Allied Properties Real Estate Investment Trust
Annual Report 2020

Plain-text annual report

Annual Report December 31, 2020 Urban environments for creativity and connectivity 02.03.21 COVER: PHOTOGRAPHY BY EMA PETER 2020 YOY SANOI GROWTH 0.8% YOY FFO PER UNIT (DECLINE) (0.2%) YOY AFFO PER UNIT GROWTH 2.1% YOY RENT GROWTH ON RENEWALS AND REPLACEMENTS 17.2% YOY NAV/UNIT GROWTH 4.3% DEBT RATIO AT YEAR-END 29.2% UNENCUMBERED ASSETS AT YEAR-END $6.5B Annual Report December 31, 2020 Contents LETTER TO UNITHOLDERS . . . . . . . . . . . . . . . . . . 5 MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION AS AT DECEMBER 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION I—Overview . . . . . . . . . . . . . . . . . . . . . . . . 9 Summary of Key Financial and Operating Performance Measures . . . . . . . . . . . . . Business Overview and Strategy . . . . . . . . . . . . . . Property Management . . . . . . . . . . . . . . . . . . . . . . . Property Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . 12 14 17 17 Acquisitions & Dispositions . . . . . . . . . . . . . . . . . . 18 Environmental, Social and Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Business Environment and Outlook . . . . . . . . . . . . 20 SECTION II—Leasing . . . . . . . . . . . . . . . . . . . . . . . 21 Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 User Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Lease Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION III—Asset Profile . . . . . . . . . . . . . . . . . . . 28 Rental Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Development Properties . . . . . . . . . . . . . . . . . . . . . 39 Residential Inventory . . . . . . . . . . . . . . . . . . . . . . . 42 Development Completions . . . . . . . . . . . . . . . . . . . 43 Loans Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION IV—Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . 46 SECTION IX—Risks and Uncertainties . . . . . . . . . 81 COVID-19 Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Credit Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . 54 Unitholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . 55 Distributions to Unitholders . . . . . . . . . . . . . . . . . . 57 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION V—Discussion of Operations . . . . . . . . . 59 Net Income and Comprehensive Income . . . . . . . . 60 Net Operating Income . . . . . . . . . . . . . . . . . . . . . . . 62 Same Asset NOI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 General and Administrative Expenses . . . . . . . . . . 68 Other Financial Performance Measures . . . . . . . . . 68 SECTION VI—Historical Performance . . . . . . . . . 75 SECTION VII—Accounting Estimates and Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 SECTION VIII—Disclosure Controls and Internal Controls . . . . . . . . . . . . . . . . . . . . . . . 79 Financing and Interest Rate Risk . . . . . . . . . . . . . . 83 Credit Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Lease Roll-Over Risk . . . . . . . . . . . . . . . . . . . . . . . . 85 Environmental and Climate Change Risk . . . . . . . . 86 Development Risk . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Taxation Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Joint Arrangement Risk . . . . . . . . . . . . . . . . . . . . . . 87 Cybersecurity Risk . . . . . . . . . . . . . . . . . . . . . . . . . 87 Real Estate Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 SECTION X—Property Table . . . . . . . . . . . . . . . . . 89 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 . . . . . . . . . . . . . 97 Management’s Statement of Responsibility for Financial Reporting . . . . . . . . . . . . . . . . . . . . . . 98 Independent Auditor’s Report . . . . . . . . . . . . . . . . 99 Consolidated Balance Sheets . . . . . . . . . . . . . . . . 104 Consolidated Statements of Income and Comprehensive Income . . . . . . . . . . . . . . . . . 105 Consolidated Statements of Unitholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . 106 Consolidated Statements of Cash Flows . . . . . . . 107 Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 109 4 ALLIED 2020 ANNUAL REPORTLetter to Unitholders Dear Fellow Unitholder: Allied pursues sustained profitability for the benefit of its unitholders by operating distinctive urban workspace and network-dense urban data centres (UDCs) in Canada’s major cities . Despite the disruption caused by the global pandemic, we pursued our mission in 2020 with encouraging short-term and long- term results . Most notably, we allocated $325 million to strategic acquisitions and another $252 million to development and value-add activity . In the face of continuing robust capital allocation, we maintained strong balance-sheet metrics by raising a significant amount of capital ($700 million in unsecured debentures and $153 million in equity) on favourable terms . Measured by short-term results, our performance was largely in-line with 2019, with our same-asset NOI and FFO per unit coming in flat and our AFFO per unit up slightly . Measured by long-term results, our performance was solid, with NAV per unit growth up 4 .3% from 2019 . Development completions and value- add initiatives represented 39% of our NAV per unit growth, organic NOI growth 27%, cap-rate compression in our Toronto and Montréal workspace portfolios 26% and cap-rate compression in our UDC portfolio 8% . Our urban workspace across the country continued to strengthen in the fourth quarter . With our rent- deferral program scaling down, aided meaningfully by the Canada Emergency Rent Subsidy (CERS), and the variable component of our parking revenue recovering, our fourth quarter was stronger than our third, with same-asset NOI, FFO per unit and AFFO per unit up from the comparable quarter last year . The quarter and the year as a whole once again confirmed that our team, our properties and our user-base are truly resilient . The resilience of our platform, coupled with uninterrupted demand for distinctive urban workspace, enabled us late in the fourth quarter to increase our annual distribution for the ninth consecutive year . While speculation about the disruptive impact of working from home continues, every indication we’ve received from our users is that they’ll bring their workforce back to the office once the pandemic is over . For most knowledge-based organizations, working from home for an extended period of time appears to be materially sub-optimal in relation to culture, engagement and productivity . 5 ALLIED 2020 ANNUAL REPORTLooking forward, we expect our operating and development environment to be generally favourable in 2021 . Our internal forecast for 2021 calls for low-to-mid-single-digit percentage growth in each of same-asset NOI, FFO per unit and AFFO per unit . While we do not forecast NAV per unit growth, we do expect to propel further growth in 2021 . We also expect to allocate a large amount of capital in 2021 with the same strategic coherence and discipline we demonstrated in 2020 and prior years . We’ve committed to allocate $451 million to completing our active developments over the next three years . Our completion and return estimates remained largely intact through 2020, and we currently estimate that the developments will increase our annual EBITDA by approximately $70 million and have a weighted average lease term in excess of 13 years . Not only will this augment our cash flow per unit significantly (along with anticipated organic growth), it will materially reduce our ratio of net debt to annualized EBITDA and materially increase our interest coverage ratio, our two most important debt metrics . It follows that we continue to have deep confidence in our strategy of operating distinctive urban workspace and UDCs in Canada’s major cities . We firmly believe that our strategy is underpinned by the most important secular trends in Canadian and global real estate . We also firmly believe that we have the properties, the people and the platform necessary to execute our strategy for the ongoing benefit of our unitholders . If you have any questions or comments, please don’t hesitate to call me at (416) 977-0643 or e-mail me at memory@alliedreit.com . * * * Yours truly, Michael Emory PRESIDENT AND CHIEF EXECUTIVE OFFICER 6 ALLIED 2020 ANNUAL REPORT7 ALLIED 2020 ANNUAL REPORTManagement’s Discussion and Analysis of Results of Operations and Financial Condition as at December 31, 2020 8 ALLIED 2020 ANNUAL REPORTSection I —Overview Allied is an unincorporated closed-end real estate investment trust created pursuant to the Declaration of Trust (“Declaration of Trust”) dated October 25, 2002, as amended and restated from time to time, most recently on April 14, 2020 . Allied is governed by the laws of Ontario . Allied’s units (“Units”) are publicly traded on the Toronto Stock Exchange under the symbol “AP .UN’’ . Additional information on Allied, including its annual information form, is available on SEDAR at www .sedar .com . This Management’s Discussion and Analysis (“MD&A”) of results of operations and financial condition relates to the year ended December 31, 2020 . Unless the context indicates otherwise, all references to “Allied”, “we”, “us” and “our” in this MD&A refer to Allied Properties Real Estate Investment Trust . The Board of Trustees of Allied, upon the recommendation of its Audit Committee, approved the contents of this MD&A . This MD&A has been prepared with an effective date of February 3, 2021, and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020 . Historical results and percentage relationships contained in this MD&A, including trends that might appear, should not be taken as indicative of future results, operations or performance . Unless otherwise indicated, all amounts in this MD&A are in thousands of Canadian dollars . NON-IFRS MEASURES Readers are cautioned that certain terms used in the MD&A such as Funds from Operations (“FFO”), Funds from Operations excluding condominium related items and prepayment costs (“FFO excluding condominium related items and prepayment costs”), Adjusted Funds from Operations (“AFFO”), Adjusted Funds from Operations excluding condominium related items and prepayment costs (“AFFO excluding condominium related items and prepayment costs”), Net Rental Income (“NRI”) (a non-IFRS measure on a consolidated basis), Net Operating Income (“NOI”), “Same Asset NOI”, Normalized Last Quarter Annualized NOI (“Normalized LQA NOI”), Net Asset Value (“NAV”), Gross Book Value (“GBV”), Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”), Annualized Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Annualized Adjusted EBITDA”), “Net debt as a multiple of Annualized Adjusted EBITDA”, 9 ALLIED 2020 ANNUAL REPORT“Payout Ratio”, “Interest Coverage”, “Net Debt to Adjusted EBITDA” and any related per Unit amounts used by Management of Allied to measure, compare and explain the operating results and financial performance of Allied do not have any standardized meaning prescribed under International Financial Reporting Standards (“IFRS”) and, therefore, should not be construed as alternatives to net income or cash flow from operating activities calculated in accordance with IFRS . These terms are defined in the MD&A and reconciled to the consolidated financial statements of Allied for the year ended December 31, 2020 . Such terms do not have a standardized meaning prescribed by IFRS and may not be comparable to similarly titled measures presented by other publicly traded entities . See “Other Financial Performance Measures”, “Net Operating Income”, “Debt” and “Financial Covenants” . Allied applies the equity method of accounting to its joint venture, TELUS Sky, as prescribed under IFRS . Any references to the financial statements refer to amounts as reported under IFRS unless referenced as “proportionate share” or “proportionate basis,” which are non-IFRS measures and include the proportionate share of equity accounted investments . Management presents the proportionate share of its interests in joint arrangements that are accounted for using the equity method as it is viewed as more relevant in demonstrating Allied’s performance and is the basis of many of Allied’s key performance measures . Refer to Section III - Asset Profile, Section IV - Liquidity and Capital Resources, and Section V - Discussion of Operations, for a reconciliation of Allied’s consolidated financial statements as presented under IFRS to the proportionate share basis . FORWARD-LOOKING STATEMENTS Certain information included in this MD&A contains forward-looking statements within the meaning of applicable securities laws, including, among other things, statements concerning Allied’s objectives and strategies to achieve those objectives, statements with respect to Management’s beliefs, plans, estimates and intentions and statements concerning anticipated future events, circumstances, expectations, results, operations or performance that are not historical facts . Forward-looking statements can be identified generally by the use of forward-looking terminology, such as “indicators”, “outlook”, “objective”, “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans”, “continue” or similar expressions suggesting future outcomes or events . In particular, certain statements in the Letter to Unitholders, Section I—Overview, under the headings “Business Overview and Strategy”, “Focus and Definition”, “Vision and Mission”, “Environmental, Social and Governance” and “Business Environment and Outlook”, Section II - Leasing under the headings “Status” and “Lease Maturity”, Section III—Asset Profile, under the headings “Rental Properties”, and “Development Properties”, Section IV—Liquidity and Capital Resources and Section IX - Risks and Uncertainties, constitute forward-looking information . This MD&A includes, but is not limited to, forward-looking statements regarding: increases to Allied’s annual EBITDA over the next four years due to development activities; increases to earnings per Unit; reductions in Allied’s ratio of net debt to annualized EBITDA; increases to Allied’s interest coverage ratio; expected capital expenditure and allocation over 2021; completion of construction and lease-up in connection with Properties Under Development (“PUDs”); growth of our FFO excluding condominium related items and prepayment costs per Unit and AFFO excluding condominium related items and prepayment costs per Unit; continued demand for space in our target markets; the expected effect of the global pandemic 10 ALLIED 2020 ANNUAL REPORTand consequent economic disruption; expected erosion in rental revenue over 2021; expected changes in Allied’s internal forecast; increase in operating income per square foot of gross leasable area (“GLA”); ability to extend lease terms; the creation of future value; estimated GLA, NOI and growth from PUDs; estimated costs of PUDs; future economic occupancy; return on investments, including yield on cost of PUDs; estimated rental NOI and anticipated rental rates; lease up of our intensification projects; anticipated available square feet of leasable area; Management’s plans to put additional buildings forward for certification; our ability to generate ancillary revenue; our ability to achieve risk-adjusted returns on intensification; our expectations regarding the timing of development of potential incremental density; receipt of municipal approval for value-creation projects, including intensifications; Management’s expectations regarding future distributions; and completion of future financings and availability of capital . Such forward-looking statements reflect Management’s current beliefs and are based on information currently available to Management . The forward-looking statements in this MD&A are not guarantees of future results, operations or performance and are based on estimates and assumptions that are subject to risks and uncertainties, including those described in Section IX - Risks and Uncertainties, which could cause actual results, operations or performance to differ materially from the forward-looking statements in this MD&A . Those risks and uncertainties include risks associated with property ownership, property development, geographic focus, asset-class focus, competition for real property investments, financing and interest rates, government regulations, environmental matters, construction liability, taxation, cybersecurity, and COVID-19 . Material assumptions that were made in formulating the forward-looking statements in this MD&A include the following: that our current target markets remain stable, with no material increase in supply of directly-competitive office space; that acquisition capitalization rates remain reasonably constant; that the trend toward intensification within our target markets continues; and that the equity and debt markets continue to provide us with access to capital at a reasonable cost to fund our future growth and potentially refinance our mortgage debt as it matures . Although the forward-looking statements contained in this MD&A are based on what Management believes are reasonable assumptions, there can be no assurance that actual results, operations or performance will be consistent with these statements . All forward-looking statements in this MD&A are qualified in their entirety by this forward-looking disclaimer . Without limiting the generality of the foregoing, the discussion in the Letter to Unitholders, Section I— Overview and Section III—Asset Profile are qualified in their entirety by this forward-looking disclaimer . These statements are made as of February 3, 2021, and, except as required by applicable law, Allied undertakes no obligation to update publicly or revise any such statements to reflect new information or the occurrence of future events or circumstances . 11 ALLIED 2020 ANNUAL REPORTSUMMARY OF KEY FINANCIAL AND OPERATING PERFORMANCE MEASURES The following table summarizes the key financial and operating performance measures for the periods listed below: ($000’s except per-square foot, per-Unit and financial ratios) DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2018 THREE MONTHS ENDED YEAR ENDED YEAR ENDED Portfolio Number of properties Total rental GLA (000’s of square feet) Leased rental GLA (000’s of square feet) Leased area Occupied area Average in-place net rent per occupied square foot (period-end) Renewal and replacement rate for leases maturing in the period Increase in net rent on maturing leases Investment properties (1) Total assets (1) Cost of PUD as % of GBV 202 13,991 12,947 92.5% 92.1% 192 175 12,948 11,192 12,278 10,826 94 .8% 96 .7% 94 .4% 96 .3% 23.88 22 .88 22 . 64 78.3% 17.2% 84 .9% 90 .6% 18 .7% 17 .8% 8,809,685 7,576,225 6,257,647 9,410,387 8,324,179 6,706,271 9.0% 9 .4% 8 .9% Unencumbered investment properties 6,463,680 5,464,860 4,266,900 Total debt (1) Net asset value 2,725,462 2,155,181 1,957,611 6,177,032 5,717,699 4,374,663 Annualized Adjusted EBITDA 361,992 333,216 349,023 310,291 267,550 Net debt 2,676,664 1,943,899 2,676,664 1,943,899 1,939,250 Net debt as a multiple of Annualized Adjusted EBITDA Adjusted EBITDA Interest expense (1) (3) Adjusted EBITDA as a multiple of interest expense 7.4x 5 .8x 7.7x 6 .3x 7 .2x 90,498 83,304 349,023 310,291 267,550 17,774 15,838 72,603 60,826 60,969 5.1x 5 .3x 4.8x 5 .1x 4 .4x Rental revenue from investment properties (1) 145,950 134,718 562,791 497,256 436,396 NOI 89,366 81,950 342,472 309,992 272,285 Same Asset NOI - rental portfolio 79,141 77,217 287,417 285,020 266,669 Same Asset NOI - total portfolio 79,507 78,111 288,802 289,120 268,519 Net income excluding fair value adjustments (2) Net income FFO 64,311 55,711 242,431 210,994 168,704 83,842 264,960 500,729 629,223 540,276 74,742 66,304 284,732 251,083 204,695 FFO excluding condominium related items and prepayment costs (3) 74,969 69,085 285,784 259,316 213,806 12 ALLIED 2020 ANNUAL REPORT ($000’s except per-square foot, per-Unit and financial ratios) DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2018 THREE MONTHS ENDED YEAR ENDED YEAR ENDED AFFO excluding condominium related items and prepayment costs (3) Distributions Per Unit: Net income excluding fair value adjustments (2) Net income FFO FFO excluding condominium related items and prepayment costs (3) FFO pay-out ratio excluding condominium related items and prepayment costs (3) AFFO excluding condominium related items and prepayment costs (3) AFFO pay-out ratio excluding condominium related items and prepayment costs (3) Distributions Net asset value (4) 64,623 57,645 248,003 219,846 177,254 52,493 47,267 205,377 180,284 153,855 0.51 0.66 0 .47 2 .24 1.95 4.02 1 .87 5 .58 1 .72 5 .51 0.587 0 .561 2.286 2 .227 2 .089 0.589 0 .584 2.295 2 .300 2 .182 70.0% 68 .4% 71.9% 69 .5% 72 .0% 0.508 0 .487 1.991 1 .950 1 . 809 81.2% 82 .0% 82.8% 82 .0% 86 .8% 0.41 0 .40 1.65 48.54 1 .60 46 .55 1 .56 42 .12 Actual Units outstanding 127,259,218 122,838,799 103,861,945 Weighted average diluted Units outstanding 127,298,000 118,248,550 124,536,634 112,731,050 97,965,711 Financial Ratios Total indebtedness ratio Secured indebtedness ratio Debt service coverage ratio Unencumbered property asset ratio Interest-coverage ratio - including interest capitalized ALLIED’S TARGETS <35% <45% >1.50x >1.40x 29.2% 8.2% 2.7x 3.3x 26 .1% 29 .4% 9 .1% 2 .5x 3 .9x 12 .5% 2 .2x 3 .8x >3.0x 3.4x 3 .3x 3 .2x (1) This measure is presented on either a proportionate consolidation or IFRS basis; refer to Section III, Section IV or Section V for a reconciliation of these measures. (2) Includes $2,071 and $4,296 of fair value loss related to an equity accounted investment for the three months and year ended December 31, 2020 (December 31, 2019 - $14,979 and $26,152). (3) In the third and fourth quarter of 2019, Allied incurred $2,563 and $3,455, respectively, of prepayment costs in connection with the favourable refinancing of unsecured debentures and first mortgages, which was partially offset by incremental condominium profits of $1,999 in the year. In June 2018, Allied incurred $7,502 of prepayment cost in connection with the favourable refinancing of the first mortgage on 151 Front W, Toronto. These amounts have been excluded from the December 31, 2019 and December 31, 2018 results. (4) Net asset value per Unit, a non-IFRS measure, is calculated as follows: total Unitholders’ equity as at the corresponding period ended, (per the consolidated balance sheets) divided by the actual number of Units outstanding at period-end. 13 ALLIED 2020 ANNUAL REPORT BUSINESS OVERVIEW AND STRATEGY Allied is a leading owner, manager and developer of (i) distinctive urban workspace in Canada’s major cities and (ii) network-dense urban data centres in Toronto that form Canada’s hub for global connectivity . Allied’s business is providing knowledge-based organizations with distinctive urban environments for creativity and connectivity .  DISTINCTIVE URBAN WORKSPACE Allied was known initially for its leading role in the emergence of Class I workspace in Toronto, a format created through the adaptive re-use of light industrial structures in the Downtown East and Downtown West submarkets . This format typically features high ceilings, abundant natural light, exposed structural frames, interior brick and hardwood floors . When restored and retrofitted to high standards, Class I workspace can satisfy the needs of the most demanding office and retail users . When operated in a coordinated manner, this workspace becomes a vital part of the urban fabric and contributes meaningfully to a sense of community . Allied went public in 2003 for the express purpose of consolidating Class I workspace that was centrally located, distinctive and cost-effective . The consolidation that ensued was continuous, enabling Allied to evolve into a leading owner, manager and developer of distinctive urban workspace in Canada’s major cities . URBAN DATA CENTRE (“UDC”) SPACE In addition to providing urban workspace, Allied provides network-dense UDC space in Downtown Toronto . Allied established this capability in 2009 through the acquisition of 151 Front W, the largest internet exchange point in Canada and the fifth largest in North America . Allied has since expanded this capability by retrofitting a portion of 905 King W and a portion of 250 Front W . Just as Allied’s workspace does, this space provides knowledge-based businesses with distinctive urban environments for creativity and connectivity . Allied’s deep expertise in adaptively re-using urban structures has contributed meaningfully to its success in operating network-dense data centre space in Downtown Toronto . WORKSPACE INNOVATION Allied’s experience informed its approach to workspace innovation . Office users today value light, air and an open-plan . Abundant natural light and fresh air contribute enormously to human wellness and productivity . An open-plan improves collaboration and creativity . When people can move around and freely connect with one another, communication is improved, along with mutual understanding, and sparks of ingenuity occur . Technology has contributed to workspace innovation . Light harvesting has made great strides, as has fresh air delivery . Raised-floor systems have made aesthetic and practical contributions in recent years . Aesthetically, they declutter the workspace and obviate the need for drop-ceilings . Practically, they improve air circulation by pressurizing the underfloor area and de-pressurizing the actual work environment . All this can be delivered to workspace users in an environmentally sustainable manner . Workspace amenities have made an equivalent contribution to workspace innovation . While achievable to an extent within a single building, amenity-richness is best achieved within a surrounding urban neighbourhood . This in turn places a premium on clustering buildings within an amenity-rich urban neighbourhood . 14 ALLIED 2020 ANNUAL REPORTAllied’s experience with Class I workspace also increased its sensitivity to design . When people migrated to the suburbs in the 1950s, the sensitivity to design in the inner-cities seemed to diminish, if not disappear altogether . Heritage properties were destroyed to make way for non-descript, inward-looking buildings, and synthetic materials seemed to cover everything everywhere . Fortunately, design now matters, and design now pays . The workspace Allied created at QRC West in Toronto is an excellent example . Allied’s architects came up with a creative and beautiful way to build a new office tower above two fully-restored heritage buildings . Although the design entailed additional cost, the ultimate economic and social return on the investment was exceptional . The design paid off in every conceivable way . Finally, Allied’s experience with Class I workspace put it at the forefront of creating workspace for the knowledge-based economy . This led Allied to place ever-greater emphasis on the ongoing relationship between the user and provider of workspace . Put differently, it led Allied to understand the need for a partnership-like relationship between itself and workspace users . FOCUS AND DEFINITION From the outset, Allied adhered to a clear investment and operating focus . It focused initially on the Class I format and continues to do so on a large scale in major urban centres in Canada . More recently, Allied expanded its focus to include hybrid structures like QRC West and King Portland Centre in Toronto and 425 Viger in Montréal, where heritage buildings were integrated with new structures in a way that resonated meaningfully with the knowledge-based organizations Allied serves . Allied will continue to do so on a large scale in major urban centres in Canada . As Allied’s business grew and evolved, it was defined not by the specific workspace format Allied owns, operates and develops, but rather by the workspace users Allied serves . If a particular format enables Allied to serve knowledge-based organizations better and more profitably, Allied will invest in it . The Well in Toronto is a good example . The workspace component will be a high-rise tower for the most part with no heritage element at all . However, because of its architecture, performance attributes and location within a vibrant and amenity-rich neighbourhood, it has attracted outstanding knowledge-based organizations . Allied’s acquisition of 700 de la Gauchetière Street West in Montréal (“700 DLG”) in July of 2019 is another good example . Through a user-led transformation, a small portion of the workspace at 700 DLG was improved in a manner consistent with the distinctive urban workspace environments that Allied develops, owns and operates . In fact, this workspace is strikingly similar to workspace occupied by Ubisoft, Framestore, Spaces and Sun Life Financial at Allied’s de Gaspé properties in Montréal . Allied intends (i) to work with existing and future users to continue this transformation over time and (ii) to transform the extensive public and common areas, all with a view to creating a comprehensively distinctive urban workspace environment at 700 DLG for knowledge-based organizations . In effect, Allied intends to complete on a vertical plane the kind of building transformation it has completed so often on a more horizontal plane . In doing so, Allied expects to augment its ability to serve knowledge-based organizations, as well as adding meaningful value to 700 DLG over a three- to five-year timeframe . 15 ALLIED 2020 ANNUAL REPORTWhen Allied’s business is defined by the workspace users it serves, the actual format becomes less important and the specific building attributes and neighbourhood amenities take on paramount importance . Accordingly, if a conventional office tower can be transformed to provide the specific attributes and amenities favoured by knowledge-based organizations, it falls squarely within Allied’s investment and operating focus . This expands Allied’s opportunity-set materially . VISION AND MISSION Allied’s vision statement is as follows: To make a continuous contribution to cities and culture that elevates and inspires the humanity in all of us . In isolation, this could be seen as somewhat extravagant and nebulous, but it is fully grounded and informed by Allied’s mission statement, which is as follows: To provide knowledge- based organizations with distinctive urban workspace in a manner that is sustainable and conducive to human wellness, creativity, connectivity and diversity . Like all such statements, Allied’s vision and mission statements need elaboration .  From inception, Allied’s approach to workspace was both humanistic and technical . Allied sees workspace from the vantage point of people who use it rather than people who invest in it . Allied sees workspace as optimal light and air, a flexible and open floorplan and a collaborative rather than feudal relationship between owner and user . Allied sees workspace as a product of aesthetic and technical design . Finally, Allied sees workspace as part of a large, amenity-rich, urban ecosystem rather than as an instance of the monumental isolation that characterizes so many conventional office towers . Real estate is no longer a passive investment or a static tolling business . It is a profoundly human business that needs to keep pace with demographic and technological change, as well as the ongoing change in human attitudes and values . It needs to be run with future generations in mind . This means we have to run commercial real estate to save the global environment, not destroy it . It means we have to foster human wellness, not undermine it . It means we have to promote diversity, not impose uniformity . It means we have to facilitate creativity, not encourage conformity . Finally, it means we have to build and operate as city builders . City builders see commercial real estate as an integral part of a much larger ecosystem of infrastructure, buildings and people . The ecosystem, of course, is the city . We can only build cities well if they endure, if they stand the test of time . This means cities have to be sustainable and conducive to human wellness, creativity, connectivity and diversity . Put differently, it means they have to elevate and inspire the humanity in all of us . City building requires commitment, innovation and imagination, something Allied strives for on an ongoing basis . In an era of remarkable and continuous urban intensification, city building is essential to sustained profitability in real estate . Sporadic profitability is achievable without reference to the principles of city building . Merchant development of commoditized structures in a boom market illustrates this perfectly . Sustained profitability, on the other hand, requires adherence to the principles of city building . It follows that Allied’s vision and mission statements are the aspirational context within which Allied pursues sustained profitability for the benefit of its unitholders . 16 ALLIED 2020 ANNUAL REPORTPROPERTY MANAGEMENT Allied’s wholly owned subsidiary, Allied Properties Management Limited Partnership, provides property management and related services on a fee-for-services basis . PROPERTY PORTFOLIO Allied completed its initial public offering on February 20, 2003, at which time it had assets of $120 million, a market capitalization of $62 million and a local, urban-office portfolio of 820,000 square feet of GLA . As of December 31, 2020, Allied had assets of $9 .4 billion, a market capitalization of $4 .8 billion and rental properties with 14 .0 million square feet of GLA in seven cities across Canada . The illustration below depicts the geographic diversity of Allied’s rental portfolio . VANCOUVER 642,720 SF EDMONTON 129,505 SF CALGARY 1,190,587 SF MONTRÉAL 6,510,750 SF TORONTO 4,723,451 SF Including Urban Data Centres 509,911 SF OTTAWA 231,468 SF KITCHENER 562,125 SF 17 ALLIED 2020 ANNUAL REPORTACQUISITIONS AND DISPOSITIONS During the year ended December 31, 2020, Allied completed the following property acquisitions from third parties: PROPERTY ACQUISITION DATE ACQUISITION COST (1) OFFICE GLA RETAIL GLA TOTAL GLA 3530-3540 Saint-Laurent, Montréal (2) January 14, 2020 $13,421 47,068 4,008 51,076 4396-4410 Saint-Laurent, Montréal (3) January 15, 2020 18,530 41,799 14,147 55,946 54 The Esplanade, Toronto January 16, 2020 26,079 — 9,038 9,038 747 Square-Victoria, Montréal (4) January 28, 2020 284,541 530,950 37,752 568,702 375 Water, Vancouver (5) April 20, 2020 225,404 147,647 27,149 174,796 125 John, Toronto (6) 117-119 John, Toronto November 16, 2020 December 24, 2020 Ancillary residential properties, Toronto (7) 4,196 8,341 6,648 2,171 — — 798 5,800 — 2,969 5,800 — Total $587,160 769,635 98,692 868,327 (1) Purchase price plus transaction costs. (2) This property has a parking lot component containing 76 spaces. (3) This property has a parking lot component containing 40 spaces. (4) This property has a parking lot component containing 585 spaces. (5) This property has a parking lot component containing 53 spaces. (6) This property has a parking lot component containing 2 spaces. (7) Allied acquired four ancillary residential properties during the year ended December 31, 2020. On December 23, 2020, Allied and its partners closed on the disposition of a portion of The Well air rights and associated underground parking and transfer floor slab development for cash consideration of $24,911 (at Allied’s share) which represented the fair value and accordingly, there is no gain or loss on disposition . ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) Allied made a commitment to submit formally to independent scrutiny of its ESG performance by 2020 . The most important single step was to obtain a GRESB (formerly Global Real Estate Sustainability Benchmark) Assessment and to provide an annual ESG Report . These reports identify strengths and opportunities for improvement at Allied . What is most important is that they will assist the Board and Management in establishing rational priorities going forward and provide benchmarks for measuring improvement . We believe environmental, social and governance sensitivities are an integral part of Allied . They flow from Allied’s evolution as an organization focused on the provision of distinctive urban workspace and network- dense urban data centre (UDC) space in Canada’s major cities . Long before going public, Allied focused on the adaptive re-use of older structures built over a century ago for light-industrial purposes . The goal at the time was not to minimize the impact on the environment . Rather, it was to meet what was rightly perceived to be a growing need on the part of users of workspace for environments that would assist them in attracting, motivating and retaining knowledge workers . Nevertheless, by re-cycling buildings rather than re-building them, Allied minimized the impact on the environment . This evolved into greater sensitivity as to the environmental impact of its activity . 18 ALLIED 2020 ANNUAL REPORT Again long before its initial public offering (IPO), Allied concentrated its properties in specific urban areas . The goal at the time was not to make a social contribution . Rather, it was to meet what was rightly perceived to be the need on the part of users of workspace to grow in amenity-rich, mixed-use urban communities . Nevertheless, by aggregating buildings in this way, Allied became sensitized to the impact on the surrounding communities in which it operates . Allied began to see its buildings as part of a larger urban ecosystem and to acknowledge its responsibility to the surrounding community as a whole . Finally, the launch of Allied’s IPO in 2003 increased its sensitivity to governance . The sensitivities at the time were predominantly financial and operational, but as Allied evolved and attracted unitholders globally, the sensitivity to a broader conception of governance increased . Allied’s Board and Management began to see governance as something that could strengthen the business significantly . Allied’s Board and Management are committed to making the inherent approach to ESG more manifest, deliberate and measurable . They have always believed that submitting to informed scrutiny will make it a better business, and formally submitting to ESG scrutiny is no exception in this regard . The Board and Management look forward to your feedback . On December 2, 2020, Allied published its Inaugural Environmental, Social and Governance (ESG) Report on the home page of its website at www .alliedreit .com . Allied obtained a GRESB Assessment for 2019, which was published by GRESB on November 24, 2020 . Allied received a score of 64, which was recognized by GRESB as a “strong first-year showing” . Allied intends to obtain a GRESB Assessment and to provide an ESG Report on an annual basis . On December 8, 2020, Massey Hall announced that Allied made a landmark contribution to the Massey Hall Revitalization . This transformative support expands the project’s original scope and introduces Canada’s premiere multi-purpose performance facility, Allied Music Centre, home of historic Massey Hall . This partnership with Massey Hall will enable Allied to contribute meaningfully to its communities over an extended period of time . It will also enrich the experience of the many creative organizations and people who use Allied’s urban workspace across the country . 19 ALLIED 2020 ANNUAL REPORTBUSINESS ENVIRONMENT AND OUTLOOK Allied’s internal forecast for 2021 calls for low-to-mid-single-digit percentage growth in each of same-asset NOI, FFO per unit and AFFO per unit . While Allied does not forecast NAV per unit growth, it does expect to propel further growth in 2021 . Allied also expects to allocate a large amount of capital in 2021 with the same strategic coherence and discipline it demonstrated in 2020 and prior years . There are material areas of uncertainty with respect to Allied’s internal forecast, the most significant being the fact that it cannot predict how businesses and consumers will respond once physical-distancing measures are lifted or relaxed across Canada . Allied also cannot predict the extent and severity of the economic disruption flowing from the global pandemic . Allied continues to have deep confidence in, and commitment to, its strategy of consolidating and intensifying distinctive urban workspace and network-dense UDCs in Canada’s major cities . Allied firmly believes that its strategy is underpinned by the most important secular trends in Canadian and global real estate . Allied also firmly believes that it has the properties, the financial strength, the people and the platform necessary to execute its strategy for the ongoing benefit of its unitholders . 20 ALLIED 2020 ANNUAL REPORTSection II —Leasing Allied strives to maintain high levels of occupancy and leased area . At December 31, 2020, Allied’s rental portfolio was 92 .5% leased . 21 ALLIED 2020 ANNUAL REPORTSTATUS Leasing status for the rental portfolio as at December 31, 2020, is summarized below: Leased area (occupied & committed) December 31, 2019 Vacancy committed for future leases Occupancy - December 31, 2019 Previous committed vacant space now occupied New leases and expansions on vacant space New vacancies during the period Surrender / early termination agreements Suite additions, re-measurements and removals GLA AS A % OF TOTAL GLA (1) 12,277,746 94.8% (60,635) 12,217,111 94.4% 55,085 130,507 (344,048) (116,616) 30,109 Occupancy (pre acquisitions, dispositions and transfers) 11,972,148 92.5% Occupancy related to acquired properties Occupancy related to transfers from PUD Occupancy related to transfers to PUD Occupancy - December 31, 2020 767,116 381,975 (233,860) 12,887,379 92.1% Vacancy committed for future leases 59,159 Leased area (occupied & committed) - December 31, 2020 12,946,538 92.5% (1) Excludes properties under development. Of the 13,990,606 square feet total GLA in Allied’s rental portfolio, 12,887,379 square feet were occupied by users on December 31, 2020 . Another 59,159 square feet were subject to contractual lease commitments with users whose leases commence subsequent to December 31, 2020, bringing the leased area to 12,946,538 square feet, which represents 92 .5% of Allied’s total rental portfolio GLA . The table below outlines the timing of the contractual lease commitments by commencement of occupancy: FIXTURING COMMENCEMENT (OCCUPANCY) Q1 2021 Q2 2021 Q4 2021 Q3 2023 TOTAL Lease commitments - GLA % of lease commitments 31,052 52 .5% 18,501 31 .3% 4,056 6 .9% 5,550 9 .3% 59,159 100% 22 ALLIED 2020 ANNUAL REPORT In most instances, occupancy commences with a rent-free fixturing period prior to rent commencement . During the fixturing period, straight-line rent revenue is recognized, and no recoverable costs are paid by the user . Thereafter, recoverable costs are paid by the user and recognized as rental revenue . In cases where interest and realty taxes were being capitalized prior to occupancy (in accordance with IFRS), capitalization ends on occupancy . During occupancy, rental revenue is recognized and interest and realty taxes are expensed . The table below outlines the timing of the contractual lease commitments by commencement of rent payment: RENT COMMENCEMENT (ECONOMIC OCCUPANCY) Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q4 2023 TOTAL Lease commitments - GLA 22,834 8,218 8,751 4,056 9,750 5,550 59,159 % of lease commitments 38 .6% 13 .9% 14 .8% 6 .9% 16 .5% 9 .3% 100% Allied monitors the level of sub-lease space being marketed in its rental portfolio . Below is a summary of sub- lease space being marketed by city as at December 31, 2020, September 30, 2020, and December 31, 2019: DECEMBER 31, 2020 SEPTEMBER 30, 2020 DECEMBER 31, 2019 Toronto Kitchener Montréal Calgary Edmonton Vancouver Total square feet % of Total GLA 452,297 35,421 362,451 — 301,566 220,530 66,845 1,429 49,370 55,889 2,416 9,819 26,497 2,416 37,995 649,889 185,768 4 .7% 1 .4% 17,941 — 34,511 841,736 6.0% This level of marketed sublease space is somewhat elevated, but does not represent an operating or leasing challenge to Allied . 23 ALLIED 2020 ANNUAL REPORT ACTIVITY Allied places a high value on user retention, as the cost of retention is typically lower than the cost of securing new users . When retention is neither possible nor desirable, Allied strives for high-quality replacement users . Leasing activity in connection with the rental portfolio as at December 31, 2020, is summarized in the following table: LEASABLE SF LEASED SF BY DECEMBER 31 % LEASED BY DECEMBER 31 UNLEASED SF AT DECEMBER 31 Unleased area on January 1, 2020, including re-measurement Maturities during the year ended December 31, 2020 634,742 152,753 24 .1% 481,989 1,140,146 892,908 78 .3% 247,238 On January 1, 2020, 634,742 square feet of GLA was vacant . By the year ended December 31, 2020, Allied had leased 152,753 square feet of this GLA, leaving 481,989 square feet unleased (net of vacancy transferred to PUD, if any) . Leases for 1,140,146 square feet of GLA matured in the year ended December 31, 2020, at the end of which Allied renewed or replaced leases totaling 892,908 square feet of GLA, leaving 247,238 square feet unleased . For the year ended December 31, 2020, the table below summarizes the rental rates achieved for leases that were either renewed or replaced . Overall, this has resulted in an increase of 7 .7% and 17 .2% in the net rent per square foot from maturing leases in the three months and year ended December 31, 2020, respectively . The majority of this increase stems from material rent growth in Allied’s primary target markets . LEASE RENEWALS/ REPLACEMENTS % of total leased SF Maturing leases - weighted average rent Renewals and replacements - weighted average rent FOR THE YEAR ENDED DECEMBER 31, 2020 ABOVE IN-PLACE RENTS AT IN-PLACE RENTS BELOW IN-PLACE RENTS 65 .0% $19 .35 $25 .63 23 .6% $31 .15 $31 .15 11 .4% $23 .52 $15 .35 24 ALLIED 2020 ANNUAL REPORTUSER PROFILE The following sets out Allied’s user-mix on the basis of percentage of rental revenue for the year ended December 31, 2020: CATEGORY Business services and professional Telecommunications and information technology Media and entertainment Retail Financial services Government Parking and other Educational and institutional % OF RENTAL REVENUE DECEMBER 31, 2020 34 .7% 29 .8% 12 .8% 9 .1% 4 .9% 4 .4% 3 .0% 1 .3% 100 .0% The following sets out the percentage of rental revenue from the top 10 users by rental revenue for the year ended December 31, 2020: USER Cloud Service Provider Ubisoft Cologix Equinix Shopify Inc . National Capital Commission, a Canadian Crown Corporation Bell Canada Morgan Stanley Entertainment One Technicolor Canada * Credit rating for parent company % OF REVENUE DECEMBER 31, 2020 WEIGHTED AVERAGE REMAINING LEASE TERM (YEARS) CREDIT RATING DBRS/S&P/MOODY’S 4 .5% 2 .7% 2 .4% 2 .1% 1 .5% 1 .4% 1 .4% 1 .3% 1 .0% 1 .0% 19 .3% 1 .7 11 .5 17 .0 4 .3 4 .7 20 .1 14 .9 8 .9 7 .5 3 .6 9 .4 -/AAA/Aaa* Not Rated -/B-/B3 -/BBB-/Baa3 Not Rated Not Rated BBB/BBB+/Baa2 AH/BBB+/A2 -/BBB-/Baa3* -/CCC+/Caa2* 25 ALLIED 2020 ANNUAL REPORT LEASE MATURITY As at December 31, 2020, 92 .5% of the GLA in Allied’s rental portfolio was leased . The weighted average term to maturity of Allied’s leases at that date was 5 .7 years . The weighted average market net rental rate is based on Management’s estimates of today’s market rental rates and is supported in part by independent appraisals of certain relevant properties . There can be no assurance that Management’s current estimates are accurate or that they will not change with the passage of time . The following table contains information on the urban workspace, retail and UDC leases that mature up to 2025 and the corresponding estimated weighted average market rental rate as at December 31, 2020 . Where the renewal rate on maturity is contractually predetermined, it is reflected below as the market rental rate . TOTAL RENTAL PORTFOLIO December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 SQUARE FEET % OF TOTAL GLA WEIGHTED AVERAGE IN-PLACE RENTAL RATE ESTIMATED WEIGHTED AVERAGE MARKET RENTAL RATE 1,419,520 1,726,482 1,395,544 915,441 1,221,028 10 .1% 12 .3% 10 .0% 6 .5% 8 .7% 18 .58 24 .81 25 .18 28 .49 26 .15 22 .95 28 .06 26 .01 29 .72 27 .41 26 ALLIED 2020 ANNUAL REPORTThe following tables contain information on lease maturities by segment: MONTRÉAL & OTTAWA SQUARE FEET % OF SEGMENT GLA WEIGHTED AVERAGE IN-PLACE RENTAL RATE ESTIMATED WEIGHTED AVERAGE MARKET RENTAL RATE December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 723,465 646,135 417,594 208,688 347,388 10 .7% 9 .6% 6 .2% 3 .1% 5 .2% 16 .62 17 .86 16 .88 17 .45 16 .82 17 .94 18 .83 17 .69 17 .03 17 .08 TORONTO & KITCHENER SQUARE FEET % OF SEGMENT GLA WEIGHTED AVERAGE IN-PLACE RENTAL RATE ESTIMATED WEIGHTED AVERAGE MARKET RENTAL RATE December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 465,431 742,537 629,421 417,742 578,666 9 .7% 15 .5% 13 .2% 8 .7% 12 .1% 19 .47 21 .46 25 .78 28 .61 25 .36 30 .58 27 .46 30 .28 31 .67 29 .11 CALGARY, EDMONTON & VANCOUVER SQUARE FEET % OF SEGMENT GLA WEIGHTED AVERAGE IN-PLACE RENTAL RATE ESTIMATED WEIGHTED AVERAGE MARKET RENTAL RATE December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 219,996 243,329 324,161 234,848 218,579 11 .2% 12 .4% 16 .5% 12 .0% 11 .1% 20 .89 21 .67 26 .47 23 .11 22 .10 18 .27 23 .51 20 .20 21 .15 14 .18 URBAN DATA CENTRES SQUARE FEET % OF SEGMENT GLA WEIGHTED AVERAGE IN-PLACE RENTAL RATE ESTIMATED WEIGHTED AVERAGE MARKET RENTAL RATE December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 10,628 94,481 24,368 54,163 76,395 2 .1% 18 .5% 4 .8% 10 .6% 15 .0% 109 .52 106 .81 134 .82 96 .47 86 .18 124 .66 107 .52 136 .01 100 .60 99 .45 27 ALLIED 2020 ANNUAL REPORTSection III —Asset Profile The following table reconciles the consolidated balance sheet, on a proportionate basis, as at December 31, 2020 and December 31, 2019 . DECEMBER 31, 2020 DECEMBER 31, 2019 INVEST- MENT IN JOINT VENTURE PROPOR- TIONATE BASIS IFRS BASIS IFRS BASIS INVEST- MENT IN JOINT VENTURE PROPOR- TIONATE BASIS Assets Non-current assets Investment properties $8,687,375 $122,310 $8,809,685 $7,469,265 $106,960 $7,576,225 Residential inventory 140,038 — 140,038 114,910 — 114,910 Investment in joint venture and loan receivable 117,112 (117,112) — 95,596 (95,596) — Loans and notes receivable 322,543 — 322,543 247,413 Other assets 23,643 533 24,176 39,788 — — 247,413 39,788 9,290,711 5,731 9,296,442 7,966,972 11,364 7,978,336 Current assets Cash and cash equivalents 45,512 3,286 48,798 208,914 2,368 211,282 Loans and notes receivable 93 — 93 3,863 — 3,863 Accounts receivable, prepaid expenses and deposits 64,452 602 65,054 129,944 754 130,698 110,057 3,888 113,945 342,721 3,122 345,843 Total assets $9,400,768 $9,619 $9,410,387 $8,309,693 $14,486 $8,324,179 28 ALLIED 2020 ANNUAL REPORT DECEMBER 31, 2020 DECEMBER 31, 2019 INVEST- MENT IN JOINT VENTURE PROPOR- TIONATE BASIS IFRS BASIS IFRS BASIS INVEST- MENT IN JOINT VENTURE PROPOR- TIONATE BASIS $2,698,794 $— $2,698,794 $2,125,938 $— $2,125,938 63,045 157,068 2,918,907 — — — 63,045 33,923 157,068 155,221 2,918,907 2,315,082 26,668 — 26,668 29,243 — — — — 33,923 155,221 2,315,082 29,243 Liabilities Non-current liabilities Debt Other liabilities Lease liabilities Current liabilities Debt Accounts payable and other liabilities 278,161 9,619 287,780 247,669 14,486 262,155 304,829 9,619 314,448 276,912 14,486 291,398 Total liabilities 3,223,736 9,619 3,233,355 2,591,994 14,486 2,606,480 Unitholders’ equity 6,177,032 — 6,177,032 5,717,699 — 5,717,699 Total liabilities and Unitholders’ equity $9,400,768 $9,619 $9,410,387 $8,309,693 $14,486 $8,324,179 As at December 31, 2020, Allied’s portfolio consisted of 202 investment properties (183 rental properties, nine development properties and 10 ancillary parking facilities), with a fair value of $8,809,685 . 29 ALLIED 2020 ANNUAL REPORT Changes to the carrying amounts of investment properties are summarized as follows: THREE MONTHS ENDED DECEMBER 31, 2020 YEAR ENDED DECEMBER 31, 2020 RENTAL PROPER- TIES PROPERTIES UNDER DEVELOP- MENT TOTAL RENTAL PROPER- TIES PROPERTIES UNDER DEVELOP- MENT TOTAL Balance, beginning of period $7,755,255 $934,550 $8,689,805 $6,754,215 $822,010 $7,576,225 Additions: Acquisitions Improvement allowances (1) Leasing commissions (1) Capital expenditures (1) 12,537 9,784 1,614 — 12,537 587,160 — 587,160 (150) 9,634 33,531 10,145 43,676 16 1,630 8,080 3,369 11,449 25,915 86,335 112,250 82,739 277,681 360,420 Dispositions — (24,911) (24,911) — (24,911) (24,911) Transfers from PUD (1) 121,280 (121,280) (20,320) 20,320 — — 251,380 (251,380) (77,828) 77,828 — — Transfers to PUD Finance leases Amortization of straight-line rent and improvement allowances (1) Fair value gain (loss) on investment properties (1) 407 — 407 1,763 — 1,763 (6,604) 128 (6,476) (24,964) 2,574 (22,390) 13,297 1,512 14,809 297,089 (20,796) 276,293 Balance, end of period $7,913,165 $896,520 $8,809,685 $7,913,165 $896,520 $8,809,685 (1) Includes Allied’s proportionate share of the equity accounted investment of the following amounts for the three months and year ended December 31, 2020: improvement allowances of $990 and $3,871; leasing commissions of $14 and $175; capital expenditures of $1,817 and $13,654; transfers from PUD of $121,280; amortization of straight-line rent and improvement allowances of $280 and $1,947; and fair value loss on investment properties of $2,071 and $4,296. For the year ended December 31, 2020, Allied capitalized $31,010 of borrowing costs, $24,311 of which related to development activity and $2,336 to upgrade activity in the rental portfolio (250 Front W and 151 Front W) . Allied capitalized $4,363 of borrowing costs to qualifying residential inventory . In the year ended December 31, 2020, Allied completed the development of 425 Viger and TELUS Sky and has transferred these properties into the rental portfolio . The appraised fair value of investment properties is most commonly determined using the following methodologies: Discounted cash flow method (“DCF method”) - Under this approach, discount rates are applied to the projected annual operating cash flows, generally over a ten-year period, including a terminal value of the properties based on a capitalization rate applied to the estimated net operating income (“NOI”), a non-GAAP measure, in the terminal year . This method is primarily used to value the rental properties portfolio . 30 ALLIED 2020 ANNUAL REPORTComparable sales method - This approach compares a subject property’s characteristics with those of comparable properties which have recently sold . The process uses one of several techniques to adjust the price of the comparable transactions according to the presence, absence, or degree of characteristics which influence value . These characteristics include the cost of construction incurred at a property under development . This method is primarily used to value the development portfolio and ancillary parking facilities . Allied’s entire portfolio is revalued by the external appraiser each quarter . Management verifies all major inputs to the valuations, analyzes the change in fair values at the end of each reporting period and reviews the results with the independent appraiser every quarter . There were no material changes to the valuation techniques during the period . For properties with a leasehold interest with a term less than 40 years, the resulting valuation methodology is based upon a full-term discounted cash flow model . In valuing the investment properties as at December 31, 2020, the independent appraiser compares the value derived using the DCF method to the value that would have been calculated by applying a capitalization rate to NOI . This is done to assess the reasonability of the value obtained under the DCF method . The resulting portfolio weighted average capitalization rate was 4 .82%, detailed in the table below: OVERALL CAPITALIZATION RATE DECEMBER 31, 2020 DECEMBER 31, 2019 RANGE % WEIGHTED AVERAGE % FAIR VALUE $ RANGE % WEIGHTED AVERAGE % FAIR VALUE $ Montréal & Ottawa 4.75% - 6.75% 5.08% $2,419,295 5 .00% - 7 .00% 5 .28% $1,855,598 Toronto & Kitchener 3.75% - 5.75% 4.47% 3,428,395 4 .00% - 5 .75% 4 .62% 3,208,262 Calgary, Edmonton & Vancouver 3.50% - 7.00% 4.76% 1,040,835 3 .75% - 7 .00% 4 .96% 752,405 Urban Data Centres 5.00% - 5.75% 5.32% 1,024,640 5 .25% - 6 .25% 5 .60% 937,950 Rental Properties 3.50% - 7.00% 4.80% $7,913,165 3 .75% - 7 .00% 4 .96% $6,754,215 Properties Under Development 5.25% - 7.00% 5.95% 896,520 5 .00% - 7 .00% 5 .25% 822,010 Total Investment Properties 3.50% - 7.00% 4.82% $8,809,685 3 .75% - 7 .00% 4 .98% $7,576,225 31 ALLIED 2020 ANNUAL REPORTRENTAL PROPERTIES Allied’s rental portfolio was built by consolidating the ownership of urban office properties and network- dense urban data centres . Scale within each city of focus proved to be important as Allied grew . It enabled Allied to provide users with greater expansion flexibility, more parking and better human and digital connectivity than its direct competitors . Scale across the country also proved to be important . It enabled Allied to serve national and global users better, to expand its growth opportunities and to achieve meaningful geographic diversification . URBAN WORKSPACE Allied has evolved into a leading owner, manager and developer of urban workspace in Canada’s major cities . It currently owns 180 rental properties in seven Canadian cities . Listed below are Allied’s top 10 office rental properties measured by Normalized Last Quarter Annualized (“LQA”) NOI . Normalized LQA NOI is a non-IFRS measure, which represents the normalized results for the most recently completed quarter (excluding straight-line rent) multiplied by four . These properties represent 31 .8% of the last quarter annualized NOI for the period ended December 31, 2020 . PROPERTY NAME NORMALIZED LQA NOI APPRAISED FAIR VALUE CAP RATE PRINCIPAL USERS Cité Multimédia, Montréal $21,598 $421,530 4 .75% Desjardins, Morgan Stanley, SAP Canada 700 de la Gauchetière, Montréal 17,148 366,200 5 .25% Le Nordelec, Montréal 14,682 297,880 5 .00% AON Canada Inc, Autorité Régionale de Transport Métropolitain, National Bank of Canada, Hydro-Québec Gsoft, Unity Technologies, Yellow Pages Media QRC West, Toronto 12,846 289,020 4 .25% eOne, Sapient Canada 747 Rue du Square Victoria, Montréal (1) 11,012 276,000 — C-Cap Commercial, Dussault Systèmes Canada, Secretariat of the Convention on Biological Diversity, Société Québecoise des Infrastructures 5455 de Gaspé Avenue, Montréal 9,006 144,540 5 .00% Attraction Media, Framestore, Ubisoft 555 Richmond Street West, Toronto 375 Water Street, Vancouver (2) King Portland Centre, Toronto 5445 de Gaspé Avenue, Montréal 7,801 6,871 6,556 6,035 180,290 4 .75% Centre Francophone de Toronto, Synaptive 225,000 — Incognito Software Inc ., Quarterdeck Brewing Co, Salesforce .com 163,980 99,990 3 .81% 5 .25% 4 .77% Indigo, Shopify Ubisoft, Sun Life Total $113,555 $2,464,430 (1) Allied acquired 747 Rue du Square Victoria in the first quarter ended March 31, 2020. The appraised fair value remains as the purchase price net of closing costs for one year, after which the appraiser transitions to a discounted cash flow model. (2) Allied acquired 375 Water Street in the second quarter ended June 30, 2020. The appraised fair value remains as the purchase price net of closing costs for one year, after which the appraiser transitions to a discounted cash flow model. 32 ALLIED 2020 ANNUAL REPORT NETWORK-DENSE URBAN DATA CENTRES Allied operates three network-dense UDCs in downtown Toronto: 151 Front W (“151”), 250 Front W (“250”) and 905 King W (“905”) . Listed below are Allied’s UDCs measured by Normalized LQA NOI . UDCs represent 15 .8% of the total annualized NOI for the period ended December 31, 2020 . PROPERTY NAME NORMALIZED LQA NOI APPRAISED FAIR VALUE CAP RATE PRINCIPAL USERS 151 Front W, Toronto $36,770 $593,610 250 Front W, Toronto 905 King W, Toronto 15,448 4,437 332,500 5 .00% 5 .75% Bell, Cologix, Equinix AWS, Cloud Service Provider 98,530 5 .75% Beanfield, Cloud Service Provider, Cologix Total $56,655 $1,024,640 5 .32% Regular rental revenue represented 88 .7% of annualized NOI from UDCs in 2020 . Ancillary rental revenue represented 11 .3% of annualized NOI from UDCs . Ancillary rental revenue is comprised of revenue from the rental of conduit space, rack space and cross-connects . NOI from regular rental revenue NOI from ancillary rental revenue Total normalized LQA NOI NORMALIZED LQA NOI % OF UDC $50,257 6,398 $56,655 88 .7% 11 .3% 100% Allied acquired 151 in 2009 and has operated it very successfully since acquisition . 250 and 905 are connected to 151 via a multi-layered, diverse infrastructure of high-density fibre that Allied owns . 33 ALLIED 2020 ANNUAL REPORT151 is the largest internet exchange point (IXP) in Canada and the fifth largest in North America . It houses Toronto Internet Exchange (TorIX), a not-for-profit organization that enables internet networks to connect and exchange traffic . With over 230 peers connecting, TorIX has experienced a steady and dramatic increase in traffic since 2009, with traffic in 2020 exceeding 1,200 gigabits per second . The traffic growth is illustrated below: Source: TorIX Website 34 ALLIED 2020 ANNUAL REPORT151 is a carrier-neutral facility . With a critical mass of carrier networks, TorIX and numerous other networks, 151 is Canada’s hub for global connectivity and is the gateway to Canada for all major North American cities and numerous major international cities . This is illustrated below: Source: PeeringDB.com As a critical component of Canada’s communications infrastructure, 151 is a network-dense urban data centre, distinct from conventional suburban data centres . The latter are analogous to interchanges on small highways . While valuable, they are relatively easy to replicate . 151 is analogous to a massive interchange on an intersecting series of super-highways . It is exceptionally valuable and very difficult to replicate . Allied leases 173,000 square feet of GLA at 250 pursuant to a long-term lease that expires on June 2, 2062 . As a result of substantial capital improvements completed by Allied, including high-density fibre connections to 151, 250 has become an important interconnected cloud-hosting facility in Canada, providing retail, wholesale and managed services . Allied also owns 905 . As a result of substantial capital improvements completed by Allied, including connecting it to 151 with high-density fibre, 59,056 square feet of GLA at the property has become an important urban data centre . 35 ALLIED 2020 ANNUAL REPORTAllied has two basic sources of rental revenue from 151, 250 and 905 . The largest source, direct rental revenue, derives from subleasing space to ultimate users . A smaller but material source, ancillary rental revenue, derives from conduit fees, rack fees and interconnection fees charged on a recurring monthly basis for cross-connects that enable different types of users to interconnect with low-latency and redundancy, reducing network costs and improving network security and performance . Allied expects that cross-connects at 250 and 905 will give rise to recurring ancillary rental revenue . Cross- connects utilize the existing infrastructure at 250 and 905 without occupying any of the unleased GLA or requiring additional capital expenditure by Allied . RENTAL PROPERTIES UNDERGOING INTENSIFICATION APPROVAL One way Allied creates value is by intensifying the use of underutilized land . The land beneath the buildings in Toronto is significantly underutilized in relation to the existing zoning potential . This is also true of some of Allied’s buildings in Kitchener, Montréal, Calgary, Edmonton, and Vancouver . These opportunities are becoming more compelling as the urban areas of Canada’s major cities intensify . Since Allied has captured the unutilized land value at a low cost, it can achieve attractive risk-adjusted returns on intensification . Allied began tracking the intensification potential inherent in the Toronto portfolio in the fourth quarter of 2007 (see our MD&A dated March 7, 2008, for the quarter and year ended December 31, 2007) . At the time, the 46 properties in Toronto comprised 2 .4 million square feet of GLA and were situated on 780,000 square feet (17 .8 acres) of underutilized land immediately east and west of the Downtown Core . The 107 properties in Toronto (including properties in the development portfolio) now comprise 4 .2 million square feet of GLA and are situated on 37 .9 acres of underutilized land immediately east and west of the Downtown Core . With achievable rezoning, the underlying land in our Toronto portfolio could permit up to 10 .8 million square feet of GLA, 6 .6 million square feet more than currently is in place . Allied entered the Montréal market in April of 2005 . The 30 properties in Montréal now comprise 6 .5 million square feet of GLA . As they are much larger buildings on average than those comprising the Toronto portfolio, the 41 .8 acres of land on which they sit (immediately south, east and northeast of the Downtown Core) are more fully utilized than the land in the Toronto portfolio . Nevertheless, the underlying land in the Montréal portfolio could permit up to 8 .2 million square feet of GLA, 1 .7 million square feet more than currently is in place . There is similar potential inherent in the rest of Allied’s portfolio, which is quantified in the chart below . Across Canada on a portfolio-wide basis, there is 10 .5 million square feet of potential incremental density, of which 1 .7 million square feet is currently in PUD, and the remaining 8 .8 million square feet is potential incremental density . Of the 8 .8 million square feet of potential incremental density, 2 .7 million square feet is reflected in the appraised fair values, mainly at properties where zoning approvals are in place . The remaining 6 .1 million square feet is not reflected in the appraised fair values . 36 ALLIED 2020 ANNUAL REPORTPotential Incremental Density (in sq.ft.) - Geographic Breakdown CITY Toronto Kitchener CURRENT GLA 4,213,540 562,125 Total Toronto & Kitchener 4,775,665 Toronto Urban Data Centres Total Urban Data Centres Montréal Ottawa 509,911 509,911 6,510,750 231,468 Total Montréal & Ottawa 6,742,218 Calgary Edmonton Vancouver Total Calgary, Edmonton & Vancouver Total 1,192,978 129,505 642,720 1,965,203 13,992,997 CURRENT PUD (ESTIMATED ON COMPLETION) POTENTIAL INCREMENTAL DENSITY TOTAL POTENTIAL GLA 1,210,000 147,000 1,357,000 — — 87,473 — 87,473 88,000 168,437 — 256,437 1,700,910 5,365,221 332,369 10,788,761 1,041,494 5,697,590 11,830,255 — — 1,635,504 — 1,635,504 1,148,679 230,417 59,115 509,911 509,911 8,233,727 231,468 8,465,195 2,429,657 528,359 701,835 1,438,211 3,659,851 8,771,305 24,465,212 The timing of development for the 8 .8 million square feet of potential incremental density is impossible to predict with precision, however the chart below provides a reasonable estimate of when the potential could begin to be realized . One factor is our self-imposed limitation on development activity . The focus in the short-term and the long-term remains on the Toronto portfolio . 37 ALLIED 2020 ANNUAL REPORTAllied has initiated the intensification approval process for four rental properties in Toronto and one rental property in Montréal, all of which are owned in their entirety by Allied . These properties are identified in the following table: PROPERTY NAME NORMALIZED LQA NOI APPRAISED FAIR VALUE REZONING APPROVAL STATUS USE CURRENT GLA ESTIMATED GLA ON COMPLETION ESTIMATED COMPLETION King & Peter (1) $2,892 $83,070 Completed Office, limited retail 86,230 790,000 Unscheduled Union Centre 1,564 107,860 Completed Office, limited retail 41,787 1,129,000 Unscheduled King & Brant (2) Adelaide & Spadina (3) Le Nordelec — 278 — 20,850 Under Appeal Office, retail 16,340 130,000 Unscheduled 24,680 Completed Office, retail 11,015 230,000 Unscheduled 29,300 In Progress Office — 230,000 Unscheduled Total $4,734 $265,760 155,372 2,509,000 (1) King & Peter is comprised of 82 Peter and 388 King W. (2) Allied has received permission to intensify 544 King W and 7-9 Morrison. The approval permits approximately 120,000 square feet of office space and 10,000 square feet of retail space. Allied is exploring the opportunity to increase the permitted leasable area. (3) Adelaide & Spadina is comprised of 383-387 Adelaide W. 96 Spadina and 379 Adelaide W were previously included, but will now remain in the rental portfolio during future development activity. 38 ALLIED 2020 ANNUAL REPORT Estimated GLA is based on applicable standards of area measurement and the expected or actual outcome of rezoning . These properties are currently generating NOI and will continue to do so until Allied initiates construction . With respect to the ultimate intensification of these properties, a significant amount of pre- leasing will be required on the larger projects before construction commences . The design-approval costs have been, and will continue to be, funded by Allied for its share . DEVELOPMENT PROPERTIES Development is another way to create value and a particularly effective one for Allied, given the strategic positioning of its portfolio in the urban areas of Canada’s major cities . Urban intensification is the single most important trend in relation to Allied’s business . Not only does it anchor Allied’s investment and operating focus, it provides the context within which Allied creates value for its Unitholders . It is expected that development activity will become a more important component of Allied’s growth as projects are completed . The expectation is largely contingent upon completing the development projects in the manner contemplated . The most important factor affecting completion will be successful lease-up of space in the development portfolio . The material assumption is that the office leasing market in the relevant markets remains stable . Pursuant to Allied’s Declaration of Trust, the cost of Properties Under Development cannot exceed 15% of GBV . At December 31, 2020, the cost of Allied’s Properties Under Development was 9 .0% of GBV (December 31, 2019 - 9 .4%) . This self-imposed limitation is intended to align the magnitude of Allied’s development activity with the overall size of the business . Properties Under Development consist of properties purchased with the intention of being developed before being operated and properties transferred from the rental portfolio once activities changing the condition or state of the property, such as the de-leasing process, commence . 39 ALLIED 2020 ANNUAL REPORTAllied has the following nine Properties Under Development: PROPERTY NAME USE ESTIMATED GLA ON COMPLETION (SF) % OF OFFICE DEVELOPMENT LEASED The Lougheed (604-1st SW), Calgary (1) Office, retail College & Manning, 547-549 College, Toronto (2) Retail, residential Boardwalk Building, Edmonton (3) Breithaupt Phase III, Kitchener (2) The Well, Toronto (2)(4) 400 Atlantic, Montréal Office, retail Office Office, retail Office, retail Adelaide & Duncan, Toronto (2)(5) Office, retail, residential QRC West Phase II, Toronto (6) KING Toronto, Toronto (2)(7) Total Office, retail Office, retail 88,000 27,000 168,437 147,000 763,000 87,473 230,000 90,000 100,000 1,700,910 — — — 100% 84% — 100% — — 59% (1) While initially working toward repositioning this property for a different use, Allied is now working toward restoring and retrofitting the property to the highest possible standards for workspace in the creative economy. (2) These properties are co-owned, reflected in the table above at Allied’s ownership interest. (3) The GLA components (in square feet) are as follows: 130,141 of office and 28,859 of retail. (4) Each of Allied and RioCan own an undivided 50% interest with an estimated total GLA of 3,100,000 square feet. The GLA components (in square feet) at our 50% share will be as follows: approximately 578,000 of office, 185,000 of retail, and the remaining is related to residential air rights. The air rights were sold by the co-ownership as previously announced, with the first phase closing in December 2020 and the remaining phases expected to close in 2021. (5) The GLA components (in square feet) at our 50% share are as follows: 144,000 of residential, 77,000 of office and 9,000 of retail. (6) The GLA components (in square feet) are as follows: 75,500 of office and 14,500 of retail. (7) Allied entered into a joint arrangement with Westbank to develop KING Toronto. As part of the arrangement, Allied sold a 50% undivided interest to Westbank. KING Toronto is comprised of the following properties: 489 King W, 495 King W, 499 King W, 511-529 King W, 533 King W, 539 King W. The GLA components (in square feet) at our 50% share will be as follows: 200,000 of residential, 60,000 of retail and 40,000 of office. 40 ALLIED 2020 ANNUAL REPORT The following table sets out the fair value of Allied’s Properties Under Development as at December 31, 2020, as well as Management’s estimates with respect to the financial outcome on completion: PROPERTY NAME TRANSFER TO RENTAL PORTFOLIO APPRAISED VALUE ESTIMATED ANNUAL NOI ESTIMATED TOTAL COST ESTIMATED YIELD ON COST ESTIMATED COST TO COMPLETE The Lougheed (604-1st SW), Calgary Q3 2021 $15,030 TBD TBD TBD TBD College & Manning, 547-549 College, Toronto (1) Q3 2021 19,060 975 - 1,125 31,504 3 .1% - 3 .6% 9,000 Boardwalk Building, Edmonton Q4 2021 31,430 TBD TBD TBD TBD Breithaupt Phase III, Kitchener (1)(2) Q1 2022 38,510 5,375 - 5,500 78,652 6 .8% - 7 .0% 53,300 The Well, Toronto (1) Q1 2022 602,820 37,500 - 43,250 728,000 5 .2% - 5 .9% 174,600 400 Atlantic, Montréal Q1 2022 8,660 TBD TBD TBD TBD Adelaide & Duncan, Toronto (1)(4) Q2 2022 107,200 9,625 - 11,125 193,600 5 .0% - 5 .7% 92,700 QRC West Phase II, Toronto Q1 2023 39,840 4,000 - 4,400 80,704 5 .0% - 5 .5% 51,700 KING Toronto, Toronto (1)(3) Q4 2023 33,970 5,000 - 6,000 83,069 6 .0% - 7 .7% 40,300 Total $896,520 (1) These properties are co-owned, reflected in the table above at Allied’s ownership percentage of assets and liabilities. (2) Breithaupt Phase III is comprised of 43 Wellington, 53 & 55 Wellington, 305 Joseph and 2-4 Stewart. (3) Allied entered into a joint arrangement with Westbank to develop KING Toronto. As part of the arrangement, Allied sold a 50% undivided interest to Westbank. KING Toronto is comprised of the following properties: 489 King W, 495 King W, 499 King W, 511-529 King W, 533 King W, 539 King W. The appraised value relates to the commercial component. The estimated total cost is net of the estimated gross proceeds from the sale of the residential inventory of $280,000 - $290,000. (4) The project is anticipated to be completed in two phases. The commercial phase is scheduled for completion in Q2 2022 and the residential phase is scheduled for completion in Q4 2023. The initial cost of Properties Under Development includes the acquisition cost of the property, direct development costs, realty taxes and borrowing costs directly attributable to the development . Borrowing costs and realty taxes associated with direct expenditures on Properties Under Development are capitalized . The amount of capitalized borrowing costs is determined first by reference to borrowings specific to the project, where relevant, and otherwise by applying a weighted average cost of borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments . Transfer to the rental portfolio occurs when the property is capable of operating in the manner intended by Management . Generally this occurs upon completion of construction and receipt of all necessary occupancy and other material permits . Estimated annual NOI is based on 100% economic occupancy . The most important factor affecting estimated annual NOI will be successful lease-up of vacant space in the development properties at current levels of net rent per square foot . The material assumption is that the office leasing market in the relevant markets remains stable . Estimated total cost includes acquisition cost, estimated total construction, financing costs and realty taxes . The material assumption made in formulating the estimated total cost is that construction and financing costs remain stable for the remainder of the development period . Estimated yield on cost is the estimated annual NOI as a percentage of the estimated total cost . Estimated cost to complete is the difference between the estimated total cost and the costs incurred to date . 41 ALLIED 2020 ANNUAL REPORT RESIDENTIAL INVENTORY Residential inventory is as follows: KING Toronto $140,038 $114,910 DECEMBER 31, 2020 DECEMBER 31, 2019 The changes in the aggregate carrying value of Allied’s residential inventory is as follows: DECEMBER 31, 2020 DECEMBER 31, 2019 Balance, beginning of year $114,910 Acquisitions (1) Dispositions (1) Sale of residential units (2) Development expenditures Balance, end of year — — — 25,128 $140,038 $140,302 10,454 (5,227) (43,342) 12,723 $114,910 (1) On February 14, 2019, Allied acquired 464-466 Queen W, Toronto, at a purchase price of $10,454 and concurrently sold a 50% undivided interest to Westbank at a sale price of $5,227. This property will be transferred to the City of Toronto as parkland dedication related to the KING Toronto condominium development. (2) Allied recognized condominium cost of sales in 2019 for the 132 units occupied at King Portland Centre. Residential inventory consists of assets that are developed by Allied for sale in the ordinary course of business . Allied may transfer an investment property to residential inventory based on a change in use, as evidenced by the commencement of development activities with the intention to sell . Alternatively, a transfer from residential inventory to investment property would be evidenced by the commencement of leasing activity . On November 30, 2018, Allied entered into a joint arrangement with Westbank to develop KING Toronto . KING Toronto is a mixed-use property comprised of office, retail and residential uses . As part of the arrangement Allied sold a 50% undivided interest to Westbank . The residential component will be developed and sold as condominium units, totaling 440 units . Management expects the condominium sales to close in 2023 . 42 ALLIED 2020 ANNUAL REPORTDEVELOPMENT COMPLETIONS PROPERTY COMPLETION INVESTMENT STABILIZED NOI UNLEVERED YIELD ON COST FAIR VALUE VALUE CREATION VALUE CREATION AS % OF COST QRC West, Toronto 2015 $130,000 $12,846 9 .9% $289,020 $159,020 122 .3% The Breithaupt Block, Kitchener 2016 $25,020 $1,950 7 .8% $48,980 $23,960 95 .8% 180 John, Toronto 189 Joseph, Kitchener 2017 2017 $27,500 $1,600 5 .8% $31,380 $3,880 14 .1% $11,360 $720 6 .3% $13,590 $2,230 19 .6% In 2004, Allied expanded into Montréal with the purchase of 425 Viger . At the time, the property comprised of 200,000 square feet of GLA and was fully leased . In 2007, Allied purchased the adjacent parking lot with the intention of intensifying the combined property once the main user’s lease expired . Allied began the intensification activity in Q1 2018, and completed the project in Q2 2020 . The property now consists of 317,500 square feet of GLA . 425 VIGER Land Costs Hard & Soft Costs INVESTMENT $30,076 66,353 Capitalized Interest & Operating Costs 7,839 STABILIZED UNLEVERED NOI YIELD ON COST FAIR VALUE VALUE CREATION AS CREATION % OF COST VALUE Total Development Costs $104,268 $8,422 8.1% $157,430 $53,162 51.0% In 2012, Allied entered into an equal two-way joint arrangement with RioCan to develop King Portland Centre . Allied and RioCan each acquired an undivided 50% interest in 642 King W and 620 King W and subsequently put them into development, completing 642 King W in early 2018 and 620 King W in early 2019 . They are comprised of 299,150 square feet of GLA (Allied’s share 149,575 square feet) and are 99 .7% leased . 602-606 King W is excluded from the figures below as they were never under development . The property is targeting LEED platinum certification . 43 ALLIED 2020 ANNUAL REPORT KING PORTLAND CENTRE Land Costs Hard & Soft Costs INVESTMENT $21,478 64,437 Capitalized Interest & Operating Costs 5,033 Condominium Profits (14,270) STABILIZED UNLEVERED NOI YIELD ON COST FAIR VALUE VALUE CREATION AS CREATION % OF COST VALUE Total Development Costs $76,678 $6,186 8.1% $139,690 $63,012 82.2% The fair values are provided by Allied’s external appraiser, which are calculated based on the discounted cash flow method . LOANS RECEIVABLE As of December 31, 2020, total loans receivable outstanding is $320,526 (December 31, 2019 - $245,303) . In February 2015, Allied entered into a joint arrangement with Westbank and completed the acquisition of an undivided 50% interest in Adelaide & Duncan . As part of the arrangement, Allied advanced $21,173 to Westbank for its purchase of a 50% undivided interest in the property . The facility is secured by a charge on the property (subordinated to the construction lender) and assignment of rents and leases . Interest accrues and is payable monthly at a rate of 7 .75% per annum . The loan is repayable when the joint arrangement obtains external permanent financing . As at December 31, 2020, the loan receivable outstanding is $21,173 (December 31, 2019 - $21,173) . On August 1, 2017, Allied entered into an arrangement with Westbank to provide a credit facility of up to $100,000, plus interest, for the land acquisition and the pre-development costs of 400 West Georgia in Vancouver . The facility is secured by Westbank’s covenant and a charge on the property (subordinated to the construction lender) . On February 11, 2019, the facility was increased to $160,000 . Interest accrues and is payable monthly at a rate of 6 .75% per annum . The credit facility matures on August 31, 2022, and has a one-year extension option to August 31, 2023 . On placement of permanent financing, Allied intends to acquire a 50% undivided interest in 400 West Georgia based on total development costs . As at December 31, 2020, the loan receivable outstanding is $120,825 (December 31, 2019 - $106,292) . 44 ALLIED 2020 ANNUAL REPORTOn November 30, 2018, Allied entered into a joint arrangement with Westbank to develop KING Toronto . As part of the arrangement, Allied advanced $67,030 to Westbank for its purchase of a 50% undivided interest in the property . The facility will initially be secured by a first mortgage on the property . On placement of construction financing, the mortgage will be secured by a charge on the property (subordinated to the construction lender) . Interest accrues at a rate of 7 .00% per annum and is payable on loan repayment . The loan is repayable at the earlier of November 23, 2023, or the closing of the condominium units . As at December 31, 2020, the loan receivable outstanding is $84,566 (December 31, 2019 - $77,765) . On March 18, 2019, Allied made an amendment to the joint arrangement with Perimeter to develop Breithaupt Phase III and a loan receivable arrangement to provide 50% of the pre-development costs . The facility is secured by a charge on the property (subordinated to the construction lender) . Interest accrues at a rate of 7 .00% per annum and is payable on loan repayment . The loan is repayable upon completion of development and rent commencement, which is anticipated to take place in the third quarter of 2022 . As at December 31, 2020, the loan receivable outstanding is $10,637 (December 31, 2019 - $9,365) . On July 31, 2019, Allied entered into an arrangement with Westbank to provide a credit facility of up to $185,000, plus interest, for the land acquisition and the pre-development costs of 720 Beatty Street in Vancouver . The funding will initially be secured by a first mortgage on the property for a fixed term . On placement of construction financing, the mortgage will be secured by a charge on the property (subordinated to the construction lender) . Interest accrues and is payable monthly at a rate of 7 .00% per annum . The credit facility matures in six years following approval of the project by the British Columbia Utilities Commission . On placement of permanent financing, Allied intends to acquire a 50% undivided interest in 720 Beatty based on an agreed upon formula . As at December 31, 2020, the loan receivable outstanding is $83,325 (December 31, 2019 - $30,708) . The table below summarizes the loans receivable as at December 31, 2020, and December 31, 2019 . Adelaide & Duncan 400 West Georgia KING Toronto Breithaupt Phase III 720 Beatty Total loans receivable DECEMBER 31, 2020 DECEMBER 31, 2019 $21,173 120,825 84,566 10,637 83,325 $21,173 106,292 77,765 9,365 30,708 $320,526 $245,303 45 ALLIED 2020 ANNUAL REPORTSection IV —Liquidity and Capital Resources Allied’s liquidity and capital resources are used to fund capital investments including development activity, leasing costs, interest expense and distributions to Unitholders . The primary source of liquidity is net operating income generated from rental properties, which is dependent on rental and occupancy rates, the structure of lease agreements, leasing costs, and the rate and amount of capital investment and development activity, among other variables . Allied has financed its operations through the use of equity, mortgage debt secured by rental properties, construction loans, unsecured operating lines, senior unsecured debentures and unsecured term loans . Conservative financial management has been consistently applied through the use of long term, fixed rate, debt financing . Allied’s objective is to maximize financial flexibility while continuing to strengthen the balance sheet . Management intends to achieve this by continuing to access the equity market, unsecured debenture market, unsecured loans and growing the pool of unencumbered assets, which totals $6,463,680 as at December 31, 2020 . 46 ALLIED 2020 ANNUAL REPORTDEBT Total debt and net debt are non-IFRS financial measures and do not have any standard meaning prescribed by IFRS . As computed by Allied, total debt and net debt may differ from similar computations reported by other Canadian real estate investment trusts and, accordingly, may not be comparable to similar computations reported by such organizations . Management considers total debt and net debt to be useful measures for evaluating debt levels and interest coverage . The following illustrates the calculation of total debt (net of transaction costs) and net debt as at December 31, 2020, and December 31, 2019: Mortgages payable Construction loans payable Unsecured revolving operating facilities Senior unsecured debentures Unsecured term loans DECEMBER 31, 2020 DECEMBER 31, 2019 $716,813 57,104 60,000 1,642,119 249,426 $737,448 23,210 — 945,369 449,154 Total debt, IFRS basis and at proportionate share (1) $2,725,462 $2,155,181 Less cash and cash equivalents (2) Net debt 48,798 $2,676,664 211,282 $1,943,899 (1) As of December 31, 2020, there was no debt outstanding attributable to TELUS Sky (December 31, 2019 - nil). (2) As of December 31, 2020, cash and cash equivalents attributable to TELUS Sky total $3,286 (December 31, 2019 - $2,368). The table below summarizes the scheduled principal maturity for Allied’s Mortgages Payable, Unsecured Debentures and Unsecured Term Loans: W/A INTEREST RATE OF MATURING MORTGAGES MORTGAGES PAYABLE SENIOR UNSECURED DEBENTURES W/A INTEREST RATE UNSECURED TERM LOANS W/A INTEREST RATE TOTAL CONSOLIDATED W/A INTEREST RATE OF MATURING DEBT $26,668 —% $— —% $— 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 231,356 4 .19% 150,000 3 .93% 242,366 4 .72% 157,198 4 .31% — — —% —% 15,384 3 .63% 200,000 3 .64% 21,834 3 .59% — —% 487 —% 300,000 3 .11% 14,750 4 .04% 300,000 3 .13% — 5,000 — —% —% —% 300,000 3 .39% 400,000 3 .12% —% —% —% —% —% —% —% —% —% —% $26,668 —% 381,356 4 .08% 242,366 4 .72% 157,198 4 .31% 215,384 3 .64% 21,834 3 .59% 300,487 3 .11% 314,750 3 .17% 300,000 3 .39% 405,000 3 .12% — — — — — — — — — — —% 250,000 3 .50% 250,000 3 .50% $715,043 4 .31% $1,650,000 3 .31% $250,000 3 .50% $2,615,043 3 .60% 47 ALLIED 2020 ANNUAL REPORT The chart below summarizes the maturities of principal in regards to Allied’s debt obligations as at December 31, 2020: MORTGAGES PAYABLE As of December 31, 2020, mortgages payable, net of financing costs, total $716,813 and have a weighted average stated interest rate of 4 .31% (December 31, 2019 - 4 .38%) . The weighted average term of the mortgage debt is 2 .9 years (December 31, 2019 - 3 .8 years) . The mortgages are secured by a first registered charge over specific investment properties and first general assignments of leases, insurance and registered chattel mortgages . 48 ALLIED 2020 ANNUAL REPORTThe following table contains information on the remaining contractual mortgage maturities: PRINCIPAL REPAYMENTS BALANCE DUE AT MATURITY DECEMBER 31, 2020 DECEMBER 31, 2019 2021 2022 2023 2024 2025 2026 2027 2028 2030 $26,668 25,728 16,781 4,726 6,596 1,391 487 293 5,000 $— 205,628 225,585 152,472 8,788 20,443 — 14,457 — $26,668 231,356 242,366 157,198 15,384 21,834 487 14,750 5,000 Mortgages, principal $87,670 $627,373 $715,043 $734,286 Net premium on assumed mortgages Net financing costs 3,555 (1,785) 5,400 (2,238) $716,813 $737,448 CONSTRUCTION LOANS PAYABLE As of December 31, 2020, and December 31, 2019, Allied’s obligation under the construction loans is as follows: JOINT ARRANGEMENT Adelaide & Duncan Breithaupt Phase III KING Toronto OWNERSHIP DATE OF MATURITY DECEMBER 31, 2020 DECEMBER 31, 2019 50% 50% 50% August 11, 2023 $44,051 $23,210 December 2, 2022 December 17, 2024 7,406 5,647 — — $57,104 $23,210 On January 31, 2019, the Adelaide & Duncan joint arrangement obtained a $270,000 construction lending facility from a syndicate of Canadian banks, in which Allied’s 50% share is $135,000 . The loan matures on August 11, 2023, and bears interest at bank prime plus 35 basis points or bankers’ acceptance rate plus 135 basis points . Allied is providing a joint and several guarantee, limited to $135,000, to support the construction facility and is earning a related guarantee fee . On August 23, 2019, the Adelaide & Duncan joint arrangement entered into a swap agreement to fix 75% of the construction costs up to $209,572 at 2 .86% . 49 ALLIED 2020 ANNUAL REPORT On February 21, 2020, Allied and Perimeter obtained a $138,000 construction loan for the Breithaupt Phase III joint arrangement from a syndicate of Canadian banks, in which Allied’s 50% share is $69,000 . The loan matures on December 2, 2022, and bears interest at bank prime or bankers’ acceptance rate plus 120 basis points . Allied is providing a joint and several guarantee, limited to $69,000, to support the facility and is earning a related guarantee fee . On December 17, 2020, Allied and Westbank obtained a $465,000 GREEN construction loan for the KING Toronto joint arrangement from a syndicate of Canadian banks, in which Allied’s 50% share is $232,500 . The loan matures on December 17, 2024, and bears interest at bank prime plus 45 basis points or bankers’ acceptance rate plus 145 basis points . Allied is providing a joint and several guarantee, limited to $232,500, to support the facility and is earning a related guarantee fee . UNSECURED REVOLVING OPERATING FACILITIES As of December 31, 2020 and December 31, 2019, Allied’s obligations under the unsecured revolving operating facilities (the “Unsecured Facilities”) are as follows: MATURITY DATE INTEREST RATES ON DRAWINGS STANDBY FEE FACILITY LIMIT DRAW- INGS LETTERS OF CREDIT AMOUNT AVAILABLE DECEMBER 31, 2020 Unsecured facility limit $400,000 (1) January 30, 2023 Prime + 0 .20% or Bankers’ acceptance + 1 .20% (2) Unsecured facility limit $100,000 April 20, 2021 Prime + 0 .45% or Bankers’ acceptance + 1 .45% 0.24% $400,000 $(60,000) $(22,420) $317,580 0.29% 100,000 — — 100,000 $500,000 $(60,000) $(22,420) $417,580 (1) This unsecured facility contains a $100,000 accordion feature, allowing Allied to increase the amount available under the facility to $500,000. (2) The interest rates on drawings for this facility are subject to certain conditions being met. In the event that these conditions are not met, this unsecured facility will bear interest at bank prime plus 45 basis points or bankers’ acceptance plus 145 basis points with a standby fee of 29 basis points. MATURITY DATE INTEREST RATES ON DRAWINGS STANDBY FEE FACILITY LIMIT DRAW- INGS LETTERS OF CREDIT AMOUNT AVAILABLE DECEMBER 31, 2019 Unsecured facility limit $400,000 (1) January 29, 2022 Prime + 0 .45% or Bankers’ acceptance + 1 .45% (2) 0 .29% $400,000 $— $(14,896) $385,104 (1) This unsecured facility contains a $100,000 accordion feature, allowing Allied to increase the amount available under the facility to $500,000. (2) The interest rates on drawings for this facility are subject to certain conditions being met. In the event that these conditions are not met, this unsecured facility will bear interest at bank prime plus 70 basis points or bankers’ acceptance plus 170 basis points with a standby fee of 34 basis points. On April 21, 2020, Allied entered into a $100,000 bilateral unsecured line of credit which matures on April 20, 2021, bearing interest at bank prime plus 45 basis points or bankers’ acceptance plus 145 basis points with a standby fee of 29 basis points . 50 ALLIED 2020 ANNUAL REPORT On January 29, 2021, Allied amended the unsecured facilities to merge the two existing facilities into one facility with a limit of $500,000 plus a $100,000 accordion feature and to extend the maturity to January 11, 2024 . The facility will bear interest at bank prime plus 20 basis points or bankers’ acceptance plus 120 basis points with a standby fee of 24 basis points, subject to certain conditions being met . In the event that these conditions are not met, the unsecured facility will bear interest at bank prime plus 45 basis points or bankers’ acceptance plus 145 basis points with a standby fee of 29 basis points . SENIOR UNSECURED DEBENTURES As of December 31, 2020, and December 31, 2019, Allied’s obligation under the senior unsecured debentures is as follows: SERIES Series B Series C Series D Series E Series F Series G INTEREST RATE DATE OF MATURITY INTEREST PAYMENT DATE DECEMBER 31, 2020 DECEMBER 31, 2019 3 .934% November 14, 2022 May 14 and November 14 $150,000 $150,000 3 .636% April 21, 2025 April 21 and October 21 200,000 200,000 3 .394% August 15, 2029 February 15 and August 15 300,000 300,000 3 .113% April 8, 2027 April 8 and October 8 300,000 300,000 3 .117% February 21, 2030 February 21 and August 21 400,000 3 .131% May 15, 2028 May 15 and November 15 300,000 — — Unsecured Debentures, principal Net financing costs $1,650,000 $950,000 (7,881) (4,631) $1,642,119 $945,369 The Series B, C, D, E, F and G Senior Unsecured Debentures are collectively referred to as the “Unsecured Debentures” . On February 21, 2020, Allied issued $400,000 of 3 .117% Series F Senior Unsecured Debentures (the “Series F Debentures”) due February 21, 2030, with semi-annual interest payments due on February 21 and August 21 each year commencing on August 21, 2020 . Debt financing costs of $2,350 were incurred and recorded against the principal owing . Proceeds from the Series F Debentures were used to prepay $200,000 aggregate principal amount of the Unsecured Term Facility maturing March 16, 2021, repay amounts drawn on the Unsecured Facility in the amount of $110,000, to fund Allied’s development and value-add initiatives and for general working capital purposes . On May 15, 2020, Allied issued $300,000 of 3 .131% Series G Senior Unsecured Debentures (the “Series G Debentures”) due May 15, 2028, with semi-annual interest payments due on May 15 and November 15 each year commencing on November 15, 2020 . Debt financing costs of $1,950 were incurred and recorded against the principal owing . Proceeds from the Series G Debentures were used to repay amounts drawn on the Unsecured Facility in the amount of $240,000 and for general working capital purposes . The respective financing costs and premium recognized are amortized using the effective interest method and recorded to Interest Expense . 51 ALLIED 2020 ANNUAL REPORT UNSECURED TERM LOANS As of December 31, 2020, and December 31, 2019, Allied’s obligation under the unsecured term loans is as follows: INTEREST RATE DATE OF MATURITY FREQUENCY OF INTEREST PAYMENT DECEMBER 31, 2020 DECEMBER 31, 2019 Unsecured Term Loan 3 .496% January 14, 2031 Monthly $250,000 $250,000 Unsecured Term Facility Tranche 1 Tranche 2 2 .830% March 16, 2021 2 .890% March 16, 2021 Quarterly Quarterly Unsecured Term Loans, principal Net financing costs — — 100,000 100,000 $250,000 $450,000 (574) (846) $249,426 $449,154 The Unsecured Term Loan and Unsecured Term Facility are collectively referred to as the “Unsecured Term Loans” . On February 10, 2020, Allied repaid $100,000 of the principal amount of Tranche 1 of the Unsecured Term Facility due March 16, 2021 . On March 4, 2020, Allied repaid $100,000 of the principal amount of Tranche 2, representing the remaining balance of the Unsecured Term Facility due March 16, 2021 . On August 11, 2020, Allied entered into an amended Unsecured Term Loan at a new fixed interest rate of 3 .496% (December 31, 2019 - 3 .992%) and a new maturity date of January 14, 2031 (December 31, 2019 - January 14, 2026) . The respective financing costs are amortized using the effective interest method and recorded to Interest Expense . 52 ALLIED 2020 ANNUAL REPORT CREDIT RATINGS Allied’s credit ratings as at December 31, 2020, are summarized below: DEBT Issuer Rating & Unsecured Debentures Issuer Rating & Unsecured Debentures RATING AGENCY LONG-TERM CREDIT RATING TREND/OUTLOOK DBRS Limited Moody’s Investors Service Inc . BBB Baa2 Stable Stable DBRS Limited (“DBRS”) and Moody’s Investors Service Inc . (“Moody’s”) provide issuer ratings and credit ratings of debt securities for commercial issuers that indicate the risk associated with a borrower’s capabilities to fulfill its obligations . The minimum DBRS investment grade rating is “BBB (low),” with the highest rating being “AAA .” The minimum Moody’s investment grade rating is “Baa3,” with the highest rating being “Aaa” . With these ratings, Allied’s ability to access the debt capital markets on favourable financial terms will be enhanced . Allied expects the ratings to be particularly helpful as Allied continues to fortify the balance sheet with a view to bringing added financial flexibility and discipline to the urban development program . The above-mentioned ratings assigned to Allied and the Unsecured Debentures are not recommendations to buy, sell or hold any securities of Allied . Allied has paid customary rating fees to DBRS and Moody’s in connection with the above-mentioned ratings . There can be no assurance that any rating will remain in effect for any given period of time or that a rating will not be lowered, withdrawn or revised by the rating agency if in its judgment circumstances so warrant . 53 ALLIED 2020 ANNUAL REPORTFINANCIAL COVENANTS The Unsecured Facilities, Unsecured Term Loans and Unsecured Debentures contain numerous financial covenants . Failure to comply with the covenants could result in a default, which, if not waived or cured, could result in adverse financial consequences . The related covenants are as follows: UNSECURED FACILITIES AND UNSECURED TERM LOANS The following outlines the requirements of covenants as defined in the agreements governing the Unsecured Facilities and Unsecured Term Loans . COVENANT Indebtedness ratio Secured indebtedness ratio Debt service coverage ratio Equity maintenance THRESHOLD DECEMBER 31, 2020 DECEMBER 31, 2019 Below 60% Below 45% 29.2% 8.2% 26 . 1% 9 .1% Consolidated adjusted EBITDA to be more than 1 .5 times debt service payments 2.7x 2 .5x At least $1,250,000 plus 75% of future equity issuances ($2,797,710) 6,177,032 5,717,699 Unencumbered property assets value ratio Unencumbered property assets to be more than 1 .4 times total unsecured debt Distribution payout ratio Maintain distributions below 100% of FFO 3.3x 70.8% 3 .9x 71 .5% SENIOR UNSECURED DEBENTURES The following outlines the requirements of covenants specified in the trust indenture with respect to the Unsecured Debentures . COVENANT Pro forma interest coverage ratio Pro forma asset coverage test THRESHOLD DECEMBER 31, 2020 DECEMBER 31, 2019 Maintain a 12-month rolling consolidated pro forma EBITDA of at least 1 .65 times pro forma interest expense Maintain net consolidated debt below 65% of net aggregate assets on a pro forma basis 3.2x 3 .1x 29.1% 26 .0% Equity maintenance Maintain Unitholders’ equity above $300,000 6,177,032 5,717,699 Pro forma unencumbered net aggregate adjusted asset ratio Maintain pro forma unencumbered net aggregate adjusted assets above 1 .4 times consolidated unsecured indebtedness 3.6x 4 .4x As of December 31, 2020, Allied was in compliance with the terms and covenants of the agreements governing the Unsecured Facilities, the Unsecured Term Loans and the Unsecured Debentures . A number of other financial ratios are also monitored by Allied, including net debt to EBITDA and EBITDA as a multiple of interest expense . These ratios are presented in Section I—Overview . 54 ALLIED 2020 ANNUAL REPORT UNITHOLDERS’ EQUITY The following represents the number of Units issued and outstanding, and the related carrying value of Unitholders’ equity, for the years ended December 31, 2020, and December 31, 2019 . Units, beginning of year 122,838,799 $3,725,472 103,861,945 $2,835,395 DECEMBER 31, 2020 DECEMBER 31, 2019 UNITS AMOUNT UNITS AMOUNT Restricted Unit Plan (net of forfeitures) Unit Option Plan - options exercised — 277,311 (2,695) 9,805 — 277,854 Unit issuance Units, end of year 4,143,108 152,079 18,699,000 127,259,218 $3,884,661 122,838,799 $3,725,472 (2,462) 10,437 882,102 As at February 3, 2021, 127,259,218 Trust Units and 1,288,229 options to purchase Units were issued and outstanding . On September 4, 2020, Allied raised gross proceeds of $153,295 through a private placement issuance of 4,143,108 Units at a price of $37 .00 per Unit . Costs relating to the issuance totaled $1,216 and were applied against the gross proceeds of the issuance and charged against Unitholders’ equity . Allied does not hold any of its own Units, nor does Allied reserve any Units for issue under options and contracts . The table below represents weighted average Units outstanding for: THREE MONTHS ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 127,256,661 117,917,803 124,427,715 112,443,006 41,339 330,747 108,919 288,044 127,298,000 118,248,550 124,536,634 112,731,050 Basic Unit Option Plan Fully diluted NORMAL COURSE ISSUER BID On February 20, 2020, Allied received approval from the Toronto Stock Exchange (“TSX”) for the renewal of its normal course issuer bid (“NCIB”), which entitles Allied to purchase up to 12,100,300 of its outstanding Units, representing approximately 10% of its public float as at February 10, 2020 . The NCIB commenced February 24, 2020, and will expire on February 23, 2021, or such earlier date as Allied completes its purchases pursuant to the NCIB . All purchases under the NCIB will be made on the open market through the facilities of the TSX or alternate trading systems in Canada at market prices prevailing at the time of purchase . Any Units that are repurchased will either be cancelled or delivered to participants under Allied’s Restricted Unit Plan or to employees pursuant to Allied’s employee programs . 55 ALLIED 2020 ANNUAL REPORTDuring the year ended December 31, 2020, Allied purchased 48,688 Units for $2,767 at a weighted average price of $56 .83 per Unit under its NCIB program, of which 48,148 Units were purchased for delivery to participants under Allied’s Restricted Unit Plan and 540 Units were purchased for certain employee rewards outside of Allied’s Restricted Unit Plan . UNIT OPTION AND RESTRICTED UNIT PLANS Allied adopted a unit option plan (the “Unit Option Plan”) providing for the issuance, from time to time, at the discretion of the trustees, of options to purchase Units for cash . Participation in the Unit Option Plan is restricted to certain employees of Allied . The Unit Option Plan complies with the requirements of the TSX . The exercise price of any option granted will not be less than the closing market price of the Units on the day preceding the date of grant . The term of the options may not exceed ten years . Options granted prior to February 22, 2017 vest evenly over three years; options granted subsequently vest evenly over four years from the date of grant . All options are settled in Units . At December 31, 2020, Allied had granted options to purchase up to 1,288,229 Units outstanding, of which 548,396 had vested . At December 31, 2019, Allied had options to purchase 1,213,310 Units outstanding, of which 604,445 had vested . For the year ended December 31, 2020, Allied recorded a share-based payment expense related to options of $1,988 (December 31, 2019 - $1,583) in general and administrative expense in the consolidated statements of income and comprehensive income . In March 2010, Allied adopted a restricted unit plan (the “Restricted Unit Plan”), whereby restricted Units (“Restricted Units”) are granted to certain key employees and trustees, at the discretion of the Board of Trustees . The Restricted Units are purchased in the open market . Employees and trustees who are granted Restricted Units have the right to vote and to receive distributions from the date of the grant . The Restricted Units granted to employees vest as to one-third on each of the three anniversaries following the date of the grant . Restricted Units granted to non-management trustees are fully vested . Whether vested or not, without the specific authority of the Governance and Compensation Committee, the Restricted Units may not be sold, mortgaged or otherwise disposed of for a period of six years following the date of the grant, except that in the case of a non-management trustee, the release date will be automatically accelerated to the date such person ceases to hold office as a trustee of Allied . The Restricted Unit Plan contains provisions providing for the vesting or forfeiture of unvested Restricted Units within specified time periods in the event the employee’s employment is terminated, and authorizes the Chief Executive Officer, in his or her discretion, to accelerate the release date and vesting of Restricted Units in certain circumstances where an employee’s employment is terminated . At December 31, 2020, Allied had 288,135 Restricted Units outstanding (December 31, 2019 – 287,023) . For the year ended December 31, 2020, Allied recorded a share-based payment expense related to Restricted Units of $2,804 (December 31, 2019 – $2,437) in general and administrative expense in the consolidated statements of income and comprehensive income . 56 ALLIED 2020 ANNUAL REPORTDISTRIBUTIONS TO UNITHOLDERS Allied is focused on increasing distributions to its Unitholders on a regular and prudent basis . During the first 12 months of operations, Allied made regular monthly distributions of $1 .10 per Unit on an annualized basis . The distribution increases since then are set out in the table below: MARCH, 2004 MARCH, 2005 MARCH, 2006 MARCH, 2007 MARCH, 2008 DECEMBER, 2012 DECEMBER, 2013 Annualized increase per Unit $0 .04 $0 .04 $0 .04 $0 .04 $0 .06 $0 .04 $0 .05 % increase Annualized distribution per Unit 3 .6% $1 .14 3 .5% $1 .18 3 .4% $1 .22 3 .3% $1 .26 4 .8% 3 .0% $1 .32 $1 .36 3 .7% $1 .41 DECEMBER, 2014 DECEMBER, 2015 DECEMBER, 2016 DECEMBER, 2017 DECEMBER, 2018 JANUARY, 2020 JANUARY, 2021 Annualized increase per Unit $0 .05 $0 .04 $0 .03 $0 .03 $0 .04 $0 .05 $0 .05 % increase 3 .5% 2 .7% 2 .0% 2 .0% 2 .6% 3 .1% Annualized distribution per Unit $1 .46 $1 .50 $1 .53 $1 .56 $1 .60 $1 .65 3 .0% $1 .70 SOURCES OF DISTRIBUTIONS For the three months and year ended December 31, 2020, Allied declared $52,493 and $205,377 in distributions, respectively (three months and year ended December 31, 2019 - $47,267 and $180,284, respectively) . THREE MONTHS ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 Distributions declared $52,493 $47,267 $205,377 $180,284 Net income $83,842 $264,960 $500,729 $629,223 Cash flows provided by operating activities $77,400 $67,577 $356,257 $244,599 AFFO excluding condominium related items and prepayment costs AFFO excluding condominium related items and prepayment costs payout ratio Excess of net income over distributions declared Excess of cash flows provided by operating activities over distributions declared Excess of cash provided by AFFO excluding condominium related items and prepayment costs over distributions declared $64,623 $57,645 $248,003 $219,846 81.2% 82 . 0% 82.8% 82 . 0% $31,349 $217,693 $295,352 $448,939 $24,907 $20,310 $150,880 $64,315 $12,130 $10,378 $42,626 $39,562 In the table above, AFFO has been presented in accordance with the “White Paper on Funds From Operations & Adjusted Funds From Operations for IFRS” published by the Real Property Association of Canada (“REALpac”) in February of 2019 . 57 ALLIED 2020 ANNUAL REPORTIn determining the amount of distributions to be made to Unitholders, Allied’s Board of Trustees consider many factors, including provisions in its Declaration of Trust, macro-economic and industry specific environments, the overall financial condition of Allied, future capital requirements, debt covenants, and taxable income . In accordance with Allied’s distribution policy, Management and the Board of Trustees regularly review Allied’s rate of distributions to ensure an appropriate level of cash and non-cash distributions . Management anticipates that distributions declared will, in the foreseeable future, continue to vary from net income as net income includes fair value adjustments and other non-cash items . While cash flows from operating activities are generally sufficient to cover distribution requirements, timing of expenses and seasonal fluctuations in non-cash working capital may result in a shortfall . These seasonal or short-term fluctuations will be funded, if necessary, by the Unsecured Facilities . As such, the cash distributions are not an economic return of capital, but a distribution of sustainable cash flow from operations . Based on current facts and assumptions, Management does not anticipate cash distributions will be reduced or suspended in the foreseeable future . The rate of distribution as at December 31, 2020, amounts to $1 .65 per Unit per annum (December 31, 2019 - $1 .60 per Unit per annum) . COMMITMENTS At December 31, 2020, Allied had future commitments as set out below, excluding the amount held within equity accounted investments: Capital expenditures and committed acquisitions DECEMBER 31, 2020 $335,344 Commitments as at December 31, 2020, and December 31, 2019, of $551 and $1,238, respectively, were held within equity accounted investments .  The above does not include Allied’s lease liability commitments, which are disclosed in note 12 of the consolidated financial statements for the year ended December 31, 2020 . 58 ALLIED 2020 ANNUAL REPORTSection V —Discussion of Operations The following sets out summary information and financial results for the three months and year ended December 31, 2020, and the comparable period in 2019 . Unless otherwise noted, the figures in this section are presented on a proportionate basis of accounting . 59 ALLIED 2020 ANNUAL REPORTNET INCOME AND COMPREHENSIVE INCOME The following table reconciles the consolidated statements of income and comprehensive income, on a proportionate basis, for the three months and year ended December 31, 2020, and December 31, 2019 . THREE MONTHS ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 IFRS BASIS INVESTMENT IN JOINT VENTURE PROPOR- TIONATE BASIS IFRS BASIS INVESTMENT IN JOINT VENTURE PROPOR- TIONATE BASIS Rental revenue from investment properties $145,173 $777 $145,950 $134,306 Property operating costs (62,421) (639) (63,060) (59,174) Net rental income 82,752 138 82,890 75,132 Condominium revenue Condominium cost of sales Condominium profits — — — — — — — — — 30,600 (29,022) 1,578 Operating income $82,752 $138 $82,890 $76,710 Interest expense (17,774) General and administrative expenses (5,211) Condominium marketing expenses Amortization of other assets Interest income Fair value gain (loss) on investment properties Fair value gain on derivative instruments — — (44) — — (17,774) (19,202) (5,211) (5,990) (271) (341) 5,018 (904) (365) 5,149 (227) (341) 5,018 $412 (102) 310 — — — $310 (91) — 94 — — $134,718 (59,276) 75,442 30,600 (29,022) 1,578 $77,020 (19,293) (5,990) (810) (365) 5,149 16,880 (2,071) 14,809 216,130 (14,979) 201,151 4,722 — 4,722 8,098 — 8,098 — Net loss from joint venture (1,977) 1,977 — (14,666) 14,666 Net income and comprehensive income $83,842 $— $83,842 $264,960 $— $264,960 60 ALLIED 2020 ANNUAL REPORTDECEMBER 31, 2020 DECEMBER 31, 2019 YEAR ENDED IFRS BASIS INVESTMENT IN JOINT VENTURE PROPOR- TIONATE BASIS IFRS BASIS INVESTMENT IN JOINT VENTURE PROPOR- TIONATE BASIS Rental revenue from investment properties $560,327 $2,464 $562,791 $496,109 $1,147 $497,256 Property operating costs (241,490) (1,219) (242,709) (210,747) (277) (211,024) Net rental income 318,837 1,245 320,082 285,362 870 286,232 Condominium revenue Condominium cost of sales Condominium profits 178 — 178 — — — 178 — 178 45,341 (43,342) 1,999 — — — 45,341 (43,342) 1,999 Operating income $319,015 $1,245 $320,260 $287,361 $870 $288,231 Interest expense (72,603) General and administrative expenses (22,215) — — (72,603) (66,403) (441) (66,844) (22,215) (21,953) — (21,953) Condominium marketing expenses (1,230) (133) (1,363) (4,214) (121) Amortization of other assets Interest income (1,467) 19,819 — — (1,467) (1,456) 19,819 17,351 — — (4,335) (1,456) 17,351 Fair value gain (loss) on investment properties Fair value loss on derivative instruments 280,590 (4,296) 276,294 450,490 (26,152) 424,338 (17,996) — (17,996) (6,109) — (6,109) Net loss from joint venture (3,184) 3,184 — (25,844) 25,844 — Net income and comprehensive income $500,729 $— $500,729 $629,223 $— $629,223 Net income and comprehensive income for the three months and year ended December 31, 2020, decreased by $181,118 and $128,494, respectively, over the comparable period in 2019 . Excluding the effect of the fair value changes on investment properties and derivative instruments, net income for the three months ended December 31, 2020, was up by $8,600 from the same period in the prior year, primarily due to an increase in net operating income and lower interest expense . Excluding the effect of the fair value changes on investment properties and derivative instruments, net income for the year ended December 31, 2020 was up by $31,437 from the same period in the prior year, primarily due to an increase in net operating and interest income, partially offset by higher interest expense . 61 ALLIED 2020 ANNUAL REPORTNET OPERATING INCOME (“NOI”) NOI is a non-IFRS financial measure and should not be considered as an alternative to net income or net income and comprehensive income, cash flow from operating activities or any other measure prescribed under IFRS . NOI does not have any standardized meaning prescribed by IFRS . As computed by Allied, NOI may differ from similar computations reported by other Canadian real estate investment trusts and, accordingly, may not be comparable to similar computations reported by such organizations . Management considers NOI to be a useful measure of performance for rental properties . Allied operates in seven urban markets — Montréal, Ottawa, Toronto, Kitchener, Calgary, Edmonton and Vancouver . For the purpose of analyzing NOI, Allied groups the cities by geographic location . Allied’s real estate portfolio has grown through acquisitions and development activities that have positively contributed to the operating results for the three months and year ended December 31, 2020, as compared to the same period in the prior year . The following table reconciles operating income to net operating income . Operating income Condominium revenue Condominium cost of sales THREE MONTHS ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 $82,890 $77,020 $320,260 $288,231 — — (30,600) 29,022 (178) — (45,341) 43,342 Net rental income $82,890 $75,442 $320,082 $286,232 Amortization of improvement allowances (1) Amortization of straight-line rents (1) 8,072 (1,596) 7,935 (1,427) 32,522 (10,132) 30,997 (7,237) NOI $89,366 $81,950 $342,472 $309,992 (1) Includes Allied’s proportionate share of the equity accounted investment of the following amounts for the three months and year ended December 31, 2020: amortization improvement allowances of $113 and $329, respectively, (December 31, 2019 - $56 and $201, respectively) and amortization of straight-line rents of $(393) and $(2,276), respectively (December 31, 2019 - $(463) and $(1,343), respectively). 62 ALLIED 2020 ANNUAL REPORT 20 .8% (0 .2)% 10 .7% 8 .3% 13 .4% 9 .0% % 11 .7% 13 .4% 6 .7% The following tables set out the NOI by segment and space type from the rental and development properties for the three months and year ended December 31, 2020, and the comparable period in 2019 . SEGMENT DECEMBER 31, 2020 DECEMBER 31, 2019 $ % THREE MONTHS ENDED CHANGE Urban Workspace Montréal & Ottawa $27,936 31.2% $23,125 28 .2% $4,811 Toronto & Kitchener 36,967 41.4% 37,040 45 .2% Calgary, Edmonton & Vancouver 10,071 11.3% 9,095 11 .1% Urban Workspace - Total 74,974 83.9% 69,260 84 .5% Urban Data Centres 14,392 16.1% 12,690 15 .5% (73) 976 5,714 1,702 NOI $89,366 100.0% $81,950 100 .0% $7,416 TYPE OF SPACE DECEMBER 31, 2020 DECEMBER 31, 2019 $ Urban Workspace - Office $65,228 73.0% $58,374 71 .2% $6,854 THREE MONTHS ENDED CHANGE Urban Data Centres 14,392 16.1% 12,690 15 .5% Urban Workspace - Retail Urban Workspace - Parking 6,826 2,920 7.6% 3.3% 6,397 4,489 7 .8% 5 .5% 1,702 429 (1,569) (35 .0)% NOI $89,366 100.0% $81,950 100 .0% $7,416 9 .0% The increase in NOI for the three months ended December 31, 2020, was primarily the result of rent growth in Montréal, rent and ancillary revenue growth in the UDC portfolio, a Québec government subsidy related to the CECRA program and contributions from acquisitions in Montréal, Vancouver, and Calgary . This was partially offset by a decrease in variable parking revenue . 63 ALLIED 2020 ANNUAL REPORT 1 .5% 7 .3% 11 .7% 4 .7% 10 .5% % 13 .7% 4 .7% 8 .9% SEGMENT DECEMBER 31, 2020 DECEMBER 31, 2019 $ % YEAR ENDED CHANGE Urban Workspace Montréal & Ottawa $106,711 31.2% $81,463 26 .3% $25,248 31 .0% Toronto & Kitchener 141,405 41.3% 139,317 44 .9% Calgary, Edmonton & Vancouver 38,451 11.2% 35,831 11 .6% 2,088 2,620 Urban Workspace - Total 286,567 83.7% 256,611 82 .8% 29,956 Urban Data Centres 55,905 16.3% 53,381 17 .2% 2,524 NOI $342,472 100.0% $309,992 100 .0% $32,480 TYPE OF SPACE DECEMBER 31, 2020 DECEMBER 31, 2019 $ Urban Workspace - Office $248,564 72.6% $218,588 70 .5% $29,976 YEAR ENDED CHANGE Urban Data Centres 55,905 16.3% 53,381 Urban Workspace - Retail Urban Workspace - Parking 24,953 13,050 7.3% 3.8% 22,911 17 .2% 7 .4% 2,524 2,042 15,112 4 .9% (2,062) (13 .6)% NOI $342,472 100.0% $309,992 100 .0% $32,480 10 .5% The increase in NOI for the year ended December 31, 2020, was primarily the result of rent growth in Montréal and Toronto, rent and ancillary revenue growth in the UDC portfolio and contributions from acquisitions in Montréal, Vancouver and Calgary . This was partially offset by a decrease in variable parking revenue and rent abatements totaling $5,100 provided under the CECRA program in all regions . 64 ALLIED 2020 ANNUAL REPORT SAME ASSET NOI Same asset NOI is a non-IFRS measure and refers to the NOI for those properties that Allied owned and operated for the entire period in question and for the same period in the prior year . Allied strives to maintain or increase same asset NOI over time . Same asset NOI in the table below refers to those investment properties that were owned by Allied from October 1, 2019, to December 31, 2020 . Same asset NOI of the development portfolio for the three months ended December 31, 2020, consists of 425 Viger, 305 Joseph, Adelaide & Duncan, KING Toronto, TELUS Sky, The Well, QRC West Phase II, 400 Atlantic and Boardwalk Building . THREE MONTHS ENDED CHANGE DECEMBER 31, 2020 DECEMBER 31, 2019 $ % Urban Workspace Montréal & Ottawa Toronto & Kitchener Calgary, Edmonton & Vancouver Urban Workspace Urban Data Centres Rental Portfolio - Same Asset NOI Urban Workspace Development Portfolio - Same Asset NOI $24,176 $22,201 32,822 7,751 64,749 14,392 79,141 366 366 33,903 8,423 64,527 12,690 77,217 894 894 $1,975 (1,081) (672) 222 1,702 1,924 (528) (528) Total Portfolio - Same Asset NOI $79,507 $78,111 $1,396 Acquisitions Lease terminations Development fees and corporate items 5,215 542 4,102 131 169 3,539 5,084 373 563 8 .9% (3 .2)% (8 .0)% 0 .3% 13 .4% 2 .5% (59 .1)% (59 .1)% 1 .8% NOI $89,366 $81,950 $7,416 9 .0% Amortization of improvement allowances (8,072) (7,935) Amortization of straight-line rents Condominium profits Operating income 1,596 — 1,427 1,578 $82,890 $77,020 (137) 169 (1,578) $5,870 7 .6% Same asset NOI of the total portfolio increased by 1 .8% for the three months ended December 31, 2020 . Same asset NOI of the rental portfolio increased by 2 .5% primarily as a result of rent growth in Montréal, revenue growth in the UDC portfolio and a Québec government subsidy related to the CECRA program partially offset by a decrease in variable parking revenue . Same asset NOI of the UDC portfolio increased by 13 .4% as a result of rent and ancillary revenue growth . Same asset NOI of the development portfolio decreased with the completion of deleasing activity in order to commence development at QRC West Phase II, 400 Atlantic and Boardwalk Building . 65 ALLIED 2020 ANNUAL REPORTSame asset NOI in the table below refers to those investment properties that were owned by Allied from January 1, 2019, to December 31, 2020 . Same asset NOI of the development portfolio for the year ended December 31, 2020, consists of 425 Viger, 305 Joseph, Adelaide & Duncan, KING Toronto, TELUS Sky, The Well, QRC West Phase II, 400 Atlantic and Boardwalk Building . YEAR ENDED CHANGE DECEMBER 31, 2020 DECEMBER 31, 2019 $ % (143) 2,540 2,397 (2,715) (2,715) $(318) 30,231 362 2,205 (1,525) 2,895 (1,821) Urban Workspace Montréal & Ottawa Toronto & Kitchener Calgary, Edmonton & Vancouver Urban Workspace Urban Data Centres Rental Portfolio - Same Asset NOI Urban Workspace Development Portfolio - Same Asset NOI $74,431 128,947 28,273 231,651 55,766 287,417 1,385 1,385 $70,670 129,806 $3,761 (859) 31,318 (3,045) 231,794 53,226 285,020 4,100 4,100 Total Portfolio - Same Asset NOI $288,802 $289,120 Acquisitions Lease terminations Development fees and corporate items 41,488 1,163 11,019 11,257 801 8,814 5 .3% (0 .7)% (9 .7)% (0 .1)% 4 .8% 0 .8% (66 .2)% (66 .2)% (0 .1)% NOI $342,472 $309,992 $32,480 10 .5% Amortization of improvement allowances (32,522) (30,997) Amortization of straight-line rents Condominium profits Operating income 10,132 178 7,237 1,999 $320,260 $288,231 $32,029 11 .1% Same asset NOI of the total portfolio decreased by 0 .1% for the year ended December 31, 2020 . Same asset NOI of the rental portfolio increased by 0 .8% as a result of rent growth in Montréal and revenue growth in the UDC portfolio which was offset by lower variable parking revenue and rent abatements totaling $5,100 provided under the CECRA program in all regions . Same asset NOI of the UDC portfolio increased by 4 .8% as a result of increased ancillary revenue . Same asset NOI of the development portfolio decreased with the discontinuation of capitalized operating costs as fixturing commenced at 425 Viger and TELUS Sky, as well as the completion of deleasing activity in order to commence development at KING Toronto, QRC West Phase II, 400 Atlantic and Boardwalk Building . 66 ALLIED 2020 ANNUAL REPORTINTEREST EXPENSE Interest expense for the three months and year ended December 31, 2020, and 2019 is as follows: Interest on debt: Mortgages payable Construction loans payable Unsecured Facilities Unsecured Debentures Unsecured Term Loans Interest on lease liabilities Amortization, discount on debt Amortization, net financing costs THREE MONTHS ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 $7,670 $8,102 $31,141 $33,989 378 423 13,669 2,206 2,219 (469) 518 244 631 8,012 3,945 2,078 (449) 406 1,351 2,152 49,455 10,353 8,926 (1,846) 2,081 604 2,667 24,629 15,679 8,350 (1,000) 1,660 $26,614 $22,969 $103,613 $86,578 Less: Interest capitalized to qualifying investment properties and residential inventory Interest expense excluding prepayment costs (8,840) $17,774 (7,222) (31,010) $15,747 $72,603 (26,193) $60,385 Prepayment costs — 3,455 — 6,018 Interest expense, IFRS basis $17,774 $19,202 $72,603 $66,403 Add: share from joint venture — 91 — 441 Total Interest expense, proportionate basis $17,774 $19,293 $72,603 $66,844 For the three months and year ended December 31, 2020, without taking into account capitalized interest and prepayment costs, interest expense increased by $3,554 and $16,594, respectively, over the comparable period primarily due to a higher balance of unsecured debentures, offset by a lower balance of unsecured term loans and mortgages payable . For the year ended December 31, 2020, capitalized interest increased over the comparable period with the continuation of development and upgrade activities across the portfolio . In accordance with IAS 23 - Borrowing Costs, interest may be capitalized on properties in connection with activity required to get the assets ready for their intended use (refer to note 2 (g) in Allied’s audited consolidated financial statements for the year ended December 31, 2020, for further details) . This would include upgrade work as well as work completed in relation to a future development, such as obtaining zoning approval, completing site approval plans, engineering and architectural drawings . On completion of upgrade and development activity, the ability to capitalize interest expense ends, partially offsetting the positive impact of occupancy commencement . 67 ALLIED 2020 ANNUAL REPORT GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses for the three months and year ended December 31, 2020 and 2019 are as follows: THREE MONTHS ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 Salaries and benefits $4,412 $5,263 $18,652 $19,036 Professional and trustees fees Office and general expenses Capitalized to qualifying investment properties Total general and administrative expenses 807 1,289 $6,508 (1,297) $5,211 761 1,163 $7,187 (1,197) 3,747 4,628 $27,027 (4,812) $5,990 $22,215 3,388 3,932 $26,356 (4,403) $21,953 For the three months and year ended December 31, 2020, general and administrative expenses decreased by $779 and increased by $262 from the comparable period, respectively . The decrease for the three months ended December 31, 2020, is mainly due to lower compensation expenses . OTHER FINANCIAL PERFORMANCE MEASURES FUNDS FROM OPERATIONS (“FFO”) AND FFO EXCLUDING CONDOMINIUM RELATED ITEMS AND PREPAYMENT COSTS FFO is a non-IFRS financial measure used by most Canadian real estate investment trusts and should not be considered as an alternative to net income or comprehensive income, cash flow from operating activities or any other measure prescribed under IFRS . While FFO does not have any standardized meaning prescribed by IFRS, REALpac established a standardized definition of FFO . Management believes that it is a useful measure of operating performance . Allied initiated condominium pre-sales at KING Toronto, a 50/50 joint venture with Westbank, in the fourth quarter of 2018 . The first three phases have sold well, and the fourth and final phase has been released to strong demand . For the three months and year ended December 31, 2020, Allied incurred $227 and $1,230 (at its share) of condominium marketing costs in connection with the pre-sales activity . (Marketing costs associated with merchant development are expensed when incurred .) Allied and Westbank have initiated construction of KING Toronto . FFO excluding condominium related items and prepayment costs starts with the standardized definition of FFO and removes the effects of condominium revenue, condominium cost of sales, condominium marketing costs and financing prepayment costs . For the three months ended December 31, 2020, FFO per Unit excluding condominium related items and prepayment costs totaled $0 .589 . This is an increase of $0 .005 or 0 .9% over the comparable period in the prior year . The increase was primarily due to an increase in NOI, lower interest expense and lower general and administrative expenses partially offset by lower interest income . 68 ALLIED 2020 ANNUAL REPORT For the year ended December 31, 2020, FFO per Unit excluding condominium related items and prepayment costs totaled $2 .295 . This is a decrease of $0 .005 or 0 .2% over the comparable period in the prior year . The decrease was primarily due to rent abatements provided under the CECRA program and higher interest expense partially offset by an increase in NOI and higher interest income . To ensure sufficient cash is retained to meet capital improvement and leasing objectives, Allied strives to maintain an appropriate FFO pay-out ratio excluding condominium related items and prepayment costs, which is the ratio of actual distributions to FFO excluding condominium related items and prepayment costs in a given period . For the three months and year ended December 31, 2020, the FFO pay-out ratio excluding condominium related items and prepayment costs was 70 .0% and 71 .9%, respectively . ADJUSTED FUNDS FROM OPERATIONS (“AFFO”) EXCLUDING CONDOMINIUM RELATED ITEMS AND PREPAYMENT COSTS AFFO is a non-IFRS financial measure used by most Canadian real estate investment trusts and should not be considered as an alternative to net income or comprehensive income, cash flow from operating activities or any other measure prescribed under IFRS . AFFO does not have any standardized meaning prescribed by IFRS . REALpac established a standardized definition of AFFO in its February 2017 White Paper (“White Paper”) . Management considers AFFO to be a useful measure of recurring economic earnings . The principal advantage of AFFO is that it starts from the standardized definition of FFO and takes account of regular maintenance capital expenditures and regular leasing expenditures while ignoring the impact of non-cash revenue . With the adoption of the White Paper, Allied added recoverable maintenance capital expenditures and incremental leasing costs related to regular leasing in order to comply with the white paper . As regular maintenance capital expenditures and regular leasing expenditures are not incurred evenly throughout a fiscal year, there can be volatility in AFFO on a quarterly basis . For the three months ended December 31, 2020, AFFO per Unit excluding condominium related items and prepayment costs totaled $0 .508 . This represents an increase of $0 .021 or 4 .3% over the comparable period in the prior year . AFFO excluding condominium related items and prepayment costs increased primarily due to the changes in FFO excluding condominium related items and prepayment costs discussed above, lower recoverable maintenance capital expenditures and lower regular leasing expenditures partially offset by higher amortization of straight line rent and regular maintenance capital expenditures . For the year ended December 31, 2020, AFFO per Unit excluding condominium related items and prepayment costs totaled $1 .991 . This represents an increase of $0 .041 or 2 .1% over the comparable period in the prior year . AFFO excluding condominium related items and prepayment costs increased primarily due to the changes in FFO excluding condominium related items and prepayment costs discussed above and lower regular leasing expenditures partially offset by higher amortization of straight line rent and higher regular and recoverable maintenance capital expenditures . 69 ALLIED 2020 ANNUAL REPORTTo ensure sufficient cash is retained to meet capital improvement and leasing objectives, Allied strives to maintain an appropriate AFFO pay-out ratio excluding condominium related items and prepayment costs, which is the ratio of actual distributions to AFFO excluding condominium related items and prepayment costs in a given period . For the three months and year ended December 31, 2020, the AFFO pay-out ratio excluding condominium related items and prepayment costs was 81 .2% and 82 .8%, respectively . RECONCILIATION OF FFO AND AFFO The following table reconciles Allied’s net income to FFO, FFO excluding condominium related items and prepayment costs and AFFO excluding condominium related items and prepayment costs for the three months ended December 31, 2020, and December 31, 2019 . THREE MONTHS ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 CHANGE Net income and comprehensive income Adjustment to fair value of investment properties Adjustment to fair value of derivative instruments Incremental leasing costs Amortization of improvement allowances Adjustments relating to joint venture: Adjustment to fair value on investment properties Amortization of improvement allowances Interest capitalized (1) FFO Condominium revenue Condominium cost of sales Condominium marketing costs Prepayment costs $83,842 (16,880) (4,722) 1,745 7,959 2,071 113 614 $74,742 — — 227 — FFO excluding condominium related items and prepayment costs Amortization of straight-line rents Regular leasing expenditures Regular maintenance capital expenditures Incremental leasing (related to regular leasing expenditures) Recoverable maintenance capital expenditures Adjustment relating to joint venture: $74,969 $69,085 (1,203) (3,849) (1,939) (1,221) (1,741) (964) (4,168) (1,852) (1,377) (2,616) Amortization of straight-line rents (393) (463) AFFO excluding condominium related items and prepayment costs $64,623 $57,645 $6,978 70 $264,960 $(181,118) (216,130) (8,098) 1,968 7,879 199,250 3,376 (223) 80 14,979 (12,908) 56 690 $66,304 (30,600) 29,022 904 3,455 57 (76) $8,438 30,600 (29,022) (677) (3,455) $5,884 (239) 319 (87) 156 875 70 ALLIED 2020 ANNUAL REPORT Weighted average number of Units Basic Diluted Per Unit - basic FFO FFO excluding condominium related items and prepayment costs AFFO excluding condominium related items and prepayment costs Per Unit - diluted FFO FFO excluding condominium related items and prepayment costs AFFO excluding condominium related items and prepayment costs Pay-out Ratio FFO FFO excluding condominium related items and prepayment costs AFFO excluding condominium related items and prepayment costs THREE MONTHS ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 CHANGE 127,256,661 117,917,803 9,338,858 127,298,000 118,248,550 9,049,450 $0.587 $0 .562 $0 .025 $0.589 $0 .586 $0 .003 $0.508 $0 .489 $0 .019 $0.587 $0 .561 $0 .026 $0.589 $0 .584 $0 .005 $0.508 $0 .487 $0 .021 70.2% 71 .3% (1 .1)% 70.0% 68 .4% 1 .6% 81.2% 82 .0% (0 .8)% (1) 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. 71 ALLIED 2020 ANNUAL REPORT The following table reconciles Allied’s net income to FFO, FFO excluding condominium related items and prepayment costs and AFFO excluding condominium related items and prepayment costs for the year ended December 31, 2020, and December 31, 2019 . Net income and comprehensive income $500,729 $629,223 $(128,494) Adjustment to fair value of investment properties (280,590) (450,490) 169,900 YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 CHANGE Adjustment to fair value of derivative instruments Incremental leasing costs Amortization of improvement allowances Adjustments relating to joint venture: Adjustment to fair value on investment properties Amortization of improvement allowances Interest capitalized (1) FFO Condominium revenue Condominium cost of sales Condominium marketing costs Prepayment costs FFO excluding condominium related items and prepayment costs Amortization of straight-line rents Regular leasing expenditures Regular maintenance capital expenditures Incremental leasing (related to regular leasing expenditures) Recoverable maintenance capital expenditures Adjustment relating to joint venture: 17,996 7,069 32,193 4,296 329 2,710 6,109 7,530 30,796 26,152 201 1,562 $284,732 $251,083 (178) — 1,230 — (45,341) 43,342 4,214 6,018 11,887 (461) 1,397 (21,856) 128 1,148 $33,649 45,163 (43,342) (2,984) (6,018) $285,784 $259,316 $26,468 (7,856) (11,016) (5,908) (4,950) (5,775) (5,894) (18,353) (3,656) (5,271) (4,953) (1,962) 7,337 (2,252) 321 (822) Amortization of straight-line rents (2,276) (1,343) (933) AFFO excluding condominium related items and prepayment costs $248,003 $219,846 $28,157 Weighted average number of Units Basic Diluted Per Unit - basic FFO 124,427,715 112,443,006 11,984,709 124,536,634 112,731,050 11,805,584 $2.288 $2 .233 $0 .055 FFO excluding condominium related items and prepayment costs $2.297 $2 .306 $(0 .009) 72 ALLIED 2020 ANNUAL REPORT AFFO excluding condominium related items and prepayment costs $1.993 $1 .955 $0 .038 YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 CHANGE Per Unit - diluted FFO FFO excluding condominium related items and prepayment costs AFFO excluding condominium related items and prepayment costs Pay-out Ratio FFO FFO excluding condominium related items and prepayment costs AFFO excluding condominium related items and prepayment costs $2.286 $2 .227 $0 .059 $2.295 $2 .300 $(0 .005) $1.991 $1 .950 $0 .041 72.1% 71 . 8% 71.9% 69 .5% 82.8% 82 . 0% 0 .3% 2 .4% 0 .8% (1) 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. CAPITAL EXPENDITURES Our portfolio requires ongoing maintenance capital expenditures and leasing expenditures . Leasing expenditures include the cost of in-suite or base-building improvements made in connection with the leasing of vacant space or the renewal or replacement of users occupying space covered by maturing leases, as well as improvement allowances and commissions paid in connection with the leasing of vacant space and the renewal or replacement of users occupying space covered by maturing leases . For the three months ended December 31, 2020, Allied incurred (i) $3,849 in regular leasing expenditures or $9 .44 per leased square foot, (ii) $1,939 in regular maintenance capital expenditures and (iii) $1,741 of recoverable maintenance capital expenditures . For the year ended December 31, 2020, Allied incurred (i) $11,016 in regular leasing expenditures or $8 .70 per leased square foot, (ii) $5,908 in regular maintenance capital expenditures and (iii) $5,775 of recoverable maintenance capital expenditures . For the three months and year ended December 31, 2020, Allied invested $108,570 and $348,737 of revenue enhancing capital, respectively, into the rental and development portfolio to enhance its income-producing capability and in ongoing development activity . 73 ALLIED 2020 ANNUAL REPORT THREE MONTHS ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 Regular leasing expenditures Regular maintenance capital expenditures Recoverable maintenance capital expenditures $3,849 $1,939 $1,741 $4,168 $1,852 $2,616 $11,016 $5,908 $5,775 $18,353 $3,656 $4,953 Revenue-enhancing capital and development costs $108,570 $84,784 $348,737 $297,046 EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (“EBITDA”) EBITDA is a non-IFRS measure that is comprised of earnings before interest expense, income taxes, depreciation expense and amortization expense . Adjusted EBITDA, as defined by Allied, is a non-IFRS measure that is comprised of net earnings before interest expense, income taxes, depreciation expense and amortization expense, gains and losses on disposal of investment properties and the fair value changes associated with investment properties and financial instruments . EBITDA is a metric that can be used to help determine Allied’s ability to service its debt, finance capital expenditures and provide distributions to its Unitholders . Additionally, Adjusted EBITDA removes the non- cash impact of the fair value changes and gains and losses on investment property dispositions . The ratio of Net Debt to Adjusted EBITDA is included and calculated each period to provide information on the level of Allied’s debt versus Allied’s ability to service that debt . Adjusted EBITDA is used as part of this calculation as the fair value changes and gains and losses on investment property dispositions do not impact cash flow, which is a critical part of the measure . The following table reconciles Allied’s net income and comprehensive income to Adjusted EBITDA for the three months and year ended December 31, 2020, and December 31, 2019 . THREE MONTHS ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 DECEMBER 31, 2020 DECEMBER 31, 2019 Net income and comprehensive income for the period $83,842 $264,960 $500,729 $629,223 Interest expense Amortization of other assets Amortization of improvement allowances 17,774 341 8,072 19,293 365 7,935 72,603 1,467 32,522 66,844 1,456 30,997 Fair value gain on investment properties (14,809) (201,151) (276,294) (424,338) Fair value (gain) loss on derivative instruments (4,722) (8,098) 17,996 6,109 Adjusted EBITDA $90,498 $83,304 $349,023 $310,291 74 ALLIED 2020 ANNUAL REPORTSection VI —Historical Performance The following sets out summary information and financial results, on an IFRS basis, for the eight most recently completed fiscal quarters . 75 ALLIED 2020 ANNUAL REPORTQ4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 (1) Q3 2019 (1) Q2 2019 Q1 2019 Rental revenue from investment properties $145,173 $139,673 $136,504 $138,977 $134,306 $127,867 $117,449 $116,486 Condominium revenue — 65 113 — 30,600 14,741 — — Property operating costs Condominium cost of sales $(62,421) $(60,647) $(59,204) $(59,218) $(59,174) $(54,284) $(47,857) $(49,432) — — — — (29,022) (14,320) — — Operating income $82,752 $79,091 $77,413 $79,759 $76,710 $74,004 $69,592 $67,054 Net income and comprehensive income Weighted average Units (diluted) $83,842 $69,013 $92,961 $254,913 $264,960 $121,191 $99,895 $143,177 127,298,000 124,390,540 123,207,219 123,255,260 118,248,550 116,563,480 110,368,003 105,546,682 Distributions $52,493 $51,354 $50,784 $50,746 $47,267 $46,393 $44,484 $42,140 FFO $74,742 $70,276 $68,624 $71,089 $66,304 $63,674 $62,557 $58,548 FFO per Unit (diluted) $0 .587 $0 .565 $0 .557 $0 .577 $0 .561 $0 .546 $0 .567 $0 .555 FFO pay-out ratio 70 .2% 73 .1% 74 .0% 71 .4% 71 .3% 72 .9% 71 .1% 72 .0% FFO excluding condominium related items and prepayments costs FFO per Unit (diluted) excluding condominium related items and prepayment costs FFO pay-out ratio excluding condominium related items and prepayment costs AFFO excluding condominium related items and prepayments costs AFFO per Unit (diluted) excluding condominium related items and prepayment costs AFFO pay-out ratio excluding condominium related items and prepayment costs 76 $74,969 $70,486 $68,652 $71,677 $69,085 $66,994 $63,845 $59,394 $0 .589 $0 .567 $0 .557 $0 .582 $0 .584 $0 .575 $0 .578 $0 .563 70 .0% 72 .9% 74 .0% 70 .8% 68 .4% 69 .2% 69 .7% 70 .9% $64,623 $59,796 $61,216 $62,367 $57,645 $58,044 $53,127 $51,033 $0 .508 $0 .481 $0 .497 $0 .506 $0 .487 $0 .498 $0 .481 $0 .484 81 .2% 85 .9% 83 .0% 81 .4% 82 .0% 79 .9% 83 .7% 82 .6% ALLIED 2020 ANNUAL REPORTQ4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019 (1) Q3 2019 (1) Q2 2019 Q1 2019 Net debt as a multiple of annualized adjusted EBITDA Total indebtedness ratio 7 .4x 7 .2x 7 .6x 6 .8x 5 .8x 6 .7x 5 .6x 6 .2x 29 .2% 28 .8% 29 .3% 27 .2% 26 .1% 28 .1% 25 .8% 27 .0% Total rental GLA 13,991 13,930 14,097 13,632 12,948 12,878 11,507 11,422 Leased rental GLA 12,947 12,990 13,343 12,929 12,278 12,234 11,080 11,010 Leased area % 92 .5% 93 .3% 94 .7% 94 .8% 94 .8% 95 .0% 96 .3% 96 .4% (1) In the third and fourth quarters of 2019, Allied incurred $2,563 and $3,455, respectively, of prepayment costs in connection with the favourable refinancing of unsecured debentures and first mortgages, which was partially offset by incremental condominium profits of $1,999 in the year. Factors that cause variation from quarter to quarter include, but are not limited to, occupancy, cost of capital, same asset NOI, acquisition activity, leasing expenditures and maintenance capital expenditures . 77 ALLIED 2020 ANNUAL REPORTSection VII —Accounting Estimates and Assumptions CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The preparation of the consolidated financial statements requires management to make judgments and estimates in applying Allied’s accounting policies that affect the reported amounts and disclosures made in the consolidated financial statements and accompanying notes . Critical accounting estimates and assumptions are discussed in Allied’s audited consolidated financial statements for the year ended December 31, 2020, and the notes contained therein . SIGNIFICANT ACCOUNTING POLICIES Accounting policies and any respective changes are discussed in Allied’s audited consolidated financial statements for the year ended December 31, 2020, and the notes contained therein . The future accounting policy changes as proposed by the International Accounting Standards Board (the “IASB”) are discussed in Allied’s consolidated financial statements for the year ended December 31, 2020, and notes contained therein . 78 ALLIED 2020 ANNUAL REPORTSection VIII —Disclosure Controls and Internal Controls Management maintains appropriate information systems, procedures and controls to provide reasonable assurance that information that is publicly disclosed is complete, reliable and timely . The Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) evaluated, or caused to be evaluated under their direct supervision, the design and operating effectiveness of disclosure controls and procedures (as defined in National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) at December 31, 2020, and based on that evaluation, have concluded that such disclosure controls and procedures were appropriately designed and were operating effectively . Management is responsible for establishing adequate internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS . The CEO and CFO evaluated, or caused to be evaluated under their direct supervision, the effectiveness of Allied’s internal controls over financial reporting (as defined in National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) at December 31, 2020, using the COSO Internal Control - Independent Framework (2013), published by the Committee of Sponsoring Organizations of the Treadway Commission . Based on that assessment, the CEO and the CFO determined that internal controls over financial reporting were appropriately designed and were operating effectively . No changes were made in the design of internal controls over financial reporting during the period ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, Allied’s internal controls over financial reporting . 79 ALLIED 2020 ANNUAL REPORTIt should be noted that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met . Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance of control issues, including whether instances of fraud, if any, have been detected . These inherent limitations include, among other items: (i) that Management’s assumptions and judgments could ultimately prove to be incorrect under varying conditions and circumstances; (ii) the impact of any undetected errors; and (iii) that controls may be circumvented by the unauthorized acts of individuals, by collusion of two or more people, or by Management override . 80 ALLIED 2020 ANNUAL REPORTSection IX —Risks and Uncertainties There are certain risk factors inherent in the investment and ownership of real estate . Real estate investments are capital intensive, and success from real estate investments depends upon maintaining occupancy levels and rental income flows to generate acceptable returns . These success factors are dependent on general economic conditions and local real estate markets, demand for leased premises and competition from other available properties . Allied’s portfolio is focused on a particular asset class in seven metropolitan real estate markets in Canada . This focus enables Management to capitalize on certain economies of scale and competitive advantages that would not otherwise be available . 81 ALLIED 2020 ANNUAL REPORTCOVID-19 RISK The ongoing COVID-19 pandemic, and government restrictive measures intended to contain or manage its impact, could adversely affect Allied’s business, financial condition and results of operations . The duration and impact of the COVID-19 pandemic on Allied remains unknown at this time . As such, it is not possible to reliably estimate the length and severity of COVID-19-related impacts on the financial results and operations of Allied . The global pandemic could have adverse consequences on Allied including, but not limited to, business continuity interruptions, disruptions and costs of development activities, unfavorable market conditions, and threats to the health and safety of employees . Allied’s users may also face business challenges as a result of the pandemic that may adversely affect their business and their ability to pay rent as required under the leases . Allied has abated rent under the CECRA program and has afforded rent deferrals to certain users . There can be no assurance that deferred rents will be collected in accordance with deferral arrangements or at all . Any inability to collect rents in a timely manner or at all could adversely affect Allied’s business and financial results . Allied is a party to various joint arrangements and partnerships with different entities . If these joint arrangements or partnerships do not perform as expected or default on financial obligations due in whole or in part to factors related to COVID-19, Allied has an associated risk . Allied has mitigated these risks by negotiating contractual rights upon default, by entering into agreements with financially stable partners and by working with partners who have a successful record of completing development projects . Certain of the materials and products used in the development of Allied’s Properties Under Development are sourced from third-party suppliers and manufacturers in China and elsewhere . The COVID-19 pandemic has resulted in the extended shutdown of certain businesses across the world which may in turn result in disruptions or delays to the supply of such materials and products including disruptions from the temporary closure of third-party supplier and manufacturer facilities and interruptions in product supply . Any disruption of Allied’s suppliers and their contract manufacturers may have an impact on the planned development of Allied’s Properties Under Development and related timelines . The duration of business disruptions and related financial impact of COVID-19 cannot be reasonably estimated at this time nor can Allied predict how consumers and users will respond while restrictive measures continue or thereafter . In response to the pandemic, Allied has developed and implemented a plan to monitor and mitigate risks posed to its employees, users and business . Allied’s plan is guided by local public health authorities and governments in each of its markets . Allied continues to closely monitor business operations and may take further actions that respond to directives of governments and public health authorities or that are in the best interests of employees, users, suppliers or other stakeholders, as necessary . However, no such plan can eliminate the risks associated with events of this magnitude, and much of the impacts will be the result of matters beyond Allied’s control . There can be no assurance that the measures undertaken to date will eliminate the risk of disruption to Allied’s business operations and development activity, and there can be no assurance that Allied’s users will be able to maintain their business operations and continue to be able to pay rent in full, on a timely basis or at all . Such events could materially adversely affect Allied’s operations, reputation and financial condition, including the fair value of Allied’s properties . 82 ALLIED 2020 ANNUAL REPORTThe global pandemic has caused an economic slowdown and increased volatility in financial markets, which has negatively impacted the market price for the equity securities of Allied . Governments and central banks have responded with monetary and fiscal interventions intended to stabilize economic conditions . However, it is not currently known how these interventions will impact debt and equity markets or the economy generally . Although the impact of COVID-19, and its duration, on the global economy remains uncertain, disruptions caused by COVID-19 may materially adversely affect Allied’s users, the debt and equity markets and Allied’s operations and financial performance . It could also potentially affect Allied’s current credit ratings, total return and distributions . Even after the COVID-19 pandemic has subsided, Allied may experience material adverse impacts to its business as a result of the global economy, including any related recession, as well as lingering effects on Allied’s employees, suppliers, third-party service providers and/or users . FINANCING AND INTEREST RATE RISK Allied is subject to risk associated with debt financing . The availability of debt to re-finance existing and maturing loans and the cost of servicing such debt will influence Allied’s success . In order to minimize risk associated with debt financing, Allied strives to re-finance maturing loans with long-term fixed-rate debt and to stagger the maturities over time . Allied’s current debt-maturity schedule is set out below: 83 ALLIED 2020 ANNUAL REPORTInterest rates on total debt are between 3 .11% and 4 .80% with a weighted average interest rate of 3 .60% . The weighted average term of our debt is 6 .15 years . The aforementioned excludes the construction loans and Unsecured Facilities, refer to note 11(b) and (c) of the consolidated financial statements for further details . Allied is additionally subject to risk associated with equity financing . The ability to access the equity capital markets at appropriate points in time and at an acceptable cost will influence Allied’s success . In order to minimize the risk associated with equity financing, Allied engages in extensive investor relations activity with retail and institutional investors globally and strives to fix the cost of equity in conjunction with a clear use of proceeds . CREDIT RISK Allied is subject to credit risk arising from the possibility that users may not be able to fulfill their lease obligations . Allied strives to mitigate this risk by maintaining a diversified user-mix and limiting exposure to any single user . Allied’s exposure to top 10 users is 19 .3% of gross revenue and the credit quality of our top 10 users continues to improve . As Allied has invested in mortgages to facilitate acquisitions, further credit risks arise in the event that borrowers default on the repayment of their mortgages to Allied . Allied’s mortgage investments will typically be subordinate to prior ranking mortgage or charges . Not all of Allied’s financing activities will translate into acquisitions . As at December 31, 2020, Allied had $320,526 in loans receivable, the majority of which is loaned to affiliates of a single private company . In the event of a large commercial real estate market correction, the fair market value of an underlying property may be unable to support the mortgage investment . Allied mitigates this risk by obtaining corporate guarantees and/or registered mortgage charges . 84 ALLIED 2020 ANNUAL REPORTLEASE ROLL-OVER RISK Allied is subject to lease roll-over risk . Lease roll-over risk arises from the possibility that Allied may experience difficulty renewing or replacing users occupying space covered by leases that mature . Allied strives to stagger its lease maturity schedule so that it is not faced with a disproportionately large level of lease maturities in a given year . Allied’s current lease maturity schedule is set out below: In evaluating lease roll-over risk, it is informative to determine Allied’s sensitivity to a decline in occupancy . For every full-year decline of 100 basis points in occupancy at its average rental rate per square foot, Allied’s annual AFFO excluding condominium related items and prepayment costs would decline by approximately $5,628 (approximately $0 .045 per Unit) . The decline in AFFO excluding condominium related items and prepayment costs per Unit would be more pronounced if the decline in occupancy involved space leased above the average rental rate per square foot and less pronounced if the decline in occupancy involved space leased below the average rental rate per square foot . 85 ALLIED 2020 ANNUAL REPORTENVIRONMENTAL AND CLIMATE CHANGE RISK As an owner of real estate, Allied is subject to various federal, provincial and municipal laws relating to environmental matters . Such laws provide that Allied could be liable for the costs of removal of certain hazardous substances and remediation of certain hazardous locations . The failure to remove or remediate such substances or locations, if any, could adversely affect Allied’s ability to sell such real estate or to borrow using such real estate as collateral and could potentially also result in claims against Allied . Allied is not aware of any material non-compliance with environmental laws at any of the properties . Allied is also not aware of any pending or threatened investigations or actions by environmental regulatory authorities in connection with any of the properties or any pending or threatened claims relating to environmental conditions at the properties . Allied will make the necessary capital and operating expenditures to ensure compliance with environmental laws and regulations . Although there can be no assurances, Allied does not believe that costs relating to environmental matters will have a material adverse effect on Allied’s business, financial condition or results of operation . However, environmental laws and regulations may change and Allied may become subject to more stringent environmental laws and regulations in the future . Compliance with more stringent environmental laws and regulations could have an adverse effect on Allied’s business, financial condition or results of operation . It is Allied’s operating policy to obtain a Phase I environmental assessment conducted by an independent and experienced environmental consultant prior to acquiring a property . Phase I environmental assessments have been performed in respect of all properties . Natural disasters and severe weather such as floods, blizzards and rising temperatures may result in damage to the properties . The extent of Allied’s casualty losses and loss in operating income in connection with such events is a function of the severity of the event and the total amount of exposure in the affected area . Allied is also exposed to risks associated with inclement winter weather, including increased need for maintenance and repair of its buildings . In addition, climate change, to the extent it causes changes in weather patterns, could have effects on Allied’s business by increasing the cost of property insurance, and/or energy at the properties . As a result, the consequences of natural disasters, severe weather and climate change could increase Allied’s costs and reduce Allied’s cash flow . DEVELOPMENT RISK As an owner of Properties Under Development, Allied is subject to development risks, such as construction delays, cost over-runs and the failure of users to take occupancy and pay rent in accordance with lease arrangements . In connection with all Properties Under Development, Allied incurs development costs prior to (and in anticipation of ) achieving a stabilized level of rental revenue . In the case of the development of ancillary or surplus land, these risks are managed in most cases by not commencing construction until a satisfactory level of pre-leasing is achieved . Overall, these risks are managed through Allied’s Declaration, which states that the cost of development cannot exceed 15% of GBV . 86 ALLIED 2020 ANNUAL REPORTTAXATION RISK On June 22, 2007, specified investment flow through trusts or partnerships (“SIFT”) rules were introduced and changed the manner in which certain trusts are taxed . Certain distributions from a SIFT would not be deductible in computing the SIFT’s taxable income and therefore the distributions would be subject to trust entity level tax, at the general tax rate applicable to Canadian corporations . Trusts that meet the REIT exemption are not subject to SIFT rules . The determination as to whether Allied qualifies for the REIT exemption in a particular taxation year can only be made with certainty at the end of that taxation year . Asset tests need to be met at all times in the taxation year and revenue tests need to be met for the taxation year . While there is uncertainty surrounding the interpretation of the relevant provisions of the REIT exemption and application of SIFT rules, Allied expects that it will qualify for the REIT exemption . JOINT ARRANGEMENT RISK Allied has entered into various joint arrangements and partnerships with different entities . If these joint arrangements or partnerships do not perform as expected or default on financial obligations, Allied has an associated risk . Allied reduces this risk by seeking to negotiate contractual rights upon default, by entering into agreements with financially stable partners and by working with partners who have a successful record of completing development projects . CYBERSECURITY RISK The efficient operation of Allied’s business is dependent on computer hardware and software systems . Information systems are vulnerable to cybersecurity incidents . A cybersecurity incident is considered to be any material adverse event that threatens the confidentiality, integrity or availability of Allied’s information resources . A cybersecurity incident is an intentional attack or an unintentional event including, but not limited to, malicious software, attempts to gain unauthorized access to data or information systems, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data . Allied’s primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to its reputation, damage to its business relationships with users, the disclosure of confidential information including personally identifiable information, potential liability to third parties, loss of revenue, additional regulatory scrutiny and fines, as well as litigation and other costs and expenses . Allied takes data privacy and protection seriously and has implemented processes, procedures and controls to help mitigate these risks . Access to personal data is controlled through physical security and IT security mechanisms . For information stored with or processed by third parties, Allied undertakes due diligence prior to working with them and uses contractual means to ensure compliance to standards set by Allied . Additionally, Allied monitors and assesses risks surrounding collection, usage, storage, protection, and retention/destruction practices of personal data . These measures, as well as its increased awareness of a risk of a cyber incident, do not guarantee that its financial results will not be negatively impacted by such an incident . 87 ALLIED 2020 ANNUAL REPORTREAL ESTATE RISK Allied is subject to the conventional risks associated with the ownership of real estate . Allied strives to mitigate these risks by remaining fully informed on best practices, trends and legislative and demographic changes in the commercial real estate markets within which we operate . Allied additionally strives to mitigate these risks by focusing intently on execution . 88 ALLIED 2020 ANNUAL REPORTSection X —Property Table Urban Workspace DECEMBER 31, 2020 PROPERTIES Office GLA Retail GLA Urban Data Centres GLA Total GLA % Total GLA Total Vacant & Unleased Total Leased Leased % 28 Atlantic 32 Atlantic 47 Jefferson 64 Jefferson 905 King W College & Manning - 559-563 College (1) College & Palmerston - 491 College (1) The Castle - 135 Liberty The Castle - 41 Fraser 10,065 50,434 6,884 78,820 — — — — 51,262 1,400 24,627 2,634 8,863 3,717 55,152 14,857 — — The Castle - 47 Fraser 7,468 3,480 The Castle - 49 Fraser The Castle - 53 Fraser 17,472 78,797 — — The Castle - 8 Pardee — 2,681 King West 404,701 13,912 141 Bathurst 183 Bathurst 241 Spadina 10,101 — 24,136 5,643 24,833 6,046 379 Adelaide W 38,560 3,045 383 Adelaide W 387 Adelaide W 4,515 6,500 — — 420 Wellington W 31,221 3,163 — — — — — — — — — — — — — — — — — — — — — 10,065 50,434 6,884 78,820 52,662 27,261 12,580 55,152 14,857 10,948 17,472 78,797 2,681 — — — — — — — — — 10,065 100 .0% 50,434 100 .0% 6,884 100 .0% 78,820 100 .0% 52,662 100 .0% 27,261 100 .0% 12,580 100 .0% 55,152 100 .0% 14,857 100 .0% 3,706 7,242 66 .1% 13,979 3,493 20 .0% — — 78,797 100 .0% 2,681 100 .0% 418,613 3.0% 17,685 400,928 95.8% 10,101 29,779 30,879 41,605 4,515 6,500 34,384 — 10,101 100 .0% 7,874 21,905 73 .6% — 30,879 100 .0% 7,409 34,196 82 .2% 2,382 2,133 47 .2% — — 6,500 100 .0% 34,384 100 .0% 89 ALLIED 2020 ANNUAL REPORT Urban Workspace DECEMBER 31, 2020 PROPERTIES Office GLA Retail GLA Urban Data Centres GLA Total GLA % Total GLA Total Vacant & Unleased Total Leased Leased % 425 Adelaide W 72,404 2,903 425-439 King W 66,486 23,497 441-443 King W 6,377 2,904 445-455 King W 31,523 16,342 460 King W 461 King W 468 King W 469 King W 10,144 4,285 38,689 35,833 63,121 — 61,618 12,273 478 King W (2) — 4,351 485 King W 500 King W 522 King W 544 King W 12,339 — 44,130 21,598 28,850 21,863 16,340 — 552-560 King W 6,784 17,395 555 Richmond W 296,172 1,850 579 Richmond W 662 King W 668 King W 26,818 33,731 — — — 6,934 80-82 Spadina 60,004 16,009 96 Spadina 79,456 8,815 King Portland Centre - 602-606 King W (1) King Portland Centre - 620 King W (1) King Portland Centre - 642 King W (1) 19,208 6,364 127,658 9,170 7,382 5,365 King West Central 1,249,100 235,648 116 Simcoe 117 & 119 John 125 John 179 John 180 John 185 Spadina 200 Adelaide W 208-210 Adelaide W 15,461 — — 5,800 2,171 798 70,923 45,631 55,213 26,614 11,477 — — — — — 217-225 Richmond W 30,205 22,587 257 Adelaide W 42,763 — 90 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 75,307 89,983 9,281 47,865 14,429 74,522 63,121 73,891 4,351 12,339 65,728 50,713 16,340 24,179 3,854 71,453 94 .9% — 89,983 100 .0% 3,156 6,125 66 .0% — — — — — — — — — — — 47,865 100 .0% 14,429 100 .0% 74,522 100 .0% 63,121 100 .0% 73,891 100 .0% 4,351 100 .0% 12,339 100 .0% 65,728 100 .0% 50,713 100 .0% 16,340 100 .0% 24,179 100 .0% 298,022 6,816 291,206 97 .7% 26,818 33,731 6,934 76,013 88,271 25,572 3,459 23,359 87 .1% — — — 33,731 100 .0% 6,934 100 .0% 76,013 100 .0% 2,959 85,312 96 .6% — 25,572 100 .0% 136,828 — 136,828 100 .0% 12,747 375 12,372 97 .1% 1,484,748 10.6% 38,284 1,446,464 97.4% 15,461 5,800 2,969 70,923 45,631 55,213 26,614 11,477 52,792 42,763 — 15,461 100 .0% 5,800 — —% 798 2,171 73 .1% 3,863 67,060 94 .6% — — — 45,631 100 .0% 55,213 100 .0% 26,614 100 .0% 1,854 9,623 83 .8% 7,985 44,807 84 .9% — 42,763 100 .0% ALLIED 2020 ANNUAL REPORT Urban Workspace DECEMBER 31, 2020 PROPERTIES Office GLA Retail GLA Urban Data Centres GLA Total GLA % Total GLA Total Vacant & Unleased Total Leased Leased % 312 Adelaide W 62,420 5,584 331-333 Adelaide W 19,048 3,725 358-360 Adelaide W 50,786 — 388 King W 82 Peter 99 Spadina QRC West - 134 Peter, Phase I QRC West - 364 Richmond W, Phase I Union Centre 20,275 19,040 40,069 6,846 51,058 — 298,782 8,213 38,279 41,787 — — Entertainment District 922,962 72,593 193 Yonge Downtown 106 Front E 184 Front E 34,349 16,898 34,349 16,898 24,125 10,554 84,115 4,829 35-39 Front E 34,653 13,822 36-40 Wellington E 15,494 9,993 41-45 Front E 20,958 14,239 45-55 Colborne 30,622 13,158 47 Front E 49 Front E 9,068 4,337 9,482 10,435 50 Wellington E 22,112 12,454 54 Esplanade 56 Esplanade — 9,038 59,270 22,137 60 Adelaide E 105,571 4,608 70 Esplanade 19,590 6,109 St. Lawrence Market 435,060 135,713 137 George 139 George 1,770 1,200 — — 204-214 King E 115,426 13,837 230 Richmond E 73,542 — 252-264 Adelaide E 44,536 2,582 489 Queen E 70 Richmond E 31,737 34,469 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 68,004 22,773 50,786 39,315 46,915 51,058 2,294 65,710 96 .6% — 22,773 100 .0% 8,575 42,211 83 .1% 1,601 37,714 95 .9% — — 46,915 100 .0% 51,058 100 .0% 306,995 — 306,995 100 .0% 38,279 41,787 — 38,279 100 .0% 4,952 36,835 88 .1% 995,555 7.1% 37,722 957,833 96.2% 51,247 51,247 0.4% — — 51,247 100 .0% 51,247 100.0% 34,679 88,944 48,475 25,487 35,197 43,780 13,405 19,917 34,566 9,038 81,407 110,179 25,699 3,397 31,282 90 .2% — 88,944 100 .0% 8,329 40,146 82 .8% — 25,487 100 .0% 6,991 28,206 80 .1% 5,571 38,209 87 .3% — — — — 13,405 100 .0% 19,917 100 .0% 34,566 100 .0% 9,038 100 .0% 5,461 75,946 93 .3% 15,896 94,283 85 .6% — 25,699 100 .0% 570,773 4.1% 45,645 525,128 92.0% 1,770 1,200 129,263 73,542 47,118 31,737 34,469 1,770 1,200 — — — — —% —% 129,263 100 .0% 73,542 100 .0% 4,480 42,638 90 .5% 6,927 24,810 78 .2% — 34,469 100 .0% 91 ALLIED 2020 ANNUAL REPORT Urban Workspace DECEMBER 31, 2020 PROPERTIES Office GLA Retail GLA Urban Data Centres GLA Total GLA % Total GLA Total Vacant & Unleased Total Leased Leased % Dominion Square - 468 Queen N Dominion Square - 468 Queen S Dominion Square - 478-496 Queen 30,399 3,523 34,313 9,091 6,552 33,526 QRC East - 111 Queen E 190,697 20,733 QRC South - 100 Lombard 44,671 — Queen Richmond 609,312 83,292 — — — — — — 33,922 43,404 40,078 211,430 44,671 — 33,922 100 .0% — 43,404 100 .0% — 40,078 100 .0% 8,393 203,037 96 .0% 6,610 38,061 85 .2% 692,604 5.0% 29,380 663,224 95.8% Toronto 3,655,484 558,056 — 4,213,540 30.1% 168,716 4,044,824 96.0% 189-195 Joseph 25 Breithaupt (3) 51 Breithaupt (3) 72 Victoria The Tannery - 151 Charles W 26,462 46,845 66,355 89,840 — — — — 306,813 25,810 Kitchener 536,315 25,810 — — — — — — 26,462 46,845 66,355 89,840 — — — 26,462 100 .0% 46,845 100 .0% 66,355 100 .0% 2,056 87,784 97 .7% 332,623 16,335 316,288 95 .1% 562,125 4.0% 18,391 543,734 96.7% Toronto & Kitchener 4,191,799 583,866 — 4,775,665 34.1% 187,107 4,588,558 96.1% The Chambers - 40 Elgin 195,994 5,500 The Chambers - 46 Elgin 28,218 1,756 Ottawa 224,212 7,256 3510 Saint-Laurent 85,646 15,022 3530-3540 Saint-Laurent 47,068 4,008 3575 Saint-Laurent 165,501 19,276 425 Viger 313,000 4,500 4396-4410 Saint-Laurent 41,799 14,147 4446 Saint-Laurent 72,815 7,251 451-481 Saint-Catherine W 20,879 9,984 480 Saint-Laurent 50,249 6,323 5445 de Gaspé 483,685 896 5455 de Gaspé 466,816 22,562 5505 Saint-Laurent 244,685 2,221 6300 Parc 181,180 3,736 645 Wellington 129,017 8,115 700 de la Gauchetière W 954,114 32,371 92 — — — — — — — — — — — — — — — — — 201,494 29,974 — 201,494 100 .0% 2,430 27,544 91 .9% 231,468 1.7% 2,430 229,038 99.0% 100,668 51,076 184,777 317,500 55,946 80,066 30,863 56,572 484,581 489,378 246,906 184,916 137,132 986,485 2,181 98,487 97 .8% 4,780 46,296 90 .6% 13,971 170,806 92 .4% 16,915 300,585 94 .7% 3,322 52,624 94 .1% 7,849 72,217 90 .2% 2,350 28,513 92 .4% 2,649 53,923 95 .3% 6,806 477,775 98 .6% 2,514 486,864 99 .5% — 246,906 100 .0% 19,093 165,823 89 .7% 6,811 130,321 95 .0% 140,068 846,417 85 .8% ALLIED 2020 ANNUAL REPORT Urban Workspace DECEMBER 31, 2020 PROPERTIES Office GLA Retail GLA Urban Data Centres GLA Total GLA % Total GLA Total Vacant & Unleased Total Leased Leased % 740 Saint-Maurice 67,692 — 747 Square-Victoria 530,950 37,752 8 Place du Commerce 48,240 11,633 85 Saint-Paul W 79,395 — Cité Multimédia - 111 Duke 358,913 12,571 Cité Multimédia - 50 Queen 27,071 Cité Multimédia - 700 Wellington 135,232 — — Cité Multimédia - 75 Queen 253,311 2,513 Cité Multimédia - 80 Queen 65,044 4,203 Cité Multimédia - 87 Prince 100,116 1,040 El Pro Lofts - 644 Courcelle 145,355 8,451 Le Nordelec - 1301-1303 Montmorency Le Nordelec - 1655 Richardson Le Nordelec - 1751 Richardson & 1700 Saint-Patrick 7,550 32,893 — — 787,035 42,401 RCA Building - 1001 Lenoir 308,796 35,727 Montréal 6,204,047 306,703 — — — — — — — — — — — — — — — — 67,692 568,702 59,873 79,395 371,484 27,071 135,232 255,824 69,247 101,156 153,806 7,550 32,893 829,436 344,523 9,559 58,133 85 .9% 65,837 502,865 88 .4% — 59,873 100 .0% 27,526 51,869 65 .3% 4,758 366,726 98 .7% 1,255 25,816 95 .4% 12,005 123,227 91 .1% 3,157 252,667 98 .8% 4,848 64,399 93 .0% 1,040 100,116 99 .0% 37,028 116,778 75 .9% — — 7,550 100 .0% 32,893 100 .0% 54,036 775,400 93 .5% 87,887 256,636 74 .5% 6,510,750 46.5% 538,245 5,972,505 91.7% Montréal & Ottawa 6,428,259 313,959 — 6,742,218 48.2% 540,675 6,201,543 92.0% 613 11th SW 617 11th SW — 4,288 3,230 6,306 Alberta Block - 805 1st SW 9,094 22,540 Alberta Hotel - 808 1st SW 28,036 20,424 Atrium on Eleventh - 625 11th SE Biscuit Block - 438 11th SE Burns Building - 237 8th SE Cooper Block - 809 10th SW Customs House - 134 11th SE Demcor Condo - 221 10th SE Demcor Tower - 239 10th SE 34,705 1,410 51,298 — 66,769 7,423 35,256 73,352 14,253 25,337 — — — — — — — — — — — — — — — 4,288 9,536 31,634 48,460 — 4,288 100 .0% 3,088 6,448 67 .6% 3,939 27,695 87 .5% 10,563 37,897 78 .2% 36,115 15,316 20,799 57 .6% 51,298 74,192 — 51,298 100 .0% 1,414 72,778 98 .1% 35,256 5,278 29,978 85 .0% 73,352 5,652 67,700 92 .3% 14,253 14,253 — —% 25,337 — 25,337 100 .0% 93 ALLIED 2020 ANNUAL REPORT Urban Workspace DECEMBER 31, 2020 PROPERTIES Office GLA Retail GLA Urban Data Centres GLA Total GLA % Total GLA Total Vacant & Unleased Total Leased Leased % Five Roses Building - 731-739 10th SW (4) Glenbow - 802 11th SW (4) — — 10,404 3,660 Glenbow - 822 11th SW (4) 4,848 3,919 Glenbow Annex - 816 11th SW (4) Glenbow Cornerblock - 838 11th SW (4) Glenbow Ellison - 812 11th SW (4) Kipling Square - 601 10th SW — 4,511 5,499 5,606 6,672 48,502 — — Leeson Lineham Building - 209 8th SW 27,821 5,420 LocalMotive - 1240 20th SE 57,536 Odd Fellows - 100 6th SW 33,474 Pilkington Building - 402 11th SE 40,253 — — — Roberts Block - 603-605 11th SW Sherwin Block - 738 11th SW (4) Telephone Building - 119 6th SW TELUS Sky - 685 Centre SW (5) Vintage Towers - 322-326 11th SW 23,645 27,499 10,845 4,895 63,063 — 143,000 5,000 190,219 20,418 Woodstone Building - 1207-1215 13th SE 32,423 Young Block - 129 8th SW 7,734 — — Calgary 1,036,864 153,723 Revillon Building - 10310 102nd NW Edmonton 129,505 129,505 — — 1040 Hamilton 36,276 9,162 1050 Homer 1220 Homer 1286 Homer 151-155 West Hastings 28,483 14,215 21,708 25,637 38,512 — — — 2233 Columbia 21,591 6,852 94 — — — — — — — — — — — — — — — — — — — — — — — — — — — 10,404 3,660 8,767 4,511 11,105 6,672 — — 10,404 100 .0% 3,660 100 .0% 5,563 3,204 36 .5% — 4,511 100 .0% 573 10,532 94 .8% — 6,672 100 .0% 48,502 10,033 38,469 79 .3% 33,241 57,536 33,474 — — — 33,241 100 .0% 57,536 100 .0% 33,474 100 .0% 40,253 5,898 34,355 85 .3% 51,144 15,740 63,063 13,595 37,549 73 .4% — — 15,740 100 .0% 63,063 100 .0% 148,000 47,392 100,608 68 .0% 210,637 41,377 169,260 80 .4% 32,423 7,734 12,109 20,314 62 .7% 2,414 5,320 68 .8% 1,190,587 8.5% 198,457 992,130 83.3% 129,505 17,393 112,112 86 .6% 129,505 0.9% 17,393 112,112 86.6% 45,438 42,698 21,708 25,637 38,512 28,443 14,071 31,367 69 .0% — — — — — 42,698 100 .0% 21,708 100 .0% 25,637 100 .0% 38,512 100 .0% 28,443 100 .0% ALLIED 2020 ANNUAL REPORT Urban Workspace DECEMBER 31, 2020 PROPERTIES Office GLA Retail GLA Urban Data Centres GLA Total GLA % Total GLA Total Vacant & Unleased Total Leased Leased % 342 Water 365 Railway 375 Water 840 Cambie 18,434 3,206 31,528 — 147,647 27,149 89,377 — 948-950 Homer 23,245 21,758 Sun Tower - 128 West Pender 76,247 1,693 Vancouver 558,685 84,035 — — — — — — — 21,640 31,528 174,796 89,377 45,003 10,780 10,860 50 .2% — 31,528 100 .0% 14,447 160,349 91 .7% — — 89,377 100 .0% 45,003 100 .0% 77,940 7,149 70,791 90 .8% 642,720 4.6% 46,447 596,273 92.8% Calgary, Edmonton, & Vancouver 1,725,054 237,758 — 1,962,812 14.0% 262,297 1,700,515 86.6% Total Office and Retail 12,345,112 1,135,583 — 13,480,695 96.4% 990,079 12,490,616 92.7% 151 Front W 250 Front W 905 King W Urban Data Centres — — — — — — — — 277,855 277,855 7,090 270,765 97 .4% 173,000 173,000 46,899 126,101 72 .9% 59,056 59,056 — 59,056 100 .0% 509,911 509,911 3.6% 53,989 455,922 89.4% Total Rental Portfolio 12,345,112 1,135,583 509,911 13,990,606 100% 1,044,068 12,946,538 92.5% Note that the table above does not include ancillary residential properties, which total 14 and are included in the property count. (1) RioCan/Allied Joint Arrangement (2) Lifetime/Allied Joint Arrangement (3) Perimeter/Allied Joint Arrangement (4) First Capital/Allied Joint Arrangement (5) Westbank/Allied/TELUS Joint Arrangement 95 ALLIED 2020 ANNUAL REPORT PROPERTIES UNDER DEVELOPMENT The Lougheed (604-1st SW), Calgary College & Manning, 547-549 College, Toronto (1) Boardwalk Building, Edmonton Breithaupt Phase III, Kitchener (2) The Well, Toronto (3) 400 Atlantic, Montréal Adelaide & Duncan, Toronto (4) QRC West Phase II, Toronto (5) KING Toronto, Toronto (4)(6) Total Development Portfolio ESTIMATED GLA ON COMPLETION (SF) 88,000 27,000 168,437 147,000 763,000 87,473 230,000 90,000 100,000 1,700,910 (1) RioCan/Allied Joint Arrangement (2) Perimeter/Allied Joint Arrangement. Breithaupt Phase III is comprised of 43 Wellington, 53 & 55 Wellington, 305 Joseph and 2-4 Stewart. (3) Each of Allied and RioCan own an undivided 50% interest with an estimated total GLA of 3,100,000 square feet. The GLA components (in square feet) at our 50% share will be as follows: approximately 534,000 of office, 212,000 of retail, and the remaining is related to residential air rights. The air rights were sold by the co-ownership as previously announced, with the first phase closing in December 2020 and the remaining phases expected to close in 2021. (4) Westbank/Allied Joint Arrangement. (5) The GLA components (in square feet) are as follows: 75,500 of office and 14,500 of retail. (6) Allied entered into a joint arrangement with Westbank to develop KING Toronto. As part of the arrangement, Allied sold a 50% undivided interest to Westbank. KING Toronto is comprised of the following properties: 489 King W, 495 King W, 499 King W, 511-529 King W, 533 King W and 539 King W. The GLA components (in square feet) at our 50% share will be as follows: 200,000 of residential, 60,000 of retail and 40,000 of office. ANCILLARY PARKING FACILITIES NUMBER OF SPACES 7-9 Morrison, Toronto 15 Brant, Toronto 78 Spadina, Toronto 105 George, Toronto 301 Markham, Toronto 388 Richmond, Toronto 464 King, Toronto 478 King, Toronto (1) 560 King, Toronto 650 King, Toronto Total Parking (1) Lifetime/Allied Joint Arrangement 96 25 203 39 15 47 121 12 65 171 71 769 ALLIED 2020 ANNUAL REPORTConsolidated Financial Statements For the Years Ended December 31, 2020 and 2019 97 ALLIED 2020 ANNUAL REPORTManagement’s Statement of Responsibility for Financial Reporting The accompanying consolidated financial statements, management’s discussion and analysis of results of operations and financial condition and the annual report are the responsibility of the Management of Allied Properties Real Estate Investment Trust (“Allied”) . The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards and where appropriate, include amounts which are based on judgments, estimates and assumptions of Management . Management has developed and maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition, and liabilities are recognized . The Board of Trustees (the “Board”) is responsible for ensuring that Management fulfills its responsibility for financial reporting and is ultimately responsible for reviewing and approving the consolidated financial statements . The Board carries out this responsibility principally through its Audit Committee (the “Committee”), which is comprised entirely of independent trustees . The Committee reviews the consolidated financial statements with both Management and the independent auditors . The Committee reports its findings to the Board, which approves the consolidated financial statements before they are submitted to the Unitholders of Allied . Deloitte LLP (the “Auditors”), the independent auditors of Allied, have audited the consolidated financial statements of Allied in accordance with Canadian generally accepted auditing standards to enable them to express to the Unitholders their opinion on the consolidated financial statements . The Auditors have direct and full access to, and meet periodically with the Committee, both with and without Management present . Michael R . Emory Cecilia C . Williams, CPA, CA President and Chief Executive Officer Executive Vice President and Chief Financial Officer 98 ALLIED 2020 ANNUAL REPORT99 ALLIED 2020 ANNUAL REPORTIndependent Auditor’s ReportTO THE UNITHOLDERS AND THE BOARD OF TRUSTEES OF ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST OPINIONWe have audited the consolidated financial statements of Allied Properties Real Estate Investment Trust (the “Trust”), which comprise the consolidated balance sheets as at December 31, 2020 and 2019, and the consolidated statements of income and comprehensive income, unitholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “financial statements”).In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Trust as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).BASIS FOR OPINIONWe conducted our audit in accordance with Canadian generally accepted auditing standards (“Canadian GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Trust in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.KEY AUDIT MATTERA key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.FAIR VALUE OF INVESTMENT PROPERTIES — REFER TO NOTES 2(D), 3 AND 5 OF THE FINANCIAL STATEMENTS KEY AUDIT MATTER DESCRIPTION Investment properties are accounted for using the fair value model . The Trust predominantly uses the discounted cash flow (“DCF”) method to estimate fair value and uses the comparable sales method primarily for properties under development . The critical assumptions relating to the Trust’s estimates of fair values of investment properties include discount rates, terminal capitalization rates, and anticipated cash flow assumptions relating to occupancy and rental rates . While there are several assumptions that are required to determine the fair value of all investment properties using the DCF method, the critical assumptions with the highest degree of subjectivity and impact on fair values are the anticipated rental rates, discount rates, and terminal capitalization rates . Auditing these critical assumptions required a high degree of auditor judgment as the estimations made by management contain significant measurement uncertainty . This resulted in an increased extent of audit effort, including the need to involve fair value specialists . HOW THE KEY AUDIT MATTER WAS ADDRESSED IN THE AUDIT Our audit procedures related to the anticipated rental rates, discount rates and terminal capitalization rates used to determine the fair value of the investment properties included the following, among others: — Evaluated the effectiveness of controls over determining investment properties’ fair value, including those over the determination of the anticipated rental rates, discount rates and terminal capitalization rates . — Evaluated the reasonableness of management’s forecast of anticipated rental rates by comparing management’s forecasts with historical results, internal communications to management and the Board of Trustees, and contractual information, where applicable . — With the assistance of fair value specialists, evaluated the reasonableness of management’s forecast of anticipated rental rates, discount rates and terminal capitalization rates by considering recent market transactions and industry surveys . 100 ALLIED 2020 ANNUAL REPORTOTHER INFORMATION Management is responsible for the other information . The other information comprises: — Management’s Discussion and Analysis of Results of Operations and Financial Condition — The information, other than the financial statements and our auditor’s report thereon, in the Annual Report . Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon . In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated . We obtained Management’s Discussion and Analysis of Results of Operations and Financial Condition and the Annual Report prior to the date of this auditor’s report . If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor’s report . We have nothing to report in this regard . RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error . In preparing the financial statements, management is responsible for assessing the Trust’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Trust or to cease operations, or has no realistic alternative but to do so . Those charged with governance are responsible for overseeing the Trust’s financial reporting process . AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion . Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists . Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements . 101 ALLIED 2020 ANNUAL REPORTAs part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit . We also: — Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion . The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control . — Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control . — Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management . — Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Trust’s ability to continue as a going concern . If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion . Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report . However, future events or conditions may cause the Trust to cease to continue as a going concern . — Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation . — Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Trust to express an opinion on the financial statements . We are responsible for the direction, supervision and performance of the group audit . We remain solely responsible for our audit opinion . We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit . We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards . 102 ALLIED 2020 ANNUAL REPORTFrom the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters . We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication . The engagement partner on the audit resulting in this independent auditor’s report is Antonio Ciciretto . /s/ Deloitte LLP CHARTERED PROFESSIONAL ACCOUNTANTS LICENSED PUBLIC ACCOUNTANTS TORONTO, ONTARIO FEBRUARY 3, 2021 103 ALLIED 2020 ANNUAL REPORTALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 2020 AND DECEMBER 31, 2019 (in thousands of Canadian dollars) NOTES DECEMBER 31, 2020 DECEMBER 31, 2019 Assets Non-current assets Investment properties Residential inventory Investment in joint venture and loan receivable Loans and notes receivable Other assets Current assets Cash and cash equivalents Loans and notes receivable Accounts receivable, prepaid expenses and deposits Total assets Liabilities Non-current liabilities Debt Other liabilities Lease liabilities Current liabilities Debt Accounts payable and other liabilities Total liabilities Unitholders’ equity Total liabilities and Unitholders’ equity 5 6 7 8 9 20 8 10 11 13 12 11 13 $8,687,375 $7,469,265 140,038 117,112 322,543 23,643 9,290,711 45,512 93 64,452 110,057 114,910 95,596 247,413 39,788 7,966,972 208,914 3,863 129,944 342,721 $9,400,768 $8,309,693 $2,698,794 $2,125,938 63,045 157,068 2,918,907 26,668 278,161 304,829 3,223,736 6,177,032 $9,400,768 33,923 155,221 2,315,082 29,243 247,669 276,912 2,591,994 5,717,699 $8,309,693 Commitments and Contingencies (note 26) The accompanying notes are an integral part of these consolidated financial statements. Gordon Cunningham Trustee 104 Michael R . Emory Trustee ALLIED 2020 ANNUAL REPORT ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 NOTES DECEMBER 31, 2020 DECEMBER 31, 2019 YEAR ENDED (in thousands of Canadian dollars, except Unit and per Unit amounts) Rental revenue from investment properties Condominium revenue Total revenue Property operating costs Condominium cost of sales Total operating expenses Operating income Interest expense General and administrative expenses Condominium marketing expenses Amortization of other assets Interest income Fair value gain on investment properties 18 18 6 11 (f) 19 9 5 Fair value loss on derivative instruments 14, 25 (d) Net loss from joint venture Net income and comprehensive income Income per Unit Basic Diluted Weighted average number of Units Basic Diluted 7 17 $560,327 178 560,505 (241,490) — (241,490) 319,015 (72,603) (22,215) (1,230) (1,467) 19,819 280,590 (17,996) (3,184) $500,729 $4.02 $4.02 $496,109 45,341 541,450 (210,747) (43,342) (254,089) 287,361 (66,403) (21,953) (4,214) (1,456) 17,351 450,490 (6,109) (25,844) $629,223 $5 .60 $5 .58 124,427,715 124,536,634 112,443,006 112,731,050 The accompanying notes are an integral part of these consolidated financial statements. 105 ALLIED 2020 ANNUAL REPORT ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF UNITHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (in thousands of Canadian dollars) NOTES TRUST UNITS RETAINED EARNINGS CONTRIBUTED SURPLUS TOTAL Balance at January 1, 2019 15 $2,835,395 $1,521,035 $18,233 $4,374,663 Net income and comprehensive income — 629,223 Unit issuance (net of issuance costs) 15 882,102 — Distributions — (180,284) Unit Option Plan – options exercised Contributed surplus – Unit Option Plan Restricted Unit Plan (net of forfeitures) 16 (a) 16 (a) 16 (b) 10,437 — (2,462) — — — — — — — 1,583 2,437 629,223 882,102 (180,284) 10,437 1,583 (25) Balance at December 31, 2019 $3,725,472 $1,969,974 $22,253 $5,717,699 (in thousands of Canadian dollars) NOTES TRUST UNITS RETAINED EARNINGS CONTRIBUTED SURPLUS TOTAL Balance at January 1, 2020 15 $3,725,472 $1,969,974 $22,253 $5,717,699 Net income and comprehensive income — 500,729 Unit issuance (net of issuance costs) 15 152,079 — Distributions — (205,377) Unit Option Plan – options exercised Contributed surplus – Unit Option Plan Restricted Unit Plan (net of forfeitures) 16 (a) 16 (a) 16 (b) 9,805 — (2,695) — — — — — — — 1,988 2,804 500,729 152,079 (205,377) 9,805 1,988 109 Balance at December 31, 2020 $3,884,661 $2,265,326 $27,045 $6,177,032 The accompanying notes are an integral part of these consolidated financial statements. 106 ALLIED 2020 ANNUAL REPORT ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (in thousands of Canadian dollars) NOTES DECEMBER 31, 2020 DECEMBER 31, 2019 YEAR ENDED $500,729 (280,590) $629,223 (450,490) 17,996 80 72,603 (66,511) (19,819) 13,560 3,184 1,467 32,193 (7,856) (1,846) 113 4,792 (25,128) 2,081 109,209 356,257 6,109 (2,146) 66,403 (60,079) (17,351) 12,102 25,844 1,456 30,796 (5,894) (1,127) (1,279) 4,020 (17,950) (4,367) 29,329 244,599 (25,783) (192,878) Operating activities Net income for the year Fair value gain on investment properties Fair value loss on derivative instruments Realized loss (gain) on derivative instruments Interest expense (excluding capitalized interest) 5 25 (d) 25 (d) 11 (f) Interest paid (excluding capitalized interest) 5, 6, 12, 20 Interest income Interest received Net loss from joint venture Amortization of other assets Amortization of improvement allowances Amortization of straight-line rents Amortization of discount on debt Amortization of lease liabilities Unit compensation expense Additions to residential inventory 7 9 5 5 11 (f) 12 16 6 Change in other non-cash financing items Change in other non-cash operating items 7, 20 Cash provided by operating activities Financing activities Repayment of mortgages payable Proceeds from senior unsecured debentures (net of financing costs) Repayment of senior unsecured debentures Repayment of unsecured term loan Principal payments of lease liabilities Distributions paid to Unitholders Proceeds of Unit issuance (net of issuance costs) Proceeds from exercise of Unit options Restricted Unit Plan (net of forfeitures) Proceeds from notes receivable Proceeds from Unsecured Revolving Operating Facility 11 (a) 11 (d) 11 (d) 11 (e) 12 15 15, 16 15, 16 8 (b) 695,700 — (200,000) (30) (204,217) 152,079 9,805 (2,695) 253 11 (c) 560,000 596,397 (225,000) — (2,049) (177,760) 882,102 10,437 (2,462) 551 338,000 107 ALLIED 2020 ANNUAL REPORT (continued) YEAR ENDED (in thousands of Canadian dollars) NOTES DECEMBER 31, 2020 DECEMBER 31, 2019 Repayments of Unsecured Revolving Operating Facility Proceeds from construction loan Financing costs Loan receivable payments received 11 (c) 11 (b) 8 (a) Loan receivable issued to third-party 7, 8 (a), 20 Cash provided by financing activities Investing activities Acquisition of investment properties Deposits on acquisitions Additions to investment properties (including capitalized interest) Net proceeds on disposition of properties under development (Contributions to) distributions from equity accounted investments Additions to equipment and other assets Leasing commissions Improvement allowances Cash used in investing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year (500,000) (433,000) 33,894 (306) 252 (77,927) 441,025 23,210 (96) 35,057 (178,566) 673,943 (370,075) (28,250) 4 10 (d) (567,971) (3,550) 5, 11 (f) (346,766) (274,707) 4 7 9 5 5 24,911 (15,448) (781) (11,274) (39,805) (960,684) (163,402) 208,914 $45,512 — 1,051 (396) (17,533) (37,777) (727,687) 190,855 18,059 $208,914 Note 20 contains supplemental cash flow information. The accompanying notes are an integral part of these consolidated financial statements. 108 ALLIED 2020 ANNUAL REPORT ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019 (IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT PER UNIT AND UNIT AMOUNTS) 1 . NATURE OF OPERATIONS Allied Properties Real Estate Investment Trust (“Allied”) is a Canadian unincorporated closed-end real estate investment trust created pursuant to the Declaration of Trust dated October 25, 2002, most recently amended April 14, 2020 . Allied is governed by the laws of the Province of Ontario and began operations on February 19, 2003 . The Units of Allied are traded on the Toronto Stock Exchange (“TSX”) and are traded under the symbol “AP .UN” . Allied is domiciled in Ontario, Canada . The address of Allied’s registered office and its principal place of business is 134 Peter Street, Suite 1700, Toronto, Ontario, M5V 2H2 . 2 . SIGNIFICANT ACCOUNTING POLICIES (a) Statement of compliance The consolidated financial statements of Allied for the years ended December 31, 2020 and 2019, are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) . The policies set out below were consistently applied to all the years presented unless otherwise noted . The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting judgments, estimates and assumptions that affect the amounts reported . Allied’s basis for applying judgments, estimates and assumptions to its accounting policies are described in note 2 and 3 below . The consolidated financial statements for the years ended December 31, 2020 and 2019, were approved and authorized for issue by the Board of Trustees on February 3, 2021 . (b) Basis of presentation The consolidated financial statements have been prepared on a historical cost basis except for the following items that were measured at fair value: — — investment properties as described in note 2 (d) and note 5; and interest rate swaps as described in note 2 (i) . The consolidated financial statements are presented in Canadian dollars, which is Allied’s functional currency, and all amounts are rounded to the nearest thousand, unless otherwise indicated . 109 ALLIED 2020 ANNUAL REPORTThe preparation of these consolidated financial statements requires Allied to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period . Actual outcomes could differ from these estimates . These consolidated financial statements include estimates, which, by their nature, are uncertain . The impact of such estimates is pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences . Revisions to accounting estimates are recognized in the period in which the estimate is revised and the revision affects both current and future periods . Significant estimates and assumptions include the fair values assigned to investment properties, interest rate derivative contracts, and allowances for expected credit losses . (c) Basis of consolidation The consolidated financial statements comprise the financial statements of Allied and its subsidiaries . Subsidiaries are all entities over which Allied has control, where control is defined as the power to direct the relevant activities of an entity so as to obtain benefit from its activities . Control exists when a parent company is exposed to, or has rights to, variable returns from the subsidiaries and has the ability to affect those returns through its power . Subsidiaries are consolidated from the date control is transferred to Allied, and are de-consolidated from the date control ceases . Intercompany transactions between subsidiaries are eliminated on consolidation . Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by Allied . All subsidiaries have a reporting date of December 31 . (d) Investment properties At the time of acquisition of a property, Allied applies judgment when determining if the acquisition is an asset acquisition or a business combination . Allied classifies its acquisitions as asset acquisitions when it acquires a property or a portfolio of properties and it has not acquired an operating platform . Investment properties include rental properties and properties under development that are owned by Allied, or leased by Allied as a lessee, to earn rental revenue and/or for capital appreciation . Investment properties are accounted for using the fair value model . Rental income and operating expenses from investment properties are reported within ‘total revenue’ and ‘total operating expenses’ respectively . Where Allied has concluded an acquisition of an asset, Allied uses the asset purchase model whereby the initial cost of an investment property is comprised of its purchase price and any directly attributable expenditures . Directly attributable expenditures include transaction costs such as due diligence costs, appraisal fees, environmental fees, legal fees, land transfer taxes, and brokerage fees . 110 ALLIED 2020 ANNUAL REPORTInvestment properties are externally appraised quarterly and are reported in the consolidated balance sheets at their fair values . Fair value is based on valuations prepared by a nationally recognized and qualified independent professional appraiser with sufficient experience with respect to both the geographic location and the nature of the investment property and supported by market evidence . Any gain or loss resulting from a change in the fair value of an investment property is immediately recognized in the Consolidated Statements of Income and Comprehensive Income . The fair value of each investment property is based upon, among other things, rental income from current leases and assumptions about rental income from future leases reflecting market conditions at the balance sheet date, less future estimated non-recoverable capital cash outflows in respect of such properties . The independent professional appraiser engaged by Allied predominantly uses the discounted cash flow method to determine fair value, whereby the income and expenses are projected over the anticipated term of the investment and combined with a terminal value, all of which is discounted using an appropriate discount rate . Properties under development are measured using both a comparable sales method and a discounted cash flow method, net of costs to complete, as of the balance sheet date . For further details on methods used, refer to note 5 . Valuations of investment properties are most sensitive to changes in discount rates and capitalization rates . Allied has applied judgment based on the extent that costs are incurred to enhance the service potential of the property in determining whether certain costs are additions to the carrying amount of investment properties or will be expensed . Allied has applied judgment when reporting its properties under development . The cost of properties under development includes the acquisition cost of the property, direct development costs, realty taxes and borrowing costs attributable to the development . See 2 (g) below for further information regarding Allied’s accounting for borrowing costs . (e) Joint arrangements Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor . Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control . Joint Operation A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and obligations for the liabilities relating to the arrangement . A joint operation usually results from direct interests in the assets and liabilities of an investee . None of the parties involved have unilateral control of a joint operation . Allied accounts for its joint arrangements as joint operations wherein it records its share of the assets, liabilities, revenue and expenses of the joint operations . 111 ALLIED 2020 ANNUAL REPORTJoint Venture A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets relating to the arrangement, and usually results from the establishment of a separate legal entity . Allied accounts for its joint ventures using the equity method . The share of results of earnings (loss) of the joint venture is reflected in the consolidated statement of income and comprehensive income . Under the equity method, an investment in a joint venture is recognized initially in the consolidated balance sheet at cost and adjusted thereafter to recognize Allied’s share of the profit or loss and other comprehensive income of the joint venture in accordance with Allied’s accounting policies . When Allied’s share of losses of a joint venture exceeds Allied’s interest in that joint venture (which includes any long-term interests that, in substance, form part of Allied’s net investment in the joint venture), Allied continues recognizing its share of further losses to the extent that Allied has incurred legal or constructive obligations or made payments on behalf of the joint venture . When Allied transacts with a joint venture, profits and losses resulting from the transactions with the joint venture are recognized in Allied’s consolidated financial statements only to the extent of interests in the joint venture that are not related to Allied . (f) Revenue recognition Allied has retained substantially all of the risks and benefits of ownership of its investment properties and as such accounts for its leases with tenants as operating leases . Revenue from investment properties include rents from tenants under leases, property tax and operating cost recoveries, percentage participation rents, lease cancellation fees, parking income and other income . Rents from tenants may include free rent periods and rental increases over the term of the lease and are recognized in revenue on a straight-line basis over the term of the lease . The difference between revenue recognized and the cash received is included in investment properties as straight-line rents receivable . Lease incentives provided to tenants (referred to as tenant improvements) are deferred and amortized on a straight-line basis against revenue over the term of the lease . Recoveries from tenants are recognized as revenue in the period in which the applicable costs are incurred . Percentage participation rents are recognized after the minimum sales level has been achieved with each lease, where applicable . Lease cancellation fees are recognized as revenue once an agreement is completed with the tenant to terminate the lease and the collectability is reasonably assured . Other income is recognized upon provision of goods or services when collectability is reasonably assured . Contracts with customers for residential condominium units generally include one distinct performance obligation . Revenue is measured at the transaction price agreed under the contract, and is recognized at the point in time in which control over the property has been transferred . Customer deposits received are held in trust and restricted for use . 112 ALLIED 2020 ANNUAL REPORT(g) Borrowing costs Borrowing costs directly attributable to acquiring or constructing a qualifying investment property are capitalized . Capitalization commences when the activities necessary to prepare an asset for development or redevelopment begin, and ceases once the asset is substantially complete, or is suspended if the development of the asset is suspended . The amount of borrowing costs capitalized is determined first by reference to borrowings specific to the project, where relevant, and otherwise by applying a weighted average cost of borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments . Where borrowings are associated with specific developments, the amount capitalized is the gross costs incurred on those borrowings . The capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted . (h) Other assets Computer and office equipment and owner occupied property are included in other assets and are stated at cost less accumulated amortization and accumulated impairment losses . Cost includes expenditures that are directly attributable to the acquisition of the asset . For the assets that are amortized, Allied records amortization expense on a straight-line basis over the assets’ estimated useful life which is generally three to seven years . The assets’ residual values and useful lives are reviewed annually or if expectations differ from previous estimates, and adjusted if appropriate . When events and circumstances indicate an asset may be impaired, the carrying amount is written down immediately to its recoverable amount (defined as the higher of an asset’s fair value less costs to sell and its value in use) . (i) Financial instruments Cash and cash equivalents include cash on hand, balances with banks and short-term deposits with original maturities of three months or less . Mortgages payable consists of the legal liabilities owing pursuant to loans secured by mortgages and premiums and discounts recognized on loans assumed on acquisition of properties, netted against the transaction costs, and the effective interest method of amortization is applied to the premiums, discounts and transaction costs . The following table describes Allied’s classification and measurement of its financial assets and liabilities: ASSET/LIABILITY Loans and notes receivable Cash and cash equivalents Accounts receivable Debt CLASSIFICATION MEASUREMENT Loans and receivables Amortized cost Loans and receivables Amortized cost Loans and receivables Amortized cost Other financial liabilities Amortized cost Accounts payable and other liabilities Other financial liabilities Amortized cost Interest rate swaps Fair value through profit or loss Fair value 113 ALLIED 2020 ANNUAL REPORT Allied designated its accounts receivable, loans and notes receivable, and cash and cash equivalents as loans and receivables; its debt and accounts payable and other liabilities as other financial liabilities . All derivatives, including embedded derivatives, are classified at fair value through profit or loss and are recorded on the consolidated balance sheet at fair value . At the end of each reporting period, Allied will reassess categorization between levels in the hierarchy to determine whether transfers have occurred . The reassessment is based on the lowest level input that is significant to the fair value measurement in its entirety . Financial Assets Financial assets are classified as loans and receivables or fair value through profit or loss . Financial assets are initially measured at fair value . Transaction costs that are directly attributable to the acquisition or issuance of financial assets or liabilities, with the exception of those classified as at fair value through profit or loss, are accounted for as part of the respective asset or liability’s carrying value at inception and amortized over the expected life of the financial instrument using the effective interest method . Transaction costs directly attributable to the acquisition or issuance of financial assets or liabilities classified as at fair value through profit or loss are recognized immediately in net income . Allied assesses, on a continual basis, whether there is objective evidence that a financial asset that is not carried at fair value through profit or loss is impaired based on changes in the credit risk of the financial asset since initial recognition . An impairment loss, which is the excess of the carrying amount over the fair value, is recognized if the present value of estimated future cash flows discounted at the original effective interest rate inherent in the loan is less than its carrying value and is measured as the difference between the two amounts . Impairments are recognized in the Consolidated Statements of Income and Comprehensive Income . Financial Liabilities Financial liabilities are classified and measured as disclosed in the table above . Financial liabilities are initially recognized at fair value net of any transaction costs directly attributable to the issuance of the instrument and subsequently carried at amortized cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognized in profit or loss . Allied measures its debt, finance lease obligations, and accounts payable and other liabilities, at amortized cost using the effective interest method . All interest-related charges are reported in the Consolidated Statements of Income and Comprehensive Income and are included within ‘Interest expense’, except for those interest-related charges capitalized to qualifying properties under development or rental properties . From time to time, Allied uses derivative financial instruments to manage risks from fluctuations in interest rates . All derivative instruments, including embedded derivatives that must be separately accounted for, are valued at their respective fair values unless they are effective cash flow hedging instruments . 114 ALLIED 2020 ANNUAL REPORTOn the date a derivative contract is entered into, Allied assesses whether or not to designate the derivative as either a hedge of the fair value of a recognized asset or liability (a “fair-value hedge”) or a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability or a forecasted transaction (a “cash-flow hedge”) . Allied does not hold any fair-value or cash-flow hedges . Allied has entered into interest rate derivative contracts to limit its exposure to fluctuations in the interest rates on variable rate mortgages and unsecured term loans . Gains or losses arising from the change in fair values of the interest rate derivative contracts are recognized in the Consolidated Statements of Income and Comprehensive Income . (j ) Unitholders’ equity Trust Units represents the initial value of Units that have been issued . Any transaction costs associated with the issuing of Units are deducted from Unit proceeds . Unitholders’ equity includes all current and prior period retained income . Distributions payable to Unitholders are included in ‘Distributions payable to Unitholders’ when the distributions have been approved and declared prior to the reporting date, but have yet to be paid . (k) Short-term employee benefits Allied does not provide pension plan benefits . Short-term employee benefits are expensed as a period expense . (l) Unit-based payments Equity-settled unit-based payments to employees and trustees are measured at the fair value of the equity instruments at the grant date . The fair value determined at the grant date of the equity-settled unit-based payments is expensed on a straight-line basis over the period during which the employee becomes unconditionally entitled to equity instruments, based on Allied’s estimate of equity instruments that will eventually vest . At the end of each reporting period, Allied revises its estimate of the number of equity instruments that are expected to vest . Allied utilizes the Black-Scholes Model for the valuation of unit options with no performance criteria, see note 16 for assumptions used . Unit options granted under the Unit Option Plan and Restricted Units granted under the Restricted Unit Plan are subject to vesting conditions and disposition restrictions, in order to provide a long term compensation incentive . The Unit Options and Restricted Units are subject to forfeiture until the participant has held his or her position with Allied for a specified period of time . Full vesting of Restricted Units and Unit Options may not occur until the participant has remained employed by Allied for three and four years, respectively from the date of grant . Upon forfeiture of Unit Options and Restricted Units by an employee or trustee of Allied, the expense related to any unvested, forfeited Unit Options and Restricted Units recognized up to and including the date of the forfeiture is reversed . 115 ALLIED 2020 ANNUAL REPORT(m) Provisions Provisions are recognized when there is a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated . Provisions are not recognized for future operating losses . Allied does not have any provisions as of the date of this report . (n) Per Unit calculations Basic net income per Unit is calculated by dividing net income by the weighted average number of Units outstanding for the period (refer to note 17 for further details) . Diluted net income per Unit is calculated using the denominator of the basic calculation described above adjusted to include the potentially dilutive effect of the outstanding Unit purchase options . The denominator is increased by the total number of additional Units that would have been issued by Allied assuming exercise of all Unit purchase options with exercise prices below the average market price for the year (refer to note 16 for further details) . (o) Residential inventories Residential inventory are assets that are developed by Allied for sale in the ordinary course of business and is recorded at the lower of cost and estimated net realizable value . Impairment is reviewed at each reporting date, with any losses recognized in net income when the carrying value of the inventory exceeds its net realizable value . The net realizable value is defined as the entity-specific future selling price, including any development plans, in the ordinary course of business less estimated costs of completion and selling costs . The cost of residential inventory includes any costs that are directly attributable to bring the projects to a state of active development, which includes borrowing costs . Borrowing costs are accounted under IAS 23 similarly to Allied’s policies for capitalization to qualifying assets . (p) Leases Allied adopted IFRS 16, Leases (“IFRS 16”) as issued by the IASB in January 2016, which replaced IAS 17, Leases, and related interpretations effective on January 1, 2019 . Allied elected to apply the standard on a modified retrospective basis . IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased . IFRS 16 brings most leases on balance sheet as right-of-use (“ROU”) assets and ROU lease liabilities, eliminating the distinction between operating and finance leases . Land held as part of the operating leases (“ground leases”) which meets the definition of investment property is classified as ROU assets within investment properties . Management office leases and leases for equipment components embedded as part of service contracts which do not meet the definitions of investment property are recognized as ROU assets within other real estate assets . Refer below to the various lease types identified and their respective financial statement classification . 116 ALLIED 2020 ANNUAL REPORTTYPE OF LEASE Ground lease Management office Other ROU ASSET CLASSIFICATION ROU LIABILITY CLASSIFICATION Investment properties Other assets Other assets Lease liability Lease liability Lease liability The lease liability is initially measured at the present value of the lease payments at the commencement date, discounted by using the Allied’s incremental borrowing rate . It is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made . Lease liability is remeasured when there is a change in the future lease payments arising from a change in an index or rate, a change in estimate of the amount expected to be payable under the residual value guarantee or, as appropriate, change in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised . Allied has applied significant judgment to determine the lease term for some lease contracts in which it is a lessee that include renewal or termination options . The assessment of whether Allied is reasonably certain to exercise such options impacts the lease term which in turn, affects the amount of lease obligations and right-of-use assets recognized . Allied also applies judgment in determining the discount rate used to present value the lease obligations . The adoption of IFRS 16 in 2019 did not have an impact on the consolidated statements of cash flows as all short-term leases and low-value asset payments continue to be recorded within cash provided by operating activities line items . (q) IAS 20, government grants Allied recognizes government assistance, in the form of grants or forgivable loans, when there is reasonable assurance that Allied will be able to comply with the conditions attached to the assistance and that the assistance will be received . Government assistance that compensates Allied for expenses incurred is recognized in the consolidated statements of income and comprehensive income, as a reduction of the related expense, in the periods in which the expenses are recognized . Refer to note 10 for the specific impact of this program on Allied . (r) Comparative figures Certain comparative figures in the consolidated statements of cash flows have been revised to conform to the presentation in the current year . 117 ALLIED 2020 ANNUAL REPORT3 . CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS The preparation of the consolidated financial statements requires management to make judgments and estimates in applying Allied’s accounting policies that affect the reported amounts and disclosures made in the consolidated financial statements and accompanying notes . Within the context of these consolidated financial statements, a judgment is a decision made by management in respect of the application of an accounting policy, a recognized or unrecognized financial statement amount and/or note disclosure, following an analysis of relevant information that may include estimates and assumptions . Estimates and assumptions are used mainly in determining the measurement of balances recognized or disclosed in the consolidated financial statements and are based on a set of underlying data that may include management’s historical experience, knowledge of current events and conditions and other factors that are believed to be reasonable under the circumstances . Management continually evaluates the estimates and judgments it uses . The following are the accounting policies subject to judgments and key sources of estimation uncertainty that Allied believes could have the most significant impact on the amounts recognized in the consolidated financial statements . Allied’s significant accounting policies are disclosed in note 2 . Investment Properties Judgments Made in Relation to Accounting Policies Applied - Judgment is applied in determining whether certain costs are additions to the carrying value of investment properties, identifying the point at which substantial completion of a development property occurs, and identifying the directly attributable borrowing costs to be included in the carrying value of the development property . Allied also applies judgment in determining whether the properties it acquires are considered to be asset acquisitions or business combinations . Allied has determined through the appropriate analysis that all the properties it has acquired to date to be asset acquisitions . Key Sources of Estimation - The fair value of investment properties is dependent on available comparable transactions, future cash flows over the holding period and discount rates and capitalization rates applicable to those assets . For further details, see note 5 . The review of anticipated cash flows involves assumptions relating to occupancy, rental rates and residual value . In addition to reviewing anticipated cash flows, management assesses changes in the business climate and other factors which may affect the ultimate value of the property . These assumptions may not ultimately be achieved . Joint Arrangements Judgments Made in Relation to Accounting Policies Applied - Judgment is applied in determining whether Allied has joint control and whether the arrangements are joint operations or joint ventures . In assessing whether the joint arrangements are joint operations or joint ventures, management applies judgment to determine Allied’s rights and obligations in the arrangement based on factors such as the structure, legal form and contractual terms of the arrangement . 118 ALLIED 2020 ANNUAL REPORTIncome Taxes Judgments Made in Relation to Accounting Policies Applied - Allied qualifies as a mutual fund trust (“MFT”) and a REIT as defined in the Income Tax Act (Canada) . Allied is not liable to pay entity level Canadian income taxes provided that its taxable income is fully distributed to Unitholders each year and if it meets the prescribed rules under the Income Tax Act (Canada) to be a REIT and MFT . This results in no current or deferred income tax being recognized in the financial statements . Allied applies judgment in determining whether it will continue to qualify as a REIT and in assessing its interpretation and application to its assets and revenue . While there are uncertainties in interpretation and application of these rules, Allied believes it meets the REIT and MFT rules . Allied expects to continue to qualify as a REIT under the Income Tax Act (Canada), however, should it no longer qualify, it would be subject to entity level tax and would be required to recognize current and deferred income taxes . Impact of COVID-19 On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic, which has resulted in unprecedented social and economic challenges . As a result, there are material areas of uncertainty with respect to Allied’s revised internal forecast, the most significant being the fact that it cannot predict how consumers will respond as the restriction measures continue or change in Canada . In addition, Allied cannot predict the extent and severity of the economic disruption flowing from the global pandemic . In the preparation of these consolidated financial statements, Allied has incorporated the potential impact of COVID-19 into its estimates and assumptions that affect the carrying amounts of its assets and liabilities, and the reported amount of its results using the best available information as of December 31, 2020 . Actual results could differ from those estimates . 119 ALLIED 2020 ANNUAL REPORTThe following estimates and assumptions have been significantly impacted by the COVID-19 pandemic: Valuation of Investment Properties Given the rapidly evolving circumstances surrounding COVID-19, it is difficult to predict with certainty the extent and severity of the COVID-19 pandemic and the impact it will have on the operations of Allied’s users . The impact of the COVID-19 pandemic is highly dependent on future developments, which include among other things, emerging information concerning COVID-19 and the actions required to contain or manage its impact . In determining the fair value of investment properties, Allied considered the impact on its user base related to the COVID-19 pandemic as well as the overall market performance . In line with the valuation process outlined in notes 2(d), 3 and 5, Allied has considered the effects of COVID-19 on assumptions such as rent growth, vacancy loss assumptions, credit loss assumptions, as well as valuation metrics . Allied has adjusted cash flow assumptions for its estimate of near term disruptions to cash flows to reflect collections, vacancy and assumptions on new leasing . Allied undertook a process to assess the appropriateness of the discount and terminal capitalization rates considering changes to risk free rates, changes to credit spreads as well as changes to property- level cash flows and any risk premium inherent in such cash flow changes . These considerations are reflected in the fair value adjustments of investment properties . User Trade Receivables In assessing the adequacy of the allowance for expected credit loss on user trade receivables, Allied has considered the likelihood of collection of current receivables given the impact on user operations as a result of COVID-19 . Allied continues to work with users facing financial challenges as a result of the pandemic, including for the period of the programs existence by participating in the Canada Emergency Rent Assistance (“CECRA”) program and providing rental abatement or deferrals to certain challenged users . Rental abatements provided for past amounts due are treated as expected credit loss allowance . Loans and Notes Receivable As a result of increased uncertainty arising from COVID-19, Allied considered whether there is an increase in credit risk for the loans and notes receivable in accordance with the requirements of IFRS 9, Financial Instruments . Allied considered various factors in assessing the credit risks, including but not limited to, borrower payment patterns and loan status, the status of project leasing and/ or condominium sales, the development status of each project, the corresponding value of the loan collateral and the financial health and status of the respective debtors . Allied’s assessment of expected credit losses for user trade receivables and loans and notes receivable is inherently subjective due to the forward-looking nature of the assessments . As a result, the value of the expected credit loss is subject to a degree of uncertainty and is made on the basis of assumptions which may not prove to be accurate with the unprecedented uncertainty caused by COVID-19 . 120 ALLIED 2020 ANNUAL REPORT4 . ACQUISITIONS AND DISPOSITIONS During the year ended December 31, 2020, Allied completed the following property acquisitions from third parties: PROPERTY ACQUISITION DATE PROPERTY TYPE INVESTMENT PROPERTY INTEREST ACQUIRED 3530-3540 Saint-Laurent, Montréal January 14, 2020 Office, Retail $13,421 4396-4410 Saint-Laurent, Montréal January 15, 2020 Office, Retail 54 The Esplanade, Toronto January 16, 2020 Retail 18,530 26,079 747 Square-Victoria, Montréal January 28, 2020 Office, Retail 284,541 375 Water, Vancouver 125 John, Toronto 117-119 John, Toronto April 20, 2020 Office, Retail 225,404 November 16, 2020 Office, Retail December 24, 2020 Retail Ancillary residential properties, Toronto (1) — Residential (1) Allied acquired four ancillary residential properties during the year ended December 31, 2020. 4,196 8,341 6,648 $587,160 100% 100% 100% 100% 100% 100% 100% 100% The total purchase price for the above-noted properties during the year ended December 31, 2020, of $587,160 is comprised of net cash consideration paid of $567,971, the assumption of other liabilities of $9,189 and a mortgage assumption of $10,000 . During the year ended December 31, 2019, Allied completed the following property acquisitions from third parties: PROPERTY ACQUISITION DATE PROPERTY TYPE INVESTMENT PROPERTY INTEREST ACQUIRED $6,145 25,074 1,791 738-11th SW, Calgary April 9, 2019 Office, Retail 2233 Columbia, Vancouver April 11, 2019 Office, Retail 2-4 Stewart, Kitchener 1050 Homer, Vancouver May 9, 2019 Development May 27, 2019 Office, Retail 41,420 53-55 Wellington, Kitchener June 3, 2019 Development 371 1001 Rue Lenoir, Montréal July 2, 2019 Office, Retail 82,091 700 de la Gauchetière, Montréal July 17, 2019 Office, Retail 335,714 365 Railway, Vancouver 134-11th SE, Calgary September 26, 2019 November 28, 2019 Office Office Ancillary residential properties, Toronto (1) — Residential 18,988 14,800 23,074 $549,468 (1) Allied acquired eight ancillary residential properties in 2019. 50% 100% 50% 100% 50% 100% 100% 100% 100% 100% 121 ALLIED 2020 ANNUAL REPORT The total purchase price for the above noted properties during the year ended December 31, 2019, of $549,468 is comprised of net cash consideration of $370,075, the assumption of other liabilities of $17,442 and mortgages payable of $161,951 . Dispositions On December 23, 2020, Allied and its partners closed on the disposition of a portion of The Well air rights and associated underground parking and transfer floor slab development for cash consideration of $24,911 (at Allied’s share) which represented the fair value and accordingly, there is no gain or loss on disposition . During the year ended December 31, 2019, Allied did not dispose of any investment properties . 5 . INVESTMENT PROPERTIES Changes to the carrying amounts of investment properties are summarized as follows: DECEMBER 31, 2020 DECEMBER 31, 2019 PROPERTIES UNDER DEVELOPMENT (“PUD”) RENTAL PROPERTIES TOTAL RENTAL PROPERTIES PROPERTIES UNDER DEVELOPMENT (“PUD”) TOTAL Balance, beginning of year $6,754,215 $715,050 $7,469,265 $5,592,216 $570,241 $6,162,457 Additions: Acquisitions Improvement allowances Leasing commissions 587,160 32,541 8,066 — 587,160 547,306 2,162 549,468 7,264 3,208 39,805 11,274 37,755 13,310 22 4,223 37,777 17,533 Capital expenditures 80,922 265,844 346,766 55,428 219,279 274,707 Dispositions — (24,911) (24,911) — — Transfers from PUD 130,100 (130,100) Transfers to PUD (77,828) 77,828 Transfers to other assets Lease liabilities — 1,763 — — — — — 1,763 98,850 (98,850) (6,530) 6,530 (152) 1,887 — — — — — (152) 1,887 Amortization of straight-line rent and improvement allowances Fair value gain (loss) on investment properties (25,244) 907 (24,337) (24,882) (20) (24,902) 299,160 (18,570) 280,590 439,027 11,463 450,490 Balance, end of year $7,790,855 $896,520 $8,687,375 $6,754,215 $715,050 $7,469,265 For the year ended December 31, 2020, Allied capitalized $26,647 of borrowing costs to qualifying investment properties (December 31, 2019 - $20,979) . Included in the rental properties amounts noted above are right-of-use assets with a fair value of $525,940 (December 31, 2019 - $509,860) representing the fair value of Allied’s interest in five investment properties with corresponding lease liabilities . The leases’ maturities range from 23 .8 years to 81 .5 years . 122 ALLIED 2020 ANNUAL REPORT Valuation Methodology The appraised fair value of investment properties is most commonly determined using the following methodologies:  (a) Discounted cash flow method - Under this approach, discount rates are applied to the projected annual operating cash flows, generally over a ten-year period, including a terminal value of the properties based on a capitalization rate applied to the estimated net operating income (“NOI”), a non-GAAP measure, in the terminal year . This method is primarily used to value the rental properties portfolio . (b) Comparable sales method - This approach compares a subject property’s characteristics with those of comparable properties which have recently sold . The process uses one of several techniques to adjust the price of the comparable transactions according to the presence, absence, or degree of characteristics which influence value . These characteristics include the cost of construction incurred at a property under development . This method is primarily used to value the development portfolio and ancillary parking facilities . In accordance with its policy, Allied measures and records its investment properties using valuations under the supervision of Management with the support of an independent external appraiser . Allied’s entire portfolio is revalued by the external appraiser each quarter . Management verifies all major inputs to the valuations, analyzes the change in fair values at the end of each reporting period and reviews the results with the independent appraiser every quarter . There were no material changes to the valuation techniques during the year . For properties with a leasehold interest with a term less than 40 years, the resulting valuation methodology is based upon a full-term discounted cash flow model . Significant Inputs There are significant unobservable inputs used, such as capitalization rates, in determining the fair value of each investment property . Accordingly, all investment properties are measured in accordance with the fair value measurement hierarchy levels and the inputs for investment properties comprise Level 3 unobservable inputs, reflecting Management’s best estimate of what market participants would use in pricing the asset at the measurement date . Fair values are most sensitive to changes in capitalization rates and stabilized or forecasted NOI . Generally, an increase in NOI will result in an increase in the fair value of investment properties and an increase in capitalization rates will result in a decrease in the fair value of investment properties . Below are the rates used in the modeling process for valuations . Discount rate Terminal capitalization rate Overall capitalization rate Discount horizon (years) WEIGHTED AVERAGE DECEMBER 31, 2020 DECEMBER 31, 2019 6.35% 5.18% 4.82% 10 6 .63% 5 .38% 4 .98% 10 123 ALLIED 2020 ANNUAL REPORT The analysis below shows the maximum impact on fair values of possible changes in capitalization rates, assuming no changes in NOI: CHANGE IN CAPITALIZATION RATE OF Increase (decrease) in fair value -0.50% -0.25% +0.25% +0.50% Investment Properties $1,006,627 $475,750 $(428,787) $(817,236) 6 . RESIDENTIAL INVENTORY Residential inventory is as follows: KING Toronto $140,038 $114,910 DECEMBER 31, 2020 DECEMBER 31, 2019 The changes in the aggregate carrying value of Allied’s residential inventory is as follows: Balance, beginning of year Acquisitions (1) Dispositions (1) Sale of residential units (2) Development expenditures Balance, end of year DECEMBER 31, 2020 DECEMBER 31, 2019 $114,910 — — — 25,128 $140,038 $140,302 10,454 (5,227) (43,342) 12,723 $114,910 (1) On February 14, 2019, Allied acquired 464-466 Queen W, Toronto, at a purchase price of $10,454 and concurrently sold a 50% undivided interest to Westbank at a sale price of $5,227. This property will be transferred to the City of Toronto as parkland dedication related to the KING Toronto condominium development. (2) Allied recognized condominium cost of sales in 2019 for the 132 units occupied at King Portland Centre. Residential inventory consists of assets that are developed by Allied for sale in the ordinary course of business . Allied may transfer an investment property to residential inventory based on a change in use, as evidenced by the commencement of development activities with the intention to sell . Alternatively, a transfer from residential inventory to investment property would be evidenced by the commencement of leasing activity . On September 19, 2017, Allied and its partner, RioCan, announced that they had finalized plans that would allow the co-owners to improve the return on the development of King Portland Centre . The co-owners had originally intended to develop the residential portion of the project as rental apartments and then decided to sell the residential portion as condominium units, totaling 132 units . As of December 31, 2019, all units were occupied and as of June 30, 2020, ownership has transferred to the occupants of all units . 124 ALLIED 2020 ANNUAL REPORT On November 30, 2018, Allied entered into a joint arrangement with Westbank to develop KING Toronto . KING Toronto is a mixed-use property comprised of office, retail and residential uses . As part of the arrangement Allied sold a 50% undivided interest to Westbank . The residential component will be developed and sold as condominium units, totaling 440 units . For the year ended December 31, 2020, Allied capitalized $4,363 of borrowing costs to qualifying residential inventory (December 31, 2019 - $5,214) . 7 . INVESTMENT IN JOINT VENTURE AND LOAN RECEIVABLE Investment in joint venture and the associated loan receivable is comprised of the following: Investment in joint venture Loans receivable from joint venture DECEMBER 31, 2020 DECEMBER 31, 2019 $3,825 113,287 $117,112 $(8,439) 104,035 $95,596 On July 2, 2013, Allied entered into a partnership agreement whereby Allied holds a one-third voting and economic interest in 7th Avenue Sky Partnership (“TELUS Sky”) . TELUS Sky was created with the specific purpose of acquiring the entire beneficial interest in the properties located at 100-114 7th Avenue SW, Calgary and participating in its construction and development . On October 31, 2019, Allied advanced a construction loan in the amount of $96,142 to TELUS Sky, with the loan having a maximum limit of $114,000 . The loan matures on August 31, 2021, and bears interest at bank prime plus 45 basis points or bankers’ acceptance rate plus 145 basis points . As at December 31, 2020, the loan receivable outstanding is $113,287 (December 31, 2019 - $104,035) . Allied is providing a joint and several guarantee in the amount of $114,000 to support the TELUS Sky facility . Allied accounts for its interests in joint ventures using the equity method . The financial information below represents TELUS Sky at 100%, and at Allied’s one-third interest . Current assets (including cash and cash equivalents) Non-current assets Current liabilities Non-current liabilities Net assets of TELUS Sky at 100% Net assets of TELUS Sky at Allied’s share (1) (1) Includes costs pertaining only to Allied, not the joint venture. DECEMBER 31, 2020 DECEMBER 31, 2019 $11,664 368,529 (28,857) (339,861) $11,475 $3,825 $9,377 320,880 (43,457) (312,117) $(25,317) $(8,439) 125 ALLIED 2020 ANNUAL REPORT Revenue Expenses Interest expense General and administrative expense Fair value loss Net loss and total comprehensive loss of TELUS Sky at 100% Net loss and total comprehensive loss at Allied’s share (1) (1) Includes costs pertaining only to Allied, not the joint venture. Opening balance Net earnings (loss) Contributions Distributions Ending balance 8 . LOANS AND NOTES RECEIVABLE Loans and notes receivable are as follows: Loans receivable (a) Notes and other receivables (b) Current Non-current YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 $7,392 (3,657) — (399) (12,888) $3,441 (830) (1,326) (362) (78,455) $(9,552) $(77,532) $(3,184) $(25,844) DECEMBER 31, 2020 DECEMBER 31, 2019 $(8,439) (3,184) 17,914 (2,466) $3,825 $18,456 (25,844) — (1,051) $(8,439) DECEMBER 31, 2020 DECEMBER 31, 2019 $320,526 2,110 $322,636 $93 322,543 $322,636 $245,303 5,973 $251,276 $3,863 247,413 $251,276 (a) In February 2015, Allied entered into a joint arrangement with Westbank and completed the acquisition of an undivided 50% interest in Adelaide & Duncan . As part of the arrangement, Allied advanced $21,173 to Westbank for its purchase of a 50% undivided interest in the property . The facility is secured by a charge on the property (subordinated to the construction lender) and assignment of rents and leases . Interest accrues and is payable monthly at a rate of 7 .75% per annum . The loan is repayable when the joint arrangement obtains external permanent financing . As at December 31, 2020, the loan receivable outstanding is $21,173 (December 31, 2019 - $21,173) . 126 ALLIED 2020 ANNUAL REPORT On August 1, 2017, Allied entered into an arrangement with Westbank to provide a credit facility of up to $100,000, plus interest, for the land acquisition and the pre-development costs of 400 West Georgia in Vancouver . The facility is secured by Westbank’s covenant and a charge on the property (subordinated to the construction lender) . On February 11, 2019, the facility was increased to $160,000 . Interest accrues and is payable monthly at a rate of 6 .75% per annum . The credit facility matures on August 31, 2022, and has a one-year extension option to August 31, 2023 . As at December 31, 2020, the loan receivable outstanding is $120,825 (December 31, 2019 - $106,292) . On November 30, 2018, Allied entered into a joint arrangement with Westbank to develop KING Toronto . As part of the arrangement, Allied advanced $67,030 to Westbank for its purchase of a 50% undivided interest in the property . The facility will initially be secured by a first mortgage on the property . On placement of construction financing, the mortgage will be secured by a charge on the property (subordinated to the construction lender) . Interest accrues at a rate of 7 .00% per annum and is payable on loan repayment . The loan is repayable at the earlier of November 23, 2023, or the closing of the condominium units . As at December 31, 2020, the loan receivable outstanding is $84,566 (December 31, 2019 - $77,765) . On March 18, 2019, Allied made an amendment to the joint arrangement with Perimeter to develop Breithaupt Phase III and a loan receivable arrangement to provide 50% of the pre-development costs . The facility is secured by a charge on the property (subordinated to the construction lender) . Interest accrues at a rate of 7 .00% per annum and is payable on loan repayment . The loan is repayable upon completion of development and rent commencement, which is anticipated to take place in the third quarter of 2022 . As at December 31, 2020, the loan receivable outstanding is $10,637 (December 31, 2019 - $9,365) . On July 31, 2019, Allied entered into an arrangement with Westbank to provide a credit facility of up to $185,000, plus interest, for the land acquisition and the pre-development costs of 720 Beatty Street in Vancouver . The funding will initially be secured by a first mortgage on the property for a fixed term . On placement of construction financing, the mortgage will be secured by a charge on the property (subordinated to the construction lender) . Interest accrues and is payable monthly at a rate of 7 .00% per annum . The credit facility matures in six years following approval of the project by the British Columbia Utilities Commission . As at December 31, 2020, the loan receivable outstanding is $83,325 (December 31, 2019 - $30,708) . Allied has assessed the expected credit losses on an individual loan basis . Allied assesses the risk of expected credit losses, including considering the status of corporate guarantees and/or registered mortgage charges and assignment of leases, outcome of credit checks on borrowers, results of monitoring the financial and operating performance of borrowers, results of the status of development projects and status of scheduled principal and interest payments . The expected credit losses estimated by Management considering the factors described above is $nil as at December 31, 2020 and 2019, respectively . 127 ALLIED 2020 ANNUAL REPORT (b) As at December 31, 2020, the balance of notes and other receivables related to mortgage receivables from the purchaser of Allied’s Québec City portfolio (as the mortgage transfer was not executed by the lender) were settled along with the corresponding mortgages payable (note 11) (December 31, 2019 - $3,713) . The remaining balance of notes and other receivables is made up of individually insignificant notes receivable . 9 . OTHER ASSETS Other assets consist of the following: Equipment and other assets (1) Property, plant and equipment (2) Prepaid deposits (3) Interest rate swap derivative assets DECEMBER 31, 2020 DECEMBER 31, 2019 $4,395 17,782 — 1,466 $23,643 $5,081 17,782 13,202 3,723 $39,788 (1) During the year ended December 31, 2020, Allied recorded amortization of equipment and other assets of $1,467 (December 31, 2019 - $1,456). (2) Property, plant and equipment relates to owner-occupied property. (3) For the year ended December 31, 2019, these prepaid deposits were held in trust and are from the sale of residential condominium units for KING Toronto. As of December 31, 2020, the prepaid deposits have been reclassified to prepaid expenses and deposits (Note 10(d)). 10 . ACCOUNTS RECEIVABLE, PREPAID EXPENSES AND DEPOSITS User trade receivables - net of allowance (a) Other user receivables (b) Miscellaneous receivables (c) Prepaid expenses and deposits (d) (a) User trade receivables DECEMBER 31, 2020 DECEMBER 31, 2019 $16,854 2,991 15,709 28,898 $64,452 $7,686 46,569 15,258 60,431 $129,944 User trade receivables include minimum rent, annual common area maintenance recoverable costs, property tax recovery billings and other recoverable charges . An allowance is maintained for expected credit losses resulting from the inability of users to meet obligations under lease agreements . Allied actively reviews receivables on a continuous basis and determines the potentially uncollectible accounts on a per-user basis giving consideration to their credit risk and records an impairment based on expected credit losses as required . 128 ALLIED 2020 ANNUAL REPORT The change in the allowance for expected credit loss is reconciled as follows: Allowance for expected credit loss, beginning of year Additional provision recorded during the year Reversal of previous provisions Receivables written off during the year Allowance for expected credit loss, end of year YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 $3,899 9,112 (1,172) (5,190) $6,649 $2,333 2,837 (1,008) (263) $3,899 During the year, Allied provided rent abatements for 75% of gross rent to qualifying tenants participating in the Canada Emergency Commercial Rent Assistance (“CECRA”) program . As a result, the qualifying tenants’ outstanding receivable was reduced and recorded as a charge to expected credit loss . Concurrently, Allied recognized the benefit of the government’s forgivable loan covering 50% of gross rent as a reduction of expected credit loss . As of December 31, 2020, Allied recorded rent abatements of $5,040 (net of a $760 subsidy received from the Québec government) for tenants qualifying under the CECRA program net of government assistance of $11,600 . Based on the existing information, the net charge to expected credit loss totaled $6,790 related to the CECRA program . As of December 31, 2020, all amounts related to the CECRA forgivable loan were received from the government . (b) Other user receivables Other user receivables pertain to unbilled operating costs such as common area maintenance and property tax recoveries and chargebacks . As at December 31, 2019, this balance includes $40,153 of residential condominium sales receivables from King Portland Centre (net of deposits) which have subsequently been collected . (c) Miscellaneous receivables Miscellaneous receivables consist primarily of property taxes recoverable from municipalities and insurance claims . As at December 31, 2020, there are no credit risk indicators that the debtors will not meet their payment obligations . (d) Prepaid expenses and deposits Prepaid expenses primarily relate to property operating expenses (mainly realty taxes and insurance), deposits relating to acquisitions of $3,550 (December 31, 2019 - $29,080) and deposits held in trust received from the sale of residential condominium units of $1,613 (December 31, 2019 - $18,340) . 129 ALLIED 2020 ANNUAL REPORT 11 . DEBT Debt consists of the following items, net of financing costs: Mortgages payable (a) Construction loans payable (b) Unsecured revolving operating facilities (c) Senior unsecured debentures (d) Unsecured term loans (e) Current Non-current (a) Mortgages payable DECEMBER 31, 2020 DECEMBER 31, 2019 $716,813 57,104 60,000 1,642,119 249,426 $737,448 23,210 — 945,369 449,154 $2,725,462 $2,155,181 $26,668 2,698,794 $2,725,462 $29,243 2,125,938 $2,155,181 Mortgages payable have a weighted average stated interest rate of 4 .31% as at December 31, 2020 (December 31, 2019 - 4 .38%) . The mortgages are secured by a first registered charge over specific investment properties and first general assignments of leases, insurance and registered chattel mortgages . PRINCIPAL REPAYMENTS BALANCE DUE AT MATURITY DECEMBER 31, 2020 DECEMBER 31, 2019 $26,668 25,728 16,781 4,726 6,596 1,391 487 293 5,000 $87,670 $— 205,628 225,585 152,472 8,788 20,443 — 14,457 — $26,668 231,356 242,366 157,198 15,384 21,834 487 14,750 5,000 $627,373 $715,043 $734,286 3,555 (1,785) 5,400 (2,238) $716,813 $737,448 2021 2022 2023 2024 2025 2026 2027 2028 2030 Mortgages, principal Net premium on assumed mortgages Net financing costs 130 ALLIED 2020 ANNUAL REPORT (b) Construction loans payable As of December 31, 2020 and December 31, 2019, Allied’s obligation under the construction loans is as follows: JOINT ARRANGEMENT OWNERSHIP DATE OF MATURITY DECEMBER 31, 2020 DECEMBER 31, 2019 Adelaide & Duncan Breithaupt Phase III KING Toronto 50% 50% 50% August 11, 2023 $44,051 $23,210 December 2, 2022 December 17, 2024 7,406 5,647 — — $57,104 $23,210 On January 31, 2019, the Adelaide & Duncan joint arrangement obtained a $270,000 construction lending facility from a syndicate of Canadian banks, in which Allied’s 50% share is $135,000 . The loan matures on August 11, 2023, and bears interest at bank prime plus 35 basis points or bankers’ acceptance rate plus 135 basis points . Allied is providing a joint and several guarantee, limited to $135,000, to support the construction facility and is earning a related guarantee fee . On August 23, 2019, the Adelaide & Duncan joint arrangement entered into a swap agreement to fix 75% of the construction costs up to $209,572 at 2 .86% . On February 21, 2020, Allied and Perimeter obtained a $138,000 construction loan for the Breithaupt Phase III joint arrangement from a syndicate of Canadian banks, in which Allied’s 50% share is $69,000 . The loan matures on December 2, 2022, and bears interest at bank prime or bankers’ acceptance rate plus 120 basis points . Allied is providing a joint and several guarantee, limited to $69,000, to support the facility and is earning a related guarantee fee . On December 17, 2020, Allied and Westbank obtained a $465,000 GREEN construction loan for the KING Toronto joint arrangement from a syndicate of Canadian banks, in which Allied’s 50% share is $232,500 . The loan matures on December 17, 2024, and bears interest at bank prime plus 45 basis points or bankers’ acceptance rate plus 145 basis points . Allied is providing a joint and several guarantee, limited to $232,500, to support the facility and is earning a related guarantee fee . 131 ALLIED 2020 ANNUAL REPORT (c) Unsecured revolving operating facilities As of December 31, 2020 and December 31, 2019, Allied’s obligations under the unsecured revolving operating facilities (the “Unsecured Facilities”) are as follows: MATURITY DATE INTEREST RATES ON DRAWINGS STANDBY FEE FACILITY LIMIT DRAW- INGS LETTERS OF CREDIT AMOUNT AVAILABLE DECEMBER 31, 2020 Unsecured facility limit $400,000 (1) January 30, 2023 Prime + 0 .20% or Bankers’ acceptance + 1 .20% (2) Unsecured facility limit $100,000 April 20, 2021 Prime + 0 .45% or Bankers’ acceptance + 1 .45% 0.24% $400,000 $(60,000) $(22,420) $317,580 0.29% 100,000 — — 100,000 $500,000 $(60,000) $(22,420) $417,580 (1) This unsecured facility contains a $100,000 accordion feature, allowing Allied to increase the amount available under the facility to $500,000. (2) The interest rates on drawings for this facility are subject to certain conditions being met. In the event that these conditions are not met, this unsecured facility will bear interest at bank prime plus 45 basis points or bankers’ acceptance plus 145 basis points with a standby fee of 29 basis points. MATURITY DATE INTEREST RATES ON DRAWINGS STANDBY FEE FACILITY LIMIT DRAW- INGS LETTERS OF CREDIT AMOUNT AVAILABLE DECEMBER 31, 2019 Unsecured facility limit $400,000 (1) January 29, 2022 Prime + 0 .45% or Bankers’ acceptance + 1 .45% (2) 0 .29% $400,000 $— $(14,896) $385,104 (1) This unsecured facility contains a $100,000 accordion feature, allowing Allied to increase the amount available under the facility to $500,000. (2) The interest rates on drawings for this facility are subject to certain conditions being met. In the event that these conditions are not met, this unsecured facility will bear interest at bank prime plus 70 basis points or bankers’ acceptance plus 170 basis points with a standby fee of 34 basis points. On April 21, 2020, Allied entered into a $100,000 bilateral unsecured line of credit which matures on April 20, 2021, bearing interest at bank prime plus 45 basis points or bankers’ acceptance plus 145 basis points with a standby fee of 29 basis points . On January 29, 2021, Allied amended the unsecured facilities to merge the two existing facilities into one facility with a limit of $500,000 plus a $100,000 accordion feature and to extend the maturity to January 11, 2024 . The facility will bear interest at bank prime plus 20 basis points or bankers’ acceptance plus 120 basis points with a standby fee of 24 basis points, subject to certain conditions being met . In the event that these conditions are not met, the unsecured facility will bear interest at bank prime plus 45 basis points or bankers’ acceptance plus 145 basis points with a standby fee of 29 basis points . 132 ALLIED 2020 ANNUAL REPORT (d) Senior unsecured debentures As of December 31, 2020 and December 31, 2019, Allied’s obligation under the senior unsecured debentures is as follows: SERIES Series B Series C Series D Series E Series F Series G INTEREST RATE DATE OF MATURITY INTEREST PAYMENT DATE DECEMBER 31, 2020 DECEMBER 31, 2019 3 .934% November 14, 2022 May 14 and November 14 $150,000 $150,000 3 .636% 3 .394% 3 .113% 3 .117% 3 .131% April 21, 2025 April 21 and October 21 200,000 200,000 August 15, 2029 February 15 and August 15 300,000 300,000 April 8, 2027 April 8 and October 8 300,000 300,000 February 21, 2030 February 21 and August 21 400,000 May 15, 2028 May 15 and November 15 300,000 — — Unsecured Debentures, principal Net financing costs $1,650,000 $950,000 (7,881) (4,631) $1,642,119 $945,369 The Series B, C, D, E, F and G Senior Unsecured Debentures are collectively referred to as the “Unsecured Debentures” . On February 21, 2020, Allied issued $400,000 of 3 .117% Series F Senior Unsecured Debentures (the “Series F Debentures”) due February 21, 2030, with semi-annual interest payments due on February 21 and August 21 each year commencing on August 21, 2020 . Debt financing costs of $2,350 were incurred and recorded against the principal owing . Proceeds from the Series F Debentures were used to prepay $200,000 aggregate principal amount of the Unsecured Term Facility maturing March 16, 2021, repay amounts drawn on the Unsecured Facility in the amount of $110,000, to fund Allied’s development and value-add initiatives and for general working capital purposes . On May 15, 2020, Allied issued $300,000 of 3 .131% Series G Senior Unsecured Debentures (the “Series G Debentures”) due May 15, 2028, with semi-annual interest payments due on May 15 and November 15 each year commencing on November 15, 2020 . Debt financing costs of $1,950 were incurred and recorded against the principal owing . 133 ALLIED 2020 ANNUAL REPORT Proceeds from the Series G Debentures were used to repay amounts drawn on the Unsecured Facility in the amount of $240,000 and for general working capital purposes . The respective financing costs and premium recognized are amortized using the effective interest method and recorded to Interest Expense (note 11 (f )) . (e) Unsecured term loans As of December 31, 2020 and December 31, 2019, Allied’s obligation under the unsecured term loans is as follows:  INTEREST RATE DATE OF MATURITY FREQUENCY OF INTEREST PAYMENT DECEMBER 31, 2020 DECEMBER 31, 2019 Unsecured Term Loan 3 .496% January 14, 2031 Monthly $250,000 $250,000 Unsecured Term Facility Tranche 1 Tranche 2 Unsecured Term Loans, principal Net financing costs 2 .830% March 16, 2021 Quarterly 2 .890% March 16, 2021 Quarterly — — 100,000 100,000 $250,000 $450,000 (574) (846) $249,426 $449,154 The Unsecured Term Loan and Unsecured Term Facility are collectively referred to as the “Unsecured Term Loans” . On February 10, 2020, Allied repaid $100,000 of the principal amount of Tranche 1 of the Unsecured Term Facility due March 16, 2021 . On March 4, 2020, Allied repaid $100,000 of the principal amount of Tranche 2, representing the remaining balance of the Unsecured Term Facility due March 16, 2021 . On August 11, 2020, Allied entered into an amended Unsecured Term Loan at a new fixed interest rate of 3 .496% (December 31, 2019 - 3 .992%) and a new maturity date of January 14, 2031 (December 31, 2019 - January 14, 2026) . The respective financing costs are amortized using the effective interest method and recorded to Interest Expense (note 11 (f )) . 134 ALLIED 2020 ANNUAL REPORT (f) Interest expense Interest expense consists of the following: Interest on debt: Mortgages payable Construction loans payable Unsecured Facilities Unsecured Debentures Unsecured Term Loans Interest on lease liabilities Amortization, discount on debt Amortization, net financing costs Less: Interest capitalized to qualifying investment properties and residential inventory Interest expense excluding prepayment costs Prepayment costs Interest expense YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 $31,141 1,351 2,152 49,455 10,353 8,926 (1,846) 2,081 $103,613 (31,010) $72,603 — $72,603 $33,989 604 2,667 24,629 15,679 8,350 (1,000) 1,660 $86,578 (26,193) $60,385 6,018 $66,403 Borrowing costs have been capitalized to qualifying investment properties and residential inventory, where applicable, at a weighted average rate of 3 .57% per annum (December 31, 2019 – 3 .77%) . (g) Schedule of principal repayments The table below summarizes the scheduled principal maturity for Allied’s Mortgages payable, Construction loans payable, Unsecured Facilities, Unsecured Debentures and Unsecured Term Loans . 2021 2022 2023 2024 2025 THERE- AFTER TOTAL Mortgages payable, principal repayments $26,668 $25,728 $16,781 $4,726 $6,596 $7,171 $87,670 Mortgages payable, balance due at maturity Construction loans payable Unsecured Facility Unsecured Debentures Unsecured Term Loans — — — — — 205,628 225,585 152,472 8,788 34,900 627,373 7,406 44,051 5,647 — 60,000 150,000 — — — — — — — — — — 57,104 60,000 200,000 1,300,000 1,650,000 — 250,000 250,000 Total $26,668 $388,762 $346,417 $162,845 $215,384 $1,592,071 $2,732,147 A description of Allied’s risk management objectives and policies for financial instruments is provided in note 25 . 135 ALLIED 2020 ANNUAL REPORT 12 . LEASE LIABILITIES Allied’s future minimum lease liability payments as a lessee are as follows: 2021 (1) 2022 - 2025 (1) THEREAFTER DECEMBER 31, 2020 DECEMBER 31, 2019 Future minimum lease payments $9,749 $41,018 $442,734 $493,501 $503,200 Interest accrued on lease obligations 482 78 — 560 1,401 Less: amounts representing interest payments (10,231) (41,096) (285,666) (336,993) (349,380) Present value of lease payments $— $— $157,068 $157,068 $155,221 (1) The future minimum lease payments prior to 2025 are less than the effective interest on the lease liabilities. Some of Allied’s lease agreements contain contingent rent clauses . Contingent rental payments are recognized in the consolidated statements of income and comprehensive income as required when contingent criteria are met . The lease agreements contain renewal options, purchase options, escalation clauses, additional debt and further leasing clauses . For the year ended December 31, 2020, minimum lease payments of $8,712 were paid by Allied (December 31, 2019 - $11,629) . 13 . ACCOUNTS PAYABLE AND OTHER LIABILITIES Accounts payable and other liabilities consists of the following: Trade payables and other liabilities $169,434 $157,014 DECEMBER 31, 2020 DECEMBER 31, 2019 Prepaid user rents Accrued interest payable Distributions payable to Unitholders Residential deposits (1) Interest rate swap derivative liability Current Non-current (2) 75,090 16,139 17,498 36,506 26,539 63,844 10,473 16,338 23,203 10,720 $341,206 $281,592 $278,161 63,045 $341,206 $247,669 33,923 $281,592 (1) These deposits relate to the sale of residential condominium units at KING Toronto. (2) Non-current liabilities as at December 31, 2020, are composed of residential deposits totaling $36,506 and an interest rate swap derivative liability totaling $26,539 (December 31, 2019 - $23,203 and $10,720, respectively). 136 ALLIED 2020 ANNUAL REPORT 14 . FAIR VALUE MEASUREMENTS The classification, measurement basis, and related fair value disclosures of the financial assets and liabilities are summarized in the following table: DECEMBER 31, 2020 DECEMBER 31, 2019 CLASSIFICATION/ MEASUREMENT CARRYING VALUE FAIR VALUE CARRYING VALUE FAIR VALUE Financial Assets: Loans and notes receivable (note 8) Amortized cost 322,636 355,819 251,276 251,276 Loan receivable from joint venture (note 7) Amortized cost 113,287 117,725 104,035 Cash and cash equivalents (note 20) Amortized cost Accounts receivable (note 10) Amortized cost 45,512 35,554 45,512 208,914 35,554 69,513 104,035 208,914 69,513 Interest rate swap derivative assets (note 9) FVTPL 1,466 1,466 3,723 3,723 Financial Liabilities: Debt (note 11) Mortgages Amortized cost 716,813 755,780 737,448 759,823 Construction loans payable Amortized cost 57,104 57,104 23,210 23,210 Unsecured Facilities Amortized cost 60,000 60,000 — — Unsecured Debentures Amortized cost 1,642,119 1,754,526 945,369 966,973 Unsecured Term Loans Amortized cost 249,426 277,963 449,154 Interest rate swap liability (note 13) FVTPL 26,539 26,539 10,720 457,310 10,720 Accounts payable and other liabilities (note 13) Amortized cost 314,667 314,667 270,872 270,872 Allied uses various methods in estimating the fair value of assets and liabilities that are measured on a recurring or non-recurring basis in the consolidated balance sheet after initial recognition . The fair value hierarchy reflects the significance of inputs used in determining the fair values . — — Level 1 – quoted prices in active markets for identical assets and liabilities; Level 2 – inputs other than quoted prices in active markets or valuation techniques where significant inputs are based on observable market data; and — Level 3 – valuation technique for which significant inputs are not based on observable market data . 137 ALLIED 2020 ANNUAL REPORT The following table presents the hierarchy of the significance of inputs in determining the fair value of assets and liabilities for measurement or disclosure based on Allied’s accounting policy for such instrument: Financial Assets: DECEMBER 31, 2020 DECEMBER 31, 2019 LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 1 LEVEL 2 LEVEL 3 Loans and notes receivable (note 8) Loan receivable from joint venture (note 7) — — 355,819 117,725 Cash and cash equivalents (note 20) 45,512 — Accounts receivable (note 10) Interest rate swap derivative assets (note 9) Financial Liabilities: Debt (note 11) Mortgages Construction loans payable Unsecured Facilities Unsecured Debentures Unsecured Term Loans Interest rate swap liability (note 13) Accounts payable and other liabilities (note 13) — — — — — — — — — 35,554 1,466 755,780 57,104 60,000 1,754,526 277,963 26,539 314,667 — — — — — — — — — — — — — — 251,276 104,035 208,914 — — — — — — — — — — 69,513 3,723 759,823 23,210 — 966,973 457,310 10,720 270,872 — — — — — — — — — — — — There were no transfers between levels of the fair value hierarchy during the years ended December 31, 2020 and 2019 . The following summarizes the significant methods and assumptions used in estimating the fair value of Allied’s financial assets and liabilities measured at fair value: Interest Rate Swap Derivative Contracts The fair value of Allied’s interest rate derivative contracts, which represent a net liability as at December 31, 2020, is $25,073 (December 31, 2019 - $6,997) . The fair value of the derivative contracts is determined using forward interest rates observable in the market (Level 2) . Interest rate swap derivative asset (note 9) Interest rate swap derivative liability (note 13) Total 138 DECEMBER 31, 2020 DECEMBER 31, 2019 $1,466 (26,539) $(25,073) $3,723 (10,720) $(6,997) ALLIED 2020 ANNUAL REPORT Debt The fair value of debt is determined by discounting the cash flows of these financial instruments using year end market rates for instruments of similar terms and credit risks that are observable in the market (Level 2) . 15 . UNITHOLDERS’ EQUITY The following represents the number of Units issued and outstanding, and the related carrying value of Unitholders’ equity, for the years ended December 31, 2020 and December 31, 2019 . Units, beginning of year 122,838,799 $3,725,472 103,861,945 $2,835,395 DECEMBER 31, 2020 DECEMBER 31, 2019 UNITS AMOUNT UNITS AMOUNT Restricted Unit Plan (net of forfeitures) (note 16(b)) — (2,695) — Unit Option Plan - options exercised (note 16(a)) 277,311 9,805 277,854 Unit issuance Units, end of year 4,143,108 152,079 18,699,000 127,259,218 $3,884,661 122,838,799 $3,725,472 (2,462) 10,437 882,102 On September 4, 2020, Allied raised gross proceeds of $153,295 through a private placement issuance of 4,143,108 Units at a price of $37 .00 per Unit . Costs relating to the issuance totaled $1,216 and were applied against the gross proceeds of the issuance and charged against Unitholders’ equity . On December 4, 2019, Allied raised gross proceeds of $345,449 through the issuance of 6,555,000 Units at a price of $52 .70 per unit . Costs relating to the issuance totaled $14,568 and were applied against the gross proceeds of the issuance and charged against Unitholders’ equity . On June 19, 2019, Allied raised gross proceeds of $345,524 through the issuance of 7,176,000 Units at a price of $48 .15 per unit . Costs relating to the issuance totaled $14,571 and were applied against the gross proceeds of the issuance and charged against Unitholders’ equity . On March 7, 2019, Allied raised gross proceeds of $230,018 through the issuance of 4,968,000 Units at a price of $46 .30 per unit . Costs relating to the issuance totaled $9,750 and were applied against the gross proceeds of the issuance and charged against Unitholders’ equity . Allied does not hold any of its own Units, nor does Allied reserve any Units for issue under options and contracts . Distributions On January 15, 2021, Allied declared a distribution for the month of January 2021 of $0 .1417 per Unit, representing $1 .70 per Unit on an annualized basis to Unitholders of record on January 29, 2021 . 139 ALLIED 2020 ANNUAL REPORTNormal Course Issuer Bid On February 20, 2020, Allied received approval from the Toronto Stock Exchange (“TSX”) for the renewal of its normal course issuer bid (“NCIB”), which entitles Allied to purchase up to 12,100,300 of its outstanding Units, representing approximately 10% of its public float as at February 10, 2020 . The NCIB commenced February 24, 2020, and will expire on February 23, 2021, or such earlier date as Allied completes its purchases pursuant to the NCIB . All purchases under the NCIB will be made on the open market through the facilities of the TSX or alternate trading systems in Canada at market prices prevailing at the time of purchase . Any Units that are repurchased will either be cancelled or delivered to participants under Allied’s Restricted Unit Plan or to employees pursuant to Allied’s employee programs . During the year ended December 31, 2020, Allied purchased 48,688 Units for $2,767 at a weighted average price of $56 .83 per Unit under its NCIB program, of which 48,148 Units were purchased for delivery to participants under Allied’s Restricted Unit Plan and 540 Units were purchased for certain employee rewards outside of Allied’s Restricted Unit Plan . 16 . UNIT OPTION AND RESTRICTED UNIT PLANS (a) Unit Option Plan Allied adopted a Unit Option Plan providing for the issuance, from time to time, at the discretion of the trustees, of options to purchase Units for cash . Participation in the Unit Option Plan is restricted to certain employees of Allied . The Unit Option Plan complies with the requirements of the TSX . The exercise price of any option granted will not be less than the closing market price of the Units on the day preceding the date of grant . Options granted prior to February 22, 2017, vest evenly over three years and options granted subsequently vest evenly over four years from the date of grant . All options are settled in Units . SUMMARY OF UNIT OPTION GRANTS: Date granted Expiry date Unit options granted Exercise price Exercised - life to date Forfeited - life to date Net outstanding Vested March 1, 2016 March 1, 2026 540,480 $31 .56 (344,499) (19,132) 176,849 176,849 February 22, 2017 February 22, 2027 279,654 $35 .34 (23,576) February 14, 2018 February 14, 2028 198,807 $40 .30 (14,685) — — 256,078 186,165 184,122 85,876 February 13, 2019 February 13, 2029 323,497 $47 .53 (2,717) (1,830) 318,950 88,886 February 5, 2020 February 5, 2030 352,230 $54 .59 — — 352,230 10,620 1,694,668 (385,477) (20,962) 1,288,229 548,396 140 ALLIED 2020 ANNUAL REPORT YEAR ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 The range of exercise prices Weighted average remaining contractual life (years) The range of exercise prices Weighted average remaining contractual life (years) For the Units outstanding at the end of the year $31.56-54.59 7.45 $31 .56-47 .53 7 .02 YEAR ENDED YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 Number of Units Weighted average exercise price Number of Units Weighted average exercise price Balance at the beginning of the year Granted during the year Forfeited during the year Exercised during the year Balance at the end of the year 1,213,310 352,230 — (277,311) 1,288,229 Units exercisable at the end of the year 548,396 $38.75 54.59 — 35.35 $43.81 $37.25 1,169,497 $36 .05 323,497 (1,830) (277,854) 1,213,310 604,445 47 .53 47 .53 37 .56 $38 .75 $34 .49 Allied accounts for its Unit Option Plan using the fair value method, under which compensation expense is measured at the date options are granted and recognized over the vesting period . Allied utilizes the Black-Scholes Model for the valuation of Unit options with no performance criteria . Assumptions utilized in the Black-Scholes Model for option valuation are as follows: Unit options granted Unit option holding period (years) Volatility rate Distribution yield Risk-free interest rate Value of options granted YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 352,230 10 17.04% 3.00% 1.36% $2,187 323,497 10 18 .85% 3 .37% 1 .87% $1,980 141 ALLIED 2020 ANNUAL REPORT The underlying expected volatility was determined by reference to historical data of Allied’s Units over 10 years . For the year ended December 31, 2020, Allied recorded a share-based payment expense of $1,988 in general and administrative expense in the consolidated statements of income and comprehensive income (for the year ended December 31, 2019 - $1,583) . (b) Restricted Unit Plan Certain employees and the Trustees of Allied may be granted Restricted Units pursuant to the terms of the Restricted Unit Plan, which are subject to vesting conditions and disposition restrictions, in order to provide a long-term compensation incentive . The Restricted Units will not vest and remain subject to forfeiture until the participant has held his or her position with Allied for a specific period of time . One third of the Restricted Units vest on each of the first, second and third anniversaries from the date of grant for employees . Restricted Units granted to non-management trustees are fully vested on the grant date . Units required under the Restricted Unit Plan are acquired in the secondary market through a custodian and then distributed to the individual participant accounts . The following is a summary of the activity of Allied’s Restricted Unit Plan: Restricted Units, beginning of the year Granted during the year Expiration of restriction period Forfeited during the year Restricted Units, end of the year YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 287,023 48,148 (45,640) (1,396) 288,135 267,420 51,858 (31,586) (669) 287,023 For the year ended December 31, 2020, Allied recorded a share-based payment expense of $2,804 in general and administrative expense in the consolidated statements of income and comprehensive income (for the year ended December 31, 2019 - $2,437) . 142 ALLIED 2020 ANNUAL REPORT 17 . WEIGHTED AVERAGE NUMBER OF UNITS The weighted average number of Units for the purpose of calculating basic and diluted income per unit is as follows: Basic Unit Option Plan Fully diluted 18 . TOTAL REVENUE Total revenue includes the following: Rental revenue (1) Tax and insurance recoveries Miscellaneous revenue (2) Operating cost recoveries Total rental revenue from investment properties Condominium revenue Total revenue YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 124,427,715 108,919 124,536,634 112,443,006 288,044 112,731,050 YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 $263,184 98,649 23,801 174,693 $560,327 178 $560,505 $227,528 83,368 22,506 162,707 $496,109 45,341 $541,450 Includes straight-line rent, amortization of tenant improvements and parking revenue earned at properties. (1) (2) Includes lease terminations, third-party managed parking, variable percentage rent and other miscellaneous items. Future minimum rental income is as follows: Future minimum rental income $297,893 $932,620 $995,190 $2,225,703 2021 2022-2025 THEREAFTER TOTAL 143 ALLIED 2020 ANNUAL REPORT 19 . GENERAL AND ADMINISTRATIVE EXPENSES Salaries and benefits Professional and trustee fees Office and general expenses Capitalized to qualifying investment properties Total general and administrative expenses YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 $18,652 3,747 4,628 $27,027 (4,812) $22,215 $19,036 3,388 3,932 $26,356 (4,403) $21,953 20 . SUPPLEMENTAL CASH FLOW INFORMATION Cash and cash equivalents include the following components: Cash Short-term deposits Total cash and cash equivalents DECEMBER 31, 2020 DECEMBER 31, 2019 $45,012 500 $45,512 $208,414 500 $208,914 The following summarizes supplemental cash flow information in operating activities: Supplemental Interest paid on debt (including capitalized interest (note 11)) YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 $97,521 $86,272 The following summarizes supplemental cash flow information in investing activities: Supplemental Mortgages assumed (note 4) $10,000 $161,951 YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 144 ALLIED 2020 ANNUAL REPORT The following summarizes the change in non-cash operating items: YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 Net change in accounts receivable, prepaid expenses and deposits Add back: Prepaid expenses and deposits Add back: Deposits on acquisitions Change in inventory due to sale of residential units Net change in loans and notes receivable Net change in accounts payable and other liabilities Less: Non-cash interest Less: Distributions payable to Unitholders Less: Mortgage interest swap liability Less: Accrued amounts from acquired properties (net of assumed mortgage premiums) Change in non-cash operating items 21 . JOINT OPERATIONS $65,492 13,202 3,550 — (389) 59,614 (6,092) (1,160) (15,819) (9,189) $109,209 $(97,308) — 28,250 43,342 6,340 72,546 (6,324) (2,524) (2,939) (12,054) $29,329 Allied has investments in properties under joint arrangements which are accounted for as joint operations . The following tables summarize Allied’s ownership interests in joint operations and its share of the rights to the assets, its share of the obligations with respect to liabilities, and its share of revenues and expenses for the joint operations in which it participates . Allied’s joint arrangements are governed by agreements with the respective co-owners . Included within the agreements are standard exit and transfer provisions that include, but are not limited to, buy/sell and/or right of first offers or refusals that provide for unwinding the arrangement . Allied is liable for its proportionate share of the obligations of the arrangement . In the event that there is default on payment by the co-owner, credit risk is typically mitigated with an option to remedy any non-performance by the defaulting co-owner, as well as recourse against the asset, whereby claims would be against both the underlying real estate investments and the co-owner in default . 145 ALLIED 2020 ANNUAL REPORTPROPERTIES LOCATION CURRENT STATUS 478 King W 642 King W 731-10th SW 802-838 11th SW, Glenbow Assembly Toronto, ON Toronto, ON Calgary, AB Rental Property Rental Property Rental Property Calgary, AB Rental Property Adelaide & Duncan Toronto, ON Property Under Development Breithaupt Block Kitchener, ON College & Manning Toronto, ON Rental Property and Property Under Development Rental Property and Property Under Development College & Palmerston Toronto, ON Rental Property KING Toronto Toronto, ON Property Under Development King Portland Centre Toronto, ON Sherwin Block Calgary, AB Rental Property Rental Property The Well (1) Toronto, ON Property Under Development OWNERSHIP DECEMBER 31, 2020 DECEMBER 31, 2019 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% 50% (1) Allied owns an undivided 40% interest in the residential component and an undivided 50% interest in the commercial component of The Well. The residential component is comprised of residential air rights, which were sold by the co-ownership in 2016, with the first phase closing in December 2020 and the remaining phases expected to close in 2021 when certain specified conditions are met. The commercial component is comprised of the office and retail components of the property under development. Total assets Total liabilities Revenue Expenses Income before fair value adjustment on investment properties Fair value gain (loss) on investment properties Net income (loss) DECEMBER 31, 2020 DECEMBER 31, 2019 $1,258,241 $340,930 $1,034,433 $273,556 YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 $18,267 (10,088) 8,179 18,066 $26,245 $63,068 (55,960) 7,108 (10,213) $(3,105) 146 ALLIED 2020 ANNUAL REPORT 22 . SEGMENTED INFORMATION IFRS 8, Operating Segments, requires reportable segments to be determined based on internal reports that are regularly reviewed by the chief operating decision maker (“CODM”) for the purpose of allocating resources to the segment and assessing its performance . Allied has determined that its CODM is the President and Chief Executive Officer . Allied’s operating segments are managed by use of properties and geographical locations . Urban Data Centres are comprised of properties operating similar to data centres and colocation facilities . The urban office properties are managed by geographic location consisting of three areas . The CODM measures and evaluates the performance of Allied’s operating segments based on net rental income and condominium profits . Condominium profits during the year ended December 31, 2020, were $178 (December 31, 2019 - $1,999) . Management reviews assets and liabilities on a total basis and therefore assets and liabilities are not included in the segmented information below . Allied does not allocate interest expense to segments as debt is viewed by Management to be used for the purpose of acquisitions, development and improvement of all the properties . Similarly, general and administrative expenses, interest income, fair value of investment properties and fair value of derivative instruments are not allocated to operating segments . 147 ALLIED 2020 ANNUAL REPORTThe following summary tables present a reconciliation of operating income to net income for the years ended December 31, 2020 and 2019 . SEGMENTED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Year ended December 31, 2020 MONTRÉAL & OTTAWA TORONTO & KITCHENER CALGARY, EDMONTON & VANCOU- VER (1) URBAN DATA CENTRES CONDO- MINIUMS JOINT VENTURE (TELUS SKY) TOTAL Rental revenue from investment properties $198,049 $210,798 $63,853 $90,091 Property operating costs (98,556) (82,369) (27,689) (34,095) Net rental income $99,493 $128,429 $36,164 $55,996 Condominium revenue Condominium cost of sales Condominium profits — — — — — — — — — — — — $— — $— 178 — 178 $(2,464) $560,327 1,219 (241,490) $(1,245) — — — 178 — 178 Operating income $99,493 $128,429 $36,164 $55,996 $178 $(1,245) $319,015 Interest expense General and administrative expenses Condominium marketing expenses Amortization of other assets Interest income Fair value gain on investment properties Fair value loss on derivative instruments Net loss from joint venture Net income and comprehensive income (1) Includes Allied’s proportionate share of revenue and expenses of its investment in TELUS Sky. (72,603) (22,215) (1,230) (1,467) 19,819 280,590 (17,996) (3,184) $500,729 148 ALLIED 2020 ANNUAL REPORT SEGMENTED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Year ended December 31, 2019 MONTRÉAL & OTTAWA TORONTO & KITCHENER CALGARY, EDMONTON & VANCOU- VER (1) URBAN DATA CENTRES CONDO- MINIUMS JOINT VENTURE (TELUS SKY) TOTAL Rental revenue from investment properties $144,849 $208,035 $56,311 $88,055 Property operating costs (73,040) (79,460) (23,599) (34,919) Net rental income $71,809 $128,575 $32,712 $53,136 $— — $— Condominium revenue Condominium cost of sales Condominium profits — — — — — — — — — — — — 45,341 (43,342) 1,999 $(1,141) $496,109 271 (210,747) $(870) — — — 45,341 (43,342) 1,999 Operating income $71,809 $128,575 $32,712 $53,136 $1,999 $(870) $287,361 Interest expense General and administrative expenses Condominium marketing expenses Amortization of other assets Interest income Fair value gain on investment properties Fair value loss on derivative instruments Net loss from joint venture Net income and comprehensive income (1) Includes Allied’s proportionate share of revenue and expenses of its investment in TELUS Sky. (66,403) (21,953) (4,214) (1,456) 17,351 450,490 (6,109) (25,844) $629,223 149 ALLIED 2020 ANNUAL REPORT 23 . INCOME TAXES Allied qualifies as a REIT and MFT for income tax purposes . Pursuant to its Declaration of Trust, it also distributes or designates substantially all of its taxable income to Unitholders and deducts such distributions or designations for income tax purposes . Accordingly, there is no entity level tax and no provision for current and deferred income taxes in the financial statements . Income tax obligations relating to distributions of Allied are the obligations of the Unitholders . 24 . RELATED PARTY TRANSACTIONS Allied’s related parties include its subsidiaries, nominee corporations, Allied Properties Management Trust, Allied Properties Management Limited Partnership, Allied Properties Management GP Limited, the TELUS Sky joint venture, key management, Board of Trustees, and their close family members . Allied engages in third-party property management business, including the provision of services for properties in which a trustee of Allied has an ownership interest . For the year ended December 31, 2020, real estate service revenue earned from these properties $368 (December 31, 2019 - $373) . As at December 31, 2020, the loan to the TELUS Sky joint venture has a balance outstanding of $113,287 (December 31, 2019 - $104,035) (see note 7) . The transactions are in the normal course of operations and were measured at the amount set out in agreement between the respective property owners . Related party transactions were made on terms equivalent to those that prevail in arm’s length transactions . Transactions with key management personnel are summarized in the table below: YEAR ENDED DECEMBER 31, 2020 DECEMBER 31, 2019 Salary, bonus and other short-term employee benefits Unit-based compensation Total $3,816 3,849 $7,665 $4,552 3,337 $7,889 25 . RISK MANAGEMENT (a) Capital management Allied defines capital as the aggregate of Unitholders’ equity, mortgages payable, construction loans payable, Unsecured Facilities, Unsecured Debentures, Unsecured Term Loans and lease liabilities . Allied manages its capital to comply with investment and debt restrictions pursuant to the Declaration of Trust, to comply with debt covenants, to ensure sufficient operating funds are available to fund business strategies, to fund leasing and capital expenditures, to fund acquisitions and development activities of properties, and to provide stable and growing cash distributions to Unitholders . 150 ALLIED 2020 ANNUAL REPORTVarious debt, equity and earnings distributions ratios are used to monitor capital adequacy requirements . For debt management, debt to gross book value and fair value, debt average term to maturity, and variable debt as a percentage of total debt are the primary ratios used in capital management . The Declaration of Trust requires Allied to maintain debt to gross book value, as defined by the Declaration of Trust, of less than 60% (65% including convertible debentures, if any) and the variable rate debt and debt having maturities of less than one year to not exceed 15% of gross book value . As at December 31, 2020, the debt to gross book value ratio was 29 .2% (December 31, 2019 - 26 .1%) and debts having variable interest rates or maturities of less than one year aggregated to 0 .9% of gross book value (December 31, 2019 - 0 .4%) . On November 19, 2019, Allied filed a short form base shelf prospectus allowing for the issuance, from time to time, of Units and debt securities, or any combination thereof having an aggregate offering price of up to $2,000,000 . This document is valid for a 25-month period . Allied has certain key financial covenants in its Unsecured Debentures, Unsecured Facility and Unsecured Term Loans . The key financial covenants include debt service ratios and leverage ratios, as defined in the respective agreements . These ratios are evaluated by Allied on an ongoing basis to ensure compliance with the agreements . Allied was in compliance with each of the key financial covenants under these agreements as at December 31, 2020 . (b) Market risk Market risk is the risk that the fair value or future cash flow of financial instruments will fluctuate because of changes in market prices . Allied is exposed to interest rate risk on its borrowings . Substantively all of Allied’s mortgages payable as at December 31, 2020, are at fixed interest rates and are not exposed to changes in interest rates during the term of the debt . However, there is interest rate risk associated with Allied’s fixed interest rate term debt due to the expected requirement to refinance such debts upon maturity . As fixed rate debt matures and as Allied utilizes additional floating rate debt under the Unsecured Facilities, Allied will be further exposed to changes in interest rates . As at December 31, 2020, the Unsecured Facilities, which are at floating interest rates and are exposed to changes in interest rates, had a balance outstanding of $60,000 (December 31, 2019 - nil) . In addition, there is a risk that interest rates will fluctuate from the date Allied commits to a debt to the date the interest rate is set with the lender . As part of its risk management program, Allied endeavours to maintain an appropriate mix of fixed rate and floating rate debt, to stagger the maturities of its debt and to minimize the time between committing to a debt and the date the interest rate is set with the lender . The following table illustrates the annualized sensitivity of income and equity to a reasonably possible change in interest rates of +/- 1 .0% . These changes are considered to be reasonably possible based on observation of current market conditions . The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates . All other variables are held constant . 151 ALLIED 2020 ANNUAL REPORTAS AT DECEMBER 31, 2020 CARRYING AMOUNT INCOME IMPACT INCOME IMPACT Mortgages and construction loans payable maturing within one year $26,668 $267 $(267) -1.0% +1.0% (c) Credit risk As Allied has provided loans and advances to facilitate property development, further credit risks arise in the event that borrowers default on the repayment of their amounts owing to Allied . Allied’s loans and advances will be subordinate to prior ranking mortgages or charges . As at December 31, 2020, Allied had $320,526 outstanding in loans receivable (December 31, 2019 - $245,303) and $113,287 outstanding in joint venture loan receivable (December 31, 2019 - $104,035) . In the event of a large commercial real estate market correction, the fair market value of an underlying property may be unable to support the loan value . Allied mitigates this risk by obtaining corporate guarantees and/ or registered mortgage charges and assignment of leases, performing credit checks on potential borrowers, monitoring the financial and operating performance of borrowers, monitoring the status of development projects and ensuring interest payments are made on time . The expected credit losses are estimated by Management, giving consideration to the factors above, as at December 31, 2020 and 2019 to be $nil, respectively (note 8) . Credit risk from user receivables arises from the possibility that users may experience financial difficulty and be unable to fulfill their lease commitments, resulting in Allied incurring a financial loss . Allied manages credit risk to mitigate exposure to financial loss by staggering lease maturities, diversifying revenue sources over a large user base, ensuring no individual user contributes a significant portion of Allied’s revenues and conducting credit reviews of new users . The maximum credit risk exposure related to user receivables is equivalent to the carrying amount of the user receivable balance . The expected credit losses are estimated by Management at December 31, 2020 and December 31, 2019, to be $6,649 and $3,899, respectively (Note 10 (a)) . Allied considers that all the financial assets that are not impaired or past due for each of the reporting dates under review are of good quality . The carrying amount of accounts receivable best represents Allied’s maximum exposure to credit risk . None of Allied’s financial assets are secured by collateral or other credit enhancements . An aging of trade receivables, including trade receivables past due but not impaired can be shown as follows: DECEMBER 31, 2020 DECEMBER 31, 2019 $3,632 2,591 10,631 $16,854 $2,658 835 4,193 $7,686 Less than 30 days 30 to 60 days More than 60 days Total 152 ALLIED 2020 ANNUAL REPORT (d) Liquidity risk Liquidity risk arises from the possibility of not having sufficient capital available to fund ongoing operations or the ability to refinance or meet obligations as they come due . Mitigation of liquidity risk is also managed through credit risk as discussed above . A significant portion of Allied’s assets have been pledged as security under the related mortgages and other security agreements . Interest rates on the mortgages payable are between 3 .59% and 4 .80% for December 31, 2020 (December 31, 2019 - 3 .59% and 5 .08%) . As at December 31, 2020, Allied has entered into interest rate derivative contracts to limit its exposure to fluctuations in interest rates on $81,682 of its variable rate mortgages payable, $250,000 of its variable rate Unsecured Term Loans and $37,881 of its construction loans (December 31, 2019 - $84,594, $450,000 and $14,144, respectively) . Gains or losses arising from the change in fair values of the interest rate derivative contracts are recognized in the consolidated statements of income and comprehensive income . For the year ended December 31, 2020, Allied recognized as part of the change in fair value adjustment on derivative instruments a net loss of $17,996 (for the year ended December 31, 2019 – $6,109) . Liquidity and capital availability risks are mitigated by maintaining appropriate levels of liquidity, diversifying Allied’s sources of funding, maintaining a well-staggered debt maturity profile and actively monitoring market conditions . (e) Maturity analysis The undiscounted future principal and interest payments on Allied’s debt instruments are as follows: 2021 2022 2023 2024 2025 THEREAFTER TOTAL Mortgages payable $56,665 $258,352 $259,552 $161,748 $16,929 $44,378 $797,624 Construction loans payable Unsecured Facilities 1,029 1,590 8,424 44,690 5,754 1,590 60,133 — — — — — 59,897 63,313 Unsecured Debentures 54,555 204,555 48,654 48,654 245,018 1,434,326 2,035,762 Unsecured Term Loans 8,740 8,740 8,740 8,740 8,740 294,035 337,735 Total $122,579 $481,661 $421,769 $224,896 $270,687 $1,772,739 $3,294,331 153 ALLIED 2020 ANNUAL REPORT26 . COMMITMENTS AND CONTINGENCIES Allied has entered into commitments for acquisitions, building renovations with respect to leasing activities and development costs . The commitments as at December 31, 2020 and December 31, 2019, were $335,344 and $687,242, respectively . Commitments as at December 31, 2020 and December 31, 2019, of $551 and $1,238, respectively, were held within equity accounted investments . Allied is subject to legal and other claims in the normal course of business . Management and legal counsel evaluate all claims . In the opinion of Management these claims are generally covered by Allied’s insurance policies and any liability from such remaining claims are not probable to occur and would not have a material effect on the consolidated financial statements . Allied, through a financial intermediary, has issued letters of credit in the amount of $24,578 as at December 31, 2020 (December 31, 2019 - $15,036) . 27 . SUBSEQUENT EVENTS On January 28, 2021, Allied completed the purchase of 432 Wellington Street W, Toronto, for total cash consideration of $17,200 . 154 ALLIED 2020 ANNUAL REPORT2021 Outlook LOW-TO-MID-SINGLE-DIGIT % GROWTH IN SANOI LOW-TO-MID-SINGLE-DIGIT % GROWTH IN FFO/UNIT LOW-TO-MID-SINGLE-DIGIT % GROWTH IN AFFO/UNIT CONTINUED GROWTH IN NAV/UNIT CONTINUED STRONG DEBT-METRICS CONTINUED GROWTH IN UNENCUMBERED ASSETS ALLIED PROPERTIES REIT 134 PETER STREET, SUITE 1700 TORONTO, ONTARIO M5V 2H2 T 416.977.9002 F 416.306.8704 alliedreit.com 

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