Choice Properties Real Estate Investment Trust Reports Results for the Year Ended December 31, 2021

TORONTO--(BUSINESS WIRE)--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 Units^(i)		(372,039	)		(86,370	)		(285,669	)		(862,815	)		354,286			(1,217,101	)
Fair value gains (losses) excluding Exchangeable Units^(ii)		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 - diluted^(iii)		723,363,313			718,026,576			5,336,737			723,127,566			707,764,714			15,362,852
(i) Exchangeable Units are recorded at their fair value based on the market trading price of the Trust Units, which results in a negative impact to the financial results when the Trust Unit price rises and a positive impact when the Trust Unit price declines. (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.

_______________________________________________

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

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 revenue^(i)	$	341,907		$	337,907		$	4,000		$	1,353,657		$	1,332,657		$	21,000
Net Operating Income (“NOI”), cash basis^(i)(ii)		238,674			230,353			8,321			937,499			908,081			29,418
Same-Asset NOI, cash basis^(i)(ii)		216,188			210,755			5,433			853,110			832,119			20,991
Adjustment to fair value of investment properties^(i)		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
AFFO^(i) per unit diluted		0.164			0.189			(0.025	)		0.811			0.800			0.011
AFFO^(i) 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 - diluted^(iii)		723,363,313			718,026,576			5,336,737			723,127,566			707,764,714			15,362,852
(i) Refer to Non-GAAP Financial Measures and Additional Financial Information section. (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 basis^(1)) ($ 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 basis^(1)) ($ 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.

	Three Months									Year Ended
For the periods ended December 31 ($ thousands)	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
(i) Adjustments reflect the Trust’s 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.

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:

	Three Months									Year Ended
For the periods ended December 31 ($ thousands)	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
(i) Adjustments reflect the Trust’s 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.

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 expenses		11,799			8,778			3,021			40,917			36,718			4,199
Fee income		(946	)		(1,136	)		190			(3,801	)		(4,416	)		615
Net interest expense and other financing charges		134,320			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	)
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	)
Income tax recovery		(686	)		(1,797	)		1,111			(679	)		(1,797	)		1,118
Net Operating Income, Accounting Basis - GAAP		230,072			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 - GAAP		227,893			221,256			6,637			899,759			870,694			29,065
Adjustments for equity accounted joint ventures and financial real estate assets		10,781			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.

	Three Months									Year Ended
For the periods ended December 31 ($ thousands)		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 ventures		393			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			1,897			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
(i) FFO payout ratio is calculated as cash distributions declared divided by FFO
(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.

	Three Months									Year Ended
For the periods ended December 31 ($ thousands)		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
(i) AFFO payout ratio is calculated as cash distributions declared divided by AFFO
(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 [phone] or [phone] 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.