Plaza Retail REIT (TSE:PLZ.UN) reported higher earnings per unit and stronger occupancy in the third quarter of 2026, as rent increases and improved cost recoveries helped offset income lost from property sales.
Same-asset net operating income, or NOI, rose 3.5% from a year earlier, while committed occupancy reached 98.3% at September 30, up from 97.6% at the end of June and 97.9% a year earlier. Total NOI increased 1.5% to CAD 20.8 million in the quarter.
President and CEO Jason Parravano said the trust is focused on improving its existing properties, pursuing selective intensification projects and directing capital toward assets that increase the portfolio’s earning capacity. He said Plaza would not comment on the strategic review being conducted by an independent special committee of its board.
Earnings and leasing improve
Third-quarter funds from operations, or FFO, per unit rose 3.6% to CAD 0.115. Adjusted FFO, or AFFO, per unit increased 6.5% to CAD 0.082.
For the first nine months of 2026, FFO per unit increased 6% to CAD 0.317, while AFFO per unit rose 6.8% to CAD 0.234. Parravano said those comparisons included severance costs associated with the strategic review and overlapping bonus accruals. Excluding those items, management calculated growth of 8% in FFO per unit and 9.7% in AFFO per unit.
Distribution coverage also improved. The year-to-date FFO payout ratio fell to 66.2% from 70.3% a year earlier, and the AFFO payout ratio declined to 89.9% from 96.1%. Parravano said the lower ratios allow Plaza to retain more cash and fund more investments internally.
CFO Jim Drake said year-to-date renewal spreads were 12% in the first year of renewed leases and 13.5% based on average rent over the renewal term. Parravano said the average-term spread on negotiated renewals increased to 20% when anchor tenants were excluded. Drake also cited a 50.3% spread on new leasing.
Asked whether the strong quarterly same-asset NOI growth could continue, Parravano pointed to contractual rent increases, negotiated renewals and the absence of snow-related costs that can affect recoveries on gross leases. He also cited the sale of the Village Shopping Centre, an enclosed mall with mostly gross leases. Drake added that higher operating costs in the prior-year quarter contributed to the comparison and said the 2.2% year-to-date same-asset NOI growth was around, or slightly above, historical levels.
Sales and reinvestment plans
Plaza completed the sale of Village Shopping Centre during the quarter as it concentrates on standalone properties and open-air strip centres. Parravano said property sales can create a timing gap because income from a sold asset stops before replacement investments begin contributing.
The REIT is also under contract to sell Tri-City Plaza in Cambridge, Ontario, a property anchored by Sail and Crunch Fitness. Plaza owns 50% of the property. Parravano estimated proceeds attributable to Plaza at approximately CAD 20 million before debt repayment and closer to CAD 10 million afterward. In the short term, the proceeds would be used to pay down its operating line.
Acquisitions and projects transferred to income-producing status during 2025 and 2026 represent approximately CAD 3.7 million in annual stabilized NOI, Parravano said. Additional development and redevelopment projects represent CAD 1.2 million in annual stabilized NOI when completed and stabilized.
During the quarter, Plaza completed an optimization involving a TJX banner at Granville Street Plaza in Summerside, Prince Edward Island, which moved to income-producing status, Drake said.
Balance sheet and acquisition outlook
Drake said debt to assets, excluding land leases, fell to 48.2%, down 270 basis points from a year earlier. Net debt to adjusted EBITDA was 8.5 times, also lower than a year ago. Plaza repaid mortgage bonds at maturity in the third quarter after repaying convertible debentures in the second quarter.
The REIT has CAD 59 million of fixed-rate mortgages maturing over the remainder of 2026 and in 2027, at a weighted average rate of 4.4%. Drake said current all-in mortgage rates are in the low-to-mid 5% range. Plaza recorded a CAD 2.6 million investment-property fair-value write-up during the quarter, and its weighted average capitalization rate stood at 6.73%.
At quarter-end, Plaza had roughly CAD 53 million in cash and availability on its operating lines, according to Parravano. He said that provides flexibility to pursue ownership consolidations, including potential purchases of partners’ interests in properties Plaza already owns and manages.
On transaction pricing, Parravano said market volatility had not materially affected pricing overall, although he had heard of transactions being repriced. He said Plaza had not experienced reductions in purchase prices on contracts for properties it was actively selling. He also said private buyers remained active in assets priced below CAD 50 million, while demand was somewhat softer as some investment funds worked through fundraising.
About Plaza Retail REIT (TSE:PLZ.UN)
Plaza is an open-ended real estate investment trust and is a leading retail property owner and developer, focused on Ontario, Quebec and Atlantic Canada. Plaza’s portfolio at June 30, 2026 includes interests in 189 properties totaling approximately 8.8 million square feet across Canada and additional lands held for development. Plaza’s portfolio largely consists of open-air centres and stand-alone small box retail outlets and is predominantly occupied by national tenants with a focus on the essential needs, value and convenience market segments.
