
Inovalis REIT Reports Q2 2025 Financial Results
Inovalis Real Estate Investment Trust (the “REIT”) today announced its financial and operational results for the second quarter ended June 30, 2025. The unaudited Consolidated Financial Statements and Management’s Discussion and Analysis (“MD&A”) for Q2 2025 have been made available on the REIT’s. All financial amounts are presented in thousands of Canadian dollars or Euros, unless otherwise specified. Rental rates, square footage, and per unit amounts are presented separately for clarity.
Management Commentary
Stephane Amine, President and Chief Executive Officer of Inovalis REIT, commented on the results:
“In the face of a complex economic environment marked by high interest rates, inflation, and geopolitical uncertainty, our strategic priorities remain clear—preserve and generate liquidity, manage capital expenditures prudently, sell non-core assets through our asset recycling strategy, and maintain constructive relationships with our lenders. These actions are designed to reinforce the financial resilience of the REIT and protect unitholder value.”
Financial Performance Overview
Net Rental Income (NRI)
During the second quarter of 2025, Net Rental Income (NRI) from the REIT’s wholly owned asset portfolio (the “IP Portfolio”) amounted to $3,280 (€2,130), a decline from $4,616 (€3,144) in Q2 2024. This reduction was primarily driven by increased vacancies at the Trio and Metropolitain properties and a provision for bad debt on the Gaia property following rent defaults by two tenants.
For the six-month period ending June 30, 2025, the IP Portfolio generated $3,436 (€2,231) in NRI, compared to $5,528 (€3,765) for the same period in 2024. The year-over-year decline is largely attributed to the aforementioned issues, along with the departure of the principal tenant at the Bad Homburg property in Q1 2024.
When adjusted for IFRIC 21 and accounting for the REIT’s proportional interest in joint ventures (collectively referred to as the “Total Portfolio”), the Q2 2025 NRI was $4,289 (€2,785), compared to $5,841 (€3,978) in Q2 2024. The decrease is also tied to a one-time €1,720 indemnity payment related to early tenant exits at the Duisburg and Trio properties in Q1 2024. However, the impact of this loss was partially mitigated by new leases signed at Duisburg, covering approximately 18% of the property’s leasable space.
Leasing Operations

As of June 30, 2025, the REIT’s IP Portfolio had an occupancy rate of 46.7%, while the Total Portfolio stood at 58.9%. A portion of the vacancies—specifically at the Arcueil and Baldi properties—are being strategically maintained in support of the REIT’s broader Asset Recycling Plan, which aims to reposition and divest selected properties. Excluding properties held for disposition, the REIT’s Total Portfolio occupancy rate was 80.5%.
A major leasing highlight of Q2 2025 was the successful negotiation of a long-term lease at the Neu Isenburg property, which will cover the majority of its current vacant space. The lease is set to commence in September 2025 and spans a 10-year term, with an optional break clause after five years. Although the agreement involves significant capital expenditures and leasing incentives, it is projected to yield annual NRI of approximately $300.
Management remains focused on improving occupancy across key properties and is actively engaging local brokers while selectively offering tenant improvement allowances to drive lease activity and bolster revenue performance.
Strategic Asset Recycling Plan
A key component of the REIT’s current strategy is its Asset Recycling Plan, which involves disposing of select non-core or underperforming assets to redeploy capital into value-generating initiatives or reduce leverage.
A major milestone in this plan was achieved on April 30, 2025, with the successful sale of the Sablière property located in central Paris for €18,200 ($28,625). This transaction is expected to generate net proceeds of approximately $15,300 (€9,700), which will be primarily allocated to debt repayment and reinvestment across the portfolio.
In addition, an agreement signed in January 2025 confirms the pending sale of an 87.5% ownership interest in the Arcueil property for €37,540 ($58,420). This transaction is anticipated to close in the latter half of 2026, pending administrative approvals, building permits, and buyer financing. The REIT continues to market the remaining 12.5% stake in Arcueil to potential office tenants or investors.
Capital Markets and Valuation
Since the end of 2023, the REIT has faced significant downward pressure on net asset values due to macroeconomic challenges including rising interest rates, persistent inflation, and high energy costs. As a result, unitholder equity declined to $186,770 (€116,433) as of June 30, 2025.
The book value per unit stood at $5.62 ($5.57 on a fully diluted basis). However, the REIT’s trading price on the Toronto Stock Exchange (TSX) was $0.90 per unit at quarter-end—significantly below book value, reflecting broader investor caution.
In response to this market volatility, management has remained disciplined with respect to capital structure. As of June 30, 2025, the REIT maintained a debt-to-gross-book-value ratio of 51.4% for the IP Portfolio and 59.5% for the Total Portfolio.
Funds from Operations (FFO) and Adjusted FFO
For the second quarter of 2025, the REIT reported slightly negative funds from operations (FFO) at -$0.01 per unit. This was primarily due to the provision for bad debt at the Gaia property, where two tenants have defaulted. Management has taken steps to mitigate this issue, including initiating eviction proceedings for one tenant. Stabilization of this property is expected by 2026.
Financing Activity
Inovalis REIT continues to rely primarily on asset-level, non-recourse debt financing. As of Q2 2025, the average term to maturity across the Total Portfolio was 2.2 years, and 2.6 years for the IP Portfolio. The average interest rate across the Total Portfolio increased modestly to 3.73%, largely driven by a 12% short-term facility on the Bad Homburg property.
Approximately 68% of the REIT’s debt was subject to variable interest rates as of June 30, 2025—mainly associated with short-term financing for properties currently held for sale.
A new mezzanine loan was arranged during the quarter for the Bad Homburg property. The proceeds were used to retire the €5,500 mortgage on the Trio property and to satisfy a waiver requirement tied to a second-ranking mortgage from HCOB. Management has indicated plans to refinance the high-interest mezzanine facility with longer-term, conventional debt as leasing progresses.