Good morning and welcome to Primaris Real Estate Investment Trust second quarter 2025 results conference call. At this time, all lines have been placed on mute. After the prepared remarks, there will be a question and answer session. You may ask one question and a follow-up, at which point you may return to the queue. I will now turn the call over to Claire Mahaney, Vice President, Investor Relations and ESG. Please go.
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 www.primarisreit.com. I'll now turn the call over to Alex Avery, Primaris' Chief Executive Officer.
Thank you, Claire. Good morning. Thanks for joining Primaris REIT's second quarter 2025 conference call. Joining me today are Pat Sullivan, President and Chief Operating Officer, Raghunath Davloor, Chief Financial Officer, Leslie Buist, SVP , Finance, Mordy Bobrowsky, SVP, General Counsel, Graham Procter, SVP , Asset Management, and Claire Mahaney, VP, IR and ESG. We're very pleased to deliver another excellent quarter of results, including strong same property NOI growth and substantial FFO and AFFO per unit growth driven by the secular recovery in the Canadian mall sector that we seem to be in the early to middle innings of this recovery. We continue to exercise disciplined capital allocation, recycling capital from strategic dispositions and retained free cash flow into both strategic acquisitions and unit repurchases.
Since the pandemic faded, Canadian malls have seen a very strong recovery in tenant sales, retailer leasing demand recoveries, and NOI. Primaris same property tenant sales per square foot are at all-time highs and are 33% higher at $723 per square foot than comparable 2019 levels. NOI has grown sharply but still lags sales performance. To quantify this, our occupancy cost ratio remains depressed compared to historical levels, currently approximately 12% compared to the historical 14%- 15% range. This suggests Primaris mark to market on in-place rents can drive 15%- 25% NOI growth over the next few years even if tenant sales were to remain flat at current levels. This tailwind has been key to Primaris strong operating and financial results. We expect to capture this mark to market over the next two years, supporting strong NOI growth.
To be clear, we haven't been sitting back relaxing and enjoying this strong performance. We have been incredibly active, using this time to reposition the business so that Primaris is well situated to continue to drive above average growth out of its portfolio of exceptional properties over the long term once the current tailwind subsides. With the acquisition of Lime Ridge Mall in June, Primaris has acquired $2 billion of Canada's top tier malls since the spinoff. In addition to the $800 million we acquired concurrent with the spin, those acquisitions now represent approximately 60% of the portfolio by value. To say these acquisitions have been transformational would be an understatement. These acquisitions are designed to increase portfolio quality and to structurally increase the base level of internal growth in our portfolio to an above sector average 3%- 4%.
Same property NOI growth rate on a durable and recurring basis. The basis for that above average growth in tenant sales, rents, and NOI can be framed as the moats we have around our business that form our competitive advantage. I'll describe five of them. We showcased our first moat last September at our Halifax Investor Day, being our management platform which is specialized for enclosed malls. This platform provides us with better relationships with retailers because they have confidence in our platform and as a result have more conviction when they commit to our malls. The strength of our platform acts as a barrier to entry for investors looking to enter the mall market who lack an enclosed shopping centre management platform.
There are only a few specialized mall platforms in Canada, and this platform allows us to drive better performance and growth out of the malls that we own as compared to what another owner could produce without a similar platform. We talk a lot about the second moat, 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 approximately 50%. We think of this as a moat that gives us structurally higher AFFO and FFO per unit growth as we retain and compound capital faster than if we had higher leverage and a higher payout ratio. As our public company track record continues to grow, we expect this to result in a cost of capital advantage relative to our peers with higher FFO and AFFO multiples. Our third moat is our financing strategy.
Our investment grade credit 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 can stretch the limits of the secured mortgage market in Canada. The unsecured structure also allows us to buy and sell properties as well as renovate and redevelop properties without the constraints that come with secured mortgages. This gives us a significant advantage over potential new entrants to the mall market and over smaller private groups. Our fourth moat is the barriers to new supply. Hurdles discouraging new mall development are substantial. At IFRS fair value, our properties are valued at roughly $330 per square foot, and at our current stock price, our enterprise value reflects about $270 per square foot.
This compares to a replacement cost of approximately $1,000 per square foot in most of our markets and considerably more in markets where land values are higher. The weighted average net rent in our portfolio is about $29 per square foot. To justify new construction, rents need to rise between $80 and $100 per square foot, or roughly three times our current rents. That is before you contemplate trying to assemble 50, 60, or 70 acres of land in the center of a large population center, something that can only be reasonably achieved well outside of the city limits, which is by definition an inferior location to all of our malls. That is a serious moat. Four serious moats, but as I mentioned earlier, we have not been resting on our laurels enjoying the ride. We've been working hard reshaping the portfolio to achieve structurally higher internal growth.
How are we doing that? By acquiring some of the best malls in the country and recycling capital from our non-core property portfolio. In 2023, we have acquired Southgate Centre, Oshawa Centre, and Lime Ridge Mall, three market-leading malls with sales per square foot in the $800- $1,400 per square foot range. Aggregate CRU sales of $250 million to over $300 million per mall. To put this into context, at the end of 2022, Primaris' largest mall by CRU sales volume was just under $200 million, and today we have six malls at $200 million or higher. Even better, all of these acquisitions were completed with modest FFO accretion on an NAV-neutral basis and while keeping leverage below six times EBITDA. These malls are important centers for retailers in Canada, dominate 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, forming a fifth moat around our business. Moving on from moat, and equally important as our recent acquisition activity, is our capital recycling. In the past 13 months, we have executed the sale of over $300 million of non-core properties, including St. Albert Centre, Sherwood Park Mall, Edinburgh Marketplace, and Northp ointe Town Centre, among others. Notably, we are preparing for the sale of Northland Village, a recently completed redevelopment of Northland Mall into one of Canada's best power centers. The center is anchored by Walmart, Winners, Best Buy, GoodLife, Dollarama, and Spinelli Italian Centre Shop, a specialty grocery store and restaurant similar to Eataly, all in an affluent trade area in Northwest Calgary.
With an average household income of $155,000, Northland Village represents almost 40% of the $400 million in our assets held for sale at June 30. By dollar value, we expect to find a broad pool of interested buyers for this property. With all of the transactions we've completed over the past few years, we have substantially repositioned the Primaris portfolio to deliver the outcome our investors want the most: high quality and durable NOI. With sustainable same property NOI growth in the 3%- 4% range translating to above average FFO and AFFO growth per unit, we're taking advantage of the current tailwinds we are enjoying to invest in the quality of our business, enabling us to achieve sustainable above average long term NOI growth. 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,
T hank you, Alex, and good morning. Our shopping center portfolio continues to perform very well in 2025 with NOI growth coming from strong rental revenue growth and rising operating cost recoveries. The underlying fundamentals for shopping centers continue to be supported by both low retail supply and strong tenant sales, population growth, and continued tenant demand for quality space as well as our national full service platform and team. Our same property cash NOI was up 5.5% for the quarter compared to Q2 2024 and 7.5% for the first half of the year. Q2 same property shopping center cash NOI growth was 5.7% over 2024 and 7.9% for the first six months of the year. The primary drivers were higher rents, step up rents, as well as higher percentage rent and prior year tax refunds.
Recovery ratios for the quarter were 80.8%, 1.2% higher compared to Q2 last year and consistent with the guidance we provided at the Investor Day in September of last year. For context, every 1% in common area tax we recover equates to approximately $2 million annually. This number directly impacts the bottom line. Portfolio in place occupancy was 88.8%, down 4.2% from Q2 last year. This is due to the impact of five disclaimed HBC leases, an impact of approximately 3.6%, and the addition of Lime Ridge Mall, which has elevated vacancy primarily related to two vacant department store boxes, an impact of approximately 0.7%. The average rent paid by HBC in our portfolio on the five disclaimed locations is $4.72 per square foot compared to the average large format rents of $15.62 per square foot in our portfolio at Lime Ridge.
Our acquisition underwriting did not include any rents for either the Sears or the HBC locations. Having said that, we are in advanced stages of negotiation to replace the vacant Sears department store at Lime Ridge with a single tenant and expect to provide further updates in the third quarter. Without the impact of HBC and the Lime Ridge acquisition, occupancy would have been 93.3% ahead of Q2 2024. Increasing occupancy represents a tremendous opportunity for Primaris since our spin out in 2022 and the acquisition of six enclosed malls. Since then, we have demonstrated our ability to grow NOI through driving occupancy higher. By way of example, since acquiring Oshawa Centre in February 2025, we have leased approximately 35,000 square feet, which will have strong positive impact on NOI growth at that property in 2026.
With respect to HBC locations, we are in very advanced discussions with tenants, and we look forward to sharing more information with you once the deals are firm. We are adjusting our three-year in-place occupancy target to 94%- 96% as a result of the impact of HBC as well as recent acquisitions with below portfolio average occupancy. We do not anticipate any negative impact in our ability to execute on new lease transactions or increase rents on renewals as a result of HBC store closures. Based on our experience with both Target and Sears closures and maintain 96% occupancy as a medium to long term. Target leasing activity was very strong during the quarter with 122 leases renewed that spread to 6.7%.
In addition, we completed 32 new deals encompassing 87,000 sq f t during the quarter, including a new 4,700 sq ft lululemon store at Orchard Park, a 15,500 sq f t UNIQLO at Galerie di Capitale, and a 6,600 sq f t JD Sports at Dufferin Mall. Year to date, we have completed 56 new lease deals for 150,000 sq ft , with 49 of those deals being CRU tenants equating to 100,000 sq f t. In 2024, we completed 121 new transactions, including 100 that were CRU tenants encompassing 224,000 sq f t. New CRU leasing has a significant impact on our NOI given our average CRU rents of $47.37 per square foot, and those deals have a positive impact on our recovery ratios. Our weighted average net rent per square foot for the quarter increased to $28.88 per square foot versus $25.28 at year end.
This material increase is the result of our acquisition activity of properties with higher rents and the five disclaimed HBC leases with net rent significantly lower than our portfolio average. During the first half of 2025, approximately 200,000 square feet of large format tenants opened, including a 20,000 sq f t medical facility at Sunridge. Over the second half of the year, we have approximately 136,000 sq ft of large format and exterior tenants opening, including a 29,000 sq f t Sport Chek and an 18,000 sq f t Mark's, which opened last week at Devonshire Mall, plus another 71,000 sq f t scheduled to open during 2026. Combined with our strong CRU leasing, these new transactions will contribute to our anticipated growth in NOI over the coming years. Tenant sales within our properties continue to grow.
Same properties same store sales productivity have grown at $723 per square foot at Q2 versus $710 per square foot at Q2 2024. If we add in the acquisitions, total sales productivity climbs to $784 per square foot. Our sales productivity numbers continue to grow as a result of strong tenant performance and capital recycling, including the strategy of acquiring leading shopping centres in growing markets. Over the long run, we anticipate sales growth at our properties will occur due to strong fundamentals in the enclosed shopping centre industry due to a 30-year low in per capita enclosed mall square footage in Canada coupled with population growth. A few final comments on HBC. As we have said many times over, Primaris has prepared for the departure of HBC for over 15 years as its department stores Sears downsized and ceased operations, including Zellers, Target, and Sears.
This departure enables future value creation for our stakeholders, paving the way for optimal use of space that better reflects the evolving needs and desires of the growing communities. At present, five leases have been disclaimed and five leases remain subject to the CCAA process. On July 15, one of the HBC debtor-in-possession lenders brought a motion asking for the asset purchase agreement between HBC and Central Walk's owner to be terminated. Although the Monitor supported this motion and therefore the disclaimer of the affected leases, including the five remaining Primaris locations, the court adjourned. The motion ordered that it be brought back in conjunction with a motion for forced lease assignments. In the meantime, rent continues to be fully payable by the Monitor.
We expect the next hearing to be scheduled before the end of August and maintain our position that the proposal brought forward by Central Walk's owner does not conform with the terms of the HBC leases and should not qualify for a forced assignment. As a reminder, the five leases not yet disclaimed earn gross rental revenue of approximately $0.5 million per month. While we patiently wait out the CCAA process, we are aggressively moving ahead with servicing value on the five disclaimed. We are already in advanced lease negotiations with grocers, sporting goods, and other high quality large format retailers. There are a number of opportunities where tenants are considering the entire box, others will be subdivided, and one or two could be demolished or the mall sold. Tenants are looking to expand their footprint and or relocate into the mall.
We are having conversations with municipalities on potential redevelopment plans and are in discussions with residential developers. All of these conversations have now been accelerated, and we are finally in a position to source the highest and best use out of these sites with site control restrictions eliminated. Based on our analysis to date and as a general statement, we estimate it will cost approximately $25 million- $30 million to redevelop an HBC box and approximately $8 million- $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 free rent. We are currently estimating a total HBC-related spend of $125 million- $150 million over the next few years.
Furthermore, we expect yields on the invested capital between 7% and 12% or more, or a lower 3%- 6% when including only the incremental NOI beyond the foregone HBC rent. The analysis of the impact of HBC's departure gets a little more nuanced when you consider the value of the land that becomes available. With the elimination of restrictions embedded in the HBC leases, we expect the value to fund the cost of the HBC-related spend. However, surfacing such value will take time, and because Primaris has ample capital, we don't need to monetize this value to fund HBC-related spend. Rather, we can maximize that value by pursuing monetization at the optimal time for each property.
These financial estimates also don't factor in the qualitative benefits to our shopping centres, the halo effect on sales and rents from tenants adjacent to the former HBC locations that will be reinvigorated with new retailers, nor the impact on cap rates and valuations for a property that replaces questionable tenancies with new, stronger retailers. Assuming all leases are eventually disclaimed, we anticipate that over time the sites will be fully optimized with the removal of site restrictions enabling redevelopment, improved traffic flow, better sight lines, financially stronger and more relevant tenants contributing to an enhanced merchandise mix, and the opportunity to sever and sell excess land for its highest and best use. To conclude, it's a very exciting time to be in the mall business. Primaris continues to perform very well, and we are very well positioned to capture continued growth within our malls.
With that, I'll turn the call over to Rags to discuss our financial metrics. Rags,
T hank you Pat, and good morning everyone. Our operating and financial results for the quarter continue to remain very strong. We're seeing very strong NOI growth from our portfolio, specifically the acquisition properties, and our many operating metrics are continuing to improve. Our business is reaching critical mass as can be seen in our G&A as a percentage of rental revenue, which is now more in line with our retail peers at 4.5% for the quarter and 4.3% year to date. These results are flowing through to our cash flow metrics, with FFO per unit diluted up 5.5% for the quarter and AFFO per unit diluted up a very strong 24.6%. We achieved these impressive per unit results despite higher interest costs and increased unit count. Internal growth and accretive high quality acquisitions completed over the last 12 months are drivers of our outperformance.
During the quarter, we closed on the sale of Lansdowne Industrial in Peterborough, Ontario for $10 million. Subsequent to quarter end, we also completed the disposition of three strip plazas in Medicine Hat, Alberta for approximately $12.7 million and the disposition of Northp ointe Town Centre, an open air plaza in Calgary, Alberta for $54.5 million. This brings our total dispositions year to date to $246.1 million. These dispositions, in addition to our assets held for sale pool, align to our strategy to own a growing high quality portfolio of leading enclosed shopping centres in Canada. Our average net debt to adjusted EBITDA was 5.8x and within our range of 4x- 6x . As a reminder, this range forms part of our executive compensation structure, with the top end of the range at 6x .
Near the end of June, Primaris published its inaugural Green Finance Framework and subsequently issued $200 million in senior unsecured green debentures at 4.835%. The net proceeds from the issuance will fund eligible green projects as described in our Green Finance Framework. The debt ladder was further extended as the debenture is for a 9-year term maturing in June 2033. Our weighted average term of maturity is now 4.4 years versus 4 years at year end, and our weighted average interest rate is now 5.17% as compared to 5.28% over the same period. With unencumbered assets of $4.4 billion, $584 million in liquidity, and no debt maturing until 2027, we have eliminated refinancing 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.
As at quarter end, we have purchased for cancellation 14.2 million units at an average per unit value of approximately $14.25, or an approximate 33.5% discount to our NAV of $21.43. 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 the holders. Given our strong results to date and confidence in the strength of our business, we are increasing our 2025 guidance for cash NOI to $340 million- $345 million and FFO per unit to $1.74 to $1.79. These adjustments account for accretive acquisitions completed during the year, an additional $1.5 million of expected HBC gross rental income to the end of September, and disclaimment for 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, we anticipate same property cash NOI growth to remain in the range of 3%- 4%. Our guidance includes the impact of the additional $1.5 million of HBC gross rent anticipated to the end of September, the acquisition of Oshawa Centre, Southgate Centre, and Lime Ridge Mall, and over $300 million of dispositions throughout the year, of which approximately $245 million has now been completed. No additional acquisitions are incorporated into the guidance. Further details of our 2025 guidance can be found in section 4 of the MD&A titled Current Business Environment and Outlook. Overall, we are very pleased with our results for the second quarter and are optimistic of the outlook in 2025 and beyond. Maintaining a conservative financial model and generating free cash flow after distributions and operating capital is a core focus from which we will not deviate.
With that, I'll turn the call. Back to Alex
T hank you. Rags, as you have heard, the first half of 2025 has seen strong operating and financial results, and we expect continued strength in the second half as well. Looking at Primaris as a stock, there are a few notable developments worth highlighting. These observations are byproducts of our strategy and don't drive our decision making, but are of interest to our investors. In September, S&P will complete its quarterly index rebalancing, which will capture the almost 9% increase in Primaris units outstanding due to the stock issued as consideration for our Lime Ridge Mall acquisition. This rebalancing should elevate Primaris to the 13th position in the S&P/TSX Capped REIT Index from its current 14th position and up from the 19th position when Primaris was first added in early 2022.
Combined with one or two potential index deletions over the next two or three quarters, Primaris is getting close to cracking the top 10 names in the index. Another byproduct of our recent acquisitions last October and this June, where the vendors chose to sell the units issued as consideration, is the increased float and increased trading volume of our units. The 90-day average trading volume of Primaris units has increased by over 130% over the past 12 months to $7 million a day from $3 million a day a year ago. This substantial improvement in trading liquidity opens up a very large pool of institutional investors that manage large funds and have minimum trading liquidity thresholds. Over the past few years, we have held recurring meetings with many of these investors who have shared their enthusiasm to invest in Primaris.
A frustration with trading liquidity constraints, we believe our most recent acquisition and the subsequent secondary offering of units has only partially been reflected in our trading liquidity and that our trading liquidity will continue to rise as our index weighting is increased. Also, on the topic of indices, effective with the anticipated distribution increase we typically announce with our Q3 results in November, Primaris is expected to be added to the Dividend Aristocrats Index, further enhancing trading liquidity. Moving on, we are very much looking forward to hosting analysts and investors at our property tour. At the end of September, we will be showcasing Les Galeries de la Capitale in Quebec City, acquired last October, as well as showcasing our mall management team. We will be bringing in local industry experts to provide market context. We hope to see you there.
In conclusion, we are very pleased with how our business is performing. The future looks very bright and we are committed to executing on the opportunity ahead of us. We'd now be pleased to answer any questions from the call participants. Operator, please open the line for questions.
Thank you. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. You may ask one question and a follow up, at which point you may return to the queue. We will pause for just a moment to compile the Q&A roster. The first question comes from Sam Damiani with TD Cowen. Your line is now open.
Thank you. Good morning, everyone. The first question, Alex, is just on the GROK ratio trending around 11% currently and targeting back up to that 14%- 15% historically. Is that a goal that is shared by many of your industry competitors, or is this, like, just wondering, like, you know, is that a realistic target for the industry or do you see that as a realistic target for Primaris for some unique reason?
Hi, Sam, it's Pat. I'll take that. I think tenant affordability has always been important to us, but there's certainly a case to be made that that's well within the means to have a grok level around 14%, 15%. It has been low for the past couple of years, partially coming out of the pandemic, partially because sales have really lifted off quite substantially in the last few years and rents just haven't caught up yet. It's a target we have and I know a lot of our other peers that own shopping centers are aligned and thinking the same way.
Okay, that's great, that's helpful. My follow on is just back to HBC. You gave a lot of good information in your remarks. Just wondering if you could be a little bit more specific on perhaps, you. Know some of the types of tenants. You're talking to when the earliest cash rent could commence, and are your discussions that ar going on?
Sure. I think we're talking to a variety of tenants. Most of them are national box stores. There's a couple malls where we're looking at adding CRU, and we've got some very good pre-leasing activity going on all these boxes. I think just because of the nature of the boxes, getting the permits, doing the demolition, doing the build out, especially if they're subdividing, you're really looking at about probably 18 months- 24 months before rent commences. If it's a single box taking the whole space, which we do have a couple of those that we're dealing with right now, you're looking at, say, less than 18 months.
Thank you so much for your questions. The next question comes from Lorne Kalmar with Desjardins. Your line is now open.
Thanks. Good morning. Just on the FFO guidance, I was wondering if you could give us an idea of what sort of has to happen operationally to achieve the low end versus the high end.
Oh, okay. The low end is really if shields drop off a bit and shot percent rent comes off or if we have bad debt expense. The high end is really the exact opposite. If the sales productivity keeps going and some of the acquisitions are outperforming, that can contribute to the high end. Also, if there's any further delays of the dispositions, we sort of spread it out September to December. December doesn't really move the dial. If September dispositions get delayed for some other reason, that could move us more to the high end.
Okay, perfect. Just on the Northland Village, sounds like based on the disposition guidance for the year, you're not expecting to sell that this year. Could you maybe give us a bit of an idea on timing and maybe expected yield?
Hi, Lorne. Yeah, I think we're targeting to close a transaction by the end of the year. It's a property that we expect to have a lot of interest in, given the nature of the property. It's basically a lot of new construction. It's anchored by Walmart and another grocery store with a lot of national tenants. We expect quite a bit of interest in the property and we're going to work towards completion by the end of the year.
Thank you so much for your question. The next question comes from Mark Rothschild with Canaccord Genuity. Your line is now open.
Thanks and good morning. Alex, you went over a number of variables that have driven the stronger fundamentals. I'm just curious if you see any risk to the downside, whether it's from slowing population growth or the impact of tariffs and how retailers react. Could we potentially see some softness that you don't necessarily expect over next year, or is there just enough demand coming in right now that you should be able to withstand that and continue to drive the same comparable organic growth?
Yeah, thanks, Mark. I mean, there's a lot in that question, but I would say that what's really driving our business are, generally speaking, longer term decisions from retailers. While we haven't seen any change in the tenant sales to reflect what could be a possible softening economy, we haven't seen that in our tenants' results. We also haven't seen any change in the leasing intentions from the retailers. When you think about how things are likely to evolve from our business perspective, the bigger driver is really just the shortage of retail space in Canada. It's the same thing that the other retail REITs are seeing. Retailers are, I would say, in an aggressive mode in terms of trying to secure store locations.
Embedded in the increased guidance that we provided today is, maybe not a mathematical or a quantifiable dynamic, but the pace at which discussions for HBC replacement tenancies have been moving, the volume of interest. There's a big difference between having a space and having a tenant that wants it and having a space and having five tenants that want it. It's a very constructive market right now. I can imagine that if tenants were to see an erosion in their business, they may take the foot off the gas in terms of their leasing intentions, but we're seeing none of that. If retailer operations were to moderate, it's also entirely possible that they won't take their foot off the gas on leasing intentions. Right now, we're increasing guidance because the mood of retailers is expansion and doing a lot of leasing.
I want to add, sort of building on the previous question, also, you know, downside risk versus upside risk. In our forecast guidance, I would say there's more bias to the upside than we see risk on downside.
Okay, great, that's helpful. Maybe just one quick other one on the unit buyback. To what extent have you been maximizing what you'd like to do, or have you been, whether it's just blacked out more than you'd like, held back on that? I get a part of that question is just what should we expect over the remainder of the year?
Yeah. Thanks, Mark. We have bought back stock every day that we can. We like to buy back stock. We spent $60 million in the first half of the year. We completed those buybacks at a 30% discount to NAV, which is about a 43% return on every dollar that we invest, which is pretty difficult to find elsewhere. It's something we like to do a lot of. I would say this year we have front half weighted it. In previous years, what we've sometimes found is that we've been in a position where we weren't able to actively manage the NCIB because of blackouts, whether they be reporting based or because we had transactions on the go. We did get a lot of buyback activity done in the first half of the year. We also got a lot of acquisition activity done in the first half of the year.
As we look into the back half of the year, it'll be at a slower pace for sure. What is enclosed there? The subsequent events notes show that we've been buying back units at a much lower pace since we went into blackout at the end of June. 2,500 units a day. We were at one point doing 60,000 units a day and some blocks. We've accomplished a lot of, I mean in general we've accomplished a lot of what we wanted to accomplish in 2025, you know, $1 billion dollars of acquisitions, $300 million of dispositions. Since June of last year, we bought back $60 million worth of stock. It's been an extremely active year and as we look forward, we have now these three great acquisitions that we've completed: Southgate, Oshawa, and Lime Ridge.
Each of them come with significant vacancy that will power our results over the next couple of years. We've also had HBC open up a compelling set of capital investment opportunities for us. Some of them are retenanting spaces, some of them are land that has been made available because of the elimination of the restrictions in the leases. I would say we front end loaded 2025 for sure.
Thank you so much for your question. The next question comes from Tal Woolley with CIBC Capital Markets. Your line is now open.
Hey, good morning everybody.
Morning, Tal.
Hello. Hey, if we go back, you know, 10, 15 years, you saw some retail chains experiment moving out of the malls into the off mall environment, arguably to mixed results. Given that space is very tight, you know, power centers and stuff like that. Are you seeing maybe different types of retail tenants consider looking at spaces in malls than you were before? Like, you know, you mentioned in your opening remarks a Marks, you know, any 2,000 square foot Marks that typically, you know, maybe 10, 15 years ago was probably an off mall store and now. It's in the mall. Are you seeing more of that just because the space is available?
HI, Tal. Yeah, we've definitely seen a lot of traditional power center boxes gravitating to the shopping centers. That really started back when Target went under, when they realized that there was this really good visible space available in high traffic malls that hadn't been available in the past. You really saw guys like Mark's and, you know, Best Buy, Indigo, guys that typically weren't as often going into shopping centers that they are now.
You know, likewise. Having said that, there are some tenants that have gone to power centers as well. I think there's just a general lack of space and tenants are looking to grow their footprint across the country, and there's really a shortage of space in general. The one thing that shopping centers do provide for a lot of these guys that used to go on power centers is really high profile locations. That's what Target afforded, that's what Sears afforded, and that's what HBC is going to afford. Like you said, 15 years ago, you didn't see many grocery stores in shopping centers, and now you see grocery stores being added. I mean, we're trying to add them in the Bay boxes, and we're having some dialogue about that right now.
Okay, that's great. Just on the, you updated. The guidance of the Lime Ridge acquisition. I'm just wondering, the lift in the NOI guidance, can you maybe just detail a little bit more clearly? I know there's a property tax recovery and then you've got some extra bay rent, I think is the balance just like leasing activity, percentage rent assumptions, that kind of stuff. Can you just bridge that maybe a little bit early for me?
Yeah, that would be the most part of it. Just sort of more, you know, better visibility into where we think NOI is going to go from a leasing perspective. Also, there was a delay in some of the dispositions that actually does move the dial a fair bit. It's also we're increasing our own internal growth forecasts.
Thank you so much for your question. The next question comes from Brad Sturges with Raymond James. Your line is now open.
Hey there. Just on the dispositions and specifically the pool of assets held for sale, I guess there's a few assets sold post quarter, but how should we think about the potential kind of average cap rate or NOI contribution of that pool of assets? Obviously, I think Northland could skew to the low end, but how would the rest of the pool of assets held for sale be composed in terms of potential cap rate if you were to execute a sale?
Yes, I think if you're going to try to do it on a, you know, there's $400 million in the assets held for sale. What's the average cap rate? Northland Village, I think we disclosed is about 40% of that $400 million. That would be, call it a six cap kind of range.
The Northp ointe and Medicine Hat dispositions that we've completed recently, we're at about, you know, we have some things in the assets held for sale that would be 8%- 9%, but I think on a blended basis you'd probably be somewhere in the 7%- 7.5% range for the $400 million would be a good proxy.
That's great. That's quite helpful. My other question would be just on Lime Ridge Mall, I think my understanding is you were more advanced on releasing the Sears box. Just any update there in terms of when possibly you could enter a new lease and then what that might infer in terms of occupancy and rent payments.
We're hoping to get a lease signed in the next 30 days- 45 days and have turnover to the tenant later this year.
Thank you so much for your question. The next question comes from Todd Voigt with Easterly Ranger . Your line is now open.
Hello, Alex and team, quick question on the slide deck, slides 10 and 11. On slides 10 and 11, where you talk about the potential mall acquisition pipeline and all of those dots in terms of the malls that you don't own but you're targeting, can you quantify, like, what percentage of those malls are there. Willing and active sellers, you know. Are those all pension funds? Can you just update us on current conversations and give us guidance on any of those owners of those malls that might be targets? What would be reasons that they choose not to sell?
Yeah, interesting question, Todd. Late last year we started messaging that, you know, the acquisition pipeline was quite large. Since then we've acquired $1 billion out of that pipeline. Your question is timely because as we've been moving through the year, that opportunity set has shrunken because we've taken $1 billion out of it, which is pretty substantial. There are, you know, as you noted, a lot of bubbles on that slide. It doesn't necessarily mean they're all for sale. There are still opportunities. As we've been moving through the year, we've also looked at some assets where you sort of peel the onion back and you find that it's not the exact same kind of onion that you thought it was. There are some where we would love to buy them, but the vendors may not be interested. There's some where, on closer examination, we're less inclined ourselves.
It's interesting. Taking $1 billion out of that pipeline has really helped what I would describe as sort of rebalance things. At the beginning of the year, it was sort of an overwhelming acquisition opportunity. We've had a number of things I mentioned earlier. The HBC opportunity, buying back stock. We're quite focused on some of the dispositions. With the acquisitions that we've completed, not just this year but over the last three and a half years, a lot of the portfolio construction and composition objectives that we were targeting were much, much closer to the finish line than we were even a year ago. Our average tenant sales are now $784 a square foot, which is a dramatic shift in terms of a lot of the things we talk about. We talk about the objective of becoming the first call for retailers.
We have really seen a marked shift in our dialogue with retailers as they, on a fairly regular basis, will come to us and say, like, wow, you're our largest landlord in Canada. It kind of crept up on us and these acquisitions have been helpful. Even where we have alignment, where we've got a vendor who wants to sell and we want to buy, often we don't align on valuation. I would say we're in a much more balanced position than we were certainly nine months ago or a year ago. Hopefully we'll be able to make some further acquisitions. We've accomplished quite a bit.
No doubt that the accomplishment is legitimate. I know in your press release. You highlight the three year target. Goal, more than $1 billion of acquisitions. You've done $1.3 billion. I mean, I think it's even more than that if you include the new stuff. The question is, do you have or do you expect to put out in the next six months a new acquisition target for us to think about?
Yeah, you know, we've thought about that and I think where we were a year ago, having an acquisition target reflected a lot of the objectives that we were targeting. It really was a, you know, we felt that we needed to acquire a number of these top tier malls to really achieve that first call for retailers type of objective. We declined to update that because we don't really have the same stance. I would say at this point it's much more of an opportunistic type. There are things that we would love to do but they have to work for us. We're starting to see some competition in the mall market as well. There are some other private equity buyers who are willing to pay prices that we're not willing to pay, which is both good and bad.
I think having some other buyers participate in the market that we participate in is positive. We very much look forward to having a benchmark transaction for a top tier mall. It's a challenge trying to figure out things like navigation. When we've been such a dominant buyer in the market, we're actually really thrilled to see some other people stepping in and paying prices that frankly we are not comfortable paying.
Thank you so much for your questions. As a reminder, if you would like to ask a question, please press star and then the number one on your telephone keypad. Our next question comes from Pammi Bir with RBC Capital Markets. Your line is now open.
Thanks. Good morning, Alex. I think you mentioned earlier on discussions with residential developers on some of those HBC boxes. Can you maybe just provide some more. Color there and potentially quantify that opportunity on selling some of that space, and if there's any sense of timing of when something like that could happen. Thanks.
Thanks, Pammi. It's an interesting dynamic and I think I mentioned it, but the, I guess, disclaiming of the five HBC leases that we've had have opened up fairly significant opportunities in terms of using land that was otherwise encumbered in the past. I think the way to think about it is that value has, or that opportunity set has accrued to us. We are fairly active in terms of figuring out what to do with that stuff. From a trying to get stuff done quickly to, for instance, pay for some of the construction and tenant allowance work to re-lease the bay boxes, we have lots of liquidity and we have lots of capital. As we're approaching this opportunity set in terms of the excess land and residential opportunities, it's really more about executing it right than it is about executing it quickly.
We want to have good residential developments to the extent that the residential at our shopping centers, we have discussions with developers and a lot of these developers do residential, but they also will do hotels, they can do self storage, they can do a lot of other things. We've got a team here that works a lot on what the best use for a lot of this excess land is. In fact, at our upcoming Galerie de la Capitale property tour on September 25, we'll have a local developer that we've been spending a lot of time with looking at the excess lands at Capitale. I mean, it's a 90-acre site and the mall probably requires 55 acres of that. It's a lot of excess land there and there's a lot of optionality.
I think we'll provide some good insights in September on how we think about the different uses and what to do. We have a land sale. To. A residential developer that's in process elsewhere that predates the HBC news, but it's definitely something that we're moving on. We're doing it in a manner to make sure it's the right fit for the shopping center. We don't have liquidity or capital issues to motivate the speed with which we execute.
Okay, thanks very much. Appreciate the call.
Thanks, Pammi.
Thank you so much for your question. The next question comes from Matt Kornack with National Bank Financial. Your line is now open.
Hey guys. You made a lot of progress last. Year on the recovery ratio front. It's been a little bit more stable, it looks like, for the first half. Of the year and the second half. Of last year was quite strong. Can you give us a sense as. To whether you'd expect kind of improvements. On the back half of the year. Also, just quickly on the guidance, there's same property and, sorry, straight line rent. There's a pretty big step up if you use the first half to the second half. Is that on kind of these larger. Leases that you're expecting to get done? Maybe like Lime Ridge.
Hey, Matt. On the recovery ratio, I think there's a couple different factors at play here. One is the acquisitions with their higher level of vacancy have muted the impact of the recovery ratio rising. As for why it ticks up in the second half, it's typically because when we do remerchandising and we do new store openings, to which we're doing a lot of new leasing, generally those stores open in the latter part of the year. That's when we'll start to see the recovery ratios rise, when we're starting to receive the gross rents from those new tenants. I can't recall, the second part of your question had something to do with step rent.
Yeah, straight-line rent, just the guidance is for, I think it's like almost up to $7 million. You've had, call it a little less than $3 million in the first half. I don't know if there's some leasing. That's going to be.
Yeah, no, just to Pat's point, a lot more tenants take occupancy in the second half of the year and the fit out and handing it over. You do see a pickup in straight line rent during the second half of the year. That's normal.
What we did do in the guidance was we brought down the low end of the range, which in fact suggests that more of the rent we collect is in the cash form than the non-cash form.
Okay, makes sense. Maybe just very quickly, on HBC, if you were to demise the space, should we think that you'd get kind of rents in that $50 range? If it was a single tenant, would. They be closer to kind of call it the high teens, and then maybe. If you could give a quick sense of the, if you demise, what is the cost per square foot to demise?
For CRU rents, I think you're going to see something similar to our average, and for box rents, the same kind of concept. I think you're going to see upper teens. For box rents, you're going to see $40, $50, maybe even $60. It depends on the size of the space. It really depends on exactly how we carve it up and how big the tenants are and who they are. If it's a single tenant, it's not likely to be in the upper teens. It's probably to be in the lower teens at best. It also comes back to the deal and some of these discussions we're having with large boxes. We're not putting any capital in.
The tenant's going to put it all in, which means they're going to pay a lower rent. All of this comes down to exactly who we end up transacting with and what the square footage is in terms of the cost per square foot. I think, you know, if we're looking at a 100,000 ft box and we spend $25 million, it's $400, but.
$250.
$250. Sorry.
Yeah.
Thank you so much.
I think we've also framed it as the return. From a return perspective, if we put no capital in, the returns are undefined, but, you know, we're targeting sort of in that 9% range would be a good expectation of the relationship between the cost and the NOI yield.
Thank you so much for your questions. 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 and look forward to seeing you at our property tour in September. Thank you very much and have a great long weekend.
Thank you. You may now disconnect your lines.