Toronto, Ontario February 16, 2022 - Choice Properties Real Estate Investment Trust (“Choice Properties” or the “Trust”) (TSX: CHP.UN) today announced its consolidated financial results for the three months and year ended December 31, 2021. The 2021 Annual 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 are pleased with our financial and operational results for both the quarter and the year ended December 31, 2021, as our portfolio of high-quality real estate assets continued to drive solid earnings. In addition to posting strong results, we completed over $275 million of real estate transactions and completed $115 million of new developments for the quarter, demonstrating our commitment to improving our portfolio and driving net asset value growth” said Rael Diamond, President and Chief Executive Officer of the Trust. “We also advanced our sustainability initiatives in the quarter by issuing our inaugural green bond for $350 million and by committing to set enhanced science-based emissions reduction targets. We are proud of these advancements, which are aligned with our goal of creating enduring value.”
Summary of GAAP Basis Financial Results
($ thousands except where otherwise indicated)
(unaudited)Three Months Year Ended December 31, 2021 December 31, 2020 Change December 31, 2021 December 31, 2020 Change Net income (loss) $ (163,087) $ 116,570 $ (279,657) $ 23,008 $ 450,685 $ (427,677) Net income (loss) per unit diluted (0.225) 0.162 (0.387) 0.032 0.637 (0.605) Rental revenue 325,763 321,862 3,901 1,292,321 1,270,614 21,707 Fair value gain (loss) on Exchangeable Unitsi) (372,039) (86,370) (285,669) (862,815) 354,286 (1,217,101) Fair value gains (losses) excluding Exchangeable Unitsii) 96,941 104,948 (8,007) 457,237 (217,808) 675,045 Cash flows from operating activities 244,202 255,960 (11,758) 669,428 621,184 48,244 Weighted average Units outstanding - dilutediii) 723,363,313 718,026,576 5,336,737 723,127,566 707,764,714 15,362,852
(ii) Fair value gains (losses) excluding Exchangeable Units includes adjustments to fair value of investment properties and unit-based compensation.
(iii) Includes Trust Units and Exchangeable Units.
Quarterly Results
Choice Properties recorded a net loss of $163.1 million for the fourth quarter of 2021 as compared to $116.6 million in net income in the fourth quarter of 2020. The quarterly decrease compared to the prior year was mainly due to a $285.7 million unfavourable change in the adjustment to the fair value of the Trust’s Exchangeable Units due to an increase in the Trust’s Unit price.
For the three months ended December 31, 2021, bad debt expense was $0.8 million on a GAAP basis ($0.7 million on a proportionate share basis) compared to $2.7 million on a GAAP basis ($3.5 million on a proportionate share basis) for the three months ended December 31, 2020.
Year-to-Date Results
Choice Properties reported net income for the year ended December 31, 2021 of $23.0 million compared to $450.7 million for the year ended December 31, 2020. The decrease compared to the prior year was mainly due to a $1,217.1 million unfavourable change in the adjustment to the fair value of the Trust’s Exchangeable Units due to an appreciation in the Trust’s Unit price, partially offset by a $678.8 million favourable change in the fair value of investment properties, a favourable change in the share of income from equity accounted joint ventures of $72.5 million, an increase in rental revenue of $21.7 million mainly due to the net contribution from acquisitions and development transfers completed in the past 18 months, a decline in expected credit loss on mortgage receivables of $9.3 million and lower interest expense of $6.2 million.
For the year ended December 31, 2021, the year-to-date bad debt expense was $4.4 million on a GAAP basis ($5.4 million on a proportionate share basis (1)) compared to $21.7 million on a GAAP basis ($23.7 million on a proportionate share basis(1)) for the year ended December 31, 2020.
The results for the year ended December 31, 2020 were impacted by a non-recurring $7.8 million allowance for expected credit losses on a specific mortgage receivable and $6.8 million in early redemption premiums paid in June 2020 for two senior unsecured debentures that would have matured in 2021.
Summary of Proportionate Share(1) Financial Results
As at or for the period ended
($ thousands except where otherwise indicated)Three Months Year Ended December 31, 2021 December 31, 2020 Change December 31, 2021 December 31, 2020 Change Rental revenuei) $ 341,907 $ 337,907 $ 4,000 $ 1,353,657 $ 1,332,657 $ 21,000 Net Operating Income (“NOI”), cash basisi)ii) 238,674 230,353 8,321 937,499 908,081 29,418 Same-Asset NOI, cash basisi)ii) 216,188 210,755 5,433 853,110 832,119 20,991 Adjustment to fair value of investment propertiesi) 109,227 103.931 5,296 502,295 (256,837) 759,132 Occupancy (% of GLA) 97.1% 97.1% —% 97.1% 97.1% —% Funds from operations (“FFO”)i) 174,797 171,519 3,278 689,898 652,007 37,891 FFO(i) per unit diluted 0.242 0.239 0.003 0.954 0.921 0.033 Adjusted funds from operations (“AFFO”)i) 118,924 136,054 (17,130) 586,506 566,469 20,037 AFFOi) per unit diluted 0.164 0.189 (0.025) 0.811 0.800 0.011 AFFOi) payout ratio - diluted 112.5% 97.7% 14.8% 91.2% 92.6% (1.4)% Cash distributions declared 133,820 162,411 (28,591) 535,104 554,157 (19,053) Weighted average number of Units outstanding - dilutediii) 723,363,313 718,026,576 5,336,737 723,127,566 707,764,714 15,362,852
(ii) Includes a provision for bad debts and rent abatements.
(iii) Includes Trust Units and Exchangeable Units.
Quarterly and Year-to-Date Results
For the three months ended December 31, 2021, Funds from Operations (“FFO”, a non-GAAP measure) was $174.8 million or $0.242 per unit diluted compared to $171.5 million or $0.239 per unit diluted for the three months ended December 31, 2020. For the year ended December 31, 2021, FFO was $689.9 million or $0.954 per unit diluted compared to $652.0 million or $0.921 per unit diluted for the year ended December 31, 2020.
FFO increased by $3.3 million compared to the prior year primarily due to higher net operating income from higher revenues, a $2.7 million decline in bad debt expense, and a reversal of an expected credit loss on a specific mortgage receivable, partially offset by a decline in straight line rental revenue and an increase in general and administrative expenses.
On a year-to-date basis, FFO increased by $37.9 million mainly due to a $18.2 million decrease in bad debt expense, savings from lower borrowing costs and contributions from development transfers and transaction activity. The prior year results were impacted by a non-recurring $7.8 million allowance for expected credit losses on a specific mortgage receivable and $6.8 million in early redemption premiums paid in June 2020 for two senior unsecured debentures that would have matured in 2021.
On a per unit basis, the Trust had a higher weighted average number of units outstanding as at December 31, 2021 as a result of the Trust units issued as consideration for the acquisition of two assets from Wittington Properties Limited in July 2020 and the Exchangeable Units issued as consideration for the acquisition of six assets in December 2020 from Weston Foods (Canada) Inc. (“Weston Foods”), a wholly-owned subsidiary of George Weston Limited (“GWL”). Weston Foods amalgamated with GWL in July 2021, and the Exchangeable Units held by Weston Foods were transferred to GWL.
Quarterly Financing and Transaction Activity
On November 30, 2021, the Trust completed the issuance of $350 million aggregate principal amount of Series Q senior unsecured debentures (the “Series Q Debentures”) bearing interest at 2.46% per annum and maturing on November 30, 2026. The Series Q Debentures represented the Trust’s inaugural green bond offering pursuant to its Green Financing Framework released on November 15, 2021. The Trust intends to allocate the net proceeds of the offering to fund the financing and/or refinancing of eligible green projects as described in the Green Financing Framework. Prior to the allocation of the net proceeds of the offering to eligible green projects, the Trust used the net proceeds to repay existing indebtedness, including (i) the early redemption of the Trust’s $300 million principal amount of 3.01% Series I senior unsecured debentures on December 10, 2021, and (ii) to repay a portion of the balance drawn on the Trust’s credit facility.
The Trust completed $138.2 million of mortgage financings at a weighted average rate of 3.5% and discharged $57.1 million of mortgages at a weighted average rate of 3.8%.
Since the end of the prior quarter, the Trust completed $228.4 million of dispositions and $46.4 million of acquisitions on a proportionate share basis(1). Notable transactions include:
• the disposal of $228.4 million of non-core retail, industrial, and excess land assets;
• the acquisition of strategic retail assets, tenanted by Shoppers Drug Mart and Loblaw for $38.5 million; and
• the acquisition of a land assembly parcel for a GTA industrial development for $7.9 million
The Trust invested in its development program, with $41.1 million of spending during the quarter on a proportionate share basis(1). During the quarter, the Trust transferred a new 3,500 square foot retail site, and 229 residential units from properties under development to income producing properties, at a value of $114.8 million on a proportionate share basis(1).
Outlook
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. Our goal is to provide net asset value appreciation, stable net operating income growth and capital preservation, all with a long-term focus. Although there remains uncertainty about the longer-term impacts of the COVID-19 pandemic, Choice Properties is confident that its business model, stable tenant base, and disciplined approach to financial management will continue to position it well.
Our diversified portfolio of retail, industrial, residential and office properties is 97.1% occupied and leased to high-quality tenants across Canada. Our portfolio is primarily leased to necessity-based tenants and logistics providers, who continue to perform well in this environment and provide stability to our overall portfolio. This stability is evident in our financial results and by our collections, which were approximately 99% of contractual rents for the year. Despite the unpredictable re-opening of the economy, we are encouraged by high vaccination rates and anticipate further reopening measures. This optimism is reflected in our tenant base as we are seeing positive leasing momentum across our portfolio.
We continue to advance our development program, 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 have a mix of active development projects ranging in size, scale and complexity, including retail intensification projects, industrial development, and rental residential projects located in urban markets with a focus on transit accessibility. We recently completed two residential projects in downtown Toronto, Ontario and we are progressing on the construction of two additional high-rise residential projects, one of which is in Brampton, Ontario located next to the Mount Pleasant GO Station and the other is in the Westboro neighbourhood in Ottawa, Ontario. We are also finding ways to grow our industrial platform through development. We have two active industrial projects, which we expect will deliver 0.6M square feet of new generation logistics space. This includes a modern logistics facility located in a prime industrial node in Surrey, British Columbia comprising 0.4M square feet.
Beyond our active projects, we have a substantial pipeline of larger, more complex mixed-use developments and land held for future industrial development, which collectively are expected to drive meaningful net asset value growth in the future. We continue to advance the rezoning process for several mixed-use sites with 11 projects representing over 10.5M square feet now in different stages of the rezoning and planning process. We also acquired 300 acres of future industrial land in the GTA that will be developed into a multi-phase industrial park, providing a pipeline of opportunity to grow our industrial portfolio.
Underpinning all aspects of our business model is a strong balance sheet and a disciplined approach to financial management. We take a conservative approach to leverage and financing risk by maintaining strong leverage ratios and a staggered debt maturity profile. We have approximately $691 million of debt obligations coming due in 2022 which we intend to refinance with longer term debt, primarily unsecured debentures. From a liquidity perspective, the Trust has approximately $1.6 billion of available liquidity, comprised of $1.5 billion from the unused portion of the Trust’s revolving credit facility and $124.3 million in cash and cash equivalents, in addition to approximately $12.8 billion in unencumbered assets.
Update on Rent Collection
Rent collection for the fourth quarter remained high, reflecting the stability of the Trust’s necessity-based portfolio. For the three months ended December 31, 2021, the Trust collected or expects to collect approximately 99% of contractual rents.
In determining the expected credit losses on rent receivables, the Trust takes into account the payment history and future expectations of likely default events (i.e. asking for rental concessions, applications for rental relief through government programs, or stating they will not be making rental payments on the due date) based on actual or expected insolvency filings or company voluntary arrangements and likely deferrals of payments due, and potential abatements to be granted by the landlord. These assessments are made on a tenant-by-tenant basis.
The Trust’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the assessments. As a result, the value of the expected credit loss is subject to a degree of uncertainty and is made on the basis of assumptions which may not prove to be accurate given the uncertainty caused by COVID-19. Based on its review, the Trust recorded bad debt expense of $5.4 million in property operating costs, on a proportionate share basis(1), during the year ended December 31, 2021, with a corresponding amount recorded as an expected credit loss against its rent receivables.
(on a Proportionate Share basis1)) ($ thousands) Year ended December 31, 2021 As a % Total recurring tenant billings $ 1,483,090 100.0 % Less: Amounts received and deferrals repaid to date (1,468,978) 99.0 % Balance outstanding 14,112 1.0 % Total rents expected to be collected pursuant to deferral arrangements (2,780) (0.2) % Total rents to be collected excluding collectible deferrals 11,332 0.8 % Less: Provision recorded related to recurring tenant billings (5,448) (0.4) % Balance expected to be recovered in time $ 5,884 0.4 %
The Trust’s provision for recurring tenant billings for the year ended December 31, 2021, is comprised of the following:
(on a Proportionate Share basis1)) ($ thousands) Year ended December 31, 2021 Provisions for tenants with negotiated rent abatements $ (2,128) Provisions for additional expected credit losses (3,320) Total provision recorded related to recurring tenant billings $ (5,448)
Due to continued uncertainty surrounding the pandemic, it is not possible to reliably estimate the length and severity of COVID-19 related impacts on the financial results and operations of the Trust and its tenants, as well as on consumer behaviours and the economy in general. For more information on the risks presented to the Trust by the COVID-19 pandemic, please see Section 12, “Enterprise Risks and Risk Management” of the Trust’s MD&A for the year ended December 31, 2021 and its Annual Information Form for the year ended December 31, 2021.
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 properties owned and operated by Choice Properties since January 1, 2020, inclusive.
• NOI from properties that have been (i) purchased, (ii) disposed, or (iii) subject to significant change as a result of new development, redevelopment, expansion, or demolition (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”) White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS issued in February 2019.
• 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 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 White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS issued in February 2019.
• 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.
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 and year ended December 31, 2021.
For the periods ended December 31 ($ thousands) Three Months Year Ended GAAP Basis Consolidation
and eliminations(i)Proportionate Share Basis GAAP Basis Consolidation
and eliminations(i)Proportionate Share Basis Net Operating Income Rental revenue $ 325,763 $ 16,144 $ 341,907 $ 1,292,321 $ 61,336 $ 1,353,657 Property operating costs (95,691) (4,571) (100,262) (380,306) (21,385) (401,691) 230,072 11,573 241,645 912,015 39,951 951,966 Other Income and Expenses Interest income 7,312 (3,779) 3,533 20,079 (8,040) 12,039 Fee income 946 — 946 3,801 — 3,801 Net interest expense and other financing charges (134,320) (2,408) (136,728) (534,525) (8,437) (542,962) General and administrative expenses (11,799) — (11,799) (40,917) — (40,917) Reversal of (allowance for) expected credit loss on mortgage receivable 1,026 — 1,026 1,502 — 1,502 Share of income (loss) from equity accounted joint ventures 18,338 (18,338) — 66,952 (66,952) — Amortization of intangible assets (250) — (250) (1,000) — (1,000) Foreign exchange gain reclassified from other comprehensive income — — — — — — Acquisition transaction costs and other related expenses — — — — — — Other fair value gains (losses), net 666 — 666 (1,580) — (1,580) Adjustment to fair value of Exchangeable Units (372,039) — (372,039) (862,815) — (862,815) Adjustment to fair value of investment properties 96,275 12,952 109,227 458,817 43,478 502,295 Income (Loss) before income taxes (163,773) — (163,773) 22,329 — 22,329 Income tax recovery 686 — 686 679 — 679 Net Income (Loss) $ (163,087) $ — $ (163,087) $ 23,008 $— $ 23,008
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 and year ended December 31, 2020:
For the periods ended December 31 ($ thousands) Three Months Year Ended GAAP Basis Consolidation
and eliminations(i)Proportionate Share Basis GAAP Basis Consolidation
and eliminations(i)Proportionate Share Basis Net Operating Income Rental revenue $ 321,862 $ 16,045 $ 337,907 $ 1,270,614 $ 62,043 $ 1,332,657 Property operating costs (96,460) (5,697) (102,157) (384,016) (22,127) (406,143) 225,402 10,348 235,750 886,598 39,916 926,514 Other Income and Expenses Interest income 2,770 323 3,093 13,639 (586) 13,053 Fee income 1,136 — 1,136 4,416 — 4,416 Net interest expense and other financing charges (133,121) (1,965) (135,086) (540,720) (8,081) (548,801) General and administrative expenses (8,778) — (8,778) (36,718) — (36,718) Reversal of (allowance for) expected credit loss on mortgage receivable — — — (7,830) — (7,830) Share of income (loss) from equity accounted joint ventures 9,036 (9,036) — (5,570) 5,570 — Amortization of intangible assets (250) — (250) (1,000) — (1,000) Foreign exchange gain reclassified from other comprehensive income — — — 1,184 — 1,184 Acquisition transaction costs and other related expenses — — — (1,589) — (1,589) Other fair value gains (losses), net 1,347 — 1,347 2,210 — 2,210 Adjustment to fair value of Exchangeable Units (86,370) — (86,370) 354,286 — 354,286 Adjustment to fair value of investment properties 103,601 330 103,931 (220,018) (36,819) (256,837) Income (Loss) before income taxes 114,773 — 114,773 448,888 — 448,888 Income tax recovery 1,797 — 1,797 1,797 — 1,797 Net Income (Loss) $ 116,570 $ — $ 116,570 $ 450,685 $ — $ 450,685
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.
For the periods ended December 31
($ thousands)Three Months Year Ended 2021 2020 Change 2021 2020 Change Net income (loss) $ (163,087) $ 116,570 $ (279,657) $ 23,008 $ 450,685 $ (427,677) Reversal of (allowance for)
expected credit loss on
mortgage receivable(1,026) — (1,026) (1,502) 7,830 (9,332) General and administrative
expenses11,799 8,778 3,021 40,917 36,718 4,199 Net interest expense and other
financing charges134,320 133,121 1,199 534,525 540,720 (6,195) Interest income (7,312) (2,770) (4,542) (20,079) (13,639) (6,440) Share of income (loss) from
equity accounted joint
ventures(18,338) (9,036) (9,302) (66,952) 5,570 (72,522) Foreign exchange gain
reclassified from other
comprehensive income— — — — (1,184) 1,184 Acquisition transaction costs
and other related expenses— — — — 1,589 (1,589) Other fair value gains (losses),
net(666) (1,347) 681 1,580 (2,210) 3,790 Adjustment to fair value of
Exchangeable Units372,039 86,370 285,669 862,815 (354,286) 1,217,101 Adjustment to fair value of
investment properties(96,275) (103,601) 7,326 (458,817) 220,018 (678,835) Income tax recovery (686) (1,797) 1,111 (679) (1,797) 1,118 Net Operating Income,
Accounting Basis - GAAP230,072 225,402 4,670 912,015 886,598 25,417 Straight line rental revenue (339) (3,217) 2,878 (7,893) (13,946) 6,053 Lease surrender revenue (1,840) (929) (911) (4,363) (1,958) (2,405) Net Operating Income, Cash
Basis - GAAP227,893 221,256 6,637 899,759 870,694 29,065 Adjustments for equity
accounted joint ventures and
financial real estate assets10,781 9,097 1,684 37,740 37,387 353 Net Operating Income, Cash
Basis - Proportionate
Share$ 238,674 $ 230,353 $ 8,321 $ 937,499 $ 908,081 $ 29,418
The following table reconciles Net Operating Income, Cash Basis to Same-Asset Net Operating Income, Cash Basis, for the periods ended as indicated.
For the periods ended December 31
($ thousands)Three Months Year Ended 2021 2020 Change 2021 2020 Change Net Operating Income, Cash Basis - Proportionate Share $ 238,674 $ 230,353 $ 8,321 $ 937,499 $ 908,081 $ 29,418 Transactions NOI, Cash Basis 22,486 19,598 2,888 84,389 75,962 8,427 Same-Asset NOI, Cash Basis $ 216,188 $ 210,755 $ 5,433 $ 853,110 $ 832,119 $ 20,991
The following table reconciles net income, as determined in accordance with GAAP, to Funds from Operations for the periods ended as indicated.
For the periods ended December 31
($ thousands)Three Months Year Ended 2021 2020 Change 2021 2020 Change Net income (loss) $ (163,087) $ 116,570 $ (279,657) $ 23,008 $ 450,685 $ (427,677) Amortization of intangible assets 250 250 — 1,000 1,000 — Foreign exchange gain reclassified from other
comprehensive income— — — — (1,184) 1,184 Acquisition transaction costs and other related
expenses— — — — 1,589 (1,589) Other fair value gains (losses), net (666) (1,347) 681 1,580 (2,210) 3,790 Adjustment to fair value of Exchangeable Units 372,039 86,370 285,669 862,815 (354,286) 1,217,101 Adjustment to fair value of investment properties (96,275) (103,601) 7,326 (458,817) 220,018 (678,835) Adjustment to fair value of investment property held
in equity accounted joint ventures(12,952) (330) (12,622) (43,478) 36,819 (80,297) Interest otherwise capitalized for development in
equity accounted joint ventures393 1,005 (612) 3,173 5,112 (1,939) Exchangeable Units distributions 73,221 72,502 719 292,884 288,932 3,952 Internal expenses for leasing 2,560 663 663 8,412 7,329 1,083 Income tax recovery (686) (1,797) 1,111 (679) (1,797) 1,118 Funds from Operations $ 174,797 $ 171,519 $ 3,278 $ 689,898 $ 652,007 $ 37,891 FFO per Unit - diluted(i) $ 0.242 $ 0.239 $ 0.003 $ 0.712 $ 0.921 $ 0.033 Weighted average Units outstanding - diluted(ii) 723,363,313 718,026,576 5,336,737 723,127,566 707,764,714 15,362,852
(ii) Includes Trust Units and Exchangeable Units.
The following table reconciles Funds from Operations to Adjusted Funds from Operations for the periods ended as indicated.
For the periods ended December 31
($ thousands)Three Months Year Ended 2021 2020 Change 2021 2020 Change Funds from Operations $ 174,797 $ 171,519 $ 3,278 $ 689,898 $ 652,007 $ 37,891 Internal expenses for leasing (2,560) (1,897) (663) (8,412) (7,329) (1,083) Straight line rental revenue (339) (3,217) 2,878 (7,893) (13,946) 6,053 Adjustment for proportionate share of straight line
rental revenue from equity accounted joint
ventures and financial real estate assets(792) (889) (2,878) (2,211) (2,167) (6,053) Property capital (41,073) (22,592) (18,481) (60,012) (33,112) (26,900) Direct leasing costs (2,258) (1,051) (1,207) (6,426) (6,519) 93 Tenant improvements (8,265) (4,711) (3,554) (16,379) (19,269) 2,890 Adjustment for proportionate share of operating
capital expenditures from equity accounted joint
ventures and financial real estate assets(586) (1,108) (51,596 (2,059) (3,196) 51,746 Adjusted Funds from Operations $ 118,924 $ 136,054 $ (17,130) $ 586,506 $ 566,469 $ 20,037 AFFO per unit - diluted $ 0.164 $ 0.189 $ (0.025) $ 0.811 $ 0.800 $ 0.011 AFFO payout ratio - diluted(i) 112.5 % 97.7 % 14.8 % 91.2 % 92.6 % (1.4) % Distribution declared per Unit $ 0.185 $ 0.185 $ — $ 0.740 $ 0.740 $ — Weighted average Units outstanding - diluted(ii) 723,363,313 718,026,576 5,336,737 723,127,566 707,764,714 15,362,852
(ii) Includes Trust Units and Exchangeable Units.
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 2021 Annual Report to Unitholders, which includes the 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 Thursday, February 17, 2022 at 10:00AM (ET) with a simultaneous audio webcast. To access via teleconference, please dial (236) 389-2653 or (833) 921-1643 and enter the event passcode: 2690932. The link to the audio webcast will be available on www.choicereit.ca/events-webcasts.
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, 2021, which includes detailed risks and disclosure regarding COVID-19 and its impact on the Trust, and those described in the Trust’s Annual Information Form for the year ended December 31, 2021.
Contact
For further information, please contact investor@choicereit.ca
Mario Barrafato
Chief Financial Officer
t: (416) 628-7872 e: Mario.Barrafato@choicereit.ca
(1) Refer to Non-GAAP Financial Measures and Additional Financial Information section.