Morguard Real Estate Inv. Q4 Earnings Call Highlights

Core Insights - The company anticipates a challenging year in 2025 due to a market rent reset at Penn West Plaza following the expiration of the Obsidian head lease, transitioning from a single-tenant to a multi-tenant asset [2][6] - The fourth-quarter net operating income (NOI) decreased to CAD 29.1 million from CAD 33.5 million in the same period of 2024, primarily due to the performance at Penn West Plaza [3][6] - Retail fundamentals remain stable, but the closures of Hudson's Bay locations create near-term challenges, prompting a redevelopment program at St. Laurent [5][7] Financial Performance - The company reported a decline in fourth-quarter NOI to CAD 29.1 million, attributed mainly to the transition of Penn West Plaza and a rent-reset impact quantified at CAD 16 million over 11 months [3][6] - Liquidity improved with CAD 68 million available, and total debt decreased by over CAD 100 million over four years, although fair value losses of CAD 62 million were recorded year-to-date [4][16] - Occupancy rates fell to 85.1% as of December 31, 2025, down from 91.2% at the end of 2024, primarily due to vacancies from The Bay's departure [17] Retail Sector Insights - Retail performance was stable, with good rental growth on lease renewals, despite the impact of Hudson's Bay's creditor protection [7][9] - The company is pursuing redevelopment initiatives at St. Laurent, with a planned investment of CAD 25 million to CAD 30 million to repurpose former Sears and Bay spaces [10][11] - Strong tenant conversations with national brands are ongoing, and community strip centers are reported to be 99% occupied [9] Development and Leasing Outlook - The company has initiated a strategic merchandising program at St. Laurent to attract nationally recognized brands, with current development spending at CAD 6.4 million [10] - Leasing teams have observed increased activity in major urban areas, with expectations of improved leasing in late 2026 and into 2027 [20] - Most of the 1.6 million square feet of lease maturities in 2026 have been contracted, with significant renewals expected from major retail tenants [21][22]