Creating
Enduring
Value
West Block
Toronto, ON
Table of Contents
Corporate Profile
Purpose
Business Strategy
Message from the President & CEO
Management’s Discussion & Analysis
Notes for Readers
High-Quality Portfolio
Operational Excellence
Transformational Development Program
Environment, Social &
Governance Program
Prudent Financial Management
Financial Review
Key Performance Indicators and
Financial Information
Balance Sheet
Investment Properties
Liquidity and Capital Resources
Results of Operations
Leasing Activity
Results of Operations
Segment Information
Quarterly Results of Operations
Related Party Transactions
Critical Accounting Estimates and
Judgments
Controls and Procedures
Enterprise Risks and Risk Management
Environmental, Social and
Governance (ESG)
Outlook
Non-GAAP Financial Measures
3
4
5
8
10
16
18
23
26
28
34
36
50
59
64
67
74
75
78
79
80
89
91
93
Annual Report 2021 •
22
Annual Report 2021 •
Creating
Enduring Value
Our Purpose
Choice Properties is a leading Real
Estate Investment Trust that creates
enduring value through the ownership,
operation and development of high-
quality commercial and residential
properties. We believe that value comes
from creating spaces that improve 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.
3
Annual Report 2021 • Stability
and Growth
Choice Building Blocks
Our Choice Building Blocks
illustrate our strategic
framework, which aims to
deliver stability and growth
to our stakeholders.
Our Business Strategy
The combination of stability and growth is at the core of our commitment
to creating enduring value for our stakeholders and the communities in
which we operate. Our business strategy aims to achieve Net Asset Value
appreciation, stable NOI growth and capital preservation, all with a long
term focus.
Development
program provides
long-term value
creation and
growth
Sustainabilty
practices
create value for
all stakeholders,
now and in the
future
Our business strategy is guided by a
shared set of values and a sense of social
responsibility.
CORE
Values
Our actions are grounded by a shared
commitment to Care, Ownership, Respect
and Excellence amongst our colleagues.
Fighting
Climate Change
We are committed to doing our part to
preserve our planet’s resources for current
and future generations.
Addressing
Social Equity
We hold ourselves accountable for
advancing diversity, equity and inclusion
for all stakeholders. We view the collection
of varied experiences, talents and
perspectives as a strength.
Portfolio delivers
a reliable and
growing cash flow
Industry leading
balance sheet
creates financial
flexibility
Operational excellence
ensures income stability
from an engaged, strong
tenant base, and long-
term Net Asset Value
appreciation
Ethics &
Compliance
We are dedicated to strong governance
practices designed to maintain high
standards of oversight, accountability,
ethics and compliance.
4
Annual Report 2021 • Message
from the
President
& CEO
A year of resilience
Fellow unitholders,
2021 was a year of resilience for each of us. The
COVID-19 pandemic created significant uncertainty
and impacted both our communities and our day-to-
day lives. In response, we took further actions to
mitigate the effects of the pandemic on our business
operations and continued to prioritize the health and
safety of our colleagues, tenants and other
stakeholders. We also recognized that the disruption
from the pandemic impacted the mental health and
well-being of many in our communities. Our colleagues
stepped up by concentrating our 2021 community
giving efforts on increasing equity in access to mental
health services across Canada.
Despite the continuous restrictions and re-opening
impacting the economy, we are pleased with our
financial results this past year, demonstrating that our
business model, stable tenant base and disciplined
approach to financial management continue to
position us well. While the pandemic is not yet behind
us, we are encouraged by high vaccination rates and
anticipate further re-opening measures. We are
optimistic that 2022 will be a year of further recovery.
Delivering stability with our high-quality, necessity-
based portfolio
Our diversified portfolio of retail, industrial, residential,
and office properties is well-occupied at approximately
97.1% and leased to stable, high-quality tenants across
Canada. Our retail portfolio is primarily leased to
grocery stores, pharmacies or other necessity-based
tenants, who continue to perform well in this
environment. Our industrial portfolio continues to be
our strongest performing asset class and the demand
for distribution and logistics warehouses remains at an
all-time high. This stability is evident in our financial
results and by our collections, which were
approximately 99% of contractual rents for the year.
Advancing our development pipeline and expanding
our industrial portfolio
Our development program continues to provide us with
exceptional opportunities to add high-quality real
estate to our portfolio at a reasonable cost. In 2021, we
completed and transferred $256 million from properties
under development to our income producing portfolio,
including our purpose built rental developments The
Brixton and Liberty House. With our active development
pipeline we are expanding our footprint in the rental
residential market with two ongoing projects in Ontario
and we are growing our industrial portfolio with two
ongoing projects expected to deliver over 0.6 million
square feet of new generation logistics space.
Looking ahead, we have made considerable progress in
advancing our mixed-use and residential zoning
process. We have 11 projects representing over 10.5
million square feet in different stages of the rezoning
and planning process.
5
Annual Report 2021 •
MESSAGE FROM THE PRESIDENT & CEO
Executing our capital recycling program and
strategically managing our assets
Building a sustainable future
We were successful in executing our on-going capital
recycling program in 2021. During the year, we disposed
of $329 million of assets, including $110 million of
underutilized land and $174 million of non-strategic
retail assets. The activity demonstrates the demand
from investors for our assets as we achieved pricing
that was above our IFRS fair values. We also acquired
$241 million of assets in 2021, including the acquisition
of 300 acres of future industrial land to be developed
into a multi-phase industrial park.
Collectively, we completed over $570 million of real
estate transactions through our capital recycling
program in 2021. This activity demonstrates our ability
to generate stable and growing net operating income,
to improve the overall quality of our portfolio, and
ultimately grow our net asset value over the long-term.
We expect to continue our capital recycling program in
2022.
Well-prepared for market volatility with our industry
leading balance sheet
Our business is supported by an industry leading
balance sheet that provides Choice Properties flexibility
in the face of broader market volatility. From a liquidity
perspective, we have approximately $1.5 billion
available under our credit facility, $124 million of
available cash on our balance sheet and $12.8 billion in
unencumbered assets at the end of 2021.
In 2021, we integrated sustainable finance into our
business with the release of our Green Financing
Framework. In Q4, we completed our inaugural green
bond offering of $350 million of Series Q Senior
Unsecured Debentures. We intend to allocate the net
proceeds of our green bond offering to fund eligible
green projects. Green financing enables us to make
strategic, long-term investments in energy transition
solutions and improve climate resilience across our
portfolio.
Our longstanding commitment to build a sustainable
future is integral to our purpose – to create enduring
value for our stakeholders and the communities in
which we operate. In 2021, we made significant
advancements in our Environmental, Social and
Governance (“ESG”) program including committing to
set emissions reduction targets that are in line with
current climate science, donating over $400 thousand
to local charities, and developing a comprehensive
diversity, equity and inclusion framework. We are an
industry leader in ESG practices and continue to
integrate sustainability values across our entire value
chain. To maximize our impact, we have focused our
ESG strategy into two pillars: (1) Fighting Climate
Change, and (2) Addressing Social Equity. We look
forward to releasing our progress and enhanced targets
for these two pillars in our upcoming 2021 ESG Report.
Together we stand, together we grow
Our operating results for the year were strong and
reflect the strength and resilience of our income
producing portfolio. We are confident that the strategic
and operating decisions we have made across our
business positions us well for the future. We are excited
to continue to advance our transformational
development pipeline and deliver enduring value for our
unitholders.
Our achievements are owed to the dedication and
teamwork demonstrated by our colleagues. The past
two years have not been easy to navigate, but we
adapted. We continued to provide best in class service
that prioritized the health and safety of our
stakeholders. In the face of adversity, our colleagues
chose to reassert our commitment to caring for one
another, our tenants and our communities.
On behalf of the entire Choice Properties team, we
thank you for your continued support and confidence.
We look forward to a year of activity and growth in
2022.
Rael L. Diamond
President & CEO
6
Annual Report 2021 • Management’s
Discussion
and Analysis
42 Overlea Boulevard
Toronto, ON
“Building a sustainable and equitable
future is integral to our mission of
creating enduring value.”
Ana Radic
Executive Vice President, Leasing and Operations
(1) See Section 15, “Non-GAAP Financial Measures”, of this MD&A
(2) To be read in conjunction with the “Forward-Looking Statements” included in the Notes for Readers located on page 8 of this MD&A
7
Annual Report 2021 • Notes for Readers
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. Investment properties are recorded at fair
value based on valuations performed by the Trust’s
internal valuations team. These adjustments to fair
value impact certain of the GAAP reported figures
of the Trust, including net income.
Additional risks and uncertainties are discussed in
Choice Properties’ materials filed with the
Canadian securities regulatory authorities from
time to time, including without limitation, the Trust’s
AIF for the year ended December 31, 2021. 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
Annual 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.
Choice Properties is an unincorporated, open
ended mutual fund trust governed by the laws of
the Province of Ontario and established pursuant to
an amended and restated declaration of trust
dated April 30, 2021, as may be amended,
supplemented or restated from time to time (the
“Declaration of Trust”). Choice Properties’ Trust
Units are listed on the Toronto Stock Exchange
(“TSX”) and are traded under the symbol “CHP.UN”.
George Weston Limited (“GWL”) is the controlling
unitholder of the Trust and the controlling
shareholder of Loblaw Companies Limited
(“Loblaw”), the Trust’s largest tenant. As of
December 31, 2021, GWL held a 61.7% direct
effective interest in Choice Properties. Choice
Properties’ ultimate parent is Wittington
Investments, Limited (“Wittington”), the controlling
shareholder of GWL.
Additional information about Choice Properties has
been filed electronically with the Canadian
securities regulatory authorities through the System
for Electronic Document Analysis and Retrieval
(“SEDAR”) and is available online at www.sedar.
com.
The information in this MD&A is current to February
16, 2022, unless otherwise noted.
All amounts in this MD&A are reported in thousands
of Canadian dollars, except where otherwise noted.
Please refer to the Choice Properties Real Estate
Investment Trust (“Choice Properties” or the “Trust”)
audited consolidated financial statements for the
year ended December 31, 2021 and accompanying
notes (“2021 Financial Statements”) when reading
this Management’s Discussion and Analysis
(“MD&A”). In addition, this MD&A should be read in
conjunction with the Trust’s “Forward-Looking
Statements” as listed below. Choice Properties’
2021 Annual Financial Statements have been
prepared in accordance with International
Financial Reporting Standards (“IFRS” or “GAAP”)
and were authorized for issuance by the Board of
Trustees (“Board”).
In addition to using performance measures
determined in accordance with IFRS, Choice
Properties’ management also measures
performance using certain additional non-GAAP
measures and provides these measures in this
MD&A so that investors may do the same. Such
measures do not have any standardized definitions
prescribed under IFRS and are, therefore, unlikely to
be comparable to similar measures presented by
other real estate investment trusts or enterprises.
Please refer to Section 15, “Non-GAAP Financial
Measures” for a list of defined non-GAAP financial
measures and reconciliations thereof.
This Annual Report, including this MD&A, contains
forward-looking statements about Choice
Properties’ objectives, 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 this MD&A, including but not limited to, Section 3,
“Investment Properties”, Section 5, “Results of
Operations”, Section 6, “Leasing Activity”, Section 7,
“Results of Operations - Segment Information”,
Section 13, “Environmental, Social and Governance
(“ESG”)”, and Section 14, “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”, “aspire”, “pledge, “aim”, 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
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
Section 12, “Enterprise Risks and Risk Management”
of this MD&A and the Trust’s Annual Information
Form (“AIF”) for the year ended December 31, 2021.
Selected highlights of such risks and uncertainties
include:
•
•
•
•
•
•
the duration and impact of the COVID-19
pandemic on the business, operations and
financial condition of Choice Properties and its
tenants, as well as on consumer behaviours and
the economy in general, including the nature and
length of the restrictive measures implemented
or to be implemented by various levels of
government in Canada;
changes in economic conditions, including
changes in interest rates and the rate of
inflation;
failure by Choice Properties to effectively and
efficiently manage its property and leasing
management processes;
the inability of Choice Properties to make
acquisitions and dispositions of properties in
accordance with its near and long-term
strategies;
failure by Choice Properties to anticipate,
identify and react to demographic changes,
including shifting consumer preferences toward
digital commerce, which may result in a
decrease in demand for physical space by retail
tenants; and
the inability of Choice Properties’ information
technology infrastructure to support the
requirements of Choice Properties’ business,
failure by Choice Properties to identify and
respond to business disruptions, or the
occurrence of any internal or external security
breaches, denial of service attacks, viruses,
worms or other known or unknown cyber security
or data breaches.
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.
Choice Properties’ financial results are impacted by
adjustments to the fair value of the Class B LP units
of Choice Properties Limited Partnership (the
“Exchangeable Units”), unit-based compensation
and investment properties. Exchangeable Units and
unit-based compensation liabilities are recorded at
their fair value based on the market trading price of
8
Annual Report 2021 • 301 Moore Avenue
Toronto, ON
9
Annual Report 2021 • High-Quality
Portfolio
Canada’s Largest REIT
Choice Properties is Canada’s largest REIT. Our
portfolio is comprised of retail properties primarily
leased to necessity-based tenants, as we benefit
from our strategic relationship with Loblaw
Companies Limited, the country’s leading retailer.
We also own a portfolio of high-quality industrial,
office and residential assets concentrated in
attractive markets across Canada.
709Properties
65.8M
Sq. Ft. of GLA
76%
Retail
15%
Industrial
1%
Residential
8%
Office
(i) As a % of total NOI on a cash basis(1)
(ii) Residential properties are included in the retail segment for reporting purposes
10
Annual Report 2021 • HIGH-QUALITY PORTFOLIO
Resilient
Retail
Portfolio
The retail portion of the Choice Properties portfolio is the
foundation for maintaining reliable cash flow. Our portfolio
is primarily leased to grocery stores, pharmacies, and other
necessity-based tenants, and stability is attained through a
strategic relationship and long-term leases with Loblaw,
one of Canada’s largest retailers. This relationship provides
us with access to future tenancy and related opportunities
with Loblaw, Shoppers Drug Mart and other members of the
Loblaw group of companies.
1460 East Hastings Street
Vancouver, BC
Retail Category
% of Retail NOI
Tenants
Grocery Stores & Pharmacy
71%
Specialty Retailers
Value Retailers
Essential Personal Service
6%
5%
5%
Fitness & Other Personal Services
4%
Restaurants and Cafes
Furniture & Home
Other
Total
4%
4%
1%
100%
Calculated as a % of total NOI on a
cash basis(1) for the three months ended
December 31, 2021
11
Annual Report 2021 • HIGH-QUALITY PORTFOLIO
Growing
Industrial
Portfolio
Choice Properties’ industrial portfolio is centered around
large, purpose-built distribution facilities for Loblaw and
high-quality “generic” industrial assets that readily
accommodate the diverse needs of a broad range of tenants.
The term “generic” refers to a product that appeals to a wide
range of potential users, so that the leasing or re-leasing time
frame is reduced.
Our industrial properties are located in target distribution
markets across Canada, where demand is the highest and we
can build a critical mass to enjoy management efficiencies
and to accommodate the expansion or contraction
requirements of the tenant base.
Building Critical Mass in
Target Distribution Markets
BC
AB
SK
MB
ON
Vancouver
8%
3 properties
Calgary
28%
36 properties
Edmonton
10%
13 properties
Calculated as a % of total NOI on a cash basis for
the 3 months ended December 31th, 2021
Great Plains Business Park
Calgary, AB
92%
NOI in target
markets
NL
QC
NB
PEI
NS
Halifax
6%
15 properties
12
Montreal
8%
4 properties
Greater Toronto Area
32%
42 properties
Annual Report 2021 • HIGH-QUALITY PORTFOLIO
Office and
Residential
Portfolios
Urban Core
Office Portfolio
Choice Properties’ office portfolio is focused on
well-located buildings in target markets, with an
emphasis on the downtown core in some of Canada’s
largest cities. Our objective is to seek institutional
partners for these assets as a means to diversify risk.
As the managing partner, Choice Properties’ overall
returns are enhanced through the generation of fee
income from the day-to-day management and leasing
activities at these properties.
Transit-Oriented
Residential Portfolio
Choice Properties’ residential portfolio is a recent
addition to our asset mix. Rental residential properties
provide additional income diversification and
generate further investment opportunities for portfolio
growth. Many of these opportunities to develop
residential properties are by densifying existing retail
sites with residential buildings. Our residential
properties are transit accessible and well located in
Canada’s largest cities. They include both newly
developed purpose-built rental buildings and
residential-focused mixed-use communities.
525 University Avenue
Toronto, ON
VIA 123
Toronto, ON
13
Annual Report 2021 • HIGH-QUALITY PORTFOLIO
Ownership by
Asset Class
Net operating income, cash basis(1)(i),
shown in percentage below
Briti s h Colum
b
i
a
11%
A l berta
19%
k a tchew
a
n
S a s
M a nitoba
2%
2%
O n tario
42%
Q u ebec
14%
N
A t l antic
10%
F
L
D / NB / P E I / NS
Retail
Industrial
Office
Residential
British
Columbia
Total
Retail
Industrial
Office
Residential
Alberta
Saskatchewan
Manitoba
Ontario
Quebec
Atlantic
47
42
3
2
0
Total
Retail
Industrial
Office
Residential
130
77
49
2
2
Total
Retail
Industrial
Office
Residential
17
17
0
0
0
Total
Retail
Industrial
Office
Residential
14
14
0
0
0
Total
Retail
Industrial
Office
Residential
291
237
43
8
3
Total
Retail
Industrial
Office
Residential
109
103
4
2
0
Total
Retail
Industrial
Office
Residential
101
81
18
2
0
571
Retail
117
Industrial
16
Office
5
Residential
(i) For the three months ended December 31, 2021
14
Annual Report 2021 • 2994 Peddie Road
Milton, ON
15
Annual Report 2021 • Operational
Excellence
At Choice Properties, we strive to understand the needs and
values of our tenants to provide best in class service. We
manage our properties to the highest standard, creating
spaces that promote the success and well-being of our
tenants and the surrounding community. To sustain
operational excellence we prioritize building efficiency and
climate resilience. We partner with our tenants, contractors
and suppliers to proactively monitor and manage resource
consumption through our environmental programs focused on
reducing emissions and waste.
Delivering operational excellence, coupled with pro-active
leasing, results in high occupancy rates, income stability and
long-term net asset value appreciation.
Retail
Industrial
Office
Recognized Management Excellence
We prioritize the health and safety of our
colleagues, tenants, visitors and other
stakeholders by utilizing evidence-based best
practices recognized by the WELL Health-
Safety Rating and Fitwel Viral Response
Module. Moreover, we use Green Building
standards such as LEED and BOMA BEST to
showcase exemplary operational practices.
Occupancy
Sq. Ft. GLA
97.5%
44.7M
98.0%
17.0M
88.2%
3.6M
Residential(i)
0.5M
Total
97.1%
65.8M
(i) Residential properties are included in the retail segment for reporting purposes
16
Annual Report 2021 • The Weston Centre
Toronto, ON
17
Annual Report 2021 • Transformational
Development
Program
Choice Industrial Centre
Surrey, BC
Leveraging Green Technology
We strive to reduce our environmental impact
by incorporating environmental features into
our new developments. In Surrey, British
Columbia, we identified dual-fuel heat pumps
as an opportunity to reduce emissions at the
property, while providing a pathway to
decarbonization in future years.
Activating Our Potential
Development initiatives are a key component of our business plan,
positioning Choice Properties for long-term growth and value creation.
Our income producing properties offer significant intensification and
redevelopment opportunities in Canada’s largest markets, enabling us to
add high-quality real estate to our portfolio at a reasonable cost. Our
long-term pipeline of potential mixed-use developments allow us to
transform and revitalize neighbourhoods into communities that are
self-sustaining and inclusive.
Choice Properties has internal development capabilities as well as
established relationships with strong real estate developers who share
our commitment to building healthy, resilient communities. From project
concept through to operations, we consider the environmental and
social impact of our developments. By implementing environmental
design features and taking a community-based approach to
development, we aspire to deliver a product that positively influences
the entire area for generations.
18
Annual Report 2021 • TRANSFORMATIONAL DEVELOPMENT PROGRAM
Developing
with
Purpose
A Community-Based Approach
Our plans to revitalize and redevelop our 19-acre Golden
Mile Shopping Centre in Toronto, Ontario is an example of
how we take a multi-sector, collaborative approach to
development. In 2021, we announced our partnership with
the Daniels Corp. in this mixed-use development along
with our plans to introduce the Community Innovation
District. The District will include a flagship BMO® branch
to promote financial literacy amongst local entrepreneurs,
and a “Communiversity” – a collaboration between the
University of Toronto Scarborough and Centennial College
– to enhance access to post-secondary education.
Mixed-Use
Greenfield Development
Transforming Communities
Adapting to Market Trends
Mixed-use developments are a critical part of Choice
Properties’ long-term growth strategy. These projects allow us
to transform neighbourhoods into communities that are
self-sustaining and inclusive. These developments will deliver
attractive residential and commercial spaces in close proximity
to public transportation. Our projects are in various phases of
planning and rezoning, and we continue to work on finalizing
any necessary land assemblies.
Choice Properties’ development activities include
greenfield projects that are primarily focused on new
generation logistics facilities in key distribution markets
across Canada. An advantage of greenfield
developments is that they lend themselves to phased
construction, creating flexibility to time developments
with changing market conditions.
Intensification
Delivering Steady Growth
Our intensifications are focused on adding at-grade retail
density at our existing retail properties. These projects provide
the opportunity to add new tenants and further expand our
high-quality tenant mix. Our pipeline of intensification projects
provides steady growth to our business.
Residential
Diversifying Our Portfolio
Residential development further diversifies our portfolio.
These developments are primarily purpose-built rental
assets with close proximity to major transit, local
amenities, and well-established communities.
* “BMO” is a registered trade-mark of Bank of Montreal.
19
Annual Report 2021 • TRANSFORMATIONAL DEVELOPMENT PROGRAM
2021
Achievements
10
Completed
Projects
$250M
Total
Investment
0.4M
Sq. Ft.
Delivered
394
Residential
Units
Delivered
The Brixton
Toronto, ON
Purpose built rental project in the
West Queen West neighbourhood
of Toronto
Pioneer Park
Kitchener, ON
Redeveloped modern retail hub
anchored by Zehrs and Shoppers
Drug Mart
Liberty House
Toronto, ON
25-storey purpose-built rental
tower offers premium living in
Liberty Village
20
Annual Report 2021 • TRANSFORMATIONAL DEVELOPMENT PROGRAM
On the
Move
We look forward to delivering
on our active development
projects that will strengthen
our portfolio across each asset
class.
19
Projects Under
Development
$300M
Total
Investment (2)
1.0M
Sq. Ft.
348
Residential
Units
Choice Industrial
Centre
Surrey, BC
New generation logistic
facility targeting LEED silver
certification
Mount Pleasant
Village
Brampton, ON
Residential development
designed to deliver
geothermal heating and
embodied carbon reduction
Element
Ottawa, ON
Purpose-built rental project
in the well-established
Westboro neighborhood of
Ottawa
21
Annual Report 2021 • TRANSFORMATIONAL DEVELOPMENT PROGRAM
Immense
Value Opportunity
Choice Properties has a long-
term development pipeline that
we expect will create significant
value.
10.5M
Ft. Sq.
Potential
Density
12,000
Potential
Residential
Units
Golden Mile
Toronto, ON
25 Photography Drive
Toronto, ON
685 Warden Avenue
Toronto, ON
Woodbine & Danforth
Toronto, ON
22
Annual Report 2021 • Environment,
Social &
Governance
Program
Choice Properties aspires
to develop healthy,
resilient communities
through our dedication
to social, economic
and environmental
sustainability.
Our commitment to Environmental, Social
and Governance (“ESG”) practices is
aligned with our purpose of creating
enduring value through the ownership,
operation and development of high-quality
commercial and residential properties.
Recognizing that our responsibility extends
beyond the spaces we own, and to a broad
set of stakeholders, Choice Properties
aspires to develop healthy, resilient
communities through its dedication to
social, economic and environmental
sustainability.
23
Annual Report 2021 • ENVIRONMENT, SOCIAL AND GOVERNANCE PROGRAM
2021 Highlights
Net-Zero
Commitment to set science-
based net-zero emissions
targets through the Science
Based Targets initiative
(SBTi)
Engagement
We “Tell It As It Is” in our
annual colleague survey
and provide health and
wellness resources to all
colleagues
Ethics &
Compliance
All colleagues completed
training on our new Code of
Conduct
LED Upgrades
Achieved our lighting LED
conversion target two years
ahead of schedule
Choice Cares
Over $400K and 1,200+
hours of colleague time
donated to Canadian
charities in support of
mental health initiatives
Diversity
44% of our Board of Trustees
and 50% of our Executives
(VP+) self-identify as women
Green Buildings
Over 30M sq. ft. certified
under LEED or BOMA BEST,
including LEED Gold Core
and Shell at the recently
completed West Block
Equity & Inclusion
Strengthened our culture
with diverse recruitment
panels, mandatory anti-bias
training and representation
targets for women and
visible minorities
Cybersecurity
Our cybersecurity maturity
rating exceeds the industry
benchmark after improving
33% in a year
24
Annual Report 2021 • ENVIRONMENT, SOCIAL AND GOVERNANCE PROGRAM
Focused Pillars
Choice Properties focuses its ESG program around two pillars where the we can best create enduring
value and which align with our stakeholder interests: Fighting Climate Change and Addressing Social
Equity. Since launching our ESG program, we have created leading and impactful programs, and we
have set ambitious targets that will guide our approach to advancing these two pillars in the years to
come.
Fighting Climate Change
Addressing Social Equity
Choice Properties’ goal of creating enduring value is aligned
with the need to promote a more sustainable future in order to
prevent the effects of climate change in our communities and
on our business.
In 2021, Choice Properties committed to setting ambitious
science-based targets through the Science Based Targets
initiative (SBTi) Net-Zero Standard, and expects to do so in
2022. We pledged to set targets across our entire value chain,
including our own operational emissions, and those from our
tenants and developments (Scope 1, 2, and 3), and to establish
a pathway to achieve net-zero emissions by 2050. This
commitment builds on the progress Choice Properties has
made over the past few years since issuing our first emissions
reduction targets in 2019.
Choice Properties continues to take meaningful steps to
minimize our environmental impact by improving the
operational efficiency of our portfolio, embedding sustainable
design features in our new developments, and certifying a
substantial portion of our portfolio under green building
standards including LEED and BOMA BEST.
Choice Properties is committed to nurturing and advancing
a culture of diversity, equity and inclusion (“DEI”). This
commitment is demonstrated through programs focused
on our colleagues, and programs that enhance the
community fabric at our development properties.
In 2021, Choice Properties launched its DEI Framework,
which identifies four focus areas through which the Trust
can meaningfully advance DEI through our business. As
part of this Framework, in 2021 Choice Properties set and
made progress towards ambitious DEI targets that commit
to recruiting, advancing and retaining colleagues who
self-identify as women and visible minorities within our
organization at the Board of Trustees, Executive and Senior
Management levels.
Choice Properties’ commitment to addressing social equity
through community building can be seen through
development projects such as the affordable housing
component of our Grenville and Grosvenor development.
25
Annual Report 2021 • Prudent
Financial
Management
Woodside Power Centre
Markham, ON
Our foundation is built
on maintaining a strong
balance sheet, financial
flexibility, and prudent
financial management.
Choice Properties maintains an industry leading
balance sheet to create financial flexibility for our
business and to ensure the capacity to fund our
significant development program.
Inaugural Green Bond Offering
In Q4 2021, Choice Properties released its Green Financing
Framework and completed its inaugural green bond
offering of $350 million of Series Q Senior Unsecured
Debentures. We intend to allocate the net proceeds of our
green bond offering to fund eligible green projects.
Sustainable finance will allows us to make strategic,
long-term investments in energy transitions solutions and
improve climate resilience across our portfolio.
26
Annual Report 2021 • Harvest Pointe
Edmonton, AB
27
Annual Report 2021 • Key Performance Indicators
and Financial Information
The analysis of the indicators focuses on trends and significant events affecting
the financial condition and results of operations.
Net Income (Loss)
The quarterly decrease compared to the prior year was mainly due
to a $285.7 million unfavourable change in the adjustment to the fair
value of the Trust’s Exchangeable Units due to an increase in the
Trust’s unit price.
The year-to-date decrease compared to the prior year was mainly
due to a $1,217.1 million unfavourable change in the adjustment to
the fair value of the Trust’s Exchangeable Units due to an increase in
the Trust’s unit price, partially offset by a $678.8 million favourable
change in the fair value of investment properties, a $72.5 million
increase in income from equity accounted joint ventures, and a
$25.4 million increase in in net operating income.
Rental Revenue (GAAP)
The quarterly increase in revenue was mainly due to increased
occupancy in the industrial portfolio, compared to the prior year,
partially offset by vacancies in the office portfolio.
The year-to-date increase was primarily due to net contributions
from acquisitions and development transfers completed in the past
18 months, partially offset by declines due to foregone revenue from
dispositions and vacancies in select office assets.
FFO Per Unit Diluted(1)
Funds from operations increased by $3.3 million compared to the
prior quarter primarily due to higher net operating income from the
revenue increases noted above, a decline in bad debt expense, and
the reversal of an expected credit loss on a specific mortgage
receivable, partially offset by an increase in interest expense due to
fees incurred on the early repayment of the Series I debentures in
December 2021 and an increase in general and administrative
expenses.
On a year-to-date basis, funds from operations increased by $37.9
million mainly due to a decrease in bad debt expense, savings from
lower borrowing costs and contributions from development
transfers and transaction activity. The prior year results were
impacted by a non-recurring $7.8 million allowance for expected
credit losses on a specific mortgage receivable, and $6.8 million in
early redemption premiums paid in June 2020 for two senior
unsecured debentures that would have matured in 2021.
On a per unit basis, the Trust had a higher weighted average
number of units outstanding as at December 31 2021, as a result of:
(i) the Trust units issued as consideration for the acquisition of two
assets from Wittington in July 2020 and (ii) the Exchangeable Units
issued as consideration for the acquisition of six assets from a
wholly-owned subsidiary of GWL in December 2020.
* As at and for the three month and year ended December 31, 2021
and 2020 ($ thousands except where otherwise indicated)
Q4 2021
Q4 2020
YTD 2021
YTD 2020
Q3 YTD 2021
$(163,087)
$116,570
$23,008
$450,685
$(200,000)
$(100,000)
$0
$100,000
$200,000
$300,000
$400,000
$325,763
$321,862
$1,292,321
$1,270,614
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$0.242
$0.239
$0
$0.200
$0.400
$0.600
$0.800
$0.954
$0.921
28
Annual Report 2021 •
AFFO Per Unit Diluted(1)
Adjusted funds from operations decreased compared to the prior
year on a quarterly basis due to the timing of capital spending,
leasing costs and spending on tenant improvements. The increase
on an annual basis was mainly due to the increase in funds from
operations noted above.
The change on a per unit basis was due to the decrease in AFFO,
coupled with an increase in the weighted average number of units
outstanding for the year ended December 31, 2021, as discussed
above.
For the year ended December 31, 2021, the AFFO payout ratio was
91.2% compared to 92.6% in the prior year.
Same-Asset NOI, Cash Basis(1)
The increase of 2.6% for the three months ended December 31, 2021
was mainly due to increased occupancy in the industrial portfolio,
and increased revenue from contractual rent steps, partially offset
by a reduction in occupancy in select office assets.
The increase of 2.5% on an annual basis was primarily driven by
increased revenue from contractual rent steps, and a decline in
bad debt expense, partially offset by a reduction in occupancy in
select office assets.
Period End Occupancy
Overall period end occupancy was stable compared to the prior
year as positive absorption in the Ontario and Alberta industrial
portfolios, and contributions from development transfers, were
partially offset by vacancies in the national office portfolio.
Adjusted Debt to EBITDAFV(1)
The improvement is primarily due to a decline in bad debt expense
compared to the prior year, coupled with a reduction in debt from
the redemption of the $200 million series 9 senior unsecured
debentures in June 2021.
Q4 2021
Q4 2020
YTD 2021
YTD 2020
Q3 YTD 2021
$0.164
$0.189
$0
$0.150
$0.300
$0.450
$0.600
$0.750
$216,188
$210,755
$0.811
$0.800
$853,110
$832,119
$0
$130,000
$260,000
$390,000
$520,000
$650,000
$780,000
80.0%
85.0%
90.0%
95.0%
97.1%
97.1%
0.0
2.0
4.0
6.0
8.0
7.2
7.6
Development Spending
(Proportionate)(1)
$41,056
$45,092
Development activity reflects spending on active projects during
the three months and year ended December 31, 2021 and 2020.
$133,468
$150,158
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Transfers From Properties
Under Development to Income
Producing (Proportionate)(1)
During the three months ended December 31, 2021, the Trust
transferred from properties under development to income
producing: 3,500 square feet of new retail space, and 229
residential units.
$0
$40,000
$80,000
$120,000
$160,000
$200,000
$240,000
$140,920
$255,785
29
Annual Report 2021 •
Grandview Central
Surrey, BC
30
Annual Report 2021 • Fourth Quarter
Financial Performance
During the three months ended December 31, 2021
Operating
Financing
• Reported net loss for the quarter of $163.1 million,
compared to net income of $116.6 million in the prior
year. The decline is primarily due to a $285.7 million
decrease related to the adjustment to the fair value of
the Exchangeable Units attributable to the unit price
increase for Choice Properties during the quarter.
• Reported FFO per unit diluted(1) for the quarter was
$0.242, an increase of $0.003 per unit diluted from the
prior year quarter.
• Completed Green Bond issuance for $350 million of
Series Q senior unsecured debentures at 2.46%. The
proceeds were used in the early redemption of the $300
million Series I senior unsecured debentures and to repay
a portion of the balance drawn on the credit facility.
• Completed $138.2 million of mortgage financings at a
weighted average rate of 3.5% and discharged $57.1
million of mortgages at a weighted average rate of
3.8%.
• AFFO per unit diluted(1) for the quarter was $0.164,
• Ended quarter with debt-to-gross book value(1) at 40.1%,
compared to $0.189 in the prior year. The decrease in
AFFO reflects an increase in project capital costs,
tenant improvements and direct leasing costs.
• Same-asset NOI on a cash basis, excluding bad debt
expense(1) increased by 2.0% over the same quarter in
the prior year, primarily due to contractual rent steps in
the retail portfolio and improved leasing in the industrial
portfolio, partially offset by the impact of lower
occupancy in the office portfolio. Including bad debt
expense, same-asset NOI on a cash basis(1) increased
by 2.6%, as bad debt continued to decline.
• Period end occupancy remained strong at 97.1%, with
retail at 97.5%, industrial at 98.0% and office at 88.2%.
• Net fair value gain on investment properties was $109.2
million on a proportionate share basis(1) primarily due to
fair value gains on the industrial portfolio due to strong
demand fundamentals and capitalization rate
compression.
and normalized debt to EBITDAFV(1) and interest
coverage ratios(1) of 7.2 and 3.7 times, respectively.
• Strong liquidity position with approximately $1.5 billion of
available credit and a $12.8 billion pool of unencumbered
properties.
Investing
• Completed $46.4 million in acquisitions, including:
• Two retail properties, tenanted by Loblaws and
Shoppers Drug Mart for $38.5 million;
• A land assembly parcel for the Tullamore industrial
development for $7.9 million;
• Completed $228.4 million in dispositions, including:
• Three multi-tenant retail properties, including a 50%
interest in a Quebec City retail property for a
combined $88.7 million;
• Non-strategic standalone Canadian Tire and
Loblaw anchored retail properties for $85.7 million;
• An industrial portfolio in Calgary, AB for $45.0
million;
• Two vacant land parcels for $9.0 million;
• Ongoing investment in the development program with
$41.0 million of spending during on a proportionate
share basis(1).
• Transferred $114.8 million of properties under
development to income producing status during the
quarter, delivering approximately 229 residential units
and 3,500 square feet of new GLA on a proportionate
share basis(1).
31
Annual Report 2021 •
Year Ended
Financial Performance
During the year ended December 31, 2021
Operating
Financing
• Reported net income for the year of $23.0 million,
• Completed Green Bond issuance for $350 million of
compared to net income of $450.7 million in the prior
year. The decline is primarily due to a $1,217.1 million
adjustment to the fair value of the Exchangeable Units
attributable to the unit price increase for Choice
Properties during the year, partially offset by $678.8
million increase in the fair value of investment properties,
$72.5 million increase in income from Investment in
equity accounted joint ventures and $25.4 million in net
operating income.
• Reported FFO per unit diluted(1) for the year was $0.954,
an increase of $0.033 per unit diluted from the prior year.
Excluding the effect of the bad debt expense, FFO per
Unit would have been $0.962.
• AFFO per unit diluted(1) for the year was $0.811, reflecting
a 91.2% payout ratio. The decrease in AFFO reflects the
decline in FFO for the year and increased spending on
capital projects, partially offset by a reduction in
straight-line rental revenue.
• Same-asset NOI on a cash basis excluding bad debt
expense(1) increased by 0.6% over the prior year primarily
due to a general reduction in operating and realty tax
costs. Including bad debt expense, same-asset NOI on a
cash basis(1) increased by 2.5%.
• Period end occupancy remained strong at 97.1%, with
retail at 97.5%, industrial at 98.0% and office at 88.2%.
Series Q senior unsecured debentures at 2.456%. The
proceeds were used in the early redemption of the $300
million Series I senior unsecured debentures and to repay
a portion of the balance drawn on the credit facility.
• Redeemed at par the $200 million Series 9 senior
unsecured debentures in June 2021.
• Ended the year with a debt-to-gross book value(1) at 40.1%,
and normalized debt to EBITDAFV(1) and interest coverage
ratios(1)of 7.2 and 3.7 times, respectively.
• Strong liquidity position with approximately $1.5 billion of
available credit and a $12.8 billion pool of unencumbered
properties.
Investing
• Active capital recycling with dispositions of $329.0
million of which the proceeds were utilized to facilitate
acquisitions of $241.4 million.
• Ongoing investment in the development program with
$133.5 million of spending during the year on
intensification, greenfield, mixed-use and residential
development projects on a proportionate share basis(1).
• Transferred $255.8 million of properties under
development to income producing status during the
year, delivering approximately 428,000 square feet of
new GLA on a proportionate share basis(1).
32
Annual Report 2021 •
1.
KEY PERFORMANCE INDICATORS AND SELECTED FINANCIAL INFORMATION
Choice Properties has identified key financial and operating performance indicators that were derived from, and should be
read in conjunction with, the consolidated financial statements of the Trust dated December 31, 2021 and 2020. The analysis
of the indicators focuses on trends and significant events affecting the financial condition and results of operations of the
Trust.
As at or for the year ended December 31
($ thousands except where otherwise indicated)
2020
2019
2021
Number of income producing properties
GLA (in millions of square feet)
Occupancy*
Total assets (GAAP)
Total liabilities (GAAP)
Rental revenue (GAAP)
Net income (loss)
Net income (loss) per unit diluted
FFO(1) per unit diluted*
FFO(1) payout ratio*
AFFO(1) per unit diluted*
AFFO(1) payout ratio*
Distribution declared per Unit
709
65.8
97.1%
16,172,603
(12,862,412)
1,292,321
23,008
0.032
0.954
77.6%
$
$
$
$
$
$
0.811 $
91.2%
0.740 $
$
$
$
$
$
$
$
$
713
66.1
97.1%
708
65.8
97.7%
15,647,242 $
15,576,195
(12,124,702) $
(12,478,177)
1,270,614 $
1,288,554
450,685 $
0.637 $
0.921 $
80.5%
0.800 $
92.6%
0.740 $
(581,357)
(0.843)
0.987
75.0%
0.853
86.8%
0.740
Weighted average number of Units outstanding – diluted(i)
723,127,566
707,764,714
689,285,790
Adjusted debt to total assets(ii)*
Debt service coverage(ii)*
Adjusted Debt to EBITDAFV(1)(iii)(iv)*
Indebtedness(v) – weighted average term to maturity*
Indebtedness(v) – weighted average interest rate*
* Denotes a key performance indicator
40.1%
3.3x
7.2x
5.5 years
3.59%
42.7%
3.2x
7.6x
5.7 years
3.65%
43.1%
3.0x
7.5x
5.2 years
3.74%
(i)
(ii)
(iii)
(iv)
(v)
Includes Trust Units and Exchangeable Units.
Debt ratios exclude Exchangeable Units, see Section 4, “Liquidity and Capital Resources”. The ratios are non-GAAP financial measures calculated based
on the Trust Indentures, as supplemented.
Adjusted Debt to EBITDAFV, net of cash, was 7.1x at December 31, 2021, 7.4x at December 31, 2020, and 7.2x at December 2019.
As at December 31, 2019, Debt to EBITDAFV calculated on a trailing 12-month normalized basis excludes the effect of the Oak Street disposition.
Indebtedness reflects senior unsecured debentures and mortgages only.
Choice Properties REIT
2021 Annual Report 33
2.
BALANCE SHEET
The following table reconciles Choice Properties’ balance sheet on a GAAP basis to a proportionate share basis(1) as at the
dates indicated:
($ thousands)
Assets
As at December 31, 2021
As at December 31, 2020
GAAP Basis Reconciliation
Proportionate
Share Basis(1)
GAAP Basis Reconciliation
Proportionate
Share Basis(1)
Investment properties
$ 14,930,000 $
1,113,000 $ 16,043,000
$ 14,389,000 $
1,015,000 $
15,404,000
Equity accounted joint ventures
564,378
(564,378)
86,603
(86,603)
—
—
573,649
(573,649)
68,373
(68,373)
Financial real estate assets
Residential Development
Inventory
Mortgages, loans and notes
receivable
Intangible assets
Accounts receivable and other
assets
Cash and cash equivalents
10,142
—
10,142
—
354,901
28,000
114,275
84,304
(7,972)
346,929
263,946
—
28,000
29,000
(1,844)
39,976
112,431
124,280
116,055
207,219
562
16,498
—
—
—
—
—
—
263,946
29,000
116,617
223,717
Total Assets
$ 16,172,603 $
492,179 $ 16,664,782
$ 15,647,242 $
390,038 $
16,037,280
Liabilities and Equity
Long term debt
$ 6,230,010 $
444,428 $
6,674,438
$ 6,485,521 $
363,450 $
6,848,971
Exchangeable Units
6,011,997
—
6,011,997
5,149,182
—
5,149,182
Trade payables and other
liabilities
620,405
47,751
668,156
489,999
26,588
516,587
Total Liabilities
12,862,412
492,179
13,354,591
12,124,702
390,038
12,514,740
Equity
Unitholders’ equity
3,310,191
Non-controlling interests
—
Total Equity
3,310,191
—
—
—
3,310,191
3,514,739
—
7,801
3,310,191
3,522,540
—
—
—
3,514,739
7,801
3,522,540
Total Liabilities and Equity
$ 16,172,603 $
492,179 $ 16,664,782
$ 15,647,242 $
390,038 $
16,037,280
Choice Properties REIT
2021 Annual Report 34
Balance Sheet Analysis (GAAP Basis)
Line Item
Investment
properties
Equity accounted
joint ventures
$ Change Variance Commentary
$ 541,000 The increase compared to December 31, 2020 is primarily attributable to a favourable fair
value adjustment on investment properties of $458.8 million, transfers from equity
accounted
joint ventures of $143.1 million, development and operating capital
expenditures of $140.7 million, acquisitions of $54.9 million and straight line rent
amortization of $7.9 million, partially offset by dispositions of $254.3 million.
(9,271) During the year, the Trust:
(i) Completed the acquisition in March 2021 of an 85% interest in a new equity accounted
joint venture for $138.0 million;
(ii) Contributed an additional $32.3 million to the joint ventures, primarily to fund ongoing
development activities;
(iii) Recognized favourable adjustments in the fair value for properties held in equity
accounted joint ventures of $43.5 million;
(iv) Completed the acquisition in February 2021 of its joint venture partner’s 50% interest
in two industrial buildings in Calgary, Alberta, for $25.4 million, thereby bringing the
Trust’s ownership interest to 100%; and,
(v) Earned $23.5 million in income from the equity accounted joint ventures.
The above items were partially offset by:
(i) Upon obtaining control of the joint venture in February 2021, the Trust transferred the
entire property to consolidated investments, at its carrying value of $143.1 million; and
(ii) Received distributions of $124.8 million year-to-date, primarily as a result of receiving
the proceeds from the sale of the Trust’s 50% interest in a 50 acre land parcel in
Richmond Hill, Ontario in February 2021.
Financial real
estate assets
18,230 The increase was mainly attributable to the acquisition of an asset from Loblaw, coupled
with changes in fair value of financial real estate assets during the year.
Residential
development
inventory
Mortgages, loans
and notes
receivable
10,142 The increase was attributable to a transfer from investment properties in relation to a
residential condominium project in Brampton, ON.
90,955 The increase was primarily due to $170.8 million of notes receivable advanced to GWL as
part of the deferral of distributions paid on the Exchangeable Units in the current year and
various mortgage receivables totalling $67.2 million advanced to third-party borrowers in
2021. These advances were partially offset by the repayment of GWL’s prior year
outstanding notes receivable balance of $96.2 million in January 2021. In addition,
repayments were made during the year on other mortgages and loans receivable,
including the settlement of a specific mortgage receivable upon acquisition of the
underlying investment property in the first quarter.
Intangible assets
(1,000) The decrease was attributable to amortization of the Trust’s intangible assets during the
period.
Working Capital
(255,101) Net change was primarily due to a reduction in cash and short-term investments, as
excess cash was utilized in the redemption of the $200.0 million series 9 senior unsecured
debentures and for development and transaction activity.
Long term debt
and credit facility
(255,511) Net decrease was primarily attributable to the redemption of the $300.0 million series I
and $200.0 million series 9 senior unsecured debentures, and the repayment of a $128.4
million of mortgages on maturity and through regular principal repayments throughout the
year. The decrease was partially offset by the issuance of the $350.0 million series Q
senior unsecured debenture, and upfinancing and takeout financing of various mortgages
and construction loans during the year.
Exchangeable
Units
862,815 As this liability is measured at fair value, the change was due to the increase in the unit
price for Choice Properties since December 31, 2020.
Unitholders’ equity
(204,548) Net increase was primarily due to year-to-date net income, partially offset by the
distributions to Unitholders.
Choice Properties REIT
2021 Annual Report 35
3.
INVESTMENT PROPERTIES
To expand the portfolio and participate in development opportunities, Choice Properties owns varying interests in real estate
entities that hold investment properties. Under GAAP, many of these interests are recorded as equity accounted joint
ventures and, as such, the Trust’s share of the investment properties owned by these entities is presented on the balance
sheet as a summarized value, not as part of the total investment properties. In addition, the Trust also has financial real estate
assets which are not included with investment properties as prepared under GAAP. Refer to Section 15.1, “Investment
Properties Reconciliation”, for a reconciliation of the continuity of investment properties determined in accordance with
GAAP.
The following continuity schedule presents Choice Properties’ portfolio inclusive of its financial real estate assets and equity
accounted joint ventures prepared on a proportionate share basis(1) for the periods ended, as indicated:
Three Months
Year Ended
As at or for the period ended December 31, 2021
($ thousands)
Investment
Properties(i)
Investment
Properties(i)
Income
producing
properties
Properties
under
development
Income
producing
properties
Properties
under
development
GAAP balance, beginning of period
$ 14,771,000 $
198,000 $
14,969,000 $
14,199,000 $
190,000 $
14,389,000
Adjustments to reflect investment properties held in
equity accounted joint ventures and as financial
real estate assets on a proportionate share
basis(i)
Non-GAAP proportionate share balance(1),
738,000
321,000
1,059,000
728,000
287,000
1,015,000
beginning of period
15,509,000
519,000
16,028,000
14,927,000
477,000
15,404,000
Acquisitions of investment properties(ii)
38,499
7,945
46,444
95,448
145,945
241,393
Capital expenditures
Development capital(iii)
Building improvements
Capitalized interest(iv)
Operating capital expenditures
Property capital
Direct leasing costs
Tenant improvement allowances
Amortization of straight-line rent
—
39,580
39,580
—
128,299
128,299
3,550
—
41,259
2,266
8,657
1,131
—
1,476
—
—
—
—
3,550
1,476
41,259
2,266
8,657
1,131
5,977
—
60,100
7,129
17,647
10,104
—
5,169
—
—
—
—
5,977
5,169
60,100
7,129
17,647
10,104
—
Transfers from properties under development(v)
114,838
(114,838)
—
255,758
(255,758)
Transfers to residential development inventory
—
(10,142)
(10,142)
—
(10,142)
(10,142)
Dispositions
(223,198)
(5,250)
(228,448)
(223,198)
(105,773)
(328,971)
Adjustment to fair value of investment properties
Non-GAAP proportionate share balance(1),
103,998
5,229
109,227
444,035
58,260
502,295
December 31, 2021
$ 15,600,000 $
443,000 $
16,043,000 $
15,600,000 $
443,000 $
16,043,000
(i)
(ii)
(iii)
(iv)
(v)
Refer to Section 15.1, “Investment Properties Reconciliation” for a reconciliation of the continuity of investment properties determined in accordance with GAAP.
Includes acquisition costs.
Development capital included $1,047 and $2,208 of site intensification payments paid to Loblaw for the three months and year ended December 31, 2021
(December 31, 2020 - $509 and $995).
Interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.64% (December 31, 2020 - 3.70%).
Transfers from properties under development for the three months and year ended December 31, 2021, included fair value adjustments recognized within properties
under development of $3,786 and $6,948 (December 31, 2020 - $nil and $nil).
Included in certain investment properties acquired from Loblaw is excess land with development potential. Choice Properties
will compensate Loblaw, over time, with intensification payments determined by a site intensification payment grid as
outlined in the Strategic Alliance Agreement (see Section 9, “Related Party Transactions”), should Choice Properties pursue
activity resulting in the intensification of the excess land. The fair value of this excess land has been recorded in the
consolidated financial statements.
Choice Properties REIT
2021 Annual Report 36
3.1
Valuation Method
Investment properties are measured at fair value, primarily determined using the discounted cash flow method. Under this
methodology, discount rates are applied to the projected annual operating cash flows, generally over a minimum term of ten
years, including a terminal value based on a capitalization rate applied to the estimated NOI(1) in the terminal year. The fair
value of investment properties reflects, among other things, rental income from current leases and assumptions about rental
income from future leases in light of current market conditions.
The portfolio is internally valued with external appraisals performed each quarter for a portion of the portfolio. The majority of
the properties will be subject to an external appraisal at least once over a four-year period. When an external valuation is
obtained, the internal valuation team assesses all major inputs used by the independent valuators in preparing their valuation
reports and holds discussions with the independent valuators on the reasonableness of their assumptions. Where warranted,
adjustments will be made to the internal valuations to reflect the assumptions contained in the external valuations. The Trust
will record the internal value in its consolidated financial statements.
Valuations are most sensitive to changes in capitalization rates. The valuation inputs, including capitalization rates, discount
rates, and market leasing assumptions, are supported by quarterly reports from independent nationally recognized valuation
firms. Below are the weighted averages of key rates used in the valuation models for the Trust’s investment properties
(including financial real estate assets and those properties held within equity accounted joint ventures) by asset class:
As at December 31, 2021
Discount rate
Terminal capitalization rate
Overall capitalization rate
As at December 31, 2020
Discount rate
Terminal capitalization rate
Overall capitalization rate
Retail
6.89%
6.16%
6.00%
Retail
6.97%
6.22%
6.06%
Industrial
6.01%
5.33%
5.06%
Industrial
6.52%
5.73%
5.50%
Office
6.25%
5.42%
5.18%
Office
6.21%
5.32%
5.15%
Total Investment Properties
6.68%
5.95%
5.76%
Total Investment Properties
6.84%
6.07%
5.90%
Valuation Commentary
The Trust recorded a favourable adjustment to the fair value of investment properties of $96.3 million and $458.8 million for
the three months and year ended December 31, 2021, respectively, on a GAAP basis. The adjustment on a proportionate
share basis(1) for the same periods was $109.2 million and $502.3 million. The Trust revalued its portfolio primarily through
adjustments to contractual changes in cash flows, changes in market rent assumptions, pending transactions and macro
considerations.
For the three months and year ended December 31, 2021, fair value gains recognized were mainly related to the
readjustment of certain leasing assumptions and investment parameters, specifically in the Greater Toronto Area industrial
portfolio. In response to the rising demand for industrial space in the Greater Toronto Area, the Trust applied adjustments to
reflect the income growth and capital appreciation of its industrial assets through market rent and growth projections as well
as capitalization rate and yield compression. The Trust recognized a total fair value gain of $353.8 million, on a
proportionate share basis(1),within its overall industrial portfolio primarily due to fair value increases on large bay product in
the primary markets of Toronto, Vancouver and Montreal.
In addition, the ongoing capital recycling program of non-strategic retail assets in secondary and tertiary markets
contributed to fair value gains in the retail portfolio on a year to date basis. Grocery-anchored retail has continued to
demonstrate ongoing resilience, resulting in stable fair values in the quarter. For the office portfolio, the ongoing uncertainty
regarding return to work is reflected through tempered market leasing assumptions.
Choice Properties REIT
2021 Annual Report 37
3.2
Investment Property Transactions
Acquisitions of Investment Properties
The following table summarizes the investment properties acquired in the year ended December 31, 2021:
($ thousands except where otherwise indicated)
Consideration
Location
Date of
Acquisition
Segment
Ownership
Interest
Acquired
GLA (square
feet)
Purchase
Price incl.
Related Costs
Mortgage
Receivable
Settlement
Contingent
Consideration(i)
Assumed
Liabilities
Cash
Acquisitions from related parties
Guelph, ON(i)
Dec 10
Retail
100%
96,983 $
15,134 $
Total acquisitions from related parties
96,983
15,134
Acquisitions from third-parties
Toronto, ON
Toronto, ON
Sep 2
Nov 12
Retail
Retail
100%
100%
Total acquisitions from third-parties
12,099
12,330
31,574
23,365
24,429
54,939
— $
—
—
—
—
— $
3,182 $ 11,952
—
3,182 11,952
—
—
—
— 31,574
— 23,365
— 54,939
Equity accounted joint ventures
Calgary, AB
Feb 1
Industrial
Caledon, ON(ii)
Caledon, ON
Mar 30
Nov 22
Land(iv)
Land(iv)
50%(iii)
85%
85%
277,676
25,375
4,846
—
— 20,529
N/A
NA
138,000
7,945
—
—
38,000
— 100,000
—
—
7,945
Acquisitions in equity accounted joint ventures
277,676
171,320
4,846
38,000
— 128,474
Total acquisitions
399,088 $
241,393 $
4,846 $
38,000 $
3,182 $ 195,365
(i)
(ii)
(iii)
(iv)
This property is classified as financial real estate asset under GAAP.
The acquisition was funded through a $100.0 million cash payment and a commitment to pay the remaining balance based on certain milestones being met over the
development lifecycle.
Represents additional ownership interest acquired increasing the ownership interest in this property to 100%.
Land was acquired for future industrial development.
Choice Properties REIT
2021 Annual Report 38
Dispositions of Investment Properties
The following table summarizes the investment properties disposed in the year ended December 31, 2021:
($ thousands except where otherwise indicated)
Location
Investment properties
Brampton, ON
Brampton, ON
Kanata, ON
St-Hyacinthe, QC
Calgary, AB
Portfolio of 2 assets across Canada
Magog, QC(ii)
Quebec, QC
Portfolio of 5 assets in Calgary, AB
Drummondville, QC(ii)
Dispositions of investment properties
Equity accounted joint ventures
Richmond Hill, ON
Oshawa, ON
Waterloo, ON
Dispositions from equity accounted joint ventures
Date of
Disposition
Segment
Ownership
Interest
Consideration
Sale Price
excl. Selling
costs
Mortgage
receivable
advanced
Cash
Jan 19
Mar 31
Aug 19
Oct 4
Nov 1
Dec 6
Dec 15
Dec 20
Dec 20
Dec 22
Feb 1
Dec 15
Dec 22
Land(i)
Land
Land
Land
Retail
Retail
Retail
Retail
Industrial
Retail
Land
Retail
Land
70 % $
25,000 $
— $
25,000
50 %
50 %
5,000
4,147
100 %
3,800
100 %
36,000
100 %
52,250
100 %
22,000
50 %
49,625
100 %
45,000
100 %
11,500
—
—
—
—
—
—
—
—
—
5,000
4,147
3,800
36,000
52,250
22,000
49,625
45,000
11,500
254,322
254,322
50 %
66,375
3,025
50 %
50 %
—
—
66,375
3,025
5,250
5,250
—
74,650
5,250
69,400
Total dispositions
$
328,972 $
5,250 $
323,722
(i)
(ii)
On January 19, 2021, Choice Properties sold its 70% interest which resulted in a disposition of the property under development for $25.0 million and a distribution to
the subsidiary’s 30% non-controlling interest for $7.8 million.
Property disposition included a Loblaw lease.
Choice Properties REIT
2021 Annual Report 39
Toronto, ON
Toronto, ON(i)
Portfolio of 5
assets across
Canada
Portfolio of 6
assets across
Canada
Acquisitions of Investment Properties
The following table summarizes the investment properties acquired in the year ended December 31, 2020:
($ thousands except where otherwise indicated)
Consideration
Location
Acquisition Segment
Date of
Acquisitions from related parties
Ownership
Interest
Acquired
GLA
(square
feet)
Purchase
Price incl.
Related
Costs
Issuance of
Trust /
Exchange-
able Units(ii)
Assumed
Liabilities
Mortgage
Receivable
Settlement
Cost to
Complete
Receivable
Cash
Toronto, ON
Jun 10
Land
100%
N/A $
8,190 $
— $
— $
Jul 31
Jul 31
Office
Office
100%
328,260
130,754
128,500
60%
262,000
65,350
80,435
—
—
— $
—
— $
8,190
—
2,254
—
(16,404)
1,319
Nov 24
Retail
100%
146,000
46,712
—
—
—
—
46,712
Dec 18
Industrial
100%
835,500
82,357
79,100
2,400
—
—
857
Total acquisitions from related parties
1,571,760
333,363
288,035
2,400
—
(16,404)
59,332
Acquisitions from third-parties
Coquitlam, BC
Toronto, ON
Barrie, ON
Portfolio of 4
assets across
Canada
Feb 11
Apr 9
Sep 23
Retail
Land
Retail
100%
9,400
21,840
100%
3,200
8,354
100%
156,460
51,899
Oct 16
Industrial
100%
180,632
87,330
Calgary, AB
Dec 22
Retail
N/A
N/A
2,885
Total acquisitions from third-parties
349,692
172,308
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
21,840
—
8,354
50,000
—
1,899
—
—
—
87,330
—
2,885
50,000
— 122,308
Total acquisitions
1,921,452 $
505,671 $
288,035 $
2,400 $
50,000 $
(16,404) $ 181,640
(i)
(ii)
Represents the 60% additional ownership interest acquired from Wittington, increasing the Trust’s ownership interest in this property to 100%.
The assets acquired from Wittington were satisfied in full by the issuance of 16,500,000 Units of Choice Properties. The assets acquired from GWL were satisfied in full
by the issuance of 5,824,742 Exchangeable Units.
Choice Properties REIT
2021 Annual Report 40
Disposition of Investment Properties and Assets Held for Sale
The following table summarizes the dispositions in the year ended December 31, 2020:
($ thousands except where otherwise indicated)
Consideration
Date of
Disposition
Segment
Ownership
Interest
Sale Price
excl. Selling
Costs
Cash
Lease
Receivable
Debt
Assumed by
Purchaser
Location
Assets held for sale
Chicago, USA
Jan 24
Retail
100%
$
97,800 $
97,800 $
Dispositions of assets held for sale
97,800
97,800
Investment properties
Edmonton, AB
Creston, BC
Halifax, NS
Milton, ON
Jan 29
Residential
Feb 3
Retail (parcel)
Feb 13
Sep 28
Office
Industrial
Portfolio of 11 assets across Canada (ii)
Oct 28
Retail
Quebec City, QC
Nov 23
Retail (parcel)
Portfolio of 3 assets across Canada
Nov 27
Portfolio of 5 assets across Canada (ii)
Windsor, ON (iii)
Dec 1
Dec 23
Retail
Retail
Retail
Dispositions of investment properties
Equity accounted joint ventures
50%
100%
100%
100%
50%
50%
100%
100%
100%
9,750
375
26,700
22,613
2,561
375
8,956
22,613
169,040
169,040
5,000
5,000
64,000
64,000
43,400
43,400
51,000
51,000
391,878
366,945
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
7,189
—
17,744
—
—
—
—
—
—
24,933
Ottawa, ON
Jul 1
Land
50%(i)
Dispositions to equity accounted joint ventures
9,734
9,734
—
—
9,734
9,734
—
—
Total dispositions
$
499,412 $
464,745 $
9,734 $
24,933
(i)
(ii)
(iii)
On July 1, 2020, the Trust entered into a 99-year ground lease with an equity accounted joint venture in which the Trust has a 50% ownership interest. On a
proportionate share basis(1), the disposition reflects the Trust’s joint venture partner’s 50% interest in the land held by the joint venture, with the lease receivable at the
Trust reflecting the balance owing to the Trust by its joint venture partner for the corresponding ground lease payments.
Choice Properties sold two portfolios consisting of 16 retail properties that were leased to Loblaw.
Property disposition included a Loblaw lease.
Choice Properties REIT
2021 Annual Report 41
3.3
Completed Developments
For the year ended December 31, 2021, Choice Properties completed a total of $248.8 million in development projects at
cost, delivering 144,881 square feet of retail space and 394 residential units with an expected stabilized yield of 5.5%(2).
The Trust discloses the expected stabilized yield(2) for each of its completed projects and projects under active development.
Expected stabilized yield is calculated by dividing the expected stabilized net operating income for each development by the
estimated total project costs. Stabilized net operating income is based on contracted rental rates on leased units, and market
rental rates on non-leased units which are based on the Trust’s market knowledge and, where applicable, supported by
external market studies. Estimated project costs include land costs, soft and hard construction costs, development and
construction management fees, tenant allowances and inducements, capitalized financing costs, and other carrying costs.
During the year ended December 31, 2021, there were no material changes to the previously disclosed ranges for expected
stabilized yields for completed developments and there were no events in the period that would cause actual results to
materially differ from those previously disclosed.
During the quarter, the Trust completed Liberty House, a rental residential development comprising 207 units. Liberty House
is located in the Liberty Village neighbourhood in downtown Toronto, offering premium apartments and amenities with close
proximity to major public transit, retail amenities and entertainment venues.
The Trust also completed the final rental residential building at The Brixton delivering 22 units. The Brixton is well located in
the West Queen West neighbourhood of Toronto, offering luxury rental residential living with close proximity to major public
transit and the downtown core.
For the year ended December 31, 2021, Choice Properties transferred the following from properties under development to
income producing properties as presented on a proportionate share basis(1):
($ thousands except where otherwise indicated)
Project / Location
Commercial
Retail
Completion
date
Ownership
%
Transferred
GLA
(square feet)
Transferred
residential
units
Cost of
assets
transferred
Expected
stabilized
yield(2)
1Sunwapta West, Edmonton, AB
2Mavis Rd. and Elmcreek Rd., Mississauga, ON
3Pioneer Park Dr., Kitchener, ON
9th Street E., Cornwall, ON
Q1 2021
Q1 2021
Q1 2021
Q1 2021
Harvest Hills Market, Edmonton, AB
Q2 & Q4 2021
50 %
100 %
100 %
100 %
50 %
50 %
100 %
100 %
N/A(i)
20,413
8,325
6,529
52,012
17,976
22,806
16,820
144,881
N/A $
13,415
N/A
N/A
N/A
N/A
N/A
N/A
N/A
7,615
2,883
2,010
13,815
5,943
11,549
6,233
63,463
Q2 2021
Q2 2021
Q3 2021
Q2 - Q4 2021
Q4 2021
47 %
47 %
179,975
124,641
304,616
187
207
394
103,549
81,798
185,347
Total transferred properties at cost
Total transfers at fair value within income
producing properties
449,497
394 $
248,810
5.5 %
$
294,140
(i)
The development was a land lease which is excluded from the total portfolio square footage for lease reporting purposes.
Choice Properties REIT
2021 Annual Report 42
Harvest Pointe, Edmonton, AB
West Block, Toronto, ON
Clair Rd., Guelph, ON
Subtotal commercial development
Residential
The Brixton, Toronto, ON
Liberty House, Toronto, ON
Subtotal residential development
5.7 %
9.7 %
8.6 %
9.8 %
6.8 %
6.0 %
9.7 %
7.0 %
7.5 %
4.5 %
5.2 %
4.8 %
3.4
Development Activities
Development initiatives are a key component of Choice Properties’ business model, providing the Trust with an opportunity
to add high quality real estate at a reasonable cost. The Trust continues to drive long-term growth and value creation through
the development of commercial and residential projects and has a significant long-term pipeline of potential mixed-use
projects. The Trust views its development activities through the stages of the development lifecycle, including the process of
potential site identification, planning and rezoning, construction, and finally to development completion.
Choice Properties’ development program on a proportionate share basis(1) as at December 31, 2021, is summarized below:
($ thousands except where otherwise indicated)
Project type
Section
Projects under active development
Commercial
Residential
Subtotal projects under active development
Developments in planning
Commercial
Residential and Mixed-Use
Subtotal developments in planning
Total development - cost
Total development - fair value(iv)
3.5
3.5
3.6
3.7
GLA(i)(ii)
(square feet)
Estimated
upon
completion(2)
Investment(i)(iii)
Estimated
cost to
completion(2)
To-date
Estimated
total
743,000 $
25,577 $
123,600 $
149,177
236,000
39,456
110,000
149,456
979,000
65,033
233,600
298,633
188,066
10,450,000
104,653
10,450,000
292,719
11,429,000 $
357,752
$
443,000
(i)
(ii)
(iii)
(iv)
Choice Properties’ share.
Estimated GLA is based on current development plans and final development square footage may differ. For developments in planning, GLA is an estimate and may
differ as the developments complete the rezoning and entitlement process.
Compiled on a non-GAAP proportionate share basis(1). Investment to-date compiled on a cash basis, excluding adjustments to fair value of on-going projects.
Total development fair value excludes residential development inventory of $10,142 as at December 31, 2021 ($nil - December 31, 2020).
3.5 Properties Under Active Development
Projects under active development are sites under construction or sites with appropriate approvals in place which are
expected to commence construction in the next six to twelve months. Currently, the Trust has 17 active commercial projects
and two active residential projects. Upon completion, the projects under active development are expected to deliver a total of
743,000 square feet of commercial space and 348 residential units at the Trust’s ownership share. The Trust has invested a
total of $65.0 million to date and is expected to invest an additional $233.6 million over the next one to three years to
complete these projects(2).
During the three months and year ended December 31, 2021, there were no material changes to the previously disclosed
ranges for expected stabilized yields for active developments and there were no events in the period that would cause actual
results to materially differ from those previously disclosed.
Projects Under Active Development – Commercial
The Trust continues to invest in commercial development projects through intensification of its existing retail assets and
development of greenfield industrial land. The Trust currently has 743,000 square feet of active commercial development,
which is expected to be completed in the next one to two years(2).
In the quarter, the Trust commenced the last building at its development at Horizon Business Park in Edmonton, Alberta. The
current development plans contemplate a new generation logistic facility with the Trust expected to deliver 149,000 square
feet in 2023.
Choice Properties REIT
2021 Annual Report 43
The following table details the Trust’s commercial projects under active development on a proportionate share basis(1) as of
December 31, 2021:
($ thousands except where otherwise indicated)
GLA(i)
(square feet)
Project / Location
Retail
Ownership
%
Expected
completion
date (iii)
Estimated
upon
completion(2)
%
Leased
To-date
Investment(i)(ii)
Estimated
cost to
completion(2)
Estimated
total
Expected
stabilized yield(2)
1
Erin Ridge, St. Albert, AB
50%
H1 2022
4,000
100 % $
1,711 $
500 $
2,211
8.50%-9.00%
2 Glen Erin Dr., Mississauga, ON
100%
H1 2022
17,000
100 %
5,157
700
5,857
7.00%-7.50%
3 Harvest Pointe, Edmonton, AB
4 Harvest Hills Market, Edmonton, AB
50%
50%
H2 2022
H2 2022
8,000
100 %
1,771
1,800
3,571
5.50%-6.00%
4,000
100 %
904
1,400
2,304
8.00%-8.50%
5 Calgary Trail, Edmonton, AB
100%
H2 2022
15,000
100 %
—
3,700
3,700
6.25%-6.75%
6
Sunwapta Centre, Edmonton, AB
7 Cornerstone, Olds, AB
50%
50%
H2 2022
H2 2022
8 Hwy 88 West, Bradford, ON
100%
H2 2022
13,000
100 %
N/A(iv)
100 %
884
400
1,284
9.00%-9.50%
N/A(iv)
100 %
—
—
400
400
9.00%-9.50%
4,800
4,800
6.75%-7.25%
9 Oshawa Gateway, Oshawa, ON
50%
H2 2022
7,000
100 %
1,381
2,200
3,581
6.25%-6.75%
10 Jocelyn Rd., Port Hope, ON
11 Portland St., Dartmouth, NS
12 Joseph Howe Dr., Halifax, NS
13 20th Sideroad, Innisfil, ON
14 Guelph St., Georgetown, ON
15 Oxford St. E., London, ON
100%
100%
100%
100%
100%
100%
H2 2022
H1 2023
H1 2023
H1 2023
H2 2023
H2 2023
15,000
100 %
5,000
100 %
5,000
100 %
N/A(iv)
100 %
26,000
100 %
15,000
100 %
—
12
18
5
—
—
4,600
4,600
6.75%-7.25%
1,700
1,712
8.50%-9.00%
1,400
1,418
11.00%-11.50%
700
705
21.50%-22.00%
7,900
7,900
8.50%-9.00%
4,900
4,900
6.75%-7.25%
Subtotal retail developments
134,000
11,843
37,100
48,943
7.50%-8.00%
Industrial
1 Horizon Business Park, Edmonton, AB
50%
H1 & H2 2023
256,000
— %
9,788
22,800
32,588
6.00%-6.50%
2 Choice Industrial Centre, Surrey, BC
100%
H1 2023
353,000
— %
3,946
63,700
67,646
6.00%-6.50%
Subtotal industrial developments
Total active commercial developments
609,000
743,000
13,734
86,500
100,234
6.00%-6.50%
$ 25,577 $
123,600 $ 149,177
6.50%-7.00%
(i)
(ii)
(iii)
(iv)
Choice Properties’ share.
Compiled on a non-GAAP proportionate share basis(1). Investment to-date was compiled on a cash basis, excluding adjustments to fair value of on-going projects.
H1 represents the first six months of the year. H2 represents the last six months of the year.
The development is a land lease which is excluded from the total portfolio square footage for lease reporting purposes.
Choice Properties REIT
2021 Annual Report 44
Projects Under Active Development - Residential
Choice Properties has two residential projects under active development. At Mount Pleasant Village in Brampton, Ontario,
construction continues with the ground floor expected to be complete in early 2022. At Element in Ottawa, Ontario, the
vertical structure is complete and building enclosure has commenced.
The following table details the Trust’s residential projects under active development on a proportionate share basis(1) as of
December 31, 2021:
($ thousands except where otherwise
indicated)
GLA(i)
(square feet)
Investment(i)(ii)
Project / Location
1
Mount Pleasant Village,
Brampton, ON
a
Mount Pleasant Village,
Brampton, ON
2Element, Ottawa, ON
Total residential
Ownership
%
Type
Expected
completion
date
Estimated
number of
units(i)
Estimated
upon
completion(2)
Estimated
cost to
completion(2)
Estimated
total
Expected
stabilized
yield(2)
To-date
50%
Rental
H2 2023
151
101,000
13,477
49,000
62,477
4.25%-4.75%
50%
50%
Inventory
H2 2023
71
49,000
10,142
23,000
33,142
Rental
H2 2023
126
86,000
15,837
38,000
53,837
4.75%-5.25%
348
236,000 $
39,456 $
110,000 $
149,456 4.50%-5.00%
(i)
(ii)
Choice Properties’ share.
Compiled on a non-GAAP proportionate share basis(1). Investment to-date was compiled on a cash basis, excluding adjustments to fair value of on-going projects.
3.6
Commercial Development in Planning
Beyond the projects under active development, Choice Properties continues to grow and create value through its pipeline of
potential commercial developments. As of December 31, 2021, the Trust has identified 12 sites with potential for future
commercial development. This includes 11 opportunities at existing retail sites and 1 industrial site. In the quarter, the Trust
purchased an additional 30 acres of land for $7.9 million adjacent to the Trust’s existing developable land in Caledon,
Ontario. Combined with our purchase earlier in the year, the Trust owns a total 330 acres of lands with an investment to date
of $146.8 million. The development plan for each property is subject to the Trust’s completion of its full review of each
opportunity. A given project scope may change over time or the Trust may decide not to proceed with that development
upon completion of full due diligence. To date, the Trust has invested a total of $188.1 million on these sites.
($ thousands except where otherwise indicated)
Project Type
Retail
Industrial
Total commercial development in planning
Number of Sites Investment To-date(i)(ii)
11 $
1
12 $
41,279
146,787
188,066
(i)
(ii)
Choice Properties’ share.
Compiled on a non-GAAP proportionate share basis(1). Investment to-date was compiled on a cash basis, excluding adjustments to fair value of on-going projects.
Choice Properties REIT
2021 Annual Report 45
3.7 Residential and Mixed-Use Development in Planning
Mixed-use development represents a key component of Choice Properties’ long-term development strategy. The Trust
endeavours to create enduring value through high-quality mixed-used assets with a significant rental residential component.
Leveraging the Trust’s sizable portfolio in key urban markets, Choice Properties believes there are considerable value
creation opportunities through rezoning existing grocery anchored assets into mixed-use sites. The development plan for
each project is subject to municipal review and approval which may take several years to realize.
Once zoning and entitlement is obtained, the Trust can further create value by pursuing ground up development,
repositioning existing retail and maximizing available density for residential and mixed-used development. Choice Properties
is working through the zoning and entitlement process for several of its future projects.
The Trust has obtained zoning approval on one residential development and has submitted applications for eight residential
and mixed-use projects. A total of $104.7 million has been invested to date on land acquisition and initial development and
planning costs.
The following table details the Trust’s residential and mixed-use development projects by zoning status:
($ thousands except where otherwise indicated)
Project / Location
Zoning approved
Ownership
Estimated
number of
Estimated GLA(i)(ii)
(‘000 square feet)
Investment
to-date (i)(iii)
Type
% Acreage
units Commercial Residential
Total
1 Sheppard Ave. W., Toronto, ON
Residential
50 %
0.3
Subtotal zoning approved
0.3
100
100
5
5
64
69 $
6,467
64
69
6,467
Zoning applications submitted
1 Broadview Ave.,Toronto, ON
Mixed-use
100 %
2 Dundas St. W., Toronto, ON
Mixed-use
100 %
3 Golden Mile, Toronto, ON
Mixed-use
100 %
4 Grenville & Grosvenor, Toronto, ON
5 Parkway Forest Dr., Toronto, ON
Residential
Residential
50 %
50 %
6 Photography Dr., Toronto, ON
Mixed-use
100 %
7 Warden Ave., Toronto, ON
Residential
100 %
8 Woodbine Ave., Toronto, ON
Mixed-use
100 %
3.3
13.0
19.0
0.5
0.6
7.7
6.5
1.7
500
23
409
432
2,601
2,600
900
1,600
2,500
37,572
3,800
300
3,200
3,500
9,300
385
170
2,400
1,500
400
17
—
50
10
23
320
337
28,908
95
95
284
2,000 2,050
3,057
1,100 1,110
10,769
334
357
3,530
Subtotal zoning applications submitted
52.3
11,755
1,323
9,058 10,381
96,021
Zoning applications to be submitted
1 North Rd., Coquitlam, BC
Mixed-use
100 %
7.8
2 South Service Rd., Mississauga, ON
Mixed-use
100 %
10.4
Subtotal zoning applications to be submitted
18.2
—
—
—
—
—
—
—
—
807
—
—
1,358
—
—
2,165
Total mixed-use projects in planning
70.8
11,855
1,328
9,122 10,450 $ 104,653
(i)
(ii)
(iii)
Choice Properties’ share.
Estimated GLA is based on current development plans and final development square footage may differ. For projects in planning, GLA is an estimate and may differ as
the projects complete the rezoning and entitlement process.
Investment to date is comprised of incremental land assembly and development planning costs.
Choice Properties REIT
2021 Annual Report 46
Zoning Applications Approved
Obtaining zoning is a significant milestone in the development lifecycle. Zoning approval allows the Trust to unlock significant
land value through the realization of residential density potential. Once zoning is approved, the next phase of the
development process is obtaining all necessary permits, which allows the project to proceed to active development with
construction commencement.
Project / Location
Sheppard Avenue West,
Toronto, ON
Description
The 0.6 acre site is located at the northeast corner of Allen Road and Sheppard Avenue West in Toronto. The
site is approximately 400 meters from the Sheppard West TTC subway station and in close proximity to
Downsview Park and Downsview Airport. The current development plans include a 15 storey residential building
comprising 10,000 square feet of commercial GLA and approximately 200 residential units at a 100%
ownership share. As of December 31, 2021, the Trust has invested a total of $6.5 million to date and expects
construction to commence in the next 6-12 months.
Zoning Applications Submitted
Choice Properties has submitted zoning applications for five mixed-use and three residential developments in Toronto,
Ontario. As of December 31, 2021, the Trust has invested a total of $96.0 million to date on land acquisition and initial
development and planning costs.
Project / Location
Broadview Avenue,
Toronto, ON
Dundas Street West,
Toronto, ON
Golden Mile, Toronto,
ON
Description
The approximately 3 acre site is located at the southwest corner of Danforth Avenue and Broadview Avenue in
Toronto's east end and is situated less than 150 metres from the Broadview TTC subway station. The current
development proposal includes one residential tower, a new grocery store and a public park. The submitted
application proposes 0.4 million square feet of total ground floor area, and approximately 500 residential units.
The Trust continues to refine the vision for a mixed-use, transit oriented development that will transform an
underutilized site while highlighting the natural heritage and green connections of the existing community. The
Official Plan, Zoning By-law Amendment and Draft Plan of Subdivision Applications were submitted to the City of
Toronto.
The approximately 13 acre site is located at the southeast corner of Dundas Street West and Bloor Street West
in Toronto. The site is at the intersection of several major transit corridors including a TTC subway station, a GO
train station and the Union-Pearson Express train. The current redevelopment plans contemplate a large mixed-
use community integrated with the surrounding transit services with a focus on high density residential, office,
retail and other community uses. The submitted application proposes approximately 2.5 million square feet of
total ground floor area, including 0.9 million square feet of commercial GLA, and approximately 2,600 residential
units. The development plan contemplates neighbourhood retail and community uses, including a 2.5 acre public
park and a newly built high school. The Official Plan Application was submitted to the City of Toronto and Choice
Properties is preparing a Rezoning Application for submission to the City.
The approximately 19 acre site is located along Eglinton Avenue in the Golden Mile district of Toronto. The
current redevelopment plans contemplate a large, mixed-use master-plan community to be built in phases with a
focus on high density residential and retail uses. The site is directly adjacent to new transit stations along the first
phase of the Eglinton Crosstown LRT, which is currently under construction. The current plan includes
approximately 3.5 million square feet of total ground floor area, with 0.3 million square feet of commercial GLA
and approximately 3,800 residential units. The development will transform the area through the introduction of
the Golden Mile Community Innovation District by bringing together expertise from all stakeholders including
community organizations, the local councillor, and post-secondary educational institutions. The development
will create a community comprising retail, residential, institutional and office uses along with privately owned
public spaces including a new park. The Official Plan and Zoning By-law Amendment Applications were
submitted to the City of Toronto and the Trust is working with the City on their Secondary Planning Study for the
Golden Mile Area.
Grenville & Grosvenor,
Toronto, ON
The approximately 1 acre site is located in the area of Yonge Street and College Street in downtown Toronto.
The current development plan contemplates two residential towers providing a total 0.7 million square feet of
total ground floor area, including 17,000 square feet of commercial GLA and approximately 770 rental residential
units. Approximately 30% of the residential units will be affordable housing units. The Official Plan and Zoning
By-law Amendment Applications were submitted to the City of Toronto.
Choice Properties REIT
2021 Annual Report 47
Project / Location
Parkway Forest Drive,
Toronto, ON
Photography Drive,
Toronto, ON
Description
The approximately 3 acre site is located at the southeast intersection of Parkway Forest Drive and Sheppard
Avenue East in Toronto. The site is located 350 meters from the Don Mills TTC subway station and currently
features a 19-storey rental building and ten rental townhouses. The proposed development will replace five of
the existing townhouses with a 29-storey residential building comprised of 339 units. This intensification will
support future growth in the City of Toronto by providing additional rental housing stock in a transit-connected
neighbourhood. The Official Plan Amendment, Zoning By-law Amendment and Draft Plan of Subdivision
Applications were submitted to the City of Toronto.
The approximately 7.7 acres site is located at the southwest corner of Eglinton Avenue West and Black Creek
Drive in Toronto. The site is within close proximity to several major transit corridors, including the Kitchener GO
Line, UP Express and the future Eglinton Crosstown LRT. The proposed redevelopment is comprised of seven
mixed-use buildings including residential and retail uses. The application includes a total gross floor area of
approximately 2.1 million square feet and 2,400 residential units. Choice Properties continues to refine the vision
for a mixed-use, inclusive community where people can live and access amenities, services, transit, and a brand
new grocery store, all within walking distance. The Official Plan and Zoning By-law Amendment Applications
were submitted to the City of Toronto.
Warden Avenue,
Toronto, ON
The approximately 6.5 acre site is located south of the intersection of St. Clair Avenue and Warden Avenue in
Toronto and 500 meters from the Warden TTC Subway Station. The current development plan includes over
1,500 residential units, over 1 million square feet of gross floor area and a proposal for a public park. Choice
Properties has submitted an Official Plan Amendment and Zoning By-law Amendment to the City of Toronto.
Woodbine Avenue,
Toronto, ON
The approximately 1.7 acre site is located at the north east intersection of Woodbine Avenue and Danforth
Avenue in the Danforth neighbourhood of Toronto. The site is directly adjacent to the Woodbine TTC subway
station. The current redevelopment plan includes at grade grocery retail, upgraded TTC access and two mixed-
use residential buildings with a potential density of approximately 400 residential units. The design of this project
will incorporate the urban design significance of the Danforth neighbourhood and sustainable architecture. The
current plan includes a large privately owned public space located off Woodbine Avenue, which provides a
seamless transition from the existing neighbourhood to the new retail offering proposed at grade. The Rezoning
Application was submitted to the City of Toronto and the Trust is in the final stage of discussions with the City
Planning and is working towards a Site Plan Application.
3.8 Future Pipeline
Choice Properties’ long-term development strategy is to create value through residential and mixed-use development.
Beyond the projects that are currently in planning, the Trust has identified more than 70 sites encompassing over 500 acres
in its existing portfolio that provide potential for incremental residential and mixed-use density through the intensification of
an existing asset. Over 90% of the identified sites are in the greater Toronto, Montreal and Vancouver areas, providing the
opportunity to grow the residential platform in Canada’s largest cities. Choice Properties is actively reviewing and prioritizing
these sites to proceed with the rezoning and entitlement process.
3.9
Development Project Capital
Choice Properties expects to invest a total of approximately $719.0 million at the Trust’s ownership share(1), by the end of the
year 2024(2).
($ thousands)
Intensification
Greenfield
Residential
Mixed-Use
2022
2023
2024
$
22,000 $
20,000 $
59,000 $
96,000
98,000
12,000
88,000
108,000
21,000
62,000
79,000
54,000
Total
101,000
246,000
285,000
87,000
Estimated total capital annual spend(i)
$
228,000 $
237,000 $
254,000 $
719,000
(1)
Compiled on a non-GAAP proportionate share basis(1).
Choice Properties REIT
2021 Annual Report 48
3.10
Mortgages, Loans and Notes Receivable
As a means to generate acquisition opportunities, Choice Properties has established a program with a group of strong real
estate developers whereby Choice Properties provides mezzanine and/or co-owner financing. Such financing activities
generally provide Choice Properties with an option or other rights to acquire an interest in the developed income producing
property. Mortgages and loans receivable represent amounts advanced under mezzanine loans, joint venture financing,
vendor take-back financing and other arrangements.
As at December 31, 2021
($ thousands)
GAAP Basis
Proportionate
Share Basis(1)(i)
Mortgages receivable
Loans receivable
Notes receivable from GWL
Mortgages, loans and notes receivable
186,567
178,595
—
168,334
354,901
—
168,334
346,929
GAAP Basis
Weighted
average term to
maturity (years)
Weighted
average interest
rate (%)
1.7
—
—
7.11 %
— %
— %
(i) Adjustment to proportionate share basis(1) eliminates a mortgage receivable advanced to an equity accounted joint ventures at the Trust’s share.
GAAP Basis
As at December 31, 2020
($ thousands)
GAAP Basis
Weighted average
interest rate (%)
Proportionate
Share Basis(1)
Weighted average
term to maturity
(years)
Mortgages receivable
Loans receivable
Notes receivable from GWL
Mortgages, loans and notes receivable
165,470
2,285
96,191
263,946
165,470
2,285
96,191
263,946
2.1
3.7
—
7.31 %
8.00 %
— %
Holders of Exchangeable Units may, in lieu of receiving all or a portion of their distributions, choose to be loaned an amount
from Choice Properties Limited Partnership, and to have such distributions made on the first business day following the end
of the fiscal year in which such distribution would otherwise have been made. The loans do not bear interest and are due and
payable in full on the first business day following the end of the fiscal year during which the loan was made. During the seven
months ended July 31, 2021, GWL elected to receive all distributions from Choice Properties Limited Partnership in the form
of loans. For the remainder of the year ended December 31, 2021, GWL elected to receive the distributions in cash. As such,
non-interest bearing short-term notes totalling $170,849 were issued to GWL during the year ended December 31, 2021.
$2,515 of the notes issued were repaid in August 2021 and the remaining $168,334 were repaid in January 2022. Non-
interest bearing short-term notes totalling $96,191 with respect to the loans received in the 2020 fiscal year were repaid by
GWL in January 2021.
In September 2021, the Trust advanced a $41,600 mezzanine loan to a development partner. The mezzanine loan is primarily
secured by, and has an equity conversion right for a 75% ownership interest in, 154 acres of future industrial development
land located in East Gwillimbury, Ontario.
In November 2021, the Trust advanced $9,400 to an existing development partnership, in which it owns the majority stake.
The funds were used to execute a strategic acquisition of a property adjacent to an existing development project in Caledon,
Ontario.
In December 2021, the Trust advanced $5,250, net of fees and the repayment of a previous loan balance, in a vendor take-
back mortgage. The mortgage was issued as a part of the disposition of its interest in a property under development in
Waterloo, Ontario.
The Trust has issued approximately $184,000 of secured mortgages to other third-party borrowers. These loans are with
borrowers who are strategic development partners of the Trust and are secured by real property assets.
Choice Properties REIT
2021 Annual Report 49
4.
4.1
LIQUIDITY AND CAPITAL RESOURCES
Major Cash Flow Components
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
Three Months
Year Ended
2020
Change
Cash and cash equivalents, beginning of period -
GAAP basis
$
29,074 $
28,301 $
773 $ 207,219 $
41,990 $ 165,229
Cash flows from operating activities
244,202
255,960
(11,758)
669,428
621,184
48,244
Cash flows from (used in) investing activities
146,178
43,031
103,147
(64,122)
155,194
(219,316)
Cash flows from (used in) financing activities
(335,150)
(120,073)
(215,077)
(728,221)
(611,149)
(117,072)
Cash and cash equivalents, end of period -
GAAP basis
$
84,304 $ 207,219 $
(122,915) $
84,304 $ 207,219 $
(122,915)
Cash Flows from Operating Activities
Three Months
The decrease in cash flows from operating activities is
mainly due to higher working capital requirements, coupled
with an increase in cash interest payments, partially offset by
an increase in net operating income.
Year Ended
The increase in cash flows from operating activities is mainly
due to an increase in net operating income, coupled with a
decrease in cash interest payments as a result of lower debt
levels, and a lower working capital requirements partially
offset by an
in general and administrative
expenses.
increase
Cash flows from operating activities are partially used to fund ongoing operations and expenditures for leasing capital and
property capital(2).
Cash Flows from (used in) Investing Activities
Three Months
The increase in cash flows from investing activities was
primarily due to a decrease in net advances for mortgages,
loans, and notes receivable of $96.2 million, a decrease in
acquisitions and capital spending of $93.6 million, partially
offset by a decrease in disposition proceeds of $112.2
million.
Year Ended
The increase in cash flows used in investing activities was
primarily due to an increase in net advances for mortgages,
loans, and notes receivable of $94.1 million, a net increase in
contributions to equity accounted joint ventures of $18.5
million, and a decrease in disposition proceeds of $210.4
million compared to prior year, partially offset by a decrease
in acquisition and capital spending of $103.7 million.
Cash Flows from (used in) Financing Activities
Three Months
The increase in cash used in financing activities was
primarily due to an increase in repayments made on the
credit facility of $132.8 million and a increase in cash
distributions paid on the Exchangeable Units of $75.7 million
and increase in net repayments on mortgages payable of
$59.3 million. The increase was partially offset by a net
issuance of debentures of $48.2 million.
Year Ended
The increase in cash used in financing activities was
primarily due to net repayment of debentures of $151.7
million in the current year compared to net issuance of
debentures of $94.6 million in the prior year period, an
increase in repayment of mortgages of $95.8 million, partially
offset by an increase in repayments made on the credit
facility of $130.1 million and a decrease in cash distributions
paid on the Exchangeable Units of $115.9 million.
Choice Properties REIT
2021 Annual Report 50
4.2
Liquidity and Capital Structure
Choice Properties expects to fund its ongoing operations and finance future growth primarily through the use of: (i) existing
cash; (ii) cash flows from operations; (iii) short term financing through the committed credit facility; (iv) the issuance of
unsecured debentures and equity (including Exchangeable Units), subject to market conditions; and (v) secured mortgages.
Given reasonable access to capital markets, Choice Properties does not foresee any impediments in obtaining financing to
satisfy its short- and long-term financial obligations, including its capital investment commitments(2).
($ thousands)
Cash and cash equivalents - proportionate share basis(1)
Unused portion of the credit facility
Liquidity
Unencumbered assets - proportionate share basis(1)
As at
As at
December 31, 2021
December 31, 2020
$
$
$
124,280 $
223,717 $
1,500,000
1,500,000
1,624,280 $
1,723,717 $
12,800,000 $
12,200,000 $
Change
(99,437)
—
(99,437)
600,000
Base Shelf Prospectus
On March 4, 2020, Choice Properties filed a Short Form Base Shelf Prospectus allowing for the issuance of up to $2,000,000
of Units and debt securities, or any combination thereof over a 25-month period.
4.3
Components of Total Adjusted Debt
Choice Properties’ debt structure was as follows:
As at December 31, 2021
($ thousands)
GAAP Basis
Proportionate
Share Basis(1)
Proportionate Share Basis(1)
Weighted
average term to
maturity (years)
Weighted
average interest
rate (%)
Construction loans
Credit facility
Less: Debt placement costs(i)
Variable rate debt
Senior unsecured debentures
Mortgages payable
$
12,906 $
180,709
—
—
—
—
12,906
180,709
5,125,000
1,112,310
5,125,000
1,391,398
Less: Debt placement costs, discounts and premiums
(20,206)
(22,669)
Fixed rate debt
Total adjusted debt, net
6,217,104
6,493,729
$
6,230,010 $
6,674,438
(i) Unamortized debt placement costs for the credit facility as at December 31, 2021 of $3,555 were included in other assets.
1.0
—
1.0
5.4
5.9
5.5
2.06%
—%
2.06%
3.56%
3.69%
3.59%
Proportionate Share Basis(1)
As at December 31, 2020
($ thousands)
GAAP Basis
Proportionate
Share Basis(1)
Weighted average
term to maturity
(years)
Weighted average
interest rate (%)
Construction loans
Credit facility
Less: Debt placement costs(i)
Variable rate debt
Senior unsecured debentures
Mortgages payable
$
25,193 $
166,169
—
—
—
—
25,193
166,169
5,275,000
1,206,638
5,275,000
1,431,451
Less: Debt placement costs, discounts and premiums
(21,310)
(23,649)
Fixed rate debt
Total adjusted debt, net
6,460,328
6,682,802
$
6,485,521 $
6,848,971
(i) Unamortized debt placement costs for the credit facility as at December 31, 2020 of $3,337 were included in other assets.
0.8
—
0.8
6.0
5.3
5.9
2.18%
—%
2.18%
3.61%
3.82%
3.65%
Choice Properties REIT
2021 Annual Report 51
Construction Loans
For the purpose of financing the development of certain retail, industrial and residential properties, various investments in
equity accounted joint ventures and co-ownerships have variable rate non-revolving construction facilities in which certain
subsidiaries of the Trust guarantee its own share. These construction loans, which mature throughout 2022 and 2031, have a
maximum amount available to be drawn at the Trust’s ownership interest of $293,151 of which $227,462 relates to equity
accounted joint ventures as at December 31, 2021 (December 31, 2020 - $226,145 and $198,002, respectively).
As at December 31, 2021, $180,709, of which $167,803 relates to equity accounted joint ventures, was drawn and the
construction loans had a weighted average effective interest rate of 2.06% (December 31, 2020 - 2.18%) and a weighted
average term to maturity of 1.0 years (December 31, 2020 - 0.8 years).
Credit Facility
Choice Properties has a $1,500,000 senior unsecured committed revolving credit facility provided by a syndicate of lenders.
The credit facility bears interest at variable rates of either Prime plus 0.20% or Bankers’ Acceptance rate plus 1.20%. The
pricing is contingent on the credit ratings for Choice Properties from either DBRS and S&P remaining at BBB (high). As at
December 31, 2021, $nil was drawn under the syndicated facility (December 31, 2020 - $nil).
The credit facility contains certain financial covenants. As at December 31, 2021, the Trust was in compliance with all its
financial covenants for the credit facility.
During the year ended December 31, 2021, the maturity date for the credit facility was extended to June 24, 2026.
Senior Unsecured Debentures
On June 21, 2021, Choice Properties Limited Partnership redeemed in full, at par, plus accrued and unpaid interest thereon,
the $200,000 aggregate principal amount of series 9 senior unsecured debentures bearing interest at 3.60% with an original
maturity date of September 20, 2021.
On November 30, 2021, the Trust completed a $350,000 offering on a private placement basis of the series Q senior
unsecured debenture bearing interest at 2.46% per annum maturing on November 30, 2026. The debentures were issued as
green bonds pursuant to the Trust’s Green Financing Framework, which Sustainalytics, a global leader in providing ESG
research and analysis, reviewed and confirmed as being aligned with the International Capital Markets Association’s Green
Bond Principles 2021 and the Loan Market Association Green Loan Principles 2021.
The Trust intends to allocate the net proceeds from the issuance of the series Q senior unsecured debentures to fund the
financing and/or refinancing of eligible green projects as described in the Trust’s Green Financing Framework. Prior to the
allocation of the net proceeds of the issuance to eligible green projects, the Trust used the net proceeds of the issuance to
repay existing indebtedness, including the early redemption of the Trust’s $300,000 principal amount of 3.01% series I senior
unsecured debentures on December 10, 2021, and to repay a portion of the balance drawn on the Trust’s credit facility. The
Trust incurred early repayment charges of approximately $1,500 upon redeeming the series I senior unsecured debentures.
Summary of Total Adjusted Debt Activities
The following outlines the net changes to the components of Choice Properties’ variable rate debt on a GAAP basis and non-
GAAP proportionate share basis(1) during the year ended December 31, 2021:
For the year ended December 31
($ thousands)
Construction
loans(i)
Construction
loans
GAAP Basis
Adjustment to
Proportionate
Share Basis(1)
Proportionate
Share Basis(1)
Total Adjusted
debt, variable rate
Principal balance outstanding, beginning of year
Net advances (repayments)
Principal balance outstanding, end of year
$
$
25,193 $
140,976 $
(12,287)
26,827
12,906 $
167,803 $
166,169
14,540
180,709
(i) Adjustment to proportionate share basis(1) reflects construction loans within equity accounted joint ventures.
Choice Properties REIT
2021 Annual Report 52
The following outlines the changes to the components of Choice Properties’ fixed rate debt on a GAAP basis and non-GAAP
proportionate share basis(1) during the year ended December 31, 2021:
For the year ended December 31
($ thousands)
Senior unsecured
debentures
Mortgages
payable
Mortgages
payable(i)
GAAP Basis
Adjustment to
Proportionate
Share Basis(1)
Proportionate
Share Basis(1)
Total Adjusted
debt, fixed rate
Principal balance outstanding, beginning of year
$
5,275,000 $
1,206,638 $
224,813
$
6,706,451
Issuances and advances
Repayments
350,000
(500,000)
34,072
(128,400)
63,831
(9,556)
447,903
(637,956)
Principal balance outstanding, end of year
$
5,125,000 $
1,112,310 $
279,088
$
6,516,398
(i) Adjustment to proportionate share basis(1) reflects mortgages payable within equity accounted joint ventures.
Schedules of Repayments and Cash Flow Activities
The schedule of principal repayment of total long term debt, on a GAAP basis and non-GAAP proportionate share basis(1),
based on maturity, is as follows:
GAAP Basis
Adjustment to Proportionate
Share Basis(1)
Proportionate
Share Basis(1)
As at December 31, 2021
($ thousands)
Mortgages
payable
Construction
loans
Mortgages
payable(i)
Construction
loans(i)
Total
Senior
unsecured
debentures
2022
2023
2024
2025
2026
Thereafter
Total adjusted debt
outstanding
$
300,000 $
216,837 $
4,686 $
11,253 $
158,699 $
691,475
575,000
750,000
550,000
350,000
2,600,000
76,954
158,185
153,493
64,547
442,294
—
—
—
—
8,220
10,949
7,556
7,824
43,845
197,661
—
9,104
—
—
—
662,903
924,845
711,317
458,392
3,248,175
$
5,125,000 $
1,112,310 $
12,906 $
279,088 $
167,803 $
6,697,107
(i) Adjustment to proportionate share basis(1) reflects mortgages payable and construction loans within equity accounted joint ventures.
In order to reduce refinancing risk, Choice Properties attempts to stagger debt maturities and future financing obligations to
ensure no large maturities or financing needs occur in any one year.
(i)
(ii)
(iii)
Presented on a proportionate share basis(1).
The credit facility matures on June 24, 2026.
Includes cash and cash equivalents.
Choice Properties REIT
2021 Annual Report 53
4.4
Financial Condition
Choice Properties is subject to certain financial and non-financial covenants in its senior unsecured debentures and credit
facility that include maintaining certain leverage and debt service ratios. These ratios are monitored by management on an
ongoing basis to ensure compliance. Choice Properties was in compliance with all these covenants as at December 31, 2021
and December 31, 2020.
The Trust’s compliance with leverage and coverage ratios, as they relate to its debentures, are shown below:
Adjusted Debt to Total Assets(i)
Limit: Maximum excluding convertible debt is 60.0%
Debt Service Coverage Ratio(i)
Limit: Minimum 1.5x
Adjusted Debt to EBITDAFV(1)(i)(ii)(iv)
Interest Coverage Ratio(1)(iii)
As at
As at
December 31, 2021
December 31, 2020
40.1%
3.3x
7.2x
3.7x
42.7%
3.2x
7.6x
3.7x
(i)
(ii)
(iii)
Debt ratios exclude Exchangeable Units. The ratios are non-GAAP financial measures calculated based on the Trust Indentures, as supplemented.
Refer to Section 15.8, “Earnings Before Interest, Taxes, Depreciation, Amortization and Fair Value”, for a reconciliation of net income to EBITDAFV used in
this ratio.
Refer to Section 15.7, “Net Interest Expense and Other Financing Charges Reconciliation”, for a reconciliation of proportionate share basis(1) to GAAP basis
for net interest expense and other financing charges used in the ratio.
(iv)
Adjusted Debt to EBITDAFV, net of cash, was 7.1x at December 31, 2021 and 7.4x at December 31, 2020.
4.5
Credit Ratings
Choice Properties’ debt securities are rated by two independent credit rating agencies: DBRS and S&P. Choice Properties’
ratings are linked to and equivalent to those of Loblaw, largely because of Loblaw’s significant relationship with the Trust,
and the contractual arrangements and the strategic relationship between the Trust and Loblaw.
On June 21, 2021, S&P confirmed the Choice Properties rating at BBB with a stable outlook, while on September 17, 2021,
DBRS confirmed the Choice Properties rating at BBB (high) with a stable trend. A credit rating of BBB- or higher is an
investment grade rating.
The following table sets out the current credit ratings for Choice Properties as at December 31, 2021:
Credit ratings (Canadian standards)
Issuer rating
Senior unsecured debentures
DBRS
Credit rating
BBB (high)
BBB (high)
Trend
Stable
Stable
S&P
Credit rating
BBB
BBB
Outlook
Stable
N/A
Choice Properties REIT
2021 Annual Report 54
4.6
Unit Equity
Unit equity, for the purposes of this MD&A, includes both Units and Exchangeable Units, which are economically equivalent
to Units and receive equal distributions. The following is a continuity of Choice Properties’ unit equity:
Units, beginning of year
Units issued to related party as part of investment properties acquisition
Distribution in Units
Consolidation of Units
Units issued under unit-based compensation arrangements
Units repurchased for unit-based compensation arrangements
Year ended
December 31, 2021
Year ended
December 31, 2020
326,941,663
310,292,869
—
—
—
837,071
(189,887)
16,500,000
2,277,457
(2,277,457)
307,877
(159,083)
Units, end of year
327,588,847
326,941,663
Exchangeable Units, beginning of year
395,786,525
389,961,783
Units issued to related party as part of investment properties acquisition
—
5,824,742
Exchangeable Units, end of year
395,786,525
395,786,525
Total Units and Exchangeable Units, end of year
723,375,372
722,728,188
Units Issued to Related Party as part of Investment Properties Acquisition
During the year ended December 31, 2020, the acquisition of two office assets from Wittington was satisfied in full by the
issuance of 16,500,000 Units of Choice Properties, while the acquisition of six industrial assets from a wholly-owned
subsidiary of GWL was satisfied in full by the issuance of 5,824,742 Exchangeable Units.
Distribution in Units and Consolidation of Units
As a result of the increase in taxable income generated primarily from dispositions completed in the year ended
December 31, 2020, the Board declared a special non-cash distribution payable on December 31, 2020, of 2,277,457 Units
at $0.09 per Unit totalling $29,425. Immediately following the issuance of Units, the Units were consolidated such that each
Unitholder held the same number of Units after the consolidation as each Unitholder held prior to the special non-cash
distribution.
Normal Course Issuer Bid (“NCIB”)
Choice Properties may from time to time purchase Units in accordance with the rules prescribed under applicable stock
exchange or regulatory policies. On November 17, 2021, Choice Properties received approval from the TSX to purchase up
to 27,558,665 Units during the twelve-month period from November 19, 2021 to November 18, 2022, by way of a NCIB over
the facilities of the TSX or through alternative trading systems. Choice Properties intends to file a Notice of Intention to make
a NCIB with the TSX upon the expiry of its current NCIB.
Units Issued under Unit-Based Compensation Arrangements
Units were issued as part of settlements under the Unit Option Plan and grants under the Unit-Settled Restricted Unit Plan,
as applicable.
Units Repurchased for Unit-Based Compensation Arrangement
The Trust acquired Units under its NCIB during the year ended December 31, 2021 and the year ended December 31, 2020,
which were then granted to certain employees in connection with the Unit-Settled Restricted Unit Plan, and are subject to
vesting conditions and disposition restrictions.
Choice Properties REIT
2021 Annual Report 55
Distributions
The distributions declared for the three months and year ended December 31, 2021 and 2020, including distributions to
holders of Exchangeable Units, were as follows:
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Cash distributions declared
$
133,820 $
132,986 $
834 $
535,104 $
524,732 $
10,372
Add: Special non-cash distribution(i)
—
29,425
(29,425)
—
29,425
(29,425)
Total distributions declared
$
133,820 $
162,411 $
(28,591) $
535,104 $
554,157 $
(19,053)
Choice Properties’ Board retains full discretion with respect to the timing and quantum of distributions, however the total
income distributed will not be less than the amount necessary to ensure the Trust will not be liable to pay income taxes under
Part I of the Income Tax Act (Canada). The taxable income allocated to the Trust and Exchangeable Unitholders may vary in
certain taxation years. Over time, such differences, in aggregate, are expected to be minimal.
At its most recent meeting on February 16, 2022, the Board reviewed and approved the current rate of distributions of $0.74
per unit per annum. In determining the amount of distributions to be made to Unitholders, Choice Properties’ Board
considers many factors, including provisions in its Declaration of Trust, macro-economic and industry specific environments,
the overall financial condition of the Trust, future capital requirements, debt covenants, and taxable income. In accordance
with Choice Properties’ Distribution Policy, management and the Board regularly review Choice Properties’ rate of
distributions to assess the stability of cash and non-cash distributions.
Distribution Reinvestment Plan (“DRIP”)
Choice Properties instituted a DRIP that allows eligible Unitholders to elect to automatically reinvest their regular monthly
cash distributions in additional Units. On April 25, 2018, the Board suspended the DRIP commencing with the distribution
declared in May 2018. The DRIP will remain suspended until further notice.
Choice Properties REIT
2021 Annual Report 56
4.7
Adjusted Cash Flow from Operations (“ACFO”)
Adjusted Cash Flow from Operations(1) excludes most of the short-term fluctuations in non-cash working capital, such as
property tax instalments, and the timing of semi-annual debenture instalments, although some fluctuations between quarters
for operational cash flows still exist. ACFO(1) also adjusts cash flows from operating activities for the working capital required
for operating capital expenditures to maintain productive capacity of the investment properties which adds volatility to the
values due to seasonality of capital projects. Management includes this non-GAAP measure in its assessment of cash flow
available for distributions. Refer to Section 15.5, “Adjusted Cash Flow from Operations”, for a reconciliation of ACFO(1) to
cash flows from operating activities, as determined in accordance with GAAP.
The table below summarizes the ACFO(1) metrics:
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Adjusted Cash Flow from Operations(1)
$ 117,323
$ 166,221
$
(48,898)
$ 606,292
$ 592,610
$
13,682
Cash distributions declared
(133,820)
(132,986)
(834)
(535,104)
(524,732)
(10,372)
Cash retained after cash distributions
$
(16,497)
$
33,235
$
(49,732)
$
71,188
$
67,878
$
3,310
ACFO(1) payout ratio
114.1 %
80.0 %
34.1 %
88.3 %
88.5 %
(0.2) %
Three Months
ACFO decreased compared to the prior year primarily as a
result of a $11.8 million decrease in cash flows from
operations, coupled with a $19.7 million unfavourable
adjustment for changes in sustainable non-cash working
capital, and an increase in property capital expenditures of
$18.8 million.
Year Ended
ACFO increased compared to the prior year primarily as a
result of a $48.2 million increase in cash flows from
operations, partially offset by $27.0 million unfavourable
adjustment for changes in sustainable non-cash working
capital, and an increase in property capital expenditures of
$11.8 million.
The ACFO payout ratio increased primarily due to the
decrease in ACFO, partially offset by the increase of $0.8
million in distributions declared. The increase in cash
distributions was due to a higher number of Trust and
Exchangeable Units outstanding.
The ACFO payout ratio slightly decreased primarily due to
the increase in ACFO, partially offset by the increase of
$10.4 million in distributions declared. The increase in cash
distributions was due to a higher number of Trust and
Exchangeable Units outstanding, as Trust and Exchangeable
Units were issued as consideration for certain assets
acquired during the prior year.
4.8
Financial Instruments
Designated hedging derivatives consist of interest rate swaps to hedge the interest rate associated with an equivalent
amount of variable rate mortgages. During the year ended December 31, 2021, an interest rate swap was settled upon
maturity of the underlying variable rate mortgage. As at December 31, 2021, the interest rates ranged from 2.8% to 4.4%
(December 31, 2020 - 1.8% to 4.4%).
The impact of the hedging instruments on the consolidated balance sheets was as follows:
($ thousands)
Derivative assets
Interest rate swaps
Derivative liabilities
Interest rate swaps
Maturity
Date
Notional
As at
As at
Amount
December 31, 2021
December 31, 2020
Sep 2026 - Jun 2030
$
69,878 $
3,266 $
377
Mar 2022 - Nov 2025
131,568
1,925
6,560
During the year ended December 31, 2021, Choice Properties recorded an unrealized fair value gain in other comprehensive
income of $6,343 (December 31, 2020 - unrealized fair value loss of $3,554).
Choice Properties REIT
2021 Annual Report 57
4.9
Off-Balance Sheet Arrangements
Choice Properties issues letters of credit to support guarantees related to its investment properties including maintenance
and development obligations to municipal authorities. As at December 31, 2021, the aggregate gross potential liability related
to these letters of credit totalled $32,579 including $nil posted by Loblaw with the Province of Ontario and City of Toronto on
behalf of Choice Properties related to deferral of land transfer tax on properties acquired from Loblaw subsequent to the
initial public offering (December 31, 2020 - $33,916 including $1,543 posted by Loblaw).
4.10 Contractual Obligations
The undiscounted future principal and interest payments on Choice Properties’ debt instruments and other contractual
obligations as at December 31, 2021 were as follows:
($ thousands)
2022
2023
2024
2025
2026
Thereafter
Total
Senior unsecured debentures
$
482,630 $
740,990 $
896,052 $
665,996 $
451,680 $ 2,954,742 $ 6,192,090
Mortgage payable(i)
Mortgage payable(ii)
Total Mortgage Payable
Construction loan(i)
Construction loan(ii)
Total Construction Loans
Credit facility(iii)
Other(iv)
Total
253,498
109,860
186,130
174,880
81,390
508,787
1,314,545
20,590
20,081
16,347
16,346
51,748
226,435
351,547
274,088
129,941
202,477
191,226
133,138
735,222
1,666,092
4,686
158,699
163,385
—
—
—
—
—
—
9,104
9,104
—
—
—
—
—
—
—
—
—
8,220
12,906
—
167,803
8,220
180,709
—
—
206,123
146,428
81,641
123
110
1,158
435,583
$ 1,289,611 $ 1,017,359 $ 1,198,378 $
857,345 $
584,928 $ 3,707,562 $ 8,655,183
Compiled on a GAAP basis.
(i)
(ii) Mortgages payable and construction loans held within equity accounted joint ventures.
(iii)
(iv)
Excludes interest on the revolving credit facility and construction loans at a floating interest rate.
As at December 31, 2021, Choice Properties had commitments of $435,583 for future capital expenditures related to ongoing development and property capital
projects, and other contractual obligations such as operating rents, of which $26,342 relates to equity accounted joint ventures.
Choice Properties REIT
2021 Annual Report 58
5.
RESULTS OF OPERATIONS
Choice Properties’ results, as reported under GAAP, for the three months and year ended December 31, 2021 and December
31, 2020 are summarized below:
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
%
Change
2020
Change
%
Change
Net Operating Income
Rental revenue
$ 325,763 $ 321,862 $
3,901
1.2 % $ 1,292,321 $ 1,270,614 $ 21,707
1.7 %
Property operating costs
(95,691)
(96,460)
769
(0.8) % (380,306)
(384,016)
3,710
(1.0) %
230,072
225,402
4,670
2.1 % 912,015
886,598
25,417
2.9 %
Other Income and Expenses
Interest income
Fee income
Net interest expense and other
7,312
946
2,770
1,136
4,542
164.0 %
20,079
13,639
6,440
47.2 %
(190)
(16.7) %
3,801
4,416
(615)
(13.9) %
financing charges
(134,320)
(133,121)
(1,199)
0.9 % (534,525)
(540,720)
6,195
(1.1) %
General and administrative
expenses
Reversal of (allowance for)
expected credit loss on
mortgage receivable
Share of income (loss) from equity
(11,799)
(8,778)
(3,021)
34.4 %
(40,917)
(36,718)
(4,199)
11.4 %
1,026
—
1,026
— %
1,502
(7,830)
9,332
(119.2) %
accounted joint ventures
18,338
9,036
9,302
102.9 %
66,952
(5,570)
72,522
(1302.0) %
Amortization of intangible assets
(250)
(250)
—
— %
(1,000)
(1,000)
—
— %
Foreign exchange gain reclassified
from other comprehensive
income
Acquisition transaction costs and
other related expenses
—
—
—
—
—
—
— %
— %
—
—
1,184
(1,184)
(100.0) %
(1,589)
1,589
(100.0) %
Other fair value gains (losses), net
666
1,347
(681)
N/M
(1,580)
2,210
(3,790)
N/M
Adjustment to fair value of
Exchangeable Units
Adjustment to fair value of
investment properties
Income (Loss) before Income
(372,039)
(86,370)
(285,669)
330.8 % (862,815)
354,286
(1,217,101)
(343.5) %
96,275
103,601
(7,326)
(7.1) % 458,817
(220,018)
678,835
(308.5) %
Taxes
(163,773)
114,773
(278,546)
(242.7) %
22,329
448,888
(426,559)
(95.0) %
Income tax recovery
686
1,797
(1,111)
(61.8) %
679
1,797
(1,118)
(62.2) %
Net Income (Loss)
$ (163,087) $ 116,570 $ (279,657)
(239.9) % $ 23,008 $ 450,685 $ (427,677)
(94.9) %
Three Months
The quarterly decrease compared to the prior year was
primarily due to a $285.7 million unfavourable change in the
adjustment to the fair value of the Trust’s Exchangeable
Units.
Year Ended
The year-to-date decrease compared to the prior year was
mainly due to a $1,217.1 million unfavourable change in the
adjustment to the fair value of the Trust’s Exchangeable
Units, partially offset by a $678.8 million favourable change
in the fair value of investment properties, $72.5 million
increase in income from equity accounted joint ventures and
a $25.4 million in net operating income.
Adjustments to fair value can vary widely from quarter-to-quarter as they are impacted by market factors such as the Trust’s
Unit price and market capitalization rates.
Choice Properties REIT
2021 Annual Report 59
Rental Revenue and Property Operating Costs
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
2020
Change
Net Operating Income
Rental revenue
Property operating costs
$
325,763 $
321,862 $
3,901 $ 1,292,321 $ 1,270,614 $
21,707
(95,691)
(96,460)
769
(380,306)
(384,016)
3,710
$
230,072 $
225,402 $
4,670 $
912,015 $
886,598 $
25,417
Three Months
The increase in net operating income for the quarter was
primarily driven by increased occupancy in the industrial
portfolio, and a decline in bad debt expense recorded for
tenants affected by the pandemic compared to the prior
year, partially offset by vacancies in the office portfolio.
Year Ended
The increase in net operating income was primarily driven by
a decline in bad debt expense recorded for tenants affected
by the pandemic, and a full year of net contributions from
acquisitions and development transfers completed in the
last 18 months, partially offset by declines due to foregone
revenue from dispositions in 2020 and 2021 and vacancies
in select office assets.
In addition, the Trust had an increase in rental revenue and
property operating costs during the current year that was
primarily associated with the expiration of pandemic-related
realty tax relief measures that were provided by various
municipalities in the prior year. During the prior year, the
Trust and its tenants benefited from these realty tax relief
measures which resulted in a reduction in realty tax expense
with a corresponding decline in realty tax recovery revenue.
Rental revenue is comprised primarily of base rent, including straight-line rent, and recoveries from tenants for property
taxes, insurance, operating costs and qualifying capital expenditures. Growth in rental revenue is materially impacted by
newly acquired or constructed assets.
Property operating costs are comprised primarily of expenses to manage and maintain the properties for the benefit of the
tenants, including realty taxes and insurance, that are recoverable under the leases of most tenants. Non-recoverable
operating costs do not directly benefit the tenants and include property management fees paid by the Trust for properties
managed by its partners.
Choice Properties REIT
2021 Annual Report 60
Interest Income
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
2020
Change
Interest income on mortgages and loans
receivable
$
3,217 $
3,013 $
204 $
11,224 $
12,309 $
(1,085)
Interest income earned from financial real estate
assets
Interest income (loss) from financial real estate
assets due to changes in value
Other interest income
Interest Income
1,116
2,380
599
648
468
4,295
1,741
2,554
(1,148)
257
3,528
342
2,556
2,004
(1,148)
737
3,704
1,267
$
7,312 $
2,770 $
4,542 $
20,079 $
13,639 $
6,440
Three Months
The increase is primarily due to a favourable change in fair
value recognized on financial real estate assets of $2.4
million in the current year as compared to a loss of $1.1
million in the prior year. In addition, an incremental $0.5
million of interest income was earned from the financial real
estate asset portfolio, the majority of which was acquired in
the fourth quarter of the prior year, coupled with a $0.5
million increase in other interest income and interest income
on mortgages and loans receivable.
Year Ended
The increase is primarily due to a favourable change in fair
value recognized on financial real estate assets of $2.6
million in the current year as compared to a loss of $1.1
million in the prior year. In addition, an incremental $2.6
million of interest income was earned from the financial real
estate asset portfolio, the majority of which was acquired in
the fourth quarter of the prior year, coupled with a $1.3
million increase in other interest income (inclusive of income
on short term investments), partially offset by a $1.1 million
decline due to a reduction in the balance of mortgages and
loans receivable outstanding as compared to the prior year.
Fee Income
Fees charged to third parties include property management fees, leasing fees and project management fees relating to co-
owned properties which serves as a cash flow supplement to enhance returns from the co-owned assets. Fee income from
third parties is impacted by changes in the portfolio along with the timing of leasing transactions and project activity. Until the
arrangements were terminated effective December 31, 2020, Choice Properties provided property management services to
Loblaw and administered certain services in connection with Loblaw’s gas bar subleases (see Section 9, “Related Party
Transactions”). Choice Properties provides Wittington with property management services for certain properties with third-
party tenancies on a fee for service basis.
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
2020
Change
Fees charged to related party
Fees charged to third parties
Fee Income
$
$
63 $
221 $
(158) $
315 $
858 $
883
915
(32)
3,486
3,558
946 $
1,136 $
(190) $
3,801 $
4,416 $
(543)
(72)
(615)
Three Months
Fee income from related parties declined primarily due to the
termination effective December 31, 2020, of the contract to
provide property management services to Loblaw and the
contract to administer certain services in connection with
Loblaw’s gas bar subleases.
The decrease in fee income to third parties can be primarily
attributed to a reduction in project fees.
Year Ended
Fee income from related parties declined primarily from the
termination effective December 31, 2020, of the contract to
provide property management services to Loblaw, and the
contract to administer certain services in connection with
Loblaw’s gas bar subleases, partially offset by the fees
earned from the ongoing management of properties on
behalf of Wittington, which commenced in 2020.
The decrease in fee income from third parties can be
primarily attributed to a decline in project fees.
Choice Properties REIT
2021 Annual Report 61
Net Interest Expense and Other Financing Charges
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
2020
Change
Interest on senior unsecured debentures
$
46,376 $
47,826 $
(1,450) $
186,671 $
189,978 $
(3,307)
Fees incurred on early repayment of debentures
1,512
—
1,512
1,512
6,763
Interest on mortgages and construction loans
11,065
12,010
(945)
46,260
48,960
Interest on credit facility
1,235
1,237
Interest on right-of-use lease liability
Amortization of debt discounts and premiums
Amortization of debt placement costs
Capitalized interest
Distributions on Exchangeable Units to GWL
Net interest expense and other financing
charges
35
242
1,301
(667)
61,099
73,221
41
94
1,038
(1,627)
60,619
72,502
(2)
(6)
148
263
960
480
719
4,275
147
687
4,731
(2,642)
7,316
216
(1,806)
4,592
(4,231)
241,641
251,788
(10,147)
292,884
288,932
3,952
$
134,320 $
133,121 $
1,199 $
534,525 $
540,720 $
(6,195)
(5,251)
(2,700)
(3,041)
(69)
2,493
139
1,589
Three Months
The quarterly increase was primarily due to $1.5 million of
fees incurred on the early repayment of the Series I senior
unsecured debentures in December 2021. In addition to a
decrease in capitalized interest of $1.0 million and an
increase in distributions on Exchangeable Units of $0.7
million due to an increase in the number of Exchangeable
Units outstanding as compared to the prior year. The above
increases were partially offset by a $1.5 million decline in
interest on unsecured debentures following the redemption
of the $200 million Series 9 senior unsecured debenture in
June 2021, and a $1.0 million decrease in mortgage and
construction loan interest due to refinancings at lower
interest rates over the past year.
Year Ended
The decrease was mainly due to a decline in fees incurred
on early repayment of senior unsecured debentures of $5.3
million, a $3.3 million decline in interest on unsecured
debentures related to the redemption of the $200 million
Series 9 senior unsecured debentures in June 2021, and a
general reduction in interest on the credit facility of $3.0
million due to a lower average outstanding balance, partially
offset by an increase in distribution on Exchangeable Units
of $4.0 million due to an increase in the number of
Exchangeable Units outstanding as compared to the prior
year.
Choice Properties REIT
2021 Annual Report 62
General and Administrative Expenses
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
2020
Change
Salaries, benefits and employee costs
$
13,363 $
12,529 $
834 $
51,302 $
47,940 $
3,362
Investor relations and other public entity costs
Professional fees
Information technology costs
Services Agreement expense charged by
related party(i)
Amortization of other assets
Office related costs
Other
Less:
551
942
1,642
748
410
1,853
(72)
523
1,197
1,420
680
229
509
(194)
19,437
16,893
Capitalized to investment properties
Allocated to recoverable operating expenses
(1,776)
(5,862)
(1,985)
(6,130)
28
(255)
222
68
181
1,344
122
2,544
209
268
2,616
4,079
6,324
3,094
1,294
2,861
483
2,318
4,506
4,460
3,095
548
2,590
901
72,053
66,358
298
(427)
1,864
(1)
746
271
(418)
5,695
(7,076)
(6,682)
(394)
(24,060)
(22,958)
(1,102)
General and administrative expenses
$
11,799 $
8,778 $
3,021 $
40,917 $
36,718 $
4,199
(i) The Services Agreement is described in Section 9, “Related Party Transactions”.
Three Months
The quarterly increase was primarily due to higher salary and
employee related costs and lease termination expense for a
prior head office space.
Year Ended
The year-to-date increase was primarily due to $3.4 million
in higher salary and employee costs and $1.9 million in
investment in information technology infrastructure. The
above items were partially offset by a decline in office and
other related expenses due to pandemic restrictions.
Other Fair Value Gains (Losses), Net
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
2020
Change
Adjustment to fair value of unit-based
compensation
$
666 $
(1,369) $
2,035 $
(1,580) $
(506) $
(1,074)
Fair value gain from release of holdback payable
Adjustment to fair value on mortgage receivable
classified as FVTPL
—
—
6,750 $
(6,750)
(4,034) $
4,034
—
—
6,750 $
(6,750)
(4,034)
4,034
Other fair value gains (losses), net
$
666 $
1,347 $
(681) $
(1,580) $
2,210 $
(3,790)
Three Months
In the current quarter the Trust recognized a favourable
adjustment to the fair value of unit based compensation
relative to the prior year.
Year Ended
In the current year the Trust recognized an unfavourable
adjustment to the fair value of unit based compensation
relative to the prior year.
In addition, in the prior year the Trust recognized a fair value
gain from the derecognition of a holdback payable related to
a prior year acquisition that is no longer owing to the vendor,
which was partially offset by an unfavourable adjustment to
the fair value of a specific mortgage receivable.
In addition, in the prior year the Trust recognized a fair value
gain from the derecognition of a holdback payable related to
a prior year acquisition that is no longer owing to the vendor,
which was partially offset by an unfavourable adjustment to
the fair value of a specific mortgage receivable.
Choice Properties REIT
2021 Annual Report 63
6.
LEASING ACTIVITY
Choice Properties’ leasing activities are focused on driving value by:
•
focusing on property operations and striving for superior service to tenants;
• managing properties to maintain high levels of occupancy;
•
•
increasing rental rates when market conditions permit; and
adding tenants in complementary business sectors to retail sites anchored by Loblaw food and drug stores.
The following table details the changes for in-place occupancy by segment for the three months ended December 31, 2021:
(in thousands of
square feet except
where otherwise
indicated)
September 30, 2021
Three Months
December 31, 2021
Leasable Occupied
% Expiries
New Renewals
Occupied
Subtotal:
Absorption
Portfolio
changes(i)
Acquired /
(Disposed)
vacancy Leasable Occupied
Occupied
%
Retail
45,279
44,089
97.4 %
(461)
115
410
64
(591)
(21)
44,667
43,562
97.5 %
Industrial
17,298
16,882
97.6 %
(353)
75
286
8
(277)
(71)
16,950
16,613
98.0 %
Office
Total
3,641
3,228
88.7 %
(65)
11
38
(16)
1
(1)
3,641
3,213
88.2 %
66,218
64,199
97.0 %
(879)
201
734
56
(867)
(93)
65,258
63,388
97.1 %
(i)
Represents changes in occupied square footage arising from acquisitions, dispositions, intensifications, expansions, and transfers from properties under development.
The following table details the changes for in-place occupancy by segment for the year ended December 31, 2021:
(in thousands of
square feet except
where otherwise
indicated)
December 31, 2020
Leasable Occupied
% Expiries
New Renewals
Occupied
Retail
45,108
43,940
97.4 %
(2,120)
311
1,867
Industrial
17,158
16,699
97.3 %
(1,108)
351
822
Year Ended
December 31, 2021
Subtotal:
Absorption
Portfolio
changes(i)
Acquired /
(Disposed)
vacancy Leasable Occupied
Occupied
%
58
65
(436)
(151)
(5)
44,667
43,562
97.5 %
(57)
16,950
16,613
98.0 %
Office
Total
3,604
3,320
92.1 %
(285)
55
115
(115)
8
29
3,641
3,213
88.2 %
65,870
63,959
97.1 %
(3,513)
717
2,804
8
(579)
(33)
65,258
63,388
97.1 %
(i)
Represents changes in occupied square footage arising from acquisitions, dispositions, intensifications, expansions, and transfers from properties under development.
Three Months
Period end occupancy increased marginally to 97.1% at
December 31, 2021 from 97.0% at September 30, 2021. The
Trust had positive absorption of 56,000 square feet primarily
due to net new leasing in the retail portfolio, partially offset
by vacancies at various properties in the office portfolio.
The portfolio change of approximately 867,000 square feet
primarily related to the disposition of underperforming assets
in the industrial portfolio and non-strategic assets in the
retail portfolio, partially offset by the acquisition of two retail
assets during the quarter.
Year Ended
Period end occupancy was stable at 97.1% at December
31, 2021 and December 31, 2020, as the positive absorption
in the Ontario and Alberta industrial portfolios were offset by
vacancies in the national office portfolio.
Portfolio changes of 579,000 square feet primarily related to
the disposition of underperforming assets in the industrial
portfolio and non-strategic assets in the retail portfolio,
partially offset by the acquisitions and development transfers
mainly in the Alberta industrial and Ontario retail portfolios.
Choice Properties’ principal tenant, Loblaw, represents 56.0% of its total GLA (December 31, 2020 - 55.3%). At December
31, 2021, the weighted average lease term-to-maturity on the Loblaw leases was 6.5 years (December 31, 2020 - 7.4 years).
(in millions of square feet except where otherwise
indicated)
Portfolio
GLA
Occupied
GLA
Occupancy
(%)
Portfolio
GLA
Occupied
GLA
Occupancy
(%)
As at December 31, 2021
As at December 31, 2020
Loblaw banners
Third-party tenants
Total commercial GLA
36.5
28.7
65.2
36.5
26.9
63.4
100.0 %
93.5 %
97.1 %
36.4
29.4
65.8
36.4
27.5
63.9
100.0%
93.5%
97.1%
Choice Properties REIT
2021 Annual Report 64
The lease maturity profile for Choice Properties’ portfolio as at December 31, 2021, was as follows:
(in thousands of square feet
except where otherwise
indicated)
Month-to-month
2022
2023
2024
2025
2026
2027
2028 & Thereafter
Occupied GLA
Vacant GLA
Total
(in thousands of square feet
except where otherwise
indicated)
Month-to-month
2022
2023
2024
2025
2026
2027
2028 & Thereafter
Occupied GLA
Vacant GLA
Total
Third party
GLA
Loblaw GLA
Total GLA
Expiring GLA
as a % of
total GLA
Expiring
annualized
base rent
($ 000’s)
Average expiring
base rent
(per square foot)
378
2,540
3,101
3,260
3,557
3,506
2,398
8,131
26,871
1,870
28,741
90
66
3,890
2,854
3,218
2,665
4,057
19,677
36,517
—
36,517
468
2,606
6,991
6,114
6,775
6,171
6,455
27,808
63,388
1,870
65,258
0.7 % $
5,419 $
3.9 %
10.7 %
9.4 %
10.4 %
9.5 %
36,538
96,513
83,123
90,596
96,565
9.9 %
108,926
42.6 %
451,765
97.1 %
969,445
2.9 %
978
100.0 % $
970,423 $
11.58
14.02
13.81
13.60
13.37
15.65
16.87
16.25
15.29
0.52
14.87
Retail segment
Industrial segment
Office segment
Total
Expiring
GLA
as a % of
total GLA
0.6%
GLA
30
1.4%
1,336
7.2%
1,968
6.3%
1,693
6.9%
2,001
7.3%
1,116
8.7%
466
Expiring
GLA
as a % of
total GLA
—%
2.0%
3.0%
2.6%
3.1%
1.7%
0.7%
Expiring
GLA
as a % of
total GLA
0.1%
GLA
468
0.5%
2,606
0.5%
6,991
0.5%
6,114
0.4%
6,775
0.4%
6,171
0.5%
6,455
GLA
61
349
325
322
255
301
332
28.3%
8,003
12.4%
1,268
2.0%
27,808
16,613
3,213
63,388
GLA
377
921
4,698
4,099
4,519
4,754
5,657
18,537
43,562
1,105
1.7%
337
0.5%
428
0.7%
1,870
Expiring GLA
as a % of
total GLA
0.7 %
3.9 %
10.7 %
9.4 %
10.4 %
9.5 %
9.9 %
42.6 %
97.1 %
2.9 %
44,667
68.4%
16,950
26.0%
3,641
5.6%
65,258
100.0 %
Choice Properties REIT
2021 Annual Report 65
Top 10 Tenants
Choice Properties’ ten largest tenants for the three months ended December 31, 2021, represented approximately 63.4% of
gross rental revenue, as calculated on a proportionate share basis(1). The names noted below may be the names of the parent
entities and are not necessarily the parties to the leases.
Tenants
Loblaws
Canadian Tire
TJX Companies
Dollarama
Goodlife
Staples
Canada Cartage
Liquor Control Board of Ontario (LCBO)
TD Canada Trust
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Lowe's Companies
Total
% of Gross Rental
Revenue
GLA
(000’s square feet)
55.5 %
1.9 %
1.1 %
1.0 %
0.8 %
0.7 %
0.6 %
0.6 %
0.6 %
0.6 %
36,517
1,393
608
536
386
386
633
212
148
522
63.4 %
41,341
Choice Properties REIT
2021 Annual Report 66
7.
7.1
RESULTS OF OPERATIONS - SEGMENT INFORMATION
Net Income and Segment NOI Reconciliation
Choice Properties operates in three reportable segments: retail, industrial and office. Management measures and evaluates
the performance of the Trust based on net operating income which is presented by segment below at the proportionate share
of the related revenue and expenses for these properties, while other net income (loss) items are reviewed on a consolidated
GAAP basis.
The following table reconciles net income on a proportionate share basis(1) to net income (loss) as determined in accordance
with GAAP for the three months ended December 31, 2021:
($ thousands)
Retail
Industrial
Office
Proportionate
Share Basis(1)
Consolidation
and
eliminations(i)
GAAP Basis
Rental revenue, excluding straight
line rental revenue and lease
surrender revenue
$
257,618 $
48,398 $
32,920 $
338,936 $
(15,352) $
323,584
Property operating costs
(73,057)
(12,560)
(14,645)
(100,262)
4,571
(95,691)
Net Operating Income, Cash
Basis(1)
184,561
35,838
18,275
238,674
(10,781)
227,893
Straight line rental revenue
(3)
1,301
Lease surrender revenue
1,746
44
(167)
50
1,131
1,840
(792)
—
339
1,840
186,304
37,183
18,158
241,645
(11,573)
230,072
Net Operating Income, Accounting
Basis
Other Income and Expenses
Interest income
Fee income
Net interest expense and other financing charges
General and administrative expenses
Reversal of (allowance for) expected credit loss on mortgage receivable
Share of income (loss) from equity accounted joint ventures
Amortization of intangible assets
Other fair value gains (losses), net
Adjustment to fair value of Exchangeable Units
Adjustment to fair value of investment properties
Income before Income Taxes
Income tax recovery
Net Income (Loss)
3,533
946
(136,728)
(11,799)
1,026
—
(250)
666
(372,039)
3,779
—
7,312
946
2,408
(134,320)
—
—
18,338
—
—
—
(11,799)
1,026
18,338
(250)
666
(372,039)
109,227
(12,952)
96,275
(163,773)
686
—
—
(163,773)
686
$
(163,087) $
— $
(163,087)
(i)
Reconciling items adjust Choice Properties’ proportionate share of joint ventures and financial real estate assets to reflect the equity method of accounting
and financial instrument accounting treatment under GAAP.
Choice Properties REIT
2021 Annual Report 67
The following table reconciles net income on a proportionate share basis(1) to net income (loss) as determined in accordance
with GAAP for the year ended December 31, 2021:
($ thousands)
Retail
Industrial
Office
Proportionate
Share Basis(1)
Consolidation
and
eliminations(i)
GAAP Basis
Rental revenue, excluding straight
line rental revenue and lease
surrender revenue
$
1,024,027 $
191,276 $
123,887 $
1,339,190 $
(59,125) $
1,280,065
Property operating costs
(297,429)
(50,976)
(53,286)
(401,691)
21,385
(380,306)
Net Operating Income, Cash
Basis(1)
Straight line rental revenue
Lease surrender revenue
Net Operating Income,
Accounting Basis
Other Income and Expenses
Interest income
Fee income
726,598
140,300
70,601
937,499
(37,740)
899,759
2,747
2,758
5,218
47
2,139
1,558
10,104
4,363
(2,211)
—
7,893
4,363
732,103
145,565
74,298
951,966
(39,951)
912,015
12,039
3,801
8,040
—
20,079
3,801
Net interest expense and other financing charges
(542,962)
8,437
(534,525)
General and administrative expenses
Reversal of (allowance for) expected credit loss on mortgage receivable
Share of income (loss) from equity accounted joint ventures
Amortization of intangible assets
Other fair value gains (losses), net
Adjustment to fair value of Exchangeable Units
Adjustment to fair value of investment properties
Income before Income Taxes
Income tax recovery
Net Income (Loss)
(40,917)
1,502
—
(1,000)
(1,580)
(862,815)
502,295
22,329
679
—
—
66,952
—
—
—
(40,917)
1,502
66,952
(1,000)
(1,580)
(862,815)
(43,478)
458,817
—
—
22,329
679
$
23,008 $
— $
23,008
(i)
Reconciling items adjust Choice Properties’ proportionate share of joint ventures and financial real estate assets to reflect the equity method of accounting
and financial instrument accounting treatment under GAAP.
Choice Properties REIT
2021 Annual Report 68
7.2
Net Operating Income Summary(1)
NOI(1) is a supplemental measure of operating performance widely used in the real estate industry. There is no industry-
defined definition of NOI(1). Refer to Section 15.2, “Net Operating Income”, of this MD&A, for a definition of NOI(1) and a
reconciliation to net income (loss) determined in accordance with GAAP.
Management also measures performance of operating segments using NOI(1) as calculated on a proportionate share basis(1)
and, in particular, same-asset NOI which isolates Management’s success at dealing with certain key performance factors.
“Same-Asset” refers to those properties that were owned and operated by Choice Properties for the entire 24 months ended
December 31, 2021, and where such properties had no changes to income as a result of acquisitions, dispositions, new
developments, redevelopments and expansions, intensifications, transfers, or demolitions (collectively, “Transactions”). NOI
related to Transactions for the period are presented separately from the same-asset financial results.
Choice Properties’ NOI(1) is calculated on a proportionate share basis(1) to incorporate Choice Properties’ investment in equity
accounted joint ventures as if they were owned directly for the three months and year ended December 31, 2021 and
December 31, 2020 as summarized below.
Summary - Accounting Basis
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change % Change
2021
2020
2021
2020
Change % Change
Rental revenue
$ 306,398 $ 301,306 $
5,092
1.7 % $ 1,214,131 $ 1,205,342 $
8,789
0.7 %
Straight line rental revenue
(453)
1,550
(2,003)
(129.2) %
2,531
11,615
(9,084)
(78.2) %
(88,960)
(88,145)
(815)
0.9 %
(355,438)
(351,892)
(3,546)
1.0 %
Bad debt expense
(1,250)
(2,406)
216,985
214,711
2,274
1,156
1.1 % 861,224
865,065
(3,841)
(0.4) %
(48.0) %
(5,583)
(21,331)
15,748
(73.8) %
215,735
212,305
3,430
1.6 % 855,641
843,734
11,907
1.4 %
Property operating costs
excluding bad debt expense
Same-Asset NOI, Accounting
Basis, excluding bad debt
expense
Same-Asset NOI, Accounting
Basis
Transactions NOI including
straight line rental revenue,
excluding bad debt expense
23,569
23,240
329
91,827
82,818
9,009
2,493
Bad debt expense
501
(1,086)
1,587
135
(2,358)
Transactions NOI, Accounting
Basis
24,070
22,154
1,916
91,962
80,460
11,502
Lease surrender revenue
1,840
1,291
549
4,363
2,320
2,043
Total NOI, Accounting Basis
$ 241,645 $ 235,750 $
5,895
$ 951,966 $ 926,514 $ 25,452
Choice Properties REIT
2021 Annual Report 69
Summary - Cash Basis
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change % Change
2021
2020
2021
2020
Change % Change
Rental revenue
$ 306,398 $ 301,306 $
5,092
1.7 % $ 1,214,131 $ 1,205,342 $
8,789
0.7 %
Property operating costs
excluding bad debt expense
Same-Asset NOI, Cash Basis,
excluding bad debt expense
(88,960)
(88,145)
(815)
0.9 %
(355,438)
(351,892)
(3,546)
1.0 %
217,438
213,161
4,277
2.0 % 858,693
853,450
5,243
0.6 %
Bad debt expense
(1,250)
(2,406)
1,156
(48.0) %
(5,583)
(21,331)
15,748
(73.8) %
Same-Asset NOI, Cash Basis
216,188
210,755
5,433
2.6 % 853,110
832,119
20,991
2.5 %
Transactions NOI excluding bad
debt expense
Bad debt expense
21,985
20,684
501
(1,086)
Transactions NOI, Cash Basis
22,486
19,598
1,301
1,587
2,888
84,254
78,320
135
(2,358)
84,389
75,962
5,934
2,493
8,427
Total NOI, Cash Basis
$ 238,674 $ 230,353 $
8,321
$ 937,499 $ 908,081 $ 29,418
Three Months
Same-asset NOI, cash basis, increased 2.6% primarily due
to increased occupancy in the industrial portfolio, and
increased revenue from contractual rent steps, partially
offset by vacancies in select office assets.
Year Ended
Same-asset NOI, cash basis, increased 2.5% primarily due
to increased revenue from contractual rent steps, and a
decline in bad debt expense, partially offset by a reduction in
occupancy in select office assets.
The increase in transactions NOI was primarily due to the
contribution from acquisitions and development transfers
completed in the last 18 months, partially offset by foregone
NOI from properties sold.
The increase in transactions NOI was primarily due to the full
year of net contributions from acquisitions and development
transfers completed in the second half of 2020, partially
offset by declines due to foregone revenue from dispositions
in 2020.
Retail Segment
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change % Change
2021
2021
2020
2020
Change % Change
Rental revenue
$ 238,246 $ 233,837 $
4,409
1.9 % $ 945,969 $ 939,146 $
6,823
0.7 %
Property operating costs
excluding bad debt expense
Same-Asset NOI, Cash Basis,
excluding bad debt expense
(67,374)
(66,559)
(815)
1.2 %
(271,777)
(270,647)
(1,130)
0.4 %
170,872
167,278
3,594
2.1 % 674,192
668,499
5,693
0.9 %
Bad debt expense
(1,088)
(1,808)
720
(39.8) %
(4,651)
(18,747)
14,096
(75.2) %
Same-Asset NOI, Cash Basis
169,784
165,470
4,314
2.6 % 669,541
649,752
19,789
3.0 %
Transactions NOI excluding bad
debt expense
14,254
16,043
(1,789)
56,833
70,300
(13,467)
Bad debt expense
523
(953)
1,476
224
(2,157)
2,381
Transactions NOI, Cash Basis
14,777
15,090
(313)
57,057
68,143
(11,086)
Total NOI, Cash Basis
$ 184,561 $ 180,560 $
4,001
$ 726,598 $ 717,895 $
8,703
Three Months
The 2.6% increase in same-asset NOI, cash basis, was
primarily driven by increased revenue from contractual rent
steps in Ontario, higher capital recoveries in the Atlantic and
Ontario regions, and a reduction in bad debt expense.
Year Ended
The 3.0% increase in same-asset NOI, cash basis, was
mainly due to increased revenue from contractual rent steps
in Ontario, coupled with an increase in occupancy, and a
decline in bad debt expense.
Transaction NOI declined primarily due to the foregone
income from dispositions, partially offset by the contribution
from acquisitions and development transfers completed.
The decline in transaction NOI was primarily due to the
foregone income from dispositions, partially offset by the
contribution from acquisitions and development transfers
completed.
Choice Properties REIT
2021 Annual Report 70
Industrial Segment
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change % Change
2021
2021
2020
2020
Change % Change
Rental revenue
$ 43,206 $ 42,118 $
1,088
2.6 % $ 171,199 $ 166,344 $
4,855
2.9 %
Property operating costs
excluding bad debt expense
Same-Asset NOI, Cash Basis,
excluding bad debt expense
(11,040)
(11,524)
484
(4.2) %
(45,574)
(44,144)
(1,430)
3.2 %
32,166
30,594
1,572
5.1 % 125,625
122,200
3,425
Bad debt expense
—
(101)
101
N/M
81
(673)
754
Same-Asset NOI, Cash Basis
32,166
30,493
1,673
5.5 % 125,706
121,527
4,179
Transactions NOI excluding bad
debt expense
3,677
1,437
2,240
14,602
3,353
11,249
Bad debt expense
(5)
(80)
75
(8)
(110)
102
Transactions NOI, Cash Basis
3,672
1,357
2,315
14,594
3,243
11,351
Total NOI, Cash Basis
$ 35,838 $ 31,850 $
3,988
$ 140,300 $ 124,770 $ 15,530
2.8 %
N/M
3.4 %
Three Months
Same-asset NOI, cash basis, increased by 5.5% primarily
due to a decline in bad debt expense, in addition to positive
leasing activity in the Ontario and Quebec regions.
Year Ended
Same-asset NOI, cash basis, increased by 3.4% mainly due
to a decline in bad debt expense, in addition to positive
leasing activity in the Ontario region.
Transaction NOI increased as compared to the prior year
mainly due to the contribution from acquisitions and
development transfers.
The increase in transaction NOI was mainly due to the
contribution from acquisitions and development transfers.
Office Segment
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change % Change
2021
2020
2021
2020
Change % Change
Rental revenue
$ 24,946 $ 25,351 $
(405)
(1.6) % $ 96,963 $ 99,852 $
(2,889)
(2.9) %
(10,546)
(10,062)
(484)
4.8 %
(38,087)
(37,101)
(986)
2.7 %
Property operating costs
excluding bad debt expense
Same-Asset NOI, Cash Basis,
excluding bad debt expense
Bad debt expense
14,400
15,289
(162)
(497)
Same-Asset NOI, Cash Basis
14,238
14,792
Transactions NOI excluding bad
debt expense
Bad debt expense
4,054
3,204
(17)
(53)
Transactions NOI, Cash Basis
4,037
3,151
(889)
335
(554)
850
36
886
(5.8) %
58,876
62,751
(3,875)
(6.2) %
N/M
(1,013)
(1,911)
898
N/M
(3.7) %
57,863
60,840
(2,977)
(4.9) %
12,819
4,667
8,152
(81)
(91)
10
12,738
4,576
8,162
Total NOI, Cash Basis
$ 18,275 $ 17,943 $
332
$ 70,601 $ 65,416 $
5,185
Three Months
Same-asset NOI, cash basis, decreased by 3.7% primarily
due to select vacancies in the Ontario, Alberta regions,
partially offset by a reduction in bad debt expense.
Transaction NOI increased as compared to the prior year
mainly due to the contributions from the two office assets
acquired in July 2020 and development transfers.
Year Ended
Same-asset NOI, cash basis, decreased by 4.9% primarily
due to increased vacancy in the Ontario, Alberta and British
Columbia regions, in addition to a decline in transient
parking revenue.
increase
in transaction NOI was mainly due to
The
contributions from the two office assets acquired in July
2020, partially offset by the year-to-date foregone revenue
from an office property sold in the first quarter of 2020.
Choice Properties REIT
2021 Annual Report 71
7.3
Other Key Performance Indicators
FFO(1) and AFFO(1) are included in the Trust’s summary of key performance indicators. See Section 15, “Non-GAAP Financial
Measures”, of this MD&A, for details on how these measures are defined, calculated and reconciled to GAAP financial
measures and why management uses these measures. FFO(1) and AFFO(1) for the three months and year ended December
31, 2021 and December 31, 2020 are summarized below:
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
Three Months
Year Ended
2020
Change
Funds from Operations(1)
FFO(1) per unit basic
FFO(1) per unit diluted
FFO(1) payout ratio - diluted
$ 174,797
$ 171,519
$
$
0.242
0.242
$
$
0.239
0.239
$
$
$
3,278
$ 689,898
$ 652,007
$ 37,891
0.003
0.003
$
$
0.954
0.954
$
$
0.922
0.921
$
$
0.032
0.033
76.6 %
77.5 %
(0.9) %
77.6 %
80.5 %
(2.9) %
Adjusted Funds from Operations(1)
$ 118,924
$ 136,054
$ (17,130)
$ 586,506
$ 566,469
$ 20,037
AFFO(1) per unit basic
AFFO(1) per unit diluted
$
$
0.164
0.164
$
$
0.190
0.189
$
$
(0.026)
(0.025)
$
$
0.811
0.811
$
$
0.801
0.800
$
$
0.010
0.011
AFFO(1) payout ratio - diluted
112.5 %
97.7 %
14.8 %
91.2 %
92.6 %
(1.4) %
Distribution declared per Unit
$
0.185
$
0.185
$
—
$
0.740
$
0.740
$
—
Weighted average Units outstanding - basic(i)
723,302,244
717,789,820
5,512,424
723,087,042
707,545,107
15,541,935
Weighted average Units outstanding - diluted(i)
723,363,313
718,026,576
5,336,737
723,127,566
707,764,714
15,362,852
Number of Units outstanding, end of period(i)
723,375,372
722,728,188
647,184
723,375,372
722,728,188
647,184
(i)
Includes Trust Units and Exchangeable Units.
Funds from Operations (“FFO”)(1)
FFO(1) is calculated 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 2019. From time to time the Trust may enter into transactions
that materially impact the calculation and are excluded from the calculation for management’s review purposes. Refer to
Section 15.3, “Funds from Operations”, for a reconciliation of FFO(1) to net income determined in accordance with GAAP.
Three Months
Funds from operations increased by $3.3 million compared
to the prior year quarter primarily due to higher net operating
income due to
industrial
increased occupancy
portfolio, and a $2.7 million decline in bad debt expense. The
current quarter results were impacted by $1.3 million of
termination costs for a previous head office space, and a
$1.4 million early redemption premium paid for Series I
senior unsecured debentures that would have matured in
2022.
in the
Year Ended
On a full year basis, funds from operations increased by
$37.9 million mainly due to an $18.2 million decrease in bad
debt expense, savings from lower borrowing costs and
contributions from development transfers and transaction
activity. The prior year results were impacted by non-
recurring expense
(i) a $7.8 million
allowance for expected credit losses on a specific mortgage
receivable, and (ii) $6.8 million in early redemption premiums
paid in June 2020 for two senior unsecured debentures that
would have matured in 2021.
including
items,
On a per unit basis, the Trust had a higher weighted average number of units outstanding at December 31, 2021, as a result
of: (i) the Trust units issued as consideration for the acquisition of two assets from Wittington in July 2020 and (ii) the
Exchangeable Units issued as consideration for the acquisition of six assets from a wholly-owned subsidiary of GWL in
December 2020.
Choice Properties REIT
2021 Annual Report 72
Adjusted Funds from Operations (“AFFO”)(1)
Choice Properties calculates AFFO(1) 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 2019. From time to time the Trust may enter
into transactions that materially impact the calculation and are excluded from the calculation for management’s review
purposes. Refer to Section 15.4, “Adjusted Funds from Operations”, for a reconciliation of AFFO(1) to net income determined
in accordance with GAAP.
Three Months
Adjusted funds from operations decreased by $17.1 million
compared to the prior year on a quarterly basis due to an
$18.5 million increase in capital spending and a $3.6 million
increase in spending on tenant improvements due to timing,
partially offset by increased funds from operations.
Year Ended
Adjusted funds from operations increased primarily due to a
$37.9 million increase in funds from operations, partially
offset by a $26.9 million increase in capital spending.
Operating Capital Expenditures
Choice Properties endeavours to fund operating capital requirements from cash flows from operations.
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
Three Months
Year Ended
2020
Change
Property capital
Direct leasing costs
Tenant improvements
$
41,259 $
22,498 $
18,761 $
60,100 $
33,146 $
26,954
2,266
8,657
2,091
4,873
175
3,784
7,129
8,100
(971)
17,647
20,850
(3,203)
Total operating capital expenditures,
proportionate share basis(1)
$
52,182 $
29,462 $
22,720 $
84,876 $
62,096 $
22,780
Property capital expenditures incurred to sustain the existing GLA for investment properties are considered to be operational
and are deducted in the calculation of AFFO(1) and ACFO(1). During the year ended December 31, 2021, Choice Properties
incurred $60,100 of property capital expenditures, which may be recoverable from tenants under the terms of their leases
over the useful life of the improvements (2020 - $33,146). Recoverable capital improvements may include items such as
parking lot resurfacing and roof replacements. These items are recorded as part of investment properties and the recoveries
from tenants are recorded as revenue.
Capital expenditures for leasing activities, such as direct leasing costs or leasing commissions and tenant improvement
allowances, are considered to be operational and are deducted in the calculation of AFFO(1) and ACFO(1). Leasing capital
expenditures vary with tenant demand and the balance between new and renewal leasing, as capital expenditures relating to
securing new tenants is generally higher than the cost for renewing existing tenants.
Choice Properties REIT
2021 Annual Report 73
8.
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of selected consolidated financial information for each of the eight most recently completed
quarters.
Selected Quarterly Information
($ thousands except where
otherwise indicated)
Number of income producing
properties
Fourth
Quarter
2021
709
Gross leasable area
65.8
(in millions of square feet)
Third
Quarter
2021
718
66.5
Second
Quarter
2021
717
66.4
First
Quarter
2021
715
66.2
Fourth
Quarter
2020
713
66.1
Third
Quarter
2020
707
66.1
Second
Quarter
2020
706
65.6
First
Quarter
2020
706
65.6
Occupancy
97.1 %
97.0 %
96.9 %
97.0 %
97.1 %
97.0 %
96.8 %
97.5 %
Rental revenue (GAAP)
$ 325,763
$ 316,083
$ 323,936
$ 326,539
$ 321,862
$ 308,956
$ 314,885
$ 324,911
Net income (loss)
$ (163,087)
$ 163,672
$
$
(0.225)
(0.225)
$
$
0.226
0.226
$
$
$
84,621
0.117
0.117
$
$
$
(62,198)
$ 116,570
(0.086)
(0.086)
$
$
0.161
0.162
$
$
$
97,186
0.136
0.137
$
$
$
(95,813)
$ 332,742
(0.137)
(0.137)
$
$
0.475
0.475
Net income (loss) per Unit
Net income (loss) per Unit
diluted
Net operating income,
cash basis(1)
$ 238,674
$ 236,004
$ 233,188
$ 229,633
$ 230,353
$ 229,891
$ 216,431
$ 231,531
FFO(1)
$ 174,797
$ 172,651
$ 171,842
$ 170,608
$ 171,519
$ 169,173
$ 140,645
$ 170,670
FFO(1) per Unit - diluted
$
0.242
$
0.239
$
0.238
$
0.236
$
0.239
$
0.238
$
0.201
$
0.244
AFFO(1)
$ 118,924
$ 153,566
$ 158,700
$ 155,316
$ 136,054
$ 147,594
$ 131,173
$ 151,773
AFFO(1) per Unit - diluted
Distribution declared per Unit
Market price per Unit - closing
$
$
$
0.164
0.185
15.19
$
$
$
0.212
0.185
14.25
$
$
$
0.219
0.185
14.29
$
$
$
0.215
0.185
13.56
$
$
$
0.189
0.185
13.01
$
$
$
0.207
0.185
12.78
$
$
$
0.187
0.185
12.74
$
$
$
0.217
0.185
12.92
Units outstanding, period end
723,375,372
723,302,244
723,148,168
722,728,188
722,728,188
716,903,446
700,403,446
700,403,446
Adjusted debt to total assets(i)
40.1 %
41.0 %
40.9 %
42.3 %
42.7 %
43.8 %
44.3 %
43.8 %
Debt service coverage(i)
3.3x
3.3x
3.2x
3.2x
3.2x
3.0x
2.6x
3.1x
(i)
The Exchangeable Units are excluded from the debt ratio calculations. The ratios are non-GAAP financial measures calculated based on the Trust Indentures, as
supplemented.
Choice Properties’ quarterly results were impacted by acquisition and disposition activity and the development of additional
GLA. In addition, net income (loss) was impacted by fluctuations in adjustments to fair value of Exchangeable Units,
investment properties, and unit-based compensation and therefore was often not comparable from quarter to quarter.
Choice Properties REIT
2021 Annual Report 74
9.
RELATED PARTY TRANSACTIONS
Choice Properties’ parent corporation is GWL, which as at December 31, 2021, held either directly or indirectly, a 61.7%
effective interest in the Trust through ownership of 50,661,415 Units and all of the Exchangeable Units, which are
economically equivalent to and exchangeable to Units. GWL is also the parent company of Loblaw, with ownership of 52.6%
of Loblaw’s outstanding common shares as at December 31, 2021. Choice Properties’ ultimate parent is Wittington
Investments, Limited.
In the normal course of operations, Choice Properties enters into various transactions with related parties. These transactions
are measured at the exchange amount, which is the amount of consideration established and agreed upon by the related
parties.
Loblaw represents approximately 55.5% of Choice Properties’ quarterly rental revenue on a proportionate share basis(1) and
56.0% of its commercial GLA as at December 31, 2021 (December 31, 2020 - 55.6% and 55.3%, respectively).
Acquisitions
During year ended December 31, 2021, Choice Properties acquired a financial real estate asset from Loblaw for a purchase
price of $14,777, excluding transaction costs.
During the year ended December 31, 2020, Choice Properties acquired six industrial assets from Weston Foods (Canada)
Inc., a wholly-owned subsidiary of GWL, for a purchase price of $81,500, excluding transaction costs. The acquisition was
satisfied in full through the issuance of 5,824,742 Exchangeable Units for $79,100 and assumed liabilities of $2,400. Weston
Foods (Canada) Inc. amalgamated with George Weston Limited in July 2021, and the Exchangeable Units held by Weston
Foods (Canada) Inc. were transferred to GWL. On December 29, 2021, GWL completed the sale of its entire Weston Foods
bakery business and any leases with Weston Foods (Canada) Inc. were transferred to a third-party buyer as part of the sale.
During the year ended December 31, 2020, Choice Properties acquired a development property from Loblaw for a purchase
price of $8,100, excluding transaction costs. Choice Properties also acquired from Loblaw five financial real estate assets for
a purchase price of $45,673, excluding transaction costs. Each acquisition was settled with cash.
On July 31, 2020, Choice Properties acquired two real estate assets from Wittington Properties Limited, a subsidiary of
Wittington, for an aggregate purchase price of $208,935, excluding transaction costs, which was satisfied in full by the
issuance of 16,500,000 Units of Choice Properties. The transaction was measured at market terms and conditions. The
assets acquired included: (i) an office property in Toronto, Ontario, for $128,500 and (ii) the remaining 60% interest of the
joint venture for 500 Lake Shore Boulevard West in Toronto, Ontario, for $80,435, less a cost-to-complete receivable of
$16,404, giving the Trust 100% ownership of the joint venture.
Dispositions
During year ended December 31, 2021, Choice Properties disposed of 2 retail properties which had Loblaw leases for an
aggregate sale price of $33,500, excluding transaction costs.
During the year ended December 31, 2020, Choice Properties disposed interests in 17 retail properties which had Loblaw
leases for an aggregate sale price of $263,440, excluding transaction costs.
Operating Leases
In 2014 Choice Properties entered into a ten-year lease with Wittington Properties Limited, with lease payments totalling
$2,664 over the term of the lease. Effective January 1, 2018, Choice Properties entered into a sub-lease for additional office
space with Weston Foods, a subsidiary of GWL, with a term effective until the end of the existing lease in 2024. Over the term
of the sub-lease, lease payments will total $1,282. On July 31, 2020, the Trust acquired the office building in which it was
leasing office space from Wittington Properties Limited and sub-leasing office space from Weston Foods. The Trust
derecognized its right-of-use assets and lease liabilities associated with the office lease.
Lease Surrender Payments
During the year ended December 31, 2021, Loblaw made lease surrender payments of $1,764 to the Trust (December 31,
2020 - $nil).
Services Agreement
For the year ended December 31, 2021, GWL provided Choice Properties with corporate, administrative and other support
services for an annualized cost of $3,094 (2020 - $3,095).
Strategic Alliance Agreement
The Strategic Alliance Agreement creates a series of rights and obligations between Choice Properties and Loblaw intended
to establish a preferential and mutually beneficial business and operating relationship. The Strategic Alliance Agreement
expires on July 5, 2023. The Strategic Alliance Agreement provides Choice Properties with important rights that are expected
to meaningfully contribute to the Trust’s growth. Subject to certain exceptions, rights include:
Choice Properties REIT
2021 Annual Report 75
•
•
•
Choice Properties has the right of first offer to purchase any property in Canada that Loblaw seeks to sell;
Loblaw is generally required to present shopping centre property acquisitions in Canada to Choice Properties to allow
the Trust a right of first opportunity to acquire the property itself; and
Choice Properties has the right to participate in future shopping centre developments involving Loblaw.
Included in certain investment properties acquired from Loblaw is excess land with development potential. In accordance
with the Strategic Alliance Agreement, Choice Properties will compensate Loblaw, over time, with intensification payments,
as Choice Properties pursues development, intensification or redevelopment of such excess land. The payments to Loblaw
are calculated in accordance with a payment grid that takes into account the region, market ranking and type of use for the
property.
Property Management Agreement
Choice Properties provided Loblaw with property management services for Loblaw’s properties with third-party tenancies on
a fee for service basis with automatic one-year renewals. The property management agreement was terminated effective
December 31, 2020.
Choice Properties provides Wittington with property management services for certain properties with third-party tenancies on
a fee for service basis.
Sublease Administration Agreement
On July 17, 2017, in connection with Loblaw’s sale of substantially all of its gas bar operations, Choice Properties agreed to
provide Loblaw with certain administrative services in respect of the subleases on a fee for service basis for an initial five-year
term with automatic one-year renewals. The sublease administration agreement was terminated effective December 31,
2020.
Site Intensification Payments
Choice Properties compensated Loblaw with intensification payments of $2,208 in connection with completed gross leasable
area for which tenants took possession during the year ended December 31, 2021 (December 31, 2020 - $995).
Distributions on Exchangeable Units
GWL, directly or indirectly, holds all of the Exchangeable Units issued by Choice Properties Limited Partnership, a subsidiary
of Choice Properties. During the three months and year ended December 31, 2021, distributions declared on the
Exchangeable Units totalled $73,221 and $292,884 (December 31, 2020 - $72,502 and $288,932).
As at December 31, 2021, Choice Properties had distributions on Exchangeable Units payable to GWL of $192,741
(December 31, 2020 - 120,598)
Choice Properties REIT
2021 Annual Report 76
Notes Receivable
Holders of Exchangeable Units may, in lieu of receiving all or a portion of their distributions, choose to be loaned an amount
from Choice Properties Limited Partnership, and to have such distributions made on the first business day following the end
of the fiscal year in which such distribution would otherwise have been made. The loans do not bear interest and are due and
payable in full on the first business day following the end of the fiscal year during which the loan was made. During the seven
months ended July 31, 2021, GWL elected to receive all distributions from Choice Properties Limited Partnership in the form
of loans. For the remainder of the year ended December 31, 2021, GWL elected to receive the distributions in cash. As such,
non-interest bearing short-term notes totalling $170,849 were issued to GWL during the year ended December 31, 2021.
$2,515 of the notes issued were repaid in August 2021 and the remaining $168,334 were repaid in January 2022. Non-
interest bearing short-term notes totalling $96,191 with respect to the loans received in the 2020 fiscal year were repaid by
GWL in January 2021.
Trust Unit Distributions
During the three months and year ended December 31, 2021, Choice Properties declared cash distributions of $9,373 and
$37,490 on the Units held by GWL (December 31, 2020 - $9,373 and $37,490). As at December 31, 2021, $3,124 of Trust
Unit distributions declared were payable to GWL (December 31, 2020 - $3,124). There were no non-cash distributions settled
through the issuance of additional Trust Units during the three months and year ended December 31, 2021 (December 31,
2020 - $4,660).
During the three months and year ended December 31, 2021, Choice Properties declared cash distributions of $3,052 and
$12,210 on the Units held by Wittington (December 31, 2020 - $3,052 and $6,105). As at December 31, 2021, $1,018 of Trust
Unit distributions declared were payable to Wittington (December 31, 2020 - $1,018). There were no non-cash distributions
settled through the issuance of additional Trust Units during the three months and year ended December 31, 2021
(December 31, 2020 - $1,485).
Joint Venture
On December 9, 2014, Choice Properties and its joint venture partner, Wittington Properties Limited, completed the
acquisition of 500 Lake Shore Boulevard West in Toronto, Ontario, for $15,576 from Loblaw. Choice Properties accounted for
its investment in the joint venture as an equity accounted joint venture until July 31, 2020, when the Trust acquired the
remaining 60% interest from Wittington Properties Limited, after which the 100% owned joint venture is accounted for on a
consolidated basis. Wittington Properties Limited continued to act as development and construction manager for the
commercial space at 500 Lake Shore Boulevard West until the development was completed.
Choice Properties REIT
2021 Annual Report 77
10.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of the consolidated financial statements requires management to make judgments and estimates in applying
Choice Properties’ accounting policies that affect the reported amounts and disclosures made in the consolidated financial
statements and accompanying notes.
Within the context of these consolidated financial statements, a judgment is a decision made by management in respect of
the application of an accounting policy, a recognized or unrecognized financial statement amount and/or note disclosure,
following an analysis of relevant information that may include estimates and assumptions. Estimates and assumptions are
used mainly in determining the measurement of balances recognized or disclosed in the consolidated financial statements
and are based on a set of underlying data that may include management’s historical experience, knowledge of current events
and conditions and other factors that are believed to be reasonable under the circumstances. Management continually
evaluates the estimates and judgments it uses.
The following are the accounting policies subject to judgments and key sources of estimation uncertainty that
Choice Properties believes could have the most significant impact on the amounts recognized in the consolidated financial
statements.
a.
Investment Properties
Judgments Made in Relation to Accounting Policies Applied
Judgment is applied in determining whether certain costs are additions to the carrying value of investment properties,
identifying the point at which substantial completion of a development property occurs, and identifying the attributable
borrowing costs to be included in the carrying value of the development property. Choice Properties also applies
judgment in determining whether the properties it acquires are considered to be asset acquisitions or business
combinations. Choice Properties considers all properties acquired in the current year to be asset acquisitions.
Key Sources of Estimation
The fair value of income producing properties is dependent on future cash flows over the holding period and terminal
capitalization rates and discount rates applicable to those assets. The review of future cash flows involves assumptions
relating to occupancy, rental rates and residual value. In addition to reviewing future cash flows, management assesses
changes in the business climate and other factors, which may affect the ultimate value of the property. These
assumptions may not ultimately be achieved.
b. Joint Arrangements
Judgments Made in Relation to Accounting Policies Applied
Judgment is applied in determining whether the Trust has joint control and whether the arrangements are joint
operations or joint ventures. In assessing whether the joint arrangements are joint operations or joint ventures,
management applies judgment to determine the Trust’s rights and obligations in the arrangement based on factors such
as the structure, legal form and contractual terms of the arrangement.
c. Leases
Judgments Made in Relation to Accounting Policies Applied
Choice Properties is required to make judgments in determining whether certain leases are operating or finance leases,
in particular long-term leases. All tenant leases where Choice Properties is the lessor have been determined to be
operating leases.
d.
Income Taxes
Judgments Made in Relation to Accounting Policies Applied
Choice Properties is a mutual fund trust and a REIT as defined in the Income Tax Act (Canada). Choice Properties is not
liable to pay Canadian income taxes provided that its taxable income is fully distributed to Unitholders each year. Choice
Properties is a REIT if it meets the prescribed conditions under the Income Tax Act (Canada). Choice Properties uses
judgment in reviewing these conditions in assessing its interpretation and application to its assets and revenue.
Choice Properties has determined that it qualifies as a REIT for the current period. Choice Properties expects to continue
to qualify as a REIT under the Income Tax Act (Canada), however, should it no longer qualify, it would not be able to flow
through its taxable income to Unitholders and would therefore be subject to tax.
Choice Properties REIT
2021 Annual Report 78
11.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Internal Controls Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial reports for external
purposes in accordance with IFRS.
As required by National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings” (“NI 52-109”),
the President and Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”) have caused the effectiveness of
the internal controls over financial reporting to be evaluated using the framework established in ‘Internal Control - Integrated
Framework (COSO Framework)’ (2013) published by The Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). Based on that evaluation, they have concluded that the design and operation of the Trust’s internal
controls over financial reporting were effective as at December 31, 2021.
In designing such controls, it should be recognized that due to inherent limitations, any control, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives and may not prevent or
detect misstatements. Projections of any evaluations of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate. Additionally, management is required to use judgment in evaluating controls and procedures.
Changes in Internal Controls Over Financial Reporting
There were no changes in the Trust’s internal controls over financial reporting in 2021 that materially affected or are
reasonably likely to materially affect the Trust’s internal control over financial reporting.
Disclosure Controls and Procedures
Management is responsible for establishing and maintaining a system of disclosure controls and procedures to provide
reasonable assurance that all material information relating to Choice Properties is gathered and reported to senior
management on a timely basis so that appropriate decisions can be made regarding public disclosure.
As required by NI 52-109, the CEO and CFO have caused the effectiveness of the disclosure controls and procedures to be
evaluated. Based on that evaluation, they have concluded that the design and operation of the system of disclosure controls
and procedures were effective as at December 31, 2021.
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12.
ENTERPRISE RISKS AND RISK MANAGEMENT
Choice Properties is committed to maintaining a framework that ensures risk management is an integral part of its activities.
The Trust’s Enterprise Risk Management (“ERM”) program assists all areas of the business in managing risks within
appropriate levels of tolerance by bringing a systematic approach and methodology for evaluating, measuring and monitoring
key risks. The results of the ERM program and other business planning processes are used to identify emerging risks to the
Trust, prioritize risk mitigation activities and develop a risk-based internal audit plan.
Risks are not eliminated through the ERM program, but rather, are identified and managed in line with the Trust’s Risk
Appetite Statement and within approved risk tolerances. The Risk Appetite Statement articulates key aspects of the Trust’s
business and values and provides directional guidance on risk taking.
(i) Risks are assessed and evaluated based on the Trust’s vulnerability to the risk and the potential impact that the underlying risks would have on the Trust’s
ability to execute on its strategies and achieve its objectives.
(ii) Any of the key risks have the potential to negatively affect the Trust and its financial performance. The Trust has risk management strategies in place for key
risks. However, there can be no assurance that the risks will be mitigated or will not materialize or that events or circumstances will not occur that could
adversely affect the reputation, operations or financial condition or performance of the Trust.
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12.1
COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The duration and full impact of the
COVID-19 pandemic on the Trust continues to remain unknown at this time. As such, it is not possible to reliably estimate the
length and severity of COVID-19 related impacts on the future financial results and operations of the Trust.
In response to the COVID-19 pandemic, the Trust introduced several protocols to protect its employees, tenants and guests
including mandating that employees work from home to the full extent possible, increasing sanitation and health and safety
measures at its properties and restricting access to its office buildings. The Trust established a COVID-19 response team to
coordinate critical aspects of crisis management and continues to actively execute its pandemic plan to ensure business
continuity while safeguarding the well-being of its employees, tenants, and guests.
As the pandemic evolves, the Trust continues to support its tenants and employees. The Trust implemented additional safety
measures at all of its properties, including increased frequency in cleaning and disinfecting as well as physical distancing
practices and offering COVID-19 testing at certain of its properties. Furthermore, the Trust will continue to act according to
direction provided by the federal, provincial and municipal governments. As the COVID-19 pandemic evolves, including the
emergence and progression of new variants of the virus, the Trust continues to prepare for this and potential further waves of
the pandemic as well as the implications of government restrictions and corresponding re-opening activities. Despite the
rollout of vaccinations, uncertainty remains regarding new variants of COVID-19 and the spread and severity of its impact on
the Trust’s business and operations. The Trust continues to closely monitor business operations and may take further actions
in response to directives of government and public health authorities or that are in the best interests of employees, tenants,
suppliers or other stakeholders, as necessary.
These changes and any additional changes in operations in response to COVID-19 could materially adversely impact the
financial results of the Trust and may include tenants’ ability to pay rent in full or at all, consumer demand for tenants’
products or services, impact to the fair value of the Trust’s properties and other investments, potential changes in leasing
activity, temporary or long-term stoppage of development projects, temporary or long-term labour shortages or disruptions,
temporary or long-term impacts on domestic and global supply chains, increased risks to IT systems and networks and the
Trust’s ability to access capital on acceptable terms or at all. Uncertain economic conditions resulting from the COVID-19
pandemic may, in the short or long term, materially adversely impact operations and the financial performance of the Trust.
The continued spread of COVID-19 has caused economic uncertainty and increased volatility in financial markets, which has
partially negatively impacted the market price for the securities of the Trust. Governments and central banks have responded
with monetary and fiscal interventions intended to stabilize economic conditions. However, it remains unknown how these
interventions will impact debt and equity markets or the economy generally, including in the long-term. Although the ultimate
impact of COVID-19 on the global economy and its duration remains uncertain, disruptions caused by COVID-19 may
materially adversely affect the performance of the Trust. Uncertain economic conditions resulting from the COVID-19
pandemic may, in the short or long term, materially adversely impact the Trust’s tenants and/or the debt and equity markets,
both of which could materially adversely affect the Trust’s operations and financial performance.
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12.2 Operating Risks and Risk Management
The following discussion of risks identifies significant factors that may adversely affect the Trust’s business, operations and
financial condition or future performance. This information should be read in conjunction with the Trust’s consolidated
financial statements and related notes. The following discussion of risks is not exhaustive but is designed to highlight the key
risks inherent in the Trust’s business.
Business Continuity
Choice Properties’ ability to continue critical operations and processes could be negatively impacted by adverse events
resulting from various incidents, including severe weather, development site work stoppages, prolonged IT systems failure,
terrorist activity, pandemics, power failures or other national or international catastrophes. Any of these events, including
ineffective contingency planning, may have a material adverse effect on Choice Properties’ reputation, business, cash flows,
financial condition and results of operations and its ability to make distributions to Unitholders.
Economic Environment
Choice Properties’ financial results may be affected to varying degrees by the general business and economic conditions in
the geographic regions in which it operates. Continued concerns about the uncertainty over whether the economy will be
adversely affected by the systemic impact of unemployment, volatile energy costs, geopolitical issues, pandemics and the
availability and cost of credit have contributed to increased market volatility and weakened business and consumer
confidence. This difficult operating environment could adversely affect Choice Properties’ ability to generate revenues,
thereby reducing its operating income and earnings. It could also have a material adverse effect on the ability of Choice
Properties’ operators to maintain occupancy rates in the properties, which could harm Choice Properties’ financial condition.
If these economic conditions continue, Choice Properties’ tenants may be unable to meet their rental payments and other
obligations owing to Choice Properties, which could have a material adverse effect on Choice Properties.
Asset Management
Certain significant expenditures, including property taxes, maintenance costs, debt service payments, insurance costs and
related charges, must be made throughout the period of ownership of real property, regardless of whether the property is
producing sufficient income to pay such expenses. In order to retain desirable rentable space, increase tenant demand and
to generate adequate revenue over the long-term, Choice Properties must maintain or, in some cases, improve each
property’s condition to meet market demand. Property management services, including lease management and facility
repairs and maintenance must be executed in a timely and cost-effective manner. Maintaining a rental property in
accordance with market standards can entail significant costs, which Choice Properties may not be able to recover from its
tenants. All of the Loblaw Leases contain exclusions on certain operating costs and/or tax recoveries. In addition, property
tax reassessments based on updated appraised values may occur, which Choice Properties may not be able to recover from
its tenants. As a result, Choice Properties may bear the economic cost of such operating costs and/or taxes which may
adversely impact the financial condition and results of operations and decrease the amount of cash available for distribution
to Unitholders. Numerous factors, including the age of the relevant building, the materials used at the time of construction or
currently unknown building code violations could result in substantial unbudgeted costs for refurbishment or modernization.
In addition, the timing and amount of capital expenditures may indirectly affect the amount of cash available for distribution
to Unitholders. Distributions may be reduced, or even eliminated, at times when Choice Properties deems it necessary to
make significant capital or other expenditures.
If the actual costs of maintaining or upgrading a property exceed Choice Properties’ estimates, or if hidden defects are
discovered during maintenance or upgrading which are not covered by insurance or contractual warranties, additional and
unexpected costs will be incurred. If similar properties located in the vicinity of one of the Properties are substantially
refurbished and the Property is not similarly refurbished, the net operating income derived from, and the value of, such
Property could be reduced. Any failure by Choice Properties to undertake appropriate maintenance and refurbishment work
in response to the factors described above could adversely affect the rental income that is earned from such properties. Any
such event could have a material adverse effect on Choice Properties’ business, cash flows, financial condition or results of
operations and its ability to make distributions to Unitholders.
In addition, a failure by Choice Properties to adequately allocate operational capital could negatively impact occupancy
levels, attraction of high-quality tenants and lease renewals, which could have a material adverse effect on Choice Properties’
operations and financial performance.
Demographic and Tenant Changes
A large portion of Choice Properties’ existing real estate portfolio is comprised of necessity-based retail tenants. Shifting
consumer preferences toward e-commerce may result in a decrease in the demand for physical space by retail tenants. The
failure of Choice Properties to adapt to changes in the retail landscape, including finding new tenants to replace any lost
income stream from existing tenants that reduce the amount of physical space they rent from Choice Properties, could
adversely affect Choice Properties’ operations or financial performance.
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Information and Cyber Security
Choice Properties requires segregation and protection of its information, including security over tenant lease details,
employee information, financial records and operational data (“Confidential Information”). Some of this Confidential
Information is held and managed by third-party service providers. Any failure in data security or any system vulnerability
(internal or external) could result in harm to the reputation or competitive position of the Trust. To reduce the level of
vulnerability, the Trust has implemented security measures, including monitoring and testing, maintenance of protective
systems and contingency plans, to protect and to prevent unauthorized access of Confidential Information and to reduce the
likelihood of disruptions to its IT systems.
Despite these measures, all of the Trust’s information systems, including its back-up systems and any third-party service
provider systems that it employs, are vulnerable to damage, interruption, disability or failures due to a variety of reasons,
including physical theft, fire, power loss, computer and telecommunication failures or other catastrophic events, as well as
from internal and external security breaches, denial of service attacks, viruses, worms and other known or unknown
disruptive events.
Choice Properties or its third-party service providers may be unable to anticipate, timely identify or appropriately respond to
one or more of the rapidly evolving and increasingly sophisticated means by which computer hackers, cyber terrorists and
others may attempt to breach the Trust’s security measures or those of our third-party service providers’ information
systems.
As cyber threats evolve and become more difficult to detect and successfully defend against, one or more cyber threats
might defeat the Trust’s security measures or those of its third-party service providers. Moreover, employee error or
malfeasance, faulty password management or other irregularities may result in a breach of the Trust’s or its third-party
service providers’ security measures, which could result in a breach of Confidential Information.
If Choice Properties does not allocate and effectively manage the resources necessary to build and sustain a reliable IT
infrastructure, fails to timely identify or appropriately respond to cybersecurity incidents, or Choice Properties’ or its third-
party service providers’ information systems are damaged, destroyed, shut down, interrupted or cease to function properly,
Choice Properties’ business could be disrupted and Choice Properties could, among other things, be subject to: the loss of
or failure to attract new tenants; the loss of revenue; the loss or unauthorized access to Confidential Information or other
assets; the loss of or damage to trade secrets; damage to its reputation; litigation; regulatory enforcement actions; violation
of privacy, security or other laws and regulations; and remediation costs.
Property Valuation
Choice Properties conducts a valuation assessment of its properties on a quarterly basis. As property values fluctuate over
time in response to market factors, or as underlying assumptions and inputs to the valuation model change, the fair value of
the Trust’s portfolio could change materially. Choice Properties is responsible for the reasonableness of the assumptions and
for the accuracy of the inputs into the property valuation model. Errors in the inputs to the valuation model or inappropriate
assumptions may result in an inaccurate valuation of the Properties. In addition to a market activity report that is tailored to
Choice Properties’ portfolio, management uses the market information obtained in external appraisals, across multiple firms,
commissioned during the reporting period to assess whether changes to market- related assumptions are required for the
balance of the portfolio. The Trust is responsible for monitoring the value of its portfolio going forward and evaluating the
impact of any changes in property value over time. Any changes in the value of the Trust’s properties may impact Unitholder
value.
A publicly traded real estate investment trust will not necessarily trade at values determined solely by reference to the
underlying value of its real estate assets. Accordingly, the Units may trade at a premium or a discount to values implied by
the above-mentioned valuations.
Capitalization Rate Risk
The fair market property valuation process is dependent on several inputs, including the current market capitalization rate.
Risks associated with Choice Properties’ property valuation model include fluctuations in the current market capitalization
rate which can significantly impact the value of Choice Properties’ overall real estate portfolio. In addition, Choice Properties
is subject to certain financial and non-financial covenants in the Trust Debentures and the Revolving Credit Facility that
include maintaining certain leverage ratios. Changes in the market capitalization rate could impact Choice Properties’
property valuation which in turn could impact financial covenants.
Property Development and Construction
Choice Properties engages in development, redevelopment and major renovation activities with respect to certain properties.
It is subject to certain risks, including: (a) the availability and pricing of financing on satisfactory terms or availability at all; (b)
the availability and timely receipt of zoning, occupancy, land use and other regulatory and governmental approvals; (c)
changes in zoning and land use laws; (d) the ability to achieve an acceptable level of occupancy upon completion; (e) the
potential that Choice Properties may fail to recover expenses already incurred if it abandons redevelopment opportunities
after commencing to explore them; (f) the potential that Choice Properties may expend funds on and devote management
time to projects which are not completed; (g) construction or redevelopment costs of a project, including rising construction
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costs and development charges and shortages of experienced labour in certain construction related trades, may exceed
original estimates, possibly making the project less profitable than originally estimated, or unprofitable; (h) the time required
to complete the construction or redevelopment of a project or to lease-up the completed project may be greater than
originally anticipated, thereby adversely affecting Choice Properties’ cash flows and liquidity; (i) the cost and timely
completion of construction (including risks beyond Choice Properties’ control, such as weather, labour conditions or material
shortages); (j) contractor and subcontractor disputes, strikes, labour disputes or supply disruptions; (k) occupancy rates and
rents of a completed project may not be sufficient to make the project profitable; (l) Choice Properties’ ability to dispose of
properties redeveloped with the intent to sell could be impacted by the ability of prospective buyers to obtain financing given
the current state of the credit markets; and (m) the availability and pricing of financing to fund Choice Properties’
development activities on favourable terms or availability at all.
The above risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent
the initiation of development activities or the completion of development activities once undertaken. In addition, development
projects entail risks that investments may not perform in accordance with expectations and can carry an increased risk of
litigation (and its accompanying risks) with contractors, subcontractors, suppliers, partners and others. Any failure by Choice
Properties to develop quality assets and effectively manage all development, redevelopment and major renovation initiatives
may negatively impact the reputation and financial performance of the Trust.
Regulatory Compliance
Choice Properties is subject to laws and regulations governing the ownership and leasing of real property, securities,
intellectual property, privacy, employment standards and other matters. It is possible that future changes in applicable
federal, provincial, municipal, local or common laws or regulations or changes in their enforcement or regulatory
interpretation could result in changes in the legal requirements affecting the Trust. Also, to retain its tax status as a REIT,
Choice Properties must comply with the REIT exception to the SIFT Rules at all times. Choice Properties’ failure to comply
with the REIT exception would result in certain distributions from the Trust not being deductible in computing its taxable
income and the Trust being subject to tax on such distributions at a rate that is substantially equivalent to the general tax rate
applicable to Canadian corporations. Any non-compliance under the Tax Act or non-compliance with other laws or
regulations could subject Choice Properties to civil or regulatory actions, investigations or proceedings, which in turn could
negatively impact Choice Properties’ operations and financial position. There can be no assurance that the Canadian federal
income tax laws respecting real estate investment trusts, or the ways in which these rules are interpreted and applied by the
Canada Revenue Agency, will not be changed in a manner which adversely affects Choice Properties and/or Unitholders. It is
impossible to predict whether there will be any future changes in the regulatory regimes to which the Trust will be subject or
the effect of any such changes on its investments.
Acquisitions and Dispositions
Acquired properties may be subject to unknown, unexpected or undisclosed liabilities which could have a material adverse
impact on the operations and financial results of Choice Properties. Representations and warranties given by third-parties to
Choice Properties may not adequately protect against these liabilities and any recourse against third- parties may be limited
by the financial capacity of such third-parties. Furthermore, it is not always possible to obtain from the seller the records and
documents that are required in order to fully verify that the buildings to be acquired are constructed in accordance, and that
their use complies, with planning laws and building code requirements. Accordingly, in the course of acquiring a property,
specific risks might not be or might not have been recognized or correctly evaluated. These circumstances could lead to
additional costs and could have a material adverse effect on rental income of the relevant properties or the sale prices of
such properties upon a disposition of such properties.
Choice Properties’ ability to acquire properties on satisfactory terms and successfully integrate and operate them is subject
to the following additional risks: (a) Choice Properties may be unable to acquire desired properties because of (i) constraints
imposed by the terms of the Strategic Alliance Agreement, or (ii) competition from other real estate investors with more
capital, including other real estate operating companies, real estate investment trusts and investment funds; (b) Choice
Properties may acquire properties that are not accretive to results upon acquisition, and Choice Properties may not
successfully manage and lease those properties to meet its expectations; (c) competition from other potential acquirers may
significantly increase the purchase price of a desired property; (d) Choice Properties may be unable to generate sufficient
cash from operations, or obtain the necessary debt or equity financing to consummate an acquisition or, if obtainable,
financing may not be on satisfactory terms; (e) Choice Properties may need to spend more than budgeted amounts to make
necessary improvements or renovations to acquired properties; (f) agreements for the acquisition of properties are typically
subject to customary conditions to closing, including satisfactory completion of due diligence investigations, and Choice
Properties may spend significant time and money on potential acquisitions that Choice Properties does not consummate; (g)
the process of acquiring or pursuing the acquisition of a new property may divert the attention of Choice Properties’ senior
management team from existing business operations; (h) Choice Properties may be unable to quickly and efficiently integrate
new acquisitions, particularly acquisitions of portfolios of properties, into existing operations; (i) market conditions may result
in higher than expected vacancy rates and lower than expected rental rates; and (j) Choice Properties may acquire properties
without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of
environmental contamination, claims by tenants, vendors or other persons against the former owners of the properties and
claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the
properties.
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If Choice Properties cannot complete property acquisitions on favourable terms, or operate acquired properties to meet
Choice Properties’ goals or expectations, Choice Properties’ business, financial condition, results of operations and cash
flows, the per Unit trading price and its ability to satisfy debt service obligations and to make distributions to Unitholders
could be materially and adversely affected.
In addition, Choice Properties undertakes strategic property dispositions from time to time in order to recycle its capital and
maintain an optimal portfolio composition. Failure to dispose of certain assets not aligned with Choice Properties’ investment
criteria may adversely affect its operations and financial performance.
Environmental and Social
ESG considerations are an integral component of the Trust’s corporate strategy. As a leading real estate company, Choice
Properties is committed to creating positive environmental and social change by focusing on the issues that matter most to
the Trust’s tenants, employees, communities, investors and other stakeholders, with a particular focus on combating climate
change and advancing social equity. Any failure or perceived failure to advance the ESG priorities of the Trust may
negatively affect the Trust’s reputation, operations or financial performance.
Environmental
Choice Properties faces environmental risks that could, directly or indirectly, negatively impact the Trust’s reputation,
operations or performance over the short or long term. In particular, Choice Properties is confronted with issues related to
climate change. Choice Properties defines climate-related risk as the risk of loss, either directly through financial loss or
indirectly through reputational damage, resulting from the inability or failure to adequately prepare for the impacts from
climate change or the transition to a lower-carbon economy. Choice Properties may be exposed to the impact of events
caused by climate change, such as natural disasters, severe weather events, floods, forest fires and rising sea levels. Such
events could interrupt Choice Properties’ operations and activities, damage its properties and require Choice Properties to
incur additional expenses to recover or repair properties from a natural disaster and inclement weather. Choice Properties’
financial position and results from operations could be adversely affected by the materialization of any of the risks identified
herein related to climate change. Furthermore, as a real estate property owner and manager, Choice Properties faces the risk
that its properties will be subject to government initiatives and reforms aimed at countering climate change, such as
transitioning to a low carbon economy and may entail extensive changes to policies, regulations and technologies to address
mitigation and adaption efforts. Choice Properties may require operational changes and/or incur financial costs to comply
with various reforms. Any failure to adhere and adapt to climate change could result in fines or adversely affect Choice
Properties’ reputation, operations or financial performance.
As an owner of real property in Canada, Choice Properties is subject to various federal, provincial, territorial and municipal
laws relating to environmental matters. Such laws provide that Choice Properties could be, or become, liable for
environmental harm, damage or costs, including with respect to the release of hazardous, toxic or other regulated
substances into the environment, and the removal or other remediation of hazardous, toxic or other regulated substances
that may be present at or under its properties. Further, liability may be incurred by Choice Properties with respect to the
release of such substances from or to the Properties. Applicable laws often impose liability regardless of whether the
property owner knew of, or was responsible for, the presence of such substances. Additional liability may be incurred by
Choice Properties with respect to the release of such substances from the Properties to properties owned by third- parties,
including properties adjacent to the Properties or with respect to the exposure of persons to such substances. Laws also
govern the maintenance and removal of materials containing asbestos in the event of damage, demolition or renovation of a
property and also govern emissions of, and exposure to, asbestos fibres in the air.
The portfolio of Properties may contain ground contamination, hazardous substances and/or other residual pollution and
environmental risks. Buildings and their fixtures might contain asbestos or other hazardous substances above the allowable
or recommended thresholds, or other environmental risks could be associated with the buildings. Some of the Properties
have, or have had, tenants that would or currently use, hazardous, toxic or other regulated substances. For example, retail
gas stations and dry-cleaning operations are currently located, or have been located in the past, at some of the Properties.
In such cases, Choice Properties will bear the risk of cost-intensive assessment, remediation or removal of such ground
contamination, hazardous substances or other residual pollution. The discovery of any such residual pollution on the sites
and/or in the buildings, particularly in connection with the lease or sale of properties or borrowing using the real estate as
security, could trigger claims for rent reductions or termination of leases for cause, for damages and other breach of warranty
claims against Choice Properties. The remediation of any pollution and the related additional measures Choice Properties
would have to undertake could have a materially adverse effect on Choice Properties and could involve considerable
additional costs. Choice Properties will also be exposed to the risk that recourse against the polluter or the previous owners
of the Properties might not be possible. Moreover, the existence or even the mere suspicion of the existence of ground
contamination, hazardous materials or other residual pollution can adversely affect the value of a property and Choice
Properties’ ability to lease or sell such property.
Choice Properties’ operating policy is to obtain a Phase I environmental site assessment, conducted by an independent and
experienced environmental consultant, prior to acquiring a property and to have Phase II environmental site assessment work
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completed where recommended in a Phase I environmental site assessment. Although such environmental site assessments
would provide Choice Properties with some level of assurance about the condition of such properties, Choice Properties may
become subject to liability for undetected contamination or other environmental conditions at its Properties.
Choice Properties intends to make the necessary capital and operating expenditures to comply with environmental laws and
address any material environmental issues and such costs may have a material adverse effect on Choice Properties’
business, financial condition or results of operations and decrease or eliminate the amount of cash available for distribution
to Unitholders. Environmental laws can change and Choice Properties may become subject to even more stringent
environmental laws in the future, with increased enforcement of laws by the government. Compliance with more stringent
environmental laws, which may be more rigorously enforced, the identification of currently unknown environmental issues or
an increase in the costs required to address a currently known condition, may have a material adverse effect on Choice
Properties’ financial condition and results of operations and decrease or eliminate the amount of cash available for
distribution to Unitholders.
Social
Choice Properties faces risks associated with social issues and has established certain priorities in response, including
achieving adequate representation of traditionally under-represented groups on the Board and in management positions and
the employee population as a whole and building a culture of inclusion. The Trust recognizes its responsibility to respect and
protect the human rights of all people who support and intersect with the business, and is committed to not tolerating abuse,
discrimination or harassment in any form. In addition, Choice Properties is subject to various occupational health and safety
laws and regulations. Any failure by Choice Properties to adhere to appropriate and established workplace health and safety
procedures and to ensure compliance with applicable laws and regulations could have an adverse effect on the operations,
financial performance and reputation of Choice Properties.
Talent Management and Succession Planning
Choice Properties’ continued growth is dependent on its ability to hire, retain and develop its leaders and other key
personnel. Any failure to effectively attract and retain talented and experienced employees and to establish adequate
succession planning and retention strategies could result in a lack of requisite knowledge, skill and experience. This could
erode Choice Properties’ competitive position or result in increased costs and competition for, or high turn-over of,
employees. Any of the foregoing could negatively affect Choice Properties’ ability to operate its business and execute its
strategies, which in turn, could adversely affect its reputation, operations or financial performance.
Tenant Concentration
The Trust’s properties generate income through rent payments made by tenants, and particularly rent payments made by
Loblaw as Choice Properties’ largest tenant. Upon the expiry of any lease, there can be no assurance that the lease will be
renewed or the tenant replaced. Furthermore, the terms of any subsequent lease may be less favourable than the existing
lease, including the addition of restrictive covenants. In addition, historical occupancy rates and rents are not necessarily an
accurate prediction of future occupancy rates. Choice Properties’ cash flows and financial position would be adversely
affected if its tenants (and especially Loblaw) were to become unable to meet their obligations under their leases or if a
significant amount of available space in the Properties was not able to be leased on economically favourable lease terms. In
the event of default by a tenant, Choice Properties may experience delays or limitations in enforcing its rights as lessor and
incur substantial costs in protecting its investment. In addition, restrictive covenants and the terms of the Strategic Alliance
Agreement may narrow the field of potential tenants at a property and could contribute to difficulties in leasing space to new
tenants.
Choice Properties’ net income could also be adversely affected in the event of a downturn in the business, or the bankruptcy
or insolvency, of Loblaw, as Choice Properties’ largest tenant. Choice Properties derives a large majority of its annual base
minimum rent from Loblaw. Consequently, revenues are dependent on the ability of Loblaw to meet its rent obligations and
Choice Properties’ ability to collect rent from Loblaw. The future financial performance and operating results of Loblaw are
subject to inherent risks, uncertainties, and other factors. If Loblaw were to terminate its tenancies, default on or cease to
satisfy its payment obligations, it would have a material adverse effect on Choice Properties’ financial condition or results of
operations and its ability to make distributions to Unitholders.
The closing of an anchor store at a Property could also have a material adverse effect on the value of that property. Vacated
anchor tenant space also tends to adversely affect the entire property because of the loss of the departed anchor tenant’s
power to draw customers to the property, which in turn may cause other tenants’ operations to suffer and adversely affect
such other tenants’ ability to pay rent or perform any other obligations under their leases. No assurance can be given that
Choice Properties will be able to quickly re-lease space vacated by an anchor tenant on favourable terms, if at all. In addition,
certain leases contain a provision requiring tenants to maintain continuous occupancy of leased premises, and there can be
no assurance that such tenants will continue to occupy such premises. Furthermore, at any time, an anchor tenant may seek
the protection of bankruptcy, insolvency or similar laws which could result in the rejection and termination of the lease of the
tenant and thereby cause a reduction in Choice Properties’ cash flows, financial condition or results of operations and its
ability to make distributions to Unitholders.
12.3
Financial Risks and Risk Management
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Choice Properties is exposed to a number of financial risks, which have the potential to affect its operating and financial
performance. The following is a summary of Choice Properties’ financial risks:
Interest Rate Risk
Choice Properties requires extensive financial resources to complete the implementation of its strategy. Successful
implementation of Choice Properties’ strategy will require cost effective access to additional funding. There is a risk that
interest rates may increase which could impact long-term borrowing costs and negatively impact financial performance.
The majority of Choice Properties’ debt is financed at fixed rates with maturities staggered over 28 years, thereby mitigating
the exposure to near term changes in interest rates. To the extent that Choice Properties incurs variable rate indebtedness
(such as borrowings under the Revolving Credit Facility), this will result in fluctuations in Choice Properties’ cost of borrowing
as interest rates change. If interest rates rise, Choice Properties’ operating results and financial condition could be materially
adversely affected and the amount of cash available for distribution to Unitholders would decrease.
Choice Properties’ Revolving Credit Facility and the Debentures also contain covenants that require it to maintain certain
financial ratios on a consolidated basis. If Choice Properties does not maintain such ratios, its ability to make distributions to
Unitholders may be limited or suspended.
Choice Properties analyzes its interest rate risk and the impact of rising and falling interest rates on operating results and
financial condition on a regular basis.
Liquidity and Capital Availability Risk
Liquidity risk is the risk that Choice Properties cannot meet a demand for cash or fund its obligations as they come due.
Although a portion of the cash flows generated by the Properties is devoted to servicing such outstanding debt, there can be
no assurance that Choice Properties will continue to generate sufficient cash flows from operations to meet interest
payments and principal repayment obligations upon an applicable maturity date. If Choice Properties is unable to meet
interest payments or principal repayment obligations, it could be required to renegotiate such payments or issue additional
equity or debt or obtain other financing. The failure of Choice Properties to make or renegotiate interest or principal payments
or issue additional equity or debt or obtain other financing could materially adversely affect Choice Properties’ financial
condition and results of operations and decrease or eliminate the amount of cash available for distribution to Unitholders.
The real estate industry is highly capital intensive. Choice Properties requires access to capital to fund operating expenses,
property maintenance costs, development spending, other capital expenditures, and to refinance indebtedness. Although
Choice Properties expects to have access to the Revolving Credit Facility, there can be no assurance that it will otherwise
have access to sufficient capital or access to capital on favourable terms. Further, in certain circumstances, Choice
Properties may not be able to borrow funds due to limitations set forth in the Declaration of Trust, the Indenture, as
supplemented by the Supplemental Indenture, and the Fifth Supplemental Assumed Indenture. Failure by Choice Properties
to access required capital could have a material adverse effect on its financial condition or results of operations and its ability
to make distributions to Unitholders.
Liquidity and capital availability risks are mitigated by maintaining appropriate levels of liquidity, by diversifying the Trust’s
sources of funding, by maintaining a well-diversified debt maturity profile and actively monitoring market conditions.
Liquidity of Real Property
An investment in real estate is relatively illiquid. Such illiquidity will tend to limit Choice Properties’ ability to adjust its portfolio
promptly in response to changing economic or investment conditions or in the event it seeks to sell real estate assets as a
source of liquidity. In recessionary times, it may be difficult to dispose of certain types of real estate. The costs of holding real
estate are considerable and during an economic recession Choice Properties may be faced with ongoing expenditures with a
declining prospect of incoming revenue. In such circumstances, it may be necessary for Choice Properties to dispose of
properties at lower prices in order to generate sufficient cash for operations and for making distributions to Unitholders.
Unit Price Risk
Choice Properties is exposed to Unit price risk as a result of the issuance of the Exchangeable Units, which are economically
equivalent to and exchangeable for Units, as well as the issuance of unit-based compensation. The Exchangeable Units and
unit-based compensation liabilities are recorded at their fair value based on market trading prices. The Exchangeable Units
and unit-based compensation negatively impact net income when the Unit price rises and positively impact net income when
the Unit price declines.
Credit Risk
Choice Properties is exposed to credit risk resulting from the possibility that counterparties could default on their financial
obligations to Choice Properties. Exposure to credit risk relates to rent receivables, cash and cash equivalents, short- term
investments, security deposits, derivatives, and mortgages, loans and notes receivable.
Choice Properties REIT
2021 Annual Report 87
Choice Properties mitigates the risk of credit loss related to rent receivables by evaluating the creditworthiness of new
tenants, obtaining security deposits wherever permitted by legislation, ensuring its tenant mix is diversified and by limiting its
exposure to any one tenant (except Loblaw). Choice Properties establishes for expected credit losses with respect to rent
receivables. The allowance is determined on a tenant-by-tenant basis based on the specific factors related to the tenant.
The risk related to cash and cash equivalents, short-term investments, security deposits, and derivatives is reduced by
policies and guidelines that require Choice Properties to enter into transactions only with Canadian financial and government
institutions that have a minimum short-term rating of “A-2” and a long-term credit rating of “A-” from S&P or an equivalent
credit rating from another recognized credit rating agency and by placing minimum and maximum limits for exposures to
specific counterparties and instruments.
The risk related to its mortgages, loans and notes receivable arise in the event that the borrowers default on the repayment of
such financing. Choice Properties has established a program with a group of strategic development partners whereby the
Trust provides financing in the form of mezzanine loans, joint venture financing, vendor take-back financing and other
arrangements. In exchange, the Trust generally receives an option or other rights to acquire an interest in real property
assets. The Trust mitigates this risk by ensuring the loans are well secured by real property assets and by obtaining
guarantees where necessary.
Despite such mitigation efforts, if Choice Properties’ counterparties default, it could have a material adverse impact on
Choice Properties’ financial condition or results of operations and its ability to make distributions to Unitholders.
Degree of Leverage
Choice Properties’ degree of leverage could have important consequences to Unitholders, including: (i) Choice Properties’
ability to obtain additional financing in the future for operating costs, capital expenditures, acquisitions, development or other
general business purposes, (ii) a larger portion of Choice Properties’ cash flows being dedicated to the payment of the
principal of, and interest on, its indebtedness, thereby reducing the amount of funds available for distributions to Unitholders,
and (iii) making Choice Properties more vulnerable to a downturn in business or the economy in general. Under the
Declaration of Trust, the maximum amount that Choice Properties can leverage is (i) 60% excluding any convertible
Indebtedness and (ii) 65% including any convertible Indebtedness.
To reduce this risk, Choice Properties actively monitors its degree of leverage to ensure it is within acceptable levels.
Any of these risks could have an adverse effect on Choice Properties’ financial condition, results of operations, cash flows,
the trading price of the Units, distributions to Unitholders and its ability to satisfy principal and interest obligations on its
outstanding debt.
Credit Rating Risk
Credit ratings assigned to the Trust, Partnership and any of their respective securities may be changed at any time based on
the judgement of the credit rating agencies and may also be impacted by a change in the credit rating of GWL, Loblaw and
their respective Affiliates. In addition, the Trust, GWL, Loblaw and their respective Affiliates may incur additional
indebtedness in the future, which could impact current and future credit ratings. A reduction in credit ratings could materially
adversely affect the market value of the Trust’s outstanding securities and the Trust’s access to and cost of financing.
Choice Properties REIT
2021 Annual Report 88
13.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Environmental, Social and Governance (“ESG”) practices are fully integrated into the Trust’s day-to-day business activities,
and are aligned with the Trust’s purpose of creating enduring value for generations. ESG is embedded in the Trust’s
corporate strategy, which seeks to maximize long-term value by taking a disciplined and sustainable approach to property
operations and financial management, and by unlocking value through development activities. Some of the ways in which
ESG creates enduring value for stakeholders include:
•
•
•
Protecting the planet for future generations while reducing resource consumption and costs;
Attracting, retaining and empowering a diverse, engaged workforce to bring unique perspectives and experiences to
strategic decisions;
Preserving asset value and the reputation of the Trust by managing the risks of changing regulations and
stakeholder expectations;
• Generating stable returns and long-term NAV appreciation by attracting like-minded tenants;
•
Strengthening relationships with stakeholders by working collaboratively to achieve positive social, economic and
environmental outcomes; and
Enhancing long-term investment returns by allocating capital to sustainable opportunities and attract a broader
spectrum of investors.
•
The Board oversees the Trust’s ESG program, for which the Trust’s President and Chief Executive Officer is the executive
sponsor.
The Trust aspires to develop healthy, resilient communities through its dedication to social, economic and environmental
sustainability. To achieve this aspiration, the Trust has refined its focus to two areas where it can have significant impact on
environmental and social sustainability: Fighting Climate Change, and Addressing Social Equity.
Fighting Climate Change
The Trust, in 2021, undertook a greenhouse gas emissions study to identify the magnitude of the Trust’s emissions footprint
and to identify reduction opportunities. At the conclusion of this study, Choice committed to set ambitious science-based
targets through the Science Based Targets initiative (SBTi) Business Ambition for 1.5°C program. The Trust pledges to setting
targets across the entire value chain (Scope 1, 2, and 3) that establish a pathway to achieve net-zero emissions by 2050.
Over the coming years the Trust will continue to communicate progress on programs to support reaching this goal.
In addition to its net zero commitment, other actions taken in 2021 to support the Trust’s efforts against climate change
included:
•
•
•
•
•
•
Early achievement of the 2023 target to convert 75% of parking lot lighting to high efficiency fixtures;
Certifying an additional 120 properties under LEED or BOMA BEST, bringing the total to just under 50% of building
area (towards the 2023 target of 65%);
Publishing of Choice Properties’ Green Financing Framework, with a second party opinion provided by
Sustainalytics;
Issuance of the Trust’s first green bond offering in the aggregate principal amount of $350 million green bond, with
net proceeds to be allocated to fund the financing and/or refinancing of eligible green projects as described in the
Trust’s Green Financing Framework;
Continued integration of energy-efficient, electric heating into upcoming development projects (including geo-
exchange and heat pump heating technologies); and
Adoption of resiliency measures identified by the Trust’s 2020 physical climate change risk screening.
Progress against The Trust’s 2023 environmental targets not noted above (energy, water, waste and greenhouse gases) will
be made available in the upcoming Environmental, Social, and Governance Report to be issued later this year.
Addressing Social Equity
The Trust aims to make a positive difference in the communities it serves, including by focusing on advancing diversity,
equity and inclusion (DEI) through its operations, promoting health and wellness and charitable volunteering and philanthropy.
The Trust has a long-standing commitment to diversity, equity and inclusion, which has grown in 2021 with the establishment
of a DEI Framework. Initiatives include:
•
An employee-led Diversity, Equity, and Inclusion Committee that organizes events focused on education & training,
networking, and celebration of culture;
• Mandatory colleague training sessions on bias, discrimination and inclusive behaviours;
Protocols which require a diverse panel of employees be included in all new hiring;
•
A focus on employee engagement based on the results of our annual Tell It As It Is survey;
•
Collection of self-identification data on a voluntary basis from colleagues to understand where gaps exist and to
•
monitor progress on diversity initiatives; and
Choice Properties REIT
2021 Annual Report 89
•
Donation of over $400,000 and 1,200 hours of colleague time in support of Canadian charities focusing on mental
health programming, through the Choice Cares program.
Reporting and Disclosure
As part of the Trust’s continued efforts to enhance communication with its stakeholder community, it publishes an annual
ESG Report, which is available on the Trust’s website at www.choicereit.ca. The ESG Report is reviewed by the Governance
Committee and the controls related to the Trust's ESG disclosures are reviewed by the Audit Committee. The Trust also
engages a third party to verify the energy, water, waste and GHG emission statements to a reasonable level of assurance.
Some of the 2021 highlights related to ESG reporting and disclosure included:
•
•
•
•
An increase in the Trust’s GRESB Standing Investment (Operations) score to 78 (on a 100-point scale), representing
a 37% improvement from its initial submission in 2019;
An update to the mandate of the Audit Committee to include review and testing of controls related to the Trust’s
ESG disclosures;
Reporting climate risk and opportunities in line with the requirements of the Financial Stability Board’s Task Force
for Climate-Related Financial Disclosures (TCFD) Recommendations; and
Disclosing gender and visible minority information for the Trust’s Board of Trustees and Executive Team.
Information regarding Choice Properties’ corporate governance practices is set out in the Trust’s Management Proxy Circular
for the Annual and Special Meeting of Unitholders that was held on April 30, 2021, available on the Trust's website at
www.choicereit.ca.
Choice Properties REIT
2021 Annual Report 90
14.
OUTLOOK(2)
Choice Properties is a leading Real Estate Investment Trust that creates enduring value through the ownership, operation and
development of high-quality commercial and residential properties. Our goal is to provide net asset value appreciation, stable
net operating income growth and capital preservation, all with a long-term focus. Although there remains uncertainty about
the longer-term impacts of the COVID-19 pandemic, Choice Properties is confident that its business model, stable tenant
base, and disciplined approach to financial management will continue to position it well.
Our diversified portfolio of retail, industrial, residential and office properties is 97.1%occupied and leased to high-quality
tenants across Canada. Our portfolio is primarily leased to necessity-based tenants and logistics providers, who continue to
perform well in this environment and provide stability to our overall portfolio. This stability is evident in our financial results
and by our collections, which were approximately 99% of contractual rents for the year. Despite the unpredictable re-opening
of the economy, we are encouraged by high vaccination rates and anticipate further reopening measures. This optimism is
reflected in our tenant base as we are seeing positive leasing momentum across our portfolio.
We continue to advance our development program, 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 have a mix of active
development projects ranging in size, scale and complexity, including retail intensification projects, industrial development,
and rental residential projects located in urban markets with a focus on transit accessibility. We recently completed two
residential projects in downtown Toronto, Ontario and we are progressing on the construction of two additional high-rise
residential projects, one of which is in Brampton, Ontario located next to the Mount Pleasant GO Station and the other is in
the Westboro neighbourhood in Ottawa, Ontario. We are also finding ways to grow our industrial platform through
development. We have two active industrial projects, which we expect will deliver 0.6M square feet of new generation
logistics space. This includes a modern logistics facility located in a prime industrial node in Surrey, British Columbia
comprising 0.4M square feet.
Beyond our active projects, we have a substantial pipeline of larger, more complex mixed-use developments and land held
for future industrial development, which collectively are expected to drive meaningful net asset value growth in the future. We
continue to advance the rezoning process for several mixed-use sites with 11 projects representing over 10.5M square feet
now in different stages of the rezoning and planning process. We also acquired 300 acres of future industrial land in the GTA
that will be developed into a multi-phase industrial park, providing a pipeline of opportunity to grow our industrial portfolio.
Underpinning all aspects of our business model is a strong balance sheet and a disciplined approach to financial
management. We take a conservative approach to leverage and financing risk by maintaining strong leverage ratios and a
staggered debt maturity profile. We have approximately $691 million of debt obligations coming due in 2022 which we intend
to refinance with longer term debt, primarily unsecured debentures. From a liquidity perspective, the Trust has approximately
$1.6 billion of available liquidity, comprised of $1.5 billion from the unused portion of the Trust’s revolving credit facility and
$124.3 million in cash and cash equivalents, in addition to approximately $12.8 billion in unencumbered assets.
Choice Properties REIT
2021 Annual Report 91
Update on Rent Collection(2)
Rent collection for the fourth quarter remained high, reflecting the stability of the Trust’s necessity-based portfolio. For the
three months ended December 31, 2021, the Trust collected or expects to collect approximately 99% of contractual rents.
In determining the expected credit losses on rent receivables, the Trust takes into account the payment history and future
expectations of likely default events (i.e. asking for rental concessions, applications for rental relief through government
programs, or stating they will not be making rental payments on the due date) based on actual or expected insolvency filings
or company voluntary arrangements and likely deferrals of payments due, and potential abatements to be granted by the
landlord. These assessments are made on a tenant-by-tenant basis.
The Trust’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the
assessments. As a result, the value of the expected credit loss is subject to a degree of uncertainty and is made on the basis
of assumptions which may not prove to be accurate given the uncertainty caused by COVID-19. Based on its review, the
Trust recorded bad debt expense of $5.4 million in property operating costs, on a proportionate share basis(1), during the year
ended December 31, 2021, with a corresponding amount recorded as an expected credit loss against its rent receivables.
($ thousands)
Total recurring tenant billings
Less: Amounts received and deferrals repaid to date
Balance outstanding
Total rents expected to be collected pursuant to deferral arrangements
Total rents to be collected excluding collectible deferrals
Less: Provision recorded related to recurring tenant billings
Balance expected to be recovered in time
$
Year ended December
31, 2021
As a %
$
1,483,090
100.0 %
(1,468,978)
99.0 %
14,112
(2,780)
11,332
(5,448)
5,884
1.0 %
(0.2) %
0.8 %
(0.4) %
0.4 %
The Trust’s provision for recurring tenant billings for the year ended December 31, 2021, is comprised of the following:
($ thousands)
Provisions for tenants with negotiated rent abatements
Provisions for additional expected credit losses
Total provision recorded related to recurring tenant billings
Year ended December
31, 2021
$
$
(2,128)
(3,320)
(5,448)
Choice Properties REIT
2021 Annual Report 92
15.
NON-GAAP FINANCIAL MEASURES
The financial statements of Choice Properties are prepared in accordance with GAAP. However, in this MD&A, a number of
measures are presented that do not have any standardized meaning under GAAP. Such measures and related per-unit
amounts therefore should not be construed as alternatives to net income or cash flow from operating activities determined in
accordance with GAAP and may not be comparable to similar measures presented by other real estate investment trusts or
enterprises. These terms are defined below and are cross referenced, as applicable, to a reconciliation elsewhere in this
MD&A to the most comparable GAAP measure. Choice Properties believes these non-GAAP financial measures and ratios
provide useful information to both management and investors in measuring the financial performance and financial condition
of the Trust for the reasons outlined below.
Non-GAAP
Measure
Description
Proportionate
Share
Net Operating
Income (“NOI”),
Accounting Basis
•
Represents financial information adjusted to reflect the Trust’s equity
accounted joint ventures and financial real estate assets and its share
of net income (losses) from equity accounted joint ventures and
financial real estate assets on a proportionately consolidated basis at
the Trust’s ownership percentage of the related investment.
• Management views this method as relevant in demonstrating the
Trust's ability to manage the underlying economics of the related
investments, including the financial performance and cash flows and
the extent to which the underlying assets are leveraged, which is an
important component of risk management.
•
Defined as property rental revenue including straight line rental
revenue, reimbursed contract revenue and lease surrender revenue,
less direct property operating expenses and realty taxes, and
excludes certain expenses such as interest expense and indirect
operating expenses in order to provide results that reflect a
property’s operations before consideration of how it is financed or the
costs of operating the entity in which it is held.
• Management believes that NOI is an important measure of operating
performance for the Trust’s commercial real estate assets that is
used by real estate industry analysts, investors and management,
while also being a key input in determining the fair value of the Choice
Properties portfolio.
Reconciliation
Section 2, “Balance Sheet”
Section 7.1, “Net Income
and Segment NOI
Reconciliation”
Section 7.1, “Net Income
and Segment NOI
Reconciliation”
NOI, Cash Basis
•
Defined as property rental revenue excluding straight line rental
revenue, direct property operating expenses and realty taxes and
excludes certain expenses such as interest expense and indirect
operating expenses in order to provide results that reflect a
property’s operations before consideration of how it is financed or the
costs of operating the entity in which it is held.
• Management believes NOI, Cash Basis is a useful measure in
understanding period-over-period changes in income from operations
due to occupancy, rental rates, operating costs and realty taxes.
Section 7.1, “Net Income
and Segment NOI
Reconciliation”
Section 15.2, “Net
Operating Income”
•
•
•
Same-Asset NOI,
Cash Basis
and
Same-Asset NOI,
Accounting Basis
is used
to evaluate
Same-asset NOI
the period-over-period
performance of those properties owned and operated by Choice
Properties since January 1, 2020, inclusive.
NOI from properties that have been (i) purchased, (ii) disposed, or (iii)
subject to significant change as a result of new development,
redevelopment, expansion, or demolition (collectively, “Transactions”)
are excluded from the determination of same-asset NOI.
Same-asset NOI, Cash Basis, is useful in evaluating the realization of
contractual rental rate changes embedded in lease agreements and/
or the expiry of rent-free periods, while also being a useful measure in
understanding period-over-period changes in NOI due to occupancy,
rental rates, operating costs and realty taxes, before considering the
changes in NOI that can be attributed to the Transactions and
development activities.
Section 7.2, “Net Operating
Income Summary”
Choice Properties REIT
2021 Annual Report 93
Funds from
Operations
(“FFO”)
Adjusted Funds
from Operations
(“AFFO”)
Adjusted Cash
Flow from
Operations
(“ACFO”)
•
Calculated in accordance with the Real Property Association of
Canada’s (“REALpac”) White Paper on Funds from Operations &
Adjusted Funds from Operations for IFRS issued in February 2019.
• Management considers FFO to be a useful measure of operating
performance as it adjusts for items included in net income (or net
loss) that do not arise from operating activities or do not necessarily
provide an accurate depiction of the Trust’s past or recurring
performance, such as adjustments to fair value of Exchangeable
Units, investment properties and unit-based compensation. From
time to time the Trust may enter into transactions that materially
impact the calculation and are eliminated from the calculation for
management’s review purposes.
• Management uses and believes that FFO is a useful measure of the
Trust’s performance that, when compared period over period,
reflects the impact on operations of trends in occupancy levels,
rental rates, operating costs and realty taxes, acquisition activities
and interest costs.
•
Calculated in accordance with REALpac’s White Paper on Funds
from Operations & Adjusted Funds from Operations for IFRS issued
in February 2019.
Section 15.3, “Funds from
Operations”
Section 15.9, “Selected
Information for Comparative
Purposes”
•
• Management considers AFFO to be a useful measure of operating
performance as it further adjusts FFO for capital expenditures that
sustain income producing properties and eliminates the impact of
straight-line rent. AFFO is impacted by the seasonality inherent in
the timing of executing property capital projects.
In calculating AFFO, FFO is adjusted by excluding straight-line rent
adjustments, as well as costs incurred relating to internal leasing
activities and property capital projects. Working capital changes,
viewed as short-term cash requirements or surpluses, are deemed
financing activities pursuant to the methodology and are not
considered when calculating AFFO.
Capital expenditures which are excluded and not deducted in the
calculation of AFFO comprise those which generate a new
investment stream, such as constructing a new retail pad during
property expansion or intensification, development activities or
acquisition activities.
Accordingly, AFFO differs from FFO in that AFFO excludes from its
definition certain non-cash revenues and expenses recognized
under GAAP, such as straight-line rent, but also includes capital
and leasing costs incurred during the period which are capitalized
for GAAP purposes. From time to time the Trust may enter into
transactions
the calculation and are
eliminated from the calculation for management’s review purposes.
that materially
impact
•
•
•
Calculated in accordance with REALpac’s White Paper on Adjusted
Cashflow from Operations (ACFO) for IFRS issued in February 2019.
• Management views ACFO as a useful measure of the cash
generated from operations after providing for operating capital
requirements, and in evaluating the ability of Choice Properties to
fund distributions to Unitholders. ACFO adjusts cash flows from
operations as calculated under GAAP including, but not limited to,
removing the effects of distributions on Exchangeable Units,
deducting amounts for property capital expenditures to sustain
existing GLA and for leasing capital expenditures.
The resulting ACFO will include the impact of the seasonality of
property capital expenditures and the impact of fluctuations from
normal operating working capital, such as changes to net rent
receivable from tenants, trade accounts payable and accrued
liabilities.
From time to time the Trust may enter into transactions that
materially impact the calculation and are eliminated from the
calculation for management’s review purposes.
•
•
Section 15.4, “Adjusted
Funds from Operations”
Section 15.9, “Selected
Information for Comparative
Purposes”
Section 15.5 , “Adjusted
Cash Flow from Operations”
FFO, AFFO and
ACFO Payout
Ratios
•
•
FFO, AFFO and ACFO payout ratios are supplementary measures
used by Management to assess the sustainability of the Trust's
distribution payments.
The ratios are calculated using cash distributions declared divided
by FFO, AFFO and ACFO, as applicable.
Section 7.3, “Other Key
Performance Indicators”
Choice Properties REIT
2021 Annual Report 94
•
Defined as net income attributable to Unitholders, reversing, where
applicable, income taxes, interest expense, amortization expense,
fair value and other
depreciation expense, adjustments
adjustments as allowed in the Trust Indentures, as supplemented.
• Management believes EBITDAFV is useful in assessing the Trust’s
ability to service its debt, finance capital expenditures and provide
for distributions to its Unitholders.
to
Section 15.8, “Earnings
before Taxes, Depreciation,
Amortization and Fair Value”
Represents the portion of ACFO retained within Choice Properties
which can be used to invest in new acquisitions, development
properties and capital activity.
Section 15.6, “Distribution
Excess / Shortfall Analysis”
Defined as variable rate debt (construction loans and credit facility)
and fixed rate debt (senior unsecured debentures and mortgages),
as measured on a proportionate share basis(1), and does not include
the Exchangeable Units which are included as part of Unit Equity on
account of the Exchangeable Units being economically equivalent
and receiving equal distributions to the Trust Units.
Total Adjusted Debt is also presented on a net basis to include the
impact of other finance charges such as debt placement costs and
discounts or premiums.
Determined by dividing Total Adjusted Debt (as defined above) by
total assets as presented on a proportionate share basis and can be
interpreted as the proportion of the Trust’s assets that are financed
by debt.
• Management believes this ratio is useful in evaluating the Trust’s
flexibility to incur additional financial leverage.
Section 4.3, “Components
of Total Adjusted Debt”
Section 4.4, “Financial
Conditions”
Section 15.9, “Selected
Information for Comparative
Purposes”
Calculated as EBITDAFV divided by interest expense on the Total
Adjusted Debt and all regularly scheduled principal payments made
with respect to indebtedness during such period (other than any
balloon, bullet or similar principal payable at maturity or which
repays such indebtedness in full). This ratio is calculated based on
the Trust Indentures, as supplemented.
The debt service coverage ratio is useful in determining the ability of
Choice Properties to service the interest requirements of its
outstanding debt.
Section 4.4, “Financial
Conditions”
Section 15.9, “Selected
Information for Comparative
Purposes”
Earnings before
Interest, Taxes,
Depreciation,
Amortization and
Fair Value
(“EBITDAFV”)
Cash Retained
after Distributions
Total Adjusted
Debt
Adjusted Debt to
Total Assets
Debt Service
Coverage
Adjusted Debt to
EBITDAFV,
and
Adjusted Debt to
EBITDAFV, net of
cash
•
•
•
•
•
•
•
•
Calculated as Total Adjusted Debt divided by EBITDAFV.
This ratio is used to assess the financial leverage of Choice
Properties, to measure its ability to meet financial obligations and to
provide a snapshot of its balance sheet strength.
• Management also presents this ratio with Total Adjusted Debt
calculated as net of cash and cash equivalents at the measurement
date.
Interest Coverage
•
•
Calculated as EBITDAFV divided by interest expense on the Total
Adjusted Debt incurred by Choice Properties for the period.
The
interest coverage ratio
Properties’ ability to service the
outstanding debt.
in determining Choice
its
interest requirements of
is useful
Section 4.4, “Financial
Condition”
Section 4.4, “Financial
Condition”
Choice Properties REIT
2021 Annual Report 95
15.1
Investment Properties Reconciliation
To expand the portfolio and participate in development opportunities, Choice Properties owns varying interests in real estate
entities which hold investment properties. Under GAAP, many of these interests are recorded as equity accounted joint
ventures and, as such, the Trust’s portion of the investment properties of these entities is presented on the balance sheet as
a summarized value, not as part of the total investment properties. Similarly, Choice Properties owns real estate assets,
whereby the acquisition involved a sale-leaseback arrangement with the seller. As a result of the arrangement the Trust did
not meet the GAAP definition of control, and as such, these assets are presented on the balance sheet as financial real estate
assets and not as part of investment properties. While the reconciliation for Choice Properties’ balance sheet on a GAAP
basis to a proportionate share basis(1) is detailed in Section 2, “Balance Sheet“, the following continuity schedule presents
Choice Properties’ investment properties inclusive of its proportionate share ownership in equity accounted joint ventures
and financial real estate assets for the three months ended December 31, 2021:
Income Producing Properties
Properties Under Development
Total Investment Properties
As at or for the three months
ended December 31
($ thousands except where
otherwise indicated)
Adjustment to
Proportionate
Share
Basis(1)(i)
Adjustment to
Proportionate
Share
Basis(1)(i)
Proportionate
Share Basis(1) GAAP Basis
GAAP Basis
Proportionate
Share Basis(1) GAAP Basis
Proportionate
Share Basis(1)
Balance, beginning of period
$ 14,771,000 $
738,000 $ 15,509,000 $
198,000 $
321,000 $
519,000 $ 14,969,000 $ 16,028,000
23,365
15,134
38,499
—
7,945
7,945
23,365
46,444
Acquisitions of investment
properties(i)
Capital expenditures
Development capital
Building improvements
Capitalized interest
Operating capital
expenditures
Property capital
Direct leasing costs
Tenant improvement
allowances
Amortization of straight-line
rent
Transfer from equity
accounted joint ventures
Transfer from properties
under development
Transfers to residential
development inventory
—
2,940
—
41,073
2,258
8,265
339
—
—
—
—
610
—
186
8
392
792
—
3,550
—
41,259
2,266
8,657
1,131
—
—
16,133
23,447
39,580
16,133
39,580
—
667
—
—
—
—
—
—
—
809
—
—
—
—
—
—
1,476
2,940
667
3,550
1,476
—
—
—
—
—
41,073
41,259
2,258
8,265
2,266
8,657
339
1,131
—
—
—
—
114,838
114,838
(114,838)
(114,838)
—
—
(10,142)
—
(10,142)
(10,142)
(10,142)
Dispositions
(220,173)
(3,025)
(223,198)
—
(5,250)
(5,250)
(220,173)
(228,448)
Adjustment to fair value of
investment properties
Balance, as at December
31, 2021
77,933
26,065
103,998
18,342
(13,113)
5,229
96,275
109,227
$ 14,707,000 $
893,000 $ 15,600,000 $
223,000 $
220,000 $
443,000 $ 14,930,000 $ 16,043,000
(i)
(ii)
Adjustment to Proportionate Share Basis(1) reflects the Trust’s investment properties inclusive of its proportionate share ownership in equity accounted joint ventures
and financial real estate assets.
Includes acquisition costs.
Choice Properties REIT
2021 Annual Report 96
The following continuity schedule presents Choice Properties’ investment properties inclusive of its proportionate share
ownership in equity accounted joint ventures and financial real estate assets for the year ended December 31, 2021:
Income Producing Properties
Properties Under Development
Total Investment Properties
As at or for the year ended
December 31
($ thousands except where
otherwise indicated)
Proportionate
Share Basis(1) GAAP Basis
Adjustment to
Proportionate
Share Basis(1)(i)
Adjustment to
Proportionate
Share Basis(1)(i)
GAAP Basis
Proportionate
Share Basis(1) GAAP Basis
Proportionate
Share Basis(1)
Balance, beginning of year
$ 14,199,000 $
728,000 $ 14,927,000 $
190,000 $
287,000 $
477,000 $ 14,389,000 $ 15,404,000
54,939
40,509
95,448
—
145,945
145,945
54,939
241,393
Acquisitions of investment
properties(i)
Capital expenditures
Development capital
Building improvements
Capitalized interest
Operating capital
expenditures
Property capital
Direct leasing costs
Tenant improvement
allowances
Amortization of straight-line
rent
Transfer from equity
accounted joint ventures
Transfer from properties
under development
Transfers to residential
development inventory
—
4,086
—
60,012
6,426
—
1,891
—
88
703
5,977
—
60,100
7,129
16,379
1,268
17,647
7,893
2,211
10,104
143,103
(143,103)
—
—
51,167
77,132
128,299
51,167
128,299
—
2,642
—
2,527
—
5,169
4,086
2,642
5,977
5,169
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
60,012
60,100
6,426
7,129
16,379
17,647
7,893
10,104
143,103
—
—
30,290
225,468
255,758
(30,290)
(225,468)
(255,758)
—
—
—
—
(10,142)
—
(10,142)
(10,142)
(10,142)
Dispositions
(220,173)
(3,025)
(223,198)
(34,149)
(71,624)
(105,773)
(254,322)
(328,971)
Adjustment to fair value of
investment properties
Balance, as at December
31, 2021
405,045
38,990
444,035
53,772
4,488
58,260
458,817
502,295
$ 14,707,000 $
893,000 $ 15,600,000 $
223,000 $
220,000 $
443,000 $ 14,930,000 $ 16,043,000
(i)
(ii)
Adjustment to Proportionate Share Basis(1) reflects the Trust’s investment properties inclusive of its proportionate share ownership in equity accounted joint ventures
and financial real estate assets.
Includes acquisition costs.
Choice Properties REIT
2021 Annual Report 97
15.2
Net Operating Income
The following table reconciles net income (loss), as determined in accordance with GAAP, to Net Operating Income, Cash
Basis, for the periods ended as indicated. Refer to Section 7, “Results of Operations - Segment Information” and Section 15,
“Non-GAAP Financial Measures”, for further details about this non-GAAP measure.
For the periods ended December 31
($ thousands)
Change
2021
2021
2020
Three Months
Year Ended
2020
Change
Net income (loss)
$
(163,087) $
116,570 $
(279,657) $
23,008 $
450,685 $
(427,677)
Reversal of (allowance for)
expected credit loss on
mortgage receivable
General and administrative
expenses
Fee income
Net interest expense and other
financing charges
Interest income
Share of income (loss) from
equity accounted joint
ventures
Amortization of intangible
assets
Foreign exchange gain
reclassified from other
comprehensive income
Acquisition transaction costs
and other related expenses
Other fair value gains (losses),
net
Adjustment to fair value of
Exchangeable Units
Adjustment to fair value of
investment properties
—
(1,026)
(1,502)
7,830
(9,332)
(1,026)
11,799
(946)
8,778
(1,136)
134,320
133,121
(7,312)
(2,770)
3,021
190
1,199
(4,542)
40,917
(3,801)
36,718
(4,416)
534,525
540,720
(20,079)
(13,639)
(18,338)
(9,036)
(9,302)
(66,952)
250
250
—
—
—
—
—
—
—
1,000
—
—
5,570
1,000
(1,184)
1,184
1,589
(1,589)
(666)
(1,347)
681
1,580
(2,210)
3,790
372,039
86,370
285,669
862,815
(354,286)
1,217,101
4,199
615
(6,195)
(6,440)
(72,522)
—
Income tax recovery
(686)
(1,797)
(96,275)
(103,601)
7,326
1,111
(458,817)
220,018
(678,835)
(679)
(1,797)
1,118
Net Operating Income,
Accounting Basis - GAAP
Straight line rental revenue
Lease surrender revenue
Net Operating Income, Cash
Basis - GAAP
Adjustments for equity
accounted joint ventures and
financial real estate assets
Net Operating Income, Cash
Basis - Proportionate
Share(1)
230,072 —
225,402 —
4,670 —
912,015 —
886,598 —
25,417
(339)
(1,840)
(3,217)
(929)
2,878
(911)
(7,893)
(4,363)
(13,946)
(1,958)
6,053
(2,405)
227,893 —
221,256 —
6,637 —
899,759 —
870,694 —
29,065
10,781
9,097
1,684
37,740
37,387
353
$
238,674 $
230,353 $
8,321 $
937,499 $
908,081 $
29,418
Choice Properties REIT
2021 Annual Report 98
15.3
Funds from Operations
The following table reconciles net income, as determined in accordance with GAAP, to Funds from Operations for the periods
ended as indicated. Refer to Section 7, “Results of Operations - Segment Information” and Section 15, “Non-GAAP Financial
Measures”, for further details about this non-GAAP measure.
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2020
2021
2021
2020
Change
Net income (loss)
$
(163,087)
$
116,570
$
(279,657)
$
23,008
$
450,685
$
(427,677)
Amortization of intangible assets
250
250
Foreign exchange gain reclassified from other
comprehensive income
Acquisition transaction costs and other related
expenses
—
—
—
—
—
—
—
1,000
1,000
—
—
—
(1,184)
1,184
1,589
(2,210)
(1,589)
3,790
Other fair value gains (losses), net
(666)
(1,347)
681
1,580
Adjustment to fair value of Exchangeable Units
372,039
86,370
285,669
862,815
(354,286)
1,217,101
Adjustment to fair value of investment properties
(96,275)
(103,601)
7,326
(458,817)
220,018
(678,835)
Adjustment to fair value of investment property held
in equity accounted joint ventures
(12,952)
(330)
(12,622)
(43,478)
36,819
(80,297)
Interest otherwise capitalized for development in
equity accounted joint ventures
Exchangeable Units distributions
Internal expenses for leasing
Income tax recovery
Funds from Operations
FFO per Unit - diluted
FFO payout ratio - diluted(i)
393
73,221
2,560
(686)
1,005
72,502
1,897
(1,797)
$
$
174,797
0.242
$
$
171,519
0.239
$
$
(612)
719
663
1,111
3,278
0.003
3,173
5,112
(1,939)
292,884
288,932
8,412
(679)
7,329
(1,797)
3,952
1,083
1,118
$
$
689,898
0.954
$
$
652,007
0.921
$
$
37,891
0.033
76.6 %
77.5 %
(0.9) %
77.6 %
80.5 %
(2.9) %
Distribution declared per Unit
$
0.185
$
0.185
$
—
$
0.740
$
0.740
$
—
Weighted average Units outstanding - diluted(ii)
723,363,313
718,026,576
5,336,737
723,127,566
707,764,714
15,362,852
(i)
(ii)
FFO payout ratio is calculated as cash distributions declared divided by FFO.
Includes Trust Units and Exchangeable Units.
Choice Properties REIT
2021 Annual Report 99
FFO as calculated on a proportionate share basis(1):
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Net operating income, cash basis
$
238,674
$
230,353
$
8,321
$
937,499
$
908,081
$
29,418
Straight line rental revenue
Lease surrender revenue
1,131
1,840
4,106
1,291
(2,975)
549
10,104
4,363
16,113
2,320
(6,009)
2,043
Net operating income, accounting basis
$
241,645
$
235,750
$
5,895
$
951,966
$
926,514
$
25,452
(1,014)
(615)
5,839
3,952
(1,939)
(4,199)
9,332
1,083
Interest income
Fee income
3,533
946
3,093
1,136
440
(190)
12,039
3,801
13,053
4,416
Net interest expense and other financing charges
(136,728)
(135,086)
(1,642)
(542,962)
(548,801)
Distributions on Exchangeable Units
73,221
72,502
719
292,884
288,932
Interest otherwise capitalized for development in
equity accounted joint ventures
General and administrative expenses
Reversal of (allowance for) expected credit loss on
mortgage receivable
Internal expenses for leasing
Funds from Operations
FFO per Unit - diluted(i)
FFO payout ratio - diluted(i)(ii)
393
(11,799)
1,026
2,560
1,005
(8,778)
—
1,897
$
$
174,797
0.242
$
$
171,519
0.239
$
$
1,026
663
3,278
0.003
(612)
3,173
5,112
(3,021)
(40,917)
(36,718)
1,502
8,412
(7,830)
7,329
$
$
689,898
0.954
$
$
652,007
0.921
$
$
37,891
0.033
76.6 %
77.5 %
(0.9) %
77.6 %
80.5 %
(2.9) %
Distribution declared per Unit
$
0.185
$
0.185
$
—
$
0.740
$
0.740
$
—
Weighted average Units outstanding - diluted
723,363,313
718,026,576
5,336,737
723,127,566
707,764,714
15,362,852
(i)
(ii)
FFO payout ratio is calculated as cash distributions declared divided by FFO.
Includes Trust Units and Exchangeable Units.
15.4
Adjusted Funds from Operations
The following table reconciles FFO to AFFO for the periods ended as indicated. Refer to Section 7, “Results of Operations -
Segment Information” and Section 15, “Non-GAAP Financial Measures”, for further details about this non-GAAP measure.
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Funds from Operations
$
174,797
$
171,519
3,278
$
689,898
$
652,007
$
37,891
Internal expenses for leasing
Straight line rental revenue
Adjustment for proportionate share of straight line
rental revenue from equity accounted joint
ventures and financial real estate assets
Property capital
Direct leasing costs
Tenant improvements
Adjustment for proportionate share of operating
capital expenditures from equity accounted joint
ventures and financial real estate assets
Adjusted Funds from Operations
AFFO per unit - diluted
AFFO payout ratio - diluted(i)
(2,560)
(339)
(1,897)
(3,217)
(663)
2,878
(8,412)
(7,893)
(7,329)
(13,946)
(1,083)
6,053
(792)
(889)
97
(2,211)
(2,167)
(44)
(41,073)
(22,592)
(18,481)
(60,012)
(33,112)
(26,900)
(2,258)
(8,265)
(1,051)
(4,711)
(1,207)
(3,554)
(6,426)
(6,519)
(16,379)
(19,269)
(586)
(1,108)
522
(2,059)
(3,196)
$
$
118,924
0.164
$
$
136,054
0.189
$
$
(17,130)
(0.025)
$
$
586,506
0.811
$
$
566,469
0.800
$
$
93
2,890
1,137
20,037
0.011
112.5 %
97.7 %
14.8 %
91.2 %
92.6 %
(1.4) %
Distribution declared per Unit
$
0.185
$
0.185
$
—
$
0.740
$
0.740
$
—
Weighted average Units outstanding - diluted(ii)
723,363,313
718,026,576
5,336,737
723,127,566
707,764,714
15,362,852
(i)
(ii)
AFFO payout ratio is calculated as cash distributions declared divided by AFFO.
Includes Trust Units and Exchangeable Units.
Choice Properties REIT
2021 Annual Report 100
15.5
Adjusted Cash Flow from Operations
The following table reconciles cash flows from operating activities to ACFO, as determined in accordance with GAAP, for the
periods ended as indicated. Refer to Section 4.7, “Adjusted Cash Flow from Operations” and Section 15, “Non-GAAP
Financial Measures”, for further details about this non-GAAP measure.
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Cash flows from operating activities
$
244,202
$
255,960
$
(11,758)
$
669,428
$
621,184
$
48,244
Net interest expense and other financing charges in
excess of interest paid(i)
Distributions on Exchangeable Units included in net
(92,123)
(95,169)
3,046
(289,587)
(283,306)
(6,281)
interest expense and other financing charges
73,221
72,502
719
292,884
288,932
3,952
Interest and other income in excess of interest
received(i)
Interest otherwise capitalized for development in
equity accounted joint ventures
Reversal of (allowance for) expected credit loss on
mortgage receivable
Portion of internal expenses for leasing relating to
development activity
Property capital expenditures on a proportionate
3,452
(617)
4,069
5,868
2,094
3,774
393
1,005
(612)
3,173
5,112
(1,939)
1,026
1,280
—
949
1,026
1,502
(7,830)
9,332
331
4,206
3,665
541
share basis
(41,259)
(22,498)
(18,761)
(60,100)
(33,146)
(26,954)
Leasing capital expenditures on a proportionate
share basis
Acquisition transaction costs and other related
expenses
Adjustments for proportionate share of income from
equity accounted joint ventures(ii)
Adjustment for changes in non-cash working capital
items not indicative of sustainable operating cash
flows(iii)
(10,923)
(6,964)
(3,959)
(24,776)
(28,950)
4,174
—
—
—
—
1,589
(1,589)
5,386
8,706
(3,320)
23,474
31,249
(7,775)
(67,332)
(47,653)
(19,679)
(19,780)
(7,983)
(11,797)
Adjusted Cash Flow from Operations
$
117,323
$
166,221
$
(48,898)
$
606,292
$
592,610
$
13,682
Cash distributions declared
133,820
132,986
834
535,104
524,732
10,372
Cash retained after distributions
$
(16,497)
$
33,235
$
(49,732)
$
71,188
$
67,878
$
3,310
ACFO payout ratio(iv)
114.1 %
80.0 %
34.1 %
88.3 %
88.5 %
(0.2) %
(i)
(ii)
(iii)
(iv)
The timing of the recognition of interest expense and income differs from the payment and collection. The ACFO calculations for the periods ended December 31, 2021
and December 31, 2020 were adjusted for this factor to make the periods more comparable(2).
Excludes adjustment to fair value of investment properties for equity accounted joint ventures.
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. 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.
ACFO payout ratio is calculated as the cash distributions declared divided by the ACFO.
Based on the Real Property Association of Canada’s White Paper on Adjusted Cashflow from Operations (ACFO) for IFRS
issued in February 2019, Choice Properties adjusts ACFO for amounts included in the net change in non-cash working
capital, a component of cash flows from operating activities, to eliminate fluctuations that are not indicative of sustainable
cash available for distribution. The resulting remaining impacts on ACFO from changes in non-cash working capital are
calculated below:
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Net change in non-cash working capital(i)
$
61,608 $
72,942 $
(11,334) $
26,865 $
21,657 $
5,208
Adjustment for changes in non-cash working
capital items not indicative of sustainable
operating cash flows
Net non-cash working capital increase
(67,332)
(47,653)
(19,679)
(19,780)
(7,983)
(11,797)
included in ACFO
$
(5,724) $
25,289 $
(31,013) $
7,085 $
13,674 $
(6,589)
(i)
As calculated under GAAP and disclosed in the Trust’s consolidated financial statements.
Choice Properties REIT
2021 Annual Report 101
15.6
Distribution Excess / Shortfall Analysis
The tables below summarize the excess or shortfall of certain GAAP and non-GAAP measures over cash distributions
declared:
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Cash flows from operating activities
$
244,202 $
255,960 $
(11,758) $
669,428 $
621,184 $
48,244
Less: Cash distributions declared
(133,820)
(132,986)
(834)
(535,104)
(524,732)
(10,372)
Excess (shortfall) of cash flows provided by
operating activities over cash
distributions declared
$
110,382 $
122,974 $
(12,592) $
134,324 $
96,452 $
37,872
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Net income (loss)
$
(163,087) $
116,570 $
(279,657) $
23,008 $
450,685 $
(427,677)
Add: Distributions on Exchangeable Units
included in net interest expense and other
financing charges
Net income (loss) attributable to Unitholders
excluding distributions on Exchangeable
Units
73,221
72,502
719
292,884
288,932
3,952
(89,866)
189,072
(278,938)
315,892
739,617
(423,725)
Less: Cash distributions declared
(133,820)
(132,986)
(834)
(535,104)
(524,732)
(10,372)
Excess (shortfall) of net income (loss)
attributable to Unitholders, less
distributions on Exchangeable Units,
over cash distributions declared
$
(223,686) $
56,086 $
(279,772) $
(219,212) $
214,885 $
(434,097)
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Adjusted Cash Flow from Operations(1)
$
117,323 $
166,221 $
(48,898) $
606,292 $
592,610 $
13,682
Less: Cash distributions declared
(133,820)
(132,986)
(834)
(535,104)
(524,732)
(10,372)
Excess of ACFO after distributions
$
(16,497) $
33,235 $
(49,732) $
71,188 $
67,878 $
3,310
Choice Properties’ cash flows provided by operating activities exceeded its cash distributions declared for three months and
year ended December 31, 2021.
Choice Properties’ shortfall of net income (loss) attributable to Unitholders, less distributions on Exchangeable Units, over
cash distributions declared for the three months and year ended December 31, 2021 was primarily attributable to accounting
fair value adjustments related to Exchangeable Units.
Management anticipates that distributions declared will, in the foreseeable future, continue to vary from net income as this
GAAP measure includes adjustments to fair value and other non-cash items(2).
Choice Properties REIT
2021 Annual Report 102
15.7
Net Interest Expense and Other Financing Charges Reconciliation
The following tables reconcile net interest expense and other financing charges on a proportionate share basis(1) to net
interest expense and other financing charges as determined in accordance with GAAP for the three months and year ended
December 31, 2021 and 2020:
For the three months ended December 31
($ thousands)
Proportionate
Share Basis(1)
Proportionate
Share Basis(1)
GAAP Basis
Consolidation
and
eliminations(i)
2021
2020
Consolidation
and
eliminations(i)
GAAP Basis
Interest on senior unsecured debentures
$
46,376 $
— $
46,376 $
47,826 $
— $
47,826
Fees incurred on early repayment of debentures
Interest on mortgages and construction loans
Interest on credit facility
Subtotal (for use in Debt Service Coverage(1)
calculation)
Distributions on Exchangeable Units(ii)
1,512
14,193
1,235
63,316
73,221
—
(3,128)
—
(3,128)
—
1,512
11,065
1,235
60,188
73,221
—
14,098
1,237
63,161
72,502
—
(2,088)
—
(2,088)
—
—
12,010
1,237
61,073
72,502
Subtotal (for use in EBITDAFV(1) calculation)
136,537
(3,128)
133,409
135,663
(2,088)
133,575
Interest on right of use lease liability
Amortization of debt discounts and premiums
Amortization of debt placement costs
Capitalized interest
Net interest expense and other financing
35
330
1,302
(1,476)
—
(88)
(1)
809
35
242
1,301
(667)
41
147
1,071
(1,836)
—
(53)
(33)
209
41
94
1,038
(1,627)
charges
$
136,728 $
(2,408) $
134,320 $
135,086 $
(1,965) $
133,121
(i)
(ii)
Reconciling items adjust Choice Properties’ proportionate share of joint ventures to reflect the equity method of accounting under GAAP.
Represents interest on indebtedness due to related parties.
For the year ended December 31
($ thousands)
Proportionate
Share Basis(1)
GAAP Basis
Proportionate
Share Basis(1)
Consolidation
and
eliminations(i)
2021
2020
Consolidation
and
eliminations(i)
GAAP Basis
Interest on senior unsecured debentures
$
186,671 $
— $
186,671 $
189,978 $
— $
189,978
Fees incurred on early repayment of debentures
Interest on mortgages and construction loans
Interest on credit facility
Subtotal (for use in Debt Service Coverage(1)
calculation)
Distributions on Exchangeable Units(ii)
Subtotal (for use in EBITDAFV(1) calculation)
Interest on right of use lease liability
Amortization of debt discounts and premiums
Amortization of debt placement costs
Capitalized interest
Net interest expense and other financing
1,512
56,900
4,275
249,358
292,884
542,242
147
936
4,806
(5,169)
—
(10,640)
—
1,512
46,260
4,275
6,763
57,438
7,316
—
(8,478)
—
6,763
48,960
7,316
(10,640)
238,718
261,495
(8,478)
253,017
—
292,884
288,932
—
288,932
(10,640)
531,602
550,427
(8,478)
541,949
—
(249)
(75)
2,527
147
687
4,731
(2,642)
216
(1,627)
4,724
(4,939)
—
(179)
(132)
708
216
(1,806)
4,592
(4,231)
charges
$
542,962 $
(8,437) $
534,525 $
548,801 $
(8,081) $
540,720
Choice Properties REIT
2021 Annual Report 103
15.8
Earnings Before Interest, Taxes, Depreciation, Amortization and Fair Value
The following table reconciles net income, as determined in accordance with GAAP, to EBITDAFV for the periods ended as
indicated. Refer to Section 15, “Non-GAAP Financial Measures”, for further details about this non-GAAP measure.
Three Months
Year Ended
For the periods ended December 31
($ thousands)
Change
2021
2020
2021
2020
Change
Net income (loss)
$
(163,087) $
116,570 $
(279,657) $
23,008 $
450,685 $
(427,677)
Acquisition transaction costs and other related
expenses
Other fair value gains (losses), net
—
(666)
—
(1,347)
—
681
—
1,580
1,589
(2,210)
(1,589)
3,790
Adjustment to fair value of Exchangeable Units
372,039
86,370
285,669
862,815
(354,286)
1,217,101
Adjustment to fair value of investment properties
(96,275)
(103,601)
7,326
(458,817)
220,018
(678,835)
Adjustment to fair value of investment property held
in equity accounted joint ventures
(12,952)
(330)
(12,622)
(43,478)
36,819
(80,297)
Interest expense(i)
Amortization of other assets
Amortization of intangible assets
136,537
135,663
410
250
229
250
874
181
—
542,242
550,427
(8,185)
1,294
1,000
548
1,000
746
—
Income tax recovery
(686)
(1,797)
1,111
(679)
(1,797)
1,118
Earnings Before Interest, Taxes, Depreciation,
Amortization and Fair Value (EBITDAFV)
$
235,570 $
232,007 $
3,563 $
928,965 $
902,793 $
26,172
(i)
As calculated in Section 15.7, “Net Interest Expense and Other Financing Charges Reconciliation”.
Choice Properties REIT
2021 Annual Report 104
15.9
Selected Information For Comparative Purposes
The following table reconciles net income, as determined in accordance with GAAP, to Funds from Operations for the periods
ended as indicated. Refer to Section 7, “Results of Operations - Segment Information” and Section 15, “Non-GAAP Financial
Measures”, for further details about this non-GAAP measure.
Fourth
Quarter
2021
Third
Quarter
2021
Second
Quarter
2021
First
Quarter
2021
Fourth
Quarter
2020
Third
Quarter
2020
Second
Quarter
2020
First
Quarter
2020
Year Ended
2019
Net income (loss)
$ (163,087)
$ 163,672
$ 84,621
$ (62,198)
$ 116,570
$ 97,186
$ (95,813)
$ 332,742
$ (581,357)
Amortization of intangible assets
250
250
250
250
250
250
250
250
Foreign exchange gain reclassified
from other comprehensive income
Acquisition transaction costs and other
related expenses
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1184)
1589
8,363
Other fair value gains (losses), net
(666)
(159)
2,882
(477)
(1,347)
(353)
123
(633)
7,109
Adjustment to fair value of
Exchangeable Units
Adjustment to fair value of investment
properties
Adjustment to fair value of investment
property held in equity accounted joint
ventures
Interest otherwise capitalized for
development in equity accounted joint
ventures
372,039
(15,831)
288,924
217,683
86,370
15,599
(70,193)
(386,062)
932,009
(96,275)
(34,944)
(268,855)
(58,743)
(103,601)
(29,159)
216,480
136,298
4,434
(12,952)
(16,428)
(11,946)
(2,152)
(330)
10,854
14,387
11,908
10,816
393
815
944
1,021
1,005
961
1,599
1,547
4,978
Exchangeable Units distributions
73,221
73,221
73,221
73,221
72,502
72,143
72,144
72,143
288,573
Internal expenses for leasing
2,560
2,055
1,801
1,996
1,897
1,692
1,668
2,072
6,151
Income tax expense
(686)
—
—
7
(1,797)
—
—
—
(798)
Funds from Operations
$ 174,797
$ 172,651
$ 171,842
$ 170,608
$ 171,519
$ 169,173
$ 140,645
$ 170,670
$ 680,278
FFO per Unit - diluted
$ 0.242
$ 0.239
$ 0.238
$ 0.236
$ 0.239
$ 0.238
$ 0.201
$ 0.244
$
0.987
FFO payout ratio - diluted(i)
76.6 %
77.5 %
77.8 %
78.4 %
77.5 %
78.4 %
92.1 %
75.8 %
75.0 %
Distribution declared per Unit
$ 0.185
$ 0.185
$ 0.185
$ 0.185
$ 0.185
$ 0.185
$ 0.185
$ 0.185
$
0.740
Weighted average Units outstanding -
diluted(ii)
723,363,313 723,346,150 723,265,565 722,930,485 718,026,576 711,582,778 700,600,087 700,625,695 689,285,790
(i)
(ii)
FFO payout ratio is calculated as cash distributions declared divided by FFO.
Includes Trust Units and Exchangeable Units.
Choice Properties REIT
2021 Annual Report 105
The following table reconciles FFO to AFFO for the periods ended as indicated. Refer to Section 7, “Results of Operations -
Segment Information” and Section 15, “Non-GAAP Financial Measures”, for further details about this non-GAAP measure.
Fourth
Quarter
2021
Third
Quarter
2021
Second
Quarter
2021
First
Quarter
2021
Fourth
Quarter
2020
Third
Quarter
2020
Second
Quarter
2020
First
Quarter
2020
Year
Ended
2019
Funds from Operations
$ 174,797
$ 172,651
$ 171,842
$ 170,608
$ 171,519
$ 169,173
$ 140,645
$ 170,670
$ 680,278
Internal expenses for
leasing
Straight line rental
revenue
Adjustment for
proportionate share of
straight line rental
revenue from equity
accounted joint
ventures and financial
real estate assets
(2,560)
(2,055)
(1,801)
(1,996)
(1,897)
(1,692)
(1,668)
(2,072)
(6,151)
(339)
(419)
(2,658)
(4,477)
(3,217)
(3,177)
(3,527)
(4,025)
(25,146)
(792)
(767)
—
(306)
—
(346)
—
(889)
(538)
—
(276)
—
(339)
(1,039)
Property capital
(41,073)
(13,975)
(2,280)
(2,684)
(22,592)
(7,214)
(1,152)
(2,154)
(30,264)
Direct leasing costs
(2,258)
(1,272)
(1,852)
(1,044)
(1,051)
(2,356)
(706)
(2,406)
(7,331)
Tenant improvements
(8,265)
(208)
(3,644)
(4,262)
(4,711)
(6,566)
(1,688)
(6,304)
(19,536)
Adjustment for
proportionate share of
operating capital
expenditures from
equity accounted joint
ventures and financial
real estate assets
Adjusted Funds from
Operations
(586)
(389)
—
(601)
—
(483)
—
(1,108)
(36)
—
(455)
—
(1,597)
(3,116)
$ 118,924
$ 153,566
$ 158,700
$ 155,316
$ 136,054
$ 147,594
$ 131,173
$ 151,773
$ 587,695
AFFO per unit - diluted
$
0.164
$
0.212
$
0.219
$
0.215
$
0.189
$
0.207
$
0.187
$
0.217
$
0.853
AFFO payout ratio -
diluted(i)
Distribution declared
per Unit
Weighted average
Units outstanding -
diluted(ii)
112.5 %
87.1 %
84.3 %
86.1 %
97.7 %
89.9 %
98.8 %
85.4 %
86.8 %
$
0.185
$
0.185
$
0.185
$
0.185
$
0.185
$
0.185
$
0.185
$
0.185
$
0.740
723,363,313
723,346,150
723,265,565
722,930,485
718,026,576
711,582,778
700,600,087
700,625,695
689,285,790
(i)
(ii)
AFFO payout ratio is calculated as cash distributions declared divided by AFFO.
Includes Trust Units and Exchangeable Units.
Components of certain financial leverage ratios The following table includes the denominator applied to the calculation of
Total Adjusted Debt to Total Assets ratio and Debt Service Coverage Ratios for the periods indicated. Refer to section 4.4
“Financial Condition” and Section 15, “Non-GAAP Financial Measures” for further details about this non-GAAP measure.
Fourth
Quarter
2021
Third
Quarter
2021
Second
Quarter
2021
First
Quarter
2021
Fourth
Quarter
2020
Third
Quarter
2020
Second
Quarter
2020
First
Quarter
2020
Year
Ended
2019
Total Assets -
Proportionate
Basis
Debt Service
Coverage Ratio
- Denominator
$ 16,664,782 $ 16,599,779 $ 16,395,858 $ 16,146,949 $ 16,037,280 $ 15,738,583 $ 15,555,233 $ 15,686,182 $ 15,905,381
$
72,362 $
71,063 $
72,830 $
71,356 $
72,724 $
72,706 $
80,623 $
73,999 $
311,364
Choice Properties REIT
2021 Annual Report 106
Financial
Statements
Mount Pleasant Village
Brampton, ON
“Our prudent capital structure
delivers an industry leading balance
sheet and provides us with the
financial flexibility and capacity
to fund our transformational
development program.”
Mario Barrafato
Chief Financial Officer
Annual Report 2021 • 107
Financial Results
Consolidated Balance Sheets
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Nature and Description of the Trust
Significant Accounting Policies
Critical Accounting Judgments and Estimates
Investment Property and Other Transactions
Investment Properties
Equity Accounted Joint Ventures
Co-Ownership Property Interests
Subsidiaries
Financial Real Estate Assets
Note 10.
Residential Development Inventory
Note 11.
Mortgages, Loans and Notes Receivable
Note 12.
Intangible Assets
Note 13.
Accounts Receivable and Other Assets
Note 14.
Long Term Debt
Note 15.
Credit Facility
Note 16.
Unitholders' Equity
Note 17.
Income Taxes
Note 18.
Trade Payables and Other Liabilities
Note 19.
Unit-Based Compensation
Note 20.
Rental Revenue
Note 21.
Property Operating Costs
Note 22.
Interest Income
Note 23.
Fee Income
Note 24.
Net Interest Expense and Other Financing Charges
Note 25.
General and Administrative Expenses
Note 26.
Other Fair Value Gains (Losses), Net
Note 27.
Financial Risk Management
Note 28.
Financial Instruments
Note 29.
Capital Management
Note 30.
Supplemental Cash Flow Information
Note 31.
Segment Information
Note 32.
Contingent Liabilities and Financial Guarantees
Note 33.
Related Party Transactions
Note 34.
Subsequent Events
115
116
117
118
119
119
119
129
130
134
137
140
140
140
140
141
142
143
144
146
147
149
149
150
153
153
154
154
154
155
155
155
157
158
159
160
162
163
167
Choice Properties REIT
2021 Annual Report 108
Management’s Statement of Responsibility for Financial Reporting
The management of Choice Properties Real Estate Investment Trust (the “Trust”) is responsible for the preparation,
presentation and integrity of the accompanying consolidated financial statements, Management’s Discussion and Analysis
and all other information in the Annual Report. This responsibility includes the selection and consistent application of
appropriate accounting principles and methods in addition to making the judgments and estimates necessary to prepare the
consolidated financial statements in accordance with International Financial Reporting Standards as issued by the
International Accounting Standards Board. It also includes ensuring that the financial information presented elsewhere in the
Annual Report is consistent with that in the consolidated financial statements.
Management is also responsible for providing reasonable assurance that assets are safeguarded, and that relevant and
reliable financial information is produced. Management is required to design a system of internal controls and certify as to the
design and operating effectiveness of internal controls over financial reporting. A dedicated control compliance team
reviews and evaluates internal controls, the results of which are shared with management on a quarterly basis. KPMG LLP,
whose report follows, are the independent auditors engaged to audit the consolidated financial statements of the Trust.
The Board of Trustees, acting through an Audit Committee comprised solely of trustees who are independent, is responsible
for determining that management fulfills its responsibilities in the preparation of the consolidated financial statements and the
financial control of operations. The Audit Committee recommends the independent auditors for appointment by the
Unitholders. The Audit Committee meets regularly with senior and financial management and the independent auditors to
discuss internal controls, auditing activities and financial reporting matters. The independent auditors and internal auditors
have unrestricted access to the Audit Committee. These consolidated financial statements and Management’s Discussion
and Analysis have been approved by the Board of Trustees for inclusion in the Annual Report based on the review and
recommendation of the Audit Committee.
Toronto, Canada
February 16, 2022
[signed]
Rael Diamond
President and Chief Executive Officer
[signed]
Mario Barrafato
Chief Financial Officer
Choice Properties REIT
2021 Annual Report 109
KPMG LLP
Bay Adelaide Centre
333 Bay Street, Suite 4600
Toronto ON M5H 2S5
Canada
Tel 416-777-8500
Fax 416-777-8818
INDEPENDENT AUDITORS' REPORT
To the Unitholders of Choice Properties Real Estate Investment Trust
Opinion
We have audited the consolidated financial statements of Choice Properties Real
Estate Investment Trust (the Entity), which comprise:
the consolidated balance sheets as at December 31, 2021 and December 31,
2020
the consolidated statements of income (loss) and comprehensive income (loss)
for the years then ended
the consolidated statements of changes in equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of
significant accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material
respects, the consolidated financial position of the Entity as at December 31, 2021
and December 31, 2020, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Our responsibilities under those standards are further described in the
"Auditors' Responsibilities for the Audit of the Financial Statements" section of
our auditors' report.
We are independent of the Entity in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
KPMG LLP, an Ontario limited liability partnership and member firm of the KPMG global organization of independent
member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
KPMG Canada provides services to KPMG LLP.
Page 2
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements for the year ended December 31,
2021. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be
communicated in our auditors' report.
Evaluation of the fair value of income producing properties
Description of the matter
We draw attention to Note 2(g), Note 3(a), and Note 5 of the financial statements. The
income producing properties are measured at fair value using valuations prepared by
the Entity's internal valuation team. The Entity has recorded income producing
properties at fair value for an amount of $14,707 million.
Significant assumptions in determining the fair value of income producing properties
include:
future cash flows over the holding period
terminal capitalization rates and discount rates applied to these cash flows.
Why the matter is a key audit matter
We identified the evaluation of the fair value of income producing properties as a key
audit matter. This matter represented an area of significant risk of material
misstatement given the magnitude of income producing properties and the high
degree of estimation uncertainty in determining the fair value of income producing
properties. In addition, significant auditor judgment and involvement of those with
specialized skills and knowledge were required in evaluating the results of our audit
procedures due to the sensitivity of the fair value of income producing properties to
minor changes in certain significant assumptions.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the
following:
For a selection of income producing properties, we assessed the Entity's ability to
accurately forecast by comparing the Entity's future cash flows over the holding period
used in the prior year's fair value of income producing properties to actual results.
For a selection of income producing properties, we compared the future cash flows
over the holding period to the actual historical cash flows generated by the income
producing properties. We took into account the changes in conditions and events
affecting the income producing properties to assess the adjustments, or lack of
adjustments, made by the Entity in arriving at those future cash flows.
Page 3
We involved valuations professionals with specialized skills and knowledge, who
assisted in evaluating the terminal capitalization rates and discount rates of the overall
income producing properties portfolio. These rates were evaluated by comparing them
to published reports of real estate industry commentators and considering the various
characteristics of the portfolio.
Other Information
Management is responsible for the other information. Other information comprises:
the information included in Management's Discussion and Analysis filed with the
relevant Canadian Securities Commissions.
the information, other than the financial statements and the auditors' report
thereon, included in a document entitled "Annual Report 2021".
Our opinion on the financial statements does not cover the other information and we
do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge
obtained in the audit and remain alert for indications that the other information appears
to be materially misstated.
We obtained the information included in Management's Discussion and Analysis filed
with the relevant Canadian Securities Commissions as at the date of this auditors'
report thereon. If, based on the work we have performed on this other information, we
conclude that there is a material misstatement of this other information, we are
required to report that fact in the auditors' report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with
Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial
statements in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB), and for such internal
control as management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the
Entity's ability to continue as a going concern, disclosing as applicable, matters related
to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Entity or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial
reporting process.
Page 4
Auditors' Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditors' report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional skepticism
throughout the audit.
We also:
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Entity's internal
control.
Evaluate the appropriateness of accounting policies used and the reasonableness
of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern
basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast significant
doubt on the Entity's ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditors' report
to the related disclosures in the financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditors' report. However, future events
or conditions may cause the Entity to cease to continue as a going concern.
Evaluate
the overall presentation, structure and content of
financial
statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.
the
Page 5
Communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify during our
audit.
Provide those charged with governance with a statement that we have complied
with relevant ethical requirements regarding independence, and communicate
with them all relationships and other matters that may reasonably be thought to
bear on our independence and, where applicable, related safeguards.
Obtain sufficient appropriate audit evidence regarding the financial information of
the entities or business activities within the group Entity to express an opinion on
the financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit
opinion.
Determine, from the matters communicated with those charged with governance,
those matters that were of most significance in the audit of the financial
statements of the current period and are therefore the key audit matters. We
describe these matters in our auditors' report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our auditors' report
because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Chartered Professional Accountants, Licensed Professional Accountants
The engagement partner on the audit resulting in this auditors' report is Tony Marino.
Toronto, Canada
February 16, 2022
Choice Properties Real Estate Investment Trust
Consolidated Balance Sheets
(in thousands of Canadian dollars)
Note
December 31, 2021
December 31, 2020
As at
As at
Assets
Investment properties
Equity accounted joint ventures
Financial real estate assets
Residential development inventory
Mortgages, loans and notes receivable
Intangible assets
Accounts receivable and other assets
Cash and cash equivalents
Total Assets
Liabilities and Equity
Long term debt
Exchangeable Units
Trade payables and other liabilities
Total Liabilities
Equity
Unitholders’ equity
Non-controlling interests
Total Equity
Total Liabilities and Equity
Credit Facility (Note 15)
Contingent Liabilities and Financial Guarantees (Note 32)
Subsequent Events (Note 34)
See accompanying notes to the consolidated financial statements
5
6
9
10
11
12
13
30 (c)
14
16
18
16
8
$
$
$
14,930,000
$
14,389,000
564,378
86,603
10,142
354,901
28,000
114,275
84,304
573,649
68,373
—
263,946
29,000
116,055
207,219
16,172,603
$
15,647,242
6,230,010
$
6,011,997
620,405
12,862,412
3,310,191
—
3,310,191
$
16,172,603
$
6,485,521
5,149,182
489,999
12,124,702
3,514,739
7,801
3,522,540
15,647,242
Approved on behalf of the Board of Trustees
[signed]
Gordon A. M. Currie
Chair, Board of Trustees
[signed]
Karen Kinsley
Chair, Audit Committee
Choice Properties REIT
2021 Annual Report 115
Choice Properties Real Estate Investment Trust
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(in thousands of Canadian dollars)
Net Operating Income
Rental revenue
Property operating costs
Other Income and Expenses
Interest income
Fee income
Net interest expense and other financing charges
General and administrative expenses
Reversal of (allowance for) expected credit loss on mortgage receivable
Share of income (loss) from equity accounted joint ventures
Amortization of intangible assets
Foreign exchange gain reclassified from other comprehensive income
Acquisition transaction costs and other related expenses
Other fair value gains (losses), net
Adjustment to fair value of Exchangeable Units
Adjustment to fair value of investment properties
Income (Loss) before income taxes
Income tax recovery
Net Income (Loss)
Net Income (Loss)
Other Comprehensive Income (Loss)
Foreign exchange gain (loss) on currency translation
Foreign exchange gain on currency translation reclassified to earnings
Unrealized gain (loss) on designated hedging instruments
28
Other comprehensive income (loss)
Comprehensive Income (Loss)
See accompanying notes to the consolidated financial statements
Year Ended
Note
December 31, 2021
December 31, 2020
20
21
22
23
24
25
11
6
12
26
16
5
17
$
1,292,321
$
1,270,614
(380,306)
912,015
20,079
3,801
(534,525)
(40,917)
1,502
66,952
(1,000)
—
—
(1,580)
(862,815)
458,817
22,329
679
23,008
$
(384,016)
886,598
13,639
4,416
(540,720)
(36,718)
(7,830)
(5,570)
(1,000)
1,184
(1,589)
2,210
354,286
(220,018)
448,888
1,797
450,685
23,008
$
450,685
—
—
6,343
6,343
1,016
(1,184)
(3,554)
(3,722)
$
$
$
29,351
$
446,963
Choice Properties REIT
2021 Annual Report 116
Choice Properties Real Estate Investment Trust
Consolidated Statements of Changes in Equity
Attributable to Choice Properties’ Unitholders
(in thousands of Canadian dollars)
Note
Trust
Units
Cumulative
net income
Accumulated
other
comprehensive
loss
Cumulative
distributions
to
Unitholders
Total
Unitholders’
equity
Non-
controlling
interests
Total
equity
Equity, December 31, 2020
$ 3,652,620 $
811,734 $
(4,986) $
(944,629) $ 3,514,739 $
7,801 $ 3,522,540
Net Income (Loss)
Other comprehensive income
Distributions
Units issued under unit-based
compensation arrangements
Reclassification of vested Unit-
Settled Restricted Units
liability to equity
Units repurchased for unit-
based compensation
arrangements
Distribution to non-controlling
interests
16
16
16
8
—
—
—
9,332
1,548
(2,559)
—
23,008
—
—
—
—
—
—
—
6,343
—
—
23,008
6,343
(242,220)
(242,220)
—
—
—
—
—
9,332
1,548
(2,559)
—
—
—
—
—
—
—
—
—
—
23,008
6,343
(242,220)
9,332
1,548
(2,559)
—
(7,801)
(7,801)
Equity, December 31, 2021
$ 3,660,941 $
834,742 $
1,357 $ (1,186,849) $ 3,310,191 $
— $ 3,310,191
Attributable to Choice Properties’ Unitholders
(in thousands of Canadian dollars)
Note
Trust
Units
Cumulative
net income
Accumulated
other
comprehensive
loss
Cumulative
distributions
to
Unitholders
Total
Unitholders’
equity
Non-
controlling
interests
Total
equity
Equity, December 31, 2019
$ 3,409,836 $
361,049 $
(1,264) $
(679,404) $ 3,090,217 $
7,801 $ 3,098,018
Net Income (Loss)
Other comprehensive loss
Distributions
Units issued, net of costs
Distribution in Units
Units issued under unit-based
compensation arrangements
Reclassification of vested Unit-
Settled Restricted Units
liability to equity
Units repurchased for unit-
based compensation
arrangements
16
16
16
16
16
—
—
—
208,935
29,425
4,841
1,929
(2,346)
450,685
—
—
—
—
—
—
—
—
(3,722)
—
—
450,685
(3,722)
—
—
—
—
—
—
(235,800)
(235,800)
—
208,935
(29,425)
—
—
—
—
4,841
1,929
(2,346)
—
—
—
—
—
—
—
—
450,685
(3,722)
(235,800)
208,935
—
4,841
1,929
(2,346)
Equity, December 31, 2020
$ 3,652,620 $
811,734 $
(4,986) $
(944,629) $ 3,514,739 $
7,801 $ 3,522,540
See accompanying notes to the consolidated financial statements
Choice Properties REIT
2021 Annual Report 117
Choice Properties Real Estate Investment Trust
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Operating Activities
Net income (loss)
Net interest expense and other financing charges
Interest paid
Interest income
Interest received
Share of (income) loss from equity accounted joint ventures
Items not affecting cash and other items
Net change in non-cash working capital
Cash Flows from Operating Activities
Investing Activities
Acquisitions of investment properties
Acquisition of financial real estate asset
Additions to investment properties
Additions to financial real estate assets
Contributions to equity accounted joint ventures
Distributions from equity accounted joint ventures
Mortgages, loans and notes receivable advances
Mortgages, loans and notes receivable repayments
Proceeds from dispositions
Cash Flows from (used in) Investing Activities
Financing Activities
Proceeds from issuance of debentures, net
Repayments of debentures
Net advances (repayments) of mortgages payable
Net advances on construction loans
Net advances (repayments) of credit facility
Payment of credit facility extension fee
Cash received on exercise of options
Cash paid on vesting of restricted and performance units
Repurchase of Units for unit-based compensation arrangement
Distributions paid on Exchangeable Units
Distributions paid on Trust Units
Distribution to non-controlling interests
Cash Flows from (used in) Financing Activities
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and Cash Equivalents, End of Year
Supplemental disclosure of non-cash operating activities (Note 30)
See accompanying notes to the consolidated financial statements
Year Ended
Note
December 31, 2021
December 31, 2020
$
23,008 $
24
22
6
30 (a)
30 (b)
4
4, 9
5
9
6
6
11
11
4
14
14
14
14
15
15
19
16
8
534,525
(244,938)
(20,079)
14,211
(66,952)
402,788
26,865
669,428
(54,939)
(11,952)
(138,070)
(540)
(152,805)
124,751
(233,460)
148,571
254,322
(64,122)
348,230
(500,000)
(95,258)
(12,287)
—
(1,832)
7,983
(1,736)
(2,559)
(220,741)
(242,220)
(7,801)
(728,221)
(122,915)
207,219
30 (c)
$
84,304 $
450,685
540,720
(257,414)
(13,639)
11,545
5,570
(137,940)
21,657
621,184
(134,928)
(46,712)
(127,541)
(9)
(42,128)
32,549
(164,437)
173,655
464,745
155,194
994,681
(900,000)
614
351
(132,000)
—
1,799
(2,798)
(2,346)
(336,668)
(234,782)
—
(611,149)
165,229
41,990
207,219
Choice Properties REIT
2021 Annual Report 118
Notes to the Consolidated Financial Statements
Note 1. Nature and Description of the Trust
Choice Properties Real Estate Investment Trust (“Choice Properties” or the “Trust”) is an unincorporated, open-ended mutual
fund trust governed by the laws of the Province of Ontario and established pursuant to a declaration of trust amended and
restated as of April 30, 2021, as may be amended from time to time (the “Declaration of Trust”). Choice Properties, Canada’s
preeminent diversified real estate investment trust, is the owner, manager and developer of a high-quality portfolio of
commercial retail, industrial, office and residential properties across Canada. The principal, registered, and head office of
Choice Properties is located at 22 St. Clair Avenue East, Suite 700, Toronto, Ontario, M4T 2S5. Choice Properties’ trust units
(“Trust Units” or “Units”) are listed on the Toronto Stock Exchange (“TSX”) and are traded under the symbol “CHP.UN”.
Choice Properties commenced operations on July 5, 2013, when it issued Units and debt for cash pursuant to an initial public
offering (the “IPO”) and completed the acquisition of 425 properties from Loblaw Companies Limited and its subsidiaries
(“Loblaw”). Pursuant to a reorganization transaction on November 1, 2018, Loblaw spun out its 61.6% effective interest in
Choice Properties to George Weston Limited (“GWL”). As at December 31, 2021, GWL held either directly or indirectly, a
61.7% effective interest in Choice Properties. Choice Properties’ ultimate parent is Wittington Investments, Limited
(“Wittington”).
The principal subsidiaries of the Trust included in Choice Properties’ consolidated financial statements are Choice Properties
Limited Partnership (the “Partnership”), Choice Properties GP Inc. (the “General Partner”) and CPH Master Limited
Partnership (“CPH Master LP”).
Note 2. Significant Accounting Policies
a. Statement of Compliance
The consolidated financial statements of Choice Properties are prepared in accordance with International Financial
Reporting Standards (“IFRS” or “GAAP”) as issued by the International Accounting Standards Board (“IASB”) and using
the accounting policies described herein. These consolidated financial statements were authorized for issuance by the
Choice Properties Board of Trustees (“Board”) on February 16, 2022.
b. Basis of Preparation
The consolidated financial statements are prepared on a historical cost basis except for investment properties (Note 5),
financial real estate assets (Note 9), Class B LP Units (the “Exchangeable Units”) which are exchangeable for Trust Units
at the option of the holder (Note 16), liabilities for unit-based compensation arrangements (Note 19) and certain financial
instruments (Note 28) that have been measured at fair value. The consolidated financial statements are presented in
Canadian dollars, which is the Trust’s functional currency.
The Trust presents its consolidated balance sheet based on the liquidity method, whereby all assets and liabilities are
presented in ascending order of liquidity, while the notes to the consolidated financial statements distinguish between
current and non-current assets and liabilities. Choice Properties considers this presentation to be reliable and more
relevant to the Trust’s business. Certain comparative information has been reclassified to conform with the financial
statement presentation adopted in the current year.
c.
Impact of COVID-19
The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in the federal and
provincial governments enacting emergency measures to combat the spread of the virus. These measures, which
include the implementation of travel bans, self-imposed quarantine periods, social distancing, curfews, and targeted
lockdowns, have caused material disruption to businesses resulting in an economic slowdown. Global equity and capital
markets have also experienced significant volatility and weakness. The governments have reacted with significant
monetary and fiscal interventions designed to stabilize economic conditions.
It is not possible to forecast with certainty the duration and full scope of the economic impact of COVID-19 and other
consequential changes it will have on the Trust’s business and operations, both in the short term and in the long term. In
a long term scenario, certain aspects of the Trust’s business and operations that could potentially be impacted include
rental income, occupancy, tenant inducements, future demand for space, and market rents, which all ultimately impact
the underlying valuation of investment property.
In the preparation of these consolidated financial statements, the Trust has incorporated the potential impact of
COVID-19 into its estimates and assumptions that affect the carrying amounts of its assets and liabilities, and the
reported amount of its results using the best available information as of December 31, 2021. Actual results could differ
from those estimates. The estimates and assumptions that the Trust considers critical and/or could be impacted by
COVID-19 include those underlying the valuation of investment properties and financial real estate assets, the carrying
amount of its investment in equity accounted joint ventures, the net realizable value of its residential development
Choice Properties REIT
2021 Annual Report 119
Notes to the Consolidated Financial Statements
inventory, the estimate of any expected credit losses on its accounts receivable or mortgages, loans and notes
receivable and determining the values of financial instruments for disclosure purposes.
d. Basis of Consolidation
The consolidated financial statements include the accounts of Choice Properties and other entities controlled by the
Trust (its subsidiaries). Control is achieved when the Trust has power over the entity, has exposure, or rights, to variable
returns from its involvement with the entity, and has the ability to use its power to affect its returns. Choice Properties
reassesses control on an ongoing basis.
Consolidation of a subsidiary begins when the Trust obtains control over the subsidiary and ceases when the Trust loses
control of the subsidiary. Income and expenses of a subsidiary acquired or disposed of during the year are included in
the consolidated statements of income (loss) and comprehensive income (loss) from the effective date of acquisition and
up to the effective date of disposal, as appropriate.
When Choice Properties does not own all of the equity in a subsidiary, the non-controlling equity interest is disclosed in
the consolidated balance sheet as a separate component of total equity. Changes in the Trust’s ownership interests in
subsidiaries that do not result in the Trust losing control over the subsidiaries are accounted for as equity transactions.
The carrying amounts of the Trust’s interests and any non-controlling interests are adjusted to reflect the changes in their
relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are
adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the
Unitholders of the Trust. When the Trust loses control of a subsidiary, for example through sale or partial sale, a gain or
loss is recognized and is calculated as the difference between (i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and (ii) the previous carrying amount of the assets and liabilities of the
subsidiary and any non-controlling interests.
e. Business Combinations
When an investment is acquired, the Trust considers the substance of the assets and activities of the acquisition in
determining whether the acquisition represents an asset acquisition or a business combination. The transaction is
considered to be a business combination if the acquired investment meets the definition of a business in accordance
with IFRS 3, “Business Combinations”, being an integrated set of activities and assets that are capable of being
managed for the purposes of providing a return to Unitholders.
The acquisition of a business is accounted for using the acquisition method. The cost of an acquisition is measured as
the aggregate of the consideration transferred at fair value on the date of acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the
acquisition date. Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the
acquisition date. Acquisition-related costs are expensed in the period as incurred.
If the acquisition of an investment does not represent a business, it is accounted for as an acquisition of a group of
assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their
relative fair values at the acquisition date, and no goodwill is recognized. Acquisition-related costs are capitalized to the
investment at the time the acquisition is completed.
f.
Joint Arrangements
Joint arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual
sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous
consent of the parties sharing control. Joint arrangements are classified as either joint operations or joint ventures
depending on the Trust’s rights and obligations in the arrangement based on factors such as the structure, legal form
and contractual terms of the arrangement.
Joint Ventures
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint arrangement. The Trust’s investments in joint ventures are recorded using the equity method and are
initially recognized in the consolidated balance sheet at cost and adjusted thereafter to recognize the Trust’s share of the
profit or loss and other comprehensive income or loss of the joint venture. The Trust’s share of the joint venture’s profit
or loss is recognized in the Trust’s consolidated statements of income (loss) and comprehensive income (loss).
The financial statements of the equity accounted joint ventures are prepared for the same reporting period as the Trust.
Where necessary, adjustments are made to bring the accounting policies in line with those of the Trust.
A joint venture is considered to be impaired if there is objective evidence of impairment, as a result of one or more
events that occurred after initial recognition of the joint venture, and that event has a negative impact on the future cash
flows of the joint venture that can be reliably estimated.
Choice Properties REIT
2021 Annual Report 120
Notes to the Consolidated Financial Statements
Joint Operations
A joint operation is a joint arrangement whereby the parties that have joint control have rights to the assets and
obligations for the liabilities relating to the arrangement. The financial statements of the joint operations are prepared for
the same reporting period as the Trust. Where necessary, adjustments are made to bring the accounting policies in line
with those of the Trust. The Trust accounts for its interests in joint operations by recognizing its proportionate share of
jointly controlled assets, liabilities, revenues and expenses.
g.
Investment Properties
Investment properties include income producing properties and properties under development that are held by the Trust
to earn rental income or for capital appreciation or both. The Trust accounts for its investment properties in accordance
with International Accounting Standard ("IAS") 40, "Investment Properties". Additionally, an investment property held
under a lease is classified as investment property if it meets the definition of investment property. At the inception of the
lease the investment property is recognized at the present value of the future minimum lease payments and an
equivalent amount is recognized as a lease obligation.
Subsequent to initial recognition, investment properties are measured at fair value in accordance with the valuation
policy discussed in Note 5. Gains and losses arising from changes in the fair value of investment properties are included
in the consolidated statements of income (loss) and comprehensive income (loss) in the period in which they arise.
Investment properties are derecognized when disposed.
Income Producing Properties
Additions to income producing properties are expenditures incurred for the expansion and/or redevelopment of existing
income producing properties that result in additional gross leasable area and are considered revenue producing capital
expenditures. Extending and improving the productive capacity of leasable area of existing income producing properties
owned by the Trust requires significant on-going capital expenditures. The Trust considers its operating capital
expenditures to be the following:
•
•
•
Property capital: Major expenditures such as parking lot resurfacing and roof replacements which are significant
items of improvement incurred pursuant to a capital plan are capitalized and recoverable from tenants under the
terms of their leases over the useful life of the improvements. All other repair and maintenance costs are
expensed when incurred.
Direct leasing costs: These include direct third-party brokerage fees incurred in the successful negotiation of a
lease.
Tenant improvement allowances: Amounts expended to meet the Trust’s lease obligations are characterized as
either tenant improvements, which are owned by the Trust, or tenant inducements. An expenditure is
determined to be a tenant improvement when it primarily benefits and/or is owned by the Trust. In such
circumstances, the Trust is considered to have acquired an asset which is recorded as an addition to income
producing properties. Tenant inducements are amortized on a straight-line basis over the term of the lease as a
reduction of revenue.
Properties Under Development
The cost of land and buildings under development (consisting of commercial development sites, density or intensification
rights and related infrastructure) are specifically identifiable costs incurred in the period before construction is complete.
Costs capitalized in development capital include:
•
•
•
Permits, architect fees, hard construction costs;
Payments to tenants under lease obligations when the payment is reimbursement for construction which Choice
Properties will receive benefit after the tenant vacates; and
Site intensification payments, project management fees, professional fees, and property taxes.
Directly attributable borrowing costs associated with acquiring or constructing a qualifying investment property are
capitalized. Capitalization of borrowing costs commences when the activities necessary to prepare an asset for
development or redevelopment begin, and ceases once the asset is substantially complete, or if there is a prolonged
period where development activity is interrupted. The amount of borrowing costs capitalized is determined first by
reference to borrowings specific to the project, where relevant, and otherwise by applying a weighted average cost of
borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments.
Properties under development are transferred to income producing properties at their fair value upon practical
completion. The Trust considers practical completion to have occurred when the property is capable of operating in the
manner intended by management.
Choice Properties REIT
2021 Annual Report 121
Notes to the Consolidated Financial Statements
h. Residential Development Inventory
Residential development inventory, which is developed for sale in the ordinary course of business, is stated at the lower
of cost and estimated net realizable value. Residential development inventory is reviewed for impairment at each
reporting date. An impairment loss is recognized as an expense when the carrying value of the property exceeds its net
realizable value. Net realizable value is based on projections of future cash flows, which take into account the
development plans for each project and management’s best estimate of the most probable set of anticipated economic
conditions.
i.
j.
The cost of residential development inventory includes borrowing costs directly attributable to projects under active
development. The amount of borrowing costs capitalized is determined first by reference to borrowings specific to the
project, where relevant, and otherwise by applying a weighted average cost of borrowings to eligible expenditures after
adjusting for borrowings associated with other specific developments. Borrowing costs are not capitalized on residential
development inventory where no development activity is taking place.
Transfers between residential inventory and investment property occur when there is a change in use. A change in use
occurs when the property meets, or ceases to meet, the definition of investment property based on management's
intentions and there is observable evidence of a change in use.
Assets Held for Sale
An investment property is classified as held for sale when it is expected that the carrying amount will be recovered
principally through sale rather than from continuing use. For this to be the case, the property must be available for
immediate sale in its present condition, subject only to terms that are usual and customary for sales of such property,
and its sale must be highly probable, generally within one year. Upon designation as held for sale, the investment
property continues to be measured at fair value and is presented separately on the consolidated balance sheets.
Financial Instruments
Financial assets and liabilities are recognized when Choice Properties becomes a party to the contractual provision of
the financial instrument.
Classification and Measurement
Financial assets are classified and measured based on three categories: amortized cost, fair value through other
comprehensive income (“FVOCI”), and fair value through profit or loss (“FVTPL”). Financial liabilities are classified and
measured based on two categories: amortized cost or FVTPL. Derivatives embedded in contracts where the host is a
financial asset in the scope of IFRS 9, “Financial Instruments” (“IFRS 9”), are not separated, but the hybrid financial
instrument as a whole is assessed for classification.
The classification and measurement of financial assets based on the Trust’s business model for managing these financial
assets and their contractual cash flow characteristics, is summarized as follows:
•
•
•
Assets held for the purpose of collecting contractual cash flows that represent solely payments of principal and
interest (“SPPI”) are measured at amortized cost;
Assets held within a business model where assets are held for both the purpose of collecting contractual cash
flows and selling financial assets prior to maturity, and the contractual cash flows represent solely payments of
principal and interest, are measured at FVOCI; and
Assets held within another business model or assets that do not have contractual cash flow characteristics that
are SPPI are measured at FVTPL.
Financial assets are not reclassified subsequent to their initial recognition, unless the Trust identifies changes in its
business model in managing financial assets and would reassess the classification of financial assets. All financial
liabilities are measured subsequently at amortized cost using the effective interest method or at FVTPL.
Choice Properties REIT
2021 Annual Report 122
Notes to the Consolidated Financial Statements
The following summarizes the classification and measurement of financial assets and liabilities:
Asset/Liability
Accounts receivable
Mortgages, loans and notes receivable - SPPI
Mortgages, loans and notes receivable - FVTPL
Financial real estate assets
Cash and cash equivalents
Long term debt:
Senior unsecured debentures
Mortgages payable
Construction loans
Credit facility
Trade payables and other liabilities
Designated hedging derivatives
Exchangeable Units
Classification and Measurement Basis
Amortized cost
Amortized cost
FVTPL
FVTPL
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVTPL
FVTPL
Impairment
An allowance for expected credit losses (“ECL”) is recognized at each balance sheet date for all financial assets
measured at amortized cost or those measured at FVOCI, except for investments in equity instruments. The ECL model
requires considerable judgment, including consideration of how changes in economic factors affect ECLs, which are
determined on a probability-weighted basis.
Impairment losses, if incurred, would be recorded as expenses in the consolidated statements of income (loss) and
comprehensive income (loss) with the carrying amount of the financial asset or group of financial assets reduced through
the use of impairment allowance accounts. In periods subsequent to the impairment where the impairment loss has
decreased, and such decrease can be related objectively to conditions and changes in factors occurring after the
impairment was initially recognized, the previously recognized impairment loss would be reversed through the
consolidated statements of income (loss) and comprehensive income (loss). The impairment reversal would be limited to
the lesser of the decrease in impairment or the extent that the carrying amount of the financial asset at the date the
impairment is reversed does not exceed what the amortized cost would have been had the impairment not been
recognized, after the reversal.
Fair Value
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Trust takes into
account the characteristics of the asset or liability if market participants would take those characteristics into account
when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in
these consolidated financial statements is determined on such basis, unless otherwise noted.
Choice Properties measures financial assets and financial liabilities under the following fair value hierarchy. The different
levels have been defined as follows:
Level 1:
quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2:
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
Level 3:
inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available.
The classification of a financial instrument in the hierarchy is based upon the lowest level of input that is significant to the
measurement of fair value.
Acquisition costs, other than those related to financial instruments classified as FVTPL which are expensed as incurred,
are capitalized to the carrying amount of the instrument and amortized using the effective interest method.
Choice Properties REIT
2021 Annual Report 123
Notes to the Consolidated Financial Statements
Valuation process
The determination of the fair value of financial instruments is performed by Choice Properties’ treasury and financial
reporting departments on a quarterly basis. The following table describes the valuation techniques used in the
determination of the fair values of financial instruments:
Type
Valuation approach
Financial real estate assets
Fair value is determined based on valuation methodology described in Note 5.
Mortgages, loans and notes receivable
The fair value of each mortgage, loan and note receivable is based on the current
market conditions for financing with similar terms and risks.
Accounts receivable, cash and cash equivalents,
and trade payables and other liabilities
The carrying amount approximates fair value due to the short-term maturity of these
instruments.
Unit Options
Fair value of each tranche is valued separately using a Black-Scholes option pricing
model.
Restricted Units, Performance Units, Trustee
Deferred Units and Exchangeable Units
Unit-Settled Restricted Units (“URU”)
Long term debt
Fair value is based on closing market trading price of Choice Properties’ Units.
Fair value of each grant is measured based on the market value of a Unit at the balance
sheet date, less a discount to account for the vesting and holding period restriction
placed on the URUs.
Fair value is based on the present value of contractual cash flows, discounted at Choice
for similar types of borrowing
Properties’ current
arrangements or, where applicable, quoted market prices.
incremental borrowing rate
Derecognition of Financial Instruments
Financial assets are derecognized when the contractual rights to receive cash flows and benefits from the financial asset
expire, or if Choice Properties transfers the control or substantially all the risks and rewards of ownership of the financial
asset to another party. The difference between the assets carrying amount and the sum of the consideration received
and receivable is recognized in net income.
Financial liabilities are derecognized when obligations under the contract expire, are discharged or cancelled. The
difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is
recognized in net income.
k. Mortgages, Loans and Notes Receivable
The Trust’s mortgages, loans and notes receivable are classified into two categories: (1) those held for the purpose of
collecting contractual cash flows that represent SPPI and are classified and measured at amortized cost; and (2) those
that do not meet the SPPI criteria that are classified and measured at FVTPL.
Interest income for mortgages and loans receivable is recognized using the effective interest method. At the end of each
reporting period management reviews its SPPI mortgages, loans and notes receivable to determine whether there is an
event or change in circumstance that indicates a possible impairment loss. If such indication exists, the recoverable
amount of the asset is estimated in order to measure any impairment loss and an allowance for expected credit losses is
recorded.
An impairment indicator is present when there is objective evidence of impairment as a result of one or more events,
such as a deterioration in the credit quality of the borrower to the extent that there is a reasonable doubt as to the timely
collection of the principal and interest. An impairment loss is recognized if the present value of estimated future cash
flows discounted at the original effective interest rate inherent in the loan is less than its carrying value and is measured
as the difference between the two amounts. When the amounts and timing of future cash flows cannot be estimated with
reasonable reliability, impairment is recognized if either (a) the fair value of the underlying security, net of any realization
costs and amounts legally required to be paid to the borrowers, or (b) the observable market price for the loan, is less
than the carrying value. The valuation of such amounts is subjective and is based upon assumptions regarding market
conditions that could differ materially from actual results in future periods.
l.
Intangible Assets
Intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses. Intangible
assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortization period and the amortization method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to
modify the amortization period or method, as appropriate, and are treated as changes in accounting estimates.
Choice Properties REIT
2021 Annual Report 124
Notes to the Consolidated Financial Statements
m. Rent Receivables
Rent receivables are recognized initially at fair value, subsequently at amortized cost and, where relevant, adjusted for
the time value of money. The Trust assesses on a forward-looking basis the expected credit losses associated with its
rent receivables. A recognition of a loss allowance is made for the lifetime expected credit losses on initial recognition of
the receivable. In determining the expected credit losses the Trust takes into account any recent payment behaviours
and future expectations of likely default events. These assessments are made on a tenant-by-tenant basis.
n. Leases
As lessee
The Trust acting as lessee recognizes a right-of-use asset and a lease liability for all leases with a term of more than 12
months, unless the underlying asset is of low value.
Right-of-use assets
The Trust recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated amortization and impairment losses,
and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease
liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less
any lease incentives received. Right-of-use assets are amortized on a straight-line basis over the shorter of the lease
term and the estimated useful lives of the assets.
Lease liabilities
At the commencement date of the lease, the Trust recognizes lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments less any lease incentives
receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be
exercised by the Trust and payments of penalties for terminating the lease, if the lease term reflects the Trust exercising
the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as rental
revenue in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Trust uses its incremental borrowing rate at the lease
commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments
made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease
term, a change in the lease payments or a change in the assessment of an option to purchase the underlying asset. IFRS
16, “Leases” (“IFRS 16”) requires certain adjustments to be expensed, while others are added to the cost of the related
right-of-use asset.
As lessor
When the Trust acts as a lessor, it determines and classifies each lease as a finance lease or operating lease at the lease
commencement date.
When a lease transfers to the lessee substantially all the risk and rewards of ownership incidental to the ownership of the
underlying asset, the lease is classified as a finance lease; otherwise, the lease is classified as an operating lease. To
make this assessment, the Trust considers certain indicators including whether the lease is for the major part of the
economic life of the asset or the present value of lease payments is substantially all the fair value of the underlying asset.
The majority of the lease agreements entered into by the Trust as a lessor are classified as operating leases. The Trust’s
policy for these leases are discussed further in the accounting policy for revenue recognition.
At the commencement date of a finance lease, the Trust recognizes a lease receivable at the amount of its net
investment in the lease, which is measured at the present value of lease payments to be made over the lease term. The
lease payments include fixed payments, variable lease payments that depend on an index or a rate and amounts
expected to be paid under residual value guarantees, less any lease incentives payable. The lease payments also include
the exercise price of a purchase option reasonably certain to be exercised by the lessee and payments of penalties for
terminating a lease, if the lease term reflects the lessee exercising the option to terminate. The variable lease payments
that do not depend on an index or a rate are recognized as rental revenue in the period on which the event or condition
that triggers the payment occurs.
o. Cash and Cash Equivalents
Cash and cash equivalents consist of unrestricted cash on hand and marketable investments with an original maturity
date of 90 days or less from the date of acquisition.
Choice Properties REIT
2021 Annual Report 125
Notes to the Consolidated Financial Statements
p. Financial Derivative Instruments
The Trust does not use derivative instruments for speculative purposes. Any embedded derivative instruments that may
be identified are separated from their host contract and recorded on the consolidated balance sheet at fair value.
Derivative instruments are recorded in current or non-current assets and liabilities based on their remaining terms to
maturity. All changes in fair values of the derivative instruments are recorded in net earnings unless the derivative
qualifies and is effective as a hedging item in a designated hedging relationship. The Trust has cash flow hedges which
are used to manage exposure to fluctuations in interest rates. The effective portion of the change in fair value of the
hedging item is recorded in other comprehensive income. If the change in fair value of the hedging item is not completely
offset by the change in fair value of the hedged item, the ineffective portion of the hedging relationship is recorded in net
income. Amounts accumulated in other comprehensive income are reclassified to net earnings when the hedged item is
recognized in net income.
q. Foreign Currency Translation
The functional currency of the Trust is the Canadian dollar. The assets and liabilities of foreign operations that have a
functional currency different from that of the Trust are translated into Canadian dollars at the foreign currency exchange
rate in effect at the balance sheet date. The resulting foreign currency exchange gains or losses are recognized in the
foreign currency translation adjustment as part of other comprehensive income (“OCI”). When such foreign operation is
disposed of, the related foreign currency translation reserve is recognized in net earnings as part of the gain or loss on
disposal. On the partial disposal of such foreign operation, the relevant proportion is reclassified to net income.
Asset and liabilities denominated in foreign currency held in foreign operations that have the same functional currency as
the Trust are translated into Canadian dollars at the foreign currency exchange rate in effect at the balance sheet date.
The resulting foreign currency exchange gains or losses are recognized in net income. Revenue and expenses of foreign
operations are translated into Canadian dollars at the foreign currency exchange rates that approximate the rates in
effect at the dates when such items are transacted.
Prior to disposing its only investment property in the United States during the year ended December 31, 2020, this
investment property was considered a foreign operation, which was financially and operationally independent from its
Canadian business. Assets and liabilities of this foreign operation were translated at the rate of exchange in effect at the
balance sheet date while revenue and expense items were translated at the average exchange rate for the period. Gains
or losses on translation were included in OCI as foreign currency translation gains or losses. When there was a reduction
in the net investment as a result of a dilution or sale, or reduction in equity of the foreign operation as a result of a
dividend, amounts previously recognized in accumulated other comprehensive income (“AOCI”) were reclassified to net
income.
r.
Exchangeable Units
The Class B LP Units of the Trust’s subsidiary, the Partnership, are exchangeable into Trust Units at the option of the
holder (the “Exchangeable Units”). GWL holds all the Exchangeable Units. These Exchangeable Units are considered
puttable instruments and are required to be classified as financial liabilities at FVTPL. Distributions paid on the
Exchangeable Units are accounted for as interest expense.
s. Trust Units
With certain restrictions, the Units of Choice Properties are redeemable at the option of the holder, and, therefore, are
considered puttable instruments in accordance with IAS 32, “Financial Instruments - Presentation” (“IAS 32”). Puttable
instruments are required to be accounted for as financial liabilities, except where certain conditions are met in
accordance with IAS 32, in which case, the puttable instruments may be presented as equity.
To be presented as equity, a puttable instrument must meet all of the following conditions: (i) it must entitle the holder to
a pro-rata share of the entity’s net assets in the event of the entity’s dissolution; (ii) it must be in the class of instruments
that is subordinate to all other instruments; (iii) all instruments in the class in (ii) above must have identical features; (iv)
other than the redemption feature, there can be no other contractual obligations that meet the definition of a liability; and
(v) the expected cash flows for the instrument must be based substantially on the profit or loss of the entity or change in
fair value of the instrument. The Trust Units meet the conditions of IAS 32 and, accordingly, are presented as equity in
the consolidated financial statements.
t. Revenue Recognition
Property Rental Revenue
Choice Properties has retained substantially all of the risks and benefits of ownership of its investment properties and
therefore accounts for its leases with tenants as operating leases. The Trust commences revenue recognition on its
leases based on a number of factors. In most cases, revenue recognition under a lease begins when the tenant takes
possession of, or controls, the physical use of the leased property. Generally, this occurs on the later of the lease
commencement date, or when the Trust is required to make additions to the leased property in the form of tenant
improvements, upon substantial completion of such additions.
Choice Properties REIT
2021 Annual Report 126
Notes to the Consolidated Financial Statements
The Trust's revenues are earned from lease contracts with tenants and include both a lease component and a non-lease
component. The Trust recognizes revenue from lease components on a straight-line basis over the lease term, including
the recovery of property taxes and insurance, which is included in revenue in the consolidated statements of income
(loss) and comprehensive income (loss) due to its operating nature, except for contingent rental income which is
recognized when it arises. An accrued straight-line rent receivable is recorded from tenants for the difference between
the straight-line rent and the rent that is contractually due from the tenant.
The lease agreements include certain services offered to tenants such as cleaning, utilities, security, landscaping, snow
removal, property maintenance costs, as well as other support services. The consideration charged to tenants for these
services includes fees charged based on a percentage of the rental income and reimbursement of certain expenses
incurred. The Trust has determined that these services constitute a distinct non-lease component (transferred separately
from the right to use the underlying asset) and are within the scope of IFRS 15, “Revenue from Contracts with
Customers” (“IFRS 15”). These property management services are considered one performance obligation, meeting the
criteria for over time recognition and are recognized in the period that recoverable costs are incurred, or services are
performed.
Interest Income
Interest income is the interest earned on the amounts advanced under the Trust’s mezzanine loans, vendor take-back
loans and joint venture financing arrangements together with bank interest earned from deposits. Interest income is
recognized in accordance with the terms set out in the financing arrangements using the effective interest method.
Fee Income
Fee income consists mainly of property management fees, leasing fees, project management fees and other
miscellaneous fees. Property management fees are generally based on a percentage of property revenues and are
recognized when earned in accordance with the property management or co-ownership agreements. Leasing fees are
incurred when the Trust is the leasing manager for co-owned properties and are recognized when earned in accordance
with the property management or co-ownership agreements.
Residential Development Inventory
The revenue generated from contracts with customers on the sale of residential condominium units is recognized at a
point in time when control of the asset (i.e. condominium unit) has transferred to the purchaser (i.e., generally, when the
purchaser takes possession of the condominium unit) as the purchaser has the ability to direct the use of and obtain
substantially all of the remaining benefits from the asset. The amount of revenue recognized is based on the transaction
price included in the purchasers' contracts. Any funds received prior to the purchasers taking possession of their
respective assets are recognized as deferred revenue (contractual liability).
Lease Termination Income
Lease termination income represents amounts earned from tenants in connection with the cancellation or the early
termination of their remaining lease obligations and is recognized when a lease termination agreement is signed, and
collection is reasonably assured.
u. Unit-Based Compensation
The Trust has five unit-based compensation plans. The (1) Unit Option, (2) Restricted Unit (“RU”), (3) Performance Unit
(“PU”), (4) Trustee Deferred Unit (“DU”) and (5) Unit-Settled Restricted Unit (“URU”) plans are accounted for as cash-
settled awards, as the Trust is an open-ended trust making its units redeemable, and thus requiring its unit-based
compensation plans to be recognized as a liability and carried at fair value. The fair value in respect of each plan is re-
measured at each balance sheet date. Compensation expense is recognized in general and administrative expenses
over the vesting period for each tranche with a corresponding change in the liability.
Unit Option Plan
Unit Options have a five to ten year term, vest 25% cumulatively on each anniversary date of the grant and are
exercisable at the designated Unit price, which is based on the greater of the volume weighted average trading price of a
Unit for the five trading days prior to the date of grant or the trading day immediately preceding the grant date. The fair
value of each tranche is valued separately using a Black-Scholes option pricing model, and includes the following
assumptions:
•
•
•
•
The expected distribution yield is estimated based on the expected annual distribution prior to the balance
sheet date and the closing unit price as at the balance sheet date;
The expected Unit price volatility is estimated based on the average volatility of the Trust over a period
consistent with the expected life of the options;
The risk-free interest rate is estimated based on the Government of Canada bond yield in effect at the balance
sheet date for a term to maturity equal to the expected life of the options; and
The effect of expected exercise of options prior to expiry is incorporated into the weighted average expected
life of the options, which is based on expectations of option holder behaviour.
Choice Properties REIT
2021 Annual Report 127
Notes to the Consolidated Financial Statements
Restricted Unit Plan
Restricted Units entitle certain employees to receive the value of the RU award in cash or Units at the employees’
discretion at the end of the applicable vesting period, which is usually three years in length. The RU plan provides for the
crediting of additional RUs in respect of distributions paid on Units for the period when a RU is outstanding. The fair
value of each RU granted is measured based on the market value of a Unit at the balance sheet date.
Performance Unit Plan
Performance Units entitle certain employees to receive the value of the PU award in cash or Units at the end of the
applicable performance period, which is usually three years in length, based on the Trust achieving certain performance
conditions. The PU plan provides for the crediting of additional PUs in respect of distributions paid on Units for the
period when a PU is outstanding. The fair value of each PU granted is measured based on the market value of a Unit and
an estimate of the performance conditions being met at the balance sheet date.
Trustee Deferred Unit Plan
Non-management members of the Board are required to receive a portion of their annual retainer in the form of DUs and
may also elect to receive up to 100% of their remaining fees in DUs. Distributions paid earn fractional DUs, which are
treated as additional awards. DUs vest upon grant. The fair value of each DU granted is measured based on the market
value of a Unit at the balance sheet date.
Unit-Settled Restricted Unit Plan
Unit-Settled Restricted Units are accounted for as cash-settled awards. Typically, full vesting of the URUs would not
occur until the employee had remained with Choice Properties for three or five years from the grant date. Depending on
the nature of the grant, the URUs are subject to a six- or seven-year holding period during which the Units cannot be
disposed. The fair value of each URU granted is measured based on the market value of a Unit at the balance sheet
date, less a discount to account for the vesting and holding period restriction placed on the URUs.
v.
Income Taxes
Choice Properties qualifies as a “mutual fund trust” and a real estate investment trust (“REIT”) under the Income Tax Act
(Canada). Certain legislation relating to the federal income taxation of Specified Investment Flow Through trusts or
partnerships (“SIFT”) provide that certain distributions from a SIFT will not be deductible in computing the SIFT’s taxable
income and that the SIFT will be subject to tax on such distributions at a rate that is substantially equivalent to the
general tax rate applicable to Canadian corporations.
Under the SIFT rules, the taxation regime will not apply to a REIT that meets prescribed conditions relating to the nature
of its assets and revenue (the “REIT Conditions”) and distributions may be deducted against the REIT’s taxable income.
Choice Properties has reviewed the SIFT rules and has assessed its interpretation and application to its assets and
revenue and has determined that it meets the REIT Conditions. The Trustees intend to annually distribute all taxable
income directly earned by Choice Properties to Unitholders and to deduct such distributions for income tax purposes
and, accordingly, no net current income tax expense or deferred income tax assets or liabilities have been recorded in
the consolidated financial statements related to its Canadian investment properties.
The Trust also consolidates certain taxable entities in Canada and in the United States for which current and deferred
income taxes are recorded. Current tax is the expected tax payable or receivable on the taxable income or loss for the
period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in
respect of previous years.
Deferred tax is recognized using the asset and liability method of accounting for temporary differences arising between
the financial statement carrying values of existing assets and liabilities and their respective income tax bases. Deferred
tax is measured using enacted or substantively enacted income tax rates expected to apply in the years in which those
temporary differences are expected to be recovered or settled. A deferred tax asset is recognized for temporary
differences as well as unused tax losses and credits to the extent that it is probable that future taxable profits will be
available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets
and they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different taxable
entities where Choice Properties intends to settle its current tax assets and liabilities on a net basis.
Deferred tax is recorded on temporary differences arising on investments in subsidiaries, except where the timing of the
reversal of the temporary difference is controlled by the Trust and it is probable that the temporary difference will not
reverse in the foreseeable future.
Choice Properties REIT
2021 Annual Report 128
Notes to the Consolidated Financial Statements
Note 3. Critical Accounting Judgments and Estimates
The preparation of the consolidated financial statements requires management to make judgments and estimates in applying
Choice Properties’ accounting policies that affect the reported amounts and disclosures made in the consolidated financial
statements and accompanying notes.
Within the context of these consolidated financial statements, a judgment is a decision made by management in respect of
the application of an accounting policy, a recognized or unrecognized financial statement amount and/or note disclosure,
following an analysis of relevant information that may include estimates and assumptions. Estimates and assumptions are
used mainly in determining the measurement of balances recognized or disclosed in the consolidated financial statements
and are based on a set of underlying data that may include management’s historical experience, knowledge of current events
and conditions and other factors that are believed to be reasonable under the circumstances. Management continually
evaluates the estimates and judgments it uses.
The following are the accounting policies subject to judgments and key sources of estimation uncertainty that
Choice Properties believes could have the most significant impact on the amounts recognized in the consolidated financial
statements. Choice Properties’ significant accounting policies are disclosed in Note 2.
a.
Investment Properties
Judgments Made in Relation to Accounting Policies Applied
Judgment is applied in determining whether certain costs are additions to the carrying value of investment properties,
identifying the point at which substantial completion of a development property occurs, and identifying the attributable
borrowing costs to be included in the carrying value of the development property. Choice Properties also applies
judgment in determining whether the properties it acquires are considered to be asset acquisitions or business
combinations. Choice Properties considers all properties acquired in the current year to be asset acquisitions.
Key Sources of Estimation
The fair value of income producing properties is dependent on future cash flows over the holding period and terminal
capitalization rates and discount rates applicable to those assets. The review of future cash flows involves assumptions
relating to occupancy, rental rates and residual value. In addition to reviewing future cash flows, management assesses
changes in the business climate and other factors, which may affect the ultimate value of the property. These
assumptions may not ultimately be achieved.
b. Joint Arrangements
Judgments Made in Relation to Accounting Policies Applied
Judgment is applied in determining whether the Trust has joint control and whether the arrangements are joint
operations or joint ventures. In assessing whether the joint arrangements are joint operations or joint ventures,
management applies judgment to determine the Trust’s rights and obligations in the arrangement based on factors such
as the structure, legal form and contractual terms of the arrangement.
c. Leases
Judgments Made in Relation to Accounting Policies Applied
Choice Properties is required to make judgments in determining whether certain leases are operating or finance leases,
in particular long-term leases. All tenant leases where Choice Properties is the lessor have been determined to be
operating leases.
d.
Income Taxes
Judgments Made in Relation to Accounting Policies Applied
Choice Properties is a mutual fund trust and a REIT as defined in the Income Tax Act (Canada). Choice Properties is not
liable to pay Canadian income taxes provided that its taxable income is fully distributed to Unitholders each year. Choice
Properties is a REIT if it meets the prescribed conditions under the Income Tax Act (Canada). Choice Properties uses
judgment in reviewing these conditions in assessing its interpretation and application to its assets and revenue.
Choice Properties has determined that it qualifies as a REIT for the current period. Choice Properties expects to continue
to qualify as a REIT under the Income Tax Act (Canada), however, should it no longer qualify, it would not be able to flow
through its taxable income to Unitholders and would therefore be subject to tax.
Choice Properties REIT
2021 Annual Report 129
—
—
—
—
—
23,365
54,939
20,529
100,000
7,945
Notes to the Consolidated Financial Statements
Note 4. Investment Property and Other Transactions
The following table summarizes the investment properties acquired in the year ended December 31, 2021:
($ thousands)
Consideration
Date of
Acquisition
Segment
Ownership
Interest
Acquired
Purchase
Price
Purchase
Price incl.
Related
Costs
Mortgage
Receivable
Settlement
Contingent
Consideration(i)
Assumed
Liabilities
Cash
Location
Consolidated investments
Toronto, ON
Toronto, ON
Sep 2
Nov 12
Retail
Retail
100%
$
30,300 $
31,574 $
100%
22,423
23,365
Acquisitions from third-parties
52,723
54,939
— $
—
—
—
—
— $
— $
31,574
Equity accounted joint ventures
Calgary, AB
Caledon, ON(i)
Caledon, ON
Feb 1
Mar 30
Nov 22
Industrial
Land(iii)
Land(iii)
50%(ii)
85%
85%
25,375
25,375
4,846
—
138,000
138,000
7,735
7,945
—
—
38,000
—
Acquisitions in equity accounted joint ventures
171,110
171,320
4,846
38,000
—
128,474
Total acquisitions in consolidated investments
Financial real estate assets
Guelph, ON
Dec 10
Retail
100%
14,777
15,134
Acquisitions of financial real estate assets (Note 33)
14,777
15,134
—
—
—
—
3,182
11,952
3,182
11,952
Total acquisitions
$
238,610 $
241,393 $
4,846 $
38,000 $
3,182 $
195,365
(i)
(ii)
(iii)
The acquisition was funded through a $100,000 cash payment and a commitment to pay the remaining balance based on certain milestones being met over the
development lifecycle.
Represents additional ownership interest acquired increasing the ownership interest in this property to 100%. As a result, this property has been transferred from an
equity accounted joint venture to a consolidated investment property as of the acquisition date.
Land was acquired for future industrial development.
Choice Properties REIT
2021 Annual Report 130
Notes to the Consolidated Financial Statements
The following table summarizes the investment properties sold in the year ended December 31, 2021:
($ thousands except where otherwise indicated)
Location
Investment properties
Brampton, ON
Brampton, ON
Kanata, ON
St-Hyacinthe, QC
Calgary, AB
Portfolio of 2 assets across Canada
Magog, QC(ii)
Quebec, QC
Portfolio of 5 assets in Calgary, AB
Drummondville, QC(ii)
Dispositions of investment properties
Equity accounted joint ventures
Richmond Hill, ON
Oshawa, ON
Waterloo, ON
Dispositions from equity accounted joint ventures
Date of
Disposition
Segment
Ownership
Interest
Sale Price excl.
Selling Costs
Consideration
Mortgage
receivable
advanced
Cash
Jan 19
Mar 31
Aug 19
Oct 4
Nov 1
Dec 6
Dec 15
Dec 20
Dec 20
Dec 22
Feb 1
Dec 15
Dec 22
Land(i)
Land
Land
Land
Retail
Retail
Retail
Retail
Industrial
Retail
Land
Retail
Land
70%
50%
50%
100%
100%
100%
100%
50%
100%
100%
50%
50%
50%
$
25,000 $
— $
25,000
5,000
4,147
3,800
36,000
52,250
22,000
49,625
45,000
11,500
254,322
66,375
3,025
5,250
74,650
—
—
—
—
—
—
—
—
—
—
—
—
5,250
5,250
5,000
4,147
3,800
36,000
52,250
22,000
49,625
45,000
11,500
254,322
66,375
3,025
—
69,400
Total dispositions
$
328,972 $
5,250 $
323,722
(i)
(ii)
On January 19, 2021, the Trust sold its 70% interest which resulted in a disposition of the property under development for $25,000 and a distribution to the subsidiary’s
30% non-controlling interest of $7,801.
Property disposition included a Loblaw lease (Note 33).
Choice Properties REIT
2021 Annual Report 131
Notes to the Consolidated Financial Statements
During the year ended December 31, 2020, Choice Properties completed the following acquisitions:
($ thousands)
Consideration
Location
Acquisition Segment
Date of
Consolidated investments
Ownership
Interest
Acquired
Purchase
Price
Purchase
Price incl.
Related
Costs
Issuance of
Trust /
Exchange-
able Units(ii)
Assumed
Liabilities
Mortgage
Receivable
Settlement
Cost-to-
Complete
Receivable
Cash
Toronto, ON
Jun 10
Land
100% $
8,100 $
8,190 $
— $
— $
— $
— $
8,190
Acquisition from Loblaw (Note 33)
8,100
8,190
—
—
—
—
8,190
Portfolio of 6 assets
across Canada
Dec 18
Industrial
100%
81,500
82,357
79,100
2,400
Acquisitions from GWL (Note 33)
81,500
82,357
79,100
2,400
Toronto, ON
Toronto, ON(i)
Jul 31
Jul 31
Office
Office
100%
128,500
130,754
128,500
60%
80,435
65,350
80,435
Acquisitions from Wittington (Note 33)
208,935
196,104
208,935
Coquitlam, BC
Toronto, ON
Barrie, ON
Portfolio of 4 assets
across Canada
Feb 11
Apr 9
Sep 23
Retail
Land
Retail
100%
21,150
21,840
100%
8,000
8,354
100%
50,000
51,899
Oct 16
Industrial
100%
85,895
87,330
Calgary, AB
Dec 22
Retail
N/A
1,500
2,885
Acquisitions from third-parties
166,545
172,308
—
—
—
—
—
—
—
—
—
—
857
857
—
—
2,254
—
(16,404)
1,319
—
(16,404)
3,573
—
—
50,000
—
21,840
—
—
8,354
1,899
—
—
—
87,330
—
2,885
—
—
—
—
—
—
—
—
—
50,000
— 122,308
Total acquisitions in consolidated investments
465,080
458,959
288,035
2,400
50,000
(16,404) 134,928
Financial real estate assets
Portfolio of 5 assets
across Canada
Nov 24
Retail
100%
45,673
46,712
Acquisitions of financial real estate assets (Note 33)
45,673
46,712
—
—
—
—
—
—
—
46,712
—
46,712
Total acquisitions
$ 510,753 $
505,671 $
288,035 $
2,400 $
50,000 $
(16,404) $ 181,640
(i)
(ii)
Represents the 60% additional ownership interest acquired from Wittington, increasing the Trust’s ownership interest in this property to 100%. As a result, this
property has been transferred from an equity accounted joint venture to a consolidated investment as of the acquisition date. Balance includes investment properties
and working capital. Refer to Note 33 for additional details.
The assets acquired from Wittington were satisfied in full by the issuance of 16,500,000 Units of Choice Properties (Note 33). The assets acquired from GWL were
satisfied in full by the issuance of 5,824,742 Exchangeable Units (Note 33).
Choice Properties REIT
2021 Annual Report 132
Notes to the Consolidated Financial Statements
The following table summarizes the investment properties sold in the year ended December 31, 2020:
($ thousands except where otherwise indicated)
Location
Assets held for sale
Date of
Disposition
Segment
Ownership
Interest
Sale Price
excl. Selling
Costs
Cash
Consideration
Lease Receivable
from Equity
Accounted Joint
Venture
Debt
Assumed by
Purchaser
Chicago, USA
Jan 24
Retail
100%
$
97,800 $
97,800 $
Dispositions of assets held for sale
97,800
97,800
— $
—
—
—
Investment properties
Edmonton, AB
Creston, BC
Halifax, NS
Milton, ON
Jan 29
Residential
Feb 3
Retail (parcel)
Feb 13
Sep 28
Office
Industrial
Portfolio of 11 assets across Canada (ii)
Oct 28
Retail
Quebec City, QC
Nov 23
Retail (parcel)
Portfolio of 3 assets across Canada
Nov 27
Portfolio of 5 assets across Canada (ii)
Dec 1
Windsor, ON (iii)
Dec 23
Retail
Retail
Retail
Dispositions of investment properties
Total dispositions in consolidated investments
Equity accounted joint ventures
50%
100%
100%
100%
50%
50%
100%
100%
100%
9,750
2,561
375
375
26,700
8,956
22,613
22,613
169,040
169,040
5,000
5,000
64,000
64,000
43,400
43,400
51,000
51,000
391,878
366,945
489,678
464,745
—
—
—
—
—
—
—
—
—
—
—
7,189
—
17,744
—
—
—
—
—
—
24,933
24,933
Ottawa, ON
Jul 1
Land
100%(i)
Disposition to equity accounted joint venture
19,468
19,468
—
—
19,468
19,468
—
—
Total dispositions
$
509,146 $
464,745 $
19,468 $
24,933
(i)
(ii)
(iii)
On July 1, 2020, the Trust entered into a 99-year ground lease with an equity accounted joint venture in which the Trust has a 50% ownership interest. Under IFRS 16,
this arrangement is accounted for as a disposition by the Trust and the inception of a lease receivable between the Trust and the limited partnership (Note 13). The
limited partnership has recognized an acquisition of investment property and a corresponding lease liability as part of this transaction (Note 6).
Choice Properties sold two portfolios consisting of 16 retail properties that were leased to Loblaw (Note 33).
Property disposition included a Loblaw lease (Note 33)
Choice Properties REIT
2021 Annual Report 133
Notes to the Consolidated Financial Statements
Note 5.
Investment Properties
($ thousands)
Income producing
properties
Properties under
development
Note
Year Ended
Year ended
December 31, 2021
December 31, 2020
Balance, beginning of year
$
14,199,000 $
190,000 $
14,389,000 $
14,373,000
Acquisitions - including purchase
costs of $2,216 (2020 - $10,283)
4
54,939
—
54,939
458,959
Capital expenditures
Development capital(i)
Building improvements
Capitalized interest(ii)
Operating capital expenditures
Property capital
Direct leasing costs
Tenant improvement allowances
Amortization of straight-line rent
Transfer from equity accounted joint
ventures
Transfers from properties under
development
Transfers to residential development
inventory
Dispositions
Disposition to equity accounted joint
venture
Adjustment to fair value of investment
properties
Balance, end of year
24
6
10
4
—
4,086
—
60,012
6,426
16,379
7,893
143,103
51,167
—
2,642
—
—
—
—
—
30,290
(30,290)
—
(220,173)
(10,142)
(34,149)
51,167
4,086
2,642
60,012
6,426
16,379
7,893
143,103
—
(10,142)
(254,322)
57,693
10,948
4,231
33,112
6,519
19,269
13,946
42,687
—
—
(391,878)
—
—
—
(19,468)
405,045
53,772
458,817
(220,018)
$
14,707,000 $
223,000 $
14,930,000 $
14,389,000
(i)
(ii)
Development capital included $2,208 of site intensification payments paid to Loblaw (December 31, 2020 - $995) (Note 33).
Interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.64% (December 31, 2020 - 3.70%).
Included in certain investment properties acquired from Loblaw is excess land with development potential. Choice Properties
will compensate Loblaw, over time, with intensification payments determined by a site intensification payment grid as
outlined in the Strategic Alliance Agreement (Note 33) should Choice Properties pursue activity resulting in the intensification
of such excess land. The fair value of this excess land has been recorded in the consolidated financial statements.
Choice Properties REIT
2021 Annual Report 134
Notes to the Consolidated Financial Statements
Valuation Methodology and Process
The investment properties (including those owned through equity accounted joint ventures) are measured at fair value using
valuations prepared by the Trust’s internal valuation team. The team reports directly to the Chief Financial Officer, with the
valuation processes and results reviewed by Management at least once every quarter. The valuations exclude any portfolio
premium or value for the management platform and reflect the highest and best use for each of the Trust's investment
properties.
As part of Management's internal valuation program, the Trust considers external valuations performed by independent
national real estate valuation firms for a cross-section of properties that represent different geographical locations and asset
classes across the Trust's portfolio. On a quarterly basis, the valuation team reviews and updates, as deemed necessary, the
valuation models to reflect current market data. Updates may be made to significant assumptions related to terminal
capitalization rates, discount rates and future cash flow assumptions such as market rents, as well as current leasing and/or
development activity, renewal probability, downtime on lease expiry, vacancy allowances, and expected maintenance costs.
When an external valuation is obtained, the internal valuation team assesses all major inputs used by the independent
valuators in preparing their valuation reports and holds discussions with the independent valuators on the reasonableness of
their assumptions. Where warranted, adjustments will be made to the internal valuations to reflect the assumptions contained
in the external valuations. The Trust will record the internal value in its consolidated financial statements.
Income Producing Properties
Income producing properties are valued using the discounted cash flow method. Under the discounted cash flow method,
fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life, generally
over a minimum term of 10 years, including a terminal value based on the application of a terminal capitalization rate applied
to estimated net operating income, a non-GAAP measure, in the terminal year. This method involves the projection of future
cash flows for the specific asset. To the future cash flows a market-derived discount rate is applied to establish the present
value of the income stream associated with the asset. The terminal capitalization rate is separately determined and may differ
from the discount rate.
The duration of the future cash flows and the specific timing of inflows and outflows are determined by events such as rent
reviews, new and renewed leasing and related re-leasing, redevelopment, or refurbishment. The appropriate duration is
typically driven by market behaviour that is a characteristic of the related asset class. The future cash flows are typically
estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance costs,
agent and commission costs and other operating and management expenses. The future cash flows, along with an estimate
of the terminal value anticipated at the end of the projection period, are then discounted.
Properties Under Development
Properties under active development are generally valued with reference to market land values and costs invested to date.
Where significant leasing and construction is in place and the future income stream is reasonably determinable, the
development property is valued on a discounted cash flow basis which includes future cash outflow assumptions for future
capital outlays, construction and development costs. Development risks such as planning, zoning, licenses, and building
permits are considered in the valuation process. Properties not under active development, such as land parcels held for
future development, are valued based on comparable sales of commercial land.
Impact of COVID-19
The Trust reviewed its future cash flow projections and the valuation of its properties in light of the COVID-19 pandemic
during the year ended December 31, 2021. The Trust expects that COVID-19 will have the most notable impact on its non-
grocery anchored retail and office portfolios. The carrying value for the Trust’s investment properties reflects its best estimate
for the highest and best use as at December 31, 2021.
It is not possible to forecast with certainty the duration and full scope of the economic impact of COVID-19 and other
consequential changes it will have on the Trust’s business and operations, both in the short term and in the long term. In a
long term scenario, certain aspects of the Trust’s business and operations that could potentially be impacted include rental
income, occupancy, tenant inducements, future demand for space, and market rents, which all ultimately impact the
underlying valuation of its investment properties.
Choice Properties REIT
2021 Annual Report 135
Notes to the Consolidated Financial Statements
Significant Valuation Assumptions
The following table highlights the significant assumptions used in determining the fair value of the Trust’s income producing
properties by asset class:
Total Income Producing Properties
Range Weighted average
Range Weighted average
As at December 31, 2021
As at December 31, 2020
Discount rate
Terminal capitalization rate
Retail
Discount rate
Terminal capitalization rate
Industrial
Discount rate
Terminal capitalization rate
Office
Discount rate
Terminal capitalization rate
5.00% - 11.45%
4.25% - 10.95%
6.68%
5.95%
4.75% - 11.45%
4.00% - 10.95%
5.00% - 11.45%
4.25% - 10.95%
6.89%
6.16%
5.00% - 11.45%
4.50% - 10.95%
5.00% - 8.50%
4.25% - 7.75%
6.01%
5.33%
4.75% - 9.00%
4.00% - 8.50%
5.25% - 8.75%
4.25% - 7.75%
6.25%
5.42%
5.25% - 8.50%
4.25% - 7.75%
6.83%
6.07%
6.97%
6.23%
6.50%
5.73%
6.21%
5.32%
The significant assumptions and inputs used in the valuation techniques to estimate the fair value of income producing
properties are classified as Level 3 in the fair value hierarchy as certain inputs for the valuation are not based on observable
market data points.
Independent Appraisals
Properties are typically independently appraised at the time of acquisition. In addition, Choice Properties has engaged
independent nationally-recognized valuation firms to appraise its investment properties such that the majority of the portfolio
will be independently appraised at least once over a four-year period. When an independent appraisal is obtained, the
internal valuation team assesses all major inputs used by the independent valuators in preparing their reports and holds
discussions with them on the reasonableness of their assumptions. Where warranted, adjustments will be made to the
internal valuations to reflect the assumptions contained in the external valuations. The Trust will record the internal value in its
consolidated financial statements.
The properties independently appraised each year represent a subset of the property types and geographic distribution of the
overall portfolio. A breakdown of the aggregate fair value of investment properties independently appraised each quarter, in
accordance with the Trust’s policy, is as follows:
($ thousands except where otherwise indicated)
March 31
June 30
September 30
December 31
Total
2021
Number of income
producing
properties
Fair value
Number of income
producing
properties
18 $
625,000
18 $
20
19
21
1,070,000
890,000
1,070,000
18
18
21
2020
Fair value
765,000
850,000
675,000
715,000
78 $
3,655,000
75 $
3,005,000
Choice Properties REIT
2021 Annual Report 136
Notes to the Consolidated Financial Statements
Fair Value Sensitivity
The following table summarizes fair value sensitivity for the Trust’s income producing properties which are most sensitive to
changes in terminal capitalization rates and discount rates:
Terminal Capitalization Rate
Discount Rate
Rate
Sensitivity
Weighted Average
Terminal
Capitalization Rate
Fair Value
Change in Fair
Value
Weighted Average
Discount Rate
Fair Value
Change in Fair
Value
(0.75)%
(0.50)%
(0.25)%
—%
0.25%
0.50%
0.75%
5.20 % $
16,003,000 $
1,296,000
5.93 % $
15,583,000 $
876,000
5.45 %
15,523,000
5.70 %
15,098,000
5.95 %
14,707,000
6.20 %
14,350,000
6.45 %
14,019,000
6.70 %
13,715,000
816,000
391,000
—
(357,000)
(688,000)
(992,000)
6.18 %
15,276,000
6.43 %
14,985,000
6.68 %
14,707,000
6.93 %
14,437,000
7.18 %
14,155,000
7.43 %
13,894,000
569,000
278,000
—
(270,000)
(552,000)
(813,000)
Note 6. Equity Accounted Joint Ventures
Choice Properties accounts for its investments in joint ventures using the equity method. These investments hold primarily
development properties and some income producing properties. The table below summarizes the Trust’s investment in joint
ventures.
Retail
Industrial
Residential
Land, held for development
Total equity accounted joint ventures
As at December 31, 2021
As at December 31, 2020
Number of
joint ventures
Ownership
interest
Number of
joint ventures
Ownership
interest
15
25% - 75%
16
25% - 75%
50%
47% - 50%
50% - 85%
1
3
2
21
50%
47% - 50%
50%
2
3
1
22
Choice Properties’ investment in equity accounted joint
ventures ($ thousands)
$
564,378
$
573,649
Summarized financial information for equity accounted joint ventures at 100% and Choice Properties’ ownership interest are
set out below:
Non-current
liabilities
Net assets at
100%
— $
—
210,525
163,346
96,556
($ thousands)
Ownership
Current assets
assets Current liabilities
Horizon Business Park LP
50% $
5,102 $
242,051 $
(36,628) $
As at December 31, 2021
Non-current
Tullamore Industrial LP
Dartmouth Crossing Master LP
85%
75%
1,312
172,691
(10,657)
44,995
199,444
(22,643)
(125,240)
Other joint ventures
25-50%
23,986
1,263,212
(251,876)
(523,867)
511,455
Net assets at 100%
Investment in equity accounted
joint ventures
$
$
75,395 $
1,877,398 $
(321,804) $
(649,107) $
981,882
49,292 $
1,027,634 $
(164,503) $
(348,045) $
564,378
Choice Properties REIT
2021 Annual Report 137
Notes to the Consolidated Financial Statements
($ thousands)
Ownership
Rental
Revenue
Property
operating
costs
Interest
income
Interest
expense
Adjustment
to fair value
Net income (loss)
and
comprehensive
income (loss) at
100%
Year ended December 31, 2021
Horizon Business Park LP
50% $
16,430 $
(4,922) $
Tullamore Industrial LP
85%
—
—
— $
1
— $
12,214 $
23,722
—
—
Dartmouth Crossing Master LP
75%
21,285
(9,410)
427
(4,946)
5,505
Other joint ventures
25-50%
60,949
(20,984)
2,023
(12,240)
67,527
Net income and comprehensive
income at 100%
Share of net income (loss) and
comprehensive income (loss)
in equity accounted joint
ventures
$
98,664 $
(35,316) $
2,451 $
(17,186) $
85,246 $
133,859
$
53,910 $
(19,771) $
341 $
(9,682) $
42,154 $
66,952
($ thousands)
Ownership
Current assets
Non-current
assets Current liabilities
Non-current
liabilities
Net assets at
100%
As at December 31, 2020
Horizon Business Park LP
Great Plains Business Park LP
50% $
50%
2,935 $
214,776 $
(25,289) $
— $
192,422
2,231
211,374
(4,472)
(17,475)
1
12,861
97,275
Other joint ventures
25-75%
40,884
1,404,613
(413,693)
(301,007)
191,658
730,797
Net assets at 100%
Investment in equity accounted
joint ventures
$
$
46,050 $
1,830,763 $
(443,454) $
(318,482) $
1,114,877
25,141 $
948,938 $
(218,536) $
(181,894) $
573,649
Year ended December 31, 2020
($ thousands)
Ownership
Rental
Revenue
Property
operating
costs
Interest
income
Interest
expense
Adjustment
to fair value
Net income (loss)
and
comprehensive
income (loss) at
100%
Horizon Business Park LP
50% $
15,353 $
(4,458) $
Great Plains Business Park LP
50%
17,466
(4,599)
— $
(7)
— $
(3,110) $
—
(3,089)
7,785
9,771
Other joint ventures
25-75%
79,883
(31,470)
2,772
(16,823)
(61,304)
(26,942)
Net income and comprehensive
income at 100%
Share of net income (loss) and
comprehensive income (loss) in
equity accounted joint ventures
$
112,702 $
(40,527) $
2,765 $
(16,823) $
(67,503) $
(9,386)
$
59,614 $
(21,986) $
1,496 $
(9,024) $
(35,670) $
(5,570)
Choice Properties REIT
2021 Annual Report 138
Notes to the Consolidated Financial Statements
The following table reconciles the changes in cash flows from equity accounted joint ventures:
($ thousands)
Balance, beginning of year
Contributions to equity accounted joint ventures
Distributions from equity accounted joint ventures
Total cash flow activities
Transfers from equity accounted joint venture to consolidated investments
Acquisition of equity accounted joint venture partner’s interest upon settlement of mortgage receivable
Mortgage receivable advanced upon disposition of equity accounted joint venture
Contingent consideration payable recognized on acquisition within equity accounted joint venture
5
4
11
4
Accretion of contingent consideration payable
Share of income (loss) from equity accounted joint ventures
Total non-cash activities
Balance, end of year
Note
Year ended
December 31, 2021
$
$
573,649
152,805
(124,751)
28,054
(141,868)
4,846
(6,098)
38,000
843
66,952
(37,325)
564,378
Choice Properties REIT
2021 Annual Report 139
Notes to the Consolidated Financial Statements
Note 7. Co-Ownership Property Interests
Choice Properties has the following co-owned property interests and includes its proportionate share of the related assets,
liabilities, revenue and expenses of these properties in the consolidated financial statements.
As at December 31, 2021
As at December 31, 2020
Number of co-
owned properties
Ownership
interest
Number of co-
owned properties
38
2
6
6
—
52
50% - 75%
50% - 67%
50%
50%
— %
39
2
6
6
1
54
Ownership
interest
50% - 75%
50% - 67%
50%
50%
50%
Retail
Industrial
Office
Residential
Land, held for development
Total co-ownership property interests
Note 8. Subsidiaries
On November 7, 2014, Choice Properties acquired a 70% controlling interest in Choice Properties PRC Brampton Limited
Partnership (“Brampton LP”), a subsidiary which holds land intended for future retail development in Brampton, Ontario. As a
result, Choice Properties consolidated the results of this subsidiary and recognized a 30% non-controlling interest for the
interests of PL Ventures Ltd., a subsidiary of PenEquity Realty Corporation (“PenEquity”). On January 19, 2021, Choice
Properties sold its 70% interest in Brampton LP which resulted in a disposition of the property under development for
$25,000 and a distribution to the subsidiary’s non-controlling interest of $7,801.
Note 9. Financial Real Estate Assets
($ thousands)
Balance, beginning of year
Acquisitions
Additions
Year Ended
Year ended
Note
December 31, 2021
December 31, 2020
$
$
68,373 $
15,134
540
2,556
86,603 $
22,800
46,712
9
(1,148)
68,373
Interest income (loss) from financial real estate assets due to changes in value
22
Balance, end of year
Financial real estate assets are land and buildings purchased by the Trust that did not meet the criteria of a transfer of control
under IFRS 15, “Revenue from Contracts with Customers”, due to the sale-leaseback arrangement with the seller of the
asset. In accordance with IFRS 16, “Leases”, the Trust recognized these acquisitions as financial instruments under IFRS 9,
“Financial Instruments”. As at December 31, 2021 The weighted average discount rate and terminal capitalization rate used
to determine the fair value of the Trust’s financial real estate assets are 6.76% and 6.16%. An increase of 0.75% in the
discount rate or terminal capitalization rate would result in a decrease of $4,600 or $5,500 in the value of the financial real
estate assets. While a decrease of 0.75% in the discount rate or terminal capitalization rate would result in an increase of
$4,800 or $7,000 in the value of the financial real estate assets.
Note 10. Residential Development Inventory
Residential development inventory consists of a co-owned development project located in Brampton, Ontario, for
the purpose of developing and selling residential condominium units.
The following table summarizes the activity in residential development inventory:
($ thousands)
Balance, beginning of year
Transfers from investment properties
Balance, end of year
Year Ended
Year ended
Note
December 31, 2021
December 31, 2020
5
$
$
— $
10,142
10,142 $
—
—
—
Choice Properties REIT
2021 Annual Report 140
Notes to the Consolidated Financial Statements
Note 11. Mortgages, Loans and Notes Receivable
($ thousands)
Mortgages receivable classified as amortized cost(i)
Mortgages receivable classified as fair value through profit and loss ("FVTPL")
Loans receivable classified as amortized cost(i)
Notes receivable from GWL classified as amortized cost(i)
33
Mortgages, loans and notes receivable
Classified as:
Non-current
Current
Note
December 31, 2021
December 31, 2020
As at
As at
$
$
$
$
89,944 $
96,623
—
168,334
354,901 $
109,526 $
245,375
354,901 $
111,882
53,588
2,285
96,191
263,946
117,457
146,489
263,946
(i)
The fair value of the mortgages, loans and notes receivable classified as amortized cost was $257,800 (December 31, 2020 - $208,700) (Note 28).
Mortgages and Loans Receivable
Mortgages and loans receivable represent amounts advanced under mezzanine loans, joint venture financing, vendor take-
back financing and other arrangements. Choice Properties mitigates its risk by diversifying the number of entities and assets
to which it loans funds.
December 31, 2021
December 31, 2020
Weighted average
effective interest rate
Weighted average term
to maturity (years)
Weighted average
effective interest rate
Weighted average term
to maturity (years)
Mortgages receivable
Loans receivable
Total
7.11%
— %
7.11%
1.7
—
1.7
7.31%
8.00 %
7.32%
2.1
3.7
2.2
Notes Receivable from GWL
Non-interest bearing short-term notes totalling $96,191 were repaid by GWL in January 2021 (Note 33). Non-interest bearing
short-term notes totalling $170,849 were issued during the year ended December 31, 2021 to GWL. $2,515 of the notes
issued were repaid in August 2021 and the remaining $168,334 were repaid in January 2022 (Note 33).
Schedules of Maturity and Cash Flow Activities
The schedule of repayment of mortgages, loans and notes receivable based on maturity and redemption rights is as follows:
($ thousands)
Principal repayments
2022
2023
2024
2025
2026
Thereafter
Total
Mortgages receivable
$
74,795 $
50,947 $
52,451 $
— $
— $
6,128 $ 184,321
Loans receivable
Notes receivable from GWL
—
168,334
—
—
—
—
Total principal repayments
243,129
50,947
52,451
2,246
—
—
—
—
—
—
—
—
—
—
—
—
—
168,334
6,128
352,655
—
2,246
$
245,375 $
50,947 $
52,451 $
— $
— $
6,128 $ 354,901
Interest accrued
Total repayments
Choice Properties REIT
2021 Annual Report 141
Notes to the Consolidated Financial Statements
The following table reconciles the changes in cash flows from investing activities for mortgages, loans and notes receivable:
($ thousands)
Note
Mortgages
receivable
Loans receivable
Notes receivable
from GWL
Mortgages, loans and
notes receivable
December 31, 2021
Balance, beginning of year
$
165,470 $
2,285 $
96,191 $
Advances
Repayments
Interest received
Total cash flow activities
Reversal of expected credit loss on
mortgage receivable
Settlement upon acquisition of
investment property
Advance upon disposition of West
Waterloo (i)
Interest accrued
Total non-cash activities
Balance, end of year
4
4
22
61,094
(46,082)
(7,847)
7,165
1,502
(4,846)
6,098
11,178
13,932
1,517
(3,783)
(65)
(2,331)
—
—
—
46
46
170,849
(98,706)
—
72,143
—
—
—
—
—
$
186,567 $
— $
168,334 $
263,946
233,460
(148,571)
(7,912)
76,977
1,502
(4,846)
6,098
11,224
13,978
354,901
(i)
Includes the advance of $5,250 for the principal balance of the vendor take-back mortgage and $848 of miscellaneous fees incurred on behalf of the
borrower.
Choice Properties invests in mortgages and loans to facilitate acquisitions. Credit risks arise if the borrowers default on
repayment of their mortgages and loans to the Trust. Choice Properties’ receivables, including mezzanine financings, are
typically subordinate to prior ranking mortgage charges and generally represent equity financing for the Trust’s co-owners or
development partners. Not all of the Trust’s mezzanine financing activities will result in acquisitions. At the time of advancing
financing, the Trust’s co-owners or development partners would typically have some of the equity invested in the form of
cash with the balance being financed by third-party lenders and Choice Properties.
In September 2021, the Trust advanced a $41,600 mezzanine loan to a development partner. The mezzanine loan is primarily
secured by, and has an equity conversion right for a 75% ownership interest in, 154 acres of future industrial development
land located in East Gwillimbury, Ontario.
In November 2021, the Trust advanced $9,400 to an existing development partnership, in which it owns the majority stake.
The funds were used to execute a strategic acquisition of a property adjacent to an existing development project in Caledon,
Ontario.
In December 2021, the Trust advanced $5,250, net of fees and the repayment of a previous loan balance, in a vendor take-
back mortgage. The mortgage was issued as a part of the disposition of its interest in a property under development in
Waterloo, Ontario.
The Trust has issued approximately $184,000 of secured mortgages to other third-party borrowers. These loans are with
borrowers who are strategic development partners of the Trust and are secured by real property assets. In the event of a
large commercial real estate market correction, the fair market value of an underlying property may be unable to support the
investment. The Trust mitigates this risk by obtaining guarantees and registered mortgage charges, which are often cross-
collateralized on several different commercial properties that are in various stages of development.
Note 12. Intangible Assets
The intangible assets for Choice Properties relate to its third-party revenue streams associated with property and asset
management contracts for co-ownership property interests and joint ventures. The Trust has the continuing rights, based on
the co-ownership agreements, to property and asset management fees from investment properties where it manages the
interests of co-owners. As at December 31, 2021, the carrying value was $28,000 (December 31, 2020 - $29,000), net of
accumulated amortization of $2,000 (December 31, 2020 - $1,000).
Choice Properties REIT
2021 Annual Report 142
Notes to the Consolidated Financial Statements
Note 13. Accounts Receivable and Other Assets
($ thousands)
Note
December 31, 2021
December 31, 2020
As at
As at
Rent receivables(i) - net of expected credit loss of $17,066 (2020 - $20,041)
$
12,815 $
Accrued recovery income
Lease receivable
Other receivables
Cost-to-complete receivable
Due from related parties(ii)
Restricted cash
Prepaid property taxes
Prepaid insurance
Other assets
Right-of-use assets - net of accumulated amortization of $1,290 (2020 - $1,241)
Deferred tax asset
Deferred acquisition costs and deposits on land
Designated hedging derivatives
Accounts receivable and other assets
Classified as:
Non-current
Current
14,476
22,351
13,711
8,501
2,044
239
4,465
813
18,335
1,956
2,673
8,630
3,266
33
33
17
28
$
$
$
114,275 $
116,055
42,098 $
72,177
114,275 $
38,104
77,951
116,055
19,341
13,375
19,405
13,474
13,721
—
780
10,070
185
17,846
4,081
1,981
1,419
377
(i)
(ii)
Includes net rent receivable of $1,474 from Loblaw, $nil from GWL and $nil from Wittington (December 31, 2020 - $36, $13 and $131) (Note 33).
Other receivables due from related parties include $2,044 from Loblaw (December 31, 2020 - $nil) (Note 33).
Rent receivables
In determining the expected credit losses the Trust takes into account the payment history and future expectations of likely
default events (i.e. asking for rental concessions or stating they will not be making rental payments on the due date) based on
actual or expected insolvency filings or company voluntary arrangements and likely deferrals of payments due. These
assessments are made on a tenant-by-tenant basis.
The Trust’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the
assessments. As a result, the value of the expected credit loss is subject to a degree of uncertainty and is made on the basis
of assumptions which may not prove to be accurate with the continued uncertainty caused by COVID-19.
Choice Properties REIT
2021 Annual Report 143
Notes to the Consolidated Financial Statements
Note 14. Long Term Debt
($ thousands)
Senior unsecured debentures
Mortgages payable
Construction loans
Long term debt
Classified as:
Non-current
Current
Senior Unsecured Debentures
($ thousands)
As at
As at
December 31, 2021
December 31, 2020
5,107,760 $
1,109,344
12,906
5,255,529
1,204,799
25,193
6,230,010 $
6,485,521
5,711,500 $
518,510
6,230,010 $
6,158,246
327,275
6,485,521
$
$
$
$
Series
Issuance /
Assumption Date
Maturity
Date
Effective Interest
Rate
As at
As at
December 31, 2021
December 31, 2020
B
D
F
G
H
I
J
K
L
M
N
O
P
Q
9
10
D-C
Jul. 5, 2013
Jul. 5, 2023
Feb. 8, 2014
Feb. 8, 2024
Nov. 24, 2015
Nov. 24, 2025
Mar. 7, 2016
Mar. 7, 2023
Mar. 7, 2016
Mar. 7, 2046
Jan. 12, 2018
Mar. 21, 2022
Jan. 12, 2018
Jan. 10, 2025
Mar. 8, 2018
Sep. 9, 2024
Mar. 8, 2018
Mar. 8, 2028
Jun. 11, 2019
Jun. 11, 2029
Mar. 3, 2020
Mar. 4, 2030
Mar. 3, 2020
Mar. 4, 2050
May 22, 2020
May 21, 2027
Nov. 30, 2021
Nov. 30, 2026
Jul. 4, 2013
Jul. 4, 2013
Sep. 20, 2021
Sep. 20, 2022
May 4, 2018
Jan. 18, 2023
4.90%
4.29%
4.06%
3.20%
5.27%
3.01%
3.55%
3.56%
4.18%
3.53%
2.98%
3.83%
2.85%
2.46%
3.60%
3.84%
3.30%
$
200,000 $
200,000
200,000
250,000
100,000
—
350,000
550,000
750,000
750,000
400,000
100,000
500,000
350,000
—
300,000
125,000
200,000
200,000
200,000
250,000
100,000
300,000
350,000
550,000
750,000
750,000
400,000
100,000
500,000
—
200,000
300,000
125,000
Total principal outstanding
5,125,000
5,275,000
Debt discounts and premiums - net of accumulated amortization of $16,575
(2020 - $15,522)
Debt placement costs - net of accumulated amortization of $15,250 (2020 -
$12,301)
(961)
(16,279)
Senior unsecured debentures
$
5,107,760 $
(2,014)
(17,457)
5,255,529
As at December 31, 2021, the senior unsecured debentures had a weighted average effective interest rate of 3.56% and a
weighted average term to maturity of 5.4 years (December 31, 2020 - 3.61% and 6.0 years, respectively). Senior unsecured
debentures Series B through Series Q were issued by the Trust, Series D-C was assumed by the Trust on May 4, 2018,
following the acquisition of Canadian Real Estate Investment Trust, and Series 10 was issued by the Partnership.
On June 21, 2021, Choice Properties Limited Partnership redeemed in full, at par, plus accrued and unpaid interest thereon,
the $200,000 aggregate principal amount of series 9 senior unsecured debentures bearing interest at 3.60% with an original
maturity date of September 20, 2021.
Choice Properties REIT
2021 Annual Report 144
Notes to the Consolidated Financial Statements
On November 30, 2021, the Trust completed a $350,000 offering on a private placement basis of the series Q senior
unsecured debenture bearing interest at 2.46% per annum maturing on November 30, 2026. The debentures were issued as
green bonds pursuant to the Trust’s Green Financing Framework, which Sustainalytics, a global leader in providing ESG
research and analysis, reviewed and confirmed as being aligned with the International Capital Markets Association’s Green
Bond Principles 2021 and the Loan Market Association Green Loan Principles 2021.
The Trust intends to allocate the net proceeds from the issuance of the series Q senior unsecured debentures to fund the
financing and/or refinancing of eligible green projects as described in the Trust’s Green Financing Framework. Prior to the
allocation of the net proceeds of the issuance to eligible green projects, the Trust used the net proceeds of the issuance to
repay existing indebtedness, including the early redemption of the Trust’s $300,000 principal amount of 3.01% series I senior
unsecured debentures on December 10, 2021, and to repay a portion of the balance drawn on the Trust’s credit facility. The
Trust incurred early repayment charges of approximately $1,500 upon redeeming the series I senior unsecured debentures.
Mortgages Payable
($ thousands)
Mortgage principal
Net debt discounts and premiums - net of accumulated amortization of $5,968
(2020 - $5,602)
Debt placement costs - net of accumulated amortization of $307 (2020 - $138)
Mortgages payable
As at
As at
December 31, 2021
December 31, 2020
1,112,310 $
1,206,638
(1,300)
(1,666)
(934)
(905)
1,109,344 $
1,204,799
$
$
As at December 31, 2021, the mortgages had a weighted average effective interest rate of 3.75% and a weighted average
term to maturity of 5.2 years (December 31, 2020 - 3.83% and 5.5 years, respectively).
Construction Loans
As at December 31, 2021, $12,906 was outstanding on the construction loans (December 31, 2020 - $25,193), with a
weighted average effective interest rate of 2.08% and a weighted average term to maturity of 6.0 years which are due on
demand (December 31, 2020 - 2.42% and 0.3 years, respectively).
For the purpose of financing the development of certain retail, industrial and residential properties, various investments in
equity accounted joint ventures and co-ownerships have variable rate non-revolving construction facilities in which certain
subsidiaries of the Trust guarantee its own share. These construction loans, which mature throughout 2022 and 2031, have a
maximum amount available to be drawn at the Trust’s ownership interest of $293,151, of which $227,462 relates to equity
accounted joint ventures as at December 31, 2021 (December 31, 2020 - $226,145 and $198,002, respectively).
Schedules of Repayments and Cash Flow Activities
The schedule of principal repayment of long term debt, based on maturity, is as follows:
($ thousands)
2022
2023
2024
2025
2026 Thereafter
Total
Senior unsecured debentures
$ 300,000 $ 575,000 $ 750,000 $ 550,000 $ 350,000 $ 2,600,000 $ 5,125,000
Mortgages payable
Construction loans
Total
216,837
76,954
158,185
153,493
64,547
442,294
1,112,310
4,686
—
—
—
—
8,220
12,906
$ 521,523 $ 651,954 $ 908,185 $ 703,493 $ 414,547 $ 3,050,514 $ 6,250,216
Choice Properties REIT
2021 Annual Report 145
Notes to the Consolidated Financial Statements
The following table reconciles the changes in cash flows from financing activities for long term debt:
($ thousands)
Senior unsecured
debentures
Mortgages
payable
Construction
loans
Long term debt
Balance, beginning of year
$
5,255,529 $
1,204,799 $
25,193 $
6,485,521
December 31, 2021
Issuances and advances
Repayments
Debt placement costs
Total cash flow activities
Amortization of debt discounts and premiums
Amortization of debt placement costs
Total non-cash activities
Balance, end of year
Note 15. Credit Facility
350,000
(500,000)
(1,770)
(151,770)
1,053
2,948
4,001
34,072
(128,400)
(930)
(95,258)
(366)
169
(197)
8,220
(20,507)
—
(12,287)
—
—
—
392,292
(648,907)
(2,700)
(259,315)
687
3,117
3,804
$
5,107,760 $
1,109,344 $
12,906 $
6,230,010
Choice Properties has a $1,500,000 senior unsecured committed revolving credit facility provided by a syndicate of lenders.
The credit facility bears interest at variable rates of either Prime plus 0.20% or Bankers’ Acceptance rate plus 1.20%. The
pricing is contingent on the credit ratings for Choice Properties from either DBRS and S&P remaining at BBB (high). As at
December 31, 2021,$nil was drawn under the syndicated facility (December 31, 2020 - $nil). For the year ended December
31, 2021, $1,614 of amortization of the credit facility’s deferred financing costs are included in net interest expense and other
financing charges (December 31, 2020 - $1,430). The unamortized balance for debt placement costs at December 31, 2021
of $3,555 have been included in other assets (Note 13) (2020 - $3,337).
The credit facility contains certain financial covenants. As at December 31, 2021, the Trust was in compliance with all its
financial covenants for the credit facility.
During the year ended December 31, 2021, the maturity date for the credit facility was extended to June 24, 2026.
Choice Properties REIT
2021 Annual Report 146
Notes to the Consolidated Financial Statements
Note 16. Unitholders' Equity
Trust Units (authorized - unlimited)
Each Trust Unit (“Unit”) represents a single vote at any meeting of Unitholders and entitles the Unitholder to receive a pro-
rata share of all distributions. With certain restrictions, a Unitholder has the right to require Choice Properties to redeem its
Units on demand. Upon receipt of a redemption notice by Choice Properties, all rights to and under the Units tendered for
redemption shall be surrendered and the holder thereof shall be entitled to receive a price per unit as determined by a market
formula and shall be paid in accordance with the conditions provided for in the Declaration of Trust.
Exchangeable Units (authorized - unlimited)
Exchangeable Units issued by the Partnership are economically equivalent to Units, receive distributions equal to the
distributions paid on the Units and are exchangeable, at the holder’s option, to Units. All Exchangeable Units are held,
directly or indirectly, by GWL.
The 70,881,226 Exchangeable Units issued on May 4, 2018, in connection with the acquisition of Canadian Real Estate
Investment Trust contain voting and exchange restrictions which will expire based on the following schedule:
Voting and exchange rights restriction period expiration dates
Number of Exchangeable Units eligible for voting and transfer
July 5, 2027
July 5, 2028
July 5, 2029
22,988,505
22,988,505
24,904,216
Special Voting Units
Each Exchangeable Unit is accompanied by one Special Voting Unit which provides the holder thereof with a right to vote on
matters respecting the Trust equal to the number of Units that may be obtained upon the exchange of the Exchangeable
Units for which each Special Voting Unit is attached.
Units Outstanding
($ thousands except where otherwise indicated)
Units
Amount
Units
Amount
Units, beginning of year
326,941,663 $ 3,652,620
310,292,869 $ 3,409,836
Units issued to related party as part of investment properties
Note
As at December 31, 2021
As at December 31, 2020
acquisition
Distribution in Units
Consolidation of Units
—
—
—
—
16,500,000
208,935
—
2,277,457
29,425
—
(2,277,457)
—
Units issued under unit-based compensation arrangements
19
837,071
9,332
307,877
4,841
Reclassification of vested Unit-Settled Restricted Units liability to
equity
—
1,548
—
1,929
Units repurchased for unit-based compensation arrangements
19
(189,887)
(2,559)
(159,083)
(2,346)
Units, end of year
327,588,847 $ 3,660,941
326,941,663 $ 3,652,620
Exchangeable Units, beginning of year
395,786,525 $ 5,149,182
389,961,783 $ 5,424,368
Units issued to related party as part of investment properties
acquisition
Adjustment to fair value of Exchangeable Units
—
—
—
5,824,742
79,100
862,815
—
(354,286)
Exchangeable Units, end of year
395,786,525 $ 6,011,997
395,786,525 $ 5,149,182
Total Units and Exchangeable Units, end of year
723,375,372
722,728,188
Units Issued to Related Party as part of Investment Properties Acquisition
During the year ended December 31, 2020, the acquisition of two office assets from Wittington was satisfied in full by the
issuance of 16,500,000 Units of Choice Properties, while the acquisition of six industrial assets from a wholly-owned
subsidiary of GWL was satisfied in full by the issuance of 5,824,742 Exchangeable Units.
Choice Properties REIT
2021 Annual Report 147
Notes to the Consolidated Financial Statements
Distribution in Units and Consolidation of Units
As a result of the increase in taxable income generated primarily from dispositions completed in the year ended
December 31, 2020, the Board declared a special non-cash distribution payable on December 31, 2020, of 2,277,457 Units
at $0.09 per Unit totalling $29,425. Immediately following the issuance of Units, the Units were consolidated such that each
Unitholder held the same number of Units after the consolidation as each Unitholder held prior to the special non-cash
distribution.
Normal Course Issuer Bid (“NCIB”)
Choice Properties may from time to time purchase Units in accordance with the rules prescribed under applicable stock
exchange or regulatory policies. On November 17, 2021, Choice Properties received approval from the TSX to purchase up
to 27,558,665 Units during the twelve-month period from November 19, 2021 to November 18, 2022, by way of a NCIB over
the facilities of the TSX or through alternative trading systems. Choice Properties intends to file a Notice of Intention to make
a NCIB with the TSX upon the expiry of its current NCIB.
Units Issued under Unit-Based Compensation Arrangements
Units were issued as part of settlements under the Unit Option Plan and grants under the Unit-Settled Restricted Unit Plan,
as applicable (Note 19).
Units Repurchased for Unit-Based Compensation Arrangement
The Trust acquired Units under its NCIB during the year ended December 31, 2021 and the year ended December 31, 2020,
which were then granted to certain employees in connection with the Unit-Settled Restricted Unit Plan, and are subject to
vesting conditions and disposition restrictions.
Distributions
Choice Properties’ Board retains full discretion with respect to the timing and quantum of distributions, however the total
income distributed will not be less than the amount necessary to ensure the Trust will not be liable to pay income taxes under
Part I of the Income Tax Act (Canada) (Note 17). The taxable income allocated to the Trust and Exchangeable Unitholders
may vary in certain taxation years. Over time, such differences, in aggregate, are expected to be minimal.
In the year ended December 31, 2021, Choice Properties declared cash distributions of $0.740 per unit (December 31, 2020 -
$0.740), or $535,104 in aggregate, including distributions to holders of Exchangeable Units, which are reported as interest
expense (December 31, 2020 - $554,157). Distributions declared to Unitholders of record at the close of business on the last
business day of a month are paid on or about the 15th day of the following month.
The holders of Exchangeable Units may elect to defer receipt of all, or a portion of distributions declared by the Partnership
until the first date following the end of the fiscal year. If the holder elects to defer, the Partnership will loan the holder the
amount equal to the deferred distribution without interest, and the loan will be due and payable in full on the first business
day following the end of the fiscal year the loan was advanced.
Distribution Reinvestment Plan (“DRIP”)
Choice Properties instituted a DRIP that allows eligible Unitholders to elect to automatically reinvest their regular monthly
cash distributions in additional Units. On April 25, 2018, the Board suspended the DRIP commencing with the distribution
declared in May 2018. The DRIP will remain suspended until further notice.
Base Shelf Prospectus
On March 4, 2020, Choice Properties filed a Short Form Base Shelf Prospectus allowing for the issuance of up to $2,000,000
of Units and debt securities, or any combination thereof over a 25-month period.
Choice Properties REIT
2021 Annual Report 148
Notes to the Consolidated Financial Statements
Note 17. Income Taxes
The Trust is taxed as a “mutual fund trust” and a REIT under the Income Tax Act (Canada). The Trustees intend to distribute
all of the Trust’s taxable income to the Unitholders and accordingly, the Trust is not taxable on its Canadian investment
property income. The Trust is subject to taxation on certain taxable entities in Canada and the United States.
Income taxes recognized in the consolidated statements of income (loss) and comprehensive income (loss) was as follows:
($ thousands)
Current income tax recovery (expense)
Deferred income tax recovery
Income tax recovery
Year Ended
December 31, 2021
December 31, 2020
$
$
(13) $
692
679 $
226
1,571
1,797
A deferred income tax asset of $2,673 (Note 13) was recognized due to temporary differences between the carrying value
and the tax basis of net assets held in the Trust’s taxable subsidiaries (December 31, 2020 - $1,981).
Note 18. Trade Payables and Other Liabilities
($ thousands)
Trade accounts payable
Accrued liabilities and provisions
Accrued acquisition transaction costs and other related expenses
Accrued capital expenditures(i)
Accrued interest expense
Due to related party(ii)
Contingent consideration
Unit-based compensation
Distributions payable(iii)
Right-of-use lease liabilities
Tenant deposits
Deferred revenue
Designated hedging derivatives
Trade payables and other liabilities
Classified as:
Non-current
Current
Note
December 31, 2021
December 31, 2020
As at
As at
$
40,283 $
106,744
38,643
67,967
53,402
193,927
38,843
14,285
20,344
1,920
21,960
20,162
1,925
33
19
28
20,493
108,016
38,655
59,765
57,171
121,264
—
12,930
20,344
4,224
19,867
20,710
6,560
$
$
$
620,405 $
489,999
22,332 $
598,073
620,405 $
13,734
476,265
489,999
(i)
(ii)
(iii)
Includes payable to Loblaw of $nil for construction allowances (December 31, 2020 - $7,869) (Note 33).
Includes distributions accrued on Exchangeable Units of $192,741 payable to GWL (December 31, 2020 - $120,598); $835 payable for shared costs
incurred by GWL, the Services Agreement expense and other related party charges (December 31, 2020 - $332); and $351 of reimbursed contract revenue
and other related party charges payable to Loblaw (December 31, 2020 - $334).
Includes distributions payable to GWL of $3,124 and Wittington of $1,018 (December 31, 2020 - $3,124 and $1,018) (Note 33).
Contingent Consideration
On March 30, 2021, the Trust acquired an 85% interest in future industrial development land in Caledon, Ontario, for
$138,000 (Note 4). The purchase price comprised a $100,000 cash payment and a commitment to pay the remaining $38,000
balance based on certain milestones being met over the development lifecycle, which represented the then present value of
the estimated amount payable. The present value of the estimated amount payable is $38,843 as at December 31, 2021.
Choice Properties REIT
2021 Annual Report 149
Notes to the Consolidated Financial Statements
Note 19. Unit-Based Compensation
($ thousands)
Unit Option plan
Restricted Unit plans
Performance Unit plan
Trustee Deferred Unit plan
Unit-based compensation expense
Recorded in:
General and administrative expenses
Adjustment to fair value of unit-based compensation
Year Ended
December 31, 2021
December 31, 2020
$
$
$
$
662 $
3,592
970
1,961
7,185 $
5,605 $
1,580
7,185 $
202
3,495
503
1,144
5,344
4,838
506
5,344
As at December 31, 2021, the carrying value of the unit-based compensation liability was $14,285 (December 31, 2020 -
$12,930) (Note 18).
Unit Option Plan
Choice Properties maintains a Unit Option plan for certain employees. Under this plan, Choice Properties may grant Unit
Options totalling up to 19,744,697 Units, as approved at the annual and special meeting of Unitholders on April 29, 2015. The
Unit Options vest in tranches over a period of four years. The following is a summary of Choice Properties’ Unit Option plan
activity:
Year ended December 31, 2021
Year ended December 31, 2020
Number of awards
Weighted average
exercise price/unit
Number of awards
Weighted average
exercise price/unit
Outstanding Unit Options, beginning of year
1,082,640 $
Exercised
Cancelled
Expired
Outstanding Unit Options, end of year
Unit Options exercisable, end of year
(647,184)
—
—
435,456 $
292,592 $
12.54
12.34
—
—
12.84
13.13
1,287,314 $
(148,794)
(54,414)
(1,466)
1,082,640 $
706,804 $
12.51
12.09
13.15
13.93
12.54
12.56
The assumptions used to measure the fair value of the Unit Options under the Black-Scholes model (level 2) were as follows:
Expected average distribution yield
Expected average Unit price volatility
Average risk-free interest rate
Expected average remaining life of options
As at December 31, 2021
As at December 31, 2020
5.03%
5.54%
13.38% - 21.46%
15.58% - 35.02%
0.001% - 0.84%
0.1 - 1.7 Years
0.01% - 0.27%
0.1 - 2.7 Years
The following table details the Unit Options outstanding as at December 31, 2021:
Exercise Price
$14.21
$11.92
$11.92 to $14.21
Expiry Date
Number of Unit Options outstanding
as at December 31, 2021
Remaining weighted
average life (in years)
2024
2025
174,454
261,002
435,456
2.2
3.2
2.7
Choice Properties REIT
2021 Annual Report 150
Notes to the Consolidated Financial Statements
Restricted Unit Plans
Choice Properties has a Restricted Unit Plan and a Unit-Settled Restricted Unit Plan as described below.
Restricted Unit Plan
Restricted Units (“RU”) entitle certain employees to receive the value of the RU award in cash or Units at the end of the
applicable vesting period, which is usually three years in length. The RU plan provides for the crediting of additional RUs in
respect of distributions paid on Units for the period when a RU is outstanding. The fair value of each RU granted is measured
based on the market value of a Trust Unit at the balance sheet date. No RUs had vested as at December 31, 2021
(December 31, 2020 - nil).
The following is a summary of Choice Properties’ RU plan activity:
(Number of awards)
Outstanding Restricted Units, beginning of year
Granted
Reinvested
Exercised
Cancelled
Outstanding Restricted Units, end of year
Year Ended
Year ended
December 31, 2021
December 31, 2020
405,713
119,134
22,014
(104,563)
(2,724)
439,574
484,544
69,227
24,451
(161,044)
(11,465)
405,713
Unit-Settled Restricted Unit Plan
Under the terms of the Unit-Settled Restricted Unit (“URU”) plan, certain employees are granted URUs which are subject to
vesting conditions and disposition restrictions. Typically, full vesting of the URUs will not occur until the employee has
remained with Choice Properties for three or five years from the date of grant. Depending on the nature of the grant, the
URUs are subject to a six- or seven-year holding period during which the Units cannot be disposed. There were 996,896
URUs vested but still subject to disposition restrictions as at December 31, 2021 (December 31, 2020 - 764,385).
The following is a summary of Choice Properties’ URU plan activity for units not yet vested:
(Number of awards)
Outstanding Unit-Settled Restricted Units, beginning of year
Granted
Vested
Outstanding Unit-Settled Restricted Units, end of year
Year Ended
Year ended
December 31, 2021
December 31, 2020
588,534
189,887
(177,502)
600,919
624,419
159,083
(194,968)
588,534
Performance Unit Plan
Performance Units (“PU”) entitle certain employees to receive the value of the PU award in cash or Units at the end of the
applicable performance period, which is usually three years in length, based on the Trust achieving certain performance
conditions. The PU plan provides for the crediting of additional PUs in respect of distributions paid on Units for the period
when a PU is outstanding. The fair value of each PU granted is measured based on the market value of a Trust Unit at the
balance sheet date. There were no PUs vested as at December 31, 2021 (December 31, 2020 - nil).
Choice Properties REIT
2021 Annual Report 151
Notes to the Consolidated Financial Statements
The following is a summary of Choice Properties’ PU plan activity:
(Number of awards)
Outstanding Performance Units, beginning of year
Granted
Reinvested
Exercised
Cancelled
Added by performance factor
Outstanding Performance Units, end of year
Year Ended
Year ended
December 31, 2021
December 31, 2020
135,695
82,847
9,403
(30,336)
—
—
197,609
103,868
59,273
7,241
(40,205)
(3,543)
9,061
135,695
Trustee Deferred Unit Plan
Non-management members of the Board are required to receive a portion of their annual retainer in the form of Deferred
Units (“DU”) and may also elect to receive up to 100% of their remaining fees in DUs. Distributions paid earn fractional DUs,
which are treated as additional awards. The fair value of each DU granted is measured based on the market value of a Unit at
the balance sheet date. All DUs vest when granted, however, they cannot be exercised while Trustees are members of the
Board.
The following is a summary of Choice Properties’ DU plan activity:
(Number of awards)
Outstanding Trustee Deferred Units, beginning of year
Granted
Reinvested
Exercised
Outstanding Trustee Deferred Units, end of year
Year Ended
Year ended
December 31, 2021
December 31, 2020
368,290
82,969
18,942
(80,739)
389,462
277,139
76,632
17,338
(2,819)
368,290
Choice Properties REIT
2021 Annual Report 152
Notes to the Consolidated Financial Statements
Note 20. Rental Revenue
Rental revenue is comprised of the following:
($ thousands)
Base rent
Property tax and insurance
recoveries
Related
Parties(i) Third-party
Year ended
December 31, 2021
Related
Parties(i)
Third-party
Year ended
December 31, 2020
$ 526,632 $ 357,396 $
884,028 $ 526,348 $ 347,929 $
874,277
Operating cost recoveries
62,999
86,091
149,090
57,138
146,172
100,301
246,473
146,407
96,882
86,034
243,289
143,172
Lease surrender and other
revenue
1,798
10,932
12,730
27
9,849
9,876
Rental revenue
$ 737,601 $ 554,720 $
1,292,321 $ 729,920 $ 540,694 $
1,270,614
(i)
Refer to Note 33, Related Party Transactions.
Choice Properties enters into long-term lease contracts with tenants for space in its properties. Initial lease terms are
generally between three and ten years for commercial units and longer terms for food store anchors. Leases generally
provide for the tenant to pay Choice Properties base rent, with provisions for contractual increases in base rent over the term
of the lease, plus operating cost, property tax and insurance recoveries. Many of the leases with Loblaw are for stand-alone
retail sites. Loblaw is directly responsible for the operating costs on such sites.
Future base rent revenue, excluding adjustments for straight-line rent, for the years ended December 31 is as follows:
($ thousands)
2022
2023
2024
2025
2026
Thereafter
Total
Note 21. Property Operating Costs
($ thousands)
Property taxes and insurance
Recoverable operating costs
Non-recoverable operating costs
Property operating costs
$
867,113
820,128
740,737
669,301
584,151
1,955,021
$
5,636,451
Year Ended
December 31, 2021
December 31, 2020
$
$
261,905 $
111,404
6,997
380,306 $
256,930
103,310
23,776
384,016
Included in non-recoverable operating expenses are expected credit losses of $4,388 for the year ended December 31, 2021,
respectively (2020 - $21,694, respectively). Refer to Note 13 for discussion on rents receivable and the related expected
credit losses.
Choice Properties REIT
2021 Annual Report 153
Notes to the Consolidated Financial Statements
Note 22. Interest Income
($ thousands)
Note
December 31, 2021
December 31, 2020
Year Ended
Interest income from mortgages and loans receivable
11
$
11,224 $
Interest income earned from financial real estate assets
Interest income (expense) from financial real estate assets due to
changes in value
Other interest income
Interest income
Note 23. Fee Income
($ thousands)
Fees charged to related party
Fees charged to third parties
Fee income
Note 24. Net Interest Expense and Other Financing Charges
9
4,295
2,556
2,004
$
20,079 $
12,309
1,741
(1,148)
737
13,639
Year Ended
Note
December 31, 2021
December 31, 2020
33
$
$
858
3,558
4,416
315 $
3,486
3,801 $
Year Ended
($ thousands)
Note
December 31, 2021
December 31, 2020
Interest on senior unsecured debentures
$
186,671 $
Fees incurred on early repayment of debentures
Interest on mortgages and construction loans
Interest on credit facility
Interest on right-of-use lease liabilities
Amortization of debt discounts and premiums
Amortization of debt placement costs
Distributions on Exchangeable Units(i)
Less: Capitalized interest(ii)
1,512
46,260
4,275
147
687
4,731
292,884
537,167
(2,642)
14
14,15
33
5
Net interest expense and other financing charges
$
534,525 $
(i)
(ii)
Represents interest on indebtedness due to GWL.
Interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.64% (2020 - 3.70%).
189,978
6,763
48,960
7,316
216
(1,806)
4,592
288,932
544,951
(4,231)
540,720
Choice Properties REIT
2021 Annual Report 154
Notes to the Consolidated Financial Statements
Note 25. General and Administrative Expenses
($ thousands)
Note
December 31, 2021
December 31, 2020
Salaries, benefits and employee costs
$
51,302 $
47,940
Year Ended
Investor relations and other public entity costs
Professional fees
Information technology costs
Services Agreement charged by related party
33
Amortization of other assets
Office related costs
Other
Total general and administrative expenses
Less:
Capitalized to investment properties
Allocated to recoverable operating expenses
2,616
4,079
6,324
3,094
1,294
2,861
483
72,053
(7,076)
(24,060)
General and administrative expenses
$
40,917 $
Note 26. Other Fair Value Gains (Losses), Net
Year Ended
2,318
4,506
4,460
3,095
548
2,590
901
66,358
(6,682)
(22,958)
36,718
($ thousands)
Note
December 31, 2021
December 31, 2020
Adjustment to fair value of unit-based compensation
Fair value gain from release of holdback payable
Adjustment to fair value on mortgage receivable classified as FVTPL
Other fair value gains (losses), net
19
18
11
$
$
(1,580) $
—
—
(1,580) $
(506)
6,750
(4,034)
2,210
Note 27. Financial Risk Management
As a result of holding and issuing financial instruments, Choice Properties is exposed to credit risk, market risk and liquidity
and capital availability risk. The following is a description of those risks and how the exposures are managed:
a. Credit Risk
Choice Properties is exposed to credit risk resulting from the possibility that counterparties could default on their
financial obligations to Choice Properties. Exposure to credit risk relates to rent receivables, cash and cash equivalents,
short- term investments, security deposits, derivatives, and mortgages, loans and notes receivable.
Choice Properties mitigates the risk of credit loss related to rent receivables by evaluating the creditworthiness of new
tenants, obtaining security deposits wherever permitted by legislation, ensuring its tenant mix is diversified and by
limiting its exposure to any one tenant (except Loblaw). Choice Properties establishes for expected credit losses with
respect to rent receivables. The allowance is determined on a tenant-by-tenant basis based on the specific factors
related to the tenant.
The risk related to cash and cash equivalents, short-term investments, security deposits, and derivatives is reduced by
policies and guidelines that require Choice Properties to enter into transactions only with Canadian financial and
government institutions that have a minimum short-term rating of “A-2” and a long-term credit rating of “A-” from S&P or
an equivalent credit rating from another recognized credit rating agency and by placing minimum and maximum limits for
exposures to specific counterparties and instruments.
The risk related to its mortgages, loans and notes receivable arise in the event that the borrowers default on the
repayment of such financing. Choice Properties has established a program with a group of strategic development
partners whereby the Trust provides financing in the form of mezzanine loans, joint venture financing, vendor take-back
financing and other arrangements. In exchange, the Trust generally receives an option or other rights to acquire an
Choice Properties REIT
2021 Annual Report 155
Notes to the Consolidated Financial Statements
interest in real property assets. The Trust mitigates this risk by ensuring the loans are well secured by real property
assets and by obtaining guarantees where necessary.
Despite such mitigation efforts, if Choice Properties’ counterparties default, it could have a material adverse impact on
Choice Properties’ financial condition or results of operations and its ability to make distributions to Unitholders.
b. Market Risk
Interest Rate Risk
Choice Properties requires extensive financial resources to complete the implementation of its strategy. Successful
implementation of Choice Properties’ strategy will require cost effective access to additional funding. There is a risk that
interest rates may increase which could impact long-term borrowing costs and negatively impact financial performance.
The majority of Choice Properties’ debt is financed at fixed rates with maturities staggered over 28 years, thereby
mitigating the exposure to near term changes in interest rates. To the extent that Choice Properties incurs variable rate
indebtedness (such as borrowings under the Revolving Credit Facility), this will result in fluctuations in Choice Properties’
cost of borrowing as interest rates change. If interest rates rise, Choice Properties’ operating results and financial
condition could be materially adversely affected and the amount of cash available for distribution to Unitholders would
decrease.
Choice Properties’ Revolving Credit Facility and the Debentures also contain covenants that require it to maintain certain
financial ratios on a consolidated basis. If Choice Properties does not maintain such ratios, its ability to make
distributions to Unitholders may be limited or suspended.
Choice Properties analyzes its interest rate risk and the impact of rising and falling interest rates on operating results and
financial condition on a regular basis. An increase of 1.0% per annum in the variable component of the interest rate for
the credit facility would result in an increase to liabilities and a decrease in net income of $15,000 (2020 - $15,000)
(assuming fully drawn credit facility).
Unit Price Risk
Choice Properties is exposed to Unit price risk as a result of the issuance of the Exchangeable Units, which are
economically equivalent to and exchangeable for Units, as well as the issuance of unit-based compensation. The
Exchangeable Units and unit-based compensation liabilities are recorded at their fair value based on market trading
prices. The Exchangeable Units and unit-based compensation negatively impact net income when the Unit price rises
and positively impact net income when the Unit price declines.
An increase of $1.00 in the underlying price of Choice Properties’ Units would result in an increase to liabilities and
decrease in net income due to Exchangeable Units of $395,787 (2020 - $395,787) and Unit-based compensation
liabilities of $1,299 (2020 - $1,568).
c. Liquidity and Capital Availability Risk
Liquidity risk is the risk that Choice Properties cannot meet a demand for cash or fund its obligations as they come due.
Although a portion of the cash flows generated by the Properties is devoted to servicing such outstanding debt, there
can be no assurance that Choice Properties will continue to generate sufficient cash flows from operations to meet
interest payments and principal repayment obligations upon an applicable maturity date. If Choice Properties is unable to
meet interest payments or principal repayment obligations, it could be required to renegotiate such payments or issue
additional equity or debt or obtain other financing. The failure of Choice Properties to make or renegotiate interest or
principal payments or issue additional equity or debt or obtain other financing could materially adversely affect Choice
Properties’ financial condition and results of operations and decrease or eliminate the amount of cash available for
distribution to Unitholders.
The real estate industry is highly capital intensive. Choice Properties requires access to capital to fund operating
expenses, property maintenance costs, development spending, other capital expenditures, and to refinance
indebtedness. Although Choice Properties expects to have access to the Revolving Credit Facility, there can be no
assurance that it will otherwise have access to sufficient capital or access to capital on favourable terms. Further, in
certain circumstances, Choice Properties may not be able to borrow funds due to limitations set forth in the Declaration
of Trust, the Indenture, as supplemented by the Supplemental Indenture, and the Fifth Supplemental Assumed
Indenture. Failure by Choice Properties to access required capital could have a material adverse effect on its financial
condition or results of operations and its ability to make distributions to Unitholders.
Choice Properties REIT
2021 Annual Report 156
Notes to the Consolidated Financial Statements
Liquidity and capital availability risks are mitigated by maintaining appropriate levels of liquidity, by diversifying the
Trust’s sources of funding, by maintaining a well-diversified debt maturity profile and actively monitoring market
conditions.
The undiscounted future principal and interest payments on Choice Properties’ debt instruments are as follows:
($ thousands)
2022
2023
2024
2025
2026
Thereafter
Total
Senior unsecured debentures $
482,630 $
740,990 $
896,052 $
665,996 $
451,680 $ 2,954,742 $
6,192,090
Mortgages payable
Construction loans(i)
Credit facility(i)
253,498
109,860
186,130
174,880
81,390
508,787
1,314,545
4,686
—
—
—
—
—
—
—
—
—
8,220
—
12,906
—
Total
$
740,814 $
850,850 $ 1,082,182 $
840,876 $
533,070 $ 3,471,749 $
7,519,541
(i) Excludes interest on the revolving credit facility and construction loans at a floating interest rate.
Note 28. Financial Instruments
The following table presents the fair value hierarchy of financial assets and liabilities, excluding those classified as amortized
cost that are short term in nature.
($ thousands)
Assets
Fair value through profit and loss:
Mortgages, loans and notes
receivable
Lease receivable
Financial real estate assets
Designated hedging derivatives
Amortized cost:
Mortgages, loans and notes
receivable - SPPI
Cash and cash equivalents
Liabilities
Fair value through profit and loss:
Exchangeable Units
Unit-based compensation
Designated hedging derivatives
Amortized cost:
Long term debt
Credit facility
As at December 31, 2021
As at December 31, 2020
Note
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
$
— $
— $
96,623 $
96,623
$
— $
— $
53,588 $
53,588
11
13
9
13
—
—
—
—
—
22,351
22,351
86,603
86,603
3,266
—
3,266
—
—
—
—
—
—
377
—
—
19,405
19,405
68,373
68,373
—
377
208,700
208,700
—
207,219
11
30 (c)
—
84,304
—
—
257,800
257,800
—
84,304
207,219
16
18
18
14
15
6,011,997
—
—
—
14,285
1,925
—
6,011,997
5,149,182
—
—
14,285
1,925
—
—
—
12,930
6,560
—
5,149,182
—
—
12,930
6,560
—
6,526,570
—
6,526,570
—
7,071,105
—
7,071,105
—
—
—
—
—
—
—
—
The carrying value of the Trust’s assets and liabilities approximated fair value except for long term debt. The fair value of
Choice Properties’ senior unsecured debentures was calculated using market trading prices for similar instruments, whereas
the fair values for the mortgages was calculated by discounting future cash flows using appropriate discount rates. There
were no transfers between levels of the fair value hierarchy during the periods.
Designated Hedging Derivatives
Designated hedging derivatives consist of interest rate swaps to hedge the interest rate associated with an equivalent
amount of variable rate mortgages. During the year ended December 31, 2021, an interest rate swap was settled upon
maturity of the underlying variable rate mortgage. As at December 31, 2021, the interest rates ranged from 2.8% to 4.4%
(December 31, 2020 - 1.8% to 4.4%).
Choice Properties REIT
2021 Annual Report 157
Notes to the Consolidated Financial Statements
The impact of the hedging instruments on the consolidated balance sheets was as follows:
($ thousands)
Derivative assets
Interest rate swaps
Derivative liabilities
Interest rate swaps
Note
Maturity
Date
Notional
As at
As at
Amount
December 31, 2021
December 31, 2020
13
Sep 2026 - Jun 2030
$
69,878 $
3,266 $
377
18
Mar 2022 - Nov 2025
131,568
1,925
6,560
During the year ended December 31, 2021, the Trust recorded an unrealized fair value gain in OCI of $6,343 (December 31,
2020 - fair value loss of $3,554).
Note 29. Capital Management
In order to maintain or adjust its capital structure, Choice Properties may issue new Units and debt, repay debt, or adjust the
amount of distributions paid to Unitholders. Choice Properties manages its capital structure with the objective of:
complying with the guidelines set out in its Declaration of Trust;
complying with debt covenants;
•
•
• maintaining credit rating metrics consistent with those of investment grade REITs;
•
ensuring sufficient liquidity is available to support its financial obligations and to execute its operating and strategic
plans;
• maintaining financial capacity and flexibility through access to capital to support future growth and development;
and
• minimizing its cost of capital while taking into consideration current and future industry, market and economic risks
and conditions.
On March 4, 2020, Choice Properties filed a Short Form Base Shelf Prospectus allowing for the issuance of up to $2,000,000
of Units and debt securities, or any combination thereof over a 25-month period.
Financing activity during the year ended December 31, 2021 and 2020, consisted of the repayment and issuance of various
senior unsecured debentures (Note 14) and the issuance of Trust and Exchangeable Units as consideration for investment
property acquisitions (Notes 4 and 16).
Choice Properties has certain key covenants in its debentures and its committed credit facility. The key financial covenants
include debt service ratios and leverage ratios, as defined in the respective agreements. These ratios are measured by the
Trust on an ongoing basis to ensure compliance with the agreements. Choice Properties was in compliance with each of the
key financial covenants under these agreements as at December 31, 2021 and December 31, 2020.
The following schedule details the capitalization of Choice Properties:
($ thousands)
Liabilities
Senior unsecured debentures
Mortgages payable
Construction loans
Exchangeable units
Equity
Unitholders’ equity
Non-controlling interests
Total
Note
As at December 31, 2021
As at December 31, 2020
14
14
14
16
16
16
$
5,125,000 $
1,112,310
12,906
6,011,997
3,310,191
—
$
15,572,404 $
5,275,000
1,206,638
25,193
5,149,182
3,514,739
7,801
15,178,553
Choice Properties REIT
2021 Annual Report 158
Notes to the Consolidated Financial Statements
Note 30. Supplemental Cash Flow Information
(a)
Items not affecting cash and other items
($ thousands)
Straight line rental revenue
Unit based compensation expense included in general and administrative
expenses
Reversal of (allowance for) expected credit loss on mortgage receivable
Amortization of intangible assets
Foreign exchange gain reclassified from other comprehensive income
Adjustment to fair value of Exchangeable Units
Adjustment to fair value of investment properties
Other fair value (gains) losses, net
Items not affecting cash and other items
(b) Net change in non-cash working capital
Year Ended
Note
December 31, 2021
December 31, 2020
5
19
11
12
16
5
26
$
(7,893) $
(13,946)
5,605
(1,502)
1,000
—
862,815
(458,817)
1,580
$
402,788 $
Year Ended
4,838
7,830
1,000
(1,184)
(354,286)
220,018
(2,210)
(137,940)
($ thousands)
Note
December 31, 2021
December 31, 2020
Net change in accounts receivable and other assets
13
$
1,780 $
(43,825)
Add back (deduct):
Additions to (disposition of) right of use assets
Additions to lease receivable
Transfer from mortgage receivable
Cost-to-complete receivable acquired
Accounts receivable and other assets transferred from equity accounted joint
venture
Net change in deferred financing costs included in other assets
Change to designated hedging derivative assets
Net change in trade payables and other liabilities
Add back (deduct):
Disposition of (additions to) lease liabilities
Net change in distributions payable
Net change in unit-based compensation liability
Net change to accrued interest expense
Contingent consideration payable recognized on acquisition within equity
accounted joint venture
Trade payables and other liabilities transferred from equity accounted joint
venture
Liability assumed on acquisition of investment property
Change to designated hedging derivative liabilities
Release of holdback payable
Impact of foreign exchange rate changes
Impact of currency translation
Net change in non-cash working capital
13
13
11
4
13
13
13
18
18
18
18
4
4
5
18
19, 27
(1,518)
—
—
—
—
218
2,889
(1,841)
19,468
500
16,404
765
3,337
195
130,406
(23,125)
1,684
—
(1,355)
(68,448)
(38,843)
(1,235)
(3,182)
4,635
—
(166)
—
$
26,865 $
1,921
(1,018)
(1,522)
53,506
—
(7,003)
(2,400)
(3,749)
6,750
(126)
3,420
21,657
Choice Properties REIT
2021 Annual Report 159
Notes to the Consolidated Financial Statements
(c) Cash and cash equivalents
($ thousands)
Cash
Short-term investments
Cash and cash equivalents
Note 31. Segment Information
As at
As at
December 31, 2021
December 31, 2020
$
$
84,304 $
—
84,304 $
72,248
134,971
207,219
Choice Properties operates in three reportable segments: retail, industrial and office. The segments are reported in a manner
consistent with the internal reporting provided to the chief operating decision maker, determined to be the Chief Executive
Officer (“CEO”) of the Trust. The CEO measures and evaluates the performance of the Trust based on net operating income,
cash basis.
Net operating income, cash basis, is defined as property rental revenue less straight line rental revenue, lease surrender
revenue, direct property operating expenses and realty taxes and excludes certain expenses such as interest expense and
indirect operating expenses in order to provide results that reflect a property’s operations before consideration of how it is
financed or the costs of operating the entity in which it is held. The amounts are presented by property type below and
included in these consolidated financial statements at the proportionate share. The remaining net income (loss) items and the
balance sheet are reviewed on a consolidated basis by the CEO and therefore are not included in the segmented disclosure
below.
The table below presents net operating income for the year ended December 31, 2021, in a manner consistent with internal
reporting. The accounting policies of the segments presented here are the same as those described in Note 2.
($ thousands)
Rental revenue
Retail
Industrial
Office
Consolidation and
eliminations(i)
Year ended December
31, 2021
$ 1,029,532 $ 196,541 $ 127,584 $
(61,336) $
1,292,321
Property operating costs
(297,429)
(50,976)
(53,286)
Net Operating Income, Accounting Basis
732,103
145,565
74,298
Less:
Straight line rental revenue
Lease surrender revenue
(2,747)
(2,758)
(5,218)
(47)
(2,139)
(1,558)
21,385
(39,951)
2,211
—
Net Operating Income, Cash Basis
726,598
140,300
70,601
(37,740)
Add back: cash basis reconciling items
Net operating income, accounting basis
Interest income
Fee income
Net interest expense and other financing charges
General and administrative expenses
Reversal of (allowance for) expected credit loss on mortgage receivable
Share of income (loss) from equity accounted joint ventures
Amortization of intangible assets
Other fair value gains (losses), net
Adjustment to fair value of Exchangeable Units
Adjustment to fair value of investment properties
Income (Loss) before income taxes
Income tax recovery
Net Income (Loss)
(380,306)
912,015
(7,893)
(4,363)
899,759
12,256
912,015
20,079
3,801
(534,525)
(40,917)
1,502
66,952
(1,000)
(1,580)
(862,815)
458,817
22,329
679
23,008
$
(i)
Reconciling items adjust Choice Properties’ proportionate share of joint ventures to reflect the equity method of accounting under IFRS.
Choice Properties REIT
2021 Annual Report 160
Notes to the Consolidated Financial Statements
The table below presents net operating income for the year ended December 31, 2020, in a manner consistent with internal
reporting. The accounting policies of the segments presented here are the same as those described in Note 2.
($ thousands)
Rental revenue
Retail
Industrial
Office
Consolidation
and eliminations(i)
Year ended December
31, 2020
$ 1,042,088 $ 176,631 $ 113,938 $
(62,043) $
1,270,614
Property operating costs
(314,602)
(46,700)
(44,841)
Net Operating Income, Accounting Basis
727,486
129,931
69,097
Less:
Straight line rental revenue
Lease surrender revenue
(8,538)
(1,053)
(4,172)
(3,403)
(989)
(278)
22,127
(39,916)
2,167
362
Net Operating Income, Cash Basis
717,895
124,770
65,416
(37,387)
Add back: cash basis reconciling items
Net operating income, accounting basis
Interest income
Fee income
Net interest expense and other financing charges
General and administrative expenses
Reversal of (allowance for) expected credit loss on mortgage receivable
Share of income (loss) from equity accounted joint ventures
Amortization of intangible assets
Foreign exchange gain reclassified from other comprehensive income
Acquisition transaction costs and other related expenses
Other fair value gains (losses), net
Adjustment to fair value of Exchangeable Units
Adjustment to fair value of investment properties
Income (Loss) before income taxes
Income tax recovery
Net Income (Loss)
(384,016)
886,598
(13,946)
(1,958)
870,694
15,904
886,598
13,639
4,416
(540,720)
(36,718)
(7,830)
(5,570)
(1,000)
1,184
(1,589)
2,210
354,286
(220,018)
448,888
1,797
450,685
$
(i)
Reconciling items adjust Choice Properties’ proportionate share of joint ventures to reflect the equity method of accounting under IFRS.
Choice Properties REIT
2021 Annual Report 161
Notes to the Consolidated Financial Statements
Note 32. Contingent Liabilities and Financial Guarantees
Choice Properties is involved in and potentially subject to various claims by third-parties arising from the normal course of
conduct of its business including regulatory, property and environmental claims. In addition, Choice Properties is potentially
subject to regular audits from federal and provincial tax authorities, and as a result of these audits may receive assessments
and reassessments. Although such matters cannot be predicted with certainty, management currently considers Choice
Properties’ exposure to such claims and litigation, to the extent not covered by Choice Properties’ insurance policies or
otherwise provided for, not to be material to the consolidated financial statements, but they may have a material impact in
future periods.
a. Legal Proceedings
Choice Properties is potentially the subject of various legal proceedings and claims that arise in the ordinary course of
business. The outcome of all these proceedings and claims is uncertain. Based on information currently available, any
proceedings and claims, individually and in the aggregate, are not expected to have a material impact on Choice
Properties.
b. Guarantees
Choice Properties issues letters of credit to support guarantees related to its investment properties including
maintenance and development obligations to municipal authorities. As at December 31, 2021, the aggregate gross
potential liability related to these letters of credit totalled $32,579 (December 31, 2020 - $33,916). In the current year, the
letter of credit posted by Loblaw on behalf of Choice Properties was cancelled, the remaining balance is $nil (December
31, 2020 - $1,543).
Choice Properties’ credit facility and senior unsecured debentures are guaranteed by each of the General Partner, the
Partnership and any other person that becomes a subsidiary of Choice Properties (with certain exceptions). In the case
of default by the Trust, the indenture trustee will be entitled to seek redress from the guarantors for the guaranteed
obligations in the same manner and upon the same terms that it may seek to enforce the obligations of the Trust. These
guarantees are intended to eliminate structural subordination, which would otherwise arise as a consequence of Choice
Properties’ assets being primarily held in various subsidiaries of the Trust.
CPH Master LP guarantees certain debt assumed by purchasers in connection with past dispositions of properties made
by Canadian Real Estate Investment Trust prior to being acquired by the Trust in May 2018. These guarantees will
remain until the debt is modified, refinanced or extinguished. Credit risks arise in the event that the purchasers default on
repayment of their debt. These credit risks are mitigated by the recourse which the Trust has under these guarantees, in
which case the Trust would have a claim against the underlying property. In the current year, the debt associated with
such guarantees has been fully repaid. Therefore, the remaining exposure to credit risk is $nil. (December 31, 2020 -
$35,671).
c. Commitments
Choice Properties has entered into contracts for development and property capital projects and has other contractual
obligations such as operating rents. The Trust is committed to future payments of approximately $436,000, of which
$26,000 relates to equity accounted joint ventures as at December 31, 2021 (December 31, 2020 - $376,000 and
$55,000, respectively).
d. Contingent Liabilities
The Trust held debt obligations in the amount of $250,051 in its equity accounted joint ventures as at December 31,
2021 (December 31, 2020 - $191,873). Generally, the Trust is only liable for its proportionate share of the obligations of
the co-ownerships and equity accounted joint ventures in which it participates, except in limited circumstances. Credit
risk arises in the event that the partners default on the payment of their proportionate share of such obligations. This
credit risk is mitigated as the Trust generally has recourse under its co-ownership agreements and joint venture
arrangements in the event of default of its partners, in which case the Trust’s claim would be against both the underlying
real estate investments and the partners that are in default. Management believes that the assets of its co-ownerships
and joint ventures are sufficient for the purpose of satisfying any obligation of the Trust should the Trust’s partner
default.
Choice Properties REIT
2021 Annual Report 162
Notes to the Consolidated Financial Statements
Note 33. Related Party Transactions
Choice Properties’ parent corporation is GWL, which as at December 31, 2021, held either directly or indirectly, a 61.7%
effective interest in the Trust through ownership of 50,661,415 Units and all of the Exchangeable Units, which are
economically equivalent to and exchangeable to Units. GWL is also the parent company of Loblaw, with ownership of 52.6%
of Loblaw’s outstanding common shares as at December 31, 2021. Choice Properties’ ultimate parent is Wittington
Investments, Limited.
In the normal course of operations, Choice Properties enters into various transactions with related parties. These transactions
are measured at the exchange amount, which is the amount of consideration established and agreed upon by the related
parties.
Transactions and Agreements with GWL
Acquisitions
During the year ended December 31, 2020, Choice Properties acquired six industrial assets from Weston Foods (Canada)
Inc., a wholly-owned subsidiary of GWL, a purchase price of $81,500, excluding transaction costs. The acquisition was
satisfied in full through the issuance of 5,824,742 Exchangeable Units for $79,100 (Notes 4 and 16) and assumed liabilities of
$2,400 (Note 4). Weston Foods (Canada) Inc. amalgamated with George Weston Limited in July 2021 and the Exchangeable
Units held by Weston Foods (Canada) Inc. were transferred to GWL. On December 29, 2021, GWL completed the sale of its
entire Weston Foods bakery business and any leases with Weston Foods (Canada) Inc. were transferred to a third-party
buyer as part of the sale.
Services Agreement
For the year ended December 31, 2021, GWL provided Choice Properties with corporate, administrative and other support
services for an annualized cost of $3,094 (2020 - $3,095).
Operating Lease
Effective January 1, 2018, Choice Properties entered into a sub-lease for additional office space with Weston Foods, a
subsidiary of GWL, with a term effective until the end of the existing lease in 2024. Over the term of the sub-lease, lease
payments will total $1,282. On July 31, 2020, the Trust acquired the office building in which it was sub-leasing the office
space from Weston Foods.
Distributions on Exchangeable Units
GWL, directly or indirectly, holds all of the Exchangeable Units issued by Choice Properties Limited Partnership, a subsidiary
of Choice Properties. During the year ended December 31, 2021, distributions declared on the Exchangeable Units totalled
$292,884 (December 31, 2020 - $288,932).
As at December 31, 2021, Choice Properties had distributions on Exchangeable Units payable to GWL of $192,741
(December 31, 2020 - 120,598). The payable to GWL includes deferred distributions of $168,334 to be paid on the first
business day of the 2022 fiscal year (December 31, 2020 - $96,191; 2021).
Notes Receivable
Holders of Exchangeable Units may, in lieu of receiving all or a portion of their distributions, choose to be loaned an amount
from Choice Properties Limited Partnership, and to have such distributions made on the first business day following the end
of the fiscal year in which such distribution would otherwise have been made. The loans do not bear interest and are due and
payable in full on the first business day following the end of the fiscal year during which the loan was made. During the seven
months ended July 31, 2021, GWL elected to receive all distributions from Choice Properties Limited Partnership in the form
of loans. For the remainder of the year ended December 31, 2021, GWL elected to receive the distributions in cash. As such,
non-interest bearing short-term notes totalling $170,849 were issued to GWL during the year ended December 31, 2021.
$2,515 of the notes issued were repaid in August 2021 and the remaining $168,334 were repaid in January 2022. Non-
interest bearing short-term notes totalling $96,191 with respect to the loans received in the 2020 fiscal year were repaid by
GWL in January 2021.
Trust Unit Distributions
During the year ended December 31, 2021, Choice Properties declared cash distributions of $37,490 on the Units held by
GWL (December 31, 2020 - $37,490). As at December 31, 2021, $3,124 of Trust Unit distributions declared were payable to
GWL (December 31, 2020 - $3,124). There were no non-cash distributions settled through the issuance of additional Trust
Units during the year ended December 31, 2021 (December 31, 2020 - $4,660).
Choice Properties REIT
2021 Annual Report 163
Notes to the Consolidated Financial Statements
Transaction Summary as Reflected in the Consolidated Financial Statements
Transactions with GWL recorded in the consolidated statements of income (loss) and comprehensive income (loss) were
comprised as follows:
($ thousands)
Rental revenue
Services Agreement expense
Distributions on Exchangeable Units
The balances due from (to) GWL and subsidiaries were as follows:
($ thousands)
Notes receivable
Rent receivable
Exchangeable Units
Accrued liabilities
Distributions payable on Exchangeable Units
Distributions payable on Trust Units
Due to GWL and subsidiaries
Transactions and Agreements with Loblaw
Year Ended
Note
December 31, 2021
December 31, 2020
20
25
24
$
13,995 $
(3,094)
(292,884)
4,971
(3,095)
(288,932)
Note
December 31, 2021
December 31, 2020
As at
As at
11
13
16
18
18
18
$
168,334 $
—
96,191
13
(6,011,997)
(5,149,182)
(835)
(192,741)
(3,124)
(332)
(120,598)
(3,124)
$
(6,040,363) $
(5,177,032)
Acquisitions
During year ended December 31, 2021, Choice Properties acquired a financial real estate asset from Loblaw for a purchase
price of $14,777, excluding transaction costs (Note 4).
During the year ended December 31, 2020, Choice Properties acquired a development property from Loblaw for a purchase
price of $8,100, excluding transaction costs. Choice Properties also acquired from Loblaw five financial real estate assets for
a purchase price of $45,673, excluding transaction costs. Each acquisition was settled with cash (Note 4).
Dispositions
During year ended December 31, 2021, Choice Properties disposed of 2 retail properties which had Loblaw leases for an
aggregate sale price of $33,500, excluding transaction costs.
During the year ended December 31, 2020, Choice Properties disposed interests in 17 retail properties which had Loblaw
leases for an aggregate sale price of $263,440, excluding transaction costs.
Strategic Alliance Agreement
The Strategic Alliance Agreement creates a series of rights and obligations between Choice Properties and Loblaw intended
to establish a preferential and mutually beneficial business and operating relationship. The Strategic Alliance Agreement
expires on July 5, 2023. The Strategic Alliance Agreement provides Choice Properties with important rights that are expected
to meaningfully contribute to the Trust’s growth. Subject to certain exceptions, rights include:
•
•
•
Choice Properties has the right of first offer to purchase any property in Canada that Loblaw seeks to sell;
Loblaw is generally required to present shopping centre property acquisitions in Canada to Choice Properties to allow
the Trust a right of first opportunity to acquire the property itself; and
Choice Properties has the right to participate in future shopping centre developments involving Loblaw.
Included in certain investment properties acquired from Loblaw is excess land with development potential. In accordance
with the Strategic Alliance Agreement, Choice Properties will compensate Loblaw, over time, with intensification payments,
as Choice Properties pursues development, intensification or redevelopment of such excess land. The payments to Loblaw
are calculated in accordance with a payment grid that takes into account the region, market ranking and type of use for the
property.
Choice Properties REIT
2021 Annual Report 164
Notes to the Consolidated Financial Statements
Property Management Agreement
Choice Properties provided Loblaw with property management services for Loblaw’s properties with third-party tenancies on
a fee for service basis with automatic one-year renewals. The property management agreement was terminated effective
December 31, 2020.
Lease Surrender Payments
During the year ended December 31, 2021, Loblaw made lease surrender payments of $1,764 to the Trust (December 31,
2020 - $nil).
Sublease Administration Agreement
On July 17, 2017, in connection with Loblaw’s sale of substantially all of its gas bar operations, Choice Properties agreed to
provide Loblaw with certain administrative services in respect of the subleases on a fee for service basis for an initial five-year
term with automatic one-year renewals. The sublease administration agreement was terminated effective December 31,
2020.
Site Intensification Payments
Included in certain investment properties acquired from Loblaw is excess land with development potential. Choice Properties
will compensate Loblaw, over time, with intensification payments, as Choice Properties pursues development, intensification
or redevelopment of such excess lands. The payments to Loblaw are calculated in accordance with a payment grid, set out
in the Strategic Alliance Agreement, that takes into account the region, market ranking and type of use for the property.
Choice Properties compensated Loblaw with intensification payments of $2,208 in connection with completed gross leasable
area for which tenants took possession during the year ended December 31, 2021 (December 31, 2020 - $995).
Letters of Credit
As at December 31, 2021, letters of credit totalling $nil were posted by Loblaw with the Province of Ontario and City of
Toronto on behalf of Choice Properties related to deferral of land transfer tax on properties acquired from Loblaw
(December 31, 2020 - $1,543) (Note 32).
Transaction Summary as Reflected in the Consolidated Financial Statements
Loblaw is the largest tenant for Choice Properties, representing approximately 55.9% of Choice Properties’ rental revenue for
the year ended December 31, 2021 (December 31, 2020 - 57.0%) and 56.0% of its gross leasable area as at December 31,
2021 (December 31, 2020 - 55.3%). Transactions with Loblaw recorded in the consolidated statements of income (loss) and
comprehensive income (loss) were comprised as follows:
($ thousands)
Rental revenue
Fee income
The balances due from (to) Loblaw were as follows:
($ thousands)
Rent receivable
Other receivables
Accrued liabilities
Construction allowances payable
Reimbursed contract payable
Due from (to) Loblaw
Year Ended
Note
December 31, 2021
December 31, 2020
20
23
$
721,994 $
65
724,292
858
Note
December 31, 2021
December 31, 2020
As at
As at
13
13
18
18
18
$
1,474 $
2,044
(85)
—
(266)
$
3,167 $
36
—
(26)
(7,869)
(308)
(8,167)
Transactions and Agreements with Wittington
Acquisitions
On July 31, 2020, Choice Properties acquired two real estate assets from Wittington Properties Limited, a subsidiary of
Wittington, for an aggregate purchase price of $208,935, excluding transaction costs, which was satisfied in full by the
issuance of 16,500,000 Units of Choice Properties. The transaction was measured at market terms and conditions. The
assets acquired included: (i) an office property in Toronto, Ontario, for $128,500 and (ii) the remaining 60% interest of the
joint venture for 500 Lake Shore Boulevard West in Toronto, Ontario, for $80,435, less a cost-to-complete receivable of
Choice Properties REIT
2021 Annual Report 165
Notes to the Consolidated Financial Statements
$16,404, giving the Trust 100% ownership of the joint venture (Note 4).
Operating Lease
Choice Properties was a tenant in an acquired office asset in Toronto, Ontario, having entered into a ten-year lease with
Wittington Properties Limited, in 2014, with lease payments totalling $2,664 over the term of the lease. As of the acquisition
date, Choice Properties derecognized its right-of-use assets and lease liabilities associated with the office lease and ceased
paying rent to Wittington Properties Limited.
Property Management Agreement
Choice Properties provides Wittington with property management services for certain properties with third-party tenancies on
a fee for service basis.
Joint Venture
On December 9, 2014, Choice Properties and its joint venture partner, Wittington Properties Limited, completed the
acquisition of 500 Lake Shore Boulevard West in Toronto, Ontario, for $15,576 from Loblaw. Choice Properties accounted for
its investment in the joint venture as an equity accounted joint venture until July 31, 2020, when the Trust acquired the
remaining 60% interest from Wittington Properties Limited, after which the 100% owned joint venture is accounted for on a
consolidated basis. Wittington Properties Limited continued to act as development and construction manager for the
commercial space at 500 Lake Shore Boulevard West until the development was completed.
Choice Properties contributed $6,200 to the joint venture and received distributions of $nil during the year ended December
31, 2020. The joint venture earned interest income during the year ended December 31, 2020 of $2,102.
Summarized financial information for the Trust’s share of the related party equity accounted joint venture is set out below:
($ thousands)
Year Ended
December 31, 2021
December 31, 2020
Share of income (loss) and comprehensive income (loss) in equity accounted joint
venture at 40%
$
— $
(13,305)
Trust Unit Distributions
During the year ended December 31, 2021, Choice Properties declared cash distributions of $12,210 on the Units held by
Wittington (December 31, 2020 - $6,105). As at December 31, 2021, $1,018 of Trust Unit distributions declared were payable
to Wittington (December 31, 2020 - $1,018). There were no non-cash distributions settled through the issuance of additional
Trust Units during the year ended December 31, 2021 (December 31, 2020 - $1,485).
Transaction Summary as Reflected in the Consolidated Financial Statements
Transactions with Wittington recorded in the consolidated statements of income (loss) and comprehensive income (loss) were
comprised as follows:
($ thousands)
Rental revenue
Fee income
The balances due from (to) Wittington and subsidiaries were as follows:
($ thousands)
Rent receivable
Cost-to-complete receivable
Distributions payable
Due from Wittington and subsidiaries
Year Ended
Note
December 31, 2021
December 31, 2020
$
20
23
1,612 $
250
657
—
Note
December 31, 2021
December 31, 2020
As at
As at
13
13
18
$
$
— $
8,501
(1,018)
7,483 $
131
13,721
(1,018)
12,834
Choice Properties REIT
2021 Annual Report 166
Notes to the Consolidated Financial Statements
Transactions with Key Personnel
Key personnel are comprised of Trustees and certain members of the executive team of Choice Properties. Compensation of
key personnel was as follows:
($ thousands)
Salaries, trustee fees, incentives and short-term employee benefits
Unit-based compensation recorded in:
General and administrative expenses
Adjustment to fair value of unit-based compensation
Compensation of key personnel
Note 34. Subsequent Events
December 31, 2021
December 31, 2020
3,612
$
3,416
3,689
684
7,985
$
3,148
217
6,781
$
$
Subsequent to the year-end, the Trust entered into an agreement to increase its interest in the East Liberty and the Brixton
residential development projects for consideration of $25,000. The agreement included the purchase of one of our partners’
existing interest in the projects and the cancellation of the same partners’ option to increase their equity interest in the
projects. The transaction closed in January 2022, following which the Trust’s interest in these projects is now 50%.
Choice Properties REIT
2021 Annual Report 167
Corporate Profile
Choice Properties is a leading Real Estate Investment Trust that creates enduring value through the ownership, operation and
development of high-quality commercial and residential properties.
We believe that value comes from creating spaces that improve 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.
Conference Call and Webcast
Management will host a conference call on Thursday, February 17, 2022 at 10:00AM (ET) with a simultaneous audio webcast.
To access via teleconference, please dial (236) 389-2653 or (833) 921-1643 and enter the event passcode: 2690932. The link
to the audio webcast will be available on www.choicereit.ca/events-webcasts.
Head Office
Choice Properties Real Estate Investment Trust
The Weston Centre
700-22 St. Clair Avenue East
Toronto, Ontario
M4T 2S5
Tel: 416-628-7771
Toll free:1-855-322-2122
Fax: 416-628-7777
Stock Exchange Listing and Symbol
The Trust’s Units are listed on the Toronto Stock Exchange
and trade under the symbol “CHP.UN”.
Distribution Policy
Choice Properties’ Board retains full discretion with respect
to the timing and quantum of distributions. Declared
distributions are paid to Unitholders of record at the close of
business on the last business day of a month on or about the
15th day of the following month.
Registrar and Transfer Agent
TSX Trust Company
P.O. Box 700, Station B
Montreal, QC, H3B 3K3
Tel: (416) 682-3860 (outside of Canada and US)
Tel toll free: 1-800-387-0825 (Canada and US)
Fax: (514) 985-8843 (outside of Canada and US)
Fax toll free: 1 (888) 249-6189 (Canada and US)
E-Mail: shareholderinquiries@tmx.com
Website: www.tsxtrust.com
Investor Relations
Tel: 416-628-7771
Toll free: 1-855-322-2122
Email: investor@choicereit.ca
Website: www.choicereit.ca
Additional financial information has been filed electronically
with various securities regulators in Canada through the
System for Electronic Document Analysis and Retrieval
(SEDAR), www.sedar.com. Choice Properties holds a
conference call shortly following the release of its quarterly
results. These calls are archived in the Investor Relations
section of the Trust’s website, www.choicereit.ca.
Trustees
Gordon A. M. Currie - Chair
Executive Vice President and Chief Legal Officer,
George Weston Limited
Kerry D. Adams2
President, K. Adams & Associates
Limited
Christie J.B. Clark1
Corporate Director
L. Jay Cross1
President, The Howard Hughes Corporation
Graeme M. Eadie2
Corporate Director
Karen A. Kinsley1
Corporate Director
R. Michael Latimer2
Corporate Director
Nancy H.O. Lockhart2
Corporate Director
Dale R. Ponder1
Corporate Director
1 Audit Committee
2 Governance, Compensation and Nominating Committee
Ce rapport est disponible en français.
Value for
Generations
Head Office
The Weston Centre
700-22 St. Clair Avenue East
Toronto, Ontario