Choice Properties Real Estate Investment Trust Reports Results for the Nine Months Ended September 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 nine months ended September 30, 2023. The 2023 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.sedarplus.ca.

“We delivered positive operating and financial results in the third quarter. Our performance is supported by stable cash flows, reflecting the strength of our necessity-based portfolio and demand for our well-located industrial assets, as well as an industry leading balance sheet,” said Rael Diamond, President and Chief Executive Officer of the Trust. “In a volatile economic environment, Choice is well positioned to execute on our strategic priorities and deliver strong and consistent operating performance.”

2023 Third Quarter Highlights

• Reported net income for the quarter of $435.9 million, as compared to net income of $948.1 million in the third quarter of 2022. The decrease in net income from the prior year was primarily due to non-cash fair value changes.
• Reported FFO per unit diluted⁽¹⁾ was $0.250, an increase of 4.6% compared to the third quarter of 2022.
• Period end occupancy of 97.7%.
  • Retail at 97.7%, Industrial at 98.3% and Mixed-Use & Residential at 88.6%.
• Same-Asset NOI on a cash basis⁽¹⁾ increased by 4.4% compared to the third quarter of 2022.
  • Retail increased by 3.4%;
  • Industrial increased by 9.1%; and
  • Mixed-Use & Residential increased by 6.8%.
• Transferred $60.6 million of properties under development to income producing status, delivering approximately 322,296 square feet of new GLA on a proportionate share basis⁽¹⁾, including the final phase of the Trust’s Horizon Business Park Industrial development in Edmonton, AB.
• Invested $44.8 million of capital in development on a proportionate share basis⁽¹⁾.
• Completed an issuance of $350.0 million Series T senior unsecured debentures bearing interest at 5.699% with a 10.5-year term and repaid upon maturity $200.0 million Series B senior unsecured debentures, bearing interest at 4.903%.
• Obtained CMHC-insured mortgages, secured by two residential properties in Toronto (the Brixton and Liberty House), of $162.1 million at share, bearing interest at an average rate of 4.126% and a term of 10 years.
• Ended the quarter in a strong liquidity position with $1.5 billion of available credit under the Trust’s revolving credit facility, a $12.4 billion pool of unencumbered properties and Adjusted Debt to EBITDAFV⁽¹⁾ of 7.4x (net of cash - 7.3x).
• Subsequent to the end of the quarter, transferred two projects from properties under development to income producing status, the Element in Ottawa, ON, a 126 unit residential building, and Choice Industrial Centre in Surrey, BC, a 353,000 sq. ft. new generation industrial facility.

^(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, 2023			September 30, 2022		Change $			September 30, 2023		September 30, 2022			Change $
Net Income	$	435,903		$	948,077	$	(512,174	)	$	1,242,375	$	1,323,253		$	(80,878	)
Net income per unit diluted		0.602			1.310		(0.708	)		1.717		1.829			(0.112	)
Rental revenue		325,077			309,082		15,995			980,061		950,212			29,849
Fair value gain on Exchangeable Units^(i)		352,250			577,848		(225,598	)		823,236		1,029,045			(205,809	)
Fair value gains (losses) excluding Exchangeable Units^(ii)		(17,339	)		72,906		(90,245	)		100,392		(306,343	)		406,735
Cash flows from operating activities		149,246			196,900		(47,654	)		434,305		471,428			(37,123	)
Weighted average number of Units outstanding - diluted^(iii)		723,664,818			723,577,162		87,656			723,667,850		723,530,507			137,343

(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 $435.9 million for the third quarter of 2023 as compared to net income of $948.1 million in the third quarter of 2022. The decrease of $512.2 million compared to the prior year was primarily due to:

• a $225.6 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⁽ⁱ⁾;
• a $206.5 million decrease in income from equity accounted joint ventures primarily due to fair value gains recognized in the industrial development portfolio in 2022; and
• a $114.5 million unfavourable change in the adjustment to the fair value of investment properties, driven by a smaller gain on investment properties in the third quarter of 2023 compared to the third quarter of 2022.

Year-to-date Results

Choice Properties reported net income of $1,242.4 million for the nine months ended September 30, 2023 as compared to $1,323.3 million for the nine months ended September 30, 2022. The decrease of $80.9 million compared to the prior year was mainly due to:

• a $307.3 million decrease in income from equity accounted joint ventures primarily due to fair value gains recognized in the industrial development portfolio in 2022; and
• a $205.8 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; partially offset by
• a $268.9 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 loss on investment properties in the prior year; and
• a $137.0 million favourable change in the adjustment to the fair value of the Trust’s investment in the real estate securities of Allied Properties Exchangeable Limited Partnership, a subsidiary of Allied Properties Real Estate Investment Trust (“Allied”), driven by the mark-to-market loss in 2023 being significantly smaller than the mark-to-market loss recorded in 2022.

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, 2023			September 30, 2022			Change $			September 30, 2023			September 30, 2022			Change $
Rental revenue^(i)	$	344,879		$	328,320		$	16,559		$	1,042,115		$	1,004,843		$	37,272
Net Operating Income (“NOI”), cash basis^(i)		244,886			234,540			10,346			732,468			703,116			29,352
Same-Asset NOI, cash basis^(i)		235,772			225,748			10,024			702,070			670,672			31,398
Adjustment to fair value of investment properties^(i)		26,429			344,245			(317,816	)		204,181			234,606			(30,425	)
Occupancy (% of GLA)		97.7	%		97.7	%		—	%		97.7	%		97.7	%		—	%
Funds from operations (“FFO”)^(i)		181,013			173,119			7,894			541,494			523,545			17,949
FFO^(i) per unit diluted		0.250			0.239			0.011			0.748			0.724			0.024
Adjusted funds from operations (“AFFO”)^(i)		136,558			130,360			6,198			471,337			454,817			16,520
AFFO^(i) per unit diluted		0.189			0.180			0.009			0.651			0.629			0.022
AFFO^(i) payout ratio - diluted		99.4	%		102.7	%		(3.3	)%		86.1	%		88.3	%		(2.2	)%
Cash distributions declared		135,684			133,856			1,828			405,846			401,549			4,297
Weighted average number of Units outstanding - diluted^(ii)		723,664,818			723,577,162			87,656			723,667,850			723,530,507			137,343

(i)	Refer to Non-GAAP Financial Measures and Additional Financial Information section.
(ii)	Includes Trust Units and Exchangeable Units.

Quarterly and Year-to-date Results

For the three and nine months ended September 30, 2023, Same-Asset NOI, cash basis⁽ⁱ⁾ increased by $10.0 million and $31.4 million, respectively, compared to the prior year, primarily due to increased revenue from higher rental rates on renewals, new leasing, and contractual rent steps, mainly in the retail and industrial portfolios. Higher capital and operating recoveries also contributed to the increases.

FFO increased by $7.9 million and $17.9 million for the three and nine months ended September 30, 2023, respectively. The increases were primarily due to the increase in Same-Asset NOI, higher lease surrender revenue, and an increase in interest income. The increases were partially offset by higher interest expense and general and administrative expenses. The nine month increase was also offset by the impact of 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 Class B limited partnership units of Allied Properties Exchangeable Limited Partnership (“Allied 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 have successfully completed our 2023 lease renewals. 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 has continued to focus on its core business of essential retail and industrial, our growing residential platform and our robust development pipeline, and based on its year-to-date operating and financial performance, including certain non-recurring items now expects:

• Stable occupancy across the portfolio, resulting in 4-5% year-over-year growth in Same-Asset NOI, Cash Basis;
• Annual FFO per unit Diluted in a range of $0.99 to $1.00, reflecting 3-4% 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, Cash Basis 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, and Adjusted Debt to EBITDAFV, net of cash	Calculated as Total Adjusted Debt divided by EBITDAFV. This ratio is used to assess the financial leverage of Choice Properties, 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, 2023:

		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	$	325,077		$	19,802		$	344,879		$	980,061		$	62,054		$	1,042,115
	Property operating costs		(87,229	)		(6,469	)		(93,698	)		(274,674	)		(20,691	)		(295,365	)
			237,848			13,333			251,181			705,387			41,363			746,750
Other Income and Expenses
	Interest income		11,147			(2,958	)		8,189			31,443			(10,556	)		20,887
	Investment income		5,315			—			5,315			15,945			—			15,945
	Fee income		821			—			821			3,162			—			3,162
	Net interest expense and other financing charges		(142,292	)		(5,206	)		(147,498	)		(422,774	)		(15,393	)		(438,167	)
	General and administrative expenses		(16,420	)		—			(16,420	)		(44,631	)		—			(44,631	)
	Share of income from equity accounted joint ventures		4,823			(4,823	)		—			31,000			(31,000	)		—
	Amortization of intangible assets		(250	)		—			(250	)		(750	)		—			(750	)
	Transaction costs and other related expenses		—			—			—			(34	)		—			(34	)
	Adjustment to fair value of unit-based compensation		643			—			643			2,373			—			2,373
	Adjustment to fair value of Exchangeable Units		352,250			—			352,250			823,236			—			823,236
	Adjustment to fair value of investment properties		26,775			(346	)		26,429			188,595			15,586			204,181
	Adjustment to fair value of investment in real estate securities		(44,757	)		—			(44,757	)		(90,576	)		—			(90,576	)
Income before Income Taxes			435,903			—			435,903			1,242,376			—			1,242,376
	Income tax recovery (expense)		—			—			—			(1	)		—			(1	)
Net Income		$	435,903		$	—		$	435,903		$	1,242,375		$	—		$	1,242,375

(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 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 from equity accounted joint ventures		211,279			(211,279	)		—			338,345			(338,345	)		—
	Amortization of intangible assets		(250	)		—			(250	)		(750	)		—			(750	)
	Transaction costs and other related expenses		(13	)		—			(13	)		(5,026	)		—			(5,026	)
	Adjustment to fair value of unit-based compensation		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 (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 September 30 ($ thousands)	Three Months									Nine Months
		2023			2022		Change $				2023			2022		Change $
Net Income	$	435,903		$	948,077		$	(512,174	)	$	1,242,375		$	1,323,253		$	(80,878	)
Interest income		(11,147	)		(5,195	)		(5,952	)		(31,443	)		(14,669	)		(16,774	)
Investment income		(5,315	)		(5,165	)		(150	)		(15,945	)		(10,330	)		(5,615	)
Fee income		(821	)		(714	)		(107	)		(3,162	)		(2,501	)		(661	)
Net interest expense and other financing charges		142,292			136,574			5,718			422,774			399,610			23,164
General and administrative expenses		16,420			11,360			5,060			44,631			33,345			11,286
Share of income from equity accounted joint ventures		(4,823	)		(211,279	)		206,456			(31,000	)		(338,345	)		307,345
Amortization of intangible assets		250			250			—			750			750			—
Transaction costs and other related expenses		—			13			(13	)		34			5,026			(4,992	)
Adjustment to fair value of unit-based compensation		(643	)		(476	)		(167	)		(2,373	)		(1,474	)		(899	)
Adjustment to fair value of Exchangeable Units		(352,250	)		(577,848	)		225,598			(823,236	)		(1,029,045	)		205,809
Adjustment to fair value of investment properties		(26,775	)		(141,277	)		114,502			(188,595	)		80,255			(268,850	)
Adjustment to fair value of investment in real estate securities		44,757			68,847			(24,090	)		90,576			227,562			(136,986	)
Income tax (recovery) expense		—			(4	)		4			1			2			(1	)
Net Operating Income, Accounting Basis - GAAP		237,848			223,163			14,685			705,387			673,439			31,948
Straight-line rental revenue		839			(995	)		1,834			2,716			(1,716	)		4,432
Lease surrender revenue		(6,219	)		(70	)		(6,149	)		(14,437	)		(2,354	)		(12,083	)
Net Operating Income, Cash Basis - GAAP		232,468			222,098			10,370			693,666			669,369			24,297
Adjustments for equity accounted joint ventures and financial real estate assets		12,418			12,442			(24	)		38,802			33,747			5,055
Net Operating Income, Cash Basis - Proportionate Share	$	244,886		$	234,540		$	10,346		$	732,468		$	703,116		$	29,352

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									Nine Months
		2023			2022		Change $				2023			2022		Change $
Net Operating Income, Cash Basis - Proportionate Share	$	244,886		$	234,540		$	10,346		$	732,468		$	703,116		$	29,352
Less:
Transactions NOI, Cash Basis		(9,114	)		(8,792	)		(322	)		(30,398	)		(32,444	)		2,046
Same-Asset NOI, Cash Basis	$	235,772		$	225,748		$	10,024		$	702,070		$	670,672		$	31,398

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)		2023			2022		Change $				2023			2022		Change $
Net Income	$	435,903		$	948,077		$	(512,174	)	$	1,242,375		$	1,323,253		$	(80,878	)
Add (deduct) impact of the following:
Amortization of intangible assets		250			250			—			750			750			—
Transaction costs and other related expenses		—			13			(13	)		34			5,026			(4,992	)
Adjustment to fair value of unit-based compensation		(643	)		(476	)		(167	)		(2,373	)		(1,474	)		(899	)
Adjustment to fair value of Exchangeable Units		(352,250	)		(577,848	)		225,598			(823,236	)		(1,029,045	)		205,809
Adjustment to fair value of investment properties		(26,775	)		(141,277	)		114,502			(188,595	)		80,255			(268,850	)
Adjustment to fair value of investment property held in equity accounted joint ventures		346			(202,968	)		203,314			(15,586	)		(314,861	)		299,275
Adjustment to fair value of investment in real estate securities		44,757			68,847			(24,090	)		90,576			227,562			(136,986	)
Interest otherwise capitalized for development in equity accounted joint ventures		2,933			3,071			(138	)		8,787			5,799			2,988
Exchangeable Units distributions		74,210			73,221			989			221,971			219,663			2,308
Internal expenses for leasing		2,282			2,213			69			6,790			6,615			175
Income tax (recovery) expense		—			(4	)		4			1			2			(1	)
Funds from Operations	$	181,013		$	173,119		$	7,894		$	541,494		$	523,545		$	17,949
FFO per unit - diluted	$	0.250		$	0.239		$	0.011		$	0.748		$	0.724		$	0.024
Weighted average number of Units outstanding - diluted^(i)		723,664,818			723,577,162			87,656			723,667,850			723,530,507			137,343

(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									Nine Months
For the periods ended September 30 ($ thousands)		2023			2022		Change $				2023			2022		Change $
Funds from Operations	$	181,013		$	173,119		$	7,894		$	541,494		$	523,545		$	17,949
Add (deduct) impact of the following:
Internal expenses for leasing		(2,282	)		(2,213	)		(69	)		(6,790	)		(6,615	)		(175	)
Straight-line rental revenue		839			(995	)		1,834			2,716			(1,716	)		4,432
Adjustment for proportionate share of straight-line rental revenue from equity accounted joint ventures and financial real estate assets		(925	)		(475	)		(450	)		(2,359	)		(1,415	)		(944	)
Property capital		(31,513	)		(30,119	)		(1,394	)		(39,025	)		(35,481	)		(3,544	)
Direct leasing costs		(1,681	)		(3,326	)		1,645			(4,265	)		(6,483	)		2,218
Tenant improvements		(8,323	)		(4,757	)		(3,566	)		(18,452	)		(14,194	)		(4,258	)
Adjustment for proportionate share of operating capital expenditures from equity accounted joint ventures and financial real estate assets		(570	)		(874	)		304			(1,982	)		(2,824	)		842
Adjusted Funds from Operations	$	136,558		$	130,360		$	6,198		$	471,337		$	454,817		$	16,520
AFFO per unit - diluted	$	0.189		$	0.180		$	0.009		$	0.651		$	0.629		$	0.022
AFFO payout ratio - diluted^(i)		99.4	%		102.7	%		(3.3	)%		86.1	%		88.3	%		(2.2	)%
Distribution declared per unit	$	0.188		$	0.185		$	0.003		$	0.561		$	0.555		$	0.006
Weighted average number of units outstanding - diluted^(ii)		723,664,818			723,577,162			87,656			723,667,850			723,530,507			137,343

(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 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.sedarplus.ca.

Conference Call and Webcast

Management will host a conference call on Thursday, November 9, 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.sedarplus.ca.

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.