Q2 2026 Morguard North American Residential Real Estate Investment Trust Earnings Call

July 30, 2026

Speaker #1: Good afternoon, ladies and gentlemen, and welcome to the Morguard North American Residential REIT Q2 2026 results conference call. At this time, all lines are in a listen-only mode.

Operator: Good afternoon, ladies and gentlemen, and welcome to the Morguard North American Residential REIT 2026 Q2 Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Thursday, 30 July 2026. I would now like to turn the call over to Chris Newman, CFO. Please go ahead.

Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator.

Speaker #1: This call is being recorded on Thursday, July 30, 2026. I would now like to turn the call over to Chris Newman, CEO. Please go ahead.

Speaker #2: Thank you. Hi, everyone. Welcome to the Q2 MRG conference call. With me today are Angela Sahi, President and CEO, and Paul Miettello, Senior Vice President.

Chris Newman: Thank you. Hi, everyone. Welcome to the Q2 MRG conference call. With me today is Angela Sahi, President and CEO; Paul Miatello, Senior Vice President; Beverley Flynn, Senior Vice President and General Counsel; John Talano, Senior Vice President, US Operations; and Ruth Grable, Vice President, Canadian Operations. As is customary, I'll provide some comments on the REIT's financial position and performance. In terms of our financial position, the REIT completed the Q2 with total assets of CAD 4.8 billion, higher compared to CAD 4.5 billion at 31 December 2025. The increase in total assets was due to a change in the US dollar exchange rate, a fair value increase on the REIT's income-producing properties, and an increase in cash from refinancings completed during the quarter.

Chris Newman: Thank you. Hi, everyone. Welcome to the Q2 MRG Conference Call. With me today is Angela Sahi, President and CEO; Paul Miatello, Senior Vice President; Beverley Flynn, Senior Vice President and General Counsel; John Talano, Senior Vice President, US Operations; and Ruth Grabel, Vice President, Canadian Operations. As is customary, I'll provide some comments on the REIT's financial position and performance. In terms of our financial position, the REIT completed the Q2 with total assets of CAD 4.8 billion, higher compared to CAD 4.5 billion at 31 December 2025. The increase in total assets was due to a change in the US dollar exchange rate, a fair value increase on the REIT's income-producing properties, and an increase in cash from refinancings completed during the quarter.

Speaker #2: Beverly Flynn, Senior Vice President, General Counsel; John Tolino, Senior Vice President, U.S. Operations; and Ruth Grable, Vice President, Canadian Operations. And as is customary, I'll provide some comments on the REIT's financial position and performance.

Speaker #2: In terms of our financial position, the REIT completed the second quarter with total assets of $4.8 billion, higher compared to $4.5 billion at December 31, 2025.

Speaker #2: The increase in total assets was due to a change in the U.S. dollar exchange rate, a fair value increase on the REIT's income-producing properties, and an increase in cash from refinancings completed during the quarter.

Speaker #2: During the second quarter, the REIT completed the CMHC-insured refinancing of three residential properties located in Ontario and Alberta, for an aggregate amount of $162.8 million, at a weighted average interest rate of 4.26% and for a weighted average term of 11.2 years.

Chris Newman: During the Q2, the REIT completed the CMHC-insured refinancing of three residential properties located in Ontario and Alberta for an aggregate amount of CAD 162.8 million at a weighted average interest rate of 4.26% and for a weighted average term of 11.2 years. As well, the REIT completed the refinancing of a residential property located in Kennesaw, Georgia, in the amount of $29.2 million US at an interest rate of 5.4% and for a term of 5 years. In total, the refinancing provided CAD 86.4 million of additional proceeds net of financing costs. The REIT finished the Q2 with approximately CAD 204 million of cash on hand and CAD 100 million available under the REIT's revolving credit facility with Morguard Corporation.

Speaker #2: As well, the REIT completed the refinancing of a residential property located in Kennesaw, Georgia, in the amount of $29.2 million U.S. dollars, at an interest rate of 5.4% and for a term of 5 years.

Speaker #2: In total, the refinancings provided $86.4 million of additional proceeds, net of financing costs. The REIT finished the second quarter with approximately $204 million of cash on hand and $100 million available under the REIT's revolving credit facility with Morguard Corporation.

Speaker #2: Mortgages payable ended the quarter with a weighted average term to maturity of 5.2 years, an increase from 4.8 years at December 31, 2025, and a weighted average interest rate of 4.18%, higher compared to 4.07% at December 31, 2025.

Chris Newman: Mortgages payable end of the quarter with a weighted average term to maturity of 5.2 years, an increase from 4.8 years at 31 December 2025, and a weighted average interest rate of 4.18%, higher compared to 4.07% at 31 December 2025. The REIT's debt to gross book value ratio was 40% at 30 June 2026, higher compared to 39.5% at 31 December 2025. The REIT's IFRS net asset value per unit at 30 June 2026 was CAD 45.55. As previously announced, the REIT and Morguard Corporation agreed to jointly invest approximately CAD 1 billion in a Canadian multi-suite residential real estate portfolio currently owned by TD Asset Management. We are actively progressing through due diligence, including determining individual property allocations to the REIT, and anticipate closing the transaction during H2 of the year. Turning to the statement of income.

Speaker #2: The REIT's debt-to-gross book value ratio was 40% at June 30, 2026, higher compared to 39.5% at December 31, 2025. The REIT's IFRS net asset value per unit at June 30, 2026, was $45.55.

Speaker #2: And as previously announced, the REIT and Morguard Corporation agreed to jointly invest approximately $1 billion in a Canadian multi-suite residential real estate portfolio currently owned by TD Asset Management.

Speaker #2: We are actively progressing through due diligence, including determining individual property allocations to the REIT, and anticipate closing the transaction during the second half of the year.

Speaker #2: Turning to the statement of income, net income was $26.1 million for the three months ended June 30, 2026, compared to $30.0 million in 2025.

Chris Newman: Net income was CAD 26.1 million for the three months ended 30 June 2026, compared to CAD 30 million in 2025. The CAD 3.9 million decrease in net income was primarily due to a decrease in NOI and offsetting net non-cash changes. IFRS net operating income was CAD 54.2 million for the three months ended 30 June 2026, a decrease of CAD 2.7 million or 4.7% compared to 2025. On a proportionate basis, proportionate NOI for the three months ended 30 June 2026 decreased by 4.9% compared to 2025 due to the following. NOI in Canada decreased by CAD 1.1 million or 6.6%, mainly due to higher vacancy and a decrease in ancillary revenue, partially offset by an increase in AMR.

Speaker #2: The $3.9 million decrease in net income was primarily due to a decrease in NOI and offsetting net non-cash changes. IFRS net operating income was $54.2 million for the three months ended June 30, 2026, a decrease of $2.7 million, or 4.7%, compared to 2025.

Speaker #2: And on a proportionate basis, proportionate NOI for the three months ended June 30, 2026, decreased by 4.9% compared to 2025 due to the following: NOI in Canada decreased by $1.1 million, or 6.6%, mainly due to higher vacancy and a decrease in ancillary revenue, partially offset by an increase in AMR.

Speaker #2: NOI in the U.S. decreased by $0.9 million, or 3.9%, mainly due to higher vacancy and an increase in operating expenses—primarily from higher R&M and payroll costs—partly offset by an increase in AMR and ancillary revenue.

Chris Newman: NOI in the US decreased by CAD 0.9 million or 3.9%, mainly due to higher vacancy and an increase in operating expenses, primarily from higher R&M and payroll costs, partly offset by an increase in AMR and ancillary revenue. The change in foreign exchange rate decreased proportionate NOI by CAD 0.4 million. Interest expense increased by CAD 0.4 million for the three months ended 30 June 2026, compared to 2025, primarily due to an increase in interest on mortgages from higher principal and interest rates on the completion of the REIT's refinancing. The REIT's Q2 2026 performance translated into basic FFO of CAD 22 million, a decrease of CAD 2.7 million or 11.1% compared to 2025. On a per unit basis, FFO for the three months ended 30 June 2026 decreased by CAD 0.05 to CAD 0.42 per unit compared to CAD 0.47 per unit in 2025 due to the following.

Speaker #2: And the change in foreign exchange rate decreased proportionate NOI by $0.4 million. Interest expense increased by $0.4 million for the three months ended June 30, 2026, compared to 2025, primarily due to an increase in interest on mortgages from higher principal and interest rates upon completion of the REIT's refinancings.

Chris Newman: Interest expense increased by CAD 0.4 million for the three months ended 30 June 2026, compared to 2025, primarily due to an increase in interest on mortgages from higher principal and interest rates on the completion of the REIT's refinancing. The REIT's Q2 2026 performance translated into basic FFO of CAD 22 million, a decrease of CAD 2.7 million or 11.1% compared to 2025. On a per unit basis, FFO for the three months ended 30 June 2026 decreased by CAD 0.05 to CAD 0.42 per unit compared to CAD 0.47 per unit in 2025 due to the following.

Speaker #2: The REIT's Q2 2026 performance translated into basic FFO of $22 million, a decrease of $2.7 million or 11.1% compared to 2025. On a per unit basis, FFO for the three months ended June 30, 2026, decreased by $0.05 to $0.42 per unit compared to $0.47 per unit in 2025. This was due to the following: on a proportionate basis, in local currency, a decrease in NOI, mainly from higher vacancy, lower interest income, and an increase in interest expense, was partly offset by a decrease in trust expense, with a net $0.04 per unit negative impact.

Chris Newman: On a proportionate basis in local currency, a decrease in NOI, mainly from higher vacancy, lower interest income, and an increase in interest expense was partly offset by a decrease in trust expense at a net CAD -0.04 per unit impact. The change in foreign exchange rate had a CAD -0.01 per unit impact. The REIT's FFO payout ratio of 46.8% for the three months ended 30 June 2026 represents a very conservative level, which allows for significant cash retention. Operationally, the REIT's average monthly rent in Canada increased to CAD 1,885 at 30 June 2026, a 3.5% increase compared to 2025, reflecting the quality of our Canadian portfolio. During H1 of the year, the Canadian portfolio turned over approximately 5.1% of its suites and achieved AMR growth on suite turnover of 6.8%.

Speaker #2: And the change in foreign exchange rate had a $0.01 per unit negative impact. The REIT's FFO payout ratio of 46.8% for the three months ended June 30, 2026, represents a very conservative level, which allows for significant cash retention.

Speaker #2: Operationally, the REIT's average monthly rent in Canada increased to $1,885 as of June 30, 2026, a 3.5% increase compared to 2025, reflecting the quality of our Canadian portfolio.

Speaker #2: During the first half of the year, the Canadian portfolio turned over approximately 5.1% of its suites, and achieved AMR growth on suite turnover of 6.8%.

Speaker #2: Occupancy in Canada finished the second quarter of 2026 at 91.4%, compared to 95.2% at June 30, 2025, and was lower primarily due to increased competition from new rental buildings and lower immigration levels.

Chris Newman: Occupancy in Canada finished Q2 2026 at 91.4%, compared to 95.2% at 30 June 2025, and was lower primarily due to increased competition from new rental buildings and lower immigration levels. Management believes market conditions will improve as new supply is absorbed and incentive-driven competition moderates. While in the US, AMR increased by 1.8% compared to 2025, having an average monthly rent of $1,933 at the end of Q2. Occupancy in the US of 92.8% at 30 June 2026, was lower compared to 94.8% at 30 June 2025, primarily due to a combination of tenant relocations, affordability, and increased home buying. As we move into this busier summer leasing season, management expects occupancies to continue to grow moderately, which should be followed by modest AMR growth. During the six months ended 30 June 2026, the REIT's total CapEx amounted to CAD 26.5 million.

Speaker #2: Management believes market conditions will improve as new supply is absorbed and incentive-driven competition moderates. While in the U.S., AMR increased by 1.8% compared to 2025, with an average monthly rent of $1,933.

Speaker #2: Dollars at the end of the second quarter. Occupancy in the U.S. of 92.8% at June 30, 2026, was lower compared to 94.8% at June 30, 2025, primarily due to a combination of tenant relocations, affordability, and increased home buying.

Speaker #2: As we move into the busier summer leasing season, management expects occupancies to continue to grow moderately, which should be followed by modest AMR growth.

Speaker #2: And during the six months ended June 30, 2026, the REIT's total capex amounted to $26.5 million. That included revenue-enhancing in-suite and tenant improvements, exterior building projects, garage renovations, common area mechanical, plumbing, and electrical projects, as well as energy initiative expenditures.

Chris Newman: That included revenue enhancing in-suite and tenant improvements, exterior building projects, garage renovations, common area mechanical, plumbing, and electrical projects, as well as energy initiative expenditures. At this time, I will turn the call back over to the moderator for any questions.

Speaker #2: At this time, I'll turn the call back over to the moderator for any questions.

Speaker #1: 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 1, on your touch-tone phone.

Operator: 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. If you are using a speakerphone, please lift the handset before pressing any keys. First question comes from Jonathan Kelcher at TD Cowen. Please go ahead.

Speaker #1: 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 2.

Speaker #1: And if you are using a speakerphone, please lift the handset before pressing any keys. First question comes from Jonathan Kelcher at TD Cowen. Please go ahead.

Speaker #2: Thanks, good afternoon. First question: just on the Canadian portfolio occupancy, I think in May you guys were talking about occupancy starting to improve. It ended up basically flat versus Q1.

Jonathan Kelcher: Thanks. Good afternoon. First question, just on the Canadian portfolio occupancy. I think in May you guys were talking about occupancy starting to improve. It ended up basically flat versus Q1. Could you maybe give us some color on what happened or changed in the market? Then

Speaker #2: Could you maybe give us some color on what happened or changed in the market, and then how you see occupancy trending over the back half of this year?

Jonathan Kelcher: how you see occupancy trending over the back half of this year.

Speaker #3: Hi, it's Ruth. Right now, we do see that the leasing activity has definitely increased. During the past quarter, we did have some move-outs that are pretty typical for property in Ottawa and Emmerton.

Ruth Grable: Hi, it's Ruth. Right now, we do see that the leasing activity has definitely increased. During the past quarter, we did have some move-outs that are pretty typical for us for our property in Ottawa and Edmonton. It's student-based. We have more move-outs. Now what we're seeing is leasing activity has increased. Our availability today is 92.7%. That takes into account all the leases, not necessarily all the move-outs as yet. Overall, our team is reporting significant amount of interest in the units. We have a lot of showings per day. As well, we see some groups coming back from IT, where we previously had our prospective tenants leasing out our buildings. They're coming back, like from Cognizant and Citibank, some other groups as well. The immigration for specific businesses have opened up, and we're seeing that translated into leases in Mississauga.

Ruth Grabel: Hi, it's Ruth. Right now, we do see that the leasing activity has definitely increased. During the past quarter, we did have some move-outs that are pretty typical for us for our property in Ottawa and Edmonton. It's student-based. We have more move-outs. Now what we're seeing is leasing activity has increased. Our availability today is 92.7%. That takes into account all the leases, not necessarily all the move-outs as yet. Overall, our team is reporting significant amount of interest in the units. We have a lot of showings per day. As well, we see some groups coming back from IT, where we previously had our prospective tenants leasing out our buildings. They're coming back, like from Cognizant and Citibank, some other groups as well. The immigration for specific businesses have opened up, and we're seeing that translated into leases in Mississauga.

Speaker #3: It's student-based. We have more move-outs. But now what we're seeing is leasing activity has increased. Our availability today is 92.7%. That takes into account all the leases, not necessarily all the move-outs as yet.

Speaker #3: But overall, our team is reporting a significant amount of interest in the units. We have a lot of showings per day. And as well, we see some groups coming back from, like, IT, where we previously had our prospective tenants leasing out our buildings.

Speaker #3: They're coming back—like, from Cognizant and Citibank, and some other groups as well. So, on the immigration front specifically, you know, businesses have opened up, and we're seeing that translated into leases in Mississauga.

Speaker #3: So we are, you know, optimistic going forward, and you know, the number of showings and leasing that we've completed and our availability is kind of dictating that.

Ruth Grable: We are optimistic going forward and the number of showings and leasing that we've completed and our availability is kind of dictating that.

Ruth Grabel: We are optimistic going forward and the number of showings and leasing that we've completed and our availability is kind of dictating that.

Speaker #2: Okay, so if I put that all together, it sounds like maybe Q2 is the low point for occupancy, but not expecting huge, huge gains over the back half.

Jonathan Kelcher: Okay. If I put that all together, it sounds like maybe Q2 is the low point for occupancy, but not expecting huge gains over the back H2.

Speaker #3: Yeah, I would say that's a fair statement.

Ruth Grable: Yeah, I would say that's a fair statement.

Ruth Grabel: Yeah, I would say that's a fair statement.

Speaker #2: Okay. And then the TDAM transaction—I know you're probably not going to give a lot of info here—but what approvals do you need for that to close?

Jonathan Kelcher: Okay. On the TDAM transaction, I know you're probably not going to give a lot of info here, but what approvals do you need for that to close? Is it just down to CMHC or are there any others?

Speaker #2: Is it just down to CMHC, or are there any others?

Speaker #4: John, it's Paul here. I'm going on—sorry. Yeah, it's Paul here. We're just working through what I would characterize as the final stages of due diligence.

Paul Miatello: John, it's Paul here.

Jonathan Kelcher: Yeah.

Paul Miatello: Oh, go ahead, Paul. Sorry. Yeah, it's Paul here. We're just working through what I would characterize as the final stages of due diligence. The vast majority of it is complete and behind us. Beyond just our internal work, yeah, it would be down to lender consents and obviously involving CMHC after that. We've commenced the process with CMHC in anticipation of getting to a waiver of conditions, and with CMHC, it's hard to put a timeline on.

Chris Newman: Oh, go ahead, Paul. Sorry.

Paul Miatello: Yeah, it's Paul here. We're just working through what I would characterize as the final stages of due diligence. The vast majority of it is complete and behind us. Beyond just our internal work, yeah, it would be down to lender consents and obviously involving CMHC after that. We've commenced the process with CMHC in anticipation of getting to a waiver of conditions, and with CMHC, it's hard to put a timeline on.

Speaker #4: The vast majority of it is complete and behind us. So, beyond just our internal work, yeah, it would be down to lender consents and, obviously, involving CMHC after that.

Speaker #4: We've commenced the process with CMHC in anticipation of getting to a waiver of conditions, and I can't—you know, with CMHC, it's hard to put a timeline on.

Jonathan Kelcher: Yeah

Speaker #4: If that's your next question. But, yeah, that would.

Paul Miatello: if that's your next question.

Jonathan Kelcher: No.

Paul Miatello: yeah, that would

Jonathan Kelcher: Probably CMHC.

Speaker #2: CMHC.

Speaker #4: Yeah, yeah. But yeah, CMHC and lender consents would be the only other approval required.

Paul Miatello: Yeah. Yeah, CMHC and lender consents would be the only other approval required.

Speaker #2: Okay. Does this portfolio have—do all the assets have a similar amount of leverage? I'm kind of asking, in that, the assets that MRG takes on—how do you expect to, or how are you thinking about that in terms of your overall leverage profile?

Jonathan Kelcher: Okay. Do all the assets have a similar amount of leverage? I'm kind of asking in that the assets that MRG.UN takes on, how are you thinking about that in terms of your overall leverage profile?

Speaker #4: For MRG, the debt that will be taken on won't alter— not materially, anyway— won't alter the leverage levels that are in place today.

Paul Miatello: For MRG.UN, the debt that will be taken on won't alter, not materially anyway, the leverage levels that are in place today.

Speaker #2: Okay. So you're roughly 40 percent now, and then at the end of this, you might be 42 or 43 percent, but not anywhere near 50 percent.

Jonathan Kelcher: Okay. You're roughly 40% now, and then at the end of this, you might be 42%, 43%, but not anywhere near 50%. Is that a way to think about it?

Speaker #2: Is that a way to think about it?

Speaker #4: That's fair statement, yes.

Paul Miatello: That's a fair statement. Yes.

Speaker #2: Yeah.

Speaker #4: Okay.

Jonathan Kelcher: Okay.

Speaker #2: Yeah, I will turn it back. Thank you.

Paul Miatello: Yeah.

Jonathan Kelcher: I will turn it back. Thank you.

Speaker #1: Thank you. Jimmy Shen at RBC Capital Markets. Please go ahead.

Operator: Thank you. Jimmy Shan at RBC Capital Markets, please go ahead.

Speaker #5: Thanks. Just to follow up on the Canadian portfolio, so the 92.7 percent number you referred to, that sounds like it’s committed occupancy, but if you were to include the expected move-outs, what would that number look like?

Jimmy Shan: Thanks. Just to follow up on the Canadian portfolio. The 92.7% number you referred to, that sounds like it's committed occupancy, but if you were to include the expected move-outs, what would that number look like? Roughly.

Speaker #5: Roughly.

Speaker #3: Oh, I don't know as yet what that number would look like. We do have some properties—like, in Alberta, they don't have to provide notice.

Ruth Grable: I don't know as yet what that number would look like. We do have some properties like in Alberta, they don't have to provide notice. We can fairly say fairly close to 92%. I'm not quite sure.

Ruth Grabel: I don't know as yet what that number would look like. We do have some properties like in Alberta, they don't have to provide notice. We can fairly say fairly close to 92%. I'm not quite sure.

Speaker #3: But, you know, we can say we're fairly safe, fairly close to 92%. I'm not quite sure.

Speaker #5: Okay. All right.

Jimmy Shan: Okay. All right.

Speaker #4: Yeah, and there's probably no better, no worse than where we stand today. The point is, there's a lot of leasing activity. There's a lot of momentum.

Paul Miatello: Yeah. It's probably no better, no worse than where we stand today.

Chris Newman: Yeah. It's probably no better, no worse than where we stand today.

Ruth Grable: Yeah.

Ruth Grabel: Yeah.

Paul Miatello: It's just the point is there's a lot of leasing activity. There's a lot of momentum. We also have, in Ontario, you give 2 months of notice, but we definitely have 2 months of work ahead of us to kind of keep finding leases and tenants. We think the positive momentum will lead to a net gain relative to our position at 30 June.

Chris Newman: It's just the point is there's a lot of leasing activity. There's a lot of momentum. We also have, in Ontario, you give 2 months of notice, but we definitely have 2 months of work ahead of us to kind of keep finding leases and tenants. We think the positive momentum will lead to a net gain relative to our position at 30 June.

Speaker #4: So we also have, you know, in Ontario, you give two months' notice, but we definitely have two months of work ahead of us to kind of keep finding leases and tenants.

Speaker #4: So, we think the possible momentum will lead to a net gain relative to our position in June.

Speaker #5: Okay. And I think in the MDNA, you referenced to rent cuts, et cetera. Can you maybe provide some color on sort of what rental incentives or rent cut that you're doing and how do we how does that how do we think about the AMR growth?

Jimmy Shan: Okay. I think in the MD&A, you made reference to rent cuts, et cetera. Can you maybe provide some color on sort of what rental incentives or rent cut that you're doing, and how do we think about the AMR growth on a go-forward basis for Canada?

Speaker #5: I'm going to go forward-basis for Canada.

Speaker #3: Yeah. So right now, we're offering, like, one or two months free rent. We might be offering some signing bonus—between $500 and $1,000—just so we close, you know, a lease.

Ruth Grable: Yeah. Right now, we're offering one or two months free rent. We might be offering some signing bonus between 500 and 1,000 just so we close a lease, finalize the lease. On rents, on select units, we have decreased some of our rents on one bedrooms, maybe some two bedrooms, just to, again, improve our occupancy.

Ruth Grabel: Yeah. Right now, we're offering one or two months free rent. We might be offering some signing bonus between 500 and 1,000 just so we close a lease, finalize the lease. On rents, on select units, we have decreased some of our rents on one bedrooms, maybe some two bedrooms, just to, again, improve our occupancy.

Speaker #3: Finalize the lease. And on rents, on select units, we have decreased some of our rents—on one-bedrooms, maybe some two-bedrooms—just to, again, improve our occupancy.

Speaker #5: Mm-hmm. And sort of more, again, more I'm more looking for trends. Is it has those incentives selective rent decrease, have they been pretty well the same over the last three to four months, or has it gotten worse or better?

Jimmy Shan: Mm-hmm. More, again, I'm more looking for trends. Has those incentives, selective rent decrease, have they been pretty well the same over the last three to four months, or has it gotten worse or better?

Speaker #3: No, it's trending down, so not all units are being offered the two months. We are seeing a gradual decrease in the amount of incentives that are being offered.

Ruth Grable: It's trending down. Not all units are being offered the two months. We are seeing a gradual decrease in the amount of incentives that are being offered.

Ruth Grabel: It's trending down. Not all units are being offered the two months. We are seeing a gradual decrease in the amount of incentives that are being offered.

Speaker #5: Okay, okay. And then, turning to the U.S. portfolio, the operating costs did go up quite a bit in Q2, and I was wondering if you could provide what would be your expectation for NOI margin for the U.S.

Jimmy Shan: Okay. Turning to the US portfolio, the operating costs did go up quite a bit, in Q2, I was wondering if you could provide what are the main drivers and what would be your expectation for NOI margin for the US portfolio for the year?

Speaker #5: portfolio for the year?

Speaker #2: John, do you want to answer that? I know that RNM and payroll are the main culprits for the increase. Do you want to add some more information on that, John?

Chris Newman: Sean, do you want to answer that? I know that R&M and payroll are main culprits for the increase. Do you want to add some more information on that, Sean?

Speaker #4: Sure. I would say a lot of it, especially RNM, was tied to us going into our busy leasing season. So we turned over 1,400 units over the quarter.

John Talano: Sure. I would say a lot of it, especially our R&M, was tied to going into our busy leasing season. We turned over 1,400 units over the quarter. That went up, significantly, obviously, when we're turning that many units. Payroll was up as well, and honestly, that is tied to being fully staffed. Part of our decreased payroll costs over the last several years has been the difficulty in maintaining maintenance staff on the properties. We're in a much better position now, and I would say it's stabilized. I believe that those expenses are high for the quarter, but I don't foresee that those R&M expenses will continue throughout the rest of the year.

Speaker #4: So that went up significantly, obviously, when we're turning that many units. But payroll was up as well, and honestly, that is tied to being fully staffed.

Speaker #4: So, part of our decreased payroll costs over the last, you know, several years has been the difficulty in maintaining maintenance staff on the properties.

Speaker #4: But we're in a much better position now, and I would say it's stabilized. I believe that those expenses are high for the quarter, but I don't foresee that those R&M expenses will continue throughout the rest of the year.

Jimmy Shan: This high turnover, can you provide some context, like 1,400. Is that a lot? Is that more than usual?

Speaker #5: This high turnover—is it? Can you provide some context, like 1,400? Is that a lot? Is that more than...?

John Talano: Oh, no, I would say it's actually low for us, but it's a big number. It's just much higher than it was in the previous quarter because we're so busy. If that makes sense. Our turnover in general, in the US, is between 55% and 60% nationally. We are in the 40% range on an annualized basis.

Speaker #4: Oh, no, no. I would say actually, it's low for us, but it's still a big number. It's just much higher than it was in the previous quarter because we're so busy.

Speaker #4: If that makes sense. So, our turnover in general in the U.S. is between 55% and 60% nationally. We are in the 40% range.

Speaker #4: On an annualized basis.

Speaker #5: Okay. But on a year-over-year basis, it was higher? That's what I was asking.

Jimmy Shan: Okay. On a year-over-year basis, it was higher. That's what caused-

Speaker #4: On this particular quarter, the way it hit—the way the expenses hit—in this quarter, rather than it being more normalized across Q1 and Q2.

John Talano: The way it hit, right?

Jimmy Shan: Yeah.

John Talano: The way the expenses hit in this quarter, rather than it being more normalized across Q1 and Q2.

Speaker #5: Oh, I see. Okay, got it. And then, lastly, a lot of the debt refinancing that you did—now that you've got $200 million of cash—was that done pretty well towards the end of the quarter?

Jimmy Shan: Oh, I see. Okay. Got it. Lastly, a lot of the debt refinancing that you did, now you've got CAD 200 million of cash. Was that done pretty well towards the end of the quarter? In other words, the interest expense that we see here in Q2 is probably a good run rate. Is that fair?

Speaker #5: So, in other words, the interest expense that we see here in Q2 is probably a good run rate. Is that fair?

Speaker #4: Yeah. So, a lot of them happened in the last 15 days of the quarter end. So you'll see the full impact next quarter on the higher interest expense.

Chris Newman: Yeah. All of them happened in the last 15 days of the quarter end.

Jimmy Shan: Okay.

Chris Newman: You'll see the full impact next quarter on the higher interest expense.

Speaker #5: Okay. And the cash that you have, is it sufficient to close on MRG's equity share of the TDM deal, right?

Jimmy Shan: The cash that you have is sufficient to close on MRG.UN's equity share of the TDAM deal, right?

Speaker #4: Predominantly, we might have to, based on the timing of cash flows, temporarily leverage the Morguard facility by a smaller-ish amount. But we don't expect it to be a large component.

Chris Newman: Predominantly. Based on timing of cash flows, we might have to temporarily leverage the Morguard facility by a smallish amount.

Jimmy Shan: Yeah

Chris Newman: we don't expect it to be a large component.

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

Jimmy Shan: Okay. That's it for me. Thanks.

Speaker #4: Yeah.

Chris Newman: Yeah.

Speaker #1: Thank you. And as a reminder, if you have any questions, please press star 1 now. Alex Leon from Desjardins, please go ahead.

Operator: Thank you. As a reminder, if you have any questions, please press star one now. Alex Leon from Desjardins, please go ahead.

Speaker #2: Hey, good afternoon, everyone. Just wanted to circle back again on that Canadian portfolio. There's been an increase in availability. I'm just wondering if there was any change in maybe how aggressive you guys were in rolling down rents to pick up some of the demand, or if it was more just a function of some of the seasonal move-outs in Ottawa and Edmonton and a stronger demand profile?

Alex Avery: Hey, good afternoon, everyone. Just want to circle back again on that Canadian portfolio increase in availability. I'm just wondering if there was any change in maybe how aggressive you guys were rolling down rents to pick up some of the demand, or if it was more just a function of some of the seasonal move-outs in Ottawa and Edmonton and a stronger demand profile.

Alex Leon: Hey, good afternoon, everyone. Just want to circle back again on that Canadian portfolio increase in availability. I'm just wondering if there was any change in maybe how aggressive you guys were rolling down rents to pick up some of the demand, or if it was more just a function of some of the seasonal move-outs in Ottawa and Edmonton and a stronger demand profile.

Speaker #3: It's a bit of a combination of both. So, we did reduce our rents on select units, and we were able to get more traction on those units.

Ruth Grable: A bit of combination of both. We did reduce our rents on select units, we're able to get more traction on those units. It's very competitive right now. We have great product in Mississauga, large units. There has been a considerable amount of new product out there. In order to compete, we have lowered our rent. Along with that, we're seeing a lot more prospective tenants looking to make changes and entering into the market. We had a lot more leases that took place, are taking place right now. It's typically busier at this time of year. We have been successful in closing a lot of leases right now. We certainly hope the momentum will continue. There will be some move-outs that we're aware of that kind of factoring into that availability rate.

Ruth Grabel: A bit of combination of both. We did reduce our rents on select units, we're able to get more traction on those units. It's very competitive right now. We have great product in Mississauga, large units. There has been a considerable amount of new product out there. In order to compete, we have lowered our rent. Along with that, we're seeing a lot more prospective tenants looking to make changes and entering into the market. We had a lot more leases that took place, are taking place right now. It's typically busier at this time of year. We have been successful in closing a lot of leases right now. We certainly hope the momentum will continue. There will be some move-outs that we're aware of that kind of factoring into that availability rate.

Speaker #3: It's very competitive right now. We have great product in Mississauga—a large unit. But there has been, you know, a considerable amount of new product out there.

Speaker #3: And so, in order to compete, we have lowered our rent. And, you know, along with that, we're seeing a lot more prospective tenants.

Speaker #3: Looking to make changes and entering into the market. And so, we had a lot more leases that took place, or are taking place right now.

Speaker #3: It's typically busier at this time of year, so we have been successful in closing a lot of leases right now. So, you know, we certainly hope the momentum will continue.

Speaker #3: There will be some move-outs that we're, you know, we're aware of that are kind of factoring into that availability rate. But we're seeing a lot of positive movement right now, and a lot of showings, a lot of leasing.

Ruth Grable: We're seeing a lot of positive movement right now and a lot of showings, a lot of leasing. Again, some incentives. We're dialing back some incentives on some units. It's a combination of a lot of different factors depending on the building.

Ruth Grabel: We're seeing a lot of positive movement right now and a lot of showings, a lot of leasing. Again, some incentives. We're dialing back some incentives on some units. It's a combination of a lot of different factors depending on the building.

Speaker #3: And again, you know, some incentives we're dialing back, some incentives, some units. So it's a combination of a lot of different factors, depending on the building.

Speaker #2: Okay, that's good color. And I'm just wondering, is there a certain price point where you see demand maybe bifurcating, in terms of elasticity?

Alex Avery: Okay, that's good color. I'm just wondering, is there a certain price point that you see maybe demand bifurcating around in terms of maybe elasticity? Is it CAD 2,000 a month? Typically, we've heard from some of your peers where you see lower demand if it's under CAD 2,000. There's a lot higher demand. Are you seeing that across your portfolio?

Alex Leon: Okay, that's good color. I'm just wondering, is there a certain price point that you see maybe demand bifurcating around in terms of maybe elasticity? Is it CAD 2,000 a month? Typically, we've heard from some of your peers where you see lower demand if it's under CAD 2,000. There's a lot higher demand. Are you seeing that across your portfolio?

Speaker #2: Like, is there a certain— is it $2,000 a month? Typically, we've heard from some of your peers where you see lower demand if it's under $2,000?

Speaker #2: There's a lot higher demand. Are you seeing that across your portfolio?

Speaker #3: Not really. I think it depends on—like, again, we have very large units. And so, you know, our price point is, I think our AMR is over $1,800 a month.

Ruth Grable: Not really. Again, we have very large units, our price point is, I think our AMR is over CAD 1,800 a month, and our new rents are over CAD 2,000. They are leasing at those rates, depending if it's a one bedroom. Two bedrooms are again, within that range. I can't really say that there's one particular. It depends on the unit. It depends on the building. They are leasing. We have large units in Mississauga, in Toronto as well, with our portfolio there. It really depends on the competition that's around us. If it's new rental product, the incentives that are being offered by our competition, we keep track of that very carefully. We're basically very competitive with our product, I think that's what makes the difference with us.

Ruth Grabel: Not really. Again, we have very large units, our price point is, I think our AMR is over CAD 1,800 a month, and our new rents are over CAD 2,000. They are leasing at those rates, depending if it's a one bedroom. Two bedrooms are again, within that range. I can't really say that there's one particular. It depends on the unit. It depends on the building. They are leasing. We have large units in Mississauga, in Toronto as well, with our portfolio there. It really depends on the competition that's around us. If it's new rental product, the incentives that are being offered by our competition, we keep track of that very carefully. We're basically very competitive with our product, I think that's what makes the difference with us.

Speaker #3: And our new rents are over $2,000, so they are leasing at those rates, depending if it's a one-bedroom, two-bedroom, or, you know, again, within that range.

Speaker #3: So it's really—I can't really say that there's one particular answer. It depends on the unit. It depends on the buildings they are leasing. We have large units.

Speaker #3: In Mississauga, and in Toronto as well, with our portfolio there, it really depends on the competition that's around us. If it's new rental product, the incentives that are being offered by our competition.

Speaker #3: And we keep track of that very carefully. We're basically very competitive with our product, and I think that's what makes a difference with us.

Speaker #3: We're offering larger units, and we have good management services at the property. So customer service—everything really functions when people are looking to lease a unit.

Ruth Grable: We're offering larger units, and we have good management services at the property. Customer service, everything really functions when people are looking to lease a unit.

Ruth Grabel: We're offering larger units, and we have good management services at the property. Customer service, everything really functions when people are looking to lease a unit.

Speaker #2: Okay, appreciate that. You also made the comment that incentive use was trending lower. I'm just wondering, would that be consistent across both Canada and the U.S., or are there potentially different trends there?

Alex Avery: Okay. Appreciate that. You also made the comment that incentive use was trending lower. I'm just wondering, would that be consistent across both Canada and the US or different trends there potentially?

Alex Leon: Okay. Appreciate that. You also made the comment that incentive use was trending lower. I'm just wondering, would that be consistent across both Canada and the US or different trends there potentially?

Speaker #4: Yeah, John, we can touch upon the U.S.

Chris Newman: Yeah, John.

Chris Newman: Yeah, John.I will take.

Chris Newman: I will take.

John Talano: You can touch upon the US.

Speaker #5: Yeah, yeah, yeah. I would say we are on a positive trend, for sure. You know, last quarter, our turnover rates on new leases only—new leases only—were negative.

Ruth Grable: Yeah. I would say we are on a positive trend for sure. Last quarter, our turnover rates on new leases only were negative. This quarter, they're definitely positive. We've seen a significant swing there. Our occupancy is at 93% today, and we're leased at 95%. Again, I think everything is moving in the right direction. It's certainly not easy street like it was two years ago. We're in a good place. Our management team, our leasing teams, and our marketing teams are working hard for every lease. That's the business, and we're doing pretty well.

Chris Newman: Yeah. I would say we are on a positive trend for sure. Last quarter, our turnover rates on new leases only were negative. This quarter, they're definitely positive. We've seen a significant swing there. Our occupancy is at 93% today, and we're leased at 95%. Again, I think everything is moving in the right direction. It's certainly not easy street like it was two years ago. We're in a good place. Our management team, our leasing teams, and our marketing teams are working hard for every lease. That's the business, and we're doing pretty well.

Speaker #5: And this quarter, they're definitely positive. So we've seen a significant swing there. Our occupancy is at 93 percent today, and we're leased at 95 percent.

Speaker #5: So again, I think everything is moving in the right direction. It's certainly not easy street, like it was two years ago, but we're in a good place.

Speaker #5: Our management team, our leasing teams, our marketing teams are working hard for every lease, but, you know, that's the business, and we're doing pretty well.

Alex Avery: I appreciate the color. That's it for me. I'll turn it back.

Alex Leon: I appreciate the color. That's it for me. I'll turn it back.

Speaker #2: I appreciate the color. That's it for me. I'll turn it back.

Speaker #1: Thank you. We have no further questions. Back over to Chris Newman for closing comments.

Operator: Thank you. We have no further questions. Back over to Chris Newman for closing comments.

Speaker #4: And thanks again, everyone, for joining us. We look forward to speaking again next quarter.

Chris Newman: Thanks again, everyone, for joining us, and we'll look forward to speaking again next quarter.

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

Q2 2026 Morguard North American Residential Real Estate Investment Trust Earnings Call

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