Plaza Retail REIT Q1 Earnings Call Highlights

Key Points

• Plaza Retail REIT posted solid Q1 growth, with net operating income up 2.5% to CAD 18.8 million and FFO increasing 11.7% year over year to CAD 10.9 million. Occupancy stayed very high at 97.5% committed, with open-air centers near 99% occupied.
• Leasing spreads remain a major growth driver, as negotiated spreads came in at 13.4% and new leasing spreads hit 76.1%. Management said the gap between in-place rents and market rents still offers room for strong rent growth over the next few years.
• The balance sheet continued to improve, with debt-to-assets falling to 49.5% and net debt-to-adjusted EBITDA easing to 8.8x. Plaza also refinanced higher-cost debentures with lower-rate mortgages, which should help reduce interest expense going forward.

Plaza Retail REIT TSE: PLZ.UN reported higher first-quarter funds from operations and continued occupancy strength as management pointed to resilient demand for essential-needs retail space and embedded rent growth across its portfolio.

On the company’s first-quarter 2026 earnings call, President and Chief Executive Officer Jason Parravano said the REIT entered the year “from a position of strength,” supported by stable tenant demand, limited new supply in many of its markets and ongoing optimization and intensification efforts within its existing portfolio.

“At a high level, nothing about our strategy has changed, and that's intentional,” Parravano said. He said Plaza remains focused on “optimization and intensification within our existing portfolio,” supported by an internal operating platform that allows the company to move quickly and allocate capital efficiently.

NOI Rises as Occupancy Remains Near Full

Plaza reported net operating income of CAD 18.8 million for the quarter, up 2.5% from a year earlier. Same-asset NOI increased 1.9%.

Parravano said the growth was being driven primarily by same-asset NOI expansion, leasing spreads and incremental contributions from projects advanced over recent quarters. He noted that the REIT delivered the growth even after disposing of approximately CAD 25 million of income-producing properties in 2025.

Committed occupancy remained stable at 97.5%, while same-asset occupancy was 97.1%. Excluding enclosed malls, occupancy was approximately 99%, which Parravano said underscored the tight availability within the portfolio.

“In many of our markets, there simply isn't new supply coming online,” Parravano said. “When space does become available, we're seeing strong interest and the ability to push rents.”

Leasing Spreads Point to Rent Growth Opportunity

Leasing activity was a central theme of the call. Parravano said negotiated leasing spreads were approximately 13.4% over the lease term in the quarter, while new leasing spreads reached 76.1%.

He said those results show there is still a meaningful gap between in-place rents and market rents across the portfolio, particularly in well-located open-air centers with strong anchors.

In response to a question from Canaccord Genuity analyst Mark Rothschild about whether double-digit leasing spreads are sustainable, Parravano said he believes that pace is achievable for the next few years. He said market rents on open-air strips are in the mid-CAD 20s, while average rents in Plaza’s open-air strip portfolio are in the mid-teens.

Parravano said Plaza can unlock value on expiries and in cases where tenants have fair-market-value renewal options. Asked whether that could support same-property NOI growth above 2%, he said he would “like to think so,” with a goal of achieving closer to 3%.

FFO Increases, AFFO Flat Amid Project Spending

Chief Financial Officer Jim Drake said FFO increased 11.7% year-over-year to CAD 10.9 million, or CAD 0.098 per unit. On a normalized basis, adjusting for timing-related items including accrued bonuses in the current quarter and reorganization costs in the prior year, FFO per unit would have increased almost 16% to CAD 0.102.

AFFO was essentially flat at CAD 8.3 million compared with the prior year. Parravano said AFFO reflected higher leasing activity and maintenance capital expenditures tied to the company’s strategy.

“We're making those investments deliberately because they support higher rental spreads, improve asset quality, and ultimately drive longer term cash flow,” Parravano said.

Drake said normalized AFFO per unit would have increased 7.1% after adjusting for the same timing-related items and prior-year reorganization costs. Excluding leasing costs for material optimization projects and those timing-related items, AFFO per unit would have increased 16% year-over-year.

During the question-and-answer portion, management said the accrued bonus timing reflects a change in administration and structure. The company said investors should expect the accrual to occur in the first quarter going forward, rather than in the second quarter as in the past.

Balance Sheet Metrics Improve

Drake said Plaza’s debt ratios continued to improve. Debt to assets declined 100 basis points from the prior year’s first quarter to 49.5%, excluding land leases. Net debt to adjusted EBITDA was 8.8 times, down 40 basis points from a year earlier.

The REIT repaid CAD 12 million of convertible debentures at maturity on March 31. Drake said the 5.95% coupon on those debentures was replaced with mortgages at a weighted average rate of approximately 5%, which is expected to reduce related interest expense going forward.

Plaza has CAD 45 million of fixed-rate mortgages maturing over the remainder of 2026 at a weighted average rate of 3.7%, with overall loan-to-value under 40%. Drake said the company continues to see strong interest in its mortgage offerings, with current all-in rates ranging from the mid-4% to mid-5% area.

The REIT also recorded a CAD 2 million fair value write-up on investment properties during the quarter, reflecting new appraisals and minor capitalization rate compression. Its weighted average cap rate is now 6.79%.

Development, Dispositions and Leasing Pipeline

Parravano said Plaza is beginning to see contributions from projects delivered in late 2025 and early 2026, with additional projects still in lease-up or under construction. He said the full earnings impact should become more visible through the rest of 2026 as tenants open and stabilize.

The company owns approximately 190 properties totaling about 8.8 million square feet across Canada, with a concentration in open-air centers and small-box formats. Parravano said the portfolio is predominantly leased to national tenants serving essential-needs, value and convenience segments.

In response to a question from Desjardins analyst Lorne Kalmar about a Toys “R” Us departure, Parravano said Plaza is working on a temporary deal to fill the space for a couple of months in the fall and is also working on a lease with a new tenant. He said the company has a backup tenant if that lease does not move forward and expects some straight-line rent to come in during the fourth quarter.

Asked about portfolio optimization, Parravano said Plaza is actively working on selling properties at a pace similar to last year. He said proceeds would support optimization, development and intensification initiatives, as well as consolidation opportunities. The company is working on a couple of consolidation opportunities that may require CAD 5 million to CAD 10 million of equity between now and year-end.

On the Wellen development, Parravano said Plaza has been handing over space to tenants and is now closer to 80% leased, compared with about two-thirds previously. He said the project could be 85% to 90% leased by the time it is fully completed, based on leases in circulation and ongoing pre-leasing discussions.

Looking ahead, Parravano said Plaza’s priorities remain consistent: continuing optimization and intensification projects already underway, capturing leasing spreads where there is mark-to-market opportunity and allocating capital toward the highest-return opportunities in the pipeline.

About Plaza Retail REIT TSE: PLZ.UN

Plaza Retail REIT is an open-ended real estate investment trust and is a retail property owner and developer, focused on Ontario, Quebec and Atlantic Canada. Plaza's portfolio includes interests in approximately 268 properties totaling approximately 8.6 million square feet across Canada and additional lands held for development. Its portfolio largely consists of open-air centres and stand-alone small box retail outlets and is predominantly occupied by national tenants.

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