Primaris REIT (TSX:PMZ.UN) Valuation in Focus After New Equity Raise and Debt Financing

Primaris Real Estate Investment Trust (TSX:PMZ.UN) just wrapped up a CAD 147.5 million follow-on equity offering by issuing 10 million units at CAD 14.75 each. This move expands its capital base and could potentially impact existing shareholders.

See our latest analysis for Primaris Real Estate Investment Trust.

The successful equity raise follows closely after a new $250 million debt financing and a fresh monthly distribution, making it a notably active period for Primaris. Despite these moves, its 1-year total shareholder return stands at a modest 1.2%, while the 3-year figure sits at an impressive 34.3%. This signals that longer-term investors have seen meaningful gains even as short-term price momentum has recently faded.

If this flurry of capital moves has you wondering what else is happening in the market, it could be a great moment to broaden your horizons by exploring fast growing stocks with high insider ownership.

With Primaris shares currently trading below analyst targets and recent capital activity stirring debate, investors are left to consider: is there real upside ahead, or has the market already priced in the company’s future growth potential?

Preferred Funding Profile: Is It Justified?

According to company disclosures, Primaris Real Estate Investment Trust is not a bank and relies entirely on external borrowing for its funding. This is considered a higher risk compared to funding via customer deposits. This all-in approach to external financing is a notable characteristic for shareholders evaluating the business’s capital structure.

The “preferred multiple” in this context refers to the company’s funding risk profile, rather than a traditional price-based metric such as price-to-earnings or price-to-sales. For REITs, understanding the risk profile and sources of capital is essential because the cost and availability of external borrowing can significantly affect returns and resilience during periods of market stress.

A funding base comprised solely of external debt may expose Primaris to greater refinancing and interest rate risk, compared to peers with diversified capital sources. However, this approach can also give management flexibility to pursue growth opportunities as long as the cost of capital remains manageable.

Compared to industry peers, most REITs maintain a mix of funding sources to balance risk and access to capital. Primaris’ pure exposure to external borrowing stands out, and the market may demand a risk premium unless the company can consistently demonstrate prudent risk management and stable cash flows.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Preferred funding profile is higher risk compared to sector norms (ABOUT RIGHT)

However, persistent negative price momentum and reliance on external borrowing could challenge upside potential if market sentiment or rates shift unfavorably.

Find out about the key risks to this Primaris Real Estate Investment Trust narrative.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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