H&r Real Estate Investment Trust · TSX:HR.UN
H&r Real Estate Investment Trust — Primaris REIT — Investor Presentation (October 2021)
28 slides from H&r Real Estate Investment Trust's investor presentation, Oct 27, 2021
Slide 1: Built for the New Retail Landscape
Built for the New Retail Landscape Primaris REIT 2022 Spin-Out October 27, 2021
Slide 2: Forward-Looking Statements
Forward-Looking Statements CAUTION Certain statements made in this presentation will contain forward‐looking information within the meaning of applicable securities laws (also REGARDING known as forward‐looking statements) including, among others, statements made or implied relating to Primaris REIT
Slide 3: Investment Proposition
Investment Proposition Size and scale Demonstrated resiliency throughout National portfolio of dominant enclosed shopping centre the COVID-19 pandemic properties in primarily secondary Canadian markets Stable operating metrics and steady organic EBITDA Conservative capital structure growth expected
Slide 4: Key portfolio and capital metrics
$3.2B 2,300+ Unsecured 35 Fair Value Tenants Pursuing Investment Properties Assets Grade Rating 11.4MSF 29% 45-50% 5.3x¹ GLA Debt/Value Target FFO Payout Ratio Debt/EBITDA 1. Based on 2022 expected EBITDA Primaris | Investor Presentation October 2021 4
Slide 5: Table of Contents
Table of Contents SECTION 1 Primaris Strategic Advantage SECTION 8 Excess Density and Substantial Intensification Potential with SECTION 2 Strong Management Team and Flexibility to Monetize Density Robust Operating Platform to Maintain Conservative SECTION 3 Well Positioned For Economic Capital Stru
Slide 6: Primaris Strategic Advantage: Built for the New Retail Landscape
SE CT ION 1 Demonstrated resiliency Primaris Strategic Advantage through pandemic. Steady organic EBITDA Built for the New Retail Landscape growth expected post pandemic Built to Grow and Thrive Size and Scale Proper Capitalization • $3.2B national portfolio of dominant • Debt to Gross Book Value: 2
Slide 7: Near Term Strategic Priorities
SE CT ION 1 Near Term Strategic Priorities Focus on retailer partner profitability Focus on operations and maintaining strength of balance sheet and OPERATIONS FINANCIAL • Disciplined operating cost management reduce leverage when possible • Leverage scale to achieve economies of scale cost savings
Slide 8: Primaris' Response to the Evolving Retail Landscape
SE CT ION 1 Primaris’ Response to the Evolving Retail Landscape Dominant mall in respective trade areas - Primarily secondary markets with trade area populations over 100,000 people isolated from major market trade areas Profitable retailer locations - Tenant rationalization of store count GROC due
Slide 9: Fully Internalized, Scalable Platform With Strong Management Team
SE CT ION 2 Fully Internalized, Scalable Platform With Strong Management Team Over 300 Employees Across 3 Regional Offices and Robust Operating Platform 26 18 10 17 1 Asset Management Finance & Corporate Leasing Legal Treasury 3 4 10 Development & Human Resources Information Construction Technology
Slide 10: Experienced Management Team
SE CT ION 2 Experienced Management Team Strong Management Team with Significant Real Estate Investment and and Robust Operating Platform Operations Expertise Alex Avery Appointed EVP, Asset Management & Graham Previous senior roles at Brookfield Chief Executive 20 4 Strategic Initiatives of H&R REIT
Slide 11: Guided by Strong Independent Board of Trustees
SECTION 2 Guided by Strong Independent Board of Trustees Avtar Bains Louis Forbes Deborah Weinswig • President of Premise Properties, a private property owner • Corporate Director with more than 30 years of real estate and • Founder and CEO of Coresight Research across select North American centres
Slide 12: Well Positioned for Economic Recovery
SECTION 3 Resilience Through Economic Well Positioned for Cycles and is Poised for Post-Pandemic Recovery Economic Recovery Annually Quarterly Occupied & Committed COVID-19 93.8% Occupancy¹ 87.5% 91.4% 90.7% 89.4% 90.1% 90.7% 90.6% 91.0% 2017 2018 2019 2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Ba
Slide 13: Dominant Enclosed Shopping Centre Portfolio
SECTION 4 Primaris will own and manage regional enclosed shopping Dominant Enclosed centres and open air retail properties across Canada Shopping Centre Portfolio NOI by Asset Class NOI by Province NOI by Market Grocery-Anchored QC Non-Grocery Anchored 1% 2% 5% BC Primary 16% AB 25% 36% Dufferin Mal
Slide 14: Dominant Shopping Centres in Growing Markets
SECTION 4 Dominant Enclosed Dominant Shopping Centres in Shopping Centre Portfolio Growing Markets +3.9% 2020 – 2025 Average Expected Market Income Growth CAGR1 +3.0% 2020 – 2025 Average Expected HH Income Growth CAGR1 +5.5% 5 Year Average Expected Trade Area Population Growth2 211,000 Average Trade
Slide 15: Diversified Tenant Base
SECTION 5 Diversified Across a Number of Retail Sectors with a Strong Diversified Tenant Base National Tenant Base Tenant Mix Tenant Profile Tenant Quality % of Gross Rent % of Base Rent % of Base Rent National vs. Regional Investment Grade vs. Department Store Non-Investment Grade Cinema / Personal
Slide 16: Creditworthy Top Tenants
SECTION 5 High Quality Roster of Tenants Creditworthy Top Tenants in the Retail Sector Annual Credit Ratings Annual Credit Ratings WALT WALT Tenant Sector Minimum Rent (S&P / Moody’s / Tenant Sector Minimum Rent (S&P / Moody’s / (in Years) (in Years) (% of Total) DBRS) (% of Total) DBRS) 1 Canadian
Slide 17: Positive Leasing Momentum
SECTION 5 Strong Large Format Leasing Year-to-Date Momentum with Positive Leasing Momentum High Quality Tenants Year-to-Date Large Format Leasing Activity² NEW 673,000 15 220,000 sf $3.7 million 2021 lease Leases Executed Total GLA Incremental Base Rent maturities¹ RENEWALS 5 690,000 sf $0.7 million
Slide 18: Well-Staggered Lease Maturity Profile
SECTION 5 Well-Staggered Lease Maturity Profile Lease Maturity Schedule¹ WALT = 5.0 Years (000’s sq.ft.) 856 694 632 488 449 11% 7% 9% 6% 8% 2022 2023 2024 2025 Average 1. As at January 1, 2021. Excludes HOOPP’s properties to be contributed. Primaris | Investor Presentation October 2021 18
Slide 19: Capital Structure Targets
SECTION 6 Designed to provide significant financial flexibility and create a differentiated investment Capital Structure Targets profile among Canadian REITs Sustained long term debt to EBITDA in the range Target secured debt to total debt below 40% of approximately 4x – 6x SECURED DEBT Strategy to
Slide 20: E-Commerce and Innovation Strategy
SECTION 7 Evolving to Become a Retail E-Commerce and Platform that Operates and Engages Shoppers Both Innovation Strategy Online and In-Store Current Key Initiatives Launch e-commerce market place, PRIMARCHÉ in partnership with Dropit • Modernize websites in preparation for launch of Offer customers
Slide 21: Excess Density and Substantial Intensification Potential
SECTION 8 Excess Density and Substantial Low Site Coverage Allows for Intensification, Development Intensification Potential and/or Subdivision of Land Primaris’ enclosed mall portfolio comprises of 23 assets nationwide • Situated on approximately 900 acres of land • Located close to major transport
Slide 22: Excess Density and Substantial Intensification Potential (Cont'd)
SECTION 8 Several Properties With Excess Density and Substantial Significant Intensification Potential Intensification Potential (Cont’d) Place Stone Road Northland Orchard Park Sunridge Mall Sherwood Park Grant Park¹ Kildonan Place¹ D’Orleans¹ Mall Village (Winnipeg, MB} (Kelowna, BC) (Calgary, AB)
Slide 23: Dufferin Grove Development Overview
SECTION 8 Flexibility to Develop and Excess Density and Substantial Continue to Surface Value or Intensification Potential (Cont’d) Monetize to Maintain Strong Balance Sheet Dufferin Grove Development Overview • $600 million intensification and redevelopment of Dufferin Mall’s northernmost parking a
Slide 24: ESG
SECTION 9 GOVERNANCE DIVERSITY ENVIRONMENTAL • 59% Female GM Team ESG ENERGY EFFICIENCY • Over 56% of full-time employees have been with us • Achieved set portfolio wide target of 5% for over 5 years and 10% over 20 years with Primaris energy reduction in 2021 • 67% of common areas across all proper
Slide 25: Invest With Us
SECTION 10 Invest With Us TICKER PMZ.UN HOOPP will be Primaris’ Internally Managed Largest Unitholder at 26% S&P/TSX Capped REIT Index Inclusion Independent Board Providing Strong Institutional Endorsement Anticipated of Governance and Strategy IFRS FV of Assets is $3.2 Billion, Providing Pursuing I
Slide 26: Appendix
Appendix Primaris
Slide 27: Detailed Asset List
SECTION 8 Detailed Asset List Ownership GLA at Share Store # Contributor Property Name City Province Segment Q2 2021 Major Tenants Share (SF) Count Hudson's Bay, Sport Chek, Marshalls, Indigo, Dollarama, 1 H&R Cataraqui Town Centre Kingston Ontario Enclosed 50% 301,390 103 Urban Planet 2 H&R Dufferi
Slide 28: Detailed Asset List (Cont'd)
SECTION 8 Detailed Asset List (Cont’d) Ownership GLA at Share Store # Contributor Property Name City Province Segment Q2 2021 Major Tenants Share (SF) Count Hudson's Bay, Sport Chek, Public Works and 18 H&R Place D'Orleans Orleans Ontario Enclosed 50% 343,603 108 Government Services Canada Walmart,