Choice Properties Real Estate Investment Trust Reports Results for the Three Months Ended March 31, 2024
“The first quarter was a strong start to the year for
2024 First Quarter Highlights
-
Reported net income for the quarter of
$142.3 million as compared to net income of$270.8 million in the first quarter of 2023. The change in net income from the prior year was primarily due to non-cash fair value adjustments. -
Reported FFO per unit diluted(1) was
$0.259 , an increase of 6.1% compared to the first quarter of 2023. -
Period end occupancy was 97.9%.
- Retail at 97.7%, industrial at 98.8% and mixed-use & residential at 94.7%.
-
Same-Asset NOI on a cash basis(1) increased by 2.4% compared to the first quarter of 2023.
- Retail increased by 2.5%;
- Industrial increased by 2.8%; and
- Mixed-use & residential decreased by 1.3%.
-
Completed
$61.7 million of transactions in the quarter, including:-
The acquisition of a
Toronto, ON retail property from Loblaw Companies Limited (“Loblaw”) for a purchase price of$38.4 million ; and -
The disposition of an industrial property and a retail property for aggregate proceeds of
$23.3 million .
-
The acquisition of a
-
Transferred
$74.6 million of properties under development to income producing status, with an average yield of 5.1%. The transfers included a purpose-built residential rental building located inBrampton, ON , of 151 units at the Trust’s share, and a retail intensification, which added approximately 26,000 square feet of new commercial GLA. -
Invested
$32.1 million of capital in development projects on a proportionate share basis(1). -
Ended the quarter in a strong liquidity position with approximately
$1.5 billion of available credit under the Trust’s revolving credit facility, a$12.9 billion pool of unencumbered assets and Adjusted Debt to EBITDAFV(1) of 6.9x.
(1) Refer to Non-GAAP Financial Measures and Additional Financial Information section. |
Summary of GAAP Basis Financial Results
($ thousands except where otherwise indicated)
|
|
Three Months |
|||||||||
|
|
|
|
|
Change $ |
||||||
Net Income |
|
$ |
142,279 |
|
|
$ |
270,804 |
|
$ |
(128,525 |
) |
|
|
|
|
|
|
|
|||||
Net income per unit diluted |
|
|
0.197 |
|
|
|
0.374 |
|
|
(0.177 |
) |
|
|
|
|
|
|
|
|||||
Rental revenue |
|
|
337,958 |
|
|
|
324,657 |
|
|
13,301 |
|
|
|
|
|
|
|
|
|||||
Fair value gain on Exchangeable Units(i) |
|
|
67,284 |
|
|
|
94,989 |
|
|
(27,705 |
) |
|
|
|
|
|
|
|
|||||
Fair value gains (losses) excluding Exchangeable Units(ii) |
|
|
(30,225 |
) |
|
|
61,856 |
|
|
(92,081 |
) |
|
|
|
|
|
|
|
|||||
Cash flows from operating activities |
|
|
141,592 |
|
|
|
133,027 |
|
|
8,565 |
|
|
|
|
|
|
|
|
|||||
Weighted average number of units outstanding - diluted(iii) |
|
|
723,666,036 |
|
|
|
723,665,160 |
|
|
876 |
|
(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
-
a
$77.1 million unfavourable change in the adjustment to fair value of investment properties, -
a
$27.7 million unfavourable 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
$18.1 million unfavourable change in the income from equity accounted joint ventures primarily due to a fair value loss recognized on investment properties held within equity accounted joint ventures in the current quarter compared to a gain in the prior year period, and -
a
$15.0 million unfavourable change in the adjustment to fair value of the Trust’s investment in the real estate securities ofAllied Properties Exchangeable Limited Partnership , a subsidiary of Allied Properties Real Estate Investment Trust (“Allied”), driven by the decrease in Allied’s unit price.
The unfavourable changes in fair value were partially offset by an increase in net operating income of
Summary of Proportionate Share(1) Financial Results
As at or for the period ended
|
|
Three Months |
||||||||||
|
|
|
|
|
Change $ |
|||||||
Rental revenue(i) |
|
$ |
361,408 |
|
|
$ |
346,624 |
|
|
$ |
14,784 |
|
|
|
|
|
|
|
|
||||||
Net Operating Income (“NOI”), cash basis(i) |
|
|
251,633 |
|
|
|
244,052 |
|
|
|
7,581 |
|
|
|
|
|
|
|
|
||||||
Same-Asset NOI, cash basis(i) |
|
|
238,495 |
|
|
|
232,904 |
|
|
|
5,591 |
|
|
|
|
|
|
|
|
||||||
Adjustment to fair value of investment properties(i) |
|
|
(3,560 |
) |
|
|
91,831 |
|
|
|
(95,391 |
) |
|
|
|
|
|
|
|
||||||
Occupancy (% of GLA) |
|
|
97.9 |
% |
|
|
97.7 |
% |
|
|
0.2 |
% |
|
|
|
|
|
|
|
||||||
Funds from operations (“FFO”)(i) |
|
|
187,189 |
|
|
|
176,891 |
|
|
|
10,298 |
|
|
|
|
|
|
|
|
||||||
FFO(i) per unit diluted |
|
|
0.259 |
|
|
|
0.244 |
|
|
|
0.015 |
|
|
|
|
|
|
|
|
||||||
Adjusted funds from operations (“AFFO”)(i) |
|
|
173,146 |
|
|
|
164,379 |
|
|
|
8,767 |
|
|
|
|
|
|
|
|
||||||
AFFO(i) per unit diluted |
|
|
0.239 |
|
|
|
0.227 |
|
|
|
0.012 |
|
|
|
|
|
|
|
|
||||||
AFFO(i) payout ratio - diluted |
|
|
78.7 |
% |
|
|
81.8 |
% |
|
|
(3.1 |
)% |
|
|
|
|
|
|
|
||||||
Cash distributions declared |
|
|
136,287 |
|
|
|
134,478 |
|
|
|
1,809 |
|
|
|
|
|
|
|
|
||||||
Weighted average number of units outstanding - diluted(ii) |
|
|
723,666,036 |
|
|
|
723,665,160 |
|
|
|
876 |
|
(i) |
|
Refer to Non-GAAP Financial Measures and Additional Financial Information section. |
(ii) |
|
Includes Trust Units and Exchangeable Units. |
Quarterly Results
For the three months ended
FFO(i) increased by
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,
- 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$1.03 , reflecting 2.0%-3.0% year-over-year growth; and - Strong leverage metrics, targeting Adjusted Debt to EBITDAFV slightly below 7.5x.
Non-GAAP Financial Measures and Additional Financial Information
In addition to using performance measures determined in accordance with International Financial Reporting Standards (“IFRS” or “GAAP”),
Non-GAAP Measure |
Description |
Proportionate Share |
|
Net Operating Income (“NOI”), Accounting Basis |
|
NOI, Cash Basis |
|
Same-Asset NOI, Cash Basis
|
|
Funds from Operations (“FFO”) |
|
Adjusted Funds from Operations (“AFFO”) |
|
AFFO Payout Ratio |
|
Earnings before Interest, Taxes, Depreciation, Amortization and Fair Value (“EBITDAFV”) |
|
Total Adjusted Debt |
|
Adjusted Debt to EBITDAFV,
|
|
The following table reconciles net income as determined in accordance with GAAP to net income on a proportionate share basis for the three months
|
|
Three Months |
||||||||||
($ thousands) |
|
GAAP Basis |
|
Adjustment to Proportionate Share Basis(1) |
|
Proportionate Share Basis |
||||||
Net Operating Income |
|
|
|
|
|
|
||||||
Rental revenue |
|
$ |
337,958 |
|
|
$ |
23,450 |
|
|
$ |
361,408 |
|
Property operating costs |
|
|
(98,105 |
) |
|
|
(8,246 |
) |
|
|
(106,351 |
) |
|
|
|
239,853 |
|
|
|
15,204 |
|
|
|
255,057 |
|
Residential Inventory Income |
|
|
|
|
|
|
||||||
Gross sales |
|
|
11,268 |
|
|
|
— |
|
|
|
11,268 |
|
Cost of sales |
|
|
(9,234 |
) |
|
|
— |
|
|
|
(9,234 |
) |
|
|
|
2,034 |
|
|
|
— |
|
|
|
2,034 |
|
Other Income and Expenses |
|
|
|
|
|
|
||||||
Interest income |
|
|
9,759 |
|
|
|
(1,928 |
) |
|
|
7,831 |
|
Investment income |
|
|
5,315 |
|
|
|
— |
|
|
|
5,315 |
|
Fee income |
|
|
701 |
|
|
|
— |
|
|
|
701 |
|
Net interest expense and other financing charges |
|
|
(142,284 |
) |
|
|
(6,363 |
) |
|
|
(148,647 |
) |
General and administrative expenses |
|
|
(14,638 |
) |
|
|
— |
|
|
|
(14,638 |
) |
Share of income from equity accounted joint ventures |
|
|
4,718 |
|
|
|
(4,718 |
) |
|
|
— |
|
Amortization of intangible assets |
|
|
(250 |
) |
|
|
— |
|
|
|
(250 |
) |
Adjustment to fair value of unit-based compensation |
|
|
781 |
|
|
|
— |
|
|
|
781 |
|
Adjustment to fair value of Exchangeable Units |
|
|
67,284 |
|
|
|
— |
|
|
|
67,284 |
|
Adjustment to fair value of investment properties |
|
|
(1,365 |
) |
|
|
(2,195 |
) |
|
|
(3,560 |
) |
Adjustment to fair value of investment in real estate securities |
|
|
(29,641 |
) |
|
|
— |
|
|
|
(29,641 |
) |
Income before Income Taxes |
|
|
142,267 |
|
|
|
— |
|
|
|
142,267 |
|
Income tax recovery |
|
|
12 |
|
|
|
— |
|
|
|
12 |
|
Net Income |
|
$ |
142,279 |
|
|
$ |
— |
|
|
$ |
142,279 |
|
The following table reconciles net income as determined in accordance with GAAP to net income on a proportionate share basis for the three months
|
|
Three Months |
||||||||||
($ thousands) |
|
GAAP Basis |
|
Adjustment to Proportionate Share Basis(1) |
|
Proportionate Share Basis |
||||||
Net Operating Income |
|
|
|
|
|
|
||||||
Rental revenue |
|
$ |
324,657 |
|
|
$ |
21,967 |
|
|
$ |
346,624 |
|
Property operating costs |
|
|
(95,270 |
) |
|
|
(7,613 |
) |
|
|
(102,883 |
) |
|
|
|
229,387 |
|
|
|
14,354 |
|
|
|
243,741 |
|
Other Income and Expenses |
|
|
|
|
|
|
||||||
Interest income |
|
|
8,975 |
|
|
|
(2,714 |
) |
|
|
6,261 |
|
Investment Income |
|
|
5,315 |
|
|
|
— |
|
|
|
5,315 |
|
Fee income |
|
|
1,653 |
|
|
|
— |
|
|
|
1,653 |
|
Net interest expense and other financing charges |
|
|
(139,357 |
) |
|
|
(4,880 |
) |
|
|
(144,237 |
) |
General and administrative expenses |
|
|
(14,562 |
) |
|
|
— |
|
|
|
(14,562 |
) |
Share of income from equity accounted joint ventures |
|
|
22,824 |
|
|
|
(22,824 |
) |
|
|
— |
|
Amortization of intangible assets |
|
|
(250 |
) |
|
|
— |
|
|
|
(250 |
) |
Transaction costs and other related expenses |
|
|
(25 |
) |
|
|
— |
|
|
|
(25 |
) |
Adjustment to fair value of unit-based compensation |
|
|
732 |
|
|
|
— |
|
|
|
732 |
|
Adjustment to fair value of Exchangeable Units |
|
|
94,989 |
|
|
|
— |
|
|
|
94,989 |
|
Adjustment to fair value of investment properties |
|
|
75,767 |
|
|
|
16,064 |
|
|
|
91,831 |
|
Adjustment to fair value of investment in real estate securities |
|
|
(14,643 |
) |
|
|
— |
|
|
|
(14,643 |
) |
Income before Income Taxes |
|
|
270,805 |
|
|
|
— |
|
|
|
270,805 |
|
Income tax expense |
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Net Income |
|
$ |
270,804 |
|
|
$ |
— |
|
|
$ |
270,804 |
|
The following table reconciles net income, as determined in accordance with GAAP, to Net Operating Income, Cash Basis, for the periods ended as indicated:
For the periods ended |
|
Three Months |
||||||||||
|
2024 |
|
2023 |
|
Change $ |
|||||||
Net Income |
|
$ |
142,279 |
|
|
$ |
270,804 |
|
|
$ |
(128,525 |
) |
Residential inventory income |
|
|
(2,034 |
) |
|
|
— |
|
|
|
(2,034 |
) |
Interest income |
|
|
(9,759 |
) |
|
|
(8,975 |
) |
|
|
(784 |
) |
Investment income |
|
|
(5,315 |
) |
|
|
(5,315 |
) |
|
|
— |
|
Fee income |
|
|
(701 |
) |
|
|
(1,653 |
) |
|
|
952 |
|
Net interest expense and other financing charges |
|
|
142,284 |
|
|
|
139,357 |
|
|
|
2,927 |
|
General and administrative expenses |
|
|
14,638 |
|
|
|
14,562 |
|
|
|
76 |
|
Share of income from equity accounted joint ventures |
|
|
(4,718 |
) |
|
|
(22,824 |
) |
|
|
18,106 |
|
Amortization of intangible assets |
|
|
250 |
|
|
|
250 |
|
|
|
— |
|
Transaction costs and other related expenses |
|
|
— |
|
|
|
25 |
|
|
|
(25 |
) |
Adjustment to fair value of unit-based compensation |
|
|
(781 |
) |
|
|
(732 |
) |
|
|
(49 |
) |
Adjustment to fair value of Exchangeable Units |
|
|
(67,284 |
) |
|
|
(94,989 |
) |
|
|
27,705 |
|
Adjustment to fair value of investment properties |
|
|
1,365 |
|
|
|
(75,767 |
) |
|
|
77,132 |
|
Adjustment to fair value of investment in real estate securities |
|
|
29,641 |
|
|
|
14,643 |
|
|
|
14,998 |
|
Income tax (recovery) expense |
|
|
(12 |
) |
|
|
1 |
|
|
|
(13 |
) |
Net Operating Income, Accounting Basis - GAAP |
|
|
239,853 |
|
|
|
229,387 |
|
|
|
10,466 |
|
Straight-line rental revenue |
|
|
(261 |
) |
|
|
979 |
|
|
|
(1,240 |
) |
Lease surrender revenue |
|
|
(2,549 |
) |
|
|
(11 |
) |
|
|
(2,538 |
) |
Net Operating Income, Cash Basis - GAAP |
|
|
237,043 |
|
|
|
230,355 |
|
|
|
6,688 |
|
Adjustments for equity accounted joint ventures and financial real estate assets |
|
|
14,590 |
|
|
|
13,697 |
|
|
|
893 |
|
Net Operating Income, Cash Basis - Proportionate Share(1) |
|
$ |
251,633 |
|
|
$ |
244,052 |
|
|
$ |
7,581 |
|
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 |
|
Three Months |
||||||||||
|
2024 |
|
2023 |
|
Change $ |
|||||||
Net Operating Income, Cash Basis - Proportionate Share |
|
$ |
251,633 |
|
|
$ |
244,052 |
|
|
$ |
7,581 |
|
Less: |
|
|
|
|
|
|
||||||
Transactions NOI, Cash Basis |
|
|
(13,138 |
) |
|
|
(11,148 |
) |
|
|
(1,990 |
) |
Same-Asset NOI, Cash Basis |
|
$ |
238,495 |
|
|
$ |
232,904 |
|
|
$ |
5,591 |
|
The following table reconciles net income, as determined in accordance with GAAP, to Funds from Operations for the periods ended as indicated:
For the periods ended |
|
Three Months |
||||||||||
|
2024 |
|
2023 |
|
Change $ |
|||||||
Net Income |
|
$ |
142,279 |
|
|
$ |
270,804 |
|
|
$ |
(128,525 |
) |
Add (deduct) impact of the following: |
|
|
|
|
|
|
||||||
Amortization of intangible assets |
|
|
250 |
|
|
|
250 |
|
|
|
— |
|
Transaction costs and other related expenses |
|
|
— |
|
|
|
25 |
|
|
|
(25 |
) |
Adjustment to fair value of unit-based compensation |
|
|
(781 |
) |
|
|
(732 |
) |
|
|
(49 |
) |
Adjustment to fair value of Exchangeable Units |
|
|
(67,284 |
) |
|
|
(94,989 |
) |
|
|
27,705 |
|
Adjustment to fair value of investment properties |
|
|
1,365 |
|
|
|
(75,767 |
) |
|
|
77,132 |
|
Adjustment to fair value of investment properties to proportionate share(1) |
|
|
2,195 |
|
|
|
(16,064 |
) |
|
|
18,259 |
|
Adjustment to fair value of investment in real estate securities |
|
|
29,641 |
|
|
|
14,643 |
|
|
|
14,998 |
|
Interest otherwise capitalized for development in equity accounted joint ventures |
|
|
2,508 |
|
|
|
2,915 |
|
|
|
(407 |
) |
Exchangeable Units distributions |
|
|
74,540 |
|
|
|
73,551 |
|
|
|
989 |
|
Internal expenses for leasing |
|
|
2,488 |
|
|
|
2,254 |
|
|
|
234 |
|
Income tax (recovery) expense |
|
|
(12 |
) |
|
|
1 |
|
|
|
(13 |
) |
Funds from Operations |
|
$ |
187,189 |
|
|
$ |
176,891 |
|
|
$ |
10,298 |
|
FFO per unit - diluted |
|
$ |
0.259 |
|
|
$ |
0.244 |
|
|
$ |
0.015 |
|
Weighted average number of units outstanding - diluted(i) |
|
|
723,666,036 |
|
|
|
723,665,160 |
|
|
|
876 |
|
(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:
For the periods ended |
|
Three Months |
||||||||||
|
2024 |
|
2023 |
|
Change $ |
|||||||
Funds from Operations |
|
$ |
187,189 |
|
|
$ |
176,891 |
|
|
$ |
10,298 |
|
Add (deduct) impact of the following: |
|
|
|
|
|
|
||||||
Internal expenses for leasing |
|
|
(2,488 |
) |
|
|
(2,254 |
) |
|
|
(234 |
) |
Straight-line rental revenue |
|
|
(261 |
) |
|
|
979 |
|
|
|
(1,240 |
) |
Straight-line rental revenue adjustment to proportionate share(1) |
|
|
(614 |
) |
|
|
(657 |
) |
|
|
43 |
|
Property capital |
|
|
(4,394 |
) |
|
|
(1,748 |
) |
|
|
(2,646 |
) |
Direct leasing costs |
|
|
(1,172 |
) |
|
|
(1,791 |
) |
|
|
619 |
|
Tenant improvements |
|
|
(3,026 |
) |
|
|
(6,443 |
) |
|
|
3,417 |
|
Operating capital expenditures adjustment to proportionate share(1) |
|
|
(2,088 |
) |
|
|
(598 |
) |
|
|
(1,490 |
) |
Adjusted Funds from Operations |
|
$ |
173,146 |
|
|
$ |
164,379 |
|
|
$ |
8,767 |
|
AFFO per unit - diluted |
|
$ |
0.239 |
|
|
$ |
0.227 |
|
|
$ |
0.012 |
|
AFFO payout ratio - diluted(i) |
|
|
78.7 |
% |
|
|
81.8 |
% |
|
|
(3.1 |
)% |
Distribution declared per unit |
|
$ |
0.188 |
|
|
$ |
0.186 |
|
|
$ |
0.002 |
|
Weighted average number of units outstanding - diluted(ii) |
|
|
723,666,036 |
|
|
|
723,665,160 |
|
|
|
876 |
|
(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
Conference Call and Webcast
Management will host a conference call on
Annual Meeting of Unitholders
Choice Properties’ Annual Meeting of Unitholders will be held on
About
We bring this to life by improving 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
View source version on businesswire.com: https://www.businesswire.com/news/home/20240422860489/en/
For further information, please contact investor@choicereit.ca
Chief Financial Officer
t: (416) 628-7872 e: Mario.Barrafato@choicereit.ca
Source: