Q1 2025 Allied Properties REIT Earnings Call
Speaker Change: [music].
Okay.
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.
Speaker Change: 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.
Speaker Change: [music].
Carla: Thank you for standing by my name is Carla 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.
Carla: At this time I would like to welcome everyone to the Allied properties first quarter 2025 conference call.
Carla: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
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.
Carla: 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.
Cecilia Williams: I would now like to turn the conference over to Cecilia Williams, President and CEO. You may begin.
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: 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: Good morning, and welcome to our Q1 conference call.
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.
Cecilia Williams: J.P. will outline the positive leasing momentum by urban market, then we're pleased to answer questions.
Speaker Change: 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 Reports. Material assumptions underpinning any forward-looking statements we make include those described under forward-looking statements in our most recent quarterly reports. 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.
Speaker Change: We may in the course of this conference call maybe forward looking statements about future events or future performance.
Speaker Change: 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 reports.
Speaker Change: Material assumptions underpinning any forward looking statements. We make include those described under forward looking statements and our most recent quarterly report.
Speaker Change: 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.
Speaker Change: The quarter end results reflect the resilience of our portfolio and operating platform as we make progress in these three areas. Despite the headwinds.
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.
Speaker Change: First on leasing and operational results.
Speaker Change: <unk> 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 well.
J P: While it is 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.
Cecilia Williams: Second, we make 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: Second we made progress on our development and upgrade activity.
J P: And for in Vancouver users are fixed during their space.
J P: Toronto House, we've successfully launched our in house rental residential operating platform.
J P: <unk> Toronto, the glazing is progressing highlighting the distinctiveness of the project.
J P: There we've secured a long term lease with a global retailer that will enrich the user experience across King West village all.
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.
Speaker Change: We've also improved our debt profile, taking short term variable rate debt and replacing it with longer term fixed rate debt men will now elaborate on our financial results.
Cecilia Williams: Nan will now elaborate on our financial results.
Nan: 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.
Speaker Change: Thank you Cecilia and good morning, everyone.
Speaker Change: 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 three 5% and NOI increased by 1.5% average in place rent per occupied square foot for the first quarter ended at $25.30.
Speaker Change: 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.
Speaker Change: 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.
Nan: 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 bond in the secondary market tightened by 10 to 15 basis points. Additionally, we'll see an immediate 25 basis points 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.
Speaker Change: 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.
Speaker Change: Moody's went through the unsolicited waiting five debentures after our third issuance.
Speaker Change: Lately the spreads are not bonds in the secondary market type food like 10 to 15 basis points. Additionally, we'll see an immediate 25 basis points savings on our unsecured facility.
Speaker Change: We use these proceeds to proactively address our upcoming maturities.
Speaker Change: He paid 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.
Nan: 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.
Speaker Change: 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.
Speaker Change: In our view this is a prudent corporate action given the current macroeconomic volatility.
Speaker Change: Timing of these issuance could not have been better subsequent to the last issuance the cost of floating waves debenture increased by 35 basis points, while our fixed rate debentures increased by 30 basis points.
Speaker Change: Ultimately, we refinanced approximately 20% of our outstanding debt and so only a marginal increase in our annual interest expense of approximately $1 million.
Nan: 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 facility 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 fees to close over the course of the second quarter.
Speaker Change: We continue to proactively address our remaining maturities and have completed the refinancing of the construction facility at 'twenty bright up without a partner.
Speaker Change: We are currently reviewing our options for the construction facility on Anvil in Vancouver, which matures in December of this year.
Speaker Change: What did you position remains strong with over 700 million available on our unsecured facility.
Speaker Change: 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.
Nan: 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.
Speaker Change: Anthony our balance sheet and deleveraging is an important objective for us and we're fully committed to achieving this had either reader 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 the 10 times range.
Speaker Change: By the end of 2025.
Speaker Change: We achieved this through organic growth in the range of portfolio from leasing activity.
Speaker Change: Rent commencement and on development portfolio.
Speaker Change: Cable Ization of our 2020 for acquisition and retiring debt with proceeds from the sale of non core assets we.
Speaker Change: 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.
Nan: However, we remain confident that we will achieve these targets.
Nan: Thank you everyone.
J.P.: Over to you, JP. Thanks, Nan. 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.
Speaker Change: 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.
Jeff: Jeff 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 more space in Q1, 50000 square feet of new leasing activity represented expansion.
Speaker Change: 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.
Speaker Change: We are also encouraged by our improving retention rate, which was back in line with our historical level at 75%.
Speaker Change: In Q1, the average rental rate was stable when comparing the ending to starting base rent.
Speaker Change: Up six 3% when comparing average to average.
Speaker Change: 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.
Speaker Change: 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's expense. 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: As of today, we have one 3 million square feet of leasing activity under negotiation or 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.
Speaker Change: I'll now provide a brief overview of each market.
J.P.: 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.
Speaker Change: In Montreal, we continued to observe strong demand from users with larger mandates. There are currently seven perspective groups with mandates greater than 50000 square feet considering space in our portfolio technology.
Speaker Change: 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.
Speaker Change: Most of our vacancy in Montreal is located that Lockheed J a portfolio of assets located between old Montreal, and Griffin town, comprising eight buildings totaling more than $1 1 million square feet.
Speaker Change: <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.
Speaker Change: 150000 square feet, considering lease options at Logitech.
Speaker Change: These prospects represent the technology professional services and medical sectors.
J.P.: In Toronto and Kitchener, we continue to see an increase in demand from prospective users with larger space requirements.
Speaker Change: 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.: There are presently 31 users with mandates in excess of 10,000 square feet touring our portfolio and we are currently in discussions with 7 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.
Speaker Change: <unk> in Q1, we experienced an increase in demand from AI based technology users and life science users and.
J.P.: 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.
Speaker Change: In 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.
Speaker Change: We are also engaged in discussions with 12 existing users looking to expand representing 40000 square feet of new leasing opportunity. 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 a 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: And as 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.
Speaker Change: Thanks, J P. 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.
Speaker Change: First we own and operate an irreplaceable distinctive urban portfolio second we have a strong integrated team running that portfolio.
Speaker Change: Third we're successfully selling noncore assets, which sharpens, our operating focus strengthens our balance sheet and enhances portfolio quality.
Speaker Change: This is all in the context of strong Canadian cities, they matter more than ever as hubs in education innovation culture, and opportunity 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 <unk>.
Speaker Change: Their team physically together in an environment that facilitates collaboration on culture for all of these reasons. Our team is focused patient and confident that in time, our fundamentals will be recognized.
Cecilia Williams: For all of these reasons, our team is focused, patient, and 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.
Speaker Change: We'd now be pleased to answer any questions.
Speaker Change: 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.
Jonathan Kelcher: Your first question comes from Jonathan Kelcher with TD 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.
Jonathan <unk>: Your first question comes from Jonathan <unk> with TD Cohen.
Speaker Change: Thanks, Good morning.
Speaker Change: First first question just on the touring and.
Speaker Change: Q1 was.
Speaker Change: A pretty good quarter.
Speaker Change: That slowed down the first week of April how has it trended the last couple of weeks and how does it go.
Speaker Change: Forward into.
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: I guess.
Speaker Change: That's the same going forward into two Meg.
Speaker Change: Our may one so do you expect that to hold 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? 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 <unk>.
Speaker Change: Look.
Speaker Change: You did maintain the 4% decline in <unk>, which is so about $2.09 a share.
Speaker Change: You also noted a slowdown in decision making.
Speaker Change: 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 or.
Jonathan <unk>: Or is the slowdown in decision, making we've only observe that in a very limited instances Jonathan So it's hard to tell now.
You know.
Jonathan <unk>: 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.
With 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 all of the.
Jonathan <unk>: 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. Okay.
Jonathan <unk>: Okay, and I guess Youre, a little bit ahead on an interest cost just given the rates you guys got on your financing.
Jonathan <unk>: We're very happy with the rates, we achieved on the financing.
Jonathan <unk>: Okay, and then just lastly on the renewal rate.
Jonathan Kelcher: 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.
Jonathan <unk>: 75%, obviously very good start to the year.
Jonathan <unk>: You do have.
Jonathan <unk>: At least one decent sized non renewal and I think.
Jonathan <unk>: 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%.
Jonathan <unk>: Alright, a historical number.
Jonathan <unk>: Our objective is to achieve a retention rate in line with our historical level Jonathan.
Jonathan <unk>: Yes.
Speaker Change: Okay. Thanks, I'll turn it back.
Cecilia Williams: Thank you.
Jonathan <unk>: Thank you.
Elorne Colmar: Your next question comes from Elorne Colmar with Desjardins. Thanks.
Speaker Change: Your next question comes from Lorne Kalmar with days are gone.
Lorne Kalmar: Thanks, Good morning.
Cecilia Williams: 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 Lauren, 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. We just wanted to recognize the economic environment we're operating in.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: 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: 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.
Speaker Change: Is there anything that you think.
Speaker Change: Realistically as we sit here today.
Speaker Change: That keeps you up at night that really gives you concern that you wouldn't be able to get to your targets.
Speaker Change: We're focusing on what we can control the things out of our control we can't do much about so we're not expanding energy on that.
Cecilia Williams: I actually like that approach.
Speaker Change: Hi, I actually like that approach.
Cecilia Williams: 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?
Speaker Change: Okay and then.
Speaker Change: Maybe just one quick question on the leasing activity this quarter. It looked 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.
Carly: Lauren, it's just a function of a higher percentage of renewals in our flex portfolio where we will offer shorter term. Fair enough. Okay. Thank you very much. I'll turn it back. Again, if you would like to ask a question, press star, then the number 1 on your telephone keypad.
Speaker Change: Laurence.
Speaker Change: A function of a higher percentage of renewals in our flex portfolio, where we will offer shorter terms.
Speaker Change: Fair enough. Okay. Thank you very much I'll turn it back.
Speaker Change: Thanks.
Speaker Change: Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
Mario Sarek: Your next question comes from Mario Sarek with Scotiabank. Hi, good morning. Just coming back to kind of the observation of limited or very limited tenant discussions 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 tenotypes that are comprising that limited delay design? 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: Your next question comes from Mario <unk> with Scotiabank.
Mario: Hi, good morning.
Morning.
Mario: Coming back to kind of the observation.
Mario: Limited very limited kind of discussions being extended can.
Mario: Can you maybe just help us kind of quantify how like limited that is like is it like one out of every four.
Leasing discussions one out of every 10 and are there any specific geographies or tenant types.
Mario: Our.
Mario: Why isn't that limited the latest vehicles.
Mario: In Q1, we had one maybe two Mario of the I don't know several dozen leases.
Mario: That we know down so it is limited.
Mario: Extremely limited at this stage.
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%? We have in the MD&A, the maturity table would capture what we have coming up. It's about a million square feet for the remainder of the year, Mari. But specifically in terms of known tenant vacancies, like the kind of that you know, or at least of Northern this year. Well, you can apply our historical renewal rate. So we still expect to achieve, you know, in the mid-70%.
Mario: Got it okay.
Mario: 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 total square footage maybe that was or wasn't included in your guidance.
Mario: Yes.
Mario: Target occupancy here.
Mario: I think Athena.
Mario: Sure we havent in the MD&A in the matured the majority came over to capture what we have coming up it's about 1 million square feet for the remainder of the EMR.
Mario: But specifically in terms of known tenant vacancies.
Mario: As you know are leaving.
Mario: None of them this year.
Mario: 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 might be chunky quarter over quarter, but that would be a full year estimate.
Cecilia Williams: 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. Got it. Okay. 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?
Mario: Okay.
Mario: Tenant renewal ratio.
Mario: Was it similar.
Mario: 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.
Mario: Okay I'll try again.
Speaker Change: The 75% renewal ratio in the quarter was it similar in the flex portfolio versus the non flex portfolio.
Mario Sarek: Yes. Okay, my last question, just in terms of the distributions, the $300 million for the year, you expressed confidence in hitting that. 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, a $300 million would exclude monetization of $150 million in Georgia that's receivable? Absolutely, yes. Okay, thank you.
Mario: Yes.
Mario: Okay.
Mario: My last question just in terms of the disposition was $300 million for the year.
Mario: You expressed confidence in hitting that.
Mario: Are there any factors there.
Mario: Could come into play where you would look to perhaps exceed the $300 million.
Mario: We're targeting 300 million Mario and will we expect to hit that by the end of the year that's all.
Mario: We're going to be commenting on it at this point.
Speaker Change: Got it and presumably you would exclude monetization of 150, <unk>, Georgia that receivable.
Mario: Absolutely yes.
Okay. Thank you.
Matt Cormack: Your next question comes from Matt Cormack 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 Celeron? 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.
Speaker Change: Your next question comes from Matt <unk> with National Bank financial.
Speaker Change: 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 3575 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 and committed occupancy will that come from the upgrade portfolio or from filling vacancy in the existing proper.
Speaker Change: Properties so.
So we absolutely will be making progress.
Speaker Change: And then king out of 1000, 1575 that will impact our leased area as well.
Speaker Change: The lease up there has taken place in spaces that are currently in the <unk> portfolio.
Cecilia Williams: So we'll make progress on those two assets, but we will be making progress with the 90% in the rental portfolio separately from 3575 and 1001.
Speaker Change: So we'll make progress on those two assets that we will be making progress towards the 90%.
Speaker Change: Rental portfolio separately from $35 75 in 2001.
Cecilia Williams: 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, the progress has been expected and leasing away. 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: To find the 2025 earnings 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 It progress and had expected and.
Speaker Change: Leasing away.
Speaker Change: Okay. Thanks, guys.
Speaker Change: Thank you.
Brad Sturgis: Your next question comes from Brad Sturgis 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, 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.
Brad Sturges: Hey, good morning.
Speaker Change: I appreciate all the commentary around leasing.
Speaker Change: I guess, given given youre seeing an uptick in activity.
Speaker Change: And sort of aluminum impact I guess on the market based on the macro environment.
Speaker Change: Would you expect any changes in the type of lease term that.
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.
Cecilia Williams: 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 for new leasing in the quarter was 6.3 years. When you remove new deals in our flex portfolio, it was 7.9 years. That's a trend we expect to continue. And we are pleased by the ongoing discussions we're having with tenants that mature in 2020.
Speaker Change: Secondly, wood.
Speaker Change: Would you be pursuing early renewal with any of your larger tenants that if youre looking out towards 2026.
Speaker Change: Sure.
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.
Speaker Change: By the ongoing discussions, we're having with tenants that mature in 2026.
Speaker Change: Okay.
Brad Sturgis: My other question, just in terms of the uptick in occupancy at Toronto House, as you're... 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. We're very pleased with the rental rates we're achieving.
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 lease 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'd 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.
Cecilia Williams: They're in line with our performance and we expect our performance to continue in that But there will be like a short-term rental pool.
Speaker Change: But there will be a short term rental pool I guess, one would that program really start to commence.
Cecilia Williams: I guess when would that program really start to commence? 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. Okay. It would be typically like a one-year lease term for those type of providers? Those are typically longer than one year. Great.
Speaker Change: 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.
Speaker Change: Duration of stay.
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.
Carly: I'll turn it back. Thank you.
Speaker Change: Great I'll turn it back thank you.
Speaker Change: Thanks.
Tammy Beer: Your next question comes from Tammy Beer with RBC Capital Markets. Thanks. Good morning. Just coming back to the disposition target, I guess we should see some pickup in Q2. Just 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 various types of buyers? Yes, it's consistent with what we disclosed in the press release, Bonnie, 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.
Speaker Change: Your next question comes from Tammy <unk> with RBC capital markets.
Speaker Change: 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 could 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.
Yes. It is.
Speaker Change: System with what we disclosed in the press release for me and it's all based on <unk>.
Speaker Change: Unsolicited inbounds for our assets.
Speaker Change: Private equity.
Speaker Change: The valuations remain robust and we're pleased that our ISR S values are being validated.
Cecilia Williams: 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: Okay. So these arent necessarily assets that are going through sort of a listed process with a broker.
Speaker Change: Absolutely not.
Speaker Change: Okay.
Cecilia Williams: And just coming back to 150 West Georgia Any update there in terms of the process what kind of interest maybe have has 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, is there the possibility that a deal could be transacted within the second half of the year and ultimately, I guess, repayment, like closing and repayment for the loan or? Yes, we're targeting by the end of 2025, that's right.
Speaker Change: And just coming back to $1 50, West, Georgia any update there in terms of the process what kind of interest maybe have had been seen on that site.
Speaker Change: 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 of 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 like closing at various payment for the loaner.
Speaker Change: We're targeting by the end of 2025 Thats right.
Cecilia Williams: Okay. All right. I will turn it back. Thank you.
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.
Speaker Change: Your next question comes from Fred <unk> with Green Street.
Thank you Bill and good.
Cecilia Williams: Sorry, I missed that. Just one question for me. 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.
Speaker Change: Sorry.
Speaker Change: Just one question for me.
Speaker Change: What are the lease term or being disk.
Speaker Change: At least being discussed which are prospective tenants at the moment you mentioned the $2 five years I was wondering how is that expected to trend from here.
Speaker Change: For new leases the average term achieved in the quarter was $6 three years, when removing 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 duration than shorter term.
Speaker Change: Durations.
Cecilia Williams: Okay, that's great. Thank you.
Okay. That's great. Thank you.
Speaker Change: Thanks.
Carly: Again if you would like to ask a question, press star then the number 1 on your telephone keypad.
Speaker Change: Again, if you would like to ask a question Press Star then the number one on your telephone keypad.
Sumaya Saeed: Your final question comes from Sumaya Saeed with CIBC. Thanks, good morning. Just to revisit the outlook briefly. So I think your leads up targets and 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.
Speaker Change: Your final question comes from semi side with CIBC.
Speaker Change: Thanks, Good morning, just to revisit the outlook briefly so.
Speaker Change: I think at least the targets in the 90% goal were weighted to the end of the year anyway.
Speaker Change: 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.
Speaker Change: No.
Speaker Change: 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.
Cecilia Williams: But right now, we're sticking with our target of 90%, at least 90% by the end of the year. Okay.
Speaker Change: Okay.
J.P.: And then, J.P., 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? So my 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, and we are very pleased with the amount of inbound increase that we're fielding across all markets and sectors.
Speaker Change: And then JP in your commentary you mentioned about 43% conversion rate on new leases.
Speaker Change: The ones that don't convert what are some of the main a recurring reasons that you hear and how does that 40% conversion compared with historical rates.
Speaker Change: Some of our 43% is in line with what we would have achieved in the first half of <unk>.
Speaker Change: 2024, and many cases transactions that we haven't yet converted are ongoing and.
Speaker Change: 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.
Speaker Change: And we are very pleased with the amount of inbound inquiries that we're fielding across all markets and sectors.
J.P.: Okay, great.
Speaker Change: Okay great.
Cecilia Williams: 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. I'll turn it back.
Speaker Change: 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.
Speaker Change: No that was just on the re desk categories and that's the category wagging over there was some movement this quarter, where there was.
Speaker Change: $6 million 6000 square feet, sorry that was transferred in there which is related to that.
Speaker Change: Okay. Thanks, I'll turn it back.
Carly: That concludes our Q&A session.
Speaker Change: That concludes our Q&A session I will now turn the conference back over to Cecilia Williams for closing remarks.
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.
Cecilia Williams: Thanks to everyone for joining our conference call. We will keep you updated on our progress going forward.
Carly: This concludes today's conference call. You may now disconnect.
Cecilia Williams: This concludes today's conference call you may now disconnect.
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