Canadian Apartment Properties REIT Stock

Hello, everyone. Thank you for joining us, and welcome to the Canadian Apartment Properties REIT Second Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Nicole Dolan, Investor Relations. Nicole, please go ahead.

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 2 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.

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 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 the organization. Together, they reinforce the confidence in the solid foundation upon which CAPREIT is built, and I look forward to further building on that foundation in the years ahead.

With that, let's turn to Slide 4 and walk through some highlights from the year-to-date. From a capital allocation perspective, CAPREIT has completed approximately $66 million of acquisitions and dispositions in Canada, $145 million of property divestments in Europe and privatization of European residential REIT for $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 $71 million deployed so far this year.

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 30, which is meaningful above Yardi's latest quarterly average of 95.3% nationally. More recently, CAPREIT's physical occupancy as of July 31 was down slightly to 97.3%, which is consistent with the typical seasonal trend observed between June and July.

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 remained strong at 64.2% for the 6 months ended June 30, 2026.

Our balance sheet total debt represented 41.2% of gross book value as of June 30, 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 turnover, which we'll discuss in more detail later on in the call.

I'd now like to spend a few minutes highlighting our capital allocation priorities.

Turning to Slide 6. 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 the 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 a source of continued capital recycling. With this, we'll remain disciplined and opportunistic, selectively monetizing low cash yielding 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 structure 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 and 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.

You can see on Slide 7 that since 2022, we deployed approximately $1 billion to repurchase nearly 24 million trust units at an average price of approximately $43 per unit. And as I mentioned earlier, during 2026, we invested approximately $71 million to buy back trust units at a weighted average price of $36 per unit, which represents a sizable discount to our June 30 diluted NAV of $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, and that inflection is ultimately reflected in the capital markets.

Going forward, we'll continue to evaluate the NCIB alongside any other capital allocation alternative and deploy funds into the program where repurchases are accretive to FFO per unit and NAV per unit while remaining leverage neutral.

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

Thanks, Brad. Let's start with our operating performance on Slide 9. 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 3 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 30, notably higher than Yardi's reported quarterly average of 95.2%. At the same time, we grew occupied AMR in Toronto by 2.1% year-over-year to $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.

The same underlying themes are evident across the 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. However, our turnover remains weighted towards shorter tenure leases that are above current market rents and continuing to reset towards 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 the suites for less than 2 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. The remaining 49% of turnover came from residents with lease tenures of 2 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 negative 1.2%. This compares to negative 2.1% in the first quarter, reflecting some moderation in the negative rent spreads we're realizing on shorter-term tenure leases. This trend continued into July with the overall change in rent on turnover improving further to positive 0.2% for the month.

Looking at the chart on the left of the slide, as of June 30, approximately 31% of residents have lived in their home for less than 2 years, across which in-place average monthly rent is $2.53 per square foot.

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. The remaining 69% of our residents have lived in their homes for more than 2 years. These longer tenure 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 $4.6 million, up from $2.6 million a year ago, but modestly lower than the $4.8 million recorded in the first quarter. 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'll 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 $0.654 compared to $0.661 in the second quarter of 2025, down 1.1%, primarily due to the loss 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%. With operating costs flat, our same-property Canadian NOI margin was up by 0.3% to 64.2% for the 6 months ended June 30, 2026. Diluted FFO per unit was $1.249 for the first 6 months of the year with FFO payout ratio of 62%.

Finally, Slide 14 summarizes our liquidity position and laddered mortgage maturity profile. As of June 30, 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 $180 million of immediate available liquidity on our acquisition and operating facility.

Moving ahead, we remain committed to reinforcing our prudent leverage profile, while supporting stronger per unit earnings growth.

With that, I'll turn the call back over to Brad to wrap up on Slide 15.

Thanks, Stephen. Before we open the line for questions, I'd like to close with a few thoughts. While the near-term operating environment remains competitive, it's 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, and 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, whether that's investing through our NCIB program, strengthening sustainable cash flow generation or further reinforcing the balance sheet. Importantly, every capital allocation decision will be guided by the goal of driving stronger per unit growth and FFO.

As I've said throughout today's call, I continue to use in the coming months to deepen my understanding of the platform. But one thing has already become clear to me, CAPREIT has an exceptional team and a high-quality portfolio. And 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 for unitholders.

On a final note, I'd like to remind everyone that we have rescheduled our Investor Day in Montreal to November 19, 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.

Your first question comes from the line of Jonathan Kelcher with TD Cowen.

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

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

Okay. And then I guess, so that means you'd be selling assets to kind of fund that. And if you look at the 3 buckets that you have, would asset sales -- are they going to be strictly the noncore bucket? Or would you consider some of the either recent construction or core assets?

No, I think it will be the noncore, and we'll continue to evaluate our disposition opportunistically driven by whether we believe value has been maximized on the asset.

Okay. That's helpful. And then lastly, Stephen, you talked about the inducements to maybe trend down over the back half of this year. I guess 2 things there. Like what are some of the inducements that you're offering? And if we look at a level, should we be thinking sort of 1% to 1.5% would be a good level for inducements?

Yes. So incentive use has trended up over the past quarters, like more pronounced on the recent build than legacy. We are offering in certain locations, again, all dependent on competition within that building and its area. But usually, it's about 1 month's rent. And again, it's very targeted buildings. There are some situations where we do offer 2 months, but a lot of it is just 1 month. And we try to first do non-cost-bearing incentives first before we go into actually giving actual incentives.

So while we -- new residential incentives rents have declined slightly from Q1, we do expect them to remain elevated at levels, albeit like I did say, like moderating lower to the latter part -- I mean the last half of the year. We are constructive on the Ontario, particularly the GTA, which is our largest market, and we're hopeful we can actually -- but we do have good visibility around incentives, and we have seen moderation in July and August so far.

Your next question comes from the line of Jimmy Shan with RBC Capital Markets.

So 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?

Yes. It's still early days for me, but some of my initial observations point to opportunities probably in our leasing processes and streamline some of our other operating processes. The other thing I'd maybe mention on this is also we're in the middle of our multiyear 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.

Okay. And then John 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?

I think we'll continue to -- yes, I think every dollar of capital will be allocated to the highest and best use on a risk-adjusted basis, Jimmy.

And where do you see that today? Yes.

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.

Okay. Okay. And then last, just on the turnover rent growth. The sort of improvement you've seen from Q1 to Q2, I think minus 10% to minus 7%. Is that to do with market rent improving? Is that a tenant mix? I'm trying to understand like how those same tenants turn in Q1 and Q2, would that spread be the same? Like are we actually seeing some improvement in fundamentals?

Well, I think there is -- just in terms of like as the tenants have stayed there for the past 2 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. So we have seen that. Even when I look at the July numbers, the under 2 years, we talk about -- it came down to about -- like we saw the Q2 number being like 7.1% negative. And then July, it's improved as well. It's about 5.2% negative. So I think that's a function of the market rents have come -- become more stabilized. And then I think it's more bad than anything else.

Your next question comes from the line of Matt Kornack with National Bank of Canada Capital Markets.

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? And 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?

Yes. I mean, Matt, we -- I mean, 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 has come down slightly, but that's more of a seasonal change between June and July. But overall, I would say at these levels, we're very comfortable with them.

And on --

On the incentive side -- sorry, go ahead.

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. But there is leasing activity. And depending on which market, specifically the GTA, we're getting quite constructive on that, Matt. So as we kind of move through July and August, I'd say we're going to be in a better spot. But if I had to look at the top 3 markets, I would say the GTA were quite constructive.

I think Montreal is a little bit mixed. There's a little bit of new starts in rental there, and it's more of an issue on the demand side. And I think Vancouver is still trying to work through the absorption of the supply that's been delivered and it still remains about 4% under construction. So 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 with the GTA, we think we might be approaching a more balanced market in the quarters ahead.

Okay. That's interesting, and it makes sense. Maybe, Stephen as well, are the turnover spreads that you provided, is that net of incentives? Because I know you had mentioned that incentives have picked up a bit? Or are those kind of the base rates?

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

Okay. And is that why -- I mean, 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. But just going back, the move has actually been bigger in the greater than 2-year leases in terms of that spread would have been plus 30% in Q4 '24, and it's down to 5%, although it does seem to be stabilizing at 5%, whereas there's been less of a move in the less than 2 year. Is that -- I mean, I'm just -- that's a little confounding to me like 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?

Like so there are like -- there are some leases that are now in the negative territory that are aging into the 2- to 3-year mark. And as market rents have softened, some of that segment is being exposed to the rent reset as well. So we have done more back-to-back. And I think that's what we're seeing as well.

Your next question comes from the line of Kyle Stanley with 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 2 buckets in your portfolio, your kind of legacy assets versus your more recent construction? I'm just wondering if you're seeing -- beginning to see a bit more strength in some of the more recently delivered product or if that hasn't changed much?

Yes. It's a great question, Kyle. I think there's definitely more stabilization, stability in the legacy assets, which -- and the rent control markets. We have seen being a little more competitive in the new build. 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 is more disrupted sooner than later. But we still feel quite good about the potential of those new builds. It's just got to work through some of the absorption. But really, that absorption is really going to be dependent on demand.

Okay. That makes sense. Just kind of sticking with leasing spreads. So with kind of turnover and renewals in mind, where do you see the blended spreads trending through the balance of the year? Obviously, you provided some kind of guidance into July that turnover spreads improved a bit. But just trying to think about how the blended spread trends through the balance of the year and maybe into the beginning of '27.

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

Okay. Noted. Just on the kind of operating cost efficiencies that you highlighted, obviously, the kind of other OpEx line was down 1.5% year-over-year this quarter. Just wondering if you can talk through what some of those operating efficiencies actually were that drove that? And then do you expect to be able to maintain a similar level of kind of year-over-year OpEx inflation through the balance of the year, obviously, taking in mind the kind of seasonal fluctuations that you expect into the winter months?

Yes. So I mean, like you've seen some improvements in our other OpEx line. I mean, it's -- we've talked about in prior calls. It's really just getting very good at tendering and inviting new vendors and just having a very good tendering process where bids are blind and just having that competitive competition with your vendors. So all of that is just translating to better -- I would say, flat to slightly declining R&M costs within that line. And I think we can probably see that going for the balance of the year.

Your next question comes from the line of Brad Sturges with Raymond James.

Just sticking to the Slide 10 on the leasing spreads. Just curious, the -- obviously, you've highlighted for a few quarters here that 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 in leasing spreads more a function just on the market rent growth as you suggest?

Yes. I mean, I think we said this in terms of we have seen a moderation in terms of market rents. And 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, but I do think that the 1-year leases are now just very close to market. And as we get through that, the legacy portfolio, that large embedded mark-to-market on the 2-plus years, you're going to really see that come through as we kind of work through that -- the rest of that, you could say, 20% of those rents that are still above market.

The other thing I'd like to add to Stephen's point is it also dependent on where market rents are headed, obviously. And not all markets are treated equally. And like we've said, we're quite constructive on the Toronto, Ottawa, Edmonton, Victoria market. We're still a little mixed. So the jury is still kind of out in Calgary and Halifax as far as there's some supply -- a lot of supply that's been delivered in Calgary. We'll see how the infrastructure spending continues to drive inter migration there, then I think Calgary is really set up quite nicely.

And 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, Kyle. So you've got to kind of balance that with, okay, these are today's estimate of the mark-to-market. But our biggest market being Toronto, we're getting quite constructive on. So the market could be moving.

Okay. That's quite helpful. And as you're going through your assessment process and you're streamlining some processes, I think you touched on like the operating expense side. Just how should we think about from a G&A perspective on the back half of the year? Like what would you guide for now on G&A as a run rate?

Yes. I mean 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 one-off about 4%. I think it's going to be in and around that range, and we're comfortable with that for the balance of the year.

Perfect.

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

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

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

Your next question comes from the line of Mario Saric with Scotiabank.

Just coming back to the revenue side of the equation. I think 3 months ago, we're looking at potentially kind of '26 same-store revenue in the 1% to 2% range. Q2 is a bit wider 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?

Yes. I think we're probably going to see in terms of revenue relatively flat as compared to the first 6 months of the year as you see in the MD&A.

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

Yes. I mean I think it's about 1%, yes. Yes.

Okay. And then the commentary on the Toronto market starting to look pretty interesting. You overweight 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 '27? Could it happen before that? Does it take longer than that? What are your thoughts there?

Yes. 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.

Okay. And then just maybe shifting to capital allocation. You're tying the NCIB activity 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? Just trying to get a sense of any visibility on the potential disposition side, which may impact the volume of the share buyback.

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

Got it. Okay. And then just maybe last one for you, Brad. 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?

Well, let me caveat this with the point that I'm still fairly early on in the job. 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. But I would like to say that I really do believe the team has done an excellent job over the past couple of years, and there's been a lot of the heavy lifting with the repositioning 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. So those are some earlier on things. But as far as major strategic shifts, at first, what I've seen today, I'm happy with what I've seen today.

Your next question comes from the line of Dean Wilkinson with CIBC.

Brad, welcome back?

Happy to be back.

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? Or just what are your thoughts around that? And has your approach to that changed?

Yes. I think if you're asking if this is InterRent 2.0, the answer is no. And 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, and I think we can get into more details on that.

Okay. We'll look forward to in November.

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

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

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

Good afternoon, everyone, and welcome to the Annual Meeting of Unitholders of Canadian Apartment Properties Real Estate Investment Trust. My name is Dr. Gina Parvaneh Cody. I am the Chair of the Board of Trustees of CAPREIT, and I will act as Chair of today's meeting.

Before I proceed, I would like to thank our unitholders who are able to join us virtually for today's meeting. Before we begin, please be aware that certain information to be presented or discussed today may be forward-looking. When you logged in to the webcast, I refer you to the cautionary note on the presentation slide. The cautionary note applies to our presentation and discussion this afternoon.

I will begin by introducing Mark Kenney, a member of the Board of Trustees and President and Chief Executive Officer, who will be speaking today. As previously announced, Mark will be retiring as President and Chief Executive Officer, at which time he will also step down from the Board of Trustees, effective July 2, 2026. Brad Cutsey will succeed Mark as President and Chief Executive Officer, and it is intended that he will join the Board on the same date.

Before proceeding further, on behalf of the Board, I want to recognize Mark for his many years of dedicated service, the stewardship and commitment to CAPREIT. Under Mark's leadership, CAPREIT has undergone significant growth and change and his contributions will have a lasting impact on the organization. We are very thankful for everything he has given to CAPREIT, and we wish him all the very best.

The format for today's meeting will be divided into 2 parts. First, I will deal with the formal aspects of the meeting, following which there will be a management presentation by Mark Kenney. At the end of that presentation, we will address questions from registered unitholders and proxyholders. Such questions may be submitted through the question tab provided on the virtual meeting platform. And unitholders also had an opportunity to submit questions via e-mail in advance of today's meeting. Though we may not have time to answer every question, we will do our best to provide a response to as many as possible during the meeting. In the unlikely event that we do not address your question during the meeting, CAPREIT will communicate with you after the meeting if you have provided your contact information.

I will now begin with the formal part of the meeting. I now call the meeting to order. With the consent of the meeting, Elise Lenser, CAPREIT's Secretary, will act as Secretary of the meeting; and Melissa Phillips of Computershare Trust Company of Canada will act as a scrutineer for today's meeting. The Secretary has advised me that we received the affidavit of mailing from Computershare confirming that the notice calling the meeting and related material were provided to unitholders of record on the record date for the meeting. With the consent of the meeting, I will dispense with the reading of the notice calling the meeting. The Secretary has advised me that a quorum is present for the meeting based on unitholders we know to be in attendance, including by proxy and documented in the preliminary report of the scrutineers. A final report will be prepared and filed as part of the record of the meeting. On this basis, I declare the meeting to be properly constituted for the transaction of business.

On behalf of the Board, I thank those unitholders who have joined us today. Voting results for resolutions to be voted on today will be formally announced by press release following the meeting. For the purposes of today's meeting, voting on all matters will be conducted by a single electronic ballot. Registered unitholders and proxyholders of record can use the electronic ballot feature available on your screen. You are encouraged to complete your electronic ballot during the allotted time prior to the end of the formal portion of today's meeting.

If you voted in advance of the meeting and you do not wish to revoke your previously submitted proxy, then you do not need to vote during the meeting. If during the course of the meeting, we encounter any technical difficulties with the webcast, please remain logged on, and we will resume as soon as practicable. Based on reporting by the scrutineers, the designated proxyholder for the meeting is holding proxies demonstrating voting in an abundance of favorability for all matters to be voted on. Accordingly, we will try to move through the formal meeting items quickly. To make the best use of our time, we have designated unitholders that will move and second each of the meeting matters.

The polls are now formally open for electronic voting. Voting will close once all resolutions have been formally dealt with. Once voting closes, the scrutineers will tabulate the results of the vote for each matter.

The first item of business is the presentation of the consolidated financial statements of CAPREIT for the year ended December 31, 2025, and the related auditor's report. A copy of the financial statements was provided to those unitholders who requested them and the financial statements are available electronically on CAPREIT's website and SEDAR+. Unitholders are not being asked to take any action regarding the financial statements. But if any unitholder has questions relating to the financial statements, they may be sent to CAPREIT's Investor Relations team by e-mail to [email protected].

Before proceeding with the election of trustees, I would like to recognize Mrs. Lori-Ann Beausoleil, who is retiring from the Board. We thank Mrs. Beausoleil for her contributions and service during her tenure, including her leadership of the Audit Committee, where her financial acumen supported strong oversight, discipline and accountability. This past November, we were excited to have welcomed Mrs. Francine Moore to CAPREIT's Board of Trustees. Mrs. Moore brings with her extensive real estate experience and financial expertise that will be an incredible benefit to CAPREIT moving forward.

We will now proceed with the election of trustees. The management information circular sets out information for the 9 nominees for election to the Board. Since I am advised that no further nominations were received by CAPREIT prior to the advanced notice deadline in CAPREIT's advanced notice policy, the following are the 9 trustee nominees. Myself, Gina Parvaneh Cody, Mark Kenney, Gervais Levasseur, Francine Moore, Ken Silver, Jennifer Stoddart, Elaine Todres, René Tremblay, David Wesik.

The Toronto Stock Exchange requires trustees to be voted on individually. Consistent with this requirement, unitholders have been provided with the opportunity to vote or withhold their vote for each nominee on an individual basis. In addition, and consistent with CAPREIT's commitment to good governance practices, the Board has adopted a majority voting policy. Under that policy, a trustee is required to tender his or her resignation if he or she is elected with more votes withheld than are cast in favor of his or her election. Based on the proxies received for the election of trustees, none of the nominees will have to tender their resignation under CAPREIT's majority voting policy. In light of this, I propose that we proceed with a motion to elect the nominees. May I have a motion for the election of trustees.

My name is Stephen Co. I am the Chief Financial Officer and a beneficial unitholder and proxyholder of CAPREIT. Chair, I move for the election of the 9 nominees as trustees.

My name is Jenny Chou. I am the Senior Vice President, Asset Management and a beneficial unitholder and proxyholder of CAPREIT. Chair, I second the motion.

Thank you. We will now vote for the election of trustees. Any registered unitholder or duly appointed proxyholder who has not yet voted or who wishes to change their vote with respect to the election of trustees may do so now by clicking on the "Vote Here" button on the virtual meeting platform and following instructions.

We will now proceed with the appointment of auditors and the authorization of the Board to fix their remuneration. The trustees on the recommendation of the Audit Committee propose that Ernst & Young LLP be appointed as the auditors of CAPREIT and that the trustees be authorized to fix their remuneration. May I have a motion for such appointment and authorization.

I so move.

I second the motion.

Thank you. We will now vote for appointment of auditors. Any registered unitholder or duly appointed proxyholder who has not yet voted or who wishes to change their vote with respect to the appointment of the auditor may do so now by clicking on the "Vote Here" button on the virtual meeting platform and following the instructions.

The next item of business is to hold a nonbinding advisory vote on CAPREIT's approach to executive compensation. The full text of the advisory resolution is set forth in the management information circular. Since the vote is advisory, it will not be binding on the Board, but the Board will take into account the results of the vote when considering future compensation policies and decisions. I will now ask for a motion to be made to approve the resolution to hold a nonbinding advisory vote on the approach to executive compensation as set out in the management information circular.

I so move.

I second the motion.

Thank you. We will now vote on the nonbinding advisory vote on CAPREIT's approach to executive compensation. Any registered unitholder or duly appointed proxyholder who has not yet voted or who wishes to change their vote with respect to the resolution to hold a nonbinding advisory vote on the approach to executive compensation may do so now by clicking on the "Vote Here" button on the virtual meeting platform and following the instructions.

Now that everyone has had the opportunity to vote, I now declare the polls closed. Based on the preliminary voting results received from the scrutineers, the voting results for each item of business show an abundance of favorability. Accordingly, each of the motions are carried. Therefore, I declare myself, Gina Parvaneh Cody, Mark Kenney, Gervais Levasseur, Francine Moore, Ken Silver, Jennifer Stoddart, Elaine Todres, René Tremblay and David Wesik duly elected as trustees of CAPREIT to hold office until the next Annual Meeting of unitholders or until successors are duly elected or appointed.

I declare that Ernst & Young LLP are appointed as the auditors of CAPREIT and that the trustees are authorized to fix their remuneration. And I declare that the nonbinding advisory resolution on the approach to executive compensation as set out in the management information circular is approved. Thank you, everyone. We have now completed the formal part of the meeting. If there's no further business, I will ask for a motion to terminate the meeting.

I so move.

I second the motion.

I declare the motion carried and the Annual Meeting of Unitholders of CAPREIT terminated. On behalf of management and the Board, I would like to thank you all for attending today. This concludes the formal part of the meeting.

With that, I will now ask Mark to provide his remarks.

Thank you, Gina, and a warm welcome to everyone. Let's start by taking a look back at some highlights from 2025. Last year, we completed $2 billion in gross transaction volume and included the disposition of $411 million of noncore assets in Canada and another $784 million of ancillary interest in Europe. On the investment side, we used part of the net proceeds to purchase $659 million worth of high-quality, strategically aligned properties, which offer low capital investment requirements, high cash returns in excess of our portfolio average and attractive locations in key markets. We also continue to capitalize on the public-private market disconnect by deploying $294 million into our NCIB program to enhance earnings for unitholders. And since we started leveraging this program in 2022, this brought our total NCIB spend to $960 million by the end of 2025.

Operationally, we are extremely focused on advancing our leasing and retention initiatives, lowering controllable expenditures and reinforcing procurement governance. As a result, compared to 2024, we expanded our same-property NOI margin by 50 basis points to 64.7% for the year ended December 31, 2025. Further supported by disciplined capital allocation, earnings per unit also improved. Diluted FFO per unit was $2.541 for the year ended December 31, 2025, up by 0.3% compared to 2024. This was mainly driven by lower interest costs as well as accretive impact of our NCIB program.

Moving on to an update for 2026. So far this year, we've completed $46 million worth of asset repositioning in Canada. We've also sold $143 million of properties in the Netherlands through to April 2026. Following that, on May 1, CAPREIT closed on the privatization of European Residential REIT, acquiring all publicly held units not already owned by CAPREIT for $99 million.

In addition, we continue to invest in our NCIB with $50 million in trust unit buybacks in 2026 to date. This puts our cumulative NCIB spend since 2022 at over $1 billion. From an operational standpoint, results in the first quarter were sound amid current pressures in the sector. Occupancy on same-property Canadian residential portfolio was 97.1%, comparing favorably to industry benchmarks. Supported by renewals and the positive mark-to-market opportunity embedded in our longer-duration leases, same-property Canadian residential occupied AMR was up by 2.9% to $1,726 on March 31, 2026.

We also further improved operating efficiency with our same-property Canadian NOI margin expanding to 62.2% in Q1 of 2026, up from 61.6% in the first quarter of 2025. At the same time, our balance sheet has remained strong with $124 million of available liquidity in Canada and a conservative debt to gross book value ratio of 40.3% as of March 31, 2026. With the significant volume of repositioning activity completed over the past couple of years, our portfolio composition is now better than ever. Today, the majority of our portfolio is concentrated in core assets, complemented by a meaningful allocation to recently constructed properties, which helps reduce capital requirements and improve operating efficiency. In addition, given the high quality and exceptional locations of these buildings, they offer strong upside potential once supply and demand dynamics normalize.

We also maintain flexibility through a smaller allocation of noncore assets, which supports ongoing capital recycling. This balanced mix enhances the resilience of our platform and drives more stable performance through varying market conditions.

Finally, I'd like to highlight our recently released 2025 ESG report. We've made solid progress across our ESG priorities in 2025, with these efforts supporting our ability to deliver long-term value for investors while also contributing positively to the communities we serve. I'd encourage all stakeholders to review the report for more detail on our achievements and ongoing commitments.

With that, I would like to thank you for your time this afternoon, and we would now be pleased to take any questions that you may have. Elise, could you please read any comments or questions?

We will now move to the question-and-answer session. If you have not yet submitted a question, wish to do so, please do so now by submitting your questions through the question tab provided on the virtual meeting platform. As a reminder, only registered unitholders or duly appointed proxyholders in attendance at the meeting will be able to ask questions at this time related to the business of the meeting.

Okay. We have a question, Mark, for yourself. Despite a challenging operating environment, CAPREIT's performance has remained relatively resilient. What do you attribute that to?

Well, the resilience starts with the quality and positioning of our portfolio. As many of you know, across the country, we have highly experienced teams that have been responding proactively to current market pressures while remaining focused on long-term value creation. For instance, I briefly mentioned during the presentation, we've intensified our focus on leasing and resident retention initiatives, which has become a major driver of stability in this current environment.

Okay. We have another question. CAPREIT owns what can be described as durable hard assets with relatively low obsolescence risk. Why do you think the public market valuation does not seem to fully reflect that value?

It's our view that the current disconnect is being driven primarily by market sentiment around near-term fundamentals, particularly expectations for market rent growth, interest rate conditions and the broader macroeconomic environment. That said, the underlying fundamentals supporting multifamily housing are very compelling in the long term. We do regular reviews of value in the portfolio and are very confident in the valuations that we have. While the public REIT valuations have been pressured in the current environment, our focus will remain firmly on long-term value creation.

Another question, how important is our reputation in the marketplace?

You really can't be resilient without a great reputation. So CAPREIT takes its reputation extremely seriously, and we're dedicated to unitholders to maintain that reputation going forward.

Okay. There are no more comments or questions related to the meeting to be addressed. So I will now turn the meeting back to Mr. Kenney.

I'd like to thank everyone for attending the meeting and voting. But before I conclude, I want to sincerely thank the Board for its support and partnership throughout my tenure. It's been an absolute honor to serve this great organization alongside all of you. I am deeply appreciative of the opportunity to have been part of CAPREIT's journey and to work with what I believe to be one of Canada's finest multifamily teams, and I look forward to watching CAPREIT continue to succeed in the years ahead. Thank you very much, and goodbye.

Hello, everyone, and thank you for joining the Canadian Apartment Properties REIT's First Quarter 2026 Results Conference Call. My name is Claire, and I'll be coordinating your call today. [Operator Instructions]

I will now hand over to Nicole Dolan, Investor Relations at Canadian Apartment Properties REIT, to begin. Please go ahead.

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 2 and our other regulatory filings for important information about these statements.

I will now turn the call over to Mark Kenney, President and CEO.

Thanks, Nicole, and good morning, everyone. Joining me this morning is Stephen Co, our Chief Financial Officer.

Before we begin, I'd like to take a moment to personally announce my retirement as President and CEO of CAPREIT. And I am pleased to announce Brad Cutsey as my successor effective July 2. I have greatly enjoyed the nearly 30 years I've spent with CAPREIT, and I would like to express my sincere gratitude to everyone, past and present, for their collaboration and partnership.

Brad brings substantial leadership capability and public company expertise. With 30 years of experience in real estate and capital markets, I am confident that under his leadership, CAPREIT is in good hands and well positioned for the future.

And with that, it is my pleasure to be here with you today on my final conference call to present one last update on CAPREIT's performance. Let's begin on Slide 4 and walk through some highlights from the year so far. In 2026, we've completed $45 million worth of asset repositioning in Canada. We've also sold $143 million of properties in the Netherlands through April 2026. Following that, on May 1, CAPREIT closed on the privatization of European Residential REIT, acquiring all publicly held units not already held by CAPREIT for $99 million.

On our NCIB, we've repurchased and canceled $42 million of our trust units at a weighted average price of $37 per unit, which represents a substantial discount to our NAV of approximately $55 per unit as of March 31, 2026. Operationally, despite current pressures impacting the broader multi-residential sector, CAPREIT continues to perform well.

On our same-property residential portfolio in Canada, occupancy was 97.1%, while occupied AMR grew by 2.9%. Combined with the ongoing improvements to cost control and procurement efficiency, our same-property NOI margin in Canada expanded to 62.2% for Q1 2026.

With the decrease in the fair value of our investment properties this quarter to reflect softer market conditions, our total debt to gross book value ratio increased to 40.3%, a level we still consider conservative and on target.

Turning to Slide 6. You can see how our portfolio composition has evolved. Today, the majority of our portfolio is concentrated in core assets, complemented by a meaningful allocation of recently constructed properties, which help our capital requirements and improve operating efficiency.

In addition, given the high quality and exceptional locations of these buildings, they offer strong upside potential once supply-demand dynamics normalize. We also maintain flexibility through a smaller allocation of noncore assets, which supports ongoing capital recycling. This balanced mix enhances the resilience of our platform and drives more stable performance through varying market conditions.

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

Thanks, Mark. We'll start with operational performance across our Canadian residential portfolio, as shown on Slide 8. Our occupancies have held up well given current market conditions with 97.1% occupancy as at March 31, 2026. While modestly lower year-over-year, this compares favorably to industry benchmarks. You will also see here that occupied AMR has increased, as Mark mentioned.

On the total Canadian residential portfolio, it grew by 3.3% to $1,732 as of March 31, 2026, compared to $1,677 on March 31, 2025. This rent growth is supported by renewals and the positive mark-to-market opportunity embedded across much of our portfolio. However, it also reflects turnover that remains weighted toward shorter-term leases, which are trending on average above market.

Let's turn to Slide 9 and dive deeper into that dynamic. As we've discussed previously, turnover continues to vary by lease tenure. You can see the breakdown on this slide with approximately 45% of our turnover in the first quarter coming from residents who had been in their units for less than 2 years. These leases turn at an average loss to lease of 10.8%, reflecting ongoing pressure from shorter tenure leases that are turning over below prior peak rents. The remaining 55% of turnover came from all other lease tenures from 2 through to 10-plus years, where we achieved an average uplift of 5.7%. Together, this resulted in a blended change in monthly rent of negative 2.1% for the quarter, reflecting the overall impact of current market conditions across the portfolio.

As of March 31, 2026, 28% of our leases had a tenure of less than 2 years with average monthly rent per square foot of approximately $2.60. This segment remains subject to higher turnover as market rents have declined. In contrast, longer tenure leases carry lower in-place rents, which continue to support embedded upside across the larger portion of the portfolio.

Given current conditions, we expect elevated turnover among the shorter tenure leases to persist in the near term as higher in-place rents reset to market. At the same time, longer tenure leases should continue to generate positive uplift on turnover even in a softer environment, providing an important level of downside protection until supply-demand conditions return to balance.

Referring to Slide 10, with the dynamics just described, our same-property operating revenues in Canada grew by 1.1%. On the expense side, same-property OpEx decreased by 0.5%. This reflects lower natural gas expense during the federal -- following the federal carbon tax removal that came into effect on April 1, 2025, as well as a 0.5% reduction in other operating expenses driven by our continued focus on cost containment.

With that, same-property Canadian NOI grew by 2% and our margin expanded to 62.2% for Q1 2026. Diluted FFO per unit was up by 1.7%, driven mainly by accretive impact of trust unit repurchases under our NCIB program, along with growth in same-property NOI, partly offset by lost NOI on dispositions.

On Slide 11, we've summarized our financial position with a well-staggered mortgage renewal portfolio that has no more than 13% of Canadian mortgages maturing in any single year and a low weighted average mortgage interest rate of 3.3%. We also have $124 million of available liquidity in Canada at period end, providing capacity to continue pursuing accretive opportunities.

On that note, I will turn the call back over to Mark.

Thanks, Stephen. Before wrapping up, I want to quickly highlight Slide 13, which has some key takeaways from our 2025 ESG report recently released. We've made solid progress across our ESG priorities in 2025, with these efforts supporting our ability to deliver long-term value for our investors while also contributing positively to the communities we serve. I'd encourage all stakeholders to review the report for more detail on our achievements and ongoing commitments.

With that, I'd like to take your questions. Before doing that, I just wanted to take a moment to thank CAPREIT's Board of Trustees that have been exceptionally helpful through my transition process. And I would also like to thank the incredible team at CAPREIT that's been built over the years. We have a group of really talented, highly exceptional, highly dedicated people that investors should take comfort in the fact that you've got a great team supporting your investment.

With that, happy to take any questions.

[Operator Instructions] Our first question comes from Jonathan Kelcher from TD Cowen.

Mark, congrats on a great career at CAPREIT and all the best in your retirement. It's certainly going to be big shoes for Brad to fill.

Thanks, Jonathan.

First question, just on the occupancy, you guys did manage to stay above 97%, which is a pretty good achievement. But how has it trended so far in Q2?

Well, I can comment on the market in general, more so than specifics on CAPREIT. But what we're hearing out there is cautious optimism that the market is showing up. It was a very cold winter. There's always that seasonal effect, but we definitely saw the correlation with the lifting of weather as others have reported also. And it's -- the market is there. I wouldn't read too much into that, but definitely, we've seen improvements that are expected seasonally.

Okay. So kind of cautiously optimistic on the spring leasing season. Is that fair?

Yes. Yes, as is reported in things like Rentals.ca, our favorite benchmark, cautiously optimistic.

Okay. Fair enough. And then on Slide 9, you guys -- you added in the rent per square foot, which is good info, and thanks for that. Where would you say your average market rents are right now? Where do they kind of fit in that slide?

I mean if I look at it just on a blended basis, Jonathan, I mean, the mark-to-market, I would say, in the plus teens. It would probably be 10% to 15% is what I estimate.

Okay. Okay. But -- I think we can work with that. And then lastly, just -- and we've seen this with your peers, but how much of a difference are you seeing in demand at the different price points in your portfolio?

There is steady demand for the legacy portfolio. And the demand for newer construction is very dependent on the price per foot. The product that's struggling the most in the market, not necessarily CAPREIT, is the plus $5 a foot is reported across the country as having a challenge. But where we've purchased buildings that are well located in that sort of affordable range of less than $3 a foot, there is decent demand.

Our next question comes from Jimmy Shan from RBC.

Just a follow-up on that Slide 9 breakdown. So in that 28% bucket, that's less than 2 years, would that be skewed to any particular market? Or is it representative of your entire portfolio? And would you say that bucket is consistent with the turnover rent growth that we've seen, i.e., 10% -- potential 10% roll down on the $2.60 rent?

Yes. I mean it's really skewed towards, you could say, more of a newer construction, but it also has some of the legacy assets that really -- we achieved peak rents that now are turning over. I would say within that 28%, about 10% is close to market. So you could basically say 18% has a higher propensity for it to turn over just because those ones are going to be -- those rents are way above market. So those -- that has a higher propensity to turn over.

I see. Okay. And then on the margin front, obviously, we saw a good improvement because of the carbon tax this quarter. How do you think the margin is going to play out for the balance of the year? Do you expect it to be fairly flat? Or are we still going to see some improvement from those cost containment you alluded to?

Yes. We're optimistic on cost containment. The work that's being done on cash flow improvements is definitely finding its way into margin improvement. But the team is working extraordinarily hard to find efficiencies and they're doing so. And I think that with softening in the Canadian labor market, it's definitely helping on the pricing side. We're not in the high flying days of COVID when you couldn't find anybody to work. There's good balance returning to the market. So we're feeling quite comfortable on the operating cost front and very optimistic on cash flow improvements with the new construction portfolio, really helping.

So it will all be a matter, Jimmy, of how rents evolve over the next couple of quarters. But if we can hold our own, cost containment, definitely something that we're feeling good about.

Okay. Just last technical one for me. The current tax, do you have any guidance on what that looks like for the year?

I don't have the numbers in front of me, Jimmy. Maybe we'll take this offline.

Okay. Perfect. Congrats on the retirement, Mark. We'll definitely miss your candid discussion on this call. All the best.

Thanks, Jimmy.

Our next question comes from Brad Sturges from Raymond James.

Just to go back to our favorite Slide 9 here. On the 18% of suites that have a higher propensity to turn, and you said they're above market, how much above market on average would those particular suites be?

I mean, generally if you see what we reported on Q1, the less than 2 years is about 10%. I think that's a fair representation of what that 18% is.

Okay. Perfect. And given the cautiously optimistic tone, I guess, for the spring and summer, how do you think about the use of incentives from here through the remainder of the year at this point?

Yes, I think in the case of CAPREIT, the metrics to watch are occupancy first, incentive use second, and mark-to-market rents third with renewals being kind of as high at the -- maybe at the end there. But Stage 1 for us has always been maximizing occupancy, and we are seeing those seasonal improvements show up. Again, it was pretty cold winter. So it was nice to see the seasonal change that we'd expected. But the incentive use through Q4 and Q1, as you know, Brad, it gets amortized and does build slightly. And that would be our next line of improvement.

Okay. I appreciate that. Congrats, Mark, on the retirement. All the best.

Thanks, Brad.

Our next question comes from Kyle Stanley from Desjardins Group.

I just want to echo the sentiments. Congrats, Mark, on the great career, and you will be missed.

Thank you, Kyle.

So just going into the question. So obviously, we spent a lot of time on the short duration leases and the drag that's having on leasing spreads. As we're entering the spring here, in your view, has that rolled down and kind of peaked? I mean, I think to kind of build on what Brad just asked, Stephen, but how does that trajectory look?

Yes. I mean, I would say -- it's hard to tell. I mean, we're just getting the April data and spring leasing season, obviously, is in effect. But we're also -- we're tracking the rents. We're hoping that we have seen a bit of the bottom here. But again, I don't know if that's going to be -- I don't want to call that. I also think there's potential for it to come down a little bit more. So that part -- and it's hard for me to tell.

And just to build on that for Stephen's benefit and for clarity of comments we've made, the cold -- Q1 is always the most difficult quarter. And I think the weather that seized Canada in Q1, really, what we did see is quite a dramatic drop in traffic coming to our offices. Despite that, we fought the occupancy battle well, albeit with some rent deterioration on turnover and some incentive use. And it's been very refreshing to see those seasonal changes show up again in Q2. And that's the reason for optimism. That's also kind of what's being reported widely in the market, but it's more just the seasonal change. I would not read too much more into it other than it's refreshing to see traffic returning to the offices.

Right. Okay. Just -- again, sticking with the slide, it looks like the trend on at least the proportion of your turnover that's coming from those short-tenured leases is going a bit lower at 45% today from maybe 50% over the last couple of quarters. Is that probably a good way to look at it and expect that to obviously continue a bit lower as you turn more of these? Is that the view?

Yes, I wouldn't use that as extrapolation on what that would look like for the rest of the year. I mean it could just be seasonal. So we'll see. But I mean, I wouldn't look into that too closely. But I would say it would be -- you'll still continue to see 40% plus in that short-term leases.

Kyle, you make a very interesting point, though, that we will have to continue to kind of update the market on. With the newer construction portfolio, what remains to be seen, given that those buildings do have higher turnover is this might be the profile of turnover that we have. It's just the flow-through impact of either COVID leases or a softening market. But this is the information we'll continue to provide because I do think it's very helpful. Obviously, Slide 9 is getting a lot of attention today.

Yes. No, agreed. It is very valuable, I think, in the work we're trying to do. Okay. Last one for me. Just a higher-level question. If you had to point to some markets where the trends you're seeing today are more positive maybe than you would have expected, which markets might those be?

Yes. We recently did a visit to Halifax, and it's holding up remarkably well. Like there are a lot of cranes in the sky, but we're definitely seeing strength in that market. I think what I would be looking at as an investor is just the immigration trends around foreign students, in particular. And that would have probably a greater impact on CAPREIT than our peers, just given that we're in Vancouver, Montreal, we're in the universities in London, Ontario and Ottawa, where we tend to have student populations. So that's something we'll be watching really closely. Immigration in general and the absorption rate of the supply that's here. And blending that, as we've talked about, with just the starts and do those starts get completed and the outlook for what the deliveries are going to be like, as we all know, are very, very low going into the 24-month kind of horizon.

So things -- it's just putting all these metrics together at the same time, it's supply, it's population decline and it's deliveries with an attribution to unemployment. And it's not deteriorating in the seasonal that we may have feared. It's a return to seasonal in Q2.

Our next question comes from Mario Saric from Scotiabank.

Mark, I congratulate you on your illustrious career and wish you well in retirement as well.

Well, thank you, Mario.

Yes. So just in terms of -- I apologize, I joined the call a bit late, so this may have been discussed. If it has, we can just move out. But the same-store revenue growth came in at just over 1% in Q1. Given what you're seeing thus far in the spring leasing market, it sounds like you're cautiously optimistic. Do you still think that '26 can land in that 2% to 3% growth range? Or could we expect it to be a bit more moderate than that?

Mario, I think where we're seeing, Q1 gave us about 1.5% in terms of revenue growth. I think that's something that is within the range that we expect, especially for the year. If we track OpEx growth for the remainder of the year, we did pretty well in Q1. A lot of it has to do with the carbon tax removal. But if we factor out the carbon tax on the same-property basis, I think it would turn out to be about 2% on an OpEx growth basis.

So I think Q1 -- we'll continue to achieve some cost containment initiatives throughout the year. And so if you kind of blend that 1% to 2% revenue growth and maybe 2% to 3% OpEx growth, I think that's kind of where we may land.

I think, Mario, just to add, the CAPREIT portfolio will mature into a more stabilized state this year because of all the capital recycling that's happened, including things like ERES, we'll get to a more stable, predictable metric. And definitely, the new construction is going to help us on cash flow. It's definitely helping on higher margins, cost containment. And again, the efforts that the team are making around all areas of costs and CapEx costs are very positive, very, very positive. So it will all be about rents is what we said earlier in the call, that will determine margin growth. And we've got the best team we've ever had to handle this particular situation.

Best team and best portfolio that you've had as well. So the -- in terms of the incentives, so Q2 should be a bit more active in terms of actual leasing relative to Q1. With that said, do you think the absolute amount of incentives being offered has peaked in Q1?

I think what the data we're seeing, Mario, I think -- yes, I think that's a fair comment. It did peak in Q1. A lot of incentives were given in Q1, which doesn't actually -- it shows up later on because when the lease starts. But yes, I think we've seen the peak in Q1.

Okay. And my last one, just in terms of -- I know a lot of the heavy lifting on the disposition side has been done. Is there a range outside of the Netherlands, so Canada specific, is there a range that you're targeting for the rest of '26 and into early '27?

Well, like we have done the heavy lifting. All of our backs are under strain from the heavy lifting. But I look forward to Brad sharing with the market what comes next, and he's been exceptionally complementary of the strategy. But I would hold on for guidance with Brad, and it's fully fair to him. That would be my only comment.

Rest up your back. Congratulations again.

Thanks, Mario.

Our next question is from Matt Kornack from Nation Bank Financial (sic) [ National Bank Financial ] .

I'm not sure what that bank is, but I want to reiterate what my peers have said. I've always appreciated your passion for the business and it shows through. So anyway, turning to the operations. On that 1.5% growth in revenues, is that assuming stable occupancy, I guess, to where you were in Q1? And if you could give us a sense maybe as to where April and May have trended on the occupancy front, given your comments that, that's the leading indicator, that would be interesting.

Yes. So Matt, I mean, yes, I mean, it is looking at it on a stable occupancy basis. Obviously, we're not providing information around April. But I would say in the general market, we have seen higher foot traffic. And I think there is a more cautious optimism around leasing. So you can take that as probably a slight improvement in occupancy.

For us, we look primarily at traffic to the offices and then conversion rates. So it's really what was clear as a whole industry is that Q1 just saw a very, very slow velocity rate of people visiting offices to make decisions, and we've seen that seasonal improvement, which allows conversion rates to kind of deal with the occupancy.

So again, maybe a bit of concern just with what's going on in the world and the spring is where we could be making decisions, but there's definitely an increase in visitors to the site for everybody. That's been reported kind of across the industry.

No, that makes sense. Your peers, I think, also saw a little bit of incremental occupancy improvement into the spring. And obviously, we dealt with a pretty disgusting January and February in terms of the weather. So that makes sense. I guess on -- the key thing, I guess, from here, I mean, there's all this nuance in terms of the turnover in the 2-year cohort, but some of those guys have already got a rent discount and they renewed a year ago. But where do you think market rents head, I guess that's what the key driver is going forward at some point?

Oh, you mean that inflection point. So that's the question on everybody's mind. Yes, again, the way I would try to think about it, it's a little bit complicated, but I keep saying it, is the way CAPREIT is organized is, first, it's occupancy; second, it's incentives; and third, it's mark-to-market rents with renewals. So the first line of defense for us has always been maximizing occupancy, and that will help the cash flow. And the improvement that I think is most important really to get early glimpse is use of incentives, and then you'll see mark-to-market rents follow.

So it's a bit of a convoluted answer, Matt, but that's exactly how it works. So we're very much focused on being occupancy maximizers, always have been. And I suspect that Brad will follow the same formula.

And we're viewing at the market. But what I keep commenting on is I am quite astonished that given what's happened to population decline and supply deliveries, how resilient the Canadian multifamily market is. It just doesn't seem to match the stats. And that's a testimony, I think, to CAPREIT and our peers in terms of buying well-located multifamily. And if it's location is right, it can kind of beat the statistics. And we've done a very -- I think, a very good job of picking good property in great locations. And so we should beat the overall trend with those decisions. So the market is resilient.

And the last point that I would make, I think I may have made it on the last call, is that we must remind ourselves of what's happened in other countries where you've seen a bit of a housing price correction and the rental market always gains fuel in that environment. We don't appear to be in that stage quite yet, but that will be the first indicator. As Canadian home prices come under pressure or come under more uncertainty, we would naturally expect to see the rental market benefit. So that will be -- that could be an event sooner than anticipated, but we're not giving clarity on that event. Nobody is sort of seeing that yet, but we're sort of anticipating what's going to happen. But there's just so many different metrics that we've never faced before, population decline and supply.

Yes. No, that makes sense. And we talked about it last time as well, some of my associates still live with their parents and there has been household consolidation. So I think there's pent-up demand at some point if the labor market improves.

And just maybe quickly on another point, though, on the student side. When would we anticipate seeing that trend in terms of those guys signing for kind of August leases? Because it looks like on the stats that the government puts out that the student population has been kind of stable at this point and it's not declining?

Yes. If there's an uptick in policy change there, then that effect you would see in Q3.

Okay. Awesome. Hope to chat in the future in whatever role you might eventually take or in retirement. Take care.

Our next question comes from Sairam Srinivas from ATB Cormark Capital Markets.

Mark, congratulations on a great career, and all the best for the journey ahead.

I just had a question on Slide 6, I guess. So I'm stepping away from 9 now. Looking at the strategic portfolio repositioning, I know about 19% of these assets are newly constructed, would you guys track internally as to what the margins from these would be versus the overall portfolio?

Well, the margins for the new constructed -- I don't know if we've given -- they're obviously higher because, a, rents are higher; and secondly, pass-through utilities are there. So they're just naturally higher margins for those 2 reasons. And that will continue to kind of help mitigate any sort of utility cost increases and the like. So that's what we like about those assets is they're more inflation protected. And our strategy has been around buying in that upper middle part of the market, less than $3.50 a foot, and we consider that to be the mass market. And we've been able to buy some great properties in great locations that will be resilient as we just talked about, that will support higher margins. And obviously, plays heavily into CAPREIT's cash flow story.

That makes sense, Mark. And maybe just going back to your comment on how healthy the private market seems and there's an appetite for apartments there. Considering how soft public markets have been, are you actually seeing more volumes on the private side and more participants coming in to actually now buy apartments?

Yes. The trend -- the noteworthy trend that we're hearing from brokerage, and we've had inbound, is a very, very large appetite for what we would call our core portfolio, legacy assets, definitely apartments that would fall in that, call it, "affordable range." That's where the capital seems to be orienting itself. We are actively in the market and actively losing bids on assets, which is a good sign in terms of holding up value.

So the print on some of the trades that have happened that have come out recently would have been trades that would have been executed or negotiated 6 to 8 months ago. And the valuation in terms of what we're seeing in the competitive market on assets that we're bidding on is very, very competitive. So there seems to be this ongoing disconnect between the private market and public markets, but the valuations at the asset level are alive and well.

Our next question comes from Dean Wilkinson from CIBC.

Mark, your candor, your honesty and your knowledge are going to be sorely missed. Maybe I could just get personal for a minute. You look back over the past 30 years of your career, you've seen a lot. What's kind of the biggest thing you can say has changed over that time? And what advice would you give to the generation that's going to follow you?

Well, Dean, thank you for those very kind words. And as always, I get excited when you come on the line. The institutional sort of nature of apartment ownership is the biggest change. It was a mom-and-pop business. It was what they would call the dirty cousin of real estate when in apartments, people didn't really want to get involved because the management was intense and talking with people face-to-face, takes a certain kind of person to be in multifamily. So that was the opportunity.

So like the advice that I would give anybody out there seeking a career in real estate is apartments offer an incredible opportunity for somebody that really wants to get involved in a business that is an ever-evolving, ever-institutionalizing part of real estate, and they're highly sought-after skills. And it's the old school thing. If you have work ethic and common sense, you can go a lot of ways in multifamily. And that would be my advice. And I found it an incredibly rewarding career because of how many people that I've encountered that have sort of stumbled into the sector and have just had incredible careers. And there's lots of examples of that at CAPREIT. So yes, that would be my advice. It's a sector that's institutionalizing. Demand is extremely high for skills. If you've got work ethic, if you've got some financial acumen, and if you've got discipline, you'll have a wonderful career.

Thank you for that. I can say that I am smarter for having known you. I look forward to seeing you in your retirement. Thanks for everything, Mark.

We currently have no further questions, and I would like to hand back to Mark Kenney for any closing remarks.

Well, that's a very nice way to end. I'd like to thank everybody for your time today. It's truly been my pleasure to be a part of this great company. And I'm excited to see what will come for CAPREIT in the future in the years to come, and I will be there on the sidelines to help if you need me. Thank you very much, and goodbye.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

Hello, everyone, and thank you for joining the Canadian Apartment Property REIT's Fourth Quarter 2025 Results Conference Call. My name is Claire, and I will be coordinating your call today. [Operator Instructions].

I will now hand over to your host, Nicole Dolan, Investor Relations, to begin. Please go ahead.

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 2 and our other regulatory filings for important information about these statements.

I will now turn the call over to Mark Kenney, President and CEO.

Thanks, Nicole, and good morning, everyone. Joining me this morning is Stephen Co, our Chief Financial Officer.

Let's start on Slide 4 with some key highlights from 2025. This past year, we continued to actively reposition our portfolio, and we met our disposition target by selling more than $400 million of noncore assets in Canada. We also sold $784 million of ancillary interest in Europe. We used a portion of net proceeds to purchase $659 million in well-built, strategically aligned properties, which offer low capital investment requirements and high cash returns above our portfolio average. We also continue to capitalize on the public-private market disconnect by spending $294 million on our NCIB program to enhance earnings for unitholders.

Operationally, same-property occupancies remained healthy at 97.3% as of December 31, 2025. across which average rent grew by 3.8%. This reflects the effectiveness of our leasing and retention strategies, which Stephen will expand on shortly. Combined with ongoing enhancements to cost management and procurement governance, our same-property NOI margin expanded to 64.7% for 2025. In addition, we finished the year with a total debt to gross book value ratio on target at 39.3%, in line with our commitment to maintain balance sheet strength.

Turning to Slide 6. I want to highlight the progress we've made in transforming the portfolio for long-term value creation. Today, 79% of our portfolio is made up of value-add assets with 68% of this considered a core long-term holding. This 68% comprises high-quality, well-located communities that form the backbone of CAPREIT's strategy and will continue to drive stable, predictable performance over the long run.

We've classified the other 11% as opportunistic dispositions. These are assets that we would consider selling if we were able to achieve compelling pricing. Maintaining this flexibility is an important part of our ongoing capital recycling strategy, ensuring that we are consistently rotating into higher quality, higher cash yielding opportunities.

In addition, we have an intentional 19% allocation to recently constructed properties. These newer assets help balance the portfolio, bringing down its average age and capital requirements and adding stability from a building quality and operating cost perspective. This mix gives us a more resilient platform through various market cycles. And finally, ERES now represents just 2% of our consolidated portfolio, down from 6% at the beginning of the year, reflecting the extent of our European dispositions in 2025, which have greatly simplified our business.

On Slide 7, we've displayed our 2025 noncore divestments in Canada with $411 million sold. These properties had higher capital expenditures, lower expected returns or other attributes that no longer met our strategic standards. These sales allowed us to recycle capital into stronger performing properties which also contributed to important community partnerships, including meaningful transactions with nonprofits and the Squamish Nation.

And then on Slide 8, you will see how we spent $659 million to add to our portfolio 15 well-built prime located properties across key urban markets in Canada. These buildings were acquired at attractive price points with strong economic yields that boost the cash flow generating potential of our portfolio. In addition, the recently constructed properties were purchased at pricing well below replacement cost. By investing in these mid-market properties and divesting from off-strategy underperforming buildings, we reduced the portfolio's long-term capital needs and enhanced its performance.

Our NCIB activity is summarized on Slide 9. This program has effectively allowed us to invest in our own optimized portfolio at a cap rate well above current market levels for comparable assets while increasing unitholder returns. In 2025, we remained active on this buyback program with $294 million invested at a weighted average purchase price of $41. This represents a substantial discount to our NAV per unit of $56 as of December 31, 2025. And since we started leveraging this program in 2022, we spent a total of $960 million to date to generate higher earnings for unitholders.

With that, I'll hand it over to Stephen to discuss our operational and financial results.

Thanks, Mark. On Slide 11, you can see how our portfolio is performing amid softer rental market conditions. The broader housing market is working through a finite wave of new supply coming online at a time that population growth has temporarily paused due to government changes to immigration targets. That combination has put some pressure on operational results. But given these conditions, we're performing resiliently because we have experienced and tactical teams in place who are effectively mitigating those headwinds.

A key part of that resilience is how we're deploying incentives. We're using them strategically, not broadly and reactively, but in targeted competitive way. At the same time, we have intensified our focus on retention, which has become a major driver of stability. Our teams are working directly with residents to keep them in their homes through thoughtful, personalized resident experience and retention initiatives, including price adjustments and other solutions. And all of this translated into metrics shown on the slide.

Even with the softer backdrop, occupancy remained healthy and above market averages at 97.3% as of December 31 across the total Canadian residential portfolio. And among occupied suites, average rent increased to $1,718 per month. This reflects both the challenges in today's market and how professionally we're navigating them. So while the broader environment has temporarily softened, our operational strategy, particularly our leasing discipline and retention management is ensuring that the impact to our portfolio is meaningfully better than it otherwise would be.

Turning to Slide 12. I want to walk through the turnover metrics for the year and what they're telling us about the current leasing environment in Canada. In 2025, our blended rent uplift on turnover was plus 4.2%, but the composition of that turnover is important. Residents who have been in their suites for less than 2 years accounted for nearly half of all turnover at 48%, and those leases turned at a negative 6.3%. In contrast, the rest of our turnover among residents who have lived in their homes for 2 years or longer continue to generate stronger performance with plus 16% rent growth.

Looking ahead, you can see that as of December 31, 2025, we have 27% of our residents who have been in their suites for under 2 years, and many of those leases currently carry negative mark-to-market. This represents a new cohort of leases in this situation versus 1 year ago. As market rents have declined through 2025, more leases were driven into this negative category, which has, in turn, extended the period over which we are expecting to feel the impact from this. So while we have absorbed much of the impact from leases that were in the negative mark-to-market bucket a year ago, we are now working through another tranche of leases that have fallen into this category as conditions softened further. We anticipate this dynamic will continue until we see an inflection point in market forces.

Housing starts are down significantly across Canada and population growth is projected to readjust and stabilize at sustainable levels, supporting a return to a more constructive supply-demand imbalance. In the meantime, we still have 73% of our leases with residents who have been in their homes for at least 2 years. And the vast majority of those suites are embedded with positive mark-to-market value even in a declining rent environment. This upholds a runway of stable overall rent growth, even if more moderated while reinforcing the stability of our long-tenured resident base.

With this context on our suite turnover in Canada, let's look at how these trends flow through to our financial results. Referring to Slide 13, same-property operating revenues grew by 2.8% in the fourth quarter to $224.4 million, reflecting the operational dynamics we have just discussed. On the cost side, same-property operating expenses decreased 1% year-over-year, driven by lower repairs and maintenance as our organization-wide focus on prudent cost reduction, strong procurement practices and tighter controllable spend discipline continue to make progress. Together, this drove a 1.3% point expansion in our same-property NOI margin to 64.4% for the fourth quarter of 2025. Our diluted FFO per unit increased 1.6% to $0.632, benefiting from lower interest costs as well as accretive impact of our NCIB program, which reduced our unit count and enhanced unit per unit performance.

Our fiscal 2025 metrics are shown on Slide 14. Despite heightened cost pressures in the beginning of the year, we grew our same-property NOI margin by 50 basis points since 2024 to 64.7% in 2025, reflecting stronger performance achieved in subsequent quarters. Diluted FFO per unit was $2.541 for the year ended December 31, 2025, up by 0.3% compared to 2024. This earnings growth has been partially offset by net disposition activity and elevated vacancy, particularly in Europe with the wind down of ERES.

On Slide 15, we provide an overview of our strong financial structure with a well-balanced mortgage renewal ladder that has no more than 13% maturing in any single year. We also have ample liquidity with $188 million in cash and credit facility capacity, a further $200 million in unused accordion option for additional capacity and $1.4 billion of Canadian investment properties uncovered by mortgages. This flexibility gives us the agility needed to deploy capital into high-return opportunities as they arise.

On that note, I will turn the call back to Mark.

Thanks, Stephen. Turning to the next slide. I want to take a moment to focus on one of our top priorities, cash flow. Our portfolio repositioning program recycles capital from low to high cash yielding properties and our rigorous property management seeks to strategically minimize discretionary spending, while not compromising on safety, quality, energy efficient or service standards.

On Slide 17, you can see that these 2 initiatives have reduced our capital expenditure as a percentage of NOI to 37% in 2025, down from the prior 10-year average of 46%, which is in addition to the decrease in operating costs highlighted earlier. As we move forward, further strengthening of our cash flow performance will remain a key objective.

With that, on Slide 18, I'd like to recognize the exceptional talent at CAPREIT. Our people's dedication and shared vision remain our greatest strength, and this was key to our delivery of solid strategic, operational and financial results in 2025. We're proud to see this culture also validated by CAPREIT certification as a 2025 Mercer Best Employer in Canada. We've never had a more capable team in place to achieve our goals.

And on behalf of everyone here, thank you to our stakeholders for your continued trust and support. We look forward to further enhancing the living experience of our residents, improving the communities in which we operate and creating value for our unitholders in 2026.

We would now be pleased to take your questions.

[Operator Instructions] Our first question comes from Jimmy Shan from RBC Capital Markets.

So just thanks for the added color on the turnover stats. So 2 questions there, I guess. On the 27% of the portfolio that are less than 2 years, how much above market are they? And similarly, on the remaining, how much below market are the above 2-year tenure?

Yes. So, Jimmy, you're asking for, I guess, the mark-to-market on that portfolio. If we look at the under 2 years, we're averaging probably around negative 8% is what we're seeing. And then anything above that, it's in the plus 20%.

And we would expect to see that sort of trend to hold over the next short term, at least as far as we can see in the market. and we'll keep people updated as we see change in trend on that.

Okay. And I just want to make sure I understood heard right, 20% you said, right?

Yes, plus, plus 20%. So it's above.

20%. Yes. Okay. And then I guess, by my math, if your turnover rate is around 20%, your churn rate and half of them are these above-market leases. So it will take probably 2.5 to 3 years to turn through these leases, everything else staying the same?

I think it's got a lot to do with resident mentality as well. Like if you're paying an above-market rent and you're shopping the market, you're going to leave more quickly than just following the trend line to date. So it is -- again, we've not been through this COVID leasing post/pre phenomenon before. But we would expect to have a lot more clarity in the spring as the spring market emerges with notices and seeing what is actually going to happen. So it's hard to gauge trend right now because the winter season is always slower, but the spring season will really reveal sort of the acceleration of those leases, and we'll be able to give better quantification to the impact.

Yes. Okay. That's fair. And then on the OpEx growth, what's your -- obviously, this quarter, you saw another pretty good savings on the other OpEx category. How do we think about that for 2026 on a year-over-year basis?

We're pretty excited. We're using more and more technology to help draw in competitive process. And we obviously are looking forward to the benefits of the newer portfolio, which tend to have more pass-through costs to begin with and generally lower operating costs. So that's also helping. It's also a slight function of the assets that we're selling, having higher costs associated with both CapEx and operating costs and then bringing in these higher quality. But there is more obviously happening than just that. So we think that with ongoing technology and being able to better access the market, we look forward to those cost controls continuing without compromising standard.

Yes. And Jimmy, if I look at 2026, I mean, we're -- in the first quarter, we're -- there's a mix of things happening, but we're going to have a benefit of the carbon tax reduction that was effective last year as of April. So on the base effect, it's going to be favorable. But again, the winter season has been a bit challenging. There's a lot more snow. It's a lot colder in terms of the weather. I mean, if I take -- exclude all those things, I mean, I would just say OpEx growth was -- where we were forecasting was going to be above inflation. But if there is that impact of carbon tax and the heavier snow and colder winter, you kind of have to balance that or adjust on your model.

Our next question comes from Mike Markidis from BMO Capital Markets.

I just wanted to ask, I guess, following on Jimmy's line of questioning and came up with his own estimate of 2 to 3 years to get through the less than 2-year cohort, I guess, we would call it. But that presumes they stay in place and they don't reset along the way. So I guess my question would be is, given what you're seeing, should we expect that your renewal rate experience will continue to be under pressure just because you're going to try and retain some of these and they get reset down to market as we go without term?

I would say Ontario renewals are extremely solid given the guideline. But we still think that we can expect greater than 2% type renewals overall. Different markets that are -- Western markets that are fully at market, obviously, are going to have a different renewal experience than places like Ontario or even in Quebec for that matter. But it's -- we're still feeling strong on the renewal front. It's adjusting through these post-COVID leases that CAPREIT have all have to sort of work through, given our plus 30% mark-to-market achievement during post-COVID, that's what we're working through now.

Okay. No, that's fair. So I mean, I guess if you think about sort of revenue, and I know you don't like to give forward guidance, but I mean, is 2% to 3% revenue growth kind of the objective for this year? Or would that be a good outcome given what you're seeing?

Objectives and what we're shooting for is a good way to put it. And yes, we're -- again, the only reason I'm pausing slightly is it's all in the spring market. The spring market will really give us confidence in sort of direction here. But we will keep people posted.

Okay. And I guess you guys do get leads, but I mean, when does the -- keeping with that theme with the spring market because your comment is not dissimilar to what we're hearing from other peers. But when do you typically, Mark, historically see that uptick in spring leasing and maybe not just the leasing, but the leads and the traffic where we'll be able to get a sense of how that's shaping up?

Ontario, 60-day notice. So 60 days prior to whatever month we're calling spring or summer, we get a lead -- get an idea of velocity. Quebec, it's -- we get a lot more lead time. So we're already starting to form a view in Quebec and some of the other markets are 30 days. So it comes up and sneaks on you quite quickly. And so we're not seeing notices given. So the CAPREIT portfolio is anchored in Ontario with 60 days kind of visibility, and we don't quite have a view on that yet.

Okay. And last one for me before I turn it back. Market rents obviously declined last year, and you've got many different markets, I'm sure it's very specific. But just broadly speaking, do you think market rent growth has decelerated? Has it stabilized? What are your thoughts on that right now?

We're in a very interesting window of adjusting to the impacts of temporary residents leaving and new supply coming at never before seen volumes in Toronto, Vancouver, Montreal. And these are key markets for us, obviously, but we're somewhat insulated. The Greater Toronto market for us is suburbs primarily, and that's holding up quite strong. The core of Toronto is where the most pressure is, and we've talked extensively about micro condos not being competition for us. But you can't really -- there is a window here that we've never seen before in our country's history of decelerated population growth and supply that was initiated 4 years ago, so -- 4 and 5 years ago, quite frankly.

So despite that, we're quite optimistic with how things are holding together. But that's why it's hard to call the market. It was quite easy when we had steady immigration and steady housing supply, and that was the story for over 20 years. And now we're in this period of rapid adjustments really going back to 2015 -- 2015 to 2020, temporary resident acceleration, COVID. What happened post-COVID has never happened in the country's history before with over 1 million people a year coming in 3 years in a row, followed by population decline. So obviously, this is going to have short-term impacts on the rental market. But the broader outlook is incredibly positive given the lack of starts of housing that we're seeing in coast to coast. So it is very, very difficult to kind of navigate exactly where this is going to line up, but the outlook is very positive.

Our next question comes from Jonathan Kelcher from TD Cowen.

Just going back to the turnover slide. You talked about the mark-to-market under 2 years being at negative 8%. How has that trended? And do you think that's peaked?

Well, Stephen can talk about what percentage of those under 2s are left. And then really what you're asking is what we're all trying to figure out, when will those people give notice? Will it be steady as it's been or will it be accelerated in the spring? Anyone's guess is really there, Jonathan. We don't have the insights of what people are thinking with their intentions to move. But we know what's happened so far, and it's been relatively steady, but we haven't been through like that spring season like this. So we'll see. I know I'm not giving too much clarity on this, but I can only talk about our experience to date and what we can anticipate given the fact we've never been through this before.

Okay. Fair enough. And then Stephen, just back on the op cost question. You said excluding carbon tax in the winter season, you're expecting about inflation for the year. Would you say the -- like the challenges from the winter season, the carbon tax, like do they fully offset each other? Or is one sort of bigger than the other?

Yes. Well, I mean, I would say the colder winter probably has a bigger effect. And then you also have some of the additional -- we have snow hauling that we -- I would say is nonrecurring or at least for this year, it's going to be much greater than last year. And what we're expecting is about $200,000 to $300,000 incremental in terms of cost. But definitely, I think the colder season has a much bigger impact.

And we're right in the middle of it. we had a week of minus 20 weather in Toronto. So real time, it's hard to kind of grab the first quarter when we're literally in the middle of it, but it's been cold. It's been cold definitely in the eastern part of Canada. And yes, we've got a lot of energy initiatives that we put in last year that will help mitigate. It's real time right now, Jonathan, like we're mid-Feb kind of thing and it's warming up a little bit. But we had a 45-day forecast, we can probably give you a better answer, but it's hard to tell right now.

It has been cold. It has been cold. And lastly, just on the 11% of the portfolio that's still in the opportunistic disposition bucket. Like how should we think about timing on that? Do you have any disposition targets for this for 2026?

We haven't guided on that at all, but this is definitely opportunistic. There is no rush here. These are steady performing assets. But if we can a the market with getting low cap rate deals across the line and replacing them with newer construction or legacy assets at a higher cap rate with better CapEx profile, then we will want to pursue that. And we're really about -- the adjustment period is over, and we're looking for opportunistic growth now. We are a real estate company that's committed to real estate, and we're out there looking very hard for the right deals for CAPREIT.

Our next question comes from Kyle Stanley from Desjardins.

I appreciate all the commentary on the spring leasing season and how obviously difficult that is to forecast this early. But just maybe thinking about before we get to the spring leasing season, how has leasing demand been to start the year? Have you noticed any changes versus the fourth quarter? Obviously, the snow and cold late January, early February that you were just talking about, has that impacted demand at all? Just curious on your thoughts.

Yes, it's a good question. It's been chilly in the rental offices as well. It's -- weather does impact things. We saw the same phenomenon last year. And we were trying to figure out was the effect of Trump tariffs or was that having an effect and then the spring leasing season was pretty decent. We feel very good about the quality of the portfolio. We feel very good about the acquisitions and dispositions that we've done. We think we're well, well positioned once the weather does kind of warm up, but it's a very typical phenomenon to see people like defer the decision when it's minus 25 outside. And this has been an exceptionally cold season. So again, hard to say, but we have to acknowledge the fact that it's definitely not been a robust season of leasing.

Okay. No, that's fair enough. Maybe just moving over to kind of your commentary on the capital recycling program and indicating that you're approaching the end, the bulk of the work has been done after a busy couple of years. How does your kind of corporate strategy shift in response to that? I mean, you just talked about the 11% of the portfolio that's opportunistic for dispositions. I mean, has the disposition environment shifted? Do you expect that you can still get the solid pricing that you've been able to get? I'm just trying to think about the next steps as maybe this chapter is a little more closed.

So the disposition market has definitely had an effect of, I think, programs, government programs, whether they be nonprofit programs or MLI Select. And those programs marry up with our ambitions of the part of the portfolio we want to sell. And it's also good corporate citizenship to be bending into a good cause for Canada. So we will always be focused on maintaining value for our unitholders. But if those programs continue as we expect they will, especially on the rental protection fund front, we're still waiting to hear from the federal government on more clarity there. But that's very positive for the value of the portfolio.

And what -- I'm glad you brought this up, Kyle, because what I can tell you is we have seen our valuations really hold up well. What's been proven out by our disposition program. And we're seeing trades in the marketplace that people are still very much interested in the apartment market. There's plenty of liquidity for apartment buildings. There's a lot of trades going on out there. And it's very -- it's much more diverse in who the buyers are than I've ever seen before. So it's not like one party is leading the valuation in the marketplace. It's highly diversified in terms of who the buyer pool is. And that's great news for CAPREIT. It's great news for all the apartment REITs, quite frankly.

And that's why we're all quite passionate about our NAV and very comfortable about NAV because we keep -- all of us, quite frankly, CAPREIT and our peers are proving it out in dispose. And we're really proving it out with the dispose that are probably not strategically aligned for the long run. So all good news there. Stephen, would you add anything to that?

No. I guess one, Mark always talks about it, we have 3 buckets that we can deploy capital. And right now, debt is -- it's fairly stable in terms of rates, and that's definitely not where we're going to deploy. But opportunistic acquisitions, obviously, the NCIB program where the private public disconnect in terms of pricing, I definitely think the NCIB is very attractive to us.

Okay. No, that's very helpful.

Yes. And we talked about this, like again, I'll talk to our peers as well, like none of us are trading at valuations where you can buy apartments at these cap rates. Like when you look at our trading values, when you look at cap rates, it's massively disconnected coast to coast, not just unique to CAPREIT, it's coast to coast. And we are, in particular, puzzled by this disconnect in our case because there's such strong liquidity for our assets. But that's a story that will continue on, no doubt. And we love to talk about that whenever we have a chance to because there's plenty of proof.

Right. No, that makes a lot of sense. I appreciate that. Just another maybe a high-level question. The last rental.ca report, it kind of highlighted an improvement in affordability across the country with rents now on average representing less than 30% of median incomes. That obviously probably isn't the case in Ontario. But I'm just wondering, are you seeing any changes in tenant behavior that would suggest maybe affordability is less of a concern today than it's been?

All I can say is that it's great news for Canada. I love hearing these kind of statistics for Canadians. It's not the greatest news for development because as rents fall, the likelihood of breaking ground on new homes also falls. We need a bit of balance in the market given the population decline story that we're seeing in pockets across Canada. And we need that absorption of that supply from a business point of view. But as a Canadian that's talked loudly about this, I'm very happy to see affordability falling in line. And the market will become balanced, and that's good news for all of us.

Our next question comes from Brad Sturges from Raymond James.

Just, I guess, following on some of the lines of questions that Kyle had there. Just on -- maybe broadly speaking, on the acquisition opportunity set today, what are you seeing in the market, whether it's new construction or kind of your core legacy asset pool that would have kind of a low CapEx feature that you're looking for. Is the opportunity set sort of shifted or the composition changed at all in the last few months?

I think that we are seeing fewer deals come to market, it is quite difficult to find opportunities out there, which is a double-edged sword. It shows the strength and the interest that investors have in apartments in Canada. It will -- we have to remain disciplined in CAPREIT's approach to hunting value. But as an example, Brad, the developers that got caught during COVID with higher interest rates and just had to sell because of leverage, those situations have washed through the market now, and we're seeing less and less of that. It's more portfolios that maybe have other assets attached to other asset classes that need some liquidity and apartments are a good place to go for strong liquidity.

But it's -- volumes are relatively light and cap rates are holding up relatively quite strong. So the spread between cost of money and cap rates that are trading in the market is very much in line with historical, if not on the low side. So rates are a bit higher. Cap rates are a little higher, but the spreads are holding together, if not compressing slightly, which is, again, a bullish story for the Canadian rental market.

If there's a bit of distress or liquidity requirements from a developer, like would you be willing to take on a bit of lease-up risk to get better pricing on a very attractive long-term assets?

Absolutely. We're absolutely -- we are a real estate company that has gone through repositioning that's poised to grow. Stephen talked about our leverage levels being very conservative. But to temper enthusiasm, because rents have fallen a little bit, it's not the developer selling that we would see opportunity and it would actually be bank repossessions where you really get rents falling in line with what valuation should be, and that's really yet to happen. So you've seen a little bit of that on the land development front, but we've not seen that in the apartment market. There's still frothy demand for deals out there and values really just haven't collapsed to the same extent that rents have.

Our next question comes from Sairam Srinivas from ATB Capital Markets.

Mark, going back to your comments on the various markets and their performance and then you overlay that with your comments on the growth for CAPREIT ahead, how are you seeing your geographic capital allocation strategy in terms of acquisitions?

It's a great question. The CAPREIT maintains the best rental markets in Canada, Toronto, Vancouver, Montreal. And as we work through this shift in temporary residents, those are the markets that are affected. And because those markets were really the landing spot for immigration, that is where we saw the most development. okay? So there is no question that when we return to like stable population growth, these are the markets to be in for the long term.

Canada is working through unprecedented post-COVID temporary resident growth. I think we may have showed you before in our investor deck, this phenomenon of temporary residents that's never happened in our history before. And those residents are being converted into permanent residents now, which is the form of immigration, but it's resulting in population decline in some markets. So what we will look for in all likelihood are opportunities across the board, but we're going to look for more stability in markets that represent good affordability, that represent good strength, but we're going to remain disciplined.

And it's hard to predict because we've got a -- we're in 10 markets now. We've got our eyes on all 10 of those markets and open to new ones, but really with a keen focus to what CAPREIT is all about, which is our big Canadian rental markets. And we remain quite bullish on the outlook for those markets. But again, we've not been through this window of time before, but the outlook is strong. It's very, very good. It's just -- if you look at that population growth chart and you look at supply and you see the whole story.

No, it definitely makes sense. Maybe just looking at your comments on possibly the mixed asset portfolios that could be out there, could we see CAP probably partner up with maybe some other public or private partners specialized in other asset classes to take on these acquisitions?

We're very open to looking at all opportunities. Joint ventures, if there's good value for us, is something that we would obviously -- we've always been open to. There's nothing new there. There might be a little bit more of that if you get partnerships into distress, and we think we can add value or look for compelling value. Again, when there's low trading volumes because when values are holding up, you have to look at creative solution and CAPREIT has a history of looking at creative solution, and we remain committed to that.

That makes sense. And speaking of solutions, other operating expenses, which were significantly down this quarter, and I think that's a big win for you guys. I know we spoke about this in September last year. But would you say the entire impact of the OpEx initiatives was reflected in Q4? Or could we probably expect a little bit more of that going forward?

Yes. I think we're -- we got our team hard at work, and they're looking at all opportunities within R&M, any controllable expenses. And also even when we talk about -- Mark mentioned about energy efficiency initiatives, we're also looking at that. I would say there are probably some opportunities within the next couple of quarters. So it's not completely baked in, but again, I'm being leaning more on the conservative side of saying there's probably -- OpEx is probably -- excluding the weather and also the carbon tax is going to be above inflation, but I think we can probably exceed that.

Our next question comes from Mario Saric from Scotiabank.

Mark, I want to come back to your comments on unseen supply in Montreal, Vancouver, Toronto, great long-term markets, but facing a bit of a perfect storm in the short term. Based on your kind of internal data, what's your expectation of the timing of peak deliveries in each of those markets? Is that a late '26 thing?

Yes. That is definitely a 10-market question and answer because they all are quite different. And it's further complicated by the fact that if you looked at the -- I'll use Toronto as the example, Mario. If you look at the deliveries in Toronto, you could not form a clear view because our portfolio is suburban and not affected by the deliveries that you see in the data. So it is -- and I'm not trying to skirt the question. It's so unique to each market that there's impacts that would appear to be severe for us that are not. And then there's other impacts that don't appear to be there in the data, but they are because of the maybe rent level, for example.

So it's -- in general, directionally, we've got this issue going on, not CAPREIT, but all the apartment REITs, CAPREIT for Toronto, Vancouver, Montreal is being sensitive to where we're located. But when you have population decline and deliveries of supply, you unprecedented on both metrics, you're really navigating. Now where we're quite fortunate is we have this affordable mid-tier market. And what we're waiting to see play out is that we know when there's a housing crisis, there's a strong rental market. And we know when there's uncertainty, people will rent over buy.

So it's very difficult to see that be revealed right now because of the season that we're in and just the nature of this situation is very, very unprecedented. So -- and it's highly concentrated. So you've got these very unique pockets of markets with high supply, you've got to look at the immigration impacts and poor population growth in general. And it's playing out not as bad as it would appear on paper simply because of the affordability of the portfolio and the desirability of the assets that we're buying. So it really is around that kind of expertise more than it's around data.

Zoning in on your GTA portfolio, I don't know how you answer this, but in terms of being able to quantify the variance in performance between the downtown core portfolio and the suburban portfolio, how would you characterize that, whether it's some of the metrics?

It's a great question, Mario. Like our portfolio is primarily suburban. The downtown core assets that we have had more of a COVID impact than they have like this market impact because we have large suites, not micro condos. We were getting above new construction rents in some of our downtown core buildings. That's what we're working through. But we're still seeing mark-to-market in those assets in the non-COVID leasing period or post-COVID leasing period. So our portfolio is holding up quite well in the core because of size, desirability. And we don't have a lot of this new construction $4-plus foot rent comparators. We have one asset, our Strata asset that's in little Italy downtown Toronto, and it's holding up like it's in a great market.

So it's literally the corner of whatever streets you're on that really does impact things. Strata, as an example, very, very small asset, large suites. suites, desirable areas, smaller building boutique style and holding up really, really well.

Okay. Just shifting gears to the incentives. They ticked up to 1.3% of revenue during the quarter, as you indicated on the Q3 call, they may tick up during the winter. It sounds like the leasing velocity thus far because of the weather may be a bit tempered. So I guess 2-part question. Would you expect a similar ratio of incentives to revenue in Q1? And then secondly, is it still a fair assumption granted there's lack of visibility with respect to the spring leasing season, but are you still targeting something closer to 1% throughout the remainder of '26?

Yes. We're feeling comfortable there. If you look at last year's experience, we saw exactly the same thing. We saw incentives really roll up in the winter season and then taper off in the spring leasing season. And again, we hadn't seen that before. CAPREIT was quite aggressive with our incentives granted last year because we weren't quite exactly sure the direction of the market, but then it tailed off.

And so the hope is, again, with the emergence of the spring market, we'll have far better clarity on where we're going here. But we're -- our use of incentives is very disciplined, and it's completely correlated to local competition and who's using them, but we're following the leader instead of being the leader this year.

And maybe last question on incentives. I think in Q2 and Q3 last year, they came down a little bit, but it was in part because you concluded that cutting base rent was being more impactful than the use of incentives. Where are you leaning on that spectrum today in terms of offering incentive versus reducing the base rate and is one more impactful than the other from a tenant psychology standpoint?

Yes. Mario, I think it's the same. I mean, in terms of -- we've already cut base rent, so it's not our strategy to do that going forward. We've already done that exercise. So really, it's just a use of incentives. Again, I think it's probably a seasonality that's at play right now. And then we'll really see what happens in the spring leasing season. Our expectation is, hopefully, it's going to be similar to last year. But we do see elevated, you could say, just as a percentage of revenues, incentives used just during this winter season so far, and then hopefully it will taper off.

Okay. And one last question on my end, sorry. Slide 12, the turnover slide, it's great information. I think we all really appreciate it. Do you have a sense of what those bars look like a year ago? So the less than 2 years being 27% of the lease tenure today? And do you have a sense of how those would compare to a year ago?

I'll have to get back to you, but I'm happy to chat offline about that, Mario.

Our next question comes from Matt Kornack from National Bank Financial.

I actually wanted to talk about renewals because you have this artificial now post-COVID spike in January. Are you still getting kind of roughly rent control levels, you're not having to give too much in the way of concessions? Or how should we think about that figure for Q1 on the renewal front, given the outsized GTA renewals, Ontario renewals, I should say?

Yes. So yes, we have that data. I would say, Matt, it's -- we are getting close to the guideline increase. So there has been like as we kind of pointed out on the conference call, our retention team is really working diligently with our existing tenants to kind of work out certain payment plans that they're exceptionally above -- if they're exceptionally above market. But generally, I'll just say we're achieving close to the guideline increase.

Okay. So that's a nice anchor for growth at the end of the day because as much as it seems like turnover has ticked up a bit, it doesn't seem like people are necessarily leaving suites in a significantly higher portion than we saw. But maybe if you could give us a bit of color with regards to the type of turnover you're seeing because I guess if you're sitting at above market rent, but you like your unit, don't you just ask the landlord to give you a lower rent? I'm trying to understand that dynamic a bit.

So I would say that, I want to highlight the double barrel benefit we're going to get here in the midterm, we're going to see the bleed off of the COVID leases, which will be beneficial, and we're going to see the rebalancing of the market as we work through supply and population growth. These are both big drivers for CAPREIT. Everybody is trying to guess when that exactly happens, but we've talked about when the COVID leasing will bleed off. That's more predictable than the overall health of the Canadian rental market, which again could be very surprisingly offset by economic uncertainty and people wanting to rent versus own. So that is all kind of good news that I want to highlight. It's literally working through the timing of when that all materializes.

That's fair. And not to talk up someone else's economists, but I think Ben Tal at the Toronto Real Estate Forum was talking about the fact that in Toronto and Vancouver, you had this huge amount of rooming and doubling up that there's probably excess demand sitting on the sidelines. So I mean, at a certain point, would you expect to see kind of that demand come back if they're well employed and making money into the rental market or consolidating the housing?

Well, it's a great point, and we concur with Ben Tal's comments. We've been -- I've been talking about this as another potential driver. When we saw a 10% turnover, we had a lot of this built-up demand because the market was just so tight. Now we're getting to 20%, which is in part due to the new construction portfolio. But there's no question that when the average age of a first-time homebuyer, for example, in Ontario is 40 years old now, 40. I don't believe they're living with mom and dad. So that means they're probably renting a room. And so that stat alone is very much leading towards this household consolidation of roommating.

And I hate to say this, but again, another tragic fact for Canada is just the birth rate is just so low that the younger people are going to be looking for lifestyle if they're not getting married or they're going to be looking for rental, like we said. So we've intentionally focused our new construction portfolio around amenitized buildings where we see young professionals. And the young professionals that aren't married that aren't having kids are far more likely to want well-amenitized buildings, and that's what we're kind of playing into. So a bit of a long answer there. But absolutely, we concur with Ben's assertion. It's -- don't have clear stats on it, but it's well known that this whole roommating phenomenon is very prevalent in Toronto, Vancouver, Montreal.

Makes sense. Switching gears completely, and I admittedly have not had time to fully vet the numbers, but it looked like the G&A was lower, and there may be some onetime issues there. But maybe, Stephen, if you could give us a sense as to kind of where you expect G&A to come in for 2026 or what a good kind of quarterly run rate is at this point?

Yes. So Matt, I think we expect it to be, I would say, fairly flat to 2025. If I give it as a percentage of revenues, it's about 4.8%. So I think there's opportunities within G&A. I truly believe that, that we can probably do better. So I just tend to be on more of the conservative side.

Stephen makes a very important point here that we've talked about that relative to peers, we're doing extremely well as a percentage of revenue. And we've got a great team, and that team is capable of more. And we've rightsized the team with the size of the portfolio in an exceptionally well-matched way. So we continue to see technology having opportunity, which we will, through attrition, no doubt be able to capitalize. And we remain fully committed on the G&A front to show progress.

Okay. Last one for me, just on procurement. I know you guys were going through that process, not a fun process to kind of rejig those. But how is it progressing? And is there still more to go from a cost savings standpoint as you look to rationalize procurement?

Yes. The team is working very, very hard. And again, I made comments on technology. We have more technology, we hope to help us access the market even more broadly. But again, this is an area that we know that we can find improvements in, and we will do everything we possibly can to deliver that in the short term.

Our next question comes from Dean Wilkinson from CIBC.

Matt, feel free to talk [indiscernible]. Mark, I just want to go back on the inducement question that Mario asked. The tripling of that number, 2025 over 2024, do you think that that's more related to those newer tenured tenants perhaps in the newer buildings? And if so, how do you look at that going forward and the trade-off between being able to mark those rents and sort of buying occupancy, if you will, in the short term?

I think I heard you. A little bit muted, but I'll try to answer what I thought I just heard there, okay? If we're talking about escalated turnover, Dean, is that what I heard?

The lift in the inducements.

Inducements. Okay. I think the lift in inducements does have -- the new portfolio definitely has an impact on that. I'll kind of go back to the point I thought I was going to answer. The newer construction portfolio, higher churn. So 20% of that portfolio is experiencing higher churn rates than the core portfolio. And in those -- both the core and the higher churn new portfolio, we're using incentives, okay?

But the acceleration to your answer is, yes, it is because of that. It is having an effect. But what that also means is it falls off much more quickly than the market sort of remains balance. But we're very, very happy with our decision here on the new construction portfolio, in particular, because of the cash flow attributes. So even with these incentives and even with accelerated turnover, these are proving to be exceptionally wise cash flow investments. And we're very excited about the ability for those assets to capture the market when the market comes back in strength. Our problem in the Ontario portfolio is always low churn and not able to access market rents when the market was improving. And we're well positioned to capture that when the market is well balanced.

We have a follow-up question from Mike Markidis from BMO Capital Markets.

Unprecedented times, perfect storm, all this stuff, totally get that, Mark. I'm just curious, how would you compare what we're seeing today in Toronto, Montreal and Vancouver to what we saw in Calgary and Edmonton in 2016 and '17?

A different dynamic, different rent levels like the market in Toronto, in particular, the part of the market that's most impacted is the plus $4 a foot market. So definitely affordability would be a bigger driver here versus people leaving, okay? When an economy gets hit like you see in Alberta and people leave because they lost their job, that's very different than roommating because of affordability and that kind of pressure. The kind of supply that we're seeing in Toronto, Vancouver, Montreal is typically concrete and far more expensive, therefore, commanding a far higher rent level. So that's a little bit different than wood frame Alberta, Saskatchewan, I'm going to call it.

So that's how I would say the difference is here. But also, it's this adjustment, like you said, Mike, the perfect storm, which isn't really -- it's more of a spring shower than it is a hurricane. In our case, we're holding up our vacancies like we are and holding up our rents like we are. So we're trying to give good color on the changing environment, but we're also really excited about inflection, and it's going to happen. And it's just a matter of us trying to figure out the data. We were talking internally here about all the data we're now hearing in on our markets to really try to better understand the specifics around completions, starts, immigration, unemployment. And none of these things had to be looked at in the past when you had steady population growth with immigration and natural population growth and steady supply.

So this is a very much made in Canada problem in our big centers and highly influenced by government policy. And I do feel that the government gets the message, and they're doing what they can and balance will be restored. We don't want to lose our development industry in Canada, and government understands that. And we're really, really pleased with the kind of conversations that we're hearing from the provinces and the Feds.

I think we can all hope for that spring shower that you referred to after this winter. And I guess the one important point is you've got embedded mark-to-market, which I guess is the key difference. Not all your rents are at market. So I appreciate that.

Absolutely. And thank you for highlighting that because if it wasn't for CAPREIT's dramatic increase in rents mark-to-market post-COVID, you'd be seeing more of the real value we've got in the embedded portfolio. And we do have a big insurance policy sitting underneath this portfolio in those mark-to-market rents. And we're very, very happy about our strategy and what we've done to keep that insurance policy strong.

We currently have no further questions, and I would like to hand back to Mark Kenney for any closing remarks.

I'd like to thank everybody for your time today. It was a long call. And if you have any further questions, please do not hesitate to contact us at any time. Thank you again, and have a great day.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

Hello, everyone, and thank you for joining the Canadian Apartment Properties REIT Third Quarter 2025 Results Conference Call. My name is Claire, and I will be coordinating your call today. [Operator Instructions]

I will now hand over to Nicole Dolan, Investor Relations at Canadian Apartment Properties REIT, to begin. Please go ahead.

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 2 and our other regulatory filings for important information about these statements.

I will now turn the call over to Mark Kenney, President and CEO.

Thanks, Nicole, and good morning, everyone. Joining me this morning are Stephen Co, our Chief Financial Officer; and Julian Schonfeldt, our Chief Investment Officer.

I'll start with a high-level update on our progress in 2025 as summarized on Slide 4. So far this year, we sold $411 million in noncore underperforming Canadian properties. On a consolidated basis, we've disposed of $783 million in European assets.

With the sale proceeds, we've invested $366 million into the purchase of 9 high-quality, low-CapEx properties located in some of Canada's most highly sought-after neighborhoods. We've also allocated $200 million to our NCIB program, repurchasing CAPREIT's trust units at a weighted average price of $43. With this being well under -- well below our diluted NAV per unit of $56 as of September 30, it continues to represent a highly accretive use of capital.

Operationally, our same-property Canadian portfolio was 97.8% occupied at period-end, across which we achieved 4.4% growth in average monthly rent. Combined with disciplined cost management, we are pleased to report our same-property NOI margin expanded to 66.4% in Q3. We've also strengthened CAPREIT's balance sheet with leverage decreasing to 37.7% as of September 30, 2025.

With that overview, I will now turn the call over to Julian to provide an update on our capital allocation progress.

Thanks, Mark. On Slide 6, you'll see the significant progress we've made on our portfolio repositioning program. We've been actively divesting underperforming assets and redeploying proceeds into strategically aligned mid-market apartments that come with low capital investment requirements and strong cash flow yield. This upgrading has strengthened the performance of our affordable, well-maintained portfolio and reduced our noncore exposure, which is now at only 11% in Canada and 2% in Europe. Looking ahead, we're committed to advancing this transformation, simplifying the business and returning to our roots as a pure-play provider of Canadian apartment properties.

Our NCIB is another important component of our capital allocation strategy. As shown on Slide 7, we executed $200 million of accretive repurchases in 2025, bringing total activity since inception in 2022 to $866 million. This mechanism has delivered meaningful value by allowing us to invest in our own high-quality portfolio at an implied cap rate well above market comparables without due diligence, with quick execution and minimal transaction costs. Subject to market conditions and other strategic priorities, we plan to continue leveraging this tool to maximize unitholder returns.

With that, I'll hand it over to Stephen to review our results.

Thanks, Julian. In today's operating environment, our seasoned and agile leasing and retention strategies are playing an increasingly crucial role in sustaining performance and driving value.

On Slide 9, while occupancy softened slightly given recent market dynamics, it remained healthy at 97.8% on September 30 for the total Canadian residential portfolio. Across occupied suites, our average monthly rent increased by 5.7% year-over-year to $1,709.

Turning to Slide 10. Robust rent growth was supplemented by prudent cost control. You can see that the same-property expenditures increased by 1.3% compared to Q3 last year. However, excluding realty taxes and utilities, operating costs were down by 2.5%, driven mainly by lower R&M costs. Several initiatives contributed to this, including more competitive quoting and closed bidding processes, stricter approval thresholds, enhancements to our procurement practices and improved sourcing and tendering through software optimization. These operational efforts drove a 0.8 point increase in our same-property NOI margin to 66.4% for the quarter.

Diluted FFO per unit was up by 0.6% for the 3 months ended September 30, 2025, primarily due to NCIB repurchases and, to a lesser extent, reduced interest expense on credit facilities and mortgages payable. These gains were partially offset by lower NOI from asset dispositions. However, with sale proceeds used in part to repay debt, CAPREIT successfully decreased its debt to gross book value ratio by 3.2% since September 30, 2024. However -- I mean, sorry -- higher vacancy also weighted on performance versus prior year period, including elevated vacancy in the Netherlands tied to ERES's disposition program, which intentionally holds more suites vacant each month in order to maximize sale value.

Results for the 9 months ended September 30, 2025 are summarized on Slide 11. With heightened cost pressures in the beginning of the year, our 9-month same-property NOI margin held approximately flat compared to the same period in 2024, while our total portfolio margin declined to 65.2%. This reflects those early headwinds despite strong performance in the second and third quarters.

Slide 12 provides an overview of our balance sheet, which remains one of the most resilient in our peer group. At period-end, we had $281 million in available liquidity, including $84 million in Canadian cash and $197 million in unused capacity on our acquisition and operating facility. This flexible financial position enables us to continue acting swiftly and decisively on accretive market opportunities as they arise.

On that note, I will turn the call back over to Mark to wrap up.

Thanks, Stephen. In summary, our third quarter 2025 performance underscores the enduring strength and stability of our affordable apartment portfolio in Canada: the value created through strategic capital recycling, the effectiveness of our rigorous property management and the resilience of our conservative financial framework. Importantly, these elements all work together to support one primary objective: increase free cash flow generation. We view this as an essential to sustaining earnings growth and enhancing long-term unitholder value.

On Slide 14, as we approach year-end, we remain focused on driving continued progress across all areas of our business and reinforcing CAPREIT's long-standing position as a trusted choice for living, working and investing.

We would now be pleased to take any of your questions.

[Operator Instructions] Our first question comes from Jonathan Kelcher from TD Cowen.

First question, just on the capital allocation, and the NCIB specifically with the stock below $40 here. Can we expect you to sort of increase the pace or pick up the pace going into year-end and the beginning of next year?

Well, there's no question that at today's stock price level, there's extremely compelling value for anybody purchasing the unit. So it's something that we got in our stack of capital allocation, and it remains in that stack.

Okay. I guess then shifting to operations, the uplifts on turnover obviously being weighed down by above-market leases turning. How far do you think you're into that? Like how much longer do you think that's going to really weigh on the turnover stats?

Yes. I think we're -- hey, Jonathan. I think we're still probably 12 to 18 months away. But I would say as we see a lot of the turnover represented by those above-market leases, we're going to get through that over time.

Okay. So do you think the kind of 3% to 4% where you are right now is kind of the bottom and maybe start to grow from there in the back half of next year?

Yes, I think that's a pretty reasonable range.

Our next question comes from Brad Sturges from Raymond James.

Just to follow-up on Jon's capital allocation question. Just what would be holding you back on the NCIB here today? Are you seeing more opportunities on the acquisition side that might compete for that capital? Or what would be the reason for the, I guess, the cautious tone there?

Well, what we have always said is that we've got the 3 pillars of use of capital, whether it be property acquisitions, NCIB or paying down debt. And we are very focused on our cash flow journey. And the opportunities to buy new construction assets at significantly below replacement cost is one that we had to balance with the other decisions, okay?

At these, obviously, how we're compelled to allocate capital is dependent on acquisition opportunities, the level that the stock is trading at and the cost of debt. And going back to what I said in the first case, there is extremely compelling value in the stock price today.

Okay. And just maybe just a question on the acquisition opportunity set today. How has that evolved or -- improved or not improved over the last few months? What are you seeing in the market today? I know you highlighted some opportunities in Vancouver when we were there a few weeks ago. But just maybe an update on the acquisition opportunity.

Thanks, Brad. There remains a lot of product out there to look at, but the bid-ask spread continues to be very wide with a lot of the product that's coming online now borne during the kind of COVID elevated construction cost time line, diversions between what it cost folks to build the buildings and what they're actually worth now. So we see a lot of opportunities, but I'd say very few of them are actually executable at prices that make sense for us. But we underwrite hundreds of acquisitions a year. We're not seeing that slow down. And it's just you have to be very agile, nimble and take advantage of opportunities when they are executable, which is generally when there's either vendor distress or the vendors made an explicit statement or strategy to just get out of them and take whatever the market offers. So in short, lots of opportunities, but still there's wide bid-ask spread.

Are the better opportunities still more on a one-off basis? Or are you seeing product coming to the market in a more larger portfolio size?

For the newer construction stuff, it's, by and large, on a one-off basis. And to be honest, it's the right approach. The larger you get, the less of a bid you get. And so for the most part, I think folks are trying to sell into whatever liquidity there is, which tends to be on the smaller side. So haven't seen too many large portfolios, there's a few. But by and large, it's kind of one-off.

Our next question comes from Kyle Stanley from Desjardins.

Maybe just kind of sticking with the capital allocation theme. What's your outlook for additional capital recycling within Canada in the year ahead. And given your leverage profile is in a pretty good spot, is it safer to assume that further success on the capital recycling maybe allows you to just be that much more aggressive on the buyback given the value -- the attractive value that you mentioned?

I think we're covering this. We're seeing acquisitions in the mid-4 cap sort of zone, and you're seeing cap rate stock trading in the mid-5s. So I think there's not much more color we can say than that.

Okay. But just on the capital recycling front, I guess, your expectations there for the year ahead?

Yes. We're not providing guidance on that at this point.

Okay. Moving over to the cost improvement this quarter, that was really encouraging to see on the R&M side. Can you just walk through maybe your ability to continue improving that cost profile and maybe what's your outlook for potential savings in the year ahead?

As Stephen pointed out, we're encouraged by technology changes. We're encouraged by our approach, and we look forward to improvements going forward there.

Our next question is from Jimmy Shan from RBC Capital Markets.

Just to follow up on that $2.3 million R&M savings on the procurement side. Can you -- I guess I'm still a little confused as to exactly what it is that you've done that's different now that's allowing you to get those savings. And then when we think about the balance of the year, does the $2.3 million savings sort of sustain through the balance of the year or into next year? How do we think about that?

Yes. We've had a real dollar-to-dollar approach to scope. In a changing environment like the one that we're seeing today, you've got to just do what is required in the assets. When you're not building into a high-velocity mark-to-market rent environment, you've got to be very cautious of the scope that you do.

In terms of the sustainability, we are very confident in our ability to sustain the path that we're now on.

Okay. On the turnover, the cohort of tenants that have above-market rents, do you have a rough percentage of what that represents as a percentage of the portfolio?

Yes. Looking at the stats, it's about 20% is representative, of the total leases that are above market -- or sorry, below market -- above market, yes.

Above market. And how -- what's the average differential between...

It's about -- when we look at it, it's about negative 6%.

Our next question is from Mike Markidis from BMO.

Just with the -- if we look at the -- if I look at it anyways, the Canadian portfolio, it looked like your -- I think if we looked at turnover in the last several quarters, it was accelerating. And it was still up year-over-year, but it was only up by 20 basis points in Q3. So is that just an anomaly or are you starting to see that the increase in turnover is starting to taper off here?

Well, a couple of factors. The people with COVID leases are definitely moving into the market and churning. That will have some impact. The new construction portfolio will churn at a higher percentage rate than the legacy portfolio. And we are seeing just a generally more affordable rent market, so that the legacy leaseholders are more inclined now to look at options than they would have previously. It's really those 3 factors.

No, I understand why turnover would be higher relative to where we were sort of 12 to 18 months ago. It just looked like the increase in Q3 is starting to taper off. So I was just wondering if I'm looking into it too strongly or if you guys have noticed anything where turnover -- the acceleration in turnover is starting to slow off a bit.

No. I think, Mike, I think that's, based on what we see, that's a pretty normal pace that we're going to see throughout the rest of the year. Again, you do see a lot more in the leasing season of the fall, it does turn over quite a bit. Same as the summer season. But there will be probably a little bit of taper off going into Q4.

Okay. And then as you guys think about sort of Q4 and Q1 just with a seasonally slower period, I think you had made it -- you noted last call that you guys have adjusted rents to sort of become more in tune with market reality. Do you think as traffic slows here into the winter months that further rent adjustments will be required? Or do you see market rents right now being stable?

Well, we saw a seasonal effect last year and we were having difficulty reading the environment. We will no doubt have another seasonal effect this year. But we're quite confident that the general marketplace is in stable territories. It's just the seasonal effects do tend to show up in Q4 and Q1.

Okay. No, that's fine. And then last one for me before I turn it back. On ERES, see the elevated vacancy that you guys have there as you maximize value in the wind-down process. I guess my question would be is, is there further vacancy loss that you would expect as that process continues? Or should we expect the existing vacancy level for the U.S. to sort of hold until further notice?

Yes, it will continue to elevate until there's the completion process there.

Our next question comes from Matt Kornack from Bank Capital Markets.

Stephen, just I guess last quarter, about 24% of your portfolio was minus 6% MTM and sub 2-year leases. Is that 20 a rounded figure or was the bulk of kind of your turnover this quarter impacted or at least 50% impacted by kind of sub 2-year leases turning?

Yes. That is -- I would say those are the post -- or more recent leases that are currently above market. Yes, I think it will take a bit of time to go through. I kind of said 12 to 18 months. Again, those -- a lot of the turnover that's occurring in the quarters are related to those tenures. So that would -- that is turning approximately representing 50% of the turnover currently. So it will take some time, but 12 to 18 months is what we're expecting.

Okay. And then, I guess, broadly, we've seen you guys and your peers kind of hold occupancy at a pretty high level, albeit again taking a bit of a hit on the rent side. But we've also seen broader market vacancy increase. Is there a flight to quality here or your portfolio is relatively well positioned? Or is it that just your peers are holding rents and not trying to drive occupancy at this point? I'm just trying to square that variance.

Yes. We're being agile. We're looking at all our pricing. It's all about holding vacancy -- sorry, occupancy high. So it's a combination of using incentives and then within targeted buildings, we know which building they are. But it's a strategy that our operations and marketing team are deploying. So yes, we're trying to keep occupancy up.

Okay. And on the incentive front, I know it was about 1% of the portfolio and seems to be holding, if not, maybe ticking down a little bit this quarter. Is your view still that -- you've said once that an appropriate pricing incentives are less of a driver at this point?

Yes, correct. I think based on what we've been seeing for the last couple of months, Q3 is a pretty good run rate going forward.

Winter months, Matt, are definitely the more challenging months. When we get good velocity in the spring and the summer, incentives do tend to ease a little bit. So there's a mild adjustment for quarters when you think about the run rate.

And I know we focus on R&M when we think of cost constraints, but you also saw this quarter ex the -- some of the onetime expenses on the processes you're updating, lower G&A, and your CapEx still remains very low on a relative historic basis. Is that all procurement? And on the trust expense side, is that kind of sustainable at this point? I know you guys have gone through some rationalization of costs. But just how should we think about that going forward?

Yes. We did -- we were quite aggressive, I'll say, with our NCIB program, with our debt repayment and, certainly, the high grading of assets, which has resulted in lower unit count. The heavy lifting there is, in our view, done. And I think you could rely on G&A at a far more stable level. And on the CapEx front, we continue to look at scope. We've got to tilt towards energy investments where they make sense. So we would want to give thought to those -- the cost of those investments as really being accretive investments. And in terms of repairs and maintenance, it's all about scope and rigorous market testing.

Okay. I appreciate the color, and it seems to be working.

Our next question comes from Anish Thapar from Scotiabank.

So my first question is on incentives. So do you still believe incentives trend at 1% of revenue in 2026? And what are your thoughts on bad debt expenses trend as well?

Well, I think on the incentive front, we wouldn't give guidance for the year, but what we're seeing is stability. And that's really all that I can say. Looking out is a little bit more -- we don't do that.

And on the bad debt expense, we've seen encouraging things happen in Ontario with respect to attempts by government to make things more efficient at the tribunal. A lot of our portfolio is in Ontario. So that would be a net positive.

Not your question, but just the general regulatory environment, what we're talking about, changes to the tribunal, it's quite positive coast-to-coast right now. Provinces are really tilting their minds to how to get more supply and how to engage with housing providers. So we're encouraged by just the general regulatory front.

My second question is how did the asking rents in your portfolio -- and does the primary focus right now remains occupancy stabilization?

Yes. So the asking rent, I guess you kind of talked about the mark-to-market on our portfolio. It has come down slightly, but it's nowhere near what we saw, you could say, kind of in Q4 of last year and Q1 of this year. So it's pretty much stabilizing based on what we see in the market.

And does the focus right now remains occupancy stabilization?

Yes, yes. I mean, yes, yes, occupancy is our key priority.

Our next question is from Mike Markidis from BMO.

Just a follow-up, Mark. I know obviously, a big focus for you guys is your cash flow journey. I wonder if you could somehow give us -- I know it's improving, but where you see your retained cash flow now annually for the business? I mean how that would have compared to, say, maybe a couple of years ago?

Yes. So just in terms of our journey to get to, you can say, self-sustaining, it's -- we were in a -- a couple of years ago, we were growing, we spent a lot of CapEx and we had a lot of legacy assets. Today, we have now transformed the portfolio into a much newer CAPREIT, younger CAPREIT, which results in a much stronger economic cash flow. And therefore, I think if we're looking out, it will be a couple of years or -- until we get to a self-sustaining model.

I think the timing, Mike, what we've said, is highly dependent on our acquisition [ distribution ] program. If we do newer-quality, low-CapEx acquisitions and, at the same time, sell dispositions that have higher CapEx burden, we get to the end result much faster.

So we're trying to balance those 2 things together. And at the same time, be relentless on seeking out efficiency within the existing portfolio to help move things along as well. If we do the combination of those things well together, the time line shrinks, we think, quite quickly.

Okay. And I'll also look back and [indiscernible] numbers, but you guys don't think you have a self-sustaining point in time yet?

Not at this point.

And to a certain extent, we've really focused on deleverage as the primary focus. We did a lot of that in 2025. So ability to raise cash is absolutely not a problem. The balance sheet is fortified, and our focus will stay there.

Thank you. We currently have no further questions. And I would like to hand back to Mark Kenney for closing remarks.

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

This concludes today's call. Thank you for joining. You may now disconnect your lines.