Allied Properties Real Estate Investment Trust ("Allied") (TSX: "AP.UN") today announced results for its fourth quarter and year ended December 31, 2021. “2021 was a strong year operationally and financially for Allied,” said Michael Emory, President & CEO. “FFO per unit came in at $2.405 and AFFO per unit at $2.091, in both cases at record levels and at the high end of the range contemplated in our internal forecast. NAV per unit was $50.30 at year-end, up 3.6% from year-end 2020. Leasing activity exceeded our expectations for the year, with the result that our average in-place net rent per occupied square foot rose in all four quarters, finishing at $24.64 in the fourth quarter compared to $23.88 in the comparable quarter last year.

Operations

Gross quarterly rent billed in the fourth quarter was $175.5 million. 1.4% of the total amount due derives from parking use, 8.0% from retail use, 16.2% from urban-data-centre (UDC) use and 74.5% from office use. Allied collected 97.6% of the total amount due in the quarter and afforded deferrals aggregating $4.2 million, primarily to storefront retail users, at least $1.5 million of which Management expects to collect from the Canada Emergency Rent Subsidy (CERS) and other government subsidies. Management continues the process of scaling down its pandemic-related deferral program through extensive case-by-case discussions with Allied’s storefront retail users, most of which are exceptionally well located in downtown Toronto. Accordingly, Allied did not adjust its general provision in the quarter, which remains $3 million. Allied has not yet utilized any portion of this provision.

Leasing

The occupied area of Allied’s rental portfolio at the end of the fourth quarter was 89.9%, with leased area at 90.4%, down slightly from the third quarter due to known non-renewals at Cité Multimedia in Montréal aggregating 77,300 square feet of GLA. Given the scale of Allied’s rental portfolio, upgrade activity is now constant in all markets, particularly Montréal, Toronto and Vancouver. The goal of the upgrade activity is to serve users better and to boost net rent per occupied square foot over time. At the end of the fourth quarter, Allied’s rental portfolio was comprised of (i) 13,465,789 square feet of GLA in buildings that are largely stabilized and (ii) 768,702 square feet of GLA in buildings that are undergoing active upgrade. The occupied area of the former was 91.1%, with leased area at 91.6%. The occupied and leased area of the latter was 68.0% and 68.4%, respectively. Management fully expects the occupied and leased areas of its entire rental portfolio to increase in 2022, with corresponding increases in same-asset NOI and net rent per occupied square foot.

Allied's average in-place net rent per occupied square foot rose again in the fourth quarter, coming in at $24.64 compared to $23.88 in the comparable quarter last year. Space available for sub-lease in Allied's portfolio continued to decline in the fourth quarter, as expected.

Allied renewed or replaced leases for 30.9% of the space that matured in the quarter, considerably lower than normal because of the known non-renewals at Cité Multimedia in Montréal. This resulted in the following overall increases in net rent per square foot from the affected space: (i) 9.4% in the first year of the new term compared to the last year of the prior term; and (ii) 18.3% on the annual average in the new term compared to the annual average in the prior term. It also resulted in a weighted-average lease term of 5.6 years for the entire rental portfolio.

Fourth-Quarter and Year-End Results

Allied’s financial and operating results are summarized below:

  As at December 31
(In thousands except for per unit and % amounts)   2021     2020   Change % Change
Investment properties (1)(4) $ 9,527,105   $ 8,687,375   $ 839,730   9.7 %
Unencumbered investment properties (2) $ 9,064,010   $ 6,463,680   $ 2,600,330   40.2 %
Total Assets (1)(4) $ 10,384,691   $ 9,400,768   $ 983,923   10.5 %
Cost of PUD as a % of GBV (2)   11.2 %   9.0 %   2.2 %  
NAV per unit (6) $ 50.30   $ 48.54   $ 1.76   3.6 %
Debt (1) $ 3,453,284   $ 2,725,462   $ 727,822   26.7 %
Total indebtedness ratio (2)   33.5 %   29.2 %   4.3 %  
Adjusted EBITDA (2) $ 365,050   $ 349,023   $ 16,027   4.6 %
Net debt as a multiple of Adjusted EBITDA (2)   9.4x     7.7x     1.7x    
Interest-coverage ratio including capitalized interest and excluding financing prepayment costs (2)(3)   3.4x     3.4x        
  For the three months ended December 31
(In thousands except for per unit and % amounts)   2021     2020   Change % Change
Rental Revenue (1)(4) $ 146,722   $ 145,173   $ 1,549   1.1 %
Net income (1) $ 159,921   $ 83,842   $ 76,079   90.7 %
Net income excluding fair value adjustments and financing prepayment costs (2)(3)(5) $ 64,444   $ 62,240   $ 2,204   3.5 %
Adjusted EBITDA (2) $ 90,843   $ 90,498   $ 345   0.4 %
Same asset NOI - rental portfolio (2) $ 84,915   $ 83,624   $ 1,291   1.5 %
Same asset NOI - total portfolio (2) $ 85,869   $ 85,104   $ 765   0.9 %
FFO (2) $ 75,691   $ 74,742   $ 949   1.3 %
All amounts below are excluding condominium related items and financing prepayment costs (2)(3)        
FFO $ 76,520   $ 74,969   $ 1,551   2.1 %
FFO per unit (diluted) $ 0.600   $ 0.589   $ 0.011   1.9 %
FFO pay-out ratio   70.9 %   70.0 %   0.9 %  
AFFO $ 66,076   $ 64,623   $ 1,453   2.2 %
AFFO per unit (diluted) $ 0.518   $ 0.508   $ 0.01   2.0 %
AFFO pay-out ratio   82.1 %   81.2 %   0.9 %  
  For the year ended December 31
(In thousands except for per unit and % amounts)   2021     2020   Change % Change
Rental Revenue (1)(4) $ 568,886   $ 560,327   $ 8,559   1.5 %
Net income (1) $ 443,151   $ 500,729   $ (57,578 ) (11.5 %)
Net income excluding fair value adjustments and financing prepayment costs (2)(3)(5) $ 261,854   $ 238,135   $ 23,719   10.0 %
Adjusted EBITDA (2) $ 365,050   $ 349,023   $ 16,027   4.6 %
Same asset NOI - rental portfolio (2) $ 314,125   $ 308,354   $ 5,771   1.9 %
Same asset NOI - total portfolio (2) $ 325,734   $ 313,554   $ 12,180   3.9 %
FFO (2) $ 253,376   $ 284,732   $ (31,356 ) (11.0 %)
All amounts below are excluding condominium related items and financing prepayment costs (2)(3)        
FFO $ 306,559   $ 285,784   $ 20,775   7.3 %
FFO per unit (diluted) $ 2.405   $ 2.295   $ 0.110   4.8 %
FFO pay-out ratio   70.6 %   71.9 %   (1.3 %)  
AFFO $ 266,517   $ 248,003   $ 18,514   7.5 %
AFFO per unit (diluted) $ 2.091   $ 1.991   $ 0.100   5.0 %
AFFO pay-out ratio   81.2 %   82.8 %   (1.6 %)  

(1) This measure is presented on an IFRS basis.(2) This is a non-IFRS measure. Refer to the Non-IFRS Measures section below and on page 14 of the Management's Discussion and Analysis of Results of Operations and Financial Condition (the "MD&A") as at December 31, 2021.(3) For the three months and year ended December 31, 2021, Allied incurred $721 and $52,610, respectively (December 31, 2020 - $nil and $nil, respectively) of financing prepayment costs in connection with the favourable refinancing of unsecured debentures and first mortgages.(4) Prior to Q4 2021, the comparative figures for investment properties, total assets, and rental revenue were reported on a proportionate share basis. The comparative figures for the prior period have been revised to an IFRS basis.(5) Prior to Q4 2021, the comparative figure for net income excluding fair value adjustments and financing prepayment costs was calculated on a proportionate share basis. The comparative figure for the prior period has been revised to be calculated on an IFRS basis.(6) Net asset value per Unit is calculated as follows: total Unitholders' equity as at the corresponding period ended, (per the consolidated balance sheets) divided by the actual number of Units outstanding at period end.

The operating results are summarized below:

  For the year ended December 31
    2021     2020   Change % Change
Leased area   90.4 %   92.5 %   (2.1 %)  
Occupied area   89.9 %   92.1 %   (2.2 %)  
Average in-place net rent per occupied square foot $ 24.64   $ 23.88   $ 0.76   3.2 %
Renewal and replacement rate for leases maturing in the period   57.0 %   78.3 %   (21.3 %)  
Increase in net rent on maturing leases   10.1 %   17.2 %   (7.1 %)  

In the fourth quarter, same-asset NOI for the rental portfolio was up 1.5%, FFO per unit was up 1.9% and AFFO per unit was up 2.0% from the comparable quarter last year. In addition, NAV per unit increased by 3.6% from the comparable quarter last year.

Allocation of Capital and Funding

Allied completed its acquisition of the Dominion Building in Vancouver in the fourth quarter. It will enhance Allied’s ability to provide distinctive urban workspace to the growing ecosystem of knowledge-based organizations in the area of Downtown Vancouver east of Granville Street.

Allied continues to allocate large amounts of capital to development activity with completion and return estimates remaining intact. Management estimates that current developments will increase Allied’s annual EBITDA by approximately $80 million upon stabilization of occupancy with an expected timeframe of three to five years, and have a weighted average lease term of 12.4 years.

In the fourth quarter, Allied established an at-the-market equity program (the "ATM Program") that allows it to issue and sell up to $300 million of Allied units to the public, from time to time, at its discretion. The ATM Program is designed to provide additional financing flexibility which may be used in conjunction with other existing funding sources. Allied intends to use the net proceeds from the ATM Program for development, repayment of indebtedness and general trust purposes. During the quarter ended December 31, 2021, Allied issued 477,100 Units under the ATM Program at a weighted average price of $44.07 per Unit for gross proceeds of $21.0 million. Subsequent to December 31, 2021, Allied issued 211,800 Units under the ATM Program at a weighted average price of $44.02 per Unit for gross proceeds of $9.3 million.

Outlook

Allied’s internal forecast for 2022 calls for low-to-mid-single-digit percentage growth in each of same-asset NOI, FFO per unit and AFFO per unit. While Allied does not forecast NAV per unit growth, it does expect to propel further growth in 2022. Allied also expects to allocate a large amount of capital in 2022 with the same strategic coherence and discipline it demonstrated in prior years.

Allied continues to have deep confidence in, and commitment to, its strategy of consolidating and intensifying distinctive urban workspace and network-dense UDCs in Canada’s major cities. Allied firmly believes that its strategy is underpinned by the most important secular trends in Canadian and global real estate. Allied also firmly believes that it has the properties, the financial strength, the people and the platform necessary to execute its strategy for the ongoing benefit of its unitholders and other constituents.

Non-IFRS MeasuresManagement uses financial measures based on International Financial Reporting Standards ("IFRS") and non-IFRS measures to assess Allied's performance. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore, should not be construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS. Refer to the Non-IFRS Measures section on page 14 of the MD&A as at December 31, 2021, available on www.sedar.com, for an explanation of the composition of the non-IFRS measures used in this press release and their usefulness for readers in assessing Allied's performance. Such explanation is incorporated by reference herein.

Reconciliations of Non-IFRS Measures

The following tables reconcile the non-IFRS measures to the most comparable IFRS measures for the three months and year ended December 31, 2021 and the comparable periods in 2020. These terms do not have any standardized meaning prescribed under IFRS and may not be comparable to similarly titled measures presented by other publicly traded entities.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")The following table reconciles Allied's net income and comprehensive income to Adjusted EBITDA, a non-IFRS measure, for the three months and years ended December 31, 2021, and December 31, 2020.

  Three months ended Year ended
  December 31, 2021   December 31, 2020   December 31, 2021   December 31, 2020  
Net income and comprehensive income for the period $ 159,921   $ 83,842   $ 443,151   $ 500,729  
Interest expense   17,454     17,774     120,351     72,603  
Amortization of other assets   273     341     1,167     1,467  
Amortization of improvement allowances   8,259     8,072     32,424     32,522  
Fair value gain on investment properties and investment properties held for sale   (95,070 )   (14,809 )   (215,693 )   (276,294 )
Fair value loss (gain) on derivative instruments   6     (4,722 )   (16,350 )   17,996  
Adjusted EBITDA $ 90,843   $ 90,498   $ 365,050   $ 349,023  

Net income excluding fair value adjustments and financing prepayment costsThe following table reconciles Allied's net income and comprehensive income to net income excluding fair value adjustments and financing prepayment costs, a non-IFRS measure, for the three months and years ended December 31, 2021, and December 31, 2020.

  Three months ended Year ended
  December 31, 2021   December 31, 2020 December 31, 2021 December 31, 2020  
Net income and comprehensive income $ 159,921   $ 83,842 $ 443,151 $ 500,729  
Less: Fair value gain on investment properties and investment properties held for sale   96,204     16,880   217,557   280,590  
Less: Fair value (loss) gain on derivative instruments   (6 )   4,722   16,350   (17,996 )
Add: Financing prepayment costs   721       52,610    
Net income excluding fair value adjustments and financing prepayment costs $ 64,444   $ 62,240 $ 261,854 $ 238,135  

Same Asset NOISame asset NOI, a non-IFRS measure, is measured as the net operating income for the properties that Allied owned and operated for the entire duration of both the current and comparative period. Same asset NOI of the assets held for sale for the three months and year ended December 31, 2021, consists of three investment properties that Allied classified as assets held for sale on September 30, 2021 and intends to sell to third parties within the next nine months. The following table reconciles Allied's same asset NOI to operating income for the three months and years ended December 31, 2021, and December 31, 2020.

  Three months ended Change
  December 31, 2021   December 31, 2020   $   %  
Rental Portfolio - Same Asset NOI $ 84,915   $ 83,624   $ 1,291   1.5 %
Development Portfolio - Same Asset NOI $ 574   $ 988   $ (414 ) (41.9 %)
Assets Held for Sale - Same Asset NOI $ 380   $ 492   $ (112 ) (22.8 %)
Total Portfolio - Same Asset NOI $ 85,869   $ 85,104   $ 765   0.9 %
Acquisitions   1,441     4     1,437    
Lease terminations   268     542     (274 )  
Development fees and corporate items   2,660     3,716     (1,056 )  
NOI $ 90,238   $ 89,366   $ 872   1.0 %
Amortization of improvement allowances   (8,259 )   (8,072 )   (187 )  
Amortization of straight-line rents   1,141     1,596     (455 )  
Operating income, proportionate basis $ 83,120   $ 82,890   $ 230   0.3 %
Less: investment in joint venture $ 315   $ 138   $ 177   128.3 %
Operating income, IFRS basis $ 82,805   $ 82,752   $ 53   0.1 %
  Year ended Change
  December 31, 2021   December 31, 2020   $   %  
Rental Portfolio - Same Asset NOI $ 314,125   $ 308,354   $ 5,771   1.9 %
Development Portfolio - Same Asset NOI $ 10,074   $ 3,325   $ 6,749   203.0 %
Assets Held for Sale - Same Asset NOI $ 1,535   $ 1,875   $ (340 ) (18.1 )%
Total Portfolio - Same Asset NOI $ 325,734   $ 313,554   $ 12,180   3.9 %
Acquisitions   20,146     16,735     3,411    
Lease terminations   1,281     1,163     118    
Development fees and corporate items   11,558     11,020     538    
NOI $ 358,719   $ 342,472   $ 16,247   4.7 %
Amortization of improvement allowances   (32,424 )   (32,522 )   98    
Amortization of straight-line rents   4,729     10,132     (5,403 )  
Condominium profits       178     (178 )  
Operating income, proportionate basis $ 331,024   $ 320,260   $ 10,764   3.4 %
Less: investment in joint venture $ 1,633   $ 1,245   $ 388   31.2 %
Operating income, IFRS basis $ 329,391   $ 319,015   $ 10,376   3.3 %

Funds from operations ("FFO") and Adjusted funds from operations ("AFFO")The following table reconciles Allied's net income to FFO, FFO excluding condominium related items and financing prepayment costs, AFFO, and AFFO excluding condominium related items and financing prepayment costs, which are non-IFRS measures, for the three months and years ended December 31, 2021, and December 31, 2020.

  Three months ended
  December 31, 2021   December 31, 2020   Change
Net income and comprehensive income $ 159,921   $ 83,842   $ 76,079  
Adjustment to fair value of investment properties and investment properties held for sale   (96,204 )   (16,880 )   (79,324 )
Adjustment to fair value of derivative instruments   6     (4,722 )   4,728  
Incremental leasing costs   2,249     1,745     504  
Amortization of improvement allowances   8,129     7,959     170  
Adjustments relating to joint venture:      
Adjustment to fair value on investment properties   1,134     2,071     (937 )
Amortization of improvement allowances   130     113     17  
Interest expense (1)   326     614     (288 )
FFO $ 75,691   $ 74,742   $ 949  
Condominium marketing costs   108     227     (119 )
Financing prepayment costs   721         721  
FFO excluding condominium related items and financing prepayment costs $ 76,520   $ 74,969   $ 1,551  
Amortization of straight-line rents   (902 )   (1,203 )   301  
Regular leasing expenditures   (3,253 )   (3,849 )   596  
Regular maintenance capital expenditures   (1,566 )   (1,939 )   373  
Incremental leasing costs (related to regular leasing expenditures)   (1,574 )   (1,221 )   (353 )
Recoverable maintenance capital expenditures   (2,910 )   (1,741 )   (1,169 )
Adjustment relating to joint venture:      
Amortization of straight-line rents   (239 )   (393 )   154  
AFFO excluding condominium related items and financing prepayment costs $ 66,076   $ 64,623   $ 1,453  
       
Weighted average number of Units      
Basic   127,441,142     127,256,661     184,481  
Diluted   127,611,273     127,298,000     313,273  
       
Per Unit - basic      
FFO $ 0.594   $ 0.587   $ 0.007  
FFO excluding condominium related items and financing prepayment costs $ 0.600   $ 0.589   $ 0.011  
AFFO excluding condominium related items and financing prepayment costs $ 0.518   $ 0.508   $ 0.010  
       
Per Unit - diluted      
FFO $ 0.593   $ 0.587   $ 0.006  
FFO excluding condominium related items and financing prepayment costs $ 0.600   $ 0.589   $ 0.011  
AFFO excluding condominium related items and financing prepayment costs $ 0.518   $ 0.508   $ 0.010  
       
Pay-out Ratio      
FFO   71.6 %   70.2 %   1.4 %
FFO excluding condominium related items and financing prepayment costs   70.9 %   70.0 %   0.9 %
AFFO excluding condominium related items and financing prepayment costs   82.1 %   81.2 %   0.9 %

(1) This amount represents interest expense on Allied's joint venture investment in TELUS Sky and is not capitalized under IFRS, but is allowed as an adjustment under REALPAC's definition of FFO.

  Year ended
  December 31, 2021   December 31, 2020   Change
Net income and comprehensive income $ 443,151   $ 500,729   $ (57,578 )
Adjustment to fair value of investment properties and investment properties held for sale   (217,557 )   (280,590 )   63,033  
Adjustment to fair value of derivative instruments   (16,350 )   17,996     (34,346 )
Incremental leasing costs   8,038     7,069     969  
Amortization of improvement allowances   32,305     32,193     112  
Adjustments relating to joint venture:      
Adjustment to fair value on investment properties   1,864     4,296     (2,432 )
Amortization of improvement allowances   119     329     (210 )
Interest expense (1)   1,806     2,710     (904 )
FFO $ 253,376   $ 284,732   $ (31,356 )
Condominium revenue       (178 )   178  
Condominium marketing costs   573     1,230     (657 )
Financing prepayment costs   52,610         52,610  
FFO excluding condominium related items and financing prepayment costs $ 306,559   $ 285,784   $ 20,775  
Amortization of straight-line rents   (3,682 )   (7,856 )   4,174  
Regular leasing expenditures   (17,177 )   (11,016 )   (6,161 )
Regular maintenance capital expenditures   (4,327 )   (5,908 )   1,581  
Incremental leasing costs (related to regular leasing expenditures)   (5,626 )   (4,950 )   (676 )
Recoverable maintenance capital expenditures   (8,183 )   (5,775 )   (2,408 )
Adjustment relating to joint venture:      
Amortization of straight-line rents   (1,047 )   (2,276 )   1,229  
AFFO excluding condominium related items and financing prepayment costs $ 266,517   $ 248,003   $ 18,514  
       
Weighted average number of Units      
Basic   127,305,384     124,427,715     2,877,669  
Diluted   127,455,829     124,536,634     2,919,195  
       
Per Unit - basic      
FFO $ 1.990   $ 2.288   $ (0.298 )
FFO excluding condominium related items and financing prepayment costs $ 2.408   $ 2.297   $ 0.111  
AFFO excluding condominium related items and financing prepayment costs $ 2.094   $ 1.993   $ 0.101  
       
Per Unit - diluted      
FFO $ 1.988   $ 2.286   $ (0.298 )
FFO excluding condominium related items and financing prepayment costs $ 2.405   $ 2.295   $ 0.110  
AFFO excluding condominium related items and financing prepayment costs $ 2.091   $ 1.991   $ 0.100  
       
Pay-out Ratio      
FFO   85.5 %   72.1 %   13.4 %
FFO excluding condominium related items and financing prepayment costs   70.6 %   71.9 %   (1.3 %)
AFFO excluding condominium related items and financing prepayment costs   81.2 %   82.8 %   (1.6 %)

(1) This amount represents interest expense on Allied's joint venture investment in TELUS Sky and is not capitalized under IFRS, but is allowed as an adjustment under REALPAC's definition of FFO.

Cautionary Statements

This press release may contain forward-looking statements with respect to Allied, its operations, strategy, financial performance and condition and the expected impact of the global pandemic and consequent economic disruption. These statements generally can be identified by use of forward-looking words such as "forecast", “may”, “will”, “expect”, “estimate”, “anticipate”, “intends”, “believe” or “continue” or the negative thereof or similar variations. Allied’s actual results and performance discussed herein could differ materially from those expressed or implied by such statements. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations, including the effect of the global pandemic and consequent economic disruption. Important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, competition, changes in government regulations and the factors described under “Risk Factors” in Allied’s Annual Information Form which is available at www.sedar.com. The cautionary statements qualify all forward-looking statements attributable to Allied and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release, and Allied has no obligation to update such statements.

About Allied

Allied is a leading owner operator of (i) distinctive urban workspace in Canada’s major cities and (ii) network-dense urban data centres in Toronto that form Canada’s hub for global connectivity. Allied’s business is providing knowledge-based organizations with distinctive urban environments for creativity and connectivity.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Michael EmoryPresident & Chief Executive Officer(416) 977-0643memory@alliedreit.com

Tom BurnsExecutive Vice President & Chief Operating Officer(416) 977-9002tburns@alliedreit.com

Cecilia WilliamsExecutive Vice President & Chief Financial Officer(416) 977-9002cwilliams@alliedreit.com

Allied Properties Real E... (TSX:AP.UN)
Historical Stock Chart
Von Jun 2022 bis Jul 2022 Click Here for more Allied Properties Real E... Charts.
Allied Properties Real E... (TSX:AP.UN)
Historical Stock Chart
Von Jul 2021 bis Jul 2022 Click Here for more Allied Properties Real E... Charts.