Mr. Michael Emory reports

ALLIED ANNOUNCES FOURTH-QUARTER AND YEAR-END RESULTS

Allied Properties Real Estate Investment Trust has released results for its fourth quarter and year ended Dec. 31, 2016. "Our strategy is to profit from the ongoing intensification of Canada's major cities by operating, consolidating and developing distinctive urban workspace," said Michael Emory, president and chief executive officer. "In the last two years, we pursued our strategy intently and successfully. We invested over $500-million in existing Class 1 properties, with roughly half that amount involving properties with material value-add potential, and another $200-million in development projects, seven of which reached completion in the two-year period. In the face of this extraordinary level of capital investment, we maintained strong balance sheet metrics and increased our annual distribution in both years while maintaining respectable payout ratios."

Results

The financial results are summarized in the attached tables (all amounts are in thousands, except for per-unit and percentage amounts).

                                                  As at Dec. 31, 2016   As at Dec. 31, 2015       
                                                                          
Investment properties                                    $  4,923,201          $  4,197,277 
Unencumbered investment properties                          2,306,215             1,619,465 
Cost of PUD as a per cent of GBV                                 3.4%                  4.7%    
NAV per unit                                                    35.66                 33.05   
Total debt as a per cent of total assets                        36.7%                 35.8%   
Adjusted EBITDA                                               232,399               219,208 
Net debt as a multiple of annualized adjusted EBITDA             8.2x                  7.2x    
Interest-coverage ratio including capitalized interest           2.8x                  3.1x   
                                                                                                          
                                                 For the quarter ended Dec. 31,     
                                                     2016                 2015 
   
Adjusted EBITDA                                $   60,783           $   55,246 
Net income excluding (loss) on disposal 
and IFRS value adjustments                         35,210               36,889 
Net income                                        163,731               45,165 
Same-asset NOI -- rental portfolio                 52,299               52,807 
Same-asset NOI -- total portfolio                  55,195               54,242 
Funds from operations (FFO)                        45,501               44,318 
FFO per unit (diluted)                               0.54                 0.57   
FFO payout ratio                                    70.3%                65.1%    
Adjusted FFO                                       35,806               35,356  
AFFO per unit (diluted)                              0.42                 0.45    
AFFO payout ratio                                   89.3%                81.6%    
                                                                                                          
                                                    For the year ended Dec. 31,     
                                                     2016                 2015 

Adjusted EBITDA                               $   232,399          $   219,208  
Net income excluding (loss) on disposal
and IFRS value adjustments                        140,215              144,671 
Net income                                        324,305              254,367 
Same asset NOI -- rental portfolio                195,322              195,123 
Same asset NOI -- total portfolio                 214,798              202,544 
Normalized FFO                                    173,884              168,610 
Normalized FFO per unit (diluted)                    2.15                 2.17  
Normalized FFO payout ratio                         70.1%                67.4%  
Normalized AFFO                                   142,612              140,683 
Normalized AFFO per unit (diluted)                   1.76                 1.81  
Normalized AFFO payout ratio                        85.5%                80.8% 

The operating results are summarized in the attached table.

                                                    For the year ended Dec. 31,     
                                                     2016                 2015 

Leased area                                         92.1%                91.3%  
Occupied area                                       88.7%                90.6%  
Average in-place net rent per 
occupied square foot (period-end)                  $21.31               $19.85  
Renewal and replacement rate                        85.3%                83.6%   
Increase in net rent on maturing leases              8.1%                 5.5%

Measured by short-term results, Allied's performance in 2016 was uneven, in large part because of decisions made with a view to the longer term and in part because of delayed organic growth in its rental portfolio. At $2.15 for the year, funds from operations per unit were down slightly from 2015, primarily because of (i) delayed same-asset net operating income growth in Allied's rental portfolio and (ii) dilution from Allied's equity offering in August, 2016. With recently announced leasing progress at 5445-5455 de Gaspe in Montreal, Allied has made progress in achieving the delayed same-asset NOI growth from its rental portfolio.

Measured by long-term results, Allied's performance in 2016 was strong. Following 6-per-cent growth in net asset value per unit 2015, Allied delivered 8-per-cent growth in NAV per unit in 2016, despite NAV erosion in its Calgary portfolio. In 2015, development completions represented 46 per cent of Allied's NAV-per-unit growth, development approvals represented 17 per cent and cap-rate compression in Toronto represented the remainder. In 2016, development completions represented 28 per cent of Allied's NAV-per-unit growth, development approvals represented 25 per cent, and cap-rate compression in Toronto and Vancouver represented the remainder.

Outlook

Allied expects its operating environment to be generally favourable in 2017. Allied's internal forecast for the year contemplates (i) mid-single-digit-percentage growth in same-asset NOI, with rent growth in Toronto and occupancy gains in Montreal, Edmonton and Vancouver more than offsetting erosion in Calgary, and (ii) low- to mid-single-digit-percentage growth in FFO per unit. Allied's internal forecast is predicated on the continued intensification of the urban core of Canada's major cities and the continued desire on the part of office users to locate in distinctive urban office environments. It is also underpinned by the depth and strength of the Allied team and the team's ability to execute Allied's strategy at all levels.

At the end of 2016, the leased area of 250 Front St. West was 54 per cent, somewhat below the targeted level of 65 per cent. Accordingly, Allied made conservative leasing assumptions for the facility when finalizing its internal forecast for 2017. Management remains fully confident that leaseup will be achieved at the levels of return initially projected, just as it was at QRC West in Toronto and 5445-5455 de Gaspe in Montreal, both of which were pioneering projects. Management's confidence is underpinned by a recent opportunity in the active meet-me room at the facility that, if finalized, has the potential to generate substantial recurring revenue that will be phased in over a six-to-18-month period.

We seek Safe Harbor.