Primaris Real Estate Investment Trust Aktie

All right. Good morning. Thank you, everyone, for joining us at Primaris REIT's 2026 Investor Day at Promenades St-Bruno. This is a property that we acquired a year ago this coming Saturday. I'm Alex Avery. I'm Primaris' Chief Executive Officer. Around the room, you will find a number of Primaris folks.

Stephan Landry is our Head of Operations for Central Canada. He's sitting on the right. Julie Morin is the General Manager for Promenades St-Bruno. I believe she's standing in the back. These lights are fairly bright. And then we've got quite a few other folks here, Patrick Sullivan, who will be presenting after me, our President and Chief Operating Officer. We've got Leslie Buist, who's SVP, Finance; Graham Proctor, SVP, Asset Management; Julian Schonfeldt, right there, who is our Chief Investment Officer; Claire Mahaney, who puts all of our Communications and Investor Relations stuff together, intimately involved in today. Nadia Markova, who is one of our really bright people helping us understand our own business, working on business intelligence, data management and investment analytics.

And then, of course, last night and today, we have Tim Pire, who is the Chair of our Board, one of our trustees and actively involved in our investor outreach that our Board does each year. Actually, I think it's coming up, I would think, sometime soon. And Louis Forbes, who is also on our Board. He's the Chair of our Audit Committee, onetime former CFO of Primaris and also intimately involved in our investor outreach. So we've got quite a few people here. We're going to spend a bunch of time together and I would encourage anyone here to approach and chat with all of our team members and ask them any and all questions that you find interesting.

So cautionary statements. We'll go right past that. The agenda. So as I said, I'm going to set the stage for a few minutes. We're going to move on to Pat, and he's going to talk about our business, the operations, the management of shopping malls and share a lot of the insights that he's particularly well suited to sharing. We'll have a little Q&A after that because I think we find that investors and analysts find that topic particularly of interest given that the mall business is experiencing strong growth, and there was a period of time when people didn't pay a lot of attention to malls.

After that, we'll have a little bit of a break. Leslie is going to share a lot more about our differentiated financial model. Julian will talk about our investments and our investment strategy. And then I will wrap it up. So we'll have a lunch after that. We'll tour the mall and Pat is going to share some more specific to the shopping center after that. But if you look at where we stand today, this is Primaris by numbers. We have about $5.6 billion worth of assets. That's up pretty sharply from about $2.3 billion that was prior to the spin-out.

But even those numbers don't capture the full volume of activity. We've completed about $4.4 billion of acquisitions and dispositions in the last 5 years. We've built a $2 billion unsecured bond program. We've turned over about 70% of our portfolio is new since 2021. The portfolio quality has changed quite a bit. And we've done all of this while delivering some pretty attractive returns for our investors.

So where it all started, and this is something that we review this slide with our Board at each quarterly meeting. I'm not sure I've ever actually articulated this, but the reason that I go over it, it never changes, and it probably seems like we're just killing a bit of time in the Board meeting. But I make sure to go over it each Board meeting because it really is the pillars of our strategy. You've all seen it before, size and scale. We have a $5.6 billion national portfolio of malls. That's important because in the mall business, it's a scale business for many reasons, relevance with retailers, having the internal management capability, access to capital. There's a lot of good reasons for size and scale.

Proper capitalization. Leslie is going to talk later about our differentiated financial model. We harp on it, and I will harp on it a little bit more as well. Affordability for our malls to do well, we need our retailers to do well, and we partner with our retailers to make sure that they're profitable because when they're profitable, we're profitable.

Scale and consolidation, this is something that just -- I don't know if it was last week or the week before, we announced the Upper Canada Mall acquisition, the latest in a series of marquee acquisitions, which we're quite proud of, and we see more room for that type of activity in the future. And then our disciplined capital allocation. Julian will speak more about that, but that is very key to our strategy. And as I said, we talk about this every quarter at the Board meeting because these are the pillars upon which Primaris is built.

So the portfolio construction, we've been very, very active, as you can see, lots and lots of acquisitions, fairly consistent pace. The number and dollar value has changed, but we've been pretty much in acquisition mode since the day that we spun out even before the day that we spun out. And it has been fast and furious. We continue to have lots of opportunities. And I think as part of a proper disciplined capital allocation strategy, capital recycling is a critical part of that as well.

And when you look at all of this activity, we're not transacting just so that we can pay brokerage fees to all of the property brokers. We're doing it for very specific reasons. And at the heart of what we're trying to accomplish is we're trying to maximize the steady-state run rate same-property NOI growth in our portfolio. So we're basically trying to increase that steady-state growth rate.

Right now, our best estimate once we get through this next 3-year period of leasing up to 96% or so percentage occupancy, we think our portfolio is going to revert to about a 3% to 4% same-property NOI growth trajectory. And in the period between now and then, we think we can probably do better than that as we're filling up vacant space.

So what that really requires in terms of getting that steady-state maximum or optimal internal growth rate is you need to have market-dominant shopping centers. We define that in a lot of ways, but at its simplest, what we're really talking about is malls that have the largest aggregate sales volume in the market. It's the place where the most retail transactions are taking place in the market. And what that means is that we're relevant to retailers because if a retailer is going to come into the market, they want to go to the place where the most retail sales takes place because that's where they're going to have the greatest volume, make the most money and have the greatest access to consumers.

Similarly, on the consumer side, they're going to come to our shopping centers because it's the place where they can find the most variety and options within their shopping needs. So if you look at our -- how this is translated into portfolio metrics, our aggregate sales on the left has risen from about $1.7 billion to $3.8 billion, which is a 121% increase in the volume of retail sales that take place in our portfolio. So pretty substantial growth. Sales per square foot have risen from $589 in the line chart, $589 to $829. That's up 41%. We expect that number to continue to climb over time, in part because of further acquisitions, organic growth within our portfolio and select dispositions.

One of the really interesting metrics that we haven't talked a lot about before, but I think really speaks to the market dominance of our portfolio is the average mall CRU sales, so the average per mall of aggregate sales. Before the spinout, we were at $74 million per mall. That is now $151 million. That's up 104%. We have really shifted to being the dominant mall in the market, which in a lot of cases, we already were, but we've now become the dominant mall in bigger markets with bigger trade areas and more sales volume, which, again, really speaks to Primaris being relevant to retailers.

Pat flew in late last night. Yesterday, he was working with all of the retailers at the ICSC conference in Toronto, and I'm sure he'll share some details about that. But I think the punchline from last year's ICSC was that Primaris is very much the sought-after landlord. A lot of retailers that we had a relationship with are now more prioritizing that relationship. We have retailers that we didn't have a relationship with that are now very interested in building a relationship with Primaris.

So this is our 3-year targets that we published in September of 2024. What you'll notice about them is all the way down the right, we've achieved or are on track to achieving all of those targets. Even the ones sometimes we say on track, but we've actually exceeded the top end of the range, like the first one, annual same-property cash NOI growth, we were above the top end of the range. Later, I'm going to share the -- well, it's already in the press release that went out this morning, but we'll talk about the next 3 years. We blew through the acquisitions target. We blew through the dispositions target and all of the other metrics we've been able to achieve. It's important that when we give guidance or give targets to the market that we actually deliver on them. And so I think the whole team is very proud of this slide and what it says about our ability to execute.

In this chart -- so this is a funny slide. I think a lot of people have different reactions to it. A lot of our employees love this slide and they love this slide because a lot of us get paid partially in stock. We also have a unit purchase loan program that's available to anyone in the company below the SVP level where you can borrow up to $100,000 nonrecourse to buy units in Primaris. And so we have dozens of people throughout the organization, a lot of whom bought the stock a couple of years ago and have made a lot of money. They are very well aligned with the Primaris story.

And what's fantastic about that is when we have town halls, we get a lot more engagement from all parts of the company, lots of questions, and people are genuinely interested with this financial incentives that they have to understanding why our stock price goes up or why it goes down, what they're doing in their part of the business and how it contributes to the overall mission that we're on.

And so yes, understandably, there's a lot of employees that really like this chart. I think when some analysts look at this, some investors look at this, they might have a thought of maybe this is a reversion to the mean story. The stock has performed tremendously in the first 9 months of 2026, substantially outperforming all of our peers. We can talk about a lot of details there. But I think there are some people that look at it and say, big move, shows over, nothing to see, you can move along. When I look at this chart, I immediately get the urge to remind everyone that our stock is currently trading at a valuation that implies an 8% cap rate, which for the quality of the malls that we own, including the one that we're standing in or sitting in right now, strikes me as a particularly high implied cap rate.

I'll note that, that 8% implied cap rate is also reflective of 86.6% in-place occupancy, which would suggest that our current valuation implies a stabilized cap rate, somewhere north of 9%. We have an interest rate tailwind. I could get into all sorts of things that as the chief cheerleader at Primaris, I could tell you many great things about Primaris, but let's get past that.

One of the other things that I see in this chart is a superior business model. We've been talking about the differentiated financial model since day 1, low leverage and a low payout ratio and compounding the retained free cash flow provides a structurally higher growth rate on a per unit basis as compared to a higher leverage, higher payout ratio model. And to frame that alternative, consider a REIT with high leverage and a high payout ratio, it becomes solely dependent on access to the equity markets to achieve growth, asset growth, create value to be able to reinvest in the business above and beyond sort of the steady state. And that is really, I think, where the per unit growth comes from is having the flexibility to allocate capital to have the ability to invest in acquisitions, developments, buyback stock.

You need the financial flexibility to take advantage of all the opportunities that a REIT faces. And when you have high leverage and a high payout ratio, interestingly enough, the only time that you have access to capital is when everybody else has access to capital. And when everybody else has access to capital and you have access to capital, everybody gets that capital and then they go out and they compete for properties. If you're trying to acquire a property and there are 30 other bidders, you can be sure that the pricing is going to be optimized. You're going to pay for vacant space. You're going to have very limited flexibility to capture any value or create any value.

So when I think that the low leverage, low payout ratio model, we talk about it a lot of different ways, but I think that's one of the things. One of the ways to think about it is having capital that is available to you essentially at all points in time allows you to take advantage of opportunities that a lot of REITs that have higher leverage are unable to take advantage of. I don't really think there should be much debate on this point. If you go into other parts around the world, the U.S., Europe, Asia, Australia, the REITs with the lowest leverage and the lowest payout ratio have consistently delivered above-average returns. And I think Canada has been stubbornly stuck in the old model with the high payout ratio and high leverage.

But we talk a lot about it, and I've harped about it probably enough for today. But when I think about this chart, I don't think it's a onetime dynamic with our stock outperforming. I think our stock is structurally designed to deliver superior internal growth, superior per unit growth. And that's why we have both hardwired into our executive compensation a ceiling of 6x debt to EBITDA and also aligned our executive compensation with relative total unitholder return.

So I think with that, I will stop talking about the differentiated financial model, which I could talk about all day. And I will turn it over to Pat, who is going to share a lot about the mall business. Pat?

Thanks, Alex. Thanks, everyone, for coming today. We have a slide called Slide 4 in our investor deck that most of us usually cringe when we bring it up and talk about it. It starts from 2005 to basically going forward in terms of the evolution of the shopping center. I'm old, so I'm actually going to go back further than 2005 because I think it's relevant to explaining what I want to talk about today, which is the -- we can get this thing to work. I want to talk about the transformation of the credit profile of the shopping center over the last 30 years because it has actually been significant. But to explain it, I think I need to go back into the '90s.

I started in real estate in 1991 as a broker in Vancouver. Office rates were $1 a foot in downtown Vancouver for office space, sounds familiar to a couple of years ago. And shopping centers have just come out of a really, really bad time, the late '80s, early '90s, high interest rates. Companies when it broke like Bramalea, Trizec, Aeon, they had land banked and they got caught with high interest rates and declining revenues. When you get further into the '90s, you had companies like Cambridge, Cadillac, Oxford, all were in financial trouble. Cadillac actually filed for bankruptcy and restructured. Cambridge didn't, but struggled to get through the '90s with their balance sheet intact. And along the way, you got recapitalization of those businesses by the pension funds. The pension funds started buying partial interest in malls before actually buying the entire company. The Caisse took over Cambridge and merged it with their other company, Ivanhoé. Ontrea took over Cadillac and OMERS took over Oxford.

During that same period of time, you had department stores that were starting to wane in basically the relevance. By the late '90s, you had Eaton's that had gone bankrupt for the most part and was in the process of being replaced. And then you had Walmart come to Canada and taking over Woolco and making it very clear that they had no intention of staying in shopping centers.

The interesting dynamic as we go through that part and it couples with Sears and HBC starting to become less relevant with the consumer is that you had a lot of sales migrate from the department store into the small shop space in the mall. And in the '90s and into the early 2000s, you had a lot of locals and regionals in the shopping centers. And we used to have -- every year, we had merchandise meetings at the end of the year where all the tenants would gather it would be a gala, the marketing manager would put on a big dinner and you'd explain what happened in the shopping center. And there were so many locals in the mall that the room was full. That was their livelihood.

So you had probably upwards of 50% of the mall tenants were locals. And what happened when you had this migration of sales from the anchor tenants back into the shopping center, sales started going up. The pension funds started buying into these assets and saying, we want to reinvest in them. So they started making bigger investments. And the small shop guys started realizing their sales were going up, rents were going up, too. And you had a lot of expansion going on. National tenants started expanding more. You had Gap come to Canada in the mid- to late '90s. That was the big first American coming up there and taking space. And so there was a lot of interest in shopping centers and expanding their footprint.

And over time, you saw locals and regional tenants start to diminish. And I remember, Louis you might remember like we spent the first 4 or 5 years at Primaris having a slide where we talked about our percentage of weighting for locals and regionals versus nationals because it was a lot of concern to people in terms of the creditworthiness of the tenants we had. And I mean, I go back as far as 2010 here, and you see our predominant tenants were HBC, Sears, Forzani Group, which, by the way, I think went broke that year. And Canadian Tire bought them and Reitmans and Loblaws, I think, is on this list simply because we owned a power center that had -- or a couple of power centers that had a bunch of large grocery stores. But if you got below this line, you saw a lot more fashion tenants as well.

And so there was a real concern for a long period of time, what was the creditworthiness of the mall look like. And in fact, we got into years like 2011, where we had a significant year of bankruptcies driven partially by the financial crisis of 3 years earlier, where you got through a period where these guys were hanging on and then they finally threw in the towel. So we had a lot of bankruptcies in 2011. It cleared out a lot of space, but we had a lot of turnover in the shopping center.

So in 2015, when you had Target finally failed, we had an opportunity to reset our tenant mix, which we hadn't had before. After Target failed, the year after Target failed, mall sales went up. We hadn't replaced Target, but kind of going back in history, the sales go from the department store into the shopping center, probably not 100%, but the shopping center picked it up. So you had CRU sales volume pick up.

We replaced Target with necessity-based retailers such as grocery stores, pharmacies, but also fashion boxes like TJX and such forth, all of which were really strong covenant tenants, which is fantastic. If you go back 15, 20 years, malls have been kicking out grocery stores. They didn't think they were worthy of being in the shopping center. They wanted fashion. They thought it was -- they drove traffic to the grocery store, but not to the mall. People didn't do both. They didn't grocery shop and go to the shopping center. So they were shunned from the mall. But when Target left, we were all looking for large-format tenants, and it made sense to that grocery store. And it's turned out to be a fabulous addition to the mall because people do cross-shop between grocery and the shopping center itself. And what it does is it brings just more footfall in general to the mall.

When Sears failed, similar story. Mall sales went up in the year after. We added more box stores. And in the years following both Target and Sears, overall mall sales have climbed up significantly because we increased the regular footfall to the shopping center. We took a Target or a Sears that might have been Sears was probably doing $10 million, $12 million at the time it failed. Target might have been doing $20 million. We replaced them with tenants that were probably doing $50 million or $60 million in aggregate.

So you had a significant number of people coming to the shopping center. You created a bigger retail destination node and that, in turn, helped the CRU tenants in the mall as well. So over this time period, local and regional tenants got, a, priced out of the shopping center; b, there was so much demand from small shop tenants because sales were so buoyant that they wanted more and more space. More and more Americans were coming up here. Target kind of stalled that for a couple of years as there was a little apprehension why did Target fail, what was wrong with Canada? Nothing wrong with Canada was what was wrong with Target.

And then we fast forward and then we have the e-commerce start. And with e-commerce, we had a lull in expansion with retailers did they need to add more stores. Surprisingly, the pandemic took care of that because people started to real stores. Tenants got through the pandemic realizing they needed e-commerce, but they made no money on it. So when they had to rely on it basically for 100% of their sales, it was a real problem for them. So they started to realize we need stores. So after the pandemic, they started to open stores. So the example I used the most is Sephora. Pre-pandemic, we had a really hard time getting Sephora to expand into some of the secondary markets. Post-pandemic, they were like, we need stores in all these markets. And what they learned was when they added a store, their overall sales volume combined between e-commerce and their store itself went up.

And so now we have a proliferation of tenants wanting more stores because they need an omnichannel network. You're going to see going forward, if it already hasn't really started, tenants are starting to charge for deliveries. They're starting to charge for returns. They really want you to go to the store. They want you to pick it up in the store. They want you to return it in the store. They don't make money online. There are retailers that are abandoning e-commerce because they say, what's the point of doing this if we're just losing money. We don't really need to be there. We're not going to try to compete with Amazon. They can have it. We have a very good business. We need to be profitable. So they're abandoning that side of it.

So when we talk about mall sales and the impact of these boxes opening the malls, we always talk about all-store sales volume for the CRU. What we never really get into is the all-store sales volume for the shopping center itself. And there are two reasons for that. And the primary reason is if you go back 20, 30, 40 years, the anchors didn't report sales. You didn't get numbers from HBC or Sears or Target. So you didn't really know what their numbers were. I can tell you there were some Sears stores -- Sears at Devonshire $60 million at one point. By the end, they were doing $10 million, and a lot of that migrated into the mall.

So these guys have fallen off significantly, but that's the primary reason we didn't report a number with the bigger sales volume, and now it's just become kind of the standard norm that that's what we report on. If we talk about Bruno, St-Bruno here, we have a mall that's approaching $300 million in CRU sales volume. There's probably another $150 million done in the box stores, and that's without the Bay. And when the Bay gets re-merchandised, my guess is we'll grow that number by 10% and we'll be up to $500 million.

So that's a significant amount of footfall in the shopping center. There's $150 million goes into the box stores, which helps drive further traffic into the shopping center and feeds the CRU tenants. So at the end of the day, you see where our merchandise mix has ended up. These tenants want to be in a retail center that drives the majority of sales in the region that it's in. You're starting to see Walmart want to come back to malls. We've announced two of them. There may be more. They want to be back in shopping centers. In 2003, '04, they couldn't wait to get out of malls. They thought the ideal format for them to free stand on the street with parking right in front.

And what they realized is the mall has so much activity that they can drive further sales and higher sales by going to the mall and being part of the shopping center, whereas they used to buck having an entrance into the mall, they are now open to having an entrance into the mall. They want to feed off the traffic. Grocery stores, same thing. When we're going through this whole process with the Bay, and I'll get into the Bay shortly, a lot of the box stores we're getting we're not net new to the market. They're just relocations from other centers in the area that want to upgrade their real estate to be in the dominant retail asset. And that's the kind of tenant we're attracting here, and that's why our merchandise mix and our tenant quality has morphed so drastically. We're getting the Walmarts, we're getting the grocery, we're getting TJX. We're getting high covenant tenants. And over the last 10 years, our fashion mix in the shopping center has diminished in terms of small shops.

So we used to run well over 30% fashion tenants, and we're into the low 20s now. And that was driven by adding TJX, adding H&M, adding Old Navy. There had to be an offset, corresponding offset with fashion. So we reduced the small shop fashion. We got rid of a lot of the smaller local tenants, regional tenants that were fashion-based. We've had a lot of more electronics. We've added a lot more of the health and beauty as well. So tenant mix has changed drastically.

So while there was some mall development in the 2000s with Ivanhoé building their Mills concepts, Vaughan, CrossIron, Niagara and such forth, there's been very little. And population growth has grown significantly, but malls have not been developed, retail space have not been built and now as we get into today, it's really, really hard to rationalize building anything. It's going to cost $1,000 a foot plus to build a shopping center, which means you need rents that no one is going to pay. So nothing is getting built.

And it's really become a key topic out there in the retail community because a lot of the smart retailers like TJX who were really not focused on major store expansion over the next 24 months, they got directed from the U.S. when the HBC went down that they needed to ramp up their store count in Canada. And the reason was because I think there's a recognition this is the last large block of real estate you're going to find for years in Canada. And once it's gone, your expansion options will become very, very limited. And so there's a lot of retailers out there pushing hard, whether it's TJX, Canadian Tire, Walmart, grocery guys, they're all looking for space. And I mean, I'll get into HBC shortly, but there's a lot of activity with all of those big banners.

So merchandise mix is a concept that we talk about a lot. It's essential for a shopping center. You have to continually bring in new brands to keep the mall reinvigorated. We're never going to be 100% occupied in all likelihood. We're always going to be holding some space to remerchandise because tenants come to malls for the brands. We always hear experiential. We hear entertainment. We hear add more restaurants and such forth. But the excitement when you open a new Abercrombie in a mall or a new lululemon or some of the brands that just opening here, Uniqlo has been opening stores, they get lineups in the mall when they first open that are 200 people long. And that's just the excitement over the brand.

So entertainment is nice. It still comes back to are you branding your shopping centers with the latest concepts. That's what people want, and that's what our primary focus is. So as we get into the -- so anyways, some of the tenants we're doing business with, there's a number of Americans. There's some food concepts out of the U.S. We are doing a lot of deals right now with Browns, expanding lululemons, La Vie en Rose expansions, Victoria's Secrets, Miniso on the power center side, we've announced some Walmarts, TJX, Canadian Tire banners. There's lots of activity with all these guys.

I'm really bad at following my speech with the slides, so I'll try to keep up. So when we talk about the drivers of our rent, it kind of fits into this, but the main drivers of our rent really comes from -- there's the straightforward rent structure where we lease space, we charge -- we have a contractual rent. We build in rental escalations. It's typically -- it's migrated from 2% to 3%. Most retailers are now accepting 3% as the new 2%, aligning with inflation. And then we get into all the other ways we can diversify our revenue base beyond just straightforward rent that I don't think a lot of our retail peers operating in other kind of developments, whether it be power centers, strip malls have.

Percentage rent is very much unique to a shopping center. It represents -- typically used to represent 1.5% to 2% of our revenue. Right now, it's 3% to 4%, and that's driven primarily by the fact that there's been such significant inflation in prices. Sales have gone up. Retail space is not as plentiful as it used to be. So there's a number of factors that have driven sales, but inflation certainly drove that. And that's what percentage rent was originally -- the whole original concept of percentage rent was a hedge against inflation. You entered into these 10-year leases, how are you going to get rental escalations or capture the fact that sales might increase. And the beauty of getting sales reported and getting percentage rent is we have visibility into the sales, and we can participate in the tenant success throughout the lease term without actually rewriting the lease.

And so when it comes to the expiry, we typically try to crystallize that excess rent into a new base rent and create that as the new base going forward. I expect that 3.5% to 4% of NOI to diminish over time as we reset these rents that are midterm, but we'll recapture it in terms of base rent. Our CAM, we have a very flexible lease for the most part. People consider malls very expensive to operate, which they can be at times. However, we recover virtually everything we spend from the tenant. Our lease allows us to recover where we spend -- when we have a capital spend, we treat it almost like -- we treat it very much like a loan. We spend the money. We recover the money from the tenant. Typically, we amortize it. Some of our leases, the Cadillac lease is a great example. It allows us to actually accelerate the amortization earlier, but we charge interest on the money that we spend. So we recover interest income from the tenants.

We also charge an administration fee for running the CAM pool. We charge 15%. So in theory, when you're fully occupied and you're recovering all of your cash from the tenants, you can recover up to 115% of your CAM expenditure. And that's something we've talked about a lot is our recovery ratios and how they're diminished right now. We do have some malls that have crept over 100% at this time. We expect that to keep marching forward. I think our recovery ratios on average are still in the 80s. We have two malls that right now are at 104% and Lethbridge and Peter Pond in Fort McMurray. They're running at 104%.

So we're getting up there with some of our properties as we come more occupied. Years ago, I think 2017, we kind of buck the traditional operational position, and we went out and hired an accountant to run our asset management group, basically operations, Graham Proctor. I mean nobody had ever hired an accountant to run this division. But the one thing we recognize is we spent such a significant amount of money on our capital at the properties and recovering it from the tenants that it was probably best managed by somebody who understand math as opposed to understand how a boiler worked. And that's really benefited us in terms of making sure that we're recovering our money and maximizing our returns on what we do spend.

Specialty leasing revenue, which is a slide at the end, I should have had it moved, but it's a slide at the end. We generate about 5% to 7% of our NOI through specialty leasing. 30% to 35% of that comes from in-line space, which is space -- we're not fully occupied, we'll rent out the space that's not occupied. And as I mentioned before, we hold that space sometimes for remerchandising, typically for remerchandising or are periods when we're buying malls that are very much underleased. There's a lot of SL revenue. We also get it from various other sources, whether that be branding. It's changed over time. I mean, 30 years ago, you had coin-operated vending machines, you had pay phones, you had storage lockers, you had all kinds of things like that. It's transformed over time. We actually make money off Santa now. Santa used to be a cost center. Now it's something we make money off. We used to be a marketing event. Now it's really a specialty leasing event.

But there's all kinds of other things with branding and promotion, there's car shows and such forth. When the online -- when the space gets leased -- in-line space gets leased up, when there's higher vacancy like there is now, our specialty leasing people will turn their attention to other sources of revenue. We've gone through periods when we've been really well occupied and it's our SL as a percentage of our NOI has been maintained at 5% to 7%. It really hasn't varied over 20 years. So it's just a function of their time.

Typically, we have one specialty leasing person at every property. They generate on average, the cost benefit is about 10%. So it pays to have somebody dedicated on site. We've tried before to have one person look after multiple sites. And while it spreads the cost out, you generally don't generate as much revenue. So we felt it was important to have somebody at every site.

In terms of marketing, marketing is -- it's a very important aspect of the property but it was one that was really not managed well for the last 25 years. It's a pool that the tenants pay into. So we're basically spending the tenant money. About 10 years ago, there used to be a landlord contribution. It was typical. It was built into a lot of the anchor leases with the demise of Target, Sears and HBC. In fact, I didn't even worry about HBC noticing.

We stopped making our landlord contribution, which was a nonrecoverable expense. That saved us about $100,000 to $150,000 a year. And in the last 5 years, we hired someone specifically to manage marketing. And unlike the past where we hired a marketing person, we actually hired someone to actually manage the money. And so marketing people typically spend all the money that you give them at the site, and that's great. Sometimes it's on good promotions and sometimes it's not money well spent. So this person came in to really make sure the money was spent wisely.

And so we've now taken this aspect of our company, and we've turned it into a department where we're able to use the marketing money to do things like sponsor the Canadian Hockey League nationally. And we did that last year. We're a major sponsor. It's driving traffic to our shopping centers. The Memorial Cup last year was in Kelowna. They took the Memorial Cup across Canada to different shopping centers, the hockey players from the various hockey teams that play in the CHL came to our malls. And in some of the communities, the CHL is a big deal. And it drove a lot of traffic to the shopping center, and that's one of the great things about having a national platform and having someone oversee marketing on a national basis, you can use that money and spread it around and actually drive traffic across the entire portfolio.

The other thing about marketing money is marketing money, there's many things you can do with it, signage in the shopping center, which was typically a recoverable capital item, you can actually call that marketing. So there's different aspects to how you use the money. But having somebody manage the money has been very important from our perspective. What I really love about malls is they're like LEGO. I've always thought you can -- the beauty of a shopping center is you can expand them, you can reduce the size, you can move tenants around. The flexibility is so important for remerchandising.

And as I mentioned before, it is so important that we bring in new brands to reinvigorate the mall and keep it fresh for consumers. And it's really made possible because the mall is so flexible. You might have a power center where you have a space that's impossible to subdivide, you don't have enough frontage. You have tenants on either side of them with really long lease terms. You're stuck with what you have. In a mall, we have relocation clauses in our leases that allow us to move tenants. So in Bruno, we will talk about it shortly. We're moving the food court. We're able to do that with tenants midterm because we have a relocation clause.

And lastly, another source of revenue that we don't talk about very often. We generated about 1% of our NOI from storage rent. And so when you think about tenants, they have their peaks and valleys in terms of seasons, but a lot of them need storage, and they like it on site. So we will take dead space, whether that's a basement or just space that's historically chronically vacant and we'll lease it out to tenants for storage. And there's a tremendous demand for storage and our rents, I would say, in the last 25 years have crept from -- we used to charge like $5 and $10 a foot for storage. We're up to like $50, $60 a foot for storage now. And it's not part of our GLA, and we don't recover CAM and tax necessarily from it. So it's just pure rent that goes to our bottom line, and there's no cost associated with it in terms of recoveries. So that's about 1%, it's held pretty steady at 1% over time.

So in terms of HBC, we've got a lot of deals. We're right at the finish line. We've got Board approval on the majority of our boxes. Conestoga, Orchard Park, Oshawa, Lime Ridge, Galeries de la Capitale, they're all well underway in terms of the construction process, getting city approvals and such forth. We've got the majority of the space leased. I'd love to be able to stand here and make announcements about tenants, but for the most part, they're all publicly traded companies. And because some of these tenants are relocating from other centers, they don't want to talk about it. And they'd rather get further along towards their possession date before their landlord finds out they're actually moving and their employees find out that they're actually moving as well.

So there's some tenants that will announce and there's some that we won't. But for the most part, we've made tremendous progress. Our rent is going to be significantly higher than HBC. We're still on target with what we've communicated in terms of expenditure. But going back to where I started this whole conversation, it will further enhance the tenant quality and credit quality of our shopping centers. These are all covenant tenants going into our malls. So a mall has typically been about 55% anchor, 45% CRU. And we're taking $4 rent from HBC and we're converting it to on average, $18 or $19 in base rent from replacement space on a plus or minus 1 million square feet. That's a tremendous lift in NOI. The majority of that revenue will kick in, in 2028 and 2029. It's going to take a while to get the construction going and then the tenant fit-out periods take a while.

So that's when the majority of the revenue will kick in but everything we see is proceeding as we've talked about, everything is great in terms of tenant lineups and leasing progress, we're in really good shape. With that, I really don't have much more to say. I will be happy to take any questions if you have them.

Just on that last point on HBC. Can you just walk through the cadence of the next 3 years? You said majority weighted to '28, '29. What does that mean for 2027 if you had to sort of -- I think it's a total 1 million square feet if you had to lay out the NOI?

Yes. 2027, so the project we have furthest along right now is Galeries de la Capitale. It's already started. And Galeries de la Capitale is basically fully leased. And a lot of those tenants will start paying rent later in probably mid-to-late 2027. There's several restaurants, fashion box, Imaginaire is taking a large space in the HBC box there as well. The majority of the rest are all going to be turnovers in late '27 or early '28.

You mentioned the 55 versus 45 percentage. When you think of something like a Walmart, is that not essentially a new type of anchor tenant? And what does the rents look like? I mean they're obviously a very powerful firm. Like are they different than what you're getting on the -- or like what is the trade-off versus putting more investment to get more CRU in?

Yes. I mean Walmart is an anchor. The overall weighting in the portfolio is not going to change materially just because we've added a Walmart or a Sport Chek or any of these replacements. It's still going to be in the 50-ish range. Walmart rents depend on the site they're taking and how badly they wanted it. There's one deal that we're working on right now that we haven't announced yet. We're basically it's done where they're paying a significantly higher rent than they typically do because they really wanted it. It's a relocation of a store. And then there's others like PDO where it's not a really high rent at all. It's a mid-single digit. And that was just a function of they wanted -- they saw it as an infill location, but not when they necessarily need it. For the mall itself, it's a tremendous addition for the shopping center.

Any other questions? No. Okay. We'll take a quick 5-minute break, and we'll be back just before 11.

[Break]

Thanks again for joining us today. Rags sends his regrets. He really wanted to be here to present today. And I think it's mostly because after every investor meeting, he complains that he doesn't get to say very much. And it's really not because he's a shy guy. It's just because you don't ask many questions about Primaris' financial health. I take that as a compliment. But since I'm here, I'll give you a quick run-through of the differentiated financial model.

Primaris was purposefully built with a low FFO payout ratio. Retained cash flow provides long-term compounding benefits for NAV growth and distribution growth. Primaris has increased its distribution every year. It was built to do so, and we intend to continue to do so. When we first spun out, our FFO payout ratio was above our targeted range of 45% to 50%. 2023 was 52%, 2024 was 50% and last year was 47%. We've been able to bring this ratio down while providing modest increases to distributions each year. Now that the payout ratio is within our defined range, we anticipate that future increases will be a little bit bigger than the 2% we've delivered in the past.

Retained free cash flow provides us with a flexible pool of capital for distributions, redevelopment, acquisitions and NCIB activity without having to rely solely on our unsecured revolving credit facility. We're also adding to this cash flow by disposing of some noncore assets. Most importantly, we're applying a disciplined approach to deploying that capital, focusing on long-term value growth for our unitholders without sacrificing the strength of our balance sheet.

In addition to our low FFO payout ratio, we also have a low debt-to-EBITDA ratio. This is tightly tied to our investment-grade credit rating of BBB high and it's also tied to our executive compensation, 2 things we care very much about. We're often asked if we would breach our 6x limit. And while the answer has always been no, we don't deny that it's very tempting. But leverage is a double-edged sword. It amplifies the gains in the up periods, but it also amplifies the losses on the downside. It's very easy to increase leverage, but very hard to bring it down. To bring it down, entities are forced to sell some of their best properties or to issue equity in poor market conditions.

Our low debt-to-EBITDA ratio gives us options. It reduces financial risk, supports access to lower cost capital and provides capacity to act when acquisition opportunities present themselves. It also enhances our resilience in economic cycles, reducing our refinancing risk. When Primaris spun out, we were completely floating rate debt and interest rates were rising. In this environment, we were able to put together a well-laddered unsecured debenture program and provide per unit growth. And now it looks like we're going to be entering yet another period of rising interest rates.

The average interest for the debentures that are maturing in the next 3 years is 5.7%. We put this debt in place back in 2022 and 2023. This was before we completely redeveloped our portfolio and upgraded. And since then, our credit spreads have also narrowed. We actually feel that we're going to have an interest rate tailwind, which will allow us to continue to develop our debt ladder as opposed to focusing on short-term refinancing. We view balance sheet strength as a strategic asset and not just a financing tool. Our approach to managing Primaris' capital structure is to remove risk as much as possible, maintain our investment-grade credit rating and create flexibility for the business to operate as needed. We focus on preserving our liquidity to take risk out of debt refinancing windows.

Our predominantly unsecured debt program allows us to disconnect the right side from the left side of the balance sheet, providing Primaris maximum flexibility to manage and enhance our portfolio without the constraints that are associated with property level financing. And we can make capital allocation decisions based on value creation rather than asset-specific financing constraints. We retain a large pool of unencumbered assets, which provides further financial flexibility. Our low payout ratio, our strong balance sheet and our low debt-to-EBITDA are not simply defensive characteristics. These are strategic advantages that help us create value for our unitholders over the long term.

And with that, I will turn it over to Julian. Thank you.

Perfect. So I'm going to spend most of my time on stage talking to this slide. And this is really kind of to explain how we think through capital allocation and our different sources and uses. So before I dive into them, I want to just first start off by saying our whole capital allocation program is generally done with 3 goals in mind: growing our FFO per unit while also strengthening our portfolio quality and risk profile while also operating within our strategic leverage and distribution guidelines.

And so Leslie had talked about those being the 45% to 50% FFO payout ratio that we have in the 5x to 6x debt to EBITDA. And so they're laid out in a certain order here, but I'm going to bounce around in a little bit of a different order with them. But I want to start off with the free cash flow. As Leslie mentioned, we've got a very balanced payout ratio that allows us to provide an adequate and attractive distribution yield to our unitholders, but gives us a regular cash flow, which is a very low source of capital. And it allows us to fund kind of more regular opportunities that are in front of us, whether that's doing outparcel developments, whether that's redeveloping some of our space such as HBC, and we're not reliant on the capital markets for that.

And so we're past the days where REITs were valued purely on distribution yield and payout ratios were maxed out, and there were REITs that were borrowing just to fund the distribution. And I think to a certain extent, there still are. But in our case, we have this regular annual cash flow. And so this is a very important part of the business that allows us to, again, fund those opportunities without having to be reliant on the markets and also allows us to be in offense mode in markets that are maybe softer or where capital is not accessible and allows us to be countercyclical, which has been a very key part of the Primaris story.

On the debt side, we've got a BBB high rating. We've got a low cost of debt, but we're very cognizant of the trouble that REITs can get into if they go too high. So we put a lot of thought into our debt target, which we've narrowed to 5x to 6x debt to EBITDA. And so then working within that narrow range, we tend to fund off of the unsecured programs. Broadly speaking, we can fund off mortgages, unsecured or the revolver. On the revolver side of things, that's not meant to be a structural part of the business, but it does give us flexibility. And so a good example was Upper Canada. We funded $150 million of the $411 million transaction with the revolver. And again, it wasn't trying to game interest rates or make a call on them, but in this specific transaction, we have -- in our last quarter, we showed $200 million of assets held for sale. And while those don't time perfectly with the acquisition, we have a degree of certainty that those are going to materialize such that rather than fund off a bond, we could fund off the revolver knowing that, that capital is going to come in.

And then as it pertains to mortgages versus unsecured, right now, the unsecured is quite a bit more favorable. You've got a lower cost. It's much easier to arrange. And as Rags would mention, you decouple the left and right-hand side of the balance sheet. And that's so important because it gives you incredible flexibility for selling or doing land sales or other redevelopments in there. So we tend to lean towards the unsecured. We have some mortgages in place, but those are largely for the -- some of the partnerships that we have where our partner needs debt to get to the return targets. Those are important, too.

You never know what will happen with the unsecured market. It can be cyclical and having those relationships with those secured lenders provides a benefit as well. Land sales is another one that I'd say is somewhat new to Primaris and largely off of the HBC bankruptcy that's freed up some of the land to now be sold. And what we really like about this is it's a 0 cost of capital -- 0 cost source of capital. And so we're well underway on that, and I'm going to talk about that a little bit more on the next slide, but it's land that we're not really using, as you saw when we were driving by, oftentimes, it's pieces of grass that are outside of the ring road, no NOI being lost. In some cases, we're actually saving costs of landscaping, snow removal, property tax, that type of thing. They come with a long time lines, high degree of risk and they're going to be more bite-sized, but we're well underway, which I'll elaborate more on. And eventually, it's going to be just kind of a regular small source of free capital coming in.

And another benefit I'll mention is it really demonstrates the value of the portfolio and how irreplaceable it is, which I'll touch on more. Above that, the larger chunkier sources of capital are the asset dispositions and equity offerings. And so those are more so being used to improve the portfolio, but also fund larger acquisitions. And so I'll talk to the asset dispositions first. We are looking to sell noncore assets. And so typically, by definition, that's your highest source -- your highest cost of capital. So you're selling equity interests in your kind of lowest quality assets that should be the highest source, and it historically has been. But for us, it's more so our outlook for the future, where are we going to see growth? And you heard a lot about tenants being in expansion mode, but being selective with where they want to be.

And so for us, the dispositions are really focused on malls where we don't think there's a strong growth outlook in the future, largely because maybe it's a smaller center, lower traffic center or in markets that we don't see strong fundamentals or growth in. But again, that should, in theory, be the highest cost and has been the highest cost of capital. But I don't want to get too ahead of ourselves, but we're seeing a lot of strong demand. We ran a process in the summer which had really, really impressive demand, and we're having a lot of discussions with buyers. And with all the shakeup that's going on in many asset classes, negative leverage, low returns, a lot of real estate allocators are seeing the mall as one of the few asset classes where you can get outsized returns.

And so we're seeing a lot of capital starting to build up around the mall space and a lack of supply. And so I wouldn't be too surprised if you saw us in the future being able to sell some of our lowest tier malls at cap rates that might even be inside of where the overall better quality, more liquid portfolio is trading at right now around an approximately 8% cap rate. And I think that's a really fantastic dynamic that hopefully we'll be able to demonstrate.

We're also looking at some of the outparcels as well. And so this is -- Pat showed you when we were driving around stuff that's outside of the ring road, good investments and good retail, but it's not really core to our business. Our platform, our cost of capital, our expertise are really centered around the enclosed shopping center. And so if we can tactically sell off some of these outparcels at cap rates that are meaningfully tighter and for stuff that's noncore and take advantage of the really strong interest for that open-air retail and also the different buyer pool. So it's sometimes private buyers that have a very different philosophy and aren't focused on the same return metrics that we are. We think that's a really tactical one.

So Mark [indiscernible], who's with us, is going to be launching the outparcels here this month. We think there will be incredibly strong demand, and it will show that while we buy these malls at higher IRRs, we can sell some of the noncore, less important stuff at meaningfully tighter ones, and that can be a really good source of capital. Another place where we're looking at it as well is some of the malls that we're looking to sell that we're deeming noncore, they come with outparcels as well. And so the buyers of the malls, the cap rates are coming in, but they're still wider than the outparcels. And the larger you go, the more that buyer pool falls off. And so in some cases, where we have larger malls where the ticket size might prohibit some of the private investors, we're going to sever those outparcels, sell those at meaningfully tighter cap rates and then the remaining noncore mall will be smaller and should price tighter not simply by virtue of being able to attract more competition in the bidding side.

The last major source that I'll talk through is equity offerings. That is one we take incredibly serious. We're sharing in ownership of our company. Our management team owns a meaningful amount in the stock. And so we don't do it lightly. It's something we're very, very cautious about. And generally speaking, it's something we'll only do to fund a very strategic acquisition. And so the most recent example, of course, is Upper Canada Mall. And we've done it with all the large acquisitions as well. We can do it to the public markets. We can do it to the vendors. We were now able to do it public because of where it's trading, but it doesn't mean that doing -- issuing to the vendors is off the table. It's simply another tool in our tool belt.

And the way we think through that, notwithstanding that we think the equity is a very good investment, it was something that was needed to be able to capitalize on the opportunity that was Upper Canada. And to talk very briefly on that, again, that was a low 7 cap but that was -- which is tighter than where our cap rate is, but we see -- it was accretive on day 1, partly because there's no incremental G&A load with it. So you have to factor that in when you're comparing our implied cap rate versus the cap rate we're buying at. But importantly, that was a center with 17% vacancy in the GTA with lots of upside. We see a clear path to it. And we're not paying for the upside. That wasn't factored in. It is immediately modestly accretive. But what's really exciting is where the future is.

And again, we don't rely on buying it for where the future will be 2, 3 years from now. We're happy with where it's at now, but we're just very excited for that. And I always say be wary of REITs that will tell you we're really buying it off of year 3. In our case, we're completely fine with where it's at now. But Primaris has a very strong track record. We talked about it in Halifax how that was bought at a high 6% cap rate. It's now based on the NOI, we have an implied close to a 9% and we'll be north of 10% after the sales of the annex and the land. And so we do have a track record of doing that. And so we will issue equity in order to get those types of acquisitions that improve portfolio quality, FFO and future growth.

And so let me pivot a little bit to the uses. Again, I'm going to bounce around on the orders here. Distribution to unitholders, I mean, that's something that's baked in with the 45% to 50%. Again, it's done with an aim of providing an adequate or attractive yield to our unitholders and leaving behind enough cash. I already kind of touched on that, so I won't go too much more into that. But one part of that is that's very stable. It's recurring. It's baked in there in a world where we're seeing distribution cuts throughout that this is done with the goal that it will never go down, and we have an annual cadence of increasing it, and that will always be part of it.

Debt repayment, we have a narrow band that we mentioned there. Again, the difference between the debt -- the cost of debt and the IRRs is quite strong. So debt repayment is not a huge part. We just want to operate within 5x to 6x. You'll see us sometimes lower it in advance to give us flexibility for redeployment later, but we're happy with the targets we've set.

Redevelopments and expansion, this is investing in our own portfolio. And this is one of the lowest risk, highest return ones. We do it tactically. We want to be careful. We wouldn't want to add too much retail and oversaturate them all. But where we do, do it, whether it be HBC putting up bank pads or restaurants, we typically target yields that are over 10%. We typically do it with leases in hand, so it's quite derisked. We've got a construction team that knows very well what they're doing, and this is kind of what they live and breathe. And so we're not doing -- we're not going to be building master plans or apartments or anything we've seen enough of our peers get in trouble with that.

And so it's really just kind of small within our snack bracket, high-yielding stuff that makes good sense on the math on its own and also just adds to the mall's quality and experience. And share buyback, that's been less of a part of the story right now. We're not -- it doesn't mean it's turned off, and we still think the shares make a wonderful investment and to be able to -- again, in light of being able to potentially be selling some of our lower quality assets at cap rates that are tighter than are implied with less growth, it speaks to how attractive the share buyback is on our end, but we have to manage that with strategic acquisition opportunities, our debt profile. But we have been one of a very active REIT on that front, and that will continue to be a tool that we can use in the right opportunities.

And then asset acquisitions, again, I did touch on that again. The goal with those is we're buying ones where we're improving our portfolio overall in terms of quality, whether that's through long-term growth, whether that's through higher traffic, higher sales productivity, exposure to major markets. The main idea is we want to look -- we want to buy stuff that 5 years from now and similar to what we said with Conestoga and Halifax, everyone is going to say what a great deal that was, what an amazing investment that was. And so we think Upper Canada fits squarely in that, and we're going to continue to look at opportunities like that.

So diving a little bit more into the land. We published this in June. We went through the entire portfolio. Our 25 malls, which is soon to be 26 later this month. The typical size of our mall is about 50 acres. We've got typically between 25%, 30% site coverage. And so there's a whole bunch of other restrictions that are in place, but we came to around 120 acres of land with value of $275 million to $375 million. We again view that as a very low cost of capital. And in many cases, it not only does it not have any harm to the mall by selling it, but actually it even helps the mall by bringing additional traffic. We're not just looking at multi-res. I think people think because of my background that we're going to be heavily focused on multi-res, but we're actually talking to everyone. We talk to hotel users, student housing. We're talking to the seniors housing, long-term care, even self-storage in some cases.

We're really looking across asset classes. And we do think it will help support the mall. We're not going to be, again, doing these crazy master plans that will be ripping up the parking lots and making a concrete jungle where you can barely see the mall. By and large, it's stuff outside of the ring road, so not disruptive to the mall. And that's where we're focusing first and where we'll just be adding kind of traffic and customers.

And so I want to give a tiny update. These do take quite a bit of time. Oftentimes, they're tied to rezonings and development is extremely fickle. It's very, very levered. You've got a huge amount they have to spend to build and a huge amount of value and a small tweak in assumptions can kind of make your residual land value go away. So all that's to say it will take time, and there is some degree of execution risk, but we've got one under APS that's waived conditions, two under APS that we're working through the due diligence. We've got one under LOI that hopefully we'll have under APS very soon. And then we're negotiating three other LOIs.

So we're well underway. It's exciting. And we actually got -- I want to -- I'm not going to give too many details on it, but we got one unsolicited offer on one site that we know is a gem, but it's not GTA or Montreal or anything, but there's something special about the site where the offer that I'll take as much as I can get and the value per acre of land on that site if you applied that to the entire mall, the value would be twice what we have the mall on our IFRS value. And this is, I would say, a semi-noncore mall.

And so it really speaks to like the value of the land bank that is not given any value. And even further, I'll say it speaks to the replacement cost. When the land in that site specific, and it's not typical that it's that strong. But when the land is worth twice as much as the mall, it really shows you, a, how hard it's going to be to amass the type of scale of land, but you can never really replace it. And so that's one of the really strong moats around the business. And so give us a bit more time, and we'll have more and more updates. And eventually, you're going to start seeing a cadence of just free cash flow kind of pumping back in the business that we can reinvest in our strong opportunities.

So I'm going to talk more specifically about this mall. I've just got two more slides. One of them is on the outparcels. Mark talked about it yesterday, and Pat pointed them out as he was driving through. There's a Tesla dealership and then there's some other outparcels. You've got Best Buy, Old Navy, [indiscernible], a few other tenants in there. And so this is subject to a lot of demand. Mark said there's not enough supply out there. The investors are very, very hungry for this. You can underwrite with incredibly strong fundamentals that we may not even believe in ourselves. But -- and it's -- they're smaller in size, so they draw like a much broader capital pool than pretty much, I think, almost any other asset class right now.

And so you might even say that they might be somewhat overvalued. And so if it's not core to us, it's not part of what the platform is directed to do, it makes for a really good opportunity to sell. And we've got a lot of those. We're excited about this one. We've been working with Mark's team over the last couple of months, and we're going to be launching that this fall. And again, just given the simplicity and smaller size of that, that shouldn't be too controversial of a process and should be able to sell and really show that we don't pay -- when we buy these malls, we don't ascribe a separate value to the outparcels. We value them with the same high IRRs that we're using for our malls. But then if we can flip and sell those for lower. And we talked about the annex at Halifax. For those of you that were there, it's a very similar story. We'll take advantage of that.

And then the last piece is the land. We're sitting on over 100 acres of land here. St-Bruno is an affluent area in the South Shore. It's exciting, and we've got a lot of land on the outparcels. The first area that we're going to be targeting is going to be what we've got highlighted in green here on the screen. That's the grassy area that Pat was pointing to. So there is no other use for us with that. And with the proximity to the highways, the highly affluent area, the brand-new airport that just opened and the most -- the best mall in the South Shore, this is as good as it gets for land in the South Shore, and it's very attractive.

And so I'm out talking to all different developers of all different asset classes across the country. And what I will say is this one right now is the one I get the most questions about. There's a lot of interest. The seniors housing folks love it because of the demographics, the affluent and older population. The hotel folks love it because of the new airport that just opened. There couldn't be a better spot. You are by the highway, you are by the airport and you've got all the shopping and retail in there, especially the Keg one, right? So you think for a hotel developer, they don't have to build out or operate a restaurant. You've got a perfect hotel restaurant beside it as well. The multi-res folks are quite interested in it as well. And so a bit of a frustrating one.

The reason this one is not front of the line in terms of the list that we've said -- I was kind of walking through an APS and LOIs is the municipality has expressed that they want to see more density here, and that's very encouraging. And we think either they're going to rezone it for us or they will facilitate rezoning that we would do on our end. But as great as that sounds, they said, okay, well, we got to sit down and think about this. And we're going to come out with a project charter that outlines the uses and the densities. And by the way, you're frozen from selling anything until we do that.

And since I joined over 6 months ago, it's been coming in 2 to 3 weeks. Pretty much that's the update we get every 2 to 3 weeks. And so they've said it's coming this month, we mean it for real, but I'll see it when I believe it. But once we have that, it will allow us to go to developers and say, look, this is what you can do with this. The city is supportive. There's a clear path to it. And we've got a long line. This is one I get asked quite a bit about. So that will be very exciting for us. I've outlined, call it, approximately 7 acres that would be really easy to sell that's grass, that's outside of the ring road and in working with Mark and another land broker, [ Daniel Gallon ], who specializes in this. We've talked about what we're going to do. We've walked through values. I think $4 million an acre would be not controversial at all to say. And so on 7 acres, you're talking plus or minus $28 million.

And then I'll go even further than that. We haven't outlined it, but there's more land outside of the ring road. You can see the red dotted lines is what we own. So there's quite a bit more that we could do outside of the ring road. That will have a little bit more complications, which is why it's not first. And then even within the ring roads, whenever we run out, if there are areas that aren't disruptive to the mall, we would consider that. We take piercing the ring road a little bit more seriously. So that's kind of the last line of opportunity. But again, all of that value is something we didn't pay for. So with that said, I'm going to let pass it back off to Alex.

Thank you, Julian. One thing I forgot to do when I first came up here at the beginning was Pierrick Pecqueur is the marketing manager here at Promenades St-Bruno. He's in the back. He joined us 6 or 8 months ago from the Montreal Alouettes. So lots of diverse marketing experience, and I would highly recommend you chat him up as we walk around the mall because he has lots of interesting stuff that's going on at this shopping center.

So this is going to be shorter than my earlier ramble, and it's going to be just about what we've been talking about. This is management's focus. And if you just look at through those 4 different buckets, that's really what myself and Pat and Leslie and Julian have been talking about, maintaining financial strength, allocating capital with discipline, driving NOI within the existing portfolio and growing FFO and AFFO and distributions per unit.

I think we've mentioned a few times, we've been very thoughtful about our executive compensation, creating alignment between our management team and unitholders. I think Julian mentioned there's a lot of the executive personal net wealth tied up in Primaris. We're very aligned with unitholders. And so this is the stuff that we're focused on.

When I think about the future of Primaris, this is -- and I think the team thinks about it this way as well. Our June 29 press release spoke to the lease-up of a lot of the HBC, but also the CRU leasing that we've been doing. A lot of that CRU leasing was from legacy portfolios, but a lot of it was from properties that we've acquired over the last few years, leasing up vacant space, still some remnants of the pandemic in terms of legacy vacancy within the portfolio. I think [ Pammi ] had asked earlier about the timing of the HBC rents commencing. That will be, as Pat was saying, late 2027, 2028. A lot of the CRU leasing that we've been reporting on, particularly in Q1 of this year, a lot of that is going to be sort of filling some of that gap through 2027. Those leases typically take less time to build up the space, and they tend to be at higher rents.

And so our ramp of growth, even in 2026, if you look at our same-property NOI growth in the first half, we're expecting it to pick up in the second half as is implied in our guidance for 2026, and we'll see that ramp go through 2027, 2028, 2029. And as we think about the next phase of our growth, once we get to 96%, 97%, the growth will come from a different source, but we're pretty optimistic about the scale of that growth. For the last few years, as we've been filling space, there are a number of tenants within our portfolio that we have allowed to persist. Some of them are not terribly productive or they don't pay very much rent, but they were filling space. And as we were trying to fill the space beside them, we let that be.

When our shopping centers are full, every tenant has to fight for their space. And that means they need to be more relevant for consumers. They need to pay higher rents. They need to sell more stuff. And so once we get the malls full, the next phase of growth is really around going back and optimizing the tenant mix, which is something we do on an ongoing basis, but there have been a number of retailers that we've let sort of persist in the portfolio. So that really -- I say 2029, 2032. But when you think about when that's actually going to happen, the full tenancy that we're talking about in the June 29 press release and in this slide, most of that will contractually be done in the next 12, 18, 24 months. And as soon as we get to that committed 96% is when you start to work on the tenant optimization.

So a lot of that work will be even in the latter half of 2027 and a lot of it will be in 2028. And then the operational efficiency side of things, I think it's fair to say that when you've got a portfolio that is 70% new in the last 5 years, including $1.6 billion of acquisitions in 2025, another $400 million that we just announced. We're still wrapping our arms around a lot of these properties. Sometimes it takes a little bit of time to figure out exactly what you have and where you can take it. And so as our business has been very fluid and dynamic in terms of the portfolio construction, there is a lot of opportunity in operational efficiency. Some of it comes back to AI and the optimization of some of our processes, other things, our lease structures.

We have a group of people in our lease administration group that basically calculate the recoveries from all of the tenants. I think we can utilize some technology, some AI to improve the efficiency there, but then that group sort of shifts its focus from sort of the rote calculation of the recoveries, all 3,000 tenants have a slightly different calculation of that recovery. And as you can, I guess, sort of better wrap your arms around exactly how all those calculations are done and utilize technology, you can also analyze that portfolio of leases and figure out ways that you can feed back to the legal team to say, when we're writing these leases, this is a little tweak that the tenant doesn't really care about, but it will improve our operating margin. It will improve our efficiency. There's a dozen different things along that line. And that's something that from a platform perspective, we're really excited about being the next phase of growth for Primaris.

I mentioned earlier that we have a new set of 3-year targets out, 96% in-place occupancy. That is what our prior target was before we revised it due to the HBC bankruptcy. Interestingly enough, if you exclude the HBC space, we're at 96% committed. We'd like to get the in-place back up to that level as well. We think over the next 3 years, 2027, 2028 and 2029, we've got a 3% to 5% same-property NOI growth range. I think that's sort of a compound annual growth rate. We're not exactly sure where it's going to land in each year, but it has the potential to exceed the top end of that range in some years, and we think that the average will be somewhere in that range.

Dispositions, $500 million. Julian just spoke about some of the land and outparcels. We do have some noncore malls as well that will be selling as well. Hopefully, some of that news will be available in the near term. Capital expenditures, we've got $200 million-ish around the HBC, and then there's another $100 million of projects, which once we wrap up the webcast portion of this Investor Day, Pat is going to speak to some of the projects that we have going on in this mall. There's a $50 million project that's not HBC related that will go into that $300 million just here at this property.

FFO growth, 4% to 8%. As Leslie was mentioning, our payout ratio has dropped into the below midpoint of our target range and our FFO growth, we believe, is accelerating over the next 3 years. And so we're expecting distribution increases in the 4% to 8% range as well. That's up from the 2% to 2.5% that we've been doing for the last 4 or 5 years. Leverage, we tightened up the bottom end of the range. This isn't terribly strategic. It's just sort of an acknowledgment from us that what we've really been doing when we think about the last 5 years is we've been trying to optimize the amount of equity in the business, dropping leverage to 4x doesn't really add a lot of advantage over 5x, and we are comfortable with our 6x ceiling.

So in practical reality, we've really been optimizing for that 5.5x to 6x range really, but we're comfortable going down to 5x. And the payout ratio remains unchanged. One thing you'll note about this is we don't have a target on acquisitions, and that's not to say that there has been any change in our ambition or our opportunity set. We still remain very focused on acquiring malls that we think elevate our platform in terms of the quality, the internal growth rate of the steady-state same-property NOI growth. It just is a very difficult thing to handicap because the acquisitions are $400 million, $500 million, $600 million. And when we do 4 acquisitions like we did in 2025, it's $1.6 billion. We've got one so far this year at $400 million. We're not super, super focused on growing specifically to grow. It's really about getting the right properties.

And we think that there's a significant opportunity there, but we just decided not to put out a specific target because it's just a tough one to wrap your arms around. But we do remain very interested, and we're in active discussions on a number of properties. So that is a really good quote. I'm not sure who it's attributed to, but that's probably a collective Primaris team quote. So we're pretty excited about what lies ahead. I hope everyone has found this very useful and productive, and we're looking forward to touring everyone through the mall after we have some lunch. But we have a little bit of time right now for some Q&A. And it can be for myself, it can be for Leslie, for Julian, for Pat. Any questions that anyone has, we'd be happy to field at this point.

Alex, the $500 million disposition target, you had the same target 3 years ago. Are these assets that you always wanted to sell? I assume they're not from assets you recently bought. So it's just continuing to trim from lower quality, lower sales?

Yes. So the noncore dispositions is a combination of the land, which, as Julian very clearly mentioned, has essentially no cost of capital for us. We do have some outparcels, which aren't strategic to us. And when it comes to the malls, again, what we're really trying to optimize for is the steady-state internal growth rate. So we have some malls in our portfolio that are very good, steady performers. And what we're really trying to do is optimize around the high-growth part of the portfolio.

And embedded in your question was, are these the same ones that we've always been looking at. I would say, as our portfolio has grown and the averages that we spoke about earlier have improved, that sort of that line for noncore tends to move up a little bit. As I mentioned a couple of minutes ago, hopefully, we'll have some news on that front in the quite near future. And you'll see some of the examples that would be noncore.

Alex, great presentation. Thank you for doing this today and look forward to seeing the mall. I just want to understand what's in the same-property NOI growth guidance of 3% to 5%, and this might be for Leslie, but clearly, it's 96% occupancy is where you're targeting over the next, I guess, 3 years. But what properties are in and not in that same-property asset pool in terms of some maybe some recent acquisitions that might not be part of that?

And also, you've talked in the past about getting to a mid-90s recovery ratio. Is that embedded in your 2029 target at this point and included in the same-property NOI growth guidance?

Yes. Leslie, on the same-property, would the 2025 acquisitions be in our 2027?

Yes. So next year, everything we bought in 2025 will be in 2027. So that will be in St-Bruno and Upper Canada will be the only ones that aren't same property next year and then St-Bruno steps in and then Upper Canada steps in. And yes, we would consider the growth in the recoveries as part of our same-property growth predictions as well.

So really, it's only Upper Canada Mall that won't be in same property for 2027. But after that, everything else is in. And your recovery ratio question, so on that point, one of the things that we found -- there's been a little bit of confusion about is when we talk about the drivers of same-property NOI growth, lease-up is a big driver. We've also talked about the recovery ratios going up as being a driver. But those two are really overlapping. As the occupancy goes up, the recovery ratio improves. I would say, absolutely, we're expecting our recovery ratio to get into the mid-90s for -- low to mid-90s for property taxes and ideally the mid-90s to even the high 90s for the CAM.

And the CAM, we can charge an administrative fee, which gives us the possibility to be over 100%, I think, Pat said that Peter Pond and Park Place have both been at 104%, both very well-run shopping centers. And we're hopeful that we'll be able to get the whole portfolio up into that mid-90s blended recovery ratio.

Maybe just a follow-up on that same property NOI question. Just to clarify, is the HBC backfill included in that figure when you're also, of course, putting in a fair amount of CapEx. I just want to make sure that the HBC space is part of that 3% to 5%?

Yes. No, it is. And I think it's a good question in the sense that there's a lot of ways that you can drive same-property NOI growth. If you wanted to buy up your rents, you can spend capital to manufacture same-property NOI growth. In our case, we try to be as transparent as possible. The capital that we're spending, we're calculating the return based on the space being empty.

So the 10% or 10% plus yields that we're getting on the HBC backfill is just the incremental cost and the gross rent that we're getting. And that will be included in the same property. And ideally, if we're successful on everything that we're doing, hopefully, we'll be at the top end of the range or possibly above the top end of the range, which for those who have followed us for a while, we tend to like to set targets that we're reasonably confident that we can hit. And so yes, I mean, 3% to 5% is a number that we're quite comfortable that we'll be able to achieve, and it's possible we could outperform.

And just a follow-up, that 4% to 8% FFO growth that you've laid out, there's clearly a number of moving parts here between 3% and 5% same-property NOI, $500 million of disposition depending on what yield versus land or an asset or an income-producing asset. So when you think about that 4% to 8%, is it more skewed to, I guess, some of the heavier leasing or benefit from a leasing standpoint on the backfill of that space? I think that $50 million of NOI that you showed kind of shows it kind of evenly over the next 3 years. So just trying to reconcile that range of 4% to 8% and what that might look like in the later years versus the early years.

Yes. So at the end of this month, we're going to provide our 2027 guidance, and that will give us more specific numbers around 2027. At this point, we're still working on the 3-year budget and where all of those things land. I tried to touch on it earlier, but the contributions in 2027 are more likely to be skewed towards the CRU leasing. There's been record levels of CRU leasing in our portfolio. In one of Pat's slides, it showed the volume of leasing really accelerating. And that's not just because the portfolio is larger. It is on a comparable basis, has been accelerating quite a bit.

But as it relates to the FFO per unit growth, I think you touched on the key variables. Dispositions: dispositions, there's no real 2 ways about it when you're selling something at a high single-digit cap rate and the use is paying down debt or something else, it's going to be dilutive. Fortunately, these properties are smaller in dollar value than the acquisitions that we're making. There is a negative spread. The things that we're selling are typically slightly higher cap rate than the things that we're buying. But on the whole, we think that we're generating higher internal growth, and it's really a timing difference.

But yes, I mean, to get to the 4% would imply a fair bit of dilution from dispositions and probably a lack of success on some of the leasing that we think we're pretty well advanced on. And the high end of the range would be some outperformance from some of the acquisitions, some earlier delivery of the rent from some of the CRU leasing, but also the HBC backfill leasing. So 4% to 8%, we feel is a pretty comfortable range. And again, if things go really well, possibly we'll be above that range.

Alex, we were out in Halifax and that mall is fully occupied and there's a mark-to-market on rent story there. And you have malls that are in various rates of lease-up. But just given the replacement cost and the rents that are necessary to occupy new space, do you expect to see a market rent move while you're leasing up this space? Or do you need to get to that 96% occupancy before you have tension and can push rents?

I don't know. Maybe Pat wants to answer that one.

I think probably yes, but I'll let you.

Yes. No, rents will move up. I mean there's a lot of demand for space. Halifax is a good example. We have a ton of tenants that want more space, existing tenants that want to expand. We're going to be replacing some existing tenants in the mall that are underperforming and bringing in new tenants or expanding existing ones and the rents are just going to climb.

Yes. And Kevin, one of the things that's unique about the mall business is that the rents aren't necessarily location-specific, they're tenant specific. And one of the metrics that we always encourage people to look at is our gross rent occupancy cost ratio, and it's at 12.5%. We think we can get it up to the 14.5% range, recognizing that's a gross rent metric. If you eliminate the additional rent component, you're really talking about 200 basis points of increase on 600, 650 basis points of net rent.

So the mark-to-market that we believe exists in our portfolio is somewhere in that 25% to 30% range. And it takes some time, leasing up space is a priority over the leasing spreads right now. But 12, 18 months from now, when we've done all of the committed leasing to get to 96% is when we really start to dig into that. And that's pushing the rents on existing tenants we want to keep, but also replacing some of the softer performing tenants [indiscernible].

Maybe I'll put Pat back on the spot since he had an easy out last time. With the increase in cost of financing, are you seeing any slowdown in terms of appetite for retailers to continue to expand?

It's not financing that's causing them anxiety. It's construction costs.

Mic, closer to your mouth.

Okay. It's really construction costs that are hitting retailers right now. It's the cost to build whether they're box stores like grocery stores or just tenant fit-outs, they're trying to figure out how to optimize their layout so they can get costs down. Having said that, it hasn't slowed down expansion, but it's certainly they're starting to talk about more.

So my question is, how much of the FFO per unit growth guidance is from the sale of residential density? Or in other words, like what would the 4% to 8% target be if you sold 0 excess land?

Honestly, I believe that our modeling has not really incorporated much on that front. We tend to be fairly conservative. And as Julian has highlighted, it is a complicated process. Julian has only been with us for 6 months. He brings all of the expertise in this realm, and we're giving him a little bit of leeway until it actually comes through. And the numbers are not that huge. So it's incremental. It is free capital essentially in terms of the cost of capital. But I would say that's kind of a bonus to the extent that we are successful on that front and we redeploy it. Just when you think about our weighted average cost of capital across our $5 billion of equity and debt, it's a relatively small number, but it really does help. And particularly over time, we think it's going to be a significant driver. But to date, we haven't really factored that into our forecast.

Alex, I noticed that you've had a chart on M&A targets in your presentations and some of the past ones. And I can appreciate that you don't have a target on acquisitions. But when you think about your opportunity set for malls that would fit your criteria, what does that number look like? Is it another $3 billion? Is it $4 billion?

Well, we've -- since the beginning, we've had a chart that said $40 billion or $50 billion. We've acquired $3.8 billion in the last 5 years. There's still an awful lot out there. To give you some context or some qualitative description, there are a diversity of perspectives at the pension plans. Some of them are quite keen to get entirely out of direct real estate. Some of them have platforms that want to maintain that platform, and it's more a matter of rebalancing the mix of office, retail, industrial, cell towers, data centers, infrastructure, other real assets.

But I would say that we've acquired a fair bit. But I would say that the opportunity set is still well in excess of what we've acquired to date. And we have some more stuff that we're working on. You never know until you know, but we're optimistic that we'll be able to continue to add high-quality shopping centers to the portfolio. It's possible in the remainder of 2026. I think we'll be active in 2027, and I'm getting more confident that even 2028 will continue to have some significant opportunities. It's a very interesting landscape. The malls that we acquire are large. Canada is not that large of a place. And so the liquidity in the mall market remains not anywhere near what it would be, for instance, grocery-anchored strips, where you can have an auction and have 30 or 40 bidders that are well qualified that are aggressive.

Julian has spoken, I think he spoke about it as well in Halifax. Our most recent acquisition, there was more competition that we run into than we have in the past which we believe is encouraging, but we still remain a preferred buyer, particularly as you get larger and larger, $400 million and plus. We have a great profile, excellent access to capital, no financing condition. We're very professional. Our team underwrites these properties very quickly. We can communicate very clearly with the vendors. And we have established great relationships with all of these counterparties, and we work very well with them. So we're quite optimistic that there's still a long way to go.

And that is 3 minutes before we were supposed to wrap this up. So I feel pretty good about that. And I think that's the end of the webcast portion. Thanks, everyone, for attending online and in person.

Good morning and welcome to Primaris REIT's Second Quarter 2026 Results Conference Call. [Operator Instructions]

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 REIT's filings with 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.

Good morning. Thanks for joining Primaris REIT's Second Quarter 2026 Conference Call. Joining me today are Pat Sullivan, Rags Davloor, Julian Schonfeldt, Leslie Buist, Mordy Bobrowsky, Graham Procter, and Claire Mahaney.

Halfway through our 5th year post-spinout, we are having a lot of fun at Primaris. All of the hard work over the past 5 years is manifesting in our financial and operating results. It has been a remarkable 5 years of change, with 70% of the portfolio new since 2021. We have moved from the 19th largest Capped REIT index member to the 9th, 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 3 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 3 sources. First, signed and committed deals. Second, future lease-up at our 10 most productive centers. And third, lease-up of the 10 former HBC spaces that are now 84% leased or in advanced negotiations at rents 4x higher than previous.

Compared to the midpoint of our 2026 guidance range, this represents more than 13% growth in NOI over the next 3 years. Taken together, our leasing pipeline and improving portfolio quality initiatives provide a clear and highly visible path to meaningful earnings growth over the coming years. With significant embedded NOI growth already identified, a stronger and higher quality portfolio, and multiple sources of internally generated capital, we believe Primaris is exceptionally well positioned to create long-term value for unitholders and further strengthen its position as Canada's leading owner of dominant enclosed shopping centers.

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 or are in advanced negotiations on 84% of the former HBC space, including 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 4x that 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 HBC leases. Excluding the $0.4 million contribution from the recovery of property taxes last year, same-property cash NOI would have seen an increase of 1.1%. Notably, Q2 2025 was the last quarter of full rents from HBC. We anticipate that 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 our leasing efforts to reduce this vacancy at malls such as Conestoga, Devonshire, and Oshawa Centre 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 Galeries de la Capitale, 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 Centre 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 Promenades 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 a 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 unitholders.

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 unitholders 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.

Returning 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 1 or 2 or even 3 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 Rags.

Thank you, Julian, and good morning, everyone. Primaris reported FFO per unit of $0.451 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 1/3 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. 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 6x, 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 5-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, Rags. 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 5x what it was 2 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 Centre 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 Promenades 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.

[Operator Instructions] Your first question from the line of Lorne Kalmar with Desjardins.

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 kind of year-end and folks are looking at their targets or goals for the year, that can tend to be a bit of a driver. You know, it's hard to kind of understand everyone's specific or unique motivations in the background, but we are relatively active with them. Nothing that's advanced, but, you know, with the cost of capital that we have now and the access to capital that we have, that could potentially be driving it. But, you know, again, nothing specific to report right now, but we're hopeful that we'll be able to drive at least 1 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 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, yes, it gives us more tools in the toolbox, and we're not shy to mention that.

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

Alex, you made a comment about the market, the capital markets recognizing increasingly the value of Primaris units and obviously the unit price 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?

You know, it's very difficult to ascribe the reasons behind a stock price movement, as you know. I would say, you know, 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 enclosed 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. And so I think that's probably a part of it, but also the liquidity in our stock was really probably the biggest thing. When we talk 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 know, 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.

Okay, great. And maybe just one more. It seems like selling off some residual density of properties on land is something that you're going to be looking to do. To what extent is this something we should expect in the near term? Because obviously, development land is not trading as much now as it might have been a few years ago.

Yes, 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 of seniors. Housing has become quite interesting, hospitality as well. We've been having discussions on student housing and self-storage depending on the site. 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 the 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.

Your next question from the line of Pammi Bir with RBC Capital Markets.

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 the standard 3% to 4% 3-year target that you've guided to?

Yes, Pammi, 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 probably for the next 3 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 1 year or it could be equally spread out. It really just depends on when all of the leases take effect. But yes, 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 1, and just any insight would be perhaps helpful.

Yes, sure. So 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 encountered.

And ultimately, we ended up terminating the transaction when 2 things happened. One was that we had success finding buyers. We had unsolicited interest arise for McAllister, for Marlborough. And we've now concluded 2 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.

Your next question from the line of Sam Damiani with TD Cowen.

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.

Yes, 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 were held back by our tax recovery ratio on the HBC boxes. But I suggest it'll be slightly stronger towards the end of this year and it's really stronger at the end of next year.

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? Anything, 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 tenants' lease and lease year-end. So, tenants, it's not always January to December. Some tenants have their lease years 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 we're participating in the inflation or the increased sales impact that's driving their sales higher. When we go to renew these leases, we'll try to recapture some of that or all of the percentage rent in a higher face rate on the lease. So it is somewhat hard for you guys to model that, but it is directly correlated to sales rising.

In terms of specialty leasing, yes, as we lease up space, you will see that number 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 empty Bay boxes that haven't started construction yet, specifically Spirit Halloween, which those opportunities won't be available to them next year.

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

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, yes. 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 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, and it all depends on the complexity of the redevelopment and when we start. So we've started in Galeries de la Capitale and we're going to see some tenants opening early in 2027. Lime Ridge, the Bay -- the Walmart, which is not in a Bay box, it was in a Sears box, sounds like they're going to open much earlier than we all anticipated, 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 that timing to just be stretching out over the next 24 months -- 24 to 30 months, actually.

And that's the HBC side of things. If you go back to our Q1 results, you saw the gap between in-place and committed jump out to 350 basis points at the time. And substantially all of that was CRU leasing. And at CRU leasing, generally there's less fitting out time. So sequentially, you're going to see a lot more of the CRU occupancy moving up quarter to quarter for the next few quarters. And then the actual rent commencement from a lot of the Bay stuff is, you know, more 2027, 2028. It all layers together. 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, 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 issue 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 our kind of stated leverage goals that we want to remain within, but yes, 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 they need to make Primaris a better company, needs to be accretive to the unitholders. And so 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 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.

Make sense. Ours is above yours at this point now, so we'll see where it trends.

[Operator Instructions] Your next question from the line of Mario Saric with Scotiabank.

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?

Mario, 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, and whether that's new entrants or other entrants, 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 demand side is fairly strong, and it is actually being driven by a number of foreign entrants.

Okay. 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 swollen population growth in the past 12 months anyways. Do you agree with that? And then secondly, like, 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 tenant demand -- sorry, not tenant, consumer demand. There has been a significant increase in sales in the last number of years and the inflation impact really wore off, say 2 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 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 dated question. You've talked about same-store NOI growth should be higher than the 3% to 4% range over the next 3 years. And that's clear in terms of getting up to a 96% stabilized occupancy over that timeframe. How do you, like, once the portfolio is at a stabilization, say 2 to 3 years from now, given your balance sheet leverage and kind of where you see that portfolio 3 years out, what do you think the structural earnings power growth of that portfolio may look like?

Yes, I mean, we've actually spent a fair bit of time thinking about this over the last 4 or 5 years. And what we've concluded is we believe that it's going to be in the 3% to 4% range fairly consistently. And that, you know, is better than inflation, which is really quite good. But a lot of it is a function of the moat around our properties and these properties are very, 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 3x 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 supply. 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, the 3% to 4% you're referring to, that would be kind of FFO, or same-store NOI and presumably would exclude any potential benefit from the sale of residential land?

Yes. No, that's just net operating income, same-property NOI. That's the 3% to 4%. And I think in our 3-year guidance, we had also said 5% to 6% on the FFO line. And I think that's, you know, if you can do 3% to 4% same-property, you should be able to do 5% to 6% FFO growth. We have relatively low leverage compared to some of our peers as well, and that math is all factored in.

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.

Good morning, and welcome to Primaris REIT's First Quarter 2026 Results Conference Call. [Operator Instructions]

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 REIT's filings with 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.

Good morning. Thank you for joining Primaris REIT's First Quarter 2026 Conference Call. Joining me today are Pat Sullivan, President and Chief Operating Officer; Julian Schonfeldt, Chief Investment Officer; Rags Davloor, CFO; Leslie Buist, SVP, Finance; Mordy Bobrowsky, SVP, General Counsel; Graham Procter, SVP, Asset Management; and Claire Mahaney, VP, IR and Sustainability.

As we begin 2026, we're encouraged by the strong leasing momentum across the business. Activity throughout the portfolio remains robust. Tenant demand is healthy and both the quality and volume of deals being executed continue to strengthen. While some of this progress will take time to fully translate into reported financial results, the leasing fundamentals we're seeing today give us a high degree of confidence in the direction of the business.

While near-term financial results reflect some expected headwinds, including the impacts from HBC and Toys "R" Us, equity compensation program settlements and 2025 dispositions, the underlying trajectory of the business remains very strong.

CRU leasing was a standout this quarter. The best descriptor of recent leasing activity is breathtaking with strong renewal spreads, record high leasing volume and very strong tenant demand across the portfolio. The deals executed by the team during the quarter will drive robust NOI growth over the next several quarters.

With the significant growth of our portfolio over the past few years and an expanding set of investment and capital recycling opportunities, we've strengthened our leadership team.

Julian Schonfeldt has joined Primaris as our Chief Investment Officer and will oversee our investment activities and capital allocation initiatives, including acquisitions, dispositions, portfolio optimization and underwriting.

A key area of focus will be unlocking value from our substantial excess lands, many of which have only recently become actionable following the departure of Hudson's Bay. Julian, welcome to the team. You can't see this, but he's got a big goofy grin on his face, and so do I.

In 2025, Primaris regained control of the 7% of our portfolio that had been occupied by Canada's last department store, half in June and half at the end of November. With average net rents of just over $4 per square foot, the space was the least productive but often the best located space in our portfolio.

Nevertheless, the full financial impact of this departure is notable in our Q1 2026 results as the peak quarter of occupancy and revenue drag. Now for the first time in Canadian mall history, we are no longer constrained by legacy access controls imposed by large anchor tenants, controls that have been monetized for decades without regard to the broader site optimization.

This shift gives us meaningful flexibility across our portfolio, enabling more integrated decision-making around leasing, redevelopment and excess lands, all informed by a disciplined assessment of highest and best use. By removing these long-standing barriers, we can begin to unlock value that has remained dormant for decades.

We are now executing on this opportunity to deliver a higher quality, structurally higher growth and more durable cash flow. This opportunity could not have come at a better time in terms of robust retailer demand and leasing environment.

We are also active on master planning and are approaching this massive opportunity with a disciplined and thoughtful approach. All of this work, directly advances our strategic ambition of becoming the first call, and we are very excited about what lies ahead.

With that, I'll now turn the call over to Patrick to walk you through our operational results for the quarter. Pat?

Thank you, Alex, and good morning, everyone. We've been hard at work reshaping the portfolio to achieve structurally higher internal growth. The closure of HBC represents significant progress towards this goal as we are replacing low rents with no growth that occupied a significant share of the total GLA with higher rents with contractual rent growth.

Our leasing efforts have accelerated and demand from retailers continues to exceed expectations due to low supply of available retail space and the high-quality nature of the HBC real estate. We anticipate retaining approximately 90% of the former HBC GLA. And to date, we are at various stages of advanced negotiation with tenants representing approximately 70% of the expected GLA.

Approximately 35% of space or 350,000 square feet is committed or conditionally leased with very minimal capital investment from Primaris. We plan to provide a detailed leasing update in June once we have a significant number of fully executed leases in place and are able to share a good level of detail.

Anticipated cash rent commencement from redeveloped HBC locations will begin in some properties as early as Q1 2027 with overall yields expected to be approximately 8% to 10%. At present, we continue to anticipate generating more than $17 million of annualized net rents from the former HBC premise once leases commence over the next two years from a diversified mix of high credit quality tenants.

We believe the full impact to NOI could be higher as this analysis does not account for the benefit to adjoining retail premise, some of which are currently vacant that will benefit from being next to new tenants generating higher traffic. Beyond the attractive economics we are experiencing on re-leasing the recently vacated space, the elimination of onerous development restrictions that were embedded in the disclaimed leases has now liberated more than 70 acres of land across our portfolio.

Primaris has established strategic plans for our properties that include the potential to develop excess land for outparcel buildings, including restaurants, grocery stores and financial institutions, as well as the sale of land to residential developers. We are currently engaged in discussions with retailers and financial institutions for outparcels previously restricted by HBC, which will generate returns of more than 10%. In addition, we are building a land disposition strategy and expect to begin marketing some of these excess land parcels shortly.

On to our operating results. Despite the loss of HBC revenue, same-property NOI performance this quarter was fundamentally very strong.

The reported 2.1% decline in same-property cash NOI was driven by $2.5 million in prior year property tax recoveries in Q1 2025, as well as $2.4 million of lower rental revenue due to the now disclaimed HBC leases.

Importantly, excluding only the $2.5 million contribution from the recovery of property taxes last year, same-property shopping Centre cash NOI growth would have been an increase of 1.7%. This performance reflects the strength of the underlying portfolio, continued rent growth, improving recovery, solid leasing execution, and reinforces our confidence in the embedded NOI growth as HBC space is re-leased and occupancy grows.

As a quick reminder, retail operating results are inherently seasonal, with the fourth quarter typically representing the strongest period of the year. Occupancy and retail tenant sales generally peak in the fourth quarter, driven by the holiday shopping season, higher consumer traffic plus temporary and seasonal leasing activity. By contrast, the first quarter is typically the softest period, reflecting normal post-holiday sales normalization, fewer seasonal tenants, and the timing of lease commencement.

These recurring seasonal patterns are consistent across the retail sector and should be considered when comparing performance. Given these seasonal dynamics, same-quarter year-over-year comparisons rather than sequential quarter-to-quarter results offer a more appropriate lens for evaluating underlying performance.

Leasing activity was extremely strong during the quarter, with 114 leases renewed across 372,000 square feet. CRU leasing spreads were 7.9% and 5.5% overall. If not for the renewal of one large-format tenant at a lower rate at a non-core property, overall leasing spreads would have been much higher. 60 new deals encompassing 146,000 square feet were completed during the quarter, including 55 new CRU deals for 96,000 square feet. New CRU leases completed during the quarter were completed at a weighted average net rent of $63.20.

For context, average CRU rents in the portfolio have risen to $50.03 per square foot as at Q1 2026 from $42.02 per square foot at the end of 2022. The Q1 2026 CRU new deal average rent and the new deal count recorded are the highest quarterly amounts recorded over the past 10 years and reflect the strong demand from retailers for retail real estate.

A key metric for us is CRU occupancy, which refers to space under 15,000 square feet. CRU in-place occupancy improved to 91.2% versus 90.1% at Q1 last year. CRU occupancy in newly acquired centres is lower than our portfolio average, which provides for significant income growth in these high-performing centres. HBC had a significant impact on our overall occupancy figure, negatively impacting occupancy by 6.5%, with new acquisitions also creating a negative drag of 3%.

Combined recovery ratios improved to 78.5%, driven by strong leasing activity and improvement in the portfolio composition. Stabilized levels for recovery ratios in our portfolio are around 92% to 93% for property tax and 96% to 97% for operating costs as compared to our current figures of 75.5% and 81.3%, respectively. Each 1% improvement in the combined recovery ratio adds approximately $2.5 million to NOI annually.

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 elevated CRU vacancy, and our leasing efforts to reduce this vacancy at malls such as Conestoga, Devonshire, and Oshawa Centre 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 top-tier centres newly acquired, such as Oshawa, Galeries de la Capitale, and Southgate, where recovery ratios remain well below our target levels.

Sales continue to be strong, with all store sales volume growing by 3% to $3.57 billion for the 12-month period ending February 2026, as compared to February 2025. Notable increases were realized at Orchard Park, where sales volume has surpassed $200 million to $214 million, as well as Halifax Shopping Centre, Lime Ridge Mall, Oshawa Centre, and Promenades St-Bruno. Conestoga Mall also posted strong gains, and we anticipate this property will eclipse the $200 million mark in sales volume this year, given the significant leasing activity at the property.

Across the board, our leasing and operations teams are executing at a very high level and producing outstanding results. 2025 was a transformative year for our portfolio, and 2026 is already shaping up to be a year of significant leasing progress.

With that, I'll turn the call over to Rags.

Thank you, Pat, and good morning, everyone. Primaris reported FFO per unit of $0.425 per diluted unit, down 3.2% year-over-year. It is important to frame the result in the right context. The decline in the year-over-year comparison is primarily impacted by approximately $2.5 million of prior year tax recoveries and $2.4 million from the now disclaimed HBC leases.

Excluding the $2.5 million impact of the prior year tax recoveries, FFO per unit was up 1.6%. This growth, even after absorbing the loss of $2.4 million of lost HBC revenue, speaks directly to the strength of our underlying core portfolio and operating business. We achieved these impressive per-unit results despite increased unit count, sale of non-core assets at the end of 2025, and the impact of the now disclaimed HBC leases.

Internal growth and accretive high-quality acquisitions completed in the last 18 to 24 months are the drivers of core performance. As the portfolio has grown, we've continued to realize meaningful economies of scale by leveraging our internal management platform. As a result, G&A has started to stabilize as Primaris reaches scale across its national portfolio.

In the quarter, while G&A was $2.3 million higher than the same period in 2025, this was primarily as a result of the unit-based compensation vesting and settlement. The equity compensation vested in the quarter was granted in 2023 at an average price of $13.78 per unit, being the market price at the time these options were granted, and was cash settled in the quarter at a market price of $17.45 per unit, resulting in an incremental expense of $1.4 million in the quarter.

Turning to the balance sheet. We remain very comfortable with our financial position. At quarter end, average net debt to adjusted EBITDA was 6x. Liquidity was $626.8 million, and we continue to have no debt maturities until 2027.

Importantly, Morningstar DBRS reaffirmed our BBB high credit rating with a stable trend during the quarter, which we view as a strong endorsement of our differentiated financial model and our low payout ratio. If you are trying to reconcile same-property NOI growth to FFO growth, it is important to note that over 1/3 of the 2026 cash NOI guidance is attributable to the 2025 acquisitions, which were not included in same-property NOI, but also benefited from strong leasing activity.

We expect same-property NOI growth to accelerate in 2027 and 2028 as we see vacant anchor space coming back online at higher rents. The underlying performance of our core business remains extremely strong.

Our portfolio continues to generate stable and resilient cash flow, reflecting the quality of our assets and our operating platform. 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, Rags. 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 4% and our trading liquidity now roughly 4x what it was two years ago as measured by the dollar value of units traded per day.

With leasing well advanced on the remaining HBC space, 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.

[Operator Instructions] Your first question comes from Sam Damiani from TD Cowen.

So just maybe on the occupancy to start things off. Just wondering if you think the Q1 level is a trough for the foreseeable future. And how do you see the cadence of in-place occupancy, rent paying in-place occupancy kind of materializing in the next couple of quarters and heading into the end of 2027.

Hi Sam, so occupancy will be driven by two things. One, first of all, I think we have hit the trough. I mean HBC, they're closed, and that was the big, that was the Band-Aid being ripped off. And from this point forward, you're going to see CRU leasing continue to accelerate, which is going to help improve occupancy, but that's rather small movements. The big chunky movements will come when we start replacing the base space because we're talking about replacing approximately 1 million square feet. So that will happen over the next 24 months. So, and that will come in big, like I said, lumpy pieces and it will drive occupancy up in a meaningful material way.

Yes. The other thing, Sam, it's Rags. You'll note that there's a gap between in-place occupancy and committed occupancy of 250 basis points, which is about as high as you would see. Typically, it's 100 to 150 basis points. But that's just a product of the high level of leasing activity that we've had in the last quarter and then just the lag with those tenants taking place. So, you will start to see then the occupancy start up and the cash flow starting to flow through the same-property NOI.

And just to add to that point, that 350 basis point gap is likely to expand from here and through the committed number going up and the in-place will lag. But basically, it's all about leasing right now, and we're expecting the pace of leasing to be faster than tenants can actually occupy the space.

But the guidance being maintained from an FFO perspective is indicative that later this year, you're going to see a bunch of the cash rents coming in. A lot of it's on the CRU leasing and then cash rents more so from the HBC stuff end of this year, beginning of next year and then all the way through 2027 into 2028. It should be a pretty steady cadence.

Very helpful. And just for my follow-up, maybe an update on acquisitions and dispositions. I see the held-for-sale bucket is up a little bit quarter-over-quarter. And I guess, Alex, any sort of current commentary on the prospect for the next sort of strategic acquisition for the REIT?

Yes. Sam, as we've said before, the group of counterparties that we're dealing with are large, sophisticated, largely pension fund-owned groups, and they have a whole lot of committees and approvals and processes that they go through. And they also tend to be, keep their cards relatively close to their chest. So, we engage with a number of them on a fairly regular basis, have discussions about specific properties.

We have multiple discussions about specific properties going on, but we're not at a point where we have visibility to a specific transaction on the acquisition side. We're pretty optimistic that we have one or two or three that we might be able to conclude this year. But the timing is uncertain.

On the disposition side, in terms of our ambition of becoming the first call, it's as impactful to make these big high-quality mall acquisitions as it is to recycle capital from the bottom end of our portfolio. And we have a fair bit of activity on that front. Hopefully, we'll have some further updates in the near term. And as Rags was alluding to, we're planning to provide an update on HBC leasing in the next 60 days-ish. And at that point, we are also expecting to be able to report on some of the property transactions that we've been working on as well.

Your next question comes from Brad Sturges at Raymond James.

Congrats on the leasing activity to date. It sounds like you're making good progress. Just curious on the, I guess, the last call, you talked about Toys "R" Us, you were kind of at six locations in advanced negotiations. I wonder if there was any, I guess, update specifically on those six locations.

Sure, Brad. Yes, we had 45,000 square feet. The average rent was about $12.40, so relatively low. We have leasing activity on all of them. And most of them are very advanced. We have some that are going to have possession this year, and we're achieving much, much higher rents than we had in place. So, it's a very good win for us going forward.

Perfect. And there's no shortage of investment and transaction opportunities for Primaris. Just curious, as the stock price has improved of late, where does NCIB activity or buyback activity rank? And do you still expect to kind of keep a similar amount of investment activity as you were the last couple of years into the NCIB?

Yes. We love buying back stock and continue to see it as a good use of capital, a very good use of capital. As we were talking a couple of minutes ago about the trough in occupancy, you may have noticed that our debt-to-EBITDA number hit 6.0x this quarter. And that's a function of the EBITDA ticking down a little bit with the departure of HBC as well as the seasonality that we see in our business.

And so you might have noticed that our NCIB activity has been a little lighter over the past maybe 120 days, something like that. And that's just, we're not, it's a little bit ironic. We have $50 million of cash sitting in the bank account, but we haven't been buying a lot of stock, and that's because of the governor that we have on our balance sheet of a 6x ceiling.

And so as we see the occupancy tick up, as we see the EBITDA tick up, we're going to see the natural sort of deleveraging that comes out of that. And I think at that point in time, you'll see a resumption of a higher level of repurchase activity. We've always looked at the NCIB as something that is sort of a permanent feature of Primaris. Now it's a very good use of capital and we're structured to generate excess retained cash flow and capital inside the business. And that one is always pretty attractive.

So it has been in a little bit of a lull recently, but that's really about our leverage and excess capital availability. The other piece ironically that has led to the 6x debt to EBITDA being a little inflated is the $50 million of cash sitting in a bank account, not generating any EBITDA.

So to the extent that we can deploy that into some acquisitions, that will also be deleveraging, which is a little bit counterintuitive. But we're just taking our, or we took our foot off the pedal a little bit on the NCIB as we're getting through this low.

Your next question comes from the line of Mario Saric at Scotiabank.

Just sticking to the disposition, the $256 million that are held for sale, I believe that the guidance doesn't reflect any material dispositions nor acquisitions. So can you give a sense of what the IFRS cap rate is on what is held for sale and the potential FFO impact if you were to transact on?

Yes. I believe the cap rate would be around 8.5% on a blended. It range from 8% to 9.5% on an individual asset basis, but on a blended basis, would sort of be in that zone. The guidance right now has not incorporated any further acquisitions are disposed until we have greater visibility and know that the transactions are happening. So that's not incorporated in even though we do expect to see both for the current year. So that's sort of where that sits. And as we start to dispose of assets, we will likely be moving more assets into the held for sale market.

Got it. Okay. Just as my follow-up, last quarter, I think land sales of up to $100 million were kind of discussed. And so I don't know if this is for Alex or maybe for Julian. But can you maybe shape up what the residential kind of land market is looking like feeling like and whether that's something that will be included in more thorough detail in June with the other updates?

Mario, thanks for the question. So less than a month in, I've been working with the team and going through all the assets and looking at what we can do in light of the HBC no-build clauses being gone. As you noted, the land market is an important factor in that. And in some parts of the country, I'll say it's more healthy than others. We're not in an extreme rush to do it. So we're going to focus more so on the sites where the land markets are healthier.

Still working through the analysis. As you know, I'm not the type to sit on my hand, so working very hard on that. But we're going to be focusing on the markets where there's the most liquidity.

And I'll just say as an overall comment, it's a very impressive land portfolio. I mean just with the malls, there's a lot of excess surface parking where you can build really efficient floor plates, you're connected to transit. Got amazing retail amenities, and we think this is a really attractive opportunity.

And so again, focusing on the priority sites. Stay tuned, and we'll continue to give updates and hopefully be able to execute transactions at least on some of the sites in the near-term.

Got it. At the risk of tripping the one plus one follow-up rule, just what would you consider to be the healthier markets today given the diversity.

Yes, sure. I'd say just markets where there's not a lot of unsold inventory or deep negative rent growth or falling occupancy. So to be candid, staying out of the Greater Vancouver area, the Greater Toronto area and Halifax, those are the markets that I would say are a little bit more challenged right now.

There's a lot of value in the sites that we have there. But just given a lot of developers are in what I'd say more of a defense mode and dealing with their existing challenges, those would be the markets where I'd say we better served by pausing and waiting for a better part of the cycle, whereas the other markets would be where we're putting a little bit more focus on something quicker.

Your next question comes from Pammi Bir at RBC Capital Markets.

Just in terms of the drop in NOI between Q4 and Q1, how much of that was attributable to maybe just the normal seasonality versus heavier than typical maybe winter-related costs?

So one of the things that as we were reflecting on our financials popped out was that, that seasonality that if you observe on any other year or on an average, if you look over a long, long term for Primaris, this would be larger than average and part of it actually relates to the HBC.

A year ago, when HBC went, announced that they were going bankrupt, they we looked at it and we said this is our gross revenue exposure, but the net operating income impact is less because some of the additional rents are recoverable through the CAM pool. And what sort of snuck up on us was that with our recovery ratios hovering around 80%, as that recoverable expense moved from HPC back into the CAM pool, sort of 20% of it came back to us. So you had a larger landlord burden in terms of the operating expenses as you normally do in Q1 versus Q4, but it was accentuated by the departure of HBC.

And none of us expected to still be talking about Ruby Lue and the lease assignments as late as November 27, which is when we got the space back. So you had this sort of step down from HBC in terms of the NOI contribution in Q4 to Q1. And then you also had an exaggerated impact because of the recovery ratio being depressed. So it was a little bit of the weather, but it was mostly that dynamic, I think.

Okay. So fair to say that the way we should think about it is just as the space is ultimately repositioned over time, that, I guess, that incremental 20% cost that Primaris beared in Q1 should essentially decline over, again, as you re-lease?

Yes. No. And as we were talking about a few minutes ago, I mean, the committed occupancy, 350 basis points ahead of the in-place and expanding, that will expand for another few months, and then it will probably start to catch up and the gap will start to close. But as that happens, I mean, I would imagine that this year's Q4 to Q1 is the largest sort of seasonal dynamic that we'll experience. And I would expect that in future years, it will revert to a more normal sort of Q4 to Q1 seasonality.

And the other, there is a little bit of weather in there, but the other thing that we very typically experience is the specialty leasing volumes that we get in Q4 are significantly higher. You get Santa Clause and all sorts of other things that are occupying space on a temporary basis around the holiday season. And that's a big source of the normal Q4 to Q1 dynamic.

Okay. Hopefully, that didn't count as my follow-up. But just on that, you've cited some pretty strong demand and good progress on some CRU leasing. But as we kind of progress through Q2 to date, the economy is still soft and there are pressures on the consumer. So are you seeing any changes in any of the tenant behavior in terms of their space requirements or anyone new on the watch list?

Pammi no actually the first portion of the second quarter, the leasing demand seems  it's still very strong. We're still seeing a lot of transactions, and that's just on the CRU side. The HBC stuff is moving along very, very well. Lots of demand on that. A lot of our boxes are actually oversubscribed. We have more tenants than we can accommodate. So it hasn't, we haven't seen any slowdown at all in terms of leasing demand. And likewise, with sales, sales continue to be very strong.

[Operator Instructions] Your next question comes from the line of Tal Woolley at CIBC. Your line is open please go ahead.

Just on your plans for some of the outparcels. I'm just wondering like if you're looking at maybe like selling a plot of land to a grocer or something like that to put them on the site. Is there no consideration for maybe retaining the land and building for the grocer yourselves? Or I'm just wondering what the thinking is behind doing land sales versus building for tenants.

Yes, Tal, thanks for the question. We're actually looking at both. And any time we're looking at selling land or building, like both teams are talking to each other and seeing what's kind of the highest and most profitable use for it. So when we do a development pro forma, we look at the construction costs, we look at the rent we get, but we also factor in the opportunity cost for if we were to sell that land to a residential user and vice versa. So it's all being looked at together and with the objective of maximizing value for unitholders.

Okay. And then you continue to make progress winding down the amount of short-term leasing in the tenant role. Is there like a long-term target on where you want that to be? I would presume you'd always want a little bit of that in the business just for like you said, like the holidays and things like that. Can you just sort of talk what you'd love to see that number be long term?

Tal, 3% is probably a normalized target number simply because you're always going to want to have swing space so you can carry out remerchandising efforts. We're always looking to bring in the new exciting tenants that help drive sales and drive rental growth. And sometimes you have to wait out other expiries and assemble space. So you're always going to have the swing space and it generally will equate across the portfolio to about 3%.

Your next question comes from the line of Lorne Kalmar from Desjardins.

Sorry, I was having a little bit of technical difficulty, so apologies if I missed this. But I was just wondering, could you maybe provide a little more detail on, I guess, sort of the NOI build over the next 3 quarters that underpin the guidance? Like which quarters do you expect to see the biggest uplift is sort of what I'm trying to get at just to better understand here.

Lorne, it's fairly typical in our business that a lot of the remerchandising is done in Q1. We do a lot of leasing in Q4, Q1. The tenants, they take possession and open in typically Q3, Q4. So Q3 and Q4 see the benefit of the leasing done at the end of the year prior plus the first and second quarter, plus that combined with the increased specialty leasing revenue that's done with the seasons, the holiday seasons and the percentage rent. A lot of tenants at a breakpoint, they tend to pass their breakpoint towards the end of the year and start paying percentage rent.

And then when sales just generally increase, any tenants on percentage rent in lieu and such forth, generally, there's higher volumes paid when their sales go up at the end of the year.

Okay. So you wouldn't be expecting a meaningful lift in Q2 versus Q1 on the NOI side?

I think we're going to see the benefit of some leasing activity that opens in Q2. The majority of the downtime really happens in Q1.

Okay. And then I'm going to take a cue from a few of the other folks on this call and hopefully, that doesn't kind of follow up. I just had one other question, and it relates to the Devonshire HBC box. I saw an article earlier. I'm just wondering if you could provide some color on what's happening there.

Yes. Sorry. There have been some media reports that, that may be something that Primaris would be interested in buying. And I would say that it is very logical for us to want to own a building attached to our shopping Centre. It would fall into the immaterial category, but also into strategically very logical for us to buy.

[Operator Instructions] There are no further questions at this time. Claire, I turn the call back over to you.

Thank you, operator. With no further questions, we'll close today's call. On behalf of the Primaris team, we thank you all for participating. Thank you.

Thank you. You may now disconnect.

All right. Good morning, everyone. Welcome to the 2026 Meeting of the Unitholders Primaris REIT. My name is Tim Pire, and I'm the Chair of the Board of Trustees of Primaris REIT, which I will refer to as Primaris or the REIT.

Alex Avery, the Chief Executive Officer, is also present at the meeting. As you will see and hear, this past year has been an exciting year for Primaris and the team is very excited about the coming years. Before I call this meeting to order, I would like to state that comments made during the meeting of unitholders, the management presentation and the questions period may contain forward-looking information within the meaning of the applicable securities legislation, which reflects the REIT's current expectations regarding future events.

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 the REIT's control that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking information.

These forward-looking statements are made as of today's date and except as expressly required by applicable law, the REIT assumes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, whether a result of new information, future events or event, please refer to the REIT's filings on SEDAR+, including the REIT's annual information form for the year ended December 31, 2025, which identifies certain factors that could cause actual results to differ materially from those projected in any forward-looking statements made during this meeting.

With that being said, it is my pleasure to now call the meeting to order. With the consent of the meeting, Mordy Bobrowsky, Senior Vice President, General Counsel and Corporate Secretary, will act as the Secretary of the meeting; and Patty Sindianis of Odyssey Trust Company will act as scrutineer.

The Secretary has deposited with me a statutory declaration establishing the giving of written notice of the meeting and in addition to sending the notice of the time and place of the meeting to each unitholder entitled to vote and each trustee and to the REIT's auditors.

The notice calling this meeting required that unitholders intending to vote by proxy must have properly deposited their proxies prior to April 28, 2026, at 10:00 a.m. Eastern Standard Time. The proxies so deposited are now in the custody of the scrutineer.

The scrutineer has provided me with a preliminary report on the attendance at this meeting, and I confirm that the requisite quorum of unitholders is either present in person or represented by proxy. The scrutineers' report will be kept with the records of this meeting.

Notice of the meeting have been given as required and a quorum being present, I declare that the meeting has been regularly called and is properly constituted for the transaction of business. This meeting is being held in a hybrid format, both in person and virtually a live webcast. We welcome everyone in attendance today.

Our decision to hold the meeting in a hybrid format this year was made in consideration of our desire to provide access to our investors and other stakeholders across Canada and beyond Canada's borders. We have done our best to provide a meeting that allows us to communicate with unitholders, receive your questions and comments and permit vote.

I would like to thank those unitholders who have chosen to attend the meeting today and to all those who have submitted their proxies in advance on a timely basis. The REIT has used a notice and access provision to make the management information circular available to unitholders on the Internet instead of mailing paper copies.

A copy of the management information circular is available on the REIT's public profile at sedarplus.com and its website at primarisreit.com. The agenda for motions to be submitted for the unitholders' action with respect to the matters that will be dealt with at this meeting are contained in the notice of meeting that unitholders received prior to this meeting and are fully described in the management information circular.

I will begin with a few comments regarding procedural matters for today's meeting format. Registered unitholders and duly appointed proxy holders who voted in advance of this meeting do not need to take any further steps to cast their votes.

Your advanced vote has already been recorded. If you do vote at the meeting today, that will automatically revoke any prior vote or proxy granted. That said, if you're a registered unitholder or proxy holder attending in person and you have not already voted or if you are a registered unitholder who would like to change your vote and you have not received a ballot, please raise your hand when requested to vote and the scrutineer will provide you with a ballot. The ballot should be completed by marking an X in the appropriate spaces and must be clearly signed. If you are a registered unitholder, please print your name on the ballot.

When you have completed and signed the ballot, please -- so indicate to the scrutineer who will collect it. If you're a registered unitholder or a proxy holder participating online and you have not already voted by proxy or you would like to change your vote, you can vote when prompted.

For those participating virtually, the online polls have been open for all items of business and may be voted at the same time. This will allow you to vote on each item independently immediately or if you prefer, you may wait until the conclusion of the discussion on all items prior to casting your vote.

Once all the business matters have been addressed, I will conclude the balloting. At that time, the voting page will disappear from your screen and your ballots will automatically be submitted.

Then the scrutineer will compile a report regarding the results of the voting on all items of business, and we will inform you of the outcome. To make the best use of our time today, our Secretary Mordy Bobrowsky, will move various motions. Questions in respect of the business of the meeting may be submitted by the unitholders using the designated my messages field on the web portal or by raising your hand for the participants attending in person.

When submitting your question online, please identify whether it relates to a motion being considered as part of the formal process of the meeting or whether it is general in nature. Given the hybrid format of the meeting, in order for us to expediently undertake the discussion on any matter proposed to vote, while we will pause at certain points during the meeting to provide an opportunity to ask questions, we would encourage unitholders participating online who have specific questions on a formal item of business to submit such questions now.

We will address questions directly related to a particular motion at an appropriate time of the meeting. We will do our best to answer all general questions after the formal business items have been completed. But if for any reason we are unable to do so, we will endeavor to follow up with you after the meeting. If during the course of the meeting, we encounter any technical difficulties with the virtual meeting, please remain logged on, and we will resume as soon as the issue is resolved.

All participants are responsible for maintaining their own Internet connection. The first item of business is the presentation of the consolidated financial statements and the auditor's report thereon for the year ended December 31, 2025. Copies of the financial statements are available on the REIT's website and on SEDAR+.

On behalf of the trustees, I now place before the meeting the consolidated financial statements and report of the auditors thereon for the year ended December 31, 2025.

The next item of business is the election of the trustees. The trustees have set the size of the Board at 6. Each trustee is to be elected at the meeting to hold office until the close of the next Annual Meeting of unitholders or until their successors are duly elected or appointed. Details about the individuals being nominated as trustees are found in the management information circular for the meeting.

In the proxy forms and voting instruction forms, unitholders were asked to vote individually for each of the nominees. I will now ask Mordy Bobrowsky to move a motion for the nomination of the nominees named in the management information circular.

Mr. Chair, I move that each of Alex Avery, Avtar Bains, Anne Fitzgerald, Louis Forbes, Tim Pire and Deborah Weinswig be elected to serve as trustees of the REIT for a term of 1 year beginning today and ending at the close of the next Annual Meeting of Unitholders or until their successors are duly elected or appointed. Thank you.

Thank you. The REIT's declaration of trust requires that the nomination of trustees by unitholders be received by the trustees at least 30 days in advance of the meeting in order to be valid. As no nominations were properly received from the unitholders prior to the deadline, the nominations are now closed. The motion is now open for discussion. Are there any questions in the room?

Thank you. Let us now pause to account for any delay in the broadcasting of this online meeting to allow for the questions by unitholders participating virtually. Mordy are there any questions online?

Mr. Chair, I confirm that we have not received any questions from unitholders participating online specifically on this item.

Thank you, Mordy. Whether you are participating online or in person, please follow the voting instructions I provided at the start of the meeting. The next item of business is the appointment of the auditors and the authorization of the trustees to set the remuneration.

I will ask Mordy to move a formal motion in this regard.

Mr. Chair, I move that KPMG LLP be appointed auditors of the REIT to hold office until the close of the next Annual Meeting of Unitholders or until successor is appointed and that the Board of Trustees are authorized to fix the auditor's remuneration.

The motion is now open for discussion. As before, I will pause to ask if there are any questions in the room.

Thank you. Now let us pause to come for any delay in the broadcasting of the online meeting to allow for any questions by unitholders participating virtually. Mordy, are there any questions online?

Mr. Chair, I confirm that we've not received any questions from unitholders participating online specifically on this item.

Thank you, Mordy. Whether you are participating online or in person, please follow the voting instructions I provided at the start of the meeting.

The next item of business is the vote on the nonbinding say-on-pay resolution on the approach to executive compensation. I will now ask Mordy to move a formal motion in this regard.

Mr. Chair, I move that the nonbinding say-on-pay resolution on the approach to executive compensation as outlined in the management information circular for this meeting be approved.

This motion is now open for discussion. Are there any questions in the room? Thank you. Let us now pause again to allow for any questions by unitholders participating virtually. Mordy are there any questions online?

Mr. Chair, I confirm that we have not received any questions from unitholders participating online specifically on this item.

Thank you, Mordy. Whether you are participating online or in person, please follow the voting instructions I provided at the start of the meeting. We will now proceed with the process of completing the online voting on all items of business of the meeting. Mordy, given the delay in the broadcasting of the online meeting, have any further questions come in from the unitholders participating online specifically on any of the motions?

Mr. Chair, I confirm that we've not received any questions from unitholders participating online specifically on the motions.

Thank you, Mordy. For those of you participating through the virtual meeting platform who have not voted on all the items of business, please do so now. We will now pause to allow time to vote, after which the polls of the meeting will close.

[Voting]

I declare the polls for the meeting closed. We will pause in silence for a moment to give the scrutineer the opportunity to tally the votes.

Mr. Chair, I'm reporting to you on behalf of the scrutineer that sufficient votes have been received for all items of business to pass and that all nominees for election as trustees received a majority of votes in favor of their election.

Having been informed that all of the items of business have been duly passed, I declare that Alex Avery, Avtar Bains, Anne Fitzgerald, Louis Forbes, Tim Pire, Deborah Weinswig are all duly elected as trustees of the REIT to hold office until the close of the next Annual Meeting of Unitholders or until their successors are duly elected or appointed.

KPMG LLP are appointed auditors of the REIT to hold office until the close of the next Annual Meeting of unitholders or until a successor is appointed and the Board of Trustees are authorized to fix the auditor's remuneration and the motion to approve the nonbinding say-on-pay resolution on the approach to Executive Compensation [ Chair ].

As there is no other business that may properly come before the meeting, the meeting is now terminated. It is my pleasure to serve as the Chair of the Board of Trustees. My e-mail address is [email protected]. I'm pleased to hear from any of our stakeholders who would like to engage with the Board. I will now ask Alex Avery to deliver the [indiscernible].

Thank you, Tim. Before we get started, I'd just like to thank everyone who's attending in person and those attending virtually, in particular, my mom and dad are here at our AGM, and I'm very happy to confirm that they're also unitholders. In 2022, we launched Primaris as a new REIT built from a blank slate with best-in-class characteristics.

We outlined a clear and focused strategy, identified a very large consolidation opportunity and showed a lot of ambition. Over the past 4 years, we have been remarkably fortunate to capitalize on that opportunity, significantly grow our portfolio, drive performance from our assets and deliver very attractive results for our unitholders.

Our portfolio strategy is driven by relevance to our customers and our customers are our tenants. We frame our portfolio strategy as becoming the first call. We strive to own and operate a portfolio of market-leading and closed shopping centers across Canada that makes Primaris a first call for the retailers that are looking to enter, expand and operate thriving retail businesses in Canada.

With leases that provide visibility into the sales productivity of our tenants, the mall business allows us to proactively manage retailer merchandise mix as consumer preferences evolve and as strong retailers eclipse others that are losing relevance.

Continued long-term population growth and economic growth is expected to drive continued growth in demand, putting upward pressure on the rents at our properties. This trend is clearly evident in our operating and financial results over the past 4 years. Our aggregate portfolio tenant sales volume has more than doubled from $1.7 billion in 2022 to $3.6 billion today.

The productivity of our tenant base measured by tenant sales per square foot across the portfolio reflects consumer demand for retailer brands and their products. High sales productivity reflects the combination of a strong market of consumers as well as the presence of market-leading retailers. Primaris' average tenant productivity has risen from the low $500 per square foot range at the beginning of 2022 to over $800 per square foot today.

This significant improvement in portfolio metrics is a result of the $1.6 billion of acquisitions we completed in 2025 and $3.3 billion in acquisitions since the spin-out, along with $400 million of dispositions last year and nearly $500 million since the spin-out.

Almost 65% of our current portfolio has been acquired since 2021 and just in 2025, 30% of our portfolio was acquired. The addition of high aggregate sales and high sales productivity properties to our portfolio, combined with the expanded reach of our portfolio covering every major market in the country has elevated Primaris' relevance as a landlord for retailers.

Critical to the remarkable progress Primaris has made in building our business over the past 4 years is our differentiated financial model of low leverage and a low payout ratio. Maintaining low leverage is a core element of the REIT's strategy. Protecting and preserving our balance sheet while managing Primaris through the remarkable growth over the past 2 years has required strong capital discipline. Our differentiated financial model provides the structural advantages of internally generated growth capital and superior access to external capital. It has allowed us to acquire top-tier malls, buy back stock and grow our FFO distributions during a period of time when growth capital availability has been very limited for Canadian REITs.

Our sector-leading balance sheet provides robust and efficient access to credit as reflected in Primaris' BBB high investment-grade credit rating. Employing a largely unsecured financing strategy allows Primaris to pursue acquisitions with confidence.

Malls are fabulous real estate, giant parcels of land spanning 40, 50, 60, even more than 100 acres of land in very central urban locations surrounded by rooftops and typically connected to mass rapid transit. Malls offer perhaps the greatest flexibility and adaptability of any property type.

These properties are nearly impossible to develop and built up urban locations. The 1- and 2-storey format accompanied by vast surface parking lots delivers profile and significant flexibility to accommodate new retail concepts and other uses on excess land, driving a very compelling capital appreciation profile. These characteristics create a significant barrier to new supply threats in the mall sector.

The financial and operating results we reported last night confirm the strong position our REIT is in. We reported growth in same-property NOI and FFO per unit compared to a year earlier, excluding a onetime tax recovery last year despite last year's bankruptcy of Canada's last department store anchor, which reduced the REIT's occupancy by 7 percentage points.

So the same-property NOI growth and the FFO growth were in the face of a 700 basis point decline in occupancy. A shout out to our leasing team, which has been operating at about 150% of capacity to keep up with the record high levels of leasing activity over the past number of quarters and in this past quarter being a record-breaking quarter on many of our leasing metrics. Lee, Lauren, Craig, Pam, Jason, Niko, Olivia, Catherine, Eric, Gino, Nisha, Eva and Blake, among others, the work you are doing is driving our business today.

In 2025, Primaris' flexibility was constrained by the restrictions embedded in certain leases. The departure of Hudson's Bay Company as a tenant removed no builds and parking restrictions across 71 acres of land in our portfolio, enhancing our flexibility to surface value from our excess lands.

One area of focus for 2026 is to advance our strategy for surfacing value from excess lands. The REIT's portfolio currently includes approximately 1,400 acres of land across the country. We estimate that as much as 400 acres of those are excess land, which are not required for the successful operation of the malls.

We believe there is a very significant opportunity for retail intensification and for the severance and sale of excess lands for development into other property types over the next several years. We recently added another remarkable executive to our management team with Julian Schonfeldt, joining us on April 1 after spending 4 years at CAPREIT, sitting in the front row here. Julian brings immense experience and knowledge, particularly relevant to the exercise of surfacing value from our access lands among many other skills, including a very strong understanding of capital allocation, which is a passion point for me.

Looking to the future, over the next 5 and 10 years, we expect market rents to continue to rise as mall space per capita continues to decline due to population growth, very limited new mall developments and the demolition of lower productivity malls.

We expect rising NOI to boost the value and income from our portfolio. We expect investor sentiment towards malls to continue to recover from the deep cyclical trough earlier this decade, and we expect to maintain strong discipline in capital allocation and capital structure, reinvesting excess capital into our business where it has the greatest benefit to unitholders.

In conclusion, Primaris will continue to pursue strategic property acquisitions and dispositions and advance our ambition of becoming the first call. We will leverage the strength of our scarce and valuable management -- mall management platform to drive performance from our existing properties as well as create value through transactions.

Primaris will continue to press the competitive advantages it holds due to its mall management platform, differentiated financial model, portfolio scale and clear and focused strategy to deliver best-in-class operating and financial results, including significant growth in FFO per unit and NAV per unit.

The remarkable progress that we have achieved that made -- sorry, the remarkable progress Primaris has made in 2025 and since 2021 is only possible because of the dedication and hard work of all 700 of the REIT's employees. On behalf of the REIT's Board and senior management team, a sincere thank you to all of our team members and a note of appreciation to our unitholders and our bondholders for their continued support for Primaris as we continue to pursue the substantial opportunities ahead. We'd now be pleased to open the floor for any questions or comments from any of our unitholders. Paul?

[ Paul Berning ] from Burlington, at Burlington, Center which is the RioCan property, there is a bay at the back. And there's a whole bunch of rumors floating around town about what it's going to be turned into. Some people -- somebody said it's going to be pickleball courts.

Somebody else said it will be torn down and put a condo up. And then somebody else says, well, it will just be made small stores. I think that would be a pretty big construction job to turn a bay into small stores, wouldn't it?

A bay construction job. And now okay. Now a couple of years ago, as this bay thing was being discussed, you were identified as -- I could be wrong in this, was [ 11 ] Bay stores. Is that right?

That's right.

So -- the Bay in Burlington is sort of a discount clearance thing. It's not really a store, store. They're just getting rid of stuff. So what -- how have you handled these 11 Bay properties? Have you just torn that real estate down and going to put something else up later on? Or just how have you reconfigured those 11 properties coming to today's date?

Thank you, Paul. For anyone online, I wasn't sure if we could get you a microphone, but for anyone online, the question was about the Hudson's Bay store locations and what we're planning to do with them. And I would just start by saying that the departure of Hudson's Bay is the best thing that has happened to Primaris in many, many years. And it's also an eventuality that we were planning around many years ago. When we were spun out as a stand-alone company, we had a lot of meetings in 2022 and 2023 and 2024, evaluating what these locations could be turned into, what our plans would be in the eventuality that they went bankrupt and departed as many other department stores had done before them.

And so I think the best way we can answer in a broad sense is that each of our 11 locations are unique and the solution that we're pursuing for each of them is specific to the mall in terms of how do we maximize the value, but also the appeal of the shopping center. And so in some circumstances, we have torn down anchor boxes.

Right now, we're in the process of tearing down the Sears box at Oshawa. Last year or the year before, we tore down the Sears box in Windsor at our Devonshire Mall. But that's really a very small minority of what we're doing.

Most of the locations, I would say, are either a single tenant replacement. So think about our largest tenants, our top 3 would be Canadian Tire, Walmart and Loblaws. Some of their retailer formats can take an entire 150,000 square foot store. And so of our 11, we might do that on 2 or 3 or 4 of them.

And then there's another probably 5 or 6. We have 2 or 3 different retailers. Again, most of our sort of usual suspects of larger format, but not quite so large tenants. So think about it like Mark's Work Wearhouse or Sport Chek, [indiscernible] or Marshalls, those types of tenants.

So take the space and cut it into 2 or 3 spots and then lease it out to those retailers. And then in a couple of select circumstances where our mall is just so packed and there are a lot of retailers that are really desperate to get in. We're taking the box and we're extending the corridor through the box and then creating the small CRU units, the commercial retail units, which are the 2000, 3000, 4,000, 5,000 square foot stores.

And so when you look at all of that across the 11 locations, that process started even before HBC went bankrupt in terms of our planning. We're anticipating providing a pretty comprehensive update on progress over the next 60 days before June 30 is our ambition to get that disclosure out. And across those 11 locations, our budget is $175 million to $225 million, and we're expecting a return on that capital in the 8% to 10% range.

Yes. Okay. So you don't have any base stores that are still like the Burlington one clearing out hugely discounted. It's not really a store.

So what you've seen at the Bay store in Burlington Mall, which, as you noted, is a RioCan mall. So I'm not entirely familiar with it. What I would say is that what we do have in some of our locations currently, there's a temporary tenants, so the liquidation, wholesaler type of a situation.

And we've got that in probably 4, 5 of the locations, 3 of the locations that we're basically just keeping the box animated with a retailer until such time. It's temporary, correct.

Well, there's still strikes me as I look at that Burlington Bay to reconfigure it to whatever is going to be quite a bit of construction cost, whatever it's turned into. And there's rumors, as I mentioned, about what it could be.

Yes. No, it certainly is a big opportunity, but also a big cost. And I think if you look at what we've done with our portfolio over the last 5 years, 65% of our portfolio is new in the last 4.5 years. We have been targeting what we believe are the dominant shopping centers in the market.

And so when you have a dominant shopping center in the market, that's the place where the most retail sales take place. And that means that, that's where the retailers want to be the most and also where the consumers shop the most.

One of the challenges with some of the nondominant shopping centers is that there's not as much tenant demand. And so in some cases, you might find that those sort of supposedly temporary tenants persist for a long period of time. I would be surprised if any of our 3 persist more than 2 years. It's really just until such time as we are ready to commence construction, execute leases and put a permanent solution in place.

Okay. I think it strikes me as a pretty big undertaking, 11 days converted to whatever.

It is a big undertaking and our construction and development group, like our leasing group is operating at about 150% capacity. The headcount has expanded pretty significantly over the last year. I mean it was growing before that, but the HBC really made it clear because we have many other things that we're working on in our construction and development group. Any online questions, Mordy?

No. No other questions at this time. Thank you, everyone, for joining us today. On behalf of the Board and the leadership team, we appreciate you taking the time this morning to hear from us. As the meeting has ended. I will now turn the meeting back to the operator.

Good morning, and welcome to Primaris REIT's Fourth Quarter 2025 Results Conference Call. [Operator Instructions]

I'd now like to turn the call over to Claire Mahaney, VP, Investor Relations and Sustainability to begin. Please go ahead, Claire.

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 REIT's filings with securities regulators. These filings are also available on our website at primarisreit.com.

I'll now turn the call over to Alex Avery, Primaris' Chief Executive Officer.

Thank you, Claire, and good morning. Thanks for joining Primaris REIT's Fourth Quarter 2025 Conference Call. Joining me today are Patrick Sullivan, President and Chief Operating Officer; Rags Davloor, CFO; Leslie Buist, SVP Finance; Mordy Bobrowsky, SVP, General Counsel; Graham Procter, SVP, Asset Management; and Claire Mahaney VP, IR and Sustainability.

As we look back on 2025 and our first four years as a stand-alone public REIT, it is clear that this has been a period of exceptional growth and transformation for Primaris. When we launched Primaris in early 2022, we laid out an ambitious plan to grow our best-in-class and closed shopping center platform to be the first call for retailers in Canada. I am pleased to say that over the past four years and in 2025, in particular, we have truly transformed our business.

In 2025 alone, we completed $1.6 billion of acquisitions, bringing our total since the spinout to $3.3 billion and executed on $400 million of noncore dispositions and nearly $500 million since 2021. That means almost 65% of our portfolio is new since 2021, the level of growth that is remarkable for a REIT of our scale.

These transactions have significantly elevated the quality and performance of our portfolio. The 7 malls we have acquired since 2023 have average aggregate CRU sales exceeding $250 million, well above our portfolio, $80 million per mall in 2021 and our portfolio average of $140 million per mall today.

Tenant productivity has also grown meaningfully. Sales in our portfolio has increased from $523 per square foot in 2021 to $800 per square foot per day, while the centers acquired since 2023 averaged more than $1,000 per square foot. These results underscore the strength of consumer demand and the quality of tenants operating within our centers. All of this advances our strategic ambition of becoming the first [ call ].

Critical to this growth has been our differentiated financial model of low leverage and the low payout ratio. Despite tremendous growth, we have maintained strict capital discipline, keeping our debt-to-EBITDA below 6x. While it may seem counterintuitive at first, our very low leverage and low payout ratio are critical to our ability to access growth capital.

Our discipline around capital allocation can be seen in our use of our normal course issuer bid. Since early 2022, we have consistently used our excess retained free cash flow to repurchase units. In 2025 alone, we bought back 5.2 million units at an average price of $15.13, a roughly 29% discount to IFRS NAV which delivered an immediate 43% return on the $79 million invested. Since we launched our NCIB in 2022, we have repurchased a total of 15.1 million units for $216 million at an average price of $14.31, a roughly 33% discount to NAV, which delivered an almost 50% immediate return.

Looking ahead, the environment remains highly favorable for Primaris. As mall space per capita continues to shrink and demand from market-leading retailers strengthens, we expect market rents and NOI to continue rising. We also expect mall valuations to recover from the deep cyclical lows earlier this decade. Together with our disciplined capital allocation strategy, these trends position us for significant growth in FFO per unit distributions per unit and NAV per unit.

With that, I will now turn the call over to Patrick to take you through our operational results for the quarter. Pat?

Thank you, Alex, and good morning, everyone. We have 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 noncore 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.

The closure of HBC provides Primaris a tremendous growth opportunity. As a result of HBC's departure, we regained control of space that has gone many years without investment, giving us the opportunity to revitalize and dramatically improve the productivity of some of the best located but least productive space in our portfolio.

HBC occupied prominent space within our shopping centers. Their long-term leases had, on average, low single-digit rents and contain onerous development restrictions. Recognizing that time would be required to sign long-term leases with strong retailers and to obtain city permits and approvals for redevelopment, we signed 5 short-term leases for HBC locations with tenants on variable rent terms and limited capital contribution from Primaris.

Following the court ruling terminating the proposed HBC lease assignment in November 2025, leasing efforts have accelerated and demand from retailers is exceeding expectations due to low supply of available retail space and a high quality of HBC real estate. Property specific plans include replacement with single tenants, subdividing for multiple tenants and some include partial demolition. We anticipate retaining approximately 90% of the former HBC GLA. And to date, we are at various stages of advanced negotiation with tenants representing approximately 70% of the expected GLA. Expectations are that we will be able to announce completed transactions in Q2 of this year when leases are finalized.

With robust demand from retailers for space, better clarity around development plans, which include retaining more of the HBC GLA than originally contemplated and the addition of St. Bruno Shopping Center in Q4 2025, our capital investment expectations have increased and is projected to be $175 million to $225 million. Anticipated rental commencement from the redeveloped HBC locations will begin in some properties as early as mid-2027, with overall yields improving from prior guidance and now expected to be approximately 8% to 10%.

A highly coveted benefit of HBC closing is the elimination of their onerous development restrictions from approximately 71 acres of land across our portfolio. Primaris has established strategic plans for our properties that include the potential to develop excess land for outparcel buildings, including restaurants, grocery stores and financial institutions as well as the sale of land to residential developers. We are currently engaged in discussions with retailers and financial institutions for outparcels previously restricted by HBC, which will generate returns more than 10%.

In addition, we are close to finalizing a land disposition strategy and expect to begin marketing excess land in the next few quarters. While it will take time to service value from land sales, we estimate that dispositions of land previously encumbered by HBC to generate over $100 million. Although we will forgo $5 million of lost NOI from HBC in 2026, which is partially offset by short-term leases with tenants occupying some of the former HBC premises, we anticipate generating more than $17 million from their former premises over the next three years from a diversified tenant mix with significantly lower risk profile. We believe the full impact to 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.

On to our operating results. Same property cash NOI for the quarter increased 6.8% or 2.6%, excluding prior year tax adjustments net of the impact of the disciplined HBC leases and increased 5.6% for the year. This growth reflects broad-based strength across the portfolio driven by rental rate increases, renewal spread gains and improved operating recoveries. Combined recovery ratios improved to 78.9% compared to 78% in 2024, driven by strong leasing activity but partially offset by the recently acquired properties, which have lower recovery rates and the impact of the disclaimed HBC leases. The increase in operating cost recovery ratio continues to 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 75.9% and 81.8%, respectively. As a reminder, each 1% improvement in the combined recovery ratio adds approximately $2.5 million to NOI annually.

Turning to occupancy. We ended the year at 90.6% committed occupancy and 87.2% in-place occupancy. We were progressing well toward our occupancy target of 96%, having hit 94.5% at the end of 2024. HBC had a significant impact on our overall occupancy figure negatively impacting occupancies by 6.7%, with new acquisitions also creating a negative drag of 3.4%. As noted earlier, HBC occupied large premises but paid very low rent, creating significant income upside over the next several years.

A key metric for us is CRU occupancy, which refers to space under 15,000 square feet. CRU occupancy improved to 93.6% as compared to 93.4% in 2024 and 91.7% in 2023. The CRU occupancy in newly acquired centers is lower than our portfolio average, which provides for significant income growth at these high-performing centers. At property recently purchased, we have improved occupancy by approximately 2.5% less than a year with more than 40,000 square feet of new transactions being finalized, including 25,000 square feet of new CRU leasing transactions.

Leasing activity was very strong during the quarter with 73 leases renewed at spreads of 11.3%. For 2025, our average increase in renewal rents was 7.4%, significantly higher than the 4.8% posted in 2024. We completed 40 new deals encompassing 370,000 square feet during the quarter and for the year, we have completed 137 new deals for 600,000 square feet, with 125 of those deals being CRU tenants equating to 232,000 square feet at rents above our weighted CRU average rent. Our 2025 CRU new lease transaction count was 25% higher than 2024, which demonstrates the continuing demand for retail space in our shopping centers.

Our weighted average net rent per square foot for the year increased to $31.78 versus $25.28 at the end of 2024. This 26% increase is a result of higher renewal rates, new lease transactions that completed rents higher than previous in-place rents, acquisition of properties with higher rents, disposition of properties with lower rents and the 11 disclaimed HBC leases with rents significantly lower than our portfolio average. To better understand our average rents without the distortion of the HBC impact, our CRU average rent increased almost 15% to $49.68 per square foot compared to $43.26 per square foot in 2024.

Tenant sales performance continues to be a major strength across our enclosed malls. Total same-store sales productivity, including newly acquired assets, reached $800 per square foot, up significantly from $718 per square foot last year and $672 per square foot in 2023 supported by strong consumer traffic, healthy retailer performance and the addition of high-performing regional malls. On a same-property basis, Sales increased to $727 per square foot in 2025 compared to $718 per square foot in 2024 and $624 per square foot in 2023.

While productivity is an important metric, our focus remains on total CRU sales volume, which best reflects the strength of the portfolio. Our focus is to provide retailers with a size format that enables them to generate the highest possible sales volume. With some of our top productivity tenants posting increasingly higher sales, many are looking to expand their footprint in our malls, which will negatively impact productivity but increased total mall sales volume.

For the year ended 2025, total CRU sales volume rose to $3.55 billion compared with the $2.4 billion in the prior year and $2.2 billion in 2023 due to the acquisition of large market-dominant shopping centers, rising sales and higher occupancy. Across the board, our leasing and operation teams are executing at a very high level and producing outstanding results.

2025 was a transformative year for our portfolio. We entered 2026 with significant leasing momentum and clear visibility into our drivers of continued growth. With that, I'll turn the call over to Rags.

Thank you, Pat, and good morning, everyone. We continue to deliver very strong operating and financial results this quarter. NOI growth remained impressive, especially from the acquisition properties and many of our operating metrics continued to trend positively. Our financing strategy is another critical piece of our structure. Our investment-grade rating made possible sector low financial leverage a low payout ratio allows us to access the unsecured debenture market. This greatly simplifies our ability to arrange debt financing for our acquisitions as a mortgage financing alternative for these large properties can stress 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 for the mall market and over smaller private groups.

In October, concurrent with the St. Bruno acquisition, Primaris issued a 5-year $250 million senior unsecured green debentures at a spread of 110 basis points resulting in a coupon of 3.845%. In accordance to the green finance framework, Primaris published [indiscernible] bond allocation report in December where we outlined the allocation of proceeds and highlight the eligible green projects. The allocation report was reviewed by Moody's ratings which issued a second-party opinion confirming the allocation report's alignment to the International Capital Market Association Green Bond Principles.

We published our third annual sustainability report where we outlined our sustainability plan, progress against as targets, governance practices, accomplishments and metrics that impact our business. Consistent with all disclosure that Primaris publishers, we aim to provide clear and transparent disclosure and communication about the [ Roots ] business and sustainability practices.

And finally, we closed out the year with a strategic sale of Northland and Northland Professional Center in Calgary for $154 million, rounding out the $400 million in noncore dispositions completed in 2025. Northland Village is a recently redeveloped and high-quality open-air center entered by Walmart winners, Best Buy and other lifestyle retailers. The marketed process attracted very strong interest from the broad pool of buyers. Our disposition strategy aligns to our strategy to own a growing high-quality portfolio of leading [ enclosed ] shopping centers in Canada.

Turning to earnings. FFO per unit for the quarter was $0.51, an increase of 11.6% compared to the same quarter last year and FFO per unit was $1.85, representing a 9.2% year-over-year growth. Our FFO payout ratio for the year was 46.7% and remains within our target of approximately 45% to 50%. We achieved these impressive per-unit results despite increased unit count, sale of noncore assets and the impact of the disclaimed HBC leases. Internal growth and accretive high-quality acquisitions completed over the last 18 months were the drivers of our outperformance.

At Primaris, we talk comfortably about our differentiated financial model. We are highly committed to maintaining very low leverage of below 6x debt to EBITDA and maintaining an FFO payout ratio of below 50%. This model gives a structurally higher FFO and AFFO per unit growth as we 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 current levels. Our debt-to-EBITDA ratio was 5.8x. As a reminder, this range forms part of our executive compensation structure with the top end of the range of 6x.

Our balance sheet continues to be a significant advantage. We ended the year with $644.3 million of liquidity and $4.8 billion of unencumbered assets, representing more than 90% of the investment property values. Importantly, we have no debt maturing until 2027, which effectively eliminates refinancing risk in the medium term. We ended the quarter with a weighted average interest rate of 5.07% and extended our weighted average term to maturity on our debt to 4.1 years.

Looking ahead to 2026, we have increased our guidance for both cash NOI and FFO per unit and now expect cash NOI to land in the range of $390 million to $400 million, and FFO per unit diluted to be in the range of $1.85 to $1.90. This increase reflects the full year contribution from the significant acquisitions completed in 2025 as well as continued leasing momentum and rental rate growth. Our 2026 guidance does not contemplate additional acquisitions or dispositions. We expect same-property cash NOI and growth of 1% to 3%, moderated by the HBC and Toys "R" Us vacancies. We have a lot of positive leasing momentum in our same properties that is offsetting the hurdles of HBC and Toys "R" Us vacancies and the high volume of prior tax recoveries in 2025.

If you're trying to reconcile same-property NOI growth to FFO growth, it is important to note that over 1/3 of our 2026 cash NOI guidance is attributable to 2025 acquisitions, which are not included through same-property NOI. We expect same-property NOI growth to pick up again in 2027 and 2028 as we see vacant anchor space come back online at higher rents.

Redevelopment spending in 2026 is expected to total $60 million to $64 million, including approximately $35 million allocated to re-leasing and repositioning former HBC [ anchor office ]. This is an important multiyear opportunity to drive incremental value creation across the portfolio through higher rents.

With a larger, higher-quality shopping center portfolio, strong liquidity, no debt maturities until 2027, an increase in embedded growth, we enter 2026 with excellent momentum and confidence in our outlook. Overall, we are very happy with our fourth quarter and full year results, prospecting the strength of our operating platform and discipline of our financial model and the value we are creating for our capital allocation decisions. We are well positioned for continued performance in 2026 and beyond.

And with that, I'll turn the call back to Alex.

Thank you, Rags. 2025 was a remarkable year for Primaris. $1.6 billion of strategic acquisitions completed and over 9% FFO per unit growth. This FFO growth has driven down our payout ratio to 46.7% at year-end 2025, the low end of our 45% to 50% target range. We are able to drive this growth from our strong operating results enabled by our low leverage differentiated financial model. This is a perfect demonstration of compounding capital for our unitholders.

We are also continuing to produce strong leasing and operating results. We announced our fifth consecutive annual distribution increase. Our weighting in the TSX-capped REIT Index has risen significantly to approximately 4%, and our trading volume has more than doubled as measured in dollars of units traded per day as compared to a year ago. We also completed our 3-year sustainability plan and established a new plan for the next 3 years. And lastly, our trustees met with investors in the fall as part of our annual Board engagement program.

With the HBC legal process now in the rearview mirror and a flurry of discussions and negotiations well underway on the remaining HBC space, we are confident 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.

[Operator Instructions] Our first question comes from Mike Markidis from BMO.

Thank you, operator. Got it. I was just hoping you could give us or give me, I guess, or all of us listening, a kind of a reconciliation of the 2027 year-end occupancy target of 94% to 96%. Like how much of that is short-term leasing at HBC versus how much of that is actually fully implementing your long-term re-leasing and the development plan. I guess that's question one. I'm allowed to do a follow-up, so I'll listen for the answer first and then go from there.

Yes. Mike, yes, I mean, HBC accounted for a significant drop in our occupancy rate. It's almost -- it's over 6%. And clearly, that's going to be a big driver of getting that macro number up to where it needs to be. From a CRU point of view, we're at a very -- we're right in line with where we thought we'd be at this moment in time. Having said that, we -- some of the properties we bought did have lower occupancy rate on the CRU side, and we're making really good progress leasing it. But the expectation is once we get a lot of momentum going in that -- in the HBC boxes, it will -- we'll claw back a lot of that 6% that we gave up with HBC closing.

The short-term leases really don't amount to a lot in terms of occupancy. And they are really short term, and our plan is to replace the majority of them in the next 6 to 12 months.

Okay. That's great. And then just my follow-up before I turn it back. You mentioned that you are now planning to retain 90% of the former HBC GLA. I'm just curious what that percentage would have been previously versus your expectations?

Yes. There was a lot of -- it was really unclear exactly what we're going to be able to get done until the assignment case resolved itself in November. A lot of retailers were sitting on the sideline. So we had anticipated probably more than the 75% range in terms of demolition. But subsequent to the assignment case being dismissed, we had a lot of retailers step up and say they wanted space and more than we had actually anticipated. So we really did revisit some of our plans. We were planning on knocking down more space, and that was in some of our better malls. The lessons we learned from targeted series was built to demand and don't hope that we can build space. And -- but in this case, we have a substantial amount of demand, and that's really tied to the fact that HBC real estate on our site is some of the best space in the entire property.

Our next question comes from Lorne Kalmar from Desjardins.

Pat, just on your -- the talk around rents starting in mid-27 for, I guess, the longer-term tenant at HBC or in the former HBC spaces. Would that be straight line or cash?

That's cash. Yes. We'll have straight line effectively probably this year from a lot of tenants because we'll get leases signed this year. And then really, the process comes down to construction and permits. So in the case of one property, we're probably going to have it all with the construction completed this year. It's in a municipality where we've already advanced plans with the city, and we know we can get permits fairly quickly and the leases are basically right at the finish line for the entire box. Other boxes, the pieces will get come together probably Q2 this year, and we'll get construction underway and turn over to the tenants probably in some point in '27 with rent commencement later in '27 or maybe even early '28. But so we will have -- but we will have some cash rent coming in next year.

Okay. Perfect. And then as my follow-up, I was wondering like how much -- assuming you backed all the anchor space or the 90%, where do you expect the recovery ratios to be all else equal?

So the CAM recovery ratio was not necessarily impacted by HBC because we were able to allocate that to the CRU tenants. The tax recovery ratio was the one that was impacted the most. So that should bounce back once the tenancies are in place. The replacement of HBC will pay a materially higher amount of TAM than HBC paid in the past and that will go in the CAM pool that directly affects and benefits the CRU tenants to an extent because we'll be able to keep the CAM at or reduce it from where it is today. But really, the recovery ratio, the main driver of that is continuing to lease the CRU space. And we've made good progress in that. And I see a kind of a sequential increase in that as it has been in the last few years. Just -- we leased 2,000 feet at a time on CRU. We did 235,000 feet last year, and I think we anticipate doing that again this year. So HBC is not actually going to drive that number. It's really CRU leasing.

Our next question comes from Brad Sturges from Raymond James.

Just on the comments that you're working through on, I guess, the potential to add some new outparcels on the unrestricted HBC land. Just -- I wonder if -- I know you're going through the analysis still today, but where -- what do you think that opportunity could look like as you move forward in that plan and start to come in some projects?

I think we're already well underway in talking to tenants about taking outparcels. I mean, this is stuff we couldn't deal with while HBC was in place. We wouldn't talk about it out loud because they always saw value anytime we talked about potentially doing anything, they would hold their hand out and ask us for money. So we kept fairly quiet about it. So we've always had discussions with tenants about taking outparcels. We have -- right now, we have discussions with grocery stores and banks and restaurants, and we are starting to progress those discussions especially some of our new properties where there was a lot of demand for outparcels. So I think by later this year, we'll probably give or announce some deals in place for restaurants and financials and even grocery stores.

Okay. Is that something that could ramp up to be a little bit more of an annual program given there's a lot of opportunities? And do you need to kind of pick and choose what could make sense from a capital allocation point of view? Or how should we think about that?

We have laid out. We're laying out master plans for all of our properties and kind of our strategic plan for the next, say, 5 years in terms of development. And I think this is going to -- there's a runway of building outparcel development that extend for at least 5 years.

Our next question comes from Pammi Bir from RBC.

Maybe just continuing along the lines of the last question there. Can you talk about some of the larger types of tenants that have expressed interest? It sounds like it's been going quite well beyond the tenants that you've already flagged in your update in December?

I think you can look at our top 5 tenants and our top line tenants, and it's going to be those tenants that are taking a lot of this space. It's going to be TJX, it's going to be Canadian Tire, it's going to be Walmart's grocery stores. So very high-quality covenant tenants and that they're taking the majority of the space right now.

Okay. And just maybe one follow-up. Can you maybe just talk about from an acquisition standpoint, maybe what's in the pipeline? How many properties are in maybe in advanced stages or maybe what range of value could be under discussion at this stage?

Yes. Thanks, Pammi. We don't have anything advanced at this point. We've got lots of discussions going on, but we're not really engaged in great detail. And one of the dynamics that has been happening as we've been growing the business is that the bigger we've gotten, the bigger the assets that we can acquire have become. And -- so it's tough to put a number on what activity could look like this year. I think last year was a remarkable year at $1.6 billion across 4 malls. We would be pretty pleased if we could pick up one or two or three malls this year, that would be great. And if we were to hit the high end of that range, we can possibly exceed last year's target. But at this point, we don't have visibility to even one that we have confidence that we'll be able to bring down.

Our next question comes from Sam Damiani from TD Cowen.

Maybe just first off, a point of clarification, talking about retaining 90% of the HBC space, but looking at the table, you've got -- by property, you've got two properties tagged for redevelopment. So I just want to be clear that adds up to about 20% of the GLA. So what is the, I guess, the 10% that's not being retained, which properties?

It's not substantial demolition at any of the properties. So I'll give you an example like at Conestoga, it's a 120,000-foot bay box and we're going to knock down about 20,000 of that and the purpose being is that the flow around the box isn't that great. So by demolishing a portion of it, it gets better access to the parking field for the space itself. And then like Orchard Park, we're going to shave a little bit off the building as well. So it's not substantial demolition at the buildings, but it's relatively minor and it's primarily being done just for better access through the property or through the space to the property.

Okay. That's helpful. And just on Toys "R" Us, I wonder if you could just provide some progress, either updates or expectations in the near term for each of the spaces that you have. If it's in the MD&A, I didn't see it, but if you wouldn't mind just running through that quickly.

Yes. No, I'm happy to. So we had 6 Toys "R" Us boxes. We have been working with them prior to their filing back into late last year in terms of getting control, we actually terminated all the leases. And we -- primarily because we had tenants in our back pocket wanting to take the space. So we're well advanced in discussions to replace all the boxes. I think kind of in line with HBC, we'll be in a [ position to replace ] the tenants in the next 3 to 6 months as we're well progressed on all of them. They're all good spaces.

Sorry, just to be clear, is that vacancy that will be incremental in Q1 to what degree? And how long do you expect that to be -- not paying rent.

We terminated some of them in Q4, to be honest with you, so that would have showed up last year. Some of them we terminated in Q1 of this year. So the full impact of the vacancy will show up next quarter.

Yes. I believe it was only two boxes that were not terminated until early this year. So that's a small incremental.

Our next question comes from Matt Kornack from National Bank Financial.

Alex, maybe just going back to Pammi's line of questioning around the acquisition front. Are you seeing a change in vendor expectations or even maybe their willingness to take back more of your stock in a disposition just given how malls are performing relatively and maybe the desire to have more exposure than they thought originally?

Yes, I would say a couple of different points. One is that each of our vendors is unique, and they have unique objectives. They're working towards different priorities. And so it's hard to generalize about any of them. I would say, certainly, our stock price performing well is constructive towards our ability to get deals done. I have to remind people that we still trade 30% below NAV even though our stock price is up, it's still trading at a pretty hefty discount and yet it certainly is helpful in those discussions. Our largest shareholder would have less than 19% on as if converted basis, which is down from 27%. That's certainly something that we pay attention to. And I do think there's perhaps more appetite to take our stock.

Okay. Fair. And then maybe switching to the op side. The first [ GAAP ] yesterday said that coming out of ICSC, there is no indication from tenants that they're pulling back or reducing plans based on kind of the nature of where we are macro-wise or population growth wise? Is that -- I mean, it seems like from what you're seeing on Toys and the [ Bay ] that that's the same for malls. But if you could give us a sense if there's any bifurcation between those two types of retail -- retailers?

No, it's -- we're aligned with that comment. There's a lot of activity on the leasing side. A lot of new deals happening and a lot of tenants actually looking for larger footprints as well, [ so expansions ]. Sales are really, really strong. And space is very limited. So it's a really good place for retail right now.

Our next question comes from Tal Woolley from CIBC Capital Markets.

Just given how much capital you've deployed on acquisitions, I'm just wondering if there's been enough time lapse for you guys to sort of do a broader post-deal review? And are you finding like anything consistent in these deals that you kind of have to work on or any surprises to the upside or downside that you're finding?

Thanks, Tal. I would say we do have a pretty detailed disclosure in our financial reports. And we provide both same-property and non-same property NOIs separated out from acquisitions and dispositions. So you can see the NOI from the properties and you can go through an exercise to reconstruct how the NOI has been trending. And what I would say as a general statement is that in 2021, when we were structuring the spinout, we knew that we were coming off of a cyclical low in fundamentals, occupancy, rental rate sales. And so we've seen tremendous growth in our portfolio. And I think as a general statement, the mall industry in Canada has seen tremendous growth. And when we've taken over management of the properties that we've acquired, we manage them in a slightly different way than pension funds do. And I think some of that can come down to -- we're a public company. We pay a distribution, and we are very focused on maximizing cash flow, which other investors sometimes focus more on long-term total returns and cap rates and things like that. But we've seen pretty strong performance out of our acquisitions. And we're very pleased with every one of our acquisitions. On a look-back basis, they've all been materially accretive to our business.

Okay. And then with the vendors right now, just maybe following up, I think it was on Pammi's or Matt's question. The market keeps changing. And so I'm just wondering in your opinion, like does it feel like the vendors that are out there are just as motivated to sell product as they have in the last couple of years? Or do you get a sense that, that's changing somewhat?

It's interesting. We were having this conversation in our investment committee meeting on Tuesday or Wednesday perhaps. I think it's easy in real estate to lose track of the long time lines over which trends take place. And for most of the period since the year 2000, you've seen capital flowing into real estate, large institutions, pension funds and others adding to the real estate portfolios as interest rates were declining. And I think we've moved into a different phase where institutional appetite for real estate has changed. Certainly, the menu has increased in terms of industrial being attractive, apartments being attractive cell towers, data centers, all sorts of stuff. But the general appetite for real estate seems to have softened and so I think this period of limited competition will likely continue for some period of time. And I can't say that I've observed any real change in tone from the vendors. They're really focused on portfolio construction priorities. And as I said, to call me, there are -- each of them is unique and they have different priorities. But as a general trend, I think there's continued appetite to be recycling capital.

Okay. And then just on -- as you start to move into redeveloping the HBC spaces, the last 5 years, there's sort of a lot of talk about just the escalation in pricing for redevelopment or construction, and that kind of stuff. Can you give -- given that there's a lot of mall operators out there probably working on these kind of projects. Are you finding pricing still reasonable? Or are you still seeing a fair bit of inflation in that?

Yes. Construction costs certainly have gone up. But fortunately, we're able to move rents up as well just because of the lack of space. So we're -- I think as I mentioned in my speech, we're moving our return thresholds up because I think we're going to be able to generate more than enough rent to offset the rising construction costs. I don't see any issue with keeping our estimated costs in line because there's a lot of other construction going on. I think we're a fairly large landlord, and the contractors really love doing workforce. And I think we got a fairly good pricing from the contractors just because of the volume of work we do with them across Canada.

Got it. And then just lastly, any other tenants of material size that you're concerned about coming out of like having financial difficulty coming out of the Christmas season?

No, not necessarily. I think as I've said many times in the past, I think we -- because we get our sales reported to us, we have good visibility into tenants and where they're trending and where certain categories or specific tenants are softening. And we work -- we try to work ahead and mitigate our exposure to tenants that we see as waning in terms of consumer interest in their brand. But there's nobody on our radar in terms of bankruptcies. Toys "R" us well telegraphed, I think, over more than a year ago, we could all see where they were headed, but there's nobody else really that fits in our bucket right now.

Next question is a follow-up from Mike Markidis.

Last quick one here for me. I just -- I've previously been under the expectation that most of your redevelopment CapEx would be HBC attributed and it looks like you've given us more specific information that maybe is about -- it's still over half of the expected amount. So curious if you could just give us a little bit more color of the other projects that are planned or ongoing just with Northland being finished and Devonshire being completed?

Yes. Sure, Mike. We have a project at Kildonan in Winnipeg, it's a food court redevelopment. It's going to go on over the next, say, 12 months. There's other small projects outparcel developments across the portfolio. they're all yielding generally, the outparcel developments all yield north of 10. So they're all very good projects. But those projects well in advance. I think the majority of our focus is certainly going to be on HBC for the next 12 to 24 months.

Next question is a number of follow-up from Sam Damiani.

Just wanted to sort of reconcile the very robust leasing demand with trend in sales, sales per square foot and overall CRU sales seem to have flattened out in the latest quarter. I'm just wondering what you read into that and what your expectations are in the coming year.

I don't read much into sales that fluctuate from one month to the next. I generally look at it over a much longer time horizon, and I really spend a lot of time focusing on total sales volume as opposed to productivity just because we do have a lot of tenants that are expanding. And when they expand their productivity tends to go down, but their total sales volume goes up. They take more space. We're constantly trying to give them the right footprint so they can generate the highest sales volume. When our sales volume goes up, they can afford a higher [indiscernible] and we can charge some more rent. So we really don't cater to productivity. So I wouldn't put any kind of thought into a short-term fluctuation in productivity.

There are no further questions at this time. Ms. Claire, I'd like to turn the call back to you.

Thank you, Sami. With no further questions, we'll close today's call. On behalf of the Primaris team, we thank you all for participating. Thank you, and goodbye.

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

Good morning, and welcome to the Primaris REIT's Third Quarter 2025 Results Conference Call. [Operator Instructions]

I would now like to hand over to your host, Leslie Buist, SVP of Finance, to begin. Please go ahead, Leslie.

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 Davloor, CFO; Leslie Buist, SVP, Finance; Mordy Bobrowsky, SVP, General Counsel; and Graham Procter, 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 5 disclaimed HBC leases were an occupancy and NOI headwind in the quarter, we are very excited to announce substantial leasing progress made on 5 of the 6 disclaimed HBC boxes and the leasing of the vacant Sears box at Lime Ridge. This includes the HBC at our Promenades St-Bruno property in Montreal acquired in early October. Pat will provide more details shortly, but we have leased almost 0.5 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 5 leases were disclaimed, allowing Primaris unfettered access and control of these spaces as of November 27, 2025.

In 2025, we have acquired 4 top-tier malls, including Oshawa Center, a 50% interest in Southgate Centre in Edmonton, Lime Ridge Mall in Hamilton and Promenades 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 were 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 Les Galeries de la Capitale in Quebec City, where we hosted analysts and investors. Capitale 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 2 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 noncore 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 surface value from the leases. In June 2025, 5 HBC locations in our portfolio were disclaimed. These 5 locations occupied approximately 532,000 square feet. A proposed assignee emerged for 28 locations, including 5 sites owned and managed by Primaris. These 5 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 HBC leases were disclaimed. In addition, we obtained control of the vacant HBC box at St-Bruno upon the closing of our property acquisition.

The HBC St-Bruno location is about 131,000 square feet. For reference, the average minimum rent HBC paid in our portfolio was $4.18 per square foot, equating to $5.4 million annually. With the [ disclaimant ] of all remaining HBC leases, retailers will now be able to understand and assess the full inventory of HBC space available. We now anticipate an acceleration of negotiations with tenants for all available space. We have made significant leasing progress at our HBC boxes and are pleased to announce that we have agreed to terms with tenants for the entire HBC box at St-Bruno with [indiscernible], as well as for 1 level at Galeries de la Capitale with [indiscernible] and with Zellers at Sunridge Mall.

We anticipate the Medicine Hat lease deal to replace the entire premises formerly occupied by HBC will be signed imminently. All 4 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 Place d'Orleans, we are in advanced discussion with a 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 our HBC 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 million to $30 million to demise an HBC box and approximately $8 million to $9 million to demolish, including all site works. Where a single tenant takes an HBC box, the cost to Primaris could be as little as 12 months of free rent. We are currently estimating a total HBC-related spend of $125 million 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 HBC 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 3 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 the prior quarter and $800,000 in lost revenue due to the closure of 5 HBC locations. Excluding these 2 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 HBC to maintain affordability for our tenants. The increase in operating cost recovery ratio continues to 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 we 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 pushed occupancy higher in Q3 2025. Over the past several quarters, we note there's 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 spreads of 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 was $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 5 disclaimed HBC 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 in growing markets. Over the long run, we anticipate sales growth at our properties will [ occur in ] the strong fundamentals in the enclosed shopping center industry, including a 30-year low in per capita enclosed 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 continued 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 noncore assets and the impact of the disclaimed HBC leases. Internal growth and accretive high-quality acquisitions completed over the last 12 months are the drivers of our outperformance.

During the quarter, we closed on the sale of 3 strip plazas in Medicine Hat, Alberta for proceeds of $12.7 million and the disposition of Northpointe Town Centre, 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 Centre Shop, a specialty grocery store and restaurants 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 deal 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 6x 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 we 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 their current levels.

Our average net debt to adjusted EBITDA was 5.9x. As a reminder, this range forms part of our executive compensation structure with the top end of the range of 6x. 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 debenture market. This greatly simplifies our ability to arrange debt financing for our acquisitions as the mortgage financing alternative for these large value properties and 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 the 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 5-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 $15.09, or an approximate 30% discount to NAV of $21.58. 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 accretive to unitholders.

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 HBC leases. We do not anticipate any significant CapEx spend with respect to the HBC boxes in 2025 due to the timing of the CCAA process. Our guidance includes the impact of the acquisitions of Oshawa Centre, Southgate Center, Lime Ridge Mall and Promenades St-Bruno, and approximately $250 million in dispositions that have been completed. No additional acquisitions are incorporated into the guidance.

We anticipate same property 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 HBC leases are disclaimed and accounts for acquisitions with lower occupancies. Further details of our 2025 guidance can be found in Section 4 of the MD&A 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% and FFO per unit of $1.83 to $1.88. This guidance includes the sale of Northland Village on or about December 31 of this year. No other acquisitions or disposition activity are considered. We had a lot of positive leasing momentum in our same properties that is offsetting the hurdles of HBC and Toys "R" Us vacancy and the high volume of prior year tax recoveries in 2025. If you are trying to reconcile same-property NOI growth to FFO growth, it is important to note that 1/3 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 our conservative financial model and generating free cash flow after distributions and operating capital is the 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 Capped REIT 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 3-year sustainability plan and established a new plan for the next 3 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.

[Operator Instructions] Our first question comes from Sam Damiani from TD Cowen.

So just on the HBC spaces, backfilling of those, great initial progress. I wonder 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 5 are put to bed imminently. How is that going to look in terms of leases to tenants that are sort of quick backfills 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?

Yes, I mean, our ultimate goal is to get long-term leases with national covenant tenants. The tenants we've done deals with right now are relatively short term in basis, but we are optimistic that they will -- that there's a chance they'll turn into longer terms. 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 really 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 press forward with their plans to commit capital for new store openings. 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 5 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.

And with that -- I guess, with that sort of strategy -- initial strategy, let's say, Phase 1 of the strategy, I guess, it sounds like the CapEx for Primaris might actually be quite modest 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.

Our next question comes from Mario Saric from Scotiabank.

Just coming back to your '26 FFO per unit guidance, can you discuss what FFO 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 million to $188 million range?

Yes. 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. The guidance is really -- we almost look at it as 2 buckets. There's the same store, same property, which is sort of flat to up a couple of percentage points. And HBC is obviously the big factor there. So with the 5 other stores coming back, we had not assumed anything on those 6, I should say. The 5 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 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 property tax rebates because we -- a lot of the appeals have now gone through. So we do have an amount in there, I think, about $1 million, 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, the pace of developments that we've experienced since September 30 on HBC in particular, initially with the ruling from Judge Osborne and then the disclaimer of the leases on Tuesday, the discussions have been pretty fast and furious. And we have the 3 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 has been executed, what is in process, I think as a general statement, we tend to be relatively conservative on what we include in guidance. But 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 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 if we turn over some space relatively soon, we get percentage rent -- or not percentage rent, sorry, straight-line rent during the fixturing period.

But just to reiterate on the [indiscernible] back, we have not assumed any income on those sets. At the time the budget was prepared, we didn't know what the outcome was going to be.

Yes, 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 backfill for any of those.

Our next question comes from Lorne Kalmar from Desjardins.

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 percent rent. And we also weren't sure at the time where we were going to end up with HBC, when exactly would the disclaimers kick in, will not kick in. And sales have been strong, so just trying to kind of factor in what's going on with sales because they have been surprisingly resilient, given the economic backdrop.

Our next question comes from Pammi Bir from RBC.

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, 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?

Pammi, yes, no, leasing is going very well. I mean, there's -- as I noted in my speech, I think there's Canadian and U.S. and international retailers expanding. We've done some deals with Uniqlo. We're in discussions with Victoria's Secrets for new stores. Aritzia is looking to upsize. Lululemon is adding stores. Bath & Body Works is upsizing. Canadian side, you got Soft Moc looking for more space. Browns is looking to capitalize on the closure of HBC and it's 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, Kiokii 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. Sears came out of their troubles with the new purchaser. So that situation stabilized. Otherwise, nothing much more on the horizon.

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. I don't know off the top of my head. Memory serves, it was 6 stores. The average store is about 20,000 square feet. We already have 2 -- we have vacant possession of 2 already, and we're working on the replacement.

Our next question comes from Tal Woolley from CIBC Capital Markets.

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 the residential markets about what's going on. Just wondering like 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 [indiscernible] off there just to see if -- yes, there's been any change at the CRU level.

No, no, I can't say 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 and looking for supplies and so forth 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 the sales of the properties.

Got it. And then, just when I look at your occupancy, 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 just acquisitions? Or is there something else going on there, too?

Yes. I think the occupancy -- the malls that we bought have rather -- they have low occupancy for the most part. Oshawa had a significant amount of vacancy. And I think as you can -- 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 like Lime Ridge, Galeries de la Capitale, 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.

And just as a...

Go ahead, Alex. Sorry.

Sorry, Tal. I was just going to say that one thing that struck us as we were going through the quarterly analysis internally is, 30% of our portfolio by NOI, by value has been acquired this year and almost 40% has been acquired in the last 4 quarters. So we have a tremendous amount going on. And your question about whether we're seeing any impact from foreign students and things like that, I think the mall business is a lot like the office business right now, where 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 a C product, you're having a very, very difficult time. And so, what I think may not be fully appreciated is just how much we have transformed this portfolio. And 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 2 years ago, it was $35. And that's not on a small number of leases. It was 88 leases this quarter, 38 leases 2 years ago. The average rent for the whole portfolio was $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. And the macro backdrop, I think, is something that a lot of people put a lot of emphasis on. But 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 ticked up from just below 3% to 4%. I assume, again, acquisition mix has driven that up probably too. But like do you -- 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 remerchandise the properties. I think the max occupancy for Primaris at peak 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 remerchandising. That's part of the business, and that's how you continue to grow rents if you have to remerchandise. 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.

Our next question comes from Mark Rothschild from Canaccord.

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 perhaps some larger leases. But looking at the trend of the past few quarters, I just want to know if we should be reading into that. And what should we expect the trend to be over the next few quarters with your visibility on leasing?

Mark, yes, the renewal spreads, there's 3 tenants -- if we remove 3 tenants from this number this quarter, it would have been up -- it would have been 2% higher. I think we've generally been guiding to the mid-to-high single digits. And I think that trend is going to continue. It's going to -- 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 NOI 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?

Yes. I mean, there's a bunch of moving pieces there. And when you think about the types of tenants that are going in, if you're going to take a full HBC 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 will be collecting straight-line rent in terms of our FFO. Other tenants we're going to bring in have less of a capital investment strategy, maybe shorter term in nature. And then, we have some where we're contemplating re-demising into CRU, which involves a lot more capital, but also would generate $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, the early results are pretty impressive in terms of how much leasing activity we've gotten done on HBC space since we got control of the first 5 of them back in June. But even with that control, 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 what the financial results will look like in 2027 because 2026, if something comes in, in Q1 versus Q3, that's a huge swing, whereas we're pretty confident that a lot of stuff is 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 -- it's still -- there's still a fair bit of play in there.

Our next question is from Brad Sturges from Raymond James.

Just, I guess, continuing along the lines of HBC 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 re-lease 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?

Brad, yes, the stores that we're getting back now were clearly really high-quality locations. And that's Ruby Liu had tied up a lot of the best quality real estate with -- that HBC had in Canada. And so, we've been working on replacement tenants with these boxes for quite some time. And 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, 2 or 3 boxes. And one will be, in all likelihood, a lot more CRU. And the CRU one will generate higher cost, 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 the investment activity or transaction activity that Primaris has completed or 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 quite extensively -- or 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 yes, we're almost $1.6 billion of acquisitions this year and $250 million of dispositions. We've got Northland Village, which is 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 when we think about the ratio of acquisitions to dispositions, it might be 3:1 kind of a range. So we still have more disposition activity that we'd like to get done in the relatively near term. Transacting was 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 we're -- 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 3.5 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 or a willing buyer and the 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 opportunities for [indiscernible] land and selling to developers or building out parcels for our own account. There's an awful lot going on in our business, and it's all great stuff. But yes, I mean, the -- to your point, the emphasis is less on acquisitions today than it has been at any point in the last 3.5 years.

Our next question is from Matt Kornack from National Bank Financial.

You mentioned, the number of tenants are expanding. Should we think of kind of this HBC 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 with existing tenants maybe moving around and backfilling them with others?

Matt, yes, 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 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. So -- and the CRU pays very good rent. So yes -- but in addition, I do think there'll be some musical chairs with tenants relocating some 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. Fair enough. And then, just maybe quickly, if you took out the noise from both years from HBC, 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?

Yes. I think your comment is 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 Bay, the business is very solid.

Maybe very quickly a follow-up to that last point. Like what time horizon do you think you can kind of recapture that or...

I'd like to say...

The recoveries.

Yes. I mean, I'd like to say it's probably going to be in the 3-year time frame of our forecast where we can get our occupancy back into the mid-90s.

There's no question, '26 is a bit of a transitional year as we're dealing with Hudson 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 '26 -- when you get into the latter half of '26 and move into '27, you're going to see quite the acceleration.

I do want to circle back on Toys "R" Us just for everyone's clarity. So we had 6. We terminated 2 last month. We have 4 remaining stores. The average -- it's 104,000 square feet. The average rent -- the average base rent is well below our average in the portfolio. It's only $14 a foot. So good opportunity in one of those locations is at Dufferin where we know we could grow the rent substantially.

Our next question comes from Gaurav Mathur from Green Street.

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?

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 NOI 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 -- we don't really emphasize the leasing spreads as much as you might in other retail property types. There are differences. We proactively try to encourage about 25% turnover on an annual basis in our business.

We're trying to really fine-tune the merchandise mix on an ongoing basis. And so, the leasing spreads as well, Pat was addressing it a few minutes ago, we're still seeing some 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 NOI because we're already capturing it through conversion of these leasing -- these leases that are nonstandard 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.

Our next question is a follow-up question from Sam Damiani.

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 3, 6, 12 months ago for -- in the transaction market?

Yes. I mean, we're seeing some interesting signs of capital becoming more available. We saw a transaction for a 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, 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 2 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 [1:00:05]. It depends on the day of the week, you call us. It is really kind of all over the place. And 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.

We currently have no further questions. I'd like to hand back to Leslie 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.