Primaris Real Estate Investment Trust · TSX:PMZ.UN
Primaris Real Estate Investment Trust — Q3 2023 Earnings Presentation
44 slides from Primaris Real Estate Investment Trust's earnings presentation, Nov 3, 2023
Slide 1: Enclosed Malls. Open Opportunity.
Enclosed Malls. Open Opportunity. Primaris REIT | November 2023
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: key portfolio and balance sheet metrics
BBB (high) 92.8% $3.4B $3.0B Stable Committed National Unencumbered Investment Grade Occupancy Portfolio Assets Rating SF 1 1 11.5M 35.0% 45% - 50% 5.3x GLA Debt to Total Target FFO Average Net Debt** to Assets** Payout Ratio** Adjusted EBITDA** 3 1. The debt ratios are non-GAAP ratios calculated on
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: 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 • $3.4B national portfolio of leading • Debt to Total Assets**: 35.0%1 enclosed shopping centres in growing • Average N
Slide 6: Strong Senior Leadership Team
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 2 14
Slide 7: 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 Province BC AB 15% Office, 1% 33% Open Air Retail, 5% Grocery-Anchored Plaza, 1% QC Non-Grocery Anchored Plaza, 6% 2% NB 4
Slide 8: Target Markets with Strong Growth Profiles
29.5% 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 retail sales of at least $80 million t
Slide 9: 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 10: 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 August 2023 Rolling 12 Months Same Stores Sales PSF $
Slide 11: 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 Halifax SF 1 Halifax Shopping Centre Halifa
Slide 12: 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 vs capital intensive super- regional malls 1 • Target GROC ratio of <15% • Prudent total operating costs inflation of 3
Slide 13: 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 14: 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 15: Highly Differentiated Financial Model
Best-in-class structure built with flexibility, optionality and liquidity, enabling minimized Highly Differentiated Financial Model cost of capital Preferred Units Unsecured Credit 2% Facilities 1 1,2 1 9% 35.0% 5.3x $3.0B BBB (high) 3.2x Debt to Total Average Net Debt** Unencumbered Unencumbered St
Slide 16: Well Positioned for Growth
Resilience Through Economic Cycles and Poised for Future Well Positioned for Growth Growth 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% 90.1% 89.1% 89.2% 88.1% Committed Occupancy Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-
Slide 17: 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 18: 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, 20% 1 Value Retail 5.8% 30 4.1 BBB / -
Slide 19: 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 20: 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 September 30, 2023 ('000s of SF) term (in years) Rent per OSF Rents 1 CRU New te
Slide 21: 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 22: 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 23: 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 $70.0 mil
Slide 24: Strong Q3/23 Results
Strong performance has underlined our commitment to, and confidence in our clear, and focused strategy of acquiring, owning and managing leading, Strong Q3/23 Results Canadian enclosed shopping centres • Growth in Same Properties Cash NOI** 2024 Provides 2024 anticipated to be 3.0%-4.0% +3.1% Same P
Slide 25: 2023 Financial Outlook
Management anticipates the following for the year ended 2023 Financial Outlook 2023 1 Metrics Outlook Additional Notes Occupancy Increase of 0.8% to 1.0% Approximately $2.1 million, or 1.0% of 2022 Rental Revenue (Rent Steps) base rent Rental Revenue (Straight-line) $2.7 to $3.0 million Updated from
Slide 26: 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 27: 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 28: 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 29: 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 30: 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 31: 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 32: Investment Proposition
Investment Proposition Implied discount to Net Asset Value** a compelling investment opportunity $21.76 39% 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 33: Appendix
Appendix
Slide 34: 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 35: 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 36: 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 37: 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% 498,000 Cash NOI Growth 854,295 GLA In-place Trade A
Slide 38: 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 473,424 SF 76.1% 253,000 GLA In-place Trade Area Po
Slide 39: 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 1 651,038 SF 98.1% 452,000 GLA In-place Trade Area Population ** Occupancy Cash NOI Growth 1 12.1%
Slide 40: Well-Staggered Lease Maturity Profile
Well-Staggered Lease Balanced lease profile Maturity Profile 2,000 $42.44 $45 4.3yr Weighted Average Net Rent per occupied sq. ft.² $37.27 $36.16 $40 Weighted Average Lease Occupied GLA (in thousands sq. ft.) $35 $30.21 Term $28.54 $30 $25.68 1,000 $25 3.3yr $20 CRU Weighted Average Lease $15 Term $
Slide 41: Asset List
Site Cash1 All Stores GLA at Site Acres Store Building In-place Mortgage Contractual Mortgage Same Store # Property Name Location Type Share Coverage NOI** Sales 2 Major Tenants Share (SF) at Share Count Certs Occupancy (thous) Interest Maturity Sales PSF at Share (millions) (thous) 107 Carry Drive
Slide 42: Asset List
Same Site Site Cash1 All Stores GLA at Store Building In-place Mortgage Contractual Mortgage Store # Property Name Location Type Share Acres at Coverage Count NOI** Sales Major Tenants Share (SF) Certs Occupancy (thous) Interest Maturity Sales2 Share at Share (millions) (thous) PSF 3292 Dunmore Road
Slide 43: Asset List
Same Site Site Cash1 All Stores GLA at Store Building In-place Mortgage Contractual Mortgage Store # Property Name Location Type Share Acres at Coverage Count NOI** Sales Major Tenants Share (SF) Certs Occupancy (thous) Interest Maturity Sales2 Share at Share (millions) (thous) PSF 435 Stone Rd W, M
Slide 44: 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 $3.4 Billion, BBB (high) Stable Investment Grade Providing Scale and Trading Exchange: TSX Credit Rating Liquidity Conta
Primaris Real Estate Investment Trust — Q3 2023 Earnings Presentation on 6ix