Q1 2026 H&R Real Estate Investment Trust Earnings Call

May 15, 2026

Operator: Good morning, and welcome to H&R Real Estate Investment Trust 2026 Q1 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.

Speaker #2: These 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 and the forward-looking information.

Operator: Forward-looking information requires management to make assumptions or rely on certain material factors and is subject to inherent risks and uncertainties. Actual results could differ materially from the statements in the forward-looking information.

Speaker #2: 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.

Operator 1: 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.

Operator: 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.

Speaker #2: 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.

Speaker #2: 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.

Operator: 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.

Speaker #2: Additional information about the material factors, assumptions, risks, and uncertainties that could cause actual results to differ materially from the statements and 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.cdiplus.com.

Operator 1: 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.sedarplus.ca. I would now like to introduce Mr. Thomas Hofstedter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstedter.

Operator: 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.sedarplus.ca. I would now like to introduce Mr. Thomas Hofstedter, Chief Executive Officer of H&R REIT. Please go ahead, Mr. Hofstedter.

Speaker #2: I would now like to introduce Mr. Tom Hofstedter, Chief Executive Officer of H&R Real. Please go ahead, Mr. Hofstedter. Good morning, everyone, and thanks for joining us.

Thomas Hofstedter: Good morning, everyone, and thanks for joining us. Larry Froom, our CFO, is not available today. Cheryl Fried and Jason Birken will be taking the questions. In light of that, we're gonna bypass Larry's introductory comments and go right to Emily Watson, head of our Lantower division, to bring us up to date. Emily.

Speaker #2: Larry Froom, our CFO, is not available today. Cheryl Fried and Jason Birkin will be taking the questions. In light of that, we're going to bypass Larry's introductory comments, and go right to Emily Watson, head of our Land Tower Division, to bring us up to date.

Speaker #2: Emily?

Speaker #3: Thank you, Tom, and thanks to all of you for joining us. I'll begin with a status update on externalizing property management and some operational highlights, followed by an overview of our first quarter performance before turning to development progress.

Emily Watson: Thank you, Tom, and thanks to all of you for joining us. I will begin with status update on externalizing property management and some operational highlights, followed by an overview of our Q1 performance before turning to development progress. Q1 operating conditions progressed as we anticipated. We successfully transitioned property management to Greystar as of 1 April. We are encouraged by our early post-transition indicators. April lead volume increasing 18% over prior year. Completed tours were 13% higher than April of last year, and approved leases increased over 70% year over year for the month of April. Additionally, our bulk Wi-Fi projects are progressing well. 4 communities have launched and are expected to drive roughly CAD 800,000 in revenue for 2026, with another 7 projects in the pipeline.

Speaker #3: Q1 operating conditions progressed as we anticipated. We successfully transitioned property management to Greystar as of April 1. We are encouraged by our early post-transition indicators.

Speaker #3: April lead volume increasing 18% over prior year. Completed tours were 13% higher than April of last year, and approved leases increased over 70% year over year for the month of April.

Emily Watson: April lead volume increasing 18% over prior year. Completed tours were 13% higher than April of last year, and approved leases increased over 70% year over year for the month of April. Additionally, our bulk Wi-Fi projects are progressing well. 4 communities have launched and are expected to drive roughly CAD 800,000 in revenue for 2026, with another 7 projects in the pipeline.

Speaker #3: Additionally, our bulk Wi-Fi projects are progressing well. Four communities have launched and are expected to drive roughly $800,000 in revenue for 2026, with another seven projects in the pipeline.

Speaker #3: Greystar's early results paired with strong demand driven by steady wage growth, low rent-to-income ratios, and high retention rates reinforce our confidence that we are well positioned to capitalize on a market recovery across our Sunbelt portfolio.

Emily Watson: Greystar's early results, paired with strong demand driven by steady wage growth, low rent-to-income ratios, and high retention rates, reinforce our confidence that we are well-positioned to capitalize on a market recovery across our Sunbelt portfolio. Same-property net operating income on a cash basis from residential properties in US dollars increased by 2.3% for the three months ending 31 March 2026, compared to the respective 2025 period. This growth was primarily driven by the lease-up of Lantower West Love and Lantower Midtown, both in Dallas, Texas. The increase was partially offset by a decrease in rental income from H&R Sunbelt properties as a result of higher vacancies and concessions. Same asset occupancy ended the quarter at 90.9%, a decrease of 1.2% from Q4 and 30 basis points from prior year.

Speaker #3: Same property net operating income on a cash basis from residential properties in U.S. dollars increased by 2.3% for the three months ending March 31, 2026, compared to the respective 2025 period.

Speaker #3: This growth was primarily driven by the lease-up of Land Tower West Love and Land Tower Midtown, both in Dallas, Texas. The increase was partially offset by a decrease in rental income from H&R Sunbelt properties as a result of higher vacancies and concessions.

Emily Watson: This growth was primarily driven by the lease-up of Lantower West Love and Lantower Midtown, both in Dallas, Texas. The increase was partially offset by a decrease in rental income from H&R Sunbelt properties as a result of higher vacancies and concessions. Same asset occupancy ended the quarter at 90.9%, a decrease of 1.2% from Q4 and 30 basis points from prior year.

Speaker #3: Same asset occupancy ended the quarter at 90.9%, a decrease of 1.2% from Q4 and 30 basis points from the prior year. Sunbelt blended lease trade-outs were negative 3.5% in Q1, a 50 basis point decrease over Q4 and a 114 basis point decrease over Q1 of 2025.

Emily Watson: Sunbelt blended lease trade outs were -3.5% in Q1, a 50 basis point decrease over Q4 and a 114 basis point decrease over Q1 of 2025. New lease trade outs were -14.8%, and renewal lease rates increased +3.8%. Importantly, our Sunbelt resident retention remains strong at 58.3% in Q1. Turning to developments, our new REDT projects in Florida, of which H&R has a 29.1% ownership interest, continue to progress well and remain on budget. Sunrise in Orlando received their TCO this week, expecting first move-ins by June. We expect Lantower Bayside in Tampa, Florida, to receive TCO next week and also expect first move-ins in June. Construction completion for both assets is expected before the end of June.

Speaker #3: New lease trade-outs were negative 14.8%, and renewal lease rates increased 3.8%. Importantly, our Sunbelt resident retention remained strong at 58.3% in Q1. Turning to developments, our new Reddit projects in Florida, of which H&R has a 29.1% ownership interest, continue to progress well and remain on budget.

Speaker #3: Sunrise in Orlando received their TCO this week, expecting first move-ins by June. We expect Land Tower Bayside and Tampa, Florida, to receive TCO next week, and also expect first move-ins in June.

Emily Watson: Sunrise in Orlando received their TCO this week, expecting first move-ins by June. We expect Lantower Bayside in Tampa, Florida, to receive TCO next week and also expect first move-ins in June. Construction completion for both assets is expected before the end of June.

Speaker #3: Construction completion for both assets is expected before the end of June. Land Tower currently has nine Sunbelt developments in the pipeline, totaling approximately 2,900 suites at H&R's ownership interest.

Emily Watson: Lantower 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. In summary, the partnership between the Greystar teams and our asset management, development, and accounting teams has begun well. We believe this transition will result in long-term value creation through efficiency at scale, enhanced oversight, and significant overhead savings. We are encouraged by the strong fundamentals in the multifamily sector and specifically our markets. Improving market conditions, a laser-focused operating platform with buying power and market presence of our third-party management company has positioned our portfolio to take advantage of the recovery expected in H2 of this year. Short-term pricing power remains soft in a few regions, but the broader fundamentals for multifamily are gaining traction.

Speaker #3: Multiple sites are fully permitted and ready for construction, and we are advancing design, drawing, and permitting on the remainder. In summary, the partnership between the Greystar teams and our asset management, development, and accounting teams has begun well.

Speaker #3: We believe this transition will result in long-term value creation through efficiency at scale, enhanced oversight, and significant overhead savings. We are encouraged by the strong fundamentals in the multifamily sector, and specifically our markets.

Emily Watson: We are encouraged by the strong fundamentals in the multifamily sector and specifically our markets. Improving market conditions, a laser-focused operating platform with buying power and market presence of our third-party management company has positioned our portfolio to take advantage of the recovery expected in H2 of this year. Short-term pricing power remains soft in a few regions, but the broader fundamentals for multifamily are gaining traction.

Speaker #3: Improving market conditions, a laser-focused operating platform with buying power and market presence of our third-party management company, has positioned our portfolio to take advantage of the recovery expected in the second half of this year.

Speaker #3: Short-term pricing power remains soft in a few regions, but the broader fundamentals for multifamily are gaining traction. Supply pipelines are thinning, and affordability continues to draw demand, and our early operational indicators under Greystar are moving in the right direction.

Emily Watson: Supply pipelines are thinning, and affordability continues to draw demand, and our early operational indicators under Greystar are moving in the right direction. I also want to recognize and thank our team for a successful transition to Greystar and for their continued partnership and drive to deliver strong performance across the portfolio. With that, I'll turn the call back to Tom.

Speaker #3: I also want to recognize and thank our team for a successful transition to Greystar and for their continued partnership and drive to deliver strong performance across the portfolio.

Speaker #3: And with that, I'll turn the call back to Tom.

Speaker #2: Thanks, Emily. Operator, you can open up the call for questions.

Thomas Hofstedter: Thanks, Emily. Operator, you can open up the call for questions.

Speaker #3: 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 touch-tone phone.

Operator 1: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. First question comes from Jimmy Shan with RBC Capital Markets. Please go ahead.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. First question comes from Jimmy Shan with RBC Capital Markets. Please go ahead.

Speaker #3: You will hear a prompt that your hand has been raised. If you are using a speakerphone, please lift the handset before pressing any keys.

Speaker #3: One moment, please, for your first question. First question comes from Jimmy Shen with RBC Capital Markets. Please go ahead.

Speaker #4: Oh, hi. Thanks. So maybe just on Land Tower, occupancy did decline sequentially, as you mentioned. I'm just kind of wondering sort of what do you think drove that and where is occupancy sitting today?

Jimmy Shan: Oh, hi. Thanks. Maybe just on Lantower, occupancy did decline sequentially, as you mentioned. I'm just kind of wondering sort of what do you think drove that, and where is occupancy sitting today?

Emily Watson: Occupancy is right around that 90 mark. Jimmy Shan, thanks for the question, and good morning. I would not be surprised, you know, the Q1 was our transition month to Greystar. I think that we had a lot of operational focus on transitioning our websites, transitioning our property, our folks learning new roles, just, you know, if you can remember back when you started a new job. I do think that that had an effect. To what extent? I don't know. Is it 1%, 2%? Probably. I do think that, you know, the April getting everybody marching in the right direction proves that everybody's kind of settling in and expect that number to continue to grow.

Speaker #3: Occupancy is right around that 90 mark. Jimmy, thanks for the question, and good morning. I would not be surprised, and obviously can't put an attribution to it, but Q1 was our transition month to Greystar.

Speaker #3: So I think that we had a lot of operational focus on transitioning our websites, transitioning our property, our folks learning new roles, just if you can remember back when you started a new job.

Speaker #3: So I do think that that had an effect to what extent. I don't know. Is it 1, 2 percent? Probably. But I do think that the April getting everybody marching in the right direction proves that everybody's kind of settling in and expect that number to continue to grow.

Emily Watson: I do think that that had an effect. To what extent? I don't know. Is it 1%, 2%? Probably. I do think that, you know, the April getting everybody marching in the right direction proves that everybody's kind of settling in and expect that number to continue to grow.

Speaker #4: Okay. And the 5 million of savings, you still think that's going to be realized over the course of '26?

Jimmy Shan: Okay. The CAD 5 million of savings, you still think that's gonna be realized over the course of 2026?

Speaker #3: I do. Just our management fees alone is a big bump. And we just continue to get better savings on virtually almost every line item.

Emily Watson: I do. You know, just our management fees alone is a big bump, and we just continue to get better savings on virtually almost every line item. I think I shared the pricing. Our discount last year, or on the last quarter was 40%, and theirs is 85. You extrapolate that. Group insurance alone for our employees is a 30% discount to what we were able to. Just kind of in every corner, you just get better buying power when you're 1 million units versus 9,000 units. Yeah, I feel very confident for our overhead cost and things that are hitting the property that we'll see those savings.

Speaker #3: I think I shared the painting. Our discount last year, or within the last quarter, was 40%, and theirs is 85%. Extract, like that, group insurance alone for our employees is a 30% discount to what we were able to.

Speaker #3: So just kind of in every corner, you just get better buying power when you're at a million units versus 9,000 units. So yeah, I feel very confident for our overhead costs and things that are hitting the property that we'll see those savings.

Speaker #4: Okay. And then turning to a couple of kind of big leases, the industrial lease, the former HBC, I'm wondering if there's any update on leasing that space and then the 330 Front Street RBC move-out kind of what your expectation in releasing that

Jimmy Shan: Okay. Just turning to a couple of kind of big leases, the industrial lease, the former HBC, I'm wondering if there's any update on leasing that space and then the 330 Front Street, the RBC move-out kinda. What's your expectation on releasing that space?

Speaker #2: So hey, morning. Thanks, Jimmy. So HBC is currently just leased out kind of temporary basis to a film studio. I can't tell you which movie it is.

Thomas Hofstedter: Hey, morning. Thanks, Jimmy. The HBC is currently just leased us on a temporary basis to a film studio. I can't tell you which movie it is. There's some activity. It's a weak market, we're optimistic. I hope by the end of the year, this will be leased out. The office in Front Street is seeing large demand from large users. We have, it's the financial institutions, as you'd expect. Again, we're optimistic that we should see some leases signed this year, hopefully this quarter, actually, for the RBC space that's currently available. I'm hoping that all of it will be taken by one tenant. We are seeing, as I said, large user demand for Front Street.

Speaker #2: And there's some activity. It's not—it's a weak market. But we're optimistic. I hope by the end of the year, it'll be leased out.

Speaker #2: The office in Front Street is seeing large demand from large users. So we have and so the financial institutions, as you'd expect, again, we're optimistic that we should see some lease assigned.

Thomas Hofstedter: Again, we're optimistic that we should see some leases signed this year, hopefully this quarter, actually, for the RBC space that's currently available. I'm hoping that all of it will be taken by one tenant. We are seeing, as I said, large user demand for Front Street.

Speaker #2: This year, hopefully—this quarter, actually—for the RBC space that's currently available, I'm hoping that all of it will be taken by one tenant.

Speaker #2: But we are seeing, as I said, large user demand for Front Street.

Speaker #4: Okay. And I guess just on Front Street asset sales, I suspect that's going to be pushed further out once you get the lease done.

Jimmy Shan: Okay. I guess just on Front Street asset sales, I suspect that's going to be pushed further out once you get the lease done. Maybe if you could also update us on some of the asset sales that you're working on right now.

Speaker #4: And, maybe, if you could also update us on some of the asset sales that you're working on right now.

Speaker #2: So we're working so Front Street is not on the market. We're not going to be selling it until we get further ahead in leasing.

Thomas Hofstedter: We're working, so Front Street is not on the market. We're not gonna be selling it until we get further ahead in leasing. My guess is that it won't be put on the market this year. 26 Wellington is on the market. We expect to have signed the deal. We have a conditional deal signed right now. We're hoping that it gets signed up firm in Q2. 25 Sheppard, I can say the same thing. Gowanus, we also hope to have something firm to be able to announce probably this quarter. Those three assets, I'm hoping that it'll be this quarter, maybe the next, and Front Street off the market.

Speaker #2: So, my guess is that it won't be put on the market this year. Twenty-six Wellington is on the market. We expect to have signed a deal.

Speaker #2: We have an unconditional deal done, a conditional deal signed right now. We're hoping that it gets signed up firm in the second quarter. '25 Shepherd, I can say the same thing.

Speaker #2: And Guanes, we also hope to have something firm to be able to announce probably this quarter. So those three assets, I'm hoping that it'll be this quarter, maybe the next.

Speaker #2: And Front Street is off the market.

Speaker #4: Okay. Okay. That's it for me. I'll turn it back.

Jimmy Shan: Okay. Okay. That's it for me. I'll turn it back.

Speaker #2: Thank you.

Thomas Hofstedter: Thank you.

Speaker #3: Thank you. The next question comes from Tal Woolley with CIBC Capital Markets. Please go ahead.

Operator 1: Thank you. The next question comes from Itiel Wolowie with CIBC Capital Markets. Please go ahead.

Operator: Thank you. The next question comes fromi Itel Wolowie with CIBC Capital Markets. Please go ahead.

Speaker #5: Hey, good morning, everybody. Just on the savings from the Greystar transaction, that's all going to be captured within operating expenses. There's no impact on the trust corporate expenses.

Itiel Wolowie: Hey, good morning, everybody. Just on the savings from the Greystar transaction, that's all gonna be captured within operating expenses. There's no impact on the trust corporate expenses?

Tal Woolley: Hey, good morning, everybody. Just on the savings from the Greystar transaction, that's all gonna be captured within operating expenses. There's no impact on the trust corporate expenses?

Speaker #3: Yeah. There will be considerable amount on the trust as well, just from the overhead that we had in our property management vertical that is now on Greystar's payroll and not on ours.

Emily Watson: Yeah, there will be considerable amount on the Trust as well, just from the overhead that we had in our property management vertical that is now on Greystar's payroll and not on ours, and doesn't encumber our NOI at the property. You know, I can't tell you the split off the top of my head, but there was considerable savings on Trust as well as the operational things that hit NOI.

Speaker #3: It doesn't encumber our NOI at the properties. So, I can't tell you the split off the top of my head, but there was considerable savings on trust as well as the operational things that hit NOI.

Speaker #5: Okay. And then, Tom, I think you have one unsecured bond issue coming due this year. I know when you were in the drought review process, you had looked maybe at using credit facilities more.

Itiel Wolowie: Okay. Then, Tom, I think you have 1 unsecured bond issue coming due this year. I know when you were in the draft review process, you know, you had looked maybe at using credit facilities more. I'm just wondering how you're thinking about addressing that maturity.

Tal Woolley: Okay. Then, Tom, I think you have 1 unsecured bond issue coming due this year. I know when you were in the draft review process, you know, you had looked maybe at using credit facilities more. I'm just wondering how you're thinking about addressing that maturity.

Speaker #5: I'm just wondering how you're thinking about addressing that maturity.

Speaker #2: We have the asset sales that I talked about just now, should cover the unsecured that rolls. So, we do not plan on issuing a new unsecured right now.

Thomas Hofstedter: The asset sales that I talked about just now should cover the unsecured that rolls. We do not plan on issuing any unsecured right now.

Speaker #5: Okay. And then just lastly, any comments on—I think the fees this year, your management fees were sort of flat, roughly year over year?

Itiel Wolowie: Okay. Just lastly, any comments on I think the fees this year or your management fees were sort of flat roughly year over year. Any sort of expected changes to those over the course of 2026?

Tal Woolley: Okay. Just lastly, any comments on I think the fees this year or your management fees were sort of flat roughly year over year. Any sort of expected changes to those over the course of 2026?

Speaker #5: Any sort of expected changes to those over the course of 2026?

Speaker #2: No.

Thomas Hofstedter: No.

Speaker #5: Okay, that's great. Thanks very much, everyone.

Itiel Wolowie: Okay. That's great. Thanks very much, everyone.

Tal Woolley: Okay. That's great. Thanks very much, everyone.

Speaker #2: Thank you.

Thomas Hofstedter: Thank you.

Speaker #3: Thank you, ladies and gentlemen. As a reminder, if you have any questions, please press star one. The next question comes from Sam Damiani with TD Cowen.

Operator 1: Thank you. Ladies and gentlemen, as a reminder, if you have any questions, please press star one. Next question comes from Sam Damiani with TD Cowen. Please go ahead.

Operator: Thank you. Ladies and gentlemen, as a reminder, if you have any questions, please press star one. Next question comes from Sam Damiani with TD Cowen. Please go ahead.

Speaker #3: Please go ahead.

Speaker #5: Thank you, and good morning, everyone. Maybe just looking at the top tenant list there, there's two or three with relatively short remaining terms to their maturity.

Sam Damiani: Thank you. Good morning, everyone. Maybe just looking at the top tenant list, there are 2 or 3 with relatively short remaining terms to their maturity. I wonder if you'd comment on the prospects for renewing some of those tenants. I'm thinking of Bell and O-I Canada Corp.

Speaker #5: Wondering if you could comment on the prospects for renewing some of those tenants. I'm thinking of Bell and OI Canada Corp.

Speaker #2: So the answer to the question is Bell, we I don't see why we would have Bell. Oh, just the only Bell we have is Bouchard, and that comes up in the end of the year, and we do not expect them to renew.

Thomas Hofstedter: The answer to the question is, Bell, we I don't see why we would have Bell. The only Bell we have is Ricard, and that comes up in end of the year, and we do not expect them to renew. Well, that asset is being rezoned for residential townhouse use, not for high-rise residential, so we expect to demolish that building and to build a residential and build a residential development on that. That's We're not even talking to them about renewal of that asset. As far as the other one that you mentioned, we're in discussions.

Speaker #2: That asset is being rezoned for residential, townhouse use, not for high-rise residential. So we expect to demolish that building and build a residential development on that.

Speaker #2: So, we're not even talking to them about renewal of that asset. As far as the other one that you mentioned, we're in discussions.

Speaker #5: Okay. And just on remaining of some of the remaining office tower, office buildings, you discussed with a few, but the big one in Calgary, the big one in Long Island City.

Sam Damiani: Okay. Just on the remaining, some of the remaining, you know, office tower, office buildings, you discussed a few, but, you know, there's the big one in Calgary, the big one in Long Island City.

Speaker #2: Both of those tenants are sticky tenants. We're not going to be selling them right now. Until we get to—until we negotiate some form of extension, as they're sticky, we're optimistic that we will get an extension.

Thomas Hofstedter: Both of those tenants are sticky tenants. We're not gonna be selling them right now, until we negotiate some form of extension. As they're sticky, we're optimistic that we will get an extension. It won't happen. We will not do anything this year. We're not in discussions with either one of them at this point in time.

Speaker #2: But it won't happen. We will not do anything this year. We're not in discussions with either one of them at this point in time.

Sam Damiani: When would you envision sort of entering into those discussions, to, in order to extend the lease and then open the door to a sale?

Speaker #5: So when would you envision sort of entering into those discussions in order to extend the lease and open the door to a sale?

Sam Damiani: When would you envision sort of entering into those discussions, to, in order to extend the lease and then open the door to a sale?

Speaker #2: So in case of TransCanada, I'm pretty sure that they had some changes on the real estate side recently. I expect that they're very comfortable having renewal rights, so there's not exactly there's not anybody's had to talk renewal.

Thomas Hofstedter: In case of TC Energy, I'm pretty sure that they had some changes on the real estate side recently. I expect that they're very comfortable having renewal rights, so there's not exactly anybody's interest to talk renewal. They are occupying the entire building. Again, they're using it. They're using it fully. They work in the office 5 days a week. I don't expect them to have any reason to talk to us for another year or so. I would say exactly the same thing with 2000. It's occupied by a tenant that uses the space 4 days a week.

Speaker #2: They are occupying the entire building, and so again, they're using it. They're using it fully. They work in the office five days a week.

Speaker #2: I don't expect them to have any reason to talk to us for another year or so. I would say exactly the same thing with Two Gotham.

Speaker #2: It's occupied by a tenant that's used the space four days a week. It's used fully, and I don't think—I know that they don't like, because of the nature of their use, they don't like to have other tenants within their building.

Thomas Hofstedter: It's used fully, and I know that they don't like, because the nature of their use, they don't like to have other tenants within their building. I expect optimistic results in discussing renewals over there as well. They have another 2 years to go or just under 2 years to go before they have to give us notice, and then they have a re-renewal for a 10-year option. The rent is only pegged 1.5 years after that. I don't expect to have any discussions with them for I don't see any reason to have for another 18 months or so, maybe 12 to 18 months. We would not be selling that asset either until we enter into those discussions.

Speaker #2: So, I expect optimistic results in discussing renewals over there as well. They have another two years to go—before, or just under two years to go—before they have to give us notice, and then they have a renewal for a 10-year option.

Speaker #2: And the rent is only pegged a year and a half after that. So I don't expect to have any discussions with them for probably—I don't see any reason to have—for another 12 to 18 months, maybe 18 months or so.

Thomas Hofstedter: The rent is only pegged 1.5 years after that. I don't expect to have any discussions with them for I don't see any reason to have for another 18 months or so, maybe 12 to 18 months. We would not be selling that asset either until we enter into those discussions.

Speaker #2: We would not be selling that asset either until we enter into those discussions. Again, they're sticky tenants, both of them. And as such, we're optimistic in getting renewals, and therefore, there'd be no point in taking the small chance that they'd be leaving and reducing a price and selling at this point in time.

Thomas Hofstedter: Again, they're sticky tenants, both of them, and as such, we're optimistic in getting renewals, and therefore, there'd be no point in taking the small chance that they'd be leaving and reducing the price and selling at this point in time.

Speaker #5: Okay. I understood. And then just lastly, Emily, thank you very much again for the good overview of the business and its great to see that the transition is been smooth and is opening up some new opportunities.

Sam Damiani: Okay. All right, understood. Then, just lastly, Emily, thank you very much again for the good overview of the business, and it's great to see that the transition has been smooth and is opening up some new opportunities. You did answer, I think it's Jimmy's question on the occupancy, but would you see a similar response on the slight worsening in leasing spreads that's, I guess, seem to occur in Q1?

Speaker #5: You did answer, I think, it's Jimmy's question on the occupancy, but would you see a similar response on the slight worsening in leasing spreads that, I guess, seemed to occur in Q1?

Speaker #3: I think they're going to stay stable. In Q2, we see a lot of the supply really coming down in Q3 and Q4. So we see much better pricing power.

Emily Watson: I think they're gonna stay stable in Q2. We see a lot of the supply really coming down in Q3 and Q4. We see a much better pricing power. Probably the end of Q2, we'll start seeing a little bit of the new lease trade-outs get a little bit more favorable. I do expect similar results for Q2, higher occupancy. Q3, Q4 should be much better positioned for really the multifamily market. Definitely our markets should be stronger in Q3 and Q4.

Speaker #3: Probably the end of Q2 will start seeing a little bit of the new lease trade-outs get a little bit more favorable. But I do expect similar results for Q2, higher occupancy, and then Q3, Q4 should be much better positioned for really the multifamily market.

Speaker #3: But definitely our markets should be stronger in Q3 and Q4.

Speaker #5: That's great. Okay. Thanks very much, and I'll turn it back. Thank you.

Sam Damiani: That's great. Okay. Thanks very much, and I'll turn it back. Thank you.

Speaker #3: Thank you. The next question is a follow-up from Jimmy Shen with RBC Capital Markets. Please go ahead.

Operator 1: Thank you. The next question is a follow-up from Jimmy Shan with RBC Capital Markets. Please go ahead.

Operator: Thank you. The next question is a follow-up from Jimmy Shan with RBC Capital Markets. Please go ahead.

Speaker #4: Thanks. Yeah. Just in terms of capital allocation, should we expect the proceeds from further asset sales to go towards NCIB, given that your leverage metrics have improved quite a bit?

Jimmy Shan: Thanks. Yeah, just in terms of capital allocation, should we expect the proceeds from further asset sales to go towards NCIB now that your leverage metrics is improved quite a bit?

Thomas Hofstedter: Yes, you could expect us initiating NCIB activity once we hopefully get through the sales of the three assets that I mentioned.

Speaker #2: Yes. You could expect us initiating NCIB activity once we hopefully get through the sales of the three assets that I mentioned.

Thomas Hofstedter: Yes, you could expect us initiating NCIB activity once we hopefully get through the sales of the three assets that I mentioned.

Speaker #4: Okay. And then maybe tell me the big-picture question on strategy. It's been five years since you did the last strategic plan. Office is now down to 10% or so.

Jimmy Shan: Okay. Maybe tell me big, big picture question on strategy. Like, it's been 5 years since you did the last strategic plan. Office is now down to 10% or so of the portfolios. You could argue it's almost there. When should we expect or when should investors expect, like, a refreshed sort of strategic plan in terms of what the go-forward plan would be to close, continue to close that NAV gap?

Speaker #4: Of the portfolios, you could argue it's almost there. When should we expect, or when should investors expect, a refreshed sort of strategic plan in terms of what the go-forward plan would be—gap?

Speaker #2: So your question's very, very apropos and valid. We are pretty close to finishing our plan. The assets that I mentioned that we'd be keeping are probably not going to be sold at this point in time.

Thomas Hofstedter: Your question is very apropos and valid. We are pretty close to finishing our plan. The assets that I mentioned that we'll be keeping are probably not gonna be sold at this point in time. You can basically assume by the end of the year, the strategic plan will be completed, at which point in time we'll be really having industrial and Lantower. At that point in time, we'll have to really figure out before the year is out, is my guess, giving you some indication as to timing, figure out what is next, if it's gonna be a rollout of one of the assets, keeping them or what we're gonna be doing. We're on top of it. We're having discussions among our trustees, and we hope to have a resolution by before the year is out.

Speaker #2: So you can basically assume by the end of the year, the strategic plan will be completed. At which point in time, we'll be really having industrial and land tower at that point in time will have to really figure out before the year is out is my guess, giving you some indication as to timing.

Thomas Hofstedter: At that point in time, we'll have to really figure out before the year is out, is my guess, giving you some indication as to timing, figure out what is next, if it's gonna be a rollout of one of the assets, keeping them or what we're gonna be doing. We're on top of it. We're having discussions among our trustees, and we hope to have a resolution by before the year is out.

Speaker #2: Figure out what is next—if it's going to be a rollout of one of the assets, keeping them, or what we're going to be doing.

Speaker #2: But we're on top of it. We're having discussions among our trustees, and we hope to have a resolution before the year is out.

Speaker #4: Okay. Thank you.

Jimmy Shan: Okay. Thank you.

Speaker #3: Thank you. The next question comes from Mario Saric with Scotiabank. Please go ahead.

Operator 1: Thank you. The next question comes from Mario Saric with Scotiabank. Please go ahead.

Operator: Thank you. The next question comes from Mario Saric with Scotiabank. Please go ahead.

Speaker #5: Hi, good morning. Maybe just coming back to Emily on the lease spreads for Land Tower and the expectation of them getting better in the second half of the year.

Mario Saric: Hi, good morning. Maybe just coming back to Emily on the lease spreads for Lantower, the expectation of them getting better in H2 of the year. Where would you like to see kind of the new lease spread and the blended lease spread kind of end the year? Like, how much upside do you think there is once the supply really tapers off, heading into 2027?

Speaker #5: Where would you like to see kind of the new lease spread and the blended lease spread end the year? How much upside do you think there is once the supply really tapers off heading into 2027?

Speaker #6: Great question. I think that, yeah, Q3—I think that we should get back to kind of a flat... Well, by the end of Q2, early Q3, get back to a flat lease spread.

Emily Watson: Great question. I think that Q3, I think that we should get back to kind of a flat, well, by the end of Q2 to early Q3, get back to a flat lease spread and see maybe +2%, +3% going into the end of Q4, which obviously has some seasonality. It might be a little bit tepid there. 2% or 3% favorable or positive on the blended should be where we have some inverted rent rolls out there. We see concessions starting to taper down. We see, you know, folks starting to be a little bit more resilient, that we want to get our pricing power for the leasing season and get really strong.

Speaker #6: And we see maybe positive to positive 3% going into the end of the fourth quarter, which obviously has some seasonality. So it might be a little bit tepid there.

Speaker #6: But yeah, 2 or 3 percent favorable or positive on the blended should be where we have some inverted rent rolls out there, but we see concessions starting to taper down.

Speaker #6: We see folks starting to be a little bit more resilient. Do we want to get our pricing power for the leasing season? And get really strong and then Q3, Q4 with the fundamentals really falling back into line, we should revert back to the pre-COVID leasing seasons that we've had historically.

Emily Watson: Q3, Q4, with the fundamentals really falling back into line, we should revert back to the pre-COVID leasing seasons that we've had historically.

Speaker #5: Okay. And then last quarter, there were some discussions of potentially exiting some land tower markets. Can you perhaps give us an update in terms of where that stands today?

Mario Saric: Okay. Last quarter, there was some discussion of potentially exiting some Lantower markets. Can you perhaps give us an update in terms of where that stands today?

Thomas Hofstedter: Uh, so-

Emily Watson: Uh-

Thomas Hofstedter: The market that we were referring to was Austin. At that point in time, last quarter, we told you that we're gonna wait a quarter. We're still waiting a quarter, that is the next target that we're putting on the market. I would tend to say probably later on this year, we've probably been putting that on the market. We also have the Hercules project with Ledcor, our JV in outside San Francisco that is on the market, and we hope to be able to tell you the results of that asset sale this quarter.

Speaker #2: The market that we're referring to is Austin, and at that point in time—last quarter—we told you that we were going to wait a quarter.

Speaker #2: We're still waiting a quarter, so that is the next target that we're putting on the market. I would tend to say it's probably later on this year.

Speaker #2: We probably would be putting that on the market. We also have the Hercules project with Letcor, our JV outside San Francisco, that is on the market.

Speaker #2: And we hope to be able to tell you the results of that asset sale this quarter.

Speaker #5: Good, okay. And then just sticking to the asset sales, Tom, based on the commentary with respect to some of the long lease duration office assets, is it fair to say the targeted $500 million to $1 billion-plus that we talked about last quarter—maybe it's a bit lower than that, or is that still the plan going forward?

Mario Saric: Got it. Okay. Just sticking to the asset sales, Tom, based on kind of the commentary with respect to some of the long lease duration office assets, is it fair to say the targeted CAD 500 million to CAD 1 billion plus that we talked about last quarter, maybe it's a bit lower than that? Or is that still the plan going forward?

Speaker #2: 500 is definitely achievable. A billion is probably not. It's not on the guaranteed horizon. But I'd be comfortable with it at the 500 level.

Thomas Hofstedter: CAD 500 is definitely achievable. CAD 1 billion is probably not on the guaranteed horizon. I'd be comfortable with it at the 500 level.

Speaker #5: Okay. And how much of the 500 would be attributable to the three assets that you highlighted?

Mario Saric: Got it. How much of the CAD 500 would be attributable to the three assets that you highlighted?

Thomas Hofstedter: Round numbers, 300-ish.

Speaker #2: Round numbers, 300-ish.

Thomas Hofstedter: Round numbers, 300-ish.

Speaker #5: Okay. And is there a cap rate range you'd like to provide on the 500 million?

Mario Saric: Is there a cap rate range you'd like to provide on the CAD 500 million?

Thomas Hofstedter: No. A cap rate would not be very relevant. I don't think it's relevant when you have a piece of this, the largest part of that is a piece of land which has no cap rate. I can't really talk cap rate on that.

Speaker #2: No, a cap rate would not be very relevant. I don't think it's relevant when you have a piece of the longer largest part of that, which is a piece of land—which has no cap rate.

Speaker #2: So I can't really talk cap rate on that.

Speaker #5: Yeah, no, I guess I'm trying to understand the potential FFO impact associated with the 500.

Mario Saric: You know, I guess I'm trying to understand the potential FFO impact associated with pulling the CAD 500.

Speaker #2: Oh, I see. So on the 500, the iguanas has zero, and therefore, the cap rate on the office buildings I don't know. I would say probably around 8%, 7.5, in that range.

Thomas Hofstedter: I see. On the 500, the Gowanus has zero, and therefore, the cap rate on the office buildings, I don't know, I would say probably around 8%, 7.5%, in that range.

Speaker #5: Got it. Okay. And sorry, last one for me—just on Calidon. Any update there in terms of a transaction?

Mario Saric: Got it. Okay. Sorry, last one for me, just on Caledon. Any update there in terms of a transaction?

Thomas Hofstedter: We're in discussions. No updates. It's in their court to decide. My guess is you'll have something done by the end of the quarter as well. As far as what that is, that decision is I have zero visibility because they haven't decided. All I can tell you is that they're building the highway, so something's gonna happen. What it is, though, we don't, we really don't know.

Speaker #2: We're re in discussions. No updates in their court to decide. My guess is you'll have something done by the end of the quarter as well.

Speaker #2: As far as what that is, that decision is—I have zero visibility, because they haven't decided. All I can tell you is that they're building the highway.

Speaker #2: So something's going to happen. What it is, though, we really don't know.

Speaker #5: Okay. Okay. That's it for me. Thank you.

Mario Saric: Okay. That's it for me. Thank you.

Speaker #3: Thank you. We have no further questions. I will turn the call back over to Tom Hofstedter for closing comments.

Operator 1: Thank you. We have no further questions. I will turn the call back over to Tom Hofstedter for closing comments.

Operator: Thank you. We have no further questions. I will turn the call back over to Tom Hofstedter for closing comments.

Speaker #2: Thanks, everybody. Have a great long weekend.

Thomas Hofstedter: Thanks, everybody. Have a great long weekend.

Operator 1: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

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