Choice Properties Real Estate Investment Trust Reports Results for the Year Ended December 31, 2022, and Announces Distribution Increase

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, 2022. The 2022 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 delivered solid operating and financial results for the quarter and year ended December 31, 2022. Our performance was driven by the strength of our grocery anchored and necessity-based retail portfolio, the realization of embedded rent growth in our well located generic industrial portfolio and our growing mixed-use and residential platform. In addition to our strong results, we continued to focus on improving the quality of our portfolio and driving growth through development. In 2022 we completed over $1.2 billion of real estate transactions and made significant advances in our industrial and mixed-use development pipelines,” said Rael Diamond, President and Chief Executive Officer of the Trust. “Supported by the strength of our business, we are pleased to announce Choice’s first distribution increase since 2017. The increase reflects the confidence we have in our portfolio to continue to deliver steady and growing cash flows, and our strong financial position”.

2022 Fourth Quarter Highlights

• Reported net loss for the quarter of $579.0 million, as compared to net loss of $163.1 million in Q4 2021, an increase of $415.9 million, resulting from:
  • a $486.8 million unfavourable adjustment to the fair value of the Trust’s Exchangeable Units, due to the increase in the Trust’s Unit price; and
  • a $20.8 million unfavourable adjustment to fair value of the Trust’s investment in the real estate securities of Allied, as a result of the decrease in Allied’s unit price; partially offset by
  • a net fair value gain on investment properties of $193.4 million on a GAAP basis, as compared to a gain of $96.3 million in Q4 2021. Q4 2022 net fair value gain on investment properties was $207.2 million on a proportionate share basis⁽¹⁾. Fair value gains were primarily recognized due to leasing and cash flow growth in the industrial portfolio.
• Reported FFO per unit diluted⁽¹⁾ was $0.241.
• Period end occupancy improved slightly to 97.8%.
  • Retail at 97.8%, industrial at 98.9% and mixed-use, residential and other at 87.7%.
• Same-Asset NOI on a cash basis⁽¹⁾ increased by 3.9% from Q4 2021
  • Retail increased by 4.3%;
  • Industrial increased by 2.5%; and
  • Mixed-use, residential and other increased by 1.9%.
• Completed $119.9 million of transactions, including $74.6 million of acquisitions and $45.3 million of dispositions. Transactions included:
  • the acquisition of two strategic retail properties in the Greater Toronto Area for $73.1 million;
  • the disposition of an office property in Halifax, NS for proceeds of $40.0 million; and
  • the disposition of two non-core retail assets for aggregate proceeds of $5.3 million.
• Invested $37.4 million of capital in development on a proportionate share basis⁽¹⁾.
• Ended the quarter in a strong liquidity position with approximately $1.2 billion of available credit under the Trust’s revolving credit facility, a $12.3 billion pool of unencumbered properties and Adjusted debt to EBITDAFV⁽¹⁾ of 7.5x.
• Subsequent to the quarter end, the Trust increased distributions to $0.75 per unit per annum from the previous rate of $0.74 per unit per annum (an increase of 1.4% or $0.000833 monthly). The increase will be effective for Unitholders of record on March 31, 2023.

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

Summary of GAAP Basis Financial Results

($ thousands except where otherwise indicated) (unaudited)	Three Months									Year Ended
	December 31, 2022			December 31, 2021			Change $			December 31, 2022			December 31, 2021			Change $
Net income (loss)	$	(579,000	)	$	(163,087	)	$	(415,913	)	$	744,253		$	23,008		$	721,245
Net income (loss) per unit diluted		(0.800	)		(0.225	)		(0.575	)		1.029			0.032			0.997
Rental revenue		314,382			325,763			(11,381	)		1,264,594			1,292,321			(27,727	)
Fair value gain (loss) on Exchangeable Units^(i)		(858,857	)		(372,039	)		(486,818	)		170,188			(862,815	)		1,033,003
Fair value gains (losses) excluding Exchangeable Units^(ii)		169,921			96,941			72,980			(136,422	)		457,237			(593,659	)
Cash flows from operating activities		198,105			244,202			(46,097	)		633,154			669,428			(36,274	)
Weighted average Units outstanding - diluted^(iii)		723,586,201			723,363,313			222,888			723,523,362			723,127,566			395,796

(i)	Exchangeable Units are required to be classified as financial liabilities at fair value through profit and loss under GAAP. They 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 a net loss of $579.0 million for the fourth quarter of 2022 as compared to a net loss of $163.1 million in the fourth quarter of 2021. The change of $415.9 million compared to the prior year was primarily due to:

• a $486.8 million unfavourable change in the adjustment to the fair value of the Trust’s Exchangeable Units⁽ⁱ⁾, due to the increase in the Trust’s Unit price;
• a $20.8 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”); and
• a $97.1 favourable change in fair values of investment properties, driven by leasing and cash flow growth in the industrial portfolio.

Year-to-date Results

Choice Properties reported net income of $744.3 million for the year ended December 31, 2022 as compared to $23.0 million for the year ended December 31, 2021. The increase of $721.2 million compared to the prior year was mainly due to:

• a $1,033.0 million favourable change in the adjustment to the fair value of the Trust’s Exchangeable Units⁽ⁱ⁾ due to the change in the Trust’s Unit price;
• a favourable change in the share of income from equity accounted joint ventures of $286.9 million driven by fair value increases in the Trust’s industrial developments; partially offset by
• a $345.7 million unfavourable change in the fair value of investment properties; and
• a $248.3 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									Year Ended
	December 31, 2022			December 31, 2021			Change $			December 31, 2022			December 31, 2021			Change $
Rental revenue^(i)	$	334,674		$	341,907		$	(7,233	)	$	1,339,517		$	1,353,657		$	(14,140	)
Net Operating Income (“NOI”), cash basis^(i)(ii)		238,819			238,674			145			941,935			937,499			4,436
Same-Asset NOI, cash basis^(i)(ii)		227,078			218,593			8,485			893,876			861,131			32,745
Adjustment to fair value of investment properties^(i)		207,247			109,227			98,020			441,853			502,295			(60,442	)
Occupancy (% of GLA)		97.8	%		97.1	%		0.7	%		97.8	%		97.1	%		0.7	%
Funds from operations (“FFO”)^(i)		174,183			174,797			(614	)		697,728			689,898			7,830
FFO^(i) per unit diluted		0.241			0.242			(0.001	)		0.964			0.954			0.010
Adjusted funds from operations (“AFFO”)^(i)		126,935			118,924			8,011			581,752			586,506			(4,754	)
AFFO^(i) per unit diluted		0.175			0.164			0.011			0.804			0.811			(0.007	)
AFFO^(i) payout ratio - diluted		105.5	%		112.5	%		(7.0	) %		92.0	%		91.2	%		0.8	%
Cash distributions declared		133,858			133,820			38			535,407			535,104			303
Weighted average number of Units outstanding - diluted^(iii)		723,586,201			723,363,313			222,888			723,523,362			723,127,566			395,796

(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 and year ended December 31, 2022, Same-Asset NOI, cash basis⁽ⁱ⁾ increased by $8.5 million and $32.7 million, respectively, compared to the prior year, primarily due to increased revenue from improved occupancy, contractual rent steps, higher recovery revenues, and lower bad debt expense.

For the three months ended December 31, 2022, Funds from Operations (“FFO”, a non-GAAP measure) was $174.2 million or $0.241 per unit diluted compared to $174.8 million or $0.242 per unit diluted for the three months ended December 31, 2021.

FFO decreased by $0.6 million compared to the prior year, primarily as a result of the increase in Same-Asset NOI, offset by an increase in interest and general and administrative 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 limited partnership units and promissory note received from Allied in exchange for the properties sold. In addition, a non-recurring gain recognized in Q4 2021 due to the reversal of an expected credit loss related to a specific mortgage receivable contributed to the decline in FFO.

For the year ended December 31, 2022, FFO was $697.7 million or $0.964 per unit diluted compared to $689.9 million or $0.954 per unit diluted for the year ended December 31, 2021. FFO increased by $7.8 million compared to the prior year, primarily due to higher Same-Asset NOI, partially offset by an increase in interest and general and administrative expenses, and the impact of the Allied Transaction.

Subsequent Events

On January 18, 2023, the Trust paid in full upon maturity, at par, plus accrued and unpaid interest thereon, the $125 million aggregate principal amount of the Series D-C senior unsecured debentures outstanding. The repayment of the Series D-C senior unsecured debenture was funded by an advance on the Trust’s credit facility.

On January 31, 2023, the Trust acquired three retail assets from Loblaw for an aggregate purchase price of $98.6 million.

On February 15, 2023, the Trust announced an increase in the annual distribution by 1.4% to $0.75 per unit. The increase will be effective for Unitholders of record on March 31, 2023.

Subsequent to year end, the Trust entered into commitments for approximately $161.8 million of mortgage financing.

Outlook

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

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

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

Non-GAAP Financial Measures and Additional Financial Information

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

Non-GAAP Measure	Description
Proportionate Share	Represents financial information adjusted to reflect the Trust’s equity accounted joint ventures and financial real estate assets and its share of net income (losses) from equity accounted joint ventures and financial real estate assets on a proportionately consolidated basis at the Trust’s ownership percentage of the related investment. Management views this method as relevant in demonstrating the Trust's ability to manage the underlying economics of the related investments, including the financial performance and cash flows and the extent to which the underlying assets are leveraged, which is an important component of risk management.
Net Operating Income (“NOI”), Accounting Basis	Defined as property rental revenue including straight line rental revenue, reimbursed contract revenue and lease surrender revenue, less direct property operating expenses and realty taxes, and excludes certain expenses such as interest expense and indirect operating expenses in order to provide results that reflect a property’s operations before consideration of how it is financed or the costs of operating the entity in which it is held. Management believes that NOI is an important measure of operating performance for the Trust’s commercial real estate assets that is used by real estate industry analysts, investors and management, while also being a key input in determining the fair value of the Choice Properties portfolio.
NOI, Cash Basis	Defined as property rental revenue excluding straight line rental revenue, direct property operating expenses and realty taxes and excludes certain expenses such as interest expense and indirect operating expenses in order to provide results that reflect a property’s operations before consideration of how it is financed or the costs of operating the entity in which it is held. Management believes that NOI is a useful measure in understanding period-over-period changes in income from operations due to occupancy, rental rates, operating costs and realty taxes.
Same-Asset NOI, Cash Basis   and   Same-Asset NOI, Accounting Basis	Same-asset NOI is used to evaluate the period-over-period performance of those 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 (loss) as determined in accordance with GAAP to net income on a proportionate share basis for the three months and year ended December 31, 2022.

		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	$	314,382		$	20,292		$	334,674		$	1,264,594		$	74,923		$	1,339,517
	Property operating costs		(87,180	)		(7,168	)		(94,348	)		(363,953	)		(26,427	)		(390,380	)
			227,202			13,124			240,326			900,641			48,496			949,137
Other Income and Expenses
	Interest income		12,691			(6,991	)		5,700			27,360			(7,532	)		19,828
	Investment income		5,165			—			5,165			15,495			—			15,495
	Fee income		1,292			—			1,292			3,793			—			3,793
	Net interest expense and other financing charges		(137,247	)		(4,488	)		(141,735	)		(536,857	)		(15,835	)		(552,692	)
	General and administrative expenses		(14,476	)		—			(14,476	)		(47,821	)		—			(47,821	)
	Share of income (loss) from equity accounted joint ventures		15,522			(15,522	)		—			353,867			(353,867	)		—
	Amortization of intangible assets		(250	)		—			(250	)		(1,000	)		—			(1,000	)
	Acquisition transaction costs and other related expenses		(82	)		—			(82	)		(5,108	)		—			(5,108	)
	Adjustment to fair value of unit-based compensation		(2,665	)		—			(2,665	)		(1,191	)		—			(1,191	)
	Adjustment to fair value of Exchangeable Units		(858,857	)		—			(858,857	)		170,188			—			170,188
	Adjustment to fair value of investment properties		193,370			13,877			207,247			113,115			328,738			441,853
	Adjustment to fair value of investment in real estate securities		(20,784	)		—			(20,784	)		(248,346	)		—			(248,346	)
Income (Loss) before Income Taxes			(579,119	)		—			(579,119	)		744,136			—			744,136
	Income tax recovery		119			—			119			117			—			117
Net Income (Loss)		$	(579,000	)	$	—		$	(579,000	)	$	744,253		$	—		$	744,253

(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 months and year ended December 31, 2022:

		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 expected credit loss on mortgage receivable		1,026			—			1,026			1,502			—			1,502
	Share of income from equity accounted joint ventures		18,338			(18,338	)		—			66,952			(66,952	)		—
	Amortization of intangible assets		(250	)		—			(250	)		(1,000	)		—			(1,000	)
	Adjustment to fair value of unit-based compensation		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 Operating Income, Cash Basis, for the periods ended as indicated.

For the periods ended December 31 ($ thousands)	Three Months									Year Ended
		2022			2021		Change $				2022			2021		Change $
Net income (loss)	$	(579,000	)	$	(163,087	)	$	(415,913	)	$	744,253		$	23,008		$	721,245
Reversal of expected credit loss on mortgage receivable		—			(1,026	)		1,026			—			(1,502	)		1,502
General and administrative expenses		14,476			11,799			2,677			47,821			40,917			6,904
Fee income		(1,292	)		(946	)		(346	)		(3,793	)		(3,801	)		8
Net interest expense and other financing charges		137,247			134,320			2,927			536,857			534,525			2,332
Interest income		(12,691	)		(7,312	)		(5,379	)		(27,360	)		(20,079	)		(7,281	)
Investment income		(5,165	)		—			(5,165	)		(15,495	)		—			(15,495	)
Share of income from equity accounted joint ventures		(15,522	)		(18,338	)		2,816			(353,867	)		(66,952	)		(286,915	)
Amortization of intangible assets		250			250			—			1,000			1,000			—
Transaction costs and other related expenses		82			—			82			5,108			—			5,108
Adjustment to fair value of unit-based compensation		2,665			(666	)		3,331			1,191			1,580			(389	)
Adjustment to fair value of Exchangeable Units		858,857			372,039			486,818			(170,188	)		862,815			(1,033,003	)
Adjustment to fair value of investment properties		(193,370	)		(96,275	)		(97,095	)		(113,115	)		(458,817	)		345,702
Adjustment to fair value of investment in real estate securities		20,784			—			20,784			248,346			—			248,346
Income tax recovery		(119	)		(686	)		567			(117	)		(679	)		562
Net Operating Income, Accounting Basis - GAAP		227,202			230,072			(2,870	)		900,641			912,015			(11,374	)
Straight line rental revenue		(838	)		(339	)		(499	)		(2,554	)		(7,893	)		5,339
Lease surrender revenue		(11	)		(1,840	)		1,829			(2,365	)		(4,363	)		1,998
Net Operating Income, Cash Basis - GAAP		226,353			227,893			(1,540	)		895,722			899,759			(4,037	)
Adjustments for equity accounted joint ventures and financial real estate assets		12,466			10,781			1,685			46,213			37,740			8,473
Net Operating Income, Cash Basis - Proportionate Share	$	238,819		$	238,674		$	145		$	941,935		$	937,499		$	4,436

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
		2022		2021	Change $			2022		2021	Change $
Net Operating Income, Cash Basis - Proportionate Share	$	238,819	$	238,674	$	145	$	941,935	$	908,081	$	4,436
Transactions NOI, Cash Basis		11,741		20,081		(8,340)		48,059		76,368		(28,309)
Same-Asset NOI, Cash Basis	$	227,078	$	218,593	$	8,485	$	893,876	$	861,131	$	32,745

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)		2022			2021		Change $				2022			2021		Change $
Net income (loss)	$	(579,000	)	$	(163,087	)	$	(415,913	)	$	744,253		$	23,008		$	721,245
Amortization of intangible assets		250			250			—			1,000			1,000			—
Transaction costs and other related expenses		82			—			82			5,108			—			5,108
Adjustment to fair value of unit-based compensation		2,665			(666	)		3,331			1,191			1,580			(389	)
Adjustment to fair value of Exchangeable Units		858,857			372,039			486,818			(170,188	)		862,815			(1,033,003	)
Adjustment to fair value of investment properties		(193,370	)		(96,275	)		(97,095	)		(113,115	)		(458,817	)		345,702
Adjustment to fair value of investment property held in equity accounted joint ventures		(13,877	)		(12,952	)		(925	)		(328,738	)		(43,478	)		(285,260	)
Adjustment to fair value of investment in real estate securities		20,784			—			20,784			248,346			—			248,346
Interest otherwise capitalized for development in equity accounted joint ventures		2,790			393			2,397			8,589			3,173			5,416
Exchangeable Units distributions		73,221			73,221			—			292,884			292,884			—
Internal expenses for leasing		1,900			2,560			(660	)		8,515			8,412			103
Income tax recovery		(119	)		(686	)		567			(117	)		(679	)		562
Funds from Operations	$	174,183		$	174,797		$	(614	)	$	697,728		$	689,898		$	7,830
FFO per Unit - diluted^(i)	$	0.241		$	0.242		$	(0.001	)	$	0.964		$	0.954		$	0.010
Weighted average Units outstanding - diluted^(ii)		723,586,201			723,363,313			222,888			723,523,362			723,127,566			395,796

(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)		2022			2021		Change $				2022			2021		Change
Funds from Operations	$	174,183		$	174,797		$	(614	)	$	697,728		$	689,898		$	7,830
Internal expenses for leasing		(1,900	)		(2,560	)		660			(8,515	)		(8,412	)		(103	)
Straight line rental revenue		(838	)		(339	)		(499	)		(2,554	)		(7,893	)		5,339
Adjustment for proportionate share of straight line rental revenue from equity accounted joint ventures and financial real estate assets		(658	)		(792	)		134			(2,073	)		(2,211	)		138
Property capital		(35,456	)		(41,073	)		5,617			(70,937	)		(60,012	)		(10,925	)
Direct leasing costs		(2,258	)		(2,258	)		—			(8,741	)		(6,426	)		(2,315	)
Tenant improvements		(5,188	)		(8,265	)		3,077			(19,382	)		(16,379	)		(3,003	)
Adjustment for proportionate share of operating capital expenditures from equity accounted joint ventures and financial real estate assets		(950	)		(586	)		(364	)		(3,774	)		(2,059	)		(1,715	)
Adjusted Funds from Operations	$	126,935		$	118,924		$	8,011		$	581,752		$	586,506		$	(4,754	)
AFFO per unit - diluted	$	0.175		$	0.164		$	0.011		$	0.804		$	0.811		$	(0.007	)
AFFO payout ratio - diluted(i)		105.5	%		112.5	%		(7.0	)%		92.0	%		91.2	%		0.8	%
Distribution declared per Unit	$	0.185		$	0.185		$	—		$	0.740		$	0.740		$	—
Weighted average Units outstanding - diluted(ii)		723,586,201			723,363,313			222,888			723,523,362			723,127,566			395,796

(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 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 16, 2023 at 9:00 AM (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, 2022 and those described in the Trust’s Annual Information Form for the year ended December 31, 2022.