RE:RE:RE:Primaris Announces Anticipated Insider PurchasesFROM TD: Event We are initiating coverage of Primaris REIT with a BUY recommendation (MEDIUM risk) and $17.50 target price. For a more detailed overview, please see our full report, being published later today. TD Investment Conclusion Excessively Cheap Valuation. Primaris' return to the public markets yesterday after a nine-year absence saw heavily discounted trading, in our view, with the unit price closing at a 57% P/NAV (IFRS) and 63% P/NAV (TD). These are in sharp contrast to the averages of 93% for Canadian retail REITs and 94% for U.S. peers. The current unit price also implies a portfolio valuation that, in our view, is excessively cheap at ~$189/sf and a cap rate of 8.5% (higher than the current 7.6% implied cap rate for Morguard REIT, which has ~33% concentration in Canadian enclosed malls). Omicron Appears Overly Discounted. The timing of Primaris' creation was not ideal, with the Omicron variant surging and added government restrictions put in place, but we believe the current valuation overly discounts this near-term uncertainty. Rebounding Tenant Demand. Despite the loss of two major anchor tenants (Target and Sears), followed by rising e-commerce and the pandemic in recent years, we now see signs of improving sentiment emerging for enclosed shopping centres. In 2021, net retail store openings in the U.S. turned positive for the first time in several years, as new openings rose 50% y/y and closures fell 40% y/y (both November YTD). We see this as a leading indicator for Canada, at least in part. Currently, there are several midsize-box retail chains expanding Canada- wide, and the elevated closures and bankruptcies in recent years, in our view, brought forward 2-3 years' worth of tenant turnover. As a result, we believe the tenant base for malls today is the healthiest seen in many years. Strong Operating Platform. Primaris' fully internalized operating platform has performed well versus peers, with occupancy rebounds averaging 600bps following the departures of Target and Sears, and committed occupancy already +160bps during the pandemic. Primaris is the third-largest owner/manager of malls in Canada by GLA, and has 25% market share of malls with tenant sales between $400/sf and $700/sf. (Based on price of 12.56, adjust accordingly) - TD has a conservative NAVPU of $20. - Estimate of P/FFO = 9x - Estimate of P/AFFO = 10.9x - Payout ratio to be 70% in 2022, 67% in 2023 - 6.4% Yield Here is a key point in regards to property types: "Nearly all the asset value is represented by 23 large regional shopping centres all but one of which are enclosed. " This makes Primaris much different than a Riocan or even Smartcenters which are predominantly street access locations. This is the main reason for the discount IMO. (Most likely locations to be locked down in restrictions). Initial NAV/unit Estimate Set at $20.00 (9% below $22.00 IFRS FV/unit) We approached our initial NAV/unit analysis with some caution, given the lack of history as a standalone REIT. In supporting our 6.35% average cap rate, we believe ~50% of total portfolio value resides in just six higher-quality malls (35% of GLA; detailed in our Full Report) that would attract sub-6% cap rates. Cap Rate $/unit $/sf 5.9% $22.00 $269 IFRS FV 6.1% $21.00 $261 6.4% $20.00 $252 TD NAV 6.6% $19.00 $244 6.8% $18.00 $235 7.1% $17.00 $227 7.3% $16.00 $218 7.6% $15.00 $210 8.0% $14.00 $201 8.3% $13.00 $193 8.5% $12.56 $189 (These last 3 numbers account for PMZ's initial trading range) Hope this helps with Cap Rate Mat.