Allied Properties Real Estate Investment Trust Q3 2025 Earnings Report

Allied Properties Real Estate Investment Trust EPS Results

• Actual EPS: -C$0.81
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Allied Properties Real Estate Investment Trust Revenue Results

• Actual Revenue: $147.93 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Allied Properties Real Estate Investment Trust Announcement Details

• Quarter: Q3 2025
• Date: 10/29/2025
• Time: After Market Closes
• Conference Call Date: Thursday, October 30, 2025
• Conference Call Time: 10:00AM ET

Allied is a leading owner-operator of distinctive urban workspace in Canada's major cities. Allied's mission is to provide knowledge-based organizations with workspace that is sustainable and conducive to human wellness, creativity, connectivity and diversity. Allied's vision is to make a continuous contribution to cities and culture that elevates and inspires the humanity in all people.

Allied Properties Real Estate Investment Trust Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Leasing momentum — Allied leased 882,000 sq ft in Q3 with an 81% tour-to-deal conversion and 187,000 sq ft of expansions, and management says it has line‑of‑sight to ~90% leased area by the end of 2026.
• Positive Sentiment: Development progress — All development and upgrade projects remain on track for completion by end‑2026; M4 Vancouver is 90% leased after Netflix's expansion and KING Toronto secured Whole Foods as the commercial anchor, aiding lease‑up.
• Positive Sentiment: Strengthened financing & liquidity — Liquidity rose to $903M, the unsecured facility was extended to 2028, and a $450M six‑year green debenture (5x oversubscribed) closed, with proceeds allocated to retire variable construction debt and reduce near‑term maturities.
• Negative Sentiment: Balance‑sheet pressure and potential distribution cut — Elevated interest expense and temporarily higher leverage from development weighed on quarterly results; management won’t hit its 10x debt‑to‑EBITDA target this year, has added Toronto House and Calgary House to the disposition pipeline, and is considering a distribution cut in 2026 to accelerate de‑leveraging.

Presentation

[Operator]

Good morning and thank you for standing by. My name is John and I will be your conference operator today. At this time I would like to welcome everyone to the Allied Properties REIT Third Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad, and if you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Cecilia Williams, President and CEO. Please go ahead.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Thanks, John. Good morning and welcome to our Q3 Conference Call. I'll highlight our progress towards 2025 goals and what we're focusing on going forward. Nan will do the same from a financial perspective. J.P. will outline the positive leasing momentum by Urban Market. We're then pleased to answer any questions. We may, in the course of this conference call, make forward-looking statements about future events or future performance. By their nature, these statements are subject to risks and uncertainties that may cause actual events or results to differ materially, including those described under the heading Risks and Uncertainties in our 2024 annual report. Material assumptions underpinning any forward-looking statements we make include those described under Forward-Looking Statements in our most recent quarterly report. We're focused on delivering long-term value through leasing, development, completion, and strengthening our balance sheet.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Market fundamentals continue to improve as evidenced by the higher level of leasing activity, including the highest number of sq ft of expansions in our portfolio in the last five years, increasing large format space mandates, and improving conversion rates. Our capital structure, specifically the temporarily higher level of debt we took on to complete development projects, put downward pressure on results in the quarter. While our portfolio remains resilient and strategically positioned to benefit from improving market dynamics, it will take us beyond year-end to achieve 90% occupied and leased area and our targeted 10x debt-to-EBITDA. We remain focused on those as milestones toward continued improvement in our metrics. First, leasing and operational results. Our leased area held in the quarter. We leased 882,000 sq ft across the rental and development portfolios. Conversion from tours to signed deals was high at 81%. J.P. will elaborate on these metrics.

[Cecilia Williams, President and CEO at Allied Properties REIT]

These signs of improving operating fundamentals give us confidence that while we're not getting to our ambitious target of 90% occupied and leased area by this year's end, we'll make progress going forward. Second, we advanced on our development and upgrade activities. M4 Vancouver is now 90% leased, driven by Netflix's expansion in the quarter. Fixturing is underway and rent commences in early KING Toronto, we're heading towards successful completion by the end of 2026. Securing Whole Foods as the anchor of the commercial component is facilitating the lease-up of the remaining space. We're currently in various stages of negotiation with seven retailers. Glazing continues on the fourth level and glazing for the fifth level will begin to arrive next week. It's truly a distinctive project that will elevate the entire King West Village neighborhood when it's completed.

[Cecilia Williams, President and CEO at Allied Properties REIT]

All the development and upgrade projects currently underway are on track for completion by the end of 2026. Last but certainly not least, our balance sheet. While we won't achieve our target of getting to 10x debt-to-EBITDA by this year-end, we're increasing our steps to get there.

[Cecilia Williams, President and CEO at Allied Properties REIT]

We've added Toronto House and Calgary House to our disposition pipeline. Those dispositions, together with the repayment of the 150 West Georgia loan in the first half of 2026, will strengthen our balance sheet as we'll be able to pay off more debt and moderate interest expense, accelerating progress going forward. We're improving liquidity and positioning Allied for the next phase of growth with a stronger foundation. Nan will now elaborate on our financial results and balance sheet management.

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

Thank you, Cecilia. Good morning, everyone. Thank you for joining us today. I'll take a few minutes to highlight our financial performance and the continued efforts we're making to strengthen our balance sheet. Operating fundamentals are improving. Our occupied and leased area didn't increase at the pace we expected in the quarter, along with elevated interest expense and slower lease finalization, but downward pressure on our results. We remain cautiously optimistic as market fundamentals continue to evolve in our favor. Occupancy was impacted by non-renewals, including Entertainment One at 134 Peter St. in Toronto. They consolidated space following the acquisition by Lionsgate, a decision that was made in 2023. More importantly, we offset much of this with new leasing in our portfolio, which drove our leased area from 87.2% to 87.4%. This will translate into earnings as tenants take occupancy.

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

Our same-asset NOI was 0.2% up for the quarter, supported by development completions including 20 Bright Op, 700 Sen, and 1001 Robert-Bourassa. Our results included a one-time lease termination fee of $2.1 million related to a space that was on the sublease market. The termination was strategically aligned with an expansion of an existing tenant in the building, resulting in no downtime, higher rental rates, and an incremental three-year lease extension, thereby preserving future recurring revenue. Our interest expense was higher due to timing of our dispositions. We expect our interest expense will decrease upon the completion of our disposition program and the receipt of the 150 West Georgia loan receivable. Excluding the sale of our rental residential assets, we expect to generate approximately $500 million from dispositions and the 150 West Georgia loan monetization.

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

This is expected to close between the remainder of 2025 and the first half of 2026. All these proceeds will be used to retire debt. Overall, despite pressure from higher interest expense and longer lease-up timelines, we maintain stable operating fundamentals, solid liquidity, and continued progress towards our long-term balance sheet targets. Turning to the balance sheet, liquidity remains strong at $903 million, up $168 million from the prior quarter. About 89% of our portfolio is unencumbered, giving us exceptional flexibility. During the quarter, we completed the extension of our unsecured facility to September 2028 and expanded our syndicate to include six major Canadian financial institutions. This highlights the support we have from our financial partners. We also updated our Green Financing Framework, which was initially released in 2021, to ensure alignment with best practices.

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

Subsequently, we completed the issuance of our series N debenture for $450 million, which was 5x oversubscribed with a six-year term at a rate of 4.6%. This brings our total issuance for the year to $1.3 billion, of which $900 million was issued under the Green Financing Framework, further highlighting the ongoing support that we have from the debt capital markets. Proceeds from the issuance were allocated to the retirement of variable rate construction debt and to pay down a portion of the $250 million term loan due in early 2026. At the same time, we extended the remaining $100 million of the term loan by two years to 2028 and retained the existing interest rate swap on the full $250 million at a favorable rate of 3.5%. In August, DBRS completed their annual review and maintained our credit rating.

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

We remain committed to maintaining our investment grade rating, and our ongoing disposition initiatives will allow us to reduce leverage to our targeted levels over time. We have taken proactive steps to address most of our upcoming maturities. For the end of 2026, we'll repay the upcoming $600 million debenture using proceeds from our dispositions and the monetization of the 150 West Georgia loan receivable. Overall, this quarter was built on strong leasing momentum, strengthened liquidity, and proactive management of upcoming debt maturities. All of this positions us well for long-term value creation. Thank you. With that, I'll pass it over to J.P. to discuss leasing.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

Thanks Nan. Over the past number of months we've observed improving operating fundamentals throughout our portfolio, evidenced by four trends: 1, an increase in leasing activity. 2, an increase in large format space requirements. 3, an increase in expansion activity among existing users, and 4, an increase in our conversion rate. Our leased area remained stable in the quarter and outperformed each of the urban submarkets in which we operate except for Vancouver, where we've made good progress in addressing acquired vacancy. In Q3, we completed 882,000 sq ft of leasing activity, including 512,000 sq ft of new leasing activity, the most since 2020, of which 426,000 was in our rental portfolio and 86,000 sq ft in our development portfolio. This represents an 81% conversion rate, the highest since 2020.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

The new leasing activity in the quarter included 187,000 sq ft of expansions, a 150% increase compared to the previous quarter and the highest since 2020. The impact of our new leasing activity was partially offset by non-renewals, including a large known non-renewal due to M&A activity that occurred in a prior year and not a reflection of current day space requirements. While the number of tours was lower compared to the prior quarter, the average tour size more than doubled, and the number of tours with requirements greater than 25,000 sq ft increased 83% driven by touring activity. In the modern segment of our Toronto and Montreal portfolios, industries represented by touring organizations were technology, financial services, media, professional services, education, and medical uses.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

We currently have 1.3 million sq ft of leasing activity under negotiation or at the prospect stage, of which 970,000 sq ft represents new leasing opportunities. Of the new leasing activity underway, 300,000 sq ft is under negotiation and 670,000 sq ft is at the prospect stage. Included in the leasing activity underway is 170,000 sq ft of possible expansion activity, as there are currently 17 existing users considering expansions. I'll now provide a brief overview of each market. In Montreal, we're currently working on 370,000 sq ft of new leasing activity, of which 100,000 sq ft is under negotiation and 270,000 sq ft is at the prospect stage. Most of our vacancy in Montreal is concentrated at La Cite, a portfolio of assets located between Old Montreal and Griffintown, comprising eight buildings totaling more than 1.2 million sq ft.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

We've seen a material increase in leasing activity at La Cite in the second half of the year. In Q3, we completed 100,000 sq ft of new leasing and currently have 100,000 sq ft at the prospect stage. The upgrade activity at 1001 Robert-Bourassa continues to attract large and sophisticated users. In Q3, we completed 150,000 sq ft of new leasing and currently have 130,000 sq ft at the prospect stage. The new leasing completed in Q3 included the expansion of an existing user by 100,000 sq ft to accommodate their utilization requirements by backfilling much of the National Bank sublease space. In Toronto and Kitchener, we're currently working on 550,000 sq ft of new leasing activity, of which 165,000 sq ft is under negotiation and 385,000 sq ft is at the prospect stage. In Toronto, there are several large organizations looking to sublease the Shopify space at The Well.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

Shopify is currently finalizing a sublease for a large portion of their premises with a user that will be new to our portfolio. The remaining demand exceeds the balance of space available materially. In Kitchener, Google renewed its lease of 195,000 sq ft in the Breithaupt Block, a large heritage complex in which we own 50%. Google represented our largest lease maturity in 2026. In Calgary, we're currently working on 30,000 sq ft of new leasing activity, of which 20,000 sq ft is under negotiation and 10,000 sq ft is at the prospect stage. In Vancouver, we're currently working on 20,000 sq ft of new leasing activity, of which 15,000 sq ft is under negotiation and 5,000 sq ft is at the prospect stage. At 400 West Georgia, we finalized a long-term lease, 49,000 sq ft, with a global educational institution subject only to routine regulatory approvals expected before the end of November.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

The asset is now 96% leased. At M4, we finalized the lease expansion of 26,000 sq ft with Netflix, creating Netflix's footprint of 137,000 sq ft. The asset is now 90% leased. Our leasing performance in Q3 reflects improving operating fundamentals, driven by higher physical utilization and diminishing supply of distinctive urban workspace, resulting in an increase in leasing activity, rising demand for large format space requirements, increased expansion activity among existing users, and improved conversion rates across our portfolio. I will now turn the call back to Cecilia.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Thanks J.P. Before we turn to questions, I want to reiterate my confidence in our portfolio and our team, especially as market dynamics are improving. We're staying focused on leasing, paying down debt, and completing development projects. Our targets are in sight and are achievable with our offering of both heritage and modern workspace. Our urban portfolio is unique and strategically positioned for the growing demand, and the lack of new supply will highlight this. I say this as Canadian cities are increasingly concentrating into centers of creativity, innovation, and opportunity, and urban workspace plays a critical role in that, making Allied well positioned to meet the growing demand. Our team is focused, patient, and confident that our fundamentals will ultimately be recognized. We'd now be pleased to answer any questions.

[Operator]

Thank you. The floor is now open for questions. As a reminder to everyone, if you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking the question. Thank you. Our first question comes from the line of Jonathan Kelcher with TD Cowen. Please go ahead.

[Jonathan Kelcher, Equity Analyst of Real Estate/REITs at TD Securities]

Thanks. Good morning. First, just one little clarification. When you talk about, J.P., when you talk about a conversion rate, 81% conversion rate. Is that off of leases that are in negotiation or the total for $1.3 million you talked about?

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

Jonathan, it's in relation to what we would have represented last year, last quarter as new leasing opportunities that we were pursuing at the time.

[Jonathan Kelcher, Equity Analyst of Real Estate/REITs at TD Securities]

Okay, just to, just to be sure, it includes like prospect and stuff under negotiation?

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

That's correct.

[Jonathan Kelcher, Equity Analyst of Real Estate/REITs at TD Securities]

Okay. I guess a couple weeks ago, you guys took hitting 90% occupancy off the table this year, and you addressed it a little bit based on what you're seeing. That was a pretty positive sort of update you gave, J.P., is that a target that you think you get to, some point in 2026?

[Cecilia Williams, President and CEO at Allied Properties REIT]

Hi, Jonathan. Yes, we do have line of sight to 90% in 2026.

[Jonathan Kelcher, Equity Analyst of Real Estate/REITs at TD Securities]

Okay, that's helpful. Lastly, just looking at where your leverage currently sits versus where you guys want it, the slower pace of. The occupancy recovery that we're seeing. How, how is Management and the Board looking at the distribution level right now?

[Cecilia Williams, President and CEO at Allied Properties REIT]

We are considering many options, and one of those options is a distribution cut in 2026 to strengthen the balance sheet. We haven't made a formal decision yet. We haven't made a formal recommendation, but it is one of the scenarios that is under consideration.

[Jonathan Kelcher, Equity Analyst of Real Estate/REITs at TD Securities]

Okay, thank you. I'll leave it there. Thanks.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Thanks.

[Operator]

Your next question comes from the line of Mario Saric with Scotiabank. Please go ahead.

[Mario Saric, Managing Director and Senior Equity Analyst at Scotiabank]

Hi, good morning. Just wanted to focus on the disposition pipeline a little bit. You've added Toronto House and Calgary House to the list at $450 million. That increases the total expected dispositions from about $500 million before to, call it, $675 million, give or take. That would imply that about $275 million of prior assets that were deemed for sale will remain in place going forward. Can you walk through how you think about sizing the disposition pipeline? Is it simply a matter of doing what you need to do to hit target leverage metrics, or do other factors play a role in the decision process, such as being able to get IFRS values for those assets, etc.?

[Cecilia Williams, President and CEO at Allied Properties REIT]

Hi, Mario. We've outlined $270 million on page two of the press release. On top of that, it's the proceeds from 150 West Georgia, and that's about $240 million roughly. On top of that, it would be the proceeds from the disposition from Toronto House and Calgary House, which we're not quantifying, but it would more than double the proceeds that we get from our sales, which would all be applied towards debt reduction.

[Mario Saric, Managing Director and Senior Equity Analyst at Scotiabank]

Okay, it seems like there were maybe some assets that you would think that you were considering selling previously that you're no longer considering selling. Is that a fair comment? If so, what are some of the factors that kind of drive those decisions?

[Cecilia Williams, President and CEO at Allied Properties REIT]

It's based on what we are able to sooner rather than later. The update, you know, it's opportunistic based to some extent. We have our non-core assets identified, and as we get IFRS value or higher, we sell them. The update is as we've outlined it in the press release, but there weren't material changes.

[Mario Saric, Managing Director and Senior Equity Analyst at Scotiabank]

Okay. On the $239 million Westbank loan receivable underpinned by 150 West Georgia, how would you characterize your confidence level today in terms of collecting on that receivable relative to three months ago? What factors would you highlight that underpin that confidence?

[Cecilia Williams, President and CEO at Allied Properties REIT]

We remain very confident in collecting that, Mario. It is based on the zoning that is in place and the parties that are interested in the opportunity.

[Mario Saric, Managing Director and Senior Equity Analyst at Scotiabank]

Okay, thank you.

[Operator]

Your next question comes from the line of Roger Lafontaine with Nugget Capital Partners. Please go ahead.

[Roger Nugget-Lafontaine, Research Analyst and Equity Trader at Nugget Capital Markets]

Hello. Thank you for taking my question. I had a question whether you're seeing full transaction liquidity within the office market. That's really just my question, whether it pertains to smaller buildings or larger buildings. If you could touch base on that. Thank you.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Sorry, are you asking about sales volume? I couldn't hear the first part of your question.

[Roger Nugget-Lafontaine, Research Analyst and Equity Trader at Nugget Capital Markets]

Yeah. If you're seeing improved transaction liquidity as you seek to dispose of any assets or offices, whether you're seeing more buyers on the market.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Thank you. Yes, the assets that we are looking to dispose of are smaller non-core assets. We certainly are. I think the buyers are seeing this as an opportunity to get access to buying these types of assets, which isn't normally an opportunity for them. Yes, we are absolutely seeing higher levels of interest.

[Mario Saric, Managing Director and Senior Equity Analyst at Scotiabank]

Thank you very much.

[Operator]

Your next question comes from the line of Lorne Kalmar with Desjardins. Please go ahead.

[Lorne Kalmar, Analyst at Desjardins]

Thanks. Good morning. Just on KING Toronto, I think going back, the closings were initially set for, I think, 4-25, they've kind of been pushed back. I was just wondering if you could give us some color as to what's really been driving those delays. Is there issues with purchasers that are in default on their agreements, or what's really happening there?

[Cecilia Williams, President and CEO at Allied Properties REIT]

No, it's nothing to do with any defaults. We haven't had any to date. It's really the pace of construction activity, which was recently impacted by some rain, and it prevented us from getting some of the glazing up. For the most part, things are progressing as expected.

[Lorne Kalmar, VP of Equity Research at Desjardins]

Okay. Okay, I might have missed this. Apologies if I did, but do you guys have a kind of a target yield on Toronto House and Calgary House based on the unsolicited imbalance you've gotten?

[Cecilia Williams, President and CEO at Allied Properties REIT]

Not that we're disclosing, Lorne.

[Lorne Kalmar, VP of Equity Research at Desjardins]

Fair enough. Okay, thank you very much.

[Cecilia Williams, President and CEO at Allied Properties REIT]

No Problem. Thank you.

[Operator]

Your next question comes from the line of Matt Kornack with National Bank Financial. Please go ahead.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Good morning. Just back on Toronto, KING Toronto. you revised the expected proceeds a bit lower there. Is that a function of what you think you'll get on the sale price? Is that a thought around maybe some condos that closed, not collecting on them? What was behind that assumption at the end of the day?

[Cecilia Williams, President and CEO at Allied Properties REIT]

It's just to reflect market value on the remaining 8% of units that have to be sold. As you know, we're 92% sold, so that pricing is locked in and we needed to just adjust on the remaining 8%.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

Okay, makes sense. I think, I'm not sure if it was in your same property NOI or not, but it sounds like you collected a prior bad debt provision of around $1.3 million on an asset in Calgary. Would that have been in same property NOI, and was there an offsetting negative? Should we view that as kind of one time in nature?

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

Hi Matt, it's Nan. That was a reversal in Calgary, but there was the normal course bad debt that's in our results as usual, which offsets that. That should not be something that should be backed out. Because if you're backing out the reversal. You've got to back out the provisions. If you look at Note 10, it's very clear the provisions actually in the quarter were higher than the reversal.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Okay, that's fair. I guess on 1001 Robert-Bourassa, the lease termination income, I know $2.1 million, but was there anything that we should net against that in terms of the new lease that's going to be signed relative to the older kind of? What would be the net impact if we wanted to get to a normalized number in the quarter or for future quarters on a run rate?

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

That is $3 per sq ft higher than the current lease.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

Okay. Lastly, I appreciate the disclosure in terms of the incremental NOI coming from the ground-up development, I think it was $1 million in Q4 and $10 million in 2026. Does that include anything from the redevelopment portfolio, or would that be incremental on top of those figures?

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

There's a little bit from 1001 Robert-Bourassa and RCA in those numbers.

[Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial]

In those numbers. Okay, so that's the total expected kind of incremental to just general same-asset NOI growth in the portfolio.

[Operator]

Your next question comes from the line of Tal Woolley with CIBC World Markets Inc. Please go ahead.

[Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets]

Hi, good morning. KING Toronto condos, how much capital do you expect to be getting back in 2026 from, because it seems like the closings may bleed into 2027 as well.

[Cecilia Williams, President and CEO at Allied Properties REIT]

From the condo sale?

[Dal Woolley, Analyst at CIBC World Markets Inc]

Yes.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Yeah, it's in the notes. It's about $240 million at all share.

[Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets]

Okay. Is that in 2026 or is that total?

[Cecilia Williams, President and CEO at Allied Properties REIT]

That's the total. Occupancy will be in place. The closing is based on city permits in place. We are expecting late 2026 to early 2027. Cash proceeds.

[Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets]

Okay, got it. Just on leasing in general, I guess I feel like maybe I or the market are getting a little surprised with just trying to reconcile the commentary you guys have around leasing with what's getting rendered in the quarters. If you're seeing increasing leasing, increasing large format tenant demand, improved existing user demand and a conversion rate, those sound like all good things. Yet occupancy is down quarter-over-quarter, and your revised outlook doesn't really have much of an occupancy lift baked in next quarter either. When are the wheels going to start to turn positively for occupancy despite all the sort of green shoots, I'll call it, commentary that we're getting?

[Cecilia Williams, President and CEO at Allied Properties REIT]

Yeah, there's a few quarters of a delay between getting the leasing locked down and then having occupancy and then having rent commencement. It unfortunately doesn't happen immediately. There is a lag effect, and we are seeing that. We are seeing the leasing momentum. The TAMI sector, you know, the bank mandates are kind of the latest, but we started seeing things starting to pick up before the bank mandates, and unfortunately it takes a few quarters for it to start being reflected in our numbers and then for the cash rent commencement to start hitting our statement. There is a bit of a lag that has to be taken into account.

[Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets]

Okay, so like middle of 2026, you would feel comfortable that occupancy should be above where it is right now?

[Cecilia Williams, President and CEO at Allied Properties REIT]

I would expect 2026 to be improved over 2025, but I'm not going to start speaking to 2026 on this call, Tal. Although I appreciate that you are asking from a good place, it will be a lot operating on what we expect for 2026 as we always do on our year-end call. We certainly, as we sit here today, have line of sight to improved metrics in 2026.

[Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets]

Okay. Lastly, on 150 West Georgia, do you have a data center partner prospected or in place already, or are you just saying basically you have a powered land site that could be used for that and that person will still need to go get site plan approval and all that stuff?

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

We have entitlements, and there are prospective parties at advanced stages of their due diligence.

[Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets]

Okay, so your goal here is just 100% monetize that loan and be out of this site forever?

[Cecilia Williams, President and CEO at Allied Properties REIT]

Absolutely, yes.

[Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets]

Okay, got it. All right, thanks very much.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Thanks.

[Operator]

Your next question comes from the line of Pammi Bir with RBC Capital Markets. Please go ahead.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

Thanks. Good morning. Just with respect to dispositions, the $270 million that you mentioned, plus I guess Toronto House and Calgary House. Would this collectively sort of mark the end of the disposition program for, I guess, if you think about 2020? Or would you consider just continuing to perhaps upsize that program?

[Cecilia Williams, President and CEO at Allied Properties REIT]

As we sit here today, we see that as being the end of the disposition program, Pammi.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

I guess tied to that, with the anticipated repayment of the Westbank loan, would that get you to effectively that 10x debt-to-EBITDA target? Is that enough?

[Cecilia Williams, President and CEO at Allied Properties REIT]

We have line of sight to being in the 10x range by the end of 2026.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

Okay, maybe just switching gears, coming back to the comments around the distribution. I don't think this was asked, if it was, I apologize. What are some of the parameters or goal posts that you're focused on on whether to cut, you know, is it leverage, occupancy, the payout ratio, etc., or just maybe some color around how you're approaching it?

[Cecilia Williams, President and CEO at Allied Properties REIT]

At this point, it's really looking at getting the balance sheet where we feel it needs to be at and accelerating the progress towards that goal. Certainly, payout ratios and debt-to-EBITDA and those kinds of metrics, but it's about strengthening the balance sheet.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

I guess the other way to think about it is why not just cut now? I mean, how much could, I know there's a lot happening, a lot of stuff in the works with all this capital that you expect to repatriate, but why not just do it now and just drive on and the rest sort of strengthens the balance sheet further?

[Cecilia Williams, President and CEO at Allied Properties REIT]

We have a process that has worked for us since we went public in 2003. It's a decision that the Board makes annually for the following year at the end of every Calendar Year. We don't see the need to go off process. We will be meeting with our board at the end of November and making our decision within the usual timelines.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

Okay. Just lastly, to clarify the comment that you made on getting to 90% occupancy next year, is that in place or is that committed?

[Cecilia Williams, President and CEO at Allied Properties REIT]

I was speaking to lease area, and we will also stick with our usual process, Pammi, of talking about 2026 on our year end call. My reference to having line of sight to lease area of 90% by the end of 2026 is based on the improving market fundamentals that we have in front of us today, and it's something that we'll reaffirm on our year end call.

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

Okay, okay, lastly here, okay, without commenting on 2026 growth, as you see today, do you see 2025 as the low water mark on FFO in this cycle for Allied?

[Cecilia Williams, President and CEO at Allied Properties REIT]

I think that's something that I'll have to leave for part of our year-end call, Pammi, we're focused on the metrics and we want to provide a comprehensive update in terms of our outlook for next year. I'm not trying to put you off, I just don't want to start giving piecemeal information on next year. All I can say is that with the improving fundamentals, we absolutely expect an improving set of operating metrics in 2026.

[Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets]

Okay, thanks very much. I'll turn it back, Cecilia. Thanks.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Thank you.

[Operator]

The next question comes from Shalabh Garg with Veritas Research. Please go ahead.

[Shalabh Garg, Equity Research Analyst at Veritas Investment Research]

Hi, thank you and good morning. I was just wondering, there's an expectation of maintaining the occupancy rate flat over Q3 and Q4. I see you have net lease maturities of 390,000 sq ft with some offset by fixturing commencements. Where is this roughly 100 basis points or 90 basis points of occupancy going to come from? Is it new leasing or is it renewals for whatever is maturing in this quarter?

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

It comes from term commencement as a result of contractual leasing activity achieved year-to-date that will commence in Q4.

[Shalabh Garg, Equity Research Analyst at Veritas Investment Research]

Is there anything on renewals out of that 391,000 sq ft?

[J.P. Mackay, Senior VP and COO at Allied Properties REIT]

Of the 391,000 sq ft, we expect that we will be successful in renewing approximately half, and we expect approximately half will mature for circumstances specific to each organization and exit the portfolio.

[Shalabh Garg, Equity Research Analyst at Veritas Investment Research]

Okay, thanks. The other question I have, and I think Nan, you touched on it, of the $600 million maturity up in February 2026, do you expect it to fully repay through asset sales or is there going to be some refinancing through unsecured debt?

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

It's expected to be fully repaid.

[Shalabh Garg, Equity Research Analyst at Veritas Investment Research]

Okay, those are my questions. I'll turn it back in. Thank you.

[Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT]

Thank you.

[Operator]

The next question comes from the line of Brad Sturges with Raymond James. Please go ahead.

[Brad Sturges, Managing Director of Equity Research Analyst at Raymond James]

Hey there. Just a couple of quick questions for me. Just going KING Toronto, i think you talked about total proceeds of $240 million. What kind of default rate would you assume as a base case scenario for condo closings as those progress over the balance of 2026.

[Cecilia Williams, President and CEO at Allied Properties REIT]

We understand that a regular default rate is between 7%-10%, Brad. I wouldn't expect it to be higher on that project. If anything, it might be modestly lower.

[Brad Sturges, Managing Director of Equity Research Analyst at Raymond James]

Okay, that's helpful. Second question just on the remaining asset sales to complete. Can you just talk about maybe an average yield or expected exit cap rate on a blended basis what that potentially could look like for remaining transactions?

[Cecilia Williams, President and CEO at Allied Properties REIT]

We're not going to be doing that at this time. We'll disclose as we always do as the dispositions are completed. All I can say is that we've had our IFRS values being validated through the disposition program today.

[Brad Sturges, Managing Director of Equity Research Analyst at Raymond James]

Okay, thank you.

[Operator]

Thank you. It seems that we have no further questions at this time. I will now turn the call back over to Cecilia Williams for closing remarks.

[Cecilia Williams, President and CEO at Allied Properties REIT]

Thanks John. Thanks everyone for attending our conference call. My final message is this. Market dynamics are shifting in our favor, and with the team staying focused on what we can control, we're successfully operating our way through the improving environment and remain on the path to our goals. Releasing up space, executing a plan to reduce debt, and completing developments that will strengthen our ability to serve knowledge-based organizations for years to come. Our portfolio is unique. It's deeply urban and deeply connected to the cities that are driving Canada's economic and creative future. As these cities get stronger, so does Allied. We'll keep you updated on our progress going forward. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. We thank you for your participation. Have a great day.

Participants

Analysts

• Brad Sturges, Managing Director of Equity Research Analyst at Raymond James
• Cecilia Williams, President and CEO at Allied Properties REIT
• Dal Woolley, Analyst at CIBC World Markets Inc
• J.P. Mackay, Senior VP and COO at Allied Properties REIT
• Jonathan Kelcher, Equity Analyst of Real Estate/REITs at TD Securities
• Lorne Kalmar, Analyst at Desjardins
• Lorne Kalmar, VP of Equity Research at Desjardins
• Mario Saric, Managing Director and Senior Equity Analyst at Scotiabank
• Matt Kornack, Real Estate Equity Research Analyst at National Bank Financial
• Nanthini Mahalingam, Senior VP and CFO at Allied Properties REIT
• Pammi Bir, Managing Director and Head of Global Real Estate Research at RBC Capital Markets
• Roger Nugget-Lafontaine, Research Analyst and Equity Trader at Nugget Capital Markets
• Shalabh Garg, Equity Research Analyst at Veritas Investment Research
• Tal Woolley, Executive Director of Institutional Equity Research at CIBC Capital Markets