Allied Properties Real Estate Investment Trust ("Allied") (TSX:
"AP.UN") today announced results for its third quarter ended
September 30, 2023. Allied’s operating momentum continued
through the quarter with solid operating results, sustained leasing
activity and implementation of a five-year capital-allocation plan.
Operating Results
In the third quarter, Allied’s FFO per unit(1)
was 59.8 cents, up from 58.8 cents in the prior quarter. AFFO per
unit(1) was 54.5 cents, up from 53.6 cents in the prior quarter.
This resulted in FFO and AFFO pay-out ratios(1) in the third
quarter of 75.3% and 82.6%, respectively.
While Allied’s FFO per unit in the third quarter
was down 1.3% from the comparable quarter last year, its AFFO per
unit was up 3.6%. Same Asset NOI(1) from Allied’s rental portfolio
was up 0.9% while Same Asset NOI from its total portfolio was up
6.4%.
Leasing Activity
Knowledge-based organizations continue to prefer
distinctive workspace in amenity-rich urban neighbourhoods in
Canada’s major cities. As a result, demand for Allied’s workspace
across the country continues to be evident and quantifiable.
Allied conducted 306 lease tours in its rental
portfolio in the third quarter, up from 292 in the prior quarter,
despite seasonally slower leasing activity in the summer months.
Allied’s occupied and leased area at the end of the quarter was
86.8% and 87.6%, respectively.
Allied leased a total of 358,812 square feet of
GLA in the third quarter, 321,674 square feet in its rental
portfolio and 37,138 square feet in its development portfolio. Of
the 321,674 square feet Allied leased in its rental portfolio,
90,200 square feet was vacant space, 92,761 square feet was space
maturing in the quarter and 138,713 square feet was space maturing
after the quarter.
Average in-place net rent per occupied square
foot continued to rise in the third quarter, reaching $23.78 at
quarter-end. Allied continued to achieve rent increases on renewal
(up 3.8% ending-to-starting base rent and up 10% average-to-average
base rent).
______________________________________________________________________________(1)
This is a non-GAAP measure and includes the results of the
continuing operations and the discontinued operations (except for
Same Asset NOI, which only includes continuing operations). Refer
to the Non-GAAP Measures section below.
Leasing highlights in Allied’s rental portfolio
for the third quarter include the following:
- renewal (34,818 square feet) and expansion (6,668 square feet)
for Rose Rocket at 35-45 Front Street East in Toronto;
- lease of 21,954 square feet to Crowe MacKay LLP at 1185 West
Georgia in Vancouver;
- renewal of 11,713 square feet for Restoration Hardware at
1508-1580 West Broadway in Vancouver;
- lease of 11,373 square feet to First Nations Justice Council at
Sun Tower in Vancouver;
- lease of 11,084 square feet to BinSentry at The Tannery in
Kitchener; and
- lease of 25,000 square feet of retail space to Compass Group
Canada at 747 Square Victoria in Montréal, initiating a planned
large-scale transformation of the historic ground level of the
property.
Leasing highlights in Allied’s development
portfolio for the third quarter include the following:
- lease of an additional 10,552 square feet for a total of 64,656
square feet to a global electronics and entertainment organization
at Tour Viger in Montréal;
- lease of 9,742 square feet to Anytime Fitness at 1001 Boulevard
Robert-Bourassa in Montréal; and
- lease of 8,000 square feet to Landr at 1001 Boulevard
Robert-Bourassa in Montréal.
Management expects sustained and successful
leasing activity for the remainder of 2023 and into 2024.
Capital-Allocation Plan
Allied closed the sale of its Urban Data Centre
(“UDC”) portfolio in the third quarter for $1.35 billion. Allied
used $755 million of the proceeds to repay all amounts drawn on its
unsecured credit facility and set aside $200 million of the
proceeds to repay a secured promissory note payable on December 31,
2023, and another $49 million to repay its remaining first
mortgages on fully owned properties in 2024. Allied will use the
balance of the proceeds to fund its development and upgrade
activity over the remainder of 2023 and beyond.
Reaffirmation
of Mission
Allied is an
owner-operator of distinctive urban workspace in Canada’s major
cities. Allied’s mission is to serve knowledge-based organizations
ever more successfully over time. The sale of the UDC portfolio
enabled Allied to reaffirm and focus more intently on its core
mission, which is predicated on ongoing urban intensification in
Canada’s major cities. Over the past two decades, Allied assembled
the largest and most concentrated portfolio of
economically-productive, underutilized urban land in Canada
(frequently referred to today as “covered land”), one that affords
extraordinary mixed-use intensification potential in major cities
going forward. Allied believes in the continued growth and success
of Canadian cities.
Balance
Sheet, Liquidity and Development
Allied has
demonstrated commitment to the balance sheet over its life as a
public real estate entity. With the completion of the sale of the
UDC portfolio and the utilization of the proceeds as described
above, Allied’s net debt as a multiple of Annualized Adjusted
EBITDA(2) at the end of the third quarter was 7.9x. Allied also
expects that its net debt as a multiple of Annualized Adjusted
EBITDA will decline over the next three years as developments are
completed and begin to generate material amounts of EBITDA.
Allied is nearing
completion of the development and upgrade activity to which it is
committed and does not expect to initiate new acquisition or
development activity in the near-term. Accordingly, Allied does not
expect to use its unsecured credit facility to any material extent
in the coming five years, with the result that it will have up to
$900 million in liquidity through most of that timeframe. Allied
has a favourable debt-maturity schedule and an unencumbered,
income-producing portfolio valued at $8.4 billion.
In the third quarter,
Allied transferred 365,413 square feet of GLA from its Properties
Under Development (“PUD”) to its rental portfolio at average
in-place net rent per square foot of $34.28, reducing the cost of
PUD as a percentage of Gross Book Value ("GBV")(2) to 11.6% at the
end of the third quarter. This will add to Allied's annual EBITDA
run-rate by approximately $12 million from the beginning of 2024
onward. Allied will continue to transfer material amounts of GLA
from its PUD to its rental portfolio over the remainder of 2023 and
throughout 2024 and 2025. This will (i) reduce the cost of Allied’s
PUD as a percentage of GBV to approximately 4.5% by the end of
2025, (ii) increase average in-place net rent per occupied square
foot in Allied’s rental portfolio and (iii) add to Allied’s annual
EBITDA run-rate by approximately $46 million from the beginning of
2026 onward.
Special
Distribution
The sale of the UDC
portfolio will result in a significant increase in taxable income
for fiscal 2023, requiring Allied to declare and pay a special
distribution to unitholders of record on December 31, 2023. To
assist taxable unitholders in funding the associated tax liability,
Allied expects to pay approximately $65 million (which is
approximately $0.47 per unit) of the special distribution in cash
and the balance in units. Immediately following the special
distribution, the outstanding units of Allied will be consolidated
such that each unitholder will hold, after the consolidation, the
same number of units as immediately prior to the special
distribution.
As a public real estate entity committed to
distributing a large portion of free cash flow regularly, Allied
has funded past growth primarily through equity issuance. The
proceeds from the sale of the UDC portfolio will enable Allied to
fund near-term growth, primarily in the form of upgrade and
development completions, while maintaining high levels of liquidity
and targeted debt-metrics. In the longer-term, Allied plans to take
advantage of a broader range of funding opportunities than it has
in the past. Regardless of how Allied funds growth going forward,
it will remain fully committed to its distribution program.
______________________________________________________________________________(2)
This is a non-GAAP measure and includes the results of the
continuing operations and the discontinued operations. Refer to the
Non-GAAP Measures section below.Financial
Measures
The following table summarizes GAAP financial measures for the
third quarter:
| |
For the three months ended September 30 |
| (in
thousands except for % amounts) |
2023 |
2022 |
Change |
% Change |
|
Continuing operations |
|
|
|
|
|
Rental revenue |
$ |
138,455 |
|
$ |
131,823 |
|
$ |
6,632 |
|
5.0 |
% |
|
Property operating costs |
$ |
(58,558 |
) |
$ |
(56,401 |
) |
$ |
(2,157 |
) |
(3.8 |
)% |
|
Net rental income and operating income |
$ |
79,897 |
|
$ |
75,422 |
|
$ |
4,475 |
|
5.9 |
% |
|
Interest expense |
$ |
(27,447 |
) |
$ |
(19,589 |
) |
$ |
(7,858 |
) |
(40.1 |
)% |
|
General and administrative expenses |
$ |
(5,964 |
) |
$ |
(4,325 |
) |
$ |
(1,639 |
) |
(37.9 |
)% |
|
Condominium marketing expenses |
$ |
(137 |
) |
$ |
(101 |
) |
$ |
(36 |
) |
(35.6 |
)% |
|
Amortization of other assets |
$ |
(388 |
) |
$ |
(410 |
) |
$ |
22 |
|
5.4 |
% |
|
Interest income |
$ |
14,887 |
|
$ |
8,071 |
|
$ |
6,816 |
|
84.5 |
% |
|
Fair value loss on investment properties and investment
properties held for sale |
$ |
(126,253 |
) |
$ |
(41,588 |
) |
$ |
(84,665 |
) |
(203.6 |
)% |
|
Fair value gain on Exchangeable LP Units |
$ |
44,757 |
|
$ |
— |
|
$ |
44,757 |
|
100.0 |
% |
|
Fair value gain on derivative instruments |
$ |
11,186 |
|
$ |
5,668 |
|
$ |
5,518 |
|
97.4 |
% |
|
Impairment of residential inventory |
$ |
(15,376 |
) |
$ |
(15,729 |
) |
$ |
353 |
|
2.2 |
% |
|
Net loss from joint venture |
$ |
(908 |
) |
$ |
(7,318 |
) |
$ |
6,410 |
|
87.6 |
% |
| Net (loss) income and
comprehensive (loss) income from continuing
operations |
$ |
(25,746 |
) |
$ |
101 |
|
$ |
(25,847 |
) |
(25,591.1 |
)% |
| Net (loss) income and
comprehensive (loss) income from discontinued
operations |
$ |
(8,212 |
) |
$ |
46,642 |
|
$ |
(54,854 |
) |
(117.6 |
)% |
| Net (loss) income and
comprehensive (loss) income |
$ |
(33,958 |
) |
$ |
46,743 |
|
$ |
(80,701 |
) |
(172.6 |
)% |
|
|
|
|
|
|
| |
For the nine months ended September 30 |
| (in
thousands except for % amounts) |
2023 |
2022 |
Change |
% Change |
|
Continuing operations |
|
|
|
|
|
Rental revenue |
$ |
413,082 |
|
$ |
383,544 |
|
$ |
29,538 |
|
7.7 |
% |
|
Property operating costs |
$ |
(177,920 |
) |
$ |
(165,622 |
) |
$ |
(12,298 |
) |
(7.4 |
)% |
|
Net rental income and operating income |
$ |
235,162 |
|
$ |
217,922 |
|
$ |
17,240 |
|
7.9 |
% |
|
Interest expense |
$ |
(76,808 |
) |
$ |
(52,079 |
) |
$ |
(24,729 |
) |
(47.5 |
)% |
|
General and administrative expenses |
$ |
(16,848 |
) |
$ |
(16,799 |
) |
$ |
(49 |
) |
(0.3 |
)% |
|
Condominium marketing expenses |
$ |
(449 |
) |
$ |
(413 |
) |
$ |
(36 |
) |
(8.7 |
)% |
|
Amortization of other assets |
$ |
(1,118 |
) |
$ |
(940 |
) |
$ |
(178 |
) |
(18.9 |
)% |
|
Interest income |
$ |
34,856 |
|
$ |
22,651 |
|
$ |
12,205 |
|
53.9 |
% |
|
Fair value loss on investment properties and investment
properties held for sale |
$ |
(278,081 |
) |
$ |
(30,762 |
) |
$ |
(247,319 |
) |
(804.0 |
)% |
|
Fair value gain on Exchangeable LP Units |
$ |
55,267 |
|
$ |
— |
|
$ |
55,267 |
|
100.0 |
% |
|
Fair value gain on derivative instruments |
$ |
18,519 |
|
$ |
35,610 |
|
$ |
(17,091 |
) |
(48.0 |
)% |
|
Impairment of residential inventory |
$ |
(15,376 |
) |
$ |
(15,729 |
) |
$ |
353 |
|
2.2 |
% |
|
Net loss from joint venture |
$ |
(1,491 |
) |
$ |
(4,970 |
) |
$ |
3,479 |
|
70.0 |
% |
| Net (loss) income and
comprehensive (loss) income from continuing
operations |
$ |
(46,367 |
) |
$ |
154,491 |
|
$ |
(200,858 |
) |
(130.0 |
)% |
| Net income and
comprehensive income from discontinued operations |
$ |
124,991 |
|
$ |
179,480 |
|
$ |
(54,489 |
) |
(30.4 |
)% |
| Net income and
comprehensive income |
$ |
78,624 |
|
$ |
333,971 |
|
$ |
(255,347 |
) |
(76.5 |
)% |
|
|
|
|
|
|
The following table summarizes other financial
measures as at September 30, 2023, and September 30,
2022:
| |
As at September 30 |
| (in
thousands except for per unit and % amounts) |
2023 |
2022 |
Change |
% Change |
|
Investment propertiesand investment
properties held for
sale(1) |
$ |
9,737,184 |
|
$ |
10,810,379 |
|
$ |
(1,073,195 |
) |
(9.9 |
)% |
| Unencumbered
investment properties and investment properties held for
sale(2) |
$ |
8,362,560 |
|
$ |
9,533,540 |
|
$ |
(1,170,980 |
) |
(12.3 |
)% |
| Total
Assets(1) |
$ |
11,274,187 |
|
$ |
11,680,033 |
|
$ |
(405,846 |
) |
(3.5 |
)% |
| Cost of PUD as a % of
GBV(2) |
|
11.6 |
% |
|
12.1 |
% |
|
— |
|
(0.5 |
)% |
| NAV per
unit(3) |
$ |
49.83 |
|
$ |
51.10 |
|
$ |
(1.27 |
) |
(2.5 |
)% |
|
Debt(1) |
$ |
3,834,573 |
|
$ |
3,985,742 |
|
$ |
(151,169 |
) |
(3.8 |
)% |
| Total indebtedness
ratio(2) |
|
34.2 |
% |
|
34.3 |
% |
|
— |
|
(0.1 |
%) |
| Annualized Adjusted
EBITDA(2) |
$ |
416,068 |
|
$ |
414,664 |
|
$ |
1,404 |
|
0.3 |
% |
| Net debt as a multiple
of Annualized Adjusted
EBITDA(2) |
7.9x |
|
9.6x |
|
(1.7x) |
|
— |
|
| Interest coverage
ratio including interest capitalized and excluding financing
prepayment costs - three months
trailing(2) |
2.5x |
|
2.9x |
|
(0.4x) |
|
— |
|
|
Interest coverage ratio including interest capitalized and
excluding financing prepayment costs - twelve months
trailing(2) |
2.5x |
|
3.2x |
|
(0.7x) |
|
— |
|
(1) This measure is presented on an IFRS
basis.(2) This is a non-GAAP measure and includes the results of
the continuing operations and the discontinued operations. Refer to
the Non-GAAP Measures section below.(3) Prior to Allied's
conversion to an open-end trust, net asset value per unit ("NAV per
unit") was calculated as total equity as at the corresponding
period ended, divided by the actual number of Units and class B
limited partnership units of Allied Properties Exchangeable Limited
Partnership ("Exchangeable LP Units") outstanding at period end.
With Allied's conversion to an open-end trust on June 12, 2023, NAV
per unit is calculated as total equity plus the value of
Exchangeable LP Units as at the corresponding period ended, divided
by the actual number of Units and Exchangeable LP Units. The
rationale for including the value of Exchangeable LP Units is
because they are economically equivalent to Units, receive
distributions equal to the distributions paid on the Units and are
exchangeable, at the holder's option, for Units.
Non-GAAP Measures
Management uses financial measures based on
International Financial Reporting Standards ("IFRS" or "GAAP") and
non-GAAP measures to assess Allied's performance. Non-GAAP 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-GAAP Measures section on page 17 of the
MD&A as at September 30, 2023, available on
www.sedarplus.ca, for an explanation of the composition of the
non-GAAP measures used in this press release and their usefulness
for readers in assessing Allied's performance. Such explanation is
incorporated by reference herein.
The following table summarizes non-GAAP
financial measures for the third quarter:
| |
For the three months ended September 30 |
| (in thousands except for per
unit and % amounts)(1) |
2023 |
2022 |
Change |
% Change |
|
Adjusted EBITDA |
$ |
104,017 |
|
$ |
103,666 |
|
$ |
351 |
|
0.3 |
% |
| Same Asset NOI -
rental portfolio |
$ |
77,612 |
|
$ |
76,901 |
|
$ |
711 |
|
0.9 |
% |
| Same Asset NOI - total
portfolio |
$ |
84,254 |
|
$ |
79,206 |
|
$ |
5,048 |
|
6.4 |
% |
| FFO |
$ |
83,719 |
|
$ |
85,332 |
|
$ |
(1,613 |
) |
(1.9 |
)% |
| FFO per unit
(diluted) |
$ |
0.599 |
|
$ |
0.611 |
|
$ |
(0.012 |
) |
(2.0 |
)% |
| FFO pay-out
ratio |
|
75.1 |
% |
|
71.6 |
% |
|
— |
|
3.5 |
% |
| All
amounts below are excluding condominium related items and the
mark-to-market adjustment on unit-based compensation: |
|
FFO |
$ |
83,556 |
|
$ |
84,747 |
|
$ |
(1,191 |
) |
(1.4 |
)% |
|
FFO per unit (diluted) |
$ |
0.598 |
|
$ |
0.606 |
|
$ |
(0.008 |
) |
(1.3 |
)% |
|
FFO pay-out ratio |
|
75.3 |
% |
|
72.1 |
% |
|
— |
|
3.2 |
% |
|
AFFO |
$ |
76,174 |
|
$ |
73,508 |
|
$ |
2,666 |
|
3.6 |
% |
|
AFFO per unit (diluted) |
$ |
0.545 |
|
$ |
0.526 |
|
$ |
0.019 |
|
3.6 |
% |
|
AFFO pay-out ratio |
|
82.6 |
% |
|
83.2 |
% |
|
— |
|
(0.6 |
)% |
|
|
|
|
|
|
(1) These non-GAAP measures include the results
of the continuing operations and the discontinued operations
(except for Same Asset NOI - rental portfolio, which only includes
continuing operations).
| |
For the nine months ended September 30 |
| (in thousands except for per
unit and % amounts)(1) |
2023 |
2022 |
Change |
% Change |
|
Adjusted EBITDA |
$ |
313,397 |
|
$ |
296,489 |
|
$ |
16,908 |
|
5.7 |
% |
| Same Asset NOI -
rental portfolio |
$ |
204,547 |
|
$ |
204,963 |
|
$ |
(416 |
) |
(0.2 |
%) |
| Same Asset NOI - total
portfolio |
$ |
223,440 |
|
$ |
213,308 |
|
$ |
10,132 |
|
4.7 |
% |
| FFO |
$ |
247,118 |
|
$ |
247,722 |
|
$ |
(604 |
) |
(0.2 |
%) |
| FFO per unit
(diluted) |
$ |
1.768 |
|
$ |
1.822 |
|
$ |
(0.054 |
) |
(3.0 |
%) |
| FFO pay-out
ratio |
|
76.4 |
% |
|
71.9 |
% |
|
— |
|
4.5 |
% |
| All
amounts below are excluding condominium related items and the
mark-to-market adjustment on unit-based compensation |
|
FFO |
$ |
246,857 |
|
$ |
247,067 |
|
$ |
(210 |
) |
(0.1 |
%) |
|
FFO per unit (diluted) |
$ |
1.766 |
|
$ |
1.817 |
|
$ |
(0.051 |
) |
(2.8 |
%) |
|
FFO pay-out ratio |
|
76.4 |
% |
|
72.1 |
% |
|
— |
|
4.3 |
% |
|
AFFO |
$ |
225,614 |
|
$ |
221,026 |
|
$ |
4,588 |
|
2.1 |
% |
|
AFFO per unit (diluted) |
$ |
1.614 |
|
$ |
1.625 |
|
$ |
(0.011 |
) |
(0.7 |
%) |
|
AFFO pay-out ratio |
|
83.6 |
% |
|
80.6 |
% |
|
— |
|
3.0 |
% |
(1) These non-GAAP measures include the results
of the continuing operations and the discontinued operations
(except for Same Asset NOI - rental portfolio, which only includes
continuing operations).
The following tables reconcile the non-GAAP
measures to the most comparable IFRS measures for the three and
nine months ended September 30, 2023, and the comparable
period in 2022. 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.
The following table reconciles Allied's net
(loss) income and comprehensive (loss) income to Adjusted EBITDA, a
non-GAAP measure, for the three and nine months ended
September 30, 2023 and September 30, 2022.
| |
Three months ended |
|
Nine months ended |
|
|
September 30, 2023 |
September 30, 2022 |
|
September 30, 2023 |
September 30, 2022 |
|
Net (loss) income and comprehensive (loss) income for the
period |
$ |
(33,958 |
) |
$ |
46,743 |
|
|
$ |
78,624 |
|
$ |
333,971 |
|
| Interest expense |
|
28,328 |
|
|
21,324 |
|
|
|
81,241 |
|
|
56,834 |
|
| Amortization of other
assets |
|
388 |
|
|
410 |
|
|
|
1,118 |
|
|
940 |
|
| Amortization of improvement
allowances |
|
7,896 |
|
|
8,295 |
|
|
|
24,418 |
|
|
24,636 |
|
| Impairment of residential
inventory |
|
15,376 |
|
|
15,729 |
|
|
|
15,376 |
|
|
15,729 |
|
| Transaction costs |
|
13,246 |
|
|
— |
|
|
|
13,246 |
|
|
— |
|
| Fair value loss (gain) on
investment properties and investment properties held for
sale(1) |
|
128,984 |
|
|
17,519 |
|
|
|
173,870 |
|
|
(98,943 |
) |
| Fair value gain on
Exchangeable LP Units |
|
(44,757 |
) |
|
— |
|
|
|
(55,267 |
) |
|
— |
|
| Fair value gain on derivative
instruments |
|
(11,186 |
) |
|
(5,668 |
) |
|
|
(18,519 |
) |
|
(35,610 |
) |
|
Mark-to-market adjustment on unit-based compensation |
|
(300 |
) |
|
(686 |
) |
|
|
(710 |
) |
|
(1,068 |
) |
|
Adjusted EBITDA(2) |
$ |
104,017 |
|
$ |
103,666 |
|
|
$ |
313,397 |
|
$ |
296,489 |
|
(1) Includes Allied's proportionate share of the
equity accounted investment's fair value loss on investment
properties of $1,895 and $4,638, respectively for the three and
nine months ended September 30, 2023 (September 30, 2022
- fair value loss on investment properties of $8,056 and $6,794,
respectively).(2) Includes the Urban Data Centre segment which was
classified as a discontinued operation starting in Q4 2022.
The following table reconciles operating income to net operating
income, a non-GAAP measure, for the three and nine months ended
September 30, 2023.
| |
Three months ended |
|
Nine months ended |
| |
September 30, 2023 |
September 30, 2022 |
|
September 30, 2023 |
September 30, 2022 |
|
Operating income, IFRS basis |
$ |
79,897 |
|
$ |
75,422 |
|
|
$ |
235,162 |
|
$ |
217,922 |
|
| Add:
investment in joint venture |
|
980 |
|
|
734 |
|
|
|
3,129 |
|
|
1,818 |
|
|
Operating income, proportionate basis |
$ |
80,877 |
|
$ |
76,156 |
|
|
$ |
238,291 |
|
$ |
219,740 |
|
| Amortization of improvement
allowances(1)(2) |
|
7,831 |
|
|
8,161 |
|
|
|
24,092 |
|
|
24,232 |
|
|
Amortization of straight-line rent(1)(2) |
|
(2,308 |
) |
|
(2,588 |
) |
|
|
(5,713 |
) |
|
(4,206 |
) |
|
NOI from continuing operations |
$ |
86,400 |
|
$ |
81,729 |
|
|
$ |
256,670 |
|
$ |
239,766 |
|
|
NOI from discontinued operations |
$ |
6,586 |
|
$ |
16,114 |
|
|
$ |
33,452 |
|
$ |
47,744 |
|
|
Total NOI |
$ |
92,986 |
|
$ |
97,843 |
|
|
$ |
290,122 |
|
$ |
287,510 |
|
(1) Includes Allied's proportionate share of the
equity accounted investment of the following amounts for the three
and nine months ended September 30, 2023: amortization
improvement allowances of $164 and $491, respectively
(September 30, 2022 - $158 and $449, respectively), and
amortization of straight-line rent of $(49) and $(147),
respectively (September 30, 2022 - $(102) and $(584),
respectively). (2) Excludes the Urban Data Centre segment which was
classified as a discontinued operation starting in Q4 2022. The
prior period comparative figures have been revised accordingly. For
the three and nine months ended September 30, 2023, the Urban
Data Centre segment's amortization of improvement allowances was
$65 and $326, respectively (September 30, 2022 - $134 and
$404, respectively). For the three and nine months ended
September 30, 2023, the Urban Data Centre segment's
amortization of straight-line rent was $(230) and $(695),
respectively (September 30, 2022 - $(272) and $(396),
respectively).
Same Asset NOI, a non-GAAP 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 and nine
months ended September 30, 2023, consists of one investment
property.
| |
Three months ended |
Change |
| |
September 30, 2023 |
September 30, 2022 |
$ |
% |
|
Rental Portfolio - Same Asset NOI |
$ |
77,612 |
$ |
76,901 |
$ |
711 |
|
0.9 |
% |
| Assets
Held for Sale - Same Asset NOI |
|
71 |
|
67 |
|
4 |
|
6.0 |
|
|
Rental Portfolio and Assets Held for Sale - Same Asset
NOI |
$ |
77,683 |
$ |
76,968 |
$ |
715 |
|
0.9 |
% |
|
Development Portfolio - Same Asset NOI |
$ |
6,571 |
$ |
2,238 |
$ |
4,333 |
|
193.6 |
% |
|
Total Portfolio - Same Asset NOI |
$ |
84,254 |
$ |
79,206 |
$ |
5,048 |
|
6.4 |
% |
|
Acquisitions |
$ |
139 |
$ |
6 |
$ |
133 |
|
|
|
Dispositions |
|
6,718 |
|
16,560 |
|
(9,842 |
) |
|
|
Lease terminations |
|
— |
|
29 |
|
(29 |
) |
|
|
Development fees and corporate items |
|
1,875 |
|
2,042 |
|
(167 |
) |
|
|
Total NOI |
$ |
92,986 |
$ |
97,843 |
$ |
(4,857 |
) |
(5.0 |
%) |
| |
Nine months ended |
Change |
| |
September 30, 2023 |
September 30, 2022 |
$ |
% |
|
Rental Portfolio - Same Asset NOI |
$ |
204,547 |
$ |
204,963 |
$ |
(416 |
) |
(0.2 |
)% |
| Assets
Held for Sale - Same Asset NOI |
|
239 |
|
234 |
|
5 |
|
2.1 |
|
|
Rental Portfolio and Assets Held for Sale - Same Asset
NOI |
$ |
204,786 |
$ |
205,197 |
$ |
(411 |
) |
(0.2 |
%) |
|
Development Portfolio - Same Asset NOI |
$ |
18,654 |
$ |
8,111 |
$ |
10,543 |
|
130.0 |
% |
|
Total Portfolio - Same Asset NOI |
$ |
223,440 |
$ |
213,308 |
$ |
10,132 |
|
4.7 |
% |
|
Acquisitions |
$ |
26,607 |
$ |
16,731 |
$ |
9,876 |
|
|
|
Dispositions |
|
34,320 |
|
49,603 |
|
(15,283 |
) |
|
|
Lease terminations |
|
193 |
|
352 |
|
(159 |
) |
|
|
Development fees and corporate items |
|
5,562 |
|
7,516 |
|
(1,954 |
) |
|
|
Total NOI |
$ |
290,122 |
$ |
287,510 |
$ |
2,612 |
|
0.9 |
% |
The following tables reconcile Allied's net
income and comprehensive income to FFO, FFO excluding condominium
related items and the mark-to-market adjustment on unit-based
compensation, AFFO, and AFFO excluding condominium related items
and the mark-to-market adjustment on unit-based compensation, which
are non-GAAP measures, for the three and nine months ended
September 30, 2023, and September 30, 2022.
| |
Three months ended |
|
|
September 30, 2023 |
September 30, 2022 |
Change |
|
Net (loss) income and comprehensive (loss) income from continuing
operations |
$ |
(25,746 |
) |
$ |
101 |
|
$ |
(25,847 |
) |
| Net (loss) income and
comprehensive (loss) income from discontinued operations |
|
(8,212 |
) |
|
46,642 |
|
|
(54,854 |
) |
| Adjustment to fair value of
investment properties and investment properties held for sale |
|
127,089 |
|
|
9,463 |
|
|
117,626 |
|
| Adjustment to fair value of
Exchangeable LP Units |
|
(44,757 |
) |
|
— |
|
|
(44,757 |
) |
| Adjustment to fair value of
derivative instruments |
|
(11,186 |
) |
|
(5,668 |
) |
|
(5,518 |
) |
| Impairment of residential
inventory |
|
15,376 |
|
|
15,729 |
|
|
(353 |
) |
| Transaction costs |
|
13,246 |
|
|
— |
|
|
13,246 |
|
| Incremental leasing costs |
|
2,347 |
|
|
2,233 |
|
|
114 |
|
| Amortization of improvement
allowances |
|
7,732 |
|
|
8,137 |
|
|
(405 |
) |
| Amortization of property,
plant and equipment(1) |
|
101 |
|
|
125 |
|
|
(24 |
) |
| Distributions on Exchangeable
LP Units |
|
5,314 |
|
|
— |
|
|
5,314 |
|
| Adjustments relating to joint
venture: |
|
|
|
|
Adjustment to fair value on investment properties |
|
1,895 |
|
|
8,056 |
|
|
(6,161 |
) |
|
Amortization of improvement allowances |
|
164 |
|
|
158 |
|
|
6 |
|
|
Interest expense(2) |
|
356 |
|
|
356 |
|
|
— |
|
|
FFO |
$ |
83,719 |
|
$ |
85,332 |
|
$ |
(1,613 |
) |
| Condominium marketing
costs |
|
137 |
|
|
101 |
|
|
36 |
|
|
Mark-to-market adjustment on unit-based compensation |
|
(300 |
) |
|
(686 |
) |
|
386 |
|
|
FFO excluding condominium related items and the
mark-to-market adjustment on unit-based compensation |
$ |
83,556 |
|
$ |
84,747 |
|
$ |
(1,191 |
) |
| Amortization of straight-line
rent |
|
(2,489 |
) |
|
(2,758 |
) |
|
269 |
|
| Regular leasing
expenditures |
|
(1,523 |
) |
|
(4,123 |
) |
|
2,600 |
|
| Regular and recoverable
maintenance capital expenditures |
|
(1,678 |
) |
|
(2,693 |
) |
|
1,015 |
|
| Incremental leasing costs
(related to regular leasing expenditures) |
|
(1,643 |
) |
|
(1,563 |
) |
|
(80 |
) |
| Adjustment relating to joint
venture: |
|
|
|
|
Amortization of straight-line rent |
|
(49 |
) |
|
(102 |
) |
|
53 |
|
|
AFFO excluding condominium related items and the
mark-to-market adjustment on unit-based compensation |
$ |
76,174 |
|
$ |
73,508 |
|
$ |
2,666 |
|
|
|
|
|
|
| Weighted average number of
units(3) |
|
|
|
|
Basic |
|
139,765,128 |
|
|
139,762,081 |
|
|
3,047 |
|
|
Diluted |
|
139,765,128 |
|
|
139,765,373 |
|
|
(245 |
) |
| |
|
|
|
| Per unit - basic |
|
|
|
|
FFO |
$ |
0.599 |
|
$ |
0.611 |
|
$ |
(0.012 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.598 |
|
$ |
0.606 |
|
$ |
(0.008 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.545 |
|
$ |
0.526 |
|
$ |
0.019 |
|
| |
|
|
|
| Per unit - diluted |
|
|
|
|
FFO |
$ |
0.599 |
|
$ |
0.611 |
|
$ |
(0.012 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.598 |
|
$ |
0.606 |
|
$ |
(0.008 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.545 |
|
$ |
0.526 |
|
$ |
0.019 |
|
| |
|
|
|
| Pay-out Ratio |
|
|
|
|
FFO |
|
75.1 |
% |
|
71.6 |
% |
|
3.5 |
% |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
75.3 |
% |
|
72.1 |
% |
|
3.2 |
% |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
82.6 |
% |
|
83.2 |
% |
|
(0.6 |
%) |
(1) Property, plant and equipment relates to owner-occupied
property.(2) 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. (3) The weighted average number of units includes Units and
Exchangeable LP Units. The Exchangeable LP Units were re-classified
from non-controlling interests in equity to liabilities in the
unaudited condensed consolidated financial statements on Allied's
conversion to an open-end trust on June 12, 2023.
| |
Nine months ended |
|
|
September 30, 2023 |
September 30, 2022 |
Change |
|
Net (loss) income and comprehensive (loss) income from continuing
operations |
$ |
(46,367 |
) |
$ |
154,491 |
|
$ |
(200,858 |
) |
| Net income and comprehensive
income from discontinued operations |
|
124,991 |
|
|
179,480 |
|
|
(54,489 |
) |
| Adjustment to fair value of
investment properties and investment properties held for sale |
|
169,232 |
|
|
(105,737 |
) |
|
274,969 |
|
| Adjustment to fair value of
Exchangeable LP Units |
|
(55,267 |
) |
|
— |
|
|
(55,267 |
) |
| Adjustment to fair value of
derivative instruments |
|
(18,519 |
) |
|
(35,610 |
) |
|
17,091 |
|
| Impairment of residential
inventory |
|
15,376 |
|
|
15,729 |
|
|
(353 |
) |
| Transaction costs |
|
13,246 |
|
|
— |
|
|
13,246 |
|
| Incremental leasing costs |
|
6,882 |
|
|
6,802 |
|
|
80 |
|
| Amortization of improvement
allowances |
|
23,927 |
|
|
24,187 |
|
|
(260 |
) |
| Amortization of property,
plant and equipment(1) |
|
302 |
|
|
125 |
|
|
177 |
|
| Distributions on Exchangeable
LP Units |
|
7,085 |
|
|
— |
|
|
7,085 |
|
| Adjustments relating to joint
venture: |
|
|
|
|
Adjustment to fair value on investment properties |
|
4,638 |
|
|
6,794 |
|
|
(2,156 |
) |
|
Amortization of improvement allowances |
|
491 |
|
|
449 |
|
|
42 |
|
|
Interest expense(2) |
|
1,101 |
|
|
1,012 |
|
|
89 |
|
|
FFO |
$ |
247,118 |
|
$ |
247,722 |
|
$ |
(604 |
) |
| Condominium marketing
costs |
|
449 |
|
|
413 |
|
|
36 |
|
|
Mark-to-market adjustment on unit-based compensation |
|
(710 |
) |
|
(1,068 |
) |
|
358 |
|
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
246,857 |
|
$ |
247,067 |
|
$ |
(210 |
) |
| Amortization of straight-line
rent |
|
(6,261 |
) |
|
(4,018 |
) |
|
(2,243 |
) |
| Regular leasing
expenditures |
|
(5,622 |
) |
|
(11,101 |
) |
|
5,479 |
|
| Regular and recoverable
maintenance capital expenditures |
|
(4,395 |
) |
|
(5,577 |
) |
|
1,182 |
|
| Incremental leasing costs
(related to regular leasing expenditures) |
|
(4,818 |
) |
|
(4,761 |
) |
|
(57 |
) |
| Adjustment relating to joint
venture: |
|
|
|
|
Amortization of straight-line rent |
|
(147 |
) |
|
(584 |
) |
|
437 |
|
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
225,614 |
|
$ |
221,026 |
|
$ |
4,588 |
|
|
|
|
|
|
| Weighted average number of
units(3) |
|
|
|
|
Basic |
|
139,765,128 |
|
|
135,908,624 |
|
|
3,856,504 |
|
|
Diluted |
|
139,765,128 |
|
|
135,990,362 |
|
|
3,774,766 |
|
| |
|
|
|
| Per unit - basic |
|
|
|
|
FFO |
$ |
1.768 |
|
$ |
1.823 |
|
$ |
(0.055 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.766 |
|
$ |
1.818 |
|
$ |
(0.052 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.614 |
|
$ |
1.626 |
|
$ |
(0.012 |
) |
| |
|
|
|
| Per unit - diluted |
|
|
|
|
FFO |
$ |
1.768 |
|
$ |
1.822 |
|
$ |
(0.054 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.766 |
|
$ |
1.817 |
|
$ |
(0.051 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.614 |
|
$ |
1.625 |
|
$ |
(0.011 |
) |
| |
|
|
|
| Pay-out Ratio |
|
|
|
|
FFO |
|
76.4 |
% |
|
71.9 |
% |
|
4.5 |
% |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
76.4 |
% |
|
72.1 |
% |
|
4.3 |
% |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
83.6 |
% |
|
80.6 |
% |
|
3.0 |
% |
(1) Property, plant and equipment relates to owner-occupied
property.(2) 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. (3) The weighted average number of units includes Units and
Exchangeable LP Units. The Exchangeable LP Units were re-classified
from non-controlling interests in equity to liabilities in the
unaudited condensed consolidated financial statements on Allied's
conversion to an open-end trust on June 12, 2023.
Cautionary Statements
This press release may contain forward-looking
statements with respect to Allied, its operations, strategy,
financial performance and condition. 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.sedarplus.ca. 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
distinctive urban workspace in Canada’s major cities. Allied’s
mission is to provide knowledge-based organizations with workspace
that is sustainable and conducive to human wellness, creativity,
connectivity and diversity. Allied’s vision is to make a continuous
contribution to cities and culture that elevates and inspires the
humanity in all people.
FOR FURTHER INFORMATION, PLEASE
CONTACT:
Cecilia C. Williams President & Chief Executive Officer(416)
977-9002cwilliams@alliedreit.com
Nanthini MahalingamSenior Vice President & Chief Financial
Officer(416) 977-9002nmahalingam@alliedreit.com
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