Allied To Sell More Properties To Reduce Debt, Strengthen Balance Sheet
Allied To Sell More Properties To Reduce Debt, Strengthen Balance Sheet
Allied Properties REIT is continuing to sell assets as part of the large real estate investment trust’s strategy to strengthen its balance sheet.
Allied told analysts on a conference call it has contracts to sell three properties for about $50 million. “On March 25, 2025, Allied entered into an agreement to sell the Boardwalk-Revillion Building in Edmonton,” Allied said in its earnings report. “The sale is expected to close in the second quarter of this year. In addition, Allied has two low-yielding, noncore properties under sale contract, one in MontrĆ©al and one in Vancouver.”
It did not identify the other two properties it agreed to sell, but Allied did say it “expects to sell additional non-core properties in MontrĆ©al, Toronto, Calgary and Vancouver over the remainder of the year, primarily to users and entrepreneurial purchasers, and remains highly confident with respect to its sales target for this year.”
Allied President and CEO Cecilia Williams told analysts the dispositions are going well, in part because private market valuations are robust and match the REIT’s value per International Financial Reporting Standards or IFRS.
“All proceeds will be allocated to debt reduction,” she said on the call. “We’ve also improved our debt profile, taking short-term variable rate debt, and replacing it with longer-term fixed rate debt.”
Allied units have felt downward pressure since the COVID-19 pandemic amid a weaker office market. They closed at just above $15 on Friday after having been above $60 at one point.
According to its latest filings, the REIT still has a massive portfolio valued at $10.6 billion that includes 186 rental properties and 14.3 million square feet of rental space. It has 1.7 million square feet under development.
REIT reports increased leasing activity
Allied emphasized that leasing activity across its portfolio is picking up and said it conducted 280 lease tours in its rental portfolio in the first quarter.
The REIT’s occupied and leased area at the end of the first quarter was 85.9% and 86.9%, respectively. Allied said it renewed 75% of the leases that had been set to mature in the quarter, returning to the high end of its normal lease-renewal range of 70% to 75%.
“While it’s unclear what the short-term impact of the economic uncertainty will be on the demand for urban office space, we’re confident in our position to benefit from the long-term positive impact on Canadian cities,” Williams said.
Raymond James analysts said in a note that they want to see improvements in a few key areas before making a forecast on Allied’s near-term total return prospects. Those include a clear recovery in underlying Canadian office leasing demand and supply fundamentals that would result in greater sustainability in the distribution rate and improved balance sheet strength with a reduction in financial leverage metrics toward target levels, the analysts said.
“We still believe it could be a prudent capital allocation decision to at least temporarily adjust its monthly distribution rate in order to retain more cash flow and reduce financial leverage metrics,” the analysts said in a report.
Analysts with TD Cowen said after the call that they viewed the outlook for Allied as “fairly positive.”
“While management acknowledged increased macro uncertainty could push back the timing of operational goals, it is not yet showing up in any material way,” the TD analysts said in a report.
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