Morguard Real Estate Inv. Q1 2026 Earnings Report

Morguard Real Estate Inv. EPS Results

• Actual EPS: C$0.09
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Morguard Real Estate Inv. Revenue Results

• Actual Revenue: $60.05 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Morguard Real Estate Inv. Announcement Details

• Quarter: Q1 2026
• Date: 4/29/2026
• Time: After Market Closes
• Conference Call Date: Friday, May 1, 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. Q1 2026 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: Q1 results were in line with expectations; the REIT reported NOI of CAD 25.6 million versus CAD 25.7 million a year ago, with improved retail performance largely offsetting other declines.
• Negative Sentiment: Office net operating income softened after 84,000 sq ft was returned in recent months in Ottawa and Vancouver, pushing overall occupancy down to 84.8%; management expects these vacancies to be short-term but sees continued office softness through 2026.
• Positive Sentiment: Retail fundamentals remain strong—enclosed malls and grocery-anchored strips showed improvement, Saint Laurent re‑merchandising (Sephora, H&M open) is underway with an expected spend of CAD 25–30 million, and new No Frills and a gym re‑tenant will be accretive in 2026–2027.
• Neutral Sentiment: Liquidity and financing appear manageable with CAD 61 million in liquidity, CAD 218 million of unencumbered assets, a decline in Q1 interest expense after mortgage renewals, ~22% variable-rate debt, and plans to reissue a CAD 159 million convertible debenture later this year at a higher rate.
• Neutral Sentiment: About 1 million sq ft of leases roll in the last three quarters of 2026; management is confident most will renew and expects only a few non-renewals (including one ~35,000 sq ft industrial) that should not materially impact NOI.

Presentation

[Operator]

Afternoon, ladies and gentlemen, welcome to the Morguard Real Estate Investment Trust 2026 First 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 Friday, May 1st of 2026. I would now like to turn the conference over to Andrew Tamlin, Chief Financial Officer. Please go ahead, sir.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Thank you, and good afternoon, everyone. My name is Andrew Tamlin, Chief Financial Officer of Morguard REIT. Welcome to Morguard REIT's First Quarter 2026 Earnings Conference Call. I am joined this afternoon by John Ginis, Vice President of Retail Asset Management, Tom Johnston, Senior Vice President 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 jump into the call, I would like to point out that our comments will mostly refer to the first quarter 2026 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 would make on this call.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Our first quarter results were in line with expectations and consistent with last year's results. We have seen some softness in the office net operating income from two larger tenants that have given back in Ottawa and Vancouver in recent months, but this has been mostly offset by improved retail results coming primarily from our enclosed mall asset class. The REIT's net operating income for the first quarter was CAD 25.6 million, which was down slightly from CAD 25.7 million in 2025. While we are missing the income from the two failed The Bay stores, which form part of the 2025 results, we have had some good success in adding other quality tenants in the last 12 months throughout the portfolio. Further, positive leasing spreads throughout 2025 have also helped to improve the retail net operating income.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Our community strip portfolio continues to produce solid same-store growth of 2.2%, allowing for one asset with a failed Peavey Mart, which I'll discuss in more detail later on. Just touching on the two Bay stores that we received back in 2025, at this point, we are focusing on short-term options for these two spaces. It will take some time to sort through these former Bay tenancies at Cambridge, and we are dedicating more focus to the broader redevelopment going on at Saint Laurent rather than the specific Bay vacancy at this site for now. Notwithstanding the failure of the Bay, there are still lots of positives in the retail sector. There remains lots of good conversations involve, involving well-known national brands. It still remains expensive to construct new retail space, and hence, a lot of retailers are looking at options at existing space.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

The decline in office net operating income is primarily attributed to 84,000 sq ft in space that was returned to the landlord in two separate occasions in the last few months. These two assets were located in Ottawa and Vancouver. All of our other office assets are seeing either similar or improved occupancy from a year ago and is consistent with the general theme of companies imposing back to the office policies. We believe these two vacancies will be short-term in nature as both buildings are well-located in favorable urban areas in these two cities. Our teams are focused on leasing opportunities in these areas. Just commenting quickly on our Penn West Plaza asset. Our occupancy for this asset is still in the range of 80%, which we are pleased with.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

We are expecting net operating income for this asset to be approximately CAD 2 million higher in 2026 than 2025, all to be reflected in the final three quarters of the year. This relates to some inducements booked in 2025 to gain tenancies that have started to burn off. Our leasing teams have noticed increasing interest in tours from 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 2026 and 2027. Looking at the remainder of 2026, we do expect our retail results to remain stable.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

While we have a full year of the missing Bay income to work through, we are still seeing positive retail fundamentals, and there are some retail developments that 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 the vacancies in both Ottawa and Vancouver. Turning to financing and liquidity, the trust has CAD 61 million in liquidity at the end of the year, at the end of the quarter, which is down from CAD 68 million at the end of 2025. The trust also has CAD 218 million in unencumbered assets, along with some up-financing opportunities in 2026. The trust's interest expense declined CAD 400,000 in the first quarter of 2026, mainly due to some lower interest rates on mortgage renewals.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

So far in 2026, the trust renewed two mortgages totaling CAD 27 million, lowering the interest rate from an average of 5.4% on these mortgages to an average of 4.7% on renewal. The trust has approximately 22% of its debt as variable at the end of the quarter, which has increased slightly from 21% at the end of the year. We do expect to see some opportunities for up financing in 2026 as we are currently in discussions with a number of lenders about these mortgages, mortgage 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 looking at lending opportunities for office product.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

As mentioned in past quarters, the trust operating capital reserve has been established to be CAD 35 million in 2026, which is unchanged from 2025. This equates to CAD 8,750,000 per quarter. Actual cash spent for the quarter amounted to only CAD 3.4 million, which is typical to have a slow quarter of capital spending during the Canadian winter. Our overall occupancy level of 84.8% at March 30th, March 31st, 2026 has declined from 87.7% a year ago, due primarily to The Bay failures at Cambridge and Ottawa, in addition to the office vacancies that I mentioned previously. We do expect this percentage to start to rise in the coming quarters as additional leasing deals get booked.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

When looking at the 1 million in remaining sq ft that is coming up for renewal in the last three quarters of 2026, we do feel good about the vast majority of this space. I note that there are two retail tenants between 10,000-15,000 sq ft each, along with a 35,000 sq ft industrial that we anticipate will not be renewing. We do not anticipate that the retail vacancies will have much of an impact on our overall net operating income, and we do anticipate finding a replacement tenant for the industrial building in short order. Looking quickly at 2027 for the same tenant threshold, it is a similar story with only a couple smaller office industrial type tenants that are at risk, none of which will be overly impactful.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

As mentioned in past quarters, we are now embarking on a strategic merchandising program for Saint 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 rent roll. The current development spend in the amount of CAD 6.2 million includes build-outs for tenants such as Sephora and H&M. These are all now open, and we have 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 Saint Laurent. We are looking to announce the next phase of this project shortly, which will continue to offer traffic-generating mix of tenants to this asset.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

The trust also has had two No Frills grocery deals which have been undertaken. During the fourth quarter of 2025, a new No Frills grocery store opened at Parkland Mall in Red Deer, and we are now seeing the income for that space. This cost was CAD 1.5 million and activated previously vacant space. There is also a new No Frills opening at the center in Saskatoon, an early center, with a cost of approximately CAD 5 million. The trust believes that both of these new popular grocery options will be strong additions to these malls. The trust will also be re-tenanting the old Peavey Mart box at our open air retail asset in Airdrie.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

The new tenant will be a gym operator and will represent a combined spend of approximately CAD 1.5 million and will be quite accretive to the income of the REIT starting in 2027. 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. Most of our enclosed malls remain dominant in their geographical area, our strip malls, which are largely grocery anchored, have performed steady. Beyond our retail assets, we have high quality office buildings in 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.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

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. To join the question queue, you may press star then one on your touch-tone phone. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then the number two. Our first question comes from the line of Linda Wang from TD Cowen. Your line is open.

[Linda Wang, Analyst at TD Cowen]

Hi, everyone. This is Linda standing in for Jonathan. My first question is for the CAD 159 million convertible debenture that's maturing at the end of this year, I was wondering if you could please provide some details on the plan for this amount.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Thank you for the question. We're looking at doing a new issue for those debentures at some point later this year. It'll be at an interest rate higher than the existing rate, but we are forecasting really just to do a new issue at approximately the same amount, give or take. Yeah, we'll be monitoring the market and, you know, that'll be instructive as far as when we're gonna be doing that.

[Linda Wang, Analyst at TD Cowen]

Okay. Then, on the office vacancies in Vancouver and Ottawa that you mentioned earlier, I was wondering if you have a timeline on the backfill of those spaces. Also, specifically for the office portfolio, if there's any other similar downsizing or any material non-renewals for the remainder of the year.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

I would expect we'd be able to fill those vacancies in the next year or two. It's, you know, these are going to be, you know, pretty, pretty good areas and will be in demand, they shouldn't be open for too long. There is nothing else that we're really worried about from an office perspective. I've just mentioned a few retail tenants that will be vacating. On the office side, we feel pretty good about everything in the next year or so.

[Linda Wang, Analyst at TD Cowen]

Okay. Sounds good. Then, on the HBC locations, I believe John mentioned during the last call and you mentioned earlier that we can expect like a short-term lease. I was wondering if you have any updates specifically relating to that, and then also any updates on the long-term plan?

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Do you wanna take that, John Ginis?

[John Ginis, VP of Retail Asset Management at Morguard Real Estate Investment Trust]

Sure. Thanks, Andrew, [hang on]. With respect to Ottawa, starting there, St. Laurent, we have executed a deal to backfill the lower level of the former HBC box with Urban Behavior. They will took occupancy actually today, and they should be open and operational within a matter of three to four days. Just as a reminder, they have been an occupant of ours at the shopping center in our former Sears. They have been operating there for about four years and have performed quite well, so retaining them was through their benefit and our benefit as well. Andrew spoke in his introductory remarks that we are looking to announce re-merchandising of the former Sears premises. We'll talk about that in Q2.

[John Ginis, VP of Retail Asset Management at Morguard Real Estate Investment Trust]

For the upper level of the former Sears, we're working through a transaction right now to lease that space and again, hoping to announce that in Q2 as well. When you want to pivot to Cambridge, Cambridge 2-level space, albeit it is a single-level mall, so it's a little bit more difficult to lease both levels. We are currently working through a transaction to lease the lower portion of the former HBC space there. I can't give any specifics right now, but we're working through some documentation as we speak.

[Linda Wang, Analyst at TD Cowen]

Okay. Thanks for the details. One last question from me. On the renewal for retail space in Q1, I believe the uplifts on renewal was -9% for the enclosed regional centers and +2% for the community strip centers. I was wondering if there is any particular reason that drove this to be lower than the 20%-25% average uplifts.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Yeah. We typically see a, you know, a trend like that in the first quarter, and it's really a function of some of the Christmas, type tenancies that are coming off the rolls. You know, I would call that more temporary than anything.

[Linda Wang, Analyst at TD Cowen]

Okay. Then, I guess for the remaining, like the upcoming quarters, we can expect similar uplifts compared to 2025 then?

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

I would be expecting uplifts. I can't, it's tough to put a number to it. You know, what I would say is that I don't know that, we're not anticipating is what we're seeing in the first quarter will continue for the rest of the year, and this is more of a short-term, seasonal trend.

[Linda Wang, Analyst at TD Cowen]

Okay. Got it. That's all for me. Thank you.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Okay. Thank you.

[Operator]

There are no questions at this time. Mr. Tamlin, please continue.

[Andrew Tamlin, CFO at Morguard Real Estate Investment Trust]

Okay. Thank you, everybody, for joining the call, and we'll look forward to talking to everybody at Q2. Thank you, and enjoy the weekend.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Analysts

• Andrew Tamlin, CFO at Morguard Real Estate Investment Trust
• John Ginis, VP of Retail Asset Management at Morguard Real Estate Investment Trust
• Linda Wang, Analyst at TD Cowen