Allied Properties Real Estate Investment Trust

ahead. Thanks, John. Good morning and welcome to our Q3 conference call. I'll highlight our progress towards 2025 goals and what we're focusing on going forward. Nan will do the same from a financial perspective. JP will outline the positive leasing momentum by urban market. 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 through leasing, development completion, and strengthening our balance sheet. Market fundamentals continue to improve, as evidenced by the higher level of leasing activity, including the highest number of square feet of expansions in our portfolio in the last five years, increasing large format space mandates, and improving conversion rates. Our capital structure, specifically the temporarily higher level of debt we took on to complete development projects, put downward pressure on results in the quarter. While our portfolio remains resilient and strategically positioned to benefit from improving market dynamics, it will take us beyond year end to achieve 90% occupied and leased area in our targeted 10 times debt to EBITDA. We remain focused on those as milestones toward continued improvement in our metrics. First, leasing and operational results. Our leased area held in the quarter. We leased 882,000 square feet across the rental and development portfolios. Conversion from tours to signed deals was high at 81%. JP will elaborate on these metrics. These signs of improving operating fundamentals give us confidence that while we're not getting to our ambitious target of 90% occupied and leased area by this year's end, we'll make progress going forward. Second, we advanced on our development and upgrade activities. M4 in Vancouver is now 90% leased, driven by Netflix's expansion in the quarter. Fixturing is underway and rent commences in early 2026. At King Toronto, we're heading towards successful completion by the end of 2026. Securing Whole Foods as the anchor of the commercial component is facilitating the lease up of the remaining space. We're currently in various stages of negotiation with seven retailers. Glazing continues on the fourth level, and glazing for the fifth level will begin to arrive next week. It's truly a distinctive project that will elevate the entire King West Village neighborhood when it's completed next year. All the development and upgrade projects currently underway are on track for completion by the end of 2026. Last, but certainly not least, are balance sheets. While we won't achieve our target of getting to 10 times debt to EBITDA by this year end, we're increasing our steps to get there. We've added Toronto House and Calgary House to our disposition pipeline. Those dispositions, together with the repayment of the 150 West Georgia loan in the first half of 2026, will strengthen our balance sheet as we'll be able to pay off more debt and moderate interest expense, accelerating progress going forward. We're improving liquidity and positioning Ally for the next phase of growth with a stronger foundation. Nan will now elaborate on our financial results and balance sheet management. Thank you, Cecilia. Good morning, everyone. Thank you for joining us today. I'll take a few minutes to highlight our financial performance and the continued efforts we're making to strengthen our balance sheet. Operating fundamentals are improving. Our occupied and leased area didn't increase at the pace we expected in the quarter. Along with elevated interest expense, slower lease finalization put downward pressure on our results. We remain cautiously optimistic as market fundamentals continue to evolve in our favor. Occupancy was impacted by non-renewals, including Entertainment One at 134 Peter Street in Toronto. They consolidated space following their acquisition by Lionsgate, a decision that was made in 2023. More importantly, we offset much of this with new leasing in our portfolio, which drove our leased area from 87.2% to 87.4%. This will translate into earnings as tenants take occupancy. Our same asset NOI was 0.2% up for the quarter, supported by development completions, including 20 bride-ups, 700 center bares, and 1,001 rubber barrasas. Our results included a one-time lease termination fee of $2.1 million related to a space that was on the sub-lease market. The termination was strategically aligned with an expansion of an existing tenant in the building, resulting in no downtime, higher rental rates, and an incremental three-year lease extension, thereby preserving future recurring revenue. Our interest expense was higher due to timing of our dispositions. We expect our interest expense will decrease upon the completion of our disposition program and the receipt of the 150 West Road Term loan receivable. Excluding the sale of our rental residential assets, we expect to generate approximately $500 million from dispositions and the 150 West Georgia loan monetization. This is expected to close between the remainder of 2025 and first half of 2026. All these proceeds will be used to retire debt. Overall, despite pressure from higher interest expense and longer lease-up timelines, we maintain stable operating fundamentals, solid liquidity, and continued progress towards our long-term balance sheet targets. Turning to the balance sheet, liquidity remains strong at $903 million, up $168 million from the prior quarter. About 89% of our portfolio is unencumbered, giving us exceptional flexibility. During the quarter, we completed the extension of our unsecured facility to September 2028 and expanded our syndicate to include six major Canadian financial institutions. This highlights the support we have from our financial partners. We also updated our green financing framework, which was initially released in 2021 to ensure alignment with best practices. Subsequently, we completed the issuance of our Series N debenture for $450 million, which was five times oversubscribed with a six-year term at a rate of 4.6%. This brings our total issuance for the year to $1.3 billion, of which $900 million was issued under the green financing framework, further highlighting the ongoing support that we have from the debt capital markets. Proceeds from this issuance were allocated to the retirement of variable rate construction debt and to pay down a portion of the $250 million term loan due in early 2026. At the same time, we extended the remaining $100 million of the term loan by two years to 2028 and retain the existing interest rate swap on the full $250 million at a favorable rate of 3.5%. In August, DBRS completed their annual review and maintained our credit rating. We remain committed to maintaining our investment rate rating, and our ongoing disposition initiatives will allow us to reduce leverage to our targeted levels over time. We have taken proactive steps to address most of our upcoming maturities for the end of 2026. We'll repay the upcoming 600 million debenture using proceeds from our dispositions and the monetization of 150 West Georgia loan receivable. Overall, this quarter was built on strong leasing momentum, strength and liquidity, and proactive management of upcoming debt maturities. All of this positioned us well for long-term value creation. Thank you. And with that, I'll pass it over to JP to discuss leasing.

Thanks, Nan. Over the past number of months, we've observed improving operating fundamentals throughout our portfolio, evidenced by four trends. One, an increase in leasing activity. Two, an increase in large format space requirements. Three, an increase in expansion activity among existing users. and four, an increase in our conversion rate. Our leased area remained stable in the quarter and outperformed each of the urban submarkets in which we operate, except for Vancouver, where we've made good progress in addressing acquired vacancies. In Q3, we completed 882,000 square feet of leasing activity, including 500 and 12,000 square feet of new leasing activity, the most since 2020, of which 426,000 was in our rental portfolio and 86,000 in our development portfolio. This represents an 81% conversion rate, the highest since 2020. The new leasing activity in the quarter included 187,000 square feet of expansions, a 150% increase compared to the previous quarter and the highest since 2020. The impact of our new leasing activity was partially offset by non-renewals, including a large known non-renewal due to M&A activity that occurred in a prior year and not a reflection of current day space requirements. While the number of tours was lower compared to the prior quarter, the average tour size more than doubled, and the number of tours with requirements greater than 25,000 square feet increased 83%, driven by touring activity in the modern segment of our Toronto and Montreal portfolios. Industries represented by touring organizations were technology, financial services, media, professional services, education, and medical uses. We currently have 1.3 million square feet of leasing activity under negotiation or at the prospect stage, of which 970,000 square feet represents new leasing opportunities. Of the new leasing activity underway, 300,000 square feet is under negotiation and 670,000 square feet is at the prospect stage. Included in the leasing activity underway is 170,000 square feet of possible expansion activity, as there are currently 17 existing users considering expansions. I'll now provide a brief overview of each market. In Montreal, we're currently working on 370,000 square feet of new leasing activity, of which 100,000 is under negotiation and 270,000 is at the prospect stage. Most of our vacancy in Montreal is concentrated at La Cité, a portfolio of assets located between Old Montreal and Griffintown, comprising eight buildings totaling more than 1.2 million square feet. We've seen a material increase in leasing activity at La Cité in the second half of the year. In Q3, we completed 100,000 square feet of new leasing and currently have 100,000 at the prospect stage. The upgrade activity, 1001 Robert Brassa continues to attract large and sophisticated users. In Q3, we completed 150,000 square feet of new leasing and currently have 130,000 at the prospect stage. The new leasing completed in Q3 included the expansion of an existing user by 100,000 square feet to accommodate their utilization requirements by backfilling much of the National Bank sublease space. In Toronto and Kitchener, we're currently working on 550,000 square feet of new leasing activity, of which 165,000 is under negotiation and 385,000 is at the prospect stage. In Toronto, there are several large organizations looking to sublease the Shopify space at the well. Shopify is currently finalizing a sublease for a large portion of their premises with a user that will be new to our portfolio. The remaining demand exceeds the balance of space available materially. In Kitchener, Google renewed its lease of 195,000 square feet in the Brighthock Block, a large heritage complex in which we own 50%. Google represented our largest lease maturity in 2026. In Calgary, we're currently working on 30,000 square feet of new leasing activity, of which 20,000 is under negotiation and 10,000 is at the prospect stage. In Vancouver, we're currently working on 20,000 square feet of new leasing activity, of which 15,000 is under negotiation and 5,000 is at the prospect stage. At 400 West Georgia, we finalized a long-term lease of 49,000 square feet with a global educational institution, subject only to routine regulatory approvals expected before the end of November. The asset is now 96% leased. At M4, we finalized the lease expansion of 26,000 square feet with Netflix, bringing Netflix's footprint to 137,000 square feet. The asset is now 90% leased. Our leasing performance in Q3 reflects improving operating fundamentals driven by higher physical utilization and diminishing supply of distinctive urban workspace, resulting in an increase in leasing activity, rising demand for large format space requirements, increased expansion activity among existing users, and improved conversion rates across our portfolio. I will now turn the call back to Cecilia.

Thanks, JP. Before we turn to questions, I want to reiterate my confidence in our portfolio and our team, especially as market dynamics are improving. We're staying focused on leasing, paying down debt, and completing development projects. Our targets are in sight and are achievable. With our offering of both heritage and modern workspace, our urban portfolio is unique and strategically positioned for the growing demand, and the lack of new supply will highlight this. 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 Allied well-positioned to meet the growing demand. Our team is focused patient, and confident that our fundamentals will ultimately be recognized. We'd now be pleased to answer any questions.