Allied Properties Real Estate Investment Trust Q2 Earnings Call Highlights

Allied Properties Real Estate Investment Trust TSE: AP.UN reported second-quarter leasing activity that exceeded management’s expectations, while continuing to pursue asset sales and debt reduction as it works to strengthen its balance sheet and concentrate its portfolio on higher-quality urban workspace. President and CEO Cecilia Williams said the REIT has entered “a new phase” following more than a decade of portfolio investment and development. Management is now focused on realizing earnings potential through leasing execution, capital discipline, deleveraging and selective dispositions.

The portfolio ended the second quarter 84.4% occupied and 86.7% leased, ahead of Allied’s prior expectation for 82% occupancy. The REIT completed 522,000 square feet of leasing during the quarter and said its new-leasing pipeline had risen 42% since the start of the year. Senior Vice President and COO J.P. Mackay said Allied represented 5.5% of office inventory in its operating markets but accounted for 7.4% of new leasing activity in the first half of 2026. He attributed the performance to the quality of the portfolio and the company’s operating platform. During the quarter, 463,000 square feet of leasing occurred in the rental portfolio and 59,000 square feet occurred in the development portfolio. Rental-portfolio leasing included 105,000 square feet of new leases and 358,000 square feet of renewals. Heritage workspace represented 71% of total leasing activity. Allied’s Heritage and Modern portfolios were 87% leased. Its Flex portfolio was 78% leased. New-leasing spreads, excluding Flex space, rose 8% on an ending-to-starting base-rent comparison and 9% on an average-to-average basis. Year-to-date average leasing costs were C$6.27 per square foot annually, compared with C$7.01 in 2025. Professional services and TAMI tenants accounted for more than three-quarters of transaction volume in the first half.

The REIT retained its year-end occupancy target of 84% to 86%, despite the stronger second-quarter result. Mackay said the company needs to lease between 1.05 million and 1.35 million square feet in its rental portfolio through new leases and renewals that affect 2026 occupancy. Allied had leased 633,000 square feet toward that goal year to date. Management expects occupancy to be flat or slightly lower in the third quarter due to known non-renewals and the timing of lease commencements. Of 545,000 square feet maturing during the remainder of 2026, Allied expects about half will not renew. Allied’s largest known 2026 non-renewal is Sun Life’s 56,000-square-foot space at the De Gaspé portfolio in Montreal, which expires at the end of August. Mackay said Allied is in advanced discussions with a TAMI tenant to backfill as much as 45,000 square feet, with occupancy expected in the fourth quarter of 2026 or first quarter of 2027.

Allied said it had 1.7 million square feet of leasing activity underway, its largest reported pipeline. The figure includes 1 million square feet of new opportunities and 717,000 square feet of renewals. Of the new-leasing activity, 632,000 square feet was at the prospect stage and 394,000 square feet had reached the offer stage. The total pipeline has increased 33% since the beginning of 2026, while the new-leasing pipeline has risen 42%. Mackay said the company averaged a 1.3 million-square-foot total pipeline per quarter in 2025 and 950,000 square feet in 2024. Management said its March initiatives to increase broker engagement and simplify leasing for small and midsize tenants have helped generate activity. The measures include tour bonuses, new-lease commission bonuses, accelerated commission payments, short-form gross-rent leases, constru...