CAPREIT (TSX:CAR) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Canadian Apartment Properties REIT (CAPREIT) reported a strong occupancy rate of 97.2% for its Canadian portfolio, surpassing the national average.
The company completed significant acquisitions and dispositions worth $88 million in Canada and $145 million in Europe, alongside the privatization of European Residential REIT for $99 million.
Same-property NOI margin remained strong at 64.8% for the nine months ending September 30, 2026, supported by a 1.8% growth in same-property occupied AMR.
CAPREIT’s debt increased slightly to 42.1% of gross book value due to a decrease in the fair value of investment properties.
The company continues to prioritize its NCIB program, having repurchased 2.9 million trust units in 2026 at a discount to its NAV.
Operational challenges persist in certain markets due to new supply and economic conditions, but early signs of stabilization are noted with positive blended rent growth.
CAPREIT remains optimistic about its portfolio’s potential, emphasizing strategic leasing and retention efforts, and the use of technology for efficiency gains.
The company plans to share more detailed strategic priorities at its upcoming Investor Day.
Full Transcript
OPERATOR
Hello everyone. Thank you for joining us and welcome to the Canadian Apartment Properties REIT third 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 Nicole Dolan, Investor Relations. Nicole, please go ahead.
Nicole Dolan (Investor Relations)
Thank you, operator, and good morning, everyone. Before we begin, let me remind everyone that during our conference call this morning, we may include forward-looking statements about expected future events and the financial and operating results of CAPREIT, which are subject to certain risks and uncertainties. We direct your attention to slide 2 and our other regulatory filings for important information about these statements. I will now turn the call over to Brad Cutsey, President and Chief Executive Officer.
Brad Cutsey (President and Chief Executive Officer)
Thanks, Nicole, and good morning, everyone. Joining me today is Stephen Co, our Chief Financial Officer. Since our last call, I’ve continued to tour our properties and spend time with our teams across the country. What I’ve seen has further reinforced my confidence in the quality of the platform and the depth of expertise throughout this organization. One of our most important accomplishments during my first full quarter is welcoming and onboarding James Lawrence as our Chief Operating Officer.
James brings extensive property management experience, and he has quickly become an integral part of our leadership team. We look forward to introducing him to many of you at our upcoming Investor Day, where he will outline our operating strategies and how we expect that to translate to operational gains in future quarters. We also look forward to having James join these calls to provide updates on our operating performance and progress. With that, let’s turn to slide 4 and walk through some highlights for the year to date from a capital allocation perspective. CAPREIT has completed approximately 88 million of acquisitions and dispositions in Canada so far this year, 145 million of property divestments in Europe, and the privatization of European Residential REIT for 99 million, which has provided us with greater flexibility to manage for sale of the remaining European assets. We also continue to invest in our NCIB program, with approximately 101 million deployed this year to date.
Operationally, while market conditions remain pressured across the multifamily sector, CAPREIT continues to demonstrate resilience. Occupancy for our same-property Canadian portfolio was 97.2% on September 30, which remains above Yardi’s latest quarterly national average of 95.3%. Looking into Q4, CAPREIT’s occupancy has so far held relatively stable at 97.1% as of October 31. While maintaining healthy occupancy levels, we also achieved a 1.8% growth in the same-property occupied AMR year over year.
Combined with effective cost control initiatives, our Canadian same-property NOI margin remains strong at 64.8% for the nine months ended September 30, 2026, consistent with the prior-year period. On the balance sheet, total debt represented 42.1% of gross book value as of September 30, 2026, up from 41.2% on June 30, mainly due to a decrease in the fair value of our investment properties. Overall, these results reflect the strength of the portfolio and team in what continues to be a challenging operating environment. That said, we continue to see some early signs of stabilization, as highlighted last quarter, with a blended change in rent on turnover turning positive for the first quarter of this year, which Stephen will discuss in more detail later on the call.
At current trading levels, our NCIB program continues to represent one of the most compelling uses of capital to drive FFO per unit growth. You can see on slide 5 that since 2022 we’ve deployed approximately 1.1 billion to repurchase 24.8 million trust units at a weighted average price of $42.80 per unit. And as mentioned earlier, during 2026 we’ve invested approximately 101 million to buy back 2.9 million trust units at a weighted average price of $34.83 per unit, which represents a sizable discount to our September 30 diluted NAV per unit at $52.94.
Going forward, our NCIB program will be a capital allocation priority, and we are committed to pursuing these repurchases on a leverage-neutral basis, funded by disposition proceeds. I’ll now turn the call over to Stephen to walk through our operational and financial results in more detail.
Stephen Co (Chief Financial Officer)
Thanks, Brad. Let’s start with our operating performance on Slide 6. As Brad mentioned, leasing conditions remain competitive across many parts of the Canadian rental market and our operating teams continue to execute well, maintaining a disciplined focus on managing occupancy, pricing and resident retention. As a result, you can see on the slide that for each of our three largest regions, occupancy continues to compare favorably against broader industry benchmarks, supported by the strategic use of incentives necessitated by this current environment.
In the GTA, our largest market, occupancy was 98.5% as of September 30, notably higher than Yardi’s reported quarterly average of 95.4%. At the same time, we grew occupied AMR in Toronto by 1.9% year over year to $1,873. This reflects the strength of our legacy portfolio alongside our ability to effectively balance occupancy and rental growth even in today’s more pressured conditions. In Vancouver, occupancy improved to 97.6% ahead of Yardi’s quarterly average of 96.1%, while occupied AMR of $1,962 was down by 1.2% year over year, largely reflecting continued delivery of new supply and a higher proportion of newly built properties in the Greater Vancouver portfolio. In Montreal, occupied AMR increased by 4.8% to $1,520 while occupancy stood at 94.7% as of September 30, lower than last quarter but still above Yardi’s quarterly average of 94.3%.
This was again driven by supply alongside a population decline versus last September due to federal immigration targets and softer international student enrollment trends, contributing to greater renter choice and more competitive leasing conditions in this region. Across the broader portfolio, rent growth continues to be driven by lease renewals and the embedded mark-to-market opportunity that exists within our legacy portfolio, the vast majority of which is located in rent-controlled markets. As of September 30, the mark-to-market spread across the total Canadian residential portfolio is an estimated 16%. However, our turnover remains weighted toward shorter-tenured leases that are above current market rents and continue to reset toward today’s market levels.
Turning to Slide 7, I’ll provide an update on how the turnover dynamic evolved during the third quarter. Approximately 48% of Canadian turnover during the quarter came from residents who had occupied their suites for less than two years. These leases experienced an average decrease in monthly rent of 5.2%, which is a further improvement from the declines of 7.1% in the second quarter and 10.8% in the first quarter. The remaining 52% of the turnover came from residents with lease tenures of two years or longer, where we continue to achieve positive rent growth of 5.9%, up from 5.4% last quarter.
As a result, our blended change in monthly rent on turnover returned to positive territory at 0.3% for the quarter. This compares to negative 1.2% in the second quarter and negative 2.1% in the first quarter, reflecting continued moderation in negative rent spreads we’re realizing on shorter-tenured leases. In October, overall change in rent on turnover was 0.4% for the month, a further step in the right direction. Looking at the chart on the left of the slide, as of September 30, approximately 32% of residents have lived in their home for less than two years, across which the occupied average monthly rent is $2.52 per square foot. Within this segment, approximately 18% of the in-place rents remain more than 5% above our estimated market rents. Although this is down from 20% as of Q2, it highlights there is still some additional normalization to work through.
The remaining 68% of our residents have lived in their homes for two years or longer. These longer-tenure leases continue to generate positive average rent uplifts on turnover even in the current operating environment, providing an important source of stability for overall rent growth until supply-demand fundamentals return to balance. Moving to Slide 8, I’ll walk through our same-property operating results for the region for the third quarter. In our largest market of Toronto, which represents approximately 42% of our same-property NOI, we realized an increase in NOI of 0.8%, driven by AMR growth of 1.9% and relatively stable occupancy of 98.5%. Offsets include higher building and suite maintenance costs related to flash floods in August and early September, including plumbing repairs, waterproofing, roofing repairs, tree removal and other storm-related maintenance and cleanup work at several properties.
Incentives were also up versus Q3 of 2025, but compared to Q2 of this year, incentives granted were down by 31% across the GTA. Our strongest NOI growth came from Ottawa, up 4.1%, and Halifax, up 3.3%. Ottawa remains nearly fully occupied at 99.6%, while Halifax delivered the highest AMR growth in the portfolio at 4.4%. The regions facing the most pressure were London and Kitchener-Waterloo, as well as Calgary and Edmonton, as these markets continue to absorb new supply.
In London and Kitchener-Waterloo, NOI declined by 6.9%, reflecting higher maintenance costs and a 1.5-point decline in occupancy to 96.5%, while Calgary and Edmonton recorded a combined NOI decrease of 7.3%, mainly due to higher realty taxes. Elsewhere, Vancouver NOI declined by 2.7%, with AMR down by 1.7% for reasons already discussed, although occupancy improved 0.3 points to 97.7%. In Montreal, NOI was essentially flat as AMR growth of 2.3% was offset by a 1.8-point decline in occupancy to 94.5% due to the regional market conditions described earlier.
With that, I’ll now briefly cover our overall third quarter financial results on Slide 9. For the three months ended September 30, 2026, same-property Canadian operating revenues increased by 0.6%. This includes the impact of higher amortization of incentives, which represented 1.6% of total Canadian operating revenues in this quarter, up from 1.1% a year earlier. However, as compared to Q2, the grant of new residential incentives across the portfolio was down by 27%, a further indication that leasing conditions may be easing.
Operating costs grew by 2.4%, mainly due to higher building and suite maintenance costs in Ontario. As mentioned earlier, our same-property NOI margin was therefore down this quarter to 66%. Diluted FFO per unit was 65.2 cents compared to 66.3 cents in the third quarter of 2025, down 1.7% year over year, primarily reflecting lost NOI from dispositions and higher interest expense, partially offset by lower trust and current tax expenses as well as the benefit of trust unit buybacks.
Looking at our year-to-date results on Slide 10, same-property Canadian operating revenues and operating costs each increased by 0.8%, resulting in a stable NOI margin of 64.8% for the nine months ended September 30, 2026. Diluted FFO per unit was $1.90 for the first nine months of the year, with the FFO payout ratio of 61.1%. Finally, Slide 11 summarizes our liquidity position and laddered mortgage maturity profile. As of September 30, our Canadian mortgages had a weighted average effective interest rate of 3.4% and a weighted average term to maturity of 4.4 years. Going into the fourth quarter of 2026, we have nearly $300 million of our Canadian mortgages maturing, which currently carry a weighted average effective interest rate of 3%. In total, combined with top-up financing, we expect to complete approximately $1.2 billion in total mortgage refinancings for 2026, assuming no acquisitions or dispositions.
With $960 million completed or committed as of today, we have a further $655 million maturing in Canada in 2027, across which the weighted average effective interest rate is 3.3%. This compares to estimated current market rates of 4.2% for the five-year term and 4.6% for the ten-year term, which excludes certificate of insurance costs. Moving ahead, we’ll continue to strategically ladder our mortgage profile by refinancing at both the five-year and ten-year terms in order to mitigate renewal risk in future years.
With that, I’ll turn the call back over to Brad to wrap up on Slide 12.
Brad Cutsey (President and Chief Executive Officer)
Thanks, Stephen. Before we open the line for questions, I’d like to close on a few thoughts. Having now visited nearly 70% of our assets, I see clear value in CAPREIT’s portfolio. We own high quality, competitively positioned rental communities at some of the most sought-after addresses across Canada. I also see opportunities to further improve operating performance and strengthen the earnings potential of our business. Importantly, realizing the potential will take time.
While we remain constructive on the medium-term outlook, we expect the next few quarters to remain challenging as the market absorbs new supply amid slower population growth and higher mortgage refinancing costs continue to pressure earnings. Positive blended rent growth on turnover and fewer new residential incentives granted this quarter versus Q2 offer early signs of stabilization, but we believe it’s too soon to call a sustained recovery. That said, I remain extremely bullish on our portfolio and its launch of the potential. We see significant opportunities to continue to enhance portfolio quality and create meaningful value for our unitholders. Looking ahead, our priorities are clear: strengthen leasing execution and resident retention, deliver consistent customer-centric service, and use technology, data and simpler processes to improve efficiencies across the platform. These actions will help reinforce the business through the near-term environment and position CAPREIT to benefit as market fundamentals improve.
We look forward to sharing more about our strategy and priorities at our Investor Day in Montreal on November 19th. A link to join virtually will be available in advance and we hope you can join us. With that, operator, we’re pleased to take your questions.
OPERATOR
We will now begin the question and answer session. If you’d 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’re muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jonathan Kelcher with TD Cowen.
Your line is open. Please go ahead.
Brad Cutsey (President and Chief Executive Officer)
Thanks. Good morning, Jonathan.
Jonathan Kelcher (Analyst)
Good morning. First question just on the turnover rents. Nice to see them improve versus Q2 and Q1, but you still got 18% or so that are 5% above. Like would your expectation be that those stay plus or minus flat over the next few quarters and it really just depends on what leases turn?
Stephen Co (Chief Financial Officer)
Yeah, Jonathan, that’s—I mean, assuming that market rents stay pretty flat, then that bucket obviously, well, it effectively comes down in terms of that under two-year bucket. However, I would just mention there is that some of the peak leases are aging into the two- to three-year bucket. But overall I would say that as market rents stay relatively flat, that blended rate will start to creep up.
Brad Cutsey (President and Chief Executive Officer)
And Jonathan, that number’s come down a little bit and you’ll continually see that come down, come down from—I think it was 20% in Q2.
Jonathan Kelcher (Analyst)
Okay. And what have market rents—like in your calculation of that, what have you done with market rents? Have you brought them down like the last couple of quarters?
Stephen Co (Chief Financial Officer)
You mean for the—market rents have stayed relatively flat, actually, for us. So no, we have not done that.
Brad Cutsey (President and Chief Executive Officer)
Yeah, on the whole we might have made adjustments regionally, but I would agree with that—portfolio-wide, I would say on average stayed flat.
Jonathan Kelcher (Analyst)
Okay. And then secondly, notice that you removed the strategic repositioning slide from your deck. Would it still be fair to say that you’ve got 12, 13% of the portfolio that’s non-core?
Brad Cutsey (President and Chief Executive Officer)
Yeah. Jonathan, we’re going to go through a lot of capital allocation and more strategic initiatives on Investor Day. I think what we’re trying to do is just keep this to the quarter and frame kind of the future on that Investor Day. So we’re pretty excited to obviously share a lot more with you about where we think we’re heading and how we’re going to get there.
Jonathan Kelcher (Analyst)
Okay, fair enough. I’ll look forward to that and I’ll turn it back, thanks.
OPERATOR
Your next question comes from the line of Sairam Srinivas with ATB Capital Markets. Your line is open. Please go ahead.
Sairam Srinivas (Analyst)
Thank you, operator. Good morning, gents. I will keep my questions addressed. Just looking at rents, I know you spoke about a bit of a drag with respect to the recent near-term leases that are coming up. How long do you expect that drag to sustain?
Stephen Co (Chief Financial Officer)
Yeah, I mean, in terms of—you talk about the peak leases that are turning over, right? I think what I communicated last quarter was about 18 to 20 months. For this quarter it’s come down, so it’s about 15 to 17 months left, again assuming market rents hold flat.
Sairam Srinivas (Analyst)
And in terms of the spread of these leases across different markets, are you seeing some markets being more opportunistic versus others?
Brad Cutsey (President and Chief Executive Officer)
Sorry, can you repeat that, Sai?
Sairam Srinivas (Analyst)
When you look at these leases and the spread across your different markets, are you seeing opportunities where some markets would see an earlier recovery versus others?
Brad Cutsey (President and Chief Executive Officer)
Yeah, and to be fair, it’s very similar to what we mentioned last quarter. We remain very constructive on the GTA. It’s definitely trending in the right direction, which is great for CAPREIT because such a big percentage of the portfolio is in the GTA. So we’re excited about that. But then there’s other regions where we’re still seeing some challenges and headwinds, per se, that we’ll probably have to work through 2027.
Sairam Srinivas (Analyst)
All right, thanks, gents. I’ll look forward to the rest of the day.
Brad Cutsey (President and Chief Executive Officer)
Thank you. Great, thanks.
OPERATOR
Your next question comes from the line of Matt Cornack with National Bank of Canada Capital Markets. Your line is open. Please go ahead.
Matt Cornack (Analyst)
Morning, guys. Just trying to think of the buildup to next year in terms of where we are today. It seems like, call it around 2% rent growth is possible if you give a sense on kind of how you think occupancy can trend. I don’t know if you can make any gains there. But then also on the margin front, I mean, it seems like you should maybe have 3% to 4% expense growth. So modest growth on NOI, is that a fair way of looking at the organic growth profile into next year?
And obviously interest rates are what they are—we’ll see what they do—but just trying to figure out some of the moving parts for next year.
Brad Cutsey (President and Chief Executive Officer)
Yeah, I think that’s fair. We’re definitely looking to achieve some gains on the occupancy front, and I do think modest growth in the top line from a rent perspective is achievable. And we’ll definitely continue to hopefully be able to use less incentives in the GTA, and we’ve already seen that. There are a couple markets where we’re going to probably have to continue to use incentives given where there’s oversupply. But again, that’s the GTA, our largest portion.
So I think your comments are fair.
Matt Cornack (Analyst)
Okay. And I don’t want to steal the thunder from your event upcoming in Montreal, but can you give a sense of—like, I won’t—but you mentioned in your commentary that you’ve seen some potential upside, that you think there’s some low-hanging fruit that you can do. Is that on the expense side, on the revenue side, how should we rethink about—yeah, I’m looking forward to that.
Brad Cutsey (President and Chief Executive Officer)
I think we’re going to really highlight what operational excellence means and, specifically, really excited for all of you and our investors to get to meet James Lawrence, and there’s a couple other key team members I think really deserve some time with the investment community. I think we’ll go into more detail there, Matt. I really do want to wait and give the team its day to kind of walk you through thoughtfully, and I think it’s just going to be a better format. But stay tuned. We’ll definitely be highlighting from a top line and from an operating cost-saving scenario on Investor Day.
Matt Cornack (Analyst)
Okay, that makes sense. And maybe just last for me, in terms of the nature of demand that you’ve seen kind of through the busy leasing period, I think it’s students that have kind of stabilized. Obviously the federal government throws a bit of a—or StatsCan, I should say, throws a bit of a curveball on what actual population growth numbers have looked like. But, like, are you seeing incremental pockets, whether it be young professionals, people working in some of these industries that the government’s going to invest in, taking space?
And I know we talked about household deconsolidation potential at some point—like, given the affordability—are you seeing some of those guys come back into the market? Just any kind of sense as to how the demand dynamics are evolving and if there are major disparities regionally that you’re seeing there?
Brad Cutsey (President and Chief Executive Officer)
It’s a great question. We were definitely starting to see young adults kind of moving out of their family homes back in the market. I just saw the unemployment rate in that cohort come in. I would say we’re probably seeing a little less of that demand going forward because I think as the tariff war and the war in Iran continue to ramp up, I think that kind of put the brakes. So I think some of these young adults are kind of staying put. We’ll see where that heads now after the midterm elections.
We’ll see if there’s a renewed sense of confidence within the marketplace. I agree, the student—while we missed the international students, there’s no question—it does feel like it’s starting to stabilize, meaning we’ve probably seen the trough of the negative impact from the student enrollment kind of going away. Interesting enough, our regions where they’re government-based actually did quite well, hence being Quebec City and Ottawa being very good performing regions for us. We’ll see where that takes us going forward.
We’re looking for an immigration policy target to come out imminently—looking on the table—and some think it might be today. So we’ll see where that leads. I think the underlying overall tone, I think, is likely to be positive. So I think that’s good news on the demand front. That said, the good news is overall, even at where the demand is currently, the supply that we’re seeing—now some markets better than others—but the supply that we’re seeing is slowly starting to get absorbed.
So that’s the good news. So any real positive to the immigration front is just a real net positive to the overall fundamentals.
Matt Cornack (Analyst)
Okay, great. Thanks for the color and looking forward to Montreal.
Brad Cutsey (President and Chief Executive Officer)
Likewise. Thanks, Matt.
OPERATOR
Your next question comes from the line of Kyle Stanley with Desjardins. Your line is open. Please go ahead.
Brad Cutsey (President and Chief Executive Officer)
Good morning, Kyle.
Kyle Stanley (Analyst)
Morning, guys. Just going back to the leasing spread conversation—you know, obviously encouraging to see the shift into positive territory. Can you talk about the composition of the turnover in 3Q? It looked like a bit of a higher proportion came from the greater than two-year lease tenure versus maybe the past couple of quarters. I’m wondering if that really was just mix of what turned in the quarter, or do you see that becoming a more significant driver of turnover going forward?
Stephen Co (Chief Financial Officer)
I mean, yeah, that’s hard to tell. I mean, within that two- to three-year bucket, I would say about 50% of it is those leases that are 5% or more above market. So, you know, we’re going to do our best in terms of retention strategy. But if they do turn over—you know, we kind of said it last quarter: I said 18 to 20 months; now it’s about 15 to 17 months. One thing I will add is just that those that are over the three-year tenure are providing still that healthy mark-to-market rent growth.
So that is something that we’re still very happy to see. And again, as you saw on the Q3 numbers, that over two years it was about 5.9% on rental uplift, and that has improved from Q2. So hopefully we’ll see that continue to be—I wouldn’t say increasing—but in that range.
Kyle Stanley (Analyst)
Okay, fair enough. And just on the same vein, obviously a pretty substantial improvement year to date in the turnover spreads in that shorter-duration cohort from negative 7 to negative 5 now. Can you just talk about what’s happening in that section that’s helping see rents turn more positively?
Stephen Co (Chief Financial Officer)
Yeah, I think it’s mainly just, like, market rents have, I would say, more or less stabilized and, therefore, that cohort that is turning over—it’s just going to get—that rate of change becomes less and less. And so that’s what you’re seeing: from Q1 it was about negative 10, and now it’s about negative 5. What we see in October, it’s about the same rate. So, you know, as that tenure turns over—hopefully if everything turns over—you’re going to just see zero going forward.
Like zero once that entire cohort shifts.
Kyle Stanley (Analyst)
Right. Okay, that makes sense. And then just the last one—nice improvement on the incentive side this quarter. I do believe last quarter you kind of mentioned expecting incentives to remain elevated. So just want to talk about, I guess, the balance between extending incentives and preserving occupancy. Especially, I guess, as you head into the winter season, how are you thinking about that?
Brad Cutsey (President and Chief Executive Officer)
Yeah, it’s pretty easy, Kyle. I mean, if we have a community that has elevated vacancy, we’re going to use incentives if we can bring somebody in and fill it up. There’s no question. So while we’re trying our best to minimize the use of incentives, we really are prioritizing occupancy. There’s no question the team knows that. So that’s our number one operating priority right now. So if we have to use some incentives in areas that are oversupplied or where there’s just not a lot of leasing activity, we’re going to use it.
We’ve been very confident with the leasing team this past quarter. If we’ve seen some strength within our portfolio, we’ve challenged them to take away the incentives and try to lease up without it. And I think that was really successful, and I think the team’s done a really good job. And that was one of James’ first initiatives, and I think James has done a really good job of helping bring that in.
OPERATOR
Your next question comes from the line of Brad Sturges with Raymond James. Your line is open. Please go ahead.
Brad Sturges (Analyst at Raymond James)
Hey, good morning. Just one quick one for me. Just on the NCIB program—you’ve been running about $30 million a quarter in the last few quarters, or at least this year. Is that still a good run rate at this point, or should we think about it being more tied to capital recycling or dispositions going forward?
Brad Cutsey (President and Chief Executive Officer)
Yeah, again, I’m just going to sound boring and just revert you to November 19th. We’re going to clearly walk everybody through our capital allocation priorities.
Brad Sturges (Analyst at Raymond James)
Okay, I’ll turn it back. Thank you.
Brad Cutsey (President and Chief Executive Officer)
Thanks, Brad.
OPERATOR
Your next question comes from the line of Jimmy Shan with RBC Capital Markets. Your line is open. Please go ahead.
Jimmy Shan (Analyst)
Thanks. Good morning. Just a couple questions on the GTA. I mean, when I look at the stats, AMR is growing. Incentives, I think you said, are down 30% if I heard right, and occupancy is quite high. So I know you said you’re constructive, but do you feel like the market’s bottomed, and then are you in a position now to actually start pushing rents? Kind of, where are we on that sort of life cycle in that market?
Brad Cutsey (President and Chief Executive Officer)
I think we’re constructive—it remains constructive. We’ve seen a couple quarters now of the trend going in the right direction. It’s turned positive here. I still would say we’ve got to caution what we say, Jimmy, because Q4 and Q1 are very tough leasing time periods, even in the best of markets. You just don’t get a lot of movement in the months of December, January, and February. So I really want to be cautious with my comments here. But if things stabilize and we stay where we are today, I would say yes, I would be hopeful that we could start to push rents come the start of the leasing season in April, modestly.
Jimmy Shan (Analyst)
Okay. Honestly. And would Toronto have a lot of those above-market leases? Would they be mostly in Vancouver, the ones that are turning now, or is there still a fair amount of above-market leases in that market?
Rod
Yeah, Jimmy, it’s across the markets. When there was the peak, leases—even the legacy assets—were getting really good rents. So it’s both in the legacy assets and in the new builds. So, yeah, it’s spread across. I wouldn’t say it’s disproportionate one market or the other. It’s just spread across.
Brad Cutsey (President and Chief Executive Officer)
Yeah, I would agree with that, and also maybe point to Montreal as well. Right. Okay.
OPERATOR
Okay, thank you. Your next question comes from the line of Mario Sarek with Scotiabank. Your line is open. Please go ahead.
Mario Sarek (Analyst)
Hey, guys. Good morning. Just maybe sticking to Toronto. The chart showing your occupancy versus Yardi, there’s quite a substantial delta between the two. Are the occupancy that you’re showing kind of weighted by neighborhood, meaning it’s comparable to the neighborhoods that you’re in, or are you comparing your portfolio to a broader kind of Toronto average?
Rod
Yeah, yeah, Mario, I wish we had that detail. We’re looking at the same numbers that you’re looking at in the Yardi reports, the broader versus their own portfolio.
Mario Sarek (Analyst)
Got it. Okay. And so like coming back to Jim’s question in terms of asking rents starting to move higher, where do you think the Yardi number has to go in order for market asking rents to start pushing higher from the 95.4%?
Rod
Yeah, I’m not going to answer that. I’m familiar with our communities and how our assets and our rents are set up within the markets that they’re in. So that’s how we look at pricing, Mario. So I’m really not in a position to answer a macro question on the full rents before you get the pressure there.
Mario Sarek (Analyst)
Okay. And then Rod, you’ve talked about or you’ve highlighted kind of several reasons for optimism over the kind of medium to longer term in terms of recovery operationally, but you have highlighted a couple times that you expect challenges over the next couple of quarters. By challenges, you essentially mean kind of what we saw this quarter—so a bit of a FFO per unit erosion, some same-property NOI decline. Just wondering if you can kind of define how you think about challenging in the context of the comments.
Rod
Yeah, it’s pretty easy. Like I said, I want to reiterate, we’re concentrated on the GTA. That’s our largest portion of our portfolio. So I think there’s a lot of reason to have optimism there. From the rest of it on the top line, there are markets in which they’re oversupplied or where we have rents at the higher end which still remain challenged. So we’re going to have to wait till the demand can help us out there. We’ve got to see some of that supply be absorbed before we have some pricing power or even be able to see increases in the occupancy. So from the top line, there are still going to be some headwinds in some of these markets, especially at the higher price point.
Mario Sarek (Analyst)
Okay, so from like a same-store NOI perspective, that kind of sounds like it’s something similar to what we saw this quarter over the next one to two.
Brad Cutsey (President and Chief Executive Officer)
Yeah, yeah, I think that’s fair. And I would also just say I think the glaring one—unfortunately Stephen and his team did too good of a job, if you could say that in hindsight—but unfortunately the one that hits us, glaring right in the face, that’s really going to be the biggest headwind is financing rates. And I think we’re all aware of that, and I think that’s a great spin.
Mario Sarek (Analyst)
Okay. And then just in terms of—I think Matt was asking about ’27—is it fair to say, based on the commentary of maybe a bit of margin expansion, kind of inflationary cost pressure, but you do believe that same-store revenue growth, which kind of, I think you’ve talked about it being roughly 1% in ’26, could you see that, if occupancies do go higher, could you see that kind of trending to the 2% to 3% range next year?
Stephen Co (Chief Financial Officer)
I think, Mario, maybe we can provide more color around investor day. You know, as we lay out some of those operational strategy around our operational excellence focus, there may be more, I would say, insight for you to gather from that, and that will make a more informed decision around some of the OPEX growth or revenue. But where we stand today, just without any of those—you know, when we talk about some of the OPEX costs, they are, I would say, you know, realty taxes 3% to 4%, and then you’ve got other types of costs that could be elevated such as insurance costs and whatnot. Hopefully we have a warmer winter as we are experiencing right now, so that might have more of a tailwind for us. But overall, all else being equal, costs are probably, you know, 3% to 4% as mentioned earlier.
Mario Sarek (Analyst)
Okay. And then maybe coming back to the incentives, it was nice to see them come down as much as they did this quarter. Do you have a breakdown of the three and a half million of incentives offered between the less-than-two-year buckets and the greater-than-two-year bucket in terms of lease tenure?
Stephen Co (Chief Financial Officer)
I mean they’ll all be under the two-year bucket because they’ll only be on the new leases generally. I mean there probably are some for our retention strategy, but they’re not material.
Mario Sarek (Analyst)
Okay, that’s great. Thank you.
Stephen Co (Chief Financial Officer)
Thanks, Mario.
OPERATOR
We have reached the end of the Q and A session. I will now turn the call back to Brad Cutsey for closing remarks.
Brad Cutsey (President and Chief Executive Officer)
I’d like to thank everybody for your time today. If you have any further questions, please do not hesitate to contact us at any time. Thank you again. Have a great day.
OPERATOR
This concludes today’s call. Thank you for attending. You may now disconnect.
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