Company Announcements

TORONTO--(BUSINESS WIRE)--Mar. 25, 2026-- Inovalis Real Estate Investment Trust (the “REIT”) (TSX: INO.UN) today reported financial results for the year ended December 31, 2025. The audited Consolidated Financial Statements and Management’s Discussion and Analysis ("MD&A") for Q4 2025 and the years ending December 31, 2025 and 2024 are available on the REIT’s website at www.inovalisreit.com and at www.sedarplus.ca. All amounts except rental rates, square footage and per unit amounts are presented in thousands of Canadian dollars or Euros, or as otherwise stated.

Stephane Amine, CEO and President of the REIT, commented “Amid a complex and evolving office market, we have remained focused on protecting Unitholder value through disciplined balance sheet management and the execution of our asset recycling strategy, including the sale of the Baldi, Sablière and Trio properties”.

Net Rental Income

For the investment property portfolio that includes assets owned entirely by the REIT ("IP Portfolio"), Net Rental Income (“NRI”) for Q4 2025 decreased to $3,416 (€2,164) compared to $4,732 (€3,193) for Q4 2024, mostly impacted by the reduced occupancy rate and a bad debt provision on the Gaia property due to an insolvent tenant ($569).

For the year ended December 31, 2025, the IP Portfolio NRI was $10,553 (€6,686), compared to $13,775 (€9,295) for the year 2024, the decrease being mostly attributable to the above-mentioned factors (the Gaia bad debt allowance for tenants in default of rent representing $2,103) and the sale of the Sabliere property (-$400).

Leasing Operations

As of December 31, 2025, following the disposition of the Baldi property (65% vacancy), the occupancy rate of the REIT’s IP Portfolio was 47.7% and the occupancy rate of the REIT's Total Portfolio was 60.9%. Strategic vacancy has been maintained in the Arcueil property in support of the disposition currently under an exchange contract as outlined in the Asset Recycling Plan. Excluding Arcueil, and Trio which was sold subsequent to year-end, the Total Portfolio occupancy rate was 82.3% as at December 31, 2025.

During the fourth quarter of 2025, management signed a long-term extension of the main tenant’s lease at the Metropolitain property bringing occupancy to 100%, effective February 2026. At the Gaia property, negotiations are advancing to secure a lease with a public hospital and medical center for approximately ten percent of the space in 2026.

Asset Recycling Plan

With two dispositions completed in 2025 under the Asset Recycling Plan, the REIT continued to advance its long-term strategy. Following the sale of the Sabliere property in April 2025, the Baldi property was sold in December for $22,607 (€14,000 ) and total net cash consideration of $18,363 (€11,244) following the repayment of its mortgage loan.

As the REIT generates revenue from the sale of properties, the best use of the proceeds will be considered, including the options to pay down debt, invest capital to support leasing or redevelopment opportunities.

Management is progressing toward closing the Arcueil sale before the ends of the year which is conditional to issuance of the building permit. The sale of 87.5% of the property for $60,510 (€37,540) is still evolving according to plans. Marketing efforts are ongoing for the remaining 12.5% interest in the property.

Sale of the Trio Property

The REIT signed a preliminary exchange agreement for the sale of the Trio property on October 10, 2025 and the disposition closed subsequent to year-end on January 30, 2026 for $15,797 (€9,800). Concurrently with the closing of the sale, the senior lender agreed to waive the $17,086 (€10,600) portion of its loan that could not be repaid from the proceeds of the sale, strengthening the REIT’s overall financial position. Because the agreement was finalized after December 31, 2025, the waiver was not reflected in the year-end financial statements and will be recognized in the Q1 2026 reporting period.

Capital Market Considerations

Although global equity markets have rallied through 2025, European real estate valuations remain compressed, weighed down by persistent inflation pressure, structurally higher financing costs, and continued geopolitical uncertainty.

Unitholders’ equity stood at $138,800 (€86,100) as at December 31, 2025. Book value per Unit was $4.18 ($4.14 fully diluted). The TSX closing price of $1.06 per Unit reflects continued investor caution toward the office REIT sector and current capital market conditions.

In the current market, the REIT remains focused on balance sheet resilience. As at December 31, 2025, debt to gross book value, net of cash, stood at 61.7% for the Total Portfolio and 53.0% for the IP Portfolio. Management continues to evaluate capital allocation decisions through the lens of value per transaction and sustainable leverage reduction.

Special Distribution

On December 31, 2025, the REIT declared a special cash distribution of $0.04579 per Unit for a total of $1,525 and a special non-cash distribution of $0.13738 per Unit, payable by issuance of 4,849,575 Units for a total amount of $4,575. The non-cash distribution was made to distribute to Unitholders, the taxable income realized by the REIT from transactions completed during the year. The issuance of Units had no impact on the REIT’s equity, as the new Units were immediately consolidated, resulting in the same number of Units outstanding as prior to the distribution.

Tax Liability

In December 2025, the Paris Administrative Court issued a ruling regarding withholding tax reassessments related to the Arcueil property for the 2017 to 2019 taxation years, during which the REIT held a 25% interest through a joint venture. The Court upheld the reassessments and, accordingly, an amount of €5,888 ($9,294) is payable to the French tax authorities.

Subsequent to year-end, the REIT has filed an appeal claiming to recover $6,635 (€4,116) related to withholding taxes upon submission of documentation supporting the tax residency of CanCorpEurope, Luxembourg (the REIT’s subsidiary) and the joint venture partner’s status as a regulated entity in Korea. There can be no assurance as to the outcome of the appeal process. Management has secured a deferred payment schedule over twelve months, with the remaining balance payable in 2027 or from any sale proceeds.

Funds From Operations and Adjusted Funds From Operations¹

A provision of $9,294 for income tax payable related to the dispute with the French tax administration materially affected fourth quarter and full year 2025 results. As a result, FFO for Q4 and for the year was $(0.20) and $(0.19) per Unit, respectively. Excluding this non-recurring item, full year 2025 FFO was $0.02 per Unit, reflecting the REIT’s underlying occupancy and debt profile.

During the year, the REIT invested $2,670 in capital expenditures, primarily for value enhancing tenant improvements at the Neu-Isenburg property, held in joint venture.

Annual AFFO was $(0.26) per Unit or $(0.05) per Unit excluding the tax reassessment provision.

Refer to the “Financing Activity” section below for details of the impact of finance costs on FFO and AFFO. Refer to the "Non-GAAP Financial Measures and Other Measures" section of the MD&A for a more detailed discussion on FFO and AFFO.

Financing Activity

The REIT is financed almost exclusively with asset-level, non-recourse financing with an average term to maturity of 1.8 years for the Total Portfolio (2.2 years for the IP Portfolio). Excluding the Trio mortgage loan, which was discharged upon its sale in January 2026, the average term to maturity was 2.0 years. Subsequent to the year-end, Management obtained a six-month extension of the mortgage loans financing the Stuttgart, Neu-Isenburg and Kosching properties, held in joint-venture, now maturing in August 2026.

For the three-month period ended December 31, 2025, the weighted average interest rate across the Total Portfolio was 3.40% . As at December 31, 2025, 67% of the REIT's Total Portfolio debt was subject to variable interest rates, primarily associated with short-term financing on properties currently being marketed for sale.

Environmental, Social and Governance (ESG)

Integration of ESG objectives and strategies into the REIT's business reflects the growing importance of these factors among many of our key stakeholders. The REIT is working to improve its long-term environmental performance, and also to invest in "human capital" for the implementation and monitoring of all ESG initiatives.

FORWARD-LOOKING INFORMATION

Certain statements contained, or contained in documents incorporated by reference, may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the REIT's future outlook and anticipated events or results and may include statements regarding the future financial position, business strategy, budgets, occupancy rates, rental rates, productivity, projected costs, capital investments, development and development opportunities, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding the REIT’s future results, performance, achievements, prospects, costs, opportunities, and financial outlook, including those relating to the sale of the Arcueil property, acquisition and capital investment strategies and the real estate industry generally, are forward-looking statements. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “predict”, “potential”, “continue” or the negative thereof, or other similar expressions concerning matters that are not historical facts. Forward-looking statements are based on certain factors and assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities.

Although management believes that the expectations reflected in the forward-looking information are reasonable, no assurance can be given that these expectations will prove to be correct, and since forward-looking information inherently involves risks and uncertainties, undue reliance should not be placed on such information.

Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such forward-looking statements. The estimates and assumptions, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth in this press release as well as the following:

The REIT cautions that this list of assumptions is not exhaustive. Although the forward-looking statements contained in this press release are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements.

When relying on forward-looking statements to make decisions, the REIT cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties. Forward-looking statements should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not, or the times at or by which, such performance or results will be achieved. A number of factors could cause actual results to differ, possibly materially, from the results discussed in the forward-looking statements, including, but not limited to:

• the REIT’s ability to execute its asset recycling and capital deployment strategies;
• the impact of changing conditions in the European office market;
• the marketability and value of the REIT’s portfolio;
• changes in the attitudes, financial condition and demand in the REIT’s demographic markets;
• the political environment in the REIT’s demographic markets;
• fluctuation in interest rates and volatility in financial markets;
• the geopolitical conflict around the world on the REIT’s business, operations and financial results;
• general economic conditions, including any continuation or intensification of the current economic conditions;
• developments and changes in applicable laws and regulations; and
• such other factors discussed under ‘‘Risk and Uncertainties’’ in the MD&A).

If any risks or uncertainties with respect to the above materialize, or if the opinions, estimates or assumptions underlying the forward-looking statements prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking statements. The opinions, estimates or assumptions referred to above and described in greater detail under ‘‘Risks and Uncertainties’’ in the MD&A should be considered carefully by readers. Although management has attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other risk factors not presently known or that management believes are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking statements.

Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Certain statements included in this press release may be considered a ‘‘financial outlook’’ for purposes of applicable Canadian securities laws, and as such, the financial outlook may not be appropriate for purposes other than this press release. All forward-looking statements are based only on information currently available to the REIT and are made as of the date of this press release. Except as expressly required by applicable Canadian securities law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All forward-looking statements in this press release are qualified by these cautionary statements.

Non-GAAP Financial Measures and Other Measures

There are financial measures included in this MD&A that do not have a standardized meaning under IFRS. These measures include funds from operations, adjusted funds from operations, and other measures presented on a proportionate share basis. These measures have been derived from the REIT’s financial statements and applied on a consistent basis as appropriate. Management includes these measures as they represent key performance indicators to management, and it believes certain investors use these measures as a means of assessing relative financial performance. These measures, as computed by the REIT, may differ from similar computations as reported by other entities and, accordingly, may not be comparable to other such entities. These measures should not be considered in isolation or used as a substitute for other measures of performance prepared in accordance with IFRS.

USE OF OPERATING METRICS

The REIT uses certain operating metrics to monitor and measure the operational performance of its portfolio. Operating metrics in this press release include GLA, committed occupancy, Weighted Average Lease Term and average term to maturity. Certain of these operating metrics, may constitute supplementary financial measures as defined in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure. These supplementary measures are not derived from directly comparable measures contained in the REIT’s financial statements but may be used by management and disclosed on a periodic basis to depict the historical or future expected financial performance, financial position or cash flow of the REIT.

“Adjusted Funds From Operations” or “AFFO” is a meaningful supplemental measure that can be used to determine the REIT’s ability to service debt, fund expansion capital expenditures, fund property development, and provide distributions to Unitholders after considering costs associated with sustaining operating earnings.

AFFO calculations are reconciled to net income, which is the most directly comparable IFRS measure. AFFO should not be construed as an alternative to net income or cash flow generated from operating activities, determined in accordance with IFRS.

AFFO is defined as FFO subject to certain adjustments, including adjustments for: (i) the non-cash effect of straight-line rents, (ii) the cash effect of the rental guarantee received, (iii) amortization of fair value adjustment on assumed debt, (iv) capital expenditures, excluding those funded by a dedicated cash reserve or capex financing, and (v) amortization of transaction costs on mortgage loans.

“AdjustedFunds From Operations / Unit” or “AFFO / Unit” is AFFO divided by the issued and outstanding Units, plus Exchangeable Securities (fully diluted basis).

“AFFO Payout Ratio” is the value of declared distributions on Units and Exchangeable Securities, divided by AFFO.

“Average term to maturity” refers to the average number of years remaining in the lease term.

“Book value per Unit” refers to the REIT’s total equity divided by the Weighted Average number of Units and Exchangeable Securities (on a fully diluted basis).

“Debt-service covenant ratio calculation” or “DSCR“ refers to the rental income divided by the debt service, including interest and amortization.

“Debt-to-Gross-Book Value” refers to the REIT’s apportioned amount of indebtedness respectively in the IP Portfolio and the Total Portfolio. Indebtedness on an IP and Total Portfolio basis is calculated as the sum of (i) lease liabilities, (ii) mortgage loans, (iii) other long-term liabilities, and (iv) deferred tax liabilities. Indebtedness does not include certain liabilities as is the case for the Exchangeable Securities and at the joint venture level for the contribution from the REIT and its partners.

“Exchangeable Securities” means the exchangeable securities issued by CanCorpEurope, in the form of interest bearing notes, non-interest bearing notes and variable share capital.

“Fully diluted basis” refers to a nominal value divided by the issued and outstanding Units, plus Exchangeable Securities.“Funds From Operations” or “FFO” ¹ follows the definition prescribed by the Real Estate Property Association of Canada publication on Funds From Operations & Adjusted Funds From Operations, dated January 2023 with one exception.

Management considers FFO to be a meaningful supplemental measure that can be used to determine the REIT’s ability to service debt, fund capital expenditures, and provide distributions to Unitholders.

FFO is reconciled to net income, which is the most directly comparable IFRS measure. FFO should not be construed as an alternative to net income or cash flow generated from operating activities, determined in accordance with IFRS.

FFO for the REIT is defined as net income in accordance with IFRS, subject to certain adjustments including adjustments for: (i) acquisition, eviction and disposal costs (if any), (ii) net change in fair value of investment properties, (iii) net change in fair value of derivative financial instruments at fair value through profit and loss, (iv) net changes in fair value of Exchangeable Securities, (v) finance costs related to distribution on Exchangeable Securities, (vi) adjustment for property taxes accounted for under IFRIC 21 (if any), (vii) loss on exercise of lease option (if any), (viii) adjustment for foreign exchange gains or losses on monetary items not forming part of an investment in a foreign operation (if any), (ix) gain or loss on disposal of investment properties or an interest in a subsidiary (if any), (x) finance income earned from loans to joint ventures (if any), (xi) loss on extinguishment of loans (if any), (xii) deferred taxes, (xiii) non-controlling interest, (xiv) goodwill / bargain purchase gains upon acquisition, and (xv) income taxes on sale of investment properties and provision for tax reassessment.

Exchangeable Securities are recorded as liabilities. Exchangeable Securities are recorded at fair value through profit and loss in accordance with IFRS. However, both are considered as equity for the purposes of calculating FFO and AFFO, as they are economically equivalent to the REIT’s Units, with the same features and distribution rights, that are economically equivalent to the distribution received by Unitholders.

“Funds From Operations / Unit” or “FFO / Unit”¹ is FFO divided by the issued and outstanding Units, plus Exchangeable Securities (fully diluted basis).

“Gross book value” refers to the total consolidated assets for the IP Portfolio and Total Portfolio.

“Interest Coverage Ratio” or “ICR” covenant refers to a financial metric used to assess a REIT’s ability to meet its interest obligations on outstanding debt. It indicates how many times the operating profit can cover the REIT’s interest expenses over a given period.

“Investments in Joint Ventures” refers to the REIT’s proportionate share of the financial position and results of operation of its investment in joint ventures, which are accounted for using the equity method under IFRS in the consolidated financial statements, are presented below using the proportionate consolidation method at the REIT’s ownership percentage of the related investment. Management views this method as relevant in demonstrating the REIT’s ability to manage the underlying economics of the related investments, including the financial performance and the extent to which the underlying assets are leveraged, which is an important component of risk management.

For the purpose of the proportionate consolidation, the initial investment of both partners in the joint ventures were considered as being equity investments as opposed to a combination of equity and loans and accordingly, the related proportionate consolidation balance sheet items were eliminated as well as the associated finance income and finance costs. As the loans to the joint ventures were considered equity for proportionate consolidation purposes, any impairment recorded on the loans in accordance with IFRS 9 has been reversed for MD&A purposes. As such, any impairment recorded for IFRS purposes results in a difference in equity when reconciling IFRS and proportionate consolidation reporting.

“Investment Properties Portfolio” or “IP Portfolio” refers to the six wholly owned properties of the REIT.

“Net Rental Income Adjusted for IFRIC 21” refers to Net Rental Income excluding property taxes recorded under IFRIC 21 rules.

“Net Rental Income” or “NRI” refers to the rental income plus operating cost recoveries income plus other property revenue, less property operating costs and other costs.

“Total Portfolio” refers to the six properties referred to as the IP Portfolio and the five properties of the REIT held in joint-ownership with other parties.

“Weighted average lease term” or “WALT” is a metric used to measure a property portfolio’s risk of vacancy and refers to the average period in which all leases in a property or portfolio will expire. It is calculated as the sum of the percentages of rentable area multiplied by the number of years in each remaining lease term.

“Weighted Average number of Units” refers to the mean of periodic values in the number of issued and outstanding Units over a specific reporting period.

FFO and AFFO Calculation¹

The reconciliation of FFO and AFFO for the three-month periods ended December 31 2025 and 2024, based on proportionate consolidation figures including REIT’s interest in joint ventures is as follows:

Overview – GAAP and Non-GAAP

The REIT has identified specific key performance indicators to measure the progress of its long-term objectives. These are set out below:

About Inovalis REIT

Inovalis REIT is a real estate investment trust listed on the Toronto Stock Exchange in Canada. It was founded in 2013 by Inovalis and invests in office properties in primary markets of France, Germany and Spain. It holds 10 assets. Inovalis REIT acquires (indirectly) real estate properties via CanCorpEurope, authorized Alternative Investment Fund (AIF) by the CSSF in Luxemburg, and managed by Inovalis S.A.

About Inovalis Group

Inovalis S.A. is a French Alternative Investment fund manager, authorized by the French Securities and Markets Authority (AMF) under AIFM laws. Inovalis S.A. and its subsidiaries (Advenis S.A., Advenis REIM) invest in and manage Real Estate Investment Trusts such as Inovalis REIT, open ended funds (SCPI) with stable real estate focus such as Eurovalys (for Germany) and Elialys (Southern Europe), Private Thematic Funds raised with Inovalis partners to invest in defined real estate strategies and direct Co-investments on specific assets

Inovalis Group (www.inovalis.com), founded in 1998 by Inovalis SA, is an established pan European real estate investment player with EUR 7 billion of AuM and with offices in all the world's major financial and economic centers in Paris, Luxembourg, Madrid, Frankfurt, Toronto and Dubai. The group is comprised of 300 professionals, providing Advisory, Fund, Asset and Property Management services in Real Estate as well as Wealth Management services.

View source version on businesswire.com: https://www.businesswire.com/news/home/20260325083436/en/

For further information:
Stephane Amine, President and Chief Executive Officer
Inovalis Real Estate Investment Trust
Tel: +33 1 5643 3315
stephane.amine@inovalis.com

Khalil Hankach, Chief Financial Officer
Inovalis Real Estate Investment Trust
Tel: +33 1 5643 3313
khalil.hankach@inovalis.com

Source: Inovalis Real Estate Investment Trust