Transcript
00:14 — Wayne Byrd:
Hi, I’m Wayne Byrd, Chief Financial Officer at Skyline. Thank you for joining us for our Q2 2026 financial update covering all of Skyline’s investment products.
The second quarter marked a strong continuation of performance across our apartment, industrial, retail, and clean energy portfolios. While the economic environment continues to be shaped by changing conditions and broader market volatility, our approach remains consistent. We continue to focus on what matters most: generating stable income, operating our assets effectively, and creating long-term value for our investors.
Unless otherwise indicated, all quarterly metrics are presented on a trailing 12-month basis as of June 30, 2026.
Let’s begin with Skyline Apartment REIT (real estate investment trust). In Q2 2026, the REIT’s fair market value increased 3.22% to $5.3 billion, supported by a diversified portfolio of 20,209 suites across 47 communities in five provinces.
The portfolio continued to perform well in a challenging operating environment while maintaining the key performance benchmarks investors have come to expect. Net operating income, or NOI, a key measure of profitability, increased 0.75% year over year to $54.52 million. This increase was supported by a 2.58% rise in NOI margin, which reflects stronger operating efficiency across the portfolio.
Disciplined cost management remained a key driver of this improvement, with operating expenses declining more than 5%. At the same time, average monthly in-place rent continued to increase, reaching an internal record of $1,614 per unit, up 3.46% from the prior year.
Skyline Apartment REIT also enhanced unitholder returns through a $0.0632 per unit special distribution to unitholders of record as of June 11, and subsequent to quarter end, the REIT’s annualized Class A unit distribution increased nearly 33% from $1.11 to $1.475 per unit, representing a 5% annualized yield.
This past quarter, we continued to modernize the portfolio, both through our existing development pipeline and new project acquisitions. Together, these initiatives are now at various stages of construction, lease-up, and stabilization. As they reach stabilization, each will add to the portfolio’s recurring rental income and support distribution growth in future quarters.
We now turn to Skyline Industrial REIT, whose investment property fair value ended the quarter at $1.72 billion. The portfolio spans more than 9.71 million square feet of gross leasable area (GLA) across 50 properties in four provinces and serves 172 tenants nationally.
The portfolio continued to display strong rental growth, with average annual in-place rent rising 5.56% to $10.06 per square foot, supported by healthy leasing fundamentals across all markets. Base rental revenue growth, which measures the amount of in-place rent generated from our existing tenants, increased 2.2% to $8.15 million.
During the quarter, the REIT also completed several important strategic initiatives that further strengthened the portfolio. We completed the sale of our Winnipeg cold storage asset back to Congebec for $63.6 million, demonstrating disciplined capital allocation and a focus on recycling capital toward higher-growth opportunities.
We extended and expanded our lease with Sunset Converting in Saint-Jean-sur-Richelieu, with the tenant now committed for approximately 15 years, and subsequent to quarter end, our Bayers Lake development in Halifax reached 100% occupancy, with all tenants expected to be paying full rent by the end of 2026.
Post-quarter, we also acquired the remaining partner interest in our industrial facility at 425 Avenue Fouquet in Candiac, Quebec. Bringing this 129,000 square foot multi-tenant property under full ownership enhances operational flexibility and supports long-term asset value.
In terms of cash returns, unitholders benefited from a special distribution of over $0.11 per unit, payable to unitholders of record as of June 26, and effective August 4, 2026, the annual distribution for Class A units increased to $1.09 per unit, with monthly distributions rising above $0.09 per unit. Based on the current value of $22.75, this represents an annualized yield of 4.79% for the September distribution.
As we look ahead, management continues to see positive leasing momentum across both the existing portfolio and development pipeline. As additional development properties stabilize through the remainder of 2026, we expect them to generate additional distributable income and support the REIT’s long-term growth strategy.
We now turn to Skyline Retail REIT, where investment property fair value increased 2.83% to $1.66 billion. As noted previously, this growth was supported by the addition of an Atlantic Canada grocery-anchored retail plaza acquired in late 2025. The property is a key retail focal point in a growing municipality, anchored by a pharmacy and full-service Loblaw grocery store, consistent with our strategy of acquiring high-quality assets in strong locations.
To date, the portfolio now comprises more than 5.2 million square feet of gross leasable area across 109 properties in five provinces.
Operationally, the REIT continued to deliver steady results throughout the quarter. Following an outlier quarter a year ago, NOI increased 56.94% to $23.24 million, while NOI margin rose 22.3 percentage points to 61.6%, moving back toward historical norms.
Average annual in-place rent increased 1.1% to $20.19 per square foot, supporting a 1.63% increase in base rental revenue to $25.36 million. FFO (funds from operations) increased 6.1% to $11.82 million, reflecting continued strength in the portfolio’s operating cash flow, and committed retail occupancy also remains strong at 98.2%, up from 97.8% in the prior quarter and well above historical averages. This provides a solid foundation for continued cash flow generation.
Importantly, we also saw a meaningful improvement in leasing spreads during the quarter. Leasing spreads increased to 12% in Q2 compared to 6.69% in Q1, bringing the year-to-date average to 7.41%. That is a good indication of the strength we are seeing in the underlying leasing environment and gives us great confidence in continued improvement through the remainder of 2026.
With quality new retail space constrained across many of our markets, our existing portfolio offers meaningful mark-to-market opportunities as leases expire, while its focus on necessity-based retail supports resilient occupancy and stable cash flow through changing economic conditions.
Lastly, Skyline Clean Energy Fund continued to sustain momentum through the second quarter of 2026. As at quarter end, the Fund had approximately $424.5 million in assets under management, comprised of 84 solar projects and two biogas facilities with a total generation capacity of 95.75 MW DC (megawatts of direct current) across the portfolio.
Total revenue increased 23.83% to $71.68 million, driven primarily by a rise in biogas revenue associated with the monetization of clean fuel regulation credits generated between 2022 and 2025. Net operating income margin increased 3.8% to 32.62%, resulting in an NOI of $23.38 million.
The Fund also reached an important milestone by surpassing half a billion (500,000,000) kilowatt-hours (kWh) of cumulative generation over its lifetime. To put that into perspective, that is enough electricity to power approximately 45,000 Canadian homes for a year.
Subsequent to quarter end, the Fund’s Class A units increased from $19.78 to $19.87 in July, and again to $20.02 in August, for a cumulative increase of 1.21%.
A key focus for the quarter and throughout 2026 is our solar repowering program, which upgrades existing assets with more efficient technology to increase electricity output [and] revenue, and enhance asset life. This provides a cost-effective way to drive internal growth from within the existing portfolio.
To date, we have repowered nine solar projects, with three of those being completed in July. Included in that is our first utility-scale repowering, where we brought our First Light 1 project from 9 MW (megawatts) to 15 MW. By year end, we expect a total of 14 of our targeted 19 projects to be completed, with project-level internal rate of returns ranging from 13% to 36% across the 19 assets. As these projects come online, they are expected to increase generation and support recurring revenue across the portfolio for years to come.
At Skyline, we believe consistency matters. That means staying disciplined in how we invest, focusing on assets with enduring demand, and maintaining diversification across our portfolios. These principles continue to guide our approach and have helped us deliver consistent, long-term performance for our investors.
Thank you for joining us and we look forward to providing our next quarterly update.