Investor Presentation September 2014 Based on Second Quarter 2014
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 2014 Second Quarter Report to Unitholders. 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
Our History A Solid Pedigree in Retail Real Estate Canada s Largest Retailer >2,400 stores ~70 million sq. ft. Growth Oriented Public Real Estate Entity 456 Properties 37.6 million sq. ft. 3
The Launch of Choice Properties REIT $460M in Equity $600M in Public Debentures >$7B Value 4
Our Portfolio 1 Geographically Diverse 456 Properties 444 Retail Properties 97.7% Occupied 2 9 Warehouses 1 Industrial 1 Office 1 Land 37.6 million sq. ft. BRITISH COLUMBIA RETAIL SURREY, BC LAND 19 SURREY, BC WAREHOUSE 1 47 ALBERTA RETAIL CALGARY, AB WAREHOUSE 1 11 SASKATCHEWAN RETAIL 11 REGINA, SK 1 WAREHOUSE MANITOBA RETAIL 180 ONTARIO RETAIL 2 ONTARIO WAREHOUSE + INDUSTRIAL BRAMPTON, ON OFFICE 1 LAVAL, QC WAREHOUSE 1 102 QUEBEC RETAIL 25 3 PRINCE EDWARD ISLAND RETAIL 37 9 NOVA SCOTIA RETAIL NEW BRUNSWICK 3 WAREHOUSE NEW BRUNSWICK RETAIL NEWFOUNDLAND & LABRADOR RETAIL ST. JOHN S, NL 1 WAREHOUSE Note 1 - Reflect acquisitions completed post-ipo Note 2 As at June 30, 2014 5
Highlights 1. Loblaw principal tenant and non-discretionary food store anchor 2. Strategic pipeline for long-term value creation 3. Solid capital structure with strong balance sheet and investment grade ratings 4. Sound growth strategy to enhance portfolio and provide stable, predictable and growing monthly distributions 5. Experienced internal management team with proven track record of owning, managing and developing retail real estate 6
Loblaw Companies Limited Principal tenant 10 18 year initial lease terms 88% of GLA 1 91% of base rent 1 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 Mutually beneficial business relationship Strategic Alliance Agreement 1 As at June 30, 2014 7
Strong Banner Recognition Across Canada 8
Highlights 1. Loblaw principal tenant and non-discretionary food store anchor 2. Strategic pipeline for long-term value creation 3. Solid capital structure with strong balance sheet and investment grade ratings 4. Sound growth strategy to enhance portfolio and provide stable, predictable and growing monthly distributions 5. Experienced internal management team with proven track record of owning, managing and developing retail real estate 9
Well positioned to deliver growth and build value with strategic pipeline of opportunities Dedicated acquisition pipeline from Loblaw s remaining portfolio of approximately 10 million sq. ft. 10.0 3.5 million sq. ft. of at grade development from properties with existing excess density target to develop approximately 1.0 sq. ft. in the next five years 4.5 M sq. ft. of ancillary GLA presents opportunity to enhance portfolio value through renewed focus on leasing / merchandising, operations and capital improvements Loblaw Portfolio Intensification 3.5 1.0 4.5 Ancillary GLA 10
Highlights 1. Loblaw principal tenant and non-discretionary food store anchor 2. Strategic pipeline for long-term value creation 3. Solid capital structure with strong balance sheet and investment grade ratings 4. Sound growth strategy to enhance portfolio and provide stable, predictable and growing monthly distributions 5. Experienced internal management team with proven track record of owning, managing and developing retail real estate 11
Capital Structure ($000 s) Unaudited As at June 30, 2014 Credit Facility $91,721 Senior unsecured debt Interest rates based on short-term floating rates Senior Unsecured Debentures $2,550,000 Class C LP Units $925,000 Issued through 10 separate series of notes Total Debt & Class C LP Units $3,566,721 Equity $4,086,091 Total Enterprise Value (TEV) $7,652,812 Unit price: $10.65 88,336,592 Trust Units and 295,333,962 Class B LP Units O/S 1 Debt & Class C LP Units to TEV 47% Conservative leverage 1. Loblaw held 21,500,000 Trust Units and all of the Class B LP units. George Weston held 20,752,297 Trust Units 12
Debt Profile Well distributed debt maturity profile with no more than $450M maturing in one year Weighted average term to maturity of 5.8 years 1,2 Weighted average coupon rate of 3.58% 1 Minimal near term refinancing risk (no maturities until April 2016) $500M unsecured revolving credit facility provides liquidity and financial flexibility (matures July 2018) BBB Investment Grade Rating S&P and DBRS 600 Debt Maturity Schedule 3 500 Principal ($M) 400 300 250 200 300 400 300 300 300 300 325 100 200 200 200 200 200-2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 LP Public Maturities REIT Public Maturities Class C Redemption Dates 1 Senior unsecured debentures only 2 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 3 Excludes credit facility 13
Debt Covenants Choice Properties conservative financing strategy has resulted in considerable 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 Q2 2014 Result Leverage Test 1 Cons. Indebtedness to Aggregate Assets Debt Service Coverage Test 1 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% 46% Maintenance >= 1.5x 3.4x Maintenance >= 1.5x 2.9x Incurrence <= 40% 0% 1 Includes Class C LP Units 14
Highlights 1. Loblaw principal tenant and non-discretionary food store anchor 2. Strategic pipeline for long-term value creation 3. Solid capital structure with strong balance sheet and investment grade ratings 4. Sound growth strategy to enhance portfolio and provide stable, predictable and growing monthly distributions 5. Experienced internal management team with proven track record of owning, managing and developing retail real estate 15
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 16
Our Growth Strategy Development Acquisitions Active Management Intensification potential ~3.5M sq. ft. of at-grade GLA expansion potential, ~1.0M sq. ft. slated for development within 5 years New development opportunities In partnership with Loblaw or proven third-party Right of first offer to acquire additional Loblaw properties Pipeline of ~10 million sq. ft. of GLA Opportunity to acquire properties developed or acquired by Loblaw Third-party acquisitions Focus on high quality supermarket anchored properties Contractual rent increases 13 years average term to maturity for Loblaw leases 5 years average term to maturity for ancillary tenants Leasing Focused marketing and merchandising for current vacancy and lease renewal Property management Annualized capital ~$30M ~93% recoverable or directly paid by tenants 17 17
Intensification Brown s Line, Toronto 10k Dollarama Before 31K - Existing 10K LCBO to Brown s Line Under Construction Current Lakeshore Bld W 18
Development 24 th Ave & 160 th St, Surrey Existing 50K Retail 120K Under Construction 24 th Avenue 46K Retail Gas Bar Under Construction 15K Retail Proposed 160 th Street Concept Only 19
Redevelopment Example 15K Retail 40K Food Store Existing 20k Retail Residential (Rental) Existing Proposed Mixed- Use (Retail / Res) Concept Only Existing Complete 20
Highlights 1. Loblaw principal tenant and non-discretionary food store anchor 2. Strategic pipeline for long-term value creation 3. Solid capital structure with strong balance sheet and investment grade ratings 4. Sound growth strategy to enhance portfolio and provide stable, predictable and growing monthly distributions 5. Experienced internal management team with proven track record of owning, managing and developing retail real estate 21
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 CPA, CA Chief Financial Officer Over 30 years experience in Real Estate Former 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 22
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 23
Our Plans for 2014 Development Acquisitions Active Management Create value through development and redevelopment Grow asset base through accretive acquisitions Increase cash flow and enhance property value Deliver 95K sq. ft. of retail GLA (Toronto and Stoney Creek, ON) Begin construction of 120K sq. ft. of retail space for delivery in 2015 (Surrey, BC) File municipal applications - future projects to be initiated Acquire additional properties from Loblaw Pursue desirable assets from other vendors, if opportunities arise Implement new systems and processes Internalize property management platform including the hiring of experienced professionals Drive performance through leasing, merchandising and effective capital investments Maximize portfolio occupancy 24 24
Conclusion 37.6 M sq. ft. of geographically diverse properties Canada s largest retailer as principal tenant and anchor Opportunity for development and redevelopment Dedicated pipeline for growth from Loblaw s remaining portfolio of properties Strong balance sheet and investment grade ratings Experienced internal management team with proven track record of owning, managing and developing retail real estate 25
Investor Presentation September 2014