Choice Properties Real Estate Investment Trust Reports Results for the Six Months Ended June 30, 2023

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 six months ended June 30, 2023. The 2023 Second 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 are pleased with our second quarter results, which reflect the continued demand for our necessity-based retail centres and well-located industrial assets,” said Rael Diamond, President and Chief Executive Officer of the Trust. “Our team continues to make progress on our development initiatives and we are on track to complete approximately 1.6 million square feet of industrial space and two residential projects this year. We are also advancing Choice Caledon Business Park, our largest industrial development site located in the GTA, where site work has started and the first lease was executed, both important steps towards delivering high-quality industrial space to our portfolio.”

2023 Second Quarter Highlights

• Reported net income for the quarter of $535.7 million, as compared to net loss of $11.8 million in the second quarter of 2022, driven by the fair value gain on investment properties in the second quarter of 2023 compared to the significant fair value loss on investment properties, as a result of the expansion of capitalization rates on retail properties, in the second quarter of 2022.
• Reported FFO per unit diluted⁽¹⁾ was $0.254, an increase of 5.0% compared to the second quarter of 2022.
• Period end occupancy of 97.4%.
  • Retail at 97.7%, Industrial at 97.3% and Mixed-Use & Residential at 87.9%.
• Same-Asset NOI on a cash basis⁽¹⁾ increased by 4.3% compared to the second quarter of 2022.
  • Retail increased by 3.4%;
  • Industrial increased by 6.7%; and
  • Mixed-Use & Residential increased by 14.6%.
• Completed $103.1 million of transactions, including $101.2 million of dispositions. Dispositions included:
  • a data centre in Brampton, ON for net proceeds of $74.2 million, including a $51.0 million vendor take-back mortgage bearing interest at prime + 3.3%; and
  • a non-core retail property and an office property, both previously classified as assets held for sale, for combined proceeds of $23.4 million, including a $5.5 million vendor take-back mortgage bearing interest at 6.0%.
• Invested $47.0 million of capital in development on a proportionate share basis⁽¹⁾.
• Discharged $21.7 million of mortgages payable upon maturity in the quarter, at a weighted average rate of 3.9%.
• Subsequent to the quarter end, repaid $200.0 million, 4.9% Series B senior unsecured debentures upon maturity on July 5, 2023.
• Subsequent to the quarter end, the Trust and Loblaw renewed 46 of a tranche of 49 leases expiring in 2024, comprising 2.77 million of 2.84 million square feet, at a weighted average extension term of 4.9 years.
• Ended the quarter in a strong liquidity position with over $1.4 billion of available credit under the Trust’s revolving credit facility, a $12.5 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								Six Months
	June 30, 2023		June 30, 2022			Change $			June 30, 2023		June 30, 2022			Change $
Net income (loss)	$	535,668	$	(11,810	)	$	547,478		$	806,472	$	375,176		$	431,296
Net income (loss) per unit diluted		0.740		(0.016	)		0.756			1.114		0.519			0.595
Rental revenue		330,327		313,081			17,246			654,984		641,130			13,854
Fair value gain on Exchangeable Units^(i)		375,997		569,933			(193,936	)		470,986		451,197			19,789
Fair value gains (losses) excluding Exchangeable Units^(ii)		55,875		(680,426	)		736,301			117,731		(379,249	)		496,980
Cash flows from operating activities		152,032		160,689			(8,657	)		285,059		274,528			10,531
Weighted average number of Units outstanding - diluted^(iii)		723,656,668		723,593,236			63,432			723,668,276		723,530,507			137,769

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

Quarterly Results

Choice Properties reported net income of $535.7 million for the second quarter of 2023 as compared to net loss of $11.8 million in the second quarter of 2022. The increase of $547.5 million compared to the prior year was primarily due to:

• a $609.8 million favourable change in the adjustment to the fair value of investment properties, driven by the gain on investment properties in the second quarter of 2023 compared to the significant loss on investment properties, as a result of the expansion of capitalization rates on retail properties, in the second quarter of 2022;
• a $127.5 million favourable change in the adjustment to the fair value of the Trust’s investment in the real estate securities of Allied Properties REIT (“Allied”), driven by the mark-to-market loss in the second quarter of 2023 being significantly lower than the mark-to-market loss recorded in the second quarter of 2022; partially offset by
• a $193.9 million unfavourable change in the adjustment to the fair value of the Trust’s Exchangeable Units due to the change in the Trust’s Unit price.

Year-to-date Results

Choice Properties reported net income of $806.5 million for the six months ended June 30, 2023 as compared to $375.2 million for the six months ended June 30, 2022. The increase of $431.3 million compared to the prior year was mainly due to:

• a $383.4 million favourable change in the adjustment to the fair value of investment properties, driven by the gain on investment properties in 2023 compared to the significant loss on investment properties in the prior year as a result of the expansion of capitalization rates on retail properties in the second quarter of 2022;
• a $112.9 million favourable change in the adjustment to the fair value of the Trust’s investment in the real estate securities of Allied, driven by the mark-to-market loss in 2023 being significantly lower than the mark-to-market loss recorded in 2022; partially offset by
• a $100.9 million decrease in income from equity accounted joint ventures primarily due to fair value gains recognized in the industrial development portfolio in 2022.

Summary of Proportionate Share⁽¹⁾ Financial Results

As at or for the period ended ($ thousands except where otherwise indicated)	Three Months									Six Months
	June 30, 2023			June 30, 2022			Change $			June 30, 2023			June 30, 2022			Change $
Rental revenue^(i)	$	350,612		$	331,415		$	19,197		$	697,236		$	676,523		$	20,713
Net Operating Income (“NOI”), cash basis^(i)(ii)		243,530			231,299			12,231			487,582			468,576			19,006
Same-Asset NOI, cash basis^(i)(ii)		233,110			223,538			9,572			466,301			444,925			21,376
Adjustment to fair value of investment properties^(i)		85,921			(522,319	)		608,240			177,752			(109,639	)		287,391
Occupancy (% of GLA)		97.4	%		97.6	%		(0.2	)%		97.4	%		97.6	%		(0.2	)%
Funds from operations (“FFO”)^(i)		183,590			175,290			8,300			360,481			350,426			10,055
FFO^(i) per unit diluted		0.254			0.242			0.012			0.498			0.484			0.014
Adjusted funds from operations (“AFFO”)^(i)		170,400			163,708			6,692			334,779			324,457			10,322
AFFO^(i) per unit diluted		0.235			0.226			0.009			0.463			0.448			0.015
AFFO^(i) payout ratio - diluted		79.6	%		81.8	%		(2.2	)%		80.7	%		82.5	%		(1.8	)%
Cash distributions declared		135,684			133,857			1,827			270,162			267,693			2,469
Weighted average number of Units outstanding - diluted^(iii)		723,656,668			723,593,236			63,432			723,668,276			723,530,507			137,769

(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 six months ended June 30, 2023, Same-Asset NOI, cash basis⁽ⁱ⁾ increased by $9.6 million and $21.4 million, respectively, compared to the prior year, primarily due to an increase in revenue from higher rental rates, higher capital recoveries, and contractual rent steps.

For the three months ended June 30, 2023, Funds from Operations (“FFO”, a non-GAAP measure) was $183.6 million or $0.254 per unit diluted compared to $175.3 million or $0.242 per unit diluted for the three months ended June 30, 2022.

FFO increased by $8.3 million compared to the prior year primarily due to the increase in Same-Asset NOI, higher lease surrender revenue, contributions from acquisitions and completed developments, and an increase in interest income. The increase was partially offset by higher interest and general and administrative expenses.

For the six months ended June 30, 2023, FFO was $360.5 million or $0.498 per unit diluted compared to $350.4 million or $0.484 per unit diluted for the six months ended June 30, 2022. FFO increased by $10.1 million compared to the prior year primarily due to the increase in Same-Asset NOI, higher lease surrender revenue, contributions from acquisitions and completed developments, and an increase in interest income. The increase was partially offset by higher interest and general and administrative expenses. The year-to-date increase was also impacted by the sale of six office properties to Allied Properties REIT in the first quarter of 2022 (the “Allied Transaction”). The net 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.

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 (loss) 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 commercial properties and stabilized residential properties, owned and operated by Choice Properties since January 1, 2022, inclusive. NOI from properties that have been (i) purchased, (ii) disposed, (iii) subject to significant change as a result of new development, redevelopment, expansion, or demolition, or (iv) residential properties not yet stabilized (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 measure 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 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 six months ended June 30, 2023:

		Three Months									Six Months
For the periods ended June 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	$	330,327		$	20,285		$	350,612		$	654,984		$	42,252		$	697,236
	Property operating costs		(92,175	)		(6,609	)		(98,784	)		(187,445	)		(14,222	)		(201,667	)
			238,152			13,676			251,828			467,539			28,030			495,569
Other Income and Expenses
	Interest income		11,321			(4,884	)		6,437			20,296			(7,598	)		12,698
	Investment income		5,315			—			5,315			10,630			—			10,630
	Fee income		688			—			688			2,341			—			2,341
	Net interest expense and other financing charges		(141,125	)		(5,307	)		(146,432	)		(280,482	)		(10,187	)		(290,669	)
	General and administrative expenses		(13,649	)		—			(13,649	)		(28,211	)		—			(28,211	)
	Share of income from equity accounted joint ventures		3,353			(3,353	)		—			26,177			(26,177	)		—
	Amortization of intangible assets		(250	)		—			(250	)		(500	)		—			(500	)
	Transaction costs and other related expenses		(9	)		—			(9	)		(34	)		—			(34	)
	Adjustment to fair value of unit-based compensation		998			—			998			1,730			—			1,730
	Adjustment to fair value of Exchangeable Units		375,997			—			375,997			470,986			—			470,986
	Adjustment to fair value of investment properties		86,053			(132	)		85,921			161,820			15,932			177,752
	Adjustment to fair value of investment in real estate securities		(31,176	)		—			(31,176	)		(45,819	)		—			(45,819	)
Income before Income Taxes			535,668			—			535,668			806,473			—			806,473
	Income tax recovery (expense)		—			—			—			(1	)		—			(1	)
Net Income		$	535,668		$	—		$	535,668		$	806,472		$	—		$	806,472

(i)	Adjustments reflect the Trust’s share of net income (loss) 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 six months ended June 30, 2022:

		Three Months									Six Months
For the periods ended June 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	$	313,081		$	18,334		$	331,415		$	641,130		$	35,393		$	676,523
	Property operating costs		(91,303	)		(6,176	)		(97,479	)		(190,854	)		(12,938	)		(203,792	)
			221,778			12,158			233,936			450,276			22,455			472,731
Other Income and Expenses
	Interest income		1,983			3,200			5,183			9,474			(743	)		8,731
	Investment Income		5,165			—			5,165			5,165			—			5,165
	Fee income		696			—			696			1,787			—			1,787
	Net interest expense and other financing charges		(132,233	)		(4,344	)		(136,577	)		(263,036	)		(6,539	)		(269,575	)
	General and administrative expenses		(11,145	)		—			(11,145	)		(21,985	)		—			(21,985	)
	Share of income from equity accounted joint ventures		12,470			(12,470	)		—			127,066			(127,066	)		—
	Amortization of intangible assets		(250	)		—			(250	)		(500	)		—			(500	)
	Transaction costs and other related expenses		223			—			223			(5,013	)		—			(5,013	)
	Adjustment to fair value of unit-based compensation		2,064			—			2,064			998			—			998
	Adjustment to fair value of Exchangeable Units		569,933			—			569,933			451,197			—			451,197
	Adjustment to fair value of investment properties		(523,775	)		1,456			(522,319	)		(221,532	)		111,893			(109,639	)
	Adjustment to fair value of investment in real estate securities		(158,715	)		—			(158,715	)		(158,715	)		—			(158,715	)
Income (Loss) before Income Taxes			(11,806	)		—			(11,806	)		375,182			—			375,182
	Income tax recovery (expense)		(4	)		—			(4	)		(6	)		—			(6	)
Net Income (Loss)		$	(11,810	)	$	—		$	(11,810	)	$	375,176		$	—		$	375,176

(i)	Adjustments reflect the Trust’s share of net income (loss) 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 June 30 ($ thousands)	Three Months									Six Months
	2023			2022			Change $			2023			2022			Change $
Net Income (Loss)	$	535,668		$	(11,810	)	$	547,478		$	806,472		$	375,176		$	431,296
General and administrative expenses		13,649			11,145			2,504			28,211			21,985			6,226
Fee income		(688	)		(696	)		8			(2,341	)		(1,787	)		(554	)
Net interest expense and other financing charges		141,125			132,233			8,892			280,482			263,036			17,446
Interest income		(11,321	)		(1,983	)		(9,338	)		(20,296	)		(9,474	)		(10,822	)
Investment income		(5,315	)		(5,165	)		(150	)		(10,630	)		(5,165	)		(5,465	)
Share of income from equity accounted joint ventures		(3,353	)		(12,470	)		9,117			(26,177	)		(127,066	)		100,889
Amortization of intangible assets		250			250			—			500			500			—
Transaction costs and other related expenses		9			(223	)		232			34			5,013			(4,979	)
Adjustment to fair value of unit-based compensation		(998	)		(2,064	)		1,066			(1,730	)		(998	)		(732	)
Adjustment to fair value of Exchangeable Units		(375,997	)		(569,933	)		193,936			(470,986	)		(451,197	)		(19,789	)
Adjustment to fair value of investment properties		(86,053	)		523,775			(609,828	)		(161,820	)		221,532			(383,352	)
Adjustment to fair value of investment in real estate securities		31,176			158,715			(127,539	)		45,819			158,715			(112,896	)
Income tax recovery (expense)		—			4			(4	)		1			6			(5	)
Net Operating Income, Accounting Basis - GAAP		238,152			221,778			16,374			467,539			450,276			17,263
Straight-line rental revenue		898			(210	)		1,108			1,877			(721	)		2,598
Lease surrender revenue		(8,207	)		(1,886	)		(6,321	)		(8,218	)		(2,284	)		(5,934	)
Net Operating Income, Cash Basis - GAAP		230,843			219,682			11,161			461,198			447,271			13,927
Adjustments for equity accounted joint ventures and financial real estate assets		12,687			11,617			1,070			26,384			21,305			5,079
Net Operating Income, Cash Basis - Proportionate Share	$	243,530		$	231,299		$	12,231		$	487,582		$	468,576		$	19,006

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 June 30 ($ thousands)	Three Months									Six Months
	2023			2022			Change $			2023			2022			Change $
Net Operating Income, Cash Basis - Proportionate Share	$	243,530		$	231,299		$	12,231		$	487,582		$	468,576		$	19,006
Less:
Transactions NOI, Cash Basis		(10,420	)		(7,761	)		(2,659	)		(21,281	)		(23,651	)		2,370
Same-Asset NOI, Cash Basis	$	233,110		$	223,538		$	9,572		$	466,301		$	444,925		$	21,376

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

	Three Months									Six Months
For the periods ended June 30 ($ thousands)	2023			2022			Change $			2023			2022			Change $
Net Income (Loss)	$	535,668		$	(11,810	)	$	547,478		$	806,472		$	375,176		$	431,296
Amortization of intangible assets		250			250			—			500			500			—
Transaction costs and other related expenses		9			(223	)		232			34			5,013			(4,979	)
Adjustment to fair value of unit-based compensation		(998	)		(2,064	)		1,066			(1,730	)		(998	)		(732	)
Adjustment to fair value of Exchangeable Units		(375,997	)		(569,933	)		193,936			(470,986	)		(451,197	)		(19,789	)
Adjustment to fair value of investment properties		(86,053	)		523,775			(609,828	)		(161,820	)		221,532			(383,352	)
Adjustment to fair value of investment property held in equity accounted joint ventures		132			(1,456	)		1,588			(15,932	)		(111,893	)		95,961
Adjustment to fair value of investment in real estate securities		31,176			158,715			(127,539	)		45,819			158,715			(112,896	)
Interest otherwise capitalized for development in equity accounted joint ventures		2,939			2,488			451			5,854			2,728			3,126
Exchangeable Units distributions		74,210			73,221			989			147,761			146,442			1,319
Internal expenses for leasing		2,254			2,323			(69	)		4,508			4,402			106
Income tax recovery (expense)		—			4			(4	)		1			6			(5	)
Funds from Operations	$	183,590		$	175,290		$	8,300		$	360,481		$	350,426		$	10,055
FFO per Unit - diluted	$	0.254		$	0.242		$	0.012		$	0.498		$	0.484		$	0.014
Weighted average number of Units outstanding - diluted^(i)		723,656,668			723,593,236			63,432			723,668,276			723,530,507			137,769

(i)	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									Six Months
For the periods ended June 30 ($ thousands)	2023			2022			Change $			2023			2022			Change
Funds from Operations	$	183,590		$	175,290		$	8,300		$	360,481		$	350,426		$	10,055
Internal expenses for leasing		(2,254	)		(2,323	)		69			(4,508	)		(4,402	)		(106	)
Straight-line rental revenue		898			(210	)		1,108			1,877			(721	)		2,598
Adjustment for proportionate share of straight-line rental revenue from equity accounted joint ventures and financial real estate assets		(777	)		(541	)		(236	)		(1,434	)		(940	)		(494	)
Property capital		(5,764	)		(2,998	)		(2,766	)		(7,512	)		(5,362	)		(2,150	)
Direct leasing costs		(793	)		(1,358	)		565			(2,584	)		(3,157	)		573
Tenant improvements		(3,686	)		(3,320	)		(366	)		(10,129	)		(9,437	)		(692	)
Adjustment for proportionate share of operating capital expenditures from equity accounted joint ventures and financial real estate assets		(814	)		(832	)		18			(1,412	)		(1,950	)		538
Adjusted Funds from Operations	$	170,400		$	163,708		$	6,692		$	334,779		$	324,457		$	10,322
AFFO per unit - diluted	$	0.235		$	0.226		$	0.009		$	0.463		$	0.448		$	0.015
AFFO payout ratio - diluted^(i)		79.6	%		81.8	%		(2.2	)%		80.7	%		82.5	%		(1.8	)%
Distribution declared per Unit	$	0.188		$	0.185		$	0.003		$	0.374		$	0.370		$	0.004
Weighted average number of Units outstanding - diluted^(ii)		723,656,668			723,593,236			63,432			723,668,276			723,530,507			137,769

(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 2023 Second 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 Friday, July 21, 2023 at 10:00 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.