Primaris Real Estate Investment Trust

Good morning and welcome to the Premieres REIT third quarter 2025 results conference call. At this time, all lines have been placed on mute. After the prepared remarks, there will be a question and answer session. You may ask one question and one follow-up question, at which point you may return to the question queue. I'd now like to hand over to your host, Lesley Buist, SVP of Finance to begin. Please go ahead, Lesley.

Thank you, Operator. During this call, management of Primaris REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Primaris REIT's control, and that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions, risks, and uncertainties is contained in Primaris REIT's filings with the securities regulators. These filings are also available on Primaris REIT's website at www.primarisreit.com. I'll now turn the call over to Alex Avery, Primaris' Chief Executive Officer.

Thank you, Leslie. Good morning. Thank you for joining Primaris REIT's third quarter 2025 conference call. Joining me today are Pat Sullivan, President and Chief Operating Officer, Rags DeBloer, CFO, Leslie Bust, SVP Finance, Morty Bobrowski, SVP General Counsel, and Graham Proctor, SVP Asset Management. Claire Mahaney, our VP of Investor Relations and Sustainability, is out with some of our board members doing board engagement with investors today. Q3 2025 delivered another excellent quarter of results, including same property NOI growth and almost 6% FFO per unit growth, driven by the continued secular recovery in the Canadian mall sector. Once again, this quarter, we demonstrated disciplined capital allocation, recycling capital from strategic dispositions, and retained free cash flow into both strategic acquisitions and unit repurchases. 2025 has been an incredibly active year. With the business delivering strong operating and financial results, we have been using this time to recycle capital with the objective of structurally raising Primaris' long-term internal growth rate from its portfolio of exceptional properties on a sustained and durable basis. While five disclaimed HVC leases were an occupancy in NOI headwind in the quarter, We are very excited to announce substantial leasing progress made on five of the six disclaimed HPC boxes and the leasing of the vacant Sears box at Limeridge. This includes the HPC at our Promenade St. Bruno property in Montreal acquired in early October. That will provide more details shortly, but we have leased almost a half a million square feet of space to single-tenant occupiers and anticipate tenants to take possession as soon as November, as in next month, and in Q1 of next year. Late Tuesday, we learned the remaining five leases were disclaimed, allowing Primaris unfettered access and control of these spaces as of November 27, 2025. In 2025, we have acquired four top-tier malls, including Oshawa Center, a 50% interest in Southgate Center in Edmonton, Line Ridge Mall in Hamilton, and Promenade St. Bruno in Montreal, bringing total acquisitions for the year to $1.6 billion. Consistent with our strategic ambition of becoming the first call, all of these acquisitions are consistent with our target mall criteria, and we're chosen to increase portfolio quality and to structurally increase the base level of internal growth in our portfolio to an above sector average 3% to 4% same property NOI growth rate on a durable and recurring basis. These malls, in addition to our other acquisitions to date, are important centers for retailers in Canada, are the leading shopping centers in their markets, and elevate Primaris' stature in the mall industry. The resulting scale and quality of our mall portfolio makes us a strategically important landlord to retailers across Canada. Even better, all of these acquisitions were completed with FFO accretion on an NAV neutral basis while keeping leverage within our target range. In September, we held a very well-attended property tour at Le Galerie de la Capitale in Quebec City, where we hosted analysts and investors. Capital was acquired in 2024 and is the leading shopping center in Quebec City. We showcased Primaris' execution of its acquisition strategy, as well as our mall management team, the quality of the asset, the scale of the recent renovations prior to our purchase, and spent some time on the value creation opportunities we are exploring with the excess land at this site. We also invited local industry experts to participate, providing the full picture of the opportunity we see ahead for this asset. Some of us even rode the electro roller coaster, which left my knees weak and my stomach queasy. Mission accomplished. Throughout the tour, we emphasized the connection between these acquisitions and our ambition to be the first call for retailers seeking space in Canada's top malls. We hope attendees found it valuable and a great use of time. Along with our quarterly results, we are also announcing a 2.3% distribution increase, our fifth annual increase. Effective with this increase, we anticipate Primaris will be added to the dividend aristocrats index at the next appropriate rebalancing. With all of the transactions we have completed over the past few years, we have substantially repositioned Primaris' portfolio to deliver and exceed the outcome our investors want most, high quality and durable NOI with sustainable same property NOI growth in the 3% to 4% range, translating to above average FFO and AFFO growth per unit. I'll now turn the call over to Pat to discuss operating and leasing results, followed by Rags, who will discuss our financial results. Pat?

Thank you, Alex. We've been hard at work reshaping the portfolio to achieve structurally higher internal growth by acquiring some of the best malls in the country and recycling capital from our non-core property portfolio. Underlying fundamentals for shopping centers continue to be supported by low retail supply, strong tenant sales, and continued tenant demand for quality space. In March 2025, HBC filed for CCAA protection, and a process commenced shortly thereafter to serve its value from the leases. In June 2025, five HPC locations in our portfolio were disclaimed. These five locations occupied approximately 532,000 square feet. A proposed assignee emerged for 28 locations, including five sites owned and managed by Primaris. These five locations not originally disclaimed encompass approximately 624,000 square feet. Last week, to our satisfaction, the court rejected the proposed assignment And on October 28, all remaining HPC leases were disclaimed. In addition, we obtained control of the vacant HPC box at St. Bruno upon the closing of our property acquisition. The HPC St. Bruno location is about 131,000 square feet. For reference, the average minimum rent HPC paid in our portfolio was $4.18 per square foot, equating to $5.4 million annually. With the disclaimer of all remaining HPC leases, retailers will now be able to understand and assess the full inventory of HPC space available. We now anticipate an acceleration of negotiations with tenants for all available space. We have made significant leasing progress at our HPC boxes and are pleased to announce that we have agreed to terms with tenants for the entire HPC box at St. Bruno with Les Halles de la Mode as well as for one level at Galleries de la Capitelle with Les Halles de la Mode and with sellers at Sunridge Mall. We anticipate the Medicine Hat lease deal to replace the entire premises formerly occupied by HVC will be signed imminently. All four deals have been completed with very limited capital contribution from Primaris and have been kept short-term with the potential to extend further. These stores will collectively occupy approximately 384,000 square feet and will open in spring 2026. At Plaster Orleans, we're in advanced discussion with the single tenant to occupy the entire premises on a long-term deal with limited capital contribution from Primaris and anticipate completion of a transaction in Q1, 2026. We are in active negotiations with national covenant tenants for space within all of our HPC locations, and we will provide further updates on leasing and development activity in the near term. As a general statement, we continue to estimate that it will cost approximately $25 to $30 million to devise an HPC box, and approximately $8 to $9 million to demolish, including all site works. Where a single tenant takes an HPC box, the cost of Primaris could be as little as 12 months of free rent. We are currently estimating a total HPC-related spend of $125 to $150 million over the next few years. Furthermore, we expect yields on this invested capital of between 7 and 12% or more or a lower 3 to 6% when including only the incremental NOI beyond the foregone HPC rent. We would like to take the opportunity to announce that we have signed a lease with a single national tenant for the entire former Sears premises at Lime Ridge Mall, which measures approximately 139,000 square feet. The term of the lease is 20 years with limited capital investment from Primaris. The tenant is expected to take possession in November 2025 and open early 2027. Our same property cash NOI was up 0.7% for the quarter compared to Q3 2025 and 5.1% for the first three quarters of the year. The primary drivers were higher rents and specialty leasing revenue. Same property NOI was also impacted by a $600,000 accrual adjustment in a prior quarter and $800,000 in lost revenue due to the closure of five HBC locations. Excluding these two items, same property cash NOI would have been 3.1% positive. Recovery ratios for the quarter were essentially flat compared to the same quarter in 2024, and up 1.5% to 79.4% on a year-to-date basis. While our property tax recovery ratio was negatively impacted by the closure of HBC, We realized a gain in our operating cost recoveries of 2.3% as compared to the same period of the prior year. We have adjusted our spending to incorporate the shortfall in operating contributions from HVC to maintain affordability for our tenants. The increase in operating cost recovery ratio continues the trend towards a return to historical norms in the metric, which is around 92 to 93% for property tax and 96 to 97% for operating costs as compared to our current figures of 74.8% and 84.4%, respectively. For context, every 1% increase in CAM and tax re-recover equates to approximately $2 million annually. This number directly impacts the bottom line. Portfolio in-place occupancy was 91.7%, down 1.6% from Q3 last year, but higher than the 88.8% reported in Q2 2025. New store openings push occupancy higher in Q3 2025. Over the past several quarters, we note there is a higher proportion of committed area being related to CRU space, which generates higher rents than anchor and major premises. Leasing activity was very strong during the quarter with 121 leases renewed at spread to 5.3%. In addition, we completed 41 new deals encompassing 79,000 square feet during the quarter. Average CRU rents achieved in new deals during Q3 with $57.60 per square foot, which is 20% higher than our average CRU rents of $47.81 per square foot. Year-to-date, we have completed 97 new deals for 228,000 square feet, with 88 of those deals being CRU tenants, equating to 162,000 square feet. During the third quarter, approximately 175,000 square feet of tenants commenced rental payments. and we anticipate 135,000 square feet of tenants will commence rental payments during the fourth quarter. Our leasing team continues to experience strong demand for space, and our watch list is limited. We are in active discussions with existing retailers in our properties to expand their footprint and from retailers looking for new locations, including both Canadian and international retailers. Our weighted average net rent per square foot for the quarter increased to $29.16, per square foot versus $25.28 per square foot at year end. This material increase is a result of our acquisition activity of properties with higher rents, disposition of properties with lower rents, and the five disclaimed HPC leases with net rents significantly lower than our portfolio average. Tenant sales within our properties continue to grow, and our malls realized positive sales growth on both the same store and all store basis during August. which is generally the third busiest month of the year for enclosed shopping center sales. Including St. Bruno, total sales productivity has grown to $800 per square foot versus $715 per square foot at Q3 2024, and total sales volume now exceeds $3.5 billion compared to $2.1 billion at the end of August 2024. Several of our properties have shown strong productivity growth, including Oshawa Center, where same-store sales have grown from $758 per square foot at acquisition to $825 per square foot. Our sales productivity numbers continue to grow because of strong tenant performance and capital recycling, including the strategy of acquiring leading shopping centers and growing markets. Over the long run, we anticipate sales growth at our properties will occur due to the strong fundamentals in the enclosed shopping center industry, including a 30-year low in per capita and closed mall square footage in Canada, coupled with population growth. To conclude, it is a very exciting time to be in the mall business. Primaris Business continues to perform very well, and we are very well positioned to capture continued growth within our malls. And with that, I'll turn the call over to Rags to discuss our financial results. Rags?

Thank you, Pat, and good morning, everyone. Our operating and financial results for the quarter continue to remain very strong. We're seeing very strong NOI growth from our portfolio, specifically the acquisition properties, and our many operating metrics are continuing to improve. These results are flowing through to our cash flow metrics with FFO per diluted unit up 5.7% for the quarter. We achieved these impressive per-unit results despite higher interest costs, increased unit count, sale of non-core assets, and the impact of the disclaimed HBC leases. Internal growth and the creative high-quality acquisitions completed over the last 12 months are the drivers of our outperformance. During the quarter, we closed on the sale of three strip plazas in Medicine Hat, Alberta, the proceeds of 12.7 million, and the disposition of North Point Town Center, an open-air plaza in Calgary, Alberta, for 54.5 million. This brings total dispositions year-to-date of 246.1 million. Notably, we have Northland Village up for sale, a high-quality, recently developed power center. The center is anchored by Walmart, Winners, Best Buy, Good Life, Dollarama, and Spinelli Italian Center shop, a specialty grocery store, and restaurant similar to Eataly, all in an affluent trade area in northwest Calgary. As expected, this asset has attracted a broad pool of interested buyers, and we expect this field to close late in the year. Our disposition strategy aligns to our strategy to own a growing high-quality portfolio of leading enclosed shopping centers in Canada. At Primaris, we talk constantly about our differentiated financial model. We are highly committed to maintaining very low leverage at below six times debt to EBITDA and maintaining an FFO payout ratio of approximately 50%. This model gives us structurally higher FFO and AFFO per unit growth as you retain and compound capital faster. As our public company track record continues to grow, we expect this to result in an improved cost of capital with higher FFO and AFFO multiples from the current levels. Our average net debt to adjusted EBITDA was 5.9 times. As a reminder, this range was part of our executive compensation structure with the top end of the range of six times. Our financing strategy is another critical piece of our structure. Our investment grade rating made possible by our sector low financial leverage and low payout ratio allows us to access the unsecured to bench a market. This greatly simplifies our ability to arrange debt financing for our acquisitions and the mortgage financing alternative for these large value properties can stretch the limits of the secured mortgage market in Canada. The unsecured structure also allows us to buy and sell properties as well as renovate and redevelop properties without the constraints that come with secured mortgages. This gives us a significant advantage over potential new entrants to the mall market and over smaller private groups. In October, concurrent with the Bruno acquisition, Primaris issued a five-year, $250 million senior unsecured green debenture at a spread of 110 basis points, resulting in a coupon of 3.845%. The net proceeds from the issuance will fund eligible green projects as described in our green finance framework. Including this issuance, our weighted average term to maturity is extended to 4.2 years, and the weighted average interest rate is reduced to 5.03%. With unencumbered assets of 4.4 billion, 618 million of liquidity, and no debt maturing until 2027, we have eliminated financing risk in the medium term and have access to significant liquidity. Primaris has been in the market repurchasing units since March 9, 2022 under the NCIB. In 2025, we have purchased for cancellation 4.7 million units at an average value per unit of 1,509 or an approximate 30% discount to NAV of 2,158. Repurchases under the program in 2025 funded in part by proceeds from dispositions have already exceeded all repurchases completed in 2024. This program is very creative to unit holders. Given our strong results to date and confidence in the strength of our business, we are reiterating our 2025 guidance for cash NOI of $352 million to $357 million and FFO per unit of $1.78 to $1.82. This guidance accounts for accretive acquisitions completed during the year and no rental income from the remainder of the HPC leases. We do not anticipate any significant capex spend with respect to the HPC boxes in 2025 due to the timing of the CCAA process. Our guidance includes the impact of the acquisitions of Oshawa Center, Southgate Center, Limeridge Mall, and Promenade St. Bruno, and approximately $250 million in dispositions that have been completed. No additional acquisitions are incorporated into the guidance. We anticipate same property's cash NOI growth to remain in the range of 4% to 5%. We adjusted our occupancy guidance for the balance of 2025 to 85% to 87%, which assumes the HPC leases are disclaimed, and account for acquisitions with lower occupancies. Further details of our 2025 guidance can be found in Section 4 of the NDNA titled Current Business Environment and Outlook. We are also announcing 2026 guidance with an anticipated cash NOI of $385 million to $395 million, same property cash NOI growth of 1% to 3%, an FFO per unit of 183 to $1.88. This guidance includes the sale of Northland Village on or about December 31 of this year. No other acquisitions of disposition activity are considered. We have a lot of positive leasing momentum in our same properties that is offsetting the hurdles of HBC and Trudge R Us vacancy and the high volume of prior tax recoveries in 2025. If you are trying to reconcile same property NOI growth to FFO growth, it is important to note that one-third of the 2026 cash NOI guidance is attributable to 2025 acquisitions, which are not included in same property. Overall, we are pleased with our results for the third quarter. and are optimistic of the outlook into 2026 and beyond. Maintaining a conservative financial model and generating free cash flow after distributions and operating capital is a core focus from which we will not deviate from. And with that, I will turn the call back to Alex.

Thank you, Rags. We are very pleased with our results so far in 2025. 2025 has been a remarkable year for Primaris. 1.6 billion of strategic acquisitions completed, over 6% FFO per unit growth based on our 2025 guidance midpoint, continued strong leasing and operating results, our fifth consecutive annual distribution increase, a rising weighting in the TSX cap trade index, and a doubling of our trading volume as measured in dollars of units traded per day from about a year ago. We completed our three-year sustainability plan and established a new plan for the next three years. Our trustees are out meeting with investors today as part of our annual board engagement program. With visibility to controlling all HBC spaces by the end of November, we are confident that 2026 will be another remarkable year for Primaris. We'd now be pleased to answer any questions from the call participants. Operator, please open the line for questions.

Thank you very much. To ask a question, please press star followed by one on your telephone keypad. If you wish to remove yourself from the question queue, please press star followed by two. We'd like to allow our analyst to ask one question and one follow-up question. And then please return to the question queue. Our first question comes from Sam Damiani from TD Cowan. The line is open, Sam. Please go ahead.

Thanks very much, and good morning, everyone. So just on the HBC spaces, backfilling of those, you know, great initial progress, I'm wondering if you could just maybe give us a picture of sort of how you see it playing out. You've got 11 spaces. It looks like pretty much five are put to bed imminently. You know, how is that going to look in terms of leases to tenants that are sort of quick back fills with minimal capex versus maybe tenants coming in, maybe bigger tenants with longer commitments that are taking a little longer to ramp up operations and open their stores.

Good morning, Sam. Yeah, I mean, our ultimate goal is to get long-term leases with National Covenant tenants. The tenants we've done deals with right now, relatively short-term in basis, but we are optimistic that there's a chance they'll turn into longer-term. It might not be in the square footage they're in today. They might actually get a reduced size as we go forward. One of the issues with this process that started back when the bankruptcy was filed in March has been it's been a long process, and Ruby Lou ultimately had a lot of really quality property tied up. And the result of that has been that tenants have been rather slow in dealing with commitments. They wanted to understand the full inventory of the space that was available before they really pressed forward with their plans to commit capital for a new store opening. So with the announcement on Friday coming out, we really received a lot of positive inbound calls wanting to tour, wanting to start proceeding with discussions. So we're optimistic we can move a lot of the other deals forward on the remaining five locations. And even in the stores that we've tied up short-term with tenancies, while we're optimistic that we can keep them longer-term, we're going to continue to look at our options for quality tenants that can take them for the much longer term.

Thanks. And I guess with that sort of strategy, initial strategy, let's say phase one of the strategy, I guess it sounds like the CapEx for Primaris might actually be quite modest in relative to that sort of 150 million overall perhaps budget, certainly in the next couple of years. Would that be fair?

Yes, I would say that's a fair comment.

Okay. I guess that's my second question, so I'll turn it back. Thank you.

Thanks, Sam. Our next question comes from Mario Saric from Scotiabank. Please go ahead.

Hi. Good morning, and thanks for taking the question. Just coming back to your 26 SFO per unit guidance, can you discuss what SFO you reflected regarding the HBC backfill that Pat was just talking about? And as a follow-up, what are the key items in that guidance that are driving the 183 to 188 range? Thank you.

Yeah, so the HBC, I don't know that we have any cash rent coming in. There was some, but there's also some straight line rent. I can't recall the exact numbers, so we'll have to get back to you on that. You know, the guidance is really, we would almost look at it as two buckets. There's the same store, same property, which is sort of flat to up a couple of percentage points. And HPC is obviously the big factor there. So with the five other stores coming back, we had not assumed anything on those six, I should say. The five that we got in progress, we did embed some assumptions on that. And then we do expect some significant growth on the acquisition. So that's sort of what drove the overall FFO per share increase. There's a modest increase in And G&A, as you can see. And that's about it. It was pretty clean, pretty simple. We did not include, we reduced our assumption around the properties had to rebate because a lot of the appeals have now gone through. So we do have an amount in there, I think, about a million bucks. And that's about it. If you're looking for noise, that would be the only sort of non-recurring item, if you want to call it that.

I think just from a general guidance statement perspective, you know, the pace of developments that we've experienced since September 30th on HBC in particular, initially with the ruling from Judge Osborne and then the disclaimer of the leases on Tuesday, you know, the discussions have been pretty fast and furious and, you know, We have the three leases that we noted in the press release and in the materials, but there are a lot of other discussions ongoing. And so when you think just about how the timing of preparing guidance and the visibility into what, you know, has been executed, what is in process, I think, you know, I think as a general statement, we tend to be relatively conservative on what – you know, what we include in guidance. But, you know, at the same time, we're trying to be as accurate as possible and capture the spectrum of possible outcomes. I think if you look at the bottom end of the range, that would assume that we have nothing and, you know, and some other assumptions throughout the business. And at the top end of the range, you would include a little bit of HBC backfill revenue, mainly in the form of either sort of temporary tenant cash rent or, you know, if we turn over some space relatively soon, we get, you know, percentage rent or not percentage rent, sorry, straight line rent during the fixturing period.

But just to reiterate on the site, so we just put back We have not assumed any income on those steps. At the time the budget was prepared, we didn't know what the outcome was going to be.

Yeah, we were still waiting for the ruling from Judge Osborne when we prepared the forecast. We assumed that we were going to get them back vacant, but we didn't assume any PAC fill for any of those.

Okay, great. That's pretty clear. Thank you very much.

Our next question comes from Lorne Calmar from Desjardins. Your line is open, Lorne. Please go ahead.

Thanks. Good morning. Just on the 2025 guidance, on FFO, the range is still fairly wide despite there being just one quarter left. I was just wondering if you could provide some insight or some reasoning as to why you guys are giving yourself so much wiggle room here.

It's just kind of nailed down what the center end. And we also weren't sure at the time where we were going to end up with HPC, when exactly would the disclaimers kick in or not kick in. And, you know, sales have been strong, so just trying to factor in what's going on with sales because they have been surprisingly resilient given the economic backdrop.

Okay, that's all from me. Thank you.

Our next question comes from Tammy Bear from RBC. Ryan is open. Please go ahead.

Thanks. Good morning. It sounds like the leasing overall is going well in the business. Tenants still expanding. Can you elaborate on that and which tenants are in that sort of expansion mode versus some that might be shrinking? And then I guess the second part of my question is, you know, for Q1, typically we obviously do see some seasonality. And are you anticipating anything outsized in terms of bankruptcies or closures or anything in terms of the watch list?

Tammy, yeah, no, leasing is going very well. I mean, as I noted in my speech, I think there's Canadian and U.S. and international retailers expanding. We've done some deals with Uniglo. We're in discussions with Victoria's Secrets for new stores. Aritzia is looking to upsize. Lululemon is adding stores. Bath and Body Works is upsizing. Canadian side, you've got Softmock looking for more space. Browns is Brown's is looking to capitalize on the closure of HBC and is looking for new stores. They're seeing a net benefit of footwear traffic flowing into their stores now that HBC is closed. There's a number of Southeast Asia retailers opening in Canada right now, Kiyoki being one of them. So there's lots of new activity going on in the malls, which is great. On the other side of it, one thing we did build into our budget that we do anticipate is Toys R Us failing in the new year. We have factored that into our numbers, and that's something we've been expecting for some time, and we're being proactive on the replacement tenants, and we have a good handle on all the space right now to replace. So on the small shop side, there's really not a lot of noise right now. The watch list is very limited. Claire's came out of their troubles with a new purchaser, so that situation's stabilized. Otherwise, nothing much more on the horizon.

Thanks very much. Sorry, just one follow-up. The Toys R Us you mentioned, can you just remind us how much square footage that is in total in the portfolio and, I guess, NOI exposure for rents?

I'm going to have to get back to you on that. Going off the top of my head. Memory serves it was six stores. The average store is about 20,000 square feet. Thanks very much. Two, we already have vacant possession of two already, and we're working on the replacement.

Our next question comes from Tal Woolley from CIBC Capital Markets. If your line is open, Tal, please go ahead.

Hi. Good morning, everybody.

Good morning, Tal.

I just wanted to talk a little bit about you've got a lot of college towns in your portfolio, and there's obviously been a lot of, conversations around immigration and the impact, particularly on those markets. And there's been some discussion in residential markets about what's going on. Just wondering how you're seeing that. Are you seeing any impact from changes in approach in malls like Conestoga or maybe Cataraqui and Kingston? There's a handful of names that could probably rhyme off there, just to see if there's been any change at the CRE level.

No, I can't see I've seen any correlation on that side of it. I think mall sales have been doing exceptionally well. Back to school was very strong, and that's a big indicator because that's when a lot of the kids are back shopping, looking for supplies. In September, preliminary numbers on September I looked at the other day, and they were very good as well. So, Sales continue to be strong, but I really haven't seen any correlation between the university attendance and the international student makeup and sales of the properties.

Got it. And then just when I look at your occupancy, you know, if I look last year versus this year, like this quarter last year versus this year, you have more of your occupancy in these shorter-term leases. Is that a function of –

um just acquisitions or is there something else going on there too uh yeah i think i think the occupancy sure the malls that we bought have uh have rather um they have low occupancies for the most part like oshawa had a significant amount of vacancy and i think as you can uh as you've seen by the numbers the mall sales are doing very well and we've been leasing up a lot of space but um like limeridge Deller to Capitel. I mean, these have been very opportunistic buys for us because they have not had the attention that perhaps we're affording to them. And not that the previous owner did a poor job. I think just in their greater portfolio, they had some much higher profile malls that got a lot more attention. And we're certainly giving them the attention they need. In the remainder of our portfolio, we have pretty good occupancy levels, and we're driving that forward still. But the opportunity really lies in the malls we've acquired.

Go ahead, Alex. Sorry, Tal. I was just going to say that, you know, one thing that struck us as we were going through the quarterly analysis internally is, you know, 30% of our portfolio by NOI by value has been acquired this year, and almost 40% has been acquired in the last four quarters. So we have a tremendous amount going on. And, you know, your question about, you know, whether we're seeing any impact from, you know, foreign students and things like that, I think the mall business is a lot like the office business right now where, you know, if you own the AAA product, it is going extremely well. Occupancy is essentially full. Rents are at all-time highs. And if you own the C product, you know, you're having a very, very difficult time. And so what I think, you know, may not be fully appreciated is just how much we have transformed this portfolio. And, you know, some of that shows through in some of our metrics. If you look at, for instance, I was looking at our leasing activity and in Q3 2025, our average new tenant CRU rent was over $50. And then if you look at that same number two years ago, it was $35. And, you know, that's not on a small number of leases. It was 88 leases this quarter, 38 leases two years ago. The average rent for the whole portfolio is $29, up from $25. Our pro forma average sales per square foot across the whole portfolio was $800. Two years ago, it was $621. The business has really changed quite a bit. The macro backdrop, I think, is something that a lot of people put a lot of emphasis on, but You know, I think supply and demand of space is really what drives our business. And for the space that we own, there's a lot of demand.

And just for the short-term leasing component, like, versus the long-term in-place occupancy, like, that's sort of picked up from just below 3% to 4%. I assume, again, acquisition mix has, like, driven that up probably, too. But, like, do you have, like – I'm assuming you're always going to have a bit of short-term leasing in this business. And so is there a number like where ultimately you want to get that to?

I don't think there's a – well, I think you – my obvious answer is I'd love to have none. But you're right. We're always going to have some because we're always trying to re-merchandise the properties. I think the max occupancy for Primaris at peak, you know, back 15 years ago was probably around 96%, 97%. And that's just simply related to the fact that we always had space that was swing space and re-merchandising. That's part of the business, and that's how you continue to grow rents is you have to re-merchandise. But you're right. The additional – the uptick in our specialty leasing space or our temporary space is really tied to the new acquisitions where there was a lot of vacancy in place that was occupied by temporary tenants.

Okay. Got it. Thanks very much, gentlemen.

Thanks, Sal. Our next question comes from Mark Rothstroud from Canaccord. Your line is open, Mark. Please go ahead.

Thanks, and good morning, everyone. It sounds like in general the demand is there, the fundamentals are good. To what extent should we be reading into a trend in leasing spreads? Obviously, it could be lumpy quarter to quarter, especially with or perhaps symbolized releases, but looking at the tenant past three quarters, just want to know if we should be reading into that and, you know, what should we expect the trend to be over the next few quarters with your visibility on leasing?

Hi, Mark. Yeah, the renewal spreads, there's three trends. If we removed three tenants from this number this quarter, it would have been 2% higher. I think we've generally been guided to the mid to high single digits. And I think that trend is going to continue. It always depends on the subset of tenants that's expiring. But while we're still in the phase of driving the occupancy higher, we've tended to hang on to tenants that perhaps in another time we would have let go just to maintain occupancy. So we're still working through the Bay portfolio and driving occupancy higher. So I still think mid to high single digits is the right number.

Okay, great. And maybe one more, which I think you've kind of spoken about already, just to make sure I understand this clearly. For your guidance range for same property in Hawaii for 2026, at the top end, what would that assume from HBC sites, and to what extent could that be exceeded if you get more leasing done in time, or is it just not likely to lead to a lot of rent in 2026 just because of the work you might do at those sites?

Yeah, I mean, there's a bunch of moving pieces there. And, you know, when you think about the types of tenants that are going in, if you're going to take a full HPC store and the tenant is going to build out the space, we're probably going to give them 12 or even 15 months of build-out time. And during that time, they wouldn't be paying any cash rent, so we would be collecting straight-line rent in terms of our FFO. Other tenants we're going to bring in, you know, have less of a capital investment strategy, you know, maybe shorter term in nature. And then we have some where, you know, we're contemplating redemising into CRU, which, you know, involves a lot more capital, but also would generate, you know, $70 and even higher than that average rents on the resulting CRU space. So a big part of what the, I guess, the variability in our 2026 guidance is really about the timing of all of this. And I would say, you know, the early results are pretty impressive in terms of how much leasing activity we've gotten done on HPC space since we got control of the first five of them back in June. But even with that control, you know, it's really about the timing. I think We don't have guidance for 2027, but I would say it's a lot easier to forecast, you know, what the financial results will look like in 2027, because 2026, if something comes in in Q1 versus Q3, you know, that's a huge swing, whereas, you know, we're pretty confident that a lot of stuff's going to come in through 2026, and stuff that doesn't come in in 2026 is likely to come in in early 2027, very early 2027. And so, the 2026 number is, you know, it's still, there's still a fair bit of play in there.

Yeah, that makes sense. Okay. Thanks so much. I'll turn it back.

Thanks, Mark. Our next question is from Brad Sturges from Raymond James. The line is open, Brad. Please go ahead.

Hi, there. Good morning. Just continuing along the lines of HPC questions, just on the stores that you're getting back or get control of in November, how would you characterize the prospects in terms of leasing to a single tenant or multi-tenant or the requirement around maybe more of a redevelopment or capital requirement to release the space versus what you've already had control of for a little bit longer and you've done some short-term leasing? in the first few stores.

Hi, Brad. Yeah, the stores that we're getting back now were clearly really high-quality locations. That's the Ruby Luit tied up a lot of the best quality real estate that HBC had in Canada. And so we've been working on replacement tenants with these boxes for quite some time. We pretty much know where we're going with this, and it's going to be a mix of there's a potential for a single. There's more likely most of them will be multiple tenants, two or three boxes, and one will be in a likelihood a lot more CRU. And the CRU one will generate higher costs, but it will also generate very high returns because the CRU rents are so high. So it's going to be a mixed bag, but it's all high-quality real estate, and I think we can hopefully get some transactions put to bed pretty quickly, as we've already had pretty advanced discussions with people to this point.

Okay. My other question would be just on, you know, the investment activity or transaction activity that Primaris has completed or, you know, just more on a go-forward basis, I guess, more specifically. Given you've had a lot of success on the acquisition side and you've high-graded the mall portfolio quite extensively, where do you rank acquisitions in terms of priority going forward? And how should we think about Primaris' transaction activity, I guess, over the next 12 months?

Thanks, Brad. So, yeah, we're almost $1.6 billion of acquisitions this year and $250 million of dispositions. You know, we've got Northland Village, which is, you know, ballpark $150 million disposition that we're hoping to close by the end of the quarter. So that will get us to about $400 million. And, you know, when we think about the ratio of acquisitions to dispositions, You know, it might be a three-to-one kind of a range. So we still have more disposition activity that we'd like to get done in the relatively near term. You know, transacting is a lumpy kind of an event, and each transaction is unique. But we do have some priorities in terms of dispositions, as you can see in our assets held for sale bucket. On the acquisition side, it is also very lumpy. We don't have anything that I would describe as being in any advanced stage or any serious focused negotiation, which is different from the status that we've had for most of the last three and a half years, frankly. But we're optimistic that we'll be able to find some more additions for the portfolio over the next 18 or 24 months. We have a number of properties that we've identified that we'd really like to buy, but it takes a willing seller, a willing buyer, and a meeting of the minds on price. So I think you can expect to see more on the disposition front in the near term than on the acquisition front. We also have a lot of, I mean, when you come to our office, it's a beehive of activity. And we have an awful lot to do in terms of HBC backfills. We're doing a lot of master planning of properties where we see, you know, opportunities for, you know, severing land and selling to developers or, you know, building parcels for our own account, you know, There's an awful lot going on in our business, and, you know, it's all great stuff. But, yeah, I mean, to your point, the emphasis is less on acquisitions today than it has been at any point in the last three and a half years.

That's great. Thanks a lot.

Thanks, Brad. Our next question is from Matt Cornick from National Bank Financial. Your line is open, Matt.

Please go ahead. Good morning, guys. You mentioned a number of tenants are expanding. Should we think of kind of this HPC opportunity as an ability for new entrants to come into the mall, or do you think it will create a little bit of musical chairs for existing tenants, maybe moving around and backfilling them with others?

Hi, Matt. Yeah, I think in terms of new entrants, there are tenants looking for space in Canada that are struggling to find expansion opportunities just because of the lack of available space and nothing new being built. So, you know, tenants like Uniqlo, this presents an opportunity for them to expand their footprint where there was a lack of space in the market. And then on the CRU side, it has given us the ability to actually be able to consider CRU for the bankruptcy of HBC, whereas In the past, with Sears and Target, I don't think that real opportunity was as prevalent for us. And the CRU pays very good rent. So, yes, but in addition, I do think there will be some musical chairs with tenants, you know, relocated from other developments, perhaps expanding within our own properties, whatever it might be. So it's going to be the same to an extent that it was with Sears and Target. Okay.

Yeah. Okay. And then just maybe quickly, if you took out the noise from both years from HPC, are you still kind of expecting the rest of the portfolio to be in that kind of 3% to 4% same property NOI growth range? And would that be a function of occupancy improvement, or is it still capturing of the change in kind of the accruals that you've been able to charge back to them?

Yeah, I think your comment's fair, and I think it's really driven by occupancy. We're doing a lot of new leasing that's continued. Our recovery ratios are still only in the low 80s, and we're continuing to see growth in that every year. And that's going to continue for quite some time until we get back to our historical norms, which are more than 10% from where they are today. So, yes, I think outside of the day, the business is very solid.

Maybe very quickly follow up to that last point. What time horizon do you think you can kind of recapture that for?

I'd like to say it's a debate. Yeah, I mean, I'd like to say it's probably going to be in the three-year time frame of our forecast where we can get our occupants back into the mid-90s.

There's no question 26 is a bit of a transitional year dealing with – of some bay, but 27, 28, you should start to see that acceleration. I mean, we took a small step back on recoveries, and that was wholly a function of the bay. And so we can start to work that again. But you're at 26. When you get into the latter half of 26 and move into 27, you're going to see quite the acceleration.

Makes sense. Appreciate the color, guys. I do want to circle back on Toys R Us just for everyone's clarity. So we had six. We terminated two last month. We have four remaining stores. The average, it's 104,000 square feet. The average base rent is well below our average in the portfolio. It's only $14 a foot. So good opportunity. And one of those locations is at Dufferin where we know we could grow the rent substantially. Okay.

Our next question comes from Gaurav Mathur from Green Street. Your line is open. Please go ahead.

Thank you, and good morning, everyone. Just a quick question on the forward guidance. What are the renewal spreads that you're underwriting internally when you're considering both the initial net rents and then also with the contractual rent increases?

Hi, Gaurav. Our I guess our de facto policy is we generally try to target 2% to 3% annual rental rate escalations in our leases. And that does play into cash, same property, and Y growth. It doesn't show up in our FFO because of straight lining of rent. So that would be on the sort of step rent side of things. In terms of the leasing spreads, we continue to struggle a little bit with – it's not an input. I know how you might model our business, but it's not how we would model our business in the sense that we have spaces and we know what we can generate from those spaces. Often it's a function of the tenant that we can put in that space. And so – It's a little bit, you know, we don't really emphasize the leasing spreads as much as you might in other retail property types. You know, there are differences. We proactively, you know, try to encourage about 25% turnover on an annual basis in our business. You know, we're trying to really fine-tune the merchandise mix on an ongoing basis. And so... you know, the leasing spreads as well. Pat was addressing it a few minutes ago. We're still seeing some, you know, statistical subduing of our leasing spreads because we still have some of these gross rent and percentage rent in lieu leases that are being converted to net rent leases. And those leases tend to offer the largest positive NOI impact for us, but we can't put them in. I mean, we could put them in, but we just decided that it was too much funny math to try and convert them into some sort of a form that could be captured in the leasing spread. But the trend over the next few years is going to be that our leasing spreads are going to be stronger. But that, again, that may not actually translate into an acceleration relative to what would otherwise be the case of same property in Hawaii. because we're already capturing it through conversion of these leases that are non-standard into net lease structures. So I guess I've been rambling now for a little bit about leasing spreads, but it's not as much of an input into our business as it might be for others.

Okay, understood. Well, thank you so much, Alex. I'll turn it back to the operator.

Thanks, Carl. Our next question is a follow-up question from Sam Damiani. Your line is open. Please go ahead.

Thanks. First one is just on the disposition, I guess, ambitions over the near to medium term. How would you characterize the market today versus maybe three, six, 12 months ago in the transaction market?

Yeah, I mean, we're seeing some interesting signs of capital growth becoming more available. We saw a transaction for 50% non-managing interest in a mall that we would target for ownership, which was the first in some time. And that was at about a 7% cap rate, which is very constructive for our valuations. On the disposition side, you know, it continues to be a relatively thin market from a depth of bidding perspective. There are quite a few parties that show up to the auctions for properties like the ones that we've been selling. But I think the decline in interest rates and increased availability of credit are two positives on that front. So we continue to be pretty optimistic that we'll be able to continue to execute on dispositions.

It's really choppy. So, I mean, that's what we're seeing. It depends which day of the week you call us. It is really kind of all over the place. It's hard to get any firmness of sense that there's a trend one way or the other.

Understood. And then just lastly, on the Lime Ridge full space lease for the former Sears, I mean, that's great to hear. I wonder if you could just give us a little bit of a background there, how long that took to get across the finish line. Was it in play with the vendor? Any color there would be helpful.

Yes, there was a discussion that was going on before we ended up buying the property. We advanced it very quickly once we closed on the property and brought it to a resolution very fast.

Okay, great. Look forward to that. Thanks and congratulations.

We currently have no further questions, so I'd like to hand back to Lesley for some closing remarks.

Thank you, Operator. With no further questions, we will close today's call. On behalf of the Primaris team, we thank you all for participating, and happy Halloween.

This concludes today's call. We thank everyone for joining. You may now disconnect your lines.