Mr. Rael Diamond reports

CHOICE PROPERTIES REAL ESTATE INVESTMENT TRUST REPORTS RESULTS FOR THE YEAR ENDED Dec. 31, 2023, AND ANNOUNCES DISTRIBUTION INCREASE

Choice Properties Real Estate Investment Trust today released its consolidated financial results for the year ended Dec. 31, 2023. The 2023 annual report to unitholders is available in the investors section of the trust's website and has been filed on SEDAR+.

"Our business delivered strong financial and operational performance for the quarter and year ended Dec. 31, 2023, reflecting the strength and resilience of our grocery-anchored and necessity-based retail portfolio and demand for our well-located industrial assets," said Rael Diamond, president and chief executive officer of the trust. "In 2023 our team continued to execute on our strategic priorities, further improving the quality of our portfolio by completing over $600-million of real estate transactions and by delivering over $425-million of development projects, adding 1.8 million square feet of new commercial retail and industrial space and a new purpose-built residential rental building to our portfolio. Supported by our stable and growing cash flows and solid financial position, we are pleased to announce another annual distribution increase for unitholders."

2023 fourth quarter highlights

• In the fourth quarter, the trust recorded an unfavourable non-cash fair value adjustment on exchangeable units of $502.6-million due to the increase in the trust's unit price. Unfavourable non-cash fair value adjustments on exchangeable units were the primary drivers of the net loss of $445.7-million reported for the fourth quarter of 2023 and the net loss of $579.0-million reported for the fourth quarter of 2022.
• Reported FFO (funds from operations) per unit diluted was 25.5 cents, an increase of 5.8 per cent compared with the fourth quarter of 2022.
• Period-end occupancy of 98.0 per cent.
  • Retail at 97.7 per cent, industrial at 99.0 per cent, and mixed-use and residential at 94.2 per cent.
• Same-asset NOI (net operating income) on a cash basis increased by 4.2 per cent compared with the fourth quarter of 2022.
  • Retail increased by 3.2 per cent;
  • Industrial increased by 8.5 per cent;
  • Mixed-use and residential increased by 9.3 per cent.
• Completed $238.1-million of transactions in the quarter, including:
  • The acquisition of two retail properties and one industrial property from Loblaw for an aggregate purchase price of $82.5-million;
  • The disposition of four properties previously classified as asset held for sale as at Sept. 30, 2023, including one retail property, two industrial properties and Choice's remaining non-core office property for aggregate proceeds of $92.8-million
  • The disposition of two retail properties, one parcel of land adjacent to a retail site and one industrial property for aggregate proceeds of $62.8-million.
• Transferred $354.7-million of properties under development to income producing status, with a cost of $233.8-million and an average yield of 7.9 per cent. This delivered approximately 1,434,000 square feet of new commercial GLA (gross leasable area) on a proportionate share basi, including Choice Eastway Industrial Centre located in East Gwillimbury, Ont., and Choice Industrial Centre located in Surrey, B.C., as well as Element, a purpose-built residential rental building located in Ottawa, Ont., with 126 units at the trust's share.
• Invested $92.1-million of capital in development on a proportionate share basis.
• Ended the quarter in a strong liquidity position with $1.5-billion of available credit under the trust's revolving credit facility, a $12.7-billion pool of unencumbered properties and adjusted debt to EBITDAFV (earnings before interest, taxes, depreciation, amortization and fair value) of 7.2 times (net of cash -- 7.0 times).
• Subsequent to the end of the quarter, the trust:
  • Increased distributions to 76 cents per unit per annum from the previous rate of 75 cents per unit per annum, an increase of 1.3 per cent. The increase will be effective for unitholders of record on March 31, 2024.
  • Repaid $200.0-million, 4.29 per cent Series D senior unsecured debentures upon maturity on Feb. 8, 2024.

2023 select annual highlights

• Reported net income of $796.7-million, as compared with net income of $744.3-million in 2022.
• On a full-year comparative basis, the trust:
  • Maintained stable occupancy across the portfolio, resulting in 4.6 per cent growth in same-asset NOI on a cash basis.
  • Reported FFO per unit diluted was $1.003, an increase of 4.0 per cent.
  • Reported a modest improvement in adjusted debt to EBITDAFV ending the year at 7.2 times.

Quarterly results

Choice Properties reported a net loss of $445.7-million for the fourth quarter of 2023 as compared with net loss of $579.0-million in the fourth quarter of 2022. The improvement of $133.3-million compared with the prior year was primarily due to changes in the non-cash adjustment to fair values including:

• A $356.2-million favourable change in the adjustment to fair value of the trust's exchangeable units due to the change in the trust's unit price;
• A $47.4-million favourable change in the adjustment to fair value of the trust's investment in the real estate securities of Allied Properties Exchangeable LP, a subsidiary of Allied Properties Real Estate Investment Trust, driven by the increase in Allied's unit price in the fourth quarter, compared with a decrease in the fourth quarter of 2022, partially offset by:
  • A $267.8-million unfavourable change in the adjustment to fair value of investment properties, as a result of a fair value loss recognized in the fourth quarter of 2023 compared with a fair value gain recognized in the fourth quarter of 2022.

Full year results

Choice Properties reported net income of $796.7-million for the year ended Dec. 31, 2023, as compared with $744.3-million for the year ended Dec. 31, 2022. The increase of $52.4-million compared with the prior year was mainly due to changes in the non-cash adjustment to fair values including:

• A $184.3-million favourable change in the adjustment to fair value of the trust's investment in the real estate securities of Allied, driven by the mark-to-market loss in 2023 being significantly smaller than the mark-to-market loss recorded in 2022;
• A $150.4-million favourable change in the adjustment to fair value of the trust's exchangeable units due to the change in the trust's unit price, partially offset by:
  • A $314.8-million decrease in income from equity accounted joint ventures primarily due to fair value gains recognized in the industrial development portfolio in 2022.

In addition to the changes described herein, increases in net operating income, interest income and investment income, partially offset by increases in interest expense and general and administrative expenses contributed to the increase in net income.

Quarterly and full year results

For the three months and year ended Dec. 31, 2023, same-asset NOI, cash basis, increased by $9.6-million and $41.0-million, respectively, compared with the prior year, primarily due to increased rental revenue from higher rental rates on renewals, new leasing and contractual rent steps, mainly in the retail and industrial portfolios, and higher capital and operating recoveries.

FFO increased by $10.5-million and $28.4-million for the three months and year ended Dec. 31, 2023, respectively. The increases were primarily due to an increase in net operating income, an increase in investment income due to the special distribution by Allied as a result of the sale of their urban data centre portfolio, income from the sale of residential inventory and an increase in interest income. The increases were partially offset by increases in interest expense and general and administrative expenses. The full year increase was also partially offset by the impact of the sale of six office properties to Allied in the first quarter of 2022. The net impact of the Allied transaction includes the loss of NOI, partially offset by the distribution and interest income earned from the Class B limited partnership units of Allied Properties Exchangeable LP and promissory note received from Allied in exchange for the properties sold.

Outlook

The trust is focused on capital preservation, delivering stable, and growing cash flows and net asset value appreciation, all with a long-term focus. The trust's 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 the trust's overall portfolio. Choice continues to experience positive leasing momentum across its portfolio and is well positioned to complete its 2024 lease renewals. The trust also continues to advance its development program, with a focus on commercial developments in the near term, which provides it with the best opportunity to add high-quality real estate to its portfolio at a reasonable cost and drive net asset value appreciation over time.

The trust is confident that its business model, stable tenant base, strong balance sheet and disciplined approach to financial management will continue to position it well for future success. In 2024, Choice Properties will continue to focus on its core business of essential retail and industrial, its growing residential platform and its robust development pipeline, and is targeting:

• Stable occupancy across the portfolio, resulting in 2.5-per-cent to 3.0-per-cent year-over-year growth in same-asset NOI, cash basis;
• Annual FFO per unit diluted in a range of $1.02 to $1.03, reflecting 2.0-per-cent to 3.0-per-cent year-over-year growth;
• Strong leverage metrics, targeting adjusted debt to EBITDAFV slightly below 7.5 times.

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 annual report to unitholders, which includes the audited consolidated financial statements and MD&A for the trust, and is available on the Choice website and on SEDAR+.

Conference call and webcast

Management will host a conference call on Thursday, Feb. 15, 2024, at 10 a.m. ET with a simultaneous audio webcast. To access via teleconference, please dial 1-240-789-2714 or 1-888-330-2454 and enter the event pass code: 4788974.

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 seek Safe Harbor.