Over the past two years, Allied Properties REIT (AP-UN-T) has been selling non-core properties and is now adding two high-profile assets to that list as it continues to look for ways to strengthen its balance sheet.

“Having made better than expected progress in finalizing the construction and lease-up of Toronto House and the lease-up of Calgary House, Management has added these properties to its non-core sales initiative,” the REIT noted in a press release last week which outlined its Q3 financial results.

Toronto House is a 57-storey mixed-use tower at 19 Duncan St., a few blocks from CN Tower, which was co-developed by Vancouver-based developer Westbank and Allied Properties REIT.

Last March, Allied announced it was converting a portion of a loan it provided toward the project and making a cash contribution in exchange for a 45 per cent interest in Toronto House, bringing its ownership interest to 95 per cent. In December, Allied then acquired the remaining five per cent for just over $23 million. Allied’s 2024 year-end report had the total acquisition cost of the 50 per cent stake at $271.5 million.

Calgary House, also known as Telus Sky, is a 60-storey mixed-use tower at 685 Centre St. SW - a few blocks from Calgary Tower - which was co-developed by Westbank, Allied and telecommunications company Telus. The three partners originally each held a one-third ownership interests before completing a restructuring last year that resulted in Westbank and Allied owning 100 per cent of the residential component and Telus owning 100 per cent of the commercial component.

Allied says it has made better-than-expected progress in the lease-up of both Toronto House (53 per cent of 464 units as of September 30) and Calgary House (79.4 per cent of 326 units) and was adding both to its non-core sales initiative. The REIT said it had recently received unsolicited expressions of interest from qualified buyers for Toronto House, but the interested parties have not been identified.

RENX has reached out to Allied for comment, but has not received a response.

Allied’s non-core sales initiative

Allied says it is hoping to complete the sales of Toronto House and Calgary House by Q2 2026 and that the closings would represent the completion of its non-core sales initiative.

In an update in September on its non-core property sales, the REIT said it had completed seven sales in 2024 for $252 million and two in 2025, with 10 more under contract or negotiation for a total of approximately $231 million. Allied says the sales of Toronto House and Calgary House could potentially more than double the total proceeds from its non-core property sales.

“We initiated the sale process last year to fund the acquisition of larger than expected interests in 400 West Georgia, 19 Duncan and Calgary House,” Allied Properties REIT founder and executive chair Michael Emory said at the time. “We’ve continued this year with the immediate objective of improving access to the debt capital markets and the longer-term objective of serving knowledge-based organizations in Canada’s major cities ever-better and more profitably.”

As of the end of Q3, Allied says it has four non-core properties — one in Vancouver (342 Water Street), one in Toronto (252-264 Adelaide Street E), and two in Montréal (3510 Saint-Laurent and 3530-3540 Saint-Laurent) — that are under firm contract to be sold and are scheduled to close by mid-November for a total of over $55 million.

It is also finalizing sales for three additional properties in Montréal for a total of $85 million. Those sales are expected to close in December and these two batches of sales would bring an end to the non-core sales initiative as it relates to Vancouver and Montréal.

Refortifying the balance sheet

“We continued the strengthening of our debt profile and moved steadily toward completion of our developments and non-core property sales in the third quarter,” Allied president and CEO Cecilia Williams said. “Although urban office fundamentals are improving in Canada’s major cities, our occupied and leased areas didn’t increase at the pace we expected in the quarter. Along with elevated interest expense, the slower pace of lease finalization put downward pressure on our results.”

Allied says its “overriding strategic objective” for 2025 was to “continue the re-fortification of its balance sheet,” a recurring theme emphasized throughout its Q3 earnings call last week. Allied says it has raised $1.3 billion from the bond market and used those proceeds to retire a $200-million unsecured debenture, a $400-million term loan, $150 million of a $250-million term loan scheduled to expire in early 2026, several short-term variable-rate construction loans, and amounts drawn on its unsecured revolving operating facility.

The latter unsecured revolving operating facility was also replaced with a new facility provided by six major Canadian financial institutions on the same financial terms and an expiration date of Sept. 29, 2029, the REIT said.

Allied now has a total debt ratio of 45 per cent with a weighted average term of 3.4 years and its net debt is now 12.3 times its annualized adjusted EBITDA. The REIT says it is committed to reducing that number to 10x, but that it is taking longer than previously anticipated because some of its sales are closing later than expected.

Last week, Allied also said it was considering a distribution cut in 2026 as another action to strengthen its balance sheet. The REIT’s unit price subsequently fell 20 per cent to $14.78 to end the week.