TORONTO--(BUSINESS WIRE)--

Primaris Real Estate Investment Trust (“Primaris” or the “REIT” or the “Trust”) (TSX: PMZ.UN) announced today that it has agreed to acquire a 50% interest in Southgate Centre in Edmonton, Alberta and 100% ownership interest in Oshawa Centre in Oshawa, Ontario (the “Acquisitions”), for aggregate consideration of $585.0 million, to be satisfied by a combination of cash and equity, subject to certain conditions. The Acquisitions continue to build upon Primaris’ track record of successfully executing on its well defined growth strategy focused on market leading shopping centres in growing Canadian markets.

Primaris also announced today that it has agreed to sell Sherwood Park Mall in Sherwood Park, Alberta, for $107.0 million, and that it has closed on its sale of Edinburgh Market Place in Guelph, Ontario for $31.5 million (the “Dispositions”). The sale of Sherwood Park Mall is expected to close on February 13, 2025, subject to customary closing conditions.

Transaction Highlights of Acquisitions

Aggregate consideration of $585.0 million is comprised of:

• $335.0 million of cash;
• $75.0 million of series A units of the Trust (“REIT Units”) at an issue price of the lower of $21.82 per REIT Unit, or the NAV** per REIT Unit disclosed in the Trust’s most recently published Management’s Discussion and Analysis (“MD&A”) at the time of closing (such lower price, the “Issue Price”);
• $175.0 million of 6.25% exchangeable preferred units (the “Preferred LP Units”) in a newly formed subsidiary limited partnership, which Preferred LP Units shall be exchangeable into REIT Units at an exchange price equal to the Issue Price per REIT Unit, subject to customary adjustments;
• Southgate Centre and Oshawa Centre are unencumbered; and
• Closing is expected on January 31, 2025, subject to the satisfaction of customary closing conditions.

“Southgate and Oshawa Centre are two market leading regional enclosed shopping centres with all of the property characteristics Primaris is targeting with its growth strategy. Both are located in large and growing markets, with access to mass transit, and with very strong sales volumes,” said Patrick Sullivan, President and Chief Operating Officer. “There is significant opportunity for growth at both centres including the conversion of tenants from variable to net rent deals, leasing up vacant space and temporarily tenanted space, and optimizing former department store space.”

Rags Davloor, Chief Financial Officer added, “Acquiring these high quality assets, while maintaining industry leading credit metrics, is a testament to the strategic advantages provided by Primaris’ differentiated financial model. Our commitment to maintain an extremely well capitalized balance sheet positions Primaris as a highly credible transaction counterparty, enabling continued growth.”

“Since December 31, 2021, Primaris has acquired $2.4 billion of leading enclosed shopping centres from five of Canada’s 10 largest pension funds, with the vendors taking back equity and exchangeable preferred equity investments in the REIT,” said Alex Avery, Chief Executive Officer. “The transactions announced today improve the overall quality of our enclosed shopping centre portfolio, driving the portfolio’s annual same store sales productivity from $684 per square foot as at September 30, 2024 to $736 per square foot, on a proforma basis. Consistent with prior acquisitions, these properties enhance the REIT’s value proposition with retailers, and offer a significant income growth opportunity consistent with the growth we see ahead for our existing assets.”

With Primaris’ most recent prior acquisition, les Galeries de la Capitale in Quebec City announced September 25, 2024, the REIT negotiated the right to satisfy the equity unit component of the acquisition consideration in cash rather than equity units, as detailed in the press release of September 25, 2024. This right provided Primaris with the opportunity to execute the subsequent treasury and secondary equity unit offering announced on October 2, 2024. Primaris did not negotiate the right to satisfy the REIT Units component of the current Acquisitions in cash, and as a result is obligated to issue REIT Units and Preferred LP Units to the vendor at closing. The REIT Units and Preferred LP Units will be issued on a private placement basis, and will be subject to the statutory four month hold period, that is required for private placements.

Proforma Primaris Portfolio

The composition of the consideration payable for the Acquisitions, in conjunction with the net proceeds from the Dispositions, allows Primaris to maintain its best-in-class capital structure and financial leverage metrics within the Trust’s previously disclosed target range. Upon closing of the Acquisitions, Southgate Centre will become Primaris’ largest shopping centre measured by all store sales volume and same store sales productivity, and Oshawa Centre will become Primaris’ third largest shopping centre measured by all store sales volume. Primaris anticipates the below proforma metrics:

• On a net basis, the transactions are expected to be modestly accretive to FFO** per average diluted unit, accounting for the modestly accretive and modestly dilutive impacts of the Acquisitions and Dispositions, respectively, to FFO** per average diluted unit;
• Average Net Debt** to Adjusted EBITDA** is anticipated to remain within target range of 4.0x to 6.0x; and
• Primaris intends to provide 2025 guidance with fourth quarter and year end results.

Please see the presentation titled “Southgate and Oshawa Shopping Centres” on the of Primaris’ website for additional details regarding the Acquisitions.

Potential NOI** Growth

Similar to the Trust’s existing portfolio, the Acquisitions offer potential NOI** growth over the next few years, as operating and financial performance normalizes, and as Primaris’ full-service management platform integrates and operates the properties. Opportunities to increase operating income include:

• The conversion of tenants on preferred rent deals to standard net leases;
• Lease up of approximately 56,000 square feet at Southgate Centre and 98,000 square feet at Oshawa Centre of temporary tenanted or vacant space to strong tenants at market rents; and
• Primaris intends to leverage its scalable management platform to deploy its cost management strategy.

Southgate Centre Property Highlights

• Leading super regional enclosed shopping centre in Canada’s fifth largest population centre, Edmonton, Alberta;
• Located in the southern portion of Edmonton in the affluent neighbourhood of Malmo Plains, with exceptional accessibility and visibility at the intersection of Whitemud Dr. Expressway (Hwy. 2) and 111 St. NW, drawing shoppers from across the greater Edmonton area and beyond;
• 846,000 square foot mall located on 39 acres of land, for an approximate 66% site coverage;
• $1,375 per square foot same store sales productivity and total CRU sales volume of $300 million for the twelve month period ending August 31, 2024;
• 87.5% long-term in-place occupancy, 91.0% in-place occupancy, and 95.8% committed occupancy;
• Weighted average lease term of 5.9 years;
• $93 million, 260,000 square foot redevelopment of the former Sears space into CRU and atrium completed in 2022;
• BOMA BEST Gold Certified;
• Large format tenants include The Hudson’s Bay, Winners, Safeway, London Drugs, Sporting Life, Uniqlo, and Crate & Barrel; and
• Notable CRU tenants include Apple, Ariztia, Sephora, Lululemon, Nespresso, Browns, and Alo.

Edmonton Highlights

The City of Edmonton has a large and growing population with strong demographic trends driven by relatively attractive cost of living and a favourable employment market. Other notable characteristics include:

• Expected population growth of 28.2% over the next 10 years;
• Key employment sectors are energy, government, technology, education, and healthcare; and
• Home to universities including the University of Alberta, Grant MacEwan University, and many colleges.

Oshawa Centre Property Highlights

• Leading regional enclosed shopping centre in the growing population centre of Oshawa, Ontario;
• Located 40 minutes east of Toronto, Oshawa Centre is easily accessible via the main arterial highways 401 and 407 as well as the Greater Toronto GO Transit system;
• 1,215,200 square foot mall, inclusive of approximately 100,000 square feet of office, located on 79 acres of land, for an approximate 47% site coverage;
• $758 per square foot same store sales productivity and total CRU sales volume of $242 million for the twelve month period ending August 31, 2024;
• 73.8% long-term in-place occupancy, 93.2% in-place occupancy, and 92.0% committed occupancy;
• Weighted average lease term of 3.8 years;
• $230 million, 375,000 square foot redevelopment was completed in 2016, which included the addition of 260,000 square feet of CRU space, food court expansion, and upgrades throughout the centre;
• BOMA BEST Platinum Certified;
• Large format tenants include The Hudson’s Bay, Marshalls, H&M. Uniqlo, Zara, and Sport Chek; and
• Notable CRU tenants include Aritzia, Sephora, Browns, and Nespresso.

Oshawa Highlights

Oshawa has a growing population with strong demographic trends driven by an attractive relative cost of living and its proximate location to Toronto. Other notable characteristics include:

• Expected population growth of 22.0% over the next 10 years;
• Stable employment trends with low unemployment compared to the national average; and
• Key employment sectors include manufacturing, healthcare, education and technology.

Dispositions

Primaris is successfully recycling capital consistent with its strategy of focusing on market leading enclosed shopping centres located in growing Canadian markets. The sale of Sherwood Park Mall, in Sherwood Park, Alberta, is the REIT’s first enclosed shopping centre disposition. Dispositions since January 1, 2024 total $183.7 million. Primaris intends to use the proceeds from the dispositions for future acquisitions and general trust purposes.

Sherwood Park Mall produced total CRU sales volume of $39.3 million and same store sales productivity of $551 per square foot, for the twelve month period ending August 31, 2024. The below table summarizes the REIT’s dispositions since January 1, 2024:

Comark Exposure

On January 7, 2025, Comark Group (“Comark”), announced that it had filed for creditor protection under Canada’s Companies’ Creditors Arrangement Act (“CCAA”). Comark occupies 36 stores, operating under the banners of Bootlegger, Cleo and Ricki’s, within the Primaris portfolio. Comark is Primaris’ 9^th and 20^th largest tenant measured by annualized minimum rent and gross rent, respectively. The majority of Comark’s leases were gross rent only leases, therefore, gross rent is the better reflection of the REIT’s exposure to Comark as it includes recoverable operating costs, such as common area maintenance and taxes. Primaris has intentionally maintained Comark’s weighted average lease term at one-year to enable flexibility in re-leasing the Comark space. The below table outlines Primaris’ exposure to Comark:

During Primaris’ investor day on September 24, 2024, Primaris outlined its risk mitigation strategy for higher risk tenants. Since the pandemic, Primaris has been actively working to market the Comark space, and already has plans to replace most of the stores upon expiry of the Comark leases. The REIT is in active discussions with high quality tenants and intends to release the Comark space in the upcoming quarters.

Financing Update

In November 2024, Primaris secured a $70.0 million mortgage at a contractual interest rate of 4.62% on a joint venture property, Place d’Orleans in Orleans, Ontario, held in a 50% co-ownership arrangement.

After taking into account such refinancing, as well as the Acquisitions and Dispositions, on a proforma basis the REIT would have approximately $240.0 million drawn on its $600.0 million operating line.

Advisors

CBRE Canada and TD Securities acted as advisors on the Acquisitions.

About Primaris Real Estate Investment Trust

is Canada’s only enclosed shopping centre focused REIT, with ownership interests in leading enclosed shopping centres located in growing Canadian markets. The current portfolio totals 15.0 million square feet valued at approximately $4.6 billion at Primaris’ 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.

Forward-Looking Statements and Financial Outlook

Certain statements included in this news release constitute ‘‘forward-looking information’’ or “forward-looking statements” within the meaning of applicable securities laws. The words “will”, “expects”, “plans”, "estimates", “intends” and similar expressions are often intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Specific forward-looking statements made or implied in this news release include but are not limited to statements regarding: Primaris’ future results, performance, prospects and opportunities, including with respect to the closing, costs and benefits of the proposed Acquisitions, the timing and completion of the Acquisitions, the strategy, plans and the intentions of management with respect to the Acquisitions, management’s expectations regarding the Trust’s leverage and portfolio quality, management’s expectations regarding the potential for growth from the continued normalization of operating and financial performance and the opportunities to increase operating income at Southgate Centre and Oshawa Centre, the anticipated timing of closing of the Sherwood Park Mall disposition, the allocation of the proceeds from the Dispositions for future acquisitions and for general trust purposes, the REIT’s growth strategy, including future acquisitions of market leading shopping centres in growing Canadian markets, and the REIT’s ability and plans to re-lease premises vacated by Comark stores. Forward-looking statements are provided for the purpose of presenting information about management’s current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements are not guarantees of future performance and are based on estimates and assumptions that are inherently subject to risks and uncertainties. Primaris cautions that although it is believed that the assumptions are reasonable in the circumstances, actual results, performance or achievements of Primaris may differ materially from the expectations set out in the forward-looking statements. Material risk factors and assumptions include the risk of the transactions not completing on the terms as agreed and on the expected timelines, if at all, including satisfaction of all applicable closing conditions to the transactions which will need to be met or waived; the failure of the Acquisitions to be as successful to the REIT as described herein, including the failure of the Acquisitions to be accretive to the REIT’s FFO** per average diluted unit and to enhance the REIT’s value proposition with retailers and the failure of the REIT to maintain its capital structure and financial leverage metrics within its previously disclosed target range and to realize on the opportunities for growth with respect to the Acquisitions; the risk that the use of proceeds from the Dispositions may vary from the information provided herein depending on external circumstances such as market conditions and other relevant business objectives and opportunities that may arise; the risk that the REIT is unable to successfully re-lease vacant Comark space in the upcoming quarters, or at all; and those set out in the Trust’s Annual MD&A which is available on SEDAR+, and in Primaris’ other materials filed with the Canadian securities regulatory authorities from time to time. Given these risks, undue reliance should not be placed on these forward-looking statements, which apply only as of their dates. Other than as specifically required by law, Primaris undertakes no obligation to update any forward-looking statements to reflect new information, subsequent or otherwise. Readers are cautioned that there is a significant risk that actual results will vary from the financial outlook statements provided in this news release and that such variations may be material. Certain forward-looking information included in this news release may also be considered “financial outlook” for purposes of applicable securities laws (collectively, “FOFI”). FOFI about the Trust’s prospective results of operations is subject to the same assumptions, risk factors, limitations and qualifications as set out above and in the Trust’s Annual MD&A which is available on SEDAR+, and in Primaris’ other materials filed with the Canadian securities regulatory authorities from time to time. The Trust and management believe that such FOFI have been prepared on a reasonable basis, reflecting management’s best estimates and judgments. However, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results. FOFI contained in this news release was made as of the date of this news release and was provided for the purpose of providing further information about the Trust’s prospective results of operations. Readers are cautioned that the FOFI contained herein should not be used for purposes other than for which it is disclosed herein. Readers are also urged to examine the Trust’s materials filed with the Canadian securities regulatory authorities from time to time as they may contain discussions on risks and uncertainties which could cause the actual results and performance of Primaris to differ materially from the forward-looking statements contained in this news release. All forward-looking statements in this news release are qualified by these cautionary statements. These forward-looking statements are made as the date of this news release and Primaris, except as required by applicable securities laws, assumes no obligation to update or revise them to reflect new information or the occurrence of future events or circumstances.

Non-GAAP Measures

The Trust’s financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). However, Primaris also uses a number of measures which do not have a standardized meaning prescribed under generally accepted accounting principles (“GAAP”) in accordance with IFRS. These non-GAAP measures, which are denoted in this news release by the suffix “**” include non-GAAP financial measures and non-GAAP ratios, each as defined in National Instrument 52-112, Non-GAAP and Other Financial Measures Disclosure ("NI 52-112"). None of these non-GAAP measures should be construed as an alternative to financial measures calculated in accordance with GAAP. Furthermore, these non-GAAP measures may not be comparable to similar measures presented by other real estate entities and should not be construed as an alternative to financial measures determined in accordance with IFRS. Additional information regarding these non-GAAP measures, including definitions and reconciliations to the most directly comparable GAAP figure, where applicable, can be found in the Trust’s Q3 2024 MD&A which is available on the Trust’s profile on SEDAR+ at . See Section 12, "Non-GAAP Measures" of the Trust’s Q3 2024 MD&A for the descriptions of each non-GAAP measure used in this news release and to find a quantitative reconciliation to the most directly comparable GAAP measure applicable; Section 12, "Non-GAAP Measures" and the related quantitative reconciliations are incorporated by reference herein.

Use of Operating Metrics

Primaris uses certain operating metrics to monitor and measure the operational performance of its portfolio. Operating metrics in this news release include in-place occupancy, committed occupancy, annual mall traffic, occupied gross leasable area, weighted average lease term, annualized minimum rent, total gross rent, gross rent per square foot, net rent per square foot, all store sales volume, CRU sales volume and same store sales productivity. Certain of these operating metrics, including all store sales volume, CRU sales volume and same store sales productivity, may constitute supplementary financial measures as defined in NI 52-112. These supplementary measures are not derived from directly comparable measures contained in the Trust’s financial statements but may be used by management and disclosed on a periodic basis to depict the historical or future expected financial performance, financial position or cash flow of the Trust. For an explanation of the composition of all store sales volume, CRU sales volume and same store sales productivity, see “Section 8, "Operational Performance" – “Tenant Sales” in the Trust’s Q3 2024 MD&A, which is available on SEDAR+ at , and which section is incorporated by reference herein.

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