September 2013 Based on Second Quarter 2013
Forward Looking Statements Certain statements contained in this document constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to the Choice Properties REIT s (the REIT ) future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the REIT. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the REIT or the real estate industry are forwardlooking statements. In some cases, forward-looking information can be identified by such terms such as may, might, will, could, should, would, occur, expect, plan, anticipate, believe, intend, estimate, predict, potential, continue, likely, schedule, or the negative thereof or other similar expressions concerning matters that are not historical facts. The REIT has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs, including that the Canadian economy will remain stable over the next 12 months, that inflation will remain relatively low, that interest rates will remain stable, that tax laws remain unchanged, that conditions within the real estate market, including competition for acquisitions, will be consistent with the current climate, that the Canadian capital markets will provide the REIT with access to equity and/or debt at reasonable rates when required and that Loblaw will continue its involvement with the REIT. Although the forward-looking statements contained in this document are based upon assumptions that management of the REIT believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the REIT s control, that may cause the REIT s or the industry s actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors discussed under Risk Factors of the REIT s preliminary prospectus filed on SEDAR.The forward-looking statements made in this prospectus relate only to events or information as of the date on which the statements are made in this document. Except as required by law, the REIT and Loblaw undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. 2
About Choice Properties A growth-oriented public real estate entity Growth Pipeline 35 million sq. ft. portfolio provides a stable and sizeable base for growth Access to future growth 12 million sq. ft. of remaining real estate held by Loblaw Store development and site intensification on existing portfolio Development 3.5 million sq. ft. Retained Portfolio 12 million sq. ft. IPO Portfolio 35 million sq. ft. 3
Our Objectives Provide unitholders with stable, predictable and growing monthly cash distributions Enhance value of property portfolio to maximize unitholder value Expand asset base while increasing AFFO per unit through accretive acquisitions and site intensification 4
Our Portfolio 425 Properties 415 Retail Properties 1 Office 9 Warehouses 35.3 million sq. ft. 5
Large, Diversified Portfolio 425 Properties, 35.3 million sq. ft. of GLA Portfolio NOI by Province Portfolio NOI by Property Type AB, 13.1% MB, 2.5% SK, 5.1% West Loblaw-Anchored Shopping Centres, 35.5% Stand-Alone Stores, 54.0% BC, 7.7% Ontario 43.2% NFLC, 1.7% PEI, 0.4% NS, 4.6% NB, 3.9% Atlantic 17.8% Quebec 59% Located in large urban centres Retail Properties without Loblaw Tenancy, 0.5% Warehouse, 7.9% Office, 2.1% 90% From retail focused properties 6
Loblaw Companies Limited Majority owner and major lender Single largest tenant 88% of initial GLA 93% of initial NOI Major partner in REIT growth Strategic Alliance Agreement Mutually beneficial business relationship 7
About Loblaw Canada s largest food distributor Leading provider of non-discretionary products and services food, drug, gas, and financial 22 well-know banners covering discount and conventional formats $13.5 billion market capitalization Stable profitable revenue growth with $31 billion revenues / $2 billion EBITDA in 2012 Strong balance sheet and long history of investment grade credit ratings 8
Ten-Year Strategic Alliance Agreement Rights of First Offer (ROFO) Choice has ROFO to purchase from Loblaw Loblaw has ROFO to purchase from Choice New Shopping Centre (SC) Acquisitions Choice has right of first opportunity to acquire SC presented by Loblaw Future SC development Choice has right to participate in future Loblaw s SC development and redevelopment Site Intensification Choice has right to intensify initial properties; upon substantial completion Loblaw receives payment from Choice Supermarket Properties Choice has right to purchase properties including supermarket properties from vendors other than Loblaw Loblaw has right of first offer to lease from Choice when supermarket use become available 9
Loblaw Leases 10 to 18 year initial term Series of five-year renewal options Between 40-100 years depending on province Contractual escalations built in ~1.5% average steady-state annual revenue growth after five years 10
Extended Lease Expiry 13 years weighted average term to maturity 14 years on Loblaw s leases 98% occupancy rate 11
Non-Loblaw Tenants 8.8% of base minimum rent No tenant accounts for more than 0.4% of base minimum rent 11.7% of total GLA No tenant accounts for more than 0.4% of total GLA Average lease term: 13.9 years 12
Growth Opportunities Organic Development Acquisitions Contractual rent increases 14 years average remaining term to maturity for Loblaw leases 1.5% average effective annual rent escalation once steady state reached 5 years post closing Leasing Focused marketing and merchandising for current vacancy and lease renewal Property management Annualized capital ~$30M ~93% recoverable or directly paid by tenants Intensification potential ~3.5M sq. ft. of at-grade GLA expansion potential Intensification payment paid to Loblaw only upon substantial completion New development opportunities In partnership with Loblaw or proven third-party Right of first offer to acquire additional Loblaw properties Pipeline of ~12 million sq. ft. of GLA Opportunity to acquire properties developed or acquired by Loblaw Third-party acquisitions Focus on high quality supermarket anchored properties 13
Intensification Payment Grid Region Atlantic Canada Factor Market Ranking Factor Type of Use Factor 0.90 AAA 1.35 Retail 2.00 Quebec 1.00 AA 1.20 Office 1.00 Ontario 1.50 A 1.00 Industrial 0.75 Western Canada 1.50 B 0.85 Rental Residential 1.25 C 0.70 Condo Residential 1.40 Value of additional site density not included in initial purchase price Free carry in initial portfolio includes adjacent lands or pads Incentive to develop excess density Mutually beneficial opportunity to maximize value and density to help drive complementary traffic to anchor tenant 14
Capital Structure ($ millions) Transferor Notes $1,940 Debentures $600 Class C LP Units $925 Total Debt & Class C LP Units $3,465 Issued $460 million of equity George Weston Ltd. subscribed for an additional $200 million of equity Balance is held by Loblaw Equity $3,583 Enterprise Value $7,108 15
Conservative Balance Sheet and Investment Grade Rating 3.3x service coverage ratio Up to 50% Consolidated Debt and Class C LP Units to Aggregate Adjusted Assets Staggered debt maturity profile 100% unsecured debt $500 million undrawn 5-year revolving credit facility 400 350 300 250 200 150 100 50 0 150 60 90 350 300 400 200 200 300 200 300 200 BBB Investment Grade Rating 300 300 325 Transferor Notes Debentures Class C LP Units Debt Maturity & Class C LP Unit Redemption Dates 1 ($ millions) * Note: Class C LP units are redeemable by Loblaw beginning in 2027. REIT has the option to settle in cash or Class B LP units 16
Experienced Board Of Trustees Trustees Position/Title Independent Committees Principal Occupation Galen G. Weston Ontario, Canada Chair No Executive Chairman, Loblaw Christie J.B. Clark Ontario, Canada Trustee Yes Governance, Compensation and Nominating Committee Corporate Director Graeme Eadie Ontario, Canada Michelle Felman Connecticut, United States Michael P. Kitt Ontario, Canada Daniel F. Sullivan Ontario, Canada Trustee Yes Audit Committee Trustee Trustee Lead Trustee Yes Yes Yes Governance, Compensation and Nominating Committee Audit Committee Governance, Compensation and Nominating Committee Governance, Compensation and Nominating Committee (Chair) Senior Vice President, Head of Real Estate Investments for Canada Pension Plan Investment Board Consultant, Vornado Realty Trust Executive Vice President, Canada for Oxford Properties Group Corporate Director Paul R. Weiss Ontario, Canada Trustee Yes Audit Committee (Chair) Corporate Director Kerry D. Adams Ontario, Canada Trustee Yes Audit Committee Governance, Compensation and Nominating Committee President, K. Adams and Associates Limited John Morrison Ontario, Canada Trustee, President and Chief Executive Officer No President and Chief Executive Officer of Choice Properties 17
Management John Morrison President & CEO Over 30 years experience in Real Estate Former President and CEO, Primaris REIT and President, Real Estate Management, Oxford Properties Group Bart Munn CA Chief Financial Officer Over 30 years experience in Real EstateFormer CFO, Calloway REIT and Vice President, CFO, Morguard Jane Marshall Chief Operating Officer 20 years experience as an executive in Loblaw s Real Estate division, Former Executive Vice President Loblaw Properties & Business Strategy 18
Summary Large, diversified national commercial property portfolio Future growth opportunities Investment grade major tenant with highly valuable brands in a stable industry Outstanding leasing profile Strong balance sheet, investment grade ratings Experienced, internal management team, strong Board of Trustees, continuity of operational resources 19