Allied Properties Real Estate Investment Trust (($TSE:AP.UN)) has held its Q4 earnings call. Read on for the main highlights of the call.
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In the recent earnings call, Allied Properties Real Estate Investment Trust expressed a cautiously optimistic sentiment. The company highlighted its robust leasing activity and improved retention rates, alongside successful asset dispositions. However, concerns were raised regarding increased vacancy rates in Vancouver and temporary financial pressures due to recent acquisitions. Despite these challenges, the overall outlook remains positive, with a focus on overcoming current hurdles.
Increased Leasing Activity
The earnings call detailed a significant increase in leasing activity, which rose by 14% compared to the previous year. Notably, new leasing activity surged by 41%, with a conversion rate of 55% in the latter half of 2024. This uptick underscores the company’s strategic leasing efforts and strong market demand.
Improved Retention Rate
Allied Properties reported an improvement in its retention rate, which climbed to 69% in 2024 from 61% the previous year. This brings the company closer to its historical retention rate of 75%, signaling successful tenant retention strategies.
Strong User Engagement Results
The company’s net promoter score saw a substantial increase of 30%, surpassing the industry average by 150%. This indicates high user satisfaction, which is anticipated to further bolster leasing activity and tenant loyalty.
Completion of Non-Core Asset Dispositions
Allied successfully disposed of $229 million worth of non-core assets in 2024, exceeding their target of $200 million. The proceeds from these dispositions were strategically allocated towards debt repayment, aiding in financial stability.
Increase in Net Operating Income
The company achieved a 6.5% increase in net operating income compared to the fourth quarter of 2023, along with a 5.4% rise in average in-place net rent per occupied square foot. These figures reflect Allied’s effective operational management and rental strategies.
Vacancy in Vancouver
Challenges were noted in Vancouver, where acquired vacancies need addressing to improve occupancy and leased areas to at least 90% by 2025. The company acknowledges this issue and is taking steps to resolve it.
Short-term Increase in Debt to EBITDA
Recent acquisitions in 2024 have led to a temporary rise in the company’s debt to EBITDA ratio. Allied aims to reduce this below 10x by the end of 2025, demonstrating their commitment to financial discipline.
Decline in FFO and AFFO
The company anticipates a 4% contraction in FFO and AFFO for 2025, attributed to lower interest income and higher interest expenses. This forecast reflects the financial challenges Allied faces in the near term.
Forward-Looking Guidance
Allied Properties REIT’s guidance for 2025 focuses on increasing occupied and leased areas to at least 90% by year-end, building on the strong leasing momentum from 2024. The company expects development completions to add $13 million to annual EBITDA. Despite a projected 4% contraction in FFO and AFFO, Allied aims to strengthen its balance sheet and achieve operational goals through targeted asset dispositions and debt reduction.
In summary, the earnings call of Allied Properties Real Estate Investment Trust presented a mixed yet hopeful picture. While the company celebrates significant leasing and retention achievements, it remains vigilant about overcoming financial and operational challenges. The forward-looking guidance suggests a strategic path towards stronger financial health and increased occupancy, underscoring Allied’s resilience and adaptability in the real estate market.
