Choice Properties Real Estate Investment Trust Reports Results for the Year Ended December 31, 2023, 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 year ended December 31, 2023. The 2023 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.sedarplus.ca.

“Our business delivered strong financial and operational performance for the quarter and year ended December 31, 2023, reflecting the strength and resilience of our grocery-anchored and necessity-based retail portfolio and demand for our well-located industrial assets,” said Rael Diamond, President and Chief Executive Officer of the Trust. “In 2023 our team continued to execute on our strategic priorities, further improving the quality of our portfolio by completing over $600 million of real estate transactions and by delivering over $425 million of development projects, adding 1.8 million square feet of new commercial retail and industrial space and a new purpose-built residential rental building to our portfolio. Supported by our stable and growing cash flows and solid financial position, we are pleased to announce another annual distribution increase for unitholders.”

2023 Fourth Quarter Highlights

• In the fourth quarter, the Trust recorded an unfavourable non-cash fair value adjustment on Exchangeable Units of $502.6 million due to the increase in the Trust’s unit price. Unfavourable non-cash fair value adjustments on Exchangeable Units were the primary drivers of the net loss of $445.7 million reported for the fourth quarter of 2023 and the net loss of $579.0 million reported for the fourth quarter of 2022.
• Reported FFO per unit diluted⁽¹⁾ was $0.255, an increase of 5.8% compared to the fourth quarter of 2022.
• Period end occupancy of 98.0%.
  • Retail at 97.7%, Industrial at 99.0% and Mixed-Use & Residential at 94.2%.
• Same-Asset NOI on a cash basis⁽¹⁾ increased by 4.2% compared to the fourth quarter of 2022.
  • Retail increased by 3.2%;
  • Industrial increased by 8.5%; and
  • Mixed-Use & Residential increased by 9.3%.
• Completed $238.1 million of transactions in the quarter, including:
  • The acquisition of two retail properties and one industrial property from Loblaw for an aggregate purchase price of $82.5 million;
  • The disposition of four properties previously classified as asset held for sale as at September 30, 2023, including one retail property, two industrial properties, and Choice’s remaining non-core office property for aggregate proceeds of $92.8 million; and
  • The disposition of two retail properties, one parcel of land adjacent to a retail site, and one industrial property for aggregate proceeds of $62.8 million.
• Transferred $354.7 million of properties under development to income producing status, with a cost of $233.8 million and an average yield of 7.9%. This delivered approximately 1,434,000 square feet of new commercial GLA on a proportionate share basis⁽¹⁾, including Choice Eastway Industrial Centre located in East Gwillimbury, ON, and Choice Industrial Centre located in Surrey, BC, as well as Element, a purpose-built residential rental building located in Ottawa, ON, with 126 units at the Trust’s share.
• Invested $92.1 million of capital in development on a proportionate share basis⁽¹⁾.
• Ended the quarter in a strong liquidity position with $1.5 billion of available credit under the Trust’s revolving credit facility, a $12.7 billion pool of unencumbered properties and Adjusted Debt to EBITDAFV⁽¹⁾ of 7.2x (net of cash - 7.0x).
• Subsequent to the end of the quarter, the Trust:
  • Increased distributions to $0.76 per unit per annum from the previous rate of $0.75 per unit per annum, an increase of 1.3%. The increase will be effective for Unitholders of record on March 31, 2024.
  • Repaid $200.0 million, 4.29% Series D senior unsecured debentures upon maturity on February 8, 2024.

2023 Select Annual Highlights

• Reported net income of $796.7 million, as compared to net income of $744.3 million in 2022.
• On a full-year comparative basis, the Trust:
  • Maintained stable occupancy across the portfolio, resulting in 4.6% growth in Same-Asset NOI on a cash basis⁽¹⁾.
  • Reported FFO per unit diluted⁽¹⁾ was $1.003, an increase of 4.0%.
  • Reported a modest improvement in Adjusted Debt to EBITDAFV⁽¹⁾ ending the year at 7.2x.

^(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, 2023			December 31, 2022			Change $			December 31, 2023		December 31, 2022			Change $
Net income (loss)	$	(445,684	)	$	(579,000	)	$	133,316		$	796,691	$	744,253		$	52,438
Net income (loss) per unit diluted		(0.616	)		(0.800	)		0.184			1.101		1.029			0.072
Rental revenue		329,109			314,382			14,727			1,309,170		1,264,594			44,576
Fair value gain (loss) on Exchangeable Units^(i)		(502,649	)		(858,857	)		356,208			320,587		170,188			150,399
Fair value gains (losses) excluding Exchangeable Units^(ii)		(49,310	)		169,921			(219,231	)		51,082		(136,422	)		187,504
Cash flows from operating activities		207,667			191,260			16,407			641,972		668,418			(26,446	)
Weighted average number of Units outstanding - diluted^(iii)		723,662,727			723,586,201			76,526			723,666,503		723,523,362			143,141

(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 a net loss of $445.7 million for the fourth quarter of 2023 as compared to net loss of $579.0 million in the fourth quarter of 2022. The improvement of $133.3 million compared to the prior year was primarily due to changes in the non-cash adjustment to fair values including:

• a $356.2 million favourable change in the adjustment to fair value of the Trust’s Exchangeable Units due to the change in the Trust’s Unit price⁽ⁱ⁾;
• a $47.4 million favourable change in the adjustment to 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 increase in Allied’s unit price in the fourth quarter, compared to a decrease in the fourth quarter of 2022; partially offset by,
• a $267.8 million unfavourable change in the adjustment to fair value of investment properties, as a result of a fair value loss recognized in the fourth quarter of 2023 compared to a fair value gain recognized in the fourth quarter of 2022.

Full Year Results

Choice Properties reported net income of $796.7 million for the year ended December 31, 2023 as compared to $744.3 million for the year ended December 31, 2022. The increase of $52.4 million compared to the prior year was mainly due to changes in the non-cash adjustment to fair values including:

• a $184.3 million favourable change in the adjustment to 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 smaller than the mark-to-market loss recorded in 2022;
• a $150.4 million favourable change in the adjustment to fair value of the Trust’s Exchangeable Units due to the change in the Trust’s Unit price; partially offset by
• a $314.8 million decrease in income from equity accounted joint ventures primarily due to fair value gains recognized in the industrial development portfolio in 2022.

In addition to the changes described above, increases in net operating income, interest income and investment income, partially offset by increases in interest expense and general and administrative expenses contributed to the increase in net income.

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, 2023			December 31, 2022			Change $			December 31, 2023			December 31, 2022			Change $
Rental revenue^(i)	$	350,300		$	334,674		$	15,626		$	1,392,415		$	1,339,517		$	52,898
Net Operating Income (“NOI”), cash basis^(i)		247,037			238,819			8,218			979,505			941,935			37,570
Same-Asset NOI, cash basis^(i)		236,861			227,273			9,588			932,101			891,111			40,990
Adjustment to fair value of investment properties^(i)		(73,281	)		207,247			(280,528	)		130,900			441,853			(310,953	)
Occupancy (% of GLA)		98.0	%		97.9	%		0.1	%		98.0	%		97.9	%		0.1	%
Funds from operations (“FFO”)^(i)		184,640			174,183			10,457			726,134			697,728			28,406
FFO^(i) per unit diluted		0.255			0.241			0.014			1.003			0.964			0.039
Adjusted funds from operations (“AFFO”)^(i)		127,095			126,935			160			598,432			581,752			16,680
AFFO^(i) per unit diluted		0.176			0.175			0.001			0.827			0.804			0.023
AFFO^(i) payout ratio - diluted		106.8	%		105.5	%		1.3	%		90.5	%		92.0	%		(1.5	)%
Cash distributions declared		135,683			133,858			1,825			541,529			535,407			6,122
Weighted average number of Units outstanding - diluted^(ii)		723,662,727			723,586,201			76,526			723,666,503			723,523,362			143,141

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

Quarterly and Full Year Results

For the three months and year ended December 31, 2023, Same-Asset NOI, cash basis⁽ⁱ⁾ increased by $9.6 million and $41.0 million, respectively, compared to the prior year, primarily due to increased rental revenue from higher rental rates on renewals, new leasing, and contractual rent steps, mainly in the retail and industrial portfolios, and higher capital and operating recoveries.

FFO⁽ⁱ⁾ increased by $10.5 million and $28.4 million for the three months and year ended December 31, 2023, respectively. The increases were primarily due to an increase in net operating income, an increase in investment income due to the special distribution by Allied as a result of the sale of their urban data centre portfolio, income from the sale of residential inventory, and an increase in interest income. The increases were partially offset by increases in interest expense and general and administrative expenses. The full year increase was also partially offset by the impact of the sale of six office properties to Allied 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 are well positioned to complete our 2024 lease renewals. We also continue to advance our development program, with a focus on commercial developments in the near term, 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. In 2024, 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 2.5%-3.0% year-over-year growth in Same-Asset NOI, cash basis;
• Annual FFO per unit diluted in a range of $1.02 to $1.03, reflecting 2.0%-3.0% year-over-year growth; and
• Strong leverage metrics, targeting Adjusted Debt to EBITDAFV slightly below 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 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, 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 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, 2023:

		Three Months									Year Ended
($ thousands)		GAAP Basis			Consolidation and eliminations^(i)			Proportionate Share Basis			GAAP Basis			Consolidation and eliminations^(i)			Proportionate Share Basis
Net Operating Income
	Rental revenue	$	329,109		$	21,191		$	350,300		$	1,309,170		$	83,245		$	1,392,415
	Property operating costs		(94,386	)		(7,658	)		(102,044	)		(369,060	)		(28,349	)		(397,409	)
			234,723			13,533			248,256			940,110			54,896			995,006
Residential Inventory Income
	Gross sales		25,634			—			25,634			25,634			—			25,634
	Cost of sales		(21,008	)		—			(21,008	)		(21,008	)		—			(21,008	)
			4,626			—			4,626			4,626			—			4,626
Other Income and Expenses
	Interest income		9,971			(1,195	)		8,776			41,414			(11,751	)		29,663
	Investment income		10,983			—			10,983			26,928			—			26,928
	Fee income		1,125			—			1,125			4,287			—			4,287
	Net interest expense and other financing charges		(143,373	)		(5,433	)		(148,806	)		(566,147	)		(20,826	)		(586,973	)
	General and administrative expenses		(19,599	)		—			(19,599	)		(64,230	)		—			(64,230	)
	Share of income from equity accounted joint ventures		8,069			(8,069	)		—			39,069			(39,069	)		—
	Amortization of intangible assets		(250	)		—			(250	)		(1,000	)		—			(1,000	)
	Transaction costs and other related expenses		—			—			—			(34	)		—			(34	)
	Adjustment to fair value of unit-based compensation		(1,435	)		—			(1,435	)		938			—			938
	Adjustment to fair value of Exchangeable Units		(502,649	)		—			(502,649	)		320,587			—			320,587
	Adjustment to fair value of investment properties		(74,445	)		1,164			(73,281	)		114,150			16,750			130,900
	Adjustment to fair value of investment in real estate securities		26,570			—			26,570			(64,006	)		—			(64,006	)
Income (Loss) before Income Taxes			(445,684	)		—			(445,684	)		796,692			—			796,692
	Income tax recovery (expense)		—			—			—			(1	)		—			(1	)
Net Income (Loss)		$	(445,684	)	$	—		$	(445,684	)	$	796,691		$	—		$	796,691

(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 months and year ended December 31, 2022:

		Three Months									Year Ended
($ 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 from equity accounted joint ventures		15,522			(15,522	)		—			353,867			(353,867	)		—
	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	)		—			(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 (expense)		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 (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 December 31 ($ thousands)	Three Months									Year Ended
		2023			2022		Change $				2023			2022		Change $
Net Income (Loss)	$	(445,684	)	$	(579,000	)	$	133,316		$	796,691		$	744,253		$	52,438
Residential inventory income		(4,626	)		—			(4,626	)		(4,626	)		—			(4,626	)
Interest income		(9,971	)		(12,691	)		2,720			(41,414	)		(27,360	)		(14,054	)
Investment income		(10,983	)		(5,165	)		(5,818	)		(26,928	)		(15,495	)		(11,433	)
Fee income		(1,125	)		(1,292	)		167			(4,287	)		(3,793	)		(494	)
Net interest expense and other financing charges		143,373			137,247			6,126			566,147			536,857			29,290
General and administrative expenses		19,599			14,476			5,123			64,230			47,821			16,409
Share of income from equity accounted joint ventures		(8,069	)		(15,522	)		7,453			(39,069	)		(353,867	)		314,798
Amortization of intangible assets		250			250			—			1,000			1,000			—
Transaction costs and other related expenses		—			82			(82	)		34			5,108			(5,074	)
Adjustment to fair value of unit-based compensation		1,435			2,665			(1,230	)		(938	)		1,191			(2,129	)
Adjustment to fair value of Exchangeable Units		502,649			858,857			(356,208	)		(320,587	)		(170,188	)		(150,399	)
Adjustment to fair value of investment properties		74,445			(193,370	)		267,815			(114,150	)		(113,115	)		(1,035	)
Adjustment to fair value of investment in real estate securities		(26,570	)		20,784			(47,354	)		64,006			248,346			(184,340	)
Income tax (recovery) expense		—			(119	)		119			1			(117	)		118
Net Operating Income, Accounting Basis - GAAP		234,723			227,202			7,521			940,110			900,641			39,469
Straight-line rental revenue		(446	)		(838	)		392			2,270			(2,554	)		4,824
Lease surrender revenue		(147	)		(11	)		(136	)		(14,584	)		(2,365	)		(12,219	)
Net Operating Income, Cash Basis - GAAP		234,130			226,353			7,777			927,796			895,722			32,074
Adjustments for equity accounted joint ventures and financial real estate assets		12,907			12,466			441			51,709			46,213			5,496
Net Operating Income, Cash Basis - Proportionate Share	$	247,037		$	238,819		$	8,218		$	979,505		$	941,935		$	37,570

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
		2023			2022		Change $			2023			2022		Change $
Net Operating Income, Cash Basis - Proportionate Share	$	247,037		$	238,819		$	8,218	$	979,505		$	941,935		$	37,570
Less:
Transactions NOI, Cash Basis		(10,176	)		(11,546	)		1,370		(47,404	)		(50,824	)		3,420
Same-Asset NOI, Cash Basis	$	236,861		$	227,273		$	9,588	$	932,101		$	891,111		$	40,990

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)		2023			2022		Change $				2023			2022		Change $
Net Income (Loss)	$	(445,684	)	$	(579,000	)	$	133,316		$	796,691		$	744,253		$	52,438
Add (deduct) impact of the following:
Amortization of intangible assets		250			250			—			1,000			1,000			—
Transaction costs and other related expenses		—			82			(82	)		34			5,108			(5,074	)
Adjustment to fair value of unit-based compensation		1,435			2,665			(1,230	)		(938	)		1,191			(2,129	)
Adjustment to fair value of Exchangeable Units		502,649			858,857			(356,208	)		(320,587	)		(170,188	)		(150,399	)
Adjustment to fair value of investment properties		74,445			(193,370	)		267,815			(114,150	)		(113,115	)		(1,035	)
Adjustment to fair value of investment property held in equity accounted joint ventures		(1,164	)		(13,877	)		12,713			(16,750	)		(328,738	)		311,988
Adjustment to fair value of investment in real estate securities		(26,570	)		20,784			(47,354	)		64,006			248,346			(184,340	)
Interest otherwise capitalized for development in equity accounted joint ventures		2,670			2,790			(120	)		11,457			8,589			2,868
Exchangeable Units distributions		74,210			73,221			989			296,181			292,884			3,297
Internal expenses for leasing		2,399			1,900			499			9,189			8,515			674
Income tax (recovery) expense		—			(119	)		119			1			(117	)		118
Funds from Operations	$	184,640		$	174,183		$	10,457		$	726,134		$	697,728		$	28,406
FFO per unit - diluted	$	0.255		$	0.241		$	0.014		$	1.003		$	0.964		$	0.039
Weighted average number of Units outstanding - diluted^(i)		723,662,727			723,586,201			76,526			723,666,503			723,523,362			143,141

(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									Year Ended
For the periods ended December 31 ($ thousands)		2023			2022		Change $				2023			2022		Change $
Funds from Operations	$	184,640		$	174,183		$	10,457		$	726,134		$	697,728		$	28,406
Add (deduct) impact of the following:
Internal expenses for leasing		(2,399	)		(1,900	)		(499	)		(9,189	)		(8,515	)		(674	)
Straight-line rental revenue		(446	)		(838	)		392			2,270			(2,554	)		4,824
Adjustment for proportionate share of straight-line rental revenue from equity accounted joint ventures and financial real estate assets		(626	)		(658	)		32			(2,985	)		(2,073	)		(912	)
Property capital		(46,491	)		(35,456	)		(11,035	)		(85,516	)		(70,937	)		(14,579	)
Direct leasing costs		(1,357	)		(2,258	)		901			(5,622	)		(8,741	)		3,119
Tenant improvements		(4,381	)		(5,188	)		807			(22,833	)		(19,382	)		(3,451	)
Adjustment for proportionate share of operating capital expenditures from equity accounted joint ventures and financial real estate assets		(1,845	)		(950	)		(895	)		(3,827	)		(3,774	)		(53	)
Adjusted Funds from Operations	$	127,095		$	126,935		$	160		$	598,432		$	581,752		$	16,680
AFFO per unit - diluted	$	0.176		$	0.175		$	0.001		$	0.827		$	0.804		$	0.023
AFFO payout ratio - diluted^(i)		106.8	%		105.5	%		1.3	%		90.5	%		92.0	%		(1.5	)%
Distribution declared per unit	$	0.188		$	0.185		$	0.003		$	0.749		$	0.740		$	0.009
Weighted average number of units outstanding - diluted^(ii)		723,662,727			723,586,201			76,526			723,666,503			723,523,362			143,141

(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 Annual Report to Unitholders, which includes the audited 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, February 15, 2024 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, 2023 and those described in the Trust’s Annual Information Form for the year ended December 31, 2023.