Allied Properties Real Estate Investment Trust

goals and what we're focusing on for the remainder of the year. Dan will do the same from a financial perspective. JP will outline the positive leasing momentum by urban markets. We're then pleased to answer any 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 2024 annual report. Material assumptions underpinning any forward-looking statements we make include those described under forward-looking statements in our most recent quarterly report. We're focused on delivering long-term value. This includes driving leasing and operational results, development completion, and strengthening the balance sheet. The quarter-end results reflect the resilience of our operating platform, and we're also making progress in executing our long-term strategy of portfolio optimization. First, leasing and operational results. Our portfolio continues to demonstrate strength despite headwinds. JP and Nan will expand on the highlights, which include improved lease area, positive stay mass and NY, and the successful implementation of our rental residential platform. While lease deals continue to take longer to complete due to the availability of options and ongoing macroeconomic disruption, we continue to experience a shift towards improving fundamentals in urban centers. With space mandates from organizations across industry, including significant bank mandates in the Toronto market, we expect leasing momentum to accelerate over the next few quarters. Second, we made progress on our development and upgrade activities. At M4 in Vancouver, which is currently 77% leased to three users, fixturing has commenced, and we're negotiating leases on the remaining space. This includes a current user that's already looking to expand. We also agreed to acquire the remaining 50% interest, which will close on September 30th. There will be no cash exchange as part of this transaction. We're pleased to be 100% owners of this project. It aligns perfectly with our operating focus and expands our urban office platform in the vibrant, non-pleasent banks of your neighborhood, enabling us to better serve knowledge-based organizations. At Toronto House, our in-house rental residential operating platform has achieved a 48% lease-up, meeting our ambitious targets to date. At King Toronto, we're heading towards successful completion alongside West Bank. Securing the international retailer that anchors the commercial component is facilitating the lease-up of the remaining space. We're currently in various stages of negotiation with seven retailers. Blazing is taking place on the fourth level, and we're pleased with the progress. As construction continues, we've been able to remove some of the hoarding, providing the public with a better sense of the street-level experience. It's truly a distinctive project that will elevate the entire King West Village neighborhood on completion next year. All the development and upgrade projects currently underway will be completed by the end of 2020. Last but certainly not least are found sheets. We're focused on strengthening it, keeping ample liquidity and improving our debt metrics. Nan will outline our plan to address debt coming due early next year, and we're confident in our ability to do so optimally, given the success we've had this year in addressing the issues of the financial and financial maturity with minimal impact on interest expense. Our disposition program of non-core assets continues. Private market valuations remain robust, and our IFRS values continue to be validated. We currently have nine assets under sale contract, totaling $200 million of co-seek. All co-seek will be allocated to debt reduction as part of our path to achieving a net -to-ebit ratio of under 10 times by the end of 2025 and under 9 times by the end of 2025. Nan will now elaborate on our financial results with found sheet metrics. Thank you Cecilia. Good morning everyone. We are pleased with our performance this quarter and encouraged by the emerging positive market fundamentals, which are reinforcing our strategic direction and operational resilience. I'll provide an overview of a few highlights from the quarter. CNAQ NOI of the rental portfolio grew by 1.1%, driven in part by the successful transition of our development completions into the rental portfolio and their continued stabilization. Our average in-place net rent of occupied square foot increased by 1% compared to the same period ending the quarter at $25.32. We saw strong leasing activity again this quarter. We leased over 588,000 square feet, including 75,000 square feet of expansions from existing users. Our lease area is now at .2% and our -to-date retention ratio sits at 69%, modestly below our historical average. We are also seeing a shift in user behavior with larger mandates in place and longer lease terms on new leases and renewals. That kind of commitment reflects growing confidence in the market and in our portfolio. J.P. will expand further on this later. While we have seen short-term pressure on FFO and ASFO per unit, mainly due to high interest costs from the 2024 acquisition, we are pleased to have made solid leasing progress in these properties that will meaningfully contribute to our growth in the future. We are finalizing the lease of our full FFO at 400 West Georgia, which will be 100% lease, a significant milestone. Leasing at Toronto House is gaining strong traction with 222 residential units leased. These results reaffirm the quality of our assets and the strength of demand in our key urban markets. Our development projects are making excellent progress with only three ground-up projects remaining. Our top-two growth book value is down to .8% compared to .4% last year. The remaining cost to complete is $119 million, with the majority of this to be invested by the end of 2026. As of December 31, 2023, we had ground-up and redevelopment projects that were expected to contribute $90 million to $103 million in stabilized NOI on completion. As of June 30, 2025, completed projects have contributed $60 million based on this quarter's annualized NOI. With the lease up of Toronto House and redevelopment at N4 in Vancouver, there will be incremental annualized NOI of $3 million in the second half of 2025 and another $10 million expected in 2026. We will achieve stabilized NOI on these projects throughout 2027 and 2028, subject to the successful lease up of an agency. The decapitalization impact on NOI is approximately 50% on stabilized projects. Capitalized interest is expected to reduce by 20% in Q1 2026 compared to this quarter. Our balance sheet and deleveraging efforts are of top priority. We are firmly committed to reducing our net debt to EBITDA to below 10 times by year end and below 9 times by the end of 2026. This will be driven by three key initiatives. First, focusing on operations by leasing our organic portfolio, stabilizing our 2024 agronitions, and completing our development projects. Second, our disposition program. We remain on track to divest approximately $300 million in -co-active sales this year. As of today, we have $200 million under contract and these transactions will close in the second half of 2025. Third, the monetization of our loan receivable at 150 West Georgia. This process is underway with 14 prospective groups evaluating the opportunities. We are still targeting a December 2025 close. At quarter end, our liquidity remains strong with $635 million available on our unsecured credit facility. We issued $850 million in unsecured debentures in 2025 and used these proceeds to proactively address our upcoming debt insurances. We effectively refinanced 20% of our expanding debt and saw only a marginal increase in our interest expense of approximately $1 million on an annualized basis related to this refinancing. Through this, we also saw moody withdrawal via unsolicited rating and our spread title in the secondary market. Looking ahead, we have $850 million of debt insuring in early 2025. A portion of this will be repaid as part of our deleveraging plan with approximately half expected to be refinanced. We have optionality in addressing the refinancing, including both secure and unsecured financing. Although our preference is to continue our unsecured debenture program. We've made significant progress in the first half of the year, just like macroeconomic and geopolitical uncertainties. We still have more work to do, but we remain confident in our strategy, in our platform, and in our ability to deliver long-term values. Thank you for your time today. I'll now pass it over to Jay Peak.

Thanks, Dan. In Q2, we continue to experience strong conversion rates, robust expansion activity, and a shift towards larger space requirements among prospective users, despite the uncertain macroeconomic environment. Following the close of the quarter, we've observed a noticeable increase in our leasing pipeline as more and more organizations reaffirm that the office is the principal venue for creativity and connectivity. In Q2, our lease area remains stable and outperforms each of the urban submarkets in which we operate, except for Vancouver, where we are making great progress in addressing acquired vacancies. We remain extremely encouraged by the number of existing users in our portfolio that continue to require more space. In Q2, 75,000 square feet of new leasing activity represented expansions, a 50% increase compared to the previous quarter. We are also encouraged by our improving retention rate, which -to-date is 69%, closer to our historical average of 70% to 75%. The average rental rate in the same period was up .1% when comparing the ending to starting base rent and up .2% when comparing average to average. The observed moderation in rental rate growth upon renewal is in line with our expectations and reflects the anticipated impact of increased supply, a message we have been communicating for several years. Tour activity continues to be strong. Tour activity in our rental portfolio was up 13% from the prior quarter and up 21% from the prior year. Industries represented by touring organizations continue to be technology, media, professional services, education, and medical uses. At the end of last quarter, we reported we had 1.3 million square feet of leasing activity under negotiation or at the prospect stage, including 684,000 square feet of new leasing activity. In Q2, we completed 588,000 square feet of leasing activity, including 407,000 square feet of new leasing, resulting in a 60% conversion rate. At the end of this quarter, we had 1.2 million square feet of leasing activity under negotiation or at the prospect stage, of which 60% represents new leasing opportunities and 40% represents renewals. I'll now provide a brief overview of each armpit. In Montreal, we continue to observe strong demand from users with larger space requirements. There are currently 10 perspective groups with mandates greater than 50,000 square feet considering space in our portfolio, including two groups representing a total of 150,000 square feet with which we are in advanced discussions. We also continue to see strong demand from existing users with large mandates to expand because of increasing utilization. Most of our vacancy in Montreal is concentrated at La Cite, a portfolio of assets located between Old Montreal and Bridgerton Town, comprising eight buildings totaling more than 1.2 million square feet. There are currently five perspective groups with mandates between 12,000 and 100,000 square feet considering these options at La Cite. These prospects represent the technology, professional services, and medical sectors. In Toronto, we continue to see an increase in demand from respective users with larger space requirements. There are presently 34 users with mandates greater than 10,000 square feet touring our portfolio, including nine groups representing a total of 130,000 square feet with which we are in advanced discussions. Last quarter, we reported we were in discussions with seven existing users looking to expand. We are pleased to report that we completed five of those expansions and are currently in discussions with 12 other users looking to increase their footprints representing 70,000 square feet of new leasing activity. Of the 12 users looking to expand, 11 are technology firms. At Toronto House, we are very pleased with our residential leasing efforts as we are almost 50% leased. In Kitchener, we observed an increase in leasing activity. Three existing users recently expanded and we are in active discussions with a tech user looking to lease upwards of 50,000 square feet. We are also in advanced stages of a renewal with a large tech firm that represents the largest maturity in 2026 across our national portfolio. In Calgary, we continue to see an increase in the size of mandates in the market as there are currently six prospective organizations with requirements in excess of 10,000 square feet evaluating options in our portfolio, including three groups representing a total of 30,000 square feet with which we are in advanced discussions. At Vintage Towers, we experienced a large known non-renewal totaling 45,000 square feet in Q2 that we have been communicating for several quarters. We're pleased to report that we have backfilled two-thirds of the space and continue to see strong directivity on the remaining availability. Vancouver remains the strongest leasing market in Canada. There are presently eight users with mandates between 10,000 and 50,000 square feet evaluating space in our portfolio, including three groups representing a total of 130,000 square feet with which we are in advanced discussions. We are also engaged in discussions with four existing users looking to expand representing 40,000 square feet of leasing activity. At 400 West Georgia, we are now fondly in agreement with an education user for the remaining vacant space totaling 64,000 square feet to expect possession in September 2025. While the uncertain macroeconomic may impact leasing activity in the near term, we remain confident in our ability to outperform the market in each city due to our concentration of distinctive urban workspace in many rich urban environments and the strength of our operating platform as validated by our net promoter score, which is 150% higher than our peer average. I will now turn the call back to Cecilia.

Thanks, JCP. Before we turn to questions, I want to reiterate my confidence in our portfolio and our team. Our urban portfolio is not only unique, but strategically positioned for the future. I say this as Canadian cities are increasingly concentrating into centers of creativity, innovation, and opportunity. And urban workspace plays a critical role in that, making allies well positioned to meet the growing demand. Our team is focused, patient, and confident that our fundamentals will ultimately be recognized. We now be pleased to answer any questions.