Q3 2025 Allied Properties REIT Earnings Call
Conference call.
Lines have been placed on mute to prevent any background noise. 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 and if you would like to withdraw your question simply press Star One again I would now like to turn the conference over to Cecilia Williams, President and CEO. Please go ahead.
Speaker #3: Good morning . And thank you for standing by . My name is John and I will be your conference operator today . At this time I would like to welcome everyone to the Allied Properties REIT .
Speaker #3: Third quarter 2020 Earnings Conference Call . All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .
Thanks, John Good morning, and welcome to our Q3 conference call I'll highlight our progress towards 2025 goal and what we're focusing on going forward.
Speaker #3: If you would like to ask a question during this time , simply press star , followed by the number one on your telephone keypad .
Speaker #3: And if you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Cecilia Williams, President and CEO.
And then we will do the same from a financial perspective.
Speaker #3: Please go ahead .
J P will outline the positive leasing momentum by urban market.
Speaker #4: Thanks, John. Good morning and welcome to our Q3 conference call. I'll highlight our goals towards 2025 and what we're focusing on going forward.
Then pleased to answer any questions.
In the course of this conference call, maybe forward looking statements about future events or future performance.
Speaker #4: Nan will do the same from a financial perspective . JP will outline the positive leasing momentum by Urban market . We're then pleased to progress statements about future events or future performance .
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.
Cereal assumptions underpinning any forward looking statements. We make include those described under forward looking statements and our most recent quarterly report.
Speaker #4: 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 .
We're focused on delivering long term value through leasing development completion, and strengthening our balance sheet market fundamentals continue to improve as evidenced by the higher level of leasing activity, including the highest number of square feet of expansions in our portfolio in the last five years increased.
Speaker #4: Material assumptions underpinning any forward looking statements we make include those described under forward looking statements in our most recent quarterly report . We're focused on delivering long term value through leasing development , completions and strengthening our balance sheet .
The large format space mandates and improving conversion rates.
Speaker #4: Market fundamentals continue to improve , as evidenced by the higher level of leasing activity , including the highest number of square feet of expansions in our portfolio in the last five years , increasing large format space mandates and improving conversion rates .
Our capital structure, specifically the temporarily higher level of debt, we took on to complete development projects put downward pressure on results in the quarter.
While our portfolio remains resilient and strategically positioned to benefit from improving market dynamics. It will take us beyond year end to achieve 90% occupied and leased area in our targeted 10 times debt to EBITDA.
Speaker #4: Our capital structure the temporarily higher level of debt we took on to complete development projects , put downward pressure on results in the quarter while our portfolio remains resilient and strategically positioned to benefit from improving market dynamics .
We remain focused on those as milestones toward continued improvement in our metrics.
First leasing and operational results.
Speaker #4: It will take us beyond year end to achieve 90% occupied and leased area in our targeted ten times debt to EBITDA . We remain focused on , specifically those as milestones toward continued improvement in our metrics .
Our leased area held in the quarter.
Leased 882000 square feet across the rental and development portfolios.
<unk> from tours to sign deals was high at 81%.
Speaker #4: leasing and operational results . Our leased area held in the quarter , we 882,000ft² across the rental and development portfolios . Conversion from tours to signed deals was high at 81% .
J P will elaborate on these metrics.
These signs of improving operating fundamentals give us confidence that while we're not getting too ambitious target of 90% occupied and leased area by this year's end, we will make progress going forward.
Second we advanced on our development and upgrade activities.
And foreign Vancouver is now 90% leased driven by Netflix is expansion in the quarter.
It's doing is underway and rent commences in early 2026.
And King Toronto, we're heading towards successful completion by the end of 2026.
Securing whole foods as the anchor of the commercial component is facilitating the lease up of the remaining space.
Currently in various stages of negotiation with 700 retailers.
<unk> continued on the fourth level and glazing for the fifth level will begin to arrive next week.
It's truly a distinctive projects that will elevate the entire king West village neighborhood. When it is completed next year.
All of the development and upgrade projects currently underway are on track for completion by the end of 2026.
Last but certainly not least our balance sheet.
While we won't achieve our target of getting to 10 times debt to EBITDA by this year and we're increasing our steps to get there.
Added Toronto House in Calgary House to our disposition pipeline.
Those dispositions together with the repayment of the 150 West Georgia alone in the first half of 2026 will strengthen our balance sheet as we'll be able to pay off more debt and moderate interest expense accelerating progress going forward for.
We're improving liquidity and positioning our life for the next phase of growth with a stronger foundation.
Dan will now elaborate on our financial results and balance sheet management.
Thank you Cecilia good morning, everyone. Thank you for joining us today.
I'll take a few minutes to highlight our financial performance and the continued efforts, we're making to strengthen our balance sheet.
Operating fundamentals are improving are occupied and leased area. It didn't increase at the pace, we expected in the corner.
Along with elevated interest expense slower lease finalization put downward pressure on our results.
We remain cautiously optimistic as market fundamentals continue to evolve in our favor.
Occupancy was impacted by non renewals, including entertainment one at 130 <unk> Peter Street in Toronto.
Consolidated space following the acquisition by Lionsgate.
Decision that was made in 2023.
More importantly, we offset much of this with new leasing in our portfolio, which drove our leased area from 87, 2% to 87, 4%.
This will translate into earnings as tenants take occupancy.
Same asset NOI was 2% up for the quarter supported by development completions, including 20, Brian off 700, San Jose and 1001 rubber for Russia.
Our results included a one time lease termination fee of $2 1 million related to a space that was on the sub lease market. The termination was strategically aligned with an expansion of an existing tenant in the building, resulting in no downtime.
Higher rental rates and an incremental three year lease extension, thereby preserving future recurring revenue.
Our interest expense was higher due to timing of our dispositions.
We expect our interest expense will decrease upon the completion of our disposition program and the receipt of the 150 West Georgia loan receivable.
Excluding the sale of our rental residential assets, we expect to generate approximately 500 million from dispositions and a $1 50, west Georgia load monetization.
This is expected to close between the remainder of 2025 and first half of 2026. All these proceeds will be used to retire debt.
Overall, despite pressure from higher interest expense and loan and lease up timelines, we maintained stable operating fundamentals solid liquidity and continued progress towards our long term balance sheet targets.
Turning to the balance sheet linked.
Liquidity remained strong at $903 million up $168 million from the prior quarter.
About 89% of our portfolio is unencumbered, giving us exceptional flexibility.
During the quarter, we completed the extension of our unsecured facility to September 2028, and expanded our syndicate to include six major Canadian financial institution is.
This highlights the support we have from our financial partners.
We also updated our green financing framework, which was initially released in 2021 to ensure alignment with best practices Tox.
Subsequently, we completed the issuance of our series and debenture, but $450 million, which was five times oversubscribed with a six year term at a rate of four 6%.
During the quarter, we completed the extension of our unsecured facility to September 2028 and expanded our Syndicate. To include 6, major Canadian financial institutions,
This highlights the support we have from our financial partners.
We also updated our
This brings our total issuance for the year to $1 3 billion of which 900 million was issued under the green financing framework further highlighting the ongoing support that we have on the debt capital markets.
which was initially released in 2021 to ensure alignment with best practices.
Proceeds from this issuance was allocated to the retirement of variable rate construction debt and to pay down a portion of the $250 million term loan due in early 2026 at the same time, we extended the remaining $100 million off the term loan by two years to 2028 and <unk>.
Subsequently, we completed the issuance of our series and debenture for 450 million, which was 5 times, over subscribed with a 6-year term at a rate of 4.6%.
This brings our total issuance for the year to 1.3 billion dollars off, which 900 million was issued under the green financing framework further highlighting the ongoing support that we have from the debt Capital markets
Retain the existing interest rate swap on the full $250 million at a favorable rate of three 5%.
In August D be Rs completed the annual review and maintain our credit ratings.
We remain committed to maintaining our investment grade rating and our ongoing disposition initiatives will allow us to reduce leverage to our targeted levels over time.
Proceeds from this issuance were allocated to the retirement of variable rate construction debt and to pay down a portion of the 250 million turn loan due in early 2026. At the same time we extended the remaining 100 million of the term loan by 2 years to 2028.
We have taken proactive steps to address most of our upcoming maturities. So the end of 2026th we will repay the upcoming 600 million debenture using proceeds from our disposition and amortization of 150 West Georgia loan receivable.
And retained existing interest rate, swap on the full 250 million at a favorable rate of 3.5%.
In August dbrs, completed their annual review and maintained our credit rate ratings.
Overall this quarter was built on strong leasing momentum.
<unk> liquidity and proactive management of upcoming debt maturities all of this positions us well for <unk>.
Long term value creation, thank you and with that I'll pass it over to J P to discuss leasing.
We remain committed to maintaining our investment grade rating and our ongoing disposition initiatives will allow us to reduce leverage to our targeted levels over time. We have taken proactive steps to address most of our upcoming maturity. So the end of 2026 will repay the upcoming, 600 million debenture, using proceeds from our dispositions and the monetization of 150 West, Georgia loan receivable.
Thanks, Dan.
Over the past number of months, we've observed improving operating fundamentals throughout our portfolio evidenced by or trends one an increase in leasing activity.
Overall, this quarter was built on strong leasing momentum.
Two an increase in large format space requirements.
Management of upcoming debt maturities, all of this position us. Well for a long-term value creation. Thank you. And with that, I'll pass it over to JP to discuss Leasing
Thanks Nan.
Three an increase in expansion activity among existing users and for an increase in our conversion rate.
Our leased area remained stable in the quarter and outperformed each of the urban Submarkets in which we operate.
Over the past number of months. We've observed improving operating fundamentals throughout our portfolio. Evidenced by 4 Trends 1, an increase in leasing activity.
Except for Vancouver.
2, an increase in large format space requirements.
We've made good progress in addressing required vacancies.
In Q3, we completed 800 and.
3 an increase in expansion activity, among existing users and 4, an increase in our conversion rate.
82000 square feet of leasing activity.
<unk> 512000 square feet of new leasing activity the most since 2020.
Of which 426000 was in our rental portfolio.
Our least area remains stable in the quarter and outperformed each of the urban submarkets in which we operate except for Vancouver, where we've made good progress in addressing acquired vacancy.
86000 in our development portfolio.
This represents an 81% conversion rate the highest since 2010.
In Q3, we completed 800 and 82,000 square feet of leasing activity.
The new leasing activity in the quarter included 187000 square feet of expansions at.
Including 500 and 12,000 square feet of new leasing activity the most since 2020.
A 150% increase compared to the previous quarter and the highest since 2020.
The impact of our new leasing activity was partially offset by non renewals, including a large known nonrenewals due to M&A activity that occurred in a prior year and not a reflection of current base space requirements.
Of which 400 and 26,000 was in our rental portfolio and 86,000 in our development portfolio, this represents an 81% conversion rate the highest since 2020.
The new leasing activity, in the quarter included, 187,000 Square, ft of expansions.
A 150% increase compared to the previous quarter and the highest since 2020.
While the number of tours was lower compared to the prior quarter.
Average tourist stores more than doubled the number of tours with requirements greater than 25000 square feet increased 83% driven.
Driven by touring activity in the modern segment of our Toronto and Montreal portfolios.
The impact of our new leasing activity was partially offset by non-renewals including a large known non-renewal due to Mna activity that occurred in a prior year and not a reflection of current day, space requirements.
Industries represented by touring organizations for Technology Financial services Media professional services education and medical uses.
We currently have one 3 million square feet of leasing activity under negotiation or at the prospect stage.
While the number of tools was lower compared to the prior quarter, the average tour size more than doubled and the number of tours with requirements, greater than 25,000 Square ft increased 83% driven by touring activity in the modern segment of our Toronto and Montreal portfolios.
Of which 970000 square feet represents new leasing opportunities.
Of the new leasing activity underway 300000 square feet is under negotiation and 670000 square feet is that the prospects future.
Industries represented by touring organizations, where technology Financial Services, media Professional Services, education and medical uses.
Included in the leasing activity underway is 170000 square feet of possible expansion activity as there are currently 17 existing users considering expansions.
We currently have 1.3 million square feet of leasing activity under negotiation or at the prospect stage, of which 970,000 square feet represent new leasing opportunities.
I will now provide a brief overview of each market.
Montreal, We're currently working on 370000 square feet.
Of the new leasing activity underway. 300,000 Square. Ft is under negotiation and 670,000 square. Ft is at the prospect stage.
New leasing activity.
Of which 100000 is under negotiation and 270000 is that the prospect stage.
included in the leasing activity underway is 170,000 square, ft of possible expansion activity as there are currently 17, existing users, considering expansions,
Most of our vacancy in Montreal is concentrated at <unk> a portfolio of assets located between old Montreal and Griffin tone.
I'll now provide a brief overview of each market.
Rising eight buildings totaling more than $1 2 million square feet.
You've seen a material increase in leasing activity at last few days in the second half of the year.
In Montreal, we're currently working on 370,000 square feet of new leasing activity of which 100,000 is under negotiation and 270,000 is at the prospect stage.
Q3, we completed 100000 square feet of new leasing and currently have 100000 of the prospect stage.
Most of our vacancy in Montreal is concentrated at lasting day. A portfolio of assets located between Old Montreal and Griffin town.
The upgrade activity a thousand one Robert process continues to attract large and sophisticated users.
Comprising, 8 buildings totaling more than 1.2 million square feet.
In Q3, we completed 150000 square feet of new leasing and currently have 130000 for the prospects change.
We've seen a material increase in leasing activity at lassi day in the second half of the year in Q3, we completed 100,000 square feet of new Leasing and currently have 100,000 at the prospect stage.
The new leasing completed in Q3 included the expansion of an existing user by 100000 square feet to accommodate their utilization requirements by back feeling much of the National Bank Sublease space.
The upgrade activity at 1,001 Robert, Brasa continues to attract large and sophisticated users.
In Toronto in Kitchener, We're currently working on 550000 square feet of new leasing activity of which 165000 is under negotiation and 385000 is that the prospect stage.
In Q3 we completed 150,000 square feet of new Leasing and currently have 130,000 at the prospect stage.
In Toronto, there are several large organizations looking to sublease the shopify space at the well Shopify is currently finalizing a sublease or a large portion of their premises, but the user that will be new to our portfolio.
The new leasing completed in Q3 included the expansion of an existing user by 100,000 square feet to accommodate their utilization requirements by backfilling much of the National Banks of lease space.
The remaining demand exceeds the balance of space available materially.
In Toronto and Kitchener, we're currently working on 550,000 square feet of new leasing activity of which 165,000 is under negotiation and 385,000 is at the prospect stage.
In Kitchener, Google renewed its lease of 195000 square feet in the bright Hong Kong large heritage complex in which we own 50%.
<unk> represented our largest lease maturity in 2026.
In Toronto, there are several large organizations looking to sublease the Shopify space. At the well, Shopify is currently finalizing a sub lease for a large portion of their premises with the user, that will be new to our portfolio.
In Calgary, we are currently working on 30000 square feet of new leasing activity of which 20000 is under negotiation and 10000 is that the prospect stage.
The remaining demand exceeds the balance of space available materially.
In Vancouver.
Working on 20000 square feet of new leasing activity of which 15000 is under negotiation and 5000 is that the prospect stage.
In Kitchener Google renewed. Its lease of 195,000 square ft in the bright hot block a large Heritage complex in which we own 50%. Google represented, our largest lease maturity in 2026.
At 400 West Georgia.
Finalize the long term piece of 49000 square feet with a global educational institution subject only to routine regulatory approvals expected before the end of November.
In Calgary. We're currently working on, 30,000 square feet of new leasing activity of which 20,000 is under negotiation and 10,000 is at the prospect stage.
The asset is now 96% leased.
At <unk>, we finalized the lease expansion of 26000 square feet with Netflix.
In Vancouver, we're currently working on 20,000 square feet of new leasing activity of which 15,000 is under negotiation. And 5,000, is at the prospect stage
Netflix is footprint 137000 square feet the asset is now 90% leased.
Our leasing performance in Q3 reflects improving operating fundamentals driven by higher physical utilization and diminishing supply of distinctive urban workspace.
At 400 West Georgia. We finalized the long-term lease of 49,000 square feet with a global educational institution, subject only to routine regulatory approvals expected before the end of November the asset is. Now 96% least.
<unk> and an increase in leasing activity.
Rising demand for large format space requirements increased expansion activity among existing users and improved conversion rates across our portfolio I will now turn the call back soil.
At M4. We finalized the lease expansion of 26,000 square feet with Netflix bringing Netflix is footprint 100 and 137,000 square ft. The asset is now 90% lease
Thanks, J P. Before we turn to questions I want to reiterate my confidence in our portfolio and our team, especially.
Especially as market dynamics are improving.
We're staying focused on leasing paying down debt and completing development projects are.
Our leasing performance in Q3 reflects improving operating fundamentals driven by higher physical utilization and diminishing supply of distinctive. Urban workspace, resulting in an increase in leasing activity, Rising demand for large format. Space requirements, increased expansion activity, among existing users and improved conversion rates across our portfolio.
Our targets are in sites and are achievable with our offering of both heritage and modern workspace, our urban portfolio is unique and strategically positioned for the growing demand.
I will now turn the call back to Cecilia.
Thanks, JP. Before we turn to questions. I want to reiterate my confidence in our portfolio and our team.
And the lack of new supply will highlight this.
Say theres a Canadian cities are increasingly concentrating into centers of creativity innovation and opportunity and urban workspace plays a critical role in that.
Especially as market, dynamics are improving. We're staying focused on leasing paying down debt and completing development projects.
Ally is well positioned to meet the growing demand our team is focused patient and confident that our fundamentals will ultimately be recognized.
Our targets are in sight and are achievable with our offering of both Heritage. And modern workspace are Urban portfolio. Is unique and strategically positioned for the growing demand.
And the last of new supply will highlight this.
We'd now be pleased to answer any questions.
Thank you the floor is now open for questions and as a reminder for everyone. If you would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question stupid Revpar win again.
I say this as Canadian cities are increasingly concentrating into centers of creativity, Innovation and opportunity and urban workspace, plays a critical role in that making Allied well positioned to meet the growing demand. Our team is focused patient and confident that our fundamentals will ultimately be recognized.
If you are called upon to ask your question and are eliciting via loud speaker. All your device. Please pick up your handset and ensured that you're fully sort of you've been asking the question.
We now be pleased to answer any questions.
Our first question comes from blood of Jonathan Culture with TV Cowen. Please go ahead.
Good morning.
First just one one little clarification when you talk about the JP. What are you talking about the conversion rate of 81% conversion rate is that off of.
Thank you. The floor is now open for questions. And as a reminder to everyone, if you would like to ask a question, please press star, followed by the number 1 on your telephone keypad. And if you would like to withdraw, your questions, simply press star 1. Again, if you are called upon to ask your question in our listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking the question.
Leases that are in negotiation or the total for $1 3 billion you talked about.
Thank you. Our first question comes from the line of of Jonathan culture with TD Cowen, please go ahead
Jonathan it's in relation to what we would have represented last quarter as new leasing opportunities that we were pursuing at the time.
Okay.
So just to be sure it includes like prospect and stuff under negotiation.
Thanks uh good morning. Um first just 1, 1, little clarification. When when you talk about uh JP, when you talk about a conversion rate 81% conversion rate is that off of um, leases that are negotiation or or the total for 1.3 million, you talked about
That's correct.
That's correct.
Okay.
And then I've got a couple of weeks ago, you guys took hitting 90% occupancy off the table. This year I think you addressed it a little bit.
Jonathan, it's in relation to what we would have represented last quarter as new leasing opportunities that we were pursuing at the time.
Based on.
What youre seeing in that was a pretty positive sort of update you do see is.
Okay, so that so that. So just to just to be sure it includes like Prospect and stuff under negotiation
Is that a target that you'd think you'd get to.
That's correct. That's correct.
Okay.
Some point in the.
26.
Hi, Jonathan Yes, we do have line of sight to 90%.
Um, and then I guess a couple weeks ago, you guys took hitting 90% occupancy off the table for this year and into the rest of a little bit, uh, based on
In 2026.
Okay.
That's helpful. And then lastly, just looking at where your leverage currently sits.
what you're seeing and that was a, a pretty positive sort of out update you gave JP is, is that a Target that you think you get to, um, some point in, in 26,
Versus where you guys want it at a slower pace.
The occupants recovery that we're seeing.
How is management and the board.
Hi, Jonathan. Yes, we do have line of sight to 90% um, in 2026.
Looking at the distribution level right now.
So we are considering many options.
And one of those options is a distribution cut in 2026.
So as to strengthen the balance sheet.
Um that's helpful. And then lastly, just looking at where your leverage currently sits, um, versus where you guys want it, the slower pace of, uh, the occupants recovery that we're seeing how how is management and the board. Um, looking at the distribution level right now.
We haven't made a formal decision yet we haven't made a formal recommendation, but it is one of the scenarios that is under consideration.
So we are considering many options.
um,
Okay.
Thank you all I'll leave it there thanks.
and 1 of those options is a distribution cut in 2026.
So as to strengthen the balance sheet,
Thanks.
Your next question comes from the line of Matt are you <unk> with Scotiabank. Please go ahead.
Hi, good morning.
Made a formal decision yet. We haven't made a formal recommendation but it is 1 of the scenarios that is under consideration.
Just wanted to focus on the disposition pipeline a little bit you've added Khan in Calgary hosts who list $450 million.
Okay. Um, thank you. I'll I'll I'll leave it there. Thanks.
Thanks.
So that increases the total expected dispositions from about 500 million before to 675 give or take.
Your next question comes from the line of Mario. Sak with Scotia Bank. Please go ahead.
So that would imply that about 275 million of prior assets are redeemed, Brazil will remain in place going forward. So can you walk through how you think about sizing the disposition pipeline because it's simply a matter of routes.
Do we need to do to hit target leverage metrics or do other factors play a role.
Through process. So it will be it will be a high first values.
These assets et cetera.
Yes.
Hi, Mario So we outlined $270 million.
On page two of the press release on top of that it's the proceeds from 150 U S. Georgia.
And that's about $240 million roughly and then on top of that it would be the proceeds from the disposition from Toronto housing Calgary House, which we're not quantifying them.
Hi, good morning. Um, just wanted to focus on the, uh, disposition pipeline a little bit. Uh, you've added Toronto and Calgary host of the list at 450 million. Uh, so that increases the total expected, uh, dispositions from, about 500 million before to call it. 675 give or take, that would imply that about 275 million or prior assets that were deemed for sale, uh, will remain in place going forward. So can you walk through how you think about sizing the disposition pipeline like is it simply a matter of, uh, doing what you need to do to hit Target, leverage metrics, or do other factors play a role in the decision process such as being able to get I first values for the for those assets and Etc. Thanks
But it would more than double.
Hi. Hi, Mario. So, we've outlined 270 million, um, on page 2 of the press release on top of that. It's the proceeds from 1 150, West Georgia.
The proceeds that we get from our sales at Westwood all be applied towards debt reduction.
Um, and that's about 240 million roughly and then on top of that.
Okay, but it seems like there were maybe some assets that you would think that you were considering selling previously that you are no longer considering selling is that a fair comment and then I guess if so.
It would be the proceeds from the disposition of the Toronto housing and the Calgary house, which were not quantified.
What are some of the factors.
Kind of drive those decisions.
But it would more than double. Um, the proceeds that we get from our sales and which would all be applied towards debt reduction,
Okay.
It's just it's based on.
Yes.
All around the globe.
And the update.
It's opportunistic space to some to some extent, we have our non core assets identified and.
okay, but it it's seems like there were maybe some assets that we would think that you were considering selling previously that you're no longer considering selling is that a fair comment and then I guess if if so uh what are some of the factors that kind of drive those decisions
As we get <unk> value or higher we sell them and the update is as we've outlined it in the press release, but there weren't material changes.
Okay.
Okay and then just.
On.
The two or three 9 billion dollar was sprinkled receivable underpinned by 250 West, Georgia, How would you characterize your confidence level today in terms of collecting on that receivable relative to three months ago, and what factors would you highlight kind of underpin that confidence.
sooner rather than later and the update, you know, it's, it's opportunistic based to some, to some extent, we have our non-core assets, identified and
As we get buyers value or higher, we sell them and the updated as we've outlined it in the press release, but they're working material changes.
We remain very confident in collecting that Mario and it's based on the zoning that's in place and the parties that are.
Interested in the opportunity.
Okay. Thank you.
Okay and then just um on um the uh the 239 million dollar West Bank Loan receivable, underpinned by 150 West Georgia. How would you characterize your confidence level today? In terms of collecting on that receivable relative to 3 months ago and what factors uh, would you highlight that kind of underpin that confidence.
Your next question comes from the line of Roger in Loveland pain with Nuggets Capital Partners. Please go ahead.
Hello. Thank you for taking my question that I had a question whether you are seeing in pool transaction liquidity within the office market.
We remain very confident in collecting that Mario, and it's based on the zoning that's in place, and the parties that are, um, interested in the opportunity.
But that's really just my question, whether it's okay, so smaller buildings or larger buildings.
Okay, thank you.
If you could touch base on that thank you.
Your next question comes from the line of Roger LaFontaine with nugget Capital factors. Please go ahead.
Sorry are you asking about I couldn't hear the first part of your question sales volume.
Yup, you're seeing improved transaction liquidity.
Seek to dispose of any assets for offices.
Oh, we're buyers on the market.
Hello. Thank you for taking my question. Uh, I had a question whether you're seeing in full transaction, liquidity within the office market and um that that's really just my question, whether it pertains to smaller buildings or larger buildings if you could touch base on that, thank you.
Thank you, yes for the assets that we are looking to dispose of our smaller nonstrategic assets. We certainly are.
Sorry, are you asking about? I couldn't hear the first part of your question, sales volume.
I think it's buyers are seeing this as an opportunity to get access to to buying these types of assets, which aren't isn't normally an opportunity for them. So yes, we are absolutely seeing.
yeah, if you're seeing improved transaction, liquidity as you seek to dispose of any assets for offices,
Whether you're more buyers on the market.
Higher levels of interest.
Thank you. Yes, for the assets that we are looking to dispose of our, our smaller non-core assets. We certainly are
Thank you very much.
Yeah.
Your next question comes from the line of Florida, Kalmar with Desjardins. Please go ahead.
Thanks, Good morning.
Don King Toronto.
I think it's um, the buyers are seeing this is an opportunity to get access to to buying these types of assets which aren't isn't normally an opportunity for them. So, yes, we are absolutely seeing, um,
I think going back the closings were initially set for I think 40 to 45 as a kind of a pushback I was just wondering if you could give us some color as to what's really been driving those delays is there issues with purchasers, who had R&D fault on their agreements or what's really happening there.
higher levels of Interest.
Thank you very much.
Your next question comes from the line of Lorna Colmore with Desjardins. Please go ahead.
No. It has nothing to do with any defaults, we haven't had any today.
It's really the pace of construction activity, which was recently impacted by some rain and it prevented us from getting some of the glazing up but for the most part things are progressing as expected.
Okay. Okay, and then I might have missed this so apologies if I did but do you guys have a kind of a target yield on Toronto Hudson Calgary House based on the unsolicited inbounds we've gotten.
Now that we're disclosing Lauren.
No, it's it's nothing to do with any defaults. We haven't had any to date. Um it's really the pace of construction activity which was recently impacted by some rain and it prevented us from getting some of the glazing up but for the most part things are progressing as expected.
Fair enough okay. Thank you very much.
Oh, thank you.
Your next question comes from the line of Matt <unk> with National Bank Financial. Please go ahead.
Hey, guys good morning.
Just back on Toronto, not terminals can Toronto.
Okay. Okay and then um I might have missed this so apologies if I did. But do you guys have a kind of a Target yield on uh Toronto house in Calgary house based on the um unsolicited imbalance. You've gotten
Not that we're disclosing Lauren.
Did you say you revised the expected proceeds a bit lower there is that a function of what you think you'll get on the sale price or is that a thought around maybe some condos at closed not collecting on them.
Fair enough. Okay, thank you very much.
No problem. Thank you.
Your next question comes from the line of Matt cornick with National Bank Financial, please go ahead.
What was behind that assumption at the end of the day.
It's just to reflect the market value on the remaining 8% of units that have to be sold so as you know we're 92%. So the pricing is locked in them and we need to just we needed to just adjust on the remaining 8%.
Hey guys, good morning. Um, just uh, back on Toronto, not Toronto. It's King Toronto. Um, you you revised the expected precedes a bit lower there? Is that a function of what you think, you'll get on the sale price or is that a thought around, maybe some condos that closed, not collecting on them, or just what was behind that assumption? At the end of the day,
Okay makes sense and then.
There was I think I'm not sure. If it was in your same property NOI number or not but it sounds like you collected prior bad debt provision.
The $1 3 million on our adopted in Calgary.
Would that have been in the same property NOI and was there an offsetting negative or should we view that as kind of onetime in nature.
It's just to reflect market value on the remaining 8% of units that have to be sold. So as you know, we're 92% sold so that pricing is locked in um and we need to just we needed to just adjust on the remaining 8%.
Yeah.
Hey, Matt its been bought was a reversal in Calgary, but there.
The normal course bad debt, that's in our results as usual, which offsets that so that should not be something that should be backed out because if you're backing out. The reversal you got a backup provisions. If you look at no 10, it's very clear the provisions actually in the quarter were higher than the reverse.
Okay. Thanks man. Um, and then uh there was I think, I'm not sure if it was in your same property in a line number or not, but it sounds like you collected, a prior bad debt provision of around 1.3 million on a an asset in Calgary, uh, would that have been insane property, and Ai, and and was there an offsetting negative or should we view that as kind of 1 time in nature?
Okay. That's fair and then I guess on 1001 Robert Burrows.
The lease termination income I know $2 1 million, but was there anything that we should net against that in terms of.
The new lease that's going to be signed relative to the older I kind of what would be the net impact if we wanted to get to a normalized number in the quarter.
Hi Matt its name. Um, Scott was a reversal in Calgary. But um, there was the normal course bad debt that's in our results as usual, which offsets that? So that should not be something that should be backed up because if you're backing out the reversal you got a backup the provisions. If you look at Note 10 it's very clear, the provisions actually in the quarter were higher than the reversal.
Where for a few quarters on a run rate.
That is $3 per square foot higher than the current lease.
Okay.
And then lastly for me I appreciate the disclosure in terms of the incremental NOI coming from the ground up development I think it was $1 million in Q4 and $10 million in 2026 does that include anything from the.
Okay, that's fair. Um, and then I get on 1,001 Robert for us, uh, the least termination income, I know of 2.1 million. But was there anything that we should net against that? In terms of the new lease that's going to be signed relative to the older and kind of what what would be the net impact if we wanted to get to a normalized number?
In the quarter.
Or for future Quarters on a run rate.
Matt is $3 per square foot higher than the current lease.
Okay.
Redevelopment portfolio or would that be incremental on top of those two years.
That there's a little bit from 1001 robot Bourassa and RCA in those numbers.
In those numbers. Okay. So that's the total expected kind of incremental to just general same property NOI in the portfolio.
Yeah.
The appreciate the disclosure in terms of the incremental noi coming from the ground up development. I think it was 1 million in Q4 and 10 million and 2026. Does that include anything from the uh, Redevelopment portfolio, or would that be incremental on top of of those figures?
Yeah.
Your next question comes from the line of <unk> with CIBC capital markets. Please go ahead.
That there's a little bit from a 100,001 Robert Barasa and RCA in those numbers.
Hi, good morning.
Kind of how much capital do you expect to be getting back in 2026 from because it seems like the closings may bleed into 2027 as well.
In those numbers. Okay, so that's, that's the total expected kind of incremental to just general. Same property in a library in the portfolio.
So from the condo sale yeah.
Your next question comes from the line of tal woolly with cidc capital markets, please go ahead.
Yeah. It's in the note, it's about $240 million of loss share.
Okay.
And that in 'twenty for the total.
Hi, good morning uh just on King condo. So how much Capital do you expect to be getting back in 2026 from because it seems like the closing is made bleed into 2027 as well?
That's the total so occupancy will be in place for clothing is based on selling permits in place and we are right now we're expecting late 2026th to early 2027, some cash proceeds.
So, from the condo sales, yes.
Yeah, it's just a note, it's about 240 million at our share.
Okay got it.
Hum.
And that's in 26 or that's total.
Just on leasing in general I guess I feel like maybe.
I or the market.
Youre getting a little surprised.
Trying to reconcile the commentary you guys have around leasing.
That's the total. So occupancy will be in place. The closing is based on city permits in place. So, we are right now, we're expecting late 2026 to early 2027. So cash proceeds.
What's getting rendered in the quarters and so.
um,
If you are seeing increasingly seeing increasing large format tenant demand.
Uh, just on leasing in general. I guess I feel like maybe
Improved existing user demand and the conversion rate.
uh, I or the market, uh, you know, getting a little surprised with just
Yeah.
I wouldn't necessarily it does sound like all good things and yet occupancy is down quarter over quarter and you know your revised outlook doesn't.
trying to reconcile the commentary, you guys have around leasing with what's getting rendered in the quarters. And so,
It doesn't really have much of an occupancy lift baked in next quarter, either and so when.
Conversion rate.
Are the wheel is going to start to turn positively for occupancy.
Despite all the sort of thing.
Green shoots I'll call it.
Commentary that we're getting.
I you know, like I I wouldn't necessarily those sound like all good things and yet occupancy is down quarter over quarter and you know you're revised Outlook.
Yeah, there's a few quarters of a delay between getting the leasing locked down and then having.
Doesn't really have much of an occupancy, lift baked in next quarter either. And so when
Occupancy and then having rent commencement so it.
Unfortunately, it doesn't happen immediately there is a lag effect and so we are seeing that we are seeing the leasing momentum and the tami sector.
Are the wheels going to start to turn positively for occupancy? Uh despite all the sort of, you know, sort of green shoots, I'll call it. Um, commentary that we're getting.
yeah, there's there's a few quarters of a delay between getting the leasing locked down and then having
<unk> mandates are kind of the latest hum, but we started seeing things starting to pick up before the bank mandates and unfortunately, it takes a few quarters for it to start being reflected in our numbers and then for the cash rent commencement to start.
In our statement. So there is a bit of a lag there has to be taken into account.
Occupancy and then, having rent commencement. So it unfortunately doesn't happen immediately. There is a lag effect. And so, we are seeing that we are seeing the leasing momentum from the Tami sector. Um, you know, the bank mandates are kind of the latest
Okay.
So.
Middle of 2026, you would feel comfortable that occupancy should be above where it is right now.
I would expect 2026 to beat to be improved over 2025, but I'm not going to start speaking to 2026 on this call to although I appreciate that.
Um, but we started seeing things starting to pick up before the bank mandates. And unfortunately, it takes a few quarters for it to start being reflected in our numbers and then for the cash rent, commencement to start getting our statements. So there is a bit of a lag that has to be taken into account.
Okay, so
That you are asking.
From a good place.
Yeah.
Like middle of 2026, you would feel comfortable that occupancy should be above where it is right now.
Trading on what we expect for 2026 as we always do on our year end call, but we certainly as we sit here today, we have line of sight to improved metrics in 2026.
Okay.
And then just lastly on 150 West, Georgia do you have a data center partner prospected or in place already or does that.
I would expect 2026 to be to be improved over 2025, but I'm not going to start speaking to 2026 on this call. Tal, although I I appreciate, um, that that you are asking, uh, from a, from a good place, uh, will be a lot.
Are you just saying basically you have a powered lamp fight back.
Could be used for that.
Creating on what we expect for 2026 as we always do on our year-end call. But we certainly, as we sit here today, we have line of sight to improve metrics in 2026.
That person will still need to go get a site plan approval and all that stuff.
Oh, we have entitlements and there are prospective parties at advanced stages of their due diligence.
Okay for your and then your goal here is 100% monetize that loan.
Okay, uh, and then just lastly, on 150 West Georgia. So, do you have a data center partner prospected or in place already, or are you just saying basically that you have a powered land site?
Could be used for that and that, that person will still need to go get site, plan approval and all that stuff.
Out of this site.
However.
Absolutely yes, okay.
Got it alright, thanks very much.
Now, we have entitlements and there are prospective parties at Advanced stages of their due diligence.
Thanks, Tom.
Your next question comes from the line of tiny beer with RBC capital markets. Please go ahead.
Thanks, Good morning, just with respect to dispositions.
Okay, so you're and then your goal here is just 100% monetize that loan and be out of this site.
Forever.
270 million that you mentioned, plus I guess, Toronto and Calgary House with this collectively sort of Mark the end of the disposition program for I guess, if you think about 2026.
Absolutely, yes. Okay, got it. All right, thanks very much.
Thanks Charles.
Your next question comes from the line of Tammy beer with RBC Capital markets. Please go ahead.
Or would you consider just continuing to perhaps upside to that program.
No as I believe sit here today, we see that as being the end of the disposition program money.
And then I guess tied.
Tied to that with the I guess anticipated repayments.
The West Bank loan would that get you to effectively that 10 times debt to EBITDA target is that enough.
Thanks, uh, good morning. Um, just with respect to dispositions the, uh, the 270 million that you mentioned, uh, plus I guess Toronto and Calgary house with this collectively. Sort of, Mark, the end of the disposition program for I guess if you think about 2026, um, or would you consider just continuing to, um, you know, perhaps upsize that program?
We have line of sight to being in the 10 times range.
By the end of 2026.
Okay.
Maybe just switching gears coming back to the comments around the distribution.
And then I guess, um, you know, tied to that with the, I guess anticipated repayment of the of the West Bank Loan. Would that get you to, uh, effectively that 10 times debt debit at Target. Is that enough?
Don't think this was asked but if it's if it was I apologize, but what are some of the parameters or goalposts that youre focused on whether to cut is.
We have line of sight to being in the 10 timeslot.
Range by the end of 2026.
Is it leverage.
Okay. Um,
Occupancy the payout ratio et cetera, or just maybe some color around how you're approaching it at this point.
It's really looking at getting the balance sheet, where we feel it needs to be up and accelerating the progress towards that goal.
Certainly payout ratios.
I haven't done those kinds of metrics, but it's about strengthening the balance sheet.
Maybe just Switching gears coming back to the comments around the distribution. Uh, I don't think this was us, but if I if, uh, if it was, I apologize. But what are some of the parameters or or goalposts that you're focused on on, whether to cut, you know, is it leverage um occupancy, the pair ratio Etc or just maybe some color around um how you're approaching it at this point?
I guess the other way to think about it is why not just cut now I mean, how much could I know, there's a lot happening a lot of stuff in the works from with all this capital that you expect to repatriate, but why not just do it now and then just drive on and the rest is sort of strengths and strengthened the balance.
It's really looking at getting the balance sheet where we feel, it needs to be at and accelerating the progress.
Towards that goal. Um, and and certainly payout ratios and get to Evan Dawn, those kinds of metrics, but it's about strengthening the balance sheet.
Shoot for.
Yeah.
We just we have a process that has to work for us since we went public in 2023, and it's a decision that the board makes annually for the following year at the end of every calendar year, and we don't see the need to go off process.
I guess the other way to think about it is why not just cut? Now, um, I mean, how much could I know? There's a lot happening. A lot of stuff in the works from, you know, with all this Capital that you expect to repatriate, but why not just do it now. And, and just drive on, and the rest is sort of strengthen strengthens. The, the balance sheet further,
yeah, it's
And so we will be meeting with our board.
At the end of November and in making our decision with the usual within the usual timelines.
Okay.
And then just lastly, the to.
Public in 2003 and it's a decision that the board makes annually for the following year at the end of every calendar year, and we don't see the need to go off process.
Defy the comment that you made on people.
Getting to 90% of occupancy next year is that is that in place or is that a is that committed.
So I was speaking to lease area and you know we will also.
Um, and so we will be meeting with our board um, at the end of November and and making our decision with the usual within the usual timelines.
Stick with our usual process pommy of talking about 2026 on our yearend call my reference to having line of sight to leased area of 90% by the end of 2026 is based on the improving market fundamentals and that we have in front of us today, and it's something that we'll reaffirm one.
Okay. Um, and then just lastly, the um, you know, to clarify the comment that you made on, uh, you know, getting to 90% occupancy next year. Is that is that in place or is that uh, is that committed?
no, I I was speaking to lease area and, you know,
We will also.
Our year end call.
Okay. Okay, and then just lastly here, okay without commenting on our 2026 growth.
As you see today is do you see 2025 is the low watermark on <unk>.
The cycle for for Alex.
Stick with our usual process Tommy of talking about 2026 on our year-end call uh my reference to having line of sight to lease area of 90% by the end of 2026, is based on the improving Market fundamentals, um, that we have in front of us today and it's something that will reaffirm on our year end call.
Yeah.
I think that's something that I'll have to leave sort of part of our year end call pardon me.
We're focused on them on the metrics and we want to provide a comprehensive update in terms of our outlook for next year. So I just I'm not trying to put you off I just I don't want to start giving piece meal information on on next year. All I can say is that with the improving fundamentals.
Okay. Uh okay then just lastly here. Um okay without calling commenting on, uh, 2026 growth. You know, as you see today is do do you see 2025 as the, the low water mark on ffo, um, you know, in this cycle for for Allied
We absolutely expect an improving set of operating metrics in 2026.
Okay. Thanks, very much I'll turn it back to Sam.
Thank you.
The next question comes from the line of shallow Garko with Barrington Research. Please go ahead.
Alright, Thank you and good morning, I was just wondering there was an expectation of maintaining the occupancy rate flat over Q3, and Q4 and I see you have nicky's maturities or P 90000, with some altered by fixture and commencement too.
Focused on um on the metrics and we want to provide a comprehensive update in terms of our outlook for next year. So I just I I'm not trying to put you off. I just I don't want to start giving peace meal information on on next year. All I can say is that with the improving fundamentals we absolutely expect. An improving set of operating metrics in 2026
Okay, thanks very much. I'll turn it. Back to see you. Thanks.
Thank you.
The next question comes from the line of shallow guard with varitas research. Please go ahead.
Where does this roughly 100 basis points to 90 basis points of occupancy going to come from it's like new leasing or does it begin was for whatever it is maturing in this quarter.
So I think it comes from term commencement as a result of contractual leasing activity achieved year to date that will commence in Q4.
All right, thank you and good morning. Um I was just wondering there's an expectation of maintaining the occupancy rate flat over Q3 and Q4 and I see you have net lease maturities of 390,000 with some offset by fixture in comments. So
Where is this, uh, roughly 100 basis points or 90? Basis points of occupancy going to come from? Is it new leasing? Or is it renewals for whatever is maturing in this quarter?
And then anything on renewals out of that 391000 square foot.
Of the 391000 square feet, we expect that we will be successful in renewing approximately half and we expect approximately half will mature.
Cheb, it comes from term commencement as a result of contractual uh, leasing activity achieved year to date that will commence in Q4.
Or circumstances specific to each organization.
and then the thing on renewals out of that, 391,000 square foot
And exit the portfolio.
Okay. Thanks, and the other question I have and I've been gone on your best owner of the 600 million maturity up in February 26, we expect it to fully ETP through attitude and so it is going to be some refinancing through unsecured debt.
Of the 391,000 square feet. We expect that we will be successful in renewing, approximately half and we expect approximately half will mature for circumstances specific to each organization, um, and uh, and exit the portfolio.
It is expected to be fully repaid.
Uh huh.
Okay that was all my questions I'll turn it back thank you.
Thank you.
The next question comes from the line of Brad Sturges with Raymond James. Please go ahead.
Okay. Thanks and the other question I have, and I think, uh, Nan New Testament of the 600 million maturity, uh, up in fehb 2026, the expected to fully repay through asset sales or is there going to be some refinancing through unsecured debt?
Oh, Hey, there just a couple of quick questions from me just going back to from Toronto.
Is expected to be fully repaid.
I think you talked about total.
Total proceeds of $240 million, what kind of a default rate, which you assume as a base case scenario for a condo closings out so.
Okay, those are my questions. I'll turn it back in. Thank you.
Thank you.
The next question comes from the line of bread searches with Raymond James. Please go ahead.
Those progressed over the balance of 'twenty six.
We understand that our regular default rate is between 7% to 10% abroad. So I wouldn't expect it to be higher on that project, if anything it might be modestly lower.
Uh, hey there, uh, just a couple quick questions for me. Just, uh, going back to, um, King Toronto. Um, I think you talked about a total proceeds of 240 million, uh, what kind of, uh, default rate which you assume as a base case scenario for uh, condo closings as um,
Okay.
Helpful. Second question just on the <unk>.
As those progress over the balance of 26.
Asset sales is complete can you just talk about maybe an average yield or expected exit cap rate on a blended basis of what.
That potentially could look like for many transactions.
We understand that a regular default rate is between 7 to 10% abroad. So I wouldn't expect it to be higher on that project. If anything, it might be modestly, lower,
But we're not going to be doing that at this time, we'll disclose as we always do I spend dispositions are completed and all I can say is that we've been we've had our eye on for S values being validated.
Okay, that's helpful. Um, second question. Just on the
remaining assets sales to complete. Can you just talk about, maybe an average yield or expected exit cap rate on a blended basis of what?
Physician program today.
Uh, that potentially could look like for remaining transactions.
Okay. Thank you.
Thank you and now it seems that you have no further questions. At this time I will now turn the call back over to Cecilia Williams for closing remarks.
Thanks, John and thanks, everyone for attending our conference call. My final message is this right.
as we always do, as the dispositions are completed, all I can say, is that we've been we've had our IFRS values being validated through the disposition program today
Okay, thank you.
Good dynamics are shifting in our favor and we just with the teams staying focused on what we can control we're successfully operating our way through the improving environment and remain on the path to our goals for leasing up space.
Thank you and uh, it seems that we have no further questions at this time. I will now turn the call back over to Cecilia Williams for closing remarks.
Treating a plan to reduce debt and completing developments that will strengthen our ability to serve knowledge based organizations for years to come.
Thanks, John. Thanks everyone for attending our conference call. My final message is this
Our portfolio is unique and steeply urban and deeply connected to the cities that are driving candidate economic and creative future and these cities got stronger so does allied.
Market dynamics are shifting in our favor. And with the with the team staying focused on what we can control for successfully operating our way through the improving environment and remain on the path to our goals.
We'll keep you updated on our progress going forward. Thank you.
releasing up space executing a plan to reduce debt and completing developments that will strengthen our ability to serve knowledge-based, organizations for years to come
Ladies and gentlemen. This concludes today's conference call. You May now disconnect. Your lines. Thank you for your participation have a great day.
Our portfolio is unique, it's deeply Urban and deeply connected to the cities that are driving Canada's economic and creative future as these cities get stronger. So does Allied
We'll keep you updated on our progress going forward. Thank you.
Ladies and gentlemen, this concludes today's conference call, you may now disconnect your lines, we thank you for your participation. Have a great day.