Allied Properties Real Estate Investment Trust Aktie

Thank you. Hello everyone, thank you for joining us and welcome to the Allied Properties REIT Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Cecilia Williams, President and CEO. Cecilia, please go ahead.

Thanks, Ben, and good morning, everyone. Welcome to our Q2 conference call. Please note that certain statements we make during the course of this conference call that are not statements of historical facts may constitute forward-looking information and forward-looking statements about future events or future performance. These statements are based on management's current expectations and are subject to risks, uncertainties, and other factors that may cause actual events or results to differ materially from historical results and or from our forecasts, including those described under the heading Risks and Uncertainties in our 2025 Annual Report.

Material assumptions underpinning any forward-looking statements we make include those described under the heading Forward-Looking Statements in our 2025 Annual Report. In addition, certain non-IFRS financial measures may be discussed on this call. References to non-IFRS financial measures are only provided to assist you in understanding our results and performance trends and may not be appropriate for any other purpose. For further discussion on these matters, please refer to our 2025 Annual Report under the heading Non-GAAP Measures.

Turning to our prepared remarks before we take questions. Allied is entering a new phase. After more than a decade of investing in and developing our portfolio, we're focused on realizing its earnings potential through leasing execution, disciplined capital allocation, and a stronger balance sheet. We're also continuing to strengthen our portfolio by selectively disposing of assets. These actions improve financial flexibility while creating a higher-quality portfolio positioned for long-term growth and value creation. This morning I'll focus on three areas: operating fundamentals, the balance sheet, and the financials. J.P. will cover leasing by market in more detail.

Starting with leasing and operating fundamentals. The office market is entering a different phase than we've experienced over the past five years. Demand for high-quality urban workspace is improving while future competitive supply continues to contract. These fundamentals increasingly favor the portfolio we've built over the past decade and are contributing to our improving performance. Our operating business continues to strengthen, and the clearest evidence of this is that while Allied represents 5.5% of the office inventory in our market, we've captured 7.4% of leasing activity year-to-date.

Leasing and occupancy both finished ahead of our expectations with the portfolio ending the quarter 84.4% occupied and 86.7% leased. We completed 522,000 square feet of leasing during the quarter and our new leasing pipeline is now 42% higher than the beginning of the year. These are important leading indicators that suggest our portfolio is positioned well for the next phase of the market. Financial flexibility continues to improve. We completed or secured approximately $321 million of dispositions and reduced net debt-to-EBITDA to 12x. Those actions keep us on the path toward our deleveraging objectives.

Turning briefly to the financial results. It's important to distinguish between the underlying performance of the business and certain accounting and one-time items that affected reported earnings this quarter. Operationally, the business performed largely as we expected. Same-asset NOI declined 12.6% versus the 10% we had expected. This was lower due to a one-time retroactive property tax assessment. FFO per unit was $0.24 and AFFO per unit was $0.17, in line with our expectations, and both reflect the non-recurring property tax assessment together with lower-than-expected interest income during the quarter.

Given recent market transactions, we recorded a fair value reduction on our investment property. The adjustment reflects higher market discount rates and capitalization rates rather than any fundamental change in the quality of our portfolio. Importantly, our broader outlook remains substantially unchanged. While we've updated our same-asset NOI outlook to reflect capital reallocation toward development completion and near-term leasing, our expectations regarding dispositions, occupancy, deleveraging, and the overall direction of the business remain intact.

Before I conclude, I want to mention how pleased we are to welcome Craig MacIntyre, who joins Allied as Senior Vice President and Chief Financial Officer. Craig spent nearly two decades in capital markets and corporate finance, most recently at CT REIT and Choice Properties.

Thanks, Cecilia. I'll start by providing a summary of our leasing performance, followed by market commentary and our leasing pipeline along with the associated risks, and conclude with observations on the market and our evolving approach to leasing. Starting with leasing performance. As Cecilia highlighted, in the first half of 2026, we captured strong market share. We completed 7.4% of total new leasing activity, while representing 5.5% of the total rental stock in the markets in which we operate. This underscores the quality of our portfolio and strength of our operating platform.

Equally encouraging, our new leasing pipeline has increased 42% since the beginning of the year, demonstrating continued improvement in operating fundamentals and a favorable response to the new initiatives introduced at the end of Q1 to increase engagement with the brokerage community and make it easier for small to mid-sized organizations to lease space in our portfolio. Our portfolio continues to outperform the market in Montreal, Toronto, Kitchener, and Calgary. Our Vancouver portfolio is 100 basis points lower than the market because of higher vacancy in Gastown.

Our occupied and leased area in Q2 ended slightly lower than Q1 at 84.4% and 86.7% respectively. While down moderately from Q1, occupancy ended higher than our outlook of 82% because of earlier-than-anticipated occupancy from leasing activity. To achieve our occupancy target of 84% to 86% by the end of the year, we need to lease between 1.05 million and 1.35 million square feet in our rental portfolio through new leasing and renewal activity that impacts occupancy in 2026. This is consistent with the volume leased in 2025.

To date, we've leased 633,000 square feet against our target, and there have been no material unanticipated non-renewals or terminations that would alter our objective. We expect occupancy will be flat or down slightly in Q3 because of known non-renewals that won't be fully offset by the timing of new lease commencements, and reaffirm our outlook of 84% to 86% occupancy by the end of the year. In Q2, we completed 522,000 square feet of total leasing activity, in line with the level of leasing activity in Q1. 463,000 square feet of leasing activity occurred in the rental portfolio, and 59,000 square feet occurred in the development portfolio.

Within the rental portfolio, 105,000 square feet represented new leasing, and 358,000 square feet represented renewals. Total leasing activity in the first half of 2026 was in line with H1 2025, both in square feet and number of transactions, and our conversion rate for new leasing was 29%. Leasing activity in Q2 was concentrated in our heritage workspace segment, which accounted for 71% of total leasing activity. Our heritage and modern portfolios are 87% leased, and our flex portfolio is 78% leased. New leasing spreads, excluding our flex workspace segment, increased 8% when comparing the ending to starting base rent and 9% when comparing average to average.

Average total leasing costs year-to-date are $6.27 per square foot per annum, compared to $7.01 in 2025. Average leasing costs for new leases are $9.50 per square foot per annum and $3.76 for renewals. The composition of our leasing profile remains anchored by professional services and TAMI users, which collectively represented more than three-quarters of the transaction volume in the first half of 2026. Our retention and replacement rate was 77%, slightly higher than our forecast for Q2. The average rental rate increased 1.3% when comparing the ending to starting base rent and 7.8% when comparing average to average, which was in line with our forecast.

In 2025, we successfully renewed Google at the Breithaupt Block in Kitchener, which addressed our largest 2026 maturity, representing 97,000 square feet at our 50% share. Our largest known non-renewal in 2026 is Sun Life at our de Gaspé portfolio in Montreal, representing 56,000 square feet, expiring at the end of August. We are in advanced discussions with a TAMI user to backfill up to 45,000 square feet of the Sun Life space with lease commencement in Q4 2026 or Q1 2027. We are forecasting a replacement and retention rate of 69% in 2026.

In 2027, our largest known non-renewal is SQI, a Crown corporation of the Province of Quebec at 747 Square Victoria. As part of a broader public sector consolidation, SQI will return 18,000 square feet in September 2026 and approximately 100,000 square feet in December 2027. We are actively touring users with 2028 requirements through the SQI space. There are no material non-renewals known at this time for 2028. Lastly, sublease availability increased by 30 basis points relative to Q1 and is 2.7% of GLA. The weighted average lease term of space available for sublease is five years, which reduces the risk of imminent direct vacancy and loss of economic productivity.

Moving to our leasing pipeline. We currently have 1.7 million square feet of leasing activity underway. This is the largest our pipeline has been since we began reporting this metric, and it comprises 1 million square feet of new opportunities and 717,000 square feet of renewals. Of the new activity, 632,000 square feet is at the prospect stage, and 394,000 square feet has progressed to the offer stage. Our total leasing pipeline has increased 33% since the beginning of the year, and our new leasing pipeline has increased 42%. For context, we averaged a pipeline of 1.3 million square feet in each quarter in 2025 and 950,000 in 2024.

Turning to market commentary. The increase in our leasing pipeline reflects improving fundamentals. In Q2, the Canadian office market achieved a major milestone, marking a full year of sustained recovery. For the first time since the start of the pandemic, national office leasing recorded four consecutive quarters of positive net absorption supported by: one, increased demand resulting from higher physical utilization as organizations continue to revert to an office-centric model; two, a scarcity of premium availability in AAA assets, which nationally sit at 9.4% vacancy, just 100 basis points higher than vacancy in Q1 2020, which is driving an increase in demand for Class A assets in and around the CBD; three, national downtown space remains on par with 2018 levels and has now dropped below 10 million square feet; and four, a decline in total construction, which has fallen to a 22-year low.

As a result, no new urban supply is expected in the near term. Despite the improvement in operating fundamentals, bifurcation is becoming a structural reality across the country. Premium assets in the CBD are benefiting from accelerating rent growth and contracting concessions, bolstered by the absence of new supply. Lower-tier inventory remains under pressure, requiring aggressive incentives to secure and maintain tenant interest. We continue to see positive leasing momentum in our core concentrations of downtown West Toronto and downtown South Montreal. This trend began in the second half of 2025 as AAA assets leased and demand extended to Class A buildings in and around the CBD.

Leasing activity in Kitchener remains slow, as demand is currently concentrated in the suburban market. Calgary's recovery remains tempered by consolidation in the energy sector. The market is benefiting from structural supply-side corrections resulting from conversions, including the Beltline where our portfolio is concentrated. And in Vancouver, Gastown and Yaletown continue to lag the financial district, though we're starting to observe an improvement in tour activity in Yaletown. We continue to believe the path to market stabilization will unfold in two phases. Phase one is underway and driven by higher physical utilization, flight to quality, and return-to-office mandates.

Phase two will be driven by improved economic output and employment growth in office-using sectors, propelling further expansion and fostering demand for new entrants to the Canadian market that have been largely absent for five years. While phase one momentum was robust in the second half of 2025 and has continued into the first half of 2026, we are monitoring the depth of driven demand and its ability to sustain positive absorption going forward. The Bank of Canada's recent economic update suggests a slow but constructive normalization in economic conditions, which should ultimately support office-using employment and incremental demand for high-quality workspace in our core markets.

However, uncertainty remains elevated with key risks tied to the evolving Canada-U.S. trade framework, slower population growth, and war-related supply disruptions. Lastly, an update on management's new approach to leasing following the organizational change announced in February. In March, we introduced incentives to increase engagement with the brokerage community by offering tour bonuses, commission bonuses for new leasing, and accelerated commission payments. We also introduced initiatives to make it easier for small to mid-sized organizations to lease space in our portfolio by offering short-form gross rent leases, end-to-end construction oversight, and build-out space.

These tactics aim to reduce friction in the leasing process and align with how tenants screen, tour, and shortlist properties. By removing obstacles related to fit and readiness earlier in the process and investing in areas where tenants perceive the most risk, specifically speed to transact, price certainty, and space delivery, we're able to further differentiate our product. These new initiatives have been well received as evidenced by the increase in our leasing pipeline, demonstrating our willingness to be more flexible in growing occupancy. I will now turn the call back to Cecilia.

Thanks, J.P. Six months ago, we outlined a clear operating plan. Since then, we've been executing against it. Leasing is ahead of our expectations. The balance sheet continues to strengthen. Market fundamentals are gradually improving. Most importantly, the business itself is becoming simpler, more focused, and increasingly driven by recurring revenue. With that, Ben, we'd be pleased to take questions.

We will now begin the question and answer session. [Operator Instructions] Your first question comes from the line of Jonathan Kelcher with TD Cowen. Jonathan, your line is open. Please go ahead.

First question, just on the $760 million of write-downs, was that consistent across the heritage, modern, and flex portfolios? And how much of that was related to the assets held for sale?

Some of it was related to the assets held for sale, but it was really the disposition that we completed in the quarter, creating new price points, and we felt it was prudent to apply across the portfolio. It was primarily Toronto and Montreal with a little bit of Vancouver.

An amount on Toronto House and Calgary House as well. Okay, so just so we think about it, like almost every property got hit a little bit, I think that's a fair comment. Okay. Secondly, on the leasing, the occupancy was a couple hundred basis points better than the 82% you guided to for Q2, but you didn't change your full-year target. Is that just you guys being a little conservative, or should we be thinking about you guys being closer to the higher end of that 84% to 86% range?

Jonathan, at this time we are not revising our outlook. We'll continue to evaluate it over the course of the year.

Okay, fair enough. And then just lastly, for 1185 West Georgia and 1010 West Sherbrooke, what were the cap rates on those transactions?

The cash yield on the assets that have closed is 3.4%. And when we include 1010 Sherbrooke, which is firm, the cash yield on our disposition program to date is 4%.

Okay, thanks. I'll turn it back.

Thank you. Your next question comes from the line of Bradley Sturges with Raymond James. Brad, your line is open. Please go ahead.

Just going back to the discussion around occupancy. I think you said you're expecting some non-renewals in Q3. I just want to clarify how much space at this point are you expecting to get back by the end of September?

Brad, we have 545,000 square feet that matures over the balance of the year. We expect approximately half won't renew. The largest known non-renewals in 2026 occur in the second half, and specifically Sun Life will occur in Q3. And when we previously forecast, it was heavily weighted towards Q4, and that's why you have the disconnect in timing. And so we anticipate occupancy will be flat or slightly down next quarter as a result.

Got you. That's helpful. Just as the leasing pipeline builds and it sounds like you're getting traction with new prospects, how should we think about lease negotiation timelines and your ability to convert prospects into signed leases? Have you seen any indicators of improvement in some of those KPIs?

Improvement in some of those KPIs? It's still taking longer than we would like, Brad. Our conversion rate was 29% in the first half of the year, and that's slightly lower than 2025, but it also reflects the increase in our pipeline over the past quarter or so. We're certainly encouraged, as you identify, with our increased leasing pipeline, specifically our new leasing pipeline has increased 42%. What we find is because there's not a lot of new entrants to the market, we're often competing with incumbent landlords who are offering renewal terms.

Case in point, in the past 30 days, we lost out on three transactions where we were one of two finalists, the other all being incumbent landlords offering renewals. Those were here in Toronto and amounted to about 75,000 square feet, and so we continue to see protracted leasing timelines. We're encouraged by our leasing pipeline, though, and typically we're competing with incumbent landlords for renewals who ultimately offer aggressive terms to try and retain tenants. So we certainly hope as the scarcity in premium availability continues to diminish that those timelines contract, but we haven't seen that yet.

Okay. Just last question, just trying to get an update on—I understand where you are in the process on selling Toronto and Calgary House. Are you still expecting you think you can complete something by year-end at this point, and how, I guess you took some write-downs on the assets, how do you think about further revisions on pricing expectations for those two assets?

Our outlook in relation to the disposition of those two assets, Brad, remains intact. We are finalizing an agreement of purchase and sale for Toronto House, and we're not prepared as a result to comment further on that disposition. We launched the sale process for Calgary House in June. We've been very pleased with the response, and given the state of that process, we won't comment further on that asset either.

Okay. Sounds good.

Thank you. Your next question comes from the line of Lorne Kalmar with Desjardins. Lorne, your line is open. Please go ahead.

Maybe just going back to the write-down. I was just sort of wondering, is this kind of the last big write-down or should we expect more to come? And the reason I ask is because in Toronto, for example, I think the IFRS cap rates are still roughly like 100 basis points below where you've seen some core Class A office properties transact over the past six months. So just wanted to get your thoughts there.

We're very comfortable with where our IFRS valuations are at this time.

Okay. And then in, I think it was on the Q1 call, we talked about the King Toronto loan and you mentioned it wasn't credit-impaired and then obviously this quarter it was. Can you just maybe explain the change in circumstances that led to it being credit-impaired?

There was a Westbank entity, not one that is related to any of our loans, but within the Westbank group of companies, let's say, that did have a financial situation that resulted in us feeling it was prudent to credit-impair the loan with us.

Okay. And then I guess just like sticking with that, is sort of a $3 million, $3.5 million reduction in quarterly interest income the correct way to think about the impact of the impairment?

Yes, yes, it is.

Okay, okay. And then just the last one on the other Westbank situation you guys have going on at 150 West Georgia. There was, I think, an announcement from TELUS. They were going to be potentially working with Westbank to develop a data center. I'm just wondering if you'd give us any update around that and the $125 million, I believe that was baked into the outlook and how comfortable you are with repatriating that, and then maybe also what your expectations are for when the loan matures at the end of the year?

We don't have an update on 150 West Georgia at this time, Lorne. As soon as we do, we'll be in a position to provide more color.

Okay, thank you very much.

Thank you. Your next question comes from the line of Mario Saric with Scotia. Mario, your line is open. Please go ahead.

Maybe for J.P., you mentioned the 29% new lease conversion in the first half of this year, which is I think similar to last year per your comments. If we went back on average post-COVID and maybe if you have the data even pre-COVID, how about 29% compared to historical average?

Mario, we don't have that data pre-COVID. What I can share is our conversion rate in 2025 was 56%. However, our new leasing pipeline at that time was much smaller than it is today.

Okay. And then just on the recorded leasing allowances and commissions, I think it was $23 million this quarter. Just from an accounting perspective, is the $23 million related to the 520,000 square feet that was leased this quarter, or is there a timing difference that we should be aware of?

It reflects, Mario, leases that commenced in the quarter.

Okay. And then just regarding King Toronto, is it fair to say that the risk of any further write-downs has decelerated quarter-over-quarter?

Yes, that's a fair statement.

Okay, that's it for me. Thank you.

Thanks, Mario. Your next question comes from the line of Sairam Srinivas with ATB Capital Markets. Sairam, your line is open. Please go ahead.

Just going by your comments on OPEX cost and the impact in the quarter, there was a bit of a drag on operational costs this quarter as such. Do you expect the drag to sustain, and how long should we be thinking about the drag on the cost as such?

Do you mind repeating that? We had a hard time hearing.

Sorry, Cecilia. Just checking to the operating cost drag you saw in the quarter, I'm just trying to wonder like what the timeline of the drag looks like, and when we should probably expect that drag to kind of decrease.

What I can share is that over the past five-plus years, our operating margin has been in the mid-50s. It's lower today, but our three-year outlook contemplates us returning to an operating margin in the mid-50s.

Sorry, I'm sorry. And maybe just looking at non-renewals in the quarter, is there a particular reason why you saw these renewals and is there a common trend of such tenants not essentially wanting to renew at this point in time?

Again, apologies, we're having a hard time hearing. Is your question in relation to non-renewals in the quarter?

Yes, and if there's any particular reason for the non-renewals.

The largest non-renewal in the quarter was a tenant relocating in Montreal to 1001 Robert-Bourassa. And so it was a circumstance where they were admittedly improving the quality of their workspace, and that represented approximately 40,000 square feet. The balance of the non-renewals were relatively immaterial on an individual basis, and there are no overarching trends associated with those non-renewals.

That's good. Thanks, J.P. I'll turn it back.

Your next question comes from the line of Tal Woolley with CIBC Capital Markets. Tal, your line is open. Please go ahead.

Just on King Toronto. Can you maybe give us an idea of like what the sales plan is for the rest of the units that are still available? Will there be more of an effort closer to completion, or are you really still trying to move all those units now?

We have a customer care team that will be engaging with the current purchasers, but we also have a sales team that will be working on the remaining 8% of units to be sold. So that's an effort that will be taking place over the next 18 months.

And can you remind us sort of like what your assumptions are for how the closing of that building will go? Do you have like an estimated rescission or default rate, any concerns around that?

We have a 30% default rate that has been included in our financial statements. That took place earlier this year. And so we will adjust that as necessary going forward.

Okay, and the default rate is captured already in the fair value movement for the inventory on the balance sheet, if I'm understanding it correctly?

Correct.

Okay, great. And then with Craig joining, any chance that there will be a change in how you present the financial outlook, any of the targets, or do you expect it to be a continuous transition on that front?

A continuous transition, Tal.

Perfect. And then I guess just lastly, rent growth has still sort of been a little bit elusive, it seems in the markets, at least looking at the brokerage reports. Maybe you can just talk to sort of like prior experience when, what's the occupancy level you kind of need in a building or in a market, or the balance of power to sort of start to shift towards the landlords on rent growth.

Now, we typically, as a general rule, consider 90% to be the threshold where the dynamics in these negotiations evolve and landlords can expect to experience more rent growth.

Okay. And is there a... I'm trying to think of a way to ask this. Where are sort of the best nodes in your portfolio for occupancy right now? And where are the ones that, you know, you're needing more work? I can sort of guess based on, you know, sort of aggregate numbers, but yes, just wondering if you can talk about where the competition is most intense and least intense right now.

80% of our leasing volume, Tal, is concentrated in Toronto and Montreal, primarily downtown West Toronto and downtown South Montreal, which is where we're seeing momentum as demand extends out from the CBD. As the CBD AAA assets fill up, which has been a trend that started in the second half of 2025 and continues. In Toronto, you're seeing the expansion of the demand radius both east and west of the CBD, though there is a bias for the west. We're also encouraged by the increase in our leasing pipeline in Calgary and Vancouver in the second quarter. Admittedly, those two markets represent a much smaller percentage of our overall GLA.

Where we continue to see softer demand dynamics is in Kitchener, is along the Bloor Street corridor in Toronto, in Mile End and Mile-Ex in Montreal, and in Gastown and Yaletown in Vancouver. So as I remarked earlier, we're encouraged by the increasing activity in Yaletown in the quarter. The other thing I'll comment on, Tal, is we saw a 79% increase in tour activity in our top 10 assets by vacancy, and admittedly the primary drivers of that increase were among the assets that probably caused me the greatest amount of heartburn. So we're encouraged by our increasing leasing pipeline. We're encouraged by the increase in tour activity, and we're encouraged specifically how that pipeline and tour activity is concentrated.

And so you feel right now like the changes you did make on leasing strategy are sort of having the intended effect?

Yes, I think that's reflected in our new leasing pipeline. We saw a 39% increase in tours led by brokers in the quarter. We're seeing a positive response amongst small to mid-sized organizations through our efforts to reduce friction in the leasing process. So we're very pleased with the initial response associated with those initiatives, but we recognize given the longer lead times associated with these negotiations, the full impact of those efforts will be felt in the second half of 2026 and first half of 2027.

Okay, that's great. Thanks very much, everybody.

Your next question comes from the line of Pammi Bir with RBC Capital Markets. Pammi, your line is open. Please go ahead.

I think you previously indicated in your guidance that the interest income would for the most part really be ending in the first half of the year. So I just wanted to confirm that that is still the case and that we really shouldn't be expecting much interest income through the back half.

That's right, Pammi. That's confirmed.

Okay. And then just with respect to the FFO guidance range, you kept it intact, but with the cutback in the same-property NOI growth outlook. I guess at this stage, does that sort of imply that you're, or the way you're thinking about it at least, that your FFO for the full year is probably tracking toward the lower end or is, I guess really what I'm getting to is the confidence in being able to hit that, at least the lower end of the range, based on what you've done so far through the first half of the year.

We're still confident that we'll come in the range for FFO and NOI, but it would be on the lower end. That's right.

Thanks very much. I'll turn it back.

Your next question comes from the line of Matt Kornack with National Bank of Canada Capital Markets. Matt, your line is open. Please go ahead.

Just with regards to the occupancy, Q3, sorry, Q2, it sounds like you came in ahead of expectations. Is Q3 kind of where you expected it to be as well, or is there a potential upside revision there? And what would have driven kind of the relative outperformance on occupancy?

The outperformance in Q2, Matt, was a result of earlier-than-anticipated lease commencements associated with leasing activity. Q3 is largely in line with our expectations, recognizing that a majority of the occupancy gains are contemplated in Q4.

Okay, so there was a bit of a pull forward into Q2 from Q3 at the end of the day?

That's a fair way of looking at it.

Okay, and then as you have discussions at this point, and I think you kind of hinted at it earlier in the call, but is quality more important or is location the biggest driver at this point in terms of what tenants are looking for? And then maybe a little bit of additional color in terms of, you mentioned that you had some competition from renewals. Would those have been renewals at properties in the market that you were trying to, or submarket that you were trying to get a tenant to move to, or were they in a different part of the city?

Great questions, Matt. To start with where you ended, it was a little bit of both. Two of the three transactions that we were pursuing relocated in buildings a little bit closer to the core. One I would characterize was in the same submarket. As I remarked earlier, we are often competing with incumbent landlords offering aggressive renewal terms, particularly in the absence of new entrants to the market. We often are successful in our efforts to attract tenants that are already in the market to relocate. However, sometimes the friction associated with relocation is just too much, and that was the case in the three instances that I made reference to earlier.

And then with respect to quality and location, certainly proximity to public transit and specifically public transit hubs is an attribute that many organizations seek. We are seeing a bifurcation in the market that I think in part reflects that, where AAA assets and Class A assets are in demand. There's ever-diminishing availability and that's putting upward pressure on rents and moderating concessions as a result, where Class B and C assets continue to struggle relative to higher-quality assets. At the end of the day, knowledge-based organizations are seeking to offer their team members really great workplace experiences to help attract, motivate, and retain exceptional talent.

And we think our portfolio is well positioned in that regard in many rich urban areas. And as we think about infrastructure projects in Toronto, Montreal, and Vancouver over the next five years and how we are positioned relative to those, we think the attractiveness of our portfolio in relation to specific proximity to public transit will only increase, recognizing that we have almost 80 properties in Toronto that will become within a 10-minute walking radius of the Ontario Line. We have approximately 12 properties in Montreal that will be within a 10-minute walking radius of the REM. And we have a few properties along the Broadway corridor which will benefit from that infrastructure project.

Makes sense, and it looks like it's maybe going to be completed on time. Not sure about on budget, but we'll see. Fair enough. And then last one for me, just on the disposition program, there was a fairly sizable Toronto component to what you disposed of in the quarter. Can you give us a sense as to how you're thinking or what matrix you're looking at in terms of what you're disposing of at this point and how these assets may fit that desire? And then I guess the bulk of what is still remaining is Toronto House and Calgary House. But how should we think about beyond that and what you potentially look to dispose of?

The assets, Matt, that we've sold to date reflect non-core, lower-yielding, geographically isolated properties and are part of a broader and ongoing effort to continuously optimize our portfolio. In the context of expanding our disposition program or continuing it this year or in the years to come, it will be consistent with our effort to continually improve the overall quality of our portfolio so we can most effectively and profitably serve knowledge-based organizations.

Okay, makes sense. Thanks for the update.

Thanks, Matt.

Your next question comes from the line of Gaurav Mathur with Green Street. Gaurav, your line is open. Please go ahead.

Just looking at the AFFO payout ratio, which is now above 100%, we're just wondering if you know how sustainable that is and if that's prudent from a capital allocation perspective.

Yes, we review the distribution every quarter, Gaurav. In the near term, we are expecting that AFFO payout ratio to be modestly above 100% or above 100%, but we do expect it to improve as proceeds from our dispositions support deleveraging and the lease-up activity that J.P. alluded to contributes to the economic productivity of the portfolio.

Right, okay, and then just last question from me. At this time you stated that you're very comfortable with where your '26 outlook and '27, '28 outlook is, but would you say that that's almost a done thing going into half the year, or could there be a chance that there may need to be some sort of movement around those numbers?

It'll be something that we provide an update on every quarter.

Right. Thank you very much. I'll turn it back to the operator.

Thank you. Your next question comes from the line of Mario Saric with Scotia. Mario, your line is open. Please go ahead.

Just one follow-up for me. J.P., you characterized the office demand in two phases, phase one and phase two. Some of the factors that you highlighted in phase two included CUSMA negotiations, the Ukraine war, and population growth. How sensitive is the year-end 84% to 86% target occupancy? How sensitive is that to phase two factors resolving in a positive light?

Mario, we think there remains sufficient depth in phase one, specifically the RTO, there's a demand to achieve our stated objectives in 2026. As we look to '27 and '28, we are more sensitive to economic output and the ability to attract new entrants to the market. That said, the risks associated with the Canada-U.S. trade framework, population growth, and war-related supply disruptions could impact demand in the near term, specifically in 2026, but we've yet to see that.

Okay, great, thank you.

There are no further questions at this time. I will now hand the call over to Cecilia for closing remarks.

Thanks for your questions today. Our job isn't to predict markets, it's to build a better business by focusing on what we can control. By doing that through execution and disciplined capital allocation, long-term value creation will follow. Thank you for your continued interest and support.

This concludes today's call. Thank you for attending. You may now disconnect.

Good afternoon. My name is Jennifer Tory, and I'm the Chair of the Board of Trustees of the Allied Properties Real Estate Investment Trust -- pursuant to Section 7.6 of the REIT's amended and restated decoration of Trust.

I will act as Chair of this meeting. On behalf of the Board I welcome you to this annual meeting of the unitholders of Allied. This meeting is being conducted virtually through Lumi Connect meeting platform. Lumi Connect allows registered unitholders and duly appointed proxy holders to vote and submit questions during the meeting.

Across the Canadian market, more and more public companies have been evolving the format of their AGMs. Allied has adopted the virtual format this year because it allows all unitholders to participate equally regardless of their location and makes the meeting more accessible to investors who may not be able to attend in person.

We will, of course, review unitholder participation in deciding on future formats of the annual meeting. Before proceeding with the formal business of the meeting, I'd like to take this opportunity to say a few words about the recent completion of Allied's leadership renewal and succession plan and other changes made recently in connection with the REIT's leadership and governance.

This year, we have two trustees who are not standing for reelection. First, I want to acknowledge Michael Emory. Michael founded Allied and for more than 2 decades, his vision, instincts and leadership have shaped this organization in a profound and lasting way.

As Founder, as President and Chief Executive Officer for many years and most recently as Executive Chair, Michael established much of what continues to define Allied, a long-term view of urban real estate, a deep respect for a distinctive workspace and heritage buildings and a belief that real estate can contribute meaningfully to the vitality of Canadian cities.

On behalf of the Board, management, our employees and our unitholders, I want to thank Michael for his extraordinary service and leadership. Michael, thank you for founding Allied for building it with such clarity of purpose and for the contribution you have made to Allied, Canadian cities and to our industry. I would also like to thank Tony Rossi. Tony has served Allied as an independent trustee for the last 4 years, including as a valued member of the Governance, Compensation and Nomination Committee.

She brought to the Board deep real estate experience, strong governance in stakes and an important perspective informed by her leadership in infrastructure, real estate and ESG. Tony has been thoughtful, constructive and committed in her service to Allied, and we are very grateful for her contributions.

Tony, on behalf of the Board, thank you for your dedication and for the perspective you brought to your work. Finally, I'd like to say a few words about Mario Barrafato, who is standing for election as a trustee today.

Mario brings deep experience in the Canadian public REIT sector with a strong background in strategic finance, capital markets, financial reporting, governance and real estate operations.

Over the course of his career, he has held senior executive finance roles with leading Canadian real estate organizations and has developed a strong understanding of the opportunities and challenges facing public real estate issuers.

We believe Mario's financial discipline, public company experience and real estate expertise will be highly valuable to Allied and to the Board. With those remarks, I will now introduce the following members of our senior management team who are participating in today's meeting: Cecilia Williams, Trustee, President and CEO; Nanthini Mahalingam, CFO; J.P. Mackay, Chief Operating Officer; and Anne Miatello, General Counsel and Corporate Secretary.

Before calling the meeting to order, I'd like to briefly turn it over to our CEO, Cecilia Williams, to say a few words about Allied.

Thank you, Jennifer. Q1 marked our first full quarter of executing the 3-year action plan for Allied announced in February. The results we released 2 weeks ago reflect early progress, and our focus remains firmly on consistent delivery through the balance of the year. That means continuing to delever through dispositions, refining our portfolio and driving leasing activity, all with a view to long-term value creation for our unitholders.

Our confidence is grounded in the strength of our team and the quality of our portfolio, the important components of our operating platform. Allied is at a turning point. With the most capital-intensive phase of our strategy largely behind us, our focus is now on execution.

We're leasing space, recycling capital and strengthening the balance sheet. As we complete this 3-year plan, we'll emerge with a more focused, better composed portfolio of higher-quality assets. Q1 reflects measured progress.

While we expect some near-term softness from nonrenewals in Q2, leasing activity is showing encouraging signs beyond that. Our priorities are clear, and we're focused on what we can control. The path forward is defined, and we will continue to execute with discipline to deliver improved performance over time.

Thank you for attending today's unitholder meeting and for your continued interest and support of Allied. We're committed to providing transparency as we move through this transition and look forward to continued engagement with our stakeholders.

Thank you, Cecilia. I would now like to call this meeting to order. As Chair of the meeting, I appoint Anne Miatello, the Corporate Secretary of Allied, to act as Secretary for the meeting.

And I appoint Amanda Danyluk and Laurie Grinton as representatives of the TSX Trust Company to act as the scrutineers of this meeting. And will now briefly address the notice call in this meeting and quorum before I discuss certain procedural matters for the meeting.

Thank you, Jennifer. The notice calling this meeting, the accompanying management information circular dated March 31, 2026, and related meeting materials describing the matters to be considered today were mailed to unitholders of record as of the record date being March 24, 2026, and have been filed on SEDAR+ and posted to our website.

The required quorum for this meeting is two or more unitholders who hold any aggregate not less than 25% of the issued and outstanding units entitled to be voted at this meeting. I have received the preliminary scrutineers' report on attendance and confirm that a quorum is present.

Only registered unitholders who held units in their name as of the close of business on the record date or their validly appointed proxy holders are entitled to vote at this meeting. Voting on the matters to be discussed at this meeting will be conducted by electronic ballot.

The poll will open for all resolutions at the same time. If you have appointed a proxy holder and do not wish to change your voting instructions, then you do not need to do anything. If you do wish to change your vote, then voting online will have the effect of revoking your previously submitted proxy.

The Chair will execute ballots on behalf of the proxies received by management and vote in accordance with the unitholders' instructions. Unless otherwise specified in the proxy, all proxies received will be voted for all of today's items of business.

For registered unitholders and duly appointed proxy holders who have not already voted, you will vote by indicating whether your vote is for, against or withheld from voting as applicable in respect of a given matter under the voting tab on the Lumi Connect platform.

Thank you, Anne. As the affidavit of mailing is available for inspection by any unitholder, I will dispense with calling for a reading of the notice of meeting and direct that a copy be kept by the Secretary with the minutes of the meeting. I also direct that a copy of the scrutineer's complete report on attendance be kept with the minutes of the meeting.

A quorum being present, I declare this meeting to be properly constituted for the transaction of business. There will be an opportunity for registered unitholders and proxy holders in attendance to ask questions on the business of the meeting through the Lumi Connect platform.

Following each motion, I will ask if there are any related questions. Assuming they've been submitted in sufficient time, questions related to the matters being voted on today will be addressed at the time such matter is discussed before a vote is held on the matter.

As always, questions should relate to the business of the meeting and not be of a general or personal nature. As Chair of the meeting, I have broad authority to conduct the meeting in an orderly manner, and I reserve the right to edit questions or to not table questions unrelated to the business of the meeting.

However, questions not answered during the meeting will be addressed by management or Allied's Investor Relations group following the completion of the meeting as appropriate. We will announce the preliminary results of voting towards the end of the formal business of today's meeting, and the official results will be filed on SEDAR+ and available on our website.

Lastly, in order to facilitate the proceedings for today's meeting, I've asked J.P. Mackay, our COO; and Anne Miatello, our General Counsel and Corporate Secretary, to move and second the motions identified in the notice of meeting.

I will now proceed with the formal business of the meeting. The polls are now open for voting. The first item of business is the presentation of the audited financial statements of Allied for the fiscal year ended December 31, 2025, together with the report of the auditor thereon.

These financial statements were previously mailed to unitholders who requested them and were filed on SEDAR+. There is no formal action or resolution required with regard to this item on the agenda. We will now address the election of trustees.

Information about each nominee is included in the management information circular. The Board of Trustees has fixed the number of trustees to be elected at 8, and I confirm that all nominees are eligible for election. Allied did not receive notice of any trustee nominations in connection with the meeting in accordance with the advanced notice provisions of its amended and restated declaration of trust.

Accordingly, the only persons eligible to be nominated for election to the Board are the management nominees. As a reminder, the nominees are Matthew Andrade, Mario Barrafato, Kay Brekken, Hazel Claxton, Lois Cormack, Stephen Sender, myself, Jennifer Tory and Cecilia Williams.

I now call for a motion that each of the nominees be elected to serve as a trustee of the board to hold office until the close of the next annual meeting or until a successor is duly elected unless their office is earlier vacated in accordance with the amended and restated declaration of trust.

May I have a motion?

Chair, I so move.

Someone please second the motion.

Chair, I second the motion.

Thank you. Are there any questions specific to the election of trustees?

There are no questions.

As there are no questions, I will ask all of those unitholders who have not already voted to please record their vote by indicating whether they vote for or withhold in respect of each trustee nominee under the voting tab on the Lumi Connect platform.

[Voting]

The next item of business is the appointment of Allied's auditor. I now call for a motion that Deloitte LLP, Chartered Professional Accountants, be appointed as auditor of Allied to hold office until the close of the next Annual Meeting of Unitholders or until their successor is appointed.

As such, remuneration as may be determined by the trustees and that the trustees be authorized to fix such remuneration. May I have a motion,please?

Chair, I so move.

Will someone please second the motion?

Chair, I second the motion.

Thank you. Are there any questions specific to the appointment of the auditor?

There are no questions.

As there are no further questions, I request that the discussion being concluded and that we -- the vote proceed on this motion. I ask that all those unitholders who have not already voted to please indicate whether your vote is for or withhold in respect of this matter under the voting tab on the Lumi Connect platform.

[Voting]

The next item of business is to consider and if thought advisable, to approve the nonbinding advisory resolution on the approach to executive compensation known as the Say-on-Pay resolution as more fully described and set out in the management information circular.

The result of the vote will not be binding on the Board. However, the Board will take into account the results of the vote, together with other comments from unitholders advice from Allied's independent compensation consultant and relevant information when considering the REIT's approach to executive compensation.

May I have a motion that this resolution be approved?

Chair, I so move.

Will someone please second the motion?

Chair, I second the motion.

Thank you. Are there any questions specific to the approach to executive comp?

There are no questions.

As there are no questions, I ask all those unitholders who have not already voted to please record their vote by indicating whether they vote for or against in respect of this resolution under the voting tab on the Lumi Connect platform.

As this is the final item to be voted upon, we will pause briefly to allow unitholders and proxy holders to complete voting on all motions.

[Voting]

The polls are now closed. We will now pause for a few moments while the scrutineers compile the preliminary results. I've been advised by the scrutineers that sufficient ballots and proxies deposited for the meeting have been voted in favor of the election of all management trustee nominees and the appointment of Allied's auditor.

As such, I declare those motions carried. The Say-on-Pay motion was not carried. I would like to remind attendees that the Say-on-Pay resolution is advisory and nonbinding. While the results of the vote on that resolution do not diminish the role and responsibilities of the Board, the Board takes the outcome seriously and will carefully review the results, engage with unitholders to better understand their concerns and consider what changes, if any, should be made to Allied's approach to executive compensation.

The final voting results will be disseminated by press release filed on SEDAR+ and will also be made available on our website. That concludes the formal business of the meeting. I wish to thank you all for attending and to thank you for your continued support of Allied.

May I please have a motion to conclude this meeting.

Chair, I so move.

Will someone please second the motion action?

Chair, I second the motion.

Thank you.

Hello, ladies and gentlemen, and thank you for standing by. Welcome to Allied Properties REIT First Quarter 2026 Earnings Conference Call.

[Operator Instructions] I would now like to turn the conference over to our President and CEO, Cecilia Williams. Please go ahead.

Thanks, Dustin, and good morning, everyone. Welcome to our Q1 conference call. Please note that certain statements we make during the course of this conference call that are not statements of historical facts may constitute forward-looking information and forward-looking statements about future events or future performance. These statements are based on management's current expectations and are subject to risks, uncertainties and other factors that may cause actual events or results to differ materially from historical results and/or from our forecast, including those described under the heading Risks and Uncertainties in our 2025 annual report. Material assumptions underpinning any forward-looking statements we make include those described under the heading Forward-Looking Statements in our 2025 annual report.

In addition, certain non-IFRS financial measures may be discussed on this call. References to non-IFRS financial measures are only provided to assist you in understanding our results and performance trends and may not be appropriate for any other purpose. For further discussion on these matters, please refer to our 2025 annual report under the heading non-GAAP Measures.

Turning to the quarter. Q1 marks the first full quarter of executing our action plan and the results reflect progress. Operating performance was in line with our expectations. Leasing momentum is encouraging as we see improving demand across our core urban markets and a growing pipeline. Our $500 million disposition program is on track, and we completed our equity issuance during this quarter, an important milestone in restoring financial flexibility. This morning, I'll focus on 3 areas: one, leasing and operating fundamentals; two, execution of our deleveraging strategy; and three, development and capital allocation.

Nan will then review our financial results, and J.P. will cover leasing in more detail. Starting with leasing and operating fundamentals. We ended the quarter at 87.1% leased and 85.0% occupied, modestly ahead of expectations. Leasing activity in the quarter was solid. We leased over 500,000 square feet with strong contribution from both new users and expansions. We also achieved 63% retention on expiries. More importantly, forward indicators are improving.

Our total leasing pipeline increased 20% and our new leasing pipeline increased 36% this is consistent with what we see across our markets as interest in high-quality urban workspace continues to improve and new supply remains limited. Activity is increasingly focused on smaller format space, which aligns well with our portfolio offering. As expected, we continue to expect timing impacts from nonrenewals, and we expect some softness in Q2. However, based on current activity levels, we remain confident in our year-end occupancy target of 84% to 86%.

Turning to the balance sheet. Our priority remains deleveraging and improving credit metrics. We ended the quarter at 12.3x net debt to EBITDA, an improvement from 12.9x in the prior quarter. During the quarter, we made progress across all components of the plan. We completed our equity issuance and advanced our disposition program, selling low-yield noncore assets to improve our portfolio composition and earnings potential.

In Q1, we closed $46 million of dispositions and continue to advance the remaining $450 million pipeline, which is actively marketed and progressing. And I'm pleased to report that after quarter end, we went firm on additional assets expected to generate $201 million of proceeds in Q2. This gives us confidence in our ability to reach our $500 million disposition target by year-end.

As we noted last quarter, the timing of asset sales is not entirely within our control, but expanding the pipeline improves execution certainty and flexibility. Our objective remains unchanged, get to mid-11x net debt to EBITDA by year-end, and we're on track to deliver that.

Turning to development. We're now at the final stage of our development cycle with KING Toronto as the last major project. As expected, this project continues to create near-term volatility. In Q1, we recorded additional expected credit loss and impairment on residential inventory. These reflect higher cost to complete, construction delays and increased uncertainty around condominium closings. We're actively addressing these risks and have taken over on-site construction management and are working toward extending the construction loan. While not preferred, these actions are necessary to protect value and maintain project momentum, consistent with the approach we outlined last quarter. Importantly, the underlying fundamentals of the project remain intact. The project is 92% pre-sold. Commercial leasing is progressing and anchored by Whole Foods, and completion is targeted for the second half of 2027.

Turning to our outlook. Our 3-year outlook has been updated for one item in 2026. Capital expenditures are expected to be higher in the year by $40 million to $50 million due to the higher construction cost to complete KING Toronto. All other key metrics over the 3-year period remain within previously communicated ranges.

As we said last quarter, our outlook assumes gradual occupancy improvement, which we're seeing. It also assumes continued deleveraging, which we're executing on. To conclude, we're at a turning point. With the capital-intensive phase of the business largely behind us, our focus is now on execution. We're leasing space, recycling capital and strengthening the balance sheet. While risks remain, particularly within development, we're addressing what we can control. Our portfolio is well positioned and the path forward is clear. Q1 demonstrates we're on track and the work we continue to do reflects our focus. With that, I'll turn the call over to Nan.

Thanks, Cecilia. Good morning, everyone. I'll briefly cover our first quarter financial results, our ongoing efforts to strengthen the balance sheet. Q1 performance came in line with expectations. FFO was $0.289 per unit. Rental revenue of $144 million and operating income of $70 million was consistent with our budget.

Same asset NOI for the quarter also met expectations. Our leverage ratios were slightly better than expected debt-to-EBITDA coming in at 12.3x. This was mainly due to funding time lines for KING Toronto and M4. Turning to valuations. Our Q1 results included $134 million fair value adjustment, $48 million impairment of residential inventory and a $44 million increase in expected credit loss provision.

During the first quarter, we completed dispositions totalling $46 million. These proceeds were used in conjunction with our equity raise to repay the balance owing on our 1.7% Series H debentures, which came due in February. Subsequent to the quarter end, we entered into a firm contract to sell 8 properties in Toronto for $123 million and 1 property in Montr al for $78 million. We expect these proceeds to close in the second quarter.

We continue to focus on reducing our leverage metrics to maintain our investment-grade credit rating. Disposing of noncore low-yielding assets is a key component of our strategy to strengthen the balance sheet. This will reinforce our financial stability and flexibility. In closing, the start to 2026 is largely tracked as expected.

I'll now turn the call over to J.P. Thank you.

Thanks, Nan. I'll start by providing a summary of our leasing performance in Q1. followed by commentary on our leasing pipeline and the associated risks and conclude with observations on the market and operating fundamentals.

Starting with leasing performance. In Q1, we captured strong market share. We completed 10% of the total leasing activity while representing 5% of the total rental stock. This 2:1 ratio underscores the quality of our portfolio and strength of our operating platform. Equally encouraging, our new leasing pipeline increased 36%, demonstrating continued improvement in operating fundamentals. Our occupied and leased area in the quarter ended modestly ahead of expectations and flat relative to year-end 2025 at 85% and 87.1%, respectively. We anticipate a decline in occupancy in Q2 because of known nonrenewals.

However, we expect to end the first half of the year higher than our outlook of 82%. To achieve our occupancy target of 84% to 86% by the end of the year, we need to lease between 1.05 million and 1.35 million square feet in our rental portfolio through new leasing and renewal activity that impacts occupancy in 2026. This is consistent with the volume leased in 2025. Year-to-date, we've leased 414,000 square feet against our target, and there have been no material unanticipated nonrenewals or terminations that would alter our goal.

In Q1, we completed 529,000 square feet of total leasing activity. 518,000 square feet of leasing activity occurred in the rental portfolio and 11,000 square feet occurred in the development portfolio. Within the rental portfolio, 324,000 square feet represented new leasing and 195,000 square feet represented renewals. New leasing activity in the rental portfolio measured in square feet was in line with our quarterly average in 2025 and new leasing activity measured in number of transactions was up 7%. Our conversion rate for new leasing was 45%. Of the 324,000 square feet of new leasing activity, 133,000 square feet represented expansions of existing users, in line with our quarterly average in 2025.

New leasing activity in Q1 across our 3 workspace formats was proportional to total GLA. 47% of total leasing activity occurred within our Heritage portfolio, 44% occurred in our Modern portfolio and 9% occurred in our Flex portfolio. Our Heritage portfolio is 88.4% leased, our modern portfolio is 87.2% leased, and our Flex portfolio is 75.3% leased. New leasing spreads were up 1% in our Modern portfolio and up 5% in our Heritage portfolio when excluding Calgary. Average total leasing costs in Q1 were $7.62 per square foot per annum, within the range achieved in 2025 of $4.38 to $8.57. Average leasing costs for new leases were $10.78 per square foot per annum and $2.39 for renewals.

The composition of our leasing profile remains anchored by professional services and TAMI users, which collectively represented more than 3/4 of the transaction volume in Q1. We continue to observe more demand from the professional services sector, representative of the ever diversified nature of our tenant profile. Our retention and replacement rate was 63%, higher than our forecast for Q1. The average rental rate increased 1.2% when comparing the ending to starting base rent and 7.7% when comparing average to average, in line with our forecast.

In 2025, we successfully renewed Google at the Breithaupt Block in Kitchener, which addressed our largest 2026 maturity, representing 97,000 square feet at our 50% share. Our largest known nonrenewal in 2026 is Sun Life at our de Gasp portfolio in Montr al, representing 56,000 square feet expiring at the end of August. We are in advanced discussions with the TAMI user to backfill up to 40,000 square feet of the Sun Life space with lease commencement in Q4 2026. We are forecasting a replacement and retention rate of 69% in 2026.

In 2027, our largest known nonrenewal is SQI, a Crown Corporation of the province of Quebec at 747 Square Victoria. As part of a broader public sector consolidation, SQI will return 18,000 square feet in June 2026 and approximately 100,000 square feet in December 2027. We are actively touring users with 2028 requirements through the SQI space. There are no material nonrenewals known at this time for 2028. Lastly, sublease availability dropped by 20 basis points relative to Q4 and is 2.4% of GLA. The weighted average lease term of space available for sublease is 4.6 years, which reduces the risk of imminent direct vacancy and loss of economic productivity.

Moving to our leasing pipeline. We currently have 1.57 million square feet of leasing activity underway, comprising 985,000 square feet of new opportunities and 583,000 square feet of renewals. Of the new activity, 411,000 square feet is at the prospect stage and 574,000 square feet has progressed to the offer stage. Our total leasing pipeline increased 20% since the beginning of the year, and our new leasing pipeline increased 36%.

For context, we averaged a pipeline of 1.3 million square feet each quarter in 2025 and 950,000 in 2024. There was some commentary among brokers at the beginning of the year that the momentum experienced in the second half of 2025 had not carried over into 2026. Our pipeline suggests a different narrative, though we are monitoring this dynamic closely. We are also monitoring the conflict in the Middle East for its impact on energy prices, inflation and interest rates and whether it will adversely impact office space demand. So far, we have not observed an impact, though the risk increases the longer the conflict continues. Turning to market commentary.

The increase in our leasing pipeline reflects improving fundamentals driven by: one, increased demand resulting from higher physical utilization as organizations continue to revert to an office-centric model; two, limited availability in AAA assets in the CBD of Montr al, Toronto and Vancouver, which is at or near pre-pandemic levels, driving an increase in demand for Class A assets in and around the CBD; three, reduced sublease availability, which declined for the 11th consecutive quarter to 2.4% of the national rental stock and sits closer to pre-pandemic levels of 1.5% to 2%; and four, a decline in total construction, which has fallen to a 22-year low. As a result, no new urban supply is expected in the near term. For these reasons, we continue to see positive leasing momentum in our core concentrations of Downtown West Toronto and Downtown South Montr al. This trend began in the second half of 2025 as AAA assets were leased and demand extended to Class A buildings in and around the CBD.

Leasing activity in Kitchener remains slow as demand is currently concentrated in the suburban market. Calgary's recovery remains tempered by consolidation in the energy sector, though the market is benefiting from structural supply side corrections resulting from conversions, particularly in the belt line where our portfolio is concentrated. And in Vancouver, Gastown and Yaletown continued to lag the financial district, though both showed signs of improvement in Q1. At the beginning of March, we introduced several initiatives to make it easier for small to midsized organizations to lease space in our portfolio.

These tactics aim to reduce friction in the leasing process and align with how tenants screen tour in shortlist properties. By removing these obstacles related to fit and readiness early in the process and investing in areas where tenants receive the most risk, specifically speed to transact, price certainty and space delivery, we're able to further differentiate our product. To date, these initiatives have been well received and demonstrate Allied's willingness to be more adaptive in growing occupancy. I will now turn the call back to Cecilia.

Thanks, J.P. To conclude, Q1 reflects how we're progressing through a transition phase. We've made deliberate moves to strengthen the balance sheet and better position the portfolio. Although we expect some softening from nonrenewals in Q2, we're encouraged by signs of improvement in leasing activity beyond. Our focus remains on execution and on the areas within our control. We know the path forward, and we know it will take time and consistent delivery to achieve our objectives. With that, we'll open the line for questions.

[Operator Instructions] And we will take our first question from Lorne Kalmar from Desjardins.

Thank you for all the color in terms of the operating fundamentals. That was very helpful. I just wanted to touch on the KING Toronto for a second. Firstly -- and sorry if I missed this, but can you confirm whether or not you're recognizing interest income based on the full amount of the loan or the amount net of the impairment?

Lorne, it's the full amount.

Okay. And then maybe-- I Sorry. Sorry, I missed that.

The loan is not credit impaired, so it's on the full amount.

Okay. Is there any point at which you would recognize it on the net amount?

Yes, if it becomes credit impaired.

The way it's being recognized now, Lorne, is the way we have to recognize it under IFRS.

Okay. Fair enough. And then just sticking with the KING Toronto theme here. You guys, I think, pushed out the receipt of condo proceeds from, I think, the beginning of '27 back in February to the end of the year. I know you touched on a few complications at the project, but it seems to have changed a lot in the last couple of months. Like what really changed since we spoke in February or since you released results in February?

In terms of -- I mean, the costs went up. There were curtain wall cost increases from transportation and storage, trade delays due to labor inefficiencies and required extended site presence and then schedule extensions leading to site overhead and all of those things resulted in a longer time line and higher costs.

Okay. And then one last quick one. Do you have the number of the average percent of deposits on the condos?

It's about 20%.

Our next question comes from the line of Jonathan Kelcher from TD Cowen.

One more on the KING Toronto. I believe you guys said that you completely took over the project. When was that? Just trying to get a sense of the added costs or post that or pre that or what's happening there?

Yes. We started taking over in the fall, Jonathan, and now we've completely taken over on-site construction management.

Okay. So with that and I guess, having the fall and winter to sort of look at it, do you think you're hopefully very comfortable with this being the final increase in costs?

We can't guarantee, Jonathan. We rely heavily on the cost consultants in addition to EllisDon, but we are very comfortable with where we've landed as of this point.

Okay. And same -- I guess, same question on the timing.

Yes.

Okay. And then on the dispositions, on the $200 million that you announced last night, I guess, 2 things there. One, maybe a little color on why the Competition Bureau is involved in the Montr al one? And then secondly, just on the cap rate or annualized NOI that's associated with these properties.

Yes. On the Competition Act, if it's a book value of $93 million or higher and has to go through that. So that property triggered that criteria?

And Jonathan, on the 2 properties announced last night, the cash yield is 4.4%...

Our next question comes from the line of Mario Saric from Scotiabank.

Just sticking to the disposition, can you remind us of what the overall expected disposition cap rate would be on the $500 million you're targeting this year?

In our forecast, Mario, the average cash yield is 3.1%.

Okay. And then what percentage of the $500 million goal would have been originated by unsolicited expressions of interest?

I'm sorry, what percentage of the original goal was from unsolicited interest?

Yes.

I mean we're -- everything is being marketed.

Okay. I'm trying to get a sense of the office transaction market is opening up. There's been several deals announced in Toronto recently on the office side. I'm just trying to get a sense of based on what you're seeing in the market today, do you feel you can sell more than $500 million of IFRS if you were to more actively pursue opportunities today?

We feel very confident in our ability to hit the $500 million target that we've set.

Okay. And then just maybe last question, more of a strategic question. Allied has acquired some more traditional office assets in the past with the intention of transforming the interior into more of a Class A environment for lack of a better way to describe it. From a capital allocation standpoint going forward over the next 2, 3 years that your outlook encompasses is the plan to continue to convert some of these more traditional office assets into internal Class experiences? Or is it more likely that you could see some of these become disposition candidates down the road?

Yes. We'll finish whatever we started and are currently working on. And then otherwise, we would consider anything as a disposition possibility.

Okay. Maybe one more for me, just for J.P. You mentioned some change in leasing tactics removing obstacles for leasing in the quarter. Can you just maybe touch on an example or 2 in terms of what exactly that means and what's driven?

Mario, the average size of a vacant unit in our portfolio is 5,000 square feet. So naturally, that would target small to midsized organizations who necessarily don't have the internal capabilities to take on large construction projects to prepare their space for occupancy. And as such, we're investing in our vacant space to make it occupancy ready. We're also providing end-to-end construction oversight support, leveraging our vertically integrated platform to support those small to midsized organizations. And we're also prepared when appropriate to also a short-form lease template on which we can transact with those small to midsized organizations provided the type of transaction fits certain criteria.

Our next question comes from the line of Pammi Bir from RBC.

Just maybe coming back to the leasing. You mentioned we're going to see a drop in Q2 occupancy. But I believe, J.P., you mentioned as well that it may be higher than the 82% occupancy that you previously guided to. Can you just maybe comment or maybe clarify that piece there and what's driving that?

Pammi, we do anticipate some erosion in occupancy in the second half of the year as we had contemplated in our forecast -- in the first half of the year, specifically the second quarter, as we had contemplated in our forecast and communicated. Specifically, we modeled an 82% ending occupancy in Q2. We expect to end higher than that, and that's primarily a function of leasing activity and some anticipated nonrenewals that are now renewing.

Okay. All right. Got it. And then you mentioned some of the demand from professional services and TAMI tenants. I'm just curious, are you seeing any changes in terms of space needs from software tenants or AI-related implications on demand at this stage?

We are -- we actually saw an increase in leasing volume from the TAMI sector in Q2 -- or in Q1, I should say, compared to Q4. And we are hearing and observing in our pipeline and in the broader market that there's more and more demand from the tech sector across the markets we operate.

Okay. And then just -- I do have a couple more just on KING Toronto. What are you now assuming in terms of default rates? And has that been informed by perhaps buyers just more buyers perhaps trying to get out of deals?

Yes, Pammi, we're carrying a 35% default rate right now, and we have been talking to the marketing team, and we've also been tracking the current purchases and having communications with them as well. So that's how we keep arrived at that 35% default rate.

Okay. And what was it previously assumed or estimated at?

10%.

So that incremental 25% is just from this quarter?

Yes.

Okay. And then in terms of the pricing on -- I know there's only a small amount left in terms of the remaining units, but what -- what are they currently being marketed at versus, I think the initial price is $2,000 a foot roughly or...

Yes. So what's remaining, there's about 8 penthouses remaining. So the penthouses on a per square foot basis are higher. So what's remaining of the 35 units on average is $1,500 to $1,800 per square foot. That's what we're carrying.

Okay. And then just lastly, on the disposition side, obviously, some encouraging signs. But in terms of the Toronto House and Calgary House, where are you now in terms of the sale process on those assets?

We are advanced in our marketing efforts of -- with the Toronto asset. CBRE has listed that asset for us, and we have a number of groups in the data room underwriting the asset. We are preparing to bring the Calgary asset to market in June, and that will be listed with CBRE and Scotiabank.

Okay. Fair to say then that the Calgary House is unlikely just again, given the maybe later stages of the timing of it being marketed, that's not likely to maybe transact this year?

We're still contemplating closing this year.

Our next question comes from the line of Patrick Sealy from Green Street.

Given the Q1 results, how confident are you in meeting your 2026 outlook on occupancy, NOI and FFO?

Well, like we said, we came in as expected for Q1, so we continue to expect to hit our targets for the year.

Our next question comes from the line of Matt Kornack from National Bank Financial.

Just trying to understand a bit of a divergence in terms of where NOI is headed relative to kind of the KPIs on occupancy and rents. I mean it seems like this quarter, you actually gained some occupancy. You had some positive transfers out of PUD and into IPP. But NOI kind of missed us by a fairly sizable margin. And it looks like it's maybe recoveries or margins. And I'm just -- I'm trying to understand why? And then how that progresses, if it is maybe some one-time timing delays between recoveries or it sounds like you've decapitalized some operating costs as well. And I'm just trying to figure out how that margin picture evolves.

Yes, Matt. So in terms of occupancy, you're right, year-over-year, it's 85.9%. But tenants this quarter in the rental portfolio are fixturing. So from fixturing, yes, it's in your FFO because straight-line rent is in your FFO. But from an NOI standpoint, there's all the additional rent, which they don't pay during fixturing. So that's why you have the occupancy, but you don't have the revenue. That's one component of it. The second component is the capitalization of operating costs. In the rental portfolio, there were upgrade activities that were completed at the end of Q4. So those assets from a timing perspective, some of them may be leased, but not productive yet.

Okay. So it does sound like we'll recapture some of that in subsequent quarters, and it's a function of timing. And then presumably, some of that relates to Toronto House, which is a gross lease as opposed to net leases elsewhere. And I know it's slated for sale. I don't think you provided the occupancy this quarter. But is it fair to say that, that may even be a drag on NOI in this quarter, just given seasonality and where you are in leasing?

Correct. The operating cost is not recoverable and the property is more stabilized today in terms of expenses than it was in the comparative year. So absolutely correct that -- and we also had an assessment of the realty taxes there so that to go up.

Okay. I appreciate that. Just back to the asset sales side of things, J.P., I think you said 4.4% on the Montr al asset? Or was that the combination of the Toronto and the Montr al asset?

It was the combination, Matt. And when you add the amount closed in Q1, the total yield is 4.2%.

Okay. And then 150 West Georgia, is there any update in terms of the timing or how that ultimately is expected to work in terms of the partial cash payments and how your participation in residual projects will be?

There is no update to provide at this time, Matt. As soon as we have one, we will.

Okay. Fair. And then last one for me, just on the tenant side. You have lease term with Ubisoft, but obviously, it's been a business that I think has been under a little bit of pressure. Have you guys been in contact with them? Or are you fairly comfortable that they're in a reasonable position to continue to occupy and pay on their space in Montr al?

We have been in contact, Matt, and we are confident. Vantage Studios operates in Montr al, which is Ubisoft's most well-capitalized creative house, having received a EUR 1.2 billion investment from Tencent for a 25% stake in that creative house. They also introduced a 5-day week return office policy associated with their restructuring earlier this year. And so at this time, we're confident in their incoming tenancy.

Our next question comes from the line of Tal Woolley from CIBC Capital Markets.

Is Westbank still involved in the marketing of these assets? I know you guys have taken over control of the construction, but I'm just wondering what sort of influence they have on the rest of the process?

How they are leading the sales process with our very close involvement.

Okay. And then their financial difficulties have stretched out over a period here. What is the contingency plan if they run out of liquidity?

Well, that's essentially what we already have modeled relating to KING Toronto.

Okay. So...

That's already captured in our balance sheet and our outlook.

Okay. And so if they hit the wall, then your framework really shouldn't change that much then?

Correct.

Okay. And then you talked a little bit about default rates before. I'm just wondering how confident you feel the contracts are with respect to rescission and default?

Based on what we know today, Tal, we feel confident. Everything that we've reported is based on the best information that we have to date.

Okay. And then I guess just on the leasing side, can you talk a little bit about any new initiatives or strategies you might be using that were not employed previously to try and drive demand here? And I apologize if I missed some of this earlier. I was waiting forever to get on earlier.

No problem, Tal. There are 2 constituencies that we are targeting with the recently introduced initiatives that were communicated to the broader market in the middle of March. The first constituency is the brokerage community, where we're really trying to engage or increase engagement with the brokerage community in large part in how we structure commissions by adding commission bonuses on near-term transactions and the timing of those payments.

The second constituency is the tenant community, specifically small to midsized organizations in light of the fact that the average vacancy in our portfolio is 5,000 square feet. So really trying to reduce friction in the leasing process to make it easier for organizations of that scale to lease space in our portfolio and ultimately differentiate our product relative to our peers. And we're doing that by offering short-form lease templates where appropriate for the risk is appropriately measured. Second, we are prepared to offer free rent in lieu of allowances. That's mostly on renewals, but nevertheless, an incremental tactic.

We're building out space to improve the readiness and shorten the lead time associated with occupancy and where a tenant wishes to lease space that's not built out, we are prepared to leverage our integrated platform and offer end-to-end construction oversight support as the tenant prepares their space for occupancy. And I'll add, Tal, that so far, both communities have responded exceptionally well to these initiatives, and they acknowledge that this reflects the increased adaptive nature in which Allied is prepared to grow its occupancy.

Our next question comes from the line of Brad Sturges from Raymond James.

Just going back to the disposition program yet again. Just on Toronto House and Calgary House, I know Toronto House is under lease up. I think you're carrying some vacancy at Calgary House. Like how do you think that dynamic of lease-up is going to impact sales pricing and time lines? I guess the question is, would you have an expectation of a smaller pool of buyers relative to being at a more stabilized level, maybe a little bit later on?

We haven't seen any impact to the prospective buyer pool because of the state of occupancy in the Toronto asset, nor do we expect the same for the Calgary asset.

Okay. And at this point, the $500 million target that you have not made any changes in assumptions around proceeds that you think you can generate from those 2 assets?

No.

We have reached the end of the Q&A session. I will now turn the call back over to our President and CEO, Cecilia Williams, for closing remarks.

Thanks, Dustin, and thank you, everyone, for your interest. We look forward to keeping you updated on our progress.

The meeting has now concluded. Thank you all for joining, and you may now disconnect.

Good morning, and welcome to the Allied Properties REIT Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Cecilia Williams, President and Chief Executive Officer. Thank you. Please go ahead.

Thanks, Julian, and good morning, everyone. Welcome to our Q4 conference call.

Please note that certain statements we make during the course of this conference call that are not statements of historical facts may constitute forward-looking information and forward-looking statements about future events or future performance. These statements are based on management's current expectations and are subject to risks, uncertainties and other factors that may cause actual events or results to differ materially from historical results and/or from our forecasts, including those described under the heading Risks and Uncertainties in our 2025 annual report. Material assumptions underpinning any forward-looking statements we make include those described under the heading Forward-Looking Statements in our 2025 annual report.

In addition, certain non-IFRS financial measures may be discussed on this call. References to non-IFRS financial measures are only provided to assist you in understanding our results and performance trends and may not be appropriate for any other purpose. For further discussion on these matters, please refer to our 2025 annual report under the heading Non-GAAP Measures.

Please note, there will be no question-and-answer period on this call in light of Allied's concurrent equity offering that we announced yesterday.

Turning to the substance of our conference call today, I'll outline the actions we're taking to strengthen Allied's balance sheet and improve financial flexibility. Nan will then review our financial results, and JP will cover leasing.

You may have seen the announcement last night and before we discuss our business, I want to take a moment to address the leadership change. I would like to sincerely thank Michael, Allied's Founder and Executive Chair, for his vision and for his dedication. I feel truly grateful to have had the opportunity to work with and learn from Michael over the past 11 years. Being part of the team that helped build Allied's portfolio has been an honor, and I am deeply appreciative of the trust and guidance he has provided throughout my time here. Having been CEO for almost 3 years now, I know the team is ready for this, and I thank him and our independent trustees for their continued support.

Next, I want to briefly address the announcement of the equity offering before turning to our outlook. 2025 was a challenging year, and we did not achieve certain operating or deleveraging targets. While we made some progress in leasing activity and execution, the pace of lease finalization was slower than anticipated. Interest expense also increased as we carried debt associated with completing our development pipeline and advancing settlement of loans receivable.

Those factors weighed on earnings and delayed balance sheet improvement. These results are unsatisfactory and below our expectations. As a result, we began executing an action plan focused on strengthening the balance sheet. The expansion of our property disposition program and the distribution reset implemented in December were the first steps. The marketed equity offering announced yesterday is the third and final component of that plan.

To accelerate deleveraging, we have to thoroughly assess our capital structure. This is a balance sheet decision and one we made after a comprehensive assessment of our alternatives. While asset sales are underway and additional potential sales continue to be evaluated, the timing of such transactions is not entirely within our control. Additional leverage could place pressure on our investment-grade rating and result in an increase in interest expense.

While we recognize that the equity offering, if completed, will have a dilutive impact, based on our assessment of available options, we determined that proceeding with the offering was an appropriate step to support the company's capital structure. Allied's core strength as an owner is operating its portfolio of urban assets across major Canadian cities. These buildings are designed for knowledge-based organizations and are located in markets with long-term economic significance.

The broader office recovery has taken longer than expected. That said, recent indicators suggest some stabilization and gradual improvement in certain fundamentals. In our key markets, interest in high-quality urban workspace has increased, leasing activity has improved and new supply remains limited. Strengthening the balance sheet now is intended to support our ability to benefit from future improvements in fundamentals.

For the first time, Allied is providing a multiyear outlook covering 2026 through 2028. We recognize that this outlook will ultimately be evaluated over time based on our ability to execute and the reasonability of our assumptions. We are doing this deliberately and with full recognition that credibility will be earned through execution. Our outlook reflects two primary assumptions: potential for occupancy improvement as market conditions normalize and continued deleveraging that is expected to reduce balance sheet pressure.

Looking beyond 2026 and assuming continued progress on our action plan and occupancy trends, we anticipate the potential for cash flow improvement and further balance sheet strengthening.

With that, I'll turn the call over to Nan.

Thanks, Cecilia, and good morning, everyone. I'll briefly cover our 2025 financial results, our recent balance sheet actions and our outlook.

Starting with our results. Rental revenue in 2025 was stable at approximately $592 million, while operating income declined to $317 million, primarily reflecting nonrenewals and asset dispositions. Certain operating fundamentals showed improvement during the year, particularly in leasing activity. In the second half of the year, we delivered 801,000 square feet of new leasing activity, the strongest second half results since 2020. JP will speak to recent leasing trends in more detail shortly.

Same-asset NOI declined by approximately 1% for the year, in line with our revised expectations. However, our results continue to reflect elevated interest expense, largely due to the timing of noncore disposition program. We closed on $93 million in the fourth quarter of 2025 and $46 million expected to close in the first quarter of 2026.

Our dispositions took longer than anticipated. This delay was the primary contributor to the year-over-year decline in FFO and AFFO of 12.8% and 12%, respectively, compared to our prior expectation of a contraction of approximately 10%.

Turning to leverage. Our indebtedness ratio increased from 45% in Q3 to 51% at year-end. This was driven primarily by approximately $1 billion in IFRS fair value adjustments, reflecting cap rate expansions, updated cash flow assumptions and higher construction costs.

We also recorded $128 million provision for expected credit loss on a portion of our loans receivable. This was based on a probability weighted recovery assumption under IFRS. During the quarter, we extended the maturity of the 150 West Georgia loan to December 2026 and expanded the facility by $27 million to facilitate completion and sales. This was supported by incremental collateral. We also extended the KING Toronto loan to March 2027 and expanded that facility by $23 million. This will fund construction while the construction loan remains inaccessible. While not preferred, these steps were taken to help safeguard our investment and enable continued progress.

Turning to our action plan. As mentioned earlier by Cecilia, we're taking steps intended to strengthen the balance sheet. These include a 60% distribution reset, a $500 million noncore disposition program and the launch of a $500 million equity offering. These proceeds will be used to retire debt. While the offering, if completed, would be dilutive, refinancing at current interest rates would increase interest expense and management determined that this approach was the most appropriate among available alternatives.

Looking ahead for 2026, we estimate NOI of $310 million to $320 million and FFO of $185 million to $200 million, with net debt-to-EBITDA in the mid-11x range. Based on our price assumptions, net debt-to-EBITDA would move into the below 10x range by 2027. Driving this is EBITDA growth from economic occupancy in our organic portfolio and development completions. Further, there will be incremental debt reduction as we close on the KING Toronto condominium in 2027. We also anticipate the potential for growth in FFO, same-asset NOI in 2027 and 2028 as leasing activity annualizes. In addition to providing a detailed outlook, we also endeavored to enhance our disclosures in the MD&A this quarter in the spirit of transparency.

In closing, while 2026 represents a reset year, we continue to observe an improvement in market fundamentals. We see demand increasing in well-located office space while supply continues to be limited. Based on these conditions, we believe Allied is positioned to benefit from continued improvements in market fundamentals over time.

With that, I'll pass it over to JP. Thank you.

Thanks, Nan. As a reminder, because we are in the midst of an equity offering, certain aspects of our usual operational and market commentary must be scaled back. Accordingly, my remarks today will be limited to essential leasing data and portfolio activity and will not include the more expansive forward-looking or market-wide analysis that is normally provided. I'll start by providing a summary of our leasing performance in 2025, followed by specific commentary on Q4 as well as our outlook for the next 3 years and conclude by sharing our 2025 user satisfaction results.

Certain operating fundamentals showed improvement in 2025, particularly in the second half of the year, supported in part by higher physical utilization and return-to-office mandates. In the second half of the year, we observed indicators of increased activity within our portfolio. We achieved a 57% increase in new leasing activity in H2 compared to H1. Expansion activity increased 180% in the second half of the year. The average tour size increased more than 30% compared to H1 and sublease availability decreased 50% in H2.

In 2025, we achieved 2.7 million square feet of total leasing activity between our rental and development portfolios, inclusive of new leasing and renewals, representing a 22% increase compared to 2024. This activity was offset by 231 basis points of occupancy decline from M&A consolidation and bankruptcies. As a result, our occupied and leased area for our rental portfolio ended the year essentially unchanged relative to year-end 2024 at 85.3% and 87.4%, respectively.

Sublease availability declined by 53% in 2025, which now represents just 2.6% of our total GLA. This reduction was supported by leasing activity in the modern segment of our portfolio in Toronto and Montreal that resulted in an enhanced credit profile and sector diversification of our top 10 tenants.

Lastly, our retention and replacement rate was 69.4% in 2025, closer to our historical average of 70% to 75%. The average rental rate increased 0.5% when comparing the ending to starting base rent and 8.1% when comparing average to average.

In Q4, we completed 732,000 square feet of leasing activity, including 393,000 square feet of new leasing activity, of which 376,000 is in our rental portfolio and 17,000 in our development portfolio. This represents a 40% conversion rate.

Our current 3-year forecast anticipates a gradual increase towards our historical average rental portfolio occupancy of approximately 90%. We expect a modest decline in occupancy in the first half of 2026, resulting from known nonrenewals and forecast occupancy by year-end of 84% to 86%. In 2027, we forecast year-end occupancy of 86% to 88% and 88% to 90% in 2028. Achieving these metrics requires annual leasing volumes similar to those in 2025.

At the end of Q4, we had 1.2 million square feet or 8.5% of our GLA maturing in 2026. We are forecasting a retention and replacement rate of approximately 69%. Our largest known nonrenewal in 2026 is Sun Life at our de Gaspe portfolio in Montreal, representing 56,000 square feet maturing at the end of August.

Our portfolio vacancy is highly concentrated with 10 assets accounting for 55% of our total vacancy. These assets have historically performed well, and their current vacancy is a result of nonstructural event-driven factors, including M&A consolidation, bankruptcies and relocations to new developments within our portfolio rather than a decline in asset-level demand.

These 10 concentrations are La Cite, Le Nordelec and 1010 Sherbrooke in Montreal, QRC West, 555 Richmond, 175 Bloor and the Castle in Toronto, the Tannery in Kitchener, the Lougheed Building in Calgary and 1185 West Georgia in Vancouver.

At the very core of our operating platform is an unrelenting commitment to user experience. For the past 6 years, Allied has retained Grace Hill Kingsley Surveys to assess user satisfaction within our portfolio. The results for 2025 showed improvement or stability across all measured performance indicators. In addition, Allied's Net Promoter Score, a leading indicator for tenant retention and leasing activity, increased by 31% and exceeded the industry average by 130%. These results reflect the work of our teams across the country in supporting user experience.

I will now turn the call back to Cecilia.

Thanks, JP. As JP highlighted, fundamentals are moving in the right direction, and our portfolio is well positioned. We have laid out our outlook clearly. The priority now is disciplined, consistent execution. Our action plan is straightforward and well underway. We've reset distributions, our disposing of assets and are working towards an equity recapitalization intended to strengthen the balance sheet. These steps are designed to position Allied to capitalize on improving fundamentals and enhance long-term shareholder value. Outcomes will depend on effective execution and broader economic conditions, but the path forward is defined.

I want to recognize our team for their focus and urgency in driving these initiatives forward. Thank you for joining us today.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

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" TD Cowen, Research Division

" Scotiabank Global Banking and Markets, Research Division

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" Desjardins Securities Inc., Research Division

" National Bank Financial, Inc., Research Division

" CIBC Capital Markets, Research Division

" RBC Capital Markets, Research Division

" Veritas Investment Research Corporation

" Raymond James Ltd., Research Division

Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allied Properties REIT Third Quarter 2025 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference over to Cecilia Williams, President and CEO. Please go 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 completions 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 5 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 in leased area and our targeted 10x 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 7 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, our balance sheet. While we want to achieve our target of getting to 10x 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 Allied 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 nonrenewals, 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 lease 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 Breithaupt, 700 Saint-Hubert, and 1001 Robert-Bourassa.

Our results included a onetime lease termination fee of $2.1 million related to a space that was on the sublease 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 3-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 Georgia 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 time lines, we maintained stable operating fundamentals, solid liquidity and continued progress towards our long-term balance sheet targets.

Turning to the balance sheet. Liquidity remained 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 6 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 5x oversubscribed with a 6-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 2 years to 2028 and retained 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-grade 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. strengthened liquidity and proactive management of upcoming debt maturities. All of this position 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 4 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 vacancy.

In Q3, we completed 882,000 square feet of leasing activity, including 512,000 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 nonrenewals including a large known nonrenewal due to M&A activity that occurred in the 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 8 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 at 1001 Robert-Bourassa 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 the 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 Breithaupt 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 the 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 in 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.

[Operator Instructions] Our first question comes from the line of Jonathan Kelcher with TD Cowen

First, just one little clarification. When you talk about, JP, when you talk about a conversion rate, 81% conversion rate, is that off of leases that are in negotiation or the total sort of $1.3 million you talked about?

Jonathan, it's in relation to what we would have represented last quarter as new leasing opportunities that we were pursuing at the time.

Okay. So just to be sure, it includes like prospect and stuff under negotiation?

That's correct. That's correct.

Okay. And then I guess a couple of weeks ago, you guys took hitting 90% occupancy off the table for this year and I think you addressed it a little bit. Based on what you're seeing, and that was a pretty positive sort of update you gave, JP. Is that a target that you think you get to some point in '26?

Jonathan, yes, we do have line of sight to 90% in 2026.

Okay. That's helpful. And then lastly, just looking at where your leverage currently sits versus where you guys wanted, the slower pace of the occupancy recovery that we're seeing. How is management and the Board looking at the distribution level right now?

So, we are considering many options. And one of those options is a distribution cut in 2026, so as to strengthen the balance sheet. We haven't made a formal decision yet. We haven't made a formal recommendation, but it is one of the scenarios that is under consideration.

Your next question comes from the line of Mario Saric from Scotiabank.

Just wanted to focus on the disposition pipeline a little bit. You've added Toronto and Calgary House to the list at $450 million. So that increases the total expected dispositions from about $500 million before to, call it, $675 million, give or take. That would imply that about $275 million on prior assets that were deemed for sale will remain in place going forward. So, can you walk through how you think about sizing the disposition pipeline? Like is it simply a matter of doing what you need to do to hit target leverage metrics? Or do other factors play a role in the decision process such as being able to get IFRS values for those assets and et cetera?

Mario, so we've outlined $270 million on Page 2 of the press release. On top of that, it's the proceeds from 150 West Georgia, and that's about $240 million roughly. And then on top of that, it would be the proceeds from the disposition from Toronto House and Calgary House, which we're not quantifying, but it would more than double the proceeds that we get from our sales, which would all be applied towards debt reduction.

Okay. But it seems like there were maybe some assets that you think you were considering selling previously that you're no longer considering selling. Is that a fair comment? And then I guess, if so, what are some of the factors that kind of drive those decisions?

It's just, it's based on what we rather than later. And the update, it's opportunistic based to some extent. We have our noncore assets identified. And as we get IFRS value or higher, we sell them. And the update is as we've outlined it in the press release, but there weren't material changes.

Okay. And then just on the $239 million West Bank loan receivable underpinned by 150 West Georgia, how would you characterize your confidence level today in terms of collecting on that receivable relative to 3 months ago? And what factors would you highlight that kind of underpin that confidence?

We remain very confident in collecting that, Mario, and it's based on the zoning that's in place and the parties that are interested in the opportunity.

Your next question comes from the line of Roger Lafontaine with Nugget Capital Partners.

I had a question whether you're seeing improved transaction liquidity within the office market, and that's really just my question, whether it pertains to smaller buildings or larger buildings. If you could touch base on that.

Sorry, are you asking about, I couldn't hear the first part of your question, sales volume?

Yes. Are you seeing improved transaction liquidity as you seek to dispose of any assets or offices, whether you're still more buyers on the market?

Thank you. Yes, for the assets that we are looking to dispose of our smaller noncore assets, we certainly are. I think it's, our buyers are seeing this as an opportunity to get access to buying these types of assets, which aren't, isn't normally an opportunity for them. So yes, we are absolutely seeing higher levels of interest.

Your next question comes from the line of Lorne Kalmar with Desjardins Securities Inc

Just on King Toronto, I think going back, the closings were initially set for, I think, 4Q '25 has kind of been pushed back. I was just wondering if you could give us some color as to what's really been driving those delays? Like is there issues with purchasers that are in default on their agreements? Or what's really happening there?

No, it's nothing to do with any defaults. We haven't had any to date. It's really the pace of construction activity, which was recently impacted by some rain, and it prevented us from getting some of the glazing up. But for the most part, things are progressing as expected.

Okay. Okay. And then I might have missed this, so apologies if I did. But do you guys have a kind of a target yield on Toronto House and Calgary House based on the unsolicited inbounds you've gotten?

Not that we're disclosing, Lorne.

Your next question comes from the line of Matt Kornack with National Bank Financial.

Just back on Toronto, not Toronto, King Toronto. You revised the expected proceeds a bit lower there. Is that a function of what you think you'll get on the sale price? Or is that a thought around maybe some condos that closed not collecting on them? Or just what was behind that assumption at the end of the day?

It's just to reflect market value on the remaining 8% of units that have to be sold. So, as you know, we're 92% sold. So that pricing is locked in. And we just, we need to just adjust on the remaining 8%.

Okay. Makes sense. And then, there was, I think, I'm not sure if it was in your same-property NOI number or not, but it sounds like you collected a prior bad debt provision of around $1.3 million on an asset in Calgary. Would that have been in same-property NOI? And was there an offsetting negative? Or should we view that as kind of onetime in nature?

Matt, it's Nan. That was a reversal in Calgary, but there was the normal course bad debt that's in our results as usual, which offsets that. So that should not be something that should be backed out because if you're backing out the reversal, you got to back out the provisions. If you look at Note 10, it's very clear, the provisions actually in the quarter were higher than the reversal.

Okay. That's fair. And then I guess on 1001 Robert-Bourassa, the lease termination income, I know it's $2.1 million, but was there anything that we should net against that in terms of the new lease that's going to be signed relative to the older? Kind of what would be the net impact if we wanted to get to a normalized number in the quarter for future quarters on a run rate?

That is $3 per square foot higher than the current lease.

Okay. And then lastly for me, I appreciate the disclosure in terms of the incremental NOI coming from the ground-up development. I think it was $1 million in Q4 and $10 million in 2026. Does that include anything from the redevelopment portfolio? Or would that be incremental on top of those figures?

There's a little bit from 1001 Robert-Bourassa and RCA in those numbers.

In those numbers. Okay. So that's the total expected kind of incremental to just general same-property NOI growth in the portfolio.

Yes

Your next question comes from the line of Tal Wooley with CIBC Capital Markets.

Just on King condos, so how much capital do you expect to be getting back in 2026 from, because it seems like the closings may bleed into 2027 as well.

So from the condo sales?

Yes.

Yes. It's just a note, it's about $240 million at our share.

Okay. And that's in '26 or that's total?

That's the total. So occupancy will be in place. The closing is based on city permits in place. So we are, right now, we're expecting late 2026 to early 2027, so cash proceeds.

Okay. Got it. And just on leasing in general, I guess I feel like maybe I or the market getting a little surprised with just trying to reconcile the commentary you guys have around leasing with what's getting rendered in the quarters. And so, if you're seeing increasing leasing, increasing large-format tenant demand, improved existing user demand and the conversion rate, I wouldn't necessarily, it sounds like all good things and yet occupancy is down quarter-over-quarter and your revised outlook doesn't really have much of an occupancy lift baked in next quarter either. And so when are the wheels going to start to turn positively for occupancy despite all the sort of green shoots, I'll call it, commentary that we're getting?

Yes. There's a few quarters of a delay between getting the leasing locked down and then having occupancy and then having rent commencement. So, it unfortunately doesn't happen immediately. There is a lag effect. And so, we are seeing that. We are seeing the leasing momentum in the TAMI sector. The bank mandates are kind of the latest, but we started seeing things starting to pick up before the bank mandates. And unfortunately, it takes a few quarters for it to start being reflected in our numbers and then for the cash rent commencement to start hitting our statements. So there is a bit of a lag that has to be taken into account.

Okay. So like middle of 2026, you would feel comfortable that occupancy should be above where it is right now?

I would expect 2026 to be improved over 2025, but I'm not going to start speaking to 2026 on this call, Tal, although I appreciate that you are asking from a good place. updating on what we expect for 2026 as we always do on our year-end call. But we certainly, as we sit here today, we have line of sight to improved metrics in 2026.

Okay. And then just lastly on 150 West Georgia. So, do you have a data center partner prospected or in place already? Or does that, are you just saying basically you have a powered land site that could be used for that and that person will still need to go get site plan approval and all that stuff?

We have entitlements and there are prospective parties at advanced stages of their due diligence.

Okay. So your, and then your goal here is just 100% monetize that loan and be out of this site forever.

Absolutely. Yes.

Your next question comes from the line of Pammi Bir with RBC Capital Markets.

Just with respect to dispositions, the $270 million that you mentioned plus, I guess, Toronto and Calgary House, would this collectively sort of mark the end of the disposition program for, I guess, if you think about 2026? Or would you consider just continuing to perhaps upsize that program?

No. As we sit here today, we see that as being the end of the disposition program, Pammi.

And then I guess, tied to that with the, I guess, anticipated repayment of the Westbank loan, would that get you to effectively that 10x debt-to-EBITDA target? Is that enough?

We have line of sight to being in the 10x range by the end of 2026.

Okay. Maybe just switching gears, coming back to the comments around the distribution. I don't think this was asked, but if it was, I apologize. But what are some of the parameters or goalposts that you're focused on, on whether to cut? Is it leverage, occupancy, the payout ratio, et cetera? Or just maybe some color around how you're approaching it at this point?

It's really looking at getting the balance sheet where we feel it needs to be at and accelerating the progress towards that goal. And certainly, payout ratios and debt to EBITDA and those kinds of metrics, but it's about strengthening the balance sheet.

I guess the other way to think about it is, why not just cut now? I mean, how much could, I know there's a lot happening and a lot of stuff in the works from, with all this capital that you expect to repatriate. But why not just do it now and just drive on and the rest sort of strengthens the balance sheet further?

Yes. It's, we just, we have a process that has worked for us since we went public in 2003, and it's a decision that the Board makes annually for the following year at the end of every calendar year, and we don't see the need to go off process. And so we will be meeting with our Board at the end of November and making our decision within the usual time lines.

Okay. And then just lastly, the, to clarify the comment that you made on getting to 90% occupancy next year. Is that in place? Or is that committed?

So I was speaking to lease area, and we will also stick with our usual process, Pammi, of talking about 2026 on our year-end call. My reference to having line of sight to lease area of 90% by the end of 2026 is based on the improving market fundamentals that we have in front of us today, and it's something that we'll reaffirm on our year-end call.

Okay. Okay. And then just lastly here, okay, without commenting on 2026 growth, you see today is, do you see 2025 as the low watermark on FFO in this cycle for Allied?

I think that's something that I'll have to leave for part of our year-end call, Pammi. We're focused on the metrics, and we want to provide a comprehensive update in terms of our outlook for next year. So I just. I'm not trying to put you off. I just, I don't want to start giving piecemeal information on next year. All I can say is that with the improving fundamentals, we absolutely expect an improving set of operating metrics in 2026.

The next question comes from the line of Shalabh Garg with Veritas Research.

I was just wondering, there's an expectation of maintaining the occupancy rate flat over Q3 and Q4. And I see you have net lease maturities of 390,000 with some offset by fixture commencements. So where is this roughly 100 basis points or 90 basis points of occupancy going to come from? Is it new leasing? Or is it renewals for whatever is maturing in this quarter?

So, it comes from term commencement as a result of contractual leasing activity achieved year-to-date that will commence in Q4.

And then thing on renewals out of that 391,000 square foot?

Of the 391,000 square feet, we expect that we will be successful in renewing approximately half, and we expect approximately half will mature for circumstances specific to each organization and exit the portfolio.

Okay. And the other question I have, and I think, Nan, you touched on it, of the $600 million maturity up in Feb 2026, do you expect it to fully repay through asset sales? Or is there going to be some refinancing through unsecured debt?

It's expected to be fully repaid.

The next question comes from the line of Brad Sturges with Raymond James.

Just a couple of quick questions for me. Just going back to King Toronto. I think you talked about total proceeds of $240 million. What kind of default rate would you assume as a base case scenario for condo closings as those progress over the balance of '26?

We understand that our regular default rate is between 7% to 10%, Brad. So I wouldn't expect it to be higher on that project. If anything, it might be modestly lower.

Okay. That's helpful. Second question, just on the remaining asset sales to complete. Can you just talk about maybe an average yield or expected exit cap rate on a blended basis of what that potentially could look like for remaining transactions?

We're not going to be doing that at this time. We'll disclose as we always do as the dispositions are completed. All I can say is that we've been, we've had our IFRS values being validated through the disposition program to date.

Thank you. And it seems that we have no further questions at this time. I will now turn the call back over to Cecilia Williams for closing remarks.

Thanks, John, and thanks, everyone, for attending our conference call. My final message is this. Market dynamics are shifting in our favor. And with the team staying focused on what we can control, we're successfully operating our way through the improving environment and remain on the path to our goals. We're leasing up space, executing a plan to reduce debt and completing developments that will strengthen our ability to serve knowledge-based organizations for years to come. Our portfolio is unique. It's deeply urban and deeply connected to the cities that are driving Canada's economic and creative future. As these cities get stronger, so does Allied. We'll keep you updated on our progress going forward. Thank you.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. We thank you for your participation. Have a great day.