Allied Properties Real Estate Investment Trust (AP) Q2 2024 earnings summary

Executive summary

• Focused on long-term business management, prioritizing balance sheet strength, leasing vacant space, and completing development/upgrades by 2026.

• Occupied and leased area held steady at 85.8% and 87.1%, with urban office portfolio utilization rising in major Canadian cities.

• Proactive management of 2025/2026 debt maturities through non-core asset sales and refinancing, targeting Debt to EBITDA in the 8x range.

• Leasing activity and occupancy stabilized, with strong demand and retention rates approaching historical levels.

• Management expects a positive inflection in occupancy and leasing by year-end, supported by strong user engagement.

Financial highlights

• Q2 operating income was $82M, up 5.5% year-over-year.

• Net income and comprehensive income was $28M, impacted by a fair value loss on investment properties.

• FFO was $73M (52.6 cents/unit), down 10.6% year-over-year; AFFO was $67M (47.7 cents/unit), down 11.1%.

• Rental revenue for the quarter was $146.8M, up 7.8% year-over-year.

• Adjusted EBITDA for the quarter was $95.8M, down 10% year-over-year.

Outlook and guidance

• Targeting $400M in asset sale proceeds by end of 2025, all to be used for debt reduction.

• Management expects steady demand for urban workspace and amenity space to support operating and financial results in 2024, with a positive inflection anticipated by year-end.

• Expecting Debt to EBITDA to return to 8x range within 24 months, supported by organic growth and development completions.

• Development completions expected to contribute over $85M in annual EBITDA by 2026.

• Distribution commitment is expected to be fully supported by 2024 results.