Halmont’s Real Asset Strategy Shines, But Dilution Clouds EPS Picture

TORONTO, ON – November 26, 2025 – Halmont Properties Corporation (TSX-V: HMT) has delivered a robust third-quarter report that, on the surface, signals clear skies ahead. The real asset investment firm announced impressive year-over-year growth, with net income rising to $12.25 million and revenue climbing to $24.90 million for the first nine months of 2025. This performance, underpinned by strategic acquisitions in commercial real estate and forestry, has pushed its book value per share up by a healthy 11.76%.

However, a deeper dive into the financials reveals a more nuanced story. Despite soaring income, the company’s diluted net income per common share has unexpectedly dipped. This paradox highlights a pivotal moment for Halmont, forcing investors to look beyond the headline numbers and scrutinize the firm’s capital structure and long-term value proposition. The results underscore a strategy of patient, diversified investment, but also reflect the growing pains associated with its recent expansion.

The Foundation: Prime Real Estate Defies Market Jitters

The cornerstone of Halmont’s recent success is its high-quality commercial property portfolio. The press release credits the 2024 acquisitions of 25 Dockside Drive and 2 Queen Street East for providing “stable, growing cash flows.” This statement is more than just corporate optimism; it reflects a savvy bet on a key trend in the Toronto office market: the “flight to quality.”

While the broader Canadian real estate market navigates uncertainty amid shifting interest rates, Toronto’s premium office sector is showing remarkable resilience. In the third quarter of 2025, vacancy rates for top-tier Class A and AAA office spaces fell significantly, even as older, less desirable properties struggled. Halmont’s assets are firmly in the former category. The acquisition of 25 Dockside Drive (Corus Quay), a 479,000-square-foot waterfront property substantially leased to Corus Entertainment, was a landmark deal conducted in a joint venture with George Brown College. Similarly, its stake in 2 Queen Street East, alongside partners like Toronto Metropolitan University, places it at the heart of the city’s institutional and commercial core.

These “institutional-grade assets” are acting as financial anchors, generating reliable income streams that insulate the company from the volatility seen in the residential sector, where national home prices have stagnated. By focusing on premium properties with strong tenants, Halmont has successfully positioned itself to benefit from a market where major tenants are consolidating into modern, amenity-rich buildings. This strategic focus is a primary driver behind the company’s 18.8% year-over-year revenue growth.

Unpacking the EPS Paradox

For many investors, earnings per share (EPS) is a critical barometer of a company’s profitability on a per-share basis. This makes Halmont’s slight decrease in diluted EPS—from 5.07¢ in 2024 to 4.85¢ in 2025—a point of contention, especially when total net income grew by over 18%. This apparent contradiction isn't a sign of flagging profitability but rather a direct consequence of the company’s recent capital-raising activities.

To fund its ambitious portfolio transition, which effectively doubled its equity base in 2024, Halmont undertook significant financing measures. A key move was the issuance of $50 million in Series II convertible preferred shares. When calculating diluted EPS, companies must account for the potential conversion of such securities into common shares. This increases the total number of shares in the denominator of the EPS calculation, thereby spreading the net income across a larger potential share base and putting downward pressure on the per-share figure.

While a dip in EPS can be an initial red flag, in this context, it reflects a strategic trade-off: short-term dilution in exchange for long-term growth capital. The funds raised have enabled the acquisition of the very assets now driving revenue and book value growth. The 11.76% increase in fully diluted book value per common share, from 85¢ to 95¢, offers a counter-narrative, suggesting that the underlying value of the company's assets per share is indeed appreciating. For shareholders, the key question is whether the long-term returns from these new investments will ultimately outpace the dilutive effect on earnings.

The Dual Play: Balancing Concrete with Timber

What sets Halmont apart from many of its peers is its dual-pronged investment strategy, which balances the stability of urban commercial real estate with the long-term, sustainable growth potential of forestry. The company holds a commanding 59% effective interest in Haliburton Forest and a 7% equity stake in the publicly traded Acadian Timber Corp. (TSX: ADN).

This diversification, however, means navigating two very different market environments. While Halmont's urban properties benefit from a flight to quality, its forestry assets face significant industry headwinds. The Canadian forestry sector is currently grappling with high interest rates that have cooled housing construction, leading to a sharp drop in lumber prices through Q3 2025. Compounding this pressure, the U.S. doubled countervailing duties on Canadian softwood lumber in August, squeezing profit margins for sawmills and prompting planned production cuts across the industry.

Acadian Timber’s recent results reflect this challenging climate. The company reported lower sales in Q3 2025 due to reduced timber volumes and operational challenges in Maine. The absence of carbon credit sales, which provided a significant boost in 2024, further impacted its top line. Despite this, Halmont’s continued confidence is evident in its past actions, having increased its stake in Haliburton Forest in 2024 and supported its acquisition of a major sawmill.

This long-term view sees past the current cyclical downturn. The forestry sector is poised for a potential transformation, driven by the growing demand for mass timber in sustainable construction and the burgeoning market for carbon credits. By maintaining a significant foothold in this sector, Halmont is making a patient bet on the future value of sustainable resources, a strategy that offers a powerful, though currently challenged, counterbalance to its real estate holdings.

With its portfolio transition largely complete and a reinforced balance sheet, Halmont stands at an interesting crossroads. The company has successfully assembled a collection of high-performing assets designed for resilience and long-term appreciation. Its management now faces the task of proving that its strategic dilution was a price worth paying. For investors, the focus will shift from the company’s acquisition phase to its operational execution, and its ability to translate asset growth into sustained shareholder value will be the ultimate measure of its success.