Primaris Real Estate Investment Trust

Good morning, and welcome to Primaris REIT's second quarter 2026 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 a follow-up, at which point you may return to the queue. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now turn the call over to Claire Mahaney, VP Investor Relations and Sustainability. Please go ahead.

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. 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 are contained in Primaris REITs filings with securities regulators. These filings are also available on Primaris REITs website at www.primarisreit.com. I'll now turn the call over to Alex Avery, Primaris' Chief Executive Officer.

Good morning. Thanks for joining Primaris REIT's second quarter 2026 conference call. Joining me today are Pat Sullivan, Raghunath Davloor, Julian Schonfeldt, Leslie Buist, Mordecai Bobrowsky, Graham Procter, and Claire Mahaney. Halfway through our fifth year post spinout, we are having a lot of fun at Primaris. All of the hard work over the past five years is manifesting in our financial and operating results. It has been a remarkable five years of change. with 70% of the portfolio new since 2021. We have moved from the 19th largest capped REIT index member to the ninth, driven by sector leading FFO per unit growth, significant portfolio growth through net acquisition activity, and as our FFO and AFFO multiples have expanded to the low end of our peer group. We are still in the early innings of the mall recovery story. In June, we announced visibility to approximately $52 million of incremental annual cash NOI from leasing activity expected to commence over the next three years, underscoring what we believe is one of the strongest embedded growth profiles in the Canadian REIT sector. With in-place occupancy currently sitting at 86.6%, we have approximately 1,000 basis points of occupancy gains ahead of us to get us to stabilized occupancy of 96%. The $52 million we have identified comes from three sources. First, signed and committed deals. Second, future lease up at our 10 most productive centers. And third, lease up of the 10 former HPC spaces that are now 84% leased or in advanced negotiations that rents four times higher than previous. Compared to the midpoint of our 2026 guidance range, this represents more than 13% Thank you for joining us today. and further strengthen its position as Canada's leading owner of dominant enclosed shopping centres. With that, I'll now turn the call over to Pat, who will walk you through our operational results for the quarter.

Thank you, Alex, and good morning, everyone. Year to date, tenant demand remains robust, with both the quality and volume of executed deals continuing to improve. CRU leasing performance is outstanding, driven by record leasing volume, Strong Renewal Spreads, and Sustained Tenant Demand. Leasing activity across our former HBC locations continues to accelerate, with retailer demand well ahead of our initial expectations. Benefiting from a constrained retail supply environment and the high quality of these real estate assets, we have leased our advanced negotiations on 84% of the former HBC space, including 58% that are under long-term lease agreements. Upon commencement, these leases are expected to contribute approximately $19 million of annualized net rent or $22 million of cash NOI from a diversified roster of high credit quality tenants. We believe the full impact NOI could be higher as this analysis does not account for the benefit to adjoining retail premises, some of which are currently vacant, that will benefit from being next to new tenants generating higher traffic. These leases executed to date are at rents nearly four times that have previously generated by HBC from the same space. Anticipated cash rent commencement from redeveloped HBC locations will begin in some properties as early as early 2027 with overall yields expected to be approximately 10%. On to our operating results. Same property NOI performance this quarter was fundamentally very strong, driven by rising base rent resulting from strong leasing volume, as well as rental escalations and high percentage rent driven by rising sales. The reported 0.5% increase in same property cash NOI was impacted by $0.4 million in prior year property tax recoveries, as well as $1 million in lower rental revenue due to the disclaimed HPC leases. Excluding the $0.4 million contribution from the recovery of property taxes last year, same properties cash NOI would have seen an increase of 1.1%. Notably, Q2 2025 was the last quarter of full rents from HBC. We anticipate the same property NOI growth is likely going to jump next quarter, accelerate further in the fourth quarter, and again in the first quarter of 2027. We expect it to then remain elevated for the following 10 quarters. Leasing activity was extremely strong during the quarter with 109 leases renewed across 482,000 square feet. CRU leasing spreads were 5.8% and 7.4% for the overall portfolio. 51 new deals encompassing 213,000 square feet were completed during the quarter, including 45 new CRU deals for 86,000 square feet. New CRU leases completed during the quarter were completed at a weighted average net rent of $52.20 per square foot. For context, average CRU rents in the portfolio have risen to $50.69 per square foot as at Q2 2026 from $42.02 per square foot at the end of 2022. The portfolio's 91.1% committed occupancy compared to 86.6% in-place occupancy represents 450 basis points of embedded occupancy growth already under contract. This committed space provides approximately $15 million of base rent, a strong source of future NOI growth, and demonstrates the momentum of our leasing program. Another key occupancy stat for us is CRU occupancy, which refers to the space under 15,000 square feet. CRU in-place occupancy improved 290 basis points to 92.3% from 89.4% a year ago. Same property CRU occupancy is even higher at 93.1%, reflecting the lower CRU occupancy in newly acquired centers than our portfolio average, which provides significant income growth in these high-performing centers. Occupancy is a key driver of recovery ratio improvement, and CRU occupancy has the greatest impact on this metric. Many of the properties acquired since 2022 had an elevated CRU vacancy and are leasing efforts to reduce this vacancy at malls such as Conestoga, Devonshire, and Oshawa Center have resulted in higher NOI over the past few years. With continued strength in new CRU leasing coupled with accelerating leasing progress with HBC replacement tenants, occupancy and recovery ratios will continue to improve at our properties, including newly acquired top tier centers such as Oshawa and Galleria de la Capital where recovery ratios remain well below our target levels. Sales continued to be strong with all-store sales volume at $3.5 billion and sales per square foot at $825 per square foot for the 12-month period ending May 2026. Notable increases were realized at Orchard Park, where sales volume is up 10% to $220 million, and at the Halifax Shopping Center, where sales volume is up 8% to $300 million, as well as Southgate and St. Bruno, which are growing at high single digits. Conestoga Mall, which we called out last quarter, is now producing over $200 million in sales volume as a result of the significant leasing activity at the property. In Q2, we approved a $50 million redevelopment of the food hall at Promenade St. Bruno. At present, the food hall area encompasses approximately 30,000 square feet and generates substantially no income. The project is expected to generate approximately 10% return and will be completed within 24 months. In closing, strong leasing momentum, accelerating HBC retenanting, and a strengthening tenant roster positions us for meaningful NOI growth in the years ahead. The underlying fundamentals of the portfolio remain exceptionally strong, reinforcing our confidence in long-term value creation for unit holders. With that, I'll turn the call over to Julian to discuss our land optimization strategy, dispositions, and acquisition outlook.

Thank you, Pat. And hello, everyone. Alongside this tremendous operating momentum, we are actively executing on our land optimization strategy, which is focused on unlocking value from excess and underutilized land across the portfolio that generates little to no NOI today. We have identified a potential pipeline of $275 million to $375 million of excess land, which we intend to monetize over time. Unlocking embedded value and generating an additional source of zero-cost capital to fund future growth within our core portfolio. By monetizing these land parcels and redeploying the proceeds into our higher-yielding enclosed shopping center business, we can create meaningful value for unit holders while remaining focused on our core strategy. Several sites are already under contract or actively being marketed. Importantly these opportunities have been evaluated to ensure they can be executed without disrupting mall operations. As a reminder, we have no intention of owning, managing or developing residential properties ourselves. In Q2, we also completed some smaller but strategic shopping center transactions totaling $100 million of dispositions and $68 million of acquisitions, improving the portfolio quality and metrics, as well as simplifying our balance sheet with fewer co-owned properties and less secured debt. The dollar amount may appear small, but the impact to our broader portfolio metrics are meaningful. Occupancy at the disposed properties was higher than that of the remaining portfolio, However, the tenant mix was weighted towards short-term and specialty leases, reducing the overall quality and stability of cash flow. These transactions contributed to the sales productivity increasing to $825 per square foot, long-term in-place occupancy growth to 83.5%, and weighted average net rent per square foot growth to $32.84, resulting in a significant increase in cash flow quality and durability. Beyond excess land, we've also identified approximately $200 million of non-core retail pads and other assets beyond what is currently reflected as assets held for sale that may be monetized over time. Together, these initiatives represent a significant source of low-cost capital to fund future growth and enhance portfolio returns. Turning to acquisitions, the annual cadence of pension fund activity in Canada has driven a meaningful uptick in discussions around acquisitions over the past month. We remain optimistic that we could acquire one or two or even three malls this year, though nothing is in that advanced stage or has any certainty today. As a reminder, our target acquisitions are typically in the $300 million to even more than $600 million range for each mall. With that, I'll turn the call over to Raghs.

Thank you, Julian, and good morning, everyone. Primaris supported FFO per unit of 45.1 cents per diluted unit, up 1.3% for the quarter over last year. This year-over-year increase was achieved despite the impact of approximately $1.9 million in terminated transaction costs, 0.4 million of lower prior tax recoveries recorded in 2026 over 2025 and 1 million of lost rent from the now disclaimed HBC leases. Excluding the 1.9 million in terminated transaction costs and the 0.4 million impact of prior tax recoveries, FFO per unit was up 5.4%. This growth, even after absorbing the loss of $1 million of HBC revenue, speaks directly to the strength of our underlying core portfolio and operating business. We achieved these impressive per unit results despite non-core asset sales over the last 12 months and the impact of the disclaimed HBC leases. If you're trying to reconcile same property NOI growth to FFO growth, It is important to note that over one-third of our 2026 cash NOI guidance is attributable to the 2025 acquisitions, which is not included in same property NOI, which have also benefited from strong NOI growth due to robust leasing activity. As a result of this dynamic, we have added new disclosure on quarterly same property cash flow growth in Section 9.1 of the MD&A. Consistent with prior years, NOI growth from recent acquisitions has boosted overall NOI growth. We're also reaffirming our 2026 guidance, most recently updated and disclosed in our press release dated June 29, 2026. Turning to the balance sheet, we remain very comfortable with our financial position. At quarter end, average net debt to adjusted EBITDA was six times, liquidity was 655 million, and we continue to have no debt maturities until 2027. In March 2027, we have 250 million in unsecured debentures maturing at 4.82%. Today, we could issue five-year unsecured debentures at approximately 4.25%. We remain disciplined in our approach, well-capitalized and well-positioned, to continue executing on both internal growth initiatives and selective external opportunities. With that, I'll turn the call back to Alex.

Thank you, Raghs. As you can see, our team continues to deliver remarkably strong leasing activity and very solid operating results across the portfolio. Our progress is increasingly being recognized in the capital markets, with our weighting in the TSX capped REIT index rising to over 5%, and our trading liquidity now nearly five times what it was two years ago as measured by the dollar value of units traded per day. We saw strong engagement from the investment community at our recent Oshawa Center property tour. The event provided investors with a firsthand look at one of our dominant centers that we have added through our acquisition program and showcased the significant leasing progress, redevelopment opportunities and long-term growth potential embedded within the asset. Building on that momentum, we look forward to welcoming investors to our upcoming investor day at Promenade St. Bruno this fall, where we'll be able to provide a deeper look at our strategy, portfolio strengths, value creation opportunities, and the substantial growth runway we see ahead. We'd now be pleased to answer any questions from the call participants. Operator, please open the line for questions.

Thank you. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. You may ask one question and a follow-up, at which point you may return to the queue. We'll pause for just a moment to compile the Q&A roster. Your first question from the line of Lorne Kalmar with Desjardins. Your line is open.

Thanks. Good morning, everyone. Julian, you mentioned a bit of an uptick in conversations around acquisition with the pension funds. Just wondering if you could elaborate on exactly what's been driving that.

I think as we're approaching year-end and folks are looking at their targets or goals for the year, that can tend to be a bit of a driver. It's hard to understand everyone's specific or unique motivations in the background, but we are relatively active with them. Nothing that's advanced, but with the cost of capital that we have now and the access to capital that we have, that could potentially be driving it. You know, again, nothing specific to report right now, but we're hopeful that we'll be able to drive at least one this year.

Okay. And then I guess you kind of alluded to it a little bit there, but just with the stock now trading above IFRS, it obviously changes or can change the calculus on the on the transaction structures. Has that been reflected at all or have conversations changed at all as a result of that?

I'd say it gives us more tools in the toolbox to use to affect the transaction and we're not shy about bringing that up. We remain open to using structured acquisition structures but ultimately Yeah, it gives us more tools in the toolbox, and we're not shy to mention that.

Okay, thank you very much.

Your next question from the line of Mark Rothschild with Canaccord. Your line is open.

Thanks, and good morning. Alex, you made a comment about the market, the capital markets recognizing increasingly the value of primarist units, and obviously the enterprise has done quite well of late. To what extent does this correlate with any moves at all in cap rates in the market or the prices of deals that you're seeing? Or is it simply that unit price was just severely undervalued for some time?

Thanks, Mark. It's very difficult to ascribe the reasons behind a stock price movement, as you know. I would say a couple of observations though. What we have seen in the direct property market is a significant uptick in the number of parties interested in acquiring closed shopping centers. Most of those parties remain focused on sort of the mid-tier and lower type properties and generally ticket size of under $200 million or maybe $150 million. So I think that I think that's probably a part of it, but also the liquidity in our stock was really probably the biggest thing. When we talked to some of the trading desks about what is happening with our stock, there's a couple of dynamics that they consistently cite. One is Very large institutions that were constrained by a lower daily trading volume that we had until earlier this year or late last year. And then the second thing is, I think there were a number of investors who didn't pay a lot of attention to Primaris when it was a smaller index weighting. And you can probably skate by without having any exposure and then It all sort of came together at the same time as the liquidity increased, our weighting in the index increased, you had First Capital announce their privatization, which I think also created a little bit of a tailwind for retail property broadly. So it was a bunch of different things, at least that's how we see it, but it could be something entirely different that we're not aware of.

Yeah, Mark, on the land side, what I would say is

You're right, the market has changed and particularly as it relates to residential being PBR and condo, it's come down in many markets. But I'll say we're not just focused on that. We're looking at all different asset classes. So seniors housing has become quite interesting, hospitality as well. We're even having discussions on student housing and self-storage depending on the site. So I wouldn't take the depressed residential in some markets to be a sign that we're not going to be active on it. We're looking at highest and best use for each market separately and we're active. I'll even say on the residential side, there are some markets that are still holding up strong and that can still benefit from favorable government incentives as well as favorable financing. So again, we're not in a rush to do something if a particular market or use is challenged, but we are being creative. We're talking to parties across kind of the entire landscape. So stay tuned. Okay, great. Thanks so much.

Your next question from the line of Pammy Beer with RBC Capital Markets. Your line is open.

Thanks. Good morning. Just given the progress on the leasing and I guess your comments on organic growth, how do you think same-property NOI growth shapes up in 2027 versus, say, that standard 3% to 4% three-year target that you've got it to?

Yeah, Tommy, it's sort of a little bit of a TBD. What's really going to dictate it is just the cadence and the timing of when these leases all roll in. And we are approaching our budgeting process for 2027 and beyond, which we'll be doing over the next 30 days, 45 days. But I think qualitatively, you could say we expect our same property to exceed that 3% to 4% range. for the next three years consistently and how much it's going to exceed that by or where it sort of lands. A lot of it could land in one year or it could be equally spread out. It really just depends on when all of the leases take effect. But yeah, I would think it would be 4% plus consistently for a fairly long period of time.

Got it. That's helpful. And then just maybe as a follow-up, on the terminated transaction costs that hit G&A, I'm just curious if you can maybe share any color as to maybe why that deal did not go forward or if it was multiple deals or one and just any insight would be perhaps helpful.

Yeah, sure. When we were looking at a transaction that was a portfolio disposition, and part of the reason the fees were more significant than we would typically see on a property transaction was that it had structure in the same way that when we acquire properties, we give the vendors preferred equity and equity. And so think about a very similar transaction, only Primaris is the vendor. And we were doing that because We had concerns that we would not have enough capital to fund all of the acquisition opportunities that we encounter. And ultimately we ended up terminating the transaction when two things happened. One was that we had success finding buyers. We had unsolicited interest arrive for McAllister, for Marlborough. and we've now concluded two of those enclosed mall transactions. So it became easier for us to sell properties because as I mentioned earlier, there's quite a number more people interested in buying the mid-tier mall properties. And the second thing is that our stock price moved from 14s last year up to 19 at the time that we terminated the transaction. And As Julian was saying, with our stock price higher, when we engage with prospective vendors, it's an easier conversation. You can imagine that a few years ago when we were trying to get people to take our stock at $22 when it was trading at $13, it was a bigger discussion point than it is when your stock's within $1 or $2 or $3 of the IFRS fair value.

Thanks very much.

Thanks, Paulie. Your next question from the line of Sam Damiani with TD Cowan. Your line is open.

Thanks. Good morning, everyone. Just on the recovery ratio, it's not in your guidance officially, but give some thoughts as to where that would land in 2026 for the full year and into 2027.

Hi, Sam. Yeah, I think HBC has somewhat muddied the water in terms of our recovery ratio. It is a difficult measure to talk about quarter to quarter just because it's driven by the timing of the spending throughout the year. And it's something really that I tend to focus personally on at the end of the year when all our spending is complete for the cycle and we've recovered all the money that we're going to the tenants. It is definitely going to trend upwards simply because of all the CRU leasing we're doing. The number one driver in recovery ratio improvement is occupancy, and the CRU occupancy is the primary driver of that. So as a lot of these committed leases kick in, our recovery ratio will improve. Some are held back by our tax recovery ratio on the HPC boxes. but I suggest it'll be slightly stronger towards the end of this year and particularly stronger at the end of next year.

Okay, great. Thanks, Brad. That's super helpful. And maybe just a couple smaller modeling questions. I noticed the percentage rent jumped quite a bit this quarter. Was there anything unusual in there? Any reason not to sort of look at that as a run rate at least for a second quarter? And... Sort of similar on the specialty leasing revenue. Is that a line item that might taper off as some of these long-term leases take effect?

And so the percentage rent is driven by the timing of the tenant's lease year-end. So tenants, it's not always January to December. Some tenants have... Their lease year is ending March, some June, some October. And that kind of drives the timing of when their percentage rent gets paid. So it becomes difficult to model in terms of quarter to quarter simply because it's driven by the cycle of the tenants when they're expiring. But the percentage rent jump is completely tied to the sales increases. I mean, it's the benefit of having tenants report sales is that... Thank you for joining us. theoretically drop, although we have other initiatives that are driving it higher, such as branding and other promotional activities. There is a spike right now coming in Q2, Q3 that's driven by large format tenants taking some of the bay boxes that haven't started construction yet, specifically Spirit of Halloween, which those opportunities won't be available to them next year.

Got it. Thank you. That's really helpful. I'll turn it back.

Your next question from the line of Matt Kornack with National Bank of Canada Capital Markets. Your line is open.

Good morning, guys. I just wanted to go into the cadence a bit more of the increase in occupancy. How should we think? Like, have the easy bay deals already been done and that's in your committed occupancy and then now you're going to kind of expand existing tenants into spaces? and that will take more time structurally. I mean, you mentioned 13 quarters of really solid growth. We're just trying to understand is it front end weighted or is it actually kind of tempered by the fact that there are structural limitations to how much you can do in a particular period?

Matt, yeah, no, there's still a lot of bay leases that, bay replacement tenants that have not been Signed off completely yet. So there's going to be a jump, a continued jump in the committed for the next few quarters to start with. And then a lot of the store openings take place over the next, say, 24 months. It all depends on the complexity of the redevelopment and when we start. So we've started in Gallery de Capitelle and we're going to see some tenants opening early in 2027. You know, Lime Ridge, the Bay, the Walmart, which which is not in a bay box it was in a sear box sounds like they're going to open much earlier than we all anticipated they're going to open in November it sounds like versus the original thought of January but it really is just being driven by the timing of the openings and we expect those that timing to just be stretching out over the next 24 months 24 to you know 30 months actually and that's the that's the HBC side of things if you go back to our Q1 results you saw the

Thank you for joining us. and more 2027, 2028. It all layers together though. It'll be a pretty consistent ramp for a while, but the different moving parts kind of contribute at different times.

Makes sense. Maybe switching gears to the acquisition side of things and just You mentioned you've traded quite well. You're at a premium now to your IFRS value. How should we think of the structuring of deals going forward? I mean, in the past, it was almost by necessity that you kind of issued some shares as you were doing these deals. But is there the potential that now you do an entirely cash deal and issue equity and go about it that way? or do those structured deals still make sense in the context of the size of these assets?

You know, Matt, it's kind of an ongoing and dynamic discussion, but kind of touching on what I was saying earlier on the call, it just gives us more tools in the toolbox. And we are open, we remain open to using the structure. We're also open to using cash. We have... We have our kind of stated leverage goals that we want to remain within. But yeah, again, open to using kind of the former structure that you've seen us use actively and open to also doing cash. So it just makes us a lot more nimble and powerful in our ability to acquire.

And even though our stock price is trading above IFRS NAV, The way that we have structured the deals all the way along was, you know, they need to make Primaris a better company. It needs to be accretive to the unit holders. And so, you know, the math is a little bit different, but the underlying principle is the same. And I keep saying this, but we don't attach a huge amount of significance to the IFRS NAV as a, you know, as a number. It is a Backward looking reflection of the transaction market that right now has been dominated by the lower tier malls and smaller transactions. So it is very difficult to get a really good read on what the market value of a lot of assets are when there isn't a lot of transaction activity. So we tend to not place as much significance on IFRS as a goalpost than some might think.

Makes sense. Ours is above yours at this point now. So we'll see where it trends. Take care.

Thanks, Matt. Again, if you would like to ask a question, press star, then the number one on your telephone keypad. Your next question from the line of Mario Sharic with Scotiabank. Your line is open.

Hi, good morning. I just have a small two-parter for Pat and then maybe a longer dated question for Alex. Pat, with respect to tenant demand and specifically thinking about foreign entrants, what trends are you seeing, if any, that may signify kind of a return of foreign entrant demand into the mall space in Canada over the next 12 months?

It's been a pretty good uptick in foreign demand, especially from Southeast Asia over the last couple of years. We've seen quite a few retailers led by Uniqlo opening a lot of stores in Canada. Uniqlo has been on a pretty good expansion kick, and we've managed to do a few, and we've got a lot more that we need to do. And I think it's going to continue. There's some American tenants continuing to look up here, whether that's new entrants or tenants generally just looking to expand their footprint. I think they're all realizing that space is becoming difficult to find, especially quality space and quality malls. And so there's a lot of tenants really scrambling to find that space. And what we are finding in a number of our malls is that we're starting to look out, say, beyond 12 months into 24-month range in order to figure out how to accommodate these tenants. So the inside is fairly strong, and it is actually being driven by a number of foreign entrants.

And then just associated in terms of the demand that we've seen, like retail tenant demand, not just necessarily mall demand, but just retail tenant demand. Your peers have in the past communicated this catch up from a COVID lull in terms of explaining the demand in the face of slowing population growth in the past 12 months anyways. Do you agree with that? And then secondly, where do you think we are in that cycle in terms of retailers just simply catching up to the square footage demand post-COVID?

I think there's a definite desire by tenants to find space to capture the increasing consumer demand. There has been a significant increase in sales in the last number of years, and the inflation impact really wore off, say, two years ago. That's what the tenants have told me. and so they're really realizing a big sales jump and a lot of them are looking to expand their footprint and as you know there's been no new retail built in a meaningful way so they're really clamoring for more space in a finite amount of retail space within Canada. We are starting to see the bay boxes represent an opportunity for a number of tenants to relocate from existing centers into the bay boxes to get larger So once that opportunity is gone, there'll be a real lack of additional space in the market to accommodate that. And there won't be any new construction unless rents rise materially, which, you know, it's questionable whether large format tenants can afford the rents that are required to build additional retail. So I really do think there is, it's not so much a I guess a catch-up maybe is the right way, but really they're chasing the fact that their sales are rising and a lot of them just need bigger footprints. Okay.

And then just maybe really quickly for Alex, I guess more of a longer data question. You've talked about same-star and wide growth should be higher than the 3% to 4% range over the next three years, and that's clear in terms of getting up to a 96% stabilized occupancy over that timeframe. How do you, once the portfolio is at stabilization, say two to three years from now, given your balance sheet leverage and where you see that portfolio three years out, what do you think the structural earnings power growth of that portfolio may look like?

We've actually spent a fair bit of time thinking about this over the last four or five years. What we've concluded is we believe that it's going to be in the 3% to 4% range fairly consistently. And that is better than inflation, which is really quite good. But a lot of it is a function of the moat around our properties. These properties are very expensive to build and very difficult to create new enclosed shopping center properties within an urban boundary. Finding 40, 50, 60 acres of land is very difficult. And then even if you do, to build a new mall today would be at a minimum $1,000 a square foot. And that would require rents of about $90 a square foot, which is about three times what we are averaging in our portfolio across the large box and the small box on a blended basis. So we can see a long runway of rental rate growth without any threat of new supplies. So it's probably a 10-year window where we think we can consistently do 3% or 4% after we go through this abnormally high growth rate period.

And just for clarification, that 3% to 4% you're referring to, that would be FFO or same-store NOI and presumably would exclude any potential benefit from the sale of residential land?

That's just net operating income, same property in Hawaii. That's the 3% to 4%. I think in our three-year guidance, we had also said 5% to 6% on the FFO line. If you can do 3% to 4% same property, you should be able to do 5% to 6% FFO growth. There are no further questions at this time. Claire, I turn the call back over to you. Thank you, Warren. With no further questions, today we'll close the call.

On behalf of the Primaris team, we thank you all for participating and have a great long weekend.

Thank you. You may now disconnect.