PRO Real Estate Investment Trust

Good morning and welcome to ProWeek's first quarter results conference call for fiscal 2026. At this time, all lines have been placed on mute to prevent background noise. Management will make a short presentation, which will be followed by a question and answer period, open exclusively to financial analysts. To ask a question, simply press the star key, then the number one in your telephone keypad. If you would like to withdraw your question, please press the star key followed by the number two. For your convenience, the results released along with first quarter financial statements and management discussion and analysis are available at ProWeed.com in the investor section and on Feeder Plus. Before we start, I have been asked by ProWeed to read the following message regarding forward-looking statements and non-IFRS measures. ProREIT's remarks today may contain forward-looking statements about its current and future plans, expectations, intentions, results, levels of activity, performance, goals or achievements, or other future events or developments. Forward-looking statements are based on information currently available to management and on estimates and assumptions made based on factors that management believes are appropriate and reasonable in the circumstances. However, there can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause actual results, levels of activity, performance, achievements, future events, or developments to differ maturely from those expressed or implied by the forward-looking statements. As a result, ProEat cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place under-reliance of these forward-looking statements. For additional information on the assumptions and risks, please consult the cautionary statement regarding forward-looking statements contained in per-weeks MD&A, dated May 13, 2026, available at www.scarpus.ca. Forward-looking statements represent management's expectations, as of May 13, 2026, and except as may be required by law, or it has no intention and undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. The discussion today will include non-IFRS financial measures. These non-IFRS financial measures should be considered in addition to and not as a substitute for or in isolation from the REIT's IFRS results. For a description of these non-IFRS financial measures, please see the first quarter earnings release for fiscal 2026 and non-IFRS measures section in the MD&A for the first quarter of fiscal 2026 for additional information. I will now turn the call over to Mr. Gordon Lawler, President and Chief Executive Officer of ProREIT.

Thank you, Jenny. Good morning, everyone, and welcome. Joining me today is Alison Schaffer, our CFO and Corporate Secretary. Also joining us for the Q&A session is Zach Aaron, Vice President of Investments and Asset Management. We are pleased with our start over 2026 as a pure play industrial REIT. We continue to execute on our strategic plan and delivered sound operating performance. Despite owning eight fewer properties than at this time last year, we increased revenue, NOI, and AFFO, while further reducing leverage. Building on several years of strong growth momentum, same property NOI increased 6.4% during the quarter, driven by 6.8% growth in our industrial segment. These results reflect the strength of our tenant base, and the embedded lease growth within our portfolio. At quarter end, our portfolio comprised 104 investment properties, totaling 6.4 million square feet of GLA, with a weighted average lease term to maturity of 4.3 years, compared to 4.5 years at the same time last year. Industrial assets represent 90.7% of our base rent, compared to 81.8% a year ago. as we continue to redeploy capital towards this segment. Geographically, we further diversified the portfolio across Canada. Manitoba and Western Canada increased to 19% of base rent up from 9.6 a year ago, while Atlantic Canada declined to 44% from 52.4. Our targeted markets continue to demonstrate strong industrial fundamentals. In Winnipeg, CBRE reported continued growth with industrial rental rates during the quarter. In Ottawa, increased federal defense spending is supporting near-term demand for both small and mid-day industrial space. Meanwhile, Halifax Industrial Rents reached a record high of $15.18 per square foot, reflecting a strong start to the year. Turning to the portfolio transactions during the quarter, we completed the previously announced sale of a 50% interest, a co-ownership interest in an industrial property located in Dartmouth, Nova Scotia, totaling approximately $65,000 per feet for our share of gross proceeds of $5.7 million. Subsequent to quarter end, we engaged in two additional transactions, First, we completed the acquisition of 100% interest in a single-tenant, 2024-built, 10-year-leased industrial building in Lincoln, New Brunswick, totaling approximately 60,000 square feet of GLA, worth $12.3 million and representing a going-in capitalization rate of 7%. This acquisition was financed through a culmination of drives on the revolving credit facility, and cash on hand from the Dartmouth property sale I just mentioned. Second, we entered into a binding agreement for the sale of 100% interest in a retail property located in Bathurst, New Brunswick, totaling approximately 15,000 square feet of GOA for gross proceeds of $1.4 million. Net proceeds from the sale are expected to be used for general business and working capital purposes. The transaction is scheduled to close in the second quarter, subject to customary closing conditions. Alternative leasing activity momentum remains strong during the quarter. As of today, we have renewed approximately 76.9% of 2026 lease maturities at positive average spreads of 34.8%. Notably, five leasing rules commenced in 2026 include rental increases ranging from 40% to 45%. Lease renewals negotiated in 2024 and 2025 and kicking in in 2026 will provide for incremental cash flow as 418,000 square feet of space realizes new rental rates in September 26 and fully in Q4. Overall portfolio occupancy was 96% at the river end, compared to 97.7% a year earlier. As noted on previous calls, this change was primarily driven by the temporary vacancy at 176,000 square foot single-tenant industrial property located in Saint-Hyacinthe, Quebec, following the tenant's decision not to renew its lease in July of 2025. On May 6, 2026, The REIT entered into a blinding lease for approximately 74,250 feet of the 176,000 square foot facility located at 5375 Picard Street, again in San Diego. The new tenant will have a 15-year lease term at market rent commenced in mid-2026. The new base rent on the 74,000 square feet which is 42% of the total property GLA, represents an increase of over 122% compared to the rent paid by the previous tenant for the same GLA in the prior lease. The new lease would provide for incremental cash flows for Q3 and Q4 of 2026. We continue to actively market the remaining vacant space. Excluding this property vacancy, Portfolio Occupancy would have been approximately 97.6% a quarter. With that, I'll now turn the call over to Allison. Allison, over to you.

Thank you, Gordy, and good morning, everyone. We are pleased with our first quarter performance. In the quarter, property revenue totaled $26.9 million, up 4.5% year-over-year, despite owning eight fewer properties. The increase is mainly driven by contractual increases in rent and higher rental rates on lease renewals and new leases. Net operating income, or NOI, was $16.1 million, an increase of 8.1% compared to last year due to the same factors. Same property NOI represents 97 of our 104 properties, this reached $14.1 million. That was up 6.4% year-over-year, including a 6.8% growth from our industrial segment. The increase was driven by contractual rent escalation, stronger renewal rates, and higher rents on new leases. And this was achieved despite a decline in overall average occupancy related to the single-tenant Quebec vacancy Gordy mentioned earlier. Our funds from operations, or FFO, amounted to $8.7 million for the quarter. This was up 10.6%, and it was driven by increases in contractual base rent, higher rates on renewals, and higher rental rates on new leases. This was offset by higher general and administrative expenses due to timing, impact of certain professional fees, and an increase in interest expense. On a per-unit basis, basic FFO was relatively stable year over year at approximately 13 cents. Basic AFFO payout ratio was 96.6% in Q1 compared to 93.8% for the same quarter last year. This higher ratio was due to the AFFO dilution related to the sale of 15 properties over the past 12 months and the ongoing redeployment of capital towards higher-quality industrial assets. Based on leasing renewals already completed in 2026, we expect the AFFO payout ratio to improve as the year progresses. Net cash flows provided from operating activities were $10.0 million in the quarter, up 34.1%, mainly impacted by the timing of cash receipts and the settlement of payables. The weighted average capitalization rate for our portfolio remained stable year-over-year at approximately 6.7% at March 31, 2026. Moving on to the balance sheet, we continue to focus on reducing leverage. Adjusted debt-to-growth book value improved to 47.8%, compared to 49.5% a year earlier. Adjusted debt to annualized adjusted EBITDA ratio came in at 8.8 times at March 31, 2026. This was down from nine times at December 31, 2025, and in the same period last year. We continue to target further reductions in both adjusted debt to annualized adjusted EBITDA and adjusted debt to gross book value as we continue to scale the platform. At quarter end, our total debt, including current and non-current portions, totaled $521.3 million compared to $525 million at December 31st, 2025, and $495 million at March 31st, 2025. Looking at upcoming maturities, In 2026, we have $157.1 million maturing. Subsequent to quarter end, we secured financing commitments and term sheet totaling $146.2 million on competitive terms, addressing $108.3 million of our 2026 mortgage maturities and supporting the acquisition of the industrial property in Moncton that we just closed on. The financing is expected to be completed in the second quarter of 2026 and will carry fixed-term market interest rates with terms to maturity ranging from three to seven years. In 2027, we have another $46.1 million maturing, mainly tied to high-performing industrial assets in Birdside Industrial Park. And for 2028, we have $59.8 million in maturities. The weighted average interest rate on these mortgages is 3.9% for 2026, 4.8% for 2027, and 3.5% for 2028. Finally, our distribution of 3.75 cents per unit was maintained for the first quarter of 2026. That wraps up our financial review. Gordie, back to you for closing remarks.