Vital Infrastructure Ppty

Welcome to Vital Infrastructure Property Trust Second Quarter 2026 Earnings Conference Call. At this time, all lines have been placed on mute. I are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded today, May 13, 2026. I would now like to turn the conference over to Stephen Holmes. Vice President of Investor Relations. Please go ahead. One moment, please. There has been a technical issue. We will start in one minute. Thank you. I would now like to turn the conference over to Stephen Hong, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, everyone, and thanks for participating in our second quarter results conference call. This is Stephen Hong speaking. Joining me are Zach Vaughan, CEO, Stephanie Karamarkovic, CFO, Mike Brady, President, and Tracey Whittall, COO, and Dave Casimiro, EBP. Our earnings announcement was released yesterday evening, and we posted an updated investor relations presentation on our website, which listeners can refer to during the call. Following comments, we will be glad to ask and take questions from analysts. Today's discussion includes four looking statements. As always, we want to caution you that such statements are based on measurements, assumptions, and beliefs. These four looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings on CDAR+, including our MD&A and annual information form for a discussion of these risk factors. During this call, we'll also reference certain non-GAAP financial measures. A reconciliation to the most directly comparable IFRS measure is provided in our MD&A earnings release. Unless otherwise noted, all amounts discussed today are in Canadian dollars. With that, I'll now hand it over to our CEO, Zach Vaughan.

Thanks, Stephen, and thank you, everyone, for joining us today on the call. This is my fourth earnings call as CEO of Vital, having joined a little over a year ago. Since joining, the senior management team and I, with the support of our board, have been executing on a strategic plan to transform our business, centered on four key priorities. One, simplifying our footprint. Two, strengthening our balance sheet. Three, reducing our cost structure. And four, disciplined capital allocation. We are still in the early stages of this transformation, but we are making strong progress across each of these priorities as demonstrated by our results this quarter and our recent activities. Starting with the simplification of our footprint. During the quarter, we closed on the remainder of the properties in Europe that were part of our larger transaction with TPG Real Estate. The transaction represented the majority of our invested equity in Europe, generating $145 million of net proceeds. As of June 30th, Our European property operating business and employees have also been transferred to TPG. In Europe, we are left with just two remaining investments, both of which are efficient to oversee and which we intend to exit in due course. Our substantial exit from Europe, along with the internalization of Vital Trust in New Zealand, clearly demonstrates our commitment to simplifying our business and creating a more focused operating platform. Moving to our balance sheet. At the end of Q2, our LTV on a proportionate basis stands at 47%, down about 900 basis points from a year ago. Importantly, our debt to EBITDA ratio improved meaningfully to 7.7 times on a comparable basis, down from 9.4 times a year ago, close to a two-turn reduction. In addition, we ended Q2 with liquidity of $443 million, giving us significant flexibility to pursue accretive growth. Switching to our cost structure. During the second quarter, G&A fell by $2.2 million year over year, with further reductions expected next quarter as the impact of our European sale flows through. As a result of these and other efforts undertaken by the team to streamline operations, we are on track to reduce our G&A by over 30% by year end. Importantly, with our simplified footprint, we can recycle capital with little to no incremental overhead, increasing our platform operating leverage and allowing a greater proportion of property earnings to flow through to unit holders. Lastly, turning to capital allocation. I committed on my first earnings call that we would be laser focused on disciplined capital allocation. In the past 12 months, we have realized approximately $300 million of net proceeds that have been recycled back to North America through a combination of debt reduction and accrued investment. Importantly, during the last several quarters, we have demonstrated that we are able to reinvest that capital in opportunities that are accretive for our unit holders, having completed and committed to the following transactions. At the start of the year, we entered into a commitment to build a new ambulatory facility for RVH and Barry, which when completed in 2029, will add additional NOI of $9 million, or 4 cents a unit. In March, we acquired a transitional bed facility in Ottawa on a long-term lease to the Ottawa hospital. This was our first new acquisition in Canada in almost a decade. And after quarter end, we completed or committed to approximately $153 million of additional acquisitions. In July, we acquired 142,000 square foot integrated community health center in Brooklyn, New York, marking an important step in reestablishing our presence in the US market. This property is a modern, purpose-built, transit-connected outpatient community health hub located in one of the largest and most dynamic cities in North America. New York City has a very limited supply of dedicated healthcare space and very high barriers to entry. The property brings together a broad range of healthcare services, including primary care, specialty care, imaging, and diagnostics. The facility is 100% leased to Advantage Care Physicians, one of New York's largest multi-specialty physician organizations. The lease has approximately 11 years remaining and includes contractual annual rent escalations, providing durable, predictable and growing cash flows for vital. We also announced as part of our quarterly results that we signed a definitive agreement to acquire a Canadian outpatient property in Burlington, Ontario. The property is 99% leased to a diverse mix of healthcare providers with long-term operational and densification upside of the property. Together, these acquisitions totaling approximately $153 million are being acquired at a going in cap rate of over 7% and are expected to be immediately accretive to earnings. These transactions demonstrate our ability to identify accretive, high quality healthcare real estate investments across North America. Our pipeline continues to grow in both Canada and the United States, giving us confidence that our strategy to refocus and grow the portfolio in North America is highly executable. So we are making tangible progress across all four of our strategic priorities. And we are confident that momentum will continue over the coming quarters. Turning now to the underlying performance of our real estate portfolio, which remained strong during the quarter. Excluding a one-time step up in expenses related to outsourcing facilities management in Canada, NOI across our portfolio on the same property basis grew by 3.2%. We ended the quarter with occupancy of 96.1% and a whale of over 13 years, one of the longest of the Canadian rates. These metrics continue to reflect the defensive nature, quality, and long duration income within our portfolio. In addition to supporting the delivery of critical healthcare services, many of our assets are located in dense urban markets where there's meaningful long-term embedded value. As a demonstration of this, in July, we received City of Toronto approval for our rezoning application of Fairview Health Center. This approval allows us to develop 980,000 square feet of buildable area led by 100,000 square feet of medical space. The balance of the project can be market rate residential without the need for any affordable housing component. were very pleased that our team was able to achieve this result. It provides us with significant optionality and over time, the potential to create meaningful incremental value for unit holders. Before I wrap up, a quick comment on HealthScope. As has been publicly reported, a consortium comprising four operators is in active diligence with the receiver to acquire all of HealthScope's remaining assets and operating business. This consortium has both our support and that of the other major landlord. As we have previously indicated, we have a committed transaction in place with Calvary, a large high quality, not for profit Australian hospital and senior housing operator to step into a new lease on all 12 of our properties subject to lender and receiver approval. We anticipate further information before our Q3 earnings release and we'll keep everyone informed as the process continues. Encouragingly, performance in our Australian hospitals keeps improving and from a liquidity standpoint, we continue to see institutional capital return to the market. Last week, an institutional investor agreed to acquire a hospital in suburban Melbourne. The property was acquired for $291 million Australian dollars equating to a low 5% cap rate. We view this as an encouraging data point for asset values and market liquidity and we anticipate further transaction activity as hospital operating performance keeps getting better and the HealthScope situation moves towards resolution. In addition, Stephanie will highlight after quarter end we successfully refinanced all the debt secured by our HealthScope assets on attractive terms, demonstrating the availability of funding for high quality Australian health infrastructure. So to summarize, here are a few takeaways. First, we're making real progress across each of our strategic priorities and the improvement in our reported metrics this quarter demonstrates that. Second, our portfolio continues to perform as it should, generating stable and growing cash flows underpinned by critical healthcare assets with significant long-term upside. And third, we remained disciplined in our approach to capital allocation and are demonstrating our ability to identify creative opportunities to recycle capital and grow the business. We are pleased with both the strategic progress we are making and the underlying performance of the business during this quarter. Vital is becoming a simpler, a stronger, and a more focused company with an improved balance sheet, a more efficient cost structure and a growing pipeline of attractive investment opportunities. And with that, I'll hand it over to Stephanie to talk about financial results.