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.”
Operations
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.
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.
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.
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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.
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.
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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).
Portfolio Optimization
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.
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.
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Balance-Sheet Management
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
(i) a $200 million unsecured debenture,
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(ii) a $400 million term loan,
(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),
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(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
(v) amounts drawn on its unsecured revolving operating facility this year, primarily to fund the final ground-up development completions.
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.
At the end of the third quarter, Allied
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(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,
(ii) maintained short-term, variable rate debt at a negligible level in relation to total debt,
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(iii) extended the weighted average term of its debt to 3.4 years,
(iv) had a total debt ratio* of 45%, and
(v) had net debt as a multiple of annualized adjusted EBITDA* of 12.3x.
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.
Allied’s debt and interest expense has been higher than expected this year for two reasons:
(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
(ii) Allied borrowed more than initially expected to complete the final ground-up developments in its development pipeline.
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.
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.
Outlook for 2025
With the slower than expected pace of lease finalization and higher overall interest cost, Management now expects
(i) occupied and leased area at year-end to be in-line with the third quarter,
(ii) same asset NOI* to be down approximately 1% for the year, and
(iii) FFO* and AFFO* per unit to contract by approximately 10% in the year.
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* 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 nine months ended September 30, 2025, and 2024:
For the three months ended September 30(in thousands except for % amounts) 2025 2024 Change% ChangeRental revenue$147,932 $146,593 $1,339 0.9%Property operating costs$(67,205)$(63,364)$(3,841)(6.1)%Operating income$80,727 $83,229 $(2,502)(3.0)%Interest income$9,976 $10,302 $(326)(3.2)%Interest expense$(35,488)$(31,361)$(4,127)(13.2)%General and administrative expenses (1)$(7,458)$(2,141)$(5,317)(248.3)%Condominium marketing expenses$(5)$(17)$12 70.6%Amortization of other assets$(642)$(390)$(252)(64.6)%Transaction costs$(999)$(136)$(863)(634.6)%Net income from joint venture$- $450 $(450)(100.0)ir value loss on investment properties and investment properties held for sale$(100,265)$(47,359)$(52,906)(111.7)ir value loss on Exchangeable LP Units$(42,277)$(57,983)$15,706 27.1ir value loss on derivative instruments$(2,565)$(16,689)$14,124 84.6%Impairment of residential inventory$(14,393)$(32,082)$17,689 55.1%Net loss and comprehensive loss$(113,389)$(94,177)$(19,212)(20.4)% (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.
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.
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).
For the nine months ended September 30(in thousands except for % amounts) 2025 2024 Change% ChangeRental revenue$443,613 $436,920 $6,693 1.5%Property operating costs$(201,701)$(192,829)$(8,872)(4.6)%Operating income$241,912 $244,091 $(2,179)(0.9)%Interest income$30,770 $34,676 $(3,906)(11.3)%Interest expense$(98,989)$(84,724)$(14,265)(16.8)%General and administrative expenses (1)$(20,139)$(15,959)$(4,180)(26.2)%Condominium marketing expenses$(18)$(117)$99 84.6%Amortization of other assets$(1,375)$(1,150)$(225)(19.6)%Transaction costs$(1,659)$(136)$(1,523)(1,119.9)%Net income from joint venture$- $1,737 $(1,737)(100.0)ir value loss on investment properties and investment properties held for sale$(394,098)$(211,534)$(182,564)(86.3)ir value loss on Exchangeable LP Units$(42,395)$(472)$(41,923)(8,882.0)ir value loss on derivative instruments$(5,878)$(13,031)$7,153 54.9%Impairment of residential inventory$(23,920)$(38,259)$14,339 37.5%Net loss and comprehensive loss$(315,789)$(84,878)$(230,911)(272.1)% (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.
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.
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).
The following table summarizes other financial measures as at September 30, 2025, and 2024:
As at September 30(in thousands except for per unit and % amounts) 2025 2024 Change% ChangeInvestment properties (1)$9,392,358 $9,667,178 $(274,820)(2.8)%Unencumbered investment properties (2)$8,346,998 $8,386,958 $(39,960)(0.5)%Total Assets (1)$10,378,800 $10,930,951 $(552,151)(5.1)%Cost of PUD as a % of GBV (2) 7.8% 10.7% – (2.9)%NAV per unit (3)$38.05 $43.76 $(5.71)(13.0)bt(1
