Choice Properties Real Estate Investment Trust Reports Results for the Nine Months Ended September 30, 2022

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 and nine months ended September 30, 2022. The 2022 Third 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 solid operating and financial results in the third quarter. The strength of our portfolio was clearly apparent, with near full occupancy in our retail and industrial asset classes and strong same-asset growth. We also advanced our industrial and mixed-use development pipelines in the quarter, unlocking value by achieving key zoning and entitlement milestones at two of our development projects.” said Rael Diamond, President and Chief Executive Officer of the Trust. “Supported by our high-quality tenants, necessity-based portfolio and an industry leading balance sheet, we continue to be well positioned in the current economic environment.”

2022 Third Quarter Highlights

• Reported net income for the quarter of $948.1 million, as compared to net income of $163.7 million in Q3 2021, an increase of $784.4 million.
  • There was a $562.0 million favourable change in the fair value of the Trust’s Exchangeable Units, due to the decline in the Trust’s Unit price; and
  • Net fair value gain on investment properties of $141.3 million on a GAAP basis, and $344.2 million on a proportionate share basis⁽¹⁾, fair value gains were recognized in the development portfolio as a result of reaching key milestones, and in the industrial income producing portfolio due to leasing and cash flow growth.
• Reported FFO per unit diluted⁽¹⁾ was $0.239, consistent with Q3 2021
• Period end occupancy improved slightly to 97.7%, reflecting 33,000 square feet of positive absorption.
  • Retail at 97.7%, industrial at 99.0% and mixed-use, residential and other at 88.1%.
• Same-Asset NOI on a cash basis⁽¹⁾ increased by 3.4% from Q3 2021
  • Retail increased by 3.7%;
  • Industrial increased by 1.2%. Excluding a temporary decrease in rental revenue, due to a fixturing and free rent period upon turnover of a significant unit, industrial increased by 4.8%; and
  • Mixed-use, residential and other increased by 5.1%.
• Completed $59.2 million of transactions, including $19.9 million of acquisitions and $39.3 million of dispositions.
  • Transactions included the acquisition of a retail property in Toronto, ON for $19.2 million, and the disposition of an office property in Montreal, QC for proceeds of $27.0 million.
• Invested $55.2 million of capital in development on a proportionate share basis⁽¹⁾.
• Received zoning approval at two of the Trust’s development projects:
  • Tullamore industrial development in Caledon, ON.
  • Golden Mile mixed-use development in Toronto, ON.
• Ended the quarter in a strong liquidity position with approximately $1.3 billion of available credit under the Trust’s revolving credit facility, a $12.2 billion pool of unencumbered properties and Adjusted debt to EBITDAFV⁽¹⁾ of 7.4x.

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

Summary of GAAP Basis Financial Results

($ thousands except where otherwise indicated) (unaudited)	Three Months							Nine Months
	September 30, 2022		September 30, 2021		Change $			September 30, 2022			September 30, 2021			Change $
Net income	$	948,077	$	163,672	$	784,405		$	1,323,253		$	186,095		$	1,137,158
Net income per unit diluted		1.310		0.226		1.084			1.829			0.257			1.572
Rental revenue		309,082		316,083		(7,001	)		950,212			966,558			(16,346	)
Fair value gain (loss) on Exchangeable Units^(i)		577,848		15,831		562,017			1,029,045			(490,776	)		1,519,821
Fair value gains (losses) excluding Exchangeable Units^(ii)		72,906		35,103		37,803			(306,343	)		360,296			(666,639	)
Cash flows from operating activities		198,941		153,939		45,002			441,127			425,226			15,901
Weighted average Units outstanding - diluted^(iii)		723,577,162		723,346,150		231,012			723,530,507			723,038,843			491,664

(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, real estate securities, and unit-based compensation.
(iii)	Includes Trust Units and Exchangeable Units.

Quarterly Results

Choice Properties reported net income of $948.1 million for the third quarter of 2022 as compared to net income of $163.7 million in the third quarter of 2021. The increase of $784.4 million compared to the prior year was primarily due to:

• a $562.0 million favourable change in the fair value of the Trust’s Exchangeable Units, due to the decline in the Trust’s Unit price;
• a $188.5 million favourable change in income from equity accounted joint ventures, coupled with a $106.3 favourable change in fair values of investment properties, driven by the achievement of milestones in the Trust’s development portfolio and leasing and cash flow growth in the industrial portfolio; partially offset by
• a $68.8 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”).

Year-to-date Results

Choice Properties reported net income of $1,323.3 million for the nine months ended September 30, 2022 as compared to $186.1 million for the nine months ended September 30, 2021. The increase of $1,137.2 million compared to the prior year was mainly due to:

• a $1,519.8 million favourable change in the adjustment to the fair value of the Trust’s Exchangeable Units due to the decrease in the Trust’s Unit price;
• a favourable change in the share of income from equity accounted joint ventures of $289.7 million driven by fair value increases in the Trust’s industrial developments; partially offset by
• a $442.8 million unfavourable change in the fair value of investment properties; and
• a $227.6 million unfavourable adjustment to the fair value of real estate securities due to the decrease in the unit price of Allied.

Summary of Proportionate Share⁽¹⁾ Financial Results

As at or for the period ended ($ thousands except where otherwise indicated)	Three Months									Nine Months
	September 30, 2022			September 30, 2021			Change $			September 30, 2022			September 30, 2021			Change $
Rental revenue^(i)	$	328,320		$	331,285		$	(2,965	)	$	1,004,843		$	1,011,750		$	(6,907	)
Net Operating Income (“NOI”), cash basis^(i)(ii)		234,540			236,004			(1,464	)		703,116			698,825			4,291
Same-Asset NOI, cash basis^(i)(ii)		224,814			217,456			7,358			669,922			645,598			24,324
Adjustment to fair value of investment properties^(i)		344,245			51,372			292,873			234,606			393,068			(158,462	)
Occupancy (% of GLA)		97.7	%		97.0	%		0.7	%		97.7	%		97.0	%		0.7	%
Funds from operations (“FFO”)^(i)		173,119			172,651			468			523,545			515,101			8,444
FFO^(i) per unit diluted		0.239			0.239			—			0.724			0.712			0.012
Adjusted funds from operations (“AFFO”)^(i)		130,360			153,566			(23,206	)		454,817			467,582			(12,765	)
AFFO^(i) per unit diluted		0.180			0.212			(0.032	)		0.629			0.647			(0.018	)
AFFO^(i) payout ratio - diluted		102.7	%		87.1	%		15.6	%		88.3	%		85.8	%		2.5	%
Cash distributions declared		133,856			133,811			45			401,549			401,284			265
Weighted average number of Units outstanding - diluted^(iii)		723,577,162			723,346,150			231,012			723,530,507			723,038,843			491,664

(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 and nine months ended September 30, 2022 Same-Asset NOI, increased by $7.4 million and $24.3 million compared to the prior year, respectively, primarily due to increased revenue from the leasing of vacant units, contractual rent steps, higher recovery revenues, and a decrease in bad debt expense.

For the three months ended September 30, 2022, Funds from Operations (“FFO”, a non-GAAP measure) was $173.1 million or $0.239 per unit diluted compared to $172.7 million or $0.239 per unit diluted for the three months ended September 30, 2021.

FFO increased by $0.5 million compared to the prior year, primarily due to an increase in Same-Asset NOI, which was largely offset by an increase in interest and other expenses and the impact of the Allied Transaction in Q1 2022. The impact of the Allied Transaction includes the loss of NOI, partially offset by the distribution and interest income earned from the consideration received in exchange for the properties sold.

For the nine months ended September 30, 2022, FFO was $523.5 million or $0.724 per unit diluted compared to $515.1 million or $0.712 per unit diluted for the nine months ended September 30, 2021. For the nine months ended September 30, 2022 FFO increased by $8.4 million compared to the prior year, primarily due to higher Same-Asset NOI, partially offset by an increase in general and administrative expenses and the impact of the Allied Transaction.

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 through stable net operating income growth and capital preservation, all with a long-term focus. Choice Properties is 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.

Our diversified portfolio of retail, industrial, residential and mixed-use properties is 97.7% occupied and leased to high-quality tenants across Canada. Our 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. This stability is evident in our ability to consistently deliver strong financial and operating results. We continue to experience positive leasing momentum across our portfolio and expect occupancy to remain stable for the remainder of the year as we have substantially addressed our 2022 lease renewal exposure.

Last year we made the strategic decision to focus our time and capital on the opportunities available in our core business of essential retail and industrial, our growing residential platform and our robust development pipeline. We have the ability to achieve scale in these asset classes, allowing us to deliver operating efficiencies, generate further investment opportunities, and attract top talent. This decision led to our strategic sale of six high-quality office properties to Allied in the first quarter.

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. In residential, we continue to progress on the construction of two 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 of Ottawa, Ontario.

In industrial, we have three active development projects, which we expect will deliver 1.4 million square feet at share of new generation logistics space in the near to medium term. Our industrial project at Horizon Business Park in Edmonton, Alberta, comprising two buildings totaling 0.3 million square feet is progressing, with occupancy on the first building commencing in the second quarter and substantial completion and occupancy of the second building anticipated in the second half of 2023. Construction continues at our second active industrial site, a modern logistics facility located in a prime industrial node in Surrey, British Columbia comprising 0.3 million square feet. At our third industrial development, located in East Gwillimbury in the Greater Toronto Area, site preparation is underway on the current and future phases of the site. The development plan for the property is to build a multi-phase industrial park with the potential for approximately 1.8 million total square feet of new generation logistics space. For the first phase of the development, we have entered into an approximately 100-acre land lease with Loblaw Companies Limited, who intends to build a 1.2 million square foot, automated, multi-temperature industrial facility on part of the development site, allowing Loblaw to add capacity and advance its supply chain capabilities. Choice Properties holds a 75% ownership interest in the project.

Beyond our active development 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 and industrial sites with 11 mixed-use projects representing over 10.5 million square feet, and 2 industrial projects representing over 5.6 million square feet in different stages of the rezoning and planning process. Included in our industrial development pipeline is our future developable industrial land in Caledon, Ontario where we hold an 85% interest in 380 net developable acres, including an additional parcel of land adjacent to this site acquired in the second quarter, as well as the second phase of our industrial development in East Gwillimbury, Ontario.

Since the start of the year, concerns over inflation have resulted in a significant increase in interest rates with the Bank of Canada (“BoC”) already raising the overnight rate by 350 basis points, with further rate hikes possible in the remainder of 2022. Further elevated interest rates may put further downward pressure on the fair value of properties in the remainder of 2022. In addition, market volatility and uncertainty around future interest rates continues to slow transaction volumes.

Given the current economic environment, we took proactive steps to ensure we maintain our financial strength and stability. We successfully issued $500 million of unsecured debentures in the second quarter to increase our liquidity position and further stagger our debt maturity profile. From a liquidity perspective, the Trust has $1.4 billion of available liquidity, comprised of $1.3 billion from the unused portion of the Trust’s revolving credit facility and $55.4 million in cash and cash equivalents, in addition to approximately $12.2 billion in unencumbered assets. For the remainder of the year, we have approximately $105 million of remaining debt obligations coming due for which we have several sources of capital available for refinancing.

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, 2021, 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”) 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 and nine months ended September 30, 2022.

	Three Months									Nine Months
For the periods ended September 30 ($ thousands)	GAAP Basis			Consolidation and eliminations^(i)			Proportionate Share Basis			GAAP Basis			Consolidation and eliminations^(i)			Proportionate Share Basis
Net Operating Income
Rental revenue	$	309,082		$	19,238		$	328,320		$	950,212		$	54,631		$	1,004,843
Property operating costs		(85,919	)		(6,321	)		(92,240	)		(276,773	)		(19,259	)		(296,032	)
		223,163			12,917			236,080			673,439			35,372			708,811
Other Income and Expenses
Interest income		5,195			202			5,397			14,669			(541	)		14,128
Investment income		5,165			—			5,165			10,330			—			10,330
Fee income		714			—			714			2,501			—			2,501
Net interest expense and other financing charges		(136,574	)		(4,808	)		(141,382	)		(399,610	)		(11,347	)		(410,957	)
General and administrative expenses		(11,360	)		—			(11,360	)		(33,345	)		—			(33,345	)
Share of income (loss) from equity accounted joint ventures		211,279			(211,279	)		—			338,345			(338,345	)		—
Amortization of intangible assets		(250	)		—			(250	)		(750	)		—			(750	)
Acquisition transaction costs and other related expenses		(13	)		—			(13	)		(5,026	)		—			(5,026	)
Other fair value gains (losses), net		476			—			476			1,474			—			1,474
Adjustment to fair value of Exchangeable Units		577,848			—			577,848			1,029,045			—			1,029,045
Adjustment to fair value of investment properties		141,277			202,968			344,245			(80,255	)		314,861			234,606
Adjustment to fair value of investment in real estate securities		(68,847	)		—			(68,847	)		(227,562	)		—			(227,562	)
Income before income taxes		948,073			—			948,073			1,323,255			—			1,323,255
Income tax recovery (expense)		4			—			4			(2	)		—			(2	)
Net Income	$	948,077		$	—		$	948,077		$	1,323,253		$	—		$	1,323,253

(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 and nine months ended September 30, 2021:

	Three Months									Nine Months
For the periods ended September 30 ($ thousands)	GAAP Basis			Consolidation and eliminations^(i)			Proportionate Share Basis			GAAP Basis			Consolidation and eliminations^(i)			Proportionate Share Basis
Net Operating Income
Rental revenue	$	316,083		$	15,202		$	331,285		$	966,558		$	45,192		$	1,011,750
Property operating costs		(88,424	)		(5,463	)		(93,887	)		(284,615	)		(16,814	)		(301,429	)
		227,659			9,739			237,398			681,943			28,378			710,321
Other Income and Expenses
Interest income		4,091			(1,258	)		2,833			12,767			(4,261	)		8,506
Fee income		890			—			890			2,855			—			2,855
Net interest expense and other financing charges		(132,863	)		(2,138	)		(135,001	)		(400,205	)		(6,029	)		(406,234	)
General and administrative expenses		(10,036	)		—			(10,036	)		(29,118	)		—			(29,118	)
Share of income from equity accounted joint ventures		22,771			(22,771	)		—			48,614			(48,614	)		—
Amortization of intangible assets		(250	)		—			(250	)		(750	)		—			(750	)
Other fair value gains (losses), net		159			—			159			(2,246	)		—			(2,246	)
Adjustment to fair value of Exchangeable Units		15,831			—			15,831			(490,776	)		—			(490,776	)
Adjustment to fair value of investment properties		34,944			16,428			51,372			362,542			30,526			393,068
Income before Income Taxes		163,672			—			163,672			186,102			—			186,102
Income tax recovery (expense)		—			—			—			(7	)		—			(7	)
Net Income	$	163,672		$	—		$	163,672		$	186,095		$	—		$	186,095

(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 September 30 ($ thousands)	Three Months												Nine Months
		2022				2021			Change $					2022				2021			Change $
Net income	$	948,077			$	163,672			$	784,405			$	1,323,253			$	186,095			$	1,137,158
Reversal of (allowance for) expected credit loss on mortgage receivable		—				(476	)			476				—				(476	)			476
General and administrative expenses		11,360				10,036				1,324				33,345				29,118				4,227
Fee income		(714	)			(890	)			176				(2,501	)			(2,855	)			354
Net interest expense and other financing charges		136,574				132,863				3,711				399,610				400,205				(595	)
Interest income		(5,195	)			(4,091	)			(1,104	)			(14,669	)			(12,767	)			(1,902	)
Investment income		(5,165	)			—				(5,165	)			(10,330	)			—				(10,330	)
Share of income from equity accounted joint ventures		(211,279	)			(22,771	)			(188,508	)			(338,345	)			(48,614	)			(289,731	)
Amortization of intangible assets		250				250				—				750				750				—
Transaction costs and other related expenses		13				—				13				5,026				—				5,026
Other fair value gains (losses), net		(476	)			(159	)			(317	)			(1,474	)			2,246				(3,720	)
Adjustment to fair value of Exchangeable Units		(577,848	)			(15,831	)			(562,017	)			(1,029,045	)			490,776				(1,519,821	)
Adjustment to fair value of investment properties		(141,277	)			(34,944	)			(106,333	)			80,255				(362,542	)			442,797
Adjustment to fair value of investment in real estate securities		68,847				—				68,847				227,562				—				227,562
Income tax recovery (expense)		(4	)			—				(4	)			2				7				(5	)
Net Operating Income, Accounting Basis - GAAP		223,163		—		227,659		—		(4,496	)	—		673,439		—		681,943		—		(8,504	)
Straight line rental revenue		(995	)			(419	)			(576	)			(1,716	)			(7,554	)			5,838
Lease surrender revenue		(70	)			(208	)			138				(2,354	)			(2,523	)			169
Net Operating Income, Cash Basis - GAAP		222,098		—		227,032		—		(4,934	)	—		669,369		—		671,866		—		(2,497	)
Adjustments for equity accounted joint ventures and financial real estate assets		12,442				8,972				3,470				33,747				26,959				6,788
Net Operating Income, Cash Basis - Proportionate Share	$	234,540			$	236,004			$	(1,464	)		$	703,116			$	698,825			$	4,291

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 September 30 ($ thousands)	Three Months
		2022		2021	Change $
Net Operating Income, Cash Basis - Proportionate Share	$	234,540	$	236,004	$	(1,464	)
Transactions NOI, Cash Basis		9,726		18,548		(8,822	)
Same-Asset NOI, Cash Basis	$	224,814	$	217,456	$	7,358

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

	Three Months									Nine Months
For the periods ended September 30 ($ thousands)		2022			2021		Change $				2022			2021		Change $
Net income	$	948,077		$	163,672		$	784,405		$	1,323,253		$	186,095		$	1,137,158
Amortization of intangible assets		250			250			—			750			750			—
Transaction costs and other related expenses		13			—			13			5,026			—			5,026
Other fair value gains (losses), net		(476	)		(159	)		(317	)		(1,474	)		2,246			(3,720	)
Adjustment to fair value of Exchangeable Units		(577,848	)		(15,831	)		(562,017	)		(1,029,045	)		490,776			(1,519,821	)
Adjustment to fair value of investment properties		(141,277	)		(34,944	)		(106,333	)		80,255			(362,542	)		442,797
Adjustment to fair value of investment property held in equity accounted joint ventures		(202,968	)		(16,428	)		(186,540	)		(314,861	)		(30,526	)		(284,335	)
Adjustment to fair value of investment in real estate securities		68,847			—			68,847			227,562			—			227,562
Interest otherwise capitalized for development in equity accounted joint ventures		3,071			815			2,256			5,799			2,780			3,019
Exchangeable Units distributions		73,221			73,221			—			219,663			219,663			—
Internal expenses for leasing		2,213			2,055			158			6,615			5,852			763
Income tax recovery (expense)		(4	)		—			(4	)		2			7			(5	)
Funds from Operations	$	173,119		$	172,651		$	468		$	523,545		$	515,101		$	8,444
FFO per Unit - diluted^(i)	$	0.239		$	0.239		$	—		$	0.724		$	0.712		$	0.012
Weighted average Units outstanding - diluted^(ii)		723,577,162			723,346,150			231,012			723,530,507			723,038,843			491,664

(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									Nine Months
For the periods ended September 30 ($ thousands)		2022			2021		Change $				2022			2021		Change
Funds from Operations	$	173,119		$	172,651		$	468		$	523,545		$	515,101		$	8,444
Internal expenses for leasing		(2,213	)		(2,055	)		(158	)		(6,615	)		(5,852	)		(763	)
Straight line rental revenue		(995	)		(419	)		(576	)		(1,716	)		(7,554	)		5,838
Adjustment for proportionate share of straight line rental revenue from equity accounted joint ventures and financial real estate assets		(475	)		(767	)		292			(1,415	)		(1,419	)		4
Property capital		(30,119	)		(13,975	)		(16,144	)		(35,481	)		(18,939	)		(16,542	)
Direct leasing costs		(3,326	)		(1,272	)		(2,054	)		(6,483	)		(4,482	)		(2,001	)
Tenant improvements		(4,757	)		(208	)		(4,549	)		(14,194	)		(8,407	)		(5,787	)
Adjustment for proportionate share of operating capital expenditures from equity accounted joint ventures and financial real estate assets		(874	)		(389	)		(485	)		(2,824	)		(866	)		(1,958	)
Adjusted Funds from Operations	$	130,360		$	153,566		$	(23,206	)	$	454,817		$	467,582		$	(12,765	)
AFFO per unit - diluted	$	0.180		$	0.212		$	(0.032	)	$	0.629		$	0.647		$	(0.018	)
AFFO payout ratio - diluted(i)		102.7	%		87.1	%		15.6	%		88.3	%		85.8	%		2.5	%
Distribution declared per Unit	$	0.185		$	0.185		$	—		$	0.555		$	0.555		$	—
Weighted average Units outstanding - diluted(ii)		723,577,162			723,346,150			231,012			723,530,507			723,038,843			491,664

(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 2022 Third 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 Thursday, November 10, 2022 at 9:00AM (ET) with a simultaneous audio webcast. To access via teleconference, please dial [phone] or [phone] and enter the event passcode: 4788974. 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.