Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Primaris REIT (PMREF, Financial) reported strong same property NOI growth and substantial FFO per unit growth.
- Tenant sales per square foot increased nearly 60% to an all-time high of $768 per square foot.
- Aggregate CRU sales across the portfolio grew from $800 million to $3 billion.
- The company completed a $585 million acquisition of Oshawa Center and a 50% interest in Southgate Center.
- Primaris REIT (PMREF) maintained the lowest debt EBITDA and FFO payout ratio among peers.
Negative Points
- The departure of Hudson Bay Company (HBC) is expected to impact occupancy and require significant capital for redevelopment.
- Primaris REIT (PMREF) anticipates a total HBC-related spend of $125 to $150 million over the next few years.
- The company faces potential co-tenancy issues with 27 leases potentially affected by HBC's departure.
- There is uncertainty regarding the timing and outcomes of HBC lease disclaimers and redevelopment plans.
- Despite strong performance, the company is operating in a challenging transaction market for large assets.
Q & A Highlights
Q: What are the implications of HBC's departure on M&A activities and how might it affect pension funds' views on mall assets?
A: Alex Avery, CEO, explained that HBC's departure was anticipated and factored into recent acquisitions. The departure is not surprising, and Primaris has been preparing for it. The impact on M&A is minimal as HBC was not seen as a long-term tenant. Pension funds are aware of the situation, and it has been considered in their decision-making.
Q: How will the costs previously covered by HBC be reallocated to other tenants, and will this affect recovery ratios?
A: Patrick Sullivan, COO, stated that taxes will become a non-recoverable expense for the landlord, while common area contributions will be reallocated to CRU tenants. The impact on recovery ratios is expected to be minimal, and expenses will be managed to avoid burdening tenants.
Q: What is the expected capital expenditure for dealing with HBC spaces, and does it include potential residential land sales?
A: Patrick Sullivan, COO, mentioned that the estimated $125 million to $150 million expenditure assumes subdivision or demolition of HBC spaces. It does not include potential residential land sales, as discussions with tenants are ongoing and opportunities may arise post-HBC lease disclaimers.
Q: How is Primaris handling the potential co-tenancy clauses triggered by HBC's departure?
A: Patrick Sullivan, COO, noted that co-tenancy clauses are unique to each tenant and mall. Historically, such clauses have been negotiated without being triggered, and Primaris is optimistic about managing them similarly this time.
Q: What is the outlook for Primaris's financial performance given the current economic climate and tenant demand?
A: Alex Avery, CEO, reported no change in tenant behavior or demand for store openings. Retailers are optimistic, and sales remain strong, indicating continued growth and stability in Primaris's financial performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
