Mr. Alex Avery reports

PRIMARIS REIT ANNOUNCES STRONG Q4/23 AND FULL YEAR 2023 RESULTS

Primaris Real Estate Investment Trust today released its financial and operating results for the fourth quarter and year ended Dec. 31, 2023.

Quarterly financial and operating results highlights:

• $113.8-million total rental revenue;
• Plus-5.7-per cent same properties cash net operating income (cash NOI) growth;
• 94.2-per-cent committed occupancy, 92.4-per-cent in-place occupancy and 89.0-per-cent long-term occupancy;
• Plus-1.5-per-cent weighted average spread on renewing rents across 391,000 square feet;
• Plus-3.8-per-cent funds from operations (FFO) per average diluted unit growth to 40.2 cents;
• $3.9-billion total assets;
• 52.1 per cent FFO payout ratio;
• 5.6 times average net debt to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization);
• 38.3 per cent total debt to total assets;
• $654.3-million in liquidity;
• $3.4-billion in unencumbered assets;
• $21.54 net asset value (NAV) per unit outstanding.

Annual financial and operating results highlights

• Plus-5.4-per-cent same properties cash NOI growth;
• Plus-4.6-per-cent weighted average spread on renewing rents across 1,353,000 square feet;
• $672 same stores sales productivity;
• Plus-0.5-per-cent FFO per average diluted unit growth to $1.588;
• 52.1 per cent FFO payout ratio.

Business update highlights

• Completed the acquisition of the Halifax Shopping Complex in Halifax, N.S., adding 1.16 million square feet to gross leasable area;
• Increased commitment on the unsecured syndicated revolving credit facility from $400-million to $600-million and extended the term by one year;
• Issued $400-million aggregate principal amount of senior unsecured debentures;
• Total NCIB (normal course issuer bid) activity since inception of 8,425,800 trust units repurchased at an average price of $13.82, or a discount to NAV per unit of approximately 35.8 per cent;
• Published inaugural annual ESG (environmental, social and governance) report.

"Our business is performing very well with significant runway for internal growth over the next few years. As the largest owner operator of enclosed shopping centres in Canada, we enjoy several competitive advantages as we partner with retailers on multiple location leasing deals, building deeper and more collaborative relations," said Patrick Sullivan, president and chief operating officer. "The macro environment for malls, including declining supply of retail GLA, population growth, rising tenant sales and increasing tenant demand for space, creates the significant opportunity to drive rent growth and higher occupancy to quality tenants with the ability to pay increasing rents over time, driving NOI growth."

Chief financial officer Rags Davloor added: "We continued to focus on our unsecured debt program with a $400-million unsecured debenture offering completed in late November, providing permanent financing for the Halifax acquisition. Then in December, we upsized our unsecured revolving credit facility to $600-million, ensuring excellent liquidity and financial capacity for opportunities we see in the market."

"Our differentiated financial model has allowed us to deliver positive FFO per unit growth despite absorbing approximately 12 cents per unit of higher interest expense, while also executing on our corporate strategy, materially enhancing value for our unitholders," said Alex Avery, chief executive officer. "We completed the acquisition of two exceptional properties in 2023, both perfectly illustrative of the type of acquisitions Primaris is focused on, being market leading malls in medium-sized, high-growth Canadian markets. Demonstrating disciplined capital allocation is a cornerstone of our strategy and how we make decisions, with the measurement of success being per-unit growth in value and cash flow."

2024 financial outlook

Disciplined capital allocation is a key pillar to Primaris's strategy. To this end, Primaris reiterates its established targets for managing the trust's financial condition.

Guidance: In the MD&A (management's discussion and analysis) for the three months and nine months ended Sept. 30, 2023, Primaris provided guidance for the full year of 2024. This previously published guidance has been reproduced again and has not changed.

Readers are cautioned that there is a significant risk that actual results for the year ending Dec. 31, 2024, will vary from the financial outlook statements provided in this MD&A and that such variations may be material.

Operating results

Same properties cash NOI for the three month ended Dec. 31, 2023, was $3.0-million, or 5.7 per cent, higher than the same period of the prior year. Cash NOI from same properties shopping centres increased $2.7-million, or 5.5 per cent, over the same period of the prior year. The increase in cash NOI from the shopping centres' operations was primarily driven by higher revenues from base rent, percentage rent and net operating cost recoveries, partially offset by a decline in percentage rent in lieu of base rent. Completed redevelopment projects contributed $500,000 incremental base rent to the shopping centres.

The attached table compares the composition of FFO and AFFO and calculates the drivers of the changes for the three months ended Dec. 31, 2023, as compared with the same period in 2022.

FFO for the three months ended Dec. 31, 2023, was 1.5 cents per unit higher, or plus 3.8 per cent, than the same period of the prior year. NOI from same properties increased 2.9 cents per unit and NOI from acquisitions increased 7.1 cents per unit. These increases were partially offset by the 7.2 cents per unit decrease due to higher net interest and other financing charges and a 1.5-cent-per-unit decrease due to the net change in the units outstanding (unit issuance for the acquisitions partially offset by NCIB activity).

The fourth quarter of 2023 included an expense of 2.1 cents per unit as a result of subletting a portion of Primaris's excess head office space and an expense of 0.9 cent per unit as a result of amending and restating the unsecured revolving credit facility. Excluding these expenses, FFO per unit would have been 43.1 cents and the FFO payout ratio for the quarter would have been 48.5 per cent, within Primaris's established target.

Occupancy and leasing results

Primaris's leasing activities are focused on driving value by actively managing the tenant and merchandising mix at its investment properties. Due to seasonality, fourth quarter occupancy is typically higher as retailers benefit from holiday shopping. Portfolio in-place occupancy at Dec. 31, 2023, increased 1.3 per cent from Dec. 31, 2022.

Impact of remeasurements: During the year, GLA was impacted by remeasurements including a reduction of 185,000 square feet in anticipation of the demolition of the former Sears space at Devonshire Mall in Windsor, Ont. Portfolio occupancy, excluding the impact of GLA remeasurements, would have been 91.0 per cent and occupancy for same properties shopping centres would have been 90.7 per cent. Portfolio committed occupancy, excluding the impact of GLA remeasurements, would have been 92.8 per cent.

Impact of short-term leases: Primaris includes short-term and percentage rent in lieu leases in the calculation of occupied GLA.

In the quarter, Primaris completed 178 leasing deals totalling 500,000 square feet. Overall renewal rents were up 1.5 per cent comprised of commercial retail unit (CRU) renewals of 1.5 per cent, and large format renewals of 0.7 per cent.

Included in the leasing activity for the quarter were 39 new leases that were for a lease term of less than one year, or for percentage rent in lieu of base rent. While these lease structures have always been a tool to manage tenant relocations and the timing of development plans, during the pandemic, leases structured as percentage rent in lieu of base rent were more prevalent to assist tenants and to maintain occupancy rates. As these leases mature, management anticipates moving tenants back to traditional lease structures. At Dec. 31, 2023, percentage rent in lieu of base rent leases were in place for 600,000 square feet of GLA, or 4.8 per cent as a percentage of in-place leases with an average remaining lease term of 2.1 years.

Robust liquidity and differentiated financial model

Primaris's differentiated financial model is core to its overall strategy, providing a best-in-class capital structure upon which to build the business, providing continuing financial stability and strength. The attached table summarizes key metrics relating to Primaris's unencumbered assets and unsecured debt.

On Dec. 22, 2023, Primaris amended and restated its unsecured syndicated revolving term facility increasing the commitment to $600-million (from $400-million) and extending the maturity date by one year to Jan. 4, 2027.

On Nov. 22, 2023, Primaris issued $300-million aggregate principal amount of Series D senior unsecured debentures due June 30, 2029, with interest at a fixed annual rate of 6.374 per cent and $100-million aggregate principal amount reopening of the Series A senior unsecured debentures at a price equal to $952.30 per thousand principal amount with an effective yield to maturity of 6.325 per cent.

Liquidity at quarter-end was $654.3-million, or 43.8 per cent of total debt.

Primaris's NAV (net asset value) per unit outstanding at quarter end was $21.54.

Subsequent events

Subsequent to Dec. 31, 2023, Primaris purchased additional 131,000 trust units under the ASPP for consideration of $1.8-million as of Feb. 14, 2024.

Subsequent to Dec. 31, 2023, Primaris repaid the mortgage on Cataraqui Town Centre in Kingston, Ont., that matured in January, 2024, with the intention to place new debt on the property.

Conference call and webcast

Date:  Thursday, Feb. 15, 2024, at 9 a.m. ET

Conference call details

Dial:  1-833-470-1428

Pass code:  547025

The call will be accessible for replay until Feb. 29, 2024, by dialling 1-866-813-9403 with access code 841929, or on the investor relations section of the website.

About Primaris Real Estate Investment Trust

Primaris is Canada's only enclosed shopping-centre-focused REIT, with ownership interests primarily in the leading enclosed shopping centres in growing markets. The current portfolio totals 12.5 million square feet valued at approximately $3.8-billion at Primaris's share. Economies of scale are achieved through its fully internal, vertically integrated, full-service national management platform. Primaris is very well capitalized and is exceptionally well positioned to take advantage of market opportunities at an extraordinary moment in the evolution of the Canadian retail property landscape.

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