core sales and monetization of its loan receivable at 150 West Georgia, this will require more time than initially anticipated.

Article content

Outlook for 2025

Article content

With the slower than expected pace of lease finalization and higher overall interest cost, Management now expects

Article content

(i) occupied and leased area at year-end to be in-line with the third quarter,

Article content

(ii) same asset NOI* to be down approximately 1% for the year, and

Article content

(iii) FFO* and AFFO* per unit to contract by approximately 10% in the year.

Article content

_____________________________________________________________________________
^{* 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.}

Article content

Financial Measures

Article content

The following tables summarize GAAP financial measures for the three and nine months ended September 30, 2025, and 2024:

Article content

Article content

Article content

Article content

^{(1) For the three months ended
September 30, 2025, salaries and benefits expenses includes a fair value expense of $1,450 (September 30, 2024 – recovery of $2,880) 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.}

Article content

Operating income for the three months ended September 30, 2025, decreased from the comparable period primarily due to dispositions and known non-renewals, partially offset by a lease termination fee received to accommodate an expansion of a long-term user.

Article content

General and administrative expenses for the three months ended September 30, 2025, increased from the comparable period primarily due to a higher mark-to-market expense on unit-based compensation as a result of an increase in Allied’s Unit price. Excluding the mark-to-market adjustment on unit-based compensation, the total general and administrative expenses for the three months ended September 30, 2025, would be $6,008 (September 30, 2024 – $5,021).

Article content

Article content

Article content

^{(1) For the nine months ended
September 30, 2025, salaries and benefits expenses includes a fair value expense of $1,901 (September 30, 2024 – recovery of $1,941) 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.}

Article content

Operating income for the nine months ended September 30, 2025, decreased from the comparable period primarily due to dispositions and known non-renewals, partially offset by contributions from acquisitions and rent commencement from development completions.

Article content

General and administrative expenses for the nine months ended September 30, 2025, increased from the comparable period primarily due to a higher mark-to-market expense on unit-based compensation as a result of an increase in Allied’s Unit price. Excluding the mark-to-market adjustment on unit-based compensation, the total general and administrative expenses for the nine months ended September 30, 2025, would be $18,238 (September 30, 2024 – $17,900).

Article content

Article content

The following table summarizes other financial measures as at September 30, 2025, and 2024:

Article content

Article content

^{(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.}

Article content

Non-GAAP Measures

Article content

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 16 of the MD&A as at September 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.

Article content

The following table summarizes non-GAAP financial measures for the three and nine months ended September 30, 2025, and 2024:

Article content

Article content

Article content

Article content

The following table reconciles the non-GAAP measures to the most comparable GAAP measures for the three and nine months ended September 30, 2025, and 2024. These terms do not have any standardized meaning prescribed under IFRS Accounting Standards and may not be comparable to similarly titled measures presented by other publicly traded entities.

Article content

Article content

The following table reconciles Allied’s net loss and comprehensive loss to Adjusted EBITDA, a non-GAAP measure, for the three and nine months ended September 30, 2025, and 2024.

Article content

Article content

^{(1) Includes Allied’s proportionate share of the equity accounted investment’s fair value gain on investment properties of $nil and $nil for the three and nine months ended
September 30, 2025, respectively (September 30, 2024 – $31 and $213, respectively).}

Article content

The following table reconciles operating income to net operating income, a non-GAAP measure, for the three and nine months ended September 30, 2025, and 2024.

Article content

Article content

^{(1) Includes Allied’s proportionate share of the equity accounted investment of the following amounts for the three and nine months ended
September 30, 2025: amortization improvement allowances of $nil and $nil, respectively (September 30, 2024 – $213 and $589, respectively) and amortization of straight-line rent of $nil and $nil, respectively (September 30, 2024 – $(57) and $(152), respectively).}

Article content

Same Asset NOI, a non-GAAP measure, is measured as the net operating income for the properties that Allied owned and operated for the entire duration of both the current and comparative period.

Article content

Article content

Article content

Article content

Article content

The following table reconciles Allied’s net loss and comprehensive loss to FFO, FFO excluding condominium-related items, financing prepayment costs, transaction costs and the mark-to-market adjustment on unit-based compensation, AFFO, and AFFO excluding condominium-related items, financing prepayment costs, and the mark-to-market adjustment on unit-based compensation, which are non-GAAP measures, for the three and nine months ended September 30, 2025, and 2024.

Article content

Article content

^{(1) Property, plant and equipment relates to owner-occupied property.
(2) The weighted average number of units includes Units and Exchangeable LP Units.}

Article content

Article content

Article content

^{(1) Property, plant and equipment relates to owner-occupied property.
(2) The weighted average number of units includes Units and Exchangeable LP Units.}

Article content

Cautionary Statements

Article content

This press release may contain forward-looking statements with respect to Allied, its operations, strategy, financial performance and condition, and the assumptions underlying any of the foregoing. These statements generally can be identified by the use of forward-looking words such as “forecast”, “goals”, “outlook”, “may”, “will”, “expect”, “estimate”, “anticipate”, “intends”, “believe”, “assume”, “plans” or “continue” or the negative thereof or similar variations. The forward-looking statements in this press release are not guarantees of future results, operations or performance and are based on estimates and assumptions that are subject to risks and uncertainties, including those described under “Risks and Uncertainties” in Allied’s Annual MD&A, as updated by quarterly reports, which are available at www.sedarplus.ca. Those risks and uncertainties include risks associated with financing and interest rates, access to capital, general economic conditions and joint arrangements and partnerships. Allied’s actual results and performance discussed herein could differ materially from those expressed or implied by such statements. These cautionary statements qualify all forward-looking statements attributable to Allied and persons acting on its behalf. All forward-looking statements speak only as of the date of this press release and, except as required by applicable law, Allied has no obligation to update such statements.

Article content

Article content

About Allied

Article content

Allied is a leading owner-operator of distinctive urban workspace in Canada’s major cities. Allied’s mission is to provide knowledge-based organizations with workspace that is sustainable and conducive to human wellness, creativity, connectivity and diversity. Allied’s vision is to make a continuous contribution to cities and culture that elevates and inspires the humanity in all people.

Article content

FOR FURTHER INFORMATION, PLEASE CONTACT:

Article content

Cecilia C. Williams

Article content

Article content

Nanthini Mahalingam

Article content

Article content

J.P. Mackay

Article content

Article content

Article content

Article content

Article content

Article content

Article content