Crombie Real Estate Investment Trust Stock

Good morning, everyone, and welcome to Crombie REIT's Second Quarter 2026 Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] This call is being recorded on August 6, 2026. I would now like to turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead.

Good day, everyone, and welcome to Crombie REIT's Second Quarter 2026 Conference Call and Webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under Presentations & Events.

Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations.

Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these risk factors.

Our discussion will also include expected yield on cost for capital expenditures. Please refer to the Development section of our management's discussion and analysis for additional information on assumptions and risks. I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook. Kara will review Crombie's operating and financial results, and Mark will conclude with a few final remarks. Over to you, Mark.

Thank you, Meghna, and good morning, everyone. Crombie's second quarter results reflect the continued disciplined execution of our Building Together strategy and the quality of our coast-to-coast necessity-based retail portfolio. In a dynamic economic environment, our grocery-anchored platform again delivered steady, dependable results.

Today, I'll focus my comments on 2 of the 3 value creation drivers within our strategy, own-and-operate and optimize. Starting with own-and-operate. Our coast-to-coast grocery-anchored retail assets sit at the heart of vibrant communities, generating consistent traffic and strong tenant demand. Operationally, our results are strong and stable. Specifically, our leasing this quarter reflects the success of our model and the execution of the team. We completed 121,000 square feet of renewals at a first year growth rate of 11.3% over expiring rental rates, marking our seventh consecutive quarter of double-digit renewal spreads. We also executed 33,000 square feet of new commercial leases and held committed occupancy near all-time highs of 97.5%.

Kara will walk through the leasing details in a moment, but the headline is another quarter of disciplined and consistent execution, supporting our 3.2% commercial same-asset property cash NOI growth. What drives that consistency is a portfolio built with purpose, and there are 2 main ingredients. The first is the properties themselves. Grocery-anchored real estate is difficult to replicate with constrained supply and high replacement costs. Our grocery anchors are secured on long-term leases with a weighted average lease term of approximately 10 years. A grocery store brings people to the property week in, week out, and that steady traffic is what makes our space valuable to every retailer around it.

Complementing those anchors, nearly 90% of our non-grocery units are approximately 15,000 square feet or less. That is the format the widest range of necessity-based retailers are looking for today, and there is little new supply to meet it. Our lease terms are built to capture that demand. The anchor lease runs long, while the smaller units around them turn more often coming back to market at today's rents. The stability of the anchor, the traffic it draws and the pricing power around it are why this portfolio produces such durable, dependable cash flows and quarter after quarter. That cash flow came through again this second quarter. Setting aside lease termination income, FFO and AFFO grew 3.1% and 3.6%, respectively, over prior year. Underpinning that growth is steady rent growth across the portfolio with annual minimum rent compounding at close to 4% annually over the past 3 years.

The second ingredient in a portfolio built with purpose is our disciplined approach to capital allocation. We deploy capital selectively into assets that strengthen our grocery-anchor platform and support long-term cash flow growth. In the second quarter, we added to the portfolio with the acquisition of Ocean Park, a 30,000 square foot freestanding Safeway in Surrey, British Columbia for $12.7 million, excluding transaction and closing costs. The property is at the heart of the community's primary retail node and is exactly the type of necessity-based assets we want to own for the long term.

Turning to optimize, which is about unlocking embedded value in the existing portfolio, primarily through nonmajor investments such as modernizations and intensification. In the quarter, we invested $10.6 million in a modernization program with Empire, and we had roughly 29,000 square feet of development across intensification projects and greenfield new builds. This is a repeatable lever that we have been investing in for years. It enhances asset quality and supports leasing on both renewals and new deals. We target attractive yield on cost in the 6% to 8% range. These investments also create a halo effect that benefit the other tenants on the site, and that shows up in our leasing spreads and our same-asset property growth.

With regards to major investments, we are focused on 2 items. First, the Marlstone in Halifax, where we continue to welcome residents throughout the quarter. On June 22, we celebrated the building's grand opening, an important milestone and one the entire team is very proud of. Construction is now substantially complete, and our focus has turned to leasing towards stabilization. At the end of June, nearly 1/4 of the units were leased and interest has continued to pick up with July, our strongest month yet. And second, entitlements, where our development team continues to advance select projects through the rezoning and development permit phase. These are assets within our major development ladder that will provide near- to medium-term optionality and value creation as market conditions evolve.

Taken together, the quarter reflects the same disciplined approach to capital allocation that has guided us for years. We keep adding quality necessity-based real estate and operating with excellence. We modernize and intensify what we already own, and we advance entitlements that create long-term optionality, all from a position of balance sheet strength. That disciplined approach to capital and the cash flow growth it generates is what has driven our 2 most recent distribution increases.

With that, I'll turn the call over to Kara.

Thank you, Mark, and good morning, everyone. Our second quarter results reflect the quality of our platform and the consistency of our execution. Healthy leasing fundamentals, continued growth in commercial same-asset property cash NOI and a solid balance sheet we further strengthened subsequent to quarter end. The numbers tell a clear story. Our strategy is working.

Let me start with leasing. During the quarter, we completed 121,000 square feet of renewals at a first year increase of 11.3% over expiring rental rates, driven primarily by renewals at our retail properties. As we've consistently emphasized, we focus on growth over the full duration of the lease. For the quarter, we secured a 12.7% increase when comparing expiring rates to the weighted average rental rate over the renewal term. In our first 2 quarters, new commercial leases increased occupancy by 63,000 square feet at an average first year rate of $26.26 per square foot. At quarter end, we had 160,000 square feet of committed space at an average first year rate of $28.45 per square foot with tenants expected to take possession throughout 2026 and 2027.

Committed occupancy remained at near record levels of 97.5% and economic occupancy was 96.6%. The modest decrease from the first quarter reflects natural lease expiries and early terminations. That leasing activity, together with embedded contractual rent step-ups, drove commercial same-asset property cash NOI growth of 3.2% for the quarter.

Turning to property revenue. Property revenue for the quarter was $126.2 million, up 1.9%, and net property income was $81.8 million, up 0.6% year-over-year, driven primarily by acquisitions, renewals and new leasing, partially offset by reduced lease termination income and higher tenant incentive amortization from modernizations.

Revenue from management and development services was $3.3 million, consistent with the same period last year, bringing our year-to-date total to $6.5 million. The year-to-date increases reflect higher development fees from joint ventures. Finance costs were $25.5 million in the quarter, up $1.1 million from the prior year, primarily reflecting higher interest on our revolving and bilateral credit facilities, which had no balances in the same period last year, partially offset by lower mortgage interest due to maturities and repayments.

Turning to earnings. FFO was $62.4 million or $0.33 per unit, and AFFO was $55.4 million or $0.30 per unit. On a per unit basis, FFO was down 2.9% and AFFO was essentially unchanged year-over-year, primarily reflecting additional units issued under the DRIP, together with reduced lease termination income and higher interest expense, partially offset by property revenue growth from acquisitions, new leasing and renewals.

Adjusting for that lease termination income difference, as Mark noted, FFO per unit was $0.33, up 3.1%, and AFFO per unit was $0.29, up 3.6% year-over-year, a cleaner read on the underlying performance of the business.

Turning to the balance sheet, which remains a core strategic strength and a source of resilience. We ended the quarter with available liquidity of $478.7 million. Our unencumbered asset pool continued to grow, reaching a fair value of $4.2 billion, primarily on acquisitions, mortgage maturities and higher property values. Debt to gross fair value was 42.6%, debt to trailing 12-month adjusted EBITDA was 8.01x and interest coverage was 3.4x. Approximately 90% of our debt, inclusive of joint ventures at Crombie's share, carries fixed rates. And at quarter end, our weighted average term-to-maturity on our fixed rate unsecured notes is 3.3 years.

During the quarter, Morningstar DBRS confirmed our BBB issuer and senior unsecured ratings, both with stable trends, reflecting the quality of our portfolio and the strength of our balance sheet. Our maturities remain well staggered and our liquidity, unencumbered asset pool, and access to multiple funding levers gives us the flexibility to address them and to keep deploying capital as opportunities arise. Our payout ratios were 68.2% of FFO and 76.9% of AFFO for the quarter.

Subsequent to quarter end, on July 6, we closed $300 million of Series N senior unsecured notes maturing July 6, 2033, at a rate of 4.518%. And on July 8, we redeemed the $200 million of Series F notes that were due on August 26, 2026. Together, these transactions addressed our nearest term maturity and extended our maturity profile and increased liquidity. We are very pleased with the execution.

The note's priced at a spread of 124 basis points over the government of Canada curve, our tightest new issue spread on record for Crombie, reflecting continued strong demand for our credit. We used the balance of proceeds to reduce amounts drawn on our revolving credit facility, maintaining financial flexibility. On the Marlstone, our total estimated cost at Crombie's share has increased slightly to $72 million from $71 million, with the yield on cost at stabilization still expected in the 4.5% to 5.5% range, consistent with our previous disclosure.

Overall, the second quarter was another quarter of steady, dependable execution, strong leasing, continued commercial same-asset property cash NOI growth and disciplined capital and financial management, supported by a balance sheet built for both stability and measured growth.

With that, I'll turn it back to Mark.

Thank you, Kara. I noted at the outset that in a dynamic environment, this platform again delivered steady, dependable results. That is exactly what this is built to do. Our focus is unchanged, owning and operating essential real estate at the heart of Canadian communities, deploying capital with discipline and growing cash flow while compounding long-term value for our unitholders. Before we close and open up for questions, I'd like to take a moment to highlight our 2025 Environmental, Social and Governance report, which was released last night. It reflects the depth of our commitment to sustainability and to our people. I also want to thank our team across the country. Their execution and commitment are what turns our strategy into results quarter in and quarter out.

With that, we'll open the call for questions.

[Operator Instructions] And the first question comes from Lorne Kalmar with Desjardins.

Congrats on a good quarter and getting the Marlstone over the line. Just on the Marlstone, one of my favorite topics lately. It looks like you guys have made some really good progress in the first couple of months there. I was wondering if you could kind of -- if you could give us maybe where occupancy is as of the end of July and how things are tracking versus pro forma? I think last quarter you said they were ahead, but just wanted to get an update there.

Good morning, Lorne. It's Arie. We're very happy with our performance at the Marlstone, particularly July, which, as Mark noted in the prepared remarks, was a very strong -- our strongest month to date. I won't get into specifics, but we are over 30% as at the end of July, and we're continuing to see that momentum build throughout August. And the leasing team is really looking to capitalize on the busier summer months, particularly as a number of students are coming into the city as well. So I'd say that in general, the building looks great. The feedback has been exceptional, and we're building on that momentum. And I think it's important to note that these properties, the growth trajectory is not typically linear. We've seen that in some of our other stabilized properties. And when you take a look at our results, we've had in our stabilized portfolio, that's performing exceptionally well, and that occupancy is sitting at a record high. So I think suffice it to say, we know how to operate these buildings, and we know what it takes to lease them up. And I'd say we're well underway at this point.

Okay. So is, I guess, the back half of '27 still a good target for stabilization? Or do you think you can do it quicker than that?

I would still earmarked back half of '27, Lorne.

Okay. Fair enough. And then with obviously the Marlstone now done, no more major developments currently. Any thoughts on new project initiations in the near term? Or is that sort of it for a little bit here?

On the major development side, we don't intend to put a shovel on the ground in the near term. When we look at sort of how we allocate the capital, we kind of look at it in the 4 streams, nonmajor, major, acquisitions and distributions. So nonmajor has definitely been a focus for us, quick turnarounds, predominantly modernizations and intensifications in greenfields of grocery-anchored. Major's focus has been entitlement to create the optionality to get ready at some point when the market conditions are right to maybe consider putting a shovel in the ground.

Acquisitions, we've been focused in on, on a year-to-date basis, having invested close to $150 million in acquisitions. We continue to focus in on that. We are seeing some good opportunities as we underwrite. And on distributions, we gave our second increase in distributions this year. That is definitely part of our strategic view of how we allocate capital. So it's in those 4 disciplines, and we always look at what's going on. I think the one thing that's great about Crombie is we have the flexibility in all those 4, and they're all important.

Okay. That's helpful. And then just maybe one quick last one for me, just to touch back on one of the 4 buckets, the acquisition side. What's sort of the outlook for the balance of the year? Do you think you can kind of repeat something similar to what you did in the first half? Or is that being a little bit too optimistic?

The team is very active. We're seeing more opportunities at this point in the year than we would have seen 6 months ago or a year ago. That said, we're very disciplined on how we look and underwrite them. We're not looking for growth for growth's sake. And if you kind of look back at our track record, over the last 4 years, we've been net acquirers, bought about $375 million to $400 million. We sold about $100 million. We've added about 500,000 square feet to the portfolio.

So we are focusing on acquisitions. We'd like to do more of it, but we're being extremely disciplined to make sure that they're tucking into the portfolio and delivering on the metrics that we're really focused in on, which is same asset NOI, FFO growth and not compromising the balance sheet as we do it. So are we looking to do more? Yes, but we're going to take a very disciplined approach.

And the next question comes from Brad Sturges with Raymond James.

Just following along Lorne's line of questions there, just on acquisitions. I guess, during the quarter and post quarter, you bought a few land parcels. Just wanted to maybe get a bit more color in terms of the plans with those acquisitions.

For sure. Good morning, Brad. So yes, we've been active this year. Ocean Park, which we called out, which is the 30,000 square foot Safeway in Vancouver. Earlier in the year, we bought the Whitby warehouse. We bought Saint-Hubert in Quebec, which is another warehouse. And then in the quarter, we bought Elmwood, which is a parcel that is a part of a broader development that we have had owned. It was 4 parcels. We own 3 outright, and we had a land lease on the fourth parcel. So we bought the fourth parcel, and it creates some optionality, squares up the site and gives us some optionality in the future. And then subsequent to the quarter, we bought Windsor, which is a commercial development site that we're actively working on an application.

Okay. That helps. I guess you called it out you've been a net acquirer, but opportunistically you do consider some dispositions. Is there anything near-term that you're looking at from a disposition point of view? Or should we continue to be more -- expect Crombie to be more focused from an acquisition point of view?

We do look at the sources of capital. And so when we kind of think about that, you first go to the balance sheet health and the strength of the balance sheet. Kara and team have done just an exceptional job on managing liquidity, which is now $450 million-ish, $475 million. Our free cash flows increased year in, year out. So we're almost now at $50 million of free cash flow. We have a DRIP. That DRIP provides us a nice little source of equity quarter in, quarter out, and we have an unencumbered asset pool, as you call out, for dispositions of over $4 billion.

It is not something that we are fixated on. Where we think there's a great opportunity and the market conditions allow us, we'll action it. But we're going to do it with purpose and intent so that we can then anchor up into something more core, which will be grocery-anchored that has a more -- has a stronger growth profile than our existing profile today. So it's not a necessity to sell assets, but we have demonstrated that we are doing it in order to provide a more durable portfolio for our unitholders.

Okay. Last question. In terms of the nonmajor development bucket, obviously that's a pretty core focus of Crombie. Just curious, when you talk about the 6% to 8% target returns, just given where the market fundamentals are and maybe some of the pricing power you're starting to see from a rent perspective, does that change the actual returns you're getting in terms of realized returns versus target? Or how should we think about where you're actually kind of generating unrealized returns within that range or whether it's lower end, higher end or even above?

Brad, it's Kara. No, it doesn't change our outlook on the returns that we've disclosed in terms of target. So we're still looking at that approximately 7% return on modernization that drives cash flow, especially to our same-asset property cash NOI line. And so we're still within those target ranges that we're disclosing.

And the next question comes from Sam Damiani with TD Securities.

Congratulations on another great quarter, 3% plus same property. Are you looking at the sort of trend here? And any new thoughts on sort of the guidance range for same property?

Sam, the range that we give is, as you know, 2% to 3%, and it's a long-term target that we consistently message in the last couple of years. We've been on the high side and pushing through the high side of that 2% to 3%. I think the leasing team, the finance team, the operations team has just done an exceptional job, and it's showing up in all our metrics and what we acquire, what we dispose of. As you kind of look in the back half of the year, we're expecting to reach or exceed that long-term target range that we've been giving of that 2% to 3%, consistent with what we did last year, we gave that same sort of viewpoint, and I think it's going to hold again this year as well.

That's great, and great to see. And maybe just on the -- there was a Toys "R" Us space that I think you were hoping to get wrapped up by the end of the last quarter. Is there an update on that space? I believe it's at Nicolet.

Sam, the update is the lease took a little bit longer to get past, just some summer vacation scheduling. The lease is in for execution on the tenant side, so I can't disclose anything at this point, but we are hoping to have some positive news come next quarter.

Okay. And I guess it was referenced earlier, the 3 stabilized apartments really have seen a really sharp occupancy rebound. Is there anything specific driving that?

We have done a concerted effort to really up the marketing for all 3 of the assets. So [ Davi ] in particular, just given some of the changes within the macro, particularly in that market, did see a dip over the last year, 1.5 years, call it, with some of the immigration policies. And the team has spent a large amount of time and effort on updating the website, increasing marketing spend. Incentives are a part of that as well, to really focus on more qualified leads, and those numbers are now bearing fruit for us.

So we're happy with where we are. It's by far the -- obviously, the best performance we've seen at 97.2%. And the expectation is that we're going to continue to build that momentum within Q3, try to capitalize on it before the slower months towards the back half of the year.

Okay. Great. And a small increase in the budget for the Marlstone, not really a big deal. And I think that budget has been pretty much flat ever since you announced it until now. But the leasing is going very well, could stabilize a little earlier than expected. Are you in any position today to sort of narrow that expected yield range from 4.5% to 5.5% to something more narrow?

Not at this point, Sam, but I think you've hit all the highlights when we greenlit that project in 2023, we gave what we thought the capital would be deployed. And we've been -- with Victor and his team, we've been on time and on budget. Arie's team has done just a terrific job, especially considering that we just really started leasing in May when the building was turned over. So it's been a very good positive momentum so far. But at this point, we're going to hold to the markers we've already given, which is 4.5%, 5.5% in back half of 2027. As we continue to see the back end here of lease-up and getting closer to stabilization, we'll narrow that.

And the next question comes from Tal Woolley with CIBC.

Just that you had mentioned the DRIP program before. I'm wondering, is it strictly like something you need to have in the capital stack? Or is it just sort of a nice-to-have thing at this point?

It's definitely a nice-to-have. It rounds up the balance sheet as a consistent and dependable source of equity for us, contributing approximately $40 million a year. So just where equity markets have not been open for quite a while, I mean, we are pleased with where our NAV is sitting, where the unit price is trending. I think there's still a bit to go. But -- so it's a dependable source of equity for us. So we're keeping it in place.

And I think -- pardon me. Prior to Mark's arrival, I think you sort of talked about leverage in the sort of 40% to 45% debt-to-gross book value range. Is there like a debt-to-EBITDA target you guys are sort of working towards at the end of the day?

We don't disclose a target. So right now we're definitely pleased with where we're at. It gives us the financial flexibility to go out and do some of the acquisitions that you heard Mark talk about. So from a debt-to-EBITDA or debt to adjusted EBITDA hovering in that 8x frame, that's a comfortable position for us.

Okay. And then, Mark, just wanted to go back to your comments on residential development from your preamble. I guess like if market conditions for resi improved, a, I was just wondering like what specifically you would be looking for to start greenlighting more stuff? And then we've sort of seen some interesting things happening with residential development with some of the other retail REIT peers in terms of like really kind of like pushing like exiting from it. What's sort of been a Board conversation around that as well? I'm just wondering if you can sort of give an idea of like how we should think about over the next 5 to 10 years, what residential development interest Crombie will have?

Tal, I'm not going to comment on sort of the dialogues that happen around the Board table. But what I can tell you is, as you know, we have a development ladder. The development ladder highlights somewhere in the neighborhood of 23 or 26 locations that are at different stages between near term, medium term and long term. How we have been using the ladder over the last 3, 4 years is, in some cases we've been able to monetize it and use proceeds to tuck back more into the core. In other cases, we've greenlit projects like the Marlstone. What we've been doing actively is standing up those partnerships, one on the East Coast, one on the West Coast, and we're using them as passive equity, sharing the risk as we go through that entitlement stage and getting it ready so we can decide how we want to participate.

And it doesn't mean that we're absolutely going to participate at 50%, it doesn't mean that we're actually going to participate in putting the shovel on the ground, but it's creating optionalities to determine what the conditions are. And the conditions are both the macro and internally in how we're deploying our capital. So if you kind of go back to how we've been deploying capital, nonmajors, majors, acquisitions and distributions. And we've been focused more on non-majors over the last 3 years because that is quick turnarounds, 12 months or less, less than $50 million, have a good yield on cost between 6% and 8%. And it's showing up in our FFO metrics. It's showing up in our same-asset NOI metrics. And so we're going to continue to lean into that.

We do like acquisitions. We like income-producing acquisitions. And so we're going to focus in on that. For majors, for now, the focus is absolutely on entitlements. We're spending money. We're investing in the joint ventures. At the macro stage, it's the micro market to which these locations are positioned. As you know, some of them are in Vancouver. Vancouver is not as strong as a market as we think Halifax is. The other market is Halifax. We're happy where we are in the Marlstone. But at this point, we're not prepared to green light a project. We look at the economy, immigration policies, what's happening around the micro market before we make a decision. We look at the underwriting at least twice a year to see where they are at. And it's a part of our evaluation at the executive table and a discussion at the Board table.

Got it. And then for the Marlstone, do you have a rough estimate of what the FFO breakeven occupancy is, just so we can think about modeling the drag between now and stabilization?

Tal, it's Kara. No, that's not something that we actively disclose.

Okay. I think if I'm reading like 75%, 80%, that's sort of when you would expect to be kind of like in the neutral range. Is that reasonable?

I wouldn't say that's reasonable. No, we're not giving guidance on that one.

And the next question comes from Mario Saric with Scotiabank.

Coming back to the acquisition strategy, I appreciate that you don't disclose individual acquisition cap rates. But going forward, if acquisitions are going to be a meaningful part of the capital allocation, can you give us a sense of the types of cap rate ranges one can expect on the types of assets that you look at?

Good morning, Mario. Kind of take a look at the MD&A, we kind of break them into the 3 categories of sort of the market classes that we operate in. Our all-in cap rate is sitting slightly below 6%. And then when we look at what we've been buying, we've always been suggesting and providing insights that most of the acquisitions we've been doing in the various 3 major markets have been reflective of the cap rate that we're disclosing in the MD&A.

And so when we look at what we're acquiring, we're looking at the yield, but we're also looking at the growth rate in the portfolio. So in some cases, we're prepared to pay a lower cap rate because we think that there's embedded growth in it. In other cases, it's the yield with more stable growth rate. So I can't give you one number that we're looking for. But I can tell you that when we look at it, we look at years to accretion. And most of the things that we've been acquiring have been immediately accretive.

That said, I would say that our payout ratios, our FFO growth, our property performance has put us in a really good spot where that it doesn't have to be absolutely immediately accretive to drive what we're chasing, which is longer-term growth. Our embedded portfolio is growing at one rate. We're looking at assets that can give us a higher growth rate on a long-term basis. It's going to come down to the balance between both, but that's sort of how we strategically think about acquisitions.

Got it. Okay. That makes sense. And then just in terms of funding, it sounds like there's always the possibility of dispositions selectively as a source of capital. Without them, what do you kind of estimate your acquisition capacity is today in order to maintain your target leverage metrics or where you'd like to see the balance sheet?

It's an interesting question, Mario. So you're right, dispositions have been a part of the strategy, as we called out, where we've sold about $100 million of assets over the last few years. We haven't sold any this year, and we've acquired $150 million. And with those acquired $150 million of assets, our balance sheet is still really healthy, like Kara called out, 8x debt-to-EBITDA, interest coverage ratio over 3. We're in a really nice range where we can still acquire opportunistically. We're able to use the liquidity that we've been through our bilateral revolver.

There is not a necessity to dispose to grow. But there is a viewpoint that disposing can help shore up other metrics and can help feed sort of how you're spending your capital. So it is a part of the strategy, but it's not the immediate thing of buy one, sell one because the balance sheet is in a really good spot. So I hope that answers your question. It is a part of the plan, but it's not one for one, and it doesn't have to happen in advance of.

Okay. Two more really quick ones on my end. Any update on the Calgary CFC tenant discussions and probable outcomes there?

Yes, we continue to talk to Empire. They continue working on getting the space ready. They have it -- they are marketing it. There's been some interest in the space, and we continue to support them. But there is no update. As you know, we're under a very long-term lease with Empire. We're very happy. We continue to collect the rent. There's no change for us. But we are supporting Empire as they look to backfill the space.

Okay. And then operationally, I think last quarter the sequential quarter-over-quarter decline in occupancy was attributable to the Saint-Hubert acquisition as well as some seasonality. The occupancy has come down very slightly Q2 versus Q1. What is the outlook for the second half of the year in terms of that occupancy trend?

Good morning, Mario. We're expecting occupancy to hold relatively steady. So we're near full at this point, as we've said in the past. So it will ebb and flow a little bit. Some of the declines that you've observed are related to the Toys "R" Us departure. That was about 35,000 square feet that left us early on in Q2. And as I mentioned earlier, we are expecting that to enter committed occupancy in the short term. We also had one office departure that we're managing through as well.

So I'd say that at this point, the team is continuing to renew at a very healthy pace. You saw the renewal spreads for the quarter were, again, consecutive quarter of double-digit renewal spreads. And that outlook, I would say, or that -- we believe that trend will continue on through the rest of the year. So like I said, tenants continue to covet the spaces they're in, and we're seeing those indications come through as they continue to exercise. So I don't anticipate much of a change than what you're seeing currently.

[Operator Instructions] And the next question comes from Pammi Bir with RBC Capital Markets.

Just coming back to the Marlstone, again, good to see the leasing progress there. But can you comment on how you're using incentives, if at all, and how the rents are tracking relative to your underwriting?

Sure, Pammi. The incentives that were being used are selective, and we are not currently openly advertising incentives, but we do use them as back pocket incentives that the leasing team on the ground is able to utilize. We've had a number of open houses. We had one towards the end of July. And there are promotional incentives associated with those that we do advertise. So the incentives are within the market range, typically about a month of free rent on a 12-month lease, where used. And beyond that, our underwriting on a rent per square foot basis, unfortunately, I can't disclose that specifically, but I could tell you that we are above our initial underwriting when we approved the development in 2023.

And I'd say another focus for us as well as we continue to lease up the building is we are focused on targeting a number of groups within the market that are continuing to provide us uptick. So we have military discount. We have a first responder discount. And we're advertising with students' boards as well just to capture some of the market dynamics that are unique to Halifax.

Great. And I guess just on that last comment in terms of specific groups, have any -- has there been any sort of bulk leasing or corporate users that have maybe helped, I guess, expedite the lease-up?

There have not. And we don't currently plan on utilizing that for this building. We believe that the building is great. And we don't really need to do that to augment any of the occupancy.

Got it. Just maybe coming back to the IFRS cap rates for the overall portfolio did come down a little bit in the quarter. And obviously, we've seen some M&A and some deals in the market. So can you comment on the drivers of the change there and maybe some thoughts on how you see that trending over the balance of the year?

Pammi, it's Kara. Yes, we're very pleased with some of the compression that we've been seeing across the portfolio. We have been seeing the most compression in our major markets and regional markets. And as you're saying, the transactions are giving a good proxy point, especially private market activity. It's continuing to reinforce the value of high-quality necessity-based real estate, and that's showing up largely in our portfolio. I think we've historically talked about the strength of our regional markets and major markets, and we're starting to see that benefit come through in cap rates and cap rate compression.

Okay. Got it. And then just what was the overall impact on the fair value of the portfolio in terms of the markup taken in the quarter?

Dollar-wise, I don't have that at my disposal. We -- if you include joint ventures, we had a weighted average portfolio capitalization rate of 5.77% in 2026, and it's compared to 5.86% at December 2025. So it's been -- that's a fairly decent compression for a portfolio of our size.

We can follow up on that. I'll follow...

Yes, I'll follow up with you on the number. Yes.

And this concludes the question-and-answer session and today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, everyone, and welcome to Crombie REIT's First Quarter 2026 Conference Call. [Operator Instructions] This call is being recorded today, May 7, 2026.

I would now like to turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead.

Good day, everyone, and welcome to Crombie REIT's First Quarter 2026 Conference Call and Webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under Presentations and Events.

Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations.

Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements.

Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these risk factors. Our discussion will also include expected yield on cost for capital expenditures. Please refer to the development section of our management's discussion and analysis for additional information on assumptions and risks.

I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook. Kara will review Crombie's operating and financial results, and Mark will conclude with a few final remarks.

Over to you, Mark.

Thank you, Meghna, and good morning, everyone. Crombie's first quarter results demonstrate the continued disciplined execution of our Building Together strategy and the quality of our coast-to-coast necessity-based portfolio. Our centers are built around community essentials, proving its resiliency in all economic cycles. The portfolio has been built with purpose. Durable, predictable cash flows backed by necessity-based real estate provides both stability and growth.

Today, I'll focus my comments on 2 of our value creation drivers within our strategy, own and operate and optimize. Starting with own and operate. Our coast-to-coast grocery-anchored portfolio sits at the heart of vibrant communities, both large and small, generating consistent traffic and strong tenant demand. Our leasing results this quarter once again reflect the success of our model and the execution of the team.

We completed 232,000 square feet of renewals at a first year growth rate of 12.1% over expiring rental rates. We also added 30,000 square feet of new leases at rates 52% higher than our portfolio average and maintained occupancy near all-time highs, ending the quarter at 97.6%. This drove a 3.9% increase in our average minimum rent when compared to Q1 2025. Kara will walk through the leasing details in a moment, but the headline is another quarter of disciplined execution supporting our 3.7% commercial same-asset property cash NOI growth.

Turning to portfolio management. We continue to selectively deploy capital into assets that strengthen our grocery-linked platform and support long-term cash flow growth. We added to the portfolio this quarter closing the Whitby's acquisition announced in Q4, which is a 484,000 square foot Sobeys occupied warehouse supporting retail store replenishment. We acquired that asset for $115.4 million before transaction and closing costs.

In the quarter, we successfully acquired a newly constructed 55,000 square foot warehouse property in Saint-Hubert, Quebec for $14.4 million before transaction and closing costs. We've entered into a long-term lease with Sobeys and are currently working to outfit the space for their use.

Crombie will act as development manager on the redevelopment, earning management and development fees through to completion. These 2 grocery-related industrial assets bring our retail-related industrial gross leasable area to 3 million square feet and approximately 10% of our NOI. It's a meaningful platform alongside our grocery-anchored core.

And subsequent to the quarter, we acquired a 29,000 square foot grocery property in Surrey, British Columbia for $12.7 million, excluding transaction and closing costs from Empire. The property is a freestanding Safeway on roughly 2.25 acres in Ocean Park at the heart of the community's primary retail node. It's exactly the type of well-located necessity-based assets that reflect the ongoing value of our partnership with Empire.

Turning to optimize. Optimize is about unlocking embedded value in the existing portfolio, primarily through nonmajor investments such as modernizations and intensifications and through major investments where we're advancing entitlements on the development ladder. In the quarter, we invested over $6 million in our modernization program with Empire. This is a repeatable lever we've been capitalizing on for years. It enhances asset quality, supports leasing on both renewals and new deals and delivers attractive yield on cost.

With regards to our major investment program, we're focused on 2 items. First, the Marlstone in Halifax, where we have successfully secured partial occupancy and welcomed our first group of residents on May 1. We're very proud of this accomplishment and the addition of this asset to the community and to our portfolio.

And second, entitlements, where our development team is focused on advancing select projects through the rezoning and development permit phase. We're focused on a set of assets within the major development ladder that will provide near- to medium-term optionality and value creation.

Before I hand the call over to Kara, I want to highlight the $0.01 increase to our annual distribution announced last night, our second consecutive year of growth. This increase reflects the continued execution of our strategy, the stability of the platform and the strength of our balance sheet. Crombie has a long track record of delivering dependable distributions across economic cycles. And in recent years, we've grown both FFO and AFFO while further strengthening our payout ratios. This decision reinforces our focus on long-term value creation and disciplined sustainable capital returns to our unitholders.

I also want to recognize the team behind these results. Our performance is driven by the people at Crombie, and I'm exceptionally proud of their commitment to operational excellence and to the communities we serve together. That commitment continues to be recognized externally. In 2026, Crombie was once again named one of Canada's top employers across multiple categories.

With that, I'll turn the call over to Kara.

Thank you, Mark, and good afternoon, everyone. Our first quarter results demonstrate continued momentum across the business, strong leasing fundamentals, growing per unit metrics and a balance sheet that continues to support both stability and growth. The numbers tell a clear story. Our strategy is working.

Let me start with leasing. During the quarter, we completed 232,000 square feet of renewals at a first year increase of 12.1% over expiring rental rates. As we have consistently emphasized, we focus on achieving growth over the full duration of the lease. And for the quarter, we secured a 13.2% increase when comparing expiring rates to the weighted average rental rate over the renewal term.

Within those totals, retail renewals were 117,000 square feet at 10.4% over expiring rents. New commercial leases increased occupancy by 30,000 square feet at an average first year rate of $29.20 per square foot. At quarter end, we had 166,000 square feet of committed space at an average first year rate of $28.92 per square foot with tenants expected to take possession throughout 2026 and 2027. That leasing activity, combined with embedded rent step-ups and contributions from our modernization investments drove commercial same-asset property cash NOI growth of 3.7% year-over-year.

Turning to property revenue. Property revenue for the quarter was $127.1 million and net property income was $79.7 million, up $2.5 million year-over-year. Growth was driven primarily by renewals, new leasing and the contribution of the Whitby acquisition, which closed during the quarter. These factors were partially offset by higher tenant incentive amortization for modernization.

Revenue from management and development services was $3.2 million in the quarter, driven primarily by ongoing fees from our programmatic partnerships. These contributions continue to represent a stable and recurring component of our cash flow profile.

Finance costs were $24.8 million in the quarter, up from the prior year, primarily reflecting higher interest expense on our revolving credit facility as a result of the Whitby and Saint-Hubert acquisitions, partly offset by lower mortgage interest.

Now turning to earnings. FFO was $61.6 million or $0.33 per unit. AFFO was $54.3 million or $0.29 per unit, up 7.4% year-over-year. As information, this quarter, we updated the presentation of fair value movements related to unit-based compensation, moving them from G&A into change in fair value of financial instruments and aligning our FFO and AFFO to exclude the impact of that noncash share price-driven item. Prior period results were updated for comparability. Our payout ratios were 68.4% of FFO and 77.6% of AFFO at the end of the first quarter.

Turning to the balance sheet. Our balance sheet remains a core strategic strength and a source of resilience, particularly in the current environment. We ended the quarter with available liquidity of $536.3 million between our undrawn credit facilities and cash. The $115.4 million Whitby and $14.4 million Saint-Hubert acquisitions were funded through the unsecured revolver. We ended the quarter with an unencumbered asset pool with a fair value of $4.1 billion, debt to gross fair value of 43%, debt to trailing 12-month adjusted EBITDA of 7.89x and interest coverage of 3.4x.

Approximately 92% of our debt, excluding swaps, carries fixed rates and our weighted average term to maturity on senior unsecured notes is 3.5 years. We have $200 million coming due this year with maturity of our Series F senior unsecured notes, a manageable amount that is well within our framework.

Our liquidity position, unencumbered asset pool and access to multiple funding levers gives us the flexibility to address maturities and continue deploying capital as opportunities arise.

Overall, the first quarter was another quarter of steady, dependable execution, strong leasing, continued commercial same-asset property cash NOI growth and disciplined capital and financial management, supported by a balance sheet built for both stability and measured growth.

Before I turn the call back to Mark, I'll briefly highlight the distribution increase we announced last night, which marks our second consecutive year of growth. Our payout ratios reflect several years of FFO and AFFO per unit growth, supported by a disciplined approach to distributions, resulting in meaningful financial flexibility today.

The $0.01 increase is a measured step. It keeps us well within the conservative payout range we are comfortable operating in, preserves our capacity to fund acquisitions, modernizations and our development pipeline as well as enables us to return a portion of that growth to our unitholders. This is consistent with our approach to capital allocation, disciplined, balanced and focused on long-term value creation.

With that, I'll turn it back to Mark.

Thanks, Kara. I noted at the outset that Crombie was built for this kind of environment, and the results show it. strong leasing performance, grocery-linked acquisitions that strengthen the platform and a team executing with discipline across the portfolio. Our focus is unchanged, owning and operating essential real estate at the heart of Canadian communities, deploying capital prudently and compounding long-term value for our unitholders. And while we're proud of what we've delivered, we believe we're still in the early innings of what this platform can deliver.

With that, we'll open up the call for questions.

[Operator Instructions] The first question comes from Lorne Kalmar with Desjardins.

You guys had a pretty nice start to 2026 on a same-property NOI perspective and came in ahead of the 2% to 3% target. I was just wondering, is there anything onetime in there? Or is that a good run rate for the balance of the year?

Lorne, there was nothing material as onetime in the quarter. And you're right, we do have a long-term framework of same asset in that 2% to 3% range. Last year, we delivered 3.7% as a total. The 2 years prior to that, it was at the high end of the range and around 3%. We hold our long-term target of the 2% to 3%. When you look at this quarter and you look at the rest of the year, we look at a path that could potentially push through that top end.

Okay. And maybe is there anything specific there? Is it just the broader strength in the retail fundamentals? I mean one of the things I was looking at is just the composition of lease maturities. I think the majority of them are non-Empire. Is that a factor?

Lorne, it's Arie. The renewals that are non-Empire are producing some very solid results and are a boost to our same-asset NOI. We're seeing the benefit of that this year partially. But of course, as those comp over an annual basis, we'll see them bear fruit a little bit more throughout 2027 and beyond. So they are a component, but that's not the full story.

The other part to think about, Lorne, is modernizations. They contribute to same asset, and we kind of look at those as a great investment on the retail component where we're investing in the anchor, which creates that halo that creates the benefit on the leasing spreads and shows up in same asset as well.

Okay. That's very helpful. And then maybe just one last one going back to a question from last quarter. I was wondering if you could give us an update on where leased and in-place occupancy at the Marlstone as of, I guess, today?

Lorne, so we welcomed our first tenants last week at the Marlstone and the building looks amazing. What we've done purposely is we've opened up the building with all amenities in place, and that was a key learning from us from our previous experiences to make sure that the tenants experience the building fully.

So I would say that while we're not providing numbers today with where we are as far as occupancy. We're pleased with the uptake so far. And we're seeing our lease to -- sorry, our tour-to-lease conversion rates go up significantly since we've had access to the building when we got partial occupancy towards the end of April. So we'll provide some more color on upcoming quarters.

The next question is from Brad Sturges with Raymond James.

I guess on the leasing front, you've seen, I guess, a little bit of further uptick on the leasing spreads you're getting. And I guess it's certainly going to depend on the composition of what the rollover is. But would you continue to expect kind of in that low double-digit kind of blended renewal spread right now?

We will. We're seeing that. And obviously, with the leases being 6- to 12-month triggers on renewals, we're renewing right now into 2027. So we are seeing a bit of a look through, and we expect to maintain the double-digit spreads for the short to medium term.

Okay. Sounds good. I guess my other question would be just seeing some further execution on the Empire-related acquisition pipeline. Is there anything else in the pipeline that you're looking at that you could pull the trigger on, whether it's Empire-related or just third parties?

Brad, thanks for the question. Yes, we were very happy that we've been able to execute on a few transactions year-to-date. That with the warehouse was a big one, 0.5 million square feet. We were able then to tuck in, in Saint-Hubert, which is in Longueuil just outside of Montreal, another warehouse. And both those facilities are replenishment locations for stores. So those are great opportunities for us.

Buying the Surrey Safeway location in Ocean Park is another one that we really like. For us, it's about making sure that we are underwriting as much as possible, but underwriting quality opportunities. We're not just chasing leasable area for the sake of it. So the team is busy. There's lots of opportunities out there. We're underwriting quite a bit from opportunities from our partnership with Empire.

We've talked about in the past, there are a number of locations in their portfolio that we'd love on our balance sheet. When they're ready to sell it and if it meets our criteria, we would be interested to take it on our side. Our balance sheet is in terrific shape. So we can opportunistically chase -- go after some of the stuff.

The next question is from Sam Damiani with TD Cowen.

Maybe just to start off, just wondering, as you look out multiple years for Crombie, do you see sort of room in your capital allocation for a larger weighting to grocery-anchored shopping centers like more than just the store, but acquiring those types of properties from third parties? I'm just wondering how you see that opportunity.

Sam, yes is the short answer. We are underwriting third-party opportunities each and every quarter. There are opportunities out there. We are also acquiring from Empire, which is a great strategic partner for us, which gives us first access rights to excellent real estate across the country.

Saint-Hubert is an example of a third-party opportunity that we were able to action. So found that location. It was a recently built warehouse that had vacated. We bought it from a third party, approached Empire who had a use for it. And now we're going to upfit it for their specific use, collect management fees during the duration of the outfit and then take what is sitting now in just committed occupancy and move it into economic. So we have -- we're constantly underwriting opportunities, and we're going to tuck in ones that meet the profile of what we're absolutely after, which is cash flow growth.

And the Saint-Hubert site there, how much extra CapEx beyond the initial acquisition are you anticipating there? And what sort of yield on cost should we think about?

So it's going to be functioning as a TI. So you won't see it show up in our nonmajor investments. So it's a TI that we'll be providing to Empire, which will be then built into the rent. And so we're not disclosing what that fit-up cost is at this point because it's going to ebb and flow as they sort of go through the detailed design. But we expect that it's going to take -- it will take us at least 12 to 18 months to get it to a spot when it will turn into economic occupancy. But during that time, we're going to collect management fees to build it out for them.

Okay. Great. And last one for me. I think you guys had just one Toys "R" Us. Is there an update on the progress of backfilling that one?

Sam, there is. So Toys "R" Us remained in occupancy throughout the quarter on a temporary deal that expired in early April with the receiver. And we have secured a tenancy subject to finalizing a lease for the entirety of the space that we hope to have wrapped up by the end of this quarter. And hopefully, we'll be able to announce some more details then.

The next question is from Giuliano Thornhill with National Bank Capital Markets.

I was just wondering if you could provide an update on the Calgary CFC or just maybe the Calgary industrial market in general. Do you think -- obviously, there's been some space that might be given back, if there's anything you could provide there for the future of that asset?

Sure. So as we called out, there's been no change from last quarter. So it's a 300,000 square foot industrial asset in Rocky View. Empire has ceased operating from the premise there. We are in a very, very, very long-term lease with rent commitment and the corporate covenant of Empire.

And what we're doing today is working with them on them securing a tenant that might be able to take over the space. And if they're successful in that, then we'll dialogue with them on what amendments we may want to consider with them. But until that time, very long-term lease in place, still collecting the rent, have the corporate covenant type of security. So there's been no change since the last update.

Right. And then the second question I had was just on Empire entering the kind of discount/warehouse segment with their announced kind of agreement. Does that change anything for yourselves from a real estate perspective? Like would there be sites in Quebec that you think would benefit from that kind of retailer as opposed to your current one?

So strategically, it doesn't change anything. So our focus is still to own, operate and where we can offer management services to Empire, we will, where we can acquire real estate like Saint-Hubert for their use is great opportunities for us, and they have great yields and support all our metrics.

The acquisition, I'm not going to comment on that acquisition that Empire did in Quebec specifically. But what I can say is they are looking to grow coast to coast. And that's the platform that we have, and we have a strategic partnership with them. So where they're looking to grow, we are interested in growing with them, and we'll do that in more grocery-anchored, as you can see in our nonmajor development within the MD&A, we have one project on the go at this point that is a grocery-anchored location that we're developing. And then from there, we'll continue to try and tuck in more projects.

The next question is from Mario Saric with Deutsche Bank.

Just on the Marlstone, without providing where kind of the occupancy metrics are now, are you able to give us a range of what the potential FFO impact from the property could be for '26?

Mario, is that with the Marlstone?

Yes.

Okay. So for the Marlstone, as Arie called out, the -- we just welcomed our first resident May 1. And we're going to give some updates as we progress to get to substantial completion, which for us is in around that 90% mark. So throughout 2026, it's going to be dilutive, but we expect that in the back half of 2027, it will move from dilution to accretion as we anticipate stability mid- to back end of 2027.

Got it. Okay. That's helpful. So Mark, it sounds like the acquisition pipeline is -- the potential is there, whether it's third party or through Empire. From a funding perspective, it sounds like you're pretty comfortable with the balance sheet that you have. It's probably the best that it's ever been. How do you think about the potential for dispositions and then successful rezonings in 2026 as a potential source of acquisition funding?

So on the disposition side, we have been active in that area. Last year, we disposed of 2 properties. We disposed of the office in Moncton and we disposed of a noncore non-grocery location in Saint John. Most of the dispositions that we have been actioning against have been sort of scaling up the portfolio. So some of those ones that we're not delivering on some of the key metrics that we're pushing for.

As we kind of continue to look the new -- there's the new crop of ones that are likely the drags and not contributing. So we have some others in the portfolio that we're working against.

In terms of the development ladder and assets in there that we could leverage, there are a couple. The market today, if you think specifically Vancouver and that ladder that we have, we have one in Belmont. We have one in Broadway and Commercial. We're still working through zoning and entitlements. We're still working with our partner. And so there's been no action called on either one of those in terms of when we plan to greenlight them. So I would say for now, it's about just pruning and high-grading the portfolio.

And in terms of the potential assets that are income producing right now, does the nature of the potential buyer has that changed? Or would it be similar to the types of buyers that you sold to last year?

Yes. It's a very similar profile to the buyers that bought last year.

Okay. More from an accounting perspective, IFRS perspective, the Choice, First Capital, KingSett transaction, would that serve as a data point for you from a valuation standpoint with your Q2 results in terms of thinking about the cap rate on that transaction and what that may mean for your portfolio?

Mario, it's Kara. We're -- I think that was a great transaction in the market and serves as a data point for all of us in the REIT space. And I think we're very -- I think it solidifies very much the IFRS NAV value that I think us and others in this space have been highlighting over the past several years. And so yes, we will definitely be taking that transaction into consideration as we look at cap rates and assessing our Q2 results.

Okay. My last one, just more of a modeling question. The G&A this quarter ticked up to close to $7 million, which is up sequentially and also year-over-year. What's a good run rate for '26 for that line item?

I'd say we're pretty comfortable with the run rate as it is -- as you're seeing it in the quarter. We did make a slight adjustment this quarter. I mentioned it in my prepared remarks. We had about $432,000 come out of G&A and move into the fair value of the unit-based compensation. So those -- that move was reallocated. And we actually chose to restate prior year. So prior year was about $786,000. So that's a G&A move. But -- and so you can think about this quarter as a better run rate for you.

Okay. So would most of the variation or the variance be attributable -- or are there other items involved as well?

Sorry, Mario, you cut out there?

Sorry, I'm just -- I'm wondering whether most of the variance either sequentially or year-over-year can be attributable to the reclassification from an accounting standpoint? Or is there just like a higher G&A load in part because maybe the management revenue services line item is moving higher?

Yes. So we -- it's a one-for-one on the stripping out the fair value adjustment. So there's no variance that you would see as a result of that.

The next question is from Pammi Bir with RBC Capital Markets.

Just coming back to the Marlstone, I realize it's still early, but how do the asking rents maybe compare to the initial underwriting? And do you see a need at all to lean a little bit more on incentives at this stage?

Pammi, it's Arie. The current asking rents are trending above our initial underwriting from project approval a few years ago. They're in line with what I'd say is more on the upper end of the market in the high-$3 range. And as far as incentives are concerned, what we're seeing here is there's nothing advertised. We did have a grand opening or a soft opening promotion last week or 2 weeks ago, we had our open house, which was extremely well attended. We had over 65 prospects tour and many of those led to conversions of leases. And for that particular open house, we did offer an incentive on a very short [ fuse ]. But beyond that, we're not advertising any.

Okay. And then is this an asset where there's perhaps opportunities for bulk leasing arrangements? Or is that not really contemplated at this stage?

We're not looking at that right now.

Okay. And then just, Mark, I think you mentioned earlier in 1 of the responses, the contribution for modernizations in your same property NOI. Look, it's certainly a positive, but how much of that 3.7% in Q1 came from modernizations?

Good question, Pammi. I don't have that at my fingertips. I can -- we can get Kara to circle back with you on that and give you some highlights on it.

If I look back to last year, is it on a full year basis, are we looking at something as high as in the 20%, 25% range or not?

Of the 3.7%, that would be too high. In modernization, we're investing about $25 million to $35 million annually, but we can definitely give you a bit more color on that. We just -- let us grab the materials and we'll circle back with you.

[Operator Instructions] Our next question is from Tal Woolley with CIBC Capital Markets.

With the Marlstone moving from development to -- or moving out of development, I guess. Does that change the fee -- the management and development fee earning potential from that asset going forward?

On that asset, yes, it will turn into asset. Yes, because we were clipping some development fees, it will turn into property management fees. But as a reminder, with the Montes partnership, we have 2 other projects that are still working through that entitlement program. So for -- if you think about it, the $2.4 million that we have marked as sort of a quarterly run rate on the 2 partnerships, East and West, you can hold that one for the balance of 2026.

Okay. That's -- so -- okay. So the sort of baseline fees you would expect on an annual basis is in and around that $10 million mark and then with some episodic development fees on top of that.

You nailed it. Exactly.

This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, everyone. Welcome to the Annual General Meeting of Crombie REIT. This morning's meeting is being broadcast via a live audio webcast. My name is Jason Shannon. I'm a unitholder and Chair of the Board of Crombie REIT and will chair today's meeting. I'd like to acknowledge that we're gathering on Mi'kma'ki, the ancestral and unseated territory of the Mi'kmaq people. I acknowledge my personal responsibility to understand my role in reconciliation and commit myself to learning about indigenous culture and heritage, challenge my own bias and stand up when I see injustice, we are all treaty people.

Thank you for making the effort to come and join us for our Annual General Meeting. It's great to see so many familiar faces. Joining me to my right are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Gavin Stuttard, Senior Vice President, General Counsel and Corporate Secretary. Gavin will act as the Secretary for today's meeting. Emma McKenzie of the TSX Trust Company will be acting as scrutineer for this meeting.

Our agenda is straightforward. We will first conduct the formal part of the meeting. Following, I'll make a few remarks followed by Mark Holly. And finally, we'll do our best to answer any questions you may have.

I now call the meeting to order and ask the Secretary to confirm delivery of notice of this meeting and to report on the number of Crombie units and Crombie special voting units present in person or by proxy.

Mr. Chair, notice of this meeting was mailed to the trustees and unitholders on or before April 2, 2026. The scrutineer has advised me that we have 354 unitholders represented at this meeting either in person or by proxy, representing 55,617,700 Crombie units and 76,709,180 Crombie REIT special voting units. The units represented at this meeting carry in aggregate 70.69% of the total outstanding votes eligible for this meeting.

Thank you, Gavin. Therefore, I declare that in accordance with Crombie's amended and restated declaration of trust, sufficient unitholders are present either in person or by proxy to constitute a duly convened Annual General Meeting of the Crombie Real Estate Investment Trust. The results of the meeting will be published following the meeting in accordance with the rules of the TSX.

The minutes of the Annual General Meeting held last year on May 8 were distributed at the door this morning as the minutes have been made available, unless there are any objections, I will dispense with the reading.

Are there any objections to that? Hearing none, we will proceed without reading the minutes. And unless unitholders have any comments or proposed amendments to the minutes, they will be considered final as presented. Are there any comments or proposed amendments? Hearing none, the minutes are approved as presented.

As described in our management information circular, which was made available to unitholders in connection with this meeting, ECL Developments Limited, which is 100% owned by Empire Company Limited, has the right to appoint up to 5 trustees. This right is contained in the REIT's declaration of trust and is based on the proportion of outstanding units held by ECL and the size of the Board of Trustees.

ECL has elected to appoint 5 trustees to serve for the ensuing year. I'd like to introduce the 5 trustees who have been appointed by ECL Developments Limited and ask them to stand as I call their names: Kyle S. Hartlen, Sarah MacDonald, Doug Nathanson, Vivek Sood; and finally, Michael Vels. Thank you.

In addition to the 5 appointed trustees, 7 trustees will stand for election this year at this meeting. Along with myself, I will now introduce the trustees of Crombie REIT proposed for election for the ensuing year and ask each of you to stand as I call your names. Paul Beesley, Jane Craighead, Mark Holly, Deborah Starkman, Michael Waters and Karen Weaver. Thank you.

Is there a motion for the election of trustees for the ensuing year?

I move that the following 7 persons be nominated trustees for Crombie REIT for the ensuing year: Paul Beesley, Jane Craighead, Mark Holly, Jason Shannon, Deborah Starkman, Michael Waters and Karen Weaver.

Thank you, Brady. Is there a seconder?

Mr. Chair, my name is Ryan Sharpe, and I'm the Director of Finance Business Partnering at Crombie and a unitholder of Crombie. I second the motion.

Thank you, Ryan. Are there any comments, questions or additional nominations? If not, I will now call for the vote by a show of hands. You've heard the motion. All in favor?

[Voting]

Opposed?

[Voting]

I declare the motion carried and those names elected as trustees of the REIT to hold office until the next annual meeting of trustees or until successors are elected or appointed.

In accordance with the majority voting policy for trustees, none of the foregoing trustees received more votes withheld than votes for in the proxies received by the REIT for this meeting.

In regards to the appointment of auditors, is there a motion to appoint auditors for the ensuing year and to authorize the trustees to fix remuneration of the auditors?

Mr. Chair, my name is Ryan Sharpe, and I'm a unitholder of Crombie. I move that PricewaterhouseCoopers LLP be appointed as auditors for the 2026 fiscal year and that the Board of Trustees be authorized to fix their remuneration.

Thank you, Ryan. Is there a seconder?

Mr. Chair, my name is Brady Landry, and I'm a unitholder of Crombie. I second the motion.

Thank you, Brady. Are there any comments or questions? Hearing none, I will now call for the vote by a show of hands. All in favor?

[Voting]

Opposed?

[Voting]

I declare the motion carried. The Board of Trustees on the recommendation of the Human Resources Committee has determined that it's appropriate to hold a nonbinding advisory vote relating to executive compensation. Since the vote is advisory, it will not be binding on the Board. However, the Board and in particular, the Human Resource Committee will consider the outcome of the vote as part of the ongoing review of our executive compensation. Is there a motion in this regard?

Mr. Chair, my name is Brady Landry, and I'm a unitholder of Crombie. I move on an advisory basis and not to diminish the role and responsibility of the Board of Trustees that the unitholders accept the approach to executive compensation disclosed in the management information circular for the meeting of unitholders on May 7, 2026.

Thank you, Brady. Is there a seconder?

Mr. Chair, my name is Ryan Sharpe. I'm a unitholder of Crombie, and I second the motion.

Thank you, Ryan. Are there any comments or questions? Hearing none, I'll call for the vote by show of hands. You've heard the motion. All in favor?

[Voting]

Opposed?

[Voting]

I declare the motion carried. Thank you.

A copy of the 2025 annual report, the consolidated financial statements and the auditor's report therein for the year ended December 31, 2025, have been made available to unitholders and have also been made available at the entrance and are now placed before the meeting for consideration.

Are there any questions or comments that anyone has regarding the 2025 annual report? Hearing none. This concludes the formal business of the meeting, and thank you.

I'd like now to share a few moments about my perspectives on Crombie from the last year. As a proud Nova Scotian, it's a pleasure to be here again in Pictou County where the Crombie story began, especially meaningful this year as we mark the 20 years of being a publicly listed company. And 2025 was a standout year for Crombie. In a time of continued macroeconomic complexity, Crombie's team, led by our President and CEO, Mark Holly, who you'll hear from shortly, delivered very strong performance, enhancing our strong partnership with Empire, built new partnerships and extended our track record of consistent strong performance.

Mark is now in his fourth year as CEO. And over that time, he has built a strong leadership team, focused the organization around clear cash flow-driven strategies and fostered a culture of discipline and execution. This year's results, including record committed occupancy, double-digit leasing spreads, strong cash flow growth, a credit rating upgrade and an increase to our distribution speak to the strength of our leadership.

Good governance remains a cornerstone at Crombie. Our Board brings a range of perspectives and deep experience to our work. Our role is to support management in delivering our strategy while ensuring rigorous oversight, thoughtful risk management and a long-term view of value creation that is balanced and fundamental to the stewardship role that we play. This year, we saw several important transitions on the Board since our last AGM.

In July 2025, Heather Gray Wolf stepped down after 2 years of service. And after 8 years of service, Jim Dickson, the Chair of Crombie, finished his term. Jim has made an extraordinary contribution to Crombie. Jim's wisdom, strategic guidance and true belief and passion for Crombie will be hard to replace. But he has left the Board and management stronger and ready for our new challenges. On behalf of the Board and management, I'd like to sincerely thank Jim and Heather for their dedicated service and valued contributions to Crombie during their tenures.

At the same time, we are pleased to formally welcome our newest trustees, Sarah MacDonald and Kyle Hartlen, who joined the Board in July '25, filling these vacancies left by Heather and Jim. Sarah brings 20 years of senior leadership experience and most recently served as the Chief Transformational Officer at Algonquin Power & Utility Company, where she also served as the Chief Human Resource Officer, following an extensive career at Emera, both in Canada and internationally.

Kyle joins us as a partner from Stewart McKelvey, specializing in M&A, corporate finance, governance and securities with extensive transaction experience across Canada and also serves on the Board of Governors of Huron University. We are fortunate to have their insight and judgment around the table. These appointments strengthen our governance framework and ensure we have the right people focused on Crombie's future through a lens of transparency, accountability and long-term value for unitholders.

Looking ahead, I am confident in Crombie's continued success with a coast-to-coast portfolio of essential real estate, a clear focused strategy and a culture built on disciplined execution. The company is well positioned to navigate the future.

It's now my pleasure to turn the podium over to Mark Holly, Crombie's President and Chief Executive Officer. But before I do and Mark begins, we invite you to watch a short video highlighting the strength of our necessity-based retail portfolio and the essence of our company, which is our people. Thank you.

[Presentation]

Okay. Thank you, Jason, and thank you for everyone today who's with us as well as those that are joining virtually. Before I begin, I personally want to welcome Pierre Saint-Laurent. Pierre St-Laurent is Empire's President and CEO and has been with the organization more than 34 years. Thank you for joining us today. I also want to thank members of the Sobey family and other Empire leaders who are here with us in Pictou County or watching virtually.

Empire has been a foundational partner since Crombie was formed, and our strategic relationship continues to be a sustained competitive advantage. Your presence today carries particular meaning as we recently marked 20 years since Crombie became a publicly listed company, 20 years built on the alignment and shared ambitions of 2 organizations. Crombie went public in March of 2006, raising just over $200 million in its initial public offering. The portfolio at the time was 44 properties, 7.2 million square feet across 3 regions.

The Crombie of 2006 looks very different than the Crombie today. Roughly 40% of the portfolio was enclosed malls, 15% was office and Sobeys represented approximately 13% of our minimum rent. Fast forward today, 20 years later, Crombie has a $6.4 billion portfolio, 310 properties, over 19 million square feet and an absolute coast-to-coast platform. But more important than the size of the portfolio is its quality. The properties we own and the tenants within them over the years, the platform has shifted more steadily towards grocery-anchored and necessity-based retail, retail-related industrial, specifically grocery industrial and select complementary mixed-use developments.

The tenant base has also evolved alongside it. Year ending 2025, Empire accounted for approximately 60% of our annual minimum rent with a weighted average lease term of nearly 10 years. And more broadly, necessity-based retailers generate close to 83% of our annual minimum rent. These are the grocers and the everyday service providers that Canadians rely on. Tenants with durable cash flow and proven resilience through any economic cycle is what we're thriving for.

Our footprint today stretches east to west from Canadian major urban centers to small format communities. But whether you're in a downtown hub in an urban -- sorry, excuse me, whether you're in an urban neighborhood or a regional market, the role we play is exactly the same. We provide critical infrastructure for the communities. Our properties are more than an asset on a balance sheet. They are the vital hubs where Canadians live, work, shop, play and connect every day. That foundation is what makes us the essential REIT and enables us to deliver unitholder value and durable, predictable cash flow with a consistent, reliable growth profile.

Our solid 2025 results are the product of our Building Together strategy, a strategy we set in motion in 2023 and one we have executed with discipline every year since. The strategy is anchored on 2 simple pillars: value creation and solid foundation. Value creation is where our top line growth comes from through 3 drivers: what we own and how we operate, how we optimize it and the role partnerships play within this organization.

Our solid foundation, absolutely never to be compromised, is built on financial strength, our people and culture and ESG. Together, the pillars guide the decisions we make and have been designed for resiliency, stability and long-term unitholder growth. The results are bearing that out. Since implementing the strategy, we've delivered consistently strong operating results across our key focus metrics with a continued focus on cash flow growth. Importantly, this cash flow growth hasn't come at the expense of the balance sheet.

We've deliberately strengthened it alongside that growth.

We've refinanced ahead of maturities, diversified our funding sources while growing our unencumbered asset pool by roughly 50% to $3.9 billion over the past 2 years. It's a testament to the team's focus and dedication and the strength of our platform. Let me take a moment to highlight what the team delivered by building together.

4 consecutive quarters of record committed occupancy, ending the year at 97.7%, commercial same-property cash NOI growth of 3.7%, which is materially above our long-term annual average target of 2% to 3% average annual minimum rent growth of 4.8%, AFFO per unit growth of 6.5%, not to mention a credit rating upgrade from Morningstar DBRS from BBB low to BBB mid and an increase in our distributions.

So how do we deliver these terrific results together? I'm going to frame my discussion around our 3 value creation drivers and then return to our solid foundation. The first of those drivers is what we own and how we operate. Our coast-to-coast grocery-anchored centers sit at the heart of vibrant towns, growing communities, generating consistent traffic and strong tenant demand. Grocery-anchored necessity-based retail is a distinct asset class, resilient through any economic cycle. It's essential to Canadians and delivers durable cash flow.

In 2025, demand for our space was both strong and broad. Established national retailers and emerging concepts both sought space across our portfolio. And that demand, combined with proactive leasing management and the deliberate curation of that tenant mix drove solid results. At year-end, we had 308 properties, close to that 19 million square feet and $6.2 billion in fair value with our core focus, our core focus on grocery-anchored and grocery-related properties.

Portfolio management is central to how we own and how we operate and is particularly essential to that driver. We continue to take a disciplined approach to capital allocation in 2025, focusing on assets where we can create the most value and divesting from those that are non-core or facing long-term challenges.

On the acquisition front, we continue to lean into the grocery-anchored retail opportunities. And in 2025, we were a net acquirer in line with our core focus, adding 5 Empire banner grocery properties totaling 200,000 square feet, 4 in Atlantic Canada plus our first Longo's anchored property in Ontario. We were equally disciplined on the disposition side, selling our 140,000 square foot Main Street office in Moncton, which had persistent vacancy and Loch Lomond Place, which was non-core non-grocery property in St. John.

Our second value driver, which is optimized, is about unlocking embedded value within the existing portfolio through both non-major development and major development activity. Our non-major development program had a very active year. These projects are short duration projects, which include modernizations, intensification, small-scale redevelopments and greenfield projects. They typically are $50 million or less and usually completed within 12 months.

These programs target also yield on cost between 6% and 8%.

In 2025, we completed 61 modernization projects with Empire, investing close to $38 million across that program. These projects upgrade the look, the feel, the functionality of the anchor grocery store and create a halo effect that benefits other tenants on the site. They also support the leasing portfolio across both renewals and new deals.

In addition to modernizations, we successfully completed 3 land use intensifications and redevelopment projects during the year, adding close to 60,000 square feet of new GLA to the portfolio. These programs are the most consistent and repeatable lever for driving growth, and it has a long runway.

Turning to major developments. Our approach is deliberate and disciplined. We focus on advancing entitlements as a way to unlock value while preserving strategic flexibility regarding timing, scale and capital deployment. The Marlstone in Halifax, a 291-unit residential building at the heart of Downtown Halifax, which is built to LEED Gold and Rick Hansen Foundation certification has a high-quality standard and is very welcome to the growing Halifax market.

We have successfully secured partial occupancy and welcomed our first group of residents on May 1. We're exceptionally proud of this accomplishment and the addition of this asset to the community and to our portfolio.

Across the remainder of our major development pipeline, entitlements is the strategic focus. It preserves optionality as market conditions continue to evolve and change. It provides us flexibility regarding timing, scale and the deployment of capital.

Our third value driver is partner. In 2025, we added 2 important partnerships, one in the East and one in the West. Our partnership with Montez Corporation in Halifax and West Group Properties in Vancouver are delivering on what we set out to achieve. Sharing capital and risk on larger projects, longer duration mixed-use developments and generating a steady stream of management and development fees while unlocking embedded value of the net assets through highest and best use zoning, all of while preserving balance sheet capacity for our core grocery-anchored platform.

While these new partnerships are very important, Empire remains our foundational partnership and represents a significant competitive advantage for Crombie. At year-end, Empire occupied over 11 million square feet of our portfolio and anchored 90% of our retail properties. Our real estate priorities are closely aligned with theirs, our operational needs, and that alignment shows up across acquisitions, modernizations, land use intensification, industrial optimization and development management services.

Turning to our solid foundation. A resilient balance sheet is an enabler for everything else that we do in our strategy. And in a more volatile capital markets environment, it remains the core strategic asset and a source of resiliency for Crombie. Our unencumbered asset pool has continued to grow, reaching close to $4 billion at year-end, approximately 7% higher than last year and part of a deliberate multiyear trajectory. This gives us meaningful flexibility to support both day-to-day operations and future investments on attractive terms.

We ended the year in 2025 with debt to trailing 12 months adjusted EBITDA of 7.66x and an interest coverage ratio of 3.39x. The sustained improvement in our leverage profile was recognized with a credit rating upgrade from Morningstar DBRS. This was a strategic objective that we set for ourselves and delivering on it is a testament to the discipline the financial management team has put in place and the quality of our cash flow.

That upgrade, combined with the consistency of our cash flow growth, supported a $0.01 increase to our annual distribution in August last year and again this year, a meaningful signal of confidence grounded in the sustainability of our underlying business. Our balance sheet is in terrific health, and we have access to diverse capital sources to continue to invest with discipline.

I want to take a moment to recognize the team. Annually, we celebrate our culture by naming exceptional teammates Crombie All-Stars. These awards formally recognize those who demonstrate thought leadership, living our values and ESG excellence. I would like to congratulate our 3 2025 winners who are here with us today: Victoria Clarke for thought leadership, Kyle Quigley for living our values and Tracy Naugler for ESG excellence. Congratulations to each of you and all our past winners. You do truly exemplify the Crombie culture and mindset.

Our ESG commitments are grounded in execution and not aspiration. Guided by our climate action plan, Crombie continues to make meaningful progress in reducing operational greenhouse gas emissions and advancing our transition to a lower carbon future. In 2024, Crombie reduced total operational greenhouse gas emissions by 33% from our restated 2019 baseline. This represents an absolute reduction of approximately 124,000 tons of CO2e.

I'm exceptionally proud of our climate action plan as well as the community impact strategy that we have in place, where in 2025, Crombie invested over $500,000 in cash donations, sponsorship, in-kind support as well as volunteering more than 3,700 hours across community-led initiatives. Our people and culture at the core of what we do. These commitments continue to be recognized externally with Crombie most recently being named one of Atlantic Canada's Top Employers, Nova Scotia's Top Employers, Canada's Small and Medium Employers and Canada's Greenest employers.

So looking ahead, Crombie enters 2026 on very strong footing. And last night, we reported another solid quarter of operating and financial performance and announced a $0.01 increase to our annual distribution. As we look ahead, our focus is unwavering. We will continue to own and operate essential real estate at the heart of community -- communities. We will deploy capital with discipline and grow cash flow while compounding long-term value for our unitholders.

Before I close, a personal reflection. Earlier this year, our leadership team had the privilege of ringing the bell of the Toronto Stock Exchange to mark Crombie's 20 years as a publicly listed entity. Standing side-by-side with the team, celebrating not a number, but a body of work was one of the more meaningful moments I had as a CEO. To every member of the Crombie team, at the TSX that day or celebrating at one of our offices across the country, I thank you. The discipline, the execution, the commitment you bring to the business is what turns our strategy into results.

To our Board of Trustees, thank you for your steady hand, your continued stewardship and rigorous oversight that you bring to the table. Your judgment and support have been invaluable as we have executed on our strategy and our results this year reflect the strength of that alignment.

To Empire, our largest tenant, our foundational partner and which is a relationship that has shaped Crombie from day 1. Thank you for the ongoing partnership and the shared ambition we have together.

And finally, to our unitholders, thank you for your trust. We remain focused on creating long-term value for you. Thank you all for coming today. I'll now turn the call back.

Thank you, Mark. Well done. Now we'll be pleased to answer your questions. As I mentioned at the opening, this meeting is being webcast. Therefore, I'll divide the questions and answers into 2 sections in person and by phone.

[Operator Instructions]

Are there any questions from the floor? Hearing none, we'll have to follow up with the operator. Make sure there's no questions from the questions.

[Operator Instructions]

[indiscernible] there are no questions, I'll now have a motion to terminate the meeting.

Mr. Chair, my name is Ryan Sharpe. I'm a unitholder of Crombie. I move that the meeting be terminated.

Thank you, Ryan. Is there a seconder?

Mr. Chair, my name is Brady Landry, and I'm a unitholder. I second the motion.

Thank you, Brady. You've heard the motion. All in favor?

[Voting]

Opposed?

[Voting]

Motion carried. I declare the meeting terminated.

Now thank you all again for being here today, and I invite you all to the foyer, and we have some light refreshments. And on behalf of the Board of Trustees, the management of Crombie, thank you. We really appreciate your attendance to the meeting today and your ongoing support, and please travel home safely. Thank you.

Good morning, everyone, and welcome to Crombie REIT's Fourth Quarter Conference Call. [Operator Instructions] This call is being recorded on February 11, 2026.

I would now like to turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead.

Good day, everyone, and welcome to Crombie REIT's Fourth Quarter and Year-end 2025 Conference Call and Webcast. Thank you for joining us. This call is being recorded in live audio and is available on our website at www.crombie.ca. Slides to accompany today's call are available on the Investors section of our website under Presentations & Events.

Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations.

Today's discussion includes forward-looking statements. As always, we want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these factors.

Our discussion will also include expected yield on cost for capital expenditures. Please refer to the Development section of our management's discussion and analysis for additional information on assumptions and risks.

I will now turn the call over to Mark, who will begin the discussion with comments on Crombie's strategy and outlook. Kara will review Crombie's operating and financial results, and Mark will conclude with a few final remarks. Over to you, Mark.

Thank you, Meghna, and good morning, everyone. 2025 was a standout year for Crombie for disciplined execution across the 2 pillars of our Building Together strategy combined to deliver solid results. These pillars, value creation and solid foundation, guide our day-to-day execution and have been designed for resiliency, stability and long-term unitholder growth.

2025 was a year that highlighted the power of this strategy and the operational excellence of the team. A few metrics worth highlighting. Four consecutive quarters of record committee occupancy, ending the year at 97.7%; average annual minimum rent growth of 4.8%; commercial same-asset property cash NOI growth of 3.7%, above our long-term target of 2% to 3%; 6.5% growth in AFFO per unit; a distribution increase; and finally, a credit rating upgrade from Morningstar DBRS, an impressive year.

Today, I will focus my comments on 3 drivers within value creation, own and operate, optimize and partner. Let me start with own and operate, the foundation of value creation and the core of our business. Our coast-to-coast grocery-anchored centers sits at the heart of vibrant growing communities, generating consistent traffic and strong tenant demand. Through disciplined portfolio management and deliberate curation of our tenant merchandise mix, we continue to position Crombie as an attractive partner for retailers seeking access to multiple markets on a coast-to-coast basis.

In 2025, demand for our space was very strong. Established national retailers and emerging concepts, both sought space across our portfolio, and that demand combined with proactive leasing management drove solid results. Year 1 renewal spreads averaged 10.4% and our weighted average lease term remained healthy at 7.9 years, reflecting the stability of our tenant relationships and the steady growth embedded in the portfolio.

Portfolio management is central to our own and operate driver as we always look to high-grade our portfolio of assets. On the acquisition front, we continue to lean into grocery-anchored retail opportunities. In 2025, we added 5 Empire-bannered grocery properties totaling 197,000 square feet for $49.7 million. The acquisition of the Queensway property in Q4 was the fifth. The Queensway property is a 3.6 acre newly constructed 51,000 square foot Longo's anchored site with 2 freestanding bank pads. It was built by Crombie as development manager on behalf of Empire and subsequently acquired for $28.5 million, excluding closing and transaction costs. The property is 100% leased with all tenants now operating. It is exactly the type of necessity-based high-quality asset that strengthens our portfolio and reflects the value of our strategic partnership with Empire.

We were equally disciplined on the disposition side in 2025, where we sold 2 noncore properties in New Brunswick, the 140,000 square foot Main Street office in Moncton, which had persistent vacancy, and Loch Lomond Place, a non-grocery retail property in St. John. These acquisitions reduced exposure to lower growth assets and freed up capital to be redeployed towards higher-quality properties that will provide stronger long-term FFO growth.

We also completed a strategic land swap at Barrington Street in Halifax that strengthened our position on a key urban site and enhanced its long-term development potential. Ongoing portfolio review and thoughtful capital recycling remains an important driver to how we provide long-term returns for our unitholders.

As part of our financial results press release last night, we highlighted that we have entered into a binding agreement to acquire a grocery-related industrial asset in Whitby, Ontario for approximately $115 million. The asset is a 42-acre property with 484,000 square foot high bay industrial distribution facility, fully leased to Sobeys under a long-term lease agreement. The facility features 37-foot clear heights with approximately 90 loading dock doors and roughly 240,000 square feet of temperature-controlled cooler space. Located directly off Highway 401 and within a 5-minute walk to the Whitby GO station, the property offers exceptional connectivity and operationally supports Sobey's distribution to its Ontario grocery stores.

This acquisition brings long-duration income, serves as a central logistics infrastructure and sits in a tightly supplied transit-connected industrial corridor. It strengthens the defensive profile of our property and portfolio and expands our presence in grocery-linked industrial real estate. The acquisition enhances our long-term cash flow growth and is accretive from day 1.

Turning briefly to our Calgary customer fulfillment center industrial asset. In late January, Empire announced changes to its e-commerce operations in Alberta, which included our 100% Crombie-owned industrial warehouse. The long-term lease remains in place. The asset represents approximately 300,000 square feet within our fully occupied retail-related industrial portfolio, and we expect no material financial impact from the announcement.

Our second pillar, optimize, is about unlocking embedded value in the existing portfolio through targeted investments and development. In 2025, we continue to advance nonmajor development program. These are shorter duration projects, modernization, intensifications, small-scale redevelopments and greenfield projects. They're typically $50 million or less and often completed within 12 months. We expect targeted yield on cost in the range of 6% to 8%.

One of our nonmajor investments is our modernization program with Empire, where we completed more than 60 projects with them in 2025. These projects upgrade the look, feel and functionality of the grocery stores and create a halo effect that benefits other tenants on the site. It also supports our leasing performance across both renewals and new deals. Our nonmajor program is a repeatable lever that enhances asset quality and drive steady growth.

Within our major development pipeline, entitlements remain the strategic focus. By securing zoning and planning approvals ahead of major capital commitments, we preserve flexibility on timing and phasing, ensuring we can adapt to an evolving market conditions and build a pipeline of fully entitled properties that can support our long-term value creation. We continue to advance key sites in a deliberate manner during 2025. Of the 26 identified sites in our major development category, 6 are now zoned and 3 have applications in process. The Marlstone in Halifax is our only major project currently under construction. Pre-leasing is underway and the early response has been positive.

Our last driver within value creation pillar is partner. As I noted, our strategic partnership with Empire continues to be an important competitive advantage. Our real estate priorities are closely aligned with their operational needs, and that alignment shows up across acquisitions, modernization and new store opportunities. the Queensway and our modernization program are great examples of our partnership in action.

Beyond Empire, we stood up 2 new programmatic partnerships in Halifax in Vancouver this year. These programmatic partnerships serve 3 important purposes for Crombie. First, they enable us to share capital and risk on larger, longer duration opportunities, while preserving balance sheet capacity for our core grocery-anchored platform. Second, they provide a stream of management and development fees as we progress entitlements and planning work. And third, they unlock embedded NAV through highest and best use zoning and gives us flexibility on when and how we bring these high potential sites forward for redevelopment.

Across the 3 value creation drivers, own and operate, optimize and partner, our capital allocation decisions are guided by our strategy of delivering resiliency, stability and growth.

With that, I'll turn the call over to Kara to walk us through our financial results and the strength of our balance sheet.

Thank you, Mark, and good morning, everyone. Our 2025 results reinforce the strength of our platform, the consistency of our execution and the discipline of our approach to capital allocation. And as Mark said, our focus on unitholder return. That strength translated directly to our bottom line with FFO per unit growing 4.8% and AFFO per unit growing 6.5% year-over-year. The numbers continue to tell a clear story, our strategy is working.

In the fourth quarter, we completed 239,000 square feet of renewals at a year 1 increase of 10% over expiring rental rates. As we've emphasized consistently, we focus on achieving growth over the full duration of the lease. And for the quarter, we secured a 12.1% increase when comparing expiring rates to the weighted average rental rate over the renewal term. This leasing activity, combined with contractual rent step-ups and contributions from our modernization investments drove commercial same-asset property cash NOI growth of 4.1% in the fourth quarter, above the upper end of our 2% to 3% long-term target range.

For the full year, we renewed 768,000 square feet of space at an average increase of 10.4% over expiring rents. This strength was broad-based with spreads of 11% in VECTOM, 14.5% in major markets and 7.9% across regional markets with a 12.2% increase in weighted average rental rate for the renewal term.

We also have added 259,000 square feet of new leases during the year at an average first year rate of $16.67 per square foot. Average annual minimum rent per square foot grew 4.8% year-over-year. The same fundamental drivers of Q4 performance carried through the year, contributing to commercial same-asset property cash NOI growth of 3.7%, again, above the upper end of our 2% to 3% long-term target range.

Property revenue in the fourth quarter was $122.1 million, up 0.4% from the prior year. This increase was driven by several key factors. Same asset NOI growth from renewals and new leasing, contractual rent step-ups, contributions from nonmajor development projects completed over the past 12 to 18 months, and a full quarter of income from properties acquired earlier in the year. These factors were partially offset by dispositions completed in late 2024 and 2025.

For the full year, property revenue grew 3.8% to $488.7 million, reflecting higher base rents and recoveries from record occupancy, incremental contributions from nonmajor development completions and modernization investments, and revenue from assets acquired through the year, partially offset by dispositions and higher tenant incentive amortization.

Management and development fee revenue in the quarter was $2.5 million, up from $1.4 million in quarter 4 of 2024. For the full year, fee revenue was $11.4 million, up 113% from $5.3 million in 2024. This growth reflects contributions from our programmatic partnerships in Halifax and Vancouver as well as fees from various Empire projects. These contributions have become a stable recurring component of our cash flow profile.

For the full year, general and administrative expenses, excluding unit-based compensation, represented 4.1% of total revenue, including revenue from management and development services, consistent with where we've been tracking throughout the year.

Finance costs were $97.4 million in 2025, up $4.9 million year-over-year, primarily reflecting higher interest expense related to the 2024 net issuance of senior unsecured notes.

Turning to earnings. FFO for the fourth quarter totaled $0.33 per unit, up 3.1% year-over-year. FFO was $0.29 per unit, up 3.6%. For the full year, FFO per unit was $1.30, an increase of 4.8% from 2024, and AFFO per unit was $1.15, up 6.5%. This growth was driven by higher net property income, a more than doubling of management and development fees, and contributions from acquisitions and nonmajor investment activity, partially offset by higher interest expense. We ended the quarter with FFO and AFFO payout ratios of 69.2% and 78.2%, respectively.

For the full year, payout ratios were 69.1% for FFO and 78.1% for AFFO, comfortably within our targeted ranges even after the distribution increase implemented in 2025.

The Marlstone project continues to progress on time and on budget. At year-end, estimated cost to complete was approximately $22 million at Crombie share with expected yields on cost in the 4.5% to 5.5% range. Upon completion, construction financing will convert to CMHC mortgage financing with anticipated financing rates lower than conventional mortgages.

Now turning to our balance sheet. Our balance sheet remains a core strategic asset and the source of resiliency, especially in a more volatile capital markets environment. We continue to prioritize liquidity, ending the year with $669.2 million in available liquidity between undrawn credit facilities and cash with an unencumbered asset pool exceeding $3.9 billion in fair value, earning us with ample liquidity and multiple funding levers to address our 2026 and 2027 maturities.

We continue to maintain a disciplined leverage profile with a focus on preserving financial flexibility while protecting our long-term unitholder value. Debt to gross fair value was 42.1% at year-end and debt to trailing 12-month adjusted EBITDA was 7.69x. Interest coverage ratio improved to 3.39x, reflecting higher adjusted EBITDA. We actively manage interest rate exposure through a balanced mix of fixed and floating rate debt, while maintaining meaningful undrawn credit capacity to fund near-term commitments.

Unsecured debt represents about 61% of our total debt and approximately 97% of our debt is fixed rate with a weighted average term to maturity of roughly 4 years. This approach enables us to absorb market variability, support development and leasing initiatives and remain positioned to act opportunistically without compromising credit quality.

Over the past 2 years, we have taken deliberate steps to strengthen our debt structure, refinancing ahead of maturities, extending duration, increasing the proportion of fixed rate and unsecured debt and diversifying our funding sources. The credit rating upgrade we received earlier this year is a direct result of that work. This was a strategic objective we set for ourselves, and I'm very pleased that the team's focused execution delivered it. The upgrade has enhanced our long-term funding flexibility and supports our ability to access capital at attractive rates.

Turning to capital allocation. Our capital allocation framework remains anchored in driving sustainable per unit growth, while strengthening the balance sheet. Free cash flow and disposition proceeds are directed first towards funding high-return investments, which during the year included redevelopment, intensification and leasing capital that enhanced asset quality and income durability. We continue to recycle capital out of lower growth and noncore assets such as Loch Lomond and Main Street, as Mark mentioned, into properties and projects with stronger long-term fundamentals, while also allocating capital to debt reduction where it improves leverage metrics and interest coverage.

As mentioned, subsequent to the quarter end, we entered into a bonding agreement to acquire the Whitby RFC for $115.4 million. The asset is secured by a long-term triple net lease to Sobeys with contractual annual escalations, providing a high-quality, stable income stream. The acquisition is immediately accretive to both FFO and AFFO. We expect to initially fund the transaction through our unsecured revolving credit facility.

Overall, 2025 was a strong year. We're hitting our strategic targets, producing consistently solid financial results and managing our balance sheet to support both stability and measured growth. We enter 2026 well positioned to continue generating dependable growth for our unitholders.

And with that, I'll turn it back to Mark for some closing remarks.

Thank you, Kara. To wrap up, 2025 was a year defined by consistent execution and strong performance across our business. Our Building Together strategy is working, and the results this year make that clear.

Underpinning our performance is the strength of our people. The people pillar of our strategy is core to our success. And as we look ahead, our focus remains the same, owning and operating essential real estate at the heart of Canadian communities, deploying capital thoughtfully and growing cash flow growth, while compounding long-term value for our unitholders. We have a proven strategy, a resilient and high-quality portfolio, and the team is committed to disciplined execution.

This March will mark 20 years as a publicly listed company. And over that time, we have built a portfolio, a balance sheet and a team that is focused on stability and growth. And entering 2026, we are well positioned to continue delivering, creating long-term value that our unitholders expect from Crombie.

With that, we'll open the call for questions.

[Operator Instructions] The first question comes from Mike Markidis with BMO.

Good morning, Crombie, and congrats on a strong finish to 2025. I was wondering up on the milestone. I know pre-leasing is progressing. If you could give us a little bit more color on how that looks as a percentage of the total units.

Sure, Mike. It's Arie. What I'd tell you is that pre-leasing has been since end of last year. We have been getting a lot of activity on site. The -- I would say, marketing awareness of the property is high in the market. We are getting a lot of inbound. We're conducting touring right now still predominantly within the model suite at Scotia Square. And we're going to actively ramp that up as the building nears completion towards the end of March and take prospects through the building, it's amenities and we'll be able to then start converting applications on site with the leasing office on the premises.

So I would say to date, we're pleased with the response we're seeing on the model suite. But we're going to turn that once the building gets turned over to the leasing team towards the end of March.

Okay. Sounds encouraging. Just on the Calgary CFC, I know, Mark, you had a press release and you gave some color there about no material impact. I was just wondering if you could remind us what Crombie's basis or total investment is on that property and give us a little bit more, I guess, a better lens into what the remaining term on the leases.

Sure. Total investment is and around $100 million. It is a 300,000 square foot warehouse in Rocky View, which is in an industrial park. And it has got 36-foot clear ceiling height. It's got 90 dock -- sorry, 40 dock doors and was built purposely for Empire for its Voila platform. It's under a very long-term lease, longer than what would be a commercial standard, but all other terms and conditions within that lease are commercial.

And in terms of their path forward, we started dialoguing with them about what would that look like on a go-forward basis between subletting or signing, and they do have those rights, but those rights are subject to landlords approval. So we started dialoguing with them. More to come on sort of how we're going to proceed with the asset, but we're under a long-term lease, no material impact to financials at this point, and we'll just continue to work with them as they look for subtenants.

Okay. And then just on the subsequent acquisition of the industrial asset at Whitby. Congrats on that. Kara, I know you said that you initially will finance that through your facility. And I know you got tons of capacity from a balance sheet perspective. But it's a pretty significant sizable transaction. Should we be thinking about an increase in disposition volume this year in terms of total gross proceeds? Just wondering how you guys are thinking about that as we move through '26.

Thanks for the question. Like you said, we've got a lot of liquidity. We've got nothing drawn on the revolver at year-end. So nothing that we need to dispose of at this point in order to fund that purchase. So I wouldn't link those two.

The next question comes from Lorne Kalmar with Desjardin.

Maybe just going back to the milestone because I feel like it was a little bit vague in terms of the lease-up color. To be clear, has leasing actually progressed or has it started yet? Or it's just really still preliminary at this point?

Leasing has started. We have signed applications. We have tenants moving in as of May 1. And we have a fully functioning website where tenants are self-starting applications as we speak on that website and coming in to do touring, again, in the model suite. But we have leases in place with occupancy starting in Q2.

Okay. And then I guess, are there any like direct competitors in that node to the type of product that you have at the Marlstone? Or are you guys kind of on your own with that? Just wondering about increased competition in the face of increased supply in the Halifax market.

There is a number of buildings being constructed right now in Darkmouth. I would say that on the Peninsula, there's nothing that matches the quality of what we're building. There's nothing that matches the connectivity with Scotia Square, the parking and all the other features, including the amenities that this building has at this point. So I would say that from a downtown perspective, we're feeling pretty good about the positioning of the Marlstone.

Okay. So no real concerns in terms of the timing of the lease-up versus what you guys have initially pro forma?

That's right.

Okay. Fair enough. And then just on the acquisition side, you guys are obviously pretty active now when you lump in the distribution center. What does the rest of 2026 look like for the team?

The acquisition of Whitby is $115 million. And if you kind of step back and look at how much do we allocate in capital on an annual basis, we talk about it upwards of $250 million. So this was a meaningful acquisition. We are still underwriting opportunities. We still want to grow in the core. We want to be a necessity-based, and we consider the industrial portfolio to be necessity-based as it is distributing food to stores. So we're active on it. We're doing a bunch of underwriting. The market is very hot for grocery-anchored, as you probably know. And so we're being very strategic and selective on which ones we're able to buy. We were very fortunate to be able to bring in 5 into 2025, and we're looking to do more in '26.

Is there a preference in terms of grocery-anchored versus retail-related industrial? Or is it more opportunistic?

Opportunistic. We're looking at both.

The next question comes from Golden Nguyen-Halfyard with TD Securities.

Just going back to the Whitby distribution center acquisition, would you be able to provide a cap rate on the deal as well as lease terms?

On cap rate, no. We don't give individual cap rates. But if you look at our portfolio weighted average, we're in and around that range. In terms of the lease, it's a long-term lease with renewals, and it is a commercially standard lease that you would find at any industrial facility.

Okay. And turning to the residential portfolio. Any plans to sell down a 50% interest in Zephyr?

Not at this point in time.

All right. And then maybe just one last question for me. If you had to say one area or category of leasing that will be different in 2026 versus 2025, what would it be?

Could you repeat the question? What category would be...

Yes. If you had to say one area or category of leasing that will be different in '26 versus '25, what would it be?

Different? Okay.

I would say that right now, where we're targeting is additional uses for our retail portfolio that are maybe, what you would call, nontraditional, so additional services, additional medical to our shopping centers that really complement the grocery and traditional convenience offering. That is an area that we're focusing in on, and there's a lot of inbound demand.

We demonstrated that last year with the opening of a first-class medical facility in Nova Scotia, and we're continuing to execute on deals like that. It's what tenants are asking for. It's what customers are asking for. And it really ties in nicely. And we're talking about those types of uses, medical, library uses, and more of those sort that are really adding to the complexion of our portfolio.

Our next question comes from Brad Sturges with Raymond James.

Mark, you've always talked about the kind of the long-term target for NOI growth of kind of 2% to 3%. Last year was better than that. Do you see 2026 kind of being above that long-term target, kind of in that 3% to 4% range again this year?

Yes, 2025 was a really strong year. And as Kara called out on her prepared remarks, renewals, contractual rent step-ups, modernization program that we have with Empire, intensifications that we have been doing on sites over the last couple of years have all been contributing to that in the retail side. We continue to push on all of those drivers of same-asset NOI. We are still holding though to our long-term target ranges of the 2% to 3%. But what we do indicate is that we'll likely be on the higher end of that 2% to 3% range as we look into 2026.

Okay. My other question would just be on property -- the fee income stream. Obviously, you had an acceleration last year and there might have been a little bit of catch-up on deferred fees. Just how should we think about that line item for 2026?

In terms of the 2 programmatic partnerships that we have, we talked about that stability around $2.4 million on a quarterly basis and then the flow upwards as we do one-off opportunities with Empire and some of our other partners. So as you're thinking about modeling, definitely the $2.4 billion is consistent, and then there'll be opportunities to grow off of that as we do more work with our partner at Empire or some of our JOs that we have in the portfolio.

The next question comes from Mario Saric with Scotiabank.

Just coming back to the Whitby acquisition. In terms of the annual contractual escalators, is it fair to say that, that figure is fairly consistent with the portfolio average? Or is there a nuance involved?

It's fairly consistent. I would say it's a little bit better, slightly better than our portfolio average, Mario, but it's not material.

Got it. And then coming back to the funding, I know dispositions have been opportunistic, but you're consistently kind of reviewing the portfolio for opportunities. Like in an ideal world, if things play out the way you'd like them to play out, is there a quantum of dispositions that you're thinking about in '26? Or are you conversely okay with the existing portfolio and okay with inching up leverage on a more structural basis on the back of this acquisition?

That's a good question. Definitely, always looking at the portfolio, always looking to high-grade it. We've been very active in that since 2023, pruning the ones that have low growth or have structural vacancies or have a declining NOI perspective as we look into the future. We are looking to continue to always high-grade. So actioning against some in 2026 is going to be our path and our plan.

And in terms of using it as a mechanism to ensure we free up cash flow to high-grade the portfolio, some of it, yes, but we're comfortable with our debt metrics running at 7, 6, 9x ample room in there. We have, as Kara called out, we have no material leverage issues to address. So we're on our front foot, Mario. So we are looking at high-grading the portfolio through dispositions and acquisitions and not using it to shore up the balance sheet.

Got it. And what -- turning to Broadview -- Broadway & Commercial, what are the odds of some kind of resolution at that site in 2026?

All of '26. If you had asked Q1, I would have said extremely low. First half, probably slightly better, but still low. The development team is working with municipality and there's a number of contracts that we have to work through, and that's just going to take some time. So I can't give you is it going to happen in '26, but the team is working through it.

Okay. And then just maybe last question on fundamentals. You're continually hitting record high occupancy levels at some point. Presumably occupancy can't go any higher. But relative to the Q3 call, given that we're kind of 1.5 months into what could be characterized as maybe a seasonally slower retail leasing period relative to Q3, what's your level of confidence with respect to achieving continued double-digit blended lease rents in '26? And has anything changed in terms of watch lists and so on as we're heading into the spring?

Mario, the outlook is still similar to what it was as we closed out 2025. So tenant demand remains high and supply remains constrained. The -- some of the, I'd call it, anomalies, Q4, we historically have some strong temporary leasing in some of our malls. So we typically see that fall off a little bit in Q1. And we also had Toys "R" Us announced the CCAA proceeding. But what we've done with that one is we terminated Toys "R" Us in January, and we are now working with a receiver to get them reopened with the receiver on a temporary basis. as of tomorrow potentially.

So our watch list, really, that was probably the biggest occupier space that we were keeping an eye on. And I would say that we've mitigated that in the short term, but we've been working on backfill options throughout. And I'd say that from an additional tenant perspective, we don't have any Eddie Bauer or any of the other potential tenants that of concern right now. So I would say that our occupancy is going to remain roughly where it is. It might go a little bit up, a little bit down, but we're talking a few basis points here and there.

The next question comes from Giuliano Thornhill with National Bank.

Just turning -- or sticking with the occupancy kind of question. I'm just wondering on your regional markets, what is the remainder kind of occupancy uptick left in your portfolio? Is it market specific or just kind of broadly and really like your ability to get to the higher levels is kind of what I'm asking?

We have a number of properties that are older and closed assets that still have some remnants of vacancy. We're working our way through those. In the quarter, we leased up, as an example, 19,000 square feet in Newfoundland that was historically vacant. So I would say that those are the properties that are most affected. Again, the demand is there and there's not supply. So we are having tenants come in now that we haven't seen previously. But I would say, they're not in our grocery-anchored portfolio. They're more so in the former enclosed properties.

One item that I would add on that is just when you look at the 3 market classes, regional markets versus our total of 97.7%, regional markets are running at 97.1%. And if you kind of go back 36 months, that was probably 5 percentage points lower. So Arie and the team have done just an exceptional job of catching the wind that is in retail demand and doing the things that he talked about of the medical uses and some of the local government opportunities to kind of create that hub around that grocery anchored to inflate it even more. So there is still a little bit of opportunity in it, but I'd say we've moved that needle significantly over the last couple of years.

And the renewal -- the leasing renewal maturity for next year, would you see that broadly consistent with what you saw in 2025 in terms of location and tenant type?

It is.

And then just lastly, on the Toys "R" Us, how large was the exposure there?

About 35,000 square feet.

Okay. So pretty small.

The next question comes from Tal Woolley with CIBC.

Good morning, everybody. Just with the Empire restructuring of Voila in Western Canada, does that you think portend anything in terms of changes, modifications that Empire wants to make to its retail footprint in Western Canada? Like should we expect maybe more banner conversions, more interest in modest redevelopments? Or is there a desire on Empire's part to sort of -- I think when they acquired Safeway, they really started to get moving on remodeling a lot of the older stores in the urban markets too as well. I'm just wondering if you can sort of talk a little bit about how all this maybe changes the approach.

I can't comment on Empire's business or their strategy or the things that they're looking to execute against, Tal. But as a very long-term strategic partner of theirs, we intersect with them on modernizations and land use intensifications. We're buying the Whitby warehouse from them. And so we're going to -- that is our strategic competitive advantage, and we're going to lean into it. But I can't speak to sort of their strategic intent as you're asking about their wind down of Voila and does that change any of their dynamics around store deals or units. They have talked about growing more stores. That's not new. And we're actively working with them to build more stores. We did the Queensway last quarter. We have a few others that we're working on with them. So -- but I can't comment on their operating business.

We have a follow-up question from Mario Saric with Scotiabank.

Just one more for me, maybe for Arie. The lack of new supplies, as you referenced it a couple of times in the call, it comes up consistently in the industry in terms of what's driving kind of the strong rent growth. Like if you were to add a small pad on good quality site, like what would you guess or what would you estimate is the gap between kind of market rent today and then like the rent required to achieve a good development yield on that pad?

So yes, I think on that point, Mario, the new pad opportunities, the reason a lot of them aren't getting built is not because of the lack of demand, it's because of the construction cost. So where we've been able to get around that is by working on some land leases or prep pads to overcome some of those. I would say it's hard to pin down an exact number on what that delta is on a traditional basis, just given many of these, we're not building on spec, we're building for specific uses. But these days, you're probably looking at $50 to $60 or more to construct a pad. So that gives you a rough idea of where that would place us versus our in-place $19 portfolio rent. I think that's guidepost for you.

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

Just following up on Mario's question there. Arie, the $50 to $60 a foot for a pad, is that a net or a gross figure?

Those are net rents.

Okay. And then I think last quarter, you guys talked about 2 dozen properties where you actually had expansion capabilities. So I'm just wondering and trying to reconcile that comment with the comment on rents don't work.

So I think you can see in our disclosure, we opened up a number of pad opportunities over the years. So again, the QSRs that are looking to grow are willing to pay the rents necessary in order to support their growth. So we saw that in our -- in both Nova Scotia as well as BC. So I would say that the demand is there. We're working our way through them. And those 2 dozen aren't just solely rents. There's entitlement, there's some zoning, but we're working our way through all those 2 dozen opportunities as we speak.

Okay. And then if the construction costs don't work, can you -- I mean this might be a rudimentary question, I'm missing something, but how does the land lease work? I mean, I get how land lease works for you, but how does the land lease make it more amenable for the person paying the rent?

Michael, so in a land lease scenario, they're taking on the risk of the capital deployment and they're not getting a rental structure increase over it. So from their lens, in some cases, they like to take on that and not have to pay the longer-term rent obligations. We're doing it in some cases and not all cases. We did the 2 bank deals at the Longo's plaza that we just acquired. We're slightly structured differently.

We've done QSRs, McDonald's and Wendy's and Dairy Queen's that are slightly different. So where Arie is getting to is it's not one-size-fits-all. So when we look at our entire portfolio of 308 properties, we're always looking at what the optimization of those properties are through intensification or modernization. On intensification, where we can pump out on the existing CRU, that's 3 walls. So that works a little bit better. And if we're doing pads, there are usually 5,000 square foot buildings, some have drive-through, some don't.

So the costs there do creep up. I would say what we are seeing in construction cost, though, is stabilization. We're seeing lower cost on the front-end divisions, which is the underground and earthworks. And what we haven't seen is some of the finishes. We've seen them stabilize. We haven't seen the finishes come off.

But that said, it's not escalating the way it was. So there's more certainty around what the going-in costs are going to be, which is giving the retailers less of a pause to greenlight projects. So those 2 dozen that we've talked about are the ones that we see potential near-term opportunities to build out, and that's where you're going to start to see them show up over the next number of years in that nonmajor category.

So $50 or $60 square foot rent is depending on what you're going-in costs were for land, how much underground earthworks you're doing, how much you're prepping the pad versus building the asset, shelling it. So it's really difficult just to give you a blanket number of $50 because every deal is unique. But the opportunities are real. The retailers are looking to drive more incremental units, and they're finding stability and cost and ability to run a pro forma that meets their P&L.

There are no further questions. This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

Good morning, everyone, and welcome to Crombie REIT's Third Quarter 2025 Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025.

I would now like to turn the conference over to Meghna Nair, Manager of Investor Relations at Crombie. Please go ahead.

Thank you. Good day, everyone, and welcome to Crombie REIT's Third Quarter 2025 Conference Call and Webcast. Thank you for joining us. This call is being recorded in live audio and it's available on our website at www.crombie.ca. Slides accompanying today's call are available on the Investors section of our website under Presentations & Events.

Joining me on the call today are Mark Holly, President and Chief Executive Officer; Kara Cameron, Chief Financial Officer; and Arie Bitton, Executive Vice President, Leasing and Operations.

Today's discussion includes forward-looking statements. We want to caution you that such statements are based on management's assumptions and beliefs. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. Please see our public filings, including our management's discussion and analysis and annual information form for a discussion of these risk factors. Our discussion will also include expected yields on cost for capital expenditures. Please refer to the Development section of our management's discussion and analysis for additional information on assumptions and risks.

I will now turn the call over to Mark to discuss Crombie's strategy and outlook.

Thank you, Meghna, and good morning, everyone. Crombie's third quarter results showcase the strength of our strategy and the quality of our coast-to-coast necessity-based portfolio.

In a dynamic environment, our grocery-anchored retail platform delivered a standout quarter. AFFO per unit grew 11.1% year-over-year. While this quarter benefited from several high-impact contributions, the outcome is rooted in the fundamentals of our business strategy, executing on strong leasing and tenant demand, disciplined capital allocation, active portfolio management and a focused operating platform. Results demonstrate the combination of stability and growth that differentiates Crombie as an essential retail REIT.

Our strategy is built around 3 key pillars: own and operate, optimize and partner, which will guide our capital allocation decisions and approach to operations. I'll frame my comments today around these pillars.

First, let's discuss own and operate. Our grocery-anchored retail portfolio remains the foundation of our success. Our ability to consistently attract both established and emerging tenants speaks to the strength and adaptability of our portfolio and the operational excellence of our leasing team. It's this ongoing demand from a diverse and expanding tenant base that has contributed to our fourth consecutive quarter of record occupancy.

Leasing activities' results were strong in the third quarter with renewal spreads increasing by 13.5% over expiring leases on a weighted renewal term average basis. Combined with embedded rent step-ups, new leasing activities and another quarter of record occupancy, same-asset property cash NOI grew by 4.6% in the quarter with the year-to-date now at 3.5%. This is above the upper end of our annual average target range used by management.

As we've noted in the past, portfolio management remains an integral part of the own and operate pillar. We take a disciplined approach to capital allocation, continuously evaluating opportunities to acquire properties that enhance our portfolio. Over the first 9 months of the year, we've been very active in this area, adding 4 new grocery properties to the portfolio and divesting of 2 noncore locations. We will continue to pursue opportunities that align our strategy and offer compelling long-term returns for our unitholders.

Our most recent addition to the portfolio was subsequent to the quarter where we closed an acquisition of a 3.6-acre property at Islington in the Queensway in Toronto's West End from our strategic partner Empire. Total consideration was $28.5 million, excluding closing and transaction costs. This is a newly constructed Longo's anchored retail property, which includes 2 freestanding banks totaling approximately 51,000 square feet of gross leasable area. The Longos is expected to open in the fourth quarter with the 2 banks slated to open in early 2026 as they currently finish off their leasehold improvements.

Turning to our second strategic pillar, optimize. We continue to unlock embedded value within our portfolio with a primary focus on nonmajor development projects and advancing entitlements within our major development ladder. At the end of the quarter, we had completed 50 property modernizations with Empire and advanced 4 land use intensification properties that will add 87,000 square feet of total GLA upon completion. These nonmajor investments have a yield on cost of 6% to 7%.

With respect to our major development program, we currently have only one project, The Marlstone in Halifax under construction, which continues to track on schedule and on budget with occupancy targeted for spring 2026.

We began pre-lease marketing during the third quarter and the early response has been very positive and in line with our expectations. Across the rest of our major development pipeline, we continue to advance entitlements in a very deliberate manner. This focus ensures that we maintain flexibility in timing and scale while preserving optionality as market conditions evolve. This patient, disciplined approach enables us to build a pipeline of entitled sites that can create sustainable value for unitholders over a multiyear time horizon.

And our last value creation pillar, partnerships. Our programmatic partnerships in Vancouver and Halifax continue to deliver contributions in the third quarter. These 2 partnerships generate almost half of the total $4.4 million in fee revenue we recognized during Q3.

As we noted last quarter, we expect contributions from these partnerships to be consistent each quarter as these multiyear entitlement projects advance, providing a steady baseline income stream and strategic flexibility in our development pipeline.

We also further strengthened our foundational partnership with Empire, investing $18.4 million in the quarter in store expansions and modernizations, bringing our year-to-date total investment to nearly $30 million. These collaborative investments enhance our properties, while supporting Empire store modernization program, resulting in increased rental revenue for Crombie and improved store quality for Empire. It's a relationship that continues to drive value for both organizations and reinforces the strength of our portfolio.

Overall, Crombie is delivering a combination of stability and consistent growth. Our grocery-anchored platform provides reliable, recurring cash flow. Our optimized initiatives, in particular, nonmajor projects drive organic growth and our partner approach enables us to give unitholders access to the value accretion of larger long-term opportunities, while maintaining efficiency and balance sheet flexibility.

With that, I'll turn the call over to Kara to review our financial results in more detail.

Thank you, Mark. Our third quarter financial results reinforce the strength of our platform and our disciplined approach to capital allocation. Funds from operations for the quarter totaled $61.9 million or $0.33 per unit, up 6.5% year-over-year.

AFFO was $55 million or $0.30 per unit, up 11.1% year-over-year. This growth reflects our strong same-asset NOI performance, contributions from acquisitions and development completions and higher fee income from our partnerships, partly offset by increased interest expense.

Let's break down that AFFO performance, starting with our revenue drivers. Property revenue in the quarter was $120.1 million, up 4.9% from the prior year, driven by 3 primary factors: same-asset NOI growth, which included several favorable leases and amendments in the quarter, contributions from acquisitions as well as completed development projects.

Management and development fee revenue grew significantly compared to the third quarter of 2024, delivering $4.4 million, up from $1.1 million last year. We also recognized $2.1 million in deferred revenue that was flagged last quarter. Our team continues to execute a disciplined capital allocation strategy, concentrating our investments in assets that best support Crombie's necessity-based portfolio and long-term growth objectives. As part of this approach, we have actively identified noncore properties, particularly those in regional markets with persistently lower occupancy and divested them to enable redeployment of capital into higher return opportunities. This ongoing focus enhances our operating metrics, drives consistent cash flow growth for unitholders and ensures Crombie remains well positioned for sustainable value creation.

We continue to have a strong pipeline of opportunities that align with our core necessity-based strategy, and we're executing against it. Subsequent to quarter end, we acquired the Queensway property in Toronto, as Mark mentioned, for approximately $28.5 million. This newly constructed grocery-anchored asset in a strong urban market represents the type of disciplined capital deployment that supports our growth while maintaining balance sheet strength.

On the expense side, property operating costs were $40.6 million, up modestly from the third quarter last year, but well controlled and in line with expectations.

Net property income margin remained healthy at 66.2%.

General and administrative expenses were $6.5 million or 5.2% of total revenue, including revenue from management and development services. Adjusting for unit-based compensation, G&A was 4.2% of revenue.

Looking at interest expense. Finance costs were $24.4 million for the third quarter, up $1.7 million from $22.7 million last year. This increase is primarily due to the full quarter impact of the $300 million of unsecured notes we issued late 2024.

Our debt metrics remain solid. Debt to gross fair value is 41.9% and debt-to-EBITDA is approximately 7.7x. Our debt positioning is well suited to Crombie's business model. Our income stream is exceptionally stable, anchored by long-term leases with necessity-based retailers, which gives us great cash flow visibility. With over 97% of our total debt at fixed rate, we're largely insulated from interest rate volatility. This stability enables us to be very comfortable with our current leverage, while maintaining financial flexibility.

We ended the third quarter with approximately $676 million in liquidity between undrawn credit facilities and cash. Our fair value of unencumbered asset pool is over $3.8 billion. We've deliberately positioned our debt profile for flexibility. Unsecured debt represents 61% of our total debt with a weighted average term of 4.3 years for our fixed rate debt.

We have no significant maturities until 2026, and those are well staggered.

Our payout ratios for the third quarter were 67.3% of FFO and 75.8% of AFFO. After many years of holding the distribution flat while we reinvested in growth, we increased our annual distribution by $0.01 per unit last quarter. Even post increase, our payout ratio remained very conservative.

Same-asset cash NOI grew 4.6% in the third quarter and 3.5% year-to-date, reflecting strong leasing fundamentals and occupancy gains across the portfolio. Looking ahead, we continue to see our 2% to 3% long-term annual average target range as the appropriate framework for our same-asset NOI business planning.

To summarize, the third quarter was yet another quarter of steady, dependable performance for Crombie. We're hitting our strategic targets, producing consistent financial results and managing our balance sheet to support both stability and measured growth.

With that, I'll turn it back to Mark for some closing remarks.

Thank you, Kara. Before we open up to questions, I want to emphasize that it is the disciplined execution of our strategy and the Crombie team that is driving performance. We're focused on owning essential real estate at the heart of communities, managing our assets and capital with discipline and investing and partnering strategically for growth. We're delivering consistent performance while building a stronger, more flexible platform for the long term. We thank you for your time.

And with that, we're happy to take your questions.

[Operator Instructions] Our first question comes from the line of Lorne Kalmar with Desjardins.

Just on the Etobicoke property you guys bought in October, just was wondering what percentage leased is this? And can you give us a rough idea of the stabilized cap rate on the deal?

Yes, we're pretty proud that we're able to acquire that. It is 100% leased. So it is the Longo's and the 2 freestanding bank pads. The Longo's is going to go into operations later this quarter, and the 2 banks are going to be early January, February to be operating.

In terms of how it was structured, we built that as a developer on behalf of Empire, and that investment was about $23 million, $24 million. And then after we completed the investment, which we are earning a fee on, we then acquired the real estate -- the underlying real estate, which gave us a total cost of $28 million. So that number would show up in our nonmajor development pipeline in the MD&A, which gave us a yield on cost between 6% and 7%.

If you're thinking about it from a cap rate perspective, if you take a look at in the MD&A under VECTOM and sort of how we're trending on VECTOM and our asset class, we're in that range on a cap rate. So at the end of the day, we got a great development yield and a great cap rate.

Okay. Perfect. And I guess that kind of leads my next question. Are -- should we just be looking at the nonmajor developments to see if there are any other projects like this in the pipeline that you guys could acquire in the presumably not-too-distant future?

In the near term, yes. So we have one other project, it's a greenfield in Quebec, and we have a joint operation partner there that we're developing it with. And it will be another food store grocery-anchored asset in just outside of Montreal.

Sorry. And just to be clear, you guys are developing this on behalf of Empire?

You got it.

Okay. Perfect. And then the balance sheet seems to be in good shape. Things are firing at all cylinders, but you're still trading at a pretty wide discount to NAV, especially when you look at your sponsored peers. I'm just wondering, have you guys thought about unit buybacks at all?

Lorne, it's Kara. Yes, that's always on our radar in terms of assessing whether something like an NCIB would be in our purview. Right now, it doesn't make sense to us. We do have a drip in place and a discount on the drip that produces some solid cash flow in the form of equity for us. So we'd like that for right now, but it's always on our radar.

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

Maybe just on the development side, just looking at The Marlstone, I think you slated for completion mid next year. Just would you be at a stage where you're doing pre-leasing today? And maybe just walk through where that would be?

Brad, it's Arie. We started our pre-leasing towards the end of October. So we have a kiosk set up at our Scotia Square property adjacent to The Marlstone as well as the model suite that's situated there as well. So pre-leasing has started, website is up. We are starting to do the initial intake of applications, and we're very hopeful and very enthusiastic about the response so far from the early days of our pre-leasing program.

And I guess from a stabilized yield perspective, it doesn't look like your estimates or your range has changed, I guess, given where Halifax rents are trending, I guess, on the new build side. Like has there been material movement in where you expect pro forma rents to be?

No, Brad. So our underwriting versus what we're seeing in the market, we're pretty much in line. And so our yield on cost, as we've called out, is still at the 4.5% to 5.5% range. We're still on budget with a little bit of contingency left, so it might be slightly under budget when this closes out. So we're pretty happy. And as already called out, we started pre-leasing. The intake has met our expectations, which is a positive sign. Halifax as a market relative to other markets across the country, at least in our view, has kind of held in there much better in terms of the rental market.

Okay. Just last question, in terms of the -- I know it's a small exposure for you guys just on the residential side. Vacancies ticked up just a touch. Just can you walk through what you're seeing, I guess, within the few assets you do own on the multifamily side and sort of your expectations for NOI going forward?

Sure, Brad. We are focusing on prioritizing occupancy right now. So we did have a slight dip in this quarter that is primarily related to one property that had multiple expiries within the quarter. Very happy with where we had our turnover ratio for that property in the quarter. So we started early with respect to notices to tenants to gauge interest, and we were able to really, I would say, manage the expiry cliff quite well, notwithstanding the fact that we did see some vacancy occur.

And there's not a big expiry profile for the balance of the year. So we're hoping to see that climb back up as we close out 2025. And all of that should translate into the NOI expectations that we have for the properties as a whole. But again, the focus is on delivering occupancy at this point in time, given the state of the market. We believe we've got some of the best assets situated in their respective geographies, but we are seeing that softness throughout imagine through.

I guess that turnover you saw in Q3, that would be more just like typical seasonal turnover you would expect going forward in Q3 relative to...

Your next question comes from the line of Sam Damiani from TD Cowen.

And just on the leasing spreads were quite strong this quarter. I'm just wondering, was there anything unusual that drove the sort of meaningful step-up in your leasing spreads?

This was a fairly typical quarter for us, albeit a little bit smaller on the square footage side, but it is something that we've seen continually over the last 4 quarters. So this is our fourth quarter in double digits. For us, we're seeing that demand continue to come in. We experienced that with the recent ICSC conference that we had earlier in October. We had over 100 meetings with both existing tenancies as well as new tenancies, both to Canada, but also to our portfolio. So there's just a lot of demand for open-air grocery-anchored shopping centers primarily right now. And they're really drawn to the fact of -- the fact that we're obviously got the best anchor on site, but also what our development team has been able to pull off with respect to delivering these pad opportunities and intensification opportunities, doing our best to value engineer these projects.

And Victor and his team have done a really nice job of being able to tuck in some opportunities because I mean, I can tell by occupancy, we're near full. So we're just continually looking to optimize the portfolio. And what we're also seeing in our portfolio, some of these 100-plus meetings is a bit of a diversification as well in grocery anchored. So we added to our occupancy this quarter, a brand-new state-of-the-art 20,000 square foot provincial health clinic in Nova Scotia. We also added some other service users that traditionally we're not seeing in our portfolio. So again, that's not exactly on the renewals, but I think it speaks to the health and the vibrancy that we're seeing in our portfolio currently.

That's great color. And I just -- as you look out to 2026, how are you feeling about sort of that 2% to 3% same property or same asset NOI growth? It just seems like Crombie has potential to tip above that 3% range. I'm just wondering how you feel about that.

Sam, it's Mark. We're feeling pretty good. So if you look at our year-to-date number, we're at 3.5%. We printed a 4.6%, which I think is outstanding for the team. And it's showcasing the strategy and the work that the team is doing to deliver against it. We've also got a nice little tailwind in retail and sort of that demand and supply imbalance, and we're capturing the wings on that. We're disposing of noncore assets that were legacy and structurally deficient. So all the pillars of our strategy are working. I would say on a -- if you close out 2025, I would look at where we are year-to-date in 2023 is a good indicator of how we see the year ending out. In terms of 2026, we have an internal target for ourselves, which is in that 2% to 3% range. We see ourselves being on the high side of that for next year.

Okay. That's very helpful. And just on The Marlstone, it does reach completion next year and hopefully, stabilization quickly thereafter. Does Crombie have the appetite to start a new residential development in the near term after that?

We definitely take a long-term view in mind, and we definitely look at it through a lens of partnerships. We have 2 active ones on the go. So as Marlstone gets stabilized, we have 2 others in that market, which is Barrington and Brunswick, and we have a partnership there with Montes. And so we're actively working against it. And if the window is right and the underwriting is sound as we look at the longer term, we will look at greenlighting projects. But we look at it as a whole investment of allocation of capital. So near term versus long term. So today, we've been more focused on nonmajor investments, and that is really driving same asset and really driving FFO growth, but we also look at major. And today, major is all about entitlements so that we have the flexibility, as you called out, Sam, when the window opens, we can take advantage of it.

Okay. I appreciate that. Last question for me is just on the Queensway acquisition, well, I guess, development really. I mean that site, I think it's been somewhat dormant for quite a few years and all of a sudden, obviously, it got activated within the last year or so. I guess what prompted the sort of greenlight for that project after whatever it might have been a decade that it was kind of just sitting there?

Yes. It used to be an active warehouse at one point in time for Empire and then over time, it got subdivided into 2 parcels, front end and back end, and there's a lot of dialogue and highest and best use. And at the end of the day, grocery anchored in that pocket is going to -- is the highest and best use. So there was underwriting done and market conditions were right. And as you probably read, most grocers are in expansion mode. And so they're capturing a little pocket of the market that they can drive value for. So we're really happy to green light it with them.

Your next question comes from the line of Giuliano Thornhill with National Bank Financial.

Just wondering on the retail occupancy and touching kind of an all-time high. I'm just wondering kind of where the gains were located. It was mostly in your enclosed mall portfolio and really like how sustainable do you think this is?

The occupancy levels are very healthy where we are right now. We've always said that 97% is probably top end of the range, and we've passed that now. So very happy with our results. We're still seeing additional interest in not just enclosed, our enclosed mall in St. John's is performing exceptionally well. But really, the inbounds are coming primarily in our open-air portfolio. Again, we're near full there. So we're looking to see how we can accommodate them, shuffling some tenants around, trying to accommodate expansion plans as well, like I said earlier, add some intensification through the addition of pads as well. So I would say it's quite well rounded in the retail sector.

And what's kind of the opportunity there on the on-pad intensification?

We've got over 2 dozen properties in our portfolio that are identified for intensification. Those are all in various stages of development. Some are more near term, some are longer term. Some require municipal approvals and entitlements, some require lease controls to be worked out with tenants. And we work on those as we go through our renewal process. But -- so they're all at various stages, but there are quite a number of opportunities in front of us and a lot of tenant demand for those opportunities.

And then just there's a pretty large uptick in the new modernization projects. I'm just wondering where are these mostly located within your portfolio? Is in the West or East?

They're coast to coast, which is we always are very proud of and being a coast-to-coast REIT because they're basically right at the heart of the communities where the people are. So there's no one concentration market or province. It is really coast to coast.

And would you say it's fair that this is kind of in response to like more competitive pressures with more grocers looking to kind of expand their footprint, just kind of revitalizing your properties?

We've had our program in place, at least our investment portion of modernization for many, many years. So this is nothing -- this is not a new program that we've had. We've had it in place and running for 6, 7 years now.

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

Maybe an out-of-the-box question for Arie, your comment on the ICSC meetings being pretty significant, 100 meetings plus. Just curious, what would that have been like last year?

I would say it was around 75 last year. So I've been here now 7 years, my fifth ICSC given COVID. And this is by far the most attended meeting -- the highest meeting attendance we've had in my tenure here.

And would it be your sense that, that was the case for the industry overall? Or I think, Mark, you mentioned coast-to-coast a couple of times, which I think is maybe underappreciated with the portfolio. Is the coast-to-coast nature of the portfolio now seeing strategic benefit in terms of tenant discussions?

It is. So the tenants that we're talking to, by and large, are nationals and their opportunities in VECTOM markets and other urban areas seems to be pretty tapped out, so in some cases. So for us, really, we're able to add to their store network plans. So we have quite a few tenants throughout that are looking to add significant store counts to their portfolio, and they're just not able to do that predominantly in the major markets. And we're able to accommodate them throughout. It also helps them as well with their store growth. And we're able to do it in some municipalities that have shorter time lines in order to complete them. So I think that is another big benefit for them and why they're looking at our portfolio.

And with occupancy like relatively full, there isn't much space for them outside of, I guess, you talked about some potential pad additions. How do the market rents in, let's say, some of the secondary markets look relative to required development yields in order to satisfy that demand?

Our experience over the last 18, 24 months is we're pushing renewal rates. We're pushing new store rents that are similar in the geographies where we're operating. So I wouldn't say that it's that drastic of a spread between. Obviously, mixed use are quite a bit different, but there's not much. And you can see that show up in our numbers when you take a look at the renewal rates that we're pushing out from a geographic basis.

Okay. And then when we look out into '26 or maybe even '27, in '26, you have about 5% of your lease maturing in '27 closer to 7%. So they're not big numbers relative to peers. But just I'm curious whether over the next couple of years, are there any known vacancies that you're aware of, any unusual opportunities to really boost rent on low in-place expiring rent? Just anything out of the ordinary that you'd like to highlight?

No, Mario, I'd say that next year is a fairly typical renewal year for us. In some ways, it's looking fairly optimistically in the sense that we don't have a lot of office next year. We don't have a lot of fixed rate renewals next year. So I would say that's why all indicators are that the current glide path we're on is one that we expect to maintain in the short term.

Looking into 2027, it is a little bit larger than 2026. But again, we will start chipping away at some of those renewals into 2027. To the extent that we have any concerns, we're not airing any of those now. We're working with tenants. I would say that we're continually updating the watch list. Like there's nothing that strikes out right now in terms of the 2026 or 2027 expiries that we're currently significantly concerned about.

Okay. And then just last one for me, just on Broadway and Commercial's, any updated thoughts on timing on full entitlement enactment and what may happen at that property going forward?

Mario, it's Mark. We're looking Q1, Q2 for full enactment. And we're working with municipalities refining it and getting it through. So Q1, Q2 is our best estimate at this point in time. And on the go forward, it's looking at the window in terms of how the underwriting looks and the role that we'll want to play as we look at the underwriting. But the Vancouver market is soft. And so as we look at the underwriting, we have to make sure that it works for us and our partner. So more to come on that in 2026. But again, the first step is to get enacted.

Your next question comes from the line of Tal Woolley from CIBC Capital Markets.

I had to step off the call for a brief second. I apologize if some of this stuff has been answered and just let me know if it has. First of all, we got a new CEO at Empire yesterday. Just wondering if that would presage any Board changes or anything at Crombie. Maybe you can speak a little bit about your relationship with Pierre and any changes that may portend for Empire's strategy.

Yes. And so really happy that you asked the question, and I personally want to congratulate and the rest of the Crombie team. Management team and the Board has also congratulated Pierre St-Laurent on his recent appointment. I think it's excellent for Empire. Pierre is a 35-year vet of Empire, has been overseeing most divisions of that organization over his 35 years. And so I think it's a great person to come in after Michael Medline, who I also want to congratulate and acknowledge who's been there for 9 years, ran through 3 strategies and is leaving the company in a great spot from where it started when he joined in 2017. And I'm confident Pierre is going to take it and even go higher. So we're really thrilled. We have great relationships with Empire. They are our strategic partner, and we see that continuing going forward.

Okay. And I just wanted to talk about 2 of the larger nonretail -- or sorry, nongrocery-anchored retail assets in the portfolio. Just at Scotia Square, I'm wondering if you can talk a bit about the performance in the market, how you're looking at the outlook for the next couple of years with that asset?

Sure. The Halifax office market has been one of the standouts nationally, and Scotia Square is continuing to beat the market. Downtown occupancy for us is very healthy and above what we're observing from other Peninsula-based offices there. So the connectivity that Scotia Square offers, the Pedway access, the largest arcade in downtown Halifax and all the other amenities that has with the food court and everything else are really contributing to this being the magnet downtown.

Obviously, we're adding the milestone to it, but we're also adding some significant tenancies that are in our economic in some part and committed occupancy and others that are also going to be driving a lot of additional foot traffic to the shopping center. And we continue to be the first call, I believe, for many tenants that are looking for office space in Halifax. So we're seeing that gradual recovery in office throughout, and we're pretty pleased right now with where Scotia Square sits. Obviously, we'd like to see occupancy tick up a little bit more, but the team has done a fantastic job.

The one thing I'll add there, Tal, is office occupancy is up almost 340 basis points year-over-year. And part of that is because we sold the Moncton office. We did that earlier this year, which had chronic vacancy and something that we didn't see the value for us to invest in, but somebody else to take on. And because of that transition, it's taken that distraction away and the team is even more focused in on what we have at HDL, Scotia Square. And as Arie called out, we -- that committed occupancy is picking up. and it is the first call. It is Sunrise for the town. It has the highest concentration of parking. It's got the Pedway system. It's got the food court. So we're pretty happy with its performance. And it is, in our view, from all the metrics we've seen, it outperforms all the other offices in that market.

Okay. And then just wondering if you can give a brief update too on Avalon Mall as well.

Avalon Mall has been just firing all cylinders. We're experiencing really strong traffic, double-digit traffic growth year-over-year. The team there has just done a tremendous job of engaging with the community to drive traffic, which is helping tenant sales. We're seeing very healthy growth levels. Occupancy is in the mid- to high 90s. It will be near full over Christmas with temp leasing as well. So the tenant demand is still there, albeit less than open air for sure. But Avalon Mall, I would say, is performing very well. Like I said, tenant sales, traffic, all current metrics are pointing in the right direction for us.

The other benefit is it is the only enclosed mall in Newfoundland. So if you want to come to this market, you're coming to us. And the team has done an excellent job on capturing that and engaging with all the retailers. And so as we have turnover, we already have a roster of those that want to come in. While we might be near full, we already have backup plans to -- if something goes down, we have a replacement at a higher rate.

And you have no major anchor transitions there that you need to work on?

No.

Okay. And then this question has come up like before over the course of Crombie's history, but there at least has been some mall trades over the last couple of years. Like is Avalon -- you still see that as a core holding for the company going forward?

Our core is grocery anchored. Avalon Mall has been a nice asset for us. We've made a significant investment in it in 2018-ish. Those are now -- it's performing exceptionally well because of some of that investment. It's got great cash flow for us, but it is not core to what we are, which is grocery anchored. But we like the asset. As already talked about it, occupancy is high. We're getting the right turnover when we need the right turnover growth rate. So we'll continue to manage the asset and focus on the metrics that drive that business.

And then I guess, like longer term, I mean, it's a bit of a harder question to answer, but like your -- for some of the mixed-use stuff, like we went back 5 years, like this was one of the things that -- or sorry, 5-plus years that mixed-use development was this excess density was a big part of the story. Obviously, the environment has changed. Do you get the sense that like over the next decade that, that is going to be a bigger piece of the puzzle going forward? Or do you want to keep it sort of as you structured it now with 1, maybe 2 on the go, a couple of entitlement partnerships that sort of seems to be maybe the way forward as opposed to a more aggressive plan sometime in the future?

Yes. If you step back and go back, I know, 6, 7 years, we had -- the pipeline was in around 33. And since then, we developed 3, we have under construction, we sold the rest. And we used the proceeds to help fund those investments plus into our grocery anchored.

As we look at the platform today and going forward, we have the long term in mind. So that is absolutely how we look at the business long term. And right now, we need to get these projects entitled, Tal, and then once we get them entitled, we have that flexibility on what role we want to participate in. Again, it's back to sources and uses of capital and making sure that we're driving the best returns for our unitholders.

In some cases, that will be to partner and develop. In other cases, that might be change the percentage ownership that we have. In other cases, it might be to monetize it. But we do keep that flexibility open. And today, I think what we stood up is exceptional because we are the ones that are driving the entitlement value, and we're getting paid for that. And when we get them entitled, then we can create the optionality to look at what we can do with them. So the way that we focus on the business today is not a mandatory the shovel will go in the ground.

Your next question comes from the line of Pammi Bir with RBC Capital Markets.

Just really one question for me. The same-property NOI numbers obviously look quite strong and both for the quarter and year-to-date. Was there much contribution from modernization investments in those figures? And if so, I'm not sure if you could try to quantify that.

Yes, there was the modernizations are contributing to our same-asset NOI, especially where we're getting that 6% to 7% increase in opening up the lease and laying that off on top of current rental amounts. So we had a bit of an uptick in the quarter of plus 30, 50 year-to-date. And so we're capitalizing on some of that income growth, and it is delivering some solid performance in our same-asset NOI as well as other new leases, too.

And sorry, Kara, just to clarify, I'm not sure what you meant, plus 30 and plus 50. Was that sort of the year-to-date completions? Or I'm curious as to of that 4.6% or the 3.5%, roughly how much of that? Is it half of that? Is it 1/3 of that? Is it 20% of those figures that came from the modernization investments?

That was project count, not percent contribution to same-asset NOI. Yes, we don't break it out that way.

Your next question comes from the line of Mike Markidis with BMO.

Just following up on Pammi's question. How many modernizations, like how much runway is there over the next 12 to 24 months? Is this pace going to continue? Or do you expect it will accelerate or slow from here?

We've invested approximately $30 million, give or take, up and down over the last 3, 4 years. We're likely going to be in that same range again this year. And so all indications and Empire has publicly talked about this, that they are in the modernization rental program where they did say that they wanted to touch 25% to 30% of their locations over a 3-year window, and they're still in that window. So there is runway. We've been working on it with them on assets that we own, and it's been about $30 million. So we see that holding for the balance of this year, we see it holding into next year as well.

Okay. Great. Just on the deferred fee revenue you guys flagged last quarter. If we strip that out just for the next little while, given what's on the go, is that a decent run rate for the next several quarters here to think about?

Yes.

Okay. Got it. And last one for me. I kind of missed the Lorne's -- the answer to Lorne's question on Queensway. Can you just remind us for, I guess, my benefit, remind me, how that worked? Was that a development -- I understand you guys managed it. Did you fund the development on your balance sheet? Or how did that work exactly?

Yes, we did. So we funded a portion of the predevelopment costs and then bought the land from Empire. It's a total of $28 million.

And at this time, we have no further questions. I would like to conclude the Q&A session and today's conference call. We would like to thank you for your participation. You may now disconnect your lines at this time. Have a pleasant day, everyone.