Shaping the Future. SUMMARY INFORMATION PACKAGE Quarter ended June 30, 2018

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Transcription:

Shaping the Future SUMMARY INFORMATION PACKAGE Quarter ended June 30, 2018 Q2

Table of Contents Item Slide Number Forward-Looking Statements 3 Q2 2018 Conference Call July 19, 11:00AM Acquisition Activity 4 Q2 2018 Highlights 5 Key Performance Indicators and Selected Financial Information Development Activity 7 Leasing Activity Financial Results Summary 9 Financial Results Same Property NOI 10 Summary Information: Portfolio Mix 11 Lease Expiration Schedule 12 Debt Profile 13 Financial Results Summary 17 Financial Statements 18 6 NOTE: (1) See, Non-GAAP Financial Measures, of 2018 Second Quarter MD&A. (2) To be read in conjunction with, Forward-Looking Statements, of 2018 Second Quarter MD&A. (3) This document is to be read in conjunction with the 2018 Q2 Report to Unitholders for Choice Properties Real Estate Investment Trust ( Choice Properties REIT ) 2

Forward-Looking Statements This document and the 2018 Second Quarter Report, including the MD&A contains forward-looking statements about Choice Properties objectives, outlook, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities, and legal and regulatory matters. Specific statements with respect to anticipated future results and events can be found in various sections of the MD&A, including but not limited to, Section 2, Overview, Section 3 Acquisition of Canadian Real Estate Investment Trust ( CREIT ), Section 5 Investment Properties, Section 6 Results of Operations, Section 7 Other Measures of Performance, Section 8 Reportable Operating Segments Results of Operations, Section 9 Liquidity and Capital Resources, Section 11 Quarterly Results of Operations and Section 15 Outlook. Forward-looking statements are typically identified by words such as expect, anticipate, believe, foresee, could, estimate, goal, intend, plan, seek, strive, will, may, should and similar expressions, as they relate to Choice Properties and its management. Forward-looking statements reflect Choice Properties current estimates, beliefs and assumptions, which are based on management s perception of historic trends, current conditions, outlook and expected future developments, as well as other factors it believes are appropriate in the circumstances. Choice Properties expectation of operating and financial performance is based on certain assumptions, including assumptions about the Trust s future growth potential, prospects and opportunities, industry trends, future levels of indebtedness, tax laws, economic conditions and competition. Management s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and as such, are subject to change. Choice Properties can give no assurance that such estimates, beliefs and assumptions will prove to be correct. 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 the Enterprise Risks and Risk Management section of Choice Properties 2017 Annual Report and the Trust s Annual Information Form ( AIF ) for the year ended December 31, 2017, which is hereby incorporated by reference and which are updated in Section 13, Enterprise Risks and Risk Management, of the 2018 Second Quarter MD&A. Such risks and uncertainties include: changes in timing to obtain municipal approvals, development costs, and tenant leasing and occupancy of properties under development, redevelopment, or intensification; failure to manage its growth effectively inaccordance with its growth strategy or acquire assets on an accretive basis; failure by Choice Properties to realize the strategic benefits from the acquisition of CREIT; changes in economic conditions, including changes in interest rates, and the rate of inflation; shifting consumer preferences toward electronic commerce may result in a decrease indemand for physical space by retail tenants; failure to realize benefits from investments in Choice Properties new Information Technology ( IT ) systems, the inability of Choice Properties IT infrastructure to support the requirements of Choice Properties business; changes in Choice Properties competitiveness in the real estate market or the unavailability of desirable commercial real estate assets; failure of third-party vendors, developers, co-owners or strategic partners to provide adequate services at optimal rates, complete projects or fulfill contractual obligations; the inability of Choice Properties Limited Partnership and CPH Master Limited Partnership to make distributions or other payments or advances; the inability of Choice Properties to obtain financing; the inability of Choice Properties to maintain and leverage its relationship with Loblaw Companies Limited ( Loblaw ), including in respect of: (i) Loblaw s retained interest in Choice Properties; (ii) the services to be provided to Choice Properties (whether directly or indirectly) by Loblaw; (iii) expected transactions to be entered into between Loblaw and Choice Properties (including Choice Properties acquisition of certain properties held by Loblaw); and (iv) the Strategic Alliance Agreement between Choice Properties and Loblaw; changes in Loblaw s business, activities or circumstances which may impact Choice Properties, including Loblaw s inability to make rent payments or perform its obligations under its leases; changes in laws or regulatory regimes, which may affect Choice Properties, including changes in the tax treatment of the Trust and its distributions to Unitholders or the inability of the Trust to continue to qualify as a mutual fund trust and as a real estate investment trust, as such terms are defined in the Income Tax Act (Canada); changes in Choice Properties capital expenditure and fixed cost requirements; and changes in Choice Properties degree of financial leverage. This is not an exhaustive list of the factors that may affect Choice Properties forward-looking statements. Other risks and uncertainties not presently known to Choice Properties could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in Choice Properties materials filed with the Canadian securities regulatory authorities from time to time, including the Trust s 2017 AIF. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Choice Properties expectations only as of the date of the 2018 Second Quarter Report. Except as required by applicable law, Choice Properties does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 3

Acquisition Activity Summary On May 4, 2018, Choice Properties completed its acquisition of Canadian Real Estate Investment Trust ( CREIT ), an unincorporated closed-end investment trust that traded on the Toronto Stock Exchange, by acquiring all the assets and assuming all the liabilities for a total consideration of $3.7 billion. Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 4

Q2 2018 Highlights Completed the acquisition of CREIT Delivered solid year-over-year growth in key financial metrics Rental revenue: $294.6 million, up 41.1% compared to $208.8 million for Q2 2017. NOI: $205.8 million, up approximately 42.7% compared to $144.2 million for Q2 2017. NOI, same properties, same GLA: $145.2 million, up 2.0% compared to $142.4 million for Q2 2017. FFO per unit diluted: $0.272, an increase of $0.010 or 3.8% compared to $0.262 for Q2 2017. The increase is driven by growth in net property income, attributable to the acquisition of CREIT, partially offset by higher net interest expense, excluding distributions on Exchangeable Units. Excluding these items, FFO for the quarter would have been $149.5 million or $0.260 per unit diluted. Development: Completed 61,000 square feet of GLA, delivering 20 new retail spaces for third-party tenants. 5

Key Performance Indicators and Selected Financial Information As at or for the three months ended June 30 ($ thousands except where otherwise indicated) 2018 2017 (unaudited) Number of properties 757 537 Gross leasable area ("GLA") (in millions of square feet) 67.0 43.8 Occupancy* 97.6% 98.9 % Rental revenue $ 294,648 $ 208,814 Cash flows from operating activities (i) $ 88,126 $ 107,541 Net income (loss) $ (321,133) $ 41,467 Net income (loss) per unit diluted $ (0.557) $ 0.100 NOI (1) for Same Properties, excluding development activities (ii) * $ 145,259 $ 142,443 FFO (1)(iii) per unit diluted* $ 0.272 $ 0.262 FFO (1)(iii) payout ratio* 68.1% 69.6 % AFFO (1)(iii) per unit diluted* $ 0.243 $ 0.232 AFFO (1)(iii) payout ratio* 76.1% 78.7 % Cash retained after distributions (iii)(iv) * $ 44,964 $ 22,412 Distribution declared per unit $ 0.1850 $ 0.1825 Weighted average Units outstanding diluted 576,340,477 413,031,606 Total assets - proportionate share basis $ 15,813,137 $ 9,512,207 Long term debt and Class C LP Units (v) - proportionate share basis $ 6,418,780 $ 3,729,417 Debt to total assets (vi)* 48.6% 45.8% Debt service coverage (vi)* 3.2x 3.6x Debt to EBITDAFV (1)(vii)* 8.0x 7.3x Indebtedness (viii) weighted average term to maturity* 5.6 years 5.0 years Indebtedness (viii) weighted average coupon rate* 3.74% 3.62% (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) Cash flows from operating activities excludes interest paid. Excluding $3,280 of lease surrender revenue from Loblaw. FFO and AFFO per unit as calculated on a diluted basis, the FFO and AFFO payout ratios and the cash retained after distributions were calculated excluding the accelerated amortization of debt premium of $37,282 (see Section 16, Non-GAAP Financial Measures, of the 2018 Second Quarter MD&A). Cash retained after distributions has been adjusted from the prior year s presentation to remove the impact of normalizing capital spending over the year. Concurrent with the closing of the acquisition of CREIT, Choice Properties converted all its outstanding Class C LP Units into 70,881,226 Exchangeable Units. Debt ratios include Class C LP Units but exclude Exchangeable Units, see Liquidity and Capital Resources, of the 2018 Second Quarter MD&A. The ratios are non-gaap financial measures calculated based on the Trust Indentures, as supplemented. Calculated on a 12-month normalized basis, excluding lease surrender revenue from Loblaw. Indebtedness reflects senior unsecured debentures and mortgages only. Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 6

Development Activity GLA Completed in Q2 2018 Address City Province Completed Development GLA (sf) Key Tenants Completed in Q2 2018 Q2 2018 20th Avenue NE Calgary Alberta 15,700 Starbucks, Bar Burrito, Pet Valu Herald Rd Saskatoon Saskatchewan 6,500 Metro Liquor 20th Sideroad Rd Innisfil Ontario 23,900 Starbucks, Freshii, Global Pet Foods Tecumseh Rd E Windsor Ontario 4,100 Scotiabank Main St. E Shediac New Brunswick 10,800 New Brunswick Liquor Total 61,000 Innisfil, ON Shediac, NB Saskatoon, SK Calgary, AB Windsor, ON 7

Development Activity Summary Development Progress Choice Properties development program, at the Trust s ownership share, as at June 30, 2018 is summarized below: Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 8

Leasing Activity Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 9

Financial Results Same Property NOI The number of Same Properties was 534 for the three months ended June 30, 2018 and June 30, 2017. The following table analyzes the components of NOI: (i) (ii) Properties acquired subsequent to March 31, 2017, including properties acquired in the Acquisition Transaction, net of the dispositions (see Section 17, Additional Information, of the 2018 Second Quarter MD&A). GLA developed in the comparative periods. Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 10

Summary Information Q2 2018 Portfolio Mix (i) Base rent for the month ended June 30, 2018, including straight-line rent. (ii) Based on definitions of Census Metropolitan Area (CMA) from Statistics Canada published in 2016. (1) Related party tenant Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 11

Summary Information Q2 2018 Lease Expiration Schedule Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 12

Summary Information Q2 2018 Debt Profile Components of Total Debt Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 13

Summary Information Q2 2018 Debt Profile Schedules of Repayments and Cash Flow Activities The schedule of principal repayment of long term debt, based on maturity, is as follows: Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 14

Summary Information Q2 2018 Debt Profile Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 15

Summary Information Q2 2018 Debt Profile As at or for the quarter ended (unaudited) June 30, 2018 Total assets ($000's)-on a proportionate share basis $ 15,813,137 Interest Coverage 3.5x Debt to Total Assets (i) 48.6% Debt Service Coverage (i) 3.2x Debt to Earnings Before Interest, Taxes, Depreciation and (ii) Amortization and Fair Value (EBITDAFV) Indebtedness - weighted average term to maturity 11.0x 5.6 years (iii) Indebtedness - weighted average coupon rate 3.74% (iii) (i) Debt ratios include Class C LP Units but exclude Exchangeable Units, see Section 9, Liquidity and Capital Resources, of the 2018 Second Quarter MD&A. These ratios are non-gaap financial measures calculated based on the Trust Indentures, as supplemented. (ii) Debt to EBITDA on a normalized basis would have been 8.0 times. (ii) Indebtedness reflects senior unsecured debentures and mortgages only. Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 16

Financial Results Summary For the periods ended June 30 (in thousands of Canadian dollars, except per unit amounts) (unaudited) Three Months Six Months 2018 2017 2018 2017 Proportionate share rental revenue $ 304,313 $ 208,814 $ 519,561 $ 412,421 Reverse - Straight-line rental revenue - on a proportionate share basis (9,416) (9,320) (17,514) (18,618) Proportionate share property operating costs (82,995) (55,294) (140,141) (107,005) Net Operating Income (1) 211,902 144,200 361,906 286,798 NOI (1) from Acquisition Transaction (51,137) (51,137) NOI (1) from property acquisition and disposition transactions (8,895) (433) (11,226) (1,063) NOI (1) Same Properties 151,870 143,767 299,543 285,735 NOI (1) from developed GLA (3,331) (1,324) (6,081) (1,662) NOI (1) for Same Properties, with the same GLA $ 148,539 $ 142,443 $ 293,462 $ 284,073 Net Income (Loss) $ (321,133) $ 41,467 $ 305,858 $ 65,717 Acquisition transaction costs 108,203 120,257 Adjustment to fair value of unit-based compensation 1,322 338 (3,826) 1,592 Adjustment to fair value of Exchangeable Units 191,571 (363,629) 117,656 Adjustment to fair value of investment properties 69,068 7,877 36,029 (84,792) Adjustment to fair value of investment property held in equity accounted joint ventures 425 425 1,250 Income taxes 132 132 Net Income before Acquisition Transaction Costs and Adjustments to Fair Value (1) 49,588 49,682 95,246 101,423 Interest otherwise capitalized for development in equity accounted joint ventures 654 99 900 192 Distributions on Exchangeable Units 67,772 58,033 126,802 114,476 Internal expenses for leasing 1,304 546 2,055 1,105 Funds from Operations (1), per the White Paper $ 119,318 $ 108,360 $ 225,003 $ 217,196 Accelerated amortization of debt premium 37,282 37,282 Funds from Operations (1), for management purposes $ 156,600 $ 108,360 $ 262,285 $ 217,196 Internal expenses for leasing (1,304) (546) (2,055) (1,105) Straight-line rent (9,225) (9,320) (17,323) (18,618) Property capital expenditures - on a proportionate share basis (1,333) (1,621) (1,785) (1,981) Leasing capital expenditures - on a proportionate share basis (4,405) (976) (5,429) (2,366) Adjusted Funds from Operations (1), for management purposes $ 140,333 $ 95,897 $ 235,693 $ 193,126 FFO (1)(2) per unit - diluted $ 0.272 $ 0.262 $ 0.529 $ 0.526 FFO (1)(2) payout ratio - diluted 68.1 % 69.6 % 69.9 % 68.4 % AFFO (1)(2) per unit - diluted $ 0.285 $ 0.232 $ 0.475 $ 0.468 FFO (1)(2) payout ratio - diluted 64.9 78.7 77.6 76.9 Distribution declared per unit $ 0.1850 $ 0.1825 $ 0.3700 $ 0.3600 Weighted average Units outstanding - basic 575,202,235 411,169,590 494,759,656 410,969,119 Weighted average Units outstanding - diluted 576,340,477 413,031,606 495,817,694 412,736,871 Number of Units outstanding, end of period 667,224,978 411,385,591 667,224,978 411,385,591 (1) FFO per unit on a diluted basis and the FFO payout ratio were calculated using the FFO for management purposes which excludes the impact of the accelerated amortization of the debt premium. (2) FFO and AFFO per unit as calculated on a diluted basis and the FFO and AFFO payout ratios were calculated using the FFO for management purposes. Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 17

Financial Statements Choice Properties Real Estate Investment Trust Condensed Consolidated Balance Sheets Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 18

Financial Statements Choice Properties Real Estate Investment Trust Condensed Consolidated Statements of Income (Loss) (1)The Class B LP Units of the Trust s Subsidiary, Choice Properties Limited Partnership, are exchangeable into Trust Units at the option of the holder. Loblaw holds all of the Exchangeable Units. These Exchangeable Units are considered puttable instruments and are required to be classified as financial liabilities at fair value through profit or loss. The distributions paid on the Exchangeable Units are accounted for as interest expense. Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 19

Financial Statements Choice Properties Real Estate Investment Trust Condensed Consolidated Statements of Cash Flows (unaudited) (in thousands of Canadian dollars) Three months ended June 30, 2018 Three months ended June 30, 2017 Six months ended June 30, 2018 Six months ended June 30, 2017 Operating Activities Net income (loss) $ (321,133) $ 41,467 $ 305,858 $ 65,717 Straight-line rental revenue (9,225) (9,320) (17,323) (18,618) Amortization of other assets 247 233 495 466 Net interest expense and other financing charges 167,541 98,585 275,318 194,746 Interest and other income (4,163) (656) (5,771) (1,427) Unit-based compensation expense 2,408 1,178 (1,728) 3,359 Share of (income) loss in equity accounted joint ventures (4,948) (59) (5,020) 1,131 Adjustment to fair value of Exchangeable Units 191,571 (363,629) 117,656 Adjustment to fair value of investment properties 69,068 7,877 36,029 (84,792) Interest received 2,108 413 2,812 1,137 Deferred income taxes 93 93 Net change in non-cash working capital (5,441) (32,177) (10,769) (133,880) Cash Flows from Operating Activities 88,126 107,541 216,365 145,495 Investing Activities Acquisition of CREIT, net of cash acquired (1,623,921) (1,623,921) Acquisitions of investment properties (2,086) (8,441) (29,961) (18,275) Additions to investment properties (48,101) (26,672) (75,586) (47,226) Additions to fixtures and equipment (890) (36) (1,301) (108) Change in security deposits 1,295,075 Equity investment contributions (7,916) (760) (11,996) (1,760) Mortgages, loans and notes receivable advances (69,399) (68,801) (139,992) (136,807) Mortgages, loans and notes receivable repayments 96,758 374,346 263,574 Proceeds of disposition 2,745 2,745 Cash Flows from (used in) Investing Activities (354,673) (104,710) (1,502,604) 59,398 Financing Activities Proceeds from issuance of long term debt, net of debt placement costs 3,018 1,943,107 Repayments of long term debt (20,735) (322) (420,825) (200,637) Conversion of Class C LP Units (98,659) (98,659) Net advances of credit facilities and term loans, net of debt placement costs 555,737 23,000 376,737 344,000 Trust Unit issuance costs (283) (283) Cash received on exercise of options 25 25 Cash paid on vesting of restricted units (67) (1,142) (1,124) (1,142) Interest paid (36,323) (12,240) (132,712) (104,936) Distributions paid on Exchangeable Units (78,705) (310,043) (217,324) Distributions paid to Unitholders (28,200) (11,112) (44,704) (22,180) Cash Flows from (used in) Financing Activities 295,783 (1,791) 1,311,494 (202,194) Change in cash and cash equivalents 29,236 1,040 25,255 2,699 Cash and cash equivalents, beginning of period 2,426 6,772 6,407 5,113 Cash and Cash Equivalents, end of period $ 31,662 $ 7,812 $ 31,662 $ 7,812 Source: Choice Properties REIT, 2018 Q2 Report to Unitholders 20