Pro Real Estate Investment Trust (PRVUN) Earnings Call Transcript & Summary

PROREIT just struck a massive deal for 17 industrial properties in Québec City and Winnipeg, pushing its portfolio past $1.2 billion. What's driving this decision? And will it pay off? Let's find out with Gordon Lawlor, President and Chief Executive Officer of PRO Real Estate Investment Trust. And Gordon, thanks very much for joining us today.

Thank you for having me.

Okay. I guess the question is, why Québec City and Winnipeg? What made these so appealing to you?

Well, Winnipeg, we have approximately 1.3 million square feet of small and mid-bay industrial real estate there right now. So a large platform there that's performed quite well for us over the last number of years. And Québec City, frankly, from our head office here in Montréal, is a natural step. We own real estate between Montréal and Québec City all along the Trans-Canada Highway. And then I've actually been working and looking for almost 14 years to get a sizable portfolio in Québec City. So very pleased with the outcome and the announcements yesterday.

So 14 years, what's -- has it just been -- there's never been the right opportunity? Is the market right for you now? What changed for this?

It was previously controlled by a larger REIT called Cominar REIT out of Québec City for as long as I've been around in the real estate business and then changed hands to some institutions in the past 5 years. So now there's an opportunity to purchase some of that real estate. So we took that opportunity.

And what are the positives you see with this deal for first for Québec City and then we'll talk about Winnipeg. But what -- does that give you a nice corridor? Is that -- it continues that corridor in Québec?

Yes. So our largest piece of portfolio, we control -- we have 3 million square feet with our JV partner, Crestpoint out of Toronto with 3 million square feet in Burnside Industrial Park in Halifax. Then assets on and off the island of Montréal. So a natural fit is Québec City in between. Like Halifax, it's a large port. It's a capital city. It's got a lot of defense spending to come and government and it operates separate from Montréal. So it's 1 million people and a great place for a good secondary market for our kind of real estate.

And Winnipeg, the reasons for that?

Same thing, 1 million people, a good transshipment hub to the West Coast. Not all the big players are there from a real estate standpoint. So we've managed to accumulate 1.3 million square feet there and very pleased with the incremental cash flows we're getting and the increased rents we're getting since we purchased.

And it's a decent-sized layout. It's more than 10% of your portfolio now or you've grown the portfolio up to that point. Where is the funding coming for this? How will it be paid for?

So yesterday, we just announced a $72.5 million block deal to the public. That was oversubscribed to my understanding as of this morning. And coincident with that, we had a $16.7 million concurrent private placement with Collingwood Investments, which is a Bragg group of companies out of Oxford, Nova Scotia. And they've been around us and invested in us since early 2021. And Parkit as another 10% investor came in for 10% of the REIT back in June of 2025. So over $100 million when you put it all together and a great deal in a complicated market and a complicated time.

Now are you almost pure industrial now? Is that the goal?

Yes. We've been transitioning over the last 3 years. We had a good portion of Sobeys-anchored grocery-anchored pharmacies and strips as well, but we've sold them off to really focus on small and mid-bay. And we're over 93% of our cash flow comes from small and mid-bay industrial real estate right now.

And is the goal of that other 7% to move that as well?

Eventually, but no real hurry on that. Our goal was to get to the 90% mark, which we achieved in 2025. So we don't have a need to sell the other properties. They're good cash flowing properties. But if the opportunity comes upon us, we'll look at that as well.

There never -- nothing is for sale unless it's a good price, right?

That's right, especially in the real estate business.

Why the small and mid? What's so appealing to you for them?

So small-bay real estate, it's 50,000 to 150,000 square feet properties. The mid-bay is more 100,000 to 250,000 square feet. They don't -- there's not a lot of that being rebuilt across Canada. The cost per square foot to build it is higher than the rents you achieve. And so we're our own owner-manager with our wholly owned property management group Compass out of Dartmouth, Nova Scotia. So we have -- with the roll-up-your-sleeves, manage the real estate ourselves type versus a fund that would have third-party management and that type of thing. So you have to really have the roll up your sleeves piece for the small and the mid-bay, and we've succeeded with that.

And are there any near-term re-leasing risks right now?

No. I mean we're 96% occupied across the portfolio. We do get some spaces back by times. Tenants always have needs for more or less space depending on their business needs. But in general, across Canada, industrial real estate has been quite strong. The weakest part of it is, kind of, GTA large Bay where it is -- you do have the ability to build that kind of real estate 500,000 to 1 million square feet and be able to achieve market rents, but it's the smaller assets that's quite the challenge. And we're secondary market, people were not in GTA or those areas. So we've done very well with this strategy.

And do you see more opportunities over the next little while?

Yes, for sure. I mean real estate -- industrial real estate has been quiet the last 2 or 3 years. We're starting to see some deals here. I mean with the conditional deal that we have, it's $159 million of real estate here. So that's a good chunk from 3 different vendors. So we see opportunities. It's just -- there's always a delta between the price you want to buy at and the price the vendor wants to sell at. So that's the challenge all the time.

All right, we have to wrap it up there. But Gordon, thank you very much for joining us.

Thanks so much for having me. Have a great day.

You too. Gordon Lawlor, President and Chief Executive Officer of PRO Real Estate Investment Trust.