Q2 2026 Crombie Real Estate Investment Trust Earnings Call

August 6, 2026

Operator 2: Good morning, everyone, and welcome to Crombie REIT's Q2 2026 conference call. As a reminder, all participants are on listen only mode, and the conference is being recorded. At this time, all lines are on listen only mode. Following the presentation, we will conduct a question and answer session. To join the question queue, you may press star then one on your telephone keypad. If at any time during the conference you require media assistance, please press star and zero to signal an operator. This call is being recorded on 6 August 2026. I will now turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead.

Operator: Good morning, everyone, and Welcome to Crombie REIT's Q2 2026 conference call. As a reminder, all participants are on listen only mode, and the conference is being recorded. At this time, all lines are on listen only mode. Following the presentation, we will conduct a question and answer session. To join the question queue, you may press star then one on your telephone keypad. If at any time during the conference you require media assistance, please press star and zero to signal an operator. This call is being recorded on 6 August 2026. I will now turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead.

Speaker #1: and welcome to Crombie Q2, Q3, 2026 conference call. As a reminder, all participants are on this anomaly mode, and the conference is being recorded.

Speaker #1: At this time, all lines are on this anomaly mode. Following the presentation, we will conduct a question-and-answer session. To join the question queue, you may press the star, then 1, on your telephone keypad.

Speaker #1: If any time during the conference you require immediate assistance, please press the star and 0 to signal an operator. This call is being recorded on August 6, 2026.

Speaker #1: I would now like to turn the conference over to Amanda Nair, Manager of Investor Relations at Crombie. Please go ahead.

Speaker #2: Good day, everyone, and welcome to Crombie Q2, Q4, 2026 conference call and webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca.

Meghna Nair: Good day, everyone, and welcome to Crombie REIT's Q2 2026 conference call and webcast. Thank you for joining us. This call is being recorded in live audio, and it is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under presentations and events. Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations. Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our Management's Discussion and Analysis and annual information form for a discussion of these risk factors.

Meghna Nair: Good day, everyone, and Welcome to Crombie REIT's Q2 2026 conference call and webcast. Thank you for joining us. This call is being recorded in live audio, and it is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under presentations and events. Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations. Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our Management's Discussion and Analysis and annual information form for a discussion of these risk factors.

Speaker #2: Slides to accompany today's call are available on the Investor section of our website under Presentations and Events. Joining me on the call today are Mark Hawley, President and Chief Executive Officer, Tara Cameron, Chief Financial Officer, and Ari Battan, Executive Vice President, Lee Singh, and Operations.

Speaker #2: Today's discussion includes forward-looking statements, as always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.

Speaker #2: Please see our public filings, including our Management's Discussion and Analysis and Annual Information Form, for a discussion of these risk factors. Our discussion will also include expected yields on cost for capital expenditures.

Meghna Nair: Our discussion will also include expected yield on costs for capital expenditures. Please refer to the development section of our Management's Discussion and Analysis for additional information on assumptions and risks. I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook. Kara will review Crombie's operating and financial results, and Mark will conclude with a few final remarks. Over to you, Mark.

Speaker #2: Please refer to the development section of our management discussion and analysis for additional information on assumptions and risks. I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook, Tara will review Crombie's operating and financial results, and Mark will conclude with a few final remarks.

Speaker #2: Over to you, Mark.

Speaker #3: Thank you, Meghna, and good morning, everyone. Crombie's Q2 results reflect the continued disciplined execution of our Building Together strategy and the quality of our coast-to-coast necessity-based retail portfolio.

Mark Holly: Thank you, Meghna, and good morning, everyone. Crombie’s Q2 results reflect the continued disciplined execution of our building together strategy and the quality of our coast-to-coast necessity-based retail portfolio. In a dynamic economic environment, our grocery-anchored platform again delivered steady, dependable results. Today, I will focus my comments on two of the three value creation drivers within our strategy, own and operate and optimize. Starting with own and operate. Our coast-to-coast grocery-anchored retail assets sit at the heart of vibrant communities, generating consistent traffic and strong tenant demand. Operationally, our results are strong and stable. Specifically, our leasing this quarter reflects the success of our model and the execution of the team. We completed 121,000 square feet of renewals at a first-year growth rate of 11.3% over expiring rental rates, marking our seventh consecutive quarter of double-digit renewal spreads.

Speaker #3: In a dynamic economic environment, our grocery-anchored platform again delivered steady, dependable results. Today, I'll focus my comments on two of the three value creation drivers within our strategy: own and operate, and optimize.

Speaker #3: Starting with own and operate, our coast-to-coast grocery-anchored retail assets sit at the heart of vibrant communities generating consistent traffic and strong tenant demand. Operationally, our results are strong and stabled.

Speaker #3: Specifically, our leasing this quarter reflects the success of our model and the execution of the team. We completed 121,000 square feet of renewals at a first-year growth rate of 11.3% over expiring rental rates, marking our seventh consecutive quarter of double-digit renewal spreads.

Speaker #3: We also executed 33,000 square feet of new commercial leases and held committed occupancy near all-time highs of 97.5%. Carroll will walk through the leasing details in a moment, but the headline is another quarter of disciplined and consistent execution supporting our 3.2% commercial same-asset property cash NOI growth.

Mark Holly: We also executed 33,000 square feet of new commercial leases and held committed occupancy near all-time highs of 97.5%. Kara will walk through the leasing details in a moment, the headline is another quarter of disciplined and consistent execution supporting our 3.2% commercial same asset property cash NOI growth. What drives that consistency is a portfolio built with purpose, and there are two main ingredients. The first is the properties themselves. Grocery-anchored real estate is difficult to replicate with constrained supply and high replacement costs. Our grocery anchors are secured on long-term leases with a weighted average lease term of approximately 10 years. A grocery store brings people to the property week in, week out, and that steady traffic is what makes our space valuable to every retailer around it.

Speaker #3: What drives that consistency is a portfolio built with purpose and there are two main ingredients. The first is the properties themselves. Grocery-anchored real estate is difficult to replicate with constrained supply and high replacement costs.

Speaker #3: Our grocery anchors are secured on long-term leases with a weighted average lease term of approximately 10 years. A grocery store brings people to the property week in and week out, and that steady traffic is what makes our space valuable to every retailer around it.

Speaker #3: Complementing those anchors, nearly 90% of our non-grocery units are approximately 15,000 square feet or less. That is the format the widest range of necessity-based retailers are looking for today, and there is little new supply to meet it.

Mark Holly: Complementing those anchors, nearly 90% of our non-grocery units are approximately 15,000 square feet or less. That is the format the widest range of necessity-based retailers are looking for today, and there is little new supply to meet it. Our lease terms are built to capture that demand. The anchor lease runs long, while the smaller units around them turn more often, coming back to market at today's rents. The stability of the anchor, the traffic it draws, and the pricing power around it are why this portfolio produces such durable, dependable cash flows in quarter after quarter. That cash flow came through again this Q2. Setting aside lease termination income, FFO and AFFO grew 3.1% and 3.6% respectively over prior year. Underpinning that growth is steady rent growth across the portfolio, with annual minimum rent compounding at close to 4% annually over the past three years.

Speaker #3: Our lease terms are built to capture that demand. The anchor lease runs long, while the smaller units around them turn more often, coming back to market at today's rents.

Speaker #3: The stability of the anchor, the traffic it draws, and the pricing power around it are why this portfolio produces such durable, dependable cash flows and quarter after quarter.

Speaker #3: That cash flow came through again this second quarter. Setting aside lease termination income FFO and AFFO grew 3.1% and 3.6%, respectively, over prior year.

Speaker #3: Underpinning that growth is steady rent growth across the portfolio, with annual minimum rent compounding at close to 4% annually over the past three years.

Speaker #3: The second ingredient in a portfolio built with purpose is our disciplined approach to capital allocation. We deploy capital selectively into assets that strengthen our grocery-anchor platform and support long-term cash flow growth.

Mark Holly: The second ingredient in a portfolio built with purpose is our disciplined approach to capital allocation. We deploy capital selectively into assets that strengthen our grocery-anchor platform and support long-term cash flow growth. In Q2, we added to the portfolio with the acquisition of Ocean Park, a 30,000 square foot freestanding Safeway in Surrey, British Columbia for CAD 12.7 million, excluding transaction and closing costs. The property is at the heart of the community's primary retail node and is exactly the type of necessity-based assets we want to own for the long term. Turning to optimize, which is about unlocking embedded value in the existing portfolio, primarily through non-major investments such as modernizations and intensifications. In the quarter, we invested CAD 10.6 million in a modernization program with Empire, and we had roughly 29,000 square feet of development across intensification projects and greenfield new builds.

Speaker #3: In the second quarter, we added to the portfolio with the acquisition of Ocean Park, a 30,000 square foot freesanding safeway in Surrey, British Columbia, for $12.7 million excluded transaction and closing costs.

Speaker #3: The property is at the heart of the community's primary retail node and at exactly the type of necessity-based assets we want to own for the long term.

Speaker #3: Turning to optimize, which is about unlocking embedded value in the existing portfolio, primarily through non-major investments such as modernizations and intensifications. In the quarter, we invested $10.6 million in a modernization program with Empire, and we had roughly $29,000 square feet of development across intensification projects and greenfield new builds.

Speaker #3: This is a repeatable lever that we have been investing in for years. It enhances asset quality and supports leasing on both renewals and new deals.

Mark Holly: This is a repeatable lever that we have been investing in for years. It enhances asset quality and supports leasing on both renewals and new deals. We target attractive yield on costs in the 6% to 8% range. These investments also create a halo effect that benefits the other tenants on the site, and that shows up in our leasing spreads and our same asset property growth. With regards to major investments, we are focused on two items. First, The Marlstone in Halifax, where we continued to welcome residents throughout the quarter. On 22 June, we celebrated the building's grand opening, an important milestone, and one the entire team is very proud of. Construction is now substantially complete, and our focus has turned to leasing towards stabilization.

Speaker #3: We target attractive yields on cost in the 6% to 8% range. These investments also create a halo effect that benefits the other tenants on the site, and that shows up in our leasing spreads and same-asset property growth.

Speaker #3: With regards to major investments, we are focused on two items. First, the Marlestone and Halifax, where we continue to welcome residents throughout the quarter.

Speaker #3: On June 22nd, we celebrated the building's grand opening, an important milestone, and won the entire team is very proud of. Construction is now substantially complete, and our focus has turned to leasing, toward stabilization.

Speaker #3: At the end of June, nearly a quarter of the units were leased, and interest has continued to pick up, which July are strongest month yet.

Mark Holly: At the end of June, nearly a quarter of the units were leased and interest has continued to pick up, with July our strongest month yet. Second, entitlements, where our development team continues to advance select projects through the rezoning and development permit phase. These are assets within our major development ladder that will provide near to medium-term optionality and value creation as market conditions evolve. Taken together, the quarter reflects the same disciplined approach to capital allocation that has guided us for years. We keep adding quality, necessity-based real estate and operating with excellence. We modernize and intensify what we already own, and we advance entitlements that create long-term optionality, all from a position of balance sheet strength. That disciplined approach to capital and the cash flow growth it generates is what has driven our two most recent distribution increases.

Speaker #3: And second, entitlements, where a development team continues to advance select projects through the rezoning and development permit phase. These are assets within our major development ladder that will provide near to medium-term optionality and value creation at market conditions evolve.

Speaker #3: Taken together, the quarter reflects the same disciplined approach to capital allocation that has guided us for years. We keep adding quality necessity-based real estate and operating with excellence.

Speaker #3: We modernize and intensify what we already own, and we advance entitlements that create long-term optionality all from a position of balance sheet strength. That disciplined approach to capital, and the cash flow growth it generates, is what has driven our two most recent distribution increases.

Speaker #3: With that, I'll turn the call over to Cara.

Mark Holly: With that, I'll turn the call over to Kara.

Speaker #2: Thank you, Mark, and good morning, everyone. Our second quarter results reflect the quality of the platform and the consistency of our execution: healthy leasing fundamentals, continued growth in commercial same-asset property cash NOI, and a solid balance sheet we further strengthened subsequent to quarter-end.

Kara Cameron: Thank you, Mark, and good morning, everyone. Our Q2 results reflect the quality of our platform and the consistency of our execution. Healthy leasing fundamentals, continued growth in commercial same asset property cash NOI, and a solid balance sheet we further strengthened subsequent to quarter-end. The numbers tell a clear story. Our strategy is working. Let me start with leasing. During the quarter, we completed 121,000 square feet of renewals at a first-year increase of 11.3% over expiring rental rates, driven primarily by renewals at our retail properties. As we've consistently emphasized, we focus on growth over the full duration of the lease. For the quarter, we secured a 12.7% increase when comparing expiring rates to the weighted average rental rate over the renewal term.

Speaker #2: The numbers tell a clear story. Our strategy is working. Let me start with leasing. During the quarter, we completed 121,000 square feet of renewals at a first-year increase of 11.3% over expiring rental rates.

Speaker #2: Driven primarily by renewals at our retail properties. As we've consistently emphasized, we focus on growth over the full duration of the lease. For the quarter, we secured a 12.7% increase when comparing expiring rates to the weighted average rental rate over the renewal term.

Speaker #2: In our first two quarters, new commercial leases increased occupancy by 63,000 square feet at an average first-year rate of $26.26 per square foot. At quarter end, we had 160,000 square feet of committed space at an average first-year rate of $28.45 per square foot.

Kara Cameron: In our first two quarters, new commercial leases increased occupancy by 63,000 sq ft at an average first-year rate of CAD 26.26 per square foot. At quarter end, we had 160,000 sq ft of committed space at an average first-year rate of CAD 28.45 per square foot, with tenants expected to take possession throughout 2026 and 2027. Committed occupancy remained at near record levels of 97.5%, and economic occupancy was 96.6%. The modest decrease from Q1 reflects natural lease expiries and early terminations. That leasing activity, together with embedded contractual rent step-ups, drove commercial same asset property cash NOI growth up 3.2% for the quarter. Turning to property revenue.

Speaker #2: With tenants expected to take possession throughout 2026 and 2027. Committed occupancy remained at near record levels of 96.6%. The modest decrease from the first quarter reflects natural lease expiries and early terminations.

Speaker #2: That leasing activity, together with embedded contractual rent step-ups, drove commercial same-asset property cash NOI growth of 3.2% for the quarter. Turning to property revenue, property revenue for the quarter was $126.2 million up 1.9%, and net property income was $81.8 million, up 0.6% year over year, driven primarily by acquisitions, renewals, and new leasing, partially offset by reduced lease termination income and higher tenant incentive amortization from modernizations.

Kara Cameron: Property revenue for the quarter was CAD 126.2 million, up 1.9%, and net property income was CAD 81.8 million, up 0.6% year-over-year, driven primarily by acquisitions, renewals, and new leasing, partially offset by reduced lease termination income and higher tenant incentive amortization for modernizations. Revenue from management and development services was CAD 3.3 million, consistent with the same period last year, bringing our year-to-date total to CAD 6.5 million. The year-to-date increases reflect higher development fees from joint ventures. Finance costs were CAD 25.5 million in the quarter, up CAD 1.1 million from the prior year, primarily reflecting higher interest on our revolving and bilateral credit facilities, which had no balances in the same period last year, partially offset by lower mortgage interest due to maturities and repayments. Turning to earnings. FFO was CAD 62.4 million, or CAD 0.33 per unit, and AFFO was CAD 55.4 million, or CAD 0.30 per unit.

Speaker #2: Revenue from management and development services was $3.3 million. Consistent with the same period last year, bringing our year-to-date total to $6.5 million. The year-to-date increases reflect higher development fees from joint ventures.

Kara Cameron: The year-to-date increases reflect higher development fees from joint ventures. Finance costs were CAD 25.5 million in the quarter, up CAD 1.1 million from the prior year, primarily reflecting higher interest on our revolving and bilateral credit facilities, which had no balances in the same period last year, partially offset by lower mortgage interest due to maturities and repayments. Turning to earnings. FFO was CAD 62.4 million, or CAD 0.33 per unit, and AFFO was CAD 55.4 million, or CAD 0.30 per unit.

Speaker #2: Finance costs were $25.5 million in the quarter, up 1.1 million from the prior year. Primarily reflecting higher interest on our revolving and bilateral credit facilities, which had no balances in the same period last year, partially offset by lower mortgage interest due to maturities and repayments.

Speaker #2: Turning to earnings, FFO was $62.4 million or 33 cents per unit, and AFFO was $55.4 million, or 30 cents per unit. On a per unit basis, FFO was down 2.9%, and AFFO was essentially unchanged year over year, primarily reflecting additional units issued under the drip, together with reduced lease termination income and higher interest expense, partially offset by property revenue growth from acquisitions, new leasing, and renewals.

Kara Cameron: On a per unit basis, FFO was down 2.9% and AFFO was essentially unchanged year-over-year, primarily reflecting additional units issued under the DRIP together with reduced lease termination income and higher interest expense, partially offset by property revenue growth from acquisitions, new leasing, and renewals. Adjusting for that lease termination income difference, as Mark noted, FFO per unit was CAD 0.33, up 3.1%, and AFFO per unit was CAD 0.29, up 3.6% year-over-year, a cleaner read on the underlying performance of the business. Turning to the balance sheet, which remains a core strategic strength and a source of resilience. We ended the quarter with available liquidity of CAD 478.7 million. Our unencumbered asset pool continued to grow, reaching a fair value of CAD 4.2 billion, primarily on acquisitions, mortgage maturities, and higher property values. Debt to gross fair value was 42.6%.

Speaker #2: Adjusting for that lease termination income difference, as Mark noted, FFO per unit was 33 cents, up 3.1%, and AFFO per unit was 29 cents, up 3.6% year over underlying performance of the business.

Speaker #2: Turning to the balance sheet, which remains a core strategic strength and a source of resilience. We ended the quarter with available liquidity of $478.7 million.

Speaker #2: Our unencumbered asset pool continued to grow, reaching a fair value of $4.2 billion. Primarily on acquisitions, mortgage maturities, and higher property values. Debt-to-growth fair value was $42.6%, debt-to-trailing 12-month adjusted EBITDA was 8.01 times, and interest coverage was 3.4 times.

Kara Cameron: Debt to trailing 12-month adjusted EBITDA was 8.01 times, and interest coverage was 3.4 times. Approximately 90% of our debt, inclusive of joint ventures at Crombie's share, carries fixed rates, and at quarter end, our weighted average term to maturity on our fixed rate unsecured notes is 3.3 years. During the quarter, Morningstar DBRS confirmed our BBB issuer and senior unsecured ratings, both with stable trends, reflecting the quality of our portfolio and the strength of our balance sheet. Our maturities remain well staggered and our liquidity, unencumbered asset pool, and access to multiple funding levers gives us the flexibility to address them and to keep deploying capital as opportunities arise. Our payout ratios were 68.2% of FFO and 76.9% of AFFO for the quarter. Subsequent quarter end, on 6 July, we closed CAD 300 million of Series N senior unsecured notes maturing 6 July 2033, at a rate of 4.518%.

Speaker #2: Approximately 90% of our debt inclusive of joint ventures at Crombie Share carries fixed rates and at quarter end, our weighted average term-to-maturity on our fixed-rate unsecured notes is 3.3 years.

Speaker #2: During the quarter, Morningstar DBRS confirmed our BBB issuer and senior unsecured ratings, both with stable trends, reflecting the quality of our portfolio and the strength of our balance sheet.

Speaker #2: Our maturities remain well staggered, and our liquidity unencumbered asset pool and access to multiple funding levers gives us the flexibility to address them and to keep deploying capital as opportunities arise.

Kara Cameron: Our maturities remain well staggered and our liquidity, unencumbered asset pool, and access to multiple funding levers gives us the flexibility to address them and to keep deploying capital as opportunities arise. Our payout ratios were 68.2% of FFO and 76.9% of AFFO for the quarter. Subsequent quarter end, on 6 July, we closed CAD 300 million of Series N senior unsecured notes maturing 6 July 2033, at a rate of 4.518%.

Speaker #2: Our payout ratios were 68.2% of FFO and 76.9% of AFFO for the quarter. Subsequent quarter end, on July 6th, we closed $300 million of Series N senior unsecured notes, maturing July 6th, 2033, at a rate of 4.518%.

Speaker #2: And on July 8th, we redeemed the $200 million of Series F notes that were due on August 26th, 2026. Together, these transactions addressed our nearest term maturity and extended our maturity profile and increased liquidity.

Kara Cameron: On 8 July, we redeemed CAD 200 million of Series F notes that were due on 26 August 2026. Together, these transactions addressed our nearest term maturity, extended our maturity profile, and increased liquidity. We are very pleased with the execution. The notes priced at a spread of 124 basis points over the Government of Canada curve, our tightest new issue spread on record for Crombie, reflecting continued strong demand for our credit. We used the balance of proceeds to reduce amounts drawn on our revolving credit facility, maintaining financial flexibility. On The Marlstone, our total estimated cost at Crombie's share has increased slightly to CAD 72 million from CAD 71 million, with a yield on cost at stabilization still expected in the 4.5% to 5.5% range, consistent with our previous disclosure.

Speaker #2: We are very pleased with the execution. The notes priced at a spread of $124 basis points over the government of Canada curve, our tightest new issue spread on record for Crombie, reflecting continued strong demand for our credit.

Speaker #2: We used the balance of proceeds to reduce amounts drawn on our revolving credit facility maintaining financial flexibility. On the Marlestone, our total estimated cost at Crombie Share has increased slightly to $72 million from $71 million.

Kara Cameron: On The Marlstone, our total estimated cost at Crombie's share has increased slightly to CAD 72 million from CAD 71 million, with a yield on cost at stabilization still expected in the 4.5% to 5.5% range, consistent with our previous disclosure. Overall, the Q2 was another quarter of steady, dependable execution, strong leasing, continued commercial same asset property cash NOI growth, and disciplined capital and financial management, supported by a balance sheet built for both stability and measured growth. With that, I'll turn it back to Mark.

Speaker #2: With a yield on cost that stabilization still expected in the 4.5% to 5.5% range, consistent with our previous disclosure. Overall, the second quarter was another quarter of steady, dependable execution.

Kara Cameron: Overall, the Q2 was another quarter of steady, dependable execution, strong leasing, continued commercial same asset property cash NOI growth, and disciplined capital and financial management, supported by a balance sheet built for both stability and measured growth. With that, I'll turn it back to Mark.

Speaker #2: Strong leasing, continued commercial same-asset property cash NOI growth, and disciplined capital and financial management supported by a balance sheet built for both stability and measured growth.

Speaker #2: With that, I'll turn it back to Mark.

Speaker #1: Thank you, Kara. I noted at the outset that in a dynamic environment, this platform again delivered steady, dependable results. That is exactly what this is built to do, our focus is unchanged, owning and operating a central real estate at the heart of Canadian communities, deploying capital with discipline and growing cash flow while compounding long-term value for our unit holders.

Mark Holly: Thank you, Kara. I noted at the outset that in a dynamic environment, this platform again delivered steady, dependable results. That is exactly what this is built to do. Our focus is unchanged, owning and operating essential real estate at the heart of Canadian communities, deploying capital with discipline, and growing cash flow while compounding long-term value for our unit holders. Before we close and open up for questions, I'd like to take a moment to highlight our 2025 environmental, social, and governance report, which was released last night. It reflects the depth of our commitment to sustainability and to our people. I also want to thank our team across the country. Their execution and commitment are what turns our strategy into results quarter in and quarter out. With that, we'll open the call for questions.

Speaker #1: Before we close, and open it up for questions, I'd like to take a moment to highlight our 2025 environmental, social, and governance report, which was released last night.

Speaker #1: It reflects the depth of our commitment to sustainability and to our people. I also want to thank our team across the country; their execution and commitment are what turns our strategy into results, quarter in and quarter out.

Speaker #1: With that, we'll open the call for questions.

Speaker #3: Yes. Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad.

Operator 2: Yes. Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Lorne Kalmar with Desjardins.

Operator: Yes. Thank you. We will now begin the question and answer session. The first question comes from Lorne Kalmar with Desjardins.

Speaker #3: You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing the keys. To enter a question, please press star then two.

Speaker #3: We will pause for a moment queue. And the first question comes from Lauren Comer with Asia Dan.

Lorne Kalmar: Thanks. Good morning, and congrats on a good quarter and getting the Marlstone over the line. Just on the Marlstone, one of my favorite topics lately

Lorne Kalmar: Thanks. Good morning, and congrats on a good quarter and getting the Marlstone over the line. Just on the Marlstone, one of my favorite topics lately. Looks like you guys have made some really good progress in the first couple of months there. I was wondering if you could give us maybe where occupancy is as of the end of July, and how things are tracking versus pro forma. I think last quarter you said they were ahead, just wanted to get an update there.

Speaker #4: Thanks. Good morning and congrats on a good quarter and getting the Marlestone over the line. Just on the Marlestone, my favorite topic lately, it looks like you guys have made some really good progress in the first couple months there.

Lorne Kalmar: Looks like you guys have made some really good progress in the first couple of months there. I was wondering if you could give us maybe where occupancy is as of the end of July, and how things are tracking versus pro forma. I think last quarter you said they were ahead, just wanted to get an update there.

Speaker #4: I was wondering if you could kind of if you could give us maybe where occupancy is as of the end of July, and how things are tracking versus pro forma.

Speaker #4: I think on the last quarter you said they were ahead, but just wanted to get an update there.

Speaker #1: Good morning, Lauren. It's Ari. We're very happy with our performance at the Marlestone. Particularly July, which, as Mark noted in the prepared remarks, was a very strong or strongest month to date.

Arie Bitton: Morning, Lauren, it's Arie. We're very happy with our performance at the Marlstone, particularly in July, which, as Mark noted in the prepared remarks, was a very strong, our strongest month to date. I won't get into specifics, we are over 30% as at the end of July, we're continuing to see that momentum build throughout August. The leasing team is really looking to capitalize on the busier summer months, particularly as a number of students are coming into the city as well. I'd say that in general, the building looks great. The feedback has been exceptional, and we're building on that momentum. I think it's important to note that these properties, the growth trajectory is not typically linear. We've seen that in some of our other stabilized properties.

Speaker #1: I won't get into specifics, but we are over 30%. At as at the end of July, and we're continuing to see that momentum build throughout August.

Speaker #1: And the leasing team is really looking to capitalize on the busier summer months, particularly as a number of students are coming into the city as well.

Speaker #1: So I'd say that in general, the building looks great, the feedback has been exceptional, and we're building on that momentum. And I think it's important to note that these properties the growth trajectory is not typically linear.

Arie Bitton: I think it's important to note that these properties, the growth trajectory is not typically linear. We've seen that in some of our other stabilized properties. When you take a look at our results we've had in our stabilized portfolio, that's performing exceptionally well, and that occupancy is sitting at a record high. I think suffice it to say, we know how to operate these buildings, and we know what it takes to lease them up. I'd say we're well underway at this point.

Speaker #1: We've seen that in some of our other stabilized properties, and when you take a look at our results, we've had in our stabilized portfolio that's performing exceptionally well.

Arie Bitton: When you take a look at our results we've had in our stabilized portfolio, that's performing exceptionally well, and that occupancy is sitting at a record high. I think suffice it to say, we know how to operate these buildings, and we know what it takes to lease them up. I'd say we're well underway at this point.

Speaker #1: And that occupancy is sitting at a record high. So I think suffice it to say, we know how to operate these buildings, and we know what it takes to lease them up.

Speaker #1: And I'd say we're well underway at this point.

Speaker #4: Okay. So is, I guess, the back half of '27 still a good target for stabilization, or do you think you can do it quicker than that?

Lorne Kalmar: Okay. Is the back half of 2027 still a good target for stabilization, or you think you can do it quicker than that?

Speaker #1: I would still hear a mark back half of '27, Lauren.

Mark Holly: I would still earmark back half of 2027, Lauren.

Speaker #4: Okay. Fair enough. And then with obviously the Marlestone now done, no more major developments currently, any thoughts on new project initiations in the near term, or is that sort of it for a little bit here?

Lorne Kalmar: Okay, fair enough. With obviously The Marlstone now done, no more major developments currently, any thoughts on new project initiations in the near term, or is that sort of it for a little bit here?

Speaker #1: On the major development side, we don't intend to put a shovel in the ground in the near term. When we look at sort of how we allocate the capital, we kind of look at it in the four streams: non-major, major, acquisitions, and distributions.

Mark Holly: On the major development side, we don't intend to put a shovel in the ground in the near term. When we look at how we allocate the capital, we look at it in the four streams, non-major, major, acquisitions, and distributions. Non-major has definitely been a focus for us. Quick turnarounds, predominantly modernizations, intensifications in greenfields of grocery anchored. Major's focus has been entitlement to create the optionality to get ready at some point when the market conditions are right to maybe consider putting a shovel in the ground. Acquisitions, we've been focused in on a year-to-date basis, having invested close to CAD 150 million in acquisitions, and we continue to focus in on that. We are seeing some good opportunities as we underwrite. On distributions, we gave our second increase in distributions this year. That is definitely part of our strategic view of how we allocate capital.

Speaker #1: So non-major has definitely been a focus for us. Quick turnarounds, predominantly modernizations and intensifications in greenfields of grocery anchored, majors focus has been entitlement to create the optionality to get ready at some point when the market conditions are right to maybe consider putting a shovel in the ground.

Speaker #1: Acquisitions, we've been focused in on a year-to-date basis, having invested close to $150 million in acquisitions. And we continue to focus in on that.

Mark Holly: Acquisitions, we've been focused in on a year-to-date basis, having invested close to CAD 150 million in acquisitions, and we continue to focus in on that. We are seeing some good opportunities as we underwrite. On distributions, we gave our second increase in distributions this year. That is definitely part of our strategic view of how we allocate capital. It's in those four disciplines, and we always look at what's going on. I think the one thing that's great about Crombie is we have the flexibility in all those four, and they're all important.

Speaker #1: We are seeing some good opportunities as we underwrite. And on distributions, we gave our second increase in distributions this year. That is definitely a part of our strategic view of how we allocate capital.

Speaker #1: So within those four disciplines, and we always look at what's going on, I think the one thing that's great about Crombie is we have the flexibility in all those four, and they're all important.

Mark Holly: It's in those four disciplines, and we always look at what's going on. I think the one thing that's great about Crombie is we have the flexibility in all those four, and they're all important.

Speaker #4: Okay, that's helpful. And then, just maybe one quick last one from me, just to touch back on one of the four buckets—the acquisition side.

Lorne Kalmar: Okay. That's helpful. Then just maybe one quick last one from me just to touch back on one of the four buckets, the acquisition side. What's sort of the outlook for the balance of the year? Do you think you can kind of repeat something similar to what you did in the H1, or is that being a little bit too optimistic?

Speaker #4: What's sort of the outlook for the balance of the year? Do you think you can kind of repeat something similar to what you did in the first half, or is that being a little bit too optimistic?

Speaker #1: The team is very active. We're seeing more opportunities at this point in the year than we would have seen six months ago or a year ago.

Mark Holly: The team is very active. We're seeing more opportunities at this point in the year than we would've seen six months ago or a year ago. That said, we're very disciplined on how we look and underwrite them. We're not looking for growth for growth sake. And if you look back at our track record over the last four years, we've been net acquirers. Bought about CAD 375 to 400 million. We sold about CAD 100 million. We've added about 500,000 sq ft to the portfolio. We are focused in on acquisitions. We'd like to do more of it, but we're being extremely disciplined to make sure that they're tucking into the portfolio and delivering on the metrics that we're really focused in on, which is same as NOI, FFO growth, and not compromising the balance sheet as we do it. Are we looking to do more? Yes.

Speaker #1: That said, we're very disciplined on how we look and underwrite them. We're not looking for growth for growth's sake. And if you kind of look back at our track record, over the last four years, we've been net acquirers.

Speaker #1: Bought about 375 to 400 million dollars. We sold about 100 million. We've added about 500,000 square feet to the portfolio. So we are focused on acquisitions.

Mark Holly: We are focused in on acquisitions. We'd like to do more of it, but we're being extremely disciplined to make sure that they're tucking into the portfolio and delivering on the metrics that we're really focused in on, which is same as NOI, FFO growth, and not compromising the balance sheet as we do it. Are we looking to do more? Yes. We're going to take a very disciplined approach.

Speaker #1: We'd like to do more of it, but we're being extremely disciplined to make sure that they're tucking into the portfolio. And delivering on the metrics that we're really focused in on, which is same asset NOI, FFO growth, and not compromising the balance sheet as we do it.

Speaker #1: So are we looking to do more? Yes. But we're going to take a very disciplined approach.

Mark Holly: We're going to take a very disciplined approach.

Speaker #4: Okay. Fair enough. I will turn it back. Thank you.

Lorne Kalmar: Okay, fair enough. I will turn it back. Thank you.

Speaker #3: Thank you. And the next question comes from Rez Turgis with Raymond James.

Operator 2: Thank you. The next question comes from Brad Sturges with Raymond James.

Operator: Thank you. The next question comes from Brad Sturges with Raymond James.

Speaker #5: Hey. Good morning. Just following along Lauren's line of questions there, just on acquisitions. Just, I guess, during the quarter and post-quarter, you bought a few land parcels.

Brad Sturges: Hey, good morning. Just following along Lauren's line of questions there, just on acquisitions. Just, I guess during the quarter and post-quarter, you bought a few land parcels. Just wanted to maybe give a bit more color in terms of the plans with those acquisitions.

Brad Sturges [Managing Director of Equity Research Analyst: Hey, good morning. Just following along Lauren's line of questions there, just on acquisitions. Just, I guess during the quarter and post-quarter, you bought a few land parcels. Just wanted to maybe give a bit more color in terms of the plans with those acquisitions.

Speaker #5: Just wanted to maybe get a bit more color in terms of the plans with those acquisitions.

Speaker #1: For sure. Good morning, Brad. So yeah, we've been active this year. Ocean Park, which we called out, which is the 30,000 square foot Safeway, in Vancouver.

Mark Holly: For sure. Good morning, Brad. Yeah, we've been active this year. Ocean Park, which we called out, which is the 30,000 square foot Safeway, in Vancouver. Earlier in the year, we bought the Whitby warehouse. We bought St-Hubert in Quebec, which is another warehouse. In the quarter, we bought Elmwood, which is a parcel that is a part of a broader development that we had owned. It was four parcels. We owned three outright, and we had a land lease on the fourth parcel. We bought the fourth parcel, and it creates some optionality, squares up the site, and gives us some optionality down the future. Subsequent to the quarter, we bought Windsor, which is a commercial development site that we're actively working on an application.

Speaker #1: Earlier in the year, we bought the Whitby Warehouse. We bought St. Hubert in Quebec, which is another warehouse. And then in the quarter, we bought Elmwood, which is a parcel that is a part of a broader development that we have had owned.

Speaker #1: It was four parcels. We owned three outright, and we had a land lease on the fourth parcel. So we bought the fourth parcel. And it creates some optionality, squares up the site, and gives us some optionality down the future.

Speaker #1: And then subsequent to the quarter, we bought Windsor, which is a commercial development site that we're actively working on an application.

Speaker #5: Okay. That helps. I guess you called it out. You've been a net acquirer, but opportunistically, you do consider some dispositions? Is there anything near term that you're looking at from a disposition point of view, or should we continue to be more expect Crombie to be more focused from an acquisition point of view?

Arie Bitton: Okay. That helps. I guess you called it out, you've been a net acquirer, but opportunistically, you do consider some dispositions. Is there anything near term that you're looking at from a disposition point of view, or should we continue to expect Crombie to be more focused from an acquisition point of view?

Brad Sturges [Managing Director of Equity Research Analyst: Okay. That helps. I guess you called it out, you've been a net acquirer, but opportunistically, you do consider some dispositions. Is there anything near term that you're looking at from a disposition point of view, or should we continue to expect Crombie to be more focused from an acquisition point of view?

Speaker #1: We do look at the sources of capital. And so when we kind of think about that, you first go to the balance sheet health and the strength of the balance sheet.

Mark Holly: We do look at the sources of capital. When we think about that, you first go to the balance sheet health and the strength of the balance sheet. Kara and team have done just an exceptional job on managing liquidity, which is now CAD 450 million-ish, CAD 475 million. Our free cash flows increase year in, year out, so we're almost now at CAD 50 million of free cash flow. We have a DRIP. That DRIP provides us a nice little source of equity, quarter in, quarter out, and we have an unencumbered asset pool, as you call out, for dispositions of over CAD 4 billion. It is not something that we are fixated on. Where we think there's a great opportunity and the market conditions allow us, we'll action it.

Speaker #1: Karen and the team have done just an exceptional job on managing liquidity, which is now 450 million-ish, 475 million. Our free cash flows increase year in, year out.

Speaker #1: So we're almost now at 50 million dollars of free cash flow. We have a drip. That drip provides us a nice little source of equity.

Speaker #1: Quarter in, quarter out. And we have an unencumbered asset pool, as you call out, for dispositions. Of over $4 billion. It is not something that we are fixated on.

Mark Holly: It is not something that we are fixated on. Where we think there's a great opportunity and the market conditions allow us, we'll action it. We're going to do it with purpose and intent so that we can then anchor up into something more core, which will be grocery anchored, that has a stronger growth profile than our existing profile today. It's not a necessity to sell assets, but we have demonstrated that we are doing it in order to provide a more durable portfolio for our unit holders.

Speaker #1: Where we think there's a great opportunity in the market conditions allow us, we'll action it. But we're going to do it with purpose and intent so that we can then anchor up into something more core, which will be grocery anchored, that has a more has a stronger growth profile than our existing profile today.

Mark Holly: We're going to do it with purpose and intent so that we can then anchor up into something more core, which will be grocery anchored, that has a stronger growth profile than our existing profile today. It's not a necessity to sell assets, but we have demonstrated that we are doing it in order to provide a more durable portfolio for our unit holders.

Speaker #1: So it's not a necessity to sell assets, but we have demonstrated that we are doing it in order to provide a more durable portfolio for our unit holders.

Speaker #5: Okay. Last question. In terms of the non-major development bucket, obviously, that's a pretty core focus of Crombie. Just curious, when you talk about the 60% target returns, just given where the market fundamentals are and maybe some of the pricing power you're starting to see from a rent perspective, does that change the actual returns you're getting in terms of realized returns versus target, or how should we think about where you're actually kind of generating unrealized returns within that range, or whether it's lower end, higher end, or even above?

Brad Sturges: Okay. Last question. In terms of the non-major development bucket, obviously, that's a pretty core focus of Crombie. Just curious, when you talk about the 60% target returns, just given where the market fundamentals are and maybe some of the pricing power you're starting to see from a rent perspective, does that change the actual returns you're getting in terms of realized returns versus target? How should we think about where you're actually kind of generating unrealized returns within that range, or whether it's lower end, higher end, or even above?

Brad Sturges [Managing Director of Equity Research Analyst: Okay. Last question. In terms of the non-major development bucket, obviously, that's a pretty core focus of Crombie. Just curious, when you talk about the 60% target returns, just given where the market fundamentals are and maybe some of the pricing power you're starting to see from a rent perspective, does that change the actual returns you're getting in terms of realized returns versus target? How should we think about where you're actually kind of generating unrealized returns within that range, or whether it's lower end, higher end, or even above?

Speaker #6: Hi, Brad. It's Kara. No, it doesn't change our outlook on the returns that we've disclosed in terms of target. So we're still looking at that approximately 7% return on modernizations that drives good cash flow, especially to our same asset property cash NOI line.

Kara Cameron: Hi, Brad, it's Kara. No, it doesn't change our outlook on the returns that we've disclosed in terms of target. We're still looking at that approximately 7% return on modernizations. That drives good cash flow, especially to our same asset property cash NOI line. We're still within those target ranges that we're disclosing.

Speaker #6: And so we're still within those target ranges that we're disclosing.

Speaker #5: Okay. Sounds good. Thank you.

Brad Sturges: Okay. Sounds good. Thank you.

Brad Sturges [Managing Director of Equity Research Analyst: Okay. Sounds good. Thank you.

Speaker #3: Thank you. And the next question comes from San Damiani with TD Securities.

Operator 2: Thank you. The next question comes from Sam Damiani with TD Securities.

Operator: Thank you. The next question comes from Sam Damiani with TD Securities.

Speaker #4: Hi. Good morning. Yeah, congratulations on another great quarter. 3% plus same property. Are you looking at the sort of trend here and have any new thoughts on sort of the guidance range for same property?

Sam Damiani: Hi. Good morning. Congratulations on another great quarter, 3% plus same property. Are you looking at the sort of trend here and have any new thoughts on sort of the guidance range for same property?

Speaker #1: Hi, Sam. The range that we give is, as you know, 2 to 3 percent, and it's a long-term target that we consistently message in the last couple of years.

Mark Holly: Hi, Sam. The range that we give is, as you know, 2% to 3%, and it's a long-term target that we consistently message. In the last couple of years, we've been on the high side and pushing through the high side of that 2% to 3%. I think the leasing team, the finance team, the operations team have just done an exceptional job, and it's showing up in all our metrics in what we acquire, what we dispose of. As you kind of look in the back half of the year, we're expecting to reach or exceed that long-term target range that we've been giving of that 2% to 3%, consistent with what we did last year. We gave that same sort of viewpoint, and I think it's going to hold again this year as well.

Speaker #1: We've been on the high side and pushing through the high side of that 2 to 3 percent. I think the leasing team, the finance team, the operations team has just done an exceptional job and is showing up in all our metrics and what we acquire, what we dispose of.

Speaker #1: As you kind of look in the back half of the year, we're expecting to reach or exceed that long-term target range that we've been giving of that 2 to 3 percent, consistent with what we did last year.

Speaker #1: We gave that same sort of viewpoint, and I think it's going to hold again this year as well.

Speaker #4: That's great. And great to see you. Thank you. And maybe just on the there was a Toys R Us space that I think you were hoping to get wrapped up by the end of the last quarter.

Sam Damiani: That's great, and great to see you. Thank you. Maybe just on the there was a Toys "R" Us space that I think you were hoping to get wrapped up by the end of the last quarter. Is there an update on that space? I believe it's in Newfoundland.

Speaker #4: Is there an update on that space? I believe it's in Newfoundland.

Speaker #7: Good morning, Sam. The update is the lease took a little bit longer to get past, just some summer vacation scheduling. The lease is in for execution on the tenant side, so I can't disclose But we are hoping to have some positive news come next quarter.

Arie Bitton: Morning, Sam. The update is, the lease took a little bit longer to get passed, just some summer vacation scheduling. The lease is in for execution on the tenant side, so I can't disclose anything at this point. We are hoping to have some positive news come next quarter.

Speaker #4: Okay. Thanks. Thanks, Ari. And I guess it was referenced earlier, the three stabilized apartments really have seen a really sharp occupancy rebound. Is there anything specific driving that?

Sam Damiani: Okay. Thanks, Arie. I guess it was referenced earlier, the three stabilized apartments really have seen a really sharp occupancy rebound. Is there anything specific driving that?

Speaker #7: We have done a concerted effort to really up the marketing for all three of the assets. So Davie, in particular, just given some of the changes within the macro, particularly in that market, did see a dip over the last year, year and a half, call it, with some of the immigration policies.

Arie Bitton: We have done a concerted effort to really up the marketing for all three of the assets. Davie Street in particular, just given some of the changes within the macro, particularly in that market, did see a dip over the last year and a half, call it, with some of the immigration policies. The team has spent a large amount of time and effort on updating the website, increasing marketing spend. Incentives are a part of that as well, to really focus on more qualified leads, and those numbers are now bearing fruit for us. We're happy with where we are. It's by far obviously the best performance we've seen at 97.2%, and the expectation is that we're going to continue to build that momentum within Q3, try to capitalize on it before the slower months towards H2.

Speaker #7: And the team has spent a large amount of time and effort on updating the website, increasing marketing spend, incentives are a part of that as well to really focus on more qualified lease.

Speaker #7: And those numbers are now bearing fruit for us. So we're happy with where we are. It's by far the obviously, the best performance we've seen at 97.2%.

Speaker #7: And the expectation is that we're going to continue to build that momentum within Q3, try to capitalize on it before the slower months towards the back half of the year.

Speaker #4: Okay. Great. And a small increase in the budget for the milestone, not really a big deal. And I think that budget's been pretty much flat ever since you announced it until now.

Sam Damiani: Okay, great. A small increase in the budget for The Marlstone. Not really a big deal, and I think that budget's been pretty much flat ever since you announced it until now. The leasing's going very well. Could stabilize a little earlier than expected. Are you in a position today to sort of narrow that expected yield range from the 4.5% to 5.5% to something more narrow?

Speaker #4: But the leasing's going very well. Could stabilize a little earlier than expected. Are you in any position today to sort of narrow that expected yield range from 4.5% to 5.5% to something more narrow?

Speaker #1: Not at this point, Sam, but I think you've hit all the highlights when we greenlit that project in 2023. We gave what we thought the capital would be deployed, and we've been with Victor and his team, we've been on time and on budget.

Mark Holly: Not at this point, Sam. I think you've hit all the highlights. When we greenlit that project in 2023, we gave what we thought the capital would be deployed, and we've been, with Victor and his team, we've been on time and on budget. Arie's team has done just a terrific job, especially considering that we just really started leasing in May when the building was turned over. It's been a very good positive momentum so far. At this point, we're going to hold to the markers we've already given, which is 4.5%, 5.5% in H2 2027. As we continue to see the back end here of lease up and getting closer to stabilization, we'll narrow that.

Speaker #1: Ari's team has done just a terrific job, especially considering that we just really started leasing in May when the building was turned over. So it's been a very good positive momentum so far.

Speaker #1: But at this point, we're going to hold to the markers we've already given, which is 4.5, 5.5, and back half of 2027 as we continue to see the back end here of lease up and getting closer to stabilization.

Speaker #1: We'll narrow that.

Speaker #4: Okay. Thanks, Mark. I'll turn it back over to you.

Sam Damiani: Okay. Thanks, Mark. I'll turn it back.

Speaker #3: Thank you. And the next question comes from Taiwu with CIBC.

Operator 2: Thank you. The next question comes from Tal Woolley with CIBC.

Operator: Thank you. The next question comes from Tal Woolley with CIBC.

Speaker #4: Hi. Good morning. Just you had mentioned the drip program before. I'm wondering is it strictly something you need to have in the capital stack, or is it just sort of a nice-to-have thing at this point?

Tal Woolley: Hi. Good morning. Just that you'd mentioned the DRIP program before. I'm wondering, is it strictly something you need to have in the capital stack, or is it just sort of a nice to have thing at this point?

Speaker #6: Good morning. It's definitely a nice-to-have. It rounds out the balance sheet. It's a consistent and dependable source of equity for us, contributing approximately $40 million a year.

Kara Cameron: Good morning. It's definitely a nice to have. It rounds out the balance sheet. It's a consistent and dependable source of equity for us, contributing approximately CAD 40 million a year. Just where our equity markets have not been open for quite a while, we are pleased with where our NAV is sitting, where the unit price is trending. I think there's still a bit to go, but it's a dependable source of equity for us, so we're keeping it in place.

Speaker #6: So just where equity markets have not been open for quite a while, I mean, we are pleased with where our NAV is sitting, where the unit price is trending.

Speaker #6: I think there's still a bit to go. But so it's a dependable source of equity for us, so we're keeping it in place.

Speaker #4: And I think pardon me. Prior to Mark's arrival, I think you'd sort of talked about leverage. In the sort of 40 to 45 percent of the gross book value range, is there a debt-to-EBITDA target you guys are sort of working towards at the end of the day?

Tal Woolley: I think, pardon me, prior to Mark's arrival, I think you'd sort of talked about leverage in the sort of 40% to 45% debt to gross book value range. Is there a debt to EBITDA target you guys are sort of working towards at the end of the day?

Speaker #6: We don't disclose a target. So right now, we're definitely pleased with where we're at. It gives us the financial flexibility to go out and do some of the acquisitions that you heard Mark talk about.

Kara Cameron: We don't disclose a target. Right now, we're definitely pleased with where we're at. It gives us the financial flexibility to go out and do some of the acquisitions that you heard Mark talk about. From a debt to EBITDA or a debt to adjusted EBITDA, hovering in that eight times frame, that's a comfortable position for us.

Speaker #6: So from a debt-to-EBITDA or debt-to-adjusted EBITDA, hovering in that eight-times frame, that's a comfortable position for us.

Speaker #4: Okay. And then Mark, just wanted to go back to your comments on the residential development from your preamble. I guess if market conditions for resi improved, A, I was just wondering what specifically you would be looking for to start greenlighting more stuff.

Tal Woolley: Okay. Mark, just wanted to go back to your comments on residential development from your preamble. I guess, if market conditions for resi improved, A, I was just wondering what specifically you would be looking for to start green-lighting more stuff. We've sort of seen some interesting things happening with residential development with some of the other retail REIT peers, in terms of really kind of exiting from it. What's sort of been the board conversation around that as well? I'm just wondering if you can sort of give an idea of how we should think about over the next five to 10 years, what residential development interest Crombie will have.

Speaker #4: And then we've sort of seen some interesting things happening with residential development with some of the other retail rate peers in terms of really kind of pushing it, exiting from it.

Speaker #4: What's sort of been the board conversation around that as well? I'm just wondering if you can sort of give an idea of how we should think about over the next 5 to 10 years, what residential development interest Crumbie will have.

Speaker #1: Hi, Tal. Not going to comment on sort of the dialogues that happen around the board table, but what I can tell you is, as you know, we have a development ladder that development ladder highlights somewhere in the neighborhood of 23 or 26 locations that are at different stages between near-term, medium-term, long-term.

Mark Holly: Hi, Tal. I'm not going to comment on sort of the dialogues that happen around the board table, but what I can tell you is, as you know, we have a development ladder. That development ladder highlights somewhere in the neighborhood of 23 or 26 locations that are at different stages between near term, medium term, long term. How we have been using the ladder over the last 3, 4 years is, in some cases, we've been able to monetize it and use proceeds to tuck back more into the core. In other cases, we've green-lit projects like The Marlstone. What we've been doing actively is standing up those partnerships, one on the East Coast, one on the West Coast, and we're using them as passive equity, sharing the risk as we go through that entitlement stage and getting it ready so we can decide how we want to participate.

Speaker #1: How we have been using the ladder over the last three, four years is in some cases, we've been able to monetize it and use proceeds to tuck back more into the core.

Speaker #1: In other cases, we've greenlit projects like the Marlestone. What we've been doing actively is standing up those partnerships one on the East Coast, one on the West Coast.

Speaker #1: And we're using them as passive equity, sharing the risk as we go through that entitlement stage and getting it ready so that we can decide how we want to participate.

Speaker #1: And it doesn't mean that we're absolutely going to participate at 50%. It doesn't mean that we're actually going to participate in putting the shovel in the ground, but it is creating optionalities to determine what the conditions are.

Mark Holly: It doesn't mean that we're absolutely going to participate at 50%. It doesn't mean that we're actually going to participate in putting the shovel in the ground, but it's creating optionalities to determine what the conditions are. The conditions are both the macro and internally on how we're deploying our capital. If you go back to how we've been deploying capital, non-majors, majors, acquisitions, and distributions, we've been focused more on non-majors over the last 3 years because that is quick turnarounds, 12 months or less, less than CAD 50 million, have a good yield on cost between 6% and 8%, and it's showing up in our FFO metrics. It's showing up on our same asset NOI metrics. We're going to continue to lean into that. We do like acquisitions. We like income-producing acquisitions, we're going to focus in on that.

Speaker #1: And the conditions are both the macro and internally and how we're deploying our capital. So if you kind of go back to how we've been deploying capital, non-majors, majors, acquisitions and distributions, and we've been focused more on non-majors over the last three years because that is quick turnarounds 12 months or less, less than $50 million have a good yield on cost between 6 and 8 percent.

Speaker #1: And it's showing up in our FFO metrics. It's showing up under same asset NOI metrics. And so we're going to continue to lean into that.

Speaker #1: We do like acquisitions. We like income-producing acquisitions, and so we're going to focus in on that. For majors, for now, the focus is absolutely on entitlements.

Mark Holly: For majors, for now, the focus is absolutely on entitlements. We're spending money. We're investing in the joint ventures. At the macro stage, it's the micro market to which these locations are positioned. As you know, some of them are in Vancouver. Vancouver is not as strong as a market as we think Halifax is. The other market is Halifax. We're happy where we are in the Marlstone, but at this point, we're not prepared to green-light a project. We look at the economy, immigration policies, what's happening around the micro market before we make a decision. We look at the underwriting at least twice a year to see where they are at, and it's a part of our evaluation at the executive table and a discussion at the board table.

Speaker #1: We're spending money. We're investing in the joint ventures. At the macro stage, it's the micro market to which these locations are positioned. As you know, some of them are in Vancouver.

Speaker #1: Vancouver is as not as strong as a market as we think Halifax is. The other market is Halifax. We're happy where we are in the Marlestone, but at this point, we're not prepared to greenlight a project.

Speaker #1: We look at the economy, immigration policies, what's happening around the micro market before we make a decision. We look at the underwriting at least twice a year to see where they are at.

Speaker #1: And it's a part of our evaluation. At the executive table and a discussion at the board table.

Speaker #4: Got it. And then for the Marlestone, do you have a rough estimate of what the FFO break-even occupancy is, just so we can think about modeling the drag between now and stabilization?

Tal Woolley: Got it. Then for the Marlstone, do you have a rough estimate of what the FFO breakeven occupancy is, just so we can think about modeling the drag between now and stabilization?

Speaker #6: Hi, Tal, Kara. No, that's not something that we actively disclose.

Kara Cameron: Hi, Tal. It's Kara. No, that's not something that we actively disclose.

Speaker #4: Okay. I think if I'm reading but 75, 80 percent, that's sort of when you would expect to be kind of in the neutral range?

Tal Woolley: Okay. I think as I'm reading, like 75% and 80%, that's sort of when you would expect to be kind of in the neutral range. Is that reasonable?

Speaker #4: Is that reasonable?

Kara Cameron: I wouldn't say that's reasonable. No, we're not giving guidance on that one.

Speaker #6: I wouldn't say that's reasonable. No, we're not giving guidance on that one.

Speaker #4: Okay. Thank you very much.

Tal Woolley: Okay. Thank you very much.

Speaker #1: Thanks, Tal.

Mark Holly: Thanks, Tal.

Speaker #5: Thank you. And the next question goes to Mario Sarek with Scotiabank.

Operator 2: Thank you. The next question goes to Mario Saric with Scotiabank.

Operator: Thank you. The next question goes to Mario Saric with Scotiabank.

Speaker #4: Hi. Good morning.

Mario Saric: Hi, good morning. Coming back to the acquisition strategy, I appreciate that you don't disclose individual acquisition cap rates. Going forward, if acquisitions are going to be a meaningful part of the capital allocation, can you give us a sense of the types of cap rate ranges one can expect on the types of assets that you look at?

Speaker #5: Coming back to the acquisition strategy, I appreciate that you don't disclose individual acquisition cap rates, but going forward, if acquisitions are going to be a meaningful part of the capital allocation, can you give us a sense of the types of cap rate ranges one can expect on the types of assets that you look at?

Speaker #1: Good morning, Mario. Kind of take a look at the MDNA. We kind of break them into the three categories of sort of the market classes that we operate in are all in cap rate is sitting slightly below six.

Mark Holly: Good morning, Mario. To take a look at the MD&A, we break them into the 3 categories of the market classes that we operate in. Our all-in cap rate is sitting slightly below 6. When we look at what we've been buying, we've always been suggesting and providing insights that most of the acquisitions we've been doing in the various three major markets have been reflective of the cap rate that we're disclosing in the MD&A. When we look at what we're acquiring, we're looking at the yield, we are also looking at the growth rate in the portfolio. In some cases, we're prepared to play a lower cap rate because we think that there's embedded growth in it. In other cases, it's the yield with more stable growth rates.

Speaker #1: And then when we look at what we've been buying, we've always been suggesting and providing insights that most of the acquisitions we've been doing in the various three major markets have been reflective of the cap rate that we're disclosing in the MDNA.

Speaker #1: And so when we look at what we're acquiring, we're looking at the yield, but we're also looking at the growth rate in the portfolio.

Speaker #1: So, in some cases, we're prepared to pay a lower cap rate because we think that there's embedded growth in it. In other cases, it's the yield, with a more stable growth rate.

Speaker #1: So I can't give you one number that we're looking for. But I can tell you that when we look at it, we look at years to accretion.

Mark Holly: I can't give you one number that we're looking for. I can tell you that when we look at it, we look at years to accretion, and most of the things that we've been acquiring have been immediately accretive. That said, I would say that our payout ratios, our FFO growth, our property performance has put us in a really good spot where that it doesn't have to be absolutely immediately accretive to drive what we're chasing, which is longer-term growth. Our embedded portfolio is growing at one rate. We are looking at assets that can give us a higher growth rate on a long-term basis. It's going to come down to the balance between both. That's how we strategically think about acquisitions.

Speaker #1: And most of the things that we've been acquiring has been immediately accretive. That said, I would say that our payout ratios are FFO growth, our property performance has put us in a really good spot where that it doesn't have to be absolutely immediately accretive to drive what we're chasing, which is longer-term growth or embedded portfolio is growing at one rate and we're looking at assets that can give us a higher growth rate on a long-term basis.

Speaker #1: It's going to come down to the balance between both. But that's sort of how we strategically think about acquisitions.

Mario Saric: Got it. Okay. That makes sense. Just in terms of funding, it sounds like there's always the possibility of dispositions selectively as a source of capital. Without them, what do you estimate your acquisition capacity is today in order to maintain your target leverage metrics, or where you'd like to see the balance sheet?

Speaker #5: Got it. Okay. That makes sense. And then just in terms of funding, it sounds like they're there's always the possibility of dispositions selectively as a source of capital.

Speaker #5: Without them, what do you kind of estimate your acquisition capacity is today in order to maintain your target leverage metrics or where you'd like to see the balance sheet?

Mark Holly: It's an interesting question, Mario. You're right. Dispositions have been a part of the strategy, as we called out, where we've sold about CAD 100 million of assets over the last few years. We haven't sold any this year, and we've acquired CAD 150 million. With those acquired CAD 150 million of assets, our balance sheet is still really healthy. Like Kara called out, 8x debt to EBITDA. Interest coverage ratio over 3. We're in a really nice range where we can still acquire opportunistically. We're able to use the liquidity through our bilateral revolver. There's not a necessity to dispose to grow. There is a viewpoint that disposing can help shore up other metrics and can help feed how you're spending your capital.

Speaker #1: It's an interesting question, Mario. So you're right, dispositions have been a part of the strategy, as we call that, where we've sold about $100 million of assets over the last few years.

Speaker #1: We haven't sold any this year, and we've acquired 150 million. And with those acquired 150 million dollars of assets, our balance sheet is still really healthy, like Kara called out, eight times debt to EBITDA.

Speaker #1: Interest coverage ratio over three. We're in a really nice range where we can still acquire opportunistically we're able to use the liquidity that we've been through our bilateral revolver.

Mark Holly: We're able to use the liquidity through our bilateral revolver. There's not a necessity to dispose to grow. There is a viewpoint that disposing can help shore up other metrics and can help feed how you're spending your capital. It is a part of the strategy, but it is not the immediate thing of buy one, sell one, because the balance sheet is in a really good spot. I hope that answers your question. It is a part of the plan. It's not one for one, and it doesn't have to happen in advance of.

Speaker #1: There's not a necessity to dispose to grow. But there is a viewpoint that disposing can help shore up other metrics and can help feed sort of how you're spending your capital.

Speaker #1: So, it is a part of the strategy, but it's not the immediate thing of buy one, sell one, because the balance sheet is in a really good spot.

Mark Holly: It is a part of the strategy, but it is not the immediate thing of buy one, sell one, because the balance sheet is in a really good spot. I hope that answers your question. It is a part of the plan. It's not one for one, and it doesn't have to happen in advance of.

Speaker #1: So I hope that answers your question. It is a part of the plan. But it's not one for one, and it doesn't have to happen in advance of.

Speaker #4: Okay.

Mario Saric: Okay. Two more really quick ones on my end. Any update on the Calgary CFC tenant discussions and probable outcomes there?

Speaker #5: Two more really quick ones on my end. Any update on the Calgary CFC kind of tenant discussions and probable outcomes there?

Speaker #1: Yeah. We continue to talk to Empire. They continue working on getting the space ready. They have it they are marketing it. There's been some interest in the space, and we continue to support them.

Mark Holly: Yeah, we continue to talk to Empire. They continue working on getting the space ready. They are marketing it. There's been some interest in the space, and we continue to support them. There is no update. As you know, we're under a very long-term lease with Empire. We're very happy. We continue to collect the rent. There's no change for us. We are supporting Empire as they look to backfill the space.

Speaker #1: But there is no update. As you know, we're under a very long-term lease with Empire. We're very happy. We continue to collect the rent.

Speaker #1: There's no change for us. But we are supporting Empire as they look to backfill the space.

Speaker #5: Okay. And then operationally, I think last quarter, the sequential quarter-quarter decline in occupancy was attributable to the St. Hubert acquisition as well as some seasonality.

Mario Saric: Okay. Operationally, I think last quarter, the sequential quarter-over-quarter decline in occupancy was attributable to the Sagu Bear acquisition, as well as some seasonality. The occupancy has come down very slightly, Q2 versus Q1. What is the outlook for H2 of the year in terms of that occupancy trend?

Speaker #5: The occupancy has come down very slightly in Q2 versus Q1. What is the outlook for the second half of the year in terms of that occupancy trend?

Speaker #1: Good morning, Mario. We're expecting occupancy to hold relatively steady. So we're near full at this point, as we've said in the past. So it will ebb and flow a little bit.

Arie Bitton: Morning, Mario. We're expecting occupancy to hold relatively steady. We're near full at this point, as we've said in the past, it will ebb and flow a little bit. Some of the declines that you've observed are related to the Toys Us departure. That was about 35,000 sq ft. That left us early on in Q2. As I mentioned earlier, we are expecting that to enter committed occupancy in the short term. We also had one office departure that we're managing through as well. I'd say that at this point, the team's continuing to renew at a very healthy pace. You saw the renewal spreads for the quarter were, again, the consecutive quarter of double-digit renewal spreads. That outlook, I would say, we believe that trend will continue on through the rest of the year.

Speaker #1: Some of the declines that you've observed are related to the Toys R Us departure. That was about 35,000 square feet that left us early on in Q2.

Speaker #1: And as I mentioned earlier, we are expecting that to enter committed occupancy. In the short term, we also had one office departure that we're managing through as well.

Speaker #1: So, I'd say that at this point, the teams continue to renew at a very healthy pace. You saw the renewal spreads for the quarter where, again, the executed quarter of double-digit renewal spreads.

Arie Bitton: I'd say that at this point, the team's continuing to renew at a very healthy pace. You saw the renewal spreads for the quarter were, again, the consecutive quarter of double-digit renewal spreads. That outlook, I would say, we believe that trend will continue on through the rest of the year. Like I said, tenants continue to covet the spaces they're in, we're seeing those indications come through as they continue to exercise. Don't anticipate much of a change than what you're seeing currently.

Speaker #1: And that outlook, I would say—or that we believe that trend will continue on through the rest of the year. So, like I said, tenants continue to covet the spaces they're in, and we're seeing those indications come through as they continue to exercise.

Arie Bitton: Like I said, tenants continue to covet the spaces they're in, we're seeing those indications come through as they continue to exercise. Don't anticipate much of a change than what you're seeing currently.

Speaker #1: So, don't anticipate much of a change from what you're seeing currently.

Speaker #5: Okay. Thank you.

Mario Saric: Okay. Thank you.

Speaker #3: Thank you. And once again, if you have a question, please press star, then one. And the next question, customer having a beer with RBC Capital Markets.

Operator 2: Thank you. Once again, if you have a question, please press star then one. The next question comes from Pammi Bir with RBC Capital Markets.

Operator: Thank you. Once again, if you have a question, please press star then one. The next question comes from Pammi Bir with RBC Capital Markets.

Speaker #4: Thanks. Good morning. Just coming back to the milestone, again, good to see the leasing progress there. But can you comment on how you're using incentives, if at all, and how the rents are attracting relative to your underwriting?

Pammi Bir: Thanks. Good morning. Just coming back to The Marlstone. Again, good to see the leasing progress there. Can you comment on how you're using incentives, if at all, and how the rents are tracking relative to your underwriting?

Speaker #1: Sure, Palmy. The incentives that we're being used are selective. And we are not currently openly advertising incentives, but we do use them as back pocket incentives that the leasing team on the ground is able to utilize.

Arie Bitton: Sure, Pammi. The incentives that were being used are selective, we are not currently openly advertising incentives, but we do use them as back-pocket incentives that the leasing team on the ground is able to utilize. We've had a number of open houses. We had one towards the end of July. There are promotional incentives associated with those that we do advertise. The incentives are within the market range, typically about a month of free rent on a 12-month lease where used. Beyond that, our underwriting on a rent per square foot basis, unfortunately, I can't disclose that specifically, but I could tell you that we are above our initial underwriting when we approved the development in 2023.

Speaker #1: We've had a number of open houses we had one towards the end of July, and there are promotional incentives associated with those that we do advertise.

Speaker #1: So the incentives are within the market range. Typically, about a month of free rent on a 12-month lease. We're used. And beyond that, our underwriting on a rent per square foot basis unfortunately, I can't disclose that specifically, but I could tell you that we are above our initial underwriting when we approved the development in 2023.

Arie Bitton: Beyond that, our underwriting on a rent per square foot basis, unfortunately, I can't disclose that specifically, but I could tell you that we are above our initial underwriting when we approved the development in 2023. I'd say another focus for us as well as we continue to lease up the building is we are focused on targeting a number of groups within the market that are continuing to provide us uptake. We have a military discount, we have a first responder discount, we're advertising with student boards as well, just to capture just some of the market dynamics that are unique to Halifax.

Speaker #1: And I'd say another focus for us as well as we continue to lease up the building is we are focused on targeting a number of groups within the market that are continuing to provide us uptakes.

Arie Bitton: I'd say another focus for us as well as we continue to lease up the building is we are focused on targeting a number of groups within the market that are continuing to provide us uptake. We have a military discount, we have a first responder discount, we're advertising with student boards as well, just to capture just some of the market dynamics that are unique to Halifax.

Speaker #1: So, we have a military discount. We have a first responder discount, and we're advertising with students' boards as well, just to capture some of the market dynamics that are unique to Halifax.

Speaker #4: Great. And I guess just on that last comment in terms of specific groups, have any has there been any sort of bulk leasing or corporate users that have maybe helped I guess expedite the lease up?

Pammi Bir: Great. I guess just on that last comment in terms of specific groups, has there been any sort of bulk leasing or corporate users that have maybe helped, I guess, expedite the lease-up?

Speaker #1: There have not. And we don't currently plan on utilizing that for this building. We believe that the building is great, and we don't really need to do that to augment any of the occupancy.

Arie Bitton: There have not, and we don't currently plan on utilizing that for this building. We believe that the building is great, and we don't really need to do that to augment any of the occupancy.

Speaker #4: Got it. Just maybe coming back to the IFRS cap rates, for the overall portfolio, it did come down a little bit in the quarter.

Pammi Bir: Got it. Just maybe coming back to the IFRS cap rates, for the overall portfolio, it did come down a little bit in the quarter, and obviously, we've seen some M&A and some deals in the market. Can you comment on the drivers of the change there and maybe some thoughts on how you see that trending over the balance of the year?

Speaker #4: And obviously, we've seen some M&A and some deals in the market. So can you comment on the drivers of the change there and maybe some thoughts on how you see that trending over the balance of the year?

Speaker #6: Hi, Palmy. It's Kara. Yeah. We're very pleased with some of the compression that we've been seeing across the portfolio. We have been seeing the most compression in our major markets and regional markets.

Kara Cameron: Hi, Tommy. It's Kara. Yeah. We're very pleased with some of the compression that we've been seeing across the portfolio. We have been seeing the most compression in our major markets and regional markets. As you're saying, the transactions are giving a good proxy point, especially private market activity. It's continuing to reinforce the value of high-quality necessity-based real estate, and that's showing up largely in our portfolio. I think we've historically talked about the strength of our regional markets and major markets, and we're starting to see that benefit come through in cap rates and cap rate compression.

Speaker #6: And as you're saying, the transactions are giving a good proxy point, especially private market activity. It's continuing to reinforce the value of high-quality necessity-based real estate.

Speaker #6: And that's showing up largely in our portfolio, I think. We've historically talked about the strengths of our regional markets and major markets, and we're starting to see that benefit come through in cap rates and cap rate compression.

Speaker #4: Okay. Got it. And then just what was the overall impact on the fair value of the portfolio in terms of the markup taken in the quarter?

Pammi Bir: Okay. Got it. What was the overall impact on the fair value of the portfolio in terms of the markup taken in the Q?

Kara Cameron: Dollar-wise, I don't have that at my disposal. If you include joint ventures, we had a weighted average portfolio capitalization rate of 5.77% in 2026, and it's compared to 5.86% at December 2025. That's a fairly decent compression for a portfolio of our size.

Speaker #6: Dollar-wise, I don't have that at my disposal. If you include joint ventures, we had a weighted average portfolio capitalization rate of 5.77% in Q2 2026.

Speaker #6: And it's compared to 5.86 at December 2025. So it's been that's a fairly decent compression for our portfolio of our size.

Speaker #4: Yeah. Okay. We can follow up on that offline.

Pammi Bir: Yeah. Okay. We can follow up on that offline.

Kara Cameron: Yeah. I'll follow up with you on the number. Yeah.

Speaker #6: Yeah. I'll follow up with you on the number. Yep.

Speaker #4: Cool. Thanks. I'll turn it back.

Pammi Bir: Thanks. I will turn it back.

Speaker #3: Thank you. And this concludes the question-and-answer session and today's conference call. We now disconnect your lines. Thank you for participating, and have a pleasant day.

Operator 2: This concludes the question and answer session and today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Operator: This concludes the question and answer session and today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Q2 2026 Crombie Real Estate Investment Trust Earnings Call

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