Allied Properties REIT recorded a net loss of $342.53 million in 2024, down 18.6 per cent from a year earlier, as president and CEO Cecilia Williams said the company is optimistic about the coming year.

The biggest drain on the balance sheet was a $557.57-million fair value loss on investment properties and investment properties held for sale. Still, that number was down 27.8 per cent from 2023.

Allied’s rental revenue rose by five per cent from the previous year to $592.04 million while operating income improved by 3.6 per cent to $328.47 million. Total net operating income fell by 4.3 per cent to $361.1 million.

Despite some of these numbers, however, Williams cited several reasons for optimism in 2025 during its annual investor and analyst conference call to present Allied’s results.

Improvements in leasing activity

Allied conducted 255 lease tours in its rental portfolio in the fourth quarter ended Dec. 31, and its occupied and leased areas were 85.9 per cent and 87.2 per cent respectively. Allied leased 571,298 square feet of gross leasable area in the fourth quarter.

“Our national portfolio’s leased area remained steady over the year and, with challenges starting to ease, we're focused on improving both occupied and leased areas to at least 90 per cent by the end of 2025,” Williams said.

She expects Allied to outperform the market and for the bulk of the occupancy gains to come from Montreal and Toronto.

“Another positive metric in 2024 was our improved retention rate to 69 per cent, up from 61 per cent in 2023. We expect retention to continue improving in 2025, getting closer to our historical rate of 75 per cent.”

“We are currently engaged in discussions with 29 existing users that are exploring expansion options, representing approximately 150,000 to 200,000 square feet of net new leasing in aggregate,” said senior vice-president of national operations J.P. MacKay, who added that he’s seen a shift toward larger space requirements among prospective users.

Leasing activity under negotiation

Allied has 933,000 square feet of leasing activity under negotiation or at the prospect stage, of which 61 per cent represents new leasing requirements and 39 per cent represents renewals.

The primary uses represented by those touring properties continue to be firms in the technology, media, professional services, education and medical-related sectors.

Deals continue to take longer due to the availability of options in both the sublease market and in direct vacancy, but those timelines are expected to shorten as sublease space is absorbed and direct vacancies fall. 

It's helpful there's no major new urban office building supply on the horizon beyond this year, with the last delivery being the second tower of Toronto’s CIBC Square.

Average in-place net rent per occupied square foot continued its steady improvement, ending Q4 up 5.4 per cent from a year earlier at $25.41.

Acquisitions and dispositions

Allied ended the year with total assets valued at $10.6 billion.

The trust acquired three class-AAA urban properties for $677 million in 2024:

• 400 West Georgia in Vancouver;
• the remaining 50 per cent interest in 19 Duncan in Toronto;
• and an additional 16.7 per cent interest in the residential component of TELUS Sky (now known as Calgary House), bringing its ownership to 50 per cent.

The aggregate acquisition price was below development and replacement cost.

Allied sold seven lower-yielding, non-core properties — four in Montreal, one in Toronto, one in Ottawa and one in Calgary — for $229 million. That figure was above its target of $200 million.

The proceeds from those sales were allocated to debt repayment in the fourth quarter. Allied plans to sell similar properties — primarily in Montreal, Calgary, Edmonton and Vancouver — for at least $300 million that will go toward debt repayment this year.

“We’ve made progress on our development and upgrade activity as well,” Williams said. “Transfers from the development to the rental portfolio in 2025 are expected to total 340,000 square feet of completed urban workspace and 218 rental residential units.”

Allied is focused on completing all development and upgrade projects currently underway by the end of 2026, Williams added.

Debt and liquidity

Dealing with debt was a priority in 2024 and Allied reduced the amount drawn on its $800-million unsecured revolving operating facility to zero. The REIT also reduced short-term, variable rate debt to $153 million, representing 3.5 per cent of its total debt. 

Allied ended 2024 with $863 million of liquidity and 83 per cent of its investment properties are unencumbered. Its total indebtedness ratio, however, rose to 41.7 per cent from 34.7 per cent in 2023.

“While the timing of the 2024 acquisitions resulted in short-term downward pressure on our debt metrics, they will contribute positively to our earnings as they stabilize,” said senior vice-president and chief financial officer Nanthini Mahalingam.

“I want to reiterate my confidence that our portfolio will continue to hold up well in this economic environment,” Williams said to end the presentation portion of the call.

“Yes, we're aware of the headwinds, but we see more upside and are optimistic because of the strength of our operating platform.”

$450-million green bond offering

In a separate announcement Monday, Allied unveiled a $450-million green bond offering. The unsecured Series K debentures will bear interest at a rate of 4.808 per cent. Proceeds are to be used to pay off a construction loan on 19 Duncan (approximately $250 million) and Allied's series C senior unsecured debentures due April 21 ($200 million).

The 19 Duncan property is comprised of 149,230 square feet of office space, 3,570 square feet of retail space, 464 rental residential units plus related facilities and parking. The office component is fully leased to Thomson Reuters and residential lease-up is under way.

The property is seeking LEED Gold certification.