Primaris Real Estate Investment Trust · TSX:PMZ.UN
Primaris Real Estate Investment Trust — Q4 2023 Earnings Presentation
50 slides from Primaris Real Estate Investment Trust's earnings presentation, Feb 15, 2024
Slide 1: Primaris REIT: Strategy in Action
Primaris REIT Strategy in Action. Primaris™
Slide 2: Caution Regarding Forward-Looking Statements
Forward-Looking Statements and Future Orientated Financial Information Disclaimer: Certain statements included in this presentation constitute ‘‘forward-looking information’’ or “forward-looking statements” within the meaning of applicable securities laws. The words “will”, “expects”, “plans”, "esti
Slide 3: Primaris at a Glance
Conestoga Mall, Waterloo, Ontario BBB (high) 94.2% $3.8B $3.4B Stable Committed National Unencumbered Investment Grade Occupancy Portfolio Assets Rating SF 1 1 12.5M $672 45% - 50% 5.6x GLA Same Store Sales Target FFO Average Net Debt** to Productivity Payout Ratio** Adjusted EBITDA** 1. Supplementa
Slide 4: Canadian Enclosed Evolution
A blank slate to design a best- in-class vehicle to take advantage of the recovery in Canadian Enclosed Evolution enclosed shopping centres Expansion Through Euphoria Retail in Transition Pandemic Growth Retailers conclude Over levered, too bricks & mortar anchors much concentration omnichannel stra
Slide 5: Very Strong Mall Fundamentals
The combination of low supply, rising sales, population growth and increasing tenant demand creates the significant opportunity to drive Very Strong Mall Fundamentals rents and occupancy higher, driving NOI** growth Occupancy Lease-Up • 250bps of occupancy runway • Canadian retail REIT peer set are
Slide 6: Primaris Strategic Advantage
Primaris Strategic Advantage Differentiated financial model and a mandate for growth Enclosed Malls. Open Opportunity. Built to Grow and Thrive Size and Scale Proper Capitalization • $3.8B national portfolio of leading • Average Net Debt** to Adjusted EBITDA**: 5.6x1 enclosed shopping centres in gro
Slide 7: The Canadian Consolidation Opportunity
The Canadian Consolidation Opportunity
Slide 8: Canadian Consolidation Opportunity
Large opportunity to be the consolidator as institutions contemplate rebalancing, Primaris stands alone as a Canadian Consolidation Opportunity potential buyer Canada’s only enclosed shopping centre REIT • $50 billion of Canadian enclosed shopping centres concentrated to institutional owners • Outsi
Slide 9: Target Markets with Strong Growth Profiles
30.6% Canadian population resides Target Markets with Strong within a 30 minute drive of a Primaris mall 3 Growth Profiles Market Leading Shopping Centres • Owning and operating shopping centres that constitute the primary retail node in their markets: • Annual CRU sales of at least $80 million to e
Slide 10: Canadian Mall Classifications
Within the Canadian retail landscape, Primaris has classified malls across into 8 key Canadian Mall Classifications categories Total Number of Malls in Canada by Classification 50 40 30 # of Malls 20 10 0 Super-Regional Regional Mall in Secondary Mall in Dominant Mall in Secondary Mall in Dominant M
Slide 11: Primaris Has Identified High Quality Target Assets
Primaris Has Identified High Quality High Quality Target Assets in Growing Target Assets Target Markets Sources: ICSC Canada Mall Property Performance Report, 2022. 11
Slide 12: Conestoga Mall - Landmark Transaction of Trophy Shopping Centre
Conestoga Mall - Landmark Transaction of Trophy Shopping Centre • Acquired on July 12, 2023 • High quality asset acquisition consistent with Primaris’ previously expressed growth strategy • Leading regional enclosed shopping centre in the high growth market of Kitchener-Waterloo, Ontario • Immediate
Slide 13: Halifax Shopping Centre
Halifax Shopping Centre • Leading regional enclosed shopping centre in the high growth market of Halifax, Nova Scotia • Located at the entrance to the Halifax peninsula within the newly redesigned main mass transit node • $54 million Sears redevelopment substantially completed in 2023, and $70 milli
Slide 14: Shopping Centre Overview
Conestoga Mall & Halifax Shopping Centre adds to Primaris' Leading Regional Shopping Centre Overview Shopping Centre Portfolio All Stores Sales Same Store GLA at Share Property Name Location Volume1 Sales 1 2 Site Coverage (SF) (thous) (thous) Productivity SF 1 Halifax Shopping Centre Halifax, NS $2
Slide 15: Strong Supply - Demand Dynamics for Canadian Enclosed Malls
Low supply, rising sales, population growth and increasing tenant demand is Strong Supply - Demand Dynamics creating a significant opportunity to drive rents and occupancy, for Canadian Enclosed Malls driving NOI growth 1. Source: Environics Analytics Estimates & Projections. 2.7% population growth
Slide 16: Disciplined Capital Allocation
Disciplined Capital Allocation
Slide 17: Capital Structure Strategy and Targets
Designed to provide significant financial flexibility and create a differentiated investment Capital Structure Strategy and Targets profile among Canadian REITs Committed to maintaining a conservative financial profile Maintain low leverage Maintain staggered and long dated debt maturity profile to
Slide 18: Highly Differentiated Financial Model
Best-in-class structure built with flexibility, optionality and liquidity, enabling minimized Highly Differentiated Financial Model cost of capital Unsecured Credit Facilities Convertible 5% 1 1 1 Senior Unsecured Debentures Preferred LP Units 5% 5.6x 38.3% $3.4B BBB (high) 2.8x 26% Average Net Debt
Slide 19: NCIB Compounding Capital at a Rapid Pace
A financial model built for measured amount of Indefinite Buybacks funded through Free NCIB Compounding Capital Cash Flow, on a Leverage Neutral Basis at a Rapid Pace Compounding Capital • Leverage remains Highly Lowest Leverage and FCF available for through Unit neutral Differentiated Free Cash FFO
Slide 20: The Primaris REIT Portfolio
The Primaris REIT Portfolio Primaris”
Slide 21: Leading Enclosed Shopping Centre Portfolio
Leading Enclosed Primaris owns and manages regional enclosed shopping Shopping Centre Portfolio centres in growing, mid-sized markets across Canada NOI** by Asset Class NOI** by Region British Columbia 15% Office, 1% Alberta Open Air Retail, 5% 32% Grocery-Anchored Plaza, 1% Quebec Non-Grocery Ancho
Slide 22: Strong Senior Leadership Team
21 2 Experienced Senior Leadership Team with Significant Real Estate Investment and Strong Senior Leadership Team Operations Expertise Alex Avery Patrick Sullivan Rags Davloor Leslie Buist Chief Executive President & Chief Chief Financial SVP, Finance Officer Operating Officer Officer 21 5 31 20 36
Slide 23: Well Positioned for Growth
Resilience Through Economic Cycles and Poised for Future Well Positioned for Growth Growth 93.7% 94.2% 92.1% 92.2% 92.0% 92.5% 92.6% 92.5% 92.8% 91.8% 91.5% 91.5% 91.2% 91.3% 90.7% 90.6% 91.0% 90.9% 91.0% 89.1% 89.2% 88.1% Committed Occupancy Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-
Slide 24: Value, Staples and Necessity Type Tenants
Value, Staples and Necessity Creditworthy Top Tenants Create a High Quality Tenants Type Tenants Roster Annualized Tenant Mix (% of Gross Rent) Store WALT² Credit Ratings (S&P / Top Tenants¹ Sector Minimum Rent Count (yrs) Moody’s / DBRS) (% of Total) Apparel, 22% 1 Value Retail 5.2% 32 3.8 BBB / -
Slide 25: Strong Canadian Retail Tenants
Canadian retail REIT tenants largely dominated by grocery, pharmacy and value retailers, representative of the Canadian Strong Canadian Retail Tenants consumer Common Retailer Other Canadian Retail REITs¹ across 5+ REITs Primaris REIT A B C D E F 1 Canadian Tire Canadian Tire Walmart Loblaws Empire/
Slide 26: Current Markets Demonstrate Strong Growth Characteristics
With the rising cost of living in Canada's largest cities, medium- Current Markets Demonstrate sized high-growth markets, where Primaris owns leading malls, are Strong Growth Characteristics experiencing historically, high population growth rates December 2023 Rolling 12 Months Same Stores Sales PSF
Slide 27: Positive Leasing Momentum
Strong Large Format Leasing Year-to-Date Momentum with Positive Leasing Momentum High Quality Tenants Weighted Average For the three months ended GLA Weighted Average Lease Weighted Average Net3 Count Spread on Renewing December 31, 2023 ('000s of SF) term (in years) Rent per OSF Rents 1 CRU New ten
Slide 28: Retailer Affordability
Retailer Affordability Primaris”
Slide 29: Retailer Affordability Core Focus
Core focus is providing affordable space for retail partners enabling profitability Retailer Affordability Core Focus Efficient cost structure • Operate with a lower cost structure 1 • Target GROC ratio of <15% 2 • Actual GROC ration of 11% • Prudent total operating costs inflation of 3% • Use econo
Slide 30: Capital Expenditure Programs Enable Prudent Cost Management
Properties maintained to a high Capital Expenditure Programs standard while keeping focus on Enable Prudent Cost Management controlling costs and adherence to our long-term capital plan Prudent 15-Year Capital Plans • All properties have a 15-year capital plan • Allows Primaris to properly manage Co
Slide 31: Unique Lease Structure Captures Growth
Property operating costs are Unique Lease Structure recovered from tenants who absorb the impact of rising Captures Growth inflation Lease Structure Primaris unique lease structure • Long-term contractual net rents + Net Rent • Incremental rent escalation provides the opportunity to grow revenues in
Slide 32: Financial Results
Financial Results Primaris”
Slide 33: Strong Q4/23 Results
Strong performance has underlined our commitment to, and confidence in our clear, and focused strategy of acquiring, owning and managing leading, Strong Q4/23 Results Canadian enclosed shopping centres • Growth in Same Properties Cash NOI** 2024 Confirms 2024 anticipated to be 3.0%-4.0% +5.7% Same P
Slide 34: 2024 Financial Outlook
Management anticipates the following for the year ended 2024 Financial Outlook 2024 Metrics Outlook Additional Notes Occupancy Increase of 0.8% to 1.0% Rental Revenue (Rent Steps) $3.0 to $3.2 million 1.25% to 1.50% of 2023 base rent Rental Revenue (Straight-line) $3.3 to $3.6 million Same Propertie
Slide 35: Board-led ESG Strategic Plan
In early 2023, management and the Board approved our ESG Strategic Plan and 3-year Implementation Roadmap Board-led ESG Strategic Plan CG&N Committee oversees and monitors Primaris' performance against the ESG Strategy • Strategic Plan and Roadmap based on the ESG Materiality Assessment, aligning to
Slide 36: Primaris Screens Well Against Retail REIT Peers on All Metrics
Primaris trades at a discount, Primaris Screens Well Against despite its focused and clearly defined strategy, with its Retail REIT Peers on All Metrics Differentiated Financial Model and Disciplined Capital Allocation 1. Based on analyst estimates. 2. Primaris reports Average Net Debt** to Adjusted
Slide 37: Investment Proposition
Investment Proposition Implied discount to Net Asset Value** a compelling investment opportunity $21.54 38% Upside Capital Recycling Convert pandemic Occupancy Compounding Increasing Rents to NAV** Opportunities lease concessions Improvements Excess Free Cash Upon Renewal 1 to market rents Flow $13.
Slide 38: Appendix
Primaris REIT APPENDIX Primaris™
Slide 39: Rezoning and Entitlement of Excess Land
Low Site Coverage Allows for Rezoning and Entitlement Intensification, Development and/or Subdivision of Land of Excess Land Rezoning and Entitlement Strategy • May pursue JV partner or monetize severed parcel 370 35% Broad Zoning • Create value through low risk, low capital requirement Acres of Lan
Slide 40: Case Study: Dufferin Grove Received Final Approval
Flexibility to Develop and Continue to Surface Value or Case Study: Dufferin Grove Monetize to Maintain Strong Balance Sheet Received Final Approval Development Overview • $600 million intensification and redevelopment of Dufferin Mall’s northernmost parking area • Replace surface parking with +1,20
Slide 41: Guided by Skilled Independent Board of Trustees
Tremendous Strategic Resource: Guided by Skilled Independent Experiential Retailing, Institutional Property Brokerage, Investment Management, REIT Board of Trustees Operations, Financial Strategy, Public Company Reporting, Retail Technology Avtar Bains Louis Forbes Deborah Weinswig • President of Pr
Slide 42: The Canadian Advantage
Canadian retail property landscape differs substantially The Canadian Advantage from the United States Canada US The Canadian Advantage Retail Space per Capita 17 sf per person¹ 23 sf per person¹ 35% less space drives higher sales productivity Immigration Record high immigration targets for Limiting
Slide 43: Devonshire Mall
Devonshire Mall • Regional Shopping Centre located in Windsor, Ontario within close proximity to the U.S. border • Built in 1970, last renovated in 2018 • Acquired on January 1, 2022 • Situated on approximately 73 acres Windsor, ON 2 1 ** SF 73.6% 500,000 Cash NOI Growth 669,175 GLA In-place Trade A
Slide 44: Park Place Mall
Park Place Mall • Located at the intersection of 1st Avenue South and Scenic Drive in Lethbridge, Alberta • Built in 1988, expanded in 1996 and most recently renovated in 2017 • Situated on approximately 39 acres Lethbridge, AB ** 1 Cash NOI Growth 473,308 SF 76.2% 256,000 GLA In-place Trade Area Po
Slide 45: Orchard Park Shopping Centre
Orchard Park Shopping Centre • Largest regional enclosed mall between the Greater Vancouver Area and Calgary • Built in 1971, last renovated in 2000, 2006/7 and 2021 • Situated on 51 acres Kelowna, BC 1 651,088 SF 98.1% 469,000 GLA In-place Trade Area Population ** Occupancy Cash NOI Growth 1 12.1%
Slide 46: Well-Staggered Lease Maturity Profile
Well-Staggered Lease Balanced lease profile Maturity Profile 2,000 $45 4.3yr Weighted Average Net Rent per occupied sq. ft.² $39.21 $40 Weighted $36.04 Average Lease Occupied GLA (in thousands sq. ft.) $35 Term $29.43 $27.61 $30 $26.40 $26.40 1,000 $25 3.4yr $20 CRU Weighted Average Lease $15 Term $
Slide 47: Asset List - Shopping Centres
Asset List - Shopping Centres Site Cash All Stores GLA at Site Acres Store Building In-place Mortgage Contractual Mortgage Same Store # Property Name Location Type Share Share Coverage NOI** Sales 1 Major Tenants (SF) at Share Count Certs Occupancy (thous) Interest Maturity Sales PSF at Share (milli
Slide 48: Asset List - Shopping Centres continued
Asset List - Shopping Centres continued Site Cash All Stores Same GLA at Site Acres Store Building In-place Mortgage Contractual Mortgage # Property Name Location Type Share Share Coverage NOI** Sales Store 1 Major Tenants (SF) at Share Count Certs Occupancy (thous) Interest Maturity at Share (milli
Slide 49: Asset List - Other Property Types
Asset List - Other Property Types Site Cash All Stores GLA at Site Acres Store Building In-place Mortgage Contractual Mortgage Same Store # Property Name Location Type Share Share Coverage NOI** Sales 1 Major Tenants (SF) at Share Count Certs Occupancy (thous) Interest Maturity Sales PSF at Share (m
Slide 50: Invest With Us
Invest With Us TICKER: PMZ.UN Internally Managed Strong Institutional S&P/TSX Capped REIT Index and S&P/TSX Independent Board Endorsement Composite Index member Total Portfolio of $3.8 Billion, BBB (high) Stable Investment Grade Providing Scale and Trading Exchange: TSX Credit Rating Liquidity Conta
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