Allied Properties REIT (AP-UN-T) president and CEO Cecilia Williams said she's encouraged by the trust’s Q2 performance, as leasing activity increases, major occupiers bring more workers back to the office, net rents stabilize and non-core property sales accelerate.

Williams offered the insights during the trust's July 30 conference call with analysts to review its performance.

“Our urban portfolio is not only unique, but strategically positioned for the future,” Williams said. “I say this as Canadian cities are increasingly concentrating into centres of creativity, innovation and opportunity, and urban workspace plays a critical role in that, making Allied well-positioned to meet the growing demand.” 

Toronto-based Allied conducted 317 lease tours in its rental portfolio in the quarter, up 13 per cent from the prior quarter and 21 per cent from the prior year.  

“Industries represented by touring organizations continue to be technology, media, professional services, education and medical uses,” senior vice-president of national operations J.P. MacKay noted.

Allied’s quarterly rental revenue of $145.05 million was down $1.71 million from the same period a year earlier. It recorded a net loss of $94.74 million, which compares to net income of $28.06 million in Q2 2024.

Allied had total assets of $10.42 billion, including unencumbered investment properties valued at $8.17 billion, at the end of the second quarter. Its total debt ratio was 44 per cent.

Its stock was trading in the range of $17.18 in morning activity Friday, near the middle of its 52-week high and low of $20.74 and $13.44.

Allied's leasing activity stats

Allied's occupied and leased areas at the end of the quarter were 84.9 per cent and 87.2 per cent respectively. It renewed 54 per cent of the leases maturing in the quarter, bringing renewals in the first half of the year to 69 per cent - below its normal range of 70 to 75 per cent.

Allied leased 546,437 square feet in its rental portfolio and 41,936 square feet in its development portfolio during the quarter. Of that 546,437 square feet, 224,651 had been vacant, 190,904 were maturing in the quarter and 130,882 were to mature after the quarter. Almost 75,000 square feet involved expansions by existing users.

“We continue to experience the shift towards improving fundamentals in urban centres,” Williams said. “With space mandates from organizations across industries, including significant bank mandates in the Toronto market, we expect leasing momentum to accelerate over the next few quarters.”

Allied increased rent levels on its Q2 renewals and average in-place net rent per occupied square foot ended at $25.32, up one per cent from the end of the comparable quarter.

Acquisition of Westbank’s share in M4

Allied has reached an agreement to buy out Westbank from the M4 building at 108 East 5th Ave. in Vancouver’s Mount Pleasant neighbourhood, which they currently co-own. Allied is paying $89.7 million for the 50 per cent stake and the deal is expected to close on Sept. 30.

The nine-storey building, which was completed earlier this year, has 166,800 square feet of office space, 38,000 square feet of industrial and retail space, and 21,400 square feet of outdoor space. It's 77 per cent leased to three users that are building out their spaces; rent collection is scheduled to start early in 2026.

“We're negotiating leases on the remaining space,” Williams said. “This includes a current user that's already looking to expand.” 

Updates on other properties

An international retailer will anchor the commercial component of KING Toronto with 28,291 square feet below grade and 4,587 square feet at grade. Seven other retailers are in negotiations to fill the remaining commercial space.

Allied and Westbank expect to complete the mixed-use development by the end of next year.

Allied expanded its business in 2024 by acquiring a larger-than-expected interest in three completed developments: 400 West Georgia in Vancouver; Toronto House (formerly known as 19 Duncan) in Toronto; and Calgary House. At the time, 63,772 square feet of office space at 400 West Georgia was unleased, the 464 residential units at Toronto House were yet-to-be-leased and 26 of the 326 residential units at Calgary House were available.

Allied is now finalizing a long-term lease for the remaining office space at 400 West Georgia with an established knowledge-based organization. It has leased 222 units at Toronto House and 12 more units at Calgary House have been leased.

Non-core property sales

Allied funded a portion of the equity component of 400 West Georgia and Toronto House by selling seven non-core properties — four in Montreal, one in Toronto, one in Ottawa and one in Calgary — for $229 million last year. It intends to sell additional non-core properties for at least $300 million this year.

In the second quarter, Allied closed the sale of a non-core property in Edmonton and put nine non-core properties (six in Montreal, one in Toronto and two in Vancouver) under sale contract, for aggregate proceeds of approximately $200 million. The remaining closings are expected to occur before the end of this year. 

Allied expects to sell additional non-core properties in Montreal, Toronto and Calgary over the remainder of the year, primarily to users and entrepreneurial purchasers.

Allied has $120 million drawn on its $800-million unsecured revolving operating facility, but expects to reduce that to zero by year-end.

“Keeping ample liquidity and improving our debt will underline our plan to address debt coming due early next year,” Williams explained. “We're confident in our ability to do so optimally, given the success we've had this year in addressing maturity with minimal impact on interest expense.”