Primaris Real Estate Investment Trust · TSX:PMZ.UN
Primaris Real Estate Investment Trust — Q1 2023 Earnings Presentation
38 slides from Primaris Real Estate Investment Trust's earnings presentation, May 4, 2023
Slide 1: Enclosed Malls. Open Opportunity.
Enclosed Malls. Open Opportunity. Primaris REIT | May 2023
Slide 2: Caution Regarding Forward-Looking Statements and Non-GAAP Measures
CAUTION 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
Slide 3: Key Metrics: Total Assets, GLA, Debt Ratios, Occupancy
BBB (high) 91.3% $3.3B $2.7B Stable Committed Unencumbered Investment Grade Occupancy Total Assets Assets Rating SF 1 1 10.9M 33.5% 45% - 50% 5.1x 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 the b
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 • $3.1B national portfolio of dominant • Debt to Total Assets**: 33.5%¹ enclosed shopping centres in growing • Average
Slide 6: Strong Management Team
Experienced Management Team with Significant Real Estate Investment and Strong Management 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 1 14 5 25-years of
Slide 7: Dominant Enclosed Shopping Centre Portfolio
Dominant Enclosed Primaris owns and manages regional enclosed shopping Shopping Centre Portfolio centres and open air retail properties across Canada NOI** by Asset Class NOI** by Province BC 16% Office, 1% AB Open Air Retail, 8% 36% QC Grocery-Anchored Plaza, 1% 2% Non-Grocery Anchored Plaza, 4% NB
Slide 8: Target Markets with Strong Growth Profiles
29.1% Canadian population resides Target Markets with Strong within a 30 minute drive of a Primaris mall 3 Growth Profiles Market Dominant Shopping Centres • Owning and operating shopping centres that constitute the primary retail mode in their markets: • Annual retail sales of at least $80 million
Slide 9: Current Markets Demonstrate Strong Growth Characteristics
Current enclosed mall trade Current Markets Demonstrate areas are expected to grow at 11.1%, far outpacing the Strong Growth Characteristics National average Feb 2023 Rolling 12 Months Same Store Sales PSF $807 $745 $711 $737 $660 $623 $667 $675 $604 $575 $616 $499 $553 $505 $515 $512 $510 $507 $486
Slide 10: Retailer Affordability Core Focus
Core focus is providing affordable space for retail partners enabling profitability and omnichannel success 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% • Total operating cost
Slide 11: 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 12: 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 13: 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 1 1 5.1x $2.7B BBB (high) 3.4x Facilities 6% Senior Unsecured 33.5% Debt to Total Average Net Debt** Unencumbered Unencumbered Debentur
Slide 14: Positioned for Growth
Resilience Through Economic Cycles and Poised for Post- Positioned for Growth Pandemic Growth 92.1% 92.2% 92.5% 92.6% 91.8% 92.0% 91.5% 91.5% 91.2% 91.3% 90.7% 90.6% 91.0% 89.7% 90.1% 89.4% 89.1% 89.2% 88.1% Committed Occupancy Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22
Slide 15: 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 16: Optimal Merchandise Mix with Strong Tenant Financial Health
Tenant financial health Optimal Merchandise Mix with strongest witnessed in over a Strong Tenant Financial Health decade Tenant Mix (% of Gross Rent) Tenant Sales Recovered from Pre-Pandemic Levels Apparel, 19% 111% 111% 111% 107% 107% 108% 107% 108% 107% 104% 105% 101% 97% Personal Services, 16% Fo
Slide 17: Value, Staples and Necessity Type Tenants
Value, Staples and Necessity Creditworthy Top Tenants Create a High Quality Roster of Type Tenants Tenants Annualized Annualized Minimum Store WALT² Credit Ratings (S&P / Store WALT² Credit Ratings (S&P / Top Tenant¹ Sector Top Tenants¹ Sector Minimum Rent Rent (% of Count (yrs) Moody’s / DBRS) Coun
Slide 18: Strong Canadian Retail Tenants
Canadian retail REIT tenants largely dominated by grocery, Strong Canadian Retail Tenants pharmacy and value retailers 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/ Sobeys Loblaws Canadian Tire 2 Walmart T
Slide 19: 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 March 31, 2023 ('000s of SF) term (in years) Rent per OSF Rents 1 CRU New tenant
Slide 20: 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 21: Strong Q1/23 Results
Strong performance has underlined our commitment to, and confidence in our clear, and focused strategy of acquiring, Strong Q1/23 Results owning and managing Canadian enclosed shopping centres BBB (high) and maintaining a Stable trend, amongst the Issuer Rating Driven by strong rental growth, effect
Slide 22: 2023 Financial Outlook
Management continues to anticipate the following for the 2023 Financial Outlook year ended 2023 Metrics Outlook Description Occupancy 0.8% to 1.0% Portfolio occupancy increase Rental Revenue (Rent Steps) ~$2.1 million Approximately 1% of base rent Higher in 2021 and 2022 than anticipated future run
Slide 23: 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 24: 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 25: 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 26: 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. • Materiali
Slide 27: Investment Proposition
Investment Proposition Implied discount to Net Asset Value** a compelling investment opportunity $21.74 40% 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 28: Appendix
Appendix
Slide 29: 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 30: 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 31: Bricks-and-Mortar Anchor a Successful Retailer Strategy
Retailers believe their most profitable mode of fulfillment is Bricks-and-Mortar Anchor a Successful when customers shop at their stores, followed by BOPIS, and 1 Retailer Strategy lastly direct delivery Five Lessons from Profitable Retailers In-Store Shopping is The Most Profitable 1. Have physical
Slide 32: Devonshire Mall
Devonshire Mall • Regional shopping centre located in Windsor, Ontario within very close proximity to the U.S. border • Built in 1970, last renovated in 2019 • Acquired on January 1, 2022 • Situated on approximately 73 acres Windsor, ON 1 ** SF 75.2% 498,000 Cash NOI Growth 854,295 GLA In-place Trad
Slide 33: 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 38 acres Lethbridge, AB ** 1 Cash NOI Growth 473,424 SF 76.8% 253,000 GLA In-place Trade Area Po
Slide 34: 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 98.4% 452,000 GLA In-place Trade Area Population ** Occupancy Cash NOI Growth 1 +6.3%
Slide 35: Well-Staggered Lease Maturity Profile
Well-Staggered Lease Balanced lease profile Maturity Profile 2,000 $40 $36.54 Weighted Average Net Rent per occupied sq. ft.² 4.5yr $32.57 $35 $29.81 $29.72 $30 $26.63 Weighted GLA (in thousands sq. ft.) $24.62 $25 Average Lease Term 1,000 $20 $15 $10 $5 — $0 Short-term¹ 2023 2024 2025 2026 2027 CRU
Slide 36: Asset List
GLA at Site Acres Site Store Cash In-place Mortgage Contractual Mortgage All Stores Same Store # Property Name Location Type Share NOI** 1 Major Tenants Share (SF) at Share Coverage Count (millions) Occupancy (thous) Interest Maturity Sales Sales PSF 1 Carry Drive Medicine Hat, AB Open Air 100% 30,0
Slide 37: Asset List
Same Site Cash GLA at Site Store In-place Mortgage Contractual Mortgage All Stores Store # Property Name Location Type Share Acres at Coverage NOI** Major Tenants Share (SF) Count (millions) Occupancy (thous) Interest Maturity Sales Sales1 Share PSF 20 Northpointe Town Calgary, AB Open Air 100% 200,
Slide 38: 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 Assets of $3.3 Billion, BBB (high) Stable Investment Grade Providing Scale and Trading Exchange: TSX Credit Rating Liquidity Contact
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