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- Completes succession plan; Michael Emory to conclude term as Executive Chair
- Announces Q4 2025 and year-end results along with outlook through 2028
- Executing decisive Action Plan to strengthen the balance sheet
- Launches $500 million offering of units
- Successful execution of the Action Plan and achievement of 2026 targets are expected to drive growth in key operating metrics driven by occupancy approaching historical averages
TORONTO, Feb. 10, 2026 (GLOBE NEWSWIRE) — Allied Properties Real Estate Investment Trust (“Allied”) (TSX: “AP.UN”) today announced results for the fourth quarter and year ended December 31, 2025. In addition, Allied provided its outlook for 2026 through 2028 and launched a $350 million marketed public offering and $150 million concurrent private placement of units with proceeds to be allocated to debt repayment.
“While the return to historical occupancy levels has taken longer than expected, we’re seeing an increase in demand and limited new supply on the horizon,” said Allied President and CEO Cecilia Williams. “Against this backdrop we’re executing an Action Plan to strengthen our balance sheet and improve financial flexibility. This includes our previously announced distribution reset, advancing a growing non-core disposition pipeline, and pursuing a $500 million equity offering. These put Allied in a position of strength to benefit from the market recovery in 2026 and beyond.”
Leadership Update
In May 2023, Allied implemented a comprehensive leadership renewal and succession plan. Consistent with that plan, Cecilia Williams was appointed President and CEO and Michael Emory entered into an employment agreement providing for a transition to Executive Chair through May 2, 2026, subject to a potential extension, as previously disclosed in its management information circulars.
In light of the equity offering and the importance for clarity on the go forward leadership of Allied and execution of Allied’s Action Plan, the Independent Trustees determined that this is the appropriate time to confirm that Mr. Emory’s employment agreement will not be renewed. This decision reflects the Independent Trustees’ confidence in Allied’s CEO and senior management team.
In connection with this transition, Mr. Emory has agreed that he will step back from his day-to-day Executive Chair duties and that he will not stand for re-election as a trustee at Allied’s upcoming annual meeting of Unitholders.
“On behalf of Allied and on behalf of the Board of Trustees, I want to thank Michael for his vision, leadership, and lasting contributions as Allied’s Founder,” said Jennifer Tory, Lead Trustee. “Michael shaped Allied’s culture and long-term strategy and built Allied into one of Canada’s leading owner-operators of distinctive, high-quality urban workspace.”
2025 Results
In 2025, Allied executed on a number of its strategic initiatives. However certain operating and deleveraging targets were not achieved due to slower lease finalization, higher debt and interest expense to complete development projects and steps taken in managing loans receivable.
Key items:
- Rental revenue remained steady at approximately $592 million.
- Operating income declined to $317 million from $328 million, mainly due to dispositions, non-renewals and lower development fees, partially offset by contributions from acquisitions, rent commencement from development completions, net of the decapitalization of operating costs.
- In the second half of 2025 Allied delivered 801,000 square feet of new leasing activity, the strongest second half since 2020. Total leasing activity increased 16% in 2025 versus 2024.
- At the end of 2025, occupied and leased area remained steady at 85.3% and 87.4%, respectively.
- Recorded an expected credit loss of $128 million in relation to two remaining loans receivable.
- IFRS valuation adjustment of $1.4 billion due to the expansion of capitalization rates based on recent transactions in the market and adjustments to cash flow assumptions in the rental portfolio based on the slower than expected leasing, as well as carrying and construction cost increases in the development portfolio.
- Closed $140 million of non-core, low-yielding property dispositions in 2025, with net proceeds allocated to debt reduction.
Action Plan
Leading into 2026, management is acting decisively to strengthen the balance sheet to take advantage of an expected recovery in the Canadian office market.
Distribution Reset
- Allied reduced its distribution by 60% in December 2025 and is reallocating cash conserved to debt reduction. Allied will continue to evaluate its distribution policy, as appropriate.
Non-Core, Low-Yielding Property Dispositions
- Allied has a disposition pipeline of approximately $500 million and continues to evaluate additional opportunities.
- $29 million closed in Q1 2026 and $17 million is firm and expected to close by the end of Q1 2026.
- The remaining pipeline, which includes the recent addition of two substantial rental-residential assets, totals ~$454 million and is at various stages of marketing and dispositions are targeted to close by year-end 2026.
Equity Recapitalization
- Allied is launching a $500 million offering of units ($350 million by way of a marketed public offering and $150 million by way of private placement), with net proceeds to be used primarily to repay its Series H debentures. The equity offering is intended to accelerate deleveraging and enhance balance sheet resilience.
Upon successful execution of the Action Plan, Allied expects to remain investment-grade rated.
Outlook
A strengthened balance sheet from execution of the Action Plan creates the foundation from which expected higher occupancy can drive improved financial performance, support ongoing deleveraging, and position Allied for long-term growth as market fundamentals recover. The Outlook is provided to help stakeholders understand management’s expectations for the periods indicated and may not be appropriate for other purposes.
Looking beyond 2026, as the Action Plan is fully executed and 2026 targets are achieved, Allied anticipates improved operating metrics driven by occupancy rates approaching historical averages. The table below details management’s outlook for year-end 2026, 2027 and 2028:
| Metric | 2026 Outlook | 2027 Outlook/Target | 2028 Outlook/Target | |||
| Occupied area by year-end | 84% to 86%(1) | 86% to 88% | 88% to 90% | |||
| NOI* | $310 million to $320 million | – | – | |||
| Growth/(decline) in Same Asset NOI* (rental portfolio) |
(5.5%) to (6.5%) | 12% to 16% | 9% to 13% | |||
| FFO*(2) | $185 million to $200 million(3) | Growth of 7% to 10%(4) | Growth of 5% to 8% | |||
| Interest expense(5) | $145 million to $155 million | – | – | |||
| Capital expenditures | $180 million to $190 million (development, residential inventory, recurring rental portfolio) | – | – | |||
| Non-core, low-yielding property dispositions | ~ $500 million aggregate gross proceeds | – | – | |||
| Net debt to EBITDA*(6) | Mid-11x range | Low 10x range | Low 9x range |
(1) ~82% at the end of Q2 due to non-renewals.
(2) Excluding condominium related items, financing prepayment costs, and the mark-to-market adjustment on unit-based compensation.
(3) This includes $20 million of interest income from loans receivable on KING Toronto and 150 West Georgia.
(4) Excluding the $20 million of interest income from loans receivable on KING Toronto and 150 West Georgia in 2026, growth in 2027 is expected to be 18%-22%.
(5) Interest expense before capitalized interest and excluding distributions on Exchangeable LP Units is expected to be $175 million to $185 million.
(6) Net debt as a multiple of Annualized Adjusted EBITDA* by year-end.
*This is a non-GAAP measure. Refer to the Non-GAAP Measures section below.
Forecast Assumptions
A comprehensive analysis of all aspects of the business was conducted by management in determining the outlook. Below are the key assumptions considered reasonable at this time:
| Key Assumptions | ||
| Operating fundamentals |
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| Non-core, low-yielding property dispositions |
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| General and administrative expenses |
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| Loans receivable |
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| KING Toronto condo sale proceeds |
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| Financing |
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| Distribution |
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Q4 2025 and Year-end 2025 Results
Operations
At the end of 2025, Allied’s occupied and leased area was 85.3% and 87.4%, respectively. Its occupied and leased area at the end of 2024 was 85.9% and 87.2%, respectively.
At the end of 2025, space available for sub-lease in Allied’s portfolio represented 2.6% of GLA (381,801 square feet), down from 5.7% of GLA (815,107 square feet) at the end of 2024. The 53% reduction in GLA available for sub-lease occurred primarily in the Allied Modern format in Toronto and Montréal, most notably at The Well.
Allied leased a total of 2,709,797 square feet of GLA in 2025, 2,464,763 square feet in its rental portfolio and 245,034 square feet in its development portfolio. Of the 2,464,763 square feet Allied leased in its rental portfolio, 760,921 square feet were vacant at the beginning of the year, 973,040 square feet matured in the year, representing a 60% renewal rate, and 730,802 square feet mature in 2026 and 2027. Most notably, Google renewed its lease of 194,842 square feet maturing in 2026 at The Breithaupt Block (97,421 square feet at Allied’s share). Rent levels on renewal increased by 0.5% ending-to-starting base rent and 8.1% average-to-average base rent.
525,191 square feet of the space leased in 2025 involved expansion by existing users. 787,222 square feet of the space leased in 2025 involved new users to the portfolio.
Average in-place net rent per occupied square foot ended 2025 at $25.23, down slightly from $25.41 at the end of 2024. The weighted average term to maturity of the portfolio at the end of 2025 was 5.7 years, up slightly from 5.6 years at the end of 2024.
Allied conducted 1,054 lease tours in 2025, compared to 1,083 in 2024. While down slightly, the average size of the space requirement per tour in 2025 exceeded 2024 by approximately 17%.
Non-Core, Low-Yielding Property Dispositions
In 2025, Allied completed the sale of nine properties, generating total gross proceeds of $140 million.
The remaining disposition pipeline totals approximately $500 million. Of this, $29 million closed in Q1 2026 and $17 million is firm and expected to close by the end of Q1 2026. The remaining pipeline includes the recent addition of two substantial rental-residential assets. Management is continuously evaluating additional properties for sale to support deleveraging objectives.
Completion of Development Pipeline
The necessary completion of Allied’s development pipeline resulted in increased capital intensity during 2024 and 2025 and elevated debt. In the third quarter of 2025, Allied acquired full ownership of M4 at Main Alley Campus, Vancouver, which is currently 90% leased primarily to Netflix, with rental payments scheduled to commence in the first quarter of 2026.
The final committed development, KING Toronto at 489-539 King Street West, will comprise 440 condominium units of which 92% are pre-sold, 46,000 square feet of office space, and 122,000 square feet of retail space. Completion is expected in the first half of 2027. Whole Foods Market is the anchor tenant for the retail portion and is committed to occupy 32,878 square feet in August 2027. Allied is now responsible for onsite construction management.
Management does not intend to initiate any new development projects in the foreseeable future.
150 West Georgia
150 West Georgia, a municipally approved downtown Vancouver site, is set for a 10-story AI data center with BC Hydro committed to providing 39 MW of power with a clear path to 50 MW and potential for up to 100 MW. Integration with Creative Energy’s district heating grid could make the facility a net-positive data centre and expand the district heating grid’s reach.
Allied extended Westbank’s loan on 150 West Georgia to December 31, 2026, with additional security, as the project shifted from office to data center. Allied and Westbank aim to sell a major portion of the site to a Canadian operator, partially repaying Allied’s loan while retaining a minority interest.
Financial Measures
The following tables summarize GAAP financial measures for the three months and years ended December 31, 2025, and 2024:
| For the three months ended December 31 | |||||||||||
| (in thousands except for % amounts) | 2025 | 2024 | Change | % Change | |||||||
| Rental revenue | $ | 148,766 | $ | 155,120 | $ | (6,354 | ) | (4.1 | )% | ||
| Property operating costs | $ | (73,714 | ) | $ | (70,737 | ) | $ | (2,977 | ) | (4.2 | )% |
| Operating income | $ | 75,052 | $ | 84,383 | $ | (9,331 | ) | (11.1 | )% | ||
| Interest income | $ | 10,632 | $ | 10,393 | $ | 239 | 2.3 | % | |||
| Interest expense | $ | (36,464 | ) | $ | (31,743 | ) | |||||