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      Choice Properties Real Estate Investment Trust Reports Continued Growth for the Third Quarter of 2017


      News provided by

      Choice Properties Real Estate Investment Trust

      Nov 07, 2017, 17:00 ET

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      TORONTO, Nov. 7, 2017 /CNW/ - Choice Properties Real Estate Investment Trust ("Choice Properties" or the "Trust") (TSX: CHP.UN) today announced its condensed consolidated financial results for the third quarter ended September 30, 2017.  The Trust's Quarterly Report will be available in the Investor Relations section of the Trust's website at www.choicereit.ca, filed with SEDAR and available at www.sedar.com. 

      Quarter Highlights:

      • Reported rental revenue of $206.8 million, an increase of $10.5 million or 5.3% compared with $196.3 million in the third quarter of 2016;
      • Reported net income of $303.1 million, an increase of $89.4 million compared with a net income of $213.7 million in the third quarter of 2016. The third quarter of 2017 included a net fair value adjustment gain of $252.5 million (2016 - net gain of $168.4 million);
      • Reported Funds from Operations ("FFO")(1) per unit diluted of $0.263, an increase of $0.015, or 6.0%, compared with $0.248 in the third quarter of 2016;
      • Acquired investment properties (retail and land), from third-party vendors for a combined purchase price of $27.9 million. The retail properties added approximately 65,000 square feet of gross leasable area ("GLA"), at a weighted average capitalization rate of 6.9%;
      • Constructed 66,000 square feet of GLA for 2017 projects, delivering 26 new ancillary retail units thus completing the targeted GLA of 347,000 square feet for 2017; and
      • Maintained ancillary occupancy and increased organic Net Operating Income ("NOI")(1) for the quarter by 3.6% to $140.6 million from $135.7 million in 2016.

      "Choice Properties' steadfast focus on the execution of its strategic plan continued to deliver positive operational and financial results in the third quarter of 2017," said John Morrison, President and Chief Executive Officer.  "Our investments during the quarter resulted in successful acquisitions, completion of new gross leasable area for our tenants, and maintained the quality of our portfolio as well as its high occupancy rate. Supported by a solid base with predictable cash flows, we remain confident in our capacity to further unlock the value creation potential in our portfolio as we continue our intensification program and build momentum for our mixed-use redevelopment projects."

      (1)

      See "Non-GAAP Financial Measures" beginning on page 5.

      Financial and Operational Summary

      As at or for the three months ended September 30




      ($ thousands except where otherwise indicated)




      (unaudited)


      2017

      2016

      Number of properties


      540

      530

      Gross Leasable Area ("GLA") (in millions of square feet)


      43.8

      42.9

      Occupancy


      98.9%

      98.8%

      Rental revenue


      $

      206,750

      $

      196,275

      Net Operating Income ("NOI")(1)


      $

      145,422

      $

      137,835

      Net Income(i)


      $

      303,095

      $

      213,718

      Net Income(i) per unit diluted


      $

      0.733

      $

      0.521

      Funds from Operations ("FFO")(1) per unit diluted


      $

      0.263

      $

      0.248

      Adjusted Cash Flow from Operations ("ACFO")(1)


      $

      81,940

      $

      88,369

      Adjusted Cash Flow from Operations(1) payout ratio


      92.9%

      82.2%

      Distribution declared per unit


      $

      0.1850

      $

      0.1775

      Total assets (in millions)


      $

      9,702

      $

      9,156

      Debt to total assets(ii)


      44.6%

      45.9%

      Debt service coverage(ii)


      3.6x

      3.6x

      (i)   

      Net income included positive adjustments of $174,894 and $123,673 for the fair value of Exchangeable Units, and positive adjustments of $77,604 and $44,757 for the fair value of investment properties for the three months ended September 30, 2017 and September 30, 2016, respectively. Net income before adjustments to fair value(1) was $50,597 and $45,288 for the three months ended September 30, 2017 and September 30, 2016, respectively.

      (ii)  

      Debt ratios include Class C LP Units but exclude Exchangeable Units. The ratios are non-GAAP financial measures calculated based on the trust indentures, as supplemented.

      Financial Results for the Quarter:

      • Rental Revenue - Third quarter rental revenue totalled $206.8 million, an increase of $10.5 million or 5.3% compared with $196.3 million in the third quarter of 2016. Properties owned throughout both comparative periods contributed $8.3 million to the increase.
      • Net Operating Income(1) - NOI(1) for the third quarter of 2017 was $145.4 million, an increase of $7.6 million, or 5.5%, compared with the third quarter of 2016, including an increase in NOI(1) of $1.5 million from properties acquired subsequent to June 30, 2016 and $1.2 million from new developments. Excluding NOI(1) from acquisitions and developments, NOI(1) was $140.6 million, $4.9 million, or 3.6%, higher than the $135.7 million achieved in the third quarter of 2016. This improvement was primarily driven by rent steps in Loblaw leases and higher average rents per square foot on ancillary leases.
      • Net Income - Net income for the third quarter of 2017 was $303.1 million compared to a net income of $213.7 million in the third quarter of 2016. Adjustments to fair value measures were the primary cause of the variance between these comparative periods.
      • Net Income before Adjustments to Fair Value(1) - Third quarter net income before adjustments to fair value(1) of $50.6 million compared with $45.3 million reported in the third quarter of 2016. The increase was driven by an increase of net property income, partially offset by an increase to net interest expense and other financing charges, including distributions on Exchangeable Units.
      • Funds from Operations(1) - FFO(1) for the third quarter of 2017 was $108.9 million or $0.263 per unit diluted, compared with $101.9 million or $0.248 per unit diluted in the third quarter of 2016. The year-over-year improvement in FFO(1) of $0.015 per unit diluted was primarily driven by growth in net property income partially offset by higher net interest expense, excluding distributions on Exchangeable Units.
      • Adjusted Cash Flow from Operations(1) - ACFO(1) for the third quarter of 2017 was $81.9 million, representing an excess of $5.8 million over distributions paid during the quarter, which is a decrease of $10.0 million compared to an excess of $15.8 million in the third quarter of 2016. The year-over-year decrease in ACFO(1) is indicative of fluctuations in the timing of cash flows from operating working capital.
      • Distributions - Distributions per unit declared during the quarter totalled $0.1850, for an ACFO(1) payout ratio of 92.9% (2016 - $0.1775 and 82.2%, respectively).

      (1)

      See "Non-GAAP Financial Measures" beginning on page 5.

      Operational Results for the Quarter:

      • Acquisitions - In the third quarter of 2017, Choice Properties completed six acquisitions, from third-party vendors, for a combined purchase price of $27.9 million. These properties included two retail properties located in St-Raymond, Quebec and Uxbridge, Ontario, adding approximately 65,000 square feet of GLA, anchored by approximately 49,000 square feet of Loblaw leases, at an accretive weighted average capitalization rate of 6.9%. The remaining four properties were parcels of land acquired for development, two of which are located in Toronto, Ontario and one each in Ancienne Lorette, Quebec and Spruce Grove, Alberta.
      • Development Progress - In the third quarter of 2017, Choice Properties constructed 66,000 square feet towards its 2017 projects, delivering 26 new retail spaces for third-party tenants, primarily at greenfield sites in Surrey, British Columbia and Barrie, Ontario as well as an intensification site in St. Albert, Alberta, thus completing the targeted GLA of 347,000 square feet for 2017.
      • Leasing Activity - In the third quarter of 2017, Choice Properties entered into leases for approximately 193,000 square feet of GLA with an average lease term of 9.0 years. This total included approximately 68,000 square feet of lease renewals, with an average increase over expiring base rent rates of 11.7%, and approximately 61,000 square feet for new developments at an average base rent per square foot of $30.74.
      • Occupancy - At September 30, 2017, the Trust's portfolio occupancy rate was 98.9%, compared to 98.8% as at September 30, 2016.

      Capital Structure:

      • Capacity to Invest for Further Growth - As at September 30, 2017, the Trust's debt service coverage ratio(2) was 3.6 times. With stable cash flows from operations and access to several funding sources, including from our senior unsecured committed revolving credit facilities, the Trust believes it has the financial capacity to meet ongoing obligations and invest for further growth.

      Outlook

      Choice Properties continues to drive value creation through accretive acquisitions, strategic development and active management of its portfolio of properties.  This strategy supports the Trust's goal to expand its asset base and increase monthly distributions to unitholders.

      Choice Properties is well positioned to meet its current obligations and to invest for future growth.  The Trust's competitive advantages include: a sizable asset base that is geographically diverse across Canada; long-term leases and a strategic alliance with Loblaw; and an existing development pipeline, supported by sound financial management focused on maintaining a solid balance sheet and its investment grade credit ratings.  With these key differentiators, Choice Properties believes that it is well positioned to achieve its strategic goals despite an increasingly competitive landscape, underscored by ever changing square footage requirements in the retail industry.

      For 2017, Choice Properties expects to:

      • Acquire additional properties from Loblaw and third-party vendors on an accretive basis when opportunities arise;
      • Invest approximately $155 million in development projects, including mixed-use projects, completed in 2017 and future years; and
      • Maintain a total occupancy rate of approximately 98%, with the occupancy rate for ancillary GLA in the 90% range.

      (1)

      See "Non-GAAP Financial Measures" beginning on page 5.

      (2)

      Debt ratios include Class C LP Units but exclude Exchangeable Units. The ratios are non-GAAP financial measures calculated based on the trust indentures, as supplemented.

      Forward-Looking Statements

      This press release 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 can be found in various sections of this press release and in the MD&A of Choice Properties' Third Quarter 2017 Report. 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 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 Choice Properties' 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", in the MD&A of Choice Properties' 2016 Annual Report. Such risks and uncertainties include:

      • changes in economic conditions, including changes in interest rates, and the rate of inflation;
      • the inability of Choice Properties to maintain and leverage its relationship with 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;
      • failure to manage its growth effectively in accordance with its growth strategy or acquire assets on an accretive basis;
      • changes in timing to obtain municipal approvals, development costs, and tenant leasing and occupancy of properties under development, redevelopment, or intensification;
      • changes in Choice Properties' capital expenditure and fixed cost requirements;
      • the inability of Choice Properties Limited Partnership to make distributions or other payments or advances;
      • the inability of Choice Properties to obtain financing;
      • changes in Choice Properties' degree of financial leverage;
      • 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); and
      • changes in Choice Properties' competitiveness in the real estate market or the unavailability of desirable commercial real estate assets.

      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 2016 Annual Information Form. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Choice Properties' expectations only as of the date of this press release. 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.

      Non-GAAP Financial Measures

      Choice Properties reports non-GAAP financial measures, including, but not limited to, Net Operating Income ("NOI"), Net Income before Adjustments to Fair Value, Funds from Operations ("FFO"), and Adjusted Cash Flow from Operations ("ACFO"). The Trust believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Trust for the reasons outlined below.

      Management uses these and other non-GAAP financial measures to exclude the impact of certain expenses and income that must be recognized under IFRS when analyzing operating performance, as the excluded items are not necessarily reflective of Choice Properties' underlying operating performance or impact the comparability of financial performance between periods.

      These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other publicly traded REITs, and should not be construed as an alternative to other financial measures determined in accordance with IFRS.

      A comprehensive list of non-GAAP measures are defined and discussed in the Trust's 2016 Annual Report.

      Net Operating Income  NOI is defined as rental revenue, excluding straight-line rent, from investment properties less property operating costs. NOI is a key performance indicator as it evaluates the operating performance of the portfolio and represents a measure over which management has control. It is also a key input in determining the fair value of the portfolio. The Trust's method of calculating NOI may differ from other issuers' methods and, accordingly, may not be comparable to NOI reported by other issuers.

      Net Income before Adjustments to Fair Value  Net Income (or net loss) as calculated under IFRS excluding adjustments to fair value of Exchangeable Units, investment properties and investment property held in equity-accounted joint venture.

      Funds from Operations  FFO is not a term defined under IFRS and may not be comparable to similar measures used by other real estate entities. Except as otherwise noted, Choice Properties calculates its FFO in accordance with the Real Property Association of Canada's White Paper on Funds from Operations & Adjusted Funds from Operations for IFRS issued in February 2017. The purpose of the White Paper was to provide reporting issuers and investors with greater guidance on the definition of FFO, and to help promote more consistent disclosure from reporting issuers.

      Choice Properties calculates FFO by adjusting net income (or net loss) for items that do not arise from operating activities, such as adjustments to fair value.

      Funds from Operations Payout Ratio  FFO Payout ratio is calculated as the distributions declared per unit, divided by the FFO per unit diluted.

      Adjusted Cash Flow from Operations  ACFO is not a term defined under IFRS and may not be comparable to similar measures used by other real estate entities. Except as otherwise noted, Choice Properties calculates its ACFO in accordance with the Real Property Association of Canada's White Paper on Adjusted Cashflow from Operations (ACFO) for IFRS issued in February 2017. The purpose of the White Paper was to provide reporting issuers and investors with greater guidance on the definitions of ACFO and to help promote more consistent disclosure from reporting issuers.

      Choice Properties considers ACFO an input to determining the appropriate level of distributions to Unitholders as it adjusts cash flows from operations for other sustainable economic cash flows.

      Adjusted Cash Flow from Operations Payout Ratio  ACFO Payout ratio is calculated as the total distributions declared, divided by the ACFO.

      Choice Properties Real Estate Investment Trust
      Calculation of Non-GAAP Financial Measures


      Three Months

      Nine Months

      For the periods ended September 30





      (in thousands of Canadian dollars, except per unit amounts)





      (unaudited)

      2017

      2016

      2017

      2016

      Rental revenue

      $

      206,750

      $

      196,275

      $

      618,809

      $

      585,861

      Reverse - Straight-line rental revenue

      (8,030)

      (8,695)

      (26,648)

      (27,423)

      Property operating costs

      (53,298)

      (49,745)

      (160,303)

      (151,431)

      Net Operating Income(1)

      145,422

      137,835

      431,858

      407,007

      NOI(1) from newly acquired properties

      (1,658)

      (170)

      (9,786)

      (2,950)

      NOI(1) from new developments

      (3,159)

      (1,979)

      (11,240)

      (3,254)

      NOI(1) for Same Properties, with same GLA

      $

      140,605

      $

      135,686

      $

      410,832

      $

      400,803

      Net Income (Loss)

      $

      303,095

      $

      213,718

      $

      368,812

      $

      (478,646)

      Adjustment to fair value of Exchangeable Units

      (174,894)

      (123,673)

      (57,238)

      637,391

      Adjustment to fair value of investment properties

      (77,604)

      (44,757)

      (162,758)

      (7,384)

      Adjustment to fair value of investment property held





      in equity accounted joint venture

      —

      —

      1,250

      (13,640)

      Net Income before Adjustments to Fair Value(1)

      50,597

      45,288

      150,066

      137,721

      Adjustment to fair value of unit-based compensation

      (1,391)

      (489)

      201

      4,534

      Interest otherwise capitalized for development in





      equity accounted joint venture

      112

      82

      304

      240

      Distributions on Exchangeable Units

      58,828

      56,287

      173,304

      162,517

      Amortization of tenant improvement allowances

      228

      165

      590

      365

      Internal expenses for leasing

      522

      546

      1,627

      1,617

      Funds from Operations(1)

      $

      108,896

      $

      101,879

      $

      326,092

      $

      306,994

      FFO(1) per unit - diluted

      $

      0.263

      $

      0.248

      $

      0.790

      $

      0.749

      FFO(1) payout ratio - diluted

      70.2%

      71.5%

      69.0%

      68.4%

      Distribution declared per unit

      $

      0.1850

      $

      0.1775

      $

      0.5450

      $

      0.5125

      Weighted average Units outstanding - diluted

      413,445,869

      410,254,616

      412,871,899

      409,618,643

      (1)

      See "Non-GAAP Financial Measures" beginning on page 5.



      Three Months

      Nine Months

      For the periods ended September 30






      ($ thousands)






      (unaudited)


      2017

      2016

      2017

      2016

      Cash flows from operating activities


      $

      164,042

      $

      158,275

      $

      309,537

      $

      296,855


      Interest paid


      (45,564)

      (43,520)

      (150,500)

      (142,404)

      Cash flows from operating activities less interest paid


      118,478

      114,755

      159,037

      154,451

      Add (deduct) impact of the following:







      Net interest expense and other financing charges







      in excess of interest paid(1)


      (54,119)

      (52,775)

      (143,929)

      (133,410)


      Distributions on Exchangeable Units included in







      net interest expense and other financing charges


      58,828

      56,287

      173,304

      162,517


      Gain on settlement of bond forward contracts


      —

      —

      —

      (2,682)


      Interest income in excess of interest received(1)


      44

      557

      334

      1,634


      Interest otherwise capitalized for development in







      equity accounted joint venture


      112

      82

      304

      240


      Share of interest income from joint venture


      66

      —

      185

      —


      Portion of internal expenses for leasing relating







      to development activity


      261

      273

      814

      809


      Property capital expenditures - incurred


      (22,320)

      (24,074)

      (24,301)

      (25,849)


      Property capital expenditures - normalized(2)


      11,070

      14,074

      (9,449)

      (4,151)


      Leasing capital expenditures - incurred


      (1,077)

      (2,395)

      (3,443)

      (4,030)

      Adjustment for changes in non-cash working capital






      items which are not indicative of sustainable






      operating cash flows(3)


      (29,403)

      (18,415)

      107,698

      97,254

      Adjusted Cash Flow from Operations(4)


      $

      81,940

      $

      88,369

      $

      260,554

      $

      246,783

      Total distributions declared


      $

      76,163

      $

      72,617

      $

      224,140

      $

      209,472

      ACFO(4) payout ratio


      92.9%

      82.2%

      86.0%

      84.9%



      (1)

      The timing of the recognition of interest expense and income differs from the payment and collection. The ACFO calculations for the three and nine months ended September 30, 2017 and September 30, 2016 were adjusted for this factor to make the quarters more comparable.

      (2)

      Seasonality impacts the timing of capital expenditures.  The ACFO calculations for the three and nine months ended September 30, 2017 and September 30, 2016 were adjusted for this factor to make the quarters more comparable based on the annual anticipated spend of approximately $1.00 per square foot.

      (3)

      ACFO is adjusted each quarter for fluctuations in non-cash working capital due to the timing of transactions for realty taxes prepaid or payable, and prepaid insurance. The payments for these operating expenses tend to have quarterly, seasonal fluctuations that even out on an annual basis. Also, variability in non-cash working capital was created, in the first quarter of 2017, when rental payments for January 2017, of $57,135, plus the related sales taxes payable, of $6,334, were received in advance from Loblaw.  ACFO is also adjusted each quarter to remove fluctuations in non-cash working capital due to capital expenditure accruals, which are not related to sustainable operating activities.

      (4)

      See "Non-GAAP Financial Measures" beginning on page 5.

      Selected Financial Information
      The following includes quarterly financial information prepared by management in accordance with IFRS and based on the Trust's Third Quarter 2017 Report. This financial information does not contain all disclosures required by IFRS, and accordingly should be read in conjunction with the Trust's 2016 Annual Report, which is available in the Investor Relations section of the Trust's website at www.choicereit.ca.

      Choice Properties Real Estate Investment Trust
      Condensed Consolidated Balance Sheets

      (unaudited)



      As at

      As at

      (in thousands of Canadian dollars)



      September 30, 2017

      December 31, 2016

      Assets







      Non-current Assets








      Investment properties



      $

      9,400,000

      $

      9,098,000


      Equity accounted joint venture



      21,965

      19,070


      Accounts receivable and other assets



      5,313

      5,888


      Notes receivable



      2,505

      2,360





      9,429,783

      9,125,318

      Current Assets






      Accounts receivable and other assets



      38,402

      14,882


      Notes receivable



      233,821

      290,009


      Cash and cash equivalents



      —

      5,113





      272,223

      310,004

      Total Assets



      $

      9,702,006

      $

      9,435,322








      Liabilities and Unitholders' Equity







      Non-current Liabilities








      Long term debt and Class C LP Units



      $

      3,329,759

      $

      3,726,991


      Credit facilities



      520,000

      172,000


      Exchangeable Units



      4,226,066

      4,283,304


      Trade payables and other liabilities



      2,320

      1,397





      8,078,145

      8,183,692

      Current Liabilities






      Bank indebtedness



      269

      —


      Long term debt and Class C LP Units



      399,974

      201,723


      Trade payables and other liabilities



      311,590

      472,762





      711,833

      674,485

      Total Liabilities



      8,789,978

      8,858,177






      Equity






      Unitholders' equity



      904,257

      569,374


      Non-controlling interests



      7,771

      7,771

      Total Equity



      912,028

      577,145

      Total Liabilities and Equity



      $

      9,702,006

      $

      9,435,322

      Choice Properties Real Estate Investment Trust
      Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

      (unaudited)

      (in thousands of Canadian dollars)

      Three months
      ended

      September 30,
      2017


      Three months
      ended

      September 30,
      2016


      Nine months
      ended

      September 30,
      2017


      Nine months
      ended

      September 30,
      2016

      Net Property Income













      Rental revenue from investment properties

      $

      206,750


      $

      196,275


      $

      618,809


      $

      585,861


      Property operating costs


      (53,298)



      (49,745)



      (160,303)



      (151,431)




      153,452



      146,530



      458,506



      434,430

      Other Income and Expenses













      General and administrative expenses


      (4,332)



      (5,436)



      (16,585)



      (22,470)


      Property management and other administration fees charged to related party


      669



      150



      1,003



      549


      Amortization of other assets


      (233)



      (231)



      (699)



      (697)


      Net interest expense and other financing charges


      (99,683)



      (96,295)



      (294,429)



      (275,814)


      Interest Income


      658



      570



      2,085



      1,723


      Share of income (loss) from joint venture


      66



      —



      (1,065)



      13,640


      Adjustment to fair value of Exchangeable Units(1)


      174,894



      123,673



      57,238



      (637,391)


      Adjustment to fair value of investment properties


      77,604



      44,757



      162,758



      7,384













      Net Income (Loss) and Comprehensive Income (Loss)

      $

      303,095


      $

      213,718


      $

      368,812


      $

      (478,646)



      (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.

      Choice Properties Real Estate Investment Trust
      Condensed Consolidated Statements of Cash Flows

      (unaudited)

      (in thousands of Canadian dollars)

      Three months
      ended

      September 30,
      2017


      Three months
      ended

      September 30,
      2016


      Nine months
      ended

      September 30,
      2017


      Nine months
      ended

      September 30,
      2016

      Operating Activities


      Net income (loss)

      $

      303,095


      $

      213,718


      $

      368,812


      $

      (478,646)


      Straight-line rental revenue


      (8,030)



      (8,695)



      (26,648)



      (27,423)


      Amortization of tenant improvement allowances


      228



      165



      590



      365


      Amortization of other assets


      233



      231



      699



      697


      Net interest expense and other financing charges


      99,683



      96,295



      294,429



      275,814


      Interest income


      (658)



      (570)



      (2,085)



      (1,723)


      Value of unit-based compensation granted


      (525)



      171



      2,834



      6,827


      Share of loss (income) from joint venture


      (66)



      —



      1,065



      (13,640)


      Adjustment to fair value of Exchangeable Units


      (174,894)



      (123,673)



      (57,238)



      637,391


      Adjustment to fair value of investment properties


      (77,604)



      (44,757)



      (162,758)



      (7,384)


      Interest received


      614



      13



      1,751



      89


      Net change in non-cash working capital


      21,966



      25,377



      (111,914)



      (95,512)

      Cash Flows from Operating Activities


      164,042



      158,275



      309,537



      296,855

      Investing Activities













      Acquisitions of investment properties


      (28,941)



      (19,920)



      (47,216)



      (139,815)


      Additions to investment properties


      (51,632)



      (74,203)



      (98,858)



      (130,598)


      Additions to fixtures and equipment


      (38)



      —



      (146)



      (338)


      Equity investment contribution


      (2,200)



      4,000



      (3,960)



      4,000


      Proceeds of disposition


      34,745



      —



      34,745



      —

      Cash Flows used in Investing Activities


      (48,066)



      (90,123)



      (115,435)



      (266,751)

      Financing Activities













      Long term debt














      Issued - Senior unsecured debentures, net of debt placement costs


      —



      (217)



      —



      347,854



      Principal repayments - Senior unsecured debentures


      —



      —



      (200,000)



      (300,000)



      Principal repayments - Mortgage


      (327)



      (306)



      (964)



      (901)



      Gain on settlement of bond forward contracts


      —



      —



      —



      2,682


      Credit facilities














      Net advances


      4,000



      61,000



      348,000



      203,000



      Debt placement costs


      (275)



      —



      (275)



      (275)


      Change in bank indebtedness


      269



      (4,232)



      269



      —


      Notes receivable














      Issued to related party


      (70,390)



      (66,792)



      (207,197)



      (195,620)



      Repaid by related party


      —



      —



      263,574



      248,463


      Trust Unit issuance costs


      —



      —



      —



      (133)


      Cash received on exercise of options


      —



      136



      25



      732


      Cash paid on vesting of restricted units


      —



      (1,493)



      (1,142)



      (1,493)


      Interest paid


      (45,564)



      (43,520)



      (150,500)



      (142,404)


      Distributions paid on Exchangeable Units


      —



      —



      (217,324)



      (202,204)


      Distributions paid to Unitholders


      (11,501)



      (10,944)



      (33,681)



      (32,375)

      Cash Flows used in Financing Activities


      (123,788)



      (66,368)



      (199,215)



      (72,674)

      Change in cash and cash equivalents


      (7,812)



      1,784



      (5,113)



      (42,570)

      Cash and cash equivalents, beginning of period


      7,812



      —



      5,113



      44,354

      Cash and Cash Equivalents, end of period

      $

      —

      $


      1,784


      $

      —


      $

      1,784

      Management Discussion and Analysis and Financial Statements and Notes

      Information appearing in this news release is a consolidated select summary of results. This news release should be read in conjunction with Choice Properties' Third Quarter 2017 Report to Unitholders, which includes the unaudited interim period condensed consolidated financial statements and MD&A for the Trust and is available at www.choicereit.ca and on SEDAR at www.sedar.com.

      Conference Call and Webcast

      Senior management will host a conference call to discuss the results on November 8, 2017 at 10:00AM (ET). To access via teleconference, please dial (647) 427-7450. A playback will be made available two hours after the event at (416) 849-0833, access code: 82419627. To access the conference call via webcast, a link is available at www.choicereit.ca in the "Events and Webcast" section under "News and Events".

      About Choice Properties Real Estate Investment Trust

      Choice Properties Real Estate Investment Trust is an owner, manager and developer of well-located retail and other commercial real estate across Canada. Choice Properties' portfolio spans approximately 43.8 million square feet of gross leasable area and consists of 540 properties primarily focused on supermarket and drug store anchored shopping centres and stand-alone supermarkets and drug stores. Choice Properties' strategy is to create value by enhancing and optimizing its portfolio through accretive acquisitions, strategic development and active property management. Choice Properties' principal tenant and largest Unitholder is Loblaw Companies Limited, Canada's largest retailer. Choice Properties' strong alliance with Loblaw positions it well for future growth. For more information, visit Choice Properties' website at www.choicereit.ca and Choice Properties' issuer profile at www.sedar.com.

      SOURCE Choice Properties Real Estate Investment Trust

      Kim Lee, Vice President, Investor Relations and Business Intelligence, Choice Properties Real Estate Investment Trust, t: (416) 324-7899, e: [email protected]

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      Choice Properties Real Estate Investment Trust

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