Primaris Real Estate Investment Trust (PMZ-UN.TO), mcap=C$1.4bn, price C$13.62 vs C$14.73

Pitch: Classic “bad co” in a good co/bad co split. H&R REIT wanted to retain its higher quality real estate assets while spinning off its enclosed secondary/tertiary mall portfolio. Trades below peers at 7.7% cap rate. Minimal leverage with C$1.2bn of unencumbered assets and only 30% debt to value. Meaningful residential development potential is not yet reflected in NAV. Insiders are buying. Due to different mall market nuances in Canada, unlikely to become the CBL of the North.

Valuation: PMZ trades at fwd cap rate of 7.7% (below peers). A more reasonable cap rate of 6.5% (still a discount to peers) would imply C$19/share price. Additional upside from development assets.

Exp. gain: +35% to C$20/share

Full PMZ-UN.TO write-up (free guest account required):

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