PRO Real Estate Investment Trust

Good morning and welcome to ProReap's second 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 and the number one on the 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 release, along with the second quarter financial statements and management discussion and analyses, are available at ProReach.com, Investors, and on Feeder Plus. Before we start, I have been asked by ProReach to read the following message regarding forward-looking statements and non-IFRS measures. ProReach remarks today 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. These factors could cause actual results, levels of activity, performance, achievements, future events or development to differ materially from those expressed or implied by the forward-looking states. As a result, ProReit cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements. For additional information on the assumptions and risks, please consult the cautionary statement regarding forward-looking statements contained in ProReit's MD&A, dated August 12, 2026, Available at www.cedarplus.ca Forward-looking statements represent management's expectations as at August 12, 2026, and except as may be required by law, ProREIT 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 measures should be considered in addition to and not as a substitute for or in isolation from the REITs IFRS results. For inscription of these non-IFRS financial measures, please see the second quarter earnings release for fiscal 2026 and non-IFRS measures section in the MD&A for the second quarter of fiscal 2026 for additional information. I will now turn the call over to Mr. Gordon Lawler, President and Chief Executive Officer of ProEat.

Thank you, Vanessa. Good morning, everyone, and welcome. Joining me today is Allison Schaefer, our CFO and Corporate Secretary. Also joining us for our Q&A session is Zachary Aaron, Vice President of Investments and Asset Management. We're pleased with our second quarter performance and the positive momentum across the business. Let me start with our investment activity. The second quarter was particularly active for ProReit. In June, we completed the acquisition of 17 industrial properties in Quebec City and Winnipeg for a combined purchase price of $136.8 million. These acquisitions meaningfully expand our industrial platform in two markets with strong underlying fundamentals. In Quebec City, we established an immediate scale of 13 industrial properties representing approximately 609,000 square feet of GLA, acquired for $112.8 million. In Winnipeg, we further strengthened our position in one of Canada's tightest industrial markets, where we are now the second largest industrial landlord. We added four properties representing approximately 159,000 square feet of GLA for $24 million. Together, the two portfolios were funded through a combination of proceeds from our recent equity financing, which I will discuss in a few minutes, and $89.4 million of new mortgage financing. During the quarter, we also completed the previously announced acquisition of a newly built, fully leased industrial property in Moncton, New Brunswick for $12.3 million. So since 2024, Single tenant property comprises approximately 60,000 square feet of GLA. Our investment activity continued following quarter end. We acquired four additional industrial properties in Winnipeg, totaling approximately 165,000 square feet of GLA for $21.7 million. At the same time, we continued to optimize the portfolio with the sale of a retail property in Bathurst, New Brunswick for gross proceeds of $1.4 million. Altogether, year-to-date, we've acquired 22 high-quality industrial properties for $170.8 million in our portfolio to 126 income-producing properties, representing approximately 7.4 million square feet of GLA. We also completed $107.3 million of equity financing during the quarter, including an $83.3 million bought deal offering and a $24 million private placement. The private placement included participation from our strategic partners, Hollywood Investments and Parkhead Enterprise. Financing strengthened our liquidity and financial flexibility and supported the execution of our growth plan. Let me now turn to our operating performance in the second quarter. Revenue, NOI, and FFO all increased year over year. While same property, NOI continued to grow Despite the impact of two previously disclosed vacancies, these results reflect the contractual rent growth, strong renewal activity, and the continued mark-to-market opportunity embedded in our portfolio. Our core geographic markets continue to present strong fundamentals. Nova Scotia, one of our key markets, is well positioned to benefit from the anticipated boom of federal defense spending investment over the coming years. In Halifax, Amazon's recently announced operation hub is under construction in our Birdside Industrial Park, where we are one of the largest landlords. Together, with increased defense and infrastructure investment, we believe these developments provide additional long-term demand drivers for the industrial market. Turning to leasing activity, momentum remained strong during the quarter. As of today, we have renewed approximately 83% of our 2026 lease maturities at positive average spreads of 36.8%. Within our industrial portfolio, 80.4% of the 2026 maturities have been renewed at an average positive spread of 40.6%. Several completed lease renewals will begin contributing incremental cash flow during the second half of the year. More than 400,000 square feet will begin generating higher rental rates in September, with the full quarter impact reflected in Q4. Notably, five lease renewals commencing in 26, including rental increases, ranging from approximately 40% to 45%. Overall portfolio occupancy was 95% at quarter end, compared to 97.8% a year earlier. As noted on previous calls, the change is primarily driven by the impact of two vacancies. The first one is our 176,000 square foot industrial property in Saint-Hyacinthe, Quebec, which became vacant in 2025. As previously announced, we signed a 15-year lease for approximately 74,000 square feet, representing 42% of the property that will be cash flowing July 1, 2026. The new base rent of that space represents an increase of more than 122% compared to the previous tenant's rent for the same GLA. With rent commencement on July 1st, a new lease will contribute in incremental cash flow beginning in the third quarter. Second vacancy relates to approximately 81,000 square feet in Woodstock, Ontario, which became vacant April of this year. These are high-quality properties, and we continue to actively market the available space. Including these two property vacancies, portfolio occupancy would have been approximately 97.4% at quarter end. Allison, over to you.

Thank you, Gordy, and good morning, everyone. We are pleased with our second quarter performance. Property revenue totaled $27 million, up 7.7% year-over-year. The increase was mainly driven by contractual increases in rent and higher rental rates on lease renewals and new leases and contributions from four additional properties compared to the prior year. NOI was $16.5 million, an increase of 6.5% year-over-year, driven largely by these same factors. Same property NOI, representing 97 of our 122 properties at June 30th, was $14.3 million, up 3.3% year-over-year. Industrial same property NOI increased 2.9%. The increase reflects contractual rent escalations, stronger renewal rates, and higher rents on new leases. This was achieved despite a decline in overall average occupancy related to the two vacancies Gordy mentioned earlier. FFO totaled $8.5 million for the quarter, an increase of 6.1% year over year, primarily reflecting higher contractual rents and stronger renewal and new lease rates, partially offset by increased interest and financing costs. On a per-unit basis, basic FFO was approximately $0.12 compared with $0.13 a year ago. reflecting the higher weighted average unit count following the equity financing and the timing of capital deployment. The basic AFSO payout ratio was 98.9% in Q2 compared with 89.8% in the same quarter last year. The increase primarily reflects the timing differences between the June equity financing and the deployment of those proceeds into acquisitions as well as higher interest and financing costs. As we deploy the proceeds from the equity financing and benefit from the contribution of our recent acquisitions and completed lease renewals, we expect these factors to support our financial performance going forward. Net cash flows provided from operating activities were $10.6 million in the quarter, up 54.3%, mainly impacted by the timing of cash receipts and the settlement of payables. The weighted average capitalization rate for our portfolio remains stable year over year at approximately 6.7% at June 30th, 2026. Turning to the balance sheet, we remain focused on maintaining financial flexibility while reducing leverage over time. Total debt to total assets was 47.4% at June 30th, down from 50.6% a year earlier. Adjusted debt to gross book value was also 47.4% compared with 50.7% a year earlier. Adjusted debt to annualized adjusted EBITDA was 10.0 times at June 30th compared with the 9.8 times a year earlier, reflecting the timing of the deployment of proceeds from the equity financing. We remain focused on maintaining financial flexibility and reducing leverage over time. At quarter end, our total debt, including current and non-current portions, totaled $609.2 million compared to $562.4 million at the same date last year. At June 30th, we had $71.7 million of remaining mortgage maturities in 2026. As of today, all of those maturities have either been refinanced or are subject to renewal commitments. Subsequent to quarter end, approximately $32.9 million of maturing debt was refinanced with $40.4 million of new mortgages, while approximately $38.8 million was committed for one-year renewal. Looking beyond 2026, We have 55 million of mortgage maturities in 2027 and 66.8 million in 2028. The weighted average interest rate on those maturities are 4.8% and 3.5% respectively. Finally, our distribution of 3.75 cents per unit was maintained for the second quarter of 2026. That wraps up our financial review. Gordy, back to you for closing remarks.