Allied Properties Real Estate Investment Trust (AP) Q3 2025 earnings summary

Executive summary

• Leasing activity reached its highest level in five years, with 882,000 sq ft leased and an 81% conversion rate, but occupancy and leasing growth lagged expectations, impacting results.

• Occupied and leased area increased slightly to 87.4%, but the 90% target will not be met by year-end; management now expects to reach this milestone in 2026.

• Urban office fundamentals are improving, with strong demand and improved market conditions, though recovery is slower than anticipated.

• Development projects, including M4 Vancouver (90% leased) and KING Toronto, are progressing, with all major projects on track for completion by end of 2026.

Financial highlights

• Rental revenue for Q3 2025 was $147.9M, up 0.9% year-over-year; operating income fell 3.0% to $80.7M.

• Net loss for Q3 2025 was $113.4M, a 20.4% increase in loss year-over-year, mainly due to higher fair value losses.

• Same-asset NOI rose 0.2% for the quarter, supported by development completions.

• Results included a one-time $2.1 million lease termination fee, offset by higher rental rates and a three-year lease extension.

• Liquidity increased to $903 million, up $168 million sequentially.

Outlook and guidance

• Management has line of sight to achieving 90% leased area and 10x debt-to-EBITDA by end of 2026, but year-end occupied and leased area expected to remain in line with Q3 levels.

• Disposition program, including Toronto House and Calgary House, plus the 150 West Georgia loan, is expected to generate over $500 million for debt repayment by mid-2026.

• Same asset NOI projected to decline by about 1% for 2025; FFO and AFFO per unit expected to contract by about 10%.

• A distribution cut in 2026 is under consideration to accelerate balance sheet strengthening.