Allied Properties Real Estate Investment Trust ("Allied") (TSX:
"AP.UN") today announced results for the three months ended
September 30, 2024. “Our occupied and leased area remained
steady for the second consecutive quarter, and our urban workspace
portfolio continued to outperform the market,” said Cecilia
Williams, President & CEO. “With demand rising in Canada’s
major cities, we expect our leasing activity to accelerate over the
remainder of the year and into 2025.”
Operations
Allied’s portfolio is comprised of three urban
workspace formats. Allied Heritage is a format created through the
adaptive re-use of light industrial structures for office use above
grade and retail use at grade. The buildings are inherently
distinctive, clustered in the urban core and generally low-rise.
Allied Modern is a format created specifically for office use. The
buildings are generally mid- to high-rise, clustered in the urban
core and distinctive by virtue of design, integration with heritage
structure and/or integration with the different elements of
mixed-use, amenity-rich urban neighbourhoods. Allied Flex is a
limited format for buildings that Allied intends to redevelop
comprehensively within a five-to 10-year period. Because of the
near-term transformation of these buildings, Allied can make
workspace in them available on more flexible than normal terms.
Utilization of, and demand for, Allied's
workspace continued to strengthen in the third quarter. In the
Montréal rental portfolio, demand for storefront retail space and
Allied Heritage was most pronounced. In the Toronto rental
portfolio, demand across all three formats was strong, giving rise
to a 1.5% increase in leased area. In the Calgary and Vancouver
rental portfolios, demand for Allied Heritage was most
pronounced.
Allied conducted 266 lease tours in its rental
portfolio in the third quarter. Its occupied and leased area at the
end of the quarter was 85.6% and 87.2%, respectively. Allied
renewed 60% of the leases maturing in the quarter, closer to its
normal level of 70% to 75%.
Allied leased a total of 640,331 square feet of
GLA in the third quarter, 617,743 square feet in its rental
portfolio and 22,588 square feet in its development portfolio. Of
the 617,743 square feet Allied leased in its rental portfolio,
174,065 square feet were vacant, 100,342 square feet were maturing
in the quarter and 343,336 square feet were maturing after the
quarter. 94,262 square feet of the vacant space leased in the
quarter involved expansion by existing users, a long-standing trend
in Allied's rental portfolio that appears now to be regaining
momentum.
Average in-place net rent per occupied square
foot continued its steady improvement, ending the third quarter at
$25.30. Excluding a short-term renewal at an Allied Flex property
in Toronto, Allied maintained rent levels on renewal in the third
quarter (up 0.5% ending-to-starting base rent and up 10.3%
average-to-average base rent).
Results
Operating income from continuing operations was
$83 million, up 4.2% from the comparable quarter last year.
Allied's net loss and comprehensive loss was $94 million, in large
part due to fair value adjustments on investment properties,
Exchangeable LP Units and derivative instruments.
With temporary downward pressure from Allied’s
recent portfolio optimization transactions at 400 West Georgia in
Vancouver and 19 Duncan in Toronto, FFO(1) was $75 million (53.5
cents per unit), down 10.5% from $84 million (59.8 cents per unit)
in the comparable quarter last year. AFFO(1) was $65 million (46.6
cents per unit), down 14.5% from $76 million (54.5 cents per unit)
in the comparable quarter last year. This resulted in FFO and AFFO
pay-out ratios(1) in the third quarter of 84.1% and 96.6%,
respectively, and year-to-date of 82.4% and 91.2%, respectively.
Same Asset NOI(1) from Allied's rental portfolio was down 3.1%
while Same Asset NOI from its total portfolio was up 1.1%,
reflecting the productivity of its upgrade and development
portfolio.
_____________________________________________________________________________(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) and
excludes condominium related items, financing prepayment costs, and
the mark-to-market adjustment on unit-based compensation. Refer to
the Non-GAAP Measures section below.
Non-Core Property Sales and Portfolio
Optimization
Allied has made steady progress this year in
selling non-core properties at or above IFRS value. This includes
the completed sale of three properties in Montréal for $51 million,
the net proceeds of which were used to repay short-term,
variable-rate debt. It also includes the pending sale over the
remainder of the year of five properties (including the TELUS Sky
reorganization) for approximately $142 million, the net proceeds of
which will be used for the same purpose.
In the first half of 2025, Allied intends to
sell additional non-core properties at or above IFRS value for
approximately $200 million. Management expects to use the bulk of
the net proceeds to repay the $200 million series C senior
unsecured debenture due on April 21, 2025.
Debt Financing and Balance-Sheet
Optimization
Just prior to the end of the third quarter,
Allied completed the offering of $250 million aggregate principal
amount of series J senior unsecured debentures for a term of four
years bearing interest at 5.534% per annum. The proceeds were used
to repay short-term, variable-rate debt.
Allied has obtained a commitment for a $63
million first mortgage on 375-381 Queen Street West in Toronto for
a term of five years bearing interest at approximately 4.7% per
annum and a $100 million first mortgage on 425 Viger Street West in
Montréal for a term of five years bearing interest at approximately
4.9% per annum, the net proceeds of which will be used to repay
short-term, variable-rate debt over the remainder of the year.
Allied and Westbank have obtained a $180 million first-mortgage
financing commitment on 400 West Georgia in Vancouver for a term of
five years bearing interest at approximately 4.75% per annum, the
net proceeds of which will be used to repay the current short-term,
variable-rate facility. These three financings will materially
reduce Allied’s annual interest expense and extend the
term-to-maturity of its debt.
Allied and Westbank have obtained a commitment
for $100 million of first-mortgage financing on the residential
component of TELUS Sky with the intention to obtain a higher amount
of CMHC-insured financing in due course. Allied and Westbank are
working toward finalizing a commitment for approximately $340
million of CMHC-insured, first-mortgage financing on 19 Duncan in
Toronto for a term of 10 years bearing interest at approximately
3.5% per annum. With funding scheduled for the first quarter of
2025, the net proceeds will be used to repay the current
construction financing and will materially reduce Allied’s annual
interest expense and extend the term-to-maturity of its debt.
“We’re committed to maintaining and ultimately
improving our access to the debt capital markets and will continue
to manage our balance sheet accordingly,” said Michael Emory,
Founder & Executive Chair. “We’re also committed to growing our
FFO and AFFO per unit going forward. These commitments are mutually
reinforcing, well within our operating capability and responsive to
the rightful expectations of equity and debt investors.”
Outlook
Thus far in 2024, Allied experienced steady
demand for urban workspace, urban rental-residential space and
urban amenity space, as well as strong and quantifiable engagement
among users of space in the Allied portfolio generally. Management
expects this to underpin a slow but steady return to earnings and
value growth in 2025 and beyond.
Financial Measures
The following tables summarize GAAP financial measures for the
three and nine months ended September 30, 2024, and 2023:
| |
For the three months ended September 30 |
| (in
thousands except for % amounts) |
|
2024 |
|
|
2023 |
|
Change |
% Change |
| Continuing
operations |
|
|
|
|
|
Rental revenue |
$ |
146,593 |
|
$ |
138,455 |
|
$ |
8,138 |
|
|
5.9 |
% |
|
Property operating costs |
$ |
(63,364 |
) |
$ |
(58,558 |
) |
$ |
(4,806 |
) |
|
(8.2 |
)% |
|
Operating income |
$ |
83,229 |
|
$ |
79,897 |
|
$ |
3,332 |
|
|
4.2 |
% |
|
Interest income |
$ |
10,302 |
|
$ |
14,887 |
|
$ |
(4,585 |
) |
|
(30.8 |
)% |
|
Interest expense |
$ |
(31,361 |
) |
$ |
(27,447 |
) |
$ |
(3,914 |
) |
|
(14.3 |
)% |
|
General and administrative expenses (1) |
$ |
(2,141 |
) |
$ |
(5,964 |
) |
$ |
3,823 |
|
|
64.1 |
% |
|
Condominium marketing expenses |
$ |
(17 |
) |
$ |
(137 |
) |
$ |
120 |
|
|
87.6 |
% |
|
Amortization of other assets |
$ |
(390 |
) |
$ |
(388 |
) |
$ |
(2 |
) |
|
(0.5 |
)% |
|
Transaction costs |
$ |
(136 |
) |
$ |
— |
|
$ |
(136 |
) |
|
100.0 |
% |
|
Net income (loss) from joint venture |
$ |
450 |
|
$ |
(908 |
) |
$ |
1,358 |
|
|
149.6 |
% |
|
Fair value loss on investment properties and investment
properties held for sale |
$ |
(47,359 |
) |
$ |
(126,253 |
) |
$ |
78,894 |
|
|
62.5 |
% |
|
Fair value (loss) gain on Exchangeable LP
Units |
$ |
(57,983 |
) |
$ |
44,757 |
|
$ |
(102,740 |
) |
|
(229.6 |
)% |
|
Fair value (loss) gain on derivative
instruments |
$ |
(16,689 |
) |
$ |
11,186 |
|
$ |
(27,875 |
) |
|
(249.2 |
)% |
|
Impairment of residential inventory |
$ |
(32,082 |
) |
$ |
(15,376 |
) |
$ |
(16,706 |
) |
|
(108.6 |
)% |
| Net loss and
comprehensive loss from continuing operations |
$ |
(94,177 |
) |
$ |
(25,746 |
) |
$ |
(68,431 |
) |
|
(265.8 |
)% |
| Net loss and
comprehensive loss from discontinued operations |
$ |
— |
|
$ |
(8,212 |
) |
$ |
8,212 |
|
|
100.0 |
% |
| Net loss and
comprehensive loss |
$ |
(94,177 |
) |
$ |
(33,958 |
) |
$ |
(60,219 |
) |
|
(177.3 |
)% |
|
|
|
|
|
|
(1) For the three months ended
September 30, 2024, general and administrative expenses
decreased by $3,823 or 64.1% from the comparable period. This was
primarily due to the fair value adjustment on the total return swap
of $3,676 on unit-based compensation plans. The fair value
adjustment on the total return swap is added back in the
calculation of FFO defined in REALPAC's "Funds From Operations
(FFO) & Adjusted Funds From Operations (AFFO) for IFRS" issued
in January 2022.
| |
For the nine months ended September 30 |
| (in
thousands except for % amounts) |
|
2024 |
|
|
2023 |
|
Change |
% Change |
| Continuing
operations |
|
|
|
|
|
Rental revenue |
$ |
436,920 |
|
$ |
413,082 |
|
$ |
23,838 |
|
|
5.8 |
% |
|
Property operating costs |
$ |
(192,829 |
) |
$ |
(177,920 |
) |
$ |
(14,909 |
) |
|
(8.4 |
)% |
|
Operating income |
$ |
244,091 |
|
$ |
235,162 |
|
$ |
8,929 |
|
|
3.8 |
% |
|
Interest income |
$ |
34,676 |
|
$ |
34,856 |
|
$ |
(180 |
) |
|
(0.5 |
)% |
|
Interest expense |
$ |
(84,724 |
) |
$ |
(76,808 |
) |
$ |
(7,916 |
) |
|
(10.3 |
)% |
|
General and administrative expenses (1) |
$ |
(15,959 |
) |
$ |
(16,848 |
) |
$ |
889 |
|
|
5.3 |
% |
|
Condominium marketing expenses |
$ |
(117 |
) |
$ |
(449 |
) |
$ |
332 |
|
|
73.9 |
% |
|
Amortization of other assets |
$ |
(1,150 |
) |
$ |
(1,118 |
) |
$ |
(32 |
) |
|
(2.9 |
)% |
|
Transaction costs |
$ |
(136 |
) |
$ |
— |
|
$ |
(136 |
) |
|
100.0 |
% |
|
Net income (loss) from joint venture |
$ |
1,737 |
|
$ |
(1,491 |
) |
$ |
3,228 |
|
|
216.5 |
% |
|
Fair value loss on investment properties and investment
properties held for sale |
$ |
(211,534 |
) |
$ |
(278,081 |
) |
$ |
66,547 |
|
|
23.9 |
% |
|
Fair value (loss) gain on Exchangeable LP
Units |
$ |
(472 |
) |
$ |
55,267 |
|
$ |
(55,739 |
) |
|
(100.9 |
)% |
|
Fair value (loss) gain on derivative
instruments |
$ |
(13,031 |
) |
$ |
18,519 |
|
$ |
(31,550 |
) |
|
(170.4 |
)% |
|
Impairment of residential inventory |
$ |
(38,259 |
) |
$ |
(15,376 |
) |
$ |
(22,883 |
) |
|
(148.8 |
)% |
| Net loss and
comprehensive loss from continuing operations |
$ |
(84,878 |
) |
$ |
(46,367 |
) |
$ |
(38,511 |
) |
|
(83.1 |
)% |
| Net income and
comprehensive income from discontinued operations |
$ |
— |
|
$ |
124,991 |
|
$ |
(124,991 |
) |
|
(100.0 |
)% |
| Net (loss) income and
comprehensive (loss) income |
$ |
(84,878 |
) |
$ |
78,624 |
|
$ |
(163,502 |
) |
|
(208.0 |
)% |
|
|
|
|
|
|
(1) For the nine months ended September 30,
2024, general and administrative expenses decreased by $889 or 5.3%
from the comparable period primarily due to fair value adjustments
on the total return swap on unit-based compensation plans of
$1,993. This was partially offset by lower capitalization to
qualifying investment properties of $779 primarily due to the
directly attributable employee costs related to the disposition of
the UDC portfolio in 2023. The fair value adjustment on the total
return swap is added back in the calculation of FFO defined in
REALPAC's "Funds From Operations (FFO) & Adjusted Funds From
Operations (AFFO) for IFRS" issued in January 2022.
The following table summarizes other financial
measures as at September 30, 2024, and 2023:
| |
As at September 30 |
| (in
thousands except for per unit and % amounts) |
|
2024 |
|
|
2023 |
|
Change |
% Change |
|
Investment properties (1) |
$ |
9,667,178 |
|
$ |
9,717,184 |
|
$ |
(50,006 |
) |
|
(0.5 |
)% |
| Unencumbered
investment properties (2) |
$ |
8,386,958 |
|
$ |
8,342,560 |
|
$ |
44,398 |
|
|
0.5 |
% |
| Total Assets
(1) |
$ |
10,930,951 |
|
$ |
11,274,187 |
|
$ |
(343,236 |
) |
|
(3.0 |
)% |
| Cost of PUD as a % of
GBV (2) |
|
10.7 |
% |
|
11.6 |
% |
|
— |
|
|
(0.9 |
)% |
| NAV per unit
(3) |
$ |
43.76 |
|
$ |
49.83 |
|
$ |
(6.07 |
) |
|
(12.2 |
)% |
| Debt (1) |
$ |
4,321,654 |
|
$ |
3,834,573 |
|
$ |
487,081 |
|
|
12.7 |
% |
| Total indebtedness
ratio (2) |
|
39.7 |
% |
|
34.2 |
% |
|
— |
|
|
5.5 |
% |
| Annualized Adjusted
EBITDA (2) |
$ |
394,432 |
|
$ |
416,068 |
|
$ |
(21,636 |
) |
|
(5.2 |
)% |
| Net debt as a multiple
of Annualized Adjusted EBITDA (2) |
|
10.7x |
|
|
7.9x |
|
|
2.8x |
|
|
— |
|
| Interest coverage
ratio including interest capitalized and excluding financing
prepayment costs - three months trailing (2) |
|
2.3x |
|
|
2.5x |
|
|
(0.2x |
) |
|
— |
|
|
Interest coverage ratio including interest capitalized and
excluding financing prepayment costs - twelve months trailing
(2) |
|
2.5x |
|
|
2.5x |
|
|
— |
|
|
— |
|
(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 16 of the
MD&A as at September 30, 2024, 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 tables summarize non-GAAP
financial measures for the three and nine months ended
September 30, 2024, and 2023:
| |
For the three months ended September 30 |
| (in thousands except for per
unit and % amounts)(1) |
|
2024 |
|
|
2023 |
|
Change |
% Change |
|
Adjusted EBITDA |
$ |
98,608 |
|
$ |
104,017 |
|
$ |
(5,409 |
) |
(5.2 |
)% |
| Same Asset NOI -
rental portfolio |
$ |
73,892 |
|
$ |
76,221 |
|
$ |
(2,329 |
) |
(3.1 |
)% |
| Same Asset NOI - total
portfolio |
$ |
84,495 |
|
$ |
83,574 |
|
$ |
921 |
|
1.1 |
% |
| FFO |
$ |
77,645 |
|
$ |
83,719 |
|
$ |
(6,074 |
) |
(7.3 |
)% |
| FFO per unit
(diluted) |
$ |
0.556 |
|
$ |
0.599 |
|
$ |
(0.043 |
) |
(7.2 |
)% |
| FFO pay-out
ratio |
|
81.0 |
% |
|
75.1 |
% |
|
— |
|
5.9 |
% |
| AFFO |
$ |
68,005 |
|
$ |
76,337 |
|
$ |
(8,332 |
) |
(10.9 |
)% |
| AFFO per unit
(diluted) |
$ |
0.487 |
|
$ |
0.546 |
|
$ |
(0.059 |
) |
(10.8 |
)% |
| AFFO pay-out
ratio |
|
92.5 |
% |
|
82.4 |
% |
|
— |
|
10.1 |
% |
| All
amounts below are excluding condominium related items, financing
prepayment costs, and the mark-to-market adjustment on unit-based
compensation: |
|
FFO |
$ |
74,782 |
|
$ |
83,556 |
|
$ |
(8,774 |
) |
(10.5 |
)% |
|
FFO per unit (diluted) |
$ |
0.535 |
|
$ |
0.598 |
|
$ |
(0.063 |
) |
(10.5 |
)% |
|
FFO pay-out ratio |
|
84.1 |
% |
|
75.3 |
% |
|
— |
|
8.8 |
% |
|
AFFO |
$ |
65,142 |
|
$ |
76,174 |
|
$ |
(11,032 |
) |
(14.5 |
)% |
|
AFFO per unit (diluted) |
$ |
0.466 |
|
$ |
0.545 |
|
$ |
(0.079 |
) |
(14.5 |
)% |
|
AFFO pay-out ratio |
|
96.6 |
% |
|
82.6 |
% |
|
— |
|
14.0 |
% |
| |
|
|
|
|
(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).
| |
For the nine months ended September 30 |
| (in thousands except for per
unit and % amounts)(1) |
|
2024 |
|
|
2023 |
|
Change |
% Change |
|
Adjusted EBITDA |
$ |
290,888 |
|
$ |
313,397 |
|
$ |
(22,509 |
) |
(7.2 |
)% |
| Same Asset NOI -
rental portfolio |
$ |
218,792 |
|
$ |
224,402 |
|
$ |
(5,610 |
) |
(2.5 |
)% |
| Same Asset NOI - total
portfolio |
$ |
252,110 |
|
$ |
247,618 |
|
$ |
4,492 |
|
1.8 |
% |
| FFO |
$ |
230,883 |
|
$ |
247,118 |
|
$ |
(16,235 |
) |
(6.6 |
)% |
| FFO per unit
(diluted) |
$ |
1.652 |
|
$ |
1.768 |
|
$ |
(0.116 |
) |
(6.6 |
)% |
| FFO pay-out
ratio |
|
81.7 |
% |
|
76.4 |
% |
|
— |
|
5.3 |
% |
| AFFO |
$ |
208,632 |
|
$ |
225,875 |
|
$ |
(17,243 |
) |
(7.6 |
)% |
| AFFO per unit
(diluted) |
$ |
1.493 |
|
$ |
1.616 |
|
$ |
(0.123 |
) |
(7.6 |
)% |
| AFFO pay-out
ratio |
|
90.4 |
% |
|
83.5 |
% |
|
— |
|
6.9 |
% |
| All
amounts below are excluding condominium related items, financing
prepayment costs, and the mark-to-market adjustment on unit-based
compensation: |
|
FFO |
$ |
229,059 |
|
$ |
246,857 |
|
$ |
(17,798 |
) |
(7.2 |
)% |
|
FFO per unit (diluted) |
$ |
1.639 |
|
$ |
1.766 |
|
$ |
(0.127 |
) |
(7.2 |
)% |
|
FFO pay-out ratio |
|
82.4 |
% |
|
76.4 |
% |
|
— |
|
6.0 |
% |
|
AFFO |
$ |
206,808 |
|
$ |
225,614 |
|
$ |
(18,806 |
) |
(8.3 |
)% |
|
AFFO per unit (diluted) |
$ |
1.480 |
|
$ |
1.614 |
|
$ |
(0.134 |
) |
(8.3 |
)% |
|
AFFO pay-out ratio |
|
91.2 |
% |
|
83.6 |
% |
|
— |
|
7.6 |
% |
(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).
The following tables reconcile the non-GAAP
measures to the most comparable IFRS measures for the three and
nine months ended September 30, 2024, and the comparable
period in 2023. 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
income (loss) and comprehensive income (loss) to Adjusted EBITDA, a
non-GAAP measure, for the three and nine months ended
September 30, 2024, and 2023.
| |
Three months ended |
|
Nine months ended |
|
|
September 30, 2024 |
|
September 30, 2023 |
|
|
September 30, 2024 |
|
September 30, 2023 |
|
|
Net (loss) income and comprehensive (loss) income for the
period |
$ |
(94,177 |
) |
$ |
(33,958 |
) |
|
$ |
(84,878 |
) |
$ |
78,624 |
|
| Interest expense |
|
31,361 |
|
|
28,328 |
|
|
|
84,724 |
|
|
81,241 |
|
| Amortization of other
assets |
|
441 |
|
|
388 |
|
|
|
1,311 |
|
|
1,118 |
|
| Amortization of improvement
allowances |
|
9,645 |
|
|
7,896 |
|
|
|
28,453 |
|
|
24,418 |
|
| Impairment of residential
inventory |
|
32,082 |
|
|
15,376 |
|
|
|
38,259 |
|
|
15,376 |
|
| Transaction costs |
|
136 |
|
|
13,246 |
|
|
|
136 |
|
|
13,246 |
|
| Fair value loss on investment
properties and investment properties held for sale (1) |
|
47,328 |
|
|
128,984 |
|
|
|
211,321 |
|
|
173,870 |
|
| Fair value loss (gain) on
Exchangeable LP Units |
|
57,983 |
|
|
(44,757 |
) |
|
|
472 |
|
|
(55,267 |
) |
| Fair value loss (gain) on
derivative instruments |
|
16,689 |
|
|
(11,186 |
) |
|
|
13,031 |
|
|
(18,519 |
) |
|
Mark-to-market adjustment on unit-based compensation |
|
(2,880 |
) |
|
(300 |
) |
|
|
(1,941 |
) |
|
(710 |
) |
|
Adjusted EBITDA (2) |
$ |
98,608 |
|
$ |
104,017 |
|
|
$ |
290,888 |
|
$ |
313,397 |
|
(1) Includes Allied's proportionate share of the
equity accounted investment's fair value gain on investment
properties of $31 and $213 for the three and nine months ended
September 30, 2024, respectively (September 30, 2023 -
fair value loss on investment properties of $1,895 and
$4,638, respectively).(2) The Adjusted EBITDA for the three and
nine months ended September 30, 2023 includes the Urban Data
Centre segment which was classified as a discontinued operation
from Q4 2022 until its disposition in August 2023.
The following table reconciles operating income to net operating
income, a non-GAAP measure, for the three and nine months ended
September 30, 2024, and 2023.
| |
Three months ended |
Nine months ended |
| |
September 30, 2024 |
|
September 30, 2023 |
|
September 30, 2024 |
|
September 30, 2023 |
|
|
Operating income, IFRS basis |
$ |
83,229 |
|
$ |
79,897 |
|
$ |
244,091 |
|
$ |
235,162 |
|
| Add:
investment in joint venture |
|
466 |
|
|
980 |
|
|
1,659 |
|
|
3,129 |
|
| Operating income,
proportionate basis |
$ |
83,695 |
|
$ |
80,877 |
|
$ |
245,750 |
|
$ |
238,291 |
|
| Amortization of improvement
allowances (1)(2) |
|
9,645 |
|
|
7,831 |
|
|
28,453 |
|
|
24,092 |
|
|
Amortization of straight-line rent (1)(2) |
|
(2,188 |
) |
|
(2,308 |
) |
|
(5,898 |
) |
|
(5,713 |
) |
| NOI from continuing
operations |
$ |
91,152 |
|
$ |
86,400 |
|
$ |
268,305 |
|
$ |
256,670 |
|
|
NOI from discontinued operations |
$ |
— |
|
$ |
6,586 |
|
$ |
— |
|
$ |
33,452 |
|
|
Total NOI |
$ |
91,152 |
|
$ |
92,986 |
|
$ |
268,305 |
|
$ |
290,122 |
|
(1) Includes Allied's proportionate share of the
equity accounted investment of the following amounts for the three
and nine months ended September 30, 2024: amortization
improvement allowances of $213 and $589, respectively
(September 30, 2023 - $164 and $491, respectively) and
amortization of straight-line rent of $(57) and $(152),
respectively (September 30, 2023 - $(49) and $(147),
respectively). (2) Excludes the Urban Data Centre segment which was
classified as a discontinued operation starting in Q4 2022, and was
sold in Q3 2023. 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, and the amortization of straight-line rent was $(230)
and $(695), 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.
| |
Three months ended |
Change |
| |
September 30, 2024 |
|
September 30, 2023 |
|
$ |
|
% |
|
|
Rental Portfolio - Same Asset NOI |
$ |
73,892 |
|
$ |
76,221 |
|
$ |
(2,329 |
) |
(3.1 |
)% |
| Assets
Held for Sale - Same Asset NOI |
|
2,739 |
|
|
3,757 |
|
|
(1,018 |
) |
(27.1 |
) |
|
Rental Portfolio and Assets Held for Sale - Same Asset
NOI |
$ |
76,631 |
|
$ |
79,978 |
|
$ |
(3,347 |
) |
(4.2 |
%) |
|
Development Portfolio - Same Asset NOI |
|
7,864 |
|
|
3,596 |
|
|
4,268 |
|
118.7 |
|
|
Total Portfolio - Same Asset NOI |
$ |
84,495 |
|
$ |
83,574 |
|
$ |
921 |
|
1.1 |
% |
|
Acquisitions |
|
3,999 |
|
|
— |
|
|
3,999 |
|
|
|
|
Dispositions |
|
756 |
|
|
7,539 |
|
|
(6,783 |
) |
|
|
|
Development fees and corporate items |
|
1,902 |
|
|
1,873 |
|
|
29 |
|
|
|
|
Total NOI |
$ |
91,152 |
|
$ |
92,986 |
|
$ |
(1,834 |
) |
(2.0 |
%) |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Nine months ended |
Change |
| |
September 30, 2024 |
|
September 30, 2023 |
|
$ |
|
% |
|
|
Rental Portfolio - Same Asset NOI |
$ |
218,792 |
|
$ |
224,402 |
|
$ |
(5,610 |
) |
|
(2.5 |
)% |
| Assets
Held for Sale - Same Asset NOI |
|
9,035 |
|
|
11,530 |
|
|
(2,495 |
) |
|
(21.6 |
) |
|
Rental Portfolio and Assets Held for Sale - Same Asset
NOI |
$ |
227,827 |
|
$ |
235,932 |
|
$ |
(8,105 |
) |
|
(3.4 |
%) |
|
Development Portfolio - Same Asset NOI |
|
24,283 |
|
|
11,686 |
|
|
12,597 |
|
|
107.8 |
|
|
Total Portfolio - Same Asset NOI |
$ |
252,110 |
|
$ |
247,618 |
|
$ |
4,492 |
|
|
1.8 |
% |
|
Acquisitions |
|
7,664 |
|
|
— |
|
|
7,664 |
|
|
|
Dispositions |
|
2,430 |
|
|
36,750 |
|
|
(34,320 |
) |
|
|
Lease terminations |
|
28 |
|
|
193 |
|
|
(165 |
) |
|
|
Development fees and corporate items |
|
6,073 |
|
|
5,561 |
|
|
512 |
|
|
|
Total NOI |
$ |
268,305 |
|
$ |
290,122 |
|
$ |
(21,817 |
) |
|
(7.5 |
%) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
The following tables reconcile Allied's net loss and
comprehensive loss from continuing operations to FFO, FFO excluding
condominium related items, financing prepayment costs, and the
mark-to-market adjustment on unit-based compensation, AFFO, and
AFFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation, which are non-GAAP measures, for the three and nine
months ended September 30, 2024, and 2023.
| |
Three months ended |
|
|
September 30, 2024 |
|
September 30, 2023 |
|
Change |
|
|
Net loss and comprehensive loss from continuing operations |
$ |
(94,177 |
) |
$ |
(25,746 |
) |
$ |
(68,431 |
) |
| Net loss and comprehensive
loss from discontinued operations |
|
— |
|
|
(8,212 |
) |
|
8,212 |
|
| Adjustment to fair value of
investment properties and investment properties held for sale |
|
47,359 |
|
|
127,089 |
|
|
(79,730 |
) |
| Adjustment to fair value of
Exchangeable LP Units |
|
57,983 |
|
|
(44,757 |
) |
|
102,740 |
|
| Adjustment to fair value of
derivative instruments |
|
16,689 |
|
|
(11,186 |
) |
|
27,875 |
|
| Impairment of residential
inventory |
|
32,082 |
|
|
15,376 |
|
|
16,706 |
|
| Transaction costs |
|
136 |
|
|
13,246 |
|
|
(13,110 |
) |
| Incremental leasing costs |
|
2,544 |
|
|
2,347 |
|
|
197 |
|
| Amortization of improvement
allowances |
|
9,432 |
|
|
7,732 |
|
|
1,700 |
|
| Amortization of property,
plant and equipment (1) |
|
101 |
|
|
101 |
|
|
— |
|
| Distributions on Exchangeable
LP Units |
|
5,314 |
|
|
5,314 |
|
|
— |
|
| Adjustments relating to joint
venture: |
|
|
|
|
Adjustment to fair value on investment properties |
|
(31 |
) |
|
1,895 |
|
|
(1,926 |
) |
|
Amortization of improvement allowances |
|
213 |
|
|
164 |
|
|
49 |
|
|
Interest expense(2) |
|
— |
|
|
356 |
|
|
(356 |
) |
| FFO |
$ |
77,645 |
|
$ |
83,719 |
|
$ |
(6,074 |
) |
| Condominium marketing
costs |
|
17 |
|
|
137 |
|
|
(120 |
) |
| Financing prepayment
costs |
|
— |
|
|
— |
|
|
— |
|
|
Mark-to-market adjustment on unit-based compensation |
|
(2,880 |
) |
|
(300 |
) |
|
(2,580 |
) |
|
FFO excluding condominium related items, financing
prepayment costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
74,782 |
|
$ |
83,556 |
|
$ |
(8,774 |
) |
| |
|
|
|
| FFO |
$ |
77,645 |
|
$ |
83,719 |
|
$ |
(6,074 |
) |
| Amortization of straight-line
rent |
|
(2,131 |
) |
|
(2,489 |
) |
|
358 |
|
| Regular leasing
expenditures |
|
(3,650 |
) |
|
(1,523 |
) |
|
(2,127 |
) |
| Regular and recoverable
maintenance capital expenditures |
|
(2,022 |
) |
|
(1,678 |
) |
|
(344 |
) |
| Incremental leasing costs
(related to regular leasing expenditures) |
|
(1,781 |
) |
|
(1,643 |
) |
|
(138 |
) |
| Adjustment relating to joint
venture: |
|
|
|
|
Amortization of straight-line rent |
|
(57 |
) |
|
(49 |
) |
|
(8 |
) |
|
Regular leasing expenditures |
|
1 |
|
|
— |
|
|
1 |
|
| AFFO |
$ |
68,005 |
|
$ |
76,337 |
|
$ |
(8,332 |
) |
| Condominium marketing
costs |
|
17 |
|
|
137 |
|
|
(120 |
) |
| Financing prepayment
costs |
|
— |
|
|
— |
|
|
— |
|
|
Mark-to-market adjustment on unit-based compensation |
|
(2,880 |
) |
|
(300 |
) |
|
(2,580 |
) |
|
AFFO excluding condominium related items, financing
prepayment costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
65,142 |
|
$ |
76,174 |
|
$ |
(11,032 |
) |
| |
|
|
|
| Weighted average number of
units (3) |
|
|
|
|
Basic |
|
139,765,128 |
|
|
139,765,128 |
|
|
— |
|
|
Diluted |
|
139,765,128 |
|
|
139,765,128 |
|
|
— |
|
| |
|
|
|
| Per unit - basic and
diluted |
|
|
|
|
FFO |
$ |
0.556 |
|
$ |
0.599 |
|
$ |
(0.043 |
) |
|
FFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
0.535 |
|
$ |
0.598 |
|
$ |
(0.063 |
) |
|
AFFO |
$ |
0.487 |
|
$ |
0.546 |
|
$ |
(0.059 |
) |
|
AFFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
0.466 |
|
$ |
0.545 |
|
$ |
(0.079 |
) |
| |
|
|
|
| Pay-out Ratio |
|
|
|
|
FFO |
|
81.0 |
% |
|
75.1 |
% |
|
5.9 |
% |
|
FFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
|
84.1 |
% |
|
75.3 |
% |
|
8.8 |
% |
|
AFFO |
|
92.5 |
% |
|
82.4 |
% |
|
10.1 |
% |
|
AFFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
|
96.6 |
% |
|
82.6 |
% |
|
14.0 |
% |
(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 in "Funds From Operations (FFO) & Adjusted Funds From
Operations (AFFO) for IFRS" issued in January 2022. (3) The
weighted average number of units includes Units and Exchangeable LP
Units. The Exchangeable LP Units were reclassified 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, 2024 |
|
September 30, 2023 |
|
Change |
|
|
Net loss and comprehensive loss from continuing operations |
$ |
(84,878 |
) |
$ |
(46,367 |
) |
$ |
(38,511 |
) |
| Net income and comprehensive
income from discontinued operations |
|
— |
|
|
124,991 |
|
|
(124,991 |
) |
| Adjustment to fair value of
investment properties and investment properties held for sale |
|
211,534 |
|
|
169,232 |
|
|
42,302 |
|
| Adjustment to fair value of
Exchangeable LP Units |
|
472 |
|
|
(55,267 |
) |
|
55,739 |
|
| Adjustment to fair value of
derivative instruments |
|
13,031 |
|
|
(18,519 |
) |
|
31,550 |
|
| Impairment of residential
inventory |
|
38,259 |
|
|
15,376 |
|
|
22,883 |
|
| Transaction costs |
|
136 |
|
|
13,246 |
|
|
(13,110 |
) |
| Incremental leasing costs |
|
7,847 |
|
|
6,882 |
|
|
965 |
|
| Amortization of improvement
allowances |
|
27,864 |
|
|
23,927 |
|
|
3,937 |
|
| Amortization of property,
plant and equipment (1) |
|
300 |
|
|
302 |
|
|
(2 |
) |
| Distributions on Exchangeable
LP Units |
|
15,942 |
|
|
7,085 |
|
|
8,857 |
|
| Adjustments relating to joint
venture: |
|
|
|
|
Adjustment to fair value on investment properties |
|
(213 |
) |
|
4,638 |
|
|
(4,851 |
) |
|
Amortization of improvement allowances |
|
589 |
|
|
491 |
|
|
98 |
|
|
Interest expense (2) |
|
— |
|
|
1,101 |
|
|
(1,101 |
) |
| FFO |
$ |
230,883 |
|
$ |
247,118 |
|
$ |
(16,235 |
) |
| Condominium marketing
costs |
|
117 |
|
|
449 |
|
|
(332 |
) |
| Financing prepayment
costs |
|
— |
|
|
— |
|
|
— |
|
|
Mark-to-market adjustment on unit-based compensation |
|
(1,941 |
) |
|
(710 |
) |
|
(1,231 |
) |
|
FFO excluding condominium related items, financing
prepayment costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
229,059 |
|
$ |
246,857 |
|
$ |
(17,798 |
) |
| |
|
|
|
| FFO |
$ |
230,883 |
|
$ |
247,118 |
|
$ |
(16,235 |
) |
| Amortization of straight-line
rent |
|
(5,746 |
) |
|
(6,261 |
) |
|
515 |
|
| Regular leasing
expenditures |
|
(7,403 |
) |
|
(5,622 |
) |
|
(1,781 |
) |
| Regular and recoverable
maintenance capital expenditures |
|
(3,450 |
) |
|
(4,395 |
) |
|
945 |
|
| Incremental leasing costs
(related to regular leasing expenditures) |
|
(5,493 |
) |
|
(4,818 |
) |
|
(675 |
) |
| Adjustment relating to joint
venture: |
|
|
|
|
Amortization of straight-line rent |
|
(152 |
) |
|
(147 |
) |
|
(5 |
) |
|
Regular leasing expenditures |
|
(7 |
) |
|
— |
|
|
(7 |
) |
| AFFO |
$ |
208,632 |
|
$ |
225,875 |
|
$ |
(17,243 |
) |
| Condominium marketing
costs |
|
117 |
|
|
449 |
|
|
(332 |
) |
| Financing prepayment
costs |
|
— |
|
|
— |
|
|
— |
|
|
Mark-to-market adjustment on unit-based compensation |
|
(1,941 |
) |
|
(710 |
) |
|
(1,231 |
) |
|
AFFO excluding condominium related items, financing
prepayment costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
206,808 |
|
$ |
225,614 |
|
$ |
(18,806 |
) |
| |
|
|
|
| Weighted average number of
units (3) |
|
|
|
|
Basic |
|
139,765,128 |
|
|
139,765,128 |
|
|
— |
|
|
Diluted |
|
139,765,128 |
|
|
139,765,128 |
|
|
— |
|
| |
|
|
|
| Per unit - basic and
diluted |
|
|
|
|
FFO |
$ |
1.652 |
|
$ |
1.768 |
|
$ |
(0.116 |
) |
|
FFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
1.639 |
|
$ |
1.766 |
|
$ |
(0.127 |
) |
|
AFFO |
$ |
1.493 |
|
$ |
1.616 |
|
$ |
(0.123 |
) |
|
AFFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
$ |
1.480 |
|
$ |
1.614 |
|
$ |
(0.134 |
) |
| |
|
|
|
| Pay-out Ratio |
|
|
|
|
FFO |
|
81.7 |
% |
|
76.4 |
% |
|
5.3 |
% |
|
FFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
|
82.4 |
% |
|
76.4 |
% |
|
6.0 |
% |
|
AFFO |
|
90.4 |
% |
|
83.5 |
% |
|
6.9 |
% |
|
AFFO excluding condominium related items, financing prepayment
costs, and the mark-to-market adjustment on unit-based
compensation |
|
91.2 |
% |
|
83.6 |
% |
|
7.6 |
% |
(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 in "Funds From Operations (FFO) & Adjusted Funds From
Operations (AFFO) for IFRS" issued in January 2022. (3) The
weighted average number of units includes Units and Exchangeable LP
Units. The Exchangeable LP Units were reclassified 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, and the assumptions underlying
any of the foregoing. These statements generally can be identified
by the use of forward-looking words such as “forecast”, “outlook”,
“may”, “will”, “expect”, “estimate”, “anticipate”, “intends”,
“believe”, “assume”, “plans” or “continue” or the negative thereof
or similar variations. The forward-looking statements in this press
release are not guarantees of future results, operations or
performance and are based on estimates and assumptions that are
subject to risks and uncertainties, including those described under
“Risks and Uncertainties” in Allied’s Annual MD&A, which is
available at www.sedarplus.ca. Those risks and uncertainties
include risks associated with financing and interest rates, access
to capital, general economic conditions and lease roll-over.
Allied’s actual results and performance discussed herein could
differ materially from those expressed or implied by such
statements. These cautionary statements qualify all forward-looking
statements attributable to Allied and persons acting on its behalf.
All forward-looking statements speak only as of the date of this
press release and, except as required by applicable law, 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. WilliamsPresident & Chief
Executive Officer(416) 977-9002cwilliams@alliedreit.com
Nanthini MahalingamSenior Vice President &
Chief Financial Officer(416) 977-9002nmahalingam@alliedreit.com
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