TD commentsQ2/24 RESULTS MISS SLIGHTLY; TARGETING $200MM IN FURTHER ASSET SALES
Q2/24 results slightly missed our estimates/consensus after adjusting for one-time items. That said, occupancy appears to be stabilizing — +10bps q/q for the first gain in six quarters, with management expecting “a point of positive inflection by the end of the year.” We believe occ gains should be a catalyst for the stock. Management again reiterated its commitment to the current distribution.
Impact: SLIGHTLY NEGATIVE
FFO/unit (f.d.) of $0.52 was -11% vs. Q2/23. Excluding a $1.7mm FV, adjusted FFO was $0.53, slightly below our estimate/consensus of $0.55/$0.56. Lower NOI/higher interest expense drove the miss. AFFO/unit of $0.44 was -12% y/y. Q2/24 occupancy was +10bps q/q to 87.1%—the first increase in six quarters. Touring activity moderated with 262 lease tours vs. 300 in Q1/24 and 292 in Q2/23. Q2/24 leasing totalled 444,963sf, renewals were 60%. 72% of 2024 expires have been leased.
Portfolio optimization. Allied has seven non-core asset sales (including three announced from Q1/24) that are expected to close in H2/24. Net proceeds (including the Telus Sky transaction expected to close in Q3/24 — link) will amount to nearly $200mm and meet management's 2024 target. We view the pricing of these transactions favourably, with three assets sold meaningfully above IFRS value (including intensification potential) and the remaining four assets sold in line with IFRS. Based on the $234mm held for sale, we estimate a sub-4% cash yield, which should be accretive, with the proceeds used to reduce the high-6% debt. Looking ahead, management expects to complete $200mm in additional asset sales through 2025.
Operating Highlights Q2/24 Rental Portfolio same-asset NOI was -2.3% y/y. Gains in Montreal/Ottawa (+0.6%) were offset by Toronto/Kitchener (-2.6%), Calgary (-11.2%), and Vancouver (-6.5%). Sublease space rose slightly vs. Q1/24 (+30bps to 5.6%).
Lease renewal rates were +9.7%. Average in-place rent of $25.08/sf was +6.7% y/y. MTM spreads were +17%/5%/7% for 2024/2025/2026 (Q1/24: +12%/5%/5%). In Q2/24, Allied completed 125 leases (50 new; 75 renewals) with a WALT of 4.8 years.
cash and $485mm available on the LOC). IFRS NAV of $44.43/unit was -0.9% q/q. Recorded a $45mm loss (related to the development portfolio).