Allied Properties Real Estate Investment Trust Annual Report 2020

FY2020 Annual Report · Allied Properties Real Estate Investment Trust

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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 . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisitions & Dispositions . . . . . . . . . . . . . . . . . .

Environmental, Social and

Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

ALLIED 2020 ANNUAL REPORTLetter 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 .

ALLIED 2020 ANNUAL REPORTLooking 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

ALLIED 2020 ANNUAL REPORT7

ALLIED 2020 ANNUAL REPORTManagement’s Discussion and
Analysis of Results of Operations
and Financial Condition as at
December 31, 2020

ALLIED 2020 ANNUAL REPORTSection 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”,

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

ALLIED 2020 ANNUAL REPORTand 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 .

ALLIED 2020 ANNUAL REPORTSUMMARY 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

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

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

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.

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 .

ALLIED 2020 ANNUAL REPORTAllied’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 .

ALLIED 2020 ANNUAL REPORTWhen 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 .

ALLIED 2020 ANNUAL REPORTPROPERTY 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

ALLIED 2020 ANNUAL REPORTACQUISITIONS 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

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 .

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 .

ALLIED 2020 ANNUAL REPORTBUSINESS 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 .

ALLIED 2020 ANNUAL REPORTSection 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 .

ALLIED 2020 ANNUAL REPORTSTATUS

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%

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 .

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

11 .4%

$23 .52

$15 .35

ALLIED 2020 ANNUAL REPORTUSER 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 .3%

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

BBB/BBB+/Baa2

AH/BBB+/A2

-/BBB-/Baa3*

-/CCC+/Caa2*

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

ALLIED 2020 ANNUAL REPORTThe 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

ALLIED 2020 ANNUAL REPORTSection 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

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

—

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

ALLIED 2020 ANNUAL REPORT

DECEMBER 31, 2020

DECEMBER 31, 2019

INVEST-
MENT
IN JOINT
VENTURE

PROPOR-
TIONATE
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 .

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

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)

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 .

ALLIED 2020 ANNUAL REPORTComparable 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

ALLIED 2020 ANNUAL REPORTRENTAL 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.

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 .

ALLIED 2020 ANNUAL REPORT151 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

ALLIED 2020 ANNUAL REPORT151 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 .

ALLIED 2020 ANNUAL REPORTAllied 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 .

ALLIED 2020 ANNUAL REPORTPotential 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

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

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 .

ALLIED 2020 ANNUAL REPORTAllied 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.

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 .

ALLIED 2020 ANNUAL REPORTAllied 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

Adelaide & Duncan, Toronto (2)(5)

Office, retail, residential

QRC West Phase II, Toronto (6)

KING Toronto, Toronto (2)(7)

Total

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.

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

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

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

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 .

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 .

ALLIED 2020 ANNUAL REPORTDEVELOPMENT 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

$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

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 .

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

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) .

ALLIED 2020 ANNUAL REPORTOn 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

ALLIED 2020 ANNUAL REPORTSection 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 .

ALLIED 2020 ANNUAL REPORTDEBT

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%

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 .

ALLIED 2020 ANNUAL REPORTThe 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%

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% .

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 .

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

3 .636%

April 21, 2025

April 21 and October 21

200,000

3 .394%

August 15, 2029

February 15 and August 15

300,000

3 .113%

April 8, 2027

April 8 and October 8

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 .

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

Unsecured Term Facility

Tranche 1

Tranche 2

2 .830%

March 16, 2021

2 .890%

March 16, 2021

Quarterly

Unsecured Term Loans, principal

Net financing costs

—

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 .

ALLIED 2020 ANNUAL REPORT

CREDIT RATINGS

Allied’s credit ratings as at December 31, 2020, are summarized below:

DEBT

Issuer Rating &
Unsecured Debentures

RATING AGENCY

LONG-TERM
CREDIT RATING

TREND/OUTLOOK

DBRS Limited

Moody’s Investors Service Inc .

BBB

Baa2

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 .

ALLIED 2020 ANNUAL REPORTFINANCIAL 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 .

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 .

ALLIED 2020 ANNUAL REPORTDuring 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 .

ALLIED 2020 ANNUAL REPORTDISTRIBUTIONS 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 .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 .04

$0 .05

% increase

3 .5%

2 .7%

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 .

ALLIED 2020 ANNUAL REPORTIn 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 .

ALLIED 2020 ANNUAL REPORTSection 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 .

ALLIED 2020 ANNUAL REPORTNET 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)

—

$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

ALLIED 2020 ANNUAL REPORTDECEMBER 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 .

ALLIED 2020 ANNUAL REPORTNET 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).

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 .

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 .

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

33,903

8,423

64,527

12,690

77,217

894

$1,975

(1,081)

(672)

222

1,702

1,924

(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)%

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 .

ALLIED 2020 ANNUAL REPORTSame 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)

$(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

$70,670

129,806

$3,761

(859)

31,318

(3,045)

231,794

53,226

285,020

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)%

(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 .

ALLIED 2020 ANNUAL REPORTINTEREST 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

—

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 .

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 .

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 .

ALLIED 2020 ANNUAL REPORTTo 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

$264,960

$(181,118)

(216,130)

(8,098)

1,968

7,879

199,250

3,376

(223)

14,979

(12,908)

690

$66,304

(30,600)

29,022

904

3,455

(76)

$8,438

30,600

(29,022)

(677)

(3,455)

$5,884

(239)

319

(87)

156

875

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.

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)

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 .

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

ALLIED 2020 ANNUAL REPORTSection VI
—Historical Performance

The following sets out summary information and financial results, on an IFRS basis, for the eight most

recently completed fiscal quarters .

ALLIED 2020 ANNUAL REPORTQ4
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

—

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

$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 REPORTQ4
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%

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 .

ALLIED 2020 ANNUAL REPORTSection 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 .

ALLIED 2020 ANNUAL REPORTSection 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 .

ALLIED 2020 ANNUAL REPORTIt 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 .

ALLIED 2020 ANNUAL REPORTSection 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 .

ALLIED 2020 ANNUAL REPORTCOVID-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 .

ALLIED 2020 ANNUAL REPORTThe 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:

ALLIED 2020 ANNUAL REPORTInterest 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 .

ALLIED 2020 ANNUAL REPORTLEASE 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 .

ALLIED 2020 ANNUAL REPORTENVIRONMENTAL 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 .

ALLIED 2020 ANNUAL REPORTTAXATION 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 .

ALLIED 2020 ANNUAL REPORTREAL 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 .

ALLIED 2020 ANNUAL REPORTSection 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%

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

—

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

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%

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

—

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

—

—%

25,337

—

25,337

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 %

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

—

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

—

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

7,090

270,765

97 .4%

173,000

46,899

126,101

72 .9%

59,056

—

59,056

100 .0%

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

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

203

121

171

769

ALLIED 2020 ANNUAL REPORTConsolidated Financial Statements

For the Years Ended December 31,
2020 and 2019

ALLIED 2020 ANNUAL REPORTManagement’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

ALLIED 2020 ANNUAL REPORT99

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 REPORTOTHER 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 REPORTAs 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 REPORTFrom 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 REPORTALLIED 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

$8,687,375

$7,469,265

140,038

117,112

322,543

23,643

9,290,711

45,512

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

11 (f)

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

$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

$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

$2,835,395

$1,521,035

$18,233

$4,374,663

Net income and comprehensive income

—

629,223

Unit issuance (net of issuance costs)

882,102

—

Distributions

—

(180,284)

Unit Option Plan – options exercised

Contributed surplus – Unit Option Plan

Restricted Unit Plan (net of forfeitures)

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

$3,725,472

$1,969,974

$22,253

$5,717,699

Net income and comprehensive income

—

500,729

Unit issuance (net of issuance costs)

152,079

—

Distributions

—

(205,377)

Unit Option Plan – options exercised

Contributed surplus – Unit Option Plan

Restricted Unit Plan (net of forfeitures)

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

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)

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

11 (f)

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 (e)

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)

10 (d)

(567,971)

(3,550)

5, 11 (f)

(346,766)

(274,707)

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 REPORTThe 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 .

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 REPORTInvestment 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 REPORTJoint 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

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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 REPORTOn 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 REPORTTYPE OF LEASE

Ground lease

Management office

Other

ROU ASSET CLASSIFICATION

ROU LIABILITY CLASSIFICATION

Investment properties

Other assets

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 REPORT3 . 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 REPORTIncome 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 REPORTThe 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 REPORT4 . 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%

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

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%

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

4,223

37,777

17,533

Capital expenditures

80,922

265,844

346,766

55,428

219,279

274,707

Dispositions

—

(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%

6 .63%

5 .38%

4 .98%

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 .

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%

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

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

3 .636%

3 .394%

3 .113%

3 .117%

3 .131%

April 21, 2025

April 21 and October 21

200,000

August 15, 2029

February 15 and August 15

300,000

April 8, 2027

April 8 and October 8

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

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

$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

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

—

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

$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

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

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

23,210

Unsecured Facilities

Amortized cost

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

10,720

457,310

10,720

Accounts payable and other liabilities
(note 13)

Amortized cost

314,667

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 REPORTNormal 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

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

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

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

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

17.04%

3.00%

1.36%

$2,187

323,497

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 REPORTPROPERTIES

LOCATION

CURRENT STATUS

478 King W

642 King W

731-10th SW

802-838 11th SW,
Glenbow Assembly

Toronto, ON

Calgary, AB

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

College & Palmerston

Toronto, ON

Rental Property

KING Toronto

Toronto, ON

Property Under Development

King Portland Centre

Toronto, ON

Sherwin Block

Calgary, AB

Rental Property

The Well (1)

Toronto, ON

Property Under Development

OWNERSHIP

DECEMBER
31, 2020

DECEMBER
31, 2019

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 REPORTThe 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 REPORTVarious 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 REPORTAS AT DECEMBER 31, 2020

CARRYING AMOUNT

INCOME IMPACT

Mortgages and construction loans payable
maturing within one year

$26,668

$267

$(267)

-1.0%

+1.0%

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

245,018

1,434,326

2,035,762

Unsecured Term Loans

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 REPORT26 . 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 REPORT2021 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