Choice Properties Real Estate Investment Trust Reports Results For the Quarter Ended March 31, 2023

Toronto, Ontario April 24, 2023 - Choice Properties Real Estate Investment Trust (“Choice Properties” or the “Trust”) (TSX: CHP.UN) today announced its consolidated financial results for the three months ended March 31, 2023. The 2023 First Quarter Report to Unitholders is available in the Investors section of the Trust’s website at www.choicereit.ca, and has been filed on SEDAR at www.sedar.com.

“We delivered consistent operating and financial results in the quarter, driven by the strength of our portfolio and the quality and resiliency of our tenants. We further strengthened our market leading portfolio through capital recycling and took steps to ensure we maintained our industry leading balance sheet amidst on-going market volatility” said Rael Diamond, President and Chief Executive Officer of the Trust. “We completed $268 million of transactions and raised $737 million of financing in the quarter, including issuing $550 million of unsecured debentures with a ten-year term. As we look ahead, our business is strong and we are well positioned to execute on our strategic framework.”

2023 First Quarter Highlights

• Net income for the quarter of $270.8 million.
• FFO per unit diluted⁽¹⁾ was $0.244.
• Period end occupancy of 97.7%.
  • Retail at 97.9%, Industrial at 98.3% and Mixed-Use & Residential at 87.9%.
• Same-Asset NOI on a cash basis⁽¹⁾ increased by 4.6% from Q1 2022.
  • Retail increased by 3.4%;
  • Industrial increased by 8.8%; and
  • Mixed-Use & Residential increased by 14.3%.
• Completed $268.0 million of transactions, including $192.0 million of acquisitions and $76.0 million of dispositions. Transactions included:
  • the acquisition of three retail properties from Loblaw Companies Limited for $99.1 million;
  • the acquisition of the Trust’s partner’s remaining interest in the Horizon Business Park industrial asset in Edmonton, AB for $32.1 million. The acquired interest includes the partner’s share of a completed building and a building under development;
  • the acquisition of a retail property for $23.0 million, the property is a land assembly to the Trust’s Golden Mile development project;
  • the acquisition of a strategic retail asset in Whitby, ON for $17.9 million;
  • the disposition of two non-core retail assets for aggregate proceeds of $27.6 million; and
  • the disposition of the Trust’s 50% interest in the Calgary Place office building to its partner. In exchange, the Trust acquired its partner’s 50% interest in Altius Centre and provided a vendor take-back mortgage with a face value of $13.5 million (fair value of $11.1 million).
• Invested $41.7 million of capital in development on a proportionate share basis⁽¹⁾.
• Completed $737.3 million of debt financing in the quarter at an average rate of 5.322% and average term of 10.7 years, including:
  • $550 million aggregate principal amount of series S senior unsecured debentures bearing interest at a rate of 5.400% and a term of 10 years; and
  • $187.3 million of mortgage financings, on a proportionate share basis⁽¹⁾, with an average rate of 5.09% and an average term of 12.8 years, from various banks and life insurance companies. The terms of the mortgages ranged from 5 - 20 years, demonstrating the Trust's ability to access financing across the yield curve.
• Ended the quarter in a strong liquidity position with over $1.4 billion of available credit under the Trust’s revolving credit facility, a $12.5 billion pool of unencumbered properties and Adjusted debt to EBITDAFV⁽¹⁾ of 7.5x.
• During the quarter, the Trust increased distributions to $0.75 per unit per annum from the previous rate of $0.74 per unit per annum (an increase of 1.4% or $0.000833 monthly). The increase was effective for Unitholders of record on March 31, 2023.

(1) Refer to Non-GAAP Financial Measures and Additional Financial Information section.

Summary of GAAP Basis Financial Results

		Three Months		Nine Months
($ thousands except where otherwise indicated) (unaudited)		March 31, 2023		March 31, 2022		Change $
Net Income	$	270,804	$	386,986	$	(116,182)
Net income per unit diluted		0.374		0.535		(0.161)
Rental revenue		324,657		328,049		(3,392)
Fair value gain (loss) on Exchangeable Units(i)		94,989		(118,736)		213,725
Fair value gains (losses) excluding Exchangeable Units(ii)		61,856		301,177		(239,321)
Cash flows from operating activities		133,027		113,839		19,188
Weighted average Units outstanding - diluted(iii)		723,665,160		723,466,930		198,230

Quarterly Results

Choice Properties reported net income of $270.8 million for the first quarter of 2023 as compared to net income of $387.0 million in the first quarter of 2022. The change of $116.2 million compared to the prior year was primarily due to:

• a decrease in fair value gains on investment properties to $75.8 million from $302.2 million in the prior year;
• a decrease in income earned from equity accounted joint ventures of $91.8 million, primarily due to a decrease in the fair value gains recognized on investment properties held within equity accounted joint ventures;
• a $14.6 million fair value loss on the Trust’s investment in real estate securities of Allied Properties Real Estate Investment Trust (“Allied”), held by the Trust pursuant to its sale of six office properties to Allied in the first quarter of 2022 (the “Allied Transaction”); partially offset by
• a $213.7 million favourable change in the adjustment to the fair value of the Trust’s Exchangeable Units, due to the change in the Trust’s Unit price.

Summary of Proportionate Share(1) Financial Results

		Three Months
As at or for the period ended ($ thousands except where otherwise indicated)		March 31, 2023		March 31, 2022		Change $
Rental revenue(i)	$	346,624	$	345,108	$	1,516
Net Operating Income (“NOI”), cash basis(i)(ii)		244,052		237,277		6,775
Same-Asset NOI, cash basis(i)(ii)		234,878		224,446		10,432
Adjustment to fair value of investment properties(i)		91,831		412,680		(320,849)
Occupancy (% of GLA)		97.7 %		97.0 %		0.7 %
Funds from operations (“FFO”)(i)		176,891		175,136		1,755
FFO(i) per unit diluted		0.244		0.242		0.002
Adjusted funds from operations (“AFFO”)(i)		164,379		160,749		3,630
AFFO(i) per unit diluted		0.227		0.222		0.005
AFFO(i) payout ratio - diluted		81.8 %		83.3 %		(1.5) %
Cash distributions declared		134,478		133,836		642
Weighted average number of Units outstanding - diluted(iii)		723,665,160		723,466,930		198,230

Quarterly Results

For the three months ended March 31, 2023, Same-Asset NOI, cash basis(i) increased by $10.4 million compared to the prior year, primarily due to improved occupancy, higher rental rates on new tenancies and renewals, contractual rent steps, and higher capital recoveries.

For the three months ended March 31, 2023, Funds from Operations (“FFO”, a non-GAAP measure) was $176.9 million or $0.244 per unit diluted compared to $175.1 million or $0.242 per unit diluted for the three months ended March 31, 2022. FFO increased by $1.8 million compared to the prior year, primarily as a result of the increase in Same-Asset NOI, and an increase in interest income. The increase was partially offset by an increase in interest and general and administrative expenses and the impact of the Allied Transaction. The impact of the Allied Transaction includes the loss of NOI, partially offset by the distribution and interest income earned from the limited partnership units and promissory note received from Allied in exchange for the properties sold.

Outlook

We are focused on capital preservation, delivering stable and growing cash flows and net asset value appreciation, all with a long-term focus. Our high-quality portfolio is primarily leased to necessity-based tenants and logistics providers, who are less sensitive to economic volatility and therefore provide stability to our overall portfolio. We continue to experience positive leasing momentum across our portfolio and are well positioned to handle our 2023 lease renewal exposure. We also continue to advance our development program, with a focus on industrial opportunities, which provides us with the best opportunity to add high-quality real estate to our portfolio at a reasonable cost and drive net asset value appreciation over time.

We are confident that our business model, stable tenant base, strong balance sheet and disciplined approach to financial management will continue to position us well for future success; however, the Trust cannot predict the precise impacts of the broader economic environment on its 2023 financial results. In 2023, Choice Properties will continue to focus on its core business of essential retail and industrial, our growing residential platform and our robust development pipeline, and is targeting:

• Stable occupancy across the portfolio, resulting in 2-3% year-over-year growth in Same-Asset NOI, Cash Basis;
• Annual FFO per Unit Diluted in a range of $0.98 to $0.99, reflecting 2-3% year over year growth; and
• Stable leverage metrics, targeting Adjusted Debt to EBITDAFV of approximately 7.5x.

Non-GAAP Financial Measures and Additional Financial Information

In addition to using performance measures determined in accordance with International Financial Reporting Standards (“IFRS” or “GAAP”), Choice Properties also measures its performance using certain non-GAAP measures, and provides these measures in this news release so that investors may do the same. Such measures and related per-unit amounts are not defined by IFRS and therefore should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS. Furthermore, the supplemental measures used by management may not be comparable to similar measures presented by other real estate investment trusts or enterprises. The non-GAAP measures included in this news release are defined and reconciled to the most comparable GAAP measure below. Choice Properties believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Trust for the reasons outlined below.

Non-GAAP Measure	Description
Proportionate Share	• Represents financial information adjusted to reflect the Trust’s equity accounted joint ventures and financial real estate assets and its share of net income (losses) from equity accounted joint ventures and financial real estate assets on a proportionately consolidated basis at the Trust’s ownership percentage of the related investment. • Management views this method as relevant in demonstrating the Trust's ability to manage the underlying economics of the related investments, including the financial performance and cash flows and the extent to which the underlying assets are leveraged, which is an important component of risk management.
Net Operating Income (“NOI”), Accounting Basis	• Defined as property rental revenue including straight line rental revenue, reimbursed contract revenue and lease surrender revenue, less direct property operating expenses and realty taxes, and excludes certain expenses such as interest expense and indirect operating expenses in order to provide results that reflect a property’s operations before consideration of how it is financed or the costs of operating the entity in which it is held. • Management believes that NOI is an important measure of operating performance for the Trust’s commercial real estate assets that is used by real estate industry analysts, investors and management, while also being a key input in determining the fair value of the Choice Properties portfolio.
NOI, Cash Basis	• Defined as property rental revenue excluding straight line rental revenue, direct property operating expenses and realty taxes and excludes certain expenses such as interest expense and indirect operating expenses in order to provide results that reflect a property’s operations before consideration of how it is financed or the costs of operating the entity in which it is held. • Management believes that NOI is a useful measure in understanding period-over-period changes in income from operations due to occupancy, rental rates, operating costs and realty taxes.
Same-Asset NOI, Cash Basis and Same-Asset NOI, Accounting Basis	• Same-Asset NOI is used to evaluate the period-over-period performance of those commercial properties and stabilized residential properties, owned and operated by Choice Properties since January 1, 2022, inclusive. • NOI from properties that have been (i) purchased, (ii) disposed, (iii) subject to significant change as a result of new development, redevelopment, expansion, or demolition, or (iv) residential properties not yet stabilized (collectively, “Transactions”) are excluded from the determination of same-asset NOI. • Same-Asset NOI, Cash Basis, is useful in evaluating the realization of contractual rental rate changes embedded in lease agreements and/or the expiry of rent-free periods, while also being a useful measure in understanding period-over-period changes in NOI due to occupancy, rental rates, operating costs and realty taxes, before considering the changes in NOI that can be attributed to the Transactions and development activities.
Funds from Operations (“FFO”)	• Calculated in accordance with the Real Property Association of Canada’s (“REALpac”) Funds From Operations (FFO) & Adjusted Funds From Operations (AFFO) for IFRS issued in January 2022. • Management considers FFO to be a useful measure of operating performance as it adjusts for items included in net income (or net loss) that do not arise from operating activities or do not necessarily provide an accurate depiction of the Trust’s past or recurring performance, such as adjustments to fair value of Exchangeable Units, investment properties, investment in real estate securities, and unit-based compensation. From time to time the Trust may enter into transactions that materially impact the calculation and are eliminated from the calculation for management’s review purposes. • Management uses and believes that FFO is a useful measure of the Trust’s performance that, when compared period over period, reflects the impact on operations of trends in occupancy levels, rental rates, operating costs and realty taxes, acquisition activities and interest costs.
Adjusted Funds from Operations (“AFFO”)	• Calculated in accordance with REALpac’s Funds From Operations (FFO) & Adjusted Funds From Operations (AFFO) for IFRS issued in January 2022. • Management considers AFFO to be a useful measure of operating performance as it further adjusts FFO for capital expenditures that sustain income producing properties and eliminates the impact of straight-line rent. AFFO is impacted by the seasonality inherent in the timing of executing property capital projects. • In calculating AFFO, FFO is adjusted by excluding straight-line rent adjustments, as well as costs incurred relating to internal leasing activities and property capital projects. Working capital changes, viewed as short-term cash requirements or surpluses, are deemed financing activities pursuant to the methodology and are not considered when calculating AFFO. • Capital expenditures which are excluded and not deducted in the calculation of AFFO comprise those which generate a new investment stream, such as constructing a new retail pad during property expansion or intensification, development activities or acquisition activities. • Accordingly, AFFO differs from FFO in that AFFO excludes from its definition certain non-cash revenues and expenses recognized under GAAP, such as straight-line rent, but also includes capital and leasing costs incurred during the period which are capitalized for GAAP purposes. From time to time the Trust may enter into transactions that materially impact the calculation and are eliminated from the calculation for management’s review purposes.
AFFO Payout Ratio	• AFFO payout ratio is a supplementary measures used by Management to assess the sustainability of the Trust's distribution payments. • The ratio is calculated using cash distributions declared divided by AFFO.
Earnings before Interest, Taxes, Depreciation, Amortization and Fair Value (“EBITDAFV”)	• Defined as net income attributable to Unitholders, reversing, where applicable, income taxes, interest expense, amortization expense, depreciation expense, adjustments to fair value and other adjustments as allowed in the Trust Indentures, as supplemented. • Management believes EBITDAFV is useful in assessing the Trust’s ability to service its debt, finance capital expenditures and provide for distributions to its Unitholders.
Total Adjusted Debt	• Defined as variable rate debt (construction loans, mortgages, and credit facility) and fixed rate debt (senior unsecured debentures, construction loans and mortgages), as measured on a proportionate share basis(1), and does not include the Exchangeable Units which are included as part of Unit Equity on account of the Exchangeable Units being economically equivalent and receiving equal distributions to the Trust Units. • Total Adjusted Debt is also presented on a net basis to include the impact of other finance charges such as debt placement costs and discounts or premiums, and defeasance or other prepayments of debt.
Adjusted Debt to EBITDAFV	• Calculated as Total Adjusted Debt divided by EBITDAFV. • This ratio is used to assess the financial leverage of Choice Properties, to measure its ability to meet financial obligations and to provide a snapshot of its balance sheet strength. • Management also presents this ratio with Total Adjusted Debt calculated as net of cash and cash equivalents at the measurement date.

The following table reconciles net income as determined in accordance with GAAP to net income on a proportionate share basis for the three months ended March 31, 2023:

		Three Months
For the periods ended March 31 ($ thousands)		GAAP Basis		Consolidation and eliminations(i)		Proportionate Share Basis
Net Operating Income
Rental revenue	$	324,657	$	21,967	$	346,624
Property operating costs		(95,270)		(7,613)		(102,883)
		229,387		14,354		243,741
Other Income and Expenses
Interest income		8,975		(2,714)		6,261
Investment income		5,315		—		5,315
Fee income		1,653		—		1,653
Net interest expense and other financing charges		(139,357)		(4,880)		(144,237)
General and administrative expenses		(14,562)		—		(14,562)
Share of income from equity accounted joint ventures		22,824		(22,824)		—
Amortization of intangible assets		(250)		—		(250)
Transaction costs and other related expenses		(25)		—		(25)
Adjustment to fair value of unit-based compensation		732		—		732
Adjustment to fair value of Exchangeable Units		94,989		—		94,989
Adjustment to fair value of investment properties		75,767		16,064		91,831
Adjustment to fair value of investment in real estate securities		(14,643)		—		(14,643)
Income before Income Taxes		270,805		—		270,805
Income tax recovery (expense)		(1)		—		(1)
Net Income	$	270,804	$	—	$	270,804

The following table reconciles net income (loss) as determined in accordance with GAAP to net income on a proportionate share basis for the three months ended March 31, 2022:

		Three Months
For the periods ended March 31 ($ thousands)		GAAP Basis		Consolidation and eliminations(i)		Proportionate Share Basis
Net Operating Income
Rental revenue	$	328,049	$	17,059	$	345,108
Property operating costs		(99,551)		(6,762)		(106,313)
		228,498		10,297		238,795
Other Income and Expenses
Interest income		7,491		(3,943)		3,548
Fee income		1,091		—		1,091
Net interest expense and other financing charges		(130,803)		(2,195)		(132,998)
General and administrative expenses		(10,840)		—		(10,840)
Share of income from equity accounted joint ventures		114,596		(114,596)		—
Amortization of intangible assets		(250)		—		(250)
Adjustment to fair value of unit-based compensation		(1,066)		—		(1,066)
Adjustment to fair value of Exchangeable Units		(118,736)		—		(118,736)
Adjustment to fair value of investment properties		302,243		110,437		412,680
Income before Income Taxes		386,988		—		386,988
Income tax recovery (expense)		(2)		—		(2)
Net Income	$	386,986	$	—	$	386,986

The following table reconciles net income (loss), as determined in accordance with GAAP, to Net Operating Income, Cash Basis, for the periods ended as indicated.

		Three Months
For the periods ended March 31 ($ thousands)		2023		2022		Change $
Net Income	$	270,804	$	386,986	$	(116,182)
General and administrative expenses		14,562		10,840		3,722
Fee income		(1,653)		(1,091)		(562)
Net interest expense and other financing charges		139,357		130,803		8,554
Interest income		(8,975)		(7,491)		(1,484)
Investment income		(5,315)		—		(5,315)
Share of income from equity accounted joint ventures		(22,824)		(114,596)		91,772
Amortization of intangible assets		250		250		—
Transaction costs and other related expenses		25		5,236		(5,211)
Adjustment to fair value of unit-based compensation		(732)		1,066		(1,798)
Adjustment to fair value of Exchangeable Units		(94,989)		118,736		(213,725)
Adjustment to fair value of investment properties		(75,767)		(302,243)		226,476
Adjustment to fair value of investment in real estate securities		14,643		—		14,643
Income tax recovery (expense)		1		2		(1)
Net Operating Income, Accounting Basis - GAAP		229,387		228,498		889
Straight line rental revenue		979		(511)		1,490
Lease surrender revenue		(11)		(398)		387
Net Operating Income, Cash Basis - GAAP		230,355		227,589		2,766
Adjustments for equity accounted joint ventures and financial real estate assets		13,697		9,688		4,009
Net Operating Income, Cash Basis - Proportionate Share	$	244,052	$	237,277	$	6,775

The following table reconciles Net Operating Income, Cash Basis to Same-Asset Net Operating Income, Cash Basis, for the periods ended as indicated:

		Three Months
For the periods ended March 31 ($ thousands)		2023		2022		Change $
Net Operating Income, Cash Basis - Proportionate Share	$	244,052	$	237,277	$	6,775
Less:
Transactions NOI, Cash Basis		(9,174)		(12,831)		3,657
Same-Asset NOI, Cash Basis	$	234,878	$	224,446	$	10,432

The following table reconciles net income, as determined in accordance with GAAP, to Funds from Operations for the periods ended as indicated:

		Three Months
For the periods ended March 31 ($ thousands)		2023		2022		Change $
Net Income	$	270,804	$	386,986	$	(116,182)
Amortization of intangible assets		250		250		—
Transaction costs and other related expenses		25		5,236		(5,211)
Adjustment to fair value of unit-based compensation		(732)		1,066		(1,798)
Adjustment to fair value of Exchangeable Units		(94,989)		118,736		(213,725)
Adjustment to fair value of investment properties		(75,767)		(302,243)		226,476
Adjustment to fair value of investment property held in equity accounted joint ventures		(16,064)		(110,437)		94,373
Adjustment to fair value of investment in real estate securities		14,643		—		14,643
Interest otherwise capitalized for development in equity accounted joint ventures		2,915		240		2,675
Exchangeable Units distributions		73,551		73,221		330
Internal expenses for leasing		2,254		2,079		175
Income tax recovery (expense)		1		2		(1)
Funds from Operations	$	176,891	$	175,136	$	1,755
FFO per Unit - diluted(i)	$	0.244	$	0.242	$	0.002
Weighted average Units outstanding - diluted(ii)		723,665,160		723,466,930		198,230

The following table reconciles Funds from Operations to Adjusted Funds from Operations for the periods ended as indicated:

		Three Months
For the periods ended March 31 ($ thousands)		2023		2022		Change $
Funds from Operations	$	176,891	$	175,136	$	1,755
Internal expenses for leasing		(2,254)		(2,079)		(175)
Straight line rental revenue		979		(511)		1,490
Adjustment for proportionate share of straight line rental revenue from equity accounted joint ventures and financial real estate assets		(657)		(399)		(258)
Property capital		(1,748)		(2,364)		616
Direct leasing costs		(1,791)		(1,799)		8
Tenant improvements		(6,443)		(6,117)		(326)
Adjustment for proportionate share of operating capital expenditures from equity accounted joint ventures and financial real estate assets		(598)		(1,118)		520
Adjusted Funds from Operations	$	164,379	$	160,749	$	3,630
AFFO per unit - diluted	$	0.227	$	0.222	$	0.005
AFFO payout ratio - diluted(i)		81.8 %		83.3 %		(1.5) %
Distribution declared per Unit	$	0.186	$	0.185	$	0.001
Weighted average Units outstanding - diluted(ii)		723,665,160		723,466,930		198,230

Management’s Discussion and Analysis and Consolidated Financial Statements and Notes

Information appearing in this news release is a select summary of results. This news release should be read in conjunction with the Choice Properties 2023 First Quarter Report to Unitholders, which includes the condensed consolidated financial statements and MD&A for the Trust, and is available at www.choicereit.ca and on SEDAR at www.sedar.com.

Conference Call and Webcast

Management will host a conference call on Tuesday, April 25, 2023 at 9:00 AM (ET) with a simultaneous audio webcast. To access via teleconference, please dial (240) 789-2714 or (888) 330-2454 and enter the event passcode: 4788974. The link to the audio webcast will be available on www.choicereit.ca/events-webcasts.

Annual Meeting of Unitholders

Choice Properties’ Annual Meeting of Unitholders will be held on Tuesday, April 25, 2023 at 11:00 a.m. (Eastern Daylight Time) in a virtual meeting format via live webcast. Unitholders can attend the meeting by joining the live webcast online at https://web.lumiagm.com/296773916. Refer to “How do I attend and participate in the virtual Meeting?” in the Management Proxy Circular which can be viewed online at www.choicereit.ca or under Choice Properties’ SEDAR profile at www.sedar.com, for detailed instructions on how to attend and vote at the meeting. The webcast of the meeting will be archived on our website following the meeting. Please refer to the events & webcasts page at www.choicereit.ca for additional details on the virtual meeting.

About Choice Properties Real Estate Investment Trust

Choice Properties is a leading Real Estate Investment Trust that creates enduring value through the ownership, operation and development of high-quality commercial and residential properties.

We believe that value comes from creating spaces that improve how our tenants and communities come together to live, work, and connect. We strive to understand the needs of our tenants and manage our properties to the highest standard. We aspire to develop healthy, resilient communities through our dedication to social, economic, and environmental sustainability. In everything we do, we are guided by a shared set of values grounded in Care, Ownership, Respect and Excellence. For more information, visit Choice Properties’ website at www.choicereit.ca and Choice Properties’ issuer profile at www.sedar.com.

Cautionary Statements Regarding Forward-looking Statements

This news release contains forward-looking statements relating to Choice Properties’ operations and the environment in which the Trust operates, which are based on management’s expectations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. Therefore, actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. Management undertakes no obligation to publicly update any such statement, to reflect new information or the occurrence of future events or circumstances, except as required by law.

Numerous risks and uncertainties could cause the Trust’s actual results to differ materially from those expressed, implied or projected in the forward-looking statements, including those described in Section 12, “Enterprise Risks and Risk Management” of the Trust’s MD&A for the year ended December 31, 2022 and those described in the Trust’s Annual Information Form for the year ended December 31, 2022.

Contact

For further information, please contact investor@choicereit.ca

Mario Barrafato
Chief Financial Officer
t: (416) 628-7872 e: Mario.Barrafato@choicereit.ca