Q2 2026 Allied Properties REIT Earnings Call

July 29, 2026

Moderator: Hello everyone. Thank you for joining us, and welcome to the Allied Properties REIT Q2 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Cecilia Williams, President and CEO. Cecilia, please go ahead.

Operator: Hello everyone. Thank you for joining us, and welcome to the Allied Properties REIT Q2 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Cecilia Williams, President and CEO. Cecilia, please go ahead.

Speaker #1: If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Cecilia Williams, president and CEO.

Speaker #1: Cecilia, please go ahead.

Speaker #2: Thanks, Ben, and good morning, everyone. Welcome to our Q2 conference call. Please note that certain statements we make during the course of this conference call that are not statements of historical facts may constitute forward-looking information and forward-looking statements about future events or future performance.

Cecilia Williams: Thanks, Ben, good morning, everyone. Welcome to our Q2 conference call. Please note that certain statements we make during the course of this conference call that are not statements of historical facts may constitute forward-looking information and forward-looking statements about future events or future performance. These statements are based on management's current expectations and are subject to risks, uncertainties, and other factors that may cause actual events or results to differ materially from historical results and/or from our forecasts, including those described under the heading Risks and Uncertainties in our 2025 annual report. Material assumptions underpinning any forward-looking statements we make include those described under the heading Forward-Looking Statements in our 2025 annual report. In addition, certain non-IFRS financial measures may be discussed on this call.

Speaker #2: These statements are based on management's current expectations and are subject to risks, uncertainties, and other factors that may cause actual events or results to differ materially from historical results and/or from our forecasts.

Speaker #2: Including those described under the heading "Risks and Uncertainties" in our 2025 annual report. Material assumptions underpinning any forward-looking statements we make include those described under the heading "Forward-looking Statements" in our 2025 annual report.

Speaker #2: In addition, certain non-IFRS financial measures may be discussed on this call. References to non-IFRS financial measures are only provided to assist you in understanding our results and performance trends and may not be appropriate for any other purpose.

Cecilia Williams: References to non-IFRS financial measures are only provided to assist you in understanding our results and performance trends and may not be appropriate for any other purpose. For further discussion on these matters, please refer to our 2025 annual report under the heading Non-GAAP Measures. Turning to our prepared remarks before we take questions. Allied is entering a new phase. After more than a decade of investing in and developing our portfolio, we're focused on realizing its earnings potential through leasing execution, disciplined capital allocation, and a stronger balance sheet. We're also continuing to strengthen our portfolio by selectively disposing of assets. These actions improve financial flexibility while creating a higher quality portfolio positioned for long-term growth and value creation. This morning, I'll focus on three areas: operating fundamentals, the balance sheet, and the financials. JP will cover leasing by market in more detail. Starting with leasing and operating fundamentals.

Speaker #2: For further discussion on these matters, please refer to our 2025 annual report under the heading "Non-GAAP Measures." Turning to our prepared remarks before we take questions.

Speaker #2: Allied is entering a new phase. After more than a decade of investing in and developing our portfolio, we're focused on realizing its earnings potential through leasing executions, disciplined capital allocation, and a stronger balance sheet.

Speaker #2: We're also continuing to strengthen our portfolio by selectively disposing of assets. These actions improve financial flexibility while creating a higher-quality portfolio positioned for long-term growth and value creation.

Speaker #2: This morning, I'll focus on three areas: operating fundamentals, the balance sheet, and the financials. JP will cover leasing by market in more detail. Starting with leasing and operating fundamentals.

Cecilia Williams: JP will cover leasing by market in more detail. Starting with leasing and operating fundamentals. The office market is entering a different phase than we've experienced over the past five years. Demand for high-quality urban workspace is improving while future competitive supply continues to contract. These fundamentals increasingly favor the portfolio we've built over the past decade and are contributing to our improving performance. Our operating business continues to strengthen, and the clearest evidence of this is that while Allied represents 5.5% of the office inventory in our markets, we've captured 7.4% of leasing activity year to date. Leasing and occupancy both finished ahead of our expectations, with the portfolio ending the quarter 84.4% occupied and 86.7% leased. We completed 522,000 sq ft of leasing during the quarter, and our new leasing pipeline is now 42% higher than the beginning of the year.

Speaker #2: The office market is entering a different phase than we've experienced over the past five years. Demand for high-quality urban workspace is improving, while future competitive supply continues to contract.

Cecilia Williams: The office market is entering a different phase than we've experienced over the past five years. Demand for high-quality urban workspace is improving while future competitive supply continues to contract. These fundamentals increasingly favor the portfolio we've built over the past decade and are contributing to our improving performance. Our operating business continues to strengthen, and the clearest evidence of this is that while Allied represents 5.5% of the office inventory in our markets, we've captured 7.4% of leasing activity year to date. Leasing and occupancy both finished ahead of our expectations, with the portfolio ending the quarter 84.4% occupied and 86.7% leased. We completed 522,000 sq ft of leasing during the quarter, and our new leasing pipeline is now 42% higher than the beginning of the year. These are important leading indicators that suggest our portfolio is positioned well for the next phase of the market.

Speaker #2: These fundamentals increasingly favor the portfolio we've built over the past decade and are contributing to our improving performance. Our operating business continues to strengthen, and the clearest evidence of this is that, while Allied represents 5.5% of the office inventory in our markets, we've captured 7.4% to date.

Speaker #2: Leasing and occupancy both finished ahead of our expectations, with the portfolio ending the quarter 84.4% occupied and 86.7% leased. We completed 522,000 square feet of leasing during the quarter, and our new leasing pipeline is now 42% higher than the beginning of the year.

Speaker #2: These are important leading indicators that suggest our portfolio is positioned well for the next phase of the market. Financial flexibility continues to improve. We completed or secured approximately 321 million dollars of dispositions and reduced net debt-to-EBITDA to 12 times.

Cecilia Williams: These are important leading indicators that suggest our portfolio is positioned well for the next phase of the market. Financial flexibility continues to improve. We completed or secured approximately CAD 321 million of dispositions and reduced net debt to EBITDA to 12 times. Those actions keep us on the path toward our de-leveraging objectives. Turning briefly to the financial results. It's important to distinguish between the underlying performance of the business and certain accounting and one-time items that affected reported earnings this quarter.

Cecilia Williams: Financial flexibility continues to improve. We completed or secured approximately CAD 321 million of dispositions and reduced net debt to EBITDA to 12 times. Those actions keep us on the path toward our de-leveraging objectives. Turning briefly to the financial results. It's important to distinguish between the underlying performance of the business and certain accounting and one-time items that affected reported earnings this quarter. Operationally, the business performed largely as we expected. Same-asset NOI declined 12.6% versus the 10% we had expected. This was lower due to a one-time retroactive property tax assessment. FFO per unit was CAD 0.24 and AFFO per unit was CAD 0.17, in line with our expectations, and both reflect the non-recurring property tax assessment together with lower than expected interest income during the quarter. Given recent market transactions, we recorded a fair value reduction on our investment properties.

Speaker #2: Those actions keep us on the path toward our deleveraging objectives. Turning briefly to the financial results, it's important to distinguish between the underlying performance of the business and certain accounting and one-time items that affected reported earnings this quarter.

Speaker #2: Operationally, the business performed largely as we expected. Same asset NOI declined 12.6% versus the 10% we had expected, this was lower due to a one-time retroactive property tax assessment.

Cecilia Williams: Operationally, the business performed largely as we expected. Same-asset NOI declined 12.6% versus the 10% we had expected. This was lower due to a one-time retroactive property tax assessment. FFO per unit was CAD 0.24 and AFFO per unit was CAD 0.17, in line with our expectations, and both reflect the non-recurring property tax assessment together with lower than expected interest income during the quarter. Given recent market transactions, we recorded a fair value reduction on our investment properties.

Speaker #2: FFO per unit was 24 cents, and AFFO per unit was 17 cents, in line with our expectations and both reflect the non-recurring property tax assessment together with lower-than-expected interest income during the quarter.

Speaker #2: Given recent market transactions, we recorded a fair value reduction on our investment properties. The adjustment reflects higher market discount rates and capitalization rates, rather than any fundamental change in the quality of our portfolio.

Cecilia Williams: The adjustment reflects higher market discount rates and capitalization rates rather than any fundamental change in the quality of our portfolio. Importantly, our broader outlook remains substantially unchanged. While we've updated our same-asset NOI outlook to reflect capital reallocation toward development completion and near-term leasing, our expectations regarding dispositions, occupancy, de-leveraging, and the overall direction of the business remain intact. Before I conclude, I want to mention how pleased we are to welcome Craig MacIntyre, who joins Allied as Senior Vice President and Chief Financial Officer. Craig spent nearly two decades in capital markets and corporate finance, most recently at CREIT and Choice Properties. I will now turn the call to J.P.

Speaker #2: Importantly, our broader outlook remains substantially unchanged. While we've updated our same asset NOI outlook to reflect capital reallocation toward development completion and near-term leasing, our expectations regarding dispositions, occupancy, deleveraging, and the overall direction of the business remain intact.

Speaker #2: Before I conclude, I want to mention how pleased we are to welcome Craig McIntyre, who joins Allied as Senior Vice President and Chief Financial Officer.

Speaker #2: Craig spent nearly two decades in capital markets and corporate finance, most recently a CRE and Choice Properties. I will now turn the call to JP.

Speaker #3: Thanks, Cecilia. I'll start by providing a summary of our leasing performance. Followed by market commentary and our leasing pipeline, along with the associated risks.

J.P. Mackay: Thanks, Cecilia. I'll start by providing a summary of our leasing performance, followed by market commentary and our leasing pipeline, along with the associated risks, and conclude with observations on the market and our evolving approach to leasing. Starting with leasing performance. As Cecilia highlighted, in H1 2026, we captured strong market share. We completed 7.4% of total new leasing activity while representing 5.5% of the total rental stock in the markets in which we operate. This underscores the quality of our portfolio and strength of our operating platform. Equally encouraging, our new leasing pipeline has increased 42% since the beginning of the year, demonstrating continued improvement in operating fundamentals and a favorable response to the new initiatives introduced at the end of Q1 to increase engagement with the brokerage community and make it easier for small to mid-size organizations to lease space in our portfolio.

JP Mackay: Thanks, Cecilia. I'll start by providing a summary of our leasing performance, followed by market commentary and our leasing pipeline, along with the associated risks, and conclude with observations on the market and our evolving approach to leasing. Starting with leasing performance. As Cecilia highlighted, in H1 2026, we captured strong market share. We completed 7.4% of total new leasing activity while representing 5.5% of the total rental stock in the markets in which we operate. This underscores the quality of our portfolio and strength of our operating platform.

Speaker #3: And conclude with observations on the market and our evolving approach to leasing. Starting with leasing performance. As Cecilia highlighted, in the first half of 2026, we captured strong market share.

Speaker #3: We completed 7.4% of total new leasing activity, while representing 5.5% of the total rental stock in the markets in which we operate. This underscores the quality of our portfolio and the strength of our operating platform.

Speaker #3: Equally encouraging, our new leasing pipeline has increased 42% since the beginning of the year, demonstrating continued improvement in operating fundamentals and a favorable response to the new initiatives introduced at the end of Q1 to increase engagement with the brokerage community and make it easier for small to mid-sized organizations to lease space in our portfolio.

JP Mackay: Equally encouraging, our new leasing pipeline has increased 42% since the beginning of the year, demonstrating continued improvement in operating fundamentals and a favorable response to the new initiatives introduced at the end of Q1 to increase engagement with the brokerage community and make it easier for small to mid-size organizations to lease space in our portfolio. Our portfolio continues to outperform the market in Montreal, Toronto, Kitchener, and Calgary. Our Vancouver portfolio is 100 basis points lower than the market because of higher vacancy in Gastown. Our occupied and leased area in Q2 ended slightly lower than Q1 at 84.4% and 86.7% respectively.

Speaker #3: Our portfolio continues to outperform the market in Montreal, Toronto, Kitchener, and Calgary. Our Vancouver portfolio is 100 basis points lower than the market because of higher vacancy in Gastown.

J.P. Mackay: Our portfolio continues to outperform the market in Montreal, Toronto, Kitchener, and Calgary. Our Vancouver portfolio is 100 basis points lower than the market because of higher vacancy in Gastown. Our occupied and leased area in Q2 ended slightly lower than Q1 at 84.4% and 86.7% respectively. While down moderately from Q1, occupancy ended higher than our outlook of 82% because of earlier than anticipated occupancy from leasing activity. To achieve our occupancy target of 84% to 86% by the end of the year, we need to lease between 1.05 and 1.35 million square feet in our rental portfolio through new leasing and renewal activity that impacts occupancy in 2026. This is consistent with the volume leased in 2025. Year to date, we've leased 633,000 square feet against our target, and there have been no material unanticipated non-renewals or terminations that would alter our objective.

Speaker #3: Our occupied and leased area in Q2 ended slightly lower than Q1 at 84.4% and 86.7%, respectively. While down moderately from Q1, occupancy ended higher than our outlook of 82% because of earlier-than-anticipated occupancy from leasing activity.

JP Mackay: While down moderately from Q1, occupancy ended higher than our outlook of 82% because of earlier than anticipated occupancy from leasing activity. To achieve our occupancy target of 84% to 86% by the end of the year, we need to lease between 1.05 and 1.35 million square feet in our rental portfolio through new leasing and renewal activity that impacts occupancy in 2026. This is consistent with the volume leased in 2025. Year to date, we've leased 633,000 square feet against our target, and there have been no material unanticipated non-renewals or terminations that would alter our objective. We expect occupancy will be flat or down slightly in Q3 because of known non-renewals that won't be fully offset by the timing of new lease commencements and reaffirm our outlook of 84% to 86% occupancy by the end of the year.

Speaker #3: To achieve our occupancy target of 84 to 86 percent by the end of the year, we need to lease between 1.05 and 1.35 million square feet in our rental portfolio.

Speaker #3: Through new leasing and renewal activity that impacts occupancy in 2026. This is consistent with the volume leased in 2025. Year to date, we've leased 633,000 square feet against our target.

Speaker #3: And there have been no material unanticipated non-renewals or terminations that would alter our objective. We expect occupancy will be flat or down slightly in Q3 because of known non-renewals that won't be fully offset by the timing of new lease commencements.

J.P. Mackay: We expect occupancy will be flat or down slightly in Q3 because of known non-renewals that won't be fully offset by the timing of new lease commencements and reaffirm our outlook of 84% to 86% occupancy by the end of the year. In Q2, we completed 522,000 square feet of total leasing activity, in line with the level of leasing activity in Q1. 463,000 square feet of leasing activity occurred in the rental portfolio, and 59,000 square feet occurred in the development portfolio. Within the rental portfolio, 105,000 square feet represent new leasing and 358,000 square feet represented renewals. Total leasing activity in H1 2026 was in line with H1 2025, both in square feet and number of transactions, and our conversion rate for new leasing was 29%. Leasing activity in Q2 was concentrated in our heritage workspace segment, which accounted for 71% of total leasing activity.

Speaker #3: And reaffirm our outlook of 84 to 86 percent occupancy by the end of the year. In Q2, we completed 522,000 square feet of total leasing activity, in line with the level of leasing activity in Q1.

JP Mackay: In Q2, we completed 522,000 square feet of total leasing activity, in line with the level of leasing activity in Q1. 463,000 square feet of leasing activity occurred in the rental portfolio, and 59,000 square feet occurred in the development portfolio. Within the rental portfolio, 105,000 square feet represent new leasing and 358,000 square feet represented renewals. Total leasing activity in H1 2026 was in line with H1 2025, both in square feet and number of transactions, and our conversion rate for new leasing was 29%. Leasing activity in Q2 was concentrated in our heritage workspace segment, which accounted for 71% of total leasing activity.

Speaker #3: 463,000 square feet of leasing activity occurred in the rental portfolio, and 59,000 square feet occurred in the development portfolio. Within the rental portfolio, 105,000 square feet represent new leasing, and 358,000 square feet represent renewals.

Speaker #3: Total leasing activity in the first half of 2026 was in line with H1 2025, both in square feet and number of transactions. And our conversion rate for new leasing was 29%.

Speaker #3: Leasing activity in Q2 was concentrated in our Heritage Workspace segment, which accounted for 71 percent of total leasing activity. Our Heritage and Modern Portfolios are 87 percent leased, and our Flex Portfolio is 78 percent leased.

J.P. Mackay: Our heritage and modern portfolios are 87% leased and our flex portfolio is 78% leased. New leasing spreads, excluding our flex workspace segment, increased 8% when comparing the ending to starting base rent and 9% when comparing average to average. Average total leasing costs year to date are CAD 6.27 per square foot per annum compared to CAD 7.01 in 2025. Average leasing costs for new leases are CAD 9.50 per square foot per annum and CAD 3.76 for renewals. The composition of our leasing profile remains anchored by professional services and TAMI users, which collectively represented more than three-quarters of the transaction volume in H1 2026. Our retention and replacement rate was 77%, slightly higher than our forecast for Q2. The average rental rate increased 1.3% when comparing the ending to starting base rent and 7.8% when comparing average to average, which was in line with our forecast.

JP Mackay: Our heritage and modern portfolios are 87% leased and our flex portfolio is 78% leased. New leasing spreads, excluding our flex workspace segment, increased 8% when comparing the ending to starting base rent and 9% when comparing average to average. Average total leasing costs year to date are CAD 6.27 per square foot per annum compared to CAD 7.01 in 2025. Average leasing costs for new leases are CAD 9.50 per square foot per annum and CAD 3.76 for renewals. The composition of our leasing profile remains anchored by professional services and TAMI users, which collectively represented more than three-quarters of the transaction volume in H1 2026. Our retention and replacement rate was 77%, slightly higher than our forecast for Q2. The average rental rate increased 1.3% when comparing the ending to starting base rent and 7.8% when comparing average to average, which was in line with our forecast.

Speaker #3: New leasing spreads excluding our Flex Workspace segment increased 8 percent when comparing the ending-to-starting base rent and 9 percent when comparing average-to-average. Average total leasing costs year to date are $6.27 per square foot per annum, compared to $7.01 in 2025.

Speaker #3: Average leasing costs for new leases are $9.50 per square foot per annum, and $3.76 for renewals. The composition of our leasing profile remains anchored by professional services and TAMI users, which collectively represented more than three-quarters of the transaction volume in the first half of 2026.

Speaker #3: Our retention and replacement rate was 77 percent, slightly higher than our forecast for Q2. The average rental rate increased 1.3 percent when comparing the ending-to-starting base rent and 7.8 percent when comparing average-to-average, which is which was in line with our forecast.

Speaker #3: In 2025, we successfully renewed Google at the BrightHop block in Kitchener, which addressed our largest 2026 maturity, representing 97,000 square feet at our 50 percent share.

J.P. Mackay: In 2025, we successfully renewed Google at the Breithaupt Block in Kitchener, which addressed our largest 2026 maturity, representing 97,000 square feet at our 50% share. Our largest known non-renewal in 2026 is Sun Life at our De Gaspé portfolio in Montreal, representing 56,000 square feet expiring at the end of August. We are in advanced discussions with a TAMI user to backfill up to 45,000 square feet of the Sun Life space with lease commencement in Q4 2026 or Q1 2027. We are forecasting a replacement and retention rate of 69% in 2026. In 2027, our largest known non-renewal is SQI, a Crown corporation of the province of Quebec at 747 Square Victoria. As part of a broader public sector consolidation, SQI will return 18,000 square feet in September 2026 and approximately 100,000 square feet in December 2027. We are actively touring users with 2028 requirements through the SQI space.

JP Mackay: In 2025, we successfully renewed Google at the Breithaupt Block in Kitchener, which addressed our largest 2026 maturity, representing 97,000 square feet at our 50% share. Our largest known non-renewal in 2026 is Sun Life at our De Gaspé portfolio in Montreal, representing 56,000 square feet expiring at the end of August. We are in advanced discussions with a TAMI user to backfill up to 45,000 square feet of the Sun Life space with lease commencement in Q4 2026 or Q1 2027.

Speaker #3: Our largest known non-renewal in 2026 is Sun Life at our De Gaspe portfolio in Montreal, representing 56,000 square feet expiring at the end of August.

Speaker #3: We are in advanced discussions with the Tammy user to backfill up to 45,000 square feet of the Sunlight space, with lease commencement in Q4 2026 or Q1 2027.

Speaker #3: We are forecasting a replacement and retention rate of 69 percent in 2026. In 2027, our largest known non-renewal is SQI, a Crown Corporation of the province of Quebec, at 747 Square Victoria.

JP Mackay: We are forecasting a replacement and retention rate of 69% in 2026. In 2027, our largest known non-renewal is SQI, a Crown corporation of the province of Quebec at 747 Square Victoria. As part of a broader public sector consolidation, SQI will return 18,000 square feet in September 2026 and approximately 100,000 square feet in December 2027. We are actively touring users with 2028 requirements through the SQI space.

Speaker #3: As part of a broader public sector consolidation, SQI will return 18,000 square feet in September 2026 and approximately 100,000 square feet in December 2027.

Speaker #3: We are actively touring users with 2028 requirements through the SQI space. There are no material non-renewals known at this time for 2028. Lastly, sublease availability increased by 30 basis points relative to Q1, and is 2.7 percent of GLA.

J.P. Mackay: There are no material non-renewals known at this time for 2028. Lastly, sublease availability increased by 30 basis points relative to Q1 and is 2.7% of GLA. The weighted average lease term of space available for sublease is five years, which reduces the risk of imminent direct vacancy and loss of economic productivity. Moving to our leasing pipeline. We currently have 1.7 million square feet of leasing activity underway. This is the largest our pipeline has been since we began reporting this metric, and it comprises 1 million square feet of new opportunities and 717,000 square feet of renewals. Of the new activity, 632,000 square feet is at the prospect stage and 394,000 square feet has progressed to the offer stage. Our total leasing pipeline has increased 33% since the beginning of the year, and our new leasing pipeline has increased 42%.

JP Mackay: There are no material non-renewals known at this time for 2028. Lastly, sublease availability increased by 30 basis points relative to Q1 and is 2.7% of GLA. The weighted average lease term of space available for sublease is five years, which reduces the risk of imminent direct vacancy and loss of economic productivity. Moving to our leasing pipeline. We currently have 1.7 million square feet of leasing activity underway. This is the largest our pipeline has been since we began reporting this metric, and it comprises 1 million square feet of new opportunities and 717,000 square feet of renewals. Of the new activity, 632,000 square feet is at the prospect stage and 394,000 square feet has progressed to the offer stage. Our total leasing pipeline has increased 33% since the beginning of the year, and our new leasing pipeline has increased 42%.

Speaker #3: The weighted average lease term of space available for sublease is five years, which reduces the risk of imminent direct vacancy and loss of economic productivity.

Speaker #3: Moving to our leasing pipeline. We currently have 1.7 million square feet of leasing activity underway. This is the largest our pipeline has been since we began reporting this metric.

Speaker #3: And it comprises 1 million square feet of new opportunities, and 717,000 square feet of renewals. Of the new activity, 632,000 square feet is at the prospect stage, and 394,000 square feet has progressed to the offer stage.

Speaker #3: Our total leasing pipeline has increased 33 percent since the beginning of the year, and our new leasing pipeline has increased 42 percent. For context, we averaged a pipeline of 1.3 million square feet in each quarter in 2025, and 950,000 in 2024.

J.P. Mackay: For context, we averaged a pipeline of 1.3 million square feet in each quarter in 2025 and 950,000 in 2024. Turning to market commentary. The increase in our leasing pipeline reflects improving fundamentals. In Q2, the Canadian office market achieved a major milestone, marking a full year of sustained recovery. For the first time since the start of the pandemic, national office leasing recorded four consecutive quarters of positive net absorption, supported by, one, increased demand resulting from higher physical utilization as organizations continue to revert to an office-centric model. Two, a scarcity of premium availability in AAA assets, which nationally sit at 9.4% vacancy, just 100 basis points higher than vacancy in Q1 2020, which is driving an increase in demand for class A assets in and around the CBD.

JP Mackay: For context, we averaged a pipeline of 1.3 million square feet in each quarter in 2025 and 950,000 in 2024. Turning to market commentary. The increase in our leasing pipeline reflects improving fundamentals. In Q2, the Canadian office market achieved a major milestone, marking a full year of sustained recovery. For the first time since the start of the pandemic, national office leasing recorded four consecutive quarters of positive net absorption, supported by, one, increased demand resulting from higher physical utilization as organizations continue to revert to an office-centric model. Two, a scarcity of premium availability in AAA assets, which nationally sit at 9.4% vacancy, just 100 basis points higher than vacancy in Q1 2020, which is driving an increase in demand for class A assets in and around the CBD.

Speaker #3: Turning to market commentary. The increase in our leasing pipeline reflects improving fundamentals. In Q2, the Canadian office market achieved a major milestone, marking a full year of sustained recovery.

Speaker #3: For the first time since the start of the pandemic, national office leasing recorded four consecutive quarters of positive net absorption, supported by: 1) increased demand resulting from higher fiscal utilization as organizations continue to revert to an office-centric model; 2) a scarcity of premium availability in AAA assets, which nationally sit at 9.4 percent vacancy—just 100 basis points higher than vacancy in Q1 2020—which is driving an increase in demand for Class A assets in and around the CBD; 3) national downtown sublease space remains on par with 2018 levels and has now dropped below 10 million square feet; and 4) a decline in total construction, which has fallen to a 22-year low. As a result, no new urban supply is expected in the near term.

J.P. Mackay: Three, national downtown sublease space remains on par with 2018 levels and has now dropped below 10 million square feet. Four, a decline in total construction, which has fallen to a 22-year low. As a result, no new urban supply is expected in the near term. Despite the improvement in operating fundamentals, bifurcation is becoming a structural reality across the country. Premium assets in the CBD are benefiting from accelerating rent growth and contracting concessions, bolstered by the absence of new supply. Lower tier inventory remains under pressure, requiring aggressive incentives to secure and maintain tenant interest. We continue to see positive leasing momentum in our core concentrations of downtown West Toronto and downtown South Montreal. This trend began in H2 2025 as AAA assets were leased and demand extended to class A buildings in and around the CBD.

JP Mackay: Three, national downtown sublease space remains on par with 2018 levels and has now dropped below 10 million square feet. Four, a decline in total construction, which has fallen to a 22-year low. As a result, no new urban supply is expected in the near term. Despite the improvement in operating fundamentals, bifurcation is becoming a structural reality across the country. Premium assets in the CBD are benefiting from accelerating rent growth and contracting concessions, bolstered by the absence of new supply. Lower tier inventory remains under pressure, requiring aggressive incentives to secure and maintain tenant interest. We continue to see positive leasing momentum in our core concentrations of downtown West Toronto and downtown South Montreal. This trend began in H2 2025 as AAA assets were leased and demand extended to class A buildings in and around the CBD.

Speaker #3: Despite the improvement in operating fundamentals, bifurcation is becoming a structural reality across the country. Premium assets in the CBD are benefiting from accelerating rent growth and contracting concessions.

Speaker #3: Bolstered by the absence of new supply. Lower-tier inventory remains under pressure, requiring aggressive incentives to secure and maintain tenant interest. We continue to see positive leasing momentum in our core concentrations of downtown West Toronto, and downtown South Montreal.

Speaker #3: This trend began in the second half of 2025 as AAA assets were leased, and demand extended to Class A buildings in and around the CBD.

Speaker #3: Leasing activity in Kitchener remains slow, as demand is currently concentrated in the suburban market. Calgary's recovery remains tempered by consolidation in the energy sector.

J.P. Mackay: Leasing activity in Kitchener remains slow as demand is currently concentrated in the suburban market. Calgary's recovery remains tempered by consolidation in the energy sector, though the market is benefiting from structural supply-side corrections resulting from conversions, including the BeltLine, where our portfolio is concentrated. In Vancouver, Gastown and Yaletown continue to lag the financial district. We're starting to observe an improvement in tour activity in Yaletown. We continue to believe the path to market stabilization will unfold in two phases. Phase one is underway and driven by higher physical utilization, flight to quality, and return to office mandates. Phase two will be driven by improved economic outlook and employment growth in office-using sectors, propelling further expansion and fostering demand from new entrants to the Canadian market that have been largely absent for five years.

JP Mackay: Leasing activity in Kitchener remains slow as demand is currently concentrated in the suburban market. Calgary's recovery remains tempered by consolidation in the energy sector, though the market is benefiting from structural supply-side corrections resulting from conversions, including the BeltLine, where our portfolio is concentrated. In Vancouver, Gastown and Yaletown continue to lag the financial district. We're starting to observe an improvement in tour activity in Yaletown. We continue to believe the path to market stabilization will unfold in two phases. Phase one is underway and driven by higher physical utilization, flight to quality, and return to office mandates. Phase two will be driven by improved economic outlook and employment growth in office-using sectors, propelling further expansion and fostering demand from new entrants to the Canadian market that have been largely absent for five years.

Speaker #3: Though the market is benefiting from structural supply-side corrections resulting from conversions, including the belt line where our portfolio is concentrated. And in Vancouver, Gastown and Yelltown continue to lag the financial district.

Speaker #3: Though we're starting to observe an improvement in tour activity in Yaletown, we continue to believe the path to market stabilization will unfold in two phases.

Speaker #3: Phase one is underway and driven by higher fiscal utilization, flight to quality, and return-to-office mandates. Phase two will be driven by improved economic output and employment growth in office-using sectors, propelling further expansion and fostering demand for new entrants to the Canadian market that have been largely absent for five years.

Speaker #3: While Phase One momentum was robust in the second half of 2025 and has continued into the first half of 2026, we are monitoring the depth of RTO-driven demand and its ability to sustain positive absorption going forward.

J.P. Mackay: While phase one momentum was robust in H2 2025 and has continued into H1 2026, we are monitoring the depth of RTO-driven demand and its ability to sustain positive absorption going forward. The Bank of Canada's recent economic update suggests a slow but constructive normalization in economic conditions, which should ultimately support office-using employment and incremental demand for high-quality workspace in our core markets. However, uncertainty remains elevated, with key risks tied to the evolving Canada-US trade framework, slower population growth, and war-related supply disruptions. Lastly, an update on management's new approach to leasing following the organizational change announced in February. In March, we introduced incentives to increase engagement with the brokerage community by offering tour bonuses, commission bonuses for new leasing, and accelerated commission payments.

JP Mackay: While phase one momentum was robust in H2 2025 and has continued into H1 2026, we are monitoring the depth of RTO-driven demand and its ability to sustain positive absorption going forward. The Bank of Canada's recent economic update suggests a slow but constructive normalization in economic conditions, which should ultimately support office-using employment and incremental demand for high-quality workspace in our core markets. However, uncertainty remains elevated, with key risks tied to the evolving Canada-US trade framework, slower population growth, and war-related supply disruptions. Lastly, an update on management's new approach to leasing following the organizational change announced in February. In March, we introduced incentives to increase engagement with the brokerage community by offering tour bonuses, commission bonuses for new leasing, and accelerated commission payments.

Speaker #3: The Bank of Canada's recent economic update suggests a slow but constructive normalization in economic conditions, which should ultimately support office-using employment and incremental demand for high-quality workspace in our core markets.

Speaker #3: However, uncertainty remains elevated, with key risks tied to the evolving Canada-U.S. trade framework, slower population growth, and war-related supply disruptions. Lastly, an update on management's new approach to leasing following the organizational change announced in February.

Speaker #3: In March, we introduced incentives to increased engagement with the brokerage community by offering tour bonuses, commission bonuses for new leasing, and accelerated commission payments.

Speaker #3: We also introduced initiatives to make it easier for small to midsize organizations to lease space in our portfolio by offering short-form gross rent leases, end-to-end construction oversight, and built-out space.

J.P. Mackay: We also introduced initiatives to make it easier for small to mid-size organizations to lease space in our portfolio by offering short-form gross rent leases, end-to-end construction oversight, and built-out space. These tactics aim to reduce friction in the leasing process and align with how tenants screen, tour, and shortlist properties. By removing obstacles related to fit and readiness earlier in the process and investing in areas where tenants perceive the most risk, specifically speed to transact, price certainty, and space delivery, we are able to further differentiate our product. These new initiatives have been well-received, as evidenced by the increase in our leasing pipeline, and demonstrate our willingness to be more flexible in growing occupancy. I will now turn the call back to Cecilia.

JP Mackay: We also introduced initiatives to make it easier for small to mid-size organizations to lease space in our portfolio by offering short-form gross rent leases, end-to-end construction oversight, and built-out space. These tactics aim to reduce friction in the leasing process and align with how tenants screen, tour, and shortlist properties. By removing obstacles related to fit and readiness earlier in the process and investing in areas where tenants perceive the most risk, specifically speed to transact, price certainty, and space delivery, we are able to further differentiate our product. These new initiatives have been well-received, as evidenced by the increase in our leasing pipeline, and demonstrate our willingness to be more flexible in growing occupancy. I will now turn the call back to Cecilia.

Speaker #3: These tactics aim to reduce friction in the leasing process and align with how tenants screen, tour, and shortlist properties. By removing obstacles related to fit and readiness earlier in the process, and investing in areas where tenants perceive the most risk—specifically, speed to transact, price certainty, and space delivery—we're able to further differentiate our product.

Speaker #3: These new initiatives have been well received, as evidenced by the increase in our leasing pipeline, and demonstrate our willingness to be more flexible in growing occupancy.

Speaker #3: I will now turn the call back to Cecilia.

Speaker #1: Thanks, JP. Six months ago, we outlined a clear operating plan. Since then, we've been executing against it. Leasing is ahead of our expectations. The balance sheet continues to strengthen.

Cecilia Williams: Thanks, J.P. 6 months ago, we outlined a clear operating plan. Since then, we have been executing against it. Leasing is ahead of our expectations. The balance sheet continues to strengthen. Market fundamentals are gradually improving. Most importantly, the business itself is becoming simpler, more focused, and increasingly driven by recurring operating income. With that, Ben, we would be pleased to take questions.

Speaker #1: Market fundamentals are gradually improving. Most importantly, the business itself is becoming simpler, more focused, and increasingly driven by recurring revenue. With that, Ben, we'd be pleased to take questions.

Speaker #2: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand.

Moderator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonathan Kelcher with TD Cowen. Jonathan, your line is open. Please go ahead.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonathan Kelcher with TD Cowen. Jonathan, your line is open. Please go ahead.

Speaker #2: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #2: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonathan Kelcher with TD Cowan.

Speaker #2: Jonathan, your line is open. Please go ahead.

Speaker #4: Thanks, good morning. First question, just on the 760 million dollars of write-downs. Was that consistent across kind of the heritage modern and flex portfolios?

Jonathan Kelcher: Thanks. Good morning. First question.

Cecilia Williams: Morning

Jonathan Kelcher: just on the CAD 760 million of write-downs. Was that consistent across Kind of the heritage, modern, and flex portfolios, and how much of that was related to the assets held for sale?

Speaker #4: And how much of that was related to the assets held for sale?

Cecilia Williams: Some of it was related to the assets held for sale, it was really the dispositions that we completed in the quarter creating new price points, and we felt it was prudent to apply across the portfolio. It was primarily Toronto and Montreal with a little bit of Vancouver, and then there was an amount on Toronto House and Calgary House as well.

Speaker #1: Some of it was related to the assets held for sale, but it was really the dispositions that we completed in the quarter creating new price points.

Speaker #1: And we felt it was prudent to apply across the portfolio. It was primarily Toronto and Montreal, with a little bit of Vancouver, and then there was an amount on Toronto House and Calgary House as well.

Speaker #4: Okay. So, we think about it like almost every property got hit a little bit?

Jonathan Kelcher: Okay. Should we think about it like almost every property got hit a little bit?

Speaker #1: I think that's a fair comment.

Cecilia Williams: I think that's a fair comment.

Speaker #4: Okay. Secondly, on the leasing, the occupancy was a couple hundred basis points better than the 82% you guided to for Q2, but you didn't change your full-year target.

Jonathan Kelcher: Okay. Secondly, on the leasing. The occupancy was a couple of hundred basis points better than the 82% you guided to for Q2, but you didn't change your full-year target. Is that just you guys being a little conservative or should we be thinking about you guys being closer to the higher end of that 84% to 86% range?

Speaker #4: Is that just you guys being a little conservative, or should we be thinking about you guys being closer to the higher end of that 84 to 86 percent range?

Speaker #3: Jonathan, at this time, we are not revising our outlook. We'll continue to evaluate it over the course of the year.

J.P. Mackay: Jonathan, at this time, we are not revising our outlook. We'll continue to evaluate it over the course of the year.

JP Mackay: Jonathan, at this time, we are not revising our outlook. We'll continue to evaluate it over the course of the year.

Speaker #4: Okay. Fair enough. And then just lastly, for 1185 West Georgia and 1010 West Sherbrooke, what were the cap rates on those transactions?

Jonathan Kelcher: Okay. Fair enough. Just lastly, for 1185 West Georgia and 1010 Sherbrooke Street West, what were the cap rates on those transactions? Or blended, if you want.

J.P. Mackay: Jonathan, the cash yield on the assets that have closed is 3.4, and when we include 1010 Sherbrooke, which is firm, the cash yield on our disposition program to date is 4%.

JP Mackay: Jonathan, the cash yield on the assets that have closed is 3.4, and when we include 1010 Sherbrooke, which is firm, the cash yield on our disposition program to date is 4%.

Speaker #3: Jonathan, the cap yield on the assets that have closed is 3.4%, and when we include 1010 Sherbrooke, which is firm, the cash yield on our disposition program to date is 4%.

Speaker #4: Okay, thanks. I'll turn it back.

Jonathan Kelcher: Okay, thanks. I'll turn it back.

Speaker #1: Thank you.

Cecilia Williams: Thank you.

Speaker #2: Your next question comes from the line of Brad Sturges with Raymond James. Brad, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Brad Sturges with Raymond James. Brad, your line is open. Please go ahead.

Operator: Your next question comes from the line of Brad Sturges with Raymond James. Brad, your line is open. Please go ahead.

Speaker #4: Hey, good morning. Just going back to the discussion around occupancy I think you said you're expecting some non-renewals in Q3. I'm just want to clarify how much space at this point are you expecting to get back by the end of September?

Brad Sturges: Hey, good morning.

Cecilia Williams: Hi.

Brad Sturges: Just going back to the discussion around occupancy. I think you said you're expecting some non-renewals in Q3. I just want to clarify how much space at this point are you expecting to get back by the end of September?

Speaker #3: Brad, we have 545,000 square feet that matures over the balance of the year. We expect approximately half won't renew. The largest known non-renewals in 2026 occur in the second half, and specifically, Sun Life will occur in Q3.

J.P. Mackay: Brad, we have 545,000 square feet that matures over the balance of the year. We expect approximately half won't renew. The largest known non-renewals in 2026 occur in the second half, and specifically Sun Life will occur in Q3. When we consider our occupancy forecast, it was heavily weighted towards Q4, so we anticipate occupancy will be flat or slightly down next quarter as a result.

JP Mackay: Brad, we have 545,000 square feet that matures over the balance of the year. We expect approximately half won't renew. The largest known non-renewals in 2026 occur in the second half, and specifically Sun Life will occur in Q3. When we consider our occupancy forecast, it was heavily weighted towards Q4, so we anticipate occupancy will be flat or slightly down next quarter as a result.

Speaker #3: And when we consider our occupancy forecast, it was heavily weighted towards Q4, and that's why you have the disconnect in timing. So, we anticipate occupancy will be flat or slightly down next quarter as a result.

Speaker #4: Gotcha. That's helpful. Just as the leasing pipeline builds and it sounds like you're getting traction with new prospects, how should we think about lease negotiation timelines and your ability to convert prospects into signed leases?

Brad Sturges: Got you. That's helpful. Just as the leasing pipeline builds, and it sounds like you're getting traction with new prospects, how should we think about lease negotiation timelines and your ability to convert prospects into signed leases? Have you seen any indicators of improvement in some of those KPIs?

Speaker #4: Is that, have you seen any indicators of improvement in some of those KPIs?

Speaker #3: It's still taking longer than we would like, Brad. Our conversion rate was 29% in the first half of the year, and that's slightly lower than 2025, but it also reflects the increase in our pipeline over the past quarter or so.

J.P. Mackay: It's still taking longer than we would like, Brad. Our conversion rate was 29% in H1 of the year, that's slightly lower than 2025, but it also reflects the increase in our pipeline over the past quarter or so. We're certainly encouraged, as you identify, with our increased leasing pipeline. Specifically, our new leasing pipeline has increased 42%. What we find is because there's not a lot of new entrants to the market, we're often competing with incumbent landlords who are offering renewal terms. Case in point, in the past 30 days, we lost out on three transactions where we were one of two finalists, the other all being incumbent landlords offering renewals. Those were here in Toronto and amounted to about 75,000 square feet. We continue to see protracted leasing timelines.

JP Mackay: It's still taking longer than we would like, Brad. Our conversion rate was 29% in H1 of the year, that's slightly lower than 2025, but it also reflects the increase in our pipeline over the past quarter or so. We're certainly encouraged, as you identify, with our increased leasing pipeline. Specifically, our new leasing pipeline has increased 42%. What we find is because there's not a lot of new entrants to the market, we're often competing with incumbent landlords who are offering renewal terms. Case in point, in the past 30 days, we lost out on three transactions where we were one of two finalists, the other all being incumbent landlords offering renewals.

Speaker #3: We're certainly encouraged, as you identified, with our increased leasing pipeline—specifically, our new leasing pipeline has increased 42%. What we find is, because there's not a lot of new entrants to the market, we're often competing with incumbent landlords who are offering renewal terms.

Speaker #3: Case in point, in the past 30 days, we lost out on three transactions where we were one of two finalists, the other all being incumbent landlords offering renewals.

Speaker #3: Those were here in Toronto and amounted to about 75,000 square feet. And so we continue to see protracted leasing timelines; we're encouraged by our leasing pipeline, though, and typically we're competing with incumbent landlords for renewals who ultimately offer aggressive terms to try and retain tenants.

JP Mackay: Those were here in Toronto and amounted to about 75,000 square feet. We continue to see protracted leasing timelines. We're encouraged by our leasing pipeline, though, typically, we're competing with incumbent landlords for renewals who ultimately offer aggressive terms to try and retain tenants. We certainly hope as the scarcity and premium availability continues to diminish, that those timelines contract, but we haven't seen that yet.

J.P. Mackay: We're encouraged by our leasing pipeline, though, typically, we're competing with incumbent landlords for renewals who ultimately offer aggressive terms to try and retain tenants. We certainly hope as the scarcity and premium availability continues to diminish, that those timelines contract, but we haven't seen that yet.

Speaker #3: So we certainly hope as the scarcity and premium availability continues to diminish, that those timelines contract. But we haven't seen that yet.

Speaker #4: Okay, just one last question. I'm trying to get an update on, or understand where you are in the process of selling the Toronto and Calgary houses.

Brad Sturges: Okay. Just last question, just trying to get an update on or understand where you are in the process on selling Toronto and Calgary House. Are you still expecting, you think you can complete something by year-end at this point? I guess you took some write-downs on the assets, but how do you think about further revisions on pricing expectations for those two assets?

Speaker #4: Are you still expecting you think you can complete something by year-end at this point? And how I guess you took some write-downs on the assets, but how do you think about further revisions on pricing expectations for those two assets?

Speaker #3: Our outlook in relation to the disposition of those two assets, Brad, remains intact. We are finalizing an agreement of purchase and sale for Toronto House.

J.P. Mackay: Our outlook in relation to the disposition of those two assets, Brad, remains intact. We are finalizing an agreement of purchase and sale for Toronto House, we're not prepared, as a result, to comment further on that disposition. We launched the sale process for Calgary House in June. We've been very pleased with the response, given the state of that process, we won't comment further on that asset either.

JP Mackay: Our outlook in relation to the disposition of those two assets, Brad, remains intact. We are finalizing an agreement of purchase and sale for Toronto House, we're not prepared, as a result, to comment further on that disposition. We launched the sale process for Calgary House in June. We've been very pleased with the response, given the state of that process, we won't comment further on that asset either.

Speaker #3: And we're not prepared, as a result, to comment further on that disposition. We launched the sale process for Calgary House in June. We've been very pleased with the response, and given the state of that process, we won't comment further on that asset either.

Speaker #4: Okay. Sounds good. Thank you.

Brad Sturges: Okay. Sounds good. Thank you.

Speaker #2: Your next question comes from the line of Lorne Kalmar with Desjardins. Lorne, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Lorne Kalmar with Desjardins. Lorne, your line is open. Please go ahead.

Operator: Your next question comes from the line of Lorne Kalmar with Desjardins. Lorne, your line is open. Please go ahead.

Speaker #4: Thanks. Good morning. Maybe just going back to the write-down, I was just sort of wondering—is this kind of the last big write-down, or should we expect more to come?

Lorne Kalmar: Thanks. Good morning. Maybe just going back to the write-down. I was just sort of wondering, is this kind of the last big write-down, or should we expect more to come? The reason I ask is because in Toronto, for example, I think the IFRS cap rates are still roughly 100 basis points below where we've seen some core class A office properties transact over the past six months. Just wanted to get your thoughts there.

Speaker #4: And the reason I ask is because, in Toronto for example, I think the IFRS cap rates are still roughly 100 basis points below where you've seen some core, Class A office properties transact over the past six months.

Speaker #4: So I just wanted to get your thoughts there.

Speaker #1: We're very comfortable with where our IFRS valuations are at this time.

Cecilia Williams: We're very comfortable with where our IFRS valuations are at this time.

Speaker #4: Okay. And then I think it was on the Q1 call, we talked about the King Toronto loan, and you mentioned it wasn't credit impaired. Then, obviously, this quarter, it was.

Lorne Kalmar: Okay. In, I think it was on the Q1 call, we talked about the King Toronto loan. You mentioned it wasn't credit-impaired, obviously this quarter it was. Can you just maybe explain the change in circumstances that led to it being credit-impaired?

Speaker #4: Can you just maybe explain the change in circumstances that led to it being credit impaired?

Speaker #1: There was a Westbank entity—not one that is related to any of our loans, but within the Westbank group of companies. Let's say that entity did have a financial situation that resulted in us feeling it was prudent to credit impair the loan with us.

Cecilia Williams: There was a Westbank entity, not one that is related to any of our loans, but within the Westbank group of companies, let's say, that did have a financial situation that resulted in us feeling it was prudent to credit impair the loan with us.

Speaker #4: Okay. And then, I guess, just sticking with that, is sort of a $3.5 million reduction in quarterly interest income the correct way to think about the impact of the impairment?

Lorne Kalmar: Okay. I guess just sticking with that, is sort of a CAD 3.5 million reduction in quarterly interest income the correct way to think about the impact of the impairment?

Speaker #1: Yeah. Yes. It is.

Cecilia Williams: Yeah. Yes, it is.

Speaker #4: Okay. Okay. And then just the last one on the other Westbank situation you guys have going on at 150 West Georgia, there was, I think, an announcement from Telus.

Lorne Kalmar: Okay. Just the last one on the other Westbank situation you guys have going on at 150 West Georgia. There was, I think, an announcement from TELUS. They were going to be potentially working with Westbank to develop a data center. Just wondering if you could give us any update around that and the CAD 125 million, I believe, that was baked into the outlook and how comfortable you are with repatriating that. Maybe also what your expectations are for when the loan matures at the end of the year.

Speaker #4: They were going to be potentially working with Westbank to develop a data center. They're just wondering if you could give us any update around that and the $125 million, I believe, that was baked into the outlook, and how comfortable you are with repatriating that.

Speaker #4: And then maybe also what your expectations are for when the loan matures at the end of the year.

Speaker #1: We don't have an update on 150 West Georgia at this time, Lorne. As soon as we do, we'll be in a position to provide more color.

Cecilia Williams: We don't have an update on 150 West Georgia at this time, Lorne. As soon as we do, we'll be in a position to provide more color.

Speaker #4: Okay. Thank you very much.

Lorne Kalmar: Okay. Thank you very much.

Speaker #1: Thank you.

Cecilia Williams: Thank you.

Speaker #2: Your next question comes from the line of Mario Saric with Scotia. Mario, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Mario Saric with Scotiabank. Mario, your line is open. Please go ahead.

Operator: Your next question comes from the line of Mario Saric with Scotiabank. Mario, your line is open. Please go ahead.

Speaker #4: Hi. Thank you. And good morning. Maybe for JP, you mentioned a 29% new lease conversion in the first half of this year. Which is, I think, similar to last year, per your comments.

Mario Saric: Hi. Thank you and good morning. Maybe for JP, you mentioned the 29% new lease conversion in H1 of this year, which is I think similar to last year, per your comments. If we went back on average post-COVID and maybe if you have the data even pre-COVID, how did that 29% compare to historical average?

Speaker #4: If we went back on average post-COVID, and maybe, if you have the data, even pre-COVID, how did that 29% compare to the historical average?

Speaker #3: Mario, we don't have that data pre-COVID. What I can share is our conversion rate in 2025 was 56%. However, our new leasing pipeline at that time was much smaller than it is today.

J.P. Mackay: Mario, we don't have that data pre-COVID. What I can share is our conversion rate in 2025 was 56%. However, our new leasing pipeline at that time was much smaller than it is today.

JP Mackay: Mario, we don't have that data pre-COVID. What I can share is our conversion rate in 2025 was 56%. However, our new leasing pipeline at that time was much smaller than it is today.

Speaker #4: Okay. And then just on the recorded leasing allowances and commissions—I think it was $23 million this quarter—just from an accounting perspective, is the $23 million related to the 520,000 square feet that was leased this quarter, or is there a timing difference that we should be aware of?

Mario Saric: Okay. Just on the recorded leasing allowances and commissions, I think it was CAD 23 million this quarter. Just from an accounting perspective, is the CAD 23 million related to the 520,000 square feet that was leased this quarter, or is there a timing difference that we should be aware of?

Speaker #3: It reflects Mario leases that commenced in the quarter.

J.P. Mackay: It reflects, Mario, leases that commenced in the quarter.

JP Mackay: It reflects, Mario, leases that commenced in the quarter.

Speaker #4: Okay. And then just regarding King Toronto, is it fair to say that the risk of any further write-downs has decelerated quarter over quarter?

Mario Saric: Okay. Just regarding King Toronto, is it fair to say that the risk of any further write-downs has decelerated quarter over quarter?

Speaker #1: Yes. That's a fair statement.

Cecilia Williams: Yes, that's a fair statement.

Speaker #4: Okay. That's it for me. Thank you.

Mario Saric: Okay. That's it for me. Thank you.

Speaker #1: Thanks, Mario.

Cecilia Williams: Thanks, Mario.

Speaker #2: Your next question comes from the line of Cyram Srinivas with ATB Karma Capital Markets. Cyram, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Sairam Srinivas with ATB Cormark Capital Markets. Sairam, your line is open. Please go ahead.

Operator: Your next question comes from the line of Sairam Srinivas with ATB Cormark Capital Markets. Sairam, your line is open. Please go ahead.

Speaker #5: I'm Carol Peter. Good morning, everybody. Just going by your comments on OPEX costs and the impact in the quarter, there's a bit of a drag on operational costs this quarter as such.

Sairam Srinivas: Thank you, operator. Good morning, everybody.

Cecilia Williams: Good morning.

Sairam Srinivas: Just going by your comments on OpEx cost and the impact in the quarter, there is a bit of a drag on operational cost this quarter as such. Do you expect the drag to sustain, and how long should we be thinking about the drag on the cost as such?

Speaker #5: Do you expect the drag to sustain, and how long should we be thinking about the drag on the cost assumption?

J.P. Mackay: Do you mind repeating that? We had a hard time hearing.

JP Mackay: Do you mind repeating that? We had a hard time hearing.

Speaker #3: You might be repeating that. We had a hard time hearing.

Speaker #5: Sorry, Jeffrey. Just referring to the operating cost drag you saw in the quarter—I'm just trying to understand what the timeline of the drag looks like, and when we should probably expect that drag to start to decrease.

Sairam Srinivas: Sorry, J.P. Just referring to the operating cost drag you saw in the quarter. I am just trying to wonder what the timeline of the drag looks like and when we should probably expect that drag to kind of decrease.

Speaker #3: What I can share is that over the past five-plus in the mid-50s. It's lower today. But our three-year outlook contemplates us returning to an operating margin in the mid-50s.

J.P. Mackay: What I can share is that over the past five-plus years, our operating margin has been in the mid-fifties. It is lower today, but our three-year outlook contemplates us returning to an operating margin in the mid-fifties.

JP Mackay: What I can share is that over the past five-plus years, our operating margin has been in the mid-fifties. It is lower today, but our three-year outlook contemplates us returning to an operating margin in the mid-fifties.

Sairam Srinivas: Fair enough. Maybe just looking at non-renewals in the quarter, is there a particular reason why you saw these non-renewals, and is there a common trend of such tenants not essentially wanting to renew at this point in time?

Speaker #5: Fair enough. And maybe just looking at non-renewals in the quarter, is there a particular reason why you saw these renewals? And is there a common trend of such tenants not essentially wanting to renew at this point in time?

Speaker #3: Again, apologies. We're having a hard time hearing. Is your question in relation to non-renewals in the quarter?

J.P. Mackay: Again, apologies. We're having a hard time hearing. Is your question in relation to non-renewals in the quarter?

JP Mackay: Again, apologies. We're having a hard time hearing. Is your question in relation to non-renewals in the quarter?

Speaker #5: Yes. And if there's any particular reason for the non-renewals.

Sairam Srinivas: Yes. If there's any particular reason for the non-renewals.

Speaker #3: The largest non-renewal in the quarter was a tenant relocating in Montreal to 1,001 Robert-Bourassa. And so, it was a circumstance where they were admittedly improving the quality of their workspace, and that represented approximately 40,000 square feet.

J.P. Mackay: The largest non-renewal in the quarter was a tenant relocating in Montreal to 1001 Robert-Bourassa. A circumstance where they were admittedly improving the quality of their workspace, and that represented approximately 40,000 square feet. The balance of the non-renewals were relatively immaterial on an individual basis. There are no overarching trends associated with those non-renewals.

JP Mackay: The largest non-renewal in the quarter was a tenant relocating in Montreal to 1001 Robert-Bourassa. A circumstance where they were admittedly improving the quality of their workspace, and that represented approximately 40,000 square feet. The balance of the non-renewals were relatively immaterial on an individual basis. There are no overarching trends associated with those non-renewals.

Speaker #3: The balance of the renewal non-renewals were relatively immaterial on an individual basis, and there are no overarching trends associated with those non-renewals.

Speaker #5: That's good. Thank you, JP. I'll turn it back.

Sairam Srinivas: That's great. Thanks, JP. I'll turn it back.

Moderator: Your next question comes from the line of Tal Woolley with CIBC Capital Markets. Tal, your line is open. Please go ahead.

Operator: Your next question comes from the line of Tal Woolley with CIBC Capital Markets. Tal, your line is open. Please go ahead.

Speaker #2: Your next question comes from the line of Tal Woolley with CIBC Capital Markets. Tal, your line is open. Please go ahead.

Speaker #4: Hey, good morning, everybody. Just on King Toronto, can you maybe give us an idea of what the sales plan is for the rest of the units that are still available?

Tal Woolley: Hey, good morning, everybody. Just on King Toronto, can you maybe give us an idea of what the sales plan is for the rest of the units that are still available? Will there be more of an effort sort of closer to completion, or are you really still trying to move all those units now?

Speaker #4: Will there be more of an effort sort of closer to completion, or are you really still trying to move all those units now?

Speaker #1: We have customer care teams that will be engaging with the current purchasers, but we also have a sales team that will be working on the remaining 8% of units to be sold.

Cecilia Williams: We have a customer care team that will be engaging with the current purchasers. We also have a sales team that will be working on the remaining 8% of units to be sold. That's an effort that will be taking place over the next 18 months.

Speaker #1: So that's an effort that will be taking place over the next 18 months.

Speaker #4: And can you remind us, sort of, what your assumptions are for how the closing of that building will go? Do you have an estimated precision or default rate—any concerns around that?

Tal Woolley: Can you remind us sort of what your assumptions are for how the closing of that building will go? Do you have an estimated precision or default rate? Any concerns around that?

Speaker #1: We have a 30% default rate that has been included in our financial statements, which took place earlier this year. We will adjust that as necessary going forward.

Cecilia Williams: We have a 30% default rate that has been included in our financial statements. That took place earlier this year. We will adjust that as necessary going forward.

Speaker #4: Okay. And the default rate is captured already in the fair value movement for the inventory on the balance sheet, if I'm understanding you correctly?

Tal Woolley: Okay. The default rate is captured already in the fair value movement for the inventory on the balance sheet, if I'm understanding it correctly?

Speaker #1: Correct.

Cecilia Williams: Correct.

Speaker #4: Okay. Great. And then with Craig joining, any chance that there will be a change in how you present the financial outlook, any of the targets, or do you expect it to be a continuous transition on that front?

Tal Woolley: Okay, great. With Craig joining, any chance that there will be a change in how you present the financial outlook, any of the targets, or do you expect it to be a continuous transition on that front?

Speaker #1: A continuous transition, Tal.

Cecilia Williams: A continuous transition, Tal.

Speaker #4: Perfect. And then I guess just lastly, rent growth has still sort of been a little bit elusive, it seems, in the markets, at least looking at the brokerage reports.

Tal Woolley: Perfect. Then, I guess just lastly, rent growth has still sort of been a little bit elusive it seems in the markets, at least looking at the brokers' reports. Maybe you can just talk to sort of prior experience. What's the occupancy level you kind of need in a building or in a market for the balance of power to sort of start to shift towards the landlords on rent growth?

Speaker #4: Maybe you can just talk to sort of prior experience. When what's the occupancy level you kind of need in a building or in a market for the balance of power to sort of start to shift towards the landlords on rent growth?

J.P. Mackay: Tal, we typically, as a general rule, consider 90% to be the threshold where the dynamics and lease negotiations evolve and landlords can expect to experience more rent growth.

JP Mackay: Tal, we typically, as a general rule, consider 90% to be the threshold where the dynamics and lease negotiations evolve and landlords can expect to experience more rent growth.

Speaker #3: Tal, we typically, as a general rule, consider 90% to be the threshold where the dynamics and lease negotiations evolve, and landlords can expect to experience more rent growth.

Speaker #4: Okay. And is there a—I’m trying to think of the way to ask this—but where are sort of the best nodes in your portfolio for occupancy right now?

Tal Woolley: Okay. Is there trying to think of the way to ask this, but where are sort of the best nodes in your portfolio for occupancy right now, and where are the ones that you're needing more work? I can sort of guess based on sort of aggregate numbers, but yeah, just wondering if you can talk about where the competition sort of more is most intense and least intense right now.

Speaker #4: And where are the ones that you're needing more work? I can sort of guess based on sort of aggregate numbers, but yeah, I'm just wondering if you can talk about where the competition is sort of most intense and least intense right now.

Speaker #3: 80% of our listing volume, Tal, is concentrated in Toronto and Montreal, primarily downtown West Toronto and downtown South Montreal, which is where we're seeing momentum as demand extends out from the CBD of AAA assets fill up, which has been a trend that started in the second half of 2025 and continues.

J.P. Mackay: 80% of our leasing volume, Tal, is concentrated in Toronto and Montreal, primarily downtown West Toronto and downtown South Montreal, which is where we're seeing momentum as demand extends out from the CBD as AAA assets fill up, which has been a trend that started in H2 2025 and continues. In Toronto, you're seeing the expansion of the demand radius both east and west of the CBD, though there is a bias for the west. We're also encouraged by the increase in our leasing pipeline in Calgary and Vancouver in Q2. Admittedly, those two markets represent a much smaller percentage of our overall GLA. Where we continue to see softer demand dynamics is in Kitchener, is along the Bloor Street corridor in Toronto, in Mile End and Mile Ex in Montreal, and in Gastown and Yaletown in Vancouver.

JP Mackay: 80% of our leasing volume, Tal, is concentrated in Toronto and Montreal, primarily downtown West Toronto and downtown South Montreal, which is where we're seeing momentum as demand extends out from the CBD as AAA assets fill up, which has been a trend that started in H2 2025 and continues. In Toronto, you're seeing the expansion of the demand radius both east and west of the CBD, though there is a bias for the west. We're also encouraged by the increase in our leasing pipeline in Calgary and Vancouver in Q2. Admittedly, those two markets represent a much smaller percentage of our overall GLA. Where we continue to see softer demand dynamics is in Kitchener, is along the Bloor Street corridor in Toronto, in Mile End and Mile Ex in Montreal, and in Gastown and Yaletown in Vancouver.

Speaker #3: In Toronto, you're seeing the expansion of the demand radius both east and west of the CBD, though there is a biased for the west where also encouraged by the increase in our leasing pipeline in Calgary and Vancouver in the second quarter, admittedly those two markets represent a much smaller percentage of our overall GLA, where we continue to see softer demand dynamics is in Kitchener is along the Bloor Street corridor in Toronto in Mile End and Mile X in Montreal.

Speaker #3: And then Gastown and Yaletown in Vancouver. So, as I remarked earlier, we're encouraged by the increasing tour activity in Yaletown in the quarter. The other thing I'll comment on, Tal, is we saw a 79% increase in tour activity in our top 10 assets by vacancy.

J.P. Mackay: As I remarked earlier, we're encouraged by the increasing tour activity in Yaletown in the quarter. The other thing I'll comment on, Tal, is we saw a 79% increase in tour activity in our top 10 assets by vacancy. Admittedly, the primary drivers of that increase were among the assets that probably caused me the greatest amount of heartburn. We're encouraged by our increasing leasing pipeline, we're encouraged by the increase in tour activity, and we're encouraged specifically how that leasing pipeline and tour activity is concentrated.

JP Mackay: As I remarked earlier, we're encouraged by the increasing tour activity in Yaletown in the quarter. The other thing I'll comment on, Tal, is we saw a 79% increase in tour activity in our top 10 assets by vacancy. Admittedly, the primary drivers of that increase were among the assets that probably caused me the greatest amount of heartburn. We're encouraged by our increasing leasing pipeline, we're encouraged by the increase in tour activity, and we're encouraged specifically how that leasing pipeline and tour activity is concentrated.

Speaker #3: And, admittedly, the primary drivers of that increase were among the assets that probably caused me the greatest amount of heartburn. So, we're encouraged by our increasing leasing pipeline.

Speaker #3: We're encouraged by the increase in tour activity, and we're encouraged specifically how that leasing pipeline and tour activity is concentrated.

Speaker #4: And so you feel right now like the changes you did make on leasing strategy are sort of having the intended effect?

Tal Woolley: You feel right now like the changes you did make on leasing strategy are sort of having the intended effect?

Speaker #3: Yes, I think that's reflected in our new leasing pipeline. We saw a 39% increase in tours led by brokers in the quarter. We're seeing a positive response among multi-midsized organizations.

J.P. Mackay: Yes. I think that's reflected in our new leasing pipeline. We saw a 39% increase in tours led by brokers in the quarter. We're seeing a positive response amongst small to mid-size organizations through our efforts to reduce friction in the leasing process. We're very pleased with the initial response associated with those initiatives, we recognize given the longer lead times associated with lease negotiations, the full impact of those efforts will be felt in H2 2026 and H1 2027.

JP Mackay: Yes. I think that's reflected in our new leasing pipeline. We saw a 39% increase in tours led by brokers in the quarter. We're seeing a positive response amongst small to mid-size organizations through our efforts to reduce friction in the leasing process. We're very pleased with the initial response associated with those initiatives, we recognize given the longer lead times associated with lease negotiations, the full impact of those efforts will be felt in H2 2026 and H1 2027.

Speaker #3: Through our efforts to reduce friction in the leasing process, we're very pleased with the initial response associated with those initiatives. However, we recognize that, given the longer lead times associated with lease negotiations, the full impact of those efforts will be felt in the second half of 2026 and the first half of 2027.

Speaker #4: Okay, that's great. Thanks very much, everybody.

Tal Woolley: Okay, that's great. Thanks so much everybody.

Speaker #2: Your next question comes from the line of Pammi Bir with RBC Capital Markets. Pammi, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Pammi Bir with RBC Capital Markets. Pammi, your line is open. Please go ahead.

Operator: Your next question comes from the line of Pammi Bir with RBC Capital Markets. Pammi, your line is open. Please go ahead.

Speaker #5: Thanks. Good morning. I think you had previously indicated in your guidance that the interest income would for the most part really be ending in the first half of the year.

Pammi Bir: Thanks. Good morning. I think you previously indicated in your guidance that the interest income would, for the most part, really be ending in the H1 of the year. I just wanted to confirm that is still the case and that we really shouldn't be expecting much interest income through the H2.

Speaker #5: And so I just wanted to confirm that that is still the case and that we really shouldn't be expecting much interest income through the back half.

Speaker #1: That's right, Pammi. That's confirmed.

Cecilia Williams: That's right, Pammi. That's confirmed.

Speaker #5: Okay. And then just with respect to the FFO guidance range, you kept it intact, but with the cutback in the same property NOI growth outlook, I guess at this stage, does that sort of imply that you're or the way you're thinking about it, at least, that your FFO for the full year is probably tracking toward the lower end, or is I guess really what I'm getting to is the confidence in being able to hit that at least the lower end of the range based on what you've done so far through the first half of the year?

Pammi Bir: Okay. With respect to the FFO guidance range, you kept it intact, but with the cutback and the same store NOI growth outlook, I guess at this stage, does that sort of imply that you're, or the way you're thinking about it at least, that your FFO for the full year is probably tracking toward the lower end? Or I guess really what I'm getting to is the confidence in being able to hit that at least the lower end of the range based on what you've done so far through the H1.

Speaker #1: We're still confident that we'll come in the range for FFO and NOI, but it would be on the lower end. That's right.

Cecilia Williams: We're still confident that we'll come in the range for FFO and NOI, it would be on the lower end. That's right.

Speaker #5: Thanks very much. I'll turn it back.

Pammi Bir: Thanks very much. I'll turn it back.

Speaker #1: Thanks.

Cecilia Williams: Thanks.

Speaker #2: Your next question comes from the line of Matt Kornack with National Bank of Canada Capital Markets. Matt, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Matt Kornack with National Bank of Canada Capital Markets. Matt, your line is open. Please go ahead.

Operator: Your next question comes from the line of Matt Kornack with National Bank of Canada Capital Markets. Matt, your line is open. Please go ahead.

Speaker #5: Good morning, guys. Just with regards to the occupancy, Q3—sorry, Q2—it sounds like you came in ahead of expectations. Is Q3 kind of where you expected it to be as well, or is there a potential upside revision there?

Matt Kornack: Good morning, guys. Just with regards to occupancy, Q2, it sounds like you came in ahead of expectations. Is Q3 kind of where you expected it to be as well, or is there a potential upside revision there? What would've driven kind of the relative outperformance on occupancy?

Speaker #5: And what would have driven, kind of, the relative outperformance on occupancy?

Speaker #3: The outperformance in Q2, Matt, was a result of earlier than anticipated lease commencement associated with leasing activity. Q3 is largely in line with our expectations, recognizing that a majority of the occupancy gains are contemplated in Q4.

J.P. Mackay: The outperformance in Q2, Matt, was a result of earlier than anticipated lease commencements associated with leasing activity. Q3 is largely in line with our expectations, recognizing the majority of the occupancy gains are contemplated in Q4.

JP Mackay: The outperformance in Q2, Matt, was a result of earlier than anticipated lease commencements associated with leasing activity. Q3 is largely in line with our expectations, recognizing the majority of the occupancy gains are contemplated in Q4.

Speaker #5: Okay. So there was a bit of a pull forward into Q2 from Q3 at the end of the day, that you saw.

Matt Kornack: Okay. There was a bit of a pull forward into Q2 from Q3 at the end of the day that you saw.

Speaker #3: A fair way of looking at it.

J.P. Mackay: A fair way of looking at it.

JP Mackay: A fair way of looking at it.

Speaker #5: Okay. And then as you have discussions at this point, and I think you kind of hinted at it earlier in the call, but is quality more important or is location the biggest driver at this point in terms of what tenants are looking for?

Matt Kornack: Okay. As you have discussions at this point, I think you kind of hinted at it earlier in the call, is quality more important or is location the biggest driver at this point in terms of what tenants are looking for? Then maybe a little bit of additional color in terms of, you mentioned that you had some competition from renewals. Would those have been renewals at properties in the market that you were trying to, or sub-market that you were trying to get a tenant to move to, or were they in a different part of the city?

Speaker #5: And then maybe a little bit of additional color in terms of—you mentioned that you've had some competition from renewals. Would those have been renewals at properties in the market that you were trying to, or submarket that you were trying to get a tenant to move to, or were they in a different part of the city?

Speaker #3: Great questions, Matt. To start with where you ended, it was a little bit of both. Two of the three transactions that we were pursuing relocated in buildings a little bit closer to the core.

J.P. Mackay: Great questions, Matt. To start with where you ended, it was a little bit of both. Two of the three transactions that we were pursuing relocated in buildings a little bit closer to the core. One I would characterize, was in the same sub-market. As I remarked earlier, we are often competing with incumbent landlords offering aggressive renewal terms, particularly in the absence of new entrants to the market. We often are successful in our efforts to attract tenants that are already in the market to relocate. However, sometimes the friction associated with relocation is just too much, and that was the case in the three instances that I made reference to earlier. With respect to quality and location, certainly proximity to public transit and specifically public transit hubs is an attribute that many organizations seek.

JP Mackay: Great questions, Matt. To start with where you ended, it was a little bit of both. Two of the three transactions that we were pursuing relocated in buildings a little bit closer to the core. One I would characterize, was in the same sub-market. As I remarked earlier, we are often competing with incumbent landlords offering aggressive renewal terms, particularly in the absence of new entrants to the market. We often are successful in our efforts to attract tenants that are already in the market to relocate. However, sometimes the friction associated with relocation is just too much, and that was the case in the three instances that I made reference to earlier. With respect to quality and location, certainly proximity to public transit and specifically public transit hubs is an attribute that many organizations seek.

Speaker #3: One I would characterize was in the same submarket. As I remarked earlier, we are often competing with incumbent landlords offering aggressive renewal terms. Particularly in the absence of new entrants to the market.

Speaker #3: We often are successful in our efforts to attract tenants that are already in the market to relocate. However, sometimes the friction associated with relocation is just too much.

Speaker #3: And that was the case in the three instances that I made reference to earlier. And then, with respect to quality and location, certainly proximity to public transit—and specifically public transit hubs—is an attribute that many organizations seek.

Speaker #3: We are seeing a bifurcation in the market that I think, in part, reflects that, where AAA assets and class A assets are in demand.

J.P. Mackay: We are seeing a bifurcation in the market that I think in part reflects that, where AAA assets and class A assets are in demand. There's ever-diminishing availability, that's putting upward pressure on rents and moderating concessions as a result, where class B and C assets continue to struggle relative to higher quality assets. At the end of the day, knowledge-based organizations are seeking to offer their team members really great workplace experiences to help attract, motivate, and retain exceptional talent. We think our portfolio is well positioned in that regard in many rich urban areas.

JP Mackay: We are seeing a bifurcation in the market that I think in part reflects that, where AAA assets and class A assets are in demand. There's ever-diminishing availability, that's putting upward pressure on rents and moderating concessions as a result, where class B and C assets continue to struggle relative to higher quality assets. At the end of the day, knowledge-based organizations are seeking to offer their team members really great workplace experiences to help attract, motivate, and retain exceptional talent. We think our portfolio is well positioned in that regard in many rich urban areas.

Speaker #3: There's ever-diminishing availability, and that's putting upward pressure on rents and moderating concessions as a result, whereas Class B and C assets continue to struggle relative to higher-quality assets.

Speaker #3: At the end of the day, knowledge-based organizations are seeking to offer their team members really great workplace experiences. To help attract and motivate and retain exceptional talent.

Speaker #3: And we think our portfolio is well positioned in that regard and in many rich urban areas. And as we think about infrastructure projects in Toronto, Montreal, and Vancouver over the next five years and how we are positioned relative to those, we think the attractiveness of our portfolio in relation to specific to proximity to public transit will only increase recognizing that we have almost 80 properties in Toronto that will become within a 10-minute walking radius of the Ontario line.

J.P. Mackay: As we think about infrastructure projects in Toronto, Montreal, and Vancouver over the next five years and how we are positioned relative to those, we think the attractiveness of our portfolio in relation specific to proximity to public transit will only increase, recognizing that we have almost 80 properties in Toronto that will be come within a 10-minute walking radius of the Ontario Line. We have approximately 12 properties in Montreal that will be within a 10-minute walking radius of the REM, and we have a few properties along the Broadway Corridor, which will benefit from that infrastructure project.

JP Mackay: As we think about infrastructure projects in Toronto, Montreal, and Vancouver over the next five years and how we are positioned relative to those, we think the attractiveness of our portfolio in relation specific to proximity to public transit will only increase, recognizing that we have almost 80 properties in Toronto that will be come within a 10-minute walking radius of the Ontario Line. We have approximately 12 properties in Montreal that will be within a 10-minute walking radius of the REM, and we have a few properties along the Broadway Corridor, which will benefit from that infrastructure project.

Speaker #3: We have approximately 12 properties in Montreal that will be within a 10-minute walking radius of the REM. And we have a few properties along the Broadway corridor, which will benefit from that infrastructure project.

Speaker #5: Makes sense. And it looks like it's maybe going to be completed on time. I'm not sure about on budget, but we'll see. Okay, fair enough.

Matt Kornack: Makes sense. It looks like it's maybe going to be completed on time. Not sure about on budget, we'll see. Okay, fair enough. Last one for me, just on the disposition program. There was a fairly sizable Toronto component to what you disposed of in the quarter. Can you give us a sense as to how you're thinking or what metrics you're looking at in terms of what you're disposing of at this point, and how these assets may fit that desire? I guess the bulk of what is still remaining is Toronto House and Calgary House, but how should we think about beyond that and what you'd potentially look to dispose in 2027?

Speaker #5: And then, last one for me—just on the disposition program. There was a fairly sizable Toronto component to what you disposed of in the quarter.

Speaker #5: Can you give us a sense as to how you're thinking, or what matrix you're looking at, in terms of what you're disposing of at this point and how these assets may have fit that desire?

Speaker #5: And then I guess the bulk of what is still remaining is Toronto House and Calgary House, but how should we think about, beyond that, what you'd potentially look to dispose of in 2027?

Speaker #3: The assets, Matt, that we've sold to date reflect non-core lower-yielding geographically isolated properties and are part of a broader and ongoing effort to continuously optimize our portfolio.

J.P. Mackay: The assets, Matt, that we've sold to date reflect non-core, lower-yielding, geographically isolated properties and are part of a broader and ongoing effort to continuously optimize our portfolio. In the context of expanding our disposition program or continuing it this year or in the years to come, it will be consistent with our efforts to continually improve the overall quality of our portfolio so we can most effectively and profitably serve knowledge-based organizations.

JP Mackay: The assets, Matt, that we've sold to date reflect non-core, lower-yielding, geographically isolated properties and are part of a broader and ongoing effort to continuously optimize our portfolio. In the context of expanding our disposition program or continuing it this year or in the years to come, it will be consistent with our efforts to continually improve the overall quality of our portfolio so we can most effectively and profitably serve knowledge-based organizations.

Speaker #3: And so in the context of expanding our disposition program or continuing it this year or in the years to come, it will be consistent with our effort to continually improve the overall quality of our portfolio.

Speaker #3: So we can most effectively and properly serve knowledge-based organizations.

Speaker #5: Okay. Makes sense. Thanks for the update.

Matt Kornack: Okay, makes sense. Thanks for the update.

Speaker #2: Thanks, Matt.

Cecilia Williams: Thanks, Matt.

Speaker #1: Your next question comes from the line of Gorav Mathur with Green Street. Gorav, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Gaurav Mathur with Green Street. Gaurav, your line is open. Please go ahead.

Operator: Your next question comes from the line of Gaurav Mathur with Green Street. Gaurav, your line is open. Please go ahead.

Speaker #6: Thank you, and good morning, everyone. Just looking at the AFFO payout ratio, which is now above 100%, we're just wondering how sustainable that is, and if that's prudent from a capital allocation perspective.

Gaurav Mathur: Thank you. Good morning, everyone. Just looking at the AFFO payout ratio, which is now above 100%, we're just wondering how sustainable that is and if that's prudent from a capital allocation perspective.

Speaker #2: Yeah. We reviewed the distribution every quarter, Gorav. In the near term, we are expecting it to that AFFO payout ratio to be modestly above 100% or above 100%, but we do expect it to improve as proceeds from our dispositions support deleveraging and the lease-up activity that JP alluded to contributes to the economic productivity of the portfolio.

Cecilia Williams: Yeah, we review the distribution every quarter, Gaurav. In the near term, we are expecting that AFFO payout ratio to be modestly above 100% or above 100%, we do expect it to improve as proceeds from our dispositions support deleveraging and the lease-up activity that J.P. alluded to contributes to the economic productivity of the portfolio.

Speaker #6: Right. Okay. And then just last question from me. At this time, you stated that you're not you're very comfortable with where your 26 Outlook and 27, 28 Outlook is, but would you say that that's almost a done thing going into half the year, or could there be a chance that there may need to be some sort of movement around those numbers?

Gaurav Mathur: Right. Okay. Just last question from me. At this time, you stated that you're very comfortable with where your 2026 outlook and 2027, 2028 outlook is, would you say that that's almost a done thing going into half the year, or could there be a chance that there may need to be some sort of movement around those numbers?

Speaker #2: It'll be something that we provide an update on every quarter.

Cecilia Williams: It'll be something that we provide an update on every quarter.

Speaker #6: Right. Thank you very much. I'll turn it back to the operator.

Gaurav Mathur: Right. Thank you very much. I'll turn it back to the operator.

Speaker #2: Thank you.

Cecilia Williams: Thank you.

Speaker #1: Your next question comes from the line of Mario Saric, Wisconsia. Mario, your line is open. Please go ahead.

Moderator: Your next question comes from the line of Mario Saric with Scotiabank. Mario, your line is open. Please go ahead.

Operator: Your next question comes from the line of Mario Saric with Scotiabank. Mario, your line is open. Please go ahead.

Speaker #7: Hi. Thank you. Just one follow-up for me. JP, you characterized the office demand in two phases. Phase one and phase two. I think some of the factors that you highlighted in phase two included kind of Kuzman negotiations, the Iran war, and population growth.

Mario Saric: Hi. Thank you. Just one follow-up for me. JP, you characterized the office demand in two phases, phase I and phase II. I think some of the factors that you highlighted in phase II included CUSMA negotiations, the Iran war, and population growth. My question is, how sensitive is the year-end 84% to 86% target occupancy? How sensitive is that to phase II factors resolving in a positive light?

Speaker #7: My question is, how sensitive is the year-end '84 to '86 percent target occupancy? How sensitive is that to phase two factors resolving in a positive light?

Speaker #3: Mario, we think there remains sufficient depth in phase one, specifically the RTO-driven demand, to achieve our stated objectives in 2026. As we look to '27 and '28, we are more sensitive to economic output and the ability to track new entries to the market.

J.P. Mackay: Mario, we think there remains sufficient depth in phase I, specifically the RTO driven demand, to achieve our stated objectives in 2026. As we look to 2027 and 2028, we are more sensitive to economic output and the ability to attract new entrants to the market. That said, the risks associated with the Canada-US trade framework, population growth, and war-related supply could impact demand in the near term, specifically in 2026, but we've yet to see that.

JP Mackay: Mario, we think there remains sufficient depth in phase I, specifically the RTO driven demand, to achieve our stated objectives in 2026. As we look to 2027 and 2028, we are more sensitive to economic output and the ability to attract new entrants to the market. That said, the risks associated with the Canada-US trade framework, population growth, and war-related supply could impact demand in the near term, specifically in 2026, but we've yet to see that.

Speaker #3: That said, the risks associated with the Canada-US trade framework, population growth, and war-related supply could impact demand in the near term, specifically in 2026, but we've yet to see that.

Speaker #7: Okay. Great. Thank you.

Mario Saric: Okay, great. Thank you.

Speaker #1: There are no further questions at this time. I will now hand the call over to Cecilia for remarks.

Moderator: There are no further questions at this time. I will now hand the call over to Cecilia for closing remarks.

Operator: There are no further questions at this time. I will now hand the call over to Cecilia for closing remarks.

Speaker #2: Thank you for your questions today. Our job isn't to predict markets. It's to build a better business by focusing on what we can control. By doing that through execution and disciplined capital allocation, long-term value creation will follow.

Cecilia Williams: Thanks for your questions today. Our job isn't to predict markets. It's to build a better business by focusing on what we can control. By doing that through execution and disciplined capital allocation, long-term value creation will follow. Thank you for your continued interest and support.

Speaker #2: Thank you for your continued interest and support.

Speaker #1: This concludes today's call. Thank you for attending. You may now disconnect.

Moderator: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Operator 1: This event has now concluded. Thank you for joining Allied Properties REIT Q2 2026 earnings conference call. The line will disconnect automatically.

Q2 2026 Allied Properties REIT Earnings Call

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