Allied Properties REIT has raised $560 million through two upsized offerings as part of an ongoing effort to accelerate debt repayment and shore up its balance sheet.

The offerings comprised a public unit issuance and separate private placement. The capital raise resulted as Allied reported a $1-billion asset writedown and an additional quarterly $1-billion loss.

Toronto-based Allied also announced that founder Michael Emory will not have his employment agreement renewed. Emory had transitioned to executive chair in 2023 as part of a succession plan that saw Cecilia Williams appointed president and CEO.

Analysts did not expect the offerings and the REIT’s unit price has taken a beating after unitholders were also caught off guard and chose to unload their Allied holdings.

“Leading into 2026, management is acting decisively to strengthen the balance sheet to take advantage of an expected recovery in the Canadian office market,” said Allied in a news release.

Allied attributed its financial troubles largely to the slow pace of the office sector’s recovery following the COVID-19 pandemic. The offerings were designed help the REIT maintain its investment-grade credit rating, said Williams on an earnings conference call.

Although Allied recognized that the offerings would dilute the unit value, they were necessary after the REIT did not achieve its deleveraging targets in a “challenging” year.

“While we made some progress in leasing activity and execution, the pace of lease finalization was slower than anticipated,” said Williams. “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, she added, Allied began executing the three-step action plan focused on strengthening the balance sheet. The expansion of Allied’s ongoing property- disposition program and a 60% reduction in the REIT’s monthly cash distribution, implemented in December, marked the plan’s first two steps. The public unit offering comprised the third and final step, she said.

The REIT upsized its original offerings from $500 million altogether due to over-allotments. Allied launched a $400-million marketed public offering of units and a concurrent $160-million private-placement with Alberta Investment Management Corporation (AIMCo), for total targeted gross proceeds of about $560 million.

The public offering involved 40 million units, while AIMCo acquired 16 million shares. All units were priced at $10 apiece.

“While the return to historical occupancy levels has taken longer than expected, we’re seeing an increase in demand and limited new supply on the horizon,” said Williams. “Against this backdrop we’re executing an action plan to strengthen our balance sheet and improve financial flexibility.”

The upsizing resulted after Allied granted underwriters an option to purchase up to an additional 15%. Net proceeds are intended to repay amounts outstanding under its operating line of credit after funders were to be drawn to retire $600 million of Series H senior unsecured debentures due Thursday.

For the year ended December 31, 2025, the REIT recorded a fair-value loss on investment properties and properties held for sale of $1.4 billion.

The fair-value loss was attributed to “the expansion of capitalization rates based on recent transactions in the market and adjustments to cash-flow assumptions in the rental portfolio based on the slower=han expected leasing, as well as carrying and construction-cost increases in the REIT’s development portfolio.” The REIT said the higher loss compared with 2024 reflects shifting market conditions and updated assumptions tied to leasing velocity and development costs.

Allied also reported comprehensive loss of about $1.3 billion for 2025, compared with a net loss of $342.5 million in 2024. The 2025 loss included an expected credit loss of $128 million related to a pair of loan payments that it has not received.

Allied has been in sell-off mode for an extended period as part of the REIT’s debt-reduction effort. The REIT’s disposition pipeline totals approximately $500 million.

As part of the sell-off, Allied is attempting to divest a downtown Vancouver property that was originally slated to be an office project but is now set to become a data centre. Allied co-owns that property with Vancouver-based Westbank Properties.

The REIT said it has granted Westbank a one-year extension on a loan tied to the project.

In 2025, Allied closed $140 million worth of non-core, low-yielding assets.

Meanwhile, Emory has agreed to relinquish his day-to-day duties and will not stand for re-election to the board after independent members decided that his employment contract should not be renewed.

“I feel truly grateful to have had the opportunity to work with and learn from Michael over the past 11 years,” said Williams. “Being part of the team that helped build Allied’s portfolio has been an honour, and I am deeply appreciative of the trust and guidance he has provided throughout my time here.

“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.”

For the first time, Allied provided a three-year leasing outlook after the REIT’s annual occupancy and leased area essentially remained unchanged at 85.3% and 87.4%, respectively, at year-end 2025. The forecast anticipates that occupancy will rise gradually to 88% to 90% by year-end 2028.

“We recognize that this outlook will ultimately be evaluated over time based on our ability to execute and the reasonability of our assumptions,” said Williams. “We are doing this deliberately and with full recognition that credibility will be earned through execution.”

“In light of the equity offering and the importance for clarity on the go-forward leadership of Allied and execution of Allied’s Action Plan, the independent trustees determined that this is the appropriate time to confirm that Mr. Emory’s employment agreement will not be renewed,” the REIT said. “This decision reflects the Independent trustees’ confidence in Allied’s CEO and senior management team.”

Emory has agreed to step back from his day-to-day executive-chair duties and will not stand for re-election as a trustee at the upcoming annual meeting of unitholders.

“On behalf of Allied and on behalf of the Board of Trustees, I want to thank Michael for his vision, leadership, and lasting contributions as Allied’s founder,” said Jennifer Tory, lead trustee. “Michael shaped Allied’s culture and long-term strategy and built Allied into one of Canada’s leading owner-operators of distinctive, high-quality urban workspace.”

Allied primarily owns and operates urban office properties in Canada’s major cities.

Photo: Allied Properties REIT