Hello everyone. Thank you for joining us and welcome to GO Residential's first quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Maxwell Kaufman, the Chief Operating Officer. Please go ahead.
Good morning, everyone. I'm Maxwell Kaufman, the Chief Operating Officer, Corporate Secretary, and General Counsel of GO Residential Real Estate Investment Trust. Welcome to GO Residential's earnings call where we will discuss the financial results for the quarter ended March 31st, 2026. I'm joined on the call today by our CEO, Josh Gotlib, our CFO, Peter Sweeney, and our President, Matthew Keller, who are all available to answer questions after our prepared remarks. Before we begin, I want to remind listeners that certain statements made on this call may constitute forward-looking information as defined under Canadian securities laws. Forward-looking statements may include, but are not limited to, statements regarding our financial outlook, business strategy, acquisitions, market conditions, and future performance. Words such as expect, anticipate, intend, plan, believe, estimate, forecast, may, will, and similar expressions are intended to identify these statements.
Although we believe such statements to be based upon reasonable assumptions, they are subject to risk and uncertainty, and we cannot give assurance that the anticipated results will be achieved, and we undertake no obligation to update any forward-looking statements except as required by law. In addition, we will reference certain non-IFRS financial measures that we believe provide useful supplemental information about our financial performance which do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. For more information about forward-looking information and non-IFRS measures, including reconciliations and important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, please refer to our MD&A dated May 6th, 2026, along with the financial statements which are available on SEDAR or their website.
As always, all remarks reference figures in U.S. dollars unless otherwise noted. The first quarter of 2026 was by every measure a defining quarter for GO Residential. We delivered another set of results that exceeded our IPO forecast across every key metric. We issued inaugural senior unsecured debentures through our operating entity in the Canadian market. We completed a bought deal offering and concurrent private placement. Most consequentially, we announced four accretive acquisitions that are expected to roughly double our building count and add over 1,000 suites to our portfolio. Each of those announcements would on its own be a milestone. Taken together, they evidence that the strategy we laid out at IPO is being executed with discipline and at scale. With that, I'll turn it over to Josh to walk through the quarter and our outlook.
Thank you, Max. We are pleased to report another strong quarter of results. As compared to our IPO forecast, we beat once again on every key operating metric. Committed occupancy at the end of the quarter sat at 99%. Average monthly rent is now at $6,876 per suite. On the cost side, our 71% renewal rate on leases expiring during the quarter continued to drive lower turnover-related expenses and supported the margin expansion that you see in the numbers. Property operating costs were broadly in line with forecast, with a modest variance attributable to a colder than expected winter and the seasonality of utility expense, which our forecast straight-lined across the year.
These are the operating results that you should expect from a portfolio of best-in-class assets run by a management team that has been doing this for a long time. There's nothing flashy about beating the forecast on every metric three quarters running, but that consistency is, in many ways, the most important thing we can deliver to our unitholders. Turning to the broader market, the conditions on the ground in Manhattan continue to be exceptional and frankly continue to surprise to the upside. First, pricing. Manhattan median rents crossed $5,000 per month for the first time on record in February and held that level in March. Second, supply. By the end of March, Manhattan listings hit their lowest level in approximately four years, marking the 19th consecutive month of year-over-year inventory decline. Third, vacancy.
Manhattan vacancy remained below 2% throughout the quarter, well below any reasonable definition of a balanced rental market. Fourth, demand. Signed leases rose in each successive month of the quarter, with March marking the strongest leasing pace we've seen since the IPO. Record pricing, multi-year low inventory, sub 2% vacancy, and accelerating demand. It is hard to imagine a more constructive operating backdrop, particularly heading into our peak leasing season. Turning to acquisitions. During the first quarter of 2026, we announced agreements to acquire Ivy Tower, the Hudson Yards portfolio, 7 Dey Street, and an 81% interest in 409 Eastern Parkway. Taken together, these acquisitions will double our building count and drive our number of suites from 2,015 to above 3,000.
They will diversify our portfolio across some of New York's strongest submarkets and are expected to be mid-single digit accretive to both AFFO per unit and NAV per unit. Closings continue to be expected during the second quarter of 2026, subject to customary conditions. Since we announced these deals, our pipeline has grown substantially and inbound activity from sellers has accelerated meaningfully. Our two guiding principles for new deals remain the same. One, transactions must be accretive to both AFFO per unit and NAV per unit. Two, we are only willing to consider transactions that are neutral to or improve leverage metrics. Deleveraging has been and will continue to be our number one capital allocation priority for the time being. A few items to flag for the coming months. First, peak leasing season is just getting underway.
Second, closing of the recently announced acquisitions in the second quarter will mark the most material transformation of our portfolio since IPO. Third, we expect to host an Investor Day during the second week of June. The date and details will be released shortly. With that, I'll hand it over to Peter to walk through the financial results in more detail.
Thank you, Josh, good morning, everyone. The first quarter of 2026 was a strong financial quarter on every metric that we manage. I'll cover the operating results and then walk through the capital markets activity that materially reshaped our balance sheet during the quarter and finish with a comment on liquidity and a few accounting items that I would expect questions on later. With respect to operating results, we confirm number one, revenue adjusted for the quarter was $46.3 million, which was $1.1 million or 2.3% ahead of forecast. The beat was driven primarily by stronger than expected average monthly rent, the continued benefit of the mark- to- market initiative and the recognition of a $2.2 million non-refundable fee in connection with a potential branding arrangement involving our properties.
Number two, property operating costs of $6.2 million were modestly above forecast with the variance attributable almost entirely to the seasonal pattern of utility expense, which our IPO modeled straight-lined. Number three, NOI adjusted margin expanded to 72.8%, up from 72.5% in the fourth quarter and 71.1% in our inaugural reporting period. Number four, NOI adjusted of $33.7 million exceeded the forecast by $0.9 million. Number five, FFO adjusted of $16.5 million or $0.29 per unit exceeded the forecast by $1.6 million on a dollar for dollar basis and $0.03 on a per unit basis, which was approximately an 11% beat. Number six, AFFO adjusted was $14.3 million or $0.25 per unit modestly ahead of our forecast.
Lastly, number seven, net income and comprehensive income for the quarter was $43.8 million. As a reminder, the IFRS net income line includes a number of non-cash mark- to- market items, most notably a $42.4 million fair value gain on valuing our OpCo units, a $7.1 million fair value charge on our cross-currency swap derivative liability, a $5.1 million unrealized foreign exchange gain on our Canadian dollar debentures, and a $1.8 million fair value gain on investment properties. Of course, we neutralize these accounting items in our non-IFRS measures so that FFO and AFFO adjusted reflects the cash earnings and the income power of our portfolio. With respect to capital market activity, the first quarter was without question the most active capital markets quarter of our short history as a public company.
Three transactions are worth highlighting. Number one, senior unsecured debentures were issued on February 13th of 2026. OpCo completed a private placement of these debentures with an aggregate principal amount of CAD 325 million maturing on February the 13th of 2029. These debentures bear interest at a fixed annual interest rate of 4.534%. Concurrent with the issuance, we entered into a cross-currency interest rate swap that locks the all-in U.S. dollar coupon at a fixed interest rate of 5.552% on $239.7 million of U.S. dollar proceeds. Under this swap, we have no economic exposure to fluctuating currencies between the U.S. dollar and the Canadian dollar over the term of the debentures, including on the principal repayment at maturity.
This was an important strategic milestone for the REIT, our first unsecured debt issuance, and a foundational building block for the unencumbered asset base we're working to construct over time. Number two, our credit facility. Concurrent with the debenture issuance, we used a portion of the proceeds to repay $74.9 million outstanding on our revolving credit facility. In addition, we amended this facility to extend its maturity from July 31st of 2028 to February 13th of 2029. As at March 31st of 2026, the $125 million facility remains undrawn.
Lastly, number three, the bought deal and concurrent private placement. On March 23rd, we closed a bought deal offering of 3,768,845 REIT units at $9.95 per unit for gross proceeds of approximately $37.5 million, alongside a concurrent private placement of 3,780,910 OpCo units at the same price for gross proceeds of approximately $37.6 million. Combined gross proceeds were approximately $75.1 million. The offerings were structured to fund the cash portion of certain of the acquisitions that were announced during the quarter while preserving leverage flexibility. With respect to capital structure and liquidity, turning to our balance sheet at quarter end, we confirm, number one, debt to gross book value was 50.3%.
The increase from year-end reflects the proceeds from the debenture issuance held in cash at quarter end, pending the closing of the announced acquisitions. In other words, the leverage shows up before the assets that it will fund. Once the acquisitions have closed, leverage is expected to normalize within our previously communicated target range. Number two, the weighted average contractual interest rate on all debt was 4.4% with a weighted average term to maturity of 3.7 years. Number three, 100% of our mortgages and 100% of our debentures are now fixed rate. The credit facility is variable, and as referenced earlier, remains undrawn. Number four, liquidity at the end of the quarter was $332.5 million.
This comprising $207.5 million of available cash and $125 million of available capacity under the credit facility. On the use of this liquidity, we have firmly committed sources of capital to fund the announced acquisitions comprising cash on hand, the proceeds from the debenture issuance, the bought deal and private placement proceeds, the assumption of approximately $66.6 million of existing mortgage debt, the placement of approximately $270 million of new mortgage debt, and lastly, a draw on our credit facility. We expect to exit the second quarter with leverage metrics back inside our target range and meaningful undrawn capacity on the credit facility. A note on accounting.
One item that we wanted to flag on this call, given how it appears in IFRS accounting, is our new debentures and the related accounting noise. The income statement for the quarter includes a $5.1 million unrealized foreign exchange gain on the Canadian dollar debentures and a $7.1 million fair value charge on the cross-currency interest rate swap. While these items move in opposite directions, they will not always equal in magnitude period over period. Importantly, neither represents a cash exposure because the swap is structured so that at maturity, all interest payments and the final principal repayments on the debentures are satisfied at locked-in U.S. dollar amounts. Both items are likewise neutralized when calculating non-IFRS measures.
With respect to distributions, the REIT has continued to pay a monthly cash distribution of $0.05325 per unit, representing $0.639 on an annualized basis. After funding interest obligations and distributions on both REIT units and OpCo units, we generated a cash surplus of $2.2 million during the first quarter. The AFFO adjusted payout ratio was 62.8%, which is consistent with our distribution guideline of approximately 65% of estimated AFFO adjusted on an annualized basis.
Lastly, to conclude or summarize, the first quarter was another quarter where the REIT beat the forecast across every key operating metric, the attainment of an investment-grade rating, the addition of an unsecured debt platform, a successful bought deal, the announcement of four strategically meaningful accretive acquisitions, leverage metrics that are expected to normalize as these acquisitions close, and a payout ratio that is comfortably below our guidelines target. The financial profile of this REIT is exactly where we want it to be heading into the integration of the recently announced acquisitions and the balance of the year. With that, I'll now turn the call back over to Josh for closing remarks.
Thanks, Peter. I want to close where I started. The team here at GO Residential said we would build a portfolio of best-in-class assets run by an experienced management team. We said that we would deliver consistent operating outperformance and execute on accretive external growth when the market gave us the opportunity. The first quarter is a quarter where every one of those statements got translated into results. That is the standard we are going to continue to hold ourselves to. Operator, please open the line for questions. Thank you.
Thank you. We will now begin the question-and-answer session. Please limit yourself to one question, one follow-up. If you would like to ask a question, please press star one to raise your hand, to withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question from the line of Dean Wilkinson from CIBC. Your line is now open.
Uh-
Please go ahead.
Thanks. Morning, guys. Josh, maybe just a, you know, higher level, big picture observation question? You know, seen some rumblings about two potentially very large apartment owners maybe coming together. I mean, if that were to consummate, I guess, you know, you look at that and say, well, their exposure to New York City would probably come, you know, down. It's a core market that they want to be in. Would you anticipate something like that creating a little more tension in the acquisition market and potentially giving a rather large competitor on pricing, which you know, ostensibly raises the value of your own assets?
Hey, Dean. Thanks for the question. I'm not really sure if we view that consolidation as kind of having a real impact, let's call it, within our sub-market. You know, the fundamentals in the New York City sub-market today kind of are what they are. Supply is really tight. We continue to see strong demand. You know, the headlines are interesting. We definitely pay attention to them, but in terms of our day-to-day business, we don't think that it will impact much, and we don't see much change.
Okay, great. Just my other question, probably for Peter, can you just the normalization of the rent concessions? I know this is something that comes up every quarter. I mean, it did lift this quarter. Between that and the HAP Backstop, where do you expect those to burn off, and will that be on a declining balance? Just sort of, you know, help us kinda, you know, pencil in what that should look like over the remainder of the year.
Yeah. Good morning, Dean. Let's answer the question in two parts. With respect to any of the rental concessions, in fact, yes, we do expect those amounts to burn off substantially over the next two or three quarters. You'll recall those amounts represent concessions that were given prior to the REIT's commencement and burn off over a 12 or 24-month period thereafter as those leases burn off or mature. With respect to the HAP situation, we're currently continuing to work with the appropriate levels of municipal government and state government on that HAP initiative.
At least for now, you know, we still expect, I think it's fair to say, continued and demonstrable improvement and progress to get to a conclusion and a finish line, early in Q3 or at some point in Q3 of this year. I have no doubt that we'll be able to provide additional guidance and color on our progress in that regard as part of our Q2 disclosure.
I also just wanted to reinforce the fact, because these are adjustments, as you know, that we make to get to FFO adjusted and AFFO adjusted, and I know we've said this a couple of times on these calls, but again, just to reinforce and maybe emphasize the reality, is that our portfolio is unlike most others in the fact that it has the distinctive benefit of being in a very, very large city with a lot of opportunity to do a lot of different things. It's just not a conventional. Dean, you know this, but I'm saying this maybe for the benefit of others on the call. It provides so much opportunity to do things that one of your colleagues might have described as unorthodox, meaning different or unusual and perhaps not expected.
You have to expect the unexpected in this portfolio, again, given its distinctiveness and the opportunity to generate pools of revenue that might be unconventional when compared to other, maybe more conventional portfolios that other REITs might have. Again, it's indicative of and emblematic of the nature of these assets, where they sit in the New York market, how significant they are to groups that wanna take advantage of or use their prominence and their placement and their geography to do things in other realms of business. My point is you should expect that notwithstanding these things might seem anomalous, or again, using the word unorthodox, that this type of stream of income, we expect at least as management to be able to continue. It's a long-winded way of trying to answer your question, Dean. I hope I've done so.
Well, I'm all about long-winded myself. You know, bright lights will inspire you. That's my tune. Thanks, Peter.
Thanks, Dean.
Our next question comes from Jimmy Shan with RBC Capital Markets. Your line is now open. Please go ahead.
Thank you. Just given how tight the market is, has there been any change in your expectation of renewal rent growth that you're putting through over the next few months?
Hey, Jimmy . No, I think at this point we're comfortable continuing to guide to what we've told you in the past. You know, I think we're focused on hitting our numbers. This represents yet another quarter of frankly consistent performance. You know, I know in the past there were some concerns about what New York might look like in the first half, and we hope that the numbers that we show you today are indicative of the fact that some of those concerns were overstated. We continue to, you know, believe in our market. We continue to see good progress. We're not gonna get over our skis as it relates to communicating where we see kind of, let's call it-the runway, but for now we're very comfortable with where we've got it to.
Okay. Briefly Peter, you said something about a $2.2 million, I heard branded, a branded fee of sorts. Can you elaborate on what that is, and is that what's sitting in other property revenue?
Yeah. Jimmy, I'll take this one. I think what Peter was alluding to was the fact that, you know, our properties are pretty unique in the context of New York City, just by virtue of where they're located, kind of the awareness around them. They provide differentiated opportunities from time to time. We're seeing them recur, frankly, quarter-over-quarter. This arrangement was just with a vendor whereby we agreed to enter into a potential branding arrangement around our buildings and future acquisitions. You know, what I would say is, you know, these types of opportunities arise in the normal course. A good example of that might be something like if you go down the FDR, you can frankly see Copper. It's just a one-time branding arrangement.
Frankly, these types of opportunities kind of happen from time to time.
Okay. Again, that's sitting in other property revenue, right?
Yes, it is, Jimmy.
Okay. All right. Great. Thank you.
That's the $2.16 million that you see, in the revenue build.
Your next question from the line of John Kim with BMO Capital Markets. Your line is now open. Please go ahead.
I'm trying to think of what this branding opportunity could be. Like GoDaddy comes to mind. My question is on your new and renewal leases. Can you disclose what you signed in the first quarter and how that trended in April?
In Q1 we're seeing trade outs of between 10% and 11%, and the market's only getting stronger into April and May.
That 10%-11%, that's blended?
Well, we're at 10.7%. I apologize. That's blended between renewals and new tenants.
Okay, great. Thank you. On the acquisitions, can you discuss what upside you're seeing as you integrate these assets onto your platform, whether you see a difference in leasing strategy or potentially some expense savings of just looking at some of the potential margin upside, again, as you close on these acquisitions?
I think when we first announced the deals to the market and provided some commentary under them, we said there were things on both the revenue and expense side that we expected to pursue. And frankly, those initiatives were partially driven just by the experience we've had in New York, what we've done at our existing portfolio and what we think we could implement, let's call it, at these new properties. What I would say is in the months since digging further in, integrating the properties, and obviously we're getting prepared to close, our conviction in the ability to realize those gains on both, let's call it the revenue and cost side, has only strengthened.
We feel extremely confident in our ability to hit the numbers or hit the guidance that we kind of laid out for you. I think as we move obviously post-closing, we'll dive into the specifics a bit more and provide a little bit more color on exactly what we're doing at a property level. For now, what I would just say is, you know, as time has gone on and we've kind of gone through integration and, you know, we're now closer to those properties, our conviction in the investment, our conviction in the thesis has only grown.
Okay. Great. Thank you.
Our next question from the line of Jana Galan from Bank of America. Your line is now open. Please go ahead.
Thank you, congrats on the strong start to the year. Appreciate the comments on potential future investments needing to be accretive and neutral to deleveraging. Can you maybe also comment on whether you're looking for more value add opportunities or core higher lower average rents in the IPO portfolio, and if you're looking to add additional, outer borough exposure?
I mean, I think. Thank you for the question, Jana. Listen, I think we look at every investment, what it comes down to at the end of the day is whether the math makes sense for our unitholders. Our job is effectively to make sure that we're driving the right FFO growth, we're driving the right NAV growth, and we're doing that in the context of our cost of capital. We hesitate to kind of sit here and want to put, let's call it properties into a bucket. The math frankly has to work. You know, some opportunities are gonna look like 7 Dey Street. Some opportunities are gonna have a little bit more of a value add component like Ivy Tower does.
From a market perspective, I do think we're really sensitive to where the properties are located. Just to give an example, don't expect us to buy properties where if you look out the window, you're gonna see 15 rental concession signs, right? We want to be in sub-markets with high barriers to entry. We want to see tenancies that are somewhat similar to our tenancies today. Frankly, at the end of the day, it just comes down to the math. If it's gonna drive value for our unitholders, we're gonna go after it.
Thank you. Once the current acquisitions close, would you consider providing annual FFO guidance?
I think what you'll look for is in Q2 following closing, what we'll kind of envision for the back half of the year and then get into a more normalized cadence as we turn into the next fiscal year.
Thank you.
Your next question from the line of Matt Hornick with National Bank. Your line is now open. Please go ahead.
Okay, guys. Just looking at your kind of sequential move and in place occupancy and the rents, can you give us a sense, I mean, as to whether there's maybe some concessions offered in order to get that occupancy higher and that's maybe why we're not seeing it come through in terms of the aggregate rents? Or is it just a function of lower rent units being occupied, and hence you kind of don't see as big of a change in the average monthly rent?
Hey, Matt, thanks for the question. With respect to concessions, let's just be clear, we're offering no concessions today, and that's across all of our properties. In terms of average monthly rental growth, I just wanna make sure because I think there's a little confusion about how we're talking about that number. At the end of March 31st, we sat at about $6,876 per suite. When we've previously spoken about where we're looking, we've said that with reference to an AMR number we put out in our prospectus, which was as of April 1st. As we think about that 10% or that gap to market, we remain on track to hit our AMR figure by the end of July.
I just wanna make sure that everyone is kind of on the same page in terms of how they're talking about that AMR number, understanding that the gap to market that we referenced, it existed with respect to what our AMR sat at April first of 2025. Just wanted to provide that clarity.
Oh, no, that's very helpful. I guess if we take the $6,876 and, I mean, again, this is guidance, so you take it how you want to, what kind of growth do you think you would see off of that number kind of by the end of this year?
I don't think that we've given you through the back half. What I'll say is through the forecast period, we continue to guide to 10% as compared to April 1st. In normalized rental growth, you know, for our properties on a go-forward basis, we've told you between 3% and 5%. Listen, 1 East River, obviously, that's gonna be a little bit differentiated with the value add play we have going there. It's a little bit property specific. At least until, let's call it July, we've given you that 10% marker, then in the back half, we'll give you a little bit more direction about where we think things are heading. That being said, you know, in the grander scheme of things, our expectations around New York frankly haven't changed in the last nine months.
Maybe very quickly on that. New York seems to be accelerating, if anything, relative to kind of the rest of the country and north of the border. Are you seeing market rents kind of move at what sort of pace at this point? Thanks.
Right now, what we're seeing in terms of the market as a whole for luxury rental is year-over-year increase is greater than 4.5%.
Thanks, guys.
There are no further questions at this time. I will now turn the call back over to Maxwell Kaufman for closing remarks.
Just wanted to thank everybody once again for joining the call. Another great quarter, and we look forward to speaking to you all soon. Thanks, everyone.
This concludes today's call. Thank you for attending. You may now disconnect.