Operator: Good afternoon, ladies and gentlemen, and welcome to the Morguard North American Residential REIT 2026 Q3 Results Conference Call. At this time, all lines 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 on Thursday, 29 October 2026. I would now like to turn the conference over to Chris Newman, CFO. Please go ahead.
Chris Newman: Thank you, and welcome everyone to this quarter's conference call. With me here today is Angela Sahi, President and CEO, Paul Miatello, Senior Vice President, Beverley Flynn, Senior Vice President and General Counsel, John Talano, Senior Vice President, US Operations, and Ruth Grabel, Vice President, Canadian Operations. As is customary, I will provide comments on the REIT's financial position and performance. In terms of our financial position, the REIT completed the Q3 with total assets of CAD 4.8 billion, higher compared to CAD 4.5 billion at 31 December 2025. The increase in total assets was due to a change in the US dollar exchange rate, a fair value increase on the REIT's income-producing properties, and an increase in cash from refinancings completed during the year.
Chris Newman: During the Q3, the REIT completed the refinancing of a mortgage secured by two properties located in Pensacola, Florida, in the amount of USD 45.6 million at an interest rate of 6.33% and for a term of 10 years. As well, the REIT prepaid a mortgage at a residential property located in New Orleans in the amount of USD 8.6 million. The REIT finished the Q3 with approximately CAD 172 million of cash on hand and CAD 100 million available under the revolving credit facility with Morguard Corporation. Mortgages payable ended the quarter with a weighted average term to maturity of 5.3 years, an increase from 4.8 years at 31 December 2025, and a weighted average interest rate of 4.28%, higher compared to 4.0% at 31 December 2025.
Chris Newman: The REIT's debt to gross book value ratio was 40.1% at 30 September 2026, higher compared to 39.5% at the start of the year. In addition, the REIT is pleased to announce an increase in its annual cash distributions of CAD 0.02 per unit, an increase of 2.5%. This will bring distributions to CAD 0.81 per unit on an annualized basis from the current level of CAD 0.79 per unit. To provide a transaction update, the REIT has advanced its previously announced joint acquisition with Morguard Corporation of a Canadian multi-suite residential portfolio, with the REIT's share having a gross purchase price of approximately CAD 478 million, representing an approximate 22% undivided interest in 60 properties. Management has completed its due diligence review and related purchaser conditions have been waived. The transaction is expected to close in one tranche, subject to the timing of CMHC and lender approvals.
Chris Newman: Turning to the statement of income. Net income was CAD 31.1 million for the quarter ended 30 September 2026, compared to CAD 12.5 million in 2025. The CAD 18.6 million increase in net income was primarily due to a higher net fair value gain, partly offset by an increase in deferred income taxes. IFRS net operating income was CAD 53.7 million for the three months ended 30 September 2026, a decrease of CAD 0.4 million or 0.7% compared to 2025. On a proportionate basis, proportionate NOI for the three months ended 30 September 2026, decreased by 1.7% compared to 2025 due to the following. NOI in Canada decreased by CAD 0.4 million or 2.5%, mainly due to higher vacancy, an increase in amortization of rental incentives, and an increase in operating expenses, partially offset by an increase in AMR.
Chris Newman: NOI in the US decreased by USD 0.6 million, or 2.8%, mainly due to higher vacancy and an increase in operating expenses, primarily from higher R&M and payroll costs, partly offset by an increase in AMR and ancillary revenue. The change in foreign exchange rate increased proportionate NOI by CAD 0.2 million. Interest expense increased by CAD 1.8 million for the three months ended 30 September 2026 compared to 2025, primarily due to an increase in interest on mortgages from higher principal and interest rates on the completion of the REIT's refinancings.
Chris Newman: The REIT's Q3 2026 performance translated into basic FFO of CAD 19.7 million, a decrease of CAD 2.6 million or 11.8% compared to 2025. On a per unit basis, FFO for the three months ended 30 September 2026, decreased by CAD 0.05 to CAD 0.38 per unit compared to CAD 0.43 per unit in 2025 due to the following.
Chris Newman: On a proportionate basis in local currency, a decrease in NOI, mainly from higher vacancy, lower interest income, an increase in interest expense, and an increase in current tax, partly offset by a decrease in trust expense, had a net CAD -0.05 per unit negative impact. The REIT's FFO payout ratio of 52.4% for the three months ended 30 September 2026, represents a very conservative level, which allows for significant cash retention. Operationally, the REIT's average monthly rent in Canada increased to CAD 1,878 at 30 September 2026, a 2.2% increase compared to 2025, reflecting the quality of our Canadian portfolio. During the first three quarters of the year, the Canadian portfolio turned over approximately 12.1% of its suites and achieved AMR growth on suite turnover of 7.2%.
Chris Newman: Occupancy in Canada finished Q3 2026 at 93.8% compared to 94.3% at 30 September 2025, and was lower primarily due to increased competition from new rental buildings and lower immigration levels. Management believes market conditions will improve as new supply is absorbed and incentive-driven competition moderates. While in the US, AMR increased by 0.7% compared to 2025, having an average monthly rent of CAD 1,953 at the end of Q3.
Chris Newman: Occupancy in the US of 91.4% at 30 September 2026, was lower compared to 92.5% at 30 September 2025, primarily due to a combination of tenant relocations, affordability, and increased home buying. As we enter the slower fall and winter leasing seasons, management expects occupancy to stabilize with a combination of modest suite turnover and moderate AMR growth. During the nine months ended 30 September 2026, the REIT's total CapEx amounted to CAD 45.1 million. That included revenue enhancing in-suite and tenant improvements, exterior building projects, garage renovations, common area mechanical, plumbing and electrical projects, as well as energy initiative expenditures. At this time, I will turn the call back over to the moderator for any questions.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press star 1. Then the 1 on your touchtone keypad. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the 2. If you are using a speakerphone, please put up the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Jonathan Kelcher with TD Cowen. Your line is now open.
Jonathan Kelcher: Thanks. Good afternoon. Just on the TDAM acquisition, could you maybe give us a little bit of color on how you guys decided to divide the portfolio between MRG and MRC?
Paul Miatello: Yeah. Hey, John, it's Paul Kerr. I will start that one. Essentially, we are looking back to acquisition criteria that fits for the respective organizations. So, one of the first filters we kind of went through was looking at assets that are stabilized, looking at yields, looking at capital requirements. So, in general, a number of the higher-yielding assets went into MRG. Which, again, responsible thing to do, so that would better support MRG's distribution pattern. So, yeah. At a high level, we were looking at acquisition criteria that sort of fits each respective organization.
Jonathan Kelcher: Okay. That's helpful. When this deal closes, when we look ahead for 2027, how does this portfolio compare to the current Canadian portfolio for MRG in terms of occupancy, rental rates, margins? Yeah.
Paul Miatello: So, yeah. It's Paul again. Again, I will start that one. You can tell from looking at the disclosures we have made, geographically, we are in a lot of different markets for MRG, right? So this transaction really expands the geographic diversity of what will be MRG's Canadian portfolio going forward, right? So in some respects, a little bit hard to compare. I would say on age, comparable occupancy. There are still some headwinds, as we all know, in the market today.
Paul Miatello: So I would say that this portfolio is not immune to some of those headwinds. Rents obviously really vary by market. It's a little difficult. We have got one property in Mississauga in the portfolio that's being acquired and four in Edmonton. Then there is Kitchener-Waterloo as well, right? So there is limited overlap in terms of the existing Canadian portfolio versus what we are acquiring. So on rents, it's difficult to make comparisons.
Jonathan Kelcher: Okay. Fair enough. Then just last for me on, also on the Canadian portfolio, just on the operations, you guys had a pretty nice rebound in occupancy in Q3 versus Q2. How do you see that trending over the next, well, I guess over Q4 and into Q1 as we get into the tougher seasonally weaker leasing season?
Ruth Grabel: Hi, it's Ruth. Right now, our availability is very close to what our reported occupancy is for Q3. So we are at 94%, but that is not taking into account any future vacancy, like move-outs. So we are trending pretty much in line as we are right now. As you mentioned, it is a slower season with winter, although the weather is cooperating right now. We are seeing a little bit of a slowdown with leasing activity. But there is activity, and we do have completed some leases to date.
Jonathan Kelcher: Okay. That is it for me. I will turn it back. Thanks.
Operator: Your next question comes from Jimmy Shan with RBC Capital Markets. Your line is now open.
Jimmy Shan: Yeah. Thanks. Just to follow up on the TDAM portfolio. Maybe just in terms of the operating metrics, maybe is there any metrics you could offer to give us a sense of the growth profile of the portfolio relative to the existing Canadian portfolio? And sort of like where is in-place rent versus market, or what is the turnover rent growth for the Ontario assets? Just for us to get a sense of that.
Paul Miatello: Yeah. I am not sure at this point. There is a lot of operating metrics we are going to release, Jimmy. I am not sure if we have turnover, Chris or Ruth.
Chris Newman: Yeah. There is not too much information at the moment. These are still privately owned assets, and we do not have, or at least the MRG group does not have access to that. But from Aside from operating metrics, there is a debt figure that we gave you, and for modeling interest rate, you can use the market interest rate as we will be mark to marketing the assumed debt. So that might assist on some of the metrics.
Paul Miatello: Yeah, on the rent growth profile, I would sort of revert back to the answer somewhat that I gave to John. We are in a lot of different markets here, so that rent growth profile, again, specifically compared to what MRG owns today in Canada, it is going to vary fairly significantly by province and by sub-market.
Jimmy Shan: Okay. In terms of the allocation, would you say, I understand the filter that you went through, but would you say it covers 70%, 80% of the overall TDAM portfolio? Is it substantially, other than maybe a few assets, the majority was fairly evenly split? Would that be a fair characterization of the allocation?
Paul Miatello: Are you talking about even split between MRC and MRG of what was acquired?
Jimmy Shan: Yes.
Paul Miatello: By equity investment, yes, it is very evenly split. You have higher leverage on the MRC portfolio that is being acquired, and you have higher price per door on the MRC portfolio. So when you look at the gross acquisition prices, you will see a disparity where it is skewed towards MRC, but on an equity basis, it is very close to 50/50.
Jimmy Shan: Okay. Last, just turning to the US portfolio. It looked like the occupancy did slip from Q2. I know, I think last quarter it seemed like there was a bit of leasing momentum. Maybe just some color, did it stall? Is that more seasonal? Any color you could provide there?
John Talano: Sure. It's John Talano. In general, things have been relatively flat. I would say, we are seeing more move-outs in our markets that are less affluent. So I would say there is a little bit higher pressure there. But all of the assets have been stable. We did have a very busy quarter. We actually moved out 2,200 units and moved in roughly 2,300 units. So it was very active. Things are slowing down but we are having some great occupancies in Chicago. And markets that have been a little bit soft, I would say, are Colorado and New Orleans. Both those are small assets in general. Not a whole lot of units there. But otherwise, I would say it has been stable, but a little bit slower than in past years.
Jimmy Shan: Okay, and would your expectation be that that occupancy stay where it is, or you would expect a little bit of improvement over the next few months?
John Talano: Yeah, I would say it is stable. I am optimistic, except I do believe we are going into slower leasing seasons that is more impactful in Chicago and DC going into winter, right? But certainly the holidays will be slow, but I expect things will be pretty good in the Sun Belt.
Jimmy Shan: Okay. That is it for me. Thanks.
Operator: Your next question comes from Alexander Leon with Desjardins. Your line is now open.
Alexander Leon: Hey, good afternoon, everyone, and thanks for taking my questions. Just a couple on the debt side. I am wondering if you can provide a distribution of the 2028 mortgage maturities between Canada and the US.
Chris Newman: Yeah. That is pretty easy. It is 100% US, so there is no Canadian refinancings in our existing portfolio. There is a little bit on the TDAM acquisition. There is a little bit there, but we will release that information towards when we close.
Alexander Leon: Okay, great. Then maybe just where you guys are seeing financing rates right now for Canada and the US. Would that 6.33% that you did in Pensacola, would that be fairly stable right now?
Chris Newman: No, that's a little bit of a high mark. We caught a high spike in the USTs in late September, so it settled back down to around 6% all-in rates. That's where we are today. It could go up or down depending on what the USTs do moving forward. Our next US refinancing is in June. We have June, July, and September. We still have some time. Again, in Canada, there are no upcoming refinancings. But rates are roughly between 4.25% and 4.5% for 10-year.
Alexander Leon: Okay. That's it for me. Thanks a lot.
Operator: Ladies and gentlemen, as a reminder, should you have a question, please press star one. Your next question comes from Sumayya Syed with CIBC. Your line is now open.
Sumayya Syed: Thanks, everybody. Just wanted to follow up on the occupancy on the Canadian portfolio. Saw that Mississauga saw a nice improvement there, and just wondering what drove that pickup. I think last quarter you guys mentioned a major employer potentially returning, or was it some capital project that wrapped up? Any color there?
Ruth Grabel: It is a combination. You are correct. There were some capital projects that were completed, the underground garage restoration projects that we had at three or four of our buildings. In general, some absorption from the new properties that we were competing against. We saw that they had leased up some of their smaller units, so that drove those prospective tenants to our portfolio. You are right, there were some businesses that moved in. We are still seeing some IT companies. As well, we saw some people coming back that previously were renting condos are now returning to our portfolio. So a wide range of reasons, and we were successful in increasing our occupancy.
Sumayya Syed: Okay. In terms of incentive, what are you seeing there in the last couple of months of leasing and if there has been any change in competitive behavior from other landlords and owners?
Ruth Grabel: It is a combination. Some people are offering two months on select units, but on average, I am seeing the posting being reduced to one month free rent. We are also, on select units, we are at two months free rent. But right now, because our occupancy is higher, we are offering one month free rent. We are also, depending, giving our teams a leeway in order to close a lease if they feel they are losing a prospective, it might be two months on a 14-month lease. But mostly the incentives are being reduced.
Sumayya Syed: Okay. Thank you. I will turn it back.
Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the call over to Chris for closing remarks.
Chris Newman: Okay. Thank you everyone for joining us. We look forward to talking to you at our next call.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
