April 2014 Based on Year-End 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 Trust ) 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 Trust. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Trust 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 Trust 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 Trust with access to equity and/or debt at reasonable rates when required and that Loblaw will continue its involvement with the Trust. Although the forward-looking statements contained in this document are based upon assumptions that management of the Trust 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 Trust s control, that may cause the Trust 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 Enterprise Risks and Risk Management section the Trust s 2013 Annual Report MD&A. The forward-looking statements made in this report 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 Trust undertakes 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 36.3 million sq. ft. portfolio provides a stable and sizeable base for growth Access to future growth Growth Pipeline IPO Portfolio ~36.3M sq. ft. Store development and site intensification on existing portfolio ~11 million sq. ft. of remaining real estate held by Loblaw 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
2013 Financial Results Financials in-line with expectations with FFO and AFFO ahead of forecast Operating Year Ended December 31, 2013 $000's, except per unit amounts (Unaudited) Adjusted Actual Forecast (1) Variance Rental revenue $ 318,507 $ 317,141 $ 1,366 Straight-line rent (16,484) (15,841) (643) Property operating costs (79,756) (80,850) 1,094 Net Operating Income $ 222,267 $ 220,450 $ 1,817 Net Income $ 67,148 $ 64,237 $ 2,911 Funds from Operations $ 158,892 $ 151,141 $ 7,751 Adjusted Funds from Operations $ 130,939 $ 124,532 $ 6,407 AFFO per unit - basic $ 0.360 $ 0.352 $ 0.008 AFFO per unit - diluted $ 0.360 $ 0.352 $ 0.008 AFFO payout ratio 88.6% 90.6% 2.0% Distribution per unit $ 0.318917 $ 0.318917 $ - Weighted average units outstanding - basic 363,642,405 353,997,871 9,644,534 Weighted average units outstanding - diluted 363,767,339 353,997,871 9,769,468 Number of units outstanding, end of quarter 371,688,983 353,997,871 17,691,112 (1) Adjusted to reflect the fact that operations commenced on July 5, 2013. 5
2013 Operational Performance Occupancy Occupancy rate of 97.7% is virtually on-plan Leasing activity Maximizing return on ancillary space with higher renewal rental rates Development and Acquisitions Acquired approximately 1 million square feet for $186 million Launched development program with two projects underway 6
Acquisitions - Subsequent to IPO Immediately accretive stabilized NOI of approximately $11 M representing overall yearone capitalization rate of 6.64% Development Potential Development projects currently underway, with expected completion in Q2 2014 Development project to commence in Q2 2014 Location Banner Property Type GLA Acquisitions from Loblaw 5528 Highway 7, Porter s Lake, NS Atlantic Superstore Multi-tenant retail 54,300 3070 Main Street, Salisbury, NB Save Easy Multi-tenant retail 17,291 12 Hurontario Street, Collingwood, ON Loblaws Retail 57,795 3501 Yonge Street, Toronto, ON Loblaws Retail 33,700 1811 Avenue Road / 352 Melrose, Toronto, ON no frills Retail 13,299 192 Bullock Drive, Markham, ON N/A Multi-tenant retail 12,102 3730 Lakeshore Boulevard, Toronto, ON no frills Retail 32,011 102 Highway 8, Stoney Creek, ON Fortinos Multi-tenant retail 92,546 350 SE Marine Drive, Vancouver, BC Real Canadian Superstore Stand-alone Retail & Warehouse 621,177 1569-1591 Wilson Avenue, Toronto, ON no frills Multi-tenant retail 47,344 2332 160 TH Street, Surrey, BC N/A Vacant land N/A 981,565 Third Party Acquisition 1199 Oxford Street W, London, ON N/A Multi-tenant retail 5,538 7
Our Portfolio 435 Properties 424 Retail Properties 9 Warehouses 1 Office 1 Land 36.3 million sq. ft. 8
Loblaw Companies Limited Majority owner and major lender Single largest tenant 88% of initial GLA 93% of initial NOI Major partner in Choice Properties growth Strategic Alliance Agreement Mutually beneficial business relationship 9
About Loblaw Canada s largest food distributor Leading provider of non-discretionary products and services food, drug, gas, and financial 30 well-know banners covering discount and conventional formats > $13 billion market capitalization Stable profitable revenue growth with $32 billion revenues in 2013 Strong balance sheet and long history of investment grade credit ratings Rated BBB by DBRS and S&P Recently completed acquisition of Canada s largest pharmacy retailer, Shoppers Drug Mart 10
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 Strategic Alliance Agreement 11
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 12
Growth Opportunities Development Intensification potential ~3.6M sq. ft. of at-grade GLA expansion potential, including 95,000 square feet of intensification currently underway Intensification payment paid to Loblaw only upon substantial completion New development opportunities In partnership with Loblaw or proven third-party Acquisitions Right of first offer to acquire additional Loblaw properties Pipeline of ~11 million sq. ft. of GLA Opportunity to acquire properties developed or acquired by Loblaw Third-party acquisitions Focus on high quality supermarket anchored properties Organic 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 13
Capital Structure ($000 s) Unaudited As at December 31, 2013 Transferor Notes $1,940,000 Debentures $600,000 Class C LP Units $925,000 Total Debt & Class C LP Units $3,465,000 Equity $3,910,168 Enterprise Value $7,375,168 On Feb 6, 2014, Choice Properties issued $450M in debt at a weighted average coupon of 3.85%. Proceeds were used to prepay $440M in Transferor Notes Commenced DRIP in 4 th quarter 87,614,229 Trust Units and 284,074,754 Class B LP Units O/S 1 1. Loblaw held 21,500,000 Trust Units and all of the Class B LP units. George Weston held 20,107,810 Trust Units 14
Debt Profile Well distributed debt maturity profile with no more than $450M maturing in one year 100% unsecured Minimal refinancing risk (no maturities until April 2016) Fully undrawn $500 million unsecured revolving credit facility provides liquidity and financial flexibility BBB Investment Grade Rating S&P and DBRS * Note: Class C LP units are redeemable at Loblaw s option beginning in 2027. REIT has the option to settle in cash or Class B LP units or any combination thereof 15
Debt Covenants Choice Properties has plenty of headroom in each of its financial covenants A summary of the financial covenants for Choice Properties public debentures is shown below: Test Incurrence / Maintenance Unsecured Debentures Q4 2013 Result Leverage Test 1 Cons. Indebtedness to Aggregate Assets Debt Service Coverage Test Consolidated EBITDA to Debt Service Unencumbered Asset Value Test Unencumbered Assets to Unsecured Indebtedness Secured Indebtedness Test Cons. Secured Indebtedness to Aggregate Assets Incurrence <= 65% 47% Maintenance >= 1.5x 3.4x Maintenance >= 1.5x 2.8x Incurrence <= 40% 0% 1. Includes Class C LP Units 16
Experienced Board Of Trustees Trustees Position/Title Independent Committees Principal Occupation Galen G. Weston Ontario, Canada Chair No Executive Chairman, Loblaw John Morrison Ontario, Canada Trustee, President and Chief Executive Officer No President and Chief Executive Officer of Choice Properties Christie J.B. Clark Ontario, Canada Trustee Yes Governance, Compensation and Nominating Committee Corporate Director Graeme Eadie Ontario, Canada Trustee Yes Audit Committee Senior Vice President, Head of Real Estate Investments for Canada Pension Plan Investment Board Michelle Felman Connecticut, United States Michael P. Kitt Ontario, Canada Daniel F. Sullivan Ontario, Canada 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) Consultant, Vornado Realty Trust Executive Vice President, Canada for Oxford Properties Group Corporate Director INDEPENDENT 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 17
Summary Solid 2013 financial and operating results that are in line with plan Acquisition and development programs have commenced Large, diversified national commercial property portfolio 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 18