Canadian Apartment Properties REIT Q2 2026 Earnings Report

Canadian Apartment Properties REIT EPS Results

• Actual EPS: -C$0.42
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Canadian Apartment Properties REIT Revenue Results

• Actual Revenue: $246.41 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Canadian Apartment Properties REIT Announcement Details

• Quarter: Q2 2026
• Date: 8/6/2026
• Time: After Market Closes
• Conference Call Date: Friday, August 7, 2026
• Conference Call Time: 9:00AM ET

Canadian Apartment Properties Real Estate Investment Trust, or CAPREIT, is a real estate investment trust primarily engaged in the acquisition and leasing of multiunit residential rental properties located near major urban centers across Canada. The company's real estate portfolio is mainly composed of apartments and townhouses situated near public amenities. Most of CAPREIT's holdings are aimed towards the midtier and luxury markets in terms of demographic segments. The company derives nearly all of its income in the form of rental revenue from leasing its properties to tenants. The majority of this revenue comes from assets located in the Greater Toronto and Greater Montreal regions. The buildings in these areas also contain the majority of CAPREIT's total housing units.

Canadian Apartment Properties REIT Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Occupancy remained strong, with Canadian same-property physical occupancy at 97.5% in June versus a 95.3% national benchmark. Occupied average monthly rent rose 2.3% year over year, while same-property NOI increased 0.9% in the second quarter.
• Positive Sentiment: Leasing conditions showed early signs of stabilization, with the blended rent change on turnover improving to negative 1.2% in Q2 from negative 2.1% in Q1 and turning positive at 0.2% in July. Management is increasingly constructive on Toronto and expects new-lease spreads could reach inflationary levels in the first half of 2027 if current trends persist.
• Negative Sentiment: Market competition continues to require elevated incentives, which totaled CAD 4.6 million in Q2 compared with CAD 2.6 million a year earlier. Diluted FFO per unit declined 1.1% to CAD 0.654, primarily due to property dispositions and higher financing costs.
• Positive Sentiment: CAPREIT repurchased CAD 71 million of units year to date at an average price of CAD 36, well below its diluted NAV of CAD 54 per unit. Management views the NCIB as an attractive source of per-unit value creation, although future repurchases will be leverage neutral and may be funded through opportunistic sales of non-core assets.
• Neutral Sentiment: Management expects Canadian revenue growth to remain roughly flat to modestly positive, around 1% for the year, while regional conditions remain mixed. Toronto appears to be approaching balance, but Vancouver continues to absorb new supply and markets such as Calgary and Halifax also face significant deliveries.

Presentation

[Operator]

Hello, everyone. Thank you for joining us, and welcome to the Canadian Apartment Properties REIT Second Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Nicole Dolan, investor relations. Nicole, please go ahead.

[Nicole Dolan, Director of Investor Relations at Canadian Apartment Properties REIT]

Thank you, operator, and good morning, everyone. Before we begin, let me remind everyone that during our conference call this morning, we may include forward-looking statements about expected future events and the financial and operating results of CAPREIT, which are subject to certain risks and uncertainties. We direct your attention to slide two and our other regulatory filings for important information about these statements. I will now turn the call over to Brad Cutsey, President and Chief Executive Officer.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Thanks, Nicole, and good morning, everyone. Joining me today is Stephen Co, our Chief Financial Officer. Before we begin, I'd like to say that it's been a privilege to be joining you today for my first earnings call as President and Chief Executive Officer of CAPREIT. At this time, I'd also like to acknowledge my predecessor, Mark Kenney, for his many years of leadership and the significant contributions he's made to CAPREIT. While I'm still in the early stages of my tenure, the past several weeks have given me the opportunity to spend time with our people and our portfolio, and I have already been encouraged by the high quality of the platform and the depth of expertise across our organization. Together, they've reinforced my confidence in the solid foundation upon which CAPREIT is built, and I look forward to further building on that foundation in the years ahead.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

With that, let's turn to slide four and walk through some highlights from the year-to-date. From a capital allocation perspective, CAPREIT has completed approximately CAD 66 million of acquisitions and dispositions in Canada, EUR 145 million of property divestments in Europe, and the privatization of European Residential REIT for EUR 99 million, which provides us with the greater flexibility to manage the sale of the remaining European assets. We've also continued to invest in our NCIB program with CAD 71 million deployed so far this year.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Operationally, while market conditions remain pressured across the multifamily sector, CAPREIT continues to demonstrate resilience. Physical occupancy for our same-property Canadian portfolio was 97.5% on June 30th, which is meaningful above Yardi's latest quarterly average of 95.3% nationally. More recently, CAPREIT's physical occupancy as of July 31st was down slightly to 97.3%, which is consistent with the typical seasonal trend observed between June and July.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

While maintaining healthy occupancy levels, we've also achieved 2.3% growth in our same property occupied AMR year-over-year. Combined with effective cost initiatives, our Canadian same property NOI margin remains strong at 64.2% for the six months ended June 30th, 2026. Our balance sheet total debt representing 41.2% of Gross Book Value as of June 30th, 2026, which is up modestly versus the previous year, mainly due to fair value losses recognized on investment properties. Overall, these results reflect the strength of the portfolio and the team in which continues to be a challenging operating environment. That said, while market conditions remain competitive, we are beginning to see early signs that operating fundamentals may be stabilizing. In line with that, we have had several consecutive months of moderation in our loss to lease on turnovers, which we'll discuss in more detail later on in the call.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

I'd now like to spend a few minutes highlighting our capital allocation priorities. Turning to slide six, over the past several years, CAPREIT has significantly enhanced the quality of its portfolio. Today, approximately 68% of the portfolio consists of core legacy assets, of which 97% are located in rent-controlled markets. This provides stability in our rent growth profile, even in the softer operating environment, given the significant embedded mark-to-market opportunity across these assets. A further 19% of the portfolio is comprised of recently constructed communities that are expected to benefit from lower capital requirements, greater operating efficiencies, and strong long-term earnings growth potential as market fundamentals normalize. The remaining 13% of the portfolio across Canada and Europe represents the source of continued capital recycling.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

With this, we'll remain disciplined and opportunistic, selectively monetizing low cash yield on assets where value has been maximized and redeploying that capital into investments accretive to FFO per unit in the near term. In addition to optimizing the portfolio through ongoing repositioning, we've been investing in the implementation of a new ERP system in order to enhance our leasing capabilities, improve data-driven decision making, streamline processes, and support further optimization of our cost structures over time. More broadly, as I continue to assess the business over the coming quarters, I'll be evaluating the entire portfolio to ensure that every capital allocation decision supports stronger FFO per unit growth, an enhanced long-term cash flow position, and the creation of sustainable value for our unitholders. With those objectives in mind, our NCIB program continues to represent a compelling use of capital available to us in the current environment.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

You can see on slide seven that since 2022, we deployed approximately CAD 1 billion to repurchase nearly 24 million trust units at an average price of approximately CAD 43 per unit. As I mentioned earlier, June 2026, we invested approximately CAD 71 million to buy back trust units at a weighted average price of CAD 36 per unit, which represents a sizable discount to our June 30th diluted NAV of CAD 54 per unit. We believe these accretive repurchases not only create immediate value today, but also positions unitholders to benefit more fully in the value created once rental housing market fundamentals return to balance.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

That inflection is ultimately reflected in the capital markets. Going forward, we'll continue to evaluate the NCIB alongside every other capital allocation alternative and deploy funds into the program where repurchases are accretive to FFO per unit and the NAV per unit, while remaining leverage neutral.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

With that, I'll turn the call over to Stephen to walk through our operational and financial results.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Thanks, Brad. Let's start with our operating performance on slide nine. While leasing conditions remain competitive across many parts of the Canadian rental market, our operating teams executed well throughout the quarter, maintaining a disciplined focus on managing occupancy, pricing, and resident retention. As a result, you can see on the slide that for each of our three largest regions, occupancy continues to compare favorably against broader industry benchmarks, supported by our strategic use of incentives given the current environment. In our largest market of Toronto, physical occupancy was 98.4% as of June 30th, notably higher than the REIT's reported quarterly average of 95.2%. At the same time, we grew occupied AMR in Toronto by 2.1% year-over-year to CAD 1,867. This reflects the strength of our legacy portfolio alongside our ability to effectively balance occupancy and rental growth, even in today's more pressured operating environment.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

The same underlying themes are evident across a broader portfolio, with rent growth being driven by lease renewals and the substantial embedded mark-to-market opportunity that exists within our legacy portfolio, the vast majority of which is located in rent-controlled markets as Brad mentioned. Our turnover remains weighted towards shorter tenure leases that are above current market rents and continuing to reset toward today's market levels. Turning to slide 10, I'll provide an update on how that turnover dynamic evolved during the second quarter. Approximately 51% of Canadian turnover during the quarter came from residents who had occupied their suites for less than two years. These leases experienced an average decrease in monthly rent of 7.1%, an improvement from a decline of 10.8% in the first quarter.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

The remaining 49% of turnover came from residents with lease tenures of two years or longer, where we continue to achieve positive rent growth of 5.4%. As a result, our blended change in monthly rent improved to -1.2%. This compares to -2.1% in the first quarter, reflecting some moderation in the negative rent spreads we're realizing on shorter-term tenured leases. This trend continued into July, with the overall change in rent on turnover improving further to +0.2% for the month. Looking at the chart on the left of the slide, as of June 30th, approximately 31% of residents have lived in their home for less than two years, across which in-place average monthly rent is CAD 2.53 per sq ft. Within this segment, approximately 20% of the in-place rents remain more than 5% above our estimated market rents, indicating that there is still some additional normalization to work through.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

The remaining 69% of our residents have lived in their homes for more than two years. These longer-tenured leases continue to generate positive average rent uplifts on turnover, even in the current operating environment, providing an important source of stability, driving resilient overall rent growth until supply-demand fundamentals return to balance. Alongside that turnover dynamic, we continue to utilize incentives to support occupancy as you can see on slide 11. This strategy allows us to protect occupied AMR while remaining competitive against comparable offerings from our peers. In the second quarter of 2026, new residential inducements granted were CAD 4.6 million, up from CAD 2.6 million a year ago, but modestly lower than the CAD 4.8 million recorded in the first quarter.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

While there will be some moderation in the level of new incentives granted throughout the second half of the year, we expect them to remain elevated as market conditions continue to warrant a competitive leasing approach. With that, I will now briefly cover our overall second quarter financial results on slide 12. Same-property Canadian operating revenues increased by 0.8% while operating costs grew by 0.7%, driving NOI growth of 0.9% and a stable NOI margin of 66.2%. Diluted FFO per unit was CAD 0.654 compared to CAD 0.661 in the second quarter of 2025, down 1.1% primarily due to the loss of NOI from dispositions and higher financing costs, partially offset by accretive impact of trust unit repurchases under our NCIB. Looking at our year-to-date results on slide 13, same property Canadian operating revenues increased by 1%.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

With operating costs flat, our same property Canadian NOI margin was up by 0.3% to 64.2% for the six months ended June 30th, 2026. Diluted FFO per unit was CAD 1.249 for the first six months of the year, with FFO payout ratio of 62%. Finally, slide 14 summarizes our liquidity position and ladder mortgage maturity profile. As of June 30th, our mortgages had a weighted average interest rate of 3.4% and a weighted average term to maturity of 4.2 years. We also had CAD 180 million of immediate available liquidity on our acquisition and operating facility. Moving ahead, we will remain committed to reinforcing our prudent leverage profile while supporting stronger per unit earnings growth. With that, I will turn the call back over to Brad to wrap up on slide 15.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Thanks, Stephen. Before we open the line for questions, I would like to close on a few thoughts. While the near-term operating environment remains competitive, it is important to distinguish between today's market conditions and the long-term outlook for the business. The underlying fundamentals supporting Canadian rental housing remain robust. CAPREIT is well-positioned to benefit as those fundamentals reassert themselves over time. In the meantime, our focus is on disciplined execution in the areas we can control. That means continuing to direct capital towards its highest and best use on a risk-adjusted basis.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Whether that is investing through our NCIB program, strengthening sustainable capital generation, or further reinforcing the balance sheet. Importantly, every capital allocation decision will be guided by the goal of driving stronger per unit growth in FFO. As I have said throughout today's call, I continue to use it in the coming months to deepen my understanding of the platform.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

One thing has already become clear to me, CAPREIT has an exceptional team and a high-quality portfolio. I look forward to working alongside our residents, team members, leadership team, and the board of trustees to deliver on the opportunities ahead and enhance earnings per unitholders. On a final note, I'd like to remind everyone that we have rescheduled our Investor Day in Montreal to November 19th, as communicated earlier this week. This additional time will allow us to deliver a more comprehensive program and provide a meaningful opportunity to discuss CAPREIT's strategy and portfolio in more detail. We appreciate your understanding and hope to see you there. With that, operator, we'd be pleased to take your questions.

[Operator]

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonathan Kelcher with TD Cowen. Your line is open. Please go ahead.

[Jonathan Kelcher, Analyst at TD Cowen]

Thanks. Good morning.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Morning, Jonathan.

[Jonathan Kelcher, Analyst at TD Cowen]

First off, I guess the capital allocation focus looks like it is going to be mostly on the NCIB. I guess first, how comfortable are you with where leverage is right now? Would you take it up a little bit to buy back shares?

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

I think we are comfortable with where the leverage is right now, Jonathan. Over time, we would like to maybe trend that a little lower. As far as NCIB goes, we are committed to the NCIB, but on a leverage neutral basis.

[Jonathan Kelcher, Analyst at TD Cowen]

Okay. I guess that means you would be selling assets to kind of fund that. If you look at the three buckets that you have, would asset sales, is it going to be strictly the non-core bucket, or would you consider some of the either recent construction or core assets?

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

No, I think it would be the non-core. We will continue to evaluate a disposition optimistically driven by whether we believe value has been maximized on that asset.

[Jonathan Kelcher, Analyst at TD Cowen]

Okay. That's helpful. Lastly, Stephen, you talked about the inducements, maybe trend down over the back half of this year. I guess two things there. What are some of the inducements that you're offering? If we look at a level, should we be thinking sort of 1%-1.5% be a good level for inducements?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Yeah. Incentive use has trended up over the past quarters, more pronounced on the recent build than legacy. We are offering in certain locations, again, it's all dependent on competition within that building and its area, but usually it's about one month's rent. Again, it's very targeted buildings. There are some situations where we do offer two months, but a lot of it is just one month. We try to first do non-cost-bearing incentives first, before we go into actually giving actual incentives. While we knew residential incentives granted had declined slightly from Q1, we do expect them to remain elevated at levels, albeit, like I did say, moderating lower to the latter part of that last half of the year.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

We are constructive on the Ontario, particularly the GTA, which is our largest market, we're hopeful We do have good visibility around incentives we have seen moderation in July and August so far.

[Jonathan Kelcher, Analyst at TD Cowen]

Okay. That's it for me. I'll turn it back.

[Operator]

Your next question comes from the line of Jimmy Shan with RBC Capital Markets. Your line is open. Please go ahead.

[Jimmy Shan, Analyst at RBC Capital Markets]

Thanks. My first question to Brad. I know you're still in assessment mode, but I was curious as to where are you seeing sort of the biggest opportunities to create per unit value? Kind of what are the low-hanging fruits? Any color you can share from your initial assessment so far?

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Yeah. Good morning, Jimmy. It's still early days for me, but some of my initial observations point to opportunities probably in our leasing processes and streamlining some of our other operating processes. The other thing I'd maybe mention on this is also we're in the middle of our multi-year ERP implementation, which I think is going to give us a much better platform to standardize and automate things like leasing and some of those other processes that we can improve on.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. Jon referred to NCIB as your priority from a capital allocation perspective. I don't know if you'd confirm that. Is that really where you see the biggest bang for the buck today?

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

I think every dollar in capital will be allocated to the highest and best use on a risk-adjusted basis, Jimmy.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

So-

[Jimmy Shan, Analyst at RBC Capital Markets]

Where do you see that today? Yeah.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Well, it obviously depends, but if we're sitting on cash and we can do it on a leverage-neutral basis, I think our units represent a compelling investment at today's level.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. Then last, just on the turnover rent growth. The sort of improvement you've seen from Q1 to Q2, I think -10% to -7%, is that to do with market rent improving? Is that a tenant mix? I'm trying to understand. Had those same tenants turned in Q1, in Q2, would that spread be the same? Are we actually seeing some improvement in fundamentals?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Well, I think there is, just in terms of as the tenants have stayed there for the past two years and market rents have, I would say generally we have seen some stabilization in market rents. That you will see when the lease comes over, when it turns over, that number will be just naturally lower. We have seen that. Even when I look at the July numbers, the under two years we talk about it came down to We saw the Q2 number being like -7.1%, July it's improved as well. It's about -5.2%.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

I think that's a function of the market rent have become more stabilized, I think it's more that than anything else.

[Jimmy Shan, Analyst at RBC Capital Markets]

Okay. Thank you.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Thanks, Jimmy.

[Operator]

Your next question comes from the line of Matt Kornack with National Bank of Canada Capital Markets. Your line is open. Please go ahead.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Good morning, Matt.

[Matt Kornack, Analyst at National Bank of Canada Capital Markets]

Hey, guys. Morning. Maybe starting with occupancy because there was a bit of a sequential increase. Can you give us a sense, is that seasonal demand? How has it continued into kind of Q3? Obviously I think we need to see occupancy before we see rent growth, but what is the trend there in terms of demand relative to your portfolio?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Yeah, Matt, I kind of mentioned on the call we did use incentives strategically to increase occupancy. It was seasonality where the occupancy did increase, and we did show our July numbers have occupancy come down slightly, but that's more of a seasonal change between June and July. Overall, I would say at these levels, we're very comfortable with them.

[Matt Kornack, Analyst at National Bank of Canada Capital Markets]

And on-

[Stephen Co, CFO at Canadian Apartment Properties REIT]

I don't know.

[Matt Kornack, Analyst at National Bank of Canada Capital Markets]

On the incentive side. Oh, sorry. Go ahead.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

No, I was just going to say, too, we saw good leasing activity in Q2. Our conversion was a little down, which shows you how competitive the market is. There is leasing activity. Depending on which markets, specifically the GTA, we're getting quite constructive on that, Matt. As we kind of move through July and August, I'd say we're going to be in a better spot. If I had to look at the top three markets, I would say the GTA, we're quite constructive. I think Montreal is a little bit mixed. There's a little bit of new starts in rental there. It's more of an issue on the demand side. I think Vancouver is still trying to work through the absorption of the supply that's been delivered. It still remains about 4% under construction.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Until demand really comes back, the net absorption is probably going to be pushed out in Vancouver, maybe closer to late 2027, early 2028, where we're hopeful the GTA, we think we might be approaching a more balanced market in the quarters ahead.

[Matt Kornack, Analyst at National Bank of Canada Capital Markets]

Okay. No, that's interesting, and it makes sense. Maybe Stephen as well, are the turnover spreads that you provide, is that net of incentives? Because I know you had mentioned that incentives have ticked up a bit, or are those kind of the face rates?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

No, they're not. They're gross.

[Matt Kornack, Analyst at National Bank of Canada Capital Markets]

Okay. One other trend I was trying to figure out, just because, Brad, you wouldn't have the benefit of this, but you probably looked at it. Just going back, the move has actually been bigger in the greater than two-year leases in terms of that spread would've been +30% in Q4 2024, and it's down to five, although it does seem to be stabilizing at five, whereas there's been less of a move in the less than two year. That's a little confounding to me in terms of those longer duration leases. Is it that you're not renovating those suites when you're putting them back on the market, or how should we think of that dynamic?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

There are some leases that are now in the negative territory that are aging into the two to three-year mark, and as market rents have softened, some of that segment is being exposed to the rent reset as well. We have done more back-to-backs, and I think that's what we're seeing as well.

[Matt Kornack, Analyst at National Bank of Canada Capital Markets]

Okay. Fair enough. That's it for me. Thanks, Brad.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Thanks, Matt.

[Operator]

Your next question comes from the line of Kyle Stanley with Desjardins. Your line is open. Please go ahead.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Morning, Kyle.

[Kyle Stanley, Analyst at Desjardins]

Thanks. Morning, guys.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Hey.

[Kyle Stanley, Analyst at Desjardins]

Just maybe looking at kind of leasing demand, I'm wondering, are you seeing any differences or changes in demand across the kind of two buckets in your portfolio, your kind of legacy assets versus your more recent construction? I'm just wondering if you're beginning to see a bit more strength in some of the more recently delivered product, or if that hasn't changed much.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Yeah, it's a great question, Kyle. I'd say there's definitely more stabilization, stability in the legacy assets and the rent-controlled markets. We have seen being a little more competitive in the new builds. That said, we strongly believe when the market does, the fundamentals do tighten, and depending on which market we're talking about. Some of it's more constructed sooner than later, we still feel quite good about the potential of those new builds. It's just got to work through some of the absorption. Really, that absorption is really going to be dependent on demand.

[Kyle Stanley, Analyst at Desjardins]

Okay. That makes sense. Sticking with leasing spreads, with turnover and renewals in mind, where do you see the blended spreads trending through the balance of the year? You've provided some guidance into July that turnover spreads improved a bit. Trying to think about how the blended spread trends through the balance of the year and maybe into the beginning of 2027.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

For us, we think it's probably going to be modest. What we provided in July is probably a good indication of what Q3 is, we're hopeful. We're hopeful that we see some stabilization in certain markets, as Brad has already indicated. I don't want to jump the gun on that too early right now.

[Kyle Stanley, Analyst at Desjardins]

Okay, noted. On the operating cost efficiencies that you highlighted, the other OpEx line was down 1.5% year-over-year this quarter. Wondering if you can talk through what some of those operating efficiencies actually were that drove that, do you expect to be able to maintain a similar level of year-over-year OpEx inflation through the balance of the year? Taking in mind the seasonal fluctuations that you expect in the winter months.

[Stephen Co, CFO at Canadian Apartment Properties REIT]

You've seen some improvements in our other OpEx line. We've talked about in prior calls, it's getting very good at tendering, inviting new vendors and having a very good tendering process where bids are blind, having that competition with your vendors. All of that is translating to better, flat to slightly declining R&M costs within that line. I think we can probably see that going forward for the balance of the year.

[Kyle Stanley, Analyst at Desjardins]

Okay. Thank you for that. I will turn it back.

[Operator]

Your next question comes from the line of Brad Sturges with Raymond James. Your line is open. Please go ahead.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Good morning, Brad.

[Brad Sturges, Analyst at Raymond James]

Morning. Just sticking to the slide 10 on the leasing spreads. Just curious, obviously, you've highlighted for a few quarters here the amount of churn, I guess, in the newer short-duration leases. Is there any green shoots where the turnover in that segment is starting to moderate a bit, or is it simply that the improvement of leasing spreads is more a function just on the market rent growth, as you suggested?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

I think we said this in terms of we have seen moderation in terms of market rents. As we go through that cohort of leases that are still negative, it will take us time. I think it will probably take us about 18 to 20 months. I do think that the one-year leases are now just very close to market. As we get through that, the legacy portfolio, that large embedded mark-to-market on the 2+ years, you are going to really see that come through as we work through the rest of that 20%, you could say, 20% of those rents that are still above market.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

The other thing I would like to add to Stephen's point is it also is dependent on where market rents are headed, obviously. Not all markets are treated equally. Like we've said, we are quite constructive on the Toronto, Ottawa, Edmonton, Victoria markets, where we are still a little mixed. The jury's still out in Calgary and Halifax as far as there is a lot of supply that has been delivered in Calgary. We will see how if the infrastructure spending continues to drive inter-migration there, I think Calgary is really set up quite nicely. While Halifax has performed quite strong as a market, and it will likely continue with all the defense spending to be had in Halifax, there is a lot of supply being delivered there. You got to kind of balance that with, okay, these are today's estimate of the mark-to-market.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Our biggest market, being Toronto, we are getting quite constructive on. Market could be moving.

[Brad Sturges, Analyst at Raymond James]

No, that is quite helpful. As you are going through your assessment process and you are streamlining some processes, I think you touched on the operating expense side. Just how should we think about from a G&A perspective on the back half of the year? Where would you guide for now on G&A as a run rate?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Yeah. Just in terms of G&A, you can see in our MD&A, I think we're running about, excluding all the severance costs and whatnot, about 4%. I think it's going to be in and around that range. We're comfortable with that for the balance of the year.

[Brad Sturges, Analyst at Raymond James]

Perfect.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Brad, I apologize. I think I called you Kyle. I don't know how I got that name mixed up. I apologize, Brad.

[Brad Sturges, Analyst at Raymond James]

I'll give you a pass this time. Thanks.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

I appreciate it. Thank you. It won't happen again.

[Operator]

Your next question comes from the line of Mario Saric with Scotiabank. Your line is open. Please go ahead.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Good morning, Mario.

[Mario Saric, Analyst at Scotiabank]

Thank you. Good morning. Just coming back to the revenue side of the equation. I think three months ago, we were looking at potentially kind of 2026 revenue in the 1%-2% range. Q2 was a bit lighter than that. Do you have an updated forecast or updated thoughts in terms of where that may end in the back half of the year?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Yeah, I think we're probably going to see, in terms of revenue, relatively flat as compared to the first six months of the year, as you see in the MD&A.

[Mario Saric, Analyst at Scotiabank]

Okay. For the full year also, you're thinking that it's going to be kind of flattish? 1%?

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Yeah. I think it's about 1%. Yeah.

[Mario Saric, Analyst at Scotiabank]

Yeah. Okay. Then the commentary on the Toronto market starting to look pretty interesting. You're overweight the Toronto market, obviously. When do you think new lease spreads can approach inflationary levels? Do you think we need to wait until the spring leasing season in 2027? Could it happen before that? Does it take longer than that? What are your thoughts there?

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Yeah. I think it's definitely sometime in 2027. If the last couple of months and what we're seeing today continues to hold, Mario, I'm hopeful that this is a first half 2027 event.

[Mario Saric, Analyst at Scotiabank]

Just maybe shifting to capital allocation. You're tying the NCIB activity to dispositions in the past. CAP has put out kind of target annual dispositions. A lot of the heavy lifting has been done. Is that something you're considering doing today, or if not today, later on once you've had a chance to go through the entire portfolio? I'm just trying to get a sense of any visibility on the potential disposition side, which may impact the volume of the share buyback.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Sure. Yeah, no. Short answer is no, Mario. We'll continue to evaluate dispositions opportunistically. It'll really be driven by whether we believe value has been maximized on the asset.

[Mario Saric, Analyst at Scotiabank]

Nice. Okay. Just maybe the last one for you, Brad. In looking at kind of the key priorities that were highlighted in the report to unitholders, they look on the surface fairly consistent with what we've seen recently. Are there any kind of notable expected shifts in strategy on your end or points of emphasis kind of relative to what we've seen over the past couple of years that you'd like to highlight now, or is it still too early to kind of go through that?

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Let me caveat this with the points that I'm still pretty early on in the job, and I'm still in exploratory mode, Mario. I'm trying to spend a lot of time meeting the team and going and seeing the assets. I would like to say that I really do believe the team's done an excellent job over the past couple of years, and there's been a lot of the heavy lifting with the reposition of the portfolio, kind of enhancing the overall quality. I do think, as I mentioned earlier, there could be some low-hanging fruit, and specifically when it comes to things like the leasing and some other streamlining of processes, which I do believe should help drive organic growth. Those are some earlier on things. As far as major strategic shifts, at first, what I'm seeing today, I'm happy with what I'm seeing today.

[Mario Saric, Analyst at Scotiabank]

That's great. Yeah. Makes sense. Great. Thank you.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Thanks, Mario.

[Operator]

Your next question comes from the line of Dean Wilkinson with CIBC. Your line is open. Please go ahead.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Morning, Dean.

[Dean Wilkinson, Analyst at CIBC]

Thank you,

[Stephen Co, CFO at Canadian Apartment Properties REIT]

Dean.

[Dean Wilkinson, Analyst at CIBC]

Morning, Brad. Welcome back.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Thank you. Happy to be back.

[Dean Wilkinson, Analyst at CIBC]

You and Kyle, just go back to your prior life, and obviously different circumstances, but you sort of had a proclivity to let the vacancy build a little in a view of sort of capturing a higher growth rate going forward. Are you looking at that differently now, or is maintaining the occupancy more a function of having some newer assets? Just what are your thoughts around that, and has your approach to that changed?

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Yeah. I think if you're asking if this is InterRent 2.0, the answer is no. I think we'll have more to kind of disclose as far as the go forward on the strategy and how we're going to approach things. I think we're really excited to host you in Montreal in November, I think we can get into more details on that.

[Dean Wilkinson, Analyst at CIBC]

Okay. Well, we look forward to November. Thanks, guys.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Great. Thanks, Dean.

[Operator]

We have reached the end of the Q&A session. I will now turn the call back to Brad Cutsey for closing remarks.

[Brad Cutsey, President and CEO at Canadian Apartment Properties REIT]

Great. Thank you. I'd like to thank everybody for your time today. If you have any further questions, please do not hesitate to contact us at any time. Thank you again. Have a great day.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Nicole Dolan, Director of Investor Relations
• Brad Cutsey, President and CEO
• Stephen Co, CFO

Analysts

• Jonathan Kelcher, Analyst at TD Cowen
• Jimmy Shan, Analyst at RBC Capital Markets
• Matt Kornack, Analyst at National Bank of Canada Capital Markets
• Kyle Stanley, Analyst at Desjardins
• Brad Sturges, Analyst at Raymond James
• Mario Saric, Analyst at Scotiabank
• Dean Wilkinson, Analyst at CIBC