Q2 2026 Vital Infrastructure Property Trust Earnings Call

August 13, 2026

Speaker #1: Welcome to the Vital Infrastructure Property Trust Q2 2026 earnings conference call. At this time, all lines have been placed on mute. You are in listen-only mode.

Operator: Welcome to Vital Infrastructure Property Trust Q2 2026 earnings conference call. At this time, all lines have been placed on mute and are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded today, 13 May 2026. I would now like to turn the conference over to Steven Hong, Vice President of Investor Relations. Please go ahead. One moment, please. There has been a technical issue. We will start in one minute. Thank you. I would now like to turn the conference over to Steven Hong, Vice President of Investor Relations. Please go ahead.

Speaker #1: Following the presentation, we will conduct a Q&A session. If at any time during this call you require immediate assistance, please press *0 for the operator.

Speaker #1: This call is being recorded today. May 13, 2026. I would now like to thank the constants over to Stephen Hong, Vice President of Investor Relations, please go ahead.

Speaker #1: One moment, please. There has been a technical issue. We will start in one minute. Thank you. I would now like to thank the conference over to Stephen Hong, Vice President of Investor Relations, please go ahead.

Operator: We will start in one minute. Thank you. I would now like to turn the conference over to Steven Hong, Vice President of Investor Relations. Please go ahead.

Speaker #2: Thank you, operator. Good morning, everyone, and thanks for participating in our Q2 results conference call. This is Stephen Hong speaking. Joining me are Zach Vaughan, CEO; Stephanie Karamarkovic, CFO; Mike Brady, President; and Tracy Udall, COO; and Dave Casimiro, EVP.

Steven Hong: Thank you, operator. Good morning, everyone, and thanks for participating in our Q2 results conference call. This is Steven Hong speaking. Joining me are Zach Vaughan, CEO; Stephanie Karamarkovic, CFO; Mike Brady, President; Tracy Whittall, COO; and Dave Casimiro, EVP. Our earnings announcement was released yesterday evening, and we posted an updated investor relations presentation on our website, which listeners can refer to during the call. Following comments, we will be glad to ask and take questions from analysts. 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 on SEDAR+, including our MD&A and annual information form for a discussion of these risk factors.

Speaker #2: Our earnings announcement was released yesterday evening, and we posted an updated investor relations presentation on our website, which listeners can refer to during the call.

Speaker #2: Following comments, we will be glad to ask and take questions from analysts. 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.

Speaker #2: 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 on CedarPlus, including our MD&A and annual information form, for a discussion of these risks.

Steven Hong: Please see our public filings on SEDAR+, including our MD&A and annual information form for a discussion of these risk factors. During this call, we will also reference certain non-GAAP financial measures. A reconciliation to the most directly comparable IFRS measure is provided in our MD&A earnings release. Unless otherwise noted, all amounts discussed today are in Canadian dollars. With that, I will now hand it over to our CEO, Zach Vaughan.

Speaker #2: Factors. During this call, we'll also reference certain non-gas financial measures. I'll be constantly attuned to the most directly comparable IFRS measure is provided in our MDNA earnings release.

Steven Hong: During this call, we will also reference certain non-GAAP financial measures. A reconciliation to the most directly comparable IFRS measure is provided in our MD&A earnings release. Unless otherwise noted, all amounts discussed today are in Canadian dollars. With that, I will now hand it over to our CEO, Zach Vaughan.

Speaker #2: Unless otherwise noted, all amounts discussed today are in Canadian dollars. With that, I will now hand it over to our CEO, Zach Vaughan.

Speaker #3: Thanks, Stephen, and thank you, everyone, for joining us today on the call. This is my fourth earnings call as CEO of Vital, having joined a little over a year ago.

Zach Vaughan: Thanks, Steven, and thank you everyone for joining us today on the call. This is my fourth earnings call as CEO of Vital, having joined a little over a year ago. Since joining, the senior management team and I, with the support of our board, have been executing on a strategic plan to transform our business centered on four key priorities. One, simplifying our footprint. Two, strengthening our balance sheet. Three, reducing our cost structure, and four, disciplined capital allocation. We are still in the early stages of this transformation, but we are making strong progress across each of these priorities, as demonstrated by our results this quarter and our recent activities. Starting with the simplification of our footprint. During the quarter, we closed on the remainder of the properties in Europe that were part of our larger transaction with TPG Real Estate.

Speaker #3: Since joining, the senior management team and I, with the support of our Board, have been executing on a strategic plan to transform our business, centered on four key priorities.

Speaker #3: One, simplifying our footprint. Two, strengthening our balance sheet. Three, reducing our cost structure. And four, disciplined capital allocation. We are still in the early stages of this transformation, but we are making strong progress across each of these priorities, as demonstrated by our results this quarter and our recent activities.

Speaker #3: Starting with the simplification of our footprint: During the quarter, we closed on the remainder of the properties in Europe that were part of our larger transaction with TPG Real Estate.

Speaker #3: This transaction represented the majority of our invested equity in Europe, generating $145 million of net proceeds. As of June 30, our European property operating business and employees have also been transferred to TPG.

Zach Vaughan: This transaction represented the majority of our invested equity in Europe, generating CAD 145 million of net proceeds. As of 30 June, our European property operating business and employees have also been transferred to TPG. In Europe, we are left with just two remaining investments, both of which are efficient to oversee and which we intend to exit in due course. Our substantial exit from Europe, along with the internalization of Vital Trust in New Zealand, clearly demonstrates our commitment to simplifying our business and creating a more focused operating platform. Moving to our balance sheet. At the end of Q2, our LTV on a proportionate basis stands at 47%, down about 900 basis points from a year ago. Importantly, our debt-to-EBITDA ratio improved meaningfully to 7.7 times on a comparable basis, down from 9.4 times a year ago, close to a two-turn reduction.

Speaker #3: In Europe, we are left with just two remaining investments, both of which are efficient to oversee and which we intend to exit in due course.

Speaker #3: Our substantial exit from Europe along with the internalization of Vital Trust in New Zealand clearly demonstrates our commitment to simplifying our business and creating a more focused operating platform.

Speaker #3: Moving to our balance sheet, at the end of Q2, our LTV on a proportionate basis stands at 47%, down about 900 basis points from a year ago.

Speaker #3: Importantly, our debt-to-EBITDA ratio improved meaningfully to 7.7 times on a comparable basis, down from 9.4 times a year ago close to a two-turn reduction.

Speaker #3: In addition, we ended Q2 with liquidity of $443 million giving us significant flexibility to pursue a creative growth. Switching to our cost structure. During the second quarter, G&A fell by 2.2 million dollars year over year.

Zach Vaughan: In addition, we ended Q2 with liquidity of CAD 443 million, giving us significant flexibility to pursue accretive growth. Switching to our cost structure. During the second quarter, G&A fell by CAD 2.2 million year over year, with further reductions expected next quarter as the impact of our European sale flows through. As a result of these and other efforts undertaken by the team to streamline operations, we are on track to reduce our G&A by over 30% by year end. Importantly, with our simplified footprint, we can recycle capital with little to no incremental overhead, increasing our platform operating leverage and allowing a greater proportion of property earnings to flow through to unitholders. Lastly, turning to capital allocation. I committed on my first earnings call that we would be laser focused on disciplined capital allocation.

Speaker #3: With further reductions expected next quarter, as the impact of our European sale flows through. As a result of these and other efforts undertaken by the team to streamline operations, we are on track to reduce our G&A by over 30% by year-end. Importantly, with our simplified footprint, we can recycle capital with little to no incremental overhead, increasing our platform operating leverage and allowing a greater proportion of property earnings to flow through to unit holders.

Speaker #3: Lastly, turning to capital allocation. I committed on my first earnings call that we would be laser-focused on disciplined capital allocation. In the past 12 months, we have realized approximately $300 million of net proceeds that have been recycled back to North America through a combination of debt reduction and accretive investment.

Zach Vaughan: In the past 12 months, we have realized approximately CAD 300 million of net proceeds that have been recycled back to North America through a combination of debt reduction and accretive investment. Importantly, during the last several quarters, we have demonstrated that we are able to reinvest that capital in opportunities that are accretive for our unitholders, having completed and committed to the following transactions. At the start of the year, we entered into a commitment to build a new ambulatory facility for Royal Victoria Regional Health Centre in Barrie, which when completed in 2029, will add additional NOI of CAD 9 million or CAD 0.04 a unit. In March, we acquired a transitional bed facility in Ottawa on a long-term lease to The Ottawa Hospital. This was our first new acquisition in Canada in almost a decade. After quarter end, we completed or committed to approximately CAD 153 million of additional acquisitions.

Speaker #3: Importantly, during the last several quarters, we have demonstrated that we are able to reinvest that capital in opportunities that are accretive for our unitholders, having completed and committed to the following transactions.

Speaker #3: At the start of the year, we entered into a commitment to build a new ambulatory facility for our VH in Barry, which when completed in 2029 will add additional NOI of $9 million or 4 cents a unit.

Speaker #3: In March, we acquired a transitional bed facility in Ottawa. On a long-term lease to the Ottawa Hospital. This was our first new acquisition in Canada in almost a decade.

Speaker #3: And after quarter-end, we completed or committed to approximately $153 million of additional acquisitions. In July, we acquired 142,000 square foot integrated community health center in Brooklyn, New York, marking an important step in reestablishing our presence in the US market.

Zach Vaughan: In July, we acquired a 142,000 square foot integrated community health center in Brooklyn, New York, marking an important step in reestablishing our presence in the US market. This property is a modern, purpose-built, transit-connected outpatient community health hub located in one of the largest and most dynamic cities in North America. New York City has a very limited supply of dedicated healthcare space and very high barriers to entry. The property brings together a broad range of healthcare services, including primary care, specialty care, imaging, and diagnostics. The facility is 100% leased to AdvantageCare Physicians, one of New York's largest multi-specialty physician organizations. The lease has approximately 11 years remaining and includes contractual annual rent escalations, providing durable, predictable, and growing cash flows for Vital Infrastructure.

Speaker #3: This property is a modern, purpose-built transit-connected outpatient community health hub located in one of the largest and most dynamic cities in North America. New York City has a very limited supply of dedicated healthcare space and very high barriers to entry.

Speaker #3: The property brings together a broad range of healthcare services, including primary care, specialty care, imaging, and diagnostics. The facility is 100% leased to Advantage Care Physicians, one of New York's largest multi-specialty physician organizations.

Speaker #3: The lease has approximately 11 years remaining and includes contractual annual rent escalations, providing durable, predictable, and growing cash flows for Vital. We also announced, as part of our Q2 activity, the acquisition of a Canadian outpatient property in Burlington, Ontario.

Zach Vaughan: We also announced as part of our quarterly results that we signed a definitive agreement to acquire a Canadian outpatient property in Burlington, Ontario. The property is 99% leased to a diverse mix of healthcare providers with long-term operational densification upside at the property. Together, these acquisitions totaling approximately CAD 153 million are being acquired at a going-in cap rate of over 7% and are expected to be immediately accretive to earnings. These transactions demonstrate our ability to identify accretive, high-quality healthcare real estate investments across North America. Our pipeline continues to grow in both Canada and the United States, giving us confidence that our strategy to refocus and grow the portfolio in North America is highly executable. We are making tangible progress across all four of our strategic priorities, and we are confident that momentum will continue over the coming quarters.

Speaker #3: The property is 99% leased to a diverse mix of healthcare providers, with long-term operational and densification upside at the property. Together, these acquisitions, totaling approximately $153 million, are being acquired at a going-in cap rate of over 7% and are expected to be immediately accretive to earnings.

Speaker #3: These transactions demonstrate our ability to identify accretive, high-quality healthcare real estate investments across North America. Our pipeline continues to grow in both Canada and the United States, giving us confidence that our strategy to refocus and grow the portfolio in North America is highly executable.

Speaker #3: So, we are making tangible progress across all four of our strategic priorities, and we are confident that momentum will continue over the coming quarters.

Speaker #3: Turning now to the underlying performance of our real estate portfolio, which remains strong during the quarter. Excluding a one-time step-up in expenses related to outsourcing facilities management in Canada, NOI across our portfolio on the same property basis grew by 3.2%.

Zach Vaughan: Turning now to the underlying performance of our real estate portfolio, which remained strong during the quarter. Excluding a one-time step-up in expenses related to outsourcing facilities management in Canada, NOI across our portfolio on a same-property basis grew by 3.2%. We ended the quarter with occupancy of 96.1% and a WAIL of over 13 years, one of the longest of the Canadian REITs. These metrics continue to reflect the defensive nature, quality, and long duration income within our portfolio. In addition to supporting the delivery of critical healthcare services, many of our assets are located in dense urban markets where there is meaningful long-term embedded value. As a demonstration of this, in July, we received City of Toronto approval for our rezoning application at Fairview Health Centre. This approval allows us to develop 980,000 square feet of buildable area led by 100,000 square feet of medical space.

Speaker #3: We ended the quarter with occupancy of 96.1% and a whale of over 13 years, one of the longest of the Canadian rates. These metrics continue to reflect the defensive nature, quality, and long-duration income within our portfolio.

Speaker #3: In addition to supporting the delivery of critical healthcare services, many of our assets are located in dense urban markets, where there's meaningful long-term embedded value.

Speaker #3: As a demonstration of this, in July we received City of Toronto approval for our rezoning application at Fairview Health Centre. This approval allows us to develop 980,000 square feet of buildable area, led by 100,000 square feet of medical space.

Speaker #3: The balance of the project can be market-rate residential without the need for any affordable housing component. We're very pleased that our team was able to achieve this result.

Zach Vaughan: The balance of the project can be market-rate residential without the need for any affordable housing component. We are very pleased that our team was able to achieve this result. It provides us with significant optionality and, over time, the potential to create meaningful incremental value for unitholders. Before I wrap up, a quick comment on Healthscope. As has been publicly reported, a consortium comprising four operators is in active diligence with the receiver to acquire all of Healthscope's remaining assets and operating business. This consortium has both our support and that of the other major landlord. As we have previously indicated, we have a committed transaction in place with Calvary, a large, high quality, not-for-profit Australian hospital and senior housing operator, to step into a new lease on all 12 of our properties, subject to lender and receiver approval.

Speaker #3: It provides us with significant optionality and, over time, the potential to create meaningful incremental value for unitholders. Before I wrap up, a quick comment on HealthScope.

Speaker #3: As has been publicly reported, a consortium comprising four operators is in active diligence with the receiver to acquire all of Healthscope's remaining assets and operating business.

Speaker #3: This consortium has both our support and that of the other major landlord. As we have previously indicated, we have a committed transaction in place with Calvary.

Speaker #3: A large, high-quality not-for-profit Australian hospital and senior housing operator is set to step into a new lease on all 12 of our properties, subject to lender and receiver approval.

Speaker #3: We anticipate further information before our Q3 earnings release, and we'll keep everyone informed as the process continues. Encouragingly, performance in our Australian hospitals keeps improving, and from a liquidity standpoint, we continue to see institutional capital return to the market.

Zach Vaughan: We anticipate further information before our Q3 earnings release, and we will keep everyone informed as the process continues. Encouragingly, performance in our Australian hospitals keeps improving, and from a liquidity standpoint, we continue to see institutional capital return to the market. Last week, an institutional investor agreed to acquire a hospital in suburban Melbourne. The property was acquired for AUD 291 million, equating to a low 5% cap rate. We view this as an encouraging data point for asset values and market liquidity, and we anticipate further transaction activity as hospital operating performance keeps getting better and the Healthscope situation moves towards resolution. In addition, Stephanie will highlight, after quarter end, we successfully refinanced all the debt secured by our Healthscope assets on attractive terms, demonstrating the availability of funding for high-quality Australian healthcare infrastructure. To summarize, here are a few takeaways.

Speaker #3: Last week, an institutional investor agreed to acquire a hospital in suburban Melbourne. The property was acquired for $291 million equating Australian dollars, equating to a low 5% cap rate.

Speaker #3: We view this as an encouraging data point for asset values and market liquidity, and we anticipate further transaction activity as hospital operating performance keeps getting better, and the HealthScope situation moves towards resolution.

Speaker #3: In addition, Stephanie will highlight, after quarter-end, we successfully refinanced all the debt secured by our terms. Demonstrating the availability of the availability of funding for high-quality Australian healthcare infrastructure.

Speaker #3: So to summarize, here are a few takeaways. First, we're making real progress across each of our strategic priorities, and the improvement in our reported metrics this quarter demonstrates that.

Zach Vaughan: First, we are making real progress across each of our strategic priorities, and the improvement in our reported metrics this quarter demonstrates that. Second, our portfolio continues to perform as it should, generating stable and growing cash flows underpinned by critical healthcare assets with significant long-term upside. And third, we remained disciplined in our approach to capital allocation and are demonstrating our ability to identify creative opportunities to recycle capital and grow the business. We are pleased with both the strategic progress we are making and the underlying performance of the business during this quarter. Vital is becoming a simpler, a stronger, and a more focused company with an improved balance sheet, a more efficient cost structure, and a growing pipeline of attractive investment opportunities. With that, I will hand it over to Stephanie to talk about financial results.

Speaker #3: Second, our portfolio continues to perform as it should, generating stable and growing cash flows underpinned by critical healthcare assets with significant long-term upside. And third, we remained disciplined in our approach to capital allocation, and are demonstrating our ability to identify accretive opportunities to recycle capital and grow the business.

Speaker #3: We are pleased with both the strategic progress we are making and the underlying performance of the business during this quarter. Vital is becoming a simpler, a stronger, and a more focused company with an improved balance sheet, a more efficient cost structure, and a growing pipeline of attractive investment opportunities.

Speaker #3: And with that, I'll hand it over to Stephanie to talk about the financial results.

Speaker #1: Thanks, Zach, and good morning, everyone. On today's call, I'll first walk through Vital Infrastructure's second quarter financial and operating results, and then cover our balance sheet, including debt maturities and liquidity, before we move into Q&A.

Stephanie Karamarkovic: Thanks, Zach, and good morning, everyone. On today's call, I will first walk through Vital Infrastructure's Q2 financial and operating results and then cover our balance sheet, including debt maturities, liquidity, before we move into Q&A. Before I begin, just a quick reminder on our reporting baseline for 2026. Following the internalization of Vital Trust management structure at the end of 2025, Vital Trust is no longer consolidated within the REIT's results and is now accounted for as an equity accounted investment. As a result, certain year-over-year comparisons, particularly NOI, FFO, AFFO, and other proportionate measures, are affected. Beginning in 2026, Vital Trust no longer contributes to proportionate NOI, while FFO and AFFO now reflect cash distributions received rather than a proportionate share of its underlying operating results.

Speaker #1: Before I begin, just a quick reminder on our operating reporting baseline for 2026. Following the internalization of Vital Trust Management Structure at the end of 2025, Vital Trust is no longer consolidated within the REIT's results and is now accounted for as an equity accounted investment.

Speaker #1: As a result, certain year-over-year comparisons particularly NOI, FFO, AFFO, and other proportionate measures are affected. Beginning in 2026, Vital Trust no longer contributes to proportionate NOI, while FFO and AFFO now reflect caster distributions received rather than a proportionate share of its underlying operating results.

Speaker #1: Although this affects comparability with prior periods, it aligns our reporting with the cash flows we receive from our investment and provides a simpler, more transparent presentation.

Stephanie Karamarkovic: Although this affects comparability with prior periods, it aligns with our reporting with the cash flows we receive from our investment and provides a simpler, more transparent presentation. Turning to our Q2 results, we delivered another quarter of steady operating performance consistent with our long-term strategy. Same property NOI on a proportionate basis grew by 2.3% year over year to CAD 51 million for the quarter, driven by contractual rent escalations, rentalized capital expenditures, higher parking income, and improved cost recoveries. In North America specifically, same property NOI increased by 1% for the quarter as contractual rent escalations and higher parking income were largely offset by higher properties operating costs associated with our transition to outsource facilities operations effective in November of last year.

Speaker #1: Turning to our second quarter results, we delivered another quarter of steady operating performance consistent with our long-term strategy. Same property, NOI on a proportionate basis grew by 2.3% year over year to $51 million for the quarter, driven by contractual rent escalations, rentalized capital expenditures, higher parking income, and improved cost recoveries.

Speaker #1: In North America specifically, same property NOI increased by 1% for the quarter, as contractual rent escalations and higher parking income were largely offset by higher property operating costs associated with our transition to outsourced facilities operations effective in November of last year.

Speaker #1: Excluding the impact of that transition, North American same property met operating income increased by 3.3%, and our overall same property net operating income would have increased by 3.2% year over year.

Stephanie Karamarkovic: Excluding the impact of that transition, North American same property net operating income increased by 3.3%, and our overall same property net operating income would have increased by 3.2% year over year. FFO per unit, excluding accelerated amortization of financing costs, was CAD 0.11 for the quarter, in line with the Q1 of this year. While AFFO per unit increased to CAD 0.11 from CAD 0.10 in the Q1, it is worth noting that both FFO and AFFO exclude approximately CAD 0.5 million of accelerated amortization of financing costs related to the early repayment of certain European mortgages using proceeds from the European portfolio sale. On a proportionate basis, management fee income declined by approximately CAD 3.6 million, primarily reflecting the deconsolidation of Vital Trust and lower fees from the European joint venture following the portfolio sale.

Speaker #1: FFO per unit, excluding accelerated amortization of financing costs, was $0.11 for the quarter, in line with the first quarter of this year. While AFFO per unit increased to $0.11 from $0.10 in the first quarter, it's worth noting that both FFO and AFFO exclude approximately $0.5 million of accelerated amortization of financing costs related to the early repayment of certain European mortgages, using proceeds from the European portfolio sale.

Speaker #1: On a proportionate basis, management fee income declined by approximately $3.6 million, primarily reflecting the deconsolidation of Vital Trust and lower fees from the European joint venture following the portfolio sale.

Speaker #1: This was more than offset by an approximately $5 million reduction in finance costs compared with the second quarter of last year, reflecting again the deconsolidation of Vital and lower borrowing costs following our refinancing activity, as well as lower amortization of deferred financing fees.

Stephanie Karamarkovic: This was more than offset by an approximately CAD 5 million reduction in finance costs compared with the Q2 of last year, reflecting again the deconsolidation of Vital and lower borrowing costs following our refinancing activity and lower amortization of deferred financing fees. Overall, these items had a modest favorable impact on FFO and AFFO for the quarter. Importantly, our AFFO payout ratio remains within our targeted range at 85% this quarter, an improvement from 88% in the same period last year. Turning to G&A, our continued focus on operational excellence and business simplification is translating into a structurally lower cost base. G&A attributable to AFFO, which excludes unit-based compensation and employee termination benefits, declined to CAD 10 million for the quarter from CAD 12.2 million in the Q2 of last year.

Speaker #1: Overall, these items had a modest favorable impact on FFO and AFFO for the quarter. Importantly, our AFFO payout ratio remains within our targeted range at 85% this quarter, an improvement from 88% in the same period last year.

Speaker #1: Turning to G&A, our continued focus on operational excellence and business simplification is translating into a structurally lower cost base. G&A attributable to AFFO, which excludes unit-based compensation and employee termination benefits, declined to 10 million for the quarter from 2.

Speaker #1: $12.2 million in the second quarter of last year. These savings reflect the execution of several strategic initiatives over the past 18 months, including the internalization of Vital Trust, the European portfolio sale, the resulting closure of four regional offices, the outsourcing of our Canadian facilities management platform, and overall corporate cost optimization.

Stephanie Karamarkovic: These savings reflect the execution of several strategic initiatives over the past 18 months, including the internalization of Vital Trust, the European portfolio sale, the resulting closure of four regional offices, the outsourcing of our Canadian facilities management platform, and overall corporate cost optimization. As a result, our global headcount has declined by approximately 40% year over year while preserving the capabilities needed to support our North American growth strategy. With the majority of our European platform now transitioned to TPG and additional simplification initiatives underway, we expect to capture further efficiencies over the balance of the year. As a result, we remain on track to achieve a run rate annual G&A expense, excluding unit-based compensation and severance, of approximately CAD 35 million by the end of 2026. These actions are expected to enhance operating leverage, strengthen earnings quality, and improve the long-term unitholder value.

Speaker #1: As a result, our global headcount has declined by approximately 40% year over year, while preserving the capabilities needed to support our North American growth strategy.

Speaker #1: With the majority of our European platform now transitioned to TPG, an additional simplification initiative is underway. We expect to capture further efficiencies over the balance of the year.

Speaker #1: And as a result, we remain on track to achieve a run rate annual G&A expense excluding unit-based compensation and severance of approximately 35 million by the end of 2026.

Speaker #1: These actions are expected to enhance operating leverage, strengthen earnings quality, and improve the long-term unit holder value. NAV per unit was 766 as at June 30th, 2026, up from 755 at March 31st.

Stephanie Karamarkovic: NAV per unit was $7.66 as at 30 June 2026, up from $7.55 at 31 March. The increase was driven primarily by favorable foreign exchange movements and mark-to-market gains on our Vital Trust units, partially offset by transaction costs associated with the European portfolio sale. Turning to the balance sheet, our proportionate leverage improved materially to 46.8%, down from 52.7% at the end of the first quarter and 56% this time last year. The decrease from the prior quarter primarily reflects the timing of the European portfolio sale, with the net proceeds not yet deployed by quarter end. As we redeploy these proceeds into our North American acquisition pipeline, including the Brooklyn acquisition completed subsequent to the quarter end and our Canadian committed acquisition, we expect leverage to increase modestly from 30 June levels. On a pro forma basis reflecting these subsequent acquisitions, proportionate leverage would have been approximately 48.8%.

Speaker #1: The increase was driven primarily by favorable foreign exchange movements and mark-to-market gains on our Vital Trust units, partially offset by transaction costs associated with the European portfolio sale.

Speaker #1: Turning to the balance sheet, our proportionate leverage improved materially to 46.8%, down from 52.7% at the end of the first quarter, and 56% this time last year.

Speaker #1: The decrease from the prior quarter primarily reflects the timing of the European portfolio sale. With the net proceeds not yet deployed by quarter end.

Speaker #1: As we redeploy these proceeds into our North American acquisition pipeline, including the Brooklyn acquisition completed subsequent to the quarter-end and our Canadian committed acquisition, we expect leverage to increase modestly from June 30th levels.

Speaker #1: On a pro forma basis, reflecting these subsequent acquisitions, proportionate leverage would have been approximately 48.8%. Our debt-to-adjusted EBITDA ratio was 7.1 times at quarter end, or approximately 7.7 times on a comparable basis, excluding the EBITDA contribution from the disposed European properties.

Stephanie Karamarkovic: Our debt to adjusted EBITDA ratio was 7.1x at quarter end, or approximately 7.7x on a comparable basis, excluding the EBITDA contribution from the disposed European properties. On a pro forma basis, reflecting the impact of our subsequent acquisition and repayment, our ratio would have been approximately 8x, which we believe better reflects our ongoing operating profile. On near-term debt maturities, we had approximately $230 million of remaining 2026 maturities at the end of the quarter. In Canada, CAD 18.8 million of mortgage maturities are expected to be repaid or transitioned to our revolving credit facility, of which about CAD 7 million has already been repaid subsequent to quarter end.

Speaker #1: On a pro forma basis, reflecting the impact of our subsequent acquisitions, and repayment, our ratio would have been approximately 8 times, which we believe better reflects our ongoing operating profile.

Speaker #1: On near-term debt maturities, we had approximately 230 million of remaining 2026 maturities at the end of the quarter. In Canada, 18.8 million of mortgage maturities are expected to be repaid or transitioned to our revolving credit facility, of which about 7 million has already been repaid subsequent to quarter ends.

Speaker #1: On the Australian side, I'm pleased to report that our joint venture successfully refinanced AUD 715 million, or $210 million Canadian at our share, of term debt subsequent to quarter-end, extending the maturity from December 2026 to December 2028 and resolving what was our single largest 2026 maturity.

Stephanie Karamarkovic: On the Australian side, I am pleased to report that our joint venture successfully refinanced AUD 715 million, or CAD 210 million at our share of term debt subsequent to quarter end, extending the maturity from December 2026 to December 2028, and resolving what was our single largest 2026 maturity. As of today, total available liquidity is over $250 million, including the subsequently disclosed Q2 activities, providing significant flexibility to execute on our priorities. Our weighted average interest rate was 5.25%, compared with 4.76% a year ago, reflecting a change in our debt mix following the repayment of lower-cost European mortgages and the use of our revolving credit facility to fund acquisitions. Our weighted average term to maturity was 2.2 years, which has since improved following the successful refinancing of our Australian joint venture subsequent to quarter end.

Speaker #1: As of today, total available liquidity is over $250 million, including the subsequently disclosed Q2 activities, providing significant flexibility to execute on our priorities. Our weighted average interest rate was 5.25%, compared with 4.76% a year ago, reflecting a change in our debt mix following the repayment of lower-cost European mortgages and the use of our revolving credit facility to fund acquisitions.

Speaker #1: Our weighted average term-to-maturity was 2.2 years, which has since improved following the successful refinancing of our Australian joint venture subsequent to quarter end. Turning to capital recycling as Zach mentioned, we successfully completed the sale of our European portfolio in the quarter.

Stephanie Karamarkovic: Turning to capital recycling, as Zach Vaughan mentioned, we successfully completed the sale of our European portfolio in the quarter. This transaction generated approximately $145 million of net proceeds attributable to the REIT after transaction costs and taxes. We have already redeployed a significant portion of those proceeds into the acquisition of the East New York Health Hub in Brooklyn, with the remaining proceeds committed to our Canadian acquisition pipeline. As we have previously communicated, our expectation was to use proceeds from the European portfolio sale to repay our 6.25% Series H convertible debentures. Given the attractive acquisition opportunities available in recent months, we instead prioritized redeploying that capital into accretive North American investments that we believe will generate greater long-term value for unit holders.

Speaker #1: This transaction generated approximately 104.5 million of net proceeds attributed to the REIT after transaction costs and taxes. We have already redeployed a significant portion of those proceeds into the acquisition of the East New York Health Hub in Brooklyn, with the remaining proceeds committed to our Canadian acquisition pipeline.

Speaker #1: As we have previously communicated, our expectation was to use proceeds from the European portfolio sale to repay our 6.25 Series H convertible debentures. Given the attractive acquisition opportunities available in recent months, we instead prioritized redeploying that capital into a creative North American investment that we believe will generate greater long-term value for unit holders.

Speaker #1: With the Series H debentures becoming callable without penalty on September 1, subject to the required 30-day notice, we intend to revisit this in the near term and evaluate the most efficient approach to addressing the maturity—whether through additional asset recycling, refinancing at more favorable market rates, or a combination of both.

Stephanie Karamarkovic: With the Series H debentures becoming callable without penalty on 1 September, subject to the required 30-day notice, we intend to revisit this in the near term and evaluate the most efficient approach to addressing the maturity, whether through additional asset recycling, refinancing at more favorable market rates, or a combination of both. Importantly, our growing pool of unencumbered assets continues to enhance our financial flexibility, positioning us to access a broader range of financing alternatives over time while further diversifying our sources of capital. In the meantime, we will continue to be opportunistically repurchasing our convertible debentures under our normal course issuer bid, where we believe doing so represents an attractive use of capital. During the quarter, we repurchased approximately CAD 1.5 million of convertible debentures, bringing the year-to-date repurchases to CAD 2.9 million, while maintaining the flexibility to prioritize capital deployment into accretive investment opportunities.

Speaker #1: Importantly, our growing pool of unencumbered assets continues to enhance our financial flexibility, positioning us to access a broader range of financing alternatives over time while further diversifying our sources of capital.

Speaker #1: In the meantime, we will continue to be opportunistically repurchasing our convertible debentures under our normal course issuer bid, where we believe doing so represents an attractive use of capital.

Speaker #1: During the quarter, we repurchased approximately 1.5 million of convertible debentures, bringing the year-to-date repurchases to 2.9 million, while maintaining the flexibility to prioritize capital deployment into a creative investment opportunities.

Speaker #1: Taken together, these initiatives have simplified the business, strengthened the balance sheet, and meaningfully repositioned our capital towards North America, while preserving the stable cash flow characteristics of our portfolio.

Stephanie Karamarkovic: Taken together, these initiatives have simplified the business, strengthened the balance sheet, and meaningfully repositioned our capital towards North America while preserving the stable cash flow characteristics of our portfolio. In closing, our Q2 results demonstrate the durability of our portfolio and our disciplined approach to capital allocation. With resilient healthcare infrastructure demand supporting our assets and a proactive approach to capital management, Vital Infrastructure is well positioned to pursue opportunities and deliver sustained results in the quarters ahead. I will turn it back to the operator to open up the line for Q&A.

Speaker #1: In closing, our second quarter results demonstrate the durability of our portfolio and our disciplined approach to capital allocation. With resilient healthcare infrastructure demand supporting our assets and a proactive approach to capital management, Vital Infrastructure is well positioned to pursue opportunities and deliver sustained results in the quarters ahead.

Speaker #1: And with that, I will turn it back to the operator to open up the line for Q&A.

Speaker #2: We are now opening the question-and-answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by one again.

Operator: We are now opening the question and answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you would like to withdraw your question, please press star followed by 1 again. Thank you. Your first question comes from the line of Jonathan Kelcher from TD Cowen. Your line is now open. Please go ahead.

Speaker #2: Thank you. Your first question comes from the line of Jonathan Kelcher from TD Cowen. Your line is now open. Please go ahead.

Speaker #3: Thanks, good morning. First question, just on the just on your pipeline, the acquisition pipeline. Zach, you talked about it being pretty active. How does that stack up, US versus Canada?

Jonathan Kelcher: Thanks. Good morning. First question, just on your pipeline, the acquisition pipeline, Zach, you talked about it being pretty active. How does that stack up, US versus Canada?

Zach Vaughan: At the moment, it is probably, I would. Again, it fluctuates day to day. I would say it is probably skewed about two-thirds to the US at the moment in terms of acquisitions. It is really a reflection of. Look, if we could do everything in Canada, we may well do that. I think the challenge is obviously, a lot of the healthcare assets and infrastructure is single payer owned. So the US tends to be where we find more acquisition opportunities. Our development opportunities in terms of where we would do strategic transactions like we did with RVH, those are all here in Canada.

Speaker #4: At the moment, it's probably—I would—I mean, again, it fluctuates day to day. I would say it's probably skewed about two-thirds to the US at the moment in terms of acquisitions.

Speaker #4: It's really a reflection of—I mean, look, if we could do everything in Canada, we may well do that. I think the challenge is, obviously, a lot of the healthcare assets and infrastructure is sort of single-payer owned.

Speaker #4: So the US tends to be where we find more acquisition opportunities. Our development opportunities in terms of where we would do strategic transactions like we did with RVH, those are all here, in Canada.

Speaker #3: Okay, so no US development. Are there any states that you would that you're maybe looking to add to or conversely, stay away from?

Jonathan Kelcher: No US development. Are there any states that you are maybe looking to add to or conversely stay away from?

Speaker #4: Yeah, it's interesting, Jonathan. Coming from a background of starting my career in office, moving to apartments and hospitality, you tend to focus on certain key markets.

Zach Vaughan: Jonathan, coming from a background of starting my career in office, moving to apartments and hospitality, you tend to focus on certain kind of key markets. I think in this case, we are probably biased towards the East Coast, down to the Southeast, in terms of markets. But it is not a specific state-by-state strategy. It is more asset and area specific and what the underlying users is doing in the building, really. But I would also note, it is all skewed. Everything we are pursuing right now is really skewed towards outpatient versus inpatient.

Speaker #4: I think in this case, we're probably biased towards the East Coast down to the Southeast. In terms of markets, but it's not a specific state-by-state strategy.

Speaker #4: It's more asset- and area-specific, and it really depends on what the underlying user is doing in the building, really. But I would also note it's all skewed—everything we're pursuing right now is really skewed towards outpatient versus inpatient.

Speaker #3: Okay. And then lastly for me, just on dispositions, how should we think about that for the balance of the year?

Jonathan Kelcher: Lastly for me, just on dispositions, how should we think about that for the balance of the year?

Zach Vaughan: In terms of properties or

Speaker #4: In terms of properties or?

Speaker #3: Well, both. I guess properties and the Vital New Zealand.

Jonathan Kelcher: Well, both. I guess properties and the Vital New Zealand.

Zach Vaughan: Yeah. Mike's here, so he can give you the kind of update on timing.

Speaker #4: Yeah. I mean, Mike—Mike's here, so he can give you the kind of update on timing.

Speaker #5: Yeah, hi, Jonathan. We're no longer subject to any restrictions with respect to our holdings in the New Zealand entity. Having said that, we don't have anything to announce today.

Mike Brady: Yeah. Hi, Jonathan. We are no longer subject to any restrictions with respect to our holdings in the New Zealand entity. Having said that, we do not have anything to announce today.

Speaker #4: Yeah, I think we'll be opportunistic. About it, but certainly now being having that available as a source of liquidity, obviously, is something we'll explore.

Zach Vaughan: Yeah, I think we will be opportunistic about it, but certainly now having that available as a source of liquidity obviously is something we will explore.

Speaker #3: Okay. And on the property side?

Jonathan Kelcher: Okay. On the property side?

Speaker #4: On the property side, I think probably dispositions that are kind of actively under evaluation would be the balance of our German clinics. Potentially. And timing, that would probably be a to the extent that happened, I think it would likely be a Q4 event.

Zach Vaughan: On the property side, I think probably dispositions that are actively under evaluation would be the balance of our German clinics, potentially. Timing, to the extent that happened, I think it would likely be a Q4 event.

Speaker #3: Okay. So if just sort of put everything together, if I were to think about it, if you've kind of used all the cash that you've got back from the European sales that you're now to acquisitions, and if you were to announce more, we should probably think about the New Zealand shares as a funding source?

Jonathan Kelcher: Okay. If, just sort of put everything together, if I were to think about it, you have kind of used all the cash that you have got back from the European sales to your announced acquisitions. If you were to announce more, we should probably think about the New Zealand shares as a funding source?

Speaker #4: Yeah, I think New Zealand, Europe, are certainly a source of funding for us.

Zach Vaughan: Yeah. I think New Zealand, Europe, are certainly a source of funding for us.

Speaker #3: Okay. Thanks. I'll turn it back.

Jonathan Kelcher: Okay. Thanks. I'll turn it back.

Speaker #4: Thanks.

Zach Vaughan: Thanks.

Speaker #2: Your next question comes from the line of Saira Srinivas from ATV Cormac Capital Markets. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Sairam Srinivas from ATB Cormark Capital Markets. Your line is now open. Please go ahead.

Speaker #6: Thank you, Operator. Zach, Stephanie, congratulations on the quarter.

Sairam Srinivas: Thank you, operator. Zach, Stephanie, congratulations on the quarter.

Zach Vaughan: Yeah. Thanks.

Speaker #4: Yeah, thanks.

Sairam Srinivas: Just thinking about dry powder looking ahead, I know you mentioned all the cash from the European acquisitions is probably deployed, but how would you think about leverage, looking forward, and where should we think about leverage in the next 12 months?

Speaker #6: Just thinking about dry powder, looking ahead, I know you mentioned all the cash from the European acquisitions is probably deployed, but how would you think about leverage looking forward?

Speaker #6: And where should we think about leverage in the next 12 months?

Speaker #7: Hi, Sai. I can take that one. Yeah, so I think our kind of mid to long-term target of leverage is around that 50% or eight times debt to EBITDA.

Stephanie Karamarkovic: Hi, Sairam. I can take that one. Yeah. I think our kind of mid to long-term target of leverage is around that 50% or 8x debt to EBITDA. That will kind of vary up and down as we recycle capital and then redeploy. But we are really targeting that 50%, which is what we feel comfortable on a long-term basis, given the underlying credit and quality of our portfolio. So yeah, I think that would be what I would target.

Speaker #7: That will kind of vary up and down as we recycle capital and then redeploy. But we're really targeting that 50%, which is what we feel comfortable with on a long-term basis, given the underlying credit and quality of our portfolio.

Speaker #7: So, yeah, I think that would be what I would target.

Speaker #6: And maybe just looking on the quantum of acquisitions ahead, at this point, can you comment on what the number would look like? Would it be, let's say, another 100 million of acquisitions to come?

Sairam Srinivas: And maybe just looking at the quantum of acquisitions ahead, at this point, can you comment on what that number would look like? Would it be another CAD 100 million of acquisitions to come?

Speaker #4: Yeah, I think we sort of gave I think soft guidance to we think sort of 250 million. For the year was kind of a target.

Zach Vaughan: Yeah, I think we sort of gave, I think, soft guidance to, we think sort of CAD 250 million for the year was kind of a target. I think that is probably a pretty good range to be. Certainly another CAD 50 million of acquisitions before the end of the year is a safe assumption.

Speaker #4: So I think that's probably a pretty good range to be in. So certainly another $50 million of acquisitions before the end of the year is a safe assumption.

Speaker #6: Perfect. And Zach, what's your view on fairly health center, and what's the long-term plan here for that development?

Sairam Srinivas: Perfect. Zach, what is your view on Fairview Health Centre, and what is the long-term plan here for that development?

Speaker #4: Oh, Fairview. So, look, Fairview is one of our better-performing assets. It is kind of a critical health hub. I think, longer term, there is a need for larger community health operators in that general area.

Zach Vaughan: Fairview. Look, Fairview is one of our better-performing assets. It is kind of a critical health hub. I think longer term, there is a need for larger community health operators in that general area, and we are talking to some of them. I think, once we sort of resolve what we are doing on the health side, we will figure out how to plan for the rest of it, which is likely to be residential. Either we would sell the excess land net of the medical or possibly partner with someone who would sort of take charge of the residential. It is still early days.

Speaker #4: And so we are talking to some of them. I think once we sort of resolve what we're doing on the health side, we'll figure out how to plan for the rest of it, which is likely to be residential.

Speaker #4: So either we would sell the excess land net of the medical or possibly partner with someone to who would sort of take charge of the residential.

Speaker #4: But it's still early days.

Speaker #6: Yeah, makes sense. Totally. Thanks, Zach. Thanks, Stephanie. I'll turn it back.

Sairam Srinivas: Yeah, makes sense totally. Thanks, Zach. Thanks, Stephanie. I will turn it back.

Speaker #4: Thanks.

Zach Vaughan: Thanks.

Speaker #2: Your next question comes from the line of Himanshu Gupta from Scotiabank. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Himanshu Gupta from Scotiabank. Your line is now open. Please go ahead.

Speaker #6: Thank you, and good morning. Zach, in your prepared remarks, I think you pointed to a transaction activity—Melbourne Hospital at a low 5 cap rate?

Himanshu Gupta [Director, Equity Research Analyst: Thank you, and good morning.

Zach Vaughan: Right.

Himanshu Gupta [Director, Equity Research Analyst: Zach, in your prepared remarks, I think you pointed to a transaction activity, Melbourne Hospital at low 5% cap rates, if I heard it right. How does your cap rate or pricing compare to transactions you have seen in the last one year or the last two years? Just trying to get a sense of how competitive or desirable the market is.

Speaker #6: If I heard it right, how does that compare to—how does your cap rate or pricing compare to transactions you have seen in the last one year or the last two years?

Speaker #6: Just trying to get a sense of how competitive or desirable the market is.

Speaker #4: Yeah, this is in Australia. Look, we continue to see assets trade. I mean, out of Vital Trust, they have been trading assets. Again, it's very asset-specific depending on the operator and the profitability of the asset.

Zach Vaughan: Yeah. This is in Australia. Look, we continue to see assets trade. Out of Vital Trust, they have been trading assets. Again, it is very asset specific, depending on the operator and the profitability of the asset. But I would say, seeing that kind of pricing on a large asset with term is very encouraging. There is some element of some potential redevelopment there, but not enough to really make that pricing materially different. Look, I think what we are seeing is capital starting to come back in bigger ways and in bigger deals to Australian healthcare. In other words, if you talk to people down there, the idea of Healthscope, which 12, 18 months ago was on everyone's mind and a big discussion, people are looking through it.

Speaker #4: But I would say seeing that kind of pricing on a large asset, with term, is very encouraging. There's some element of some potential redevelopment there, but not enough to really make that pricing materially different.

Speaker #4: So look, I think what we're seeing is capital starting to come back in bigger ways and in bigger deals to Australian healthcare. In other words, if you talk to people down there, they're the idea of health scope, which 12, 18 months ago was on everyone's mind in a big discussion.

Speaker #4: People are looking through it.

Speaker #6: Correct. And then on the subject of health scope, I mean, once that situation is sorted out, I mean, will that be a source of disposition as well?

Himanshu Gupta [Director, Equity Research Analyst: Got it. On the subject of Healthscope, once that situation is sorted out, will that be a source of disposition as well? I know you outlined the Vital units and remaining Europe assets. But would this 12 asset Healthscope also be a disposition candidate?

Speaker #6: I know you outlined the Vital units and remaining Europe assets. But would this 12-asset health scope also be a disposition candidate?

Speaker #4: Look, so I think once this is resolved, certainly the liquidity of all those assets changes dramatically. And part of our strategy with that partnership was to continue to recycle capital.

Zach Vaughan: Look, I think once this is resolved, certainly the liquidity of all those assets changes dramatically. Part of our strategy with that partnership was to continue to recycle capital. We will be actively re-engaging as that. Yes, you could look at it as a source of liquidity, but I think until we are through Healthscope, it is too early to give real guidance on specific assets.

Speaker #4: And so, we'll be actively re-engaging as that. So yes, you could look at it as a source of liquidity, but I think until we're through Healthscope, it's too early to give real guidance on specific assets.

Speaker #6: Fair enough. And then sorry, one more follow-up on health scope. I think you mentioned that you support the I mean, the proposal or agreement so far with the operators.

Himanshu Gupta [Director, Equity Research Analyst: Fair enough. Sorry, one more follow-up on Healthscope. I think you mentioned that you support the proposal or agreement so far with the operators. Based on if this agreement goes through, do we know will there be rent concessions being given or any rent reduction, and what reduction we should expect if this gets done with Calvary?

Speaker #6: Based on if this agreement goes through, do we know will there be a rent concessions being given or any rent reduction? And why reduction?

Speaker #6: We should expect if this gets done, with Calvary?

Speaker #7: Yeah, hi, Himanshu. So, at this time, we're not able to comment. Again, given the terms of the transaction and the offer are still subject to approval, we're not able to provide any.

Stephanie Karamarkovic: Yeah. Hi, Himanshu. At this time, we are not able to comment. Again, given the terms of the transaction and the offer are still subject to approval, we are not able to provide any further details. But as soon as we are, we will be able to provide some update on what our lease terms with Calvary look like.

Speaker #7: Any further details, but as soon as we are, we'll be able to provide some update on what our lease terms with Calvary look like.

Speaker #6: Okay, fair enough. Fair enough. Maybe the last question is on the GNA. And obviously, a big part of your focus and making a lot of progress there as well.

Himanshu Gupta [Director, Equity Research Analyst: Okay, fair enough. Maybe the last question is on the G&A. Obviously, a big part of your focus and making a lot of progress there as well. Should we see a step down in Q3 G&A from Q2 now that Europe is folded?

Speaker #6: So should we see a step-down in Q3 GNA from Q2 now that Europe is folded and that gets you to realization that 35 million annualized savings?

Stephanie Karamarkovic: Yeah

Himanshu Gupta [Director, Equity Research Analyst: That gets you to realization of that CAD 35 million annualized CNX?

Speaker #7: Yeah, in Q3, now that all of the employees in Europe have transitioned as a June 30th, we'll see a pretty meaningful impact in Q3.

Stephanie Karamarkovic: Yeah. In Q3, now that all of the employees in Europe have transitioned as of 30 June, we will see a pretty meaningful impact in Q3, and then continuing into Q4 as some of those costs unwind related to legacy things there. Largely speaking, we will be, by the end of 2026, at that CAD 35 million run rate that we have guided to.

Speaker #7: And then continuing into Q4, some of those costs unwind related to legacy things there. So largely speaking, we'll be by the end of 2026 at that 35 million run rate that we've guided to.

Speaker #6: Okay, so 2027 will technically be the new GNA. And what's that range going to be?

Himanshu Gupta [Director, Equity Research Analyst: Okay. So 2027 will technically be the new G&A.

Stephanie Karamarkovic: Yeah.

Himanshu Gupta [Director, Equity Research Analyst: And what is that range going to be?

Speaker #7: Sorry. Range of what?

Stephanie Karamarkovic: Sorry. Range of what?

Himanshu Gupta [Director, Equity Research Analyst: On G&A. I know you are quoting this CAD 35 million annualized number.

Speaker #6: On GNA. I know you're quoting the 35 million annualized number. It's a very big reduction from what you have in '26. So I just want to make sure I got this right.

Stephanie Karamarkovic: Yeah.

Himanshu Gupta [Director, Equity Research Analyst: It is a very big reduction from what you have in 2026, so I just want to make sure I got this right.

Stephanie Karamarkovic: Yeah. Keep in mind the 35 excludes unit-based comp and any employee termination benefits. But yeah, that 35 million is kind of the safe assumption by the end of Q4.

Speaker #7: Yeah, I mean, keep in mind the 35 excludes unit-based comp and any employee termination benefits. But yeah, that's 35 million is kind of the safe assumption.

Speaker #7: By the end of Q by the end of Q4.

Speaker #6: Okay. Okay. No, thank you so much. And I'll turn it back. Thank you.

Himanshu Gupta [Director, Equity Research Analyst: Okay. Thank you so much, and I'll turn back. Thank you.

Speaker #2: Your next question comes from the line of Giuliano Thornhill from National Bank. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Giuliano Thornhill from National Bank. Your line is now open. Please go ahead.

Speaker #5: Hey, guys. Good morning, everyone. I just want to start with Australia. Have there been any kind of regulatory developments either in the budget or in the assurance?

Giuliano Thornhill: Hey, guys. Good morning, everyone.

Zach Vaughan: Morning.

Giuliano Thornhill: I just want to start with Australia. Have there been any kind of regulatory developments either in the budget or in the assurance, maybe outlook, that have impacted your business or the operators there?

Speaker #5: Maybe outlooks that have impacted your business or the operators there?

Speaker #4: Nothing from a regulatory point of view that I can think of or legal. I think, in fact, I wouldn't say it's regulatory, but what we're seeing is the kind of reimbursement rates continue to trend in a positive direction, which is just month by month just improving the profitability that we're seeing, not only with health scope, but really across the assets that we have visibility into.

Zach Vaughan: Nothing from a regulatory point of view that I can think of or legal. I think in fact, I wouldn't say it's regulatory, but what we're seeing is the kind of reimbursement rates continue to trend in a positive direction, which is just month by month, just improving the profitability that we're seeing, not only with Healthscope, but really across the assets that we have visibility into.

Speaker #5: And then for that recent transaction, are you do you figure that buyers are just assuming a more normalized environment for the operators, or are they just are they sticking to the best ones?

Giuliano Thornhill: For that recent transaction, do you figure that buyers are just assuming a more normalized environment for the operators, or are they sticking to the best ones? Just as a last question related to that, what do you expect permanent financing there would be like?

Speaker #5: And just as a last question related to that, what do you expect permanent financing there would be like?

Speaker #4: Yeah, I can sort of talk about that transaction. I mean, it is that property in Spur of Melbourne; it's a strong operator. They're a well-known operator.

Zach Vaughan: Yeah, I can sort of talk about that transaction. That property in suburban Melbourne is a strong operator. They're a well-known operator. It is a good, solid-performing hospital. Look, I think the capital behind it is likely long-term sort of income-oriented capital. Maybe Stephanie Karamarkovic can comment on financing.

Speaker #4: It is a good, solid-performing hospital. And look, I think the capital behind it is likely long-term, sort of income-oriented capital. Maybe, Stephanie, you can comment on the financing?

Speaker #7: Yeah, I mean, through our recent experience of refinancing the Australian JV, I would say that there's a larger appetite to lend against these assets than there has been in recent history.

Stephanie Karamarkovic: Yeah. Through our recent experience of refinancing the Australian JV, I would say that there is a larger appetite to lend against these assets than there has been in the recent history. We had a one-bank syndicate originally, and now it was expanded to, I think it is four banks. So there was definite appetite from others to come in and lend against this portfolio, and on actually even slightly better terms than was previously. So I definitely think there is bigger appetite to lend and availability of financing for these assets.

Speaker #7: I mean, we had a one-bank syndicate originally, and now it's been expanded to, I think, four banks. So there was definitely appetite from others to come in and lend against this portfolio.

Speaker #7: And actually, even on slightly better terms than previously. So I definitely think there's a bigger appetite to lend and greater availability of financing for these assets.

Speaker #5: Okay. And just turning to, I guess, Canada—the Ontario kind of—firstly, in the recent Ontario budget, have you noticed any demand drivers that are impacting your ability to do some of these larger developments?

Giuliano Thornhill: Okay. Just turning to Canada. The Ontario, firstly, in the recent Ontario budget, have you noticed any demand drivers that are impacting your ability to do some of these larger developments? Secondly, is the primary care push starting to positively impact maybe occupancy or anything related to your business?

Speaker #5: And then secondly, is the primary care push starting to positively impact maybe occupancy or anything related to your business?

Speaker #4: Maybe I'll add Dave's here. Maybe, Dave, you can give some thoughts on where things are headed in terms of regulatory and primary care in Ontario.

Zach Vaughan: Maybe I will let Dave Casimiro. Maybe Dave, you can give some thoughts on where things are headed in terms of regulatory and primary care in Ontario.

Speaker #3: Certainly. Good morning. Obviously, we're keeping close track of a number of the government funding initiatives around supporting primary care, as well as the support of various schools of medicine.

David Casimiro: Certainly. Good morning. Obviously, we are keeping close track of a number of the government funding initiatives around supporting primary care as well as supporting of various schools of medicine. We are seeing that happening and from an announcement perspective, and starting to see some of the flow-through in that funding wherein we are working with some of our family health teams and primary care tenants on space allocation and looking at ways on how they can grow.

Speaker #3: And so, we are seeing that happening. And from an announcement perspective, we are starting to see some of the flow-through in that funding. We are working with some of our family health teams and primary care tenants on space allocation and looking at ways on how they can grow.

Speaker #5: Okay. Thanks. And one last one on the regulatory front. I'm just wondering if you've seen do you have any thoughts on the proposed site neutrality policy in the US?

Giuliano Thornhill: Okay, thanks. One last one on the regulatory front. I am just wondering, do you have any thoughts on the proposed site neutrality policy in the US? Does that affect any of your current portfolio or change the acquisition strategy at all?

Speaker #5: And does that affect any of your current portfolio, or change the acquisition strategy at all?

Speaker #4: No, no. I mean, I don't think so. I mean, I'm not—I don't think there's any impact on our current portfolio today. So, no, I don't think it impacts that or our strategy.

Zach Vaughan: No, I don't think so. I don't think there is any impact on our current portfolio today. So no, I don't think it impacts that or our strategy. Our strategy is really high quality outpatient, limited inpatient, and minimize exposure to areas and things that could be impacted from a funding point of view negatively, as some of these regulatory changes come through.

Speaker #4: I mean, our strategy is really high-quality outpatient limited inpatient and minimize exposure to areas and things that could be impacted from a funding point of view negatively.

Speaker #4: As some of these regulatory changes come through.

Speaker #5: Okay. That's all for me. Thanks, guys.

Giuliano Thornhill: Okay. That's all for me. Thanks, guys.

Speaker #4: Thanks.

Zach Vaughan: Thanks.

Speaker #2: Your next question comes from the line of Fami Beer from RBC Capital Markets. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Pammi Bir from RBC Capital Markets. Your line is now open. Please go ahead.

Speaker #5: Thanks. Good morning. Just wanted to come back to the health scope for a second. And I think Zach, you mentioned that you expect an update before I guess you report Q3.

Pammi Bir: Thanks. Good morning. Just wanted to come back to the Healthscope for a second. I think, Zach, you mentioned that you expect an update before you report Q3. Is that just based on the timeline that the receiver has provided, or is the whole process just kind of approaching the final strokes at this point?

Speaker #5: Is that just based on the timeline that the receiver has provided, or is the whole process just kind of approaching the final strokes at this point?

Speaker #4: I mean, look, we can't comment on specific dates and times, but it does feel like we're this process as we thought was longer and more complicated, but it certainly feels like there headed towards some conclusion.

Zach Vaughan: Look, we can't comment on specific dates and times, but it does feel like this process as we thought was longer and more complicated, but it certainly feels like they're headed towards some conclusion that you now have sort of this consortium of four people. It's a holistic solution for all the assets and the business. I think you're sort of in that path where there's no more It's not as if it's an option where you're now going to go out and look for more interest. We do feel like we're headed towards some kind of resolution there. Look, for us, we have our transaction in place that is ready to go as long as this all gets approved.

Speaker #4: That you now have sort of this consortium of four people. It's a holistic solution. For all the assets and the business. So I think you're sort of in that path where there's no more it's not as if it's an auction where you're now going to go out and look for more interest.

Speaker #4: So, we do feel like we're headed towards some kind of resolution there. And, look, for us, we have our transaction in place that is ready to go.

Speaker #4: As long as this all gets approved.

Speaker #5: Got it, okay. That's helpful. And then just to clarify, if this is resolved and you were to sell at some point some of these HSO assets, would that capital be redeployed in Australia or alongside your partner, or would you repatriate that back to North America?

Pammi Bir: Got it. Okay. That's helpful. Just to clarify, if this is resolved and you were to sell, at some point, some of these HSO assets, would that capital be redeployed in Australia or like alongside your partner or would you repatriate that back to North America?

Speaker #4: Yeah, look, I think our goal is to repatriate our capital back here to reinvest in North America, as we've stated. So, again, could there be something extraordinarily attractive? We could look at it.

Zach Vaughan: Yeah, look, I think our goal is to repatriate our capital back here to reinvest in North America, as we've stated. Again, could there be something extraordinarily attractive? We could look at it, but the truth is our strategic goal won't really change. If we exit an asset likely or multiple assets, the proceeds are going to get redeployed here.

Speaker #4: But the truth is our strategic goal won't really change. I mean, if we exit an asset, likely or multiple assets that the proceeds are going to get redeployed here.

Speaker #5: Okay. And then just coming back to the acquisition commentary, I guess, particularly in the US, how are you thinking about just continuing to acquire assets sort of on your own, or are there opportunities that you're seeing with potentially partnering up with some of the local entities?

Pammi Bir: Okay. Then just coming back to the acquisition commentary, I guess particularly in the US, how are you thinking about just continuing to acquire assets on your own? Or are there opportunities that you are seeing with potentially partnering up with some of the local entities?

Zach Vaughan: Yeah. I think it is a good question, Pammi. I think it is a mix. It probably depends a bit on the asset. For example, something like East New York Health Hub, this is a single tenant, long-dated Triple net lease. That is something that we can certainly do. We can execute on the transaction from here. We are looking at transactions, as I mentioned, with groups where we would essentially acquire the asset and bring them in as partners specifically to help us with certain value enhancement initiatives. Those relationships could grow over time and become more strategic. So I think it does depend on the strategy, and we are looking at a mix of these single-tenant critical health hubs to more multi-tenant hands-on assets.

Speaker #4: Yes. Yeah, I think it's a good question, Fami. I think it's a mix. And it probably depends a bit on the asset. So, for example, something like East New York Health Hub—this is a single-tenant, long-dated, triple net lease.

Speaker #4: That's something that we can certainly do. We can execute on the transaction from here. We are looking at transactions, as I sort of mentioned, with groups where we would essentially acquire the asset and bring them in as partners specifically to help us with certain value enhancement initiatives.

Speaker #4: And those relationships could grow over time and become more strategic. So I think it does depend on the strategy. And we're looking at a mix of these sort of single-tenant, critical health hubs to more multi-tenant, hands-on assets.

Speaker #5: Okay. And maybe just on that, would the are you comfortable acquiring assets where they're going in, you'll just may not be creative or might be dilutive in the short term, but within a couple of years, that they could actually be quite attractive?

Pammi Bir: Okay, maybe just on that. Are you comfortable acquiring assets where the going-in yield just may not be accretive or might be dilutive in the short term, but within a couple of years that they could actually be quite attractive? Or do they need to be-

Speaker #5: Or do they need to be immediately creative coming in?

Zach Vaughan: Yeah, I think-

Pammi Bir: immediately accretive coming in?

Speaker #4: Yeah, I mean, I think it's, again, it's a mix. I think we're more focused on what kind of value we can enhance. Everything we're looking at today in our pipeline is accretive today.

Zach Vaughan: Yeah. I think, again, it is a mix. I think we are more focused on what kind of value we can enhance. Everything we are looking at today in our pipeline is accretive today, and is either very stable and sort of grows by the contractual increases or there is a lot of value enhancement there. So I guess if your question is, would you buy a vacant building that you are going to or something to reposition, the answer is no. Everything we are doing, we anticipate to be accretive today. Some may be more than others, and some may have more long-term upside than others.

Speaker #4: And it's either very stable and sort of grows by the contractual increases, or there's a lot of value enhancement there. So I guess if your question is, would you buy a vacant building that you're going to or something to reposition, the answer is no.

Speaker #4: I mean, everything we're doing, we anticipate to be accretive today. Some may be more than others, and some may have more long-term upside.

Speaker #4: Then others.

Speaker #5: Got it. Okay. All right. Thanks very much. That's helpful. I'll turn it back.

Pammi Bir: Got it. Okay. All right. Thanks very much. That is helpful.

Zach Vaughan: Yeah.

Pammi Bir: I will turn it back.

Zach Vaughan: Yeah.

Pammi Bir: I will turn it back.

Speaker #2: Your next question comes from the line of Juliana Soren Hill from National Bank. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Giuliano Thornhill from National Bank. Your line is now open. Please go ahead.

Speaker #3: Hey, guys. Just had two follow-ups. I'm just wondering what drove the sequential decline in the credit line rate. And Stephanie, I know you mentioned that the unencumbered asset pool increasing is kind of increasing your flexibility.

Giuliano Thornhill: Hey, guys. Just had two follow-ups. I am just wondering what drove the sequential decline in the credit line rate. Stephanie, I know you mentioned that the unencumbered asset pool increasing is kind of increasing your flexibility. Could you just kind of expand on that as well?

Speaker #3: Could you just expand on that as well?

Speaker #1: Yeah. I mean, no change to our underlying credit facility during the quarter, or even during the year for that matter. It really is based on underlying base rates, which have remained fairly stable.

Stephanie Karamarkovic: Yeah. No change to our underlying credit facility during the quarter or even during the year for that matter. It really is based on underlying base rates, which have remained fairly stable. So there has not really been much underlying change in our credit facility borrowing rate during the period. So I am not quite sure maybe what you are getting at.

Speaker #1: So, there hasn't really been much underlying change in our credit facility borrowing rate during the period, so I'm not quite sure maybe what you're getting at.

Speaker #3: Yeah, maybe a different number. And just Zach, are you comfortable kind of putting a timeline on when you think you might get to the more simplified state that that's the current kind of strategy?

Giuliano Thornhill: Yeah, maybe a different number. Zach, are you comfortable yet kind of like putting a timeline on when you think you might get to the more simplified state that is the current kind of strategy? Like, in a year time, or where do you think the end state actually can be realized?

Speaker #3: In a year's time, or where do you think the end state actually can be realized?

Speaker #4: Yeah, I mean, look, I certainly think in 12 months we'll be dramatically simpler business and we'll have repatriated more capital. Back here. In terms of what portion vastly the majority of our earnings are sort of America's North America, that may just take a while because again, in some of these situations, we obviously have partners we have to work with.

Zach Vaughan: Yeah. I certainly think in 12 months we will be a dramatically simpler business, and we will have repatriated more capital back here. In terms of at what portion, vastly the majority of our earnings are sort of Americas, North America. That may just take a while because, again, in some of these situations, we obviously have partners we have to work with, and it takes time. But I would think, again, I am going to put something out there, maybe think about it in 24 months we will be pretty much Americas, North America focused.

Speaker #4: And it just takes time. But I would think I mean, again, I'm going to put something out there. Maybe a 24 think about it in 24 months will be pretty much America's North America.

Speaker #4: Focused.

Speaker #3: Okay. Thanks.

Giuliano Thornhill: Okay, thanks.

Speaker #2: Again, if you'd like to ask a question, please press star followed by 1 on your telephone keypad. We will take a moment to let the questions come in.

Operator: Again, if you would like to ask a question, please press star followed by 1 on your telephone keypad. We will be taking a moment to let the questions come in. It seems that as of the moment, we do not have any questions queued up, so that concludes our question and answer session. I will now be passing the call over to Steven Hong, Vice President of Investor Relations, for closing remarks. Please go ahead.

Speaker #2: It seems that as of the moment, we don't have any questions queued up, so that concludes our question and answer session. I will now be passing the call over to Stephen Hong, Vice President of Investor Relations for closing remarks.

Speaker #2: Please go ahead.

Speaker #6: Thank you for joining us today in your continuing tourism bottom infrastructure. If you have any follow-up questions, please feel free to reach out to me, steven.hong@barrowreef.com.

Steven Hong: Thank you for joining us today and your continued interest in Vital Infrastructure. If you have any follow-up questions, please feel free to reach out to me at steven.hong@vitalreit.com. Thank you again for your time, and have a great day.

Speaker #6: Thank you again for your time, and have a great day.

Operator: Thank you everyone for attending this call. You may now disconnect.