Primaris REIT's Q2 2025 Earnings: A Resilient Retail REIT Navigating a Shifting Landscape

In a year marked by fluctuating interest rates and evolving consumer habits, Primaris Real Estate Investment Trust (Primaris) has emerged as a standout performer in Canada's retail real estate sector. The Q2 2025 earnings report, released on June 30, 2025, underscores the Trust's operational resilience and strategic agility. With total rental revenue reaching $150.8 million and Same Properties Cash Net Operating Income (Cash NOI) rising by 5.5%, Primaris has demonstrated its ability to navigate macroeconomic headwinds while positioning itself for long-term growth. This article evaluates the Trust's performance, its strategic initiatives, and its potential in the current real estate and interest rate environment.

Operational Resilience: Strong Financials Amid a Challenging Sector

Primaris's Q2 results highlight its disciplined approach to portfolio management. The Trust reported a 5.7% increase in Same Properties shopping centre Cash NOI, driven by rising base rents and net operating cost recoveries. Despite a decline in percentage rent in lieu of base rent—a trend observed across the retail sector—Primaris maintained a weighted average rent spread of 6.7% on renewals across 407,000 square feet. This metric signals strong tenant demand and pricing power, particularly in its grocery-anchored and service-based properties, which have outperformed traditional retail formats.

Occupancy metrics further reinforce this resilience. Committed occupancy stood at 90.5%, in-place occupancy at 88.8%, and long-term in-place occupancy at 84.8%. While these figures reflect a slight decline compared to prior years due to HBC lease disclaimers and the acquisition of Lime Ridge Mall (which had lower in-place occupancy of 78.4%), the Trust's proactive leasing activity—191 deals totaling 0.6 million square feet—has mitigated risks.

The Trust's Funds from Operations (FFO) per average diluted unit increased by 5.5% to $0.445, with a conservative 52.6% payout ratio. This balance between growth and sustainability is critical in an environment where liquidity and leverage management remain top priorities for investors.

Strategic Positioning: Capital Recycling, Acquisitions, and ESG Alignment

Primaris's strategic initiatives in Q2 2025 reflect a clear focus on value creation and long-term positioning. The acquisition of Lime Ridge Mall in Hamilton for $416 million—adding 791,000 square feet to its portfolio—aligns with demographic trends in high-growth markets. Hamilton's population and economic activity are outpacing national averages, making the mall a strategic asset for future cash flow. Conversely, the sale of Lansdowne Industrial in Peterborough for $9.9 million exemplifies disciplined capital recycling. Total dispositions in 2025 reached $246.1 million, optimizing the portfolio while generating liquidity.

The Trust also issued $200 million in senior unsecured debentures at a 4.835% fixed rate under its inaugural Green Finance Framework. This move not only reduces long-term financing costs but also aligns with global ESG benchmarks, a growing priority for institutional investors. By channeling capital into green projects, Primaris is future-proofing its assets against regulatory and market pressures.

Market Context: Interest Rates and Retail Real Estate Dynamics

The Canadian real estate landscape in 2025 has been shaped by a pivotal shift in interest rates. After peaking at 4.75% in June 2024, the Bank of Canada reduced its overnight rate to 2.75% by June 2025, providing relief to REITs and commercial real estate. This decline has improved financing conditions, with retail REIT valuations rising and debt costs stabilizing. Primaris's robust liquidity—$584 million in cash and $4.4 billion in unencumbered assets—positions it to capitalize on accretive opportunities as rates stabilize.

Retail real estate, however, remains a mixed bag. While grocery-anchored and service-based properties thrive, older malls and traditional retail centers face headwinds from e-commerce and shifting consumer behavior. Primaris's focus on repositioning underperforming assets (e.g., former HBC spaces) and integrating mixed-use developments aligns with broader urbanization trends. Its 3-year targets—94%–96% in-place occupancy, 3%–4% annual Same Properties Cash NOI growth, and $1 billion in acquisitions—underscore its confidence in this strategy.

Investment Implications: A Case for Long-Term Value Creation

Primaris's current valuation offers an attractive margin of safety. With a Net Asset Value (NAV) of $21.43 per unit and a share price trading at a 30.1% discount, the Trust presents a compelling opportunity for value investors. The recent share repurchase of 2.66 million units at $14.98 further signals management's confidence in its intrinsic value.

The Trust's conservative capital structure—5.8x net debt to EBITDA, 12% secured debt-to-total debt ratio, and no debt maturing until 2027—provides a buffer against market volatility. Its 2025 guidance (Cash NOI of $340–345 million and FFO per unit of $1.74–$1.79) and 3-year targets highlight a disciplined approach to growth.

Historically, a buy-and-hold strategy around Primaris's earnings releases has shown positive outcomes. From 2022 to the present, the 3-Day and 10-Day win rates stood at 77.78%, while the 30-Day win rate reached 88.89%. The maximum return observed was 16.56% on day 52 following an earnings release. These results suggest that the market has consistently reacted favorably to the Trust's earnings reports, reinforcing the potential for short- to medium-term gains for investors who align with its strategic momentum.

Risks to Consider:
- Retail Sector Volatility: E-commerce and changing consumer preferences could pressure occupancy in non-anchored properties.
- Interest Rate Uncertainty: While rates have stabilized, any reversal could increase financing costs.
- Acquisition Integration: The success of Lime Ridge Mall and other acquisitions depends on effective repositioning.

Conclusion: A Resilient Play in a Shifting Market

Primaris REIT's Q2 2025 results and strategic initiatives position it as a resilient and forward-looking player in the Canadian retail real estate sector. Its ability to generate strong cash flow, execute disciplined capital recycling, and align with ESG trends makes it a compelling investment for long-term investors. While risks exist, the Trust's robust balance sheet, strategic acquisitions, and proactive management of market dynamics justify a cautious optimistic outlook.

For investors seeking exposure to a high-quality REIT with a clear growth trajectory, Primaris offers a compelling case—particularly at current valuations. As the real estate market continues to evolve, the Trust's focus on quality over quantity, combined with its adaptability to shifting consumer and macroeconomic trends, positions it to deliver consistent value."""