Moody’s Ratings downgraded Allied Properties Real Estate to junk status on Tuesday, citing the Canadian office landlord’s high debt levels, as well as weakening occupancy rates that will weigh on its ability to meet its obligations.  

The bond grader cut the company’s senior unsecured rating to Ba1, the highest junk rating, from Baa3, the lowest investment-grade level. The outlook remains negative. 

Allied Properties is a real estate investment trust that specializes in turning old downtown industrial and warehouse space into offices for industries including technology. The company marked down the value of its properties by nearly $500 million in the last quarter of 2023 as remote work and high interest rates weighed on commercial property.

“Although the REIT’s properties have largely outperformed the broader markets over last few years, the difficult leasing environment has weakened its portfolio occupancy and reduced rent growth,” Moody’s senior credit officer Ranjini Venkatesan wrote in the Tuesday statement.