Q4 2025 Allied Properties REIT Earnings Call

February 11, 2026

Speaker #2: 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.

Speaker #2: 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 fact may constitute forward-looking information and forward-looking statements about future events or future performance.

Cecilia Williams: 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.

Speaker #2: 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.

Cecilia Williams: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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 concurrent equity offering that we announced yesterday.

Speaker #2: Turning to the substance of our conference call today, I'll outline the actions we're taking to strengthen Allied balance sheet and improve financial flexibility. Nan will then review our financial results and JP will cover leasing.

Cecilia Williams: 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 J.P. 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'm deeply appreciative of the trust and guidance he has provided throughout my time here.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: Having been CEO for almost three years now, I know the team is ready for this. And I thank him and our independent trustees for their continued support.

Cecilia Williams: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Cecilia Williams: The marketed equity offering announced yesterday is the third and final component of that plan. To accelerate deleveraging, we had 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.

Speaker #2: To accelerate deleveraging, we had to thoroughly assess our capital structure. This is a balance sheet decision and one we made after a comprehensive assessment of our alternatives.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Cecilia Williams: 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 multi-year 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.

Speaker #2: Office recovery has taken longer than the broader 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.

Speaker #2: 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 multi-year outlook covering 2026 through 2028.

Speaker #2: 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.

Speaker #2: 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.

Cecilia Williams: 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 CAD 592 million, while operating income declined to CAD 317 million, primarily reflecting non-renewals 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 sq ft of new leasing activity, the strongest second-half results since 2020.

Speaker #2: 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.

Speaker #2: 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.

Nanthini Mahalingam: 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 CAD 592 million, while operating income declined to CAD 317 million, primarily reflecting non-renewals 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 sq ft of new leasing activity, the strongest second-half results since 2020.

Speaker #2: Starting with our results, rental revenue in 2025 was stable at approximately $592 million, while operating income declined to $317 million. Primarily reflecting non-renewals and asset dispositions.

Speaker #2: 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.

Speaker #2: 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 expectation.

Cecilia Williams: J.P. 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 expectation. However, our results continue to reflect elevated interest expense, largely due to the timing of non-core disposition program. We closed on CAD 93 million in the fourth quarter of 2025 and CAD 46 million expected to close in the first quarter of 2026. Our dispositions took longer than anticipated. This delay was a 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 CAD 1 billion in IFRS fair value adjustments, reflecting cap rate expansions, updated cash flow assumptions, and higher construction costs.

Nanthini Mahalingam: J.P. 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 expectation. However, our results continue to reflect elevated interest expense, largely due to the timing of non-core disposition program. We closed on CAD 93 million in the fourth quarter of 2025 and CAD 46 million expected to close in the first quarter of 2026. Our dispositions took longer than anticipated. This delay was a 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 CAD 1 billion in IFRS fair value adjustments, reflecting cap rate expansions, updated cash flow assumptions, and higher construction costs.

Speaker #2: However, our results continue to reflect elevated interest expense, largely due to the timing of non-core 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.

Speaker #2: Our dispositions took longer than anticipated. This delay was a primary contributor to the year-over-year decline in FFO and AFFO of 12.8% and 12%, respectively.

Speaker #2: 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.

Speaker #2: 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.

Speaker #2: 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.

Cecilia Williams: We also recorded a CAD 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 CAD 27 million to facilitate completion and sale. This was supported by incremental collateral. We also extended the King Toronto loan to March 2027 and expanded the facility by CAD 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 CAD 500 million non-core disposition program, and the launch of a CAD 500 million equity offering.

Nanthini Mahalingam: We also recorded a CAD 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 CAD 27 million to facilitate completion and sale. This was supported by incremental collateral. We also extended the King Toronto loan to March 2027 and expanded the facility by CAD 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 CAD 500 million non-core disposition program, and the launch of a CAD 500 million equity offering.

Speaker #2: 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 sale.

Speaker #2: This was supported by incremental collateral. We also extended the King Toronto loan to March 2027 and expanded the facility by $23 million. This was to fund construction while the construction loan remained inaccessible.

Speaker #2: 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've taken steps intended to strengthen the balance sheet.

Speaker #2: These include a 60% distribution reset, a $500 million non-core disposition program, and the launch of a $500 million equity offering. These proceeds will be used to retire debt.

Cecilia Williams: These proceeds will be used to retire debt. While the offering, if completed, would be diluted, 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 CAD 310 to 320 million and FFO of CAD 185 to 300 million, with net debt to EBITDA in the mid-11 times range. Based on our current assumptions, net debt to EBITDA would move into the low 10 times 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 condominiums in 2027. We also anticipate the potential for growth in FFO, Same-Asset NOI in 2027 and 2028 as leasing activity annualizes.

Nanthini Mahalingam: These proceeds will be used to retire debt. While the offering, if completed, would be diluted, 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 CAD 310 to 320 million and FFO of CAD 185 to 300 million, with net debt to EBITDA in the mid-11 times range. Based on our current assumptions, net debt to EBITDA would move into the low 10 times 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 condominiums in 2027. We also anticipate the potential for growth in FFO, Same-Asset NOI in 2027 and 2028 as leasing activity annualizes.

Speaker #2: While the offering, if completed, would be diluted, refinancing at current interest rates would increase interest expense, and management determined that this approach was the most appropriate among available alternatives.

Speaker #2: Looking ahead for 2026, we estimate NOI of $310 to $320 million and FFO of $185 to $200 million, with net debt to EBITDA in the mid-11 times range.

Speaker #2: Based on our current assumptions, net debt to EBITDA would move into the low 10 times range by 2027. Driving this is EBITDA growth from economic occupancy in our organic portfolio and development completions.

Speaker #2: Further, there will be incremental debt reduction as we close on the King Toronto condominiums in 2027. We also anticipate the potential for growth in FFO, same asset NOI in 2027 and 2028 as leasing activity annualizes.

Speaker #2: 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. While 2026 represents a reset year, we continue to observe an improvement in market fundamentals.

Cecilia Williams: 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 J.P. 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.

Nanthini Mahalingam: 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 J.P. Thank you.

Speaker #2: 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.

Speaker #2: With that, I'll pass it over to JP. Thank

Speaker #2: you. Thanks, Nan.

J.P. Mackay: 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.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 three years, and conclude by sharing our 2025 user satisfaction results.

Cecilia Williams: 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 three 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 sublise availability decreased 50% in H2.

J.P. Mackay: 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 three 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 sublise availability decreased 50% in H2.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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.

Cecilia Williams: In 2025, we achieved 2.7 million sq ft 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%.

J.P. Mackay: In 2025, we achieved 2.7 million sq ft 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%.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: Lastly, our retention and replacement in 2025 was 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.

Cecilia Williams: 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 sq ft of leasing activity, including 393,000 sq ft of new leasing activity, of which 376,000 was in our rental portfolio and 17,000 in our development portfolio. This represents a 40% conversion rate. Our current three-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 non-renewals 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 sq ft or 8.5% of our GLA maturing in 2026.

J.P. Mackay: 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 sq ft of leasing activity, including 393,000 sq ft of new leasing activity, of which 376,000 was in our rental portfolio and 17,000 in our development portfolio. This represents a 40% conversion rate. Our current three-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 non-renewals 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 sq ft or 8.5% of our GLA maturing in 2026.

Speaker #3: In Q4, we completed 732,000 square feet of leasing activity. Including 393,000 square feet of new leasing activity, of which 376,000 was in our rental portfolio and 17,000 in our development portfolio.

Speaker #3: This represents a 40% conversion rate. Our current three-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 non-renewals and forecast occupancy by year-end of 84 to 86%.

Speaker #3: 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.

Speaker #3: 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%.

Cecilia Williams: We are forecasting a retention and replacement rate of approximately 69%. Our largest known non-renewal in 2026 is Sun Life at our Degas Bay portfolio in Montreal, representing 56,000 sq ft, 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 non-structural, 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 Cité, Le Nordelec, and 1010 Sherbrooke in Montreal, QRC West, 555 Richmond, 175 Bloor, and The Castle in Toronto, The Tannery in Kitchener, The Lahey Building in Calgary, and 1185 West Georgia in Vancouver. At the very core of our operating platform is an unrelenting commitment to user experience.

J.P. Mackay: We are forecasting a retention and replacement rate of approximately 69%. Our largest known non-renewal in 2026 is Sun Life at our Degas Bay portfolio in Montreal, representing 56,000 sq ft, 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 non-structural, 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 Cité, Le Nordelec, and 1010 Sherbrooke in Montreal, QRC West, 555 Richmond, 175 Bloor, and The Castle in Toronto, The Tannery in Kitchener, The Lahey Building in Calgary, and 1185 West Georgia in Vancouver. At the very core of our operating platform is an unrelenting commitment to user experience.

Speaker #3: Our largest known non-renewal in 2026 is Sun Life at our DeGaspé portfolio in Montreal, representing 56,000 square feet and maturing at the end of August.

Speaker #3: 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 non-structural event-driven factors, including M&A consolidation, bankruptcies, and relocations to new developments within our portfolio, rather than a decline in asset-level demand.

Speaker #3: These 10 concentrations: Lenordelac and 1010 Sherbrooke in Montreal; QRC West, 555 Richmond, 175 Bloor, and the Castle in Toronto; the Tannery in Kitchener; the Lahi Building in Calgary; and 1185 West Georgia in Vancouver.

Speaker #3: At the very core of our operating platform is an unrelenting commitment to user experience. For the past six years, Allied has retained Grace Hill Kingsley surveys to assess user satisfaction within our portfolio.

Cecilia Williams: For the past six 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, J.P. As J.P. 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, are disposing of assets, and are working towards an equity recapitalization intended to strengthen the balance sheet.

J.P. Mackay: For the past six 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.

Speaker #3: 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%.

Speaker #3: These results reflect the work of our teams across the country in supporting user experience. I will now turn the call back to Cecilia.

Speaker #2: Thanks, James Mackay. As James Mackay highlighted, fundamentals are moving in the right direction and our portfolio is well positioned. We have laid out our outlook clearly.

Cecilia Williams: Thanks, J.P. As J.P. 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, are disposing of assets, and are working towards an equity recapitalization intended to strengthen the balance sheet.

Speaker #2: 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.

Speaker #2: These steps are designed to position Allied to capitalize on improving fundamentals and enhanced long-term shareholder value. Outcomes will depend on effective execution and broader economic conditions, but the path forward is defined.

Cecilia Williams: 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.

Speaker #2: I want to recognize our team driving these initiatives forward. for their focus and urgency in Thank you for joining us today.

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

Q4 2025 Allied Properties REIT Earnings Call

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