Primaris REIT's Major Acquisition Boosts Growth and Strategy
Strategic Acquisition by Primaris REIT
Primaris Real Estate Investment Trust (TSX: PMZ.UN), a leading entity in managing enclosed shopping centers across Canada, has announced a significant acquisition. The REIT is set to acquire a 100% stake in Promenades St-Bruno in Montreal for a total sum of $565 million. This purchase will be funded through a combination of cash and equity, reinforcing Primaris' strategy of expanding its portfolio in flourishing markets.
Highlights of the Acquisition
The acquisition is projected to be accretive to its annualized fully diluted Funds From Operations (FFO) per unit by approximately $0.04, while the average net debt to adjusted EBITDA is expected to maintain its target range of 4.0x to 6.0x. Proforma metrics indicate an increase in same-store sales productivity from $784 to $791 per square foot, reflecting the robust potential of the newly acquired property. Moreover, the 2025 guidance sees an uplift in FFO per unit from a range of $1.74 to $1.79, now revised to an uplifting range of $1.78 to $1.82. The same property cash Net Operating Income (NOI) growth has been lifted from 3.0% to a range between 4.0% and 5.0%.
Benefits of the Promenades St-Bruno Acquisition
Patrick Sullivan, President and Chief Operating Officer of Primaris, emphasized the notable aspects of Promenades St-Bruno, which offers impressive sales figures and considerable land area. With existing annual sales ranking over $271 million and about $917 in sales productivity per square foot, the site is strategically situated to optimize growth. Sullivan pointed out the potential for significant NOI growth by leasing available spaces effectively and optimizing the usage of former department store areas.
Financial Insights from Management
Rags Davloor, Chief Financial Officer, commented on how high-quality acquisitions combined with sound financial metrics position Primaris advantageously in the market. The trust has made significant strides in acquiring properties valuing over $1.5 billion in 2025 alone, enhancing their overall portfolio's quality and growth prospects. CEO Alex Avery adds that since 2021, Primaris has fortuitously evolved, allowing investors to anticipate notable sales productivity. The concurrent unit offering is expected to enhance liquidity and public float, benefiting all stakeholders.
Transaction Structure and Completion Timeline
The $565 million acquisition will be fulfilled through an innovative mix of $320 million in cash, $160 million via series A units at an issue price of $21.40 per unit, and $85 million in 6.00% exchangeable preferred units. Following this structure allows Primaris to sustain a robust capital structure while ensuring investment efficacy. Promenades St-Bruno is regarded as an unencumbered asset, and the acquisition is anticipated to close shortly after customary conditions have been met.
Optimizing Growth through New Opportunities
Promenades St-Bruno represents not just numbers but a gateway for enhanced value creation through strategic redevelopment. Similar to the existing operational portfolio, this acquisition opens doors for increased NOI through leveraging underutilized spaces, sealing new leases with quality tenants, and effectively managing costs. Leading tenants at the site include notable national retailers and other well-regarded brands, creating a synergistic environment for retail activity. Primaris recognizes the strength of its location, noting the accessibility and market demographics surrounding the site.
Guidance Updates and Projected Growth
With a clear focus on growth, Primaris has also revealed its optimistic guidance metrics for 2025 considering the recent acquisition. The organization's anticipated cash NOI reflects growth ranging from $352 million to $357 million for the fiscal year, projecting upon the successful closing of the acquisition. Further, it seeks to maintain its impressive FFO per unit trailing at a range indicating renewed operational confidence among investors.
Marketing the Offering to Investors
The pathway towards securing this growth comes through a recent agreement with a consortium of underwriters, establishing a bought-deal basis to provide 10 million REIT Units priced at $14.75 each, generating around $147.5 million in gross proceeds. This offering is expected to deepen the market presence of Primaris REIT, thus aligning with their investment growth strategy. An additional over-allotment option could elevate the total gross proceeds to approximately $168.9 million, enhancing the financial capabilities of the REIT significantly.
About Primaris Real Estate Investment Trust
In essence, Primaris is more than just a real estate manager; it stands as the only enclosed shopping center-focused REIT in Canada, having strategically positioned itself in promising markets. With a proforma portfolio summing up to 15.6 million square feet, valued at about $5.4 billion, Primaris aims to harness its unique advantages in achieving operational efficiencies across its holdings. By maximizing the growth potential stemming from their acquisitions, they are not only adapting to market demands but are actively setting the stage for sustained success.
Frequently Asked Questions
What is the total investment for the acquisition of Promenades St-Bruno?
The investment totals $565 million, combining cash and equity strategies.
How will the acquisition affect Primaris REIT's financials?
The acquisition is expected to positively impact FFO per unit and overall cash NOI.
What are Primaris REIT's future guidance updates?
Primaris has updated its guidance for 2025, indicating increased projections for FFO per unit and cash NOI growth.
Who are the leading tenants at Promenades St-Bruno?
The mall features high-profile tenants including Simons, Winners, and Aritzia.
How does Primaris plan to leverage this acquisition?
Primaris plans to maximize NOI potential through effective leasing strategies and operational enhancements.
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