Good morning, everyone. Welcome to GO Residential REIT's second quarter 2026 earnings call and transaction update. Hosting today's call is Maxwell Kaufman, Chief Operating Officer. A slide presentation accompanies today's remarks and is available on GO's website. Given the pending transaction, and as is customary in this context, there will not be a question and answer session. That being said, unitholders will receive a management information circular in the coming weeks containing a detailed description of the transaction and the risks associated with it. I will now turn the call over to Maxwell Kaufman. Please go ahead.
Good morning, everyone. I'm Maxwell Kaufman, the Chief Operating Officer of GO Residential Real Estate Investment Trust. On today's call, we will discuss the financial results for the second quarter ended June 30, 2026, as well as the exciting announcement we made earlier this week. I'm joined on the call today by CEO Joshua Gotlib, our CFO Peter Sweeney, and our President, Matthew Keller. 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, future performance, and the expected timing, completion, and anticipated benefits of the H&R transaction. 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 on 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 August 13, 2026, along with the financial statements, which are available on SEDAR+ and at www.sedarplus.ca.
As always, all remarks reference figures in USD unless otherwise noted. I would add one further note by way of disclaimer. On August 11, we announced that we had entered into definitive agreements in respect to the H&R transaction. That transaction remains subject to unitholder, court, and regulatory approvals, and unitholders will receive management information circulars containing a detailed description of the transaction and the risks associated with it. With that, I'll turn it over to Joshua.
Thank you, Maxwell, and good morning, everyone. Welcome to our second quarter earnings call. I am going to start with the transaction, then hand it off to Maxwell and Peter to walk through the quarter and outlook. We have seen the analyst commentary, we have seen the unitholder price, and we recognize there are some specific questions that require clarification. Our plan is to address them as directly as possible because the questions that we have heard since Tuesday are reasonable and deserve answers. When we went public 12 months ago, we were five exceptional assets in one of the strongest residential markets in the country. Our assets remain exceptional, and our markets remain incredibly strong. We knew what we had, but we also knew the market was not giving us full credit for it. We listened to our unitholders.
Discussion after discussion came back to three things: one, scale and liquidity, two, diversification, and three, balance sheet. This transaction is an A+ on all three metrics. 35 properties, nearly 13,300 suites, eight markets, four states. With an enterprise value of CAD 7.8 billion, we will become the second largest publicly traded residential REIT in Canada and the seventh largest in the U.S. Now, that is not a ranking for its own sake. Moving from the small cap segment to the mid cap segment of the Canadian residential REIT peer group is a category shift. It means deeper institutional capital, it means broader analyst coverage, it means a better cost of capital, and it means the potential for index inclusion. These are game changers. Many folks have asked whether this transaction represents a change in strategy. It does not. This transaction represents the acceleration of work.
Our core business remains intact. We have got eight trophy assets in the best residential market in North America. We are not diversifying away from it. We are adding to it. But we are also adding 25 buildings in seven new markets. These are Class A assets in Class A locations. They are exactly what we envisioned for the company when we started back in 2022. Now let us talk about the numbers. We are buying the portfolio at a 7 cap on year one NOI. That is tremendous value but does not reflect the exit cap. The key to this deal is income support provided by Tom Hofstedter and Crow. It is what makes the transaction work for both sides. The portfolio that we are acquiring includes four assets that have either recently completed development or will be done by the time we close. This includes the two rented assets that we will have complete ownership of.
During each of the first two years post-closing, Tom will provide $22 million to bridge the gap to stabilization. If the assets stabilize quicker or above expectations, that upside belongs to the pro forma unitholder. The balance of income support is designed to keep interest expense on senior mortgages flat through the end of 2028. Taken all together, that is $51 million of guaranteed AFFO over the next two years that was specifically designed to mitigate deal risk. Now all of this, including the 7 cap, is before synergies. We told you on Tuesday that we expect to capture $15 million in 12-18 months post-close at minimal cost. That number represents low-hanging fruit. These assets sit in a multi-asset class structure today. Tomorrow, they become part of a pure play residential platform. So what does this mean for unitholders going forward?
It means low to mid-single digit accretion on FFO and AFFO. It means a healthier balance sheet with debt to EBITDA more than two times lower and expected to move down further. It means a rich catalyst path that includes the potential for dual listing and index inclusion. It means a growth platform led by a management team committed to best-in-class governance, best-in-class disclosure, and best-in-class operations. My partner, Meir, and I did not take the decision to go public 12 months ago lightly. We both have, and continue to have, a substantial portion of our net worth in this company. We could not be more aligned with it. Sitting here today, my conviction in this company and this transaction in particular could not be stronger. Now over to Maxwell to talk about the quarter.
Thanks, Joshua. We are pleased to report another strong quarter. Against our IPO forecast, revenue adjusted, NOI adjusted, NOI adjusted margin, FFO adjusted, and AFFO adjusted all came in ahead of plan for the fourth consecutive quarter. Committed occupancy at the end of the quarter was 99.6%, with in-place occupancy of 95.8%. Average monthly rent across our same property portfolio reached $6,981 per suite. Average monthly rent across the total portfolio, which now includes the two properties we acquired during the quarter, was $6,711. Post quarter end, average monthly rent for the initial properties reached $7,055 in July. Continued sequential progress in the core portfolio through peak leasing season. On leasing, our renewal rate on expiring leases during the quarter was 66.3%. That is down from 70.5% we reported in the first quarter, and that is a deliberate outcome rather than a market signal.
In a market where in-place rents sit meaningfully below achievable market rents, we will let a unit turn where the mark-to-market opportunity justifies the turnover cost. The rent and margin numbers this quarter are the result of that trade. On margin, NOI adjusted margin was 73.4% for the quarter, up from 72.8% in the first quarter and 72.5% in the fourth quarter of last year. That is three consecutive quarters of margin expansion in a portfolio that was already operating at a high margin at the IPO. Turning to the broader market, the conditions we described last quarter have not just held, they have tightened further. First, pricing. Manhattan median rents crossed $5,334 per month for the first time on record at the end of the quarter. Median rents in both Manhattan and Brooklyn set new all-time highs. Second, supply.
By the end of June, Manhattan listings reached their lowest level in approximately four years, marking the 20th consecutive month of year-over-year inventory decline for Corcoran. Third, vacancy. Manhattan vacancy remained below 2% throughout the quarter. Fourth, velocity. Average days on market declined approximately 29% year-over-year, and signed leases rose in each successive month of the quarter. Record pricing, four year low inventory, sub 2% vacancy, and units leasing faster than a year ago. This is the backdrop against which we are integrating the assets that we have just acquired. Turning to external growth, last quarter we announced four acquisitions, and we have now closed on three of them. On May 28th, we acquired 7 Dey Street for acquisition costs of $225 million, financed in part with a $146.2 million mortgage.
On June 5, we acquired Ivy Tower for acquisition cost of $151.9 million, funded from our debenture proceeds. Ivy Tower is currently unencumbered, and we secured a $10 million income support agreement from the vendor, covering approximately the first two years of ownership while we complete our light value add program. On July 1, just after quarter end, we closed on an 81.16% interest in 409 Eastern Parkway for total consideration of $88.5 million, including the assumption of a $66.3 million mortgage that carries a fixed rate of 3.125% through January 2028. Together, those three transactions took us from five buildings to eight. Our letter of intent on the Hudson Yards property remains in place, and we now expect that acquisition to close in the third quarter. Three things to watch from here.
First, the integration of 7 Dey, Ivy Tower, and 409 Eastern Parkway, and the value add program at Ivy Tower. Second, the expected third quarter closing of Hudson Yards, and third, the H&R transaction and the unitholder approval process that goes with it. With that, I'll hand it over to Peter to walk through the financial results in more detail.
Thank you, Maxwell, and good morning, everyone. I will cover the operating results and then the balance sheet and funding of the acquisitions, then liquidity, and then finally distributions.
With respect to our second quarter operating results, revenue adjusted for the quarter was $47.7 million, which is $3 million, or 6.8% ahead of forecast. On a same-property basis, revenue adjusted was $44.8 million, modestly ahead of the $44.7 million forecast amount. Net operating income as adjusted was $35 million, which was $2.8 million ahead of forecast, and NOI adjusted margin was 73.4% against a forecast of 72.2%. On a same-property basis, NOI adjusted was $32.8 million against a $32.3 million forecast amount at a 73.1% margin. FFO adjusted was $16 million, or $0.26 per unit, which was $1.9 million ahead of our forecast on a dollar basis and $0.01 ahead on a per unit basis. AFFO adjusted was $14.7 million, or $0.23 per unit. On a dollar basis, that's $1.1 million ahead of forecast.
On a per unit basis, it is $0.02 below the $0.25 forecast. I would like to explain why, and this is because the two numbers point in different directions. Simply put, the reason is the denominator, which is the weighted average units outstanding for the quarter, were 63 million against a 55.5 million unit count in our forecast. This increase of approximately 13.6% was driven by the bought deal and concurrent private placement that we closed on near the end of March. AFFO adjusted dollars grew by 7.9% against our forecast over that same period. Units grew faster than earnings because we raised the equity in March but had the closings take place later in the quarter.
The units sit in the denominator for the full quarter, whereas 7 Dey Street and the Ivy Tower sit in the numerator for roughly a third of it as we closed on Dey in late May and closed on Ivy early in June. As those two assets contribute to full reporting periods, we would expect the per unit measure to follow the dollar measure. With respect to our balance sheet and acquisition funding, total assets at June 30th were $3.23 billion, with investment properties carried at $3.12 billion. Turning to how we funded the quarter, 7 Dey Street was funded with a $146.2 million fixed-term, interest-only mortgage that matures in June of 2031. The contractual rate on this mortgage was 5.4%, and we purchased a rate buydown that brought the fixed rate on the mortgage down to 4.96% over its term.
Ivy Tower was funded from the proceeds of our February debenture issuance and remains unencumbered by any property-level financing. This is very deliberate. It is the beginning of what we expect to be a growing unencumbered asset pool that we said previously was an aspirational and a growth driver into the future. 409 Eastern Parkway, that closed early in the third quarter, was funded through the assumption of the existing mortgage, which was $66.3 million plus draws on our credit facility. At the end of the quarter, we had $72 million drawn on our $125 million credit facility against a nil balance as at March 31st. With respect to our capital structure and liquidity, debt to GBV was 53.5% at the end of the quarter, or 52.8% when one would exclude excess cash held for acquisitions that sat on the balance sheet at the end of the quarter.
That compares to 50.3% at March 31st. This increase is the mirror image of what I had described last quarter at March 31st when we were holding debt proceeds in cash ahead of closing. At June 30th, now these proceeds are in the buildings and the debt is still on the balance sheet. Weighted average contractual interest rate on all debt at the end of the quarter was 4.5%, with a weighted average term of 3.8 years. Recognize that 100% of our mortgages and 100% of our debentures are fixed rates, or at fixed rates, my apologies. Including our credit facility, which has a variable rate, 96% of total debt is fixed. Available liquidity at quarter's end was $91.3 million, which was comprised by $38.3 million of cash and $53 million of available capacity under our credit facility.
With respect to distributions, we continue to pay a monthly cash distribution of $0.05325 per unit, or $0.639 annualized. AFFO adjusted payout ratio was 68.5% for the quarter and 65.7% for the six months ended June 30th, against our guidance of approximately 65% of estimated AFFO adjusted on an annualized basis. Recall that the same impact associated with dilution that was previously mentioned occurs in our payout ratio as well, whereby the acquisitions that closed later in the quarter, although we were paying distributions on the newly issued units for the full quarter. On cash flow after funding interest obligations and distributions on both REIT units and opco units, we recorded a cash shortfall of $9.7 million in the quarter on an adjusted basis as compared to $2.2 million surplus in the first quarter. The swing is almost entirely a function of transactional timing rather than operations.
It includes approximately $10 million of escrow deposits associated with the Ivy Tower closing, and it reflects the timing of receipts and payments around the three acquisitions and their associated financings. The shortfall was funded by our credit facility. We would expect this to normalize as these acquired assets contribute for full periods into the future. With respect to the bridge to the transaction, before I hand the call back to Maxwell, I do want to draw a direct line between the results I have just described and the transaction discussion that follows. To summarize, this was the fourth consecutive quarter that GO's results were ahead of forecast. These include all primary operating and financial metrics represented by revenue adjusted, NOI adjusted, NOI adjusted margin, FFO adjusted, and AFFO adjusted, as well as a third consecutive quarter of operating margin expansion.
Leverage is where we said it would be through an acquisition-heavy quarter. Our debt is effectively all fixed rate, and our payout ratio remains in line with our guidelines. This is what this platform produces in New York and is the operational standard that we are bringing to the Lantower portfolio. The transaction case is not separate from the Q2 story, but rather it is the foundation that we're building upon. With this, I will now turn the call back to Maxwell.
Thank you, Peter. I want to close out with a few words on the transaction. This is not a straight diversification play, and this is not a retreat from New York. New York remains approximately 70% of our pro forma NOI, and we believe in that market as strongly as we did the day we went public. What this transaction does is add scale, balance sheet strength, and a margin improvement opportunity that makes every existing GO unit worth more over time. Our belief in the New York foundation and the Lantower opportunity is real. We look forward to engaging with all of you over the next few months, and thank you very much for taking the time today.
This concludes today's conference call. You may now disconnect.