Q1 2025 Allied Properties REIT Earnings Call

Jenny: [music].

Ladies and gentlemen, thank you for standing by today's conference call will begin momentarily until that time your lines will again be placed on music hold thank you for your patience.

Operator: Ladies and gentlemen, thank you for standing by. Today's conference call will begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience. Thank you for standing by.

[music].

Carly: Thank you for standing by my name is Carly and I will be your conference operator today.

Carly: My name is Carly, and I will be your conference operator today.

Carly: At this time, I would like to welcome everyone to the Allied Properties first quarter 2025 conference call. All lines have been placed on mute to prevent any background noise.

Speaker Change: At this time I would like to welcome everyone to the Allied properties first quarter 'twenty 'twenty five conference call.

Carly: All lines have been placed on mute to prevent any background noise.

Carly: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you.

Carly: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again thank.

Speaker Change: Thank you I would now like to turn the conference over just a Silvia Williams President and CEO you may begin.

Cecilia Williams: I would now like to turn the conference over to Cecilia Williams, President and CEO. You may begin.

Silvia Williams: Good morning, and welcome to our Q1 conference call.

Cecilia Williams: Good morning and welcome to our Q1 conference call. I'll highlight our achievements so far in 2025 and what we're focused on for the balance of the year.

Silvia Williams: I'll highlight our achievements so far in 2025, and what we're focused on for the balance of the year NAND.

Cecilia Williams: Nan will do the same from a financial perspective.

Silvia Williams: And then we will do the same from a financial perspective J.

Cecilia Williams: J.P. will outline the positive leasing momentum by urban market, then we're pleased to answer questions.

Silvia Williams: J P will outline the positive leasing momentum by urban market and we're pleased to answer your question.

Cecilia Williams: We may, in the course of this conference call, make forward-looking statements about future events or future performance. By their nature, these statements are subject to risks and uncertainties that may cause actual events or results to differ materially, including those described under the heading Risks and Uncertainties in our 2024 Annual Report. Material assumptions underpinning any forward-looking statements we make include those described under forward-looking statements in our most recent quarterly report. We remain focused on what we can control to create long-term value. That includes three things. Number one, leasing and operational results. Two, completing development and upgrade projects.

Silvia Williams: We may in the course of this conference call maybe forward looking statements about future events or future performance by their nature. These statements are subject to risks and uncertainties that may cause actual events or results to differ materially, including those described under the heading risks and uncertainty.

Silvia Williams: And our 2024 annual report.

Silvia Williams: Material assumptions underpinning any forward looking statements. We make include those described under forward looking statements and our most recent quarterly report.

Silvia Williams: We remain focused on what we can control to create long term value that includes three things number one leasing and operational results to completing development and upgrade projects and three strengthening the balance sheet.

Cecilia Williams: And three, strengthening the balance sheet. The quarter-end results reflect the resilience of our portfolio and operating platform as we've made progress in these three areas despite the headwinds.

Silvia Williams: Quarter end results reflect the resilience of our portfolio and operating platform as we make progress in these three areas. Despite the headwind.

Cecilia Williams: First, on leasing and operational results. Highlights include positive same asset NOI, improved retention to 75%, and a stable leased area supported by encouraging levels of tour activity.

Silvia Williams: First on the leasing and operational results.

Silvia Williams: Highlights include positive same asset NOI improved retention to 75% and a stable leased area supported by encouraging levels of tour activity.

Cecilia Williams: J.P. will elaborate on that by city. While it's unclear what the short-term impact of the economic uncertainty will be on the demand for urban office space, we're confident in our position to benefit from the long-term positive impact on Canadian cities.

J P: J P will elaborate on that by city.

Speaker Change: Well, it's unclear what the short term impact of the economic uncertainty will be on the demand for urban office space, We're confident in our position to benefit from the long term positive impact on Canadian cities.

J P: Second we made progress on our development and upgrade activity.

Cecilia Williams: Second, we made progress on our development and upgrade activity. At M4 in Vancouver, users are fixturing their space. At Toronto House, we've successfully launched our in-house rental residential operating platform. At King Toronto, the glazing is progressing, highlighting the distinctiveness of the project. There, we've secured a long-term lease with a global retailer that will enrich the user experience across King West Village.

J P: And for in Vancouver users are fixed during their space at.

J P: Toronto House, we've successfully launched our in house rental residential operating platform.

J P: At King Toronto, the glazing is progressing highlighting the distinctiveness of the project there we've secured a long term lease with a global retailer that will enrich the user experience across king West village.

Cecilia Williams: All the development and upgrade projects currently underway will be completed by the end of next year.

J P: All the development and upgrade projects currently underway will be completed by the end of next year.

Cecilia Williams: Last but certainly not least, our balance sheet. We're focused on strengthening it, keeping ample liquidity, and improving our debt metrics. We're pleased with our progress so far this year, with $850 million of refinancing resulting in negligible impact on our annual interest expense. Our disposition program of non-core assets is progressing well as private market valuations remain robust and our IFRS values continue to be validated. We closed on one asset yesterday and have two more under contract. All proceeds will be allocated to debt reduction as part of our path to get under 10 times net debt to EBITDA by the end of the year.

J P: Last but certainly not least our balance sheet, we're focused on strengthening it keeping ample liquidity and improving our debt metrics. We're pleased with our progress. So far this year $850 million of refinancing, resulting in negligible impact on our annual interest expense.

J P: Our disposition program of non core assets is progressing well as private market valuations remain robust and our ifr S values continue to be validated.

J P: We closed on one asset yesterday and have two more under contract.

J P: All proceeds will be allocated to debt reduction as part of our path to get under 10 times net debt to EBITDA by the end of the year.

Cecilia Williams: We've also improved our debt profile, taking short-term variable rate debt and replacing it with longer-term fixed rate debt.

J P: We've also improved our debt profile, taking short term variable rate debt and replacing it with longer term fixed rate debt.

Nanthini Mahalingam: Nan will now elaborate on our financial results.

Ken: Ken will now elaborate on our financial results.

Nanthini Mahalingam: Thank you, Cecilia. Good morning, everyone. We're pleased with our performance this quarter. I'll highlight some of the key metrics. Compared to the first quarter of 2024, our operating income grew by 3.5% and same asset NOI increased by 1.5%. Average in-place net rent per occupied square foot for the first quarter ended at $25.30, up 5% from the end of the comparable quarter. These metrics highlight the strength and resilience of our portfolio and the continued demand for our urban workspace. Our retention rate for the quarter increased to our historical level of 75%. Our occupied and leased area remains stable.

Ken: Thank you Cecilia and good morning, everyone.

Ken: We're pleased with our performance this quarter I'll highlight some of the key metrics.

Ken: Compared to the first quarter of 2020 for operating income grew by three 5% and NOI increased by one 5% average in place rent per occupied square foot for the first quarter ended at $25.30.

Ken: 5% from the end of the comparable quarter. These metrics highlight the strength and resilience of our portfolio and the continued demand for urban workspace.

Ken: Our retention rate for the quarter increased to a historical level of 75% occupied and leased area remains stable. These metrics reflect an encouraging start to the year and J P will elaborate more on these shortly.

Nanthini Mahalingam: These metrics reflect an encouraging start to the year, and JP will elaborate more on these shortly. We made great progress on our financing initiatives, having issued $850 million in unsecured debentures, bringing our total issuance in the last six months to $1.1 billion. Moody's withdrew the unsolicited rating of our debentures after our third issuance. Consequently, the spreads on our bonds in the secondary market tightened by 10 to 15 basis points. Additionally, we'll see an immediate 25 basis point savings on our unsecured facilities. We use these proceeds to proactively address our upcoming maturity. We repaid the construction facility on 19 Duncan, which was maturing in August, the 200 million CEC debentures, which was maturing in April, and the 400 million term loan, which was coming due in October.

Ken: We made great progress on our financing initiatives, having issued 850 million in unsecured debentures, bringing our total issuance in the last six months to $1 1 billion Moody with Trulia unsolicited waiting all five debentures after our third issuance. Consequently.

Ken: Reds are not bonds in the secondary market type food by 10 to 15 basis points. Additionally, we'll see an immediate 25 basis point savings Oh no.

Ken: Unsecured facility.

Ken: We use these proceeds to proactively address our upcoming maturities.

Ken: We repaid the construction centrally or 19, Dunkin', which was maturing in August the 200 million series C debentures, which was maturing in April and the 400 million terminal, which was coming due in October.

Nanthini Mahalingam: These transactions improved our unencumbered properties from 82.7% to 87.7% and allowed us to take advantage of opportunities in the market to address near-term maturities. In our view, this is a prudent course of action given the current macroeconomic volatility. Our timing of these issuance could not have been better. Subsequent to the last issuance, the cost of a floating rate debenture increased by 35 basis points, while a fixed rate debenture increased by 30 basis points. Ultimately, we refinance approximately 20% of our outstanding debt and so only a marginal increase in our annual interest expense of approximately $1 million.

These transactions improved our unencumbered properties from 82, 7% to 87, 7% and allowed us to take advantage of opportunities in the market to address near term maturities.

Ken: I view this as a prudent course of action given the current macroeconomic volatility.

Ken: Our timing of these issuance could not have been better subsequent to the last issuance cost of floating waves debenture increased by 35 basis points, while our fixed rate debentures increased by 30 basis points.

Ken: Lately, we refinanced approximately 20% of our outstanding debt and so only a marginal increase in our annual interest expense.

Ken: <unk> 1 million.

Nanthini Mahalingam: We continue to proactively address our remaining maturities and have completed the refinancing of the construction facility at 20 Brightock with our partner. We are currently reviewing our options for the construction facilities on M4 in Vancouver, which matures in December of this year. Our liquidity position remains strong, with over $700 million available on our unsecured facility. Our disposition program continues as expected and we will utilize the proceeds to repay debt. We have three assets currently under contract for $50 million and expect these to close over the course of the second quarter.

Ken: We continue to proactively address our remaining maturities and have completed the refinancing of the construction facility at 'twenty bright up without partner.

Ken: We are currently reviewing our options for the construction facility, an ampoule in Vancouver, which matures in December of this year.

Ken: Our liquidity position remains strong with over 700 million available on our unsecured facility.

Ken: Our disposition program continues as expected and we will utilize the proceeds to repay debt. We have three assets currently under contract for $50 million and expect these to close over the course of the second quarter.

Nanthini Mahalingam: Strengthening our balance sheet and deleveraging is an important objective for us, and we're fully committed to achieving this. As iterated during our fourth quarter conference call, we anticipated a temporary increase in our net debt to EBITDA in Q1. However, we're targeting to bring our leverage ratio to below the 10 times range by the end of 2025. We'll achieve this through organic growth in the rental portfolio from leasing activity, rent commencement in our development portfolio, stabilization of our 2024 acquisitions, and retiring debt with proceeds from the sale of non-core assets. We are mindful of the current macroeconomic uncertainties.

Ken: Strengthening our balance sheet and deleveraging is an important objective for us and we're fully committed to achieving this type of either waited during our fourth quarter conference call. We anticipated a temporary increase in our net debt to EBITDA. In Q1. However, we are targeting to bring our leverage ratio to below 10 times range.

Ken: By the end of 2025.

Ken: We achieved this through organic growth in the range of portfolio from leasing activity.

Ken: Rent commencement on develop the portfolio.

Ken: <unk> of our 2024 acquisitions and retiring debt with proceeds from the sale of non core assets.

J P: We are mindful of the current macroeconomic uncertainties. However, we remain confident that we will achieve these targets. Thank you everyone over to you J P. Thanks, Dan.

Nanthini Mahalingam: However, we remain confident that we will achieve these targets. Thank you, everyone.

J.P.: Over to you, JP. Thanks, Nanth. In Q1, we continue to observe strong conversion rates, robust expansion activity, and a shift towards larger space requirements among prospective users despite the ongoing disruption in global trade. Our occupied and leased area remained stable and outperformed each of the urban sub-markets in which we operate, except for Vancouver, where we are working to address vacancy that was acquired last year. We remain extremely encouraged by the number of existing users in our portfolio that continue to require more space. In Q1, 50,000 square feet of new leasing activity represented expansions, in line with the previous quarter.

J P: In Q1, we continued to observe strong conversion rates robust expansion activity and a shift towards larger space requirements. Among prospective users. Despite the ongoing disruption in global trade.

Speaker Change: Our occupied and leased area remains stable and outperformed each of the urban sub markets in which we operate except for Vancouver, where we are working to address vacancy that was acquired last year. We remain extremely encouraged by the number of existing users in our portfolio that continues to require.

J P: More space.

J P: In Q1, 50000 square feet of new leasing activity represented expansion.

J P: In line with the previous quarter.

J.P.: We are also encouraged by our improving retention rate, which was back in line with our historical level of 75%. In Q1, the average rental rate was stable when comparing the ending to starting base rent and up 6.3% when comparing average to average. The observed moderation in rental rate growth upon renewal is in line with our expectations and reflects the anticipated impact of increased supply, a message we have been communicating for several years. Tour activity continues to be strong. Tour activity in our rental portfolio was up 10% from the prior quarter. Industries represented by touring organizations continue to be technology, media, professional services, education, and medical use.

J P: We are also encouraged by our improving retention rate, which was back in line with our historical level of 75%.

J P: In Q1, the average rental rate was stable when comparing the ending to starting base rent.

J P: Up six 3% when comparing average to average.

J P: Zero moderation and rental rate growth upon renewal is in line with our expectations and reflects the anticipated impact of increased supply and message we have been communicating for several years.

J P: Tour activity continues to be strong tour activity and our rental portfolio was up 10% from the prior quarter industries represented by Turing organizations continue to be technology media professional services education and medical uses.

J.P.: At the end of last quarter, we reported we had 933,000 square feet of leasing activity under negotiation or at the prospect. including 570,000 square feet of new leasing activity. In Q1, we completed 507,000 sq. ft. of leasing activity, including 246,000 sq. ft. of new leasing, resulting in a 43% conversion rate.

J P: At the end of last quarter, we reported we had 933000 square feet of leasing activity under negotiation or at the prospect stage, including 570000 square feet of new leasing activity.

J P: In Q1, we completed 507000 square feet of leasing activity, including 246000 square feet of new leasing, resulting in a 43% conversion rate.

J.P.: As of today, we have 1.3 million square feet of leasing activity under negotiation or at the prospect stage split evenly between new leasing and renewals, representing a 39% increase in activity compared to the end of last quarter.

J P: As of today.

J P: We have one 3 million square feet of leasing activity under negotiation or at the prospect stage split evenly between new leasing and renewals, representing a 39% increase in activity compared to the end of last quarter.

J.P.: I'll now provide a brief overview of each market. In Montreal, we continue to observe strong demand from users with larger mandates. There are currently seven prospective groups with mandates greater than 50,000 square feet considering space in our portfolio. Technology and professional services firms are the two most active sectors and we're seeing an increase in demand from technology users headquartered in France as evidenced through recent leasing activity.

J P: I'll now provide a brief overview of each market.

J P: In Montreal, we continued to observe strong demand from users with larger mandates.

J P: There are currently seven perspective groups with mandates greater than 50000 square feet considering space in our portfolio.

J P: Technology and professional services firms are the two most active sectors and we're seeing an increase in demand from technology users headquartered in France, as evidenced through recent leasing activity.

J.P.: Most of our vacancy in Montreal is located at La Cité, a portfolio of assets located between Old Montreal and Griffintown, comprising eight buildings, totaling more than 1.1 million square feet. La Cité offers Allied Modern and Allied Heritage workspace solutions, as well as an enhanced amenity experience for users and an improved necessity-based retail and service component consistent with amenity-rich urban neighborhoods. There are currently eight prospective groups with mandates between 20,000 and 150,000 square feet considering lease options at La Cité. These prospects represent the technology, professional services, and medical sectors.

J P: Most of our vacancy in Montreal is located at Lockheed a portfolio of assets located between old Montreal, and Griffin town, comprising eight buildings totaling more than $1 1 million square feet.

J P: <unk> offers allied modern and Allied heritage Workspace solutions as well as an enhanced amenity experience for users and an improved necessity based retail and service component consistent with amenity rich urban neighborhoods. There are currently eight perspective groups with mandates between 'twenty and.

J P: 150000 square feet, considering lease options at Logitech.

J P: These prospects represent the technology professional services and medical sectors.

J P: In Toronto in Kitchener, we continue to see an increase in demand from prospective users with larger space requirements. There are presently 31 users with mandates in excess of 10000 square feet touring our portfolio and we are currently in discussions with seven existing users looking to expand representing 50000 square feet of new leasing.

J.P.: In Toronto and Kitchener, we continue to see an increase in demand from prospective users with larger space requirements. There are presently 31 users with mandates in excess of 10,000 square feet touring our portfolio, and we are currently in discussions with seven existing users looking to expand, representing 50,000 square feet of new leasing opportunity. In Q1, we experienced an increase in demand from AI-based technology users and life science users. In Calgary, we are seeing an increase in the size of mandates in the market as there are currently 11 prospective organizations with requirements in excess of 10,000 square feet evaluating options in our portfolio.

J P: <unk> in Q1, we experienced an increase in demand from AI based technology users and life science users.

J P: Calgary, we are seeing an increase in the size of the mandate in the market. As there are currently 11 perspective organizations with requirements in excess of 10000 square feet evaluating options in our portfolio.

J.P.: We are also engaged in discussions with 12 existing users looking to expand, representing 40,000 square feet of new leasing opportunity. Lastly, we continue to observe an increase in near-term demand from users in buildings slated for conversion.

J P: We are also engaged in discussions with 12 existing users looking to expand representing 40000 square feet of new leasing opportunity.

J P: Lastly, we continue to observe an increase in near term demand from users in building slated for conversion.

J.P.: Vancouver remains the strongest leasing market in Canada. There are presently 10 users with mandates between 10,000 and 50,000 square feet of valuating space in our portfolio. We are also engaged in discussions with four existing users looking to expand, representing 30,000 square feet of leasing activity.

Speaker Change: Vancouver remains the strongest leasing market in Canada. There are presently 10 users with mandates between 10050 thousand square feet evaluating space in our portfolio. We are also engaged in discussions with four existing users looking to expand representing 30000 square feet of leasing activity.

J.P.: While the ongoing disruption in global trade may impact leasing activity in the near term, we remain confident in our ability to outperform the market in each city due to our concentration of distinctive urban workspace in amenity-rich urban environments and the strength of our operating platform, as validated by our Net Promoter Score, which increased 30% year-over-year and is 150% higher than our peer average.

Speaker Change: While the ongoing disruption in global trade may impact leasing activity in the near term we remain confident in our ability to outperform the market in each city due to our concentration of distinctive urban workspace and amenity rich urban environment and the strength of our operating platform as validated by our net promoter score, which increased 30% year over year.

Speaker Change: Year and is 150% higher than our peer average I will now turn the call back to <unk>.

J.P.: I will now turn the call back to Cecilia. Thanks, JP.

J P: Thanks, JP before we turn to questions I want to reiterate my confidence in our ability to weather the current economic uncertainty and create long term value.

Cecilia Williams: Before we turn to questions, I want to reiterate my confidence in our ability to weather the current economic uncertainty and create long-term value. First, we own and operate an irreplaceable, distinctive urban portfolio. Second, we have a strong, integrated team running that portfolio. Third, we're successfully selling non-core assets, which sharpens our operating focus, strengthens our balance sheet, and enhances portfolio quality. This is all in the context of strong Canadian cities. They matter more than ever as hubs of education, innovation, culture, and opportunity. And urban workspace matters more than ever as well, as knowledge-based organizations increasingly value the attraction and retention of talent, and the importance of having their team physically together in environments that facilitate collaboration and culture.

J P: First we own and operate an irreplaceable distinctive urban portfolio.

J P: We have a strong integrated team running that portfolio.

J P: Third we're successfully selling noncore asset, which sharpens, our operating focus strengthens our balance sheet and enhances portfolio quality.

J P: This is all in the context of strong Canadian cities, they matter more than ever as hubs of education innovation culture and opportunity.

J P: And urban workspace matters more than ever as well as knowledge based organizations increasingly value of the attraction and retention of talent and the importance of having their team physically together in an environment that facilitates collaboration and culture for all of these reasons our team is focused patient and <unk>.

Cecilia Williams: For all of these reasons, our team is focused, patient, and confident that in time, our fundamentals will be recognized.

J P: Confident that in time, our fundamentals will be recognized.

Carly: We'd now be pleased to answer any questions. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.

J P: We'd now be pleased to answer any questions.

J P: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Speaker Change: Your first question comes from Jonathan <unk> with TD Cohen.

Jonathan Kelcher: Your first question comes from Jonathan Kelcher with T.D. Cohen. Thanks. Good morning. First question, just on the touring and I get Q1 was a pretty good quarter, I'm assuming that slowed down the first week of April. How has it trended the last couple of weeks and how does it look going forward into May? Jonathan, it hasn't slowed. In fact, April tour activity was in line with March and on trend to outpace Q1. Okay, and I guess That's the same going forward into May. Well, it's May 1, so we expect it to hold, yes. Okay.

Speaker Change: Thanks, Good morning.

Speaker Change: First first question just on the touring and <unk>.

Speaker Change: Q1 was a pretty good quarter I'm, assuming that slowed down the first week of April how has it trended the last couple of weeks and how does it look going forward into <unk>.

Speaker Change: Jonathan It Hasnt slowed in fact April tour activity was in line with March and on trend to outpace Q1.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: That's the same going forward into two Meg.

Speaker Change: Our may one so.

Speaker Change: Specced into a hole yet.

Speaker Change: Okay.

Cecilia Williams: And then secondly, just on the outlook, you did maintain the 4% decline in FFO, which is so about $2.09 a share. You also noted a slowdown in decision making. How much of a risk does that slowdown pose to you guys making that number? Do you have enough of a buffer built in there? For the slowdown in decision making, we've only observed that in very limited instances, Jonathan, so it's hard to tell now, you know, Balancing the visibility that we have in terms of what we have in the leasing pipeline, which is up, I think, almost 40% from what JP said, we have 1.4 million square feet.

Speaker Change: And then secondly, just on on the outlook.

Speaker Change: Did maintain the 4% decline in <unk>, which is about $2.09 a share.

Speaker Change: You also noted a slowdown in decision making how.

Speaker Change: How much how much of a risk does that slowdown posed to you guys, making your making that number do you have enough of a buffer built in there.

Speaker Change: Or is the slowdown in decision, making we've only observe that in very limited instances, Jonathan So it's hard to tell now.

Speaker Change: You know.

Speaker Change: Balancing the visibility that we have in terms of what we have in the leasing pipeline, which is up I think almost 40% from what <unk> said, we have one 4 million square feet.

Cecilia Williams: With balancing that with really the uncertainty on the short-term impact on demand for urban office space, we didn't feel that we needed to change our outlook. We're still targeting all of the metrics that we stated a few months ago for the end of the year.

Speaker Change: Balancing that was really the uncertainty on the short term impact on demand for urban office space that we didn't feel that we needed to change our outlook, we're still targeting Oliver.

Speaker Change: Metrics that we've stated a few months ago for the end of the year.

Cecilia Williams: Okay, and I guess you're a little bit ahead on on interest costs, just given the rates you guys got on your finance. We're very happy with the rates we achieved on the finance.

Speaker Change: Okay, and I guess Youre a little bit ahead on interest costs, just given the rates you guys got out of your financing.

Speaker Change: We're very happy with the rates, we achieved on the financing.

Cecilia Williams: Okay, and then just lastly, on the renewal rate, 75%, obviously very good start to the year. But you do have at least one decent size non-renewal in I think Q2, maybe Q3. But how does the balance of the year look like? Do you think you're going to hit the 70 to 75% historical number? Our objective is to achieve a retention rate in line with our historical levels. So yeah. Okay, thanks. I'll turn it back.

Speaker Change: Okay, and then just lastly on the <unk>.

Renewal rate.

Speaker Change: 75%, obviously very good start to the year.

Speaker Change: You do have.

Speaker Change: At least one decent sized non renewal and I think Q2, maybe Q3, but how does the balance of the year look like do you think you're going to hit the 70% to 75%.

Speaker Change: Alright historical number.

Speaker Change: Our objective is to achieve a retention rate in line with our historical level, Jonathan So yes.

Speaker Change: Okay. Thanks, I'll turn it back.

Cecilia Williams: Thank you.

Speaker Change: Keith.

Speaker Change: Your next question comes from Lorne Kalmar with Daves argon.

Lorne Kalmar: Your next question comes from Lorne Kalmar with Desjardins. Thanks. Good morning. Maybe just going back to the kind of, I guess, maybe a caveat around the outlook or the targets. What, in your view, has to happen to kind of give you full confidence that you guys can meet these 2025 targets? So Lorne, it's not really a caveat. We wanted to acknowledge the environment that we're operating in. We're still targeting to hit what we set out to achieve earlier this year by the end of the year. So we're not changing what we expect to achieve by the end of the year.

Lorne Kalmar: Thanks, Good morning.

Lorne Kalmar: Maybe just good morning, maybe just going back to the kind of I guess, maybe a caveat around the outlook for the targets what in your view has to happen to kind of give you full confidence that you guys can meet these 2025 targets.

Lorne Kalmar: One is that really a caveat we wanted to acknowledge the environment that we're operating in we are still targeting to hit what we set out to achieve earlier this year by the end of the year. So we're not changing.

Lorne Kalmar: What we expect to achieve by the end of the year. We just wanted to recognize the economic environment, we're operating in.

Cecilia Williams: We just wanted to recognize the economic environment we're operating in. Is there anything that you think, realistically, as we sit here today, that keeps you up at night, that really gives you concern that you wouldn't be able to get to your targets? No, we're focusing on what we can control. The things out of our control, we can't do much about, so we're not expending energy on that. I actually like that approach.

Speaker Change: Is there anything that you're seeing.

Lorne Kalmar: Realistically as we sit here today that.

Lorne Kalmar: That keeps you up at night that really just a concern that you wouldn't be able to get to your targets now we're focusing on what we can control the things out of our control we can't do much about it so we're not expanding energy on that.

Speaker Change: Hi, I actually liked that approach.

Lorne Kalmar: Okay, and then maybe just one quick question on the leasing activity this quarter. It looked like on the renewal side, the vault was fairly short, about two and a half years. Could you guys maybe provide some color on that? Lorne, it's just a function of a higher percentage of renewals in our flex portfolio where we will offer shorter term. Ah, fair enough. Okay. Thank you very much. I'll turn it back.

Speaker Change: Okay, and then maybe just one quick question on the leasing activity this quarter it looks like on the renewal side. The Walt was fairly short about two and a half years could you guys maybe provide some color on that.

Speaker Change: Yeah.

Lawrence: Lawrence just.

Lawrence: A function of a higher percentage of renewals in our flex portfolio, where we will offer shorter terms.

Lawrence: Fair enough. Okay. Thank you very much I'll turn it back.

Lawrence: Thanks.

Speaker Change: Again, if you would like to ask a question Press Star then the number one on your telephone keypad.

Carly: Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad.

Mario: Your next question comes from Mario <unk> with Scotiabank.

Mario Saric: Your next question comes from Mario Saric with Scotiabank. Hi, good morning. Just coming back to kind of the observation of limited or very limited time sessions being extended. Can you maybe just help us kind of quantify how limited that is? Like, is it like one out of every? Five leases or discussions, one out of every ten, and are there any specific geographies or tenet types that are comprising that limited delay decision? In Q1, we had one, maybe two, Mario, of the, I don't know, several dozen leases that we nailed down, so it is limited. extremely limited at this stage.

Speaker Change: Hi, good morning.

Speaker Change: Just.

Speaker Change: Coming back to kind of the observation.

Speaker Change: Limited very limited tenant discussions being extended.

Speaker Change: Can you maybe just help us kind of quantify how limited that is because it is like one out of every.

Speaker Change: By leasing discussions one out of every 10 and are there any specific geographies or tenant types that are rising.

Speaker Change: That limited the latest Nicholson.

Speaker Change: In Q1, we had one maybe two Mario of the I don't know several dozen leases.

Speaker Change: That we know down sell it is limited.

Speaker Change: Extremely limited at this stage.

Speaker Change: Got it okay.

Cecilia Williams: Okay, and then for the remainder of the year, in terms of known tenant vacancies, can you just remind us of what the total square footage may be that was or wasn't included in your 90%? Target Occupancy Letter. I think it's in our MDNA, sorry, we have it in the MDNA, in the maturity, the maturity table would capture what we have coming up. It's about a million square feet for the remainder of the year, Mario. But specifically in terms of known tenant vacancies, like the kind of that you know, or at least of North Miss here.

Speaker Change: And then.

Speaker Change: For the remainder of the year in terms of the known tenant vacancies can you just remind us of what the full square footage maybe that was or wasn't included in your guidance.

Speaker Change: Target occupancy by midyear.

Athena: I think Athena.

Speaker Change: Sorry, Ed we havent in the MD&A in the matured the majority came over to capture what we have coming out it's about 1 million square feet for the remainder of the year Maher.

Speaker Change: But specifically in terms of no tenant vacancies.

Speaker Change: As you know are leaving.

Speaker Change: This year.

Cecilia Williams: Well, you can apply our historical renewal rate, so we still expect to achieve, you know, in the mid-70%, so you can apply that to the million square feet that remain. That's what we're targeting to get to by the end of the year. So, I mean, it might be chunky quarter over quarter, but that would be a full year estimate.

Speaker Change: Well you can apply our historical renewal rate. So we still expect to achieve in the mid 70%. So you can apply that to the 1 million square feet that remain that's what we're targeting to get to by the end of the year. So I mean it.

Speaker Change: Might be chunky quarter over quarter, but that would be a full year estimate.

Cecilia Williams: And that tenant renewal ratio, was it similar in the non-FLEX portfolio versus the FLEX portfolio during Q1? Sorry, can you repeat the question? We're having trouble. Sorry, it sounds kind of mumbly. We can't tell what you're asking exactly. Okay, I'll try again. The 75% renewal ratio in the quarter, was it similar in the flex portfolio versus the non-flex portfolio? Yes. Okay.

Speaker Change: Okay.

Speaker Change: Tenant renewal ratio.

Speaker Change: Was it similar.

Speaker Change: Non flex portfolio versus <unk> portfolio during Q1.

Speaker Change: Sorry can you repeat the question were having trouble sorry, it sounds kind of mumbling, we can't tell what youre asking exactly.

Speaker Change: Okay I'll try again.

Speaker Change: 75% renewal ratio in the quarter was it similar in the flex portfolio versus the non flex portfolio.

Speaker Change: Yes.

Speaker Change: Okay.

Mario Saric: My last question, just in terms of the dispositions, the $300 million for the year, you expressed confidence in hitting that.

Speaker Change: My last question just in terms of the distribution the $300 million for the year.

Speaker Change: You expressed confidence in hitting that.

Mario Saric: Are there any factors that could come into play where you would look to perhaps exceed the $300 million? We're targeting $300 million, Mario, and we expect to hit that by the end of the year. but we're going to be commenting on it this. And presumably the $300 million would exclude monetization of 150 Georgia receivables? Absolutely, yes. Okay, thank you.

Speaker Change: Are there any factors there.

Speaker Change: Could come into play where you would look to perhaps exceed the $300 million.

Speaker Change: Yeah.

Speaker Change: We're targeting 300 million Mario one and we expect to hit that by the end of the year that's all.

Speaker Change: We're going to be commenting on at this point.

Speaker Change: Got it and then presumably a 300 million would exclude monetization of 150, Georgia that receivable.

Speaker Change: Yes.

Speaker Change: Okay. Thank you.

Speaker Change: Your next question comes from Matt <unk> with National Bank financial.

Matt Kornack: Your next question comes from Matt Kornack with National Bank Financial. Good morning, guys. Just quickly, with regards to some of the upgrade assets, particularly in Montreal, do you expect to make some progress on leasing at 1,001 RSA or maybe 3,575 CELERAL? Or how should we think about the view to getting to 90% by the end of the year on committed occupancy? Will that come from the upgrade portfolio or from filling vacancy in the existing So we absolutely will be making progress on renting out 1001 and 3575. That won't impact our leased area as the lease up there is taking place in spaces that are currently in the PUD portfolio.

Matt: Good morning, guys.

Speaker Change: Just quickly with regards to some of the upgraded assets, particularly in Montreal do you expect to make some progress on leasing at 1001, Robert Burrows, maybe 375 sell at all or how should we think about the again the view to getting to 90%.

Speaker Change: By the end of the year on committed occupancy will that come from the upgrade portfolio or from filling vacancy in the existing prep.

Speaker Change: Properties so.

Speaker Change: So we absolutely will be making progress.

Speaker Change: <unk> 1000, 1575 that will impact our leased area as lease up there has taken place in spaces that are currently in the <unk> portfolio.

Matt Kornack: So we'll make progress on those two assets, but we will be making progress towards the 90% in the rental portfolio separately from 3575 and 1001.

Speaker Change: So we will make progress on those two assets that we will be making progress towards the <unk>.

Speaker Change: 90%.

Speaker Change: Rental portfolio separately from 350 to 75 in 2001.

Matt Kornack: Okay, and then with regards to the NOI contribution from development versus capitalized interest, has anything changed on that front in terms of the cadence or how should we think about what we define the 2025 earnings impact, but I think there's more material impact in 2026 on some of those items. Nothing has changed on that map. We're progressing as expected and facing a wave. Okay, thanks guys. Thank you.

Speaker Change: Okay.

Speaker Change: And then with regards to.

Speaker Change: The NOI contribution from development versus capitalized interest has anything changed on that front.

Speaker Change: In terms of the cadence or.

Speaker Change: How should we think about.

Speaker Change: We define the 2025 earnings.

Speaker Change: Impact, but I think there is a more material impact in 2026 on some of those items.

Speaker Change: Nothing has changed on that Matt with progress and has expected and.

Speaker Change: Leasing away.

Ed Maher: Okay. Thanks, Ed.

Speaker Change: Thank you.

Speaker Change: Okay.

Bradley Sturges: Your next question comes from Brad Sturges with Raymond James. Hey, good morning. Appreciate all the commentary around leasing. I guess, given that you're seeing an uptick in activity and sort of limited impact, I guess, on the macro, you know, based on the macro environment, would you expect any changes in the type of lease term that you're seeing your tenants pursue? Are you seeing more of a preference for shorter-term deals, or is it just really user-specific?

Speaker Change: Your next question comes from Brad Sturges with Raymond James.

Speaker Change: Hey, good morning.

Speaker Change: I appreciate all the commentary around leasing.

Speaker Change: I guess, given given you've seen an uptick in.

Speaker Change: Activity and sort of aluminum impact I guess on the Mark.

Speaker Change: Based on the macro level would.

Speaker Change: Would you expect any changes in the type of lease term that youre.

Speaker Change: Youre seeing your tenants pursue or you're seeing more of a preference towards shorter term deals or is it just really user specific and then.

Bradley Sturges: And then... Secondly, with you know, would you be pursuing early renewal with any of your larger tenants if you're looking towards 2020? Brad, we're seeing requests for longer terms amongst our new leasing pipeline. The average term in for new leasing in the quarter was 6.3 years. When you remove new deals in our flex portfolio is 7.9 years. That's a trend we expect to continue.

Speaker Change: Secondly, wood.

Speaker Change: Will you be pursuing early renewal with any of your larger tenants if youre looking out towards 2026.

Speaker Change: Okay.

Speaker Change: Brad we're seeing requests for longer terms amongst our new leasing pipeline. The average term for new leasing in the quarter was $6 three years when you remove new deals in our flex portfolio was seven nine years. That's a trend we expect to continue and we are pleased.

Bradley Sturges: And we are pleased by the ongoing discussions we're having with tenants that mature in 2020. My other question, just you saw the uptick in occupancy at Toronto House as you're... you know, leasing out that asset. Just curious, I guess, would that be more like short-term rentals? And how should we think about the NOI or the rental rate contribution from short-term lease, short-term rental lease versus, I guess, at some point, you'll be focused more on the long-term rental pool. Brad, it does not represent short-term leasing opportunities. They are all long-term lease transactions, consistent with what you'd expect for the market.

Speaker Change: And by the ongoing discussions, we're having with tenants that mature in 2026.

Speaker Change: Okay.

Speaker Change: My other question just.

Speaker Change: And saw the uptick in occupancy a Toronto house.

Leasing up that asset just curious I guess would that be more like short term rentals and how should we think about the NOI or the rental rate contribution.

Speaker Change: From short term.

Speaker Change: Short term rental lease up versus I guess at some point, you'll focus more on the long term rental pool there.

Speaker Change: Brad It does not represent short term leasing opportunities. They are all long term lease transactions consistent with what you would expect for the market. We're very pleased with the rental rates, we're achieving there in line with our pro forma and we expect our performance to continue in that way.

Bradley Sturges: We're very pleased with the rental rates we're achieving. They're in line with our performa, and we expect our performance to continue in that way.

Speaker Change: But there will be a short term rental pool I guess, one would that program really start to commence.

Bradley Sturges: But there will be like a short-term rental pool. I guess when would that program really start to come in? There is not a short-term rental pool, Brad. There are third-party providers that offer that service that have entered into long-term contracts with Allied to offer that type of duration of stay.

Speaker Change: There is not a short term rental pool, Brad there are third party providers that offer that service that I've entered into long term contracts with allied to offer that type of.

Speaker Change: Duration of stay.

Bradley Sturges: Got it. Okay. It would be typically like a one-year lease term for those type of providers? Those are typically longer than one year.

Speaker Change: Got it okay.

Speaker Change: Typically like a one year lease term for those type of providers.

Speaker Change: Those are typically longer than one year.

Speaker Change: Okay.

Bradley Sturges: Great. I'll turn it back. Thank you.

Speaker Change: Great I'll turn it back thank you.

Yes.

Your next question comes from Tammy <unk> with RBC capital markets.

Tammy Beer: Your next question comes from Tammy Beer with RBC Capital Markets. Thanks. Good morning. Just coming back to the disposition target, you know, I guess we should see some pickup in Q2. Just any discussion, anything you can share in terms of color on discussions maybe beyond the $15 million? And curious if you're seeing any stronger interest in any particular markets or from, you know, various types of buyers? Yeah, it's consistent with what we disclosed in the press release, Pammi, and it's all based on unsolicited inbounds for our assets and private equities, the valuations remain robust, and we're pleased that our IFRS values are being validated.

Tammy <unk>: Thanks, Good morning, just coming back to the disposition target I guess, we should see some pickup in Q2, just any discussion or anything you can share in terms of color on discussions maybe beyond the $50 million and curious if youre seeing any stronger interest in any particular markets or from.

Speaker Change: Various types of buyers.

Speaker Change: Yes. It is.

Speaker Change: System with what we disclosed in the press release for me and it's all based on <unk>.

Unsolicited inbounds for our assets.

Speaker Change: Private equity.

Speaker Change: The valuations remain robust and we're pleased that our <unk> values are being validated.

Speaker Change: Okay. So these arent necessarily assets that are going through sort of a listed process with a broker.

Tammy Beer: Okay, so these aren't necessarily assets that, you know, are going through sort of a listed process with a broker. Absolutely not.

Speaker Change: Absolutely not.

Speaker Change: Okay.

Tammy Beer: And just coming back to 150 West Georgia, any update there in terms of the process? What kind of interests maybe have been seen on that site? Yeah, we will be going live with that process later this month, and we're very pleased with the opportunities that we'll be able to explore there. I guess in terms if it's going live, I guess this month or soon, you know, is there the possibility that a deal could be transacted within, you know, the second half of the year and ultimately, I guess, repayment, like closing and repayment for the loan or?

Speaker Change: And just coming back to 150, West, Georgia any update there in terms of the process what kind of interest maybe have it has.

Speaker Change: <unk> been seen on that site.

Speaker Change: Yes, we will be going live with that process. Later this month and we're very pleased with the opportunities that we'll be able to explore there.

Speaker Change: I guess in terms, if it's going live.

Speaker Change: This month or soon.

Speaker Change: Is there the possibility of the deal could be transacted within the second half of the year and ultimately I guess repayment by closing a payment for the loan or.

Tammy Beer: Yes, we're targeting by the end of 2025. That's right. Okay. All right. I will turn it back. Thank you.

Speaker Change: Yes, we're targeting by the end of 2025, that's right.

Speaker Change: Okay, Alright, I will now turn it back thank you.

Speaker Change: Thank you.

Fred Blondeau: Your next question comes from Fred Blondeau with Green Street. Thank you. And good morning. Sorry, I missed that. Just one question for me.

Speaker Change: Your next question comes from Fred <unk> with Green Street.

Speaker Change: Thank you and.

Speaker Change: Good morning, sorry.

Speaker Change: That's just one question for me.

Fred Blondeau: When are the lease term on being on lease being discussed with your prospective tenants at the moment? You mentioned the 2.5 years. I was wondering, how is that expected to trend from here? For new leasing, the average term achieved in the quarter was 6.3 years. When removing transactions in our Flex portfolio, it was 7.9 years, and we continue to field more and more inquiries from prospective users looking for longer term durations than shorter term durations. Okay, that's great. Thank you.

Speaker Change: Sure.

Speaker Change: What are the lease term or being on the lease being discussed with prospective tenants at the moment you mentioned the two five years I was wondering how is that expected to trend from here.

For new leases the average term achieved in the quarter was $6 three years when removing.

Speaker Change: Transactions in our flex portfolio. It was seven nine years, and we continue to field more and more inquiries from prospective users looking for longer term durations than shorter term durations.

Speaker Change: Okay. That's great. Thank you.

Speaker Change: Okay.

Speaker Change: Again, if you would like to ask a question Press Star then the number one on your telephone keypad.

Carly: Again, if you would like to ask a question, press star then the number one on your telephone keypad.

Speaker Change: Your final question comes from semi side with CIBC.

Sumayya Saeed: Your final question comes from Sumayya Saeed with CIBC. Thanks. Good morning. Just to revisit the outlook briefly. So I think your lease of targets in the 90% goal were waited to the end of the year anyway. So if things do meaningfully slow down, how do we think about that? Would that simply be that the 90% goal is deferred or in place occupancy goes down from where it is currently? No, you know, I mean, if things slow down, then we'll address them when they do. But right now, we're sticking with our target of 90%, at least 90% by the end of the year.

Speaker Change: Thanks, Good morning, just to revisit the outlook briefly so.

Speaker Change: Thank you Lisa targets in the 90% goal were weighted to the end of the year anyway.

Speaker Change: Things do meaningfully slow down how do we think about that would that simply be that the 90% goal is deferred or in place occupancy goes down from where it is currently.

Speaker Change: No.

Speaker Change: I mean, if things slow down and then we'll address them when they do but right now we're sticking with our target of 90% at least 90% by the end of the year.

Speaker Change: Okay.

Sumayya Saeed: Okay.

Speaker Change: Okay.

Sumayya Saeed: And then, JP, in your commentary, you mentioned about a 43% conversion rate on new leases. So of the ones that don't convert, what are some of the main or recurring reasons that you hear, and how does that 40% conversion compare with historical rates? Sumayya, 43% is in line with what we would have achieved in the first half of 2024. In many cases, transactions that we haven't yet converted are ongoing. And as we've addressed in our remarks, we've seen a 39% increase in prospective leasing activity in our deal pipeline, which is really encouraging. So our leasing team is very busy across the country.

Ed Maher: And then JP in your commentary you mentioned about 43% conversion rate on new leases.

Ed Maher: One is that dawn convert what are some of the main a recurring reasons that you hear and how does that 40% conversion compared with historical rates.

Ed Maher: Some of our 43% is in line with what we would have achieved in the first half of two.

Ed Maher: 2024, and many cases transactions that we haven't yet converted are ongoing and.

Ed Maher: And we as we've addressed in our remarks, we've seen a 39% increase in perspective leasing activity and our deal pipeline, which is really encouraging so our leasing team is very busy across the country.

Sumayya Saeed: And we are very pleased with the amount of inbound increase that we're fielding across all markets.

Ed Maher: And we are very pleased with the amount of inbound inquiries that we're fielding across all markets and sectors.

Ed Maher: Okay great.

Sumayya Saeed: Okay, great. And just lastly, I think in the fair value discussion, there was some comment around there being cost increases in the development portfolio, with any more color there if it's market or project specific. No, that was just on the redevelopment category, and that's the category where there was the movement this quarter, where there was 6,000 square feet that was transferred in, so it was just related to that. Okay, thanks.

Ed Maher: And just lastly, I think in the fair value discussion there was some comment around durbin cost increases and the development portfolio with any more color there if it's market or project specific.

Ed Maher: No that was just on the <unk> category and that's the category wagging over there was some movement this quarter, where there was.

Ed Maher: $6 million 6000 square feet, sorry that was transferred in there which is related to that.

Ed Maher: Okay. Thanks, I'll turn it back.

Sumayya Saeed: I'll turn it back.

That concludes our Q&A session I will now turn the conference back over to Cecilia Williams for closing remarks.

Carly: That concludes our Q&A session.

Cecilia Williams: I will now turn the conference back over to Cecilia Williams for closing remarks. Thanks everyone for joining our conference call. We'll keep you updated on our progress going forward.

Speaker Change: Thanks, everyone for joining our conference call, we will keep you updated on our progress going forward.

Speaker Change: This concludes today's conference call you may now disconnect.

Carly: This concludes today's conference call. You may now disconnect.

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