Allied Properties Real Estate Investment Trust

and answer session. If you would like to ask a question during that time, press star followed by the number one on your telephone keypad. As a reminder, today's call is being recorded. I will now hand today's call over to Cecilia Williams, President and CEO.

Please go ahead. Thanks, Tamika. Good morning, everyone, and welcome to our conference call. I'll provide an update on our three areas of focus this year. Nan will then highlight our Q2 results and our strong financial position. JP will then outline our solid leasing activity and provide a summary by urban market. Then we're pleased to answer questions. We may, in the course of this conference call, make forward-looking statements about future events or future performance. By their nature, these statements are subject to risks and uncertainties that may cause actual events or results to differ materially. including those described under the heading risks and uncertainties in our 2023 annual report and our most recent quarterly report. Material assumptions underpinning any forward-looking statements we make include those described under forward-looking statements in our most recent quarterly report. Now an update on our priorities for the year. We're focused on running the business for the long term. To us, that means three things in today's environment. Number one, an unwavering commitment to the balance sheet. Number two, leasing up vacant space. And three, completing development and upgrade activity underway. First, the balance sheet. Our unwavering commitment to the balance sheet governs our actions across the business. We're proactively managing our 2025 and 2026 debt maturities to reach our targeted debt to EBITDA in the eight times range and ensure maximum liquidity. This involves selling non-poor assets and proactive debt refinancing. The non-poor asset sales are going well with pricing from unsolicited bids coming in at or above IFRS value. There are currently seven pending sales. All of the properties are smaller and none are part of an existing concentration. The combined proceeds of these seven asset sales and the Telesky transaction will approach the $200 million target established earlier this year and be applied toward debt reduction. Because these proceeds are from the sale of lower yielding assets, paying off higher cost debt is accretive to FFO and AFFO per unit. The success of our disposition program this year has led us to identify another set of non-core properties for disposition at or above IFRS value that would generate another approximate $200 million of proceeds to also be allocated towards debt reduction. Nan will elaborate on this shortly. Second, leasing. Our results this quarter evidence the competitive advantage of our differentiated operating platform. It consistently outperforms the broader market because of the elevated quality of the portfolio and user experience. Our occupancy stabilized this quarter and we're focused on improving it. We've demonstrated that our distinctive urban workspace can accommodate many business needs. The heritage component is the premium brick and beam space we're most known for, restored and updated to meet today's knowledge workers' needs. We have this space across the country. Here, we'll invest in it for a long-term lease. The modern component is workspace that's been developed or redeveloped in the last 10 years. So by definition, it's newer space, concentrated in Toronto, Montreal, and Vancouver. It has all the attributes of brick and beam space that people love, good column spacing, natural light, and high ceilings, but with modern materiality and finishes. Here, we'll also invest in the space for a long-term lease. The flex component is workspace and buildings on underutilized land that will be redeveloped. Because of its short-term nature, we're not investing in the space, but the adjustable lease terms and flexible pricing provide an entry point into certain neighborhoods that were less accessible in the past. We've also strategically invested in suite upgrades, which will drive leasing activity. Defining our space offering in terms relating to the nature of the physical environment and our corresponding appetite to invest capital allows us to have maximum impact through our leasing efforts with the appropriate sensitivity to our balance sheet optimization efforts. On to development and upgrade activity underway. The current projects will be completed by 2026. and will be focusing on onboarding those projects with no plans to start new ones in the near term. Development risk continues to subside. I'll now pass the call to Nan.

Thank you, Cecilia. Good morning, everyone. A few highlights before I provide more detail on our commitment to the balance sheet. Our financial performance in the quarter was in line with our expectations. With operating income of $82 million, a 5.5% increase from the comparable quarter. Total portfolio same-asset NOI grew by 1.7% for the quarter. The average in-place net rent per occupied square foot continued its upward trend, reaching $25.08. Additionally, we successfully closed on the 400 West Georgia and 19 Duncan transactions. which although exerted short-term pressure on our earnings and debt metrics, are expected to yield significant strategic benefits. These transactions will enhance our urban workspace portfolio and expand our urban rental residential platform. As a testament to our unwavering commitment to maintaining a healthy balance sheet, we're actively implementing our plan to mitigate the short-term impact of these recent transactions. and return to our targeted debt metrics. There are three ways that we're doing this. Firstly, we have made rapid and material progress in selling low yielding non-co properties at or above IFRS value and will utilize the proceeds to retire higher cost debt. The total proceeds from asset sales of up to 400 million over 2024 and 2025 are expected. The $234 million assets held for sale on our balance sheet is on an equity-accounted basis. Including TelSky, the total assets held for sale is $286 million. This represents a portion of the $400 million proceeds we're targeting by the end of 2025. Under IFRS, we can only include what we expect to close within the next 12 months. So you'll see assets being transferred into this category over the balance of the year. Secondly, we have considerable optionality to refinance our 2025 and 2026 debt maturities, including utilizing the proceeds of secured financing on the residential component of Telesky, which we currently do not have financing on. Secured financing on select unencumbered properties while ensuring that our percentage of unencumbered properties remains high, accessing the bond market to refinance upcoming debentures based on single solicited rating from Morningstar DBRS. Additionally, we're currently in constructive negotiations to extend the $400 million unsecured term loan, which is due in late 2025. Our $250 million term loan currently matures in 2026 is subject to five one-year extension options. We anticipate exercising these options to extend the maturity to 2031 to align with the existing fixed rate swap which we have in place. This will maintain the existing underlying interest rate until 2031. We're addressing three of our variable rate construction loans with the intention of converting them into fixed-rate mortgages, including a lower-cost CMHC mortgage on 19 Dunkin'. As I've outlined, we have significant optionality in addressing our upcoming maturities and maintaining liquidity is a priority. Finally, we'll progress towards achieving our targeted debt metrics through organic growth by leasing space across our portfolio. We value the strength of our balance sheet and we are on a path to our targeted debt to EBITDA ratio in the eight times range within the next 24 months. The continued contribution of our development completions, which are expected to contribute over $85 million in annual EBITDA by 2026, will support the growth of our organic portfolio. JP will now speak about our leasing momentum that we're seeing. Thanks, Nan.