H&R Real Estate Investment Trust

Good morning and welcome to H&R Real Estate Investment Trust 2025 Third Quarter Earnings Conference Call. Before beginning the call, H&R would like to remind listeners that certain statements, which may include predictions, conclusions, forecasts or projections, and the remarks that follow may contain forward-looking information which reflect the current expectations of management regarding future events and performance and speak only as of today's date. Forward-looking information requires management to make assumptions, or rely on certain material factors and is subject to inherent risks and uncertainties, and actual results could differ materially from the statements in the forward-looking information. In discussing H&R's financial and operating performance and in responding to your questions, we may reference certain financial measures which do not have a meaning recognized or standardized under IFRS. or Canadian generally accepted accounting principles and are therefore unlikely to be comparable to similar measures presented by other reporting issuers. Non-GAAP measures should not be considered as alternatives to net income or comparable metrics determined in accordance with IFRS as indicators of H&R's performance, liquidity, cash flows, and profitability. H&R's management uses these measures to aid in assessing the REIT's underlying performance and provides these additional measures so that investors can do the same. Additional information about the material factors, assumptions, risks, and uncertainties that could cause actual results to differ materially from the statements in the forward-looking information and the material factors or assumptions that may have been applied in making such statements together with details on H&R's use of non-GAAP financial measures are described in more detail in H&R's public filings, which can be found on H&R's website. and www.cedarplus.com. I would now like to introduce Mr. Tom Hofstetter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstetter.

Thank you, and good morning, everyone. With me today is Larry Froome, our CFO, Emily Watson, President of the Plantower Residential. We have a lot to talk about today, so I think I'll just jump in and hand it over to Larry, followed by Emily, and then Q&A, right?

Thank you, Tom, and good morning, everyone. As at September 30th, 2025, the value of our real estate assets broken down between our segments are as follows. Residential is our largest segment at 50%, industrial 19%, office 16%, and retail 15%. By geography, 71% of our real estate assets by value are now located in the United States. Overall, given the headwinds we face with multi-family supply concerns, a weak office market, the tariff war creating general market uncertainty, and a weaker Canadian economy, we are very pleased with our results, and in particular the 2.1% growth in same property net operating income on a cash basis for the nine months end of September 30th, 2025, compared to the same period last year. For the nine months end of September 30th, 2025, FFO was 90 cents, Same as a nine month period ending September 30th, 2024. An amazing result considering that property sales of approximately 500 million over the 21 month period from January 1, 2024 to September 30th, 2025. Breaking down our same property net operating income on a cash basis between the segments. Residential was down 3.4% for Q3, 2025 versus Q3 last year. and was up 1.2% for the nine months toward 2025 versus the same period last year. Emily will provide more details on Nantower's results shortly. Our offer segment, same property net operating income on a cash basis, increased 0.5% for Q3 versus Q3 last year and was up 1.5% for the nine months 2025 versus the same period last year. primarily due to the strengthening of the US dollar. Our office occupancy of September 30th, 2025 was 96.9% with an average remaining lease term of 5.3 years. Our office portfolio now consists of 15 properties and comprise 16% of our total portfolio. Retail segment same property net operating income cash basis increased 5.3% for Q3 2025 versus Q3 last year and was up 7.3% for the nine months 2025 versus the same period last year due to occupancy gains in river landing and forests. Industrial segment same property net operating income decreased 7.5% for Q3 2025 versus Q3 last year and was down 1.9% for the nine months 2025 reversed the same period last year. Industrial occupancy decreased from 98.9% on December 31st, 2024 to 89.9% on September 30th, 2025. During the quarter, we leased our newly constructed 122,000 square foot industrial property at 6,900 minutes road. This lease will commence in December 2025. In addition, a further 108,000 square feet of vacant industrial space was leased with these leases commencing in Q4 this year and Q1 next year. Our SFO payout ratio was a healthy 50% for the nine months end of September 30th, 2025. And our ASFO payout ratio was also healthy at 61.3%. Our balance sheet remains strong. That's the total assets with the least proportion of share at September... 30th, 2025 was 47.3% and debt to EBITDA was 9.3 times. Our own encumbered property pool totaled approximately $4.1 billion. With that, I'll turn the call over to Emily for an update from the Landtower residential segment. Emily, please go ahead.

Good morning, everyone, and thank you for joining us. I'll begin with an overview of our third quarter performance and the operating environment across our multifamily platform before turning to market trends and development progress. While the broader economy continues to navigate a mixed landscape, including slower job growth, rising tariffs, and fiscal uncertainty, our portfolio once again demonstrated its resilience. Occupancy, collections, and resident retention remain solid through the quarter, and we saw steady leasing momentum even as pricing power moderated across many Sunbelt markets. The quarter underscored the strength of our operating fundamentals. Our residents remain gainfully employed, wage growth has held firm around 4%, and affordability remains a competitive advantage. With average rent-to-income ratios around 20%, that positioning gives us access to a wider and financially stable space supporting consistent collections and healthy renewal trends. We are seeing early signs that the most supply-heavy markets are beginning to rebalance. Deliveries of new competitive units are declining each quarter, and forward-looking forecasts show an expected reduction of roughly 54%, or about 79,000 units, in 2026 compared with 2025 levels. As the pace of completion eases and job growth normalizes, we anticipate regaining pricing traction and achieving more balanced fundamentals across our footprint. Our diversified presence across high growth markets, combined with a deliberate focus on expense discipline and technology adoption, continues to support performance through the cycle. Even in areas where SEP activity remains elevated, we've taken proactive steps to preserve occupancy and mitigate revenue drag through targeted concessions and digital efficiency. From a long-term perspective, we remain confident in the structural underpinning of our business. Housing affordability challenges continue to steer demand toward quality rental housing and with less than 10% of move-outs tied to home purchases, retention remains high. Taken together, we believe the ingredients are in place for a gradual re-acceleration in revenue growth through 2026 and beyond. Our operating results reflect both resilience and realism. Some state property NOI from residential properties in U.S. dollars decreased 4.6% on a cash basis for the three months ending September 30, 2025, primarily due to decrease in rental income in H&R Sunbelt properties, including higher concessions being offered to tenants and higher operating expenses, including repairs and maintenance, leasing and marketing, and utility expenses, which were partially offset by lower property taxes and insurance expenses. Same-ass occupancy ended the quarter at 94.6%, an improvement of 50 basis points from prior year and 90 basis points from Q2. Same-ass at Sunbelt occupancy closed at 93.8%, up 40 basis points quarter over quarter, supported by steady renewal demand and moderating new deliveries. Same-store blended lease tradeouts were negative 1.6% in Q3, with new lease tradeouts negative 8.9% and renewal lease spread at 4.4%. October trends improved further to a blend of negative 1.2% with new lease negative 9.6% and renewal at 4.7%. While industry broadly continues to experience slower rent growth, our fundamentals remain intact. Demand is underpinned by population inflows, resilient employment, and the enduring affordability gap between renting and owning, which today sits near all-time highs in favor of renting. These conditions reinforce our conviction, the durability of multifamily performance, even amid softer near-term pricing. Innovation continues to be a differentiator for us. Our AI-driven leasing platform ensures 100% coverage of calls, emails, and texts, as nearly one-third of all inquiries are initiated outside of traditional office hours. Our centralized platform has allowed the days between application to lease sign dates to be cut in half, and the time from lease approval to lease execution has decreased 3%. At the same time, rigorous identity and income verification protocols have reduced bad debt in half post-centralization. These tools allow our teams to focus on higher impact relationships and revenue-generating activities, effectively amplifying our workforce productivity. We also continue to make headway on portfolio-wide Wi-Fi initiatives, which improve both resident satisfaction and margin potential. We have one community scheduled to go live with property-wide Wi-Fi by year-end, with an additional six installations planned through 2026 that are projected to deliver an estimated 86% return on investment. Our Sunbelt portfolio fair market value is supported by a third-party appraisal and recent market transactions, thereby maintaining a weighted capitalization rate of approximately 4.97%. This level remains consistent with Q2 and reflects our ongoing institutional confidence in the sector. High-quality multifamily assets across the Sunbelt continue to trade at relatively depressed cap rates, driven by the region's compelling long-term fundamentals, including robust population, employment growth, business-friendly environments, and durable migration patterns that underpin lasting value creation. Turning to developments, our new Dallas assets continue to progress well. Landtower West Love is 83% leased and is expected to stabilize by April 2026 as supply pressures ease in the market. Landtower Midtown is 82% leased, on track to stabilize in early Q1 of 2026. Both communities are outperforming competitive market absorption, averaging 21 leases per month versus industry averages of roughly 14 per month since initial move-in. Each was completed on time and on budget, underscoring the discipline of our development execution. Our Reddit projects remain on budget. We are on schedule to receive first move-ins at Landtower Bayside in Tampa in March of 2026, and first move-ins at Landtower Sunrise in Orlando in April, with completion expected in mid-2026 for both assets. In addition, Landtower currently has nine Sunbelt developments in the pipeline, totaling approximately 2,900 suites at H&R's ownership interest. Multiple sites are fully permitted and ready for construction, and we are advancing design, drawing, and permitting on the remainder. These projects reflect our conviction in the long-term growth of Sunbelt markets and our ability to capitalize on favorable land positions as construction costs stabilize. In summary, our third quarter results highlight a portfolio that remains fundamentally sound, operationally agile. We've maintained stable occupancy and record high collections and continue to invest in technology and innovation that expands margins and strengthens resident loyalty. While near-term market conditions remain mixed, the long-term setup for multifamily housing is compelling, moderating new supply, favorable demographics, and strong facility advantages relative to homeownership. We expect these factors, coupled with disciplined execution and our culture of innovation, to drive sustained growth in NOI and value creation as we move into 2026. Finally, I want to recognize our exceptional Land Tower team. Their focus, adaptability, and commitment to excellence continue to be the foundation of our success and our ability to navigate evolving market conditions with confidence. And with that, I'll turn the conversation back to Tom.

Thank you, Emily. Operator, please open the call for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. And the first question comes from Sam Damiani at TD Cowen. Please go ahead.

Thank you, and good morning. Obviously, a disappointing outcome. I wonder if you could talk about the stages of the various sale transactions that aggregate $2.6 billion, the difference between the assets that are held for sale and the assets that are not.

So I guess it's a precursor to everybody will be asking the same question. We're not going to get into details of what we're selling. We're not currently in negotiations to try to conclude them. We have confidence that they will get done. Some have been approved by the board, some haven't, so that's where you have a list. of assets held for sale, and the others that are not in there is because we just haven't had approval from the Board yet. So stick with us. What we're really saying is we hope this is all finished by the end of the year, which is short enough, hopefully sooner than that, because we are confident that the annual get-downs will run the final throws of it. So I really can't get involved into any details on this. It's sensitive to the negotiations that we're having with the proposed buyers.

Okay, and what about the use of proceeds, Tom? I mean, it would be obviously selling over.

Again, the question is the use of proceeds. What's the quantum of the use of proceeds? Obviously, it's pay down debt. We have a dimension that's coming due, so that's priority number one would be pay down debt. If you do $2.6 billion, you have excess funds, and we really haven't addressed that nor at the stage to identify how to use the proceeds because we don't know what the proceeds are. So, again, same answer. You have to stick with us for a couple weeks.

Yeah, it's a theoretical question. Obviously, you've stated the plan, and so I'm just wondering what the priorities are.

Yeah, pay down that number one, get our balance sheet in order, and then if there's any excess funds, depending on the quantum, then obviously an NCIB would be a high, maybe giving back unit holders, and an NCIB would be a high.

Okay. Larry, did you want to jump in, too?

I think Tom said it. I mean, There's quite a bit of proceeds that will come in and it would hopefully come in in stages. So the first sales for sure will be going to pay back down debt. And then as we get further down and we're comfortable with our balance sheets and everything, then we'll look and it'll be a board decision then what to do with the excess cash. Do we buy back units or do we distribute to the unit holders?

Okay. Last one for me. Some of the dispositions are clearly some higher cap rate assets. And even, you know, deleveraging is often dilutive. I'm just wondering on your thoughts about the sustainability of the current distribution.

So, you are correct, Sam, that it would be dilutive to FFO as the sales because some of them are higher cap rate sales. And, you know, we've taken the write-down for that. So, but, you know, our FFO payout ratio is only 50%. So, we have a lot of room to work with. And I think the distributions are cost safe.

And in any scenario, I can envision the distributions being challenged. I don't think that's the issue. I think we'll have plenty of cash. It's just a question to distribute. There, there's obviously the number one. But after we do that, as I said beforehand, it's NCIB or the distributor. And in no scenario do we see any challenge to cutting distributions.

Thank you. I'll turn it back.

Thanks, Sam.

Thanks, Sam.

Thank you. The next question comes from Fred Blondeau at Green Street. Please go ahead.

Thank you and good morning. Just one quick for me. The fair value adjustment is quite sizable. I was wondering if you could give us a bit more color on what would be the breakdown of the adjustment between that $2.6 billion that's for sale and the core portfolio?

Good morning, Fred. I mean, if you look, You're quite right, we've taken sizable write downs, not only this quarter, but in the nine months, $830 million. To help you, give you a sense of size, I will just comment on the assets that we have marked as held for sale. That is $865 million there. We probably comprise almost the majority of the write-down was quarter. So we had 482, and most of it was in office through Heads, Front Street, and Shepherds. So most of that write-down from the office came from there. It wasn't solely there. There were other office properties that were written down, but I'd say just over 50% was from that.

Okay, perfect. Thank you. That's it for me. Thank you.

Thank you. Next question comes from Mario Saric at Scotiabank. Please go ahead.

Good morning. Just a couple of questions on the process. Firstly, is there any – are you willing to provide any color on the pricing level of the non-binding bids that were received during the process?

Again, the answer is going to be no. We were subject to confidentiality, and we really don't want to get into there because it's complicated. It depends on the mix of the scenarios, the players who were involved in, and they never got to the final stage anyhow, which was acceptable to the special committee. So I'd rather decline from answering that question.

Okay. And then I guess somewhat related, did the board ever consider kind of putting the bid received a unitholder vote, and if so, I guess, what are some of the drivers behind not doing so?

The committee did not get to the stage where they had, the answer is no, they never got to the stage where they had an acceptable offer to present at a price that they were, would suggest going forward with.

Okay. Maybe switching to the asset sales, On the 2.6 billion that are expected, do you have a sense of the potential required kind of special distribution if they were all to be completed within a calendar year?

You're talking about the tax reasons?

Yes, there would be potential Canadian sales there, obviously. I mean, the retail is part of it. The Canadian retail is definitely part of it. So there would be a special distribution that would be required to be made. But again, I would just say we will give more details as each sale becomes firm. We will put out more details, full details of the disclosure, the price, the NOI we expect to lose from those sales, and potential tax implications. Okay.

I might add that the tax implications are not for 2025. Although we have non-binding agreements we expect sometime this year, closing would take place in 2026. Okay.

And then I guess you talked about the mix being up for debate, but if we step back before the strategic review was announced and the potential kind of bids coming in, the intent was really for the organization or for the REIT to become more focused on U.S. residential and industrial. When we look at the $2.6 billion that's under consideration, would it be fair to say that you would substantially make your way towards that previous objective by doing so?

Yeah, and I can't get involved with too great details, but obviously what would be left would be either one of the two buckets you mentioned or one of the buckets, but definitely office would be brought down and retail would be brought down. In other words, this is somewhat in line with our original strategic plan, but I think on completion of this initiative, the strategic plan will be fine-tuned.

Okay. Thank you.

Thank you. The next question comes from Jimmy Shen at RBC Capital Markets. Please go ahead.

Thanks. So just on when you did the full auction process, you mentioned there were parties that were interested in some specific assets. So are the $2.6 billion essentially comprised of those assets in which you got interest in?

Yes.

I'm sorry, was that a yes? The answer was yes.

Okay. All right. So are there any residential or industrial currently under negotiation to sell?

Again, as I mentioned beforehand, we really don't want to at this time get involved in that level of detail. But again, as I said beforehand, we hope to have this all wrapped up soon enough.

I guess maybe the broader question is kind of what is the go-forward strategy? Is it to... stick to the original strategy, thought what you can, and just trying to step back and say, okay, what does H&R look like on a go-forward basis?

Well, I guess the overall strategy was to declutter. We were too many divisions. We mentioned that the overall strategy was to get more focused on industrial slash U.S. residential. Although they're not necessarily healthy, they're healthier asset classes than office. So the original strategy was declutter, and that's exactly what we will be doing. How far are we going? Will it end up being an industrial REIT or residential REIT or both? I don't know. At this stage, again, it's a little too early to tell. But the overall goal was to become less of a diversified REIT, and that's for sure what we will succeed in doing.

Okay, and then, you know, in the past you've talked about You know, condo land for condo development being pretty tough. I mean, you do have 145 Wellington. You do have the front street ones. I guess what's changed?

Well, it's interesting. What changed is two things. The office market got better. The residential markets got worse. So our initiative to rezone our commercial properties was not for the here and now in either event. It was to have some, when the market does improve, some optionality is whether it's office or residential. At this stage of the game, it looks like the office market is recovering faster and the winner of the race is going to be remaining as office rather than residential. I would say that in all cases other than 55 Young, the status quo, whether it's Union Street or Front Street or 125 Shepard, sorry, or 125 Wilkins, is always going to be commercial rather than residential.

And then on the use of proceeds, I know it's a hypothetical, but in the past you've been averse to doing substantial issue a bit, but it does look like it's going to be a decent-sized number. Would you contemplate doing that?

I don't think so. We haven't brought it to the board yet, but our objection to a substantial issue of business, you could probably achieve the same goal by doing an NTIB at probably 17% less. I was never a fan of it. I'm still not a fan of it, but we can have offline discussion in the community otherwise.

But it's safe to say that beyond paying down the debt, there'd be a decent amount of ability to do a buyback.

Yeah, you can do a special distribution of cash instead of an SIV, and you wouldn't have to worry about excess money in your bank account.

Okay, sorry, last question. Just in terms of since the original solicited bid wasn't or didn't get to the finish line or wasn't presented to the unit holders, like what did the special committee consider to be acceptable in terms of terms and pricing?

I don't know. I wasn't on the special committee. Sorry. I don't know. If the experience tells me that it was a moving target, if you had a real offer that was really acceptable that they can bring forward, I can maybe ask more people. They didn't have that at the end of the day. But, again, I was not in the special committee. I don't know what the answer to that question is. I'm sure it was arranged. Okay.

Thank you.

Thank you. The next question comes from Matt Cornack at National Bank. Please go ahead.

Just with regards to the tax implications, I understand if you sell Canadian assets, you can kind of push that through to unit holders in a special distribution, but For the U.S., if you can't take advantage of the 1031 exchange, do you think there would be a cash tax component?

There would be a minor tax cap for minimum tax, but we have tax laws carried forward, so we'd be utilizing those. I don't see any U.S. tax leakage, any material tax leakage.

Okay. And then just in terms of the quarter itself, in terms of the sequential NOI, Larry, was there anything seasonality-wise? in terms of the NOI reduction or that would have been a recovery or something to that effect. You know, the portfolio has changed, so there may be a little bit more seasonality in it, but I was a little surprised with the move there.

No, there was – I think this is a normal run rate. When you say normal run rate, I mean, we saw residential was down a little, and that's showing some weakness. But other than that, which is expected to recover – Other than that, there was nothing unusual.

Okay. And then going back to the sale, I know you aren't talking specifics, but could you give kind of a broad sense as to what the disposition cap rate would be, and then also in terms of where your line of credit is in terms of current interest expense on that?

Well, listen, I'm not going to get specific, and without that, it's pretty hard to answer your question. If you have an office building that's leased, hypothetically, obviously, And it falls off that it's not a cap rate discussion. In many cases, it's the present value of the residual, the cash flow, plus a dollar at the end, which represents by the pound. So cap rates would kind of be a useless discussion if I can't identify and not willing to identify this specific asset that we're talking about. And, you know, you're talking about land power. You can talk about a 5% cap, and that's easy. In the Sun Belt, you can use 5 to 4, whatever and whenever you want. You can't do that in office. If there's a seven-year waltz and it all comes to a balloon at the end, that's going to be substantially different than something that has a longer-term cap rate. So I can't really discuss cap rate, but we will give you all the color in a couple weeks, hopefully.

I understand the dynamics there, but we don't have the same level of detail that you guys do, so more based on kind of in-place headlines.

No, I know. Fair enough. But since we're not giving the answer, it's very hard to have an intelligent conversation as to the impact without identifying the answer.

Okay. Fair enough. But Larry, just in terms of the variable interest rate, where would that stand today on your line of credit?

Well, we disclosed that the average weighted rate is 4%. But the variable rate today is on our credit line, just about there, just 3.9, something like that.

And presumably, you have a lot available there, which is good. You have the flexibility to pay it down. What would be the next kind of pieces of debt that you'd pay off with the proceeds?

Well, we've got $250 million coming up next year in a bank term loan. That will be the next. We have another debenture later on in next year. That will be the next to be hit to be taken off the debt list. And from there, we will see.

And is it mostly unencumbered, the portfolio or the $2.6 billion slated for sale?

Well, I can tell you that the assets held to sale that we're showing of $860, whatever, $5 million, that's totally... free of any debts. It may be pretty much totally free of debts.

And the 2.6, well... In a nutshell, our land power and our industrial divisions have debt on it. The rest of us don't have debt on it. So let me try to answer your question as best as you can. But if it's not in the land power and industrial buckets, it's debt free for the most part.

Sorry, Matt. And just a correction on what I said. There is one mortgage on our SSL for sale, and that is on the Front Street property. That's about $130 million. Okay.

Last one for me, and again, maybe that's too specific, but it sounds like these skew to more Canadian asset sales, so You're becoming predominantly a U.S. REIT. Is that a fair point after this, or how should we think about that?

Well, you know, I'll let you answer the question. We are right now.

Okay. Thank you.

Thank you. Next question from Sam Damiani at TD Cowan. Please go ahead.

Yeah, Frank, just to follow up, I believe, Tom, in an answer a few minutes ago, you said that you don't see any material tax leakage from U.S. asset sales. Is that correct? That's correct. So that would suggest that the sales that are being contemplated are not those with inherent gains. Is it fair to take that away from that comment?

Well, yes and no. You have that cost carried forward. I don't know. That would not be correct. I don't believe what you're saying. You can have the gains, but we wouldn't be paying taxes on them. We have significant tax costs carried forward.

Okay. And then just the other one for me, and I'm not sure this may have been asked, but, you know, the fair value marks taken in Q3, I think the language was, you know, to reflect the bids for the stuff that's held for sale, the $865 million. Primarily. Primarily, sorry, of course. So how much of that would still need to be taken based on the remaining $1.7 billion of the 2.6 plant?

Not very little, if any. I don't think we've marked down. As I said, we've taken our hits and we've taken them now and in the previous quarter. If we were to do the 2.6 million, we would not be expecting to take anything major on that. Very good.

Thank you.

Thank you. The next question comes from Tal Woolley at CIBC Capital Markets. Please go ahead.

Hi. Good morning. One of the questions I've been trying to get an answer for investors about is that I think when we're thinking about the process, that there probably could be some agreement on what asset values are that there might not be that wide of bid-ask spread, but the problems sort of come up in affecting the transaction and that there are maybe transaction costs or tax implications that we can't see from the outside. You guys have the deferred tax liability on your balance sheet, but is there any sort of sense you can give around What beyond that might be the cost? We've seen this come up with other diversified REITs going through processes like Common R in the past.

I don't really understand the question.

I don't think there'll be, well, it depends on the price, obviously, for deferred tax and how much it ends up paying. But, you know, assuming that even at our fair market value that we're holding it at, all that will be paid is the deferred taxes on our balance sheet. So that would end up becoming payable if Everything was sold at the prices we are carrying them at. Other hidden costs would probably be like change of control payments and that kind of thing, which are normally not substantial in any deal. And I don't think ours would be any different to that effect.

Okay. Thank you very much. Thank you.

Thank you. Next question comes from Mario Saric of Scotiabank. Please go ahead.

Hi. Just one quick follow-up. You mentioned that the $2.6 billion will be effectively done in stages. In terms of communication with the market going forward, coming back to Jimmy's question a little bit in terms of what is H&R going to look like over the next two, three, five years, what is the expectation for communication with the street in terms of updated strategy, where you're going versus maybe just individually announcing the asset sales as they come up?

So the asset sales as they come up, first of all, just for clarification, it'll be lumped, that'll be done by the end of the year. Closing will be probably over the first quarter, Q1 2026. You'll have a pretty good handle on what in totality we're selling. You'll have a pretty good handle on, we will announce at that point in time, but that was before the year's out, what our revised strategy is pending on actually completion of these sales. So it's pretty hard to answer these general questions without hitting a vacuum because $2.6 billion is lumpy enough that it'll formalize our strategy going forward. So I'm sorry for being evasive all the time, but you're going to know soon enough. You don't have to wait for 2026. One way or another, we expect by the end of this year to give you the answers to those questions.

And just to clarify again, Tom, I think you mentioned that you don't see a scenario unfolding in which the existing distribution is unsustainable.

Is that correct? That is correct. Under no scenario do I see that being the case.

Okay. Thank you.

Thank you.

Thank you. Next question from Fred Blondeau at Green Street. Please go ahead.

Thank you. Just a quick follow-up. Looks like the read will be quite different, of course, in 26 than what it is now. I was wondering if we should expect some sort of a management restructuring or major management changes or any announcements in that regard before the end of the year or in the beginning of next year?

Not the end of the year, beginning of next year. Could well be, depending on how In other words, hypothetically, it's assumed that we become 100% land power, then life changes, and obviously the need for management over here changes. I think we can't answer that question again until we formalize these sales, formalize the strategy, and then we'll see. Then management will follow with the residual what's left in our company.

Okay. Thank you. Thanks.

Thank you. Next question from Sam Damiani at TD Callen. Please go ahead.

Thanks. I really appreciate this. But just trying to get some clarity and certainty on this $2.6 billion. I mean, your comments, Tom, are pretty clear. You're very confident, and you're telling everybody to wait, and you're going to hear all the details by the end of the year. But what can you tell us today that gives us comfort that this is kind of a done deal in terms of getting across the finish line, getting these – agreements signed and binding and then closing in early next year.

Just to be clear, one way or another, we're going to conclude that whatever this quarter, whether it happens or happens, I'm not at all telling you that it's going to happen or won't happen. The special committee is done. They're closed up for shop. Now it's back to the board. We either execute on these deals or we don't. We have a pretty good understanding throughout this lengthy process of our company and we where to go from there. So I think we'll be able to give you a high degree of comfort by the end of this year, by the end of December, as to what the future strategy is going to look like, what our cash position is going to be, and if there will be any further sales.

I guess, but on the $2.6 billion specifically, are you saying just there that there is a chance that they don't get signed, they don't close? Is that what you're saying now?

Well, the sign gets closed. There's definitely a possibility that the deals don't happen. In this world today, in real estate, a deal's not done until it's done. You know that. It's a very tough environment out there.

Yeah, and so this is sort of the direction.

None of the players that we're dealing with have the deals that this helps you, our contingent, our financing. They all have their equity. They don't need any debt, or they all have their debt done already. So it's not conditionality. It's just getting through the finish line.

Okay. And the path that the REIT is on now, having wound up the special committee, like this $2.6 billion of asset sales, this is not the finish line. Is that right? There's still further asset sales to achieve to get to whatever this goal is.

That I can say definitively, yes. That won't be done through the special committee, but there will definitely be formalization of the strategy, whatever that is, to conclude, to get there will involve future sales.

Okay. Thanks very much.

Thanks.

Thank you. Next question from Matt Cornback at National Bank. Please go ahead.

Hey, guys. One quick follow-up, and I don't know if you will answer it, but are management or insiders part of the bidding for any of this 2.6 billion?

No, they are not.

Okay, thank you.

Thank you. Next question from Jimmy Shen at RBC Capital Markets. Please go ahead.

Sorry, two more quick questions. So just going back to the 2.6 billion, I guess what determines an asset that makes it to the assets held for sale versus not?

Hey, Jimmy, we put the assets held for sale in that category because they've already been approved by our board. The rest of the sales have not been approved by the board yet.

Okay, so the determination is board approval only. And why were they not approved by the board yet?

For IFRS it's a bit more. It's approved by the board and highly confident that they will conclude within a year. That's the IFRS mandate of putting them into that bucket. Okay.

And so the other assets that are not on there, I guess it's just a matter of timing being not approved by the board.

Yes. The full negotiations and processing hasn't been finalized.

And then in terms of the full auction process that was done post-July, can you give us a sense of kind of how many parties looked under the hood and sort of how far did the parties get far? How far did they go?

How far did they go in what, due diligence?

Well, in terms of like how many parties were left at the table if there were any, when you did the full auction process.

Or was there none at all? This has always been, we're a diversified company. This is a diversified, as it's diversified, I think it's fair to say that it would be very hard for one player to come up and absorb the entire company. This was always a club deal. and there were various players within the clubs in and out as the asset composition changed. Towards the end, the player that was, I don't know, round numbers, very generally speaking, there was four or five that looked at the entire company, but they were club deals in different partnerships. There was one that was much more, spent more time and remained there throughout. But at the end of the day, there was nobody there left for the entire company at a price that the special committee wanted to take forward and bring forward to the interholders. Needless to say, this whole exercise has taught us, I guess the conclusion is that the sum of the parts are greater than the whole. And in a diversity of companies, it's a club deal anyhow. Maybe it's better off just to do it by ourselves. That's one of the options we have. So we don't have to go to our strategy, be industrial, be international, be industrial. We could just continue to sell and achieve a higher price. I think that's something you can't abandon. But that's definitely potential. We'll get clarity. Again, we'll have clarity on that before the year is out.

And then on to Matt's question, was management part of any of those such club deals?

Sorry, I couldn't hear you.

What? Was management also part of some of the club deals that may or may not have happened in the past?

Management were there. Management were there to flush some holes where we didn't have a player. But at the end of the day, management was not there. Well, there was no deal at the end. But management could be there if there's, for example, in all cases, there's certain assets that just nobody wanted or we needed in order to finish out a price for everything, management could step in or would step in. But at this stage, again, management is not there at all. Okay. Thank you. There's no necessity for management to be there. We're not giving you one price. There's no bidder for the entire company.

Thank you. We have no further questions at this time. I'll turn it back over to management for closing comments.

Thanks, everybody. Stay tuned. We hope to be back with you 40 years out. Have a good day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.