Allied Properties Real Estate Investment Trust (AP) Q2 2024 earnings summary

Executive summary

• Focused on long-term business management, prioritizing balance sheet strength, leasing vacant space, and completing ongoing development and upgrades.

• Occupied and leased area held steady at 85.8% and 87.1%, with urban office portfolio utilization rising in major Canadian cities.

• Management expects a positive inflection in occupancy and leasing by year-end, supported by strong user engagement and ongoing leasing efforts.

• Proactive management of 2025 and 2026 debt maturities, targeting Debt to EBITDA in the 8x range through asset sales and refinancing.

• Disposition program on track, with $200 million in asset sales pending and another $200 million identified, all proceeds to reduce debt.

Financial highlights

• Q2 operating income was $82 million, up 5.5% year-over-year.

• Net income and comprehensive income was $28 million, impacted by a fair value loss on investment properties.

• FFO was $73 million (52.6 cents/unit), down 10.6% year-over-year; AFFO was $67 million (47.7 cents/unit), down 11.1%.

• Rental revenue for the quarter was $146.8 million, up 7.8% year-over-year.

• Average in-place net rent per occupied sq ft increased to $25.08.

Outlook and guidance

• Targeting $400 million in asset sale proceeds by end of 2025, with $286 million already held for sale.

• Debt to EBITDA expected to peak in Q2 and improve through year-end, aiming for 8x by mid-2026.

• Development completions expected to contribute over $85 million in annual EBITDA by 2026.

• Management expects steady demand for urban workspace and amenity space to support results in 2024, with a positive inflection anticipated by year-end.

• Distribution commitment is expected to be fully supported by 2024 results.