Allied Properties Real Estate Investment Trust (AP) Q3 2024 earnings summary

Executive summary

• Focused on strengthening the balance sheet, leasing up vacant space, and completing development and upgrade activities to support operating results and distribution commitments.

• Proactive management of 2025 and 2026 debt maturities through non-core asset sales and debt refinancing.

• Leasing activity and user engagement remain strong, with steady leased and occupied area and robust expansion from existing users; urban workspace portfolio is outperforming the market.

• Development risk is declining as more GLA is transferred from development to rental portfolio, with no new projects planned in the near term.

• Leasing activity is expected to accelerate in major Canadian cities through the remainder of 2024 and into 2025.

Financial highlights

• Rental revenue for Q3 2024 was $146.6M, up 5.9% year-over-year; operating income rose 4.2% to $83.2M.

• Average in-place net rent per occupied sq ft reached a record CAD 25.30, up 6.4% year-over-year.

• Net debt to EBITDA improved from 10.9x in Q2 to 10.7x for Q3 2024.

• Incremental EBITDA from development completions was CAD 19 million for the nine months ended September 30, 2024; incremental FFO was CAD 9.4 million.

• Net loss and comprehensive loss for Q3 was $94.2M, mainly due to fair value adjustments on investment properties and financial instruments.

Outlook and guidance

• Targeting net debt to EBITDA in the mid-eight times range by end of 2026.

• Expecting continued growth in operating income and net rent as development projects complete and lease-up objectives are met.

• Distribution expected to be maintained at current levels.

• Management expects steady demand for urban workspace and amenity space to support a gradual return to earnings and value growth in 2025 and beyond.

• Anticipate slow but steady increase in leased and occupied area over the next few quarters.