Morguard Real Estate Inv. Q4 2025 Earnings Report

Morguard Real Estate Inv. EPS Results

• Actual EPS: -C$0.12
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Morguard Real Estate Inv. Revenue Results

• Actual Revenue: $63.00 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Morguard Real Estate Inv. Announcement Details

• Quarter: Q4 2025
• Date: 2/11/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, February 12, 2026
• Conference Call Time: 4:00PM ET

Morguard Real Estate Investment Trust is a closed-end trust that owns, manages, and invests in a diversified real estate portfolio of commercial properties across Canada. The company has three reportable segments namely Retail, Office, and Industrial. It generates maximum revenue from the Retail segment.

Morguard Real Estate Inv. Q4 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Penn West Plaza's market rent reset and the end of the Obsidian head lease drove an ~CAD 16 million hit in 2025, contributing to Q4 NOI falling to CAD 29.1 million from CAD 33.5 million while the building transitions to multi-tenant (now 81% occupancy) with significant tenant inducements.
• Positive Sentiment: Retail operations remain a bright spot with strong renewal spreads (about 5% for malls and 9% for strips in 2025), enclosed-mall sales/traffic described as strong, and grocery-anchored strip centers at 99% occupancy, supporting management's view of stable retail results in 2026.
• Positive Sentiment: Management plans a substantial redeployment at St. Laurent—including a CAD 25 million–CAD 30 million program over the next ~two years to repurpose the former Sears and activate HBC space—with some tenant build-outs already opened and expected NOI contributions beginning in 2026–2027.
• Neutral Sentiment: Liquidity and financing show mixed signals: year-end liquidity of CAD 68 million (down from CAD 81M) and CAD 219 million of unencumbered assets, lower interest expense and mortgage renewals at reduced rates, but variable-rate debt increased to ~21%.

Presentation

[Operator]

Good afternoon, ladies, and gentlemen, and welcome to the Morguard Real Estate Investment Trust 2025 Fourth Quarter 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, February 12th, 2026. I would now like to turn the conference over to Andrew Tamlin, Chief Financial Officer. Please go ahead.

[Andrew Tamlin, CFO at Morguard REIT]

Thank you, and good afternoon, everyone. As mentioned, my name is Andrew Tamlin, Chief Financial Officer of Morguard REIT. Welcome to the Morguard REIT Fourth Quarter 2025 Earnings Conference Call. I am joined this afternoon by John Ginis, Vice President of Retail Asset Management, Tom Johnston, Senior VP of Western Office Management, and Todd Febbo, Vice President of Office Asset Management, Eastern Canada. Thank you all for taking the time to join the call. Before we get into the call, I would like to point out that our comments will mostly refer to the fourth quarter 2025 MD&A and financial statements, which have been posted to our website. I refer you specifically to the cautionary language at the front of the MD&A, which would also apply to any comments that we make on this call.

[Andrew Tamlin, CFO at Morguard REIT]

Our fourth quarter results were very much in line with expectations. We have continued to see softness in the office numbers, with an expected decline in net operating income from Penn West Plaza, transitioning to a multi-tenant building. Our retail results were stable, with good rental growth on lease renewals for both our malls and retail strips. In the third quarter, we had highlighted that we had a large one-time prior year property tax refund received from one of the trust's enclosed shopping malls. The final accounting for this represented a CAD +3.8 million one-time impact on net operating income for the year. This primarily represents the portion of the refund that has been allocated to either vacant space or space where otherwise the landlord is entitled to keep the refund.

[Andrew Tamlin, CFO at Morguard REIT]

We have known for some time that 2025 was going to be a tough year due to the market rent reset at Penn West Plaza in Calgary. The impact of this has continued throughout the year and finally into this quarter. The 11-month impact of this adjustment in 2025 was CAD 16 million. This decline at Penn West Plaza is due to the expiration of the Obsidian head lease on February 1st, 2025, which has resulted in a reset of rents for all tenants to current market rates. Effectively, this building has transitioned from a single-tenant building to a multi-tenant building. We are pleased with this transition, and it has resulted in an occupancy of Penn West Plaza at 81%, which is a strong rate for the Calgary marketplace.

[Andrew Tamlin, CFO at Morguard REIT]

Significant inducements of opening free rent and free operating costs to secure various tenancies are also impacting the Penn West Plaza. Sorry about the interruption. Our net operating income for the fourth quarter declined from CAD 33.5 million in 2024 to CAD 29.1 million in 2025. As mentioned, this decline is primarily due to the results from the Penn West Plaza asset. Looking at 2026, we do expect our retail results to remain stable. While we have a partial year of the missing Bay income to work through, we are still seeing positive retail fundamentals, and there are some retail developments we are working on, which I will touch on in a few minutes. We are expecting to see some continued softness in the office numbers in 2026 as we work through some vacancies in certain markets.

[Andrew Tamlin, CFO at Morguard REIT]

Our leasing teams have noticed increasing interest in tours for office space in major urban areas as companies continue to push their employees to get back in the office. We are cautiously optimistic that this will translate into future office leasing deals into late 2026 and into 2027. Touching on The Bay, on Friday, March 7th, 2025, The Bay filed for creditor protection under the Companies' Creditors Arrangement Act. The trust had two Bay locations comprising a total of 290,000 sq ft of GLA, one at Cambridge Centre in Cambridge and one at St. Laurent in Ottawa. The trust's annualized gross rent earned from The Bay leases was approximately CAD 1.5 million. In the second quarter, the trust lease with The Bay at Cambridge was disclaimed. The remaining lease at St. Laurent was subject to a bid by Ruby Liu Commercial Investment Corp.

[Andrew Tamlin, CFO at Morguard REIT]

On October 24, the Ontario Superior Court rejected the proposal by Ruby Liu for the creation of a new Canadian department store chain. Subsequently, the St. Laurent lease was disclaimed on November 27th, 2025. Management is now looking at future opportunities for these locations and are organizing short-term tenants to replace some of The Bay income. Notwithstanding the failure of The Bay, there are still lots of positives in the retail sector. We are seeing positive rental growth on lease renewals, and there remains lots of good conversations involving well-known national brands. It still remains quite expensive to construct new retail space, and hence, a lot of retailers are looking at options in existing buildings rather than building new space. Further, with the exception of one location, our community strip centers are full at 99% occupancy.

[Andrew Tamlin, CFO at Morguard REIT]

Sales and traffic numbers at our enclosed malls also continue to be strong. Turning to financing and liquidity, the trust has CAD 68 million in liquidity at the end of the year, which is down from CAD 81 million in liquidity at the end of 2024. The trust has CAD 219 million in unencumbered assets, along with some up financing opportunities in 2026. The trust believes it has adequate liquidity to address current development initiatives. The trust's interest expense declined CAD 1 million for the quarter, due primarily to a decline in short-term variable interest rates on a year-over-year basis. Total interest expense is down almost CAD 4 million for the full 12 months.

[Andrew Tamlin, CFO at Morguard REIT]

During 2025, the trust renewed eight mortgages totaling CAD 166 million, lowering the interest rate from an average of 5.4% on these mortgages to an average of 4.95%, 4.95% on renewal. The trust has approximately 21% of its debt as variable at the end of the quarter, which has increased from 15% at the end of the year. We do expect to see selected opportunities for up financing in 2026, as we are currently in discussions with a number of lenders about these renewals. In general, we have seen this market open up more in the last year with lower spreads, especially on attractive assets, along with lenders being more open to look at lending opportunities for office products.

[Andrew Tamlin, CFO at Morguard REIT]

The trust continues to focus on paying down its debt, which has declined by more than CAD 100 million over the last four years. As mentioned in past quarters, the trust's operating capital reserve increased from CAD 25 million annually to CAD 35 million in 2025 to account for both higher repair costs as well as leasing costs. This represents CAD 8,750,000 per quarter. Actual spending for the year was CAD 36.8 million, which was slightly down from last year's operating capital spend. A significant portion of the CAD 15.3 million leasing capital was to secure office tenancies, which included new tenancies at Penn West Plaza, along with other office renewals in Vancouver and Montreal.

[Andrew Tamlin, CFO at Morguard REIT]

Looking at our accounting for real estate properties, during the quarter, we had CAD 20 million in fair value losses and CAD 62 million in losses for the year. In both cases, these adjustments are primarily coming from the office asset class. Our overall occupancy level of 85.1% at December 31, 2025, has declined from 86.6% at the end of September, due primarily to the extra vacancy from The Bay at St. Laurent. The decline from 91.2% at the end of 2024 is due to the increased vacancy at Penn West Plaza, along with the disclaimed Bay lease at Cambridge and St. Laurent. As mentioned in past quarters, we are now embarking on a strategic merchandising program for St. Laurent, which will see the addition of some new nationally recognized brand names being added to the tenant roster, along with expansion plans for other tenants on the existing tenant roll.

[Andrew Tamlin, CFO at Morguard REIT]

The current development spend in the amount of CAD 6.4 million includes build-outs for tenants such as Sephora and H&M. These are all now open, and we've received very positive reviews about their impact. We ultimately expect to spend in the range of CAD 25 million-CAD 30 million as we look to add more discriminating tenants, and also look to activate the former Sears space at St. Laurent. We are working on this future phasing as we look to ensure a stable, sustainable and traffic-generating mix of tenants to this asset, and will advise further details as they are available. The trust has also had two No Frills grocery deals, which have been undertaken.

[Andrew Tamlin, CFO at Morguard REIT]

During the fourth quarter of 2025, a new No Frills grocery store opened at Parkland Mall in Red Deer. This cost was CAD 1.5 million and activated a previously vacant space. There's also a new No Frills opening at The Centre in Saskatoon in early 2027, with a cost of approximately CAD 5 million. The trust believes that both of these new stores will be strong additions to these malls. Discussions have previously stalled with the provincial government tenant at Petroleum Plaza in Edmonton, which came up for renewal back on December 31st, 2020, and is still in overhaul. At this point, there is still nothing to report in regards to discussions or when the space will be officially renewed.

[Andrew Tamlin, CFO at Morguard REIT]

In looking at leasing renewals for 2026, the vast majority of the 1.6 million sq ft of space coming up for renewal has already been contracted for renewal. Every retail tenant greater than 20,000 sq ft is either renewed or expected to renew. This includes a Walmart and a Canadian Tire, which are both greater than 100,000 sq ft. Further, there is only one office tenant greater than 10,000 sq ft that we don't expect to renew. This includes 164,000 sq ft in Montreal, and 110,000 sq ft in Vancouver. Wrapping up, we continue to believe that there are strong fundamentals in the retail leasing environment and that the office fundamentals have changed for the better. We are looking forward to continued positive leasing conversations for all of our assets.

[Andrew Tamlin, CFO at Morguard REIT]

Most of our enclosed malls remain dominant in their geographical area, and our strip malls, which are largely grocery anchored, have performed steady. Beyond our retail assets, we have high quality office buildings on Canada's largest markets with a high degree of government office tenants. We continue to be positive about our business and the objective of building value for our unitholders. We look forward to continuing to execute our strategy and thank you for your continued support. We will now open the floor to questions.

[Operator]

Thank you. Ladies, and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please, for your first question. Your first question comes from Jonathan Kelcher from TD Cowen, Canada. Please go ahead.

[Jonathan Kelcher, Equity Analyst at TD Cowen]

Good afternoon. First question, just on, I guess, the HBC, HBC backfill, and I guess larger, more on the St. Laurent. I guess on the St. Laurent, the CAD 25 million-CAD 30 million that you, you talked about, like, what, what should we sort of think about in terms of over how long a period that, that would be?

[Andrew Tamlin, CFO at Morguard REIT]

Yeah. John Ginis will expand on that and give you some more color.

[John Ginis, VP of Retail Asset Management at Morguard REIT]

Hey, Jonathan.

[Jonathan Kelcher, Equity Analyst at TD Cowen]

Hey, John.

[John Ginis, VP of Retail Asset Management at Morguard REIT]

Okay. So, hey, how are ya? So as Andrew noted in his introductory remarks, we have exposure to locations, Cambridge and St. Laurent. Cambridge, we're evaluating longer term options as we speak, but we probably will look to invoke a short-term solution in the immediate term just to carry us through, and we get some footfall through that, the box into the mall. With respect to St. Laurent, Andrew also noted that a sizable investment program on repurposing one of our anchor boxes, but his reference was to our former Sears location, because this shopping center in St. Laurent had both a former Sears and an HBC. So the CAD 25 million-CAD 30 million refers to work that we look to conduct at some point over the next two years to repurpose a portion of the former Sears box.

[John Ginis, VP of Retail Asset Management at Morguard REIT]

As it relates to HBC, again, we are evaluating longer term objectives with respect to that box. It is two levels, almost 160,000 sq ft. But in the short term, we're looking to activate both the upper and the lower levels, and we're currently working through some transactions whereby we would do that.

[Jonathan Kelcher, Equity Analyst at TD Cowen]

What, what sort of tenants would you put in there short term? What type?

[John Ginis, VP of Retail Asset Management at Morguard REIT]

In the HBC?

[Jonathan Kelcher, Equity Analyst at TD Cowen]

Yeah.

[John Ginis, VP of Retail Asset Management at Morguard REIT]

Yeah. So we're targeting fashion-focused retailers at this juncture because that's where the demand has been expressed to us. So, and branded ones, not like ones that you know you will see across the country. And again, it is a sizable footprint on both the upper and the lower levels. So, but, we're just following up on that and hoping to execute a short-term solution probably in the next few months for both levels.

[Jonathan Kelcher, Equity Analyst at TD Cowen]

Okay, so you think we can see some NOI from those spaces in 2027?

[John Ginis, VP of Retail Asset Management at Morguard REIT]

Absolutely. That part, with respect to HBC, hoping in 2026. With, as it relates to the Sears situation, there's a lot of work to be done. And again, going back to the number that Andrew quoted, it's, it's not an insignificant amount, the CAD 25 million-CAD 30 million. But we're currently finalizing, hopefully some lease transactions on repurposing one level of that space, but the NOI contribution from those tenants won't occur until 2027.

[Jonathan Kelcher, Equity Analyst at TD Cowen]

Okay. Secondly, just on the good to hear that most of your lease maturities are already spoken for this year. But on the retail side, just given the strength in the market right now, what sort of uplifts are you expecting to get on the renewals?

[John Ginis, VP of Retail Asset Management at Morguard REIT]

It depends on what we're talking about here, right, Jonathan? We, as you know, our retail portfolio is split between two subsets, one being the enclosed malls, the other one being the open air community or grocery-anchored strip centers. So as Andrew, again, going back to his comments, we have really solid occupancy in our community, in our grocery-anchored strip centers. I think it's 99%, if memory serves me right. So there, where we are fully occupied, it's easier for us to get some good renewal spreads, when tenants roll, because of limited new supply. On the enclosed mall market, we've been very fortunate.

[John Ginis, VP of Retail Asset Management at Morguard REIT]

Again, because of the cost issues associated with building new retail, and tenants looking to expand, we've been fortunate we've been able to cure our vacancy in some of the malls, albeit we took a hit clearly with the HBC situation here. So our data suggests that our occupancy is 86%. But if you strip those out, we're probably close to historical occupancy numbers in the mall. But when you to answer your question directly, better on the community anchored, the community-based strip centers relative to the malls, but still we're seeing some pretty good spreads on renewal, that's showing up in the results in this NDA disclosure.

[Andrew Tamlin, CFO at Morguard REIT]

I'd probably highlight, Jonathan, that, that within 2025, the malls were about a 5% uplift, and then the strips were about a 9% uplift.

[Jonathan Kelcher, Equity Analyst at TD Cowen]

Okay. And that would that be fair to think about going forward in 2026, given around, like, ballpark those numbers?

[John Ginis, VP of Retail Asset Management at Morguard REIT]

In the retail space, it's always contingent on factors you can and can't control. All else equal, we feel pretty confident about our retail portfolio and our ability to grow over income.

[Jonathan Kelcher, Equity Analyst at TD Cowen]

Okay, thanks. I'll, I'll turn it back.

[Andrew Tamlin, CFO at Morguard REIT]

Thanks, Jon.

[Operator]

As a reminder, if you wish to ask a question, please press star one. There are no further questions at this time. I will now turn the call over to Andrew Tamlin, Chief Financial Officer. Please continue.

[Andrew Tamlin, CFO at Morguard REIT]

Thank you, everybody, for joining us for the call this afternoon, and we look forward to seeing everybody next quarter. Thank you.

[Operator]

Ladies, and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Analysts

• Andrew Tamlin, CFO at Morguard REIT
• John Ginis, VP of Retail Asset Management at Morguard REIT
• Jonathan Kelcher, Equity Analyst at TD Cowen