Allied Properties Real Estate Investment Trust ("Allied") (TSX:
"AP.UN") today announced results for its second quarter ended
June 30, 2023. With all mutual conditions satisfied, including
receipt of Competition Act approval, Allied also today announced
the scheduled closing date for the sale of its UDC portfolio in
Downtown Toronto (the “Portfolio”) to KDDI Canada, Inc., a wholly
owned subsidiary of KDDI Corporation, for $1.35 billion.
Sale of UDC Portfolio
The closing is scheduled for on or about August
16, 2023. Allied will use approximately $740 million of the
proceeds from the sale of the Portfolio to repay all amounts drawn
on its unsecured credit facility (the “Facility”), with the result
that it will have (i) no variable-rate debt other than three
joint-venture construction loans and (ii) up to $900 million of
available liquidity through the Facility. Allied will set aside
$200 million of the proceeds to repay a secured promissory note
payable on December 31, 2023, and another $49 million to repay its
remaining first mortgages on fully owned properties next year.
Allied will use the balance of the proceeds to fund its development
and upgrade activity over the remainder of 2023 and into 2024.
Financial Results
The following table summarizes GAAP financial measures for the
second quarter:
| |
For the three months ended June 30 |
| (in
thousands except for % amounts) |
2023 |
2022 |
Change |
% Change |
|
Continuing operations |
|
|
|
|
|
Rental revenue |
$ |
136,137 |
|
$ |
130,779 |
|
$ |
5,358 |
|
4.1 |
% |
|
Property operating costs |
$ |
(58,037 |
) |
$ |
(55,686 |
) |
$ |
(2,351 |
) |
(4.2 |
)% |
|
Net rental income and operating income |
$ |
78,100 |
|
$ |
75,093 |
|
$ |
3,007 |
|
4.0 |
% |
|
Interest expense |
$ |
(26,797 |
) |
$ |
(17,329 |
) |
$ |
(9,468 |
) |
(54.6 |
)% |
|
General and administrative expenses |
$ |
(4,714 |
) |
$ |
(5,592 |
) |
$ |
878 |
|
15.7 |
% |
|
Condominium marketing expenses |
$ |
(192 |
) |
$ |
(199 |
) |
$ |
7 |
|
3.5 |
% |
|
Amortization of other assets |
$ |
(360 |
) |
$ |
(269 |
) |
$ |
(91 |
) |
(33.8 |
)% |
|
Interest income |
$ |
10,225 |
|
$ |
7,556 |
|
$ |
2,669 |
|
35.3 |
% |
|
Fair value (loss) gain on investment properties and
investment properties held for sale |
$ |
(73,471 |
) |
$ |
20,895 |
|
$ |
(94,366 |
) |
(451.6 |
)% |
|
Fair value gain on Exchangeable LP Units |
$ |
10,510 |
|
$ |
— |
|
$ |
10,510 |
|
100.0 |
% |
|
Fair value gain on derivative instruments |
$ |
15,357 |
|
$ |
10,744 |
|
$ |
4,613 |
|
42.9 |
% |
|
Net income (loss) from joint venture |
$ |
2,423 |
|
$ |
(5,383 |
) |
$ |
7,806 |
|
145.0 |
% |
| Net income and
comprehensive income from continuing operations |
$ |
11,081 |
|
$ |
85,516 |
|
$ |
(74,435 |
) |
(87.0 |
)% |
| Net income and
comprehensive income from discontinued operations |
$ |
115,184 |
|
$ |
14,522 |
|
$ |
100,662 |
|
693.2 |
% |
| Net income and
comprehensive income |
$ |
126,265 |
|
$ |
100,038 |
|
$ |
26,227 |
|
26.2 |
% |
|
|
|
|
|
|
| |
For the six months ended June 30 |
| (in
thousands except for % amounts) |
2023 |
2022 |
Change |
% Change |
|
Continuing operations |
|
|
|
|
|
Rental revenue |
$ |
274,627 |
|
$ |
251,721 |
|
$ |
22,906 |
|
9.1 |
% |
|
Property operating costs |
$ |
(119,362 |
) |
$ |
(109,221 |
) |
$ |
(10,141 |
) |
(9.3 |
)% |
|
Net rental income and operating income |
$ |
155,265 |
|
$ |
142,500 |
|
$ |
12,765 |
|
9.0 |
% |
|
Interest expense |
$ |
(49,361 |
) |
$ |
(32,490 |
) |
$ |
(16,871 |
) |
(51.9 |
)% |
|
General and administrative expenses |
$ |
(10,884 |
) |
$ |
(12,474 |
) |
$ |
1,590 |
|
12.7 |
% |
|
Condominium marketing expenses |
$ |
(312 |
) |
$ |
(312 |
) |
$ |
— |
|
— |
% |
|
Amortization of other assets |
$ |
(730 |
) |
$ |
(530 |
) |
$ |
(200 |
) |
(37.7 |
)% |
|
Interest income |
$ |
19,969 |
|
$ |
14,580 |
|
$ |
5,389 |
|
37.0 |
% |
|
Fair value (loss) gain on investment properties and
investment properties held for sale |
$ |
(151,828 |
) |
$ |
10,826 |
|
$ |
(162,654 |
) |
(1,502.4 |
)% |
|
Fair value gain on Exchangeable LP Units |
$ |
10,510 |
|
$ |
— |
|
$ |
10,510 |
|
100.0 |
% |
|
Fair value gain on derivative instruments |
$ |
7,333 |
|
$ |
29,942 |
|
$ |
(22,609 |
) |
(75.5 |
)% |
|
Net (loss) income from joint venture |
$ |
(583 |
) |
$ |
2,348 |
|
$ |
(2,931 |
) |
(124.8 |
)% |
| Net (loss) income and
comprehensive (loss) income from continuing
operations |
$ |
(20,621 |
) |
$ |
154,390 |
|
$ |
(175,011 |
) |
(113.4 |
)% |
| Net income and
comprehensive income from discontinued operations |
$ |
133,203 |
|
$ |
132,838 |
|
$ |
365 |
|
0.3 |
% |
| Net income and
comprehensive income |
$ |
112,582 |
|
$ |
287,228 |
|
$ |
(174,646 |
) |
(60.8 |
)% |
|
|
|
|
|
|
The following table summarizes non-GAAP financial measures for
the second quarter:
| |
For the three months ended June 30 |
| (in thousands except for per
unit and % amounts)(1) |
2023 |
2022 |
Change |
% Change |
|
Adjusted EBITDA |
$ |
106,385 |
|
$ |
101,101 |
|
$ |
5,284 |
|
5.2 |
% |
| Same Asset NOI -
rental portfolio |
$ |
77,092 |
|
$ |
76,948 |
|
$ |
144 |
|
0.2 |
% |
| Same Asset NOI - total
portfolio |
$ |
97,493 |
|
$ |
95,244 |
|
$ |
2,249 |
|
2.4 |
% |
| FFO |
$ |
82,224 |
|
$ |
85,050 |
|
$ |
(2,826 |
) |
(3.3 |
)% |
| FFO per unit
(diluted) |
$ |
0.588 |
|
$ |
0.608 |
|
$ |
(0.02 |
) |
(3.3 |
)% |
| FFO pay-out
ratio |
|
76.5 |
% |
|
71.9 |
% |
|
— |
|
4.6 |
% |
| All
amounts below are excluding condominium related items and the
mark-to-market adjustment on unit-based compensation: |
|
FFO |
$ |
82,216 |
|
$ |
84,747 |
|
$ |
(2,531 |
) |
(3.0 |
)% |
|
FFO per unit (diluted) |
$ |
0.588 |
|
$ |
0.606 |
|
$ |
(0.018 |
) |
(3.0 |
)% |
|
FFO pay-out ratio |
|
76.5 |
% |
|
72.1 |
% |
|
— |
|
4.4 |
% |
|
AFFO |
$ |
74,958 |
|
$ |
75,947 |
|
$ |
(989 |
) |
(1.3 |
)% |
|
AFFO per unit (diluted) |
$ |
0.536 |
|
$ |
0.543 |
|
$ |
(0.007 |
) |
(1.3 |
)% |
|
AFFO pay-out ratio |
|
83.9 |
% |
|
80.5 |
% |
|
— |
|
3.4 |
% |
|
|
|
|
|
|
(1) These non-GAAP measures include the results
of the continuing operations and the discontinued operations
(except for same asset NOI - rental portfolio, which only includes
continuing operations). Refer to the Non-GAAP Measures section
below.
| |
For the six months ended June 30 |
| (in thousands except for per
unit and % amounts)(1) |
2023 |
2022 |
Change |
% Change |
|
Adjusted EBITDA |
$ |
209,380 |
|
$ |
192,823 |
|
$ |
16,557 |
|
8.6 |
% |
| Same asset NOI -
rental portfolio |
$ |
136,820 |
|
$ |
136,913 |
|
$ |
(93 |
) |
(0.1 |
%) |
| Same Asset NOI - total
portfolio |
$ |
175,354 |
|
$ |
174,488 |
|
$ |
866 |
|
0.5 |
% |
| FFO |
$ |
163,399 |
|
$ |
162,390 |
|
$ |
1,009 |
|
0.6 |
% |
| FFO per unit
(diluted) |
$ |
1.169 |
|
$ |
1.211 |
|
$ |
(0.042 |
) |
(3.5 |
%) |
| FFO pay-out
ratio |
|
77.0 |
% |
|
72.1 |
% |
|
— |
|
4.9 |
% |
| All
amounts below are excluding condominium related items and the
mark-to-market adjustment on unit-based compensation |
|
FFO |
$ |
163,301 |
|
$ |
162,320 |
|
$ |
981 |
|
0.6 |
% |
|
FFO per unit (diluted) |
$ |
1.168 |
|
$ |
1.210 |
|
$ |
(0.042 |
) |
(3.5 |
%) |
|
FFO pay-out ratio |
|
77.0 |
% |
|
72.1 |
% |
|
— |
|
4.9 |
% |
|
AFFO |
$ |
149,440 |
|
$ |
147,518 |
|
$ |
1,922 |
|
1.3 |
% |
|
AFFO per unit (diluted) |
$ |
1.069 |
|
$ |
1.100 |
|
$ |
(0.031 |
) |
(2.8 |
%) |
|
AFFO pay-out ratio |
|
84.2 |
% |
|
79.4 |
% |
|
— |
|
4.8 |
% |
(1) These non-GAAP measures include the results
of the continuing operations and the discontinued operations
(except for same asset NOI - rental portfolio, which only includes
continuing operations). Refer to the Non-GAAP Measures section
below.
In the second quarter, higher interest expense
and extended lease-up timeframes put temporary downward pressure on
Allied’s FFO per unit, which was 58.8 cents, modestly below
expectation. AFFO per unit of 53.6 cents was modestly above
expectation. Interest expense is expected to decline materially in
the second half of the year due to the repayment of debt with
proceeds from the sale of the Portfolio, and leasing is expected to
continue on favourable terms.
Allied recorded a fair value gain on investment
properties and investment properties held for sale of $30 million
in the second quarter. The fair value gain on the Portfolio in the
second quarter was offset partially by fair value adjustments to
specific properties in the rental portfolio and higher costs in the
development portfolio.
The following table summarizes other financial
measures as at June 30, 2023 and June 30, 2022:
| |
As at June 30 |
| (in
thousands except for per unit and % amounts) |
2023 |
2022 |
Change |
% Change |
|
Investment propertiesand investment
properties held for
sale(1) |
$ |
11,205,255 |
|
$ |
10,723,363 |
|
$ |
481,892 |
|
4.5 |
% |
| Unencumbered
investment properties and investment properties held for
sale(2) |
$ |
9,895,650 |
|
$ |
9,449,620 |
|
$ |
446,030 |
|
4.7 |
% |
| Total
Assets(1) |
$ |
12,185,427 |
|
$ |
11,620,469 |
|
$ |
564,958 |
|
4.9 |
% |
| Cost of PUD as a % of
GBV(2) |
|
11.4 |
% |
|
12.8 |
% |
|
— |
|
(1.4 |
%) |
| NAV per
unit(3) |
$ |
50.80 |
|
$ |
51.20 |
|
$ |
(0.40 |
) |
(0.8 |
)% |
|
Debt(1) |
$ |
4,474,519 |
|
$ |
3,915,687 |
|
$ |
558,832 |
|
14.3 |
% |
| Total indebtedness
ratio(2) |
|
36.9 |
% |
|
33.9 |
% |
|
— |
|
3.0 |
% |
| Annualized Adjusted
EBITDA(2) |
$ |
425,540 |
|
$ |
404,404 |
|
$ |
21,136 |
|
5.2 |
% |
| Net debt as a multiple
of Annualized Adjusted
EBITDA(2) |
10.5x |
9.6x |
0.9x |
— |
|
| Interest coverage
ratio including interest capitalized and excluding financing
prepayment costs - three months
trailing(2) |
2.3x |
3.2x |
(0.9x) |
— |
|
|
Interest coverage ratio including interest capitalized and
excluding financing prepayment costs - twelve months
trailing(2) |
2.6x |
3.3x |
(0.7x) |
— |
|
(1) This measure is presented on an IFRS
basis.(2) This is a non-GAAP measure, and includes the results of
the continuing operations and the discontinued operations. Refer to
the Non-GAAP Measures section below.(3) Prior to Allied's
conversion to an open-end trust, net asset value per unit ("NAV per
unit") was calculated as total equity as at the corresponding
period ended, divided by the actual number of Units and class B
limited partnership units of Allied Properties Exchangeable Limited
Partnership ("Exchangeable LP Units") outstanding at period end.
With Allied's conversion to an open-end trust on June 12, 2023, NAV
per unit is calculated as total equity plus the value of
Exchangeable LP Units as at the corresponding period ended, divided
by the actual number of Units and Exchangeable LP Units. The
rationale for including the value of Exchangeable LP Units is
because they are economically equivalent to Units, receive
distributions equal to the distributions paid on the Units and are
exchangeable, at the holder's option, for Units.
Operations
Knowledge-based organizations, including
educational institutions, continue to prefer distinctive urban
workspace in amenity-rich urban neighbourhoods in Canada’s major
cities. As a result, demand for Allied’s workspace across the
country continues to be evident in the behaviour of existing and
prospective users of space. Allied conducted 292 lease tours in its
rental portfolio in the second quarter, up from 258 in the
comparable quarter last year and considerably higher than 243 in
the prior quarter. Allied’s occupied and leased area at the end of
the quarter was 87.4% and 87.6%, respectively, down slightly from
the prior quarter.
Allied leased a total of 698,830 square feet in
the quarter. 124,685 square feet was vacant space in its rental
portfolio, which was more than offset by 224,509 square feet of
non-renewal, primarily in Calgary, which accounts for the slight
decline in occupied and leased area. Allied also leased 180,363
square feet of space maturing in the quarter and an additional
239,280 square feet of space maturing after June 30, 2023. Finally,
Allied leased 154,502 square feet in its development portfolio.
Average in-place net rent per occupied square
foot continued to rise in the quarter, reaching $23.51 at
quarter-end. Allied continued to achieve rent increases on renewal
(up 7.6% ending-to-starting base rent and up 13.7%
average-to-average base rent).
The leasing metrics at June 30, 2023, and
June 30, 2022, are set out in the table below:
| |
As at June 30 |
|
|
2023 |
2022 |
Change |
% Change |
|
Leased area(1) |
|
87.6 |
% |
|
90.9 |
% |
|
— |
(3.3 |
%) |
| Occupied
area(1) |
|
87.4 |
% |
|
89.5 |
% |
|
— |
(2.1 |
%) |
|
Average in-place net rent per occupied square foot -
excluding UDC in all periods |
$ |
23.51 |
|
$ |
22.67 |
|
$ |
0.84 |
3.7 |
% |
(1) This metric excludes the assets held for
sale based on the assets held for sale classification at the end of
each period.
Leasing highlights in Allied’s rental portfolio include the
following:
- renewal of 72,000 square feet of office space with Technicolor
at 645 Wellington in Montréal;
- renewal of 50,000 square feet of office space with Cossette
Advertising at 32 Atlantic in Toronto;
- lease of 34,000 square feet of office space to Collabtiv
Management at 747 Square Victoria in Montréal;
- lease of 28,000 square feet of office space to Pole To Win
Canada at 111 Boulevard Robert-Bourassa Montréal;
- lease of 25,000 square feet of retail space to Compass Group
Canada, a global food services organization, at 747 Square Victoria
in Montréal; and
- lease of 29 rental residential units in TELUS Sky in Calgary,
bringing the residential component of the property to 97.5%
leased.
Leasing highlights in Allied’s development
portfolio include the following:
- lease of 54,000 square feet of office space to a global
electronics and entertainment organization at Tour Viger in
Montréal;
- lease of 33,000 square feet of office space to a technology
organization at 1001 Boulevard Robert-Bourassa in Montréal;
- lease of 26,000 square feet of office space to Averna
Technologies at RCA Building in Montréal;
- renewal and expansion to 16,000 square feet of office space to
Puzzle Medical Devices at RCA Building in Montréal;
- lease of 10,000 square feet of retail space to Joe Fortes
Restaurant at 422-424 Wellington West in Toronto; and
- lease of 9,000 square feet of office space to Kativik School
Board at RCA Building in Montréal.
Outlook
Allied’s internal forecast for 2023 now calls
for flat to low-single-digit percentage growth in each of same
asset NOI, FFO per unit and AFFO per unit. Allied does not forecast
NAV per unit growth in any given time period.
Allied has assembled the largest and most
concentrated portfolio of economically-productive, underutilized
urban land in Canada, one that affords extraordinary mixed-use
intensification potential in major cities going forward. Allied
believes deeply in the continued success of Canadian cities and has
the platform and the breadth of funding relationships necessary to
drive value in the coming years and decades for the benefit of its
constituents.
Non-GAAP Measures
Management uses financial measures based on
International Financial Reporting Standards ("IFRS" or "GAAP") and
non-GAAP measures to assess Allied's performance. Non-GAAP measures
do not have any standardized meaning prescribed under IFRS, and
therefore, should not be construed as alternatives to net income or
cash flow from operating activities calculated in accordance with
IFRS. Refer to the Non-GAAP Measures section on page 17 of the
MD&A as at June 30, 2023, available on www.sedarplus.ca,
for an explanation of the composition of the non-GAAP measures used
in this press release and their usefulness for readers in assessing
Allied's performance. Such explanation is incorporated by reference
herein.
Reconciliations of Non-GAAP
Measures
The following tables reconcile the non-GAAP
measures to the most comparable IFRS measures for the three and six
months ended June 30, 2023, and the comparable period in 2022.
These terms do not have any standardized meaning prescribed under
IFRS and may not be comparable to similarly titled measures
presented by other publicly traded entities.
Adjusted Earnings Before Interest,
Taxes, Depreciation and Amortization ("Adjusted
EBITDA")The following table reconciles Allied's net (loss)
income and comprehensive (loss) income to Adjusted EBITDA, a
non-GAAP measure, for the three and six months ended June 30,
2023 and June 30, 2022.
| |
Three months ended |
|
Six months ended |
|
|
June 30, 2023 |
June 30, 2022 |
|
June 30, 2023 |
June 30, 2022 |
|
Net income and comprehensive income for the period |
$ |
126,265 |
|
$ |
100,038 |
|
|
$ |
112,582 |
|
$ |
287,228 |
|
| Interest expense |
|
28,578 |
|
|
18,841 |
|
|
|
52,913 |
|
|
35,510 |
|
| Amortization of other
assets |
|
360 |
|
|
269 |
|
|
|
730 |
|
|
530 |
|
| Amortization of improvement
allowances |
|
8,154 |
|
|
8,441 |
|
|
|
16,522 |
|
|
16,341 |
|
| Fair value (gain) loss on
investment properties and investment properties held for
sale(1) |
|
(30,905 |
) |
|
(15,242 |
) |
|
|
44,886 |
|
|
(116,462 |
) |
| Fair value gain on
Exchangeable LP Units |
|
(10,510 |
) |
|
— |
|
|
|
(10,510 |
) |
|
— |
|
| Fair value gain on derivative
instruments |
|
(15,357 |
) |
|
(10,744 |
) |
|
|
(7,333 |
) |
|
(29,942 |
) |
|
Mark-to-market adjustment on unit-based compensation |
|
(200 |
) |
|
(502 |
) |
|
|
(410 |
) |
|
(382 |
) |
|
Adjusted EBITDA(2) |
$ |
106,385 |
|
$ |
101,101 |
|
|
$ |
209,380 |
|
$ |
192,823 |
|
(1) Includes Allied's proportionate share of the
equity accounted investment's fair value gain on investment
properties of $1,280 and fair value loss on investment properties
of $2,743, respectively for the three and six months ended
June 30, 2023 (June 30, 2022 - fair value loss on
investment properties of $6,030 and fair value gain on investment
properties of $1,262, respectively).(2) Includes the Urban Data
Centre segment which was classified as a discontinued operation
starting in Q4 2022.
Net Operating Income (NOI)The following table
reconciles operating income to net operating income, a non-GAAP
measure for the three and six months ended June 30, 2023.
| |
Three months ended |
|
Six months ended |
| |
June 30, 2023 |
June 30, 2022 |
|
June 30, 2023 |
June 30, 2022 |
|
Operating income, IFRS basis |
$ |
78,100 |
|
$ |
75,093 |
|
|
$ |
155,265 |
|
$ |
142,500 |
|
| Add:
investment in joint venture |
|
1,140 |
|
|
645 |
|
|
|
2,149 |
|
|
1,084 |
|
|
Operating income, proportionate basis |
$ |
79,240 |
|
$ |
75,738 |
|
|
$ |
157,414 |
|
$ |
143,584 |
|
| Amortization of improvement
allowances(1)(2) |
|
8,023 |
|
|
8,306 |
|
|
|
16,261 |
|
|
16,071 |
|
|
Amortization of straight-line rent(1)(2) |
|
(1,626 |
) |
|
(1,273 |
) |
|
|
(3,405 |
) |
|
(1,618 |
) |
|
NOI from continuing operations |
$ |
85,637 |
|
$ |
82,771 |
|
|
$ |
170,270 |
|
$ |
158,037 |
|
|
NOI from discontinued operations |
$ |
13,797 |
|
$ |
15,782 |
|
|
$ |
26,866 |
|
$ |
31,630 |
|
|
Total NOI |
$ |
99,434 |
|
$ |
98,553 |
|
|
$ |
197,136 |
|
$ |
189,667 |
|
(1) Includes Allied's proportionate share of the equity
accounted investment of the following amounts for the three and six
months ended June 30, 2023: amortization improvement
allowances of $144 and $327, respectively (June 30, 2022 -
$158 and $291, respectively), and amortization of straight-line
rent of $(50) and $(98), respectively (June 30, 2022 - $(232)
and $(482), respectively).
(2) Excludes the Urban Data Centre segment which
was classified as a discontinued operation starting in Q4 2022. The
prior period comparative figures have been revised accordingly. For
the three and six months ended June 30, 2023, the Urban Data
Centre segment's amortization of improvement allowances was $131
and $261, respectively (June 30, 2022 - $135 and $270,
respectively). For the three and six months ended June 30,
2023, the Urban Data Centre segment's amortization of straight-line
rent was $(203) and $(465), respectively (June 30, 2022 -
$(10) and $(124), respectively).
Same Asset NOISame asset NOI, a
non-GAAP measure, is measured as the net operating income for the
properties that Allied owned and operated for the entire duration
of both the current and comparative period. Same asset NOI of the
assets held for sale for the three and six months ended
June 30, 2023, consists of five investment properties.
| |
Three months ended |
Change |
| |
June 30, 2023 |
June 30, 2022 |
|
$ |
|
% |
|
|
Rental Portfolio - Same Asset NOI |
$ |
77,092 |
$ |
76,948 |
$ |
144 |
|
0.2 |
% |
| Assets
Held for Sale - Same Asset NOI |
|
14,211 |
|
15,705 |
|
(1,494 |
) |
(9.5 |
) |
|
Rental Portfolio and Assets Held for Sale - Same Asset
NOI |
$ |
91,303 |
$ |
92,653 |
$ |
(1,350 |
) |
(1.5 |
%) |
|
Development Portfolio - Same Asset NOI |
$ |
6,190 |
$ |
2,591 |
$ |
3,599 |
|
138.9 |
% |
|
Total Portfolio - Same Asset NOI |
$ |
97,493 |
$ |
95,244 |
$ |
2,249 |
|
2.4 |
% |
|
Acquisitions |
$ |
339 |
$ |
33 |
$ |
306 |
|
|
|
Dispositions |
|
39 |
|
791 |
|
(752 |
) |
|
|
Lease terminations |
|
— |
|
198 |
|
(198 |
) |
|
|
Development fees and corporate items |
|
1,563 |
|
2,287 |
|
(724 |
) |
|
|
Total NOI |
$ |
99,434 |
$ |
98,553 |
$ |
881 |
|
0.9 |
% |
| |
Six months ended |
Change |
| |
June 30, 2023 |
June 30, 2022 |
|
$ |
|
% |
|
|
Rental Portfolio - Same Asset NOI |
$ |
136,820 |
$ |
136,913 |
$ |
(93 |
) |
(0.1 |
)% |
| Assets
Held for Sale - Same Asset NOI |
|
27,733 |
|
31,982 |
|
(4,249 |
) |
(13.3 |
) |
|
Rental Portfolio and Assets Held for Sale - Same Asset
NOI |
$ |
164,553 |
$ |
168,895 |
$ |
(4,342 |
) |
(2.6 |
%) |
|
Development Portfolio - Same Asset NOI |
$ |
10,801 |
$ |
5,593 |
$ |
5,208 |
|
93.1 |
% |
|
Total Portfolio - Same Asset NOI |
$ |
175,354 |
$ |
174,488 |
$ |
866 |
|
0.5 |
% |
|
Acquisitions |
$ |
17,864 |
$ |
8,156 |
$ |
9,708 |
|
|
|
Dispositions |
|
38 |
|
1,226 |
|
(1,188 |
) |
|
|
Lease terminations |
|
193 |
|
323 |
|
(130 |
) |
|
|
Development fees and corporate items |
|
3,687 |
|
5,474 |
|
(1,787 |
) |
|
|
Total NOI |
$ |
197,136 |
$ |
189,667 |
$ |
7,469 |
|
3.9 |
% |
Funds from operations ("FFO") and
Adjusted funds from operations ("AFFO")The following
tables reconcile Allied's net income and comprehensive income to
FFO, FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation, AFFO, and AFFO excluding
condominium related items and the mark-to-market adjustment on
unit-based compensation, which are non-GAAP measures, for the three
and six months ended June 30, 2023, and June 30,
2022.
| |
Three months ended |
|
|
June 30, 2023 |
June 30, 2022 |
Change |
|
Net income and comprehensive income from continuing operations |
$ |
11,081 |
|
$ |
85,516 |
|
$ |
(74,435 |
) |
| Net income and comprehensive
income from discontinued operations |
|
115,184 |
|
|
14,522 |
|
|
100,662 |
|
| Adjustment to fair value of
investment properties and investment properties held for sale |
|
(29,625 |
) |
|
(21,272 |
) |
|
(8,353 |
) |
| Adjustment to fair value of
Exchangeable LP Units |
|
(10,510 |
) |
|
— |
|
|
(10,510 |
) |
| Adjustment to fair value of
derivative instruments |
|
(15,357 |
) |
|
(10,744 |
) |
|
(4,613 |
) |
| Incremental leasing costs |
|
2,295 |
|
|
2,216 |
|
|
79 |
|
| Amortization of improvement
allowances |
|
8,010 |
|
|
8,283 |
|
|
(273 |
) |
| Amortization of property,
plant and equipment(1) |
|
101 |
|
|
— |
|
|
101 |
|
| Distributions on Exchangeable
LP Units |
|
1,771 |
|
|
— |
|
|
1,771 |
|
| Adjustments relating to joint
venture: |
|
|
|
|
Adjustment to fair value on investment properties |
|
(1,280 |
) |
|
6,030 |
|
|
(7,310 |
) |
|
Amortization of improvement allowances |
|
144 |
|
|
158 |
|
|
(14 |
) |
|
Interest expense(2) |
|
410 |
|
|
341 |
|
|
69 |
|
|
FFO |
$ |
82,224 |
|
$ |
85,050 |
|
$ |
(2,826 |
) |
| Condominium marketing
costs |
|
192 |
|
|
199 |
|
|
(7 |
) |
|
Mark-to-market adjustment on unit-based compensation |
|
(200 |
) |
|
(502 |
) |
|
302 |
|
|
FFO excluding condominium related items and the
mark-to-market adjustment on unit-based compensation |
$ |
82,216 |
|
$ |
84,747 |
|
$ |
(2,531 |
) |
| Amortization of straight-line
rent |
|
(1,779 |
) |
|
(1,051 |
) |
|
(728 |
) |
| Regular leasing
expenditures |
|
(2,973 |
) |
|
(3,783 |
) |
|
810 |
|
| Regular and recoverable
maintenance capital expenditures |
|
(849 |
) |
|
(2,183 |
) |
|
1,334 |
|
| Incremental leasing costs
(related to regular leasing expenditures) |
|
(1,607 |
) |
|
(1,551 |
) |
|
(56 |
) |
| Adjustment relating to joint
venture: |
|
|
|
|
Amortization of straight-line rent |
|
(50 |
) |
|
(232 |
) |
|
182 |
|
|
AFFO excluding condominium related items and the
mark-to-market adjustment on unit-based compensation |
$ |
74,958 |
|
$ |
75,947 |
|
$ |
(989 |
) |
|
|
|
|
|
| Weighted average number of
units(3) |
|
|
|
|
Basic |
|
139,765,128 |
|
|
139,761,340 |
|
|
3,788 |
|
|
Diluted |
|
139,765,128 |
|
|
139,860,134 |
|
|
(95,006 |
) |
| |
|
|
|
| Per unit - basic |
|
|
|
|
FFO |
$ |
0.588 |
|
$ |
0.609 |
|
$ |
(0.021 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.588 |
|
$ |
0.606 |
|
$ |
(0.018 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.536 |
|
$ |
0.543 |
|
$ |
(0.007 |
) |
| |
|
|
|
| Per unit - diluted |
|
|
|
|
FFO |
$ |
0.588 |
|
$ |
0.608 |
|
$ |
(0.020 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.588 |
|
$ |
0.606 |
|
$ |
(0.018 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
0.536 |
|
$ |
0.543 |
|
$ |
(0.007 |
) |
| |
|
|
|
| Pay-out Ratio |
|
|
|
|
FFO |
|
76.5 |
% |
|
71.9 |
% |
|
4.6 |
% |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
76.5 |
% |
|
72.1 |
% |
|
4.4 |
% |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
83.9 |
% |
|
80.5 |
% |
|
3.4 |
% |
(1) Property, plant and equipment relates to owner-occupied
property.(2) This amount represents interest expense on Allied's
joint venture investment in TELUS Sky and is not capitalized under
IFRS, but is allowed as an adjustment under REALPAC's definition of
FFO. (3) The weighted average number of units includes Units and
Exchangeable LP Units. The Exchangeable LP Units were re-classified
from non-controlling interests in equity to liabilities in the
unaudited condensed consolidated financial statements on Allied's
conversion to an open-end trust on June 12, 2023.
| |
Six months ended |
|
|
June 30, 2023 |
June 30, 2022 |
Change |
|
Net (loss) income and comprehensive (loss) income from continuing
operations |
$ |
(20,621 |
) |
$ |
154,390 |
|
$ |
(175,011 |
) |
| Net income and comprehensive
income from discontinued operations |
|
133,203 |
|
|
132,838 |
|
|
365 |
|
| Adjustment to fair value of
investment properties and investment properties held for sale |
|
42,143 |
|
|
(115,200 |
) |
|
157,343 |
|
| Adjustment to fair value of
Exchangeable LP Units |
|
(10,510 |
) |
|
— |
|
|
(10,510 |
) |
| Adjustment to fair value of
derivative instruments |
|
(7,333 |
) |
|
(29,942 |
) |
|
22,609 |
|
| Incremental leasing costs |
|
4,535 |
|
|
4,569 |
|
|
(34 |
) |
| Amortization of improvement
allowances |
|
16,195 |
|
|
16,050 |
|
|
145 |
|
| Amortization of property,
plant and equipment(1) |
|
201 |
|
|
— |
|
|
201 |
|
| Distributions on Exchangeable
LP Units |
|
1,771 |
|
|
— |
|
|
1,771 |
|
| Adjustments relating to joint
venture: |
|
|
|
|
Adjustment to fair value on investment properties |
|
2,743 |
|
|
(1,262 |
) |
|
4,005 |
|
|
Amortization of improvement allowances |
|
327 |
|
|
291 |
|
|
36 |
|
|
Interest expense(2) |
|
745 |
|
|
656 |
|
|
89 |
|
|
FFO |
$ |
163,399 |
|
$ |
162,390 |
|
$ |
1,009 |
|
| Condominium marketing
costs |
|
312 |
|
|
312 |
|
|
— |
|
| Financing prepayment
costs |
|
— |
|
|
— |
|
|
— |
|
|
Mark-to-market adjustment on unit-based compensation |
|
(410 |
) |
|
(382 |
) |
|
(28 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
163,301 |
|
$ |
162,320 |
|
$ |
981 |
|
| Amortization of straight-line
rent |
|
(3,772 |
) |
|
(1,260 |
) |
|
(2,512 |
) |
| Regular leasing
expenditures |
|
(4,099 |
) |
|
(6,978 |
) |
|
2,879 |
|
| Regular and recoverable
maintenance capital expenditures |
|
(2,717 |
) |
|
(2,884 |
) |
|
167 |
|
| Incremental leasing costs
(related to regular leasing expenditures) |
|
(3,175 |
) |
|
(3,198 |
) |
|
23 |
|
| Adjustment relating to joint
venture: |
|
|
|
|
Amortization of straight-line rent |
|
(98 |
) |
|
(482 |
) |
|
384 |
|
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
149,440 |
|
$ |
147,518 |
|
$ |
1,922 |
|
|
|
|
|
|
| Weighted average number of
units(3) |
|
|
|
|
Basic |
|
139,765,128 |
|
|
133,949,961 |
|
|
5,815,167 |
|
|
Diluted |
|
139,765,128 |
|
|
134,103,918 |
|
|
5,661,210 |
|
| |
|
|
|
| Per unit - basic |
|
|
|
|
FFO |
$ |
1.169 |
|
$ |
1.212 |
|
$ |
(0.043 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.168 |
|
$ |
1.212 |
|
$ |
(0.044 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.069 |
|
$ |
1.101 |
|
$ |
(0.032 |
) |
| |
|
|
|
| Per unit - diluted |
|
|
|
|
FFO |
$ |
1.169 |
|
$ |
1.211 |
|
$ |
(0.042 |
) |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.168 |
|
$ |
1.210 |
|
$ |
(0.042 |
) |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
$ |
1.069 |
|
$ |
1.100 |
|
$ |
(0.031 |
) |
| |
|
|
|
| Pay-out Ratio |
|
|
|
|
FFO |
|
77.0 |
% |
|
72.1 |
% |
|
4.9 |
% |
|
FFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
77.0 |
% |
|
72.1 |
% |
|
4.9 |
% |
|
AFFO excluding condominium related items and the mark-to-market
adjustment on unit-based compensation |
|
84.2 |
% |
|
79.4 |
% |
|
4.8 |
% |
(1) Property, plant and equipment relates to owner-occupied
property.(2) This amount represents interest expense on Allied's
joint venture investment in TELUS Sky and is not capitalized under
IFRS, but is allowed as an adjustment under REALPAC's definition of
FFO. (3) The weighted average number of units includes Units and
Exchangeable LP Units. The Exchangeable LP Units were re-classified
from non-controlling interests in equity to liabilities in the
unaudited condensed consolidated financial statements on Allied's
conversion to an open-end trust on June 12, 2023.
Cautionary Statements
This press release may contain forward-looking
statements with respect to Allied, its operations, strategy,
financial performance and condition and the expected impact of the
global pandemic and consequent economic disruption. These
statements generally can be identified by use of forward-looking
words such as "forecast", “may”, “will”, “expect”, “estimate”,
“anticipate”, “intends”, “believe” or “continue” or the negative
thereof or similar variations. Allied’s actual results and
performance discussed herein could differ materially from those
expressed or implied by such statements. Such statements are
qualified in their entirety by the inherent risks and uncertainties
surrounding future expectations, including the effect of the global
pandemic and consequent economic disruption. Important factors that
could cause actual results to differ materially from expectations
include, among other things, general economic and market factors,
competition, changes in government regulations and the factors
described under “Risk Factors” in Allied’s Annual Information Form
which is available at www.sedarplus.ca. The cautionary statements
qualify all forward-looking statements attributable to Allied and
persons acting on its behalf. Unless otherwise stated, all
forward-looking statements speak only as of the date of this press
release, and Allied has no obligation to update such
statements.
About Allied
Allied is a leading owner-operator of
distinctive urban workspace in Canada’s major cities. Allied’s
mission is to provide knowledge-based organizations with workspace
that is sustainable and conducive to human wellness, creativity,
connectivity and diversity. Allied’s vision is to make a continuous
contribution to cities and culture that elevates and inspires the
humanity in all people.
FOR FURTHER INFORMATION, PLEASE
CONTACT:
Cecilia C. WilliamsPresident & Chief Executive Officer(416)
977-9002cwilliams@alliedreit.com
Nanthini MahalingamSenior Vice President & Chief Financial
Officer(416) 977-9002nmahalingam@alliedreit.com
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