TORONTO, Feb. 10, 2021 /CNW/ - Choice Properties Real
Estate Investment Trust ("Choice Properties" or the "Trust") (TSX:
CHP.UN) today announced its consolidated financial results for the
year ended December 31, 2020. The
2020 Annual Report to Unitholders is available in the Investors
section of the Trust's website at www.choicereit.ca, and has been
filed on SEDAR at www.sedar.com.
"We are pleased with our financial and operational results for
the quarter and year ended December 31,
2020, as our portfolio of high-quality real estate assets
continued to produce strong earnings and stable rent collections.
In addition to posting strong results, we completed over
$1 billion of real estate
transactions this year through our capital recycling program,
demonstrating our commitment and ability to improve the overall
quality of our portfolio," said Rael
Diamond, President and Chief Executive Officer of the
Trust. "However, the strength of our results notwithstanding,
we remain cautious due to the ongoing risks and uncertainties
associated with the COVID-19 pandemic and the impact they may have
on the economy and our business."
Summary of GAAP Basis Financial Results
|
|
Three
Months
|
|
Year
Ended
|
($ thousands except
where otherwise indicated)
(unaudited)
|
|
December 31,
2020
|
|
December 31,
2019
|
|
Change
|
|
December 31,
2020
|
|
December 31,
2019
|
|
Change
|
Net income
(loss)
|
|
$
|
116,570
|
|
$
|
293,261
|
|
$
|
(176,691)
|
|
$
|
450,685
|
|
$
|
(581,357)
|
|
$
|
1,032,042
|
Net income (loss) per
unit diluted
|
|
0.162
|
|
0.419
|
|
(0.257)
|
|
0.637
|
|
(0.843)
|
|
1.480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
revenue
|
|
321,862
|
|
317,986
|
|
3,876
|
|
1,270,614
|
|
1,288,554
|
|
(17,940)
|
Fair value gain
(loss) on
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchangeable
Units(1)
|
|
(86,370)
|
|
206,680
|
|
(293,050)
|
|
354,286
|
|
(932,009)
|
|
1,286,295
|
Fair value gains
(losses) excluding
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchangeable
Units(2)
|
|
104,948
|
|
9,352
|
|
95,596
|
|
(217,808)
|
|
(11,543)
|
|
(206,265)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
|
255,960
|
|
207,460
|
|
48,500
|
|
621,184
|
|
580,556
|
|
40,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
Units outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
diluted
|
|
718,026,576
|
|
700,544,380
|
|
17,482,196
|
|
707,764,714
|
|
689,285,790
|
|
18,478,924
|
|
|
1.
|
Exchangeable Units
are recorded at their fair value based on the market trading price
of the Trust Units, which results in a negative impact to the
financial results when the Trust Unit price rises and a positive
impact when the Trust Unit price declines.
|
2.
|
Fair value gains
(losses) excluding Exchangeable Units includes adjustments to fair
value of investment properties and unit-based
compensation.
|
Quarterly Results
Net income for the fourth quarter of
2020 was $116.6 million compared to
$293.3 million in 2019. The decrease
was mainly due to an unfavourable change of $293.1 million in the adjustment to the fair
value on the Exchangeable Units, partially offset by a $109.8 million favourable change in the fair
value of investment properties, including properties held within
equity accounted joint ventures. For the quarter, bad debt expense
was $2.7 million on a GAAP basis
($3.5 million on a proportionate
share basis).
Annual Results
Net income for the year ended
December 31, 2020 was $450.7 million, compared to a loss of
$581.4 million in the prior year. The
increase was mainly due to a favourable change of $1.3 billion in the adjustment to fair value on
Exchangeable Units, reduced interest and financing charges, and a
favourable change in other fair value adjustments, partially offset
by an unfavourable change in the fair value of investment
properties, including properties held within equity accounted joint
ventures, increased bad debt expense, and non-recurring items
recorded in the second quarter which included early redemption
premiums paid on two senior unsecured debentures maturing in 2021
and an allowance for expected losses related to a specific mortgage
receivable.
The Trust has continued to support its tenants that have been
negatively impacted by the pandemic by providing rent relief
through rent deferrals and other arrangements, including
participating in the Canada
Emergency Commercial Rent Assistance ("CECRA") program for eligible
tenants, which ended on September 30,
2020. During the year ended December
31, 2020, the Trust recorded a bad debt expense of
$23.7 million on a proportionate
share basis that reflects the support provided to tenants as well
as the increased collectability risk for certain tenants with
amounts past due.
Summary of Proportionate Share(1) Financial
Results
As at or for the
period ended
|
|
Three
Months
|
|
Year
Ended
|
($ thousands except
where otherwise indicated)
(unaudited)
|
|
December 31,
2020
|
|
December 31,
2019
|
|
Change
|
|
December 31,
2020
|
|
December 31,
2019
|
|
Change
|
Rental
revenue(1)
|
|
$
|
337,907
|
|
$
|
333,744
|
|
$
|
4,163
|
|
$
|
1,332,657
|
|
$
|
1,354,383
|
|
$
|
(21,726)
|
Net Operating Income
("NOI"), cash basis(1)(3)
|
|
230,353
|
|
234,949
|
|
(4,596)
|
|
908,081
|
|
941,320
|
|
(33,239)
|
Same-Asset NOI, cash
basis(1)(3)
|
|
201,167
|
|
205,876
|
|
(4,709)
|
|
795,532
|
|
808,597
|
|
(13,065)
|
Adjustment to fair
value of investment properties(1)
|
|
103,931
|
|
(5,891)
|
|
109,822
|
|
(256,837)
|
|
(15,250)
|
|
(241,587)
|
Occupancy (% of
GLA)
|
|
97.1%
|
|
97.7%
|
|
(0.6)%
|
|
97.1%
|
|
97.7%
|
|
(0.6)%
|
Funds from operations
("FFO")(2)
|
|
171,519
|
|
165,795
|
|
5,724
|
|
652,007
|
|
680,278
|
|
(28,271)
|
FFO(2) per
unit diluted
|
|
0.239
|
|
0.237
|
|
0.002
|
|
0.921
|
|
0.987
|
|
(0.066)
|
Adjusted funds from
operations ("AFFO")(2)
|
|
136,054
|
|
129,187
|
|
6,867
|
|
566,469
|
|
587,695
|
|
(21,226)
|
AFFO(2)
per unit diluted
|
|
0.189
|
|
0.184
|
|
0.005
|
|
0.800
|
|
0.853
|
|
(0.053)
|
AFFO(2)
payout ratio - diluted
|
|
97.7%
|
|
100.3%
|
|
(2.6)%
|
|
92.6%
|
|
86.8%
|
|
5.8%
|
Cash distributions
declared
|
|
162,411
|
|
151,267
|
|
11,144
|
|
554,157
|
|
532,054
|
|
22,103
|
Weighted average
number of Units outstanding - diluted
|
|
718,026,576
|
|
700,544,380
|
|
17,482,196
|
|
707,764,714
|
|
689,285,790
|
|
18,478,924
|
|
|
1.
|
A non-GAAP
measurement which includes amounts from directly held properties
and equity accounted joint ventures.
|
2.
|
A non-GAAP
measurement.
|
3.
|
Includes a provision
for bad debts and rent abatements.
|
Quarterly Results
For the three months ended
December 31, 2020, Funds from
Operations ("FFO", a non-GAAP measure) was $171.5 million or $0.239 per unit diluted compared to $165.8 million or $0.237 per unit diluted for the three months
ended December 31, 2019. FFO
increased in the current quarter primarily due to the reduction in
net interest expense and other financing charges resulting from
deleveraging activities, partially offset by higher bad debt
expense. In addition, 2019 results included non-recurring charges
relating to the reimbursement of revenue to Loblaw for incorrectly
allocated solar rooftop leases and an allowance for expected credit
losses on a mortgage receivable.
The increase on a per unit basis is due to the increase in FFO
as described above, partially offset by the impact of the higher
weighted average number of units outstanding as a result of the
May 2019 equity offering where
proceeds were used to lower debt levels, as well as the units
issued as consideration of the acquisition of two assets from
Wittington Properties Limited in July
2020, and the issuance of Exchangeable Units to Weston Foods
(Canada) Inc., a wholly-owned
subsidiary of George Weston Limited ("GWL"), as consideration for
the acquisition of six assets in the fourth quarter of 2020.
Annual Results
For the year ended December 31, 2020, FFO was $652.0 million or $0.921 per unit diluted compared to $680.3 million or $0.987 per unit diluted for the year ended
December 31, 2019.
FFO decreased on an annual basis primarily due to an increase in
bad debt expense, partially offset by lower borrowing costs from
deleveraging activities and capital recycling.
The decline in FFO on a per unit basis also reflects the higher
weighted average number of units outstanding as discussed
above.
Transaction Activity
Since the end of the prior
quarter, the Trust completed or entered into agreements to complete
$332.4 million of dispositions and
$219.3 million of acquisitions on a
proportionate share basis(1). Notable transactions
include:
- the previously announced disposition to an institutional
partner of a 50% non-managing interest in a retail property
portfolio for an aggregate sale price of $169.0 million, excluding transaction costs,
comprised of eleven assets and 656,000 square feet;
- the previously announced disposition of two retail property
portfolios comprised of eight assets and 496,000 square feet for an
aggregate sale price of $107.4
million;
- the disposition of a retail property comprising 259,000 square
feet for an aggregate sale price of $51.0
million;
- the previously announced acquisition of an industrial portfolio
for an aggregate purchase price of $85.9
million comprised of four assets. The portfolio is 100%
leased to a national logistics company with long-term leases in
place;
- the acquisition of five retail assets from Loblaw Companies
Limited for an aggregate purchase price of $45.7 million; and
- the acquisition of six industrial properties from Weston Foods
(Canada) Inc., a subsidiary of
GWL, for an aggregate purchase price of $79.1 million.
The Trust has also made ongoing investments in its development
program with $45.1 million of
spending during the quarter on intensification, greenfield, mixed
use and residential development projects on a proportionate share
basis(1). During the quarter, the Trust also transferred
$82.8 million of properties under
development to income producing status, delivering 180,000 square
feet of new GLA on a proportionate share basis(1).
OUTLOOK AND IMPACT OF COVID-19
While the duration and longer-term impact of the COVID-19
pandemic cannot be predicted at this time, Choice Properties
remains confident that its business model and disciplined approach
to financial management will enable it to weather the impact of the
pandemic.
Our diversified portfolio of office, retail and industrial
properties is 97.1% occupied and leased to 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 and the diversification of income provided by our
industrial and office assets provides stability to our overall
portfolio This stability is evident by our rent collections, which
were 98% for the fourth quarter of 2020.
Despite the ongoing impact of the COVID-19 pandemic, Choice
Properties continues to advance our development initiatives, which
will provide us with the best opportunity to add high-quality real
estate to our portfolio at a reasonable cost. We have a mix of
development projects ranging in size, scale and complexity,
including retail intensification projects which provide incremental
growth to our existing sites, to larger, more complex major
mixed-use developments which will drive net asset value growth in
the future.
We expect to complete construction on two of our rental
residential projects underway in Toronto in 2021 and have commenced
construction on two additional high-rise residential projects. We
have invested approximately $182.7
million into residential developments to date, and will
continue to invest in our development pipeline, with an additional
$326.8 million of spending planned on
six residential projects.
In addition to our ongoing residential development, we are
evaluating opportunities within our portfolio to redevelop and
transform some of our grocery anchored retail projects into large
scale major mixed-use projects. We are in the early planning stages
on four major mixed-use sites and we expect that these initiatives
will be a significant part of our growth going forward.
Choice Properties has taken proactive steps to ensure its
financial strength and stability during and after the pandemic.
Choice Properties' strong balance sheet provides the flexibility
necessary to help insulate the Trust in the face of broader market
volatility. During 2020, the Trust made significant progress in
further strengthening its balance sheet, including refinancing
unsecured debt maturities, increasing the weighted average term of
debt and increasing available liquidity by issuing $1 billion of unsecured debentures, the proceeds
of which were primarily used to fund all unsecured debt maturities
until the third quarter of 2021 and repay amounts drawn on the
Trust's revolving credit facility. From a liquidity perspective,
the Trust has approximately $1.7
billion available comprised of $1.5
billion as the unused portion of the Trust's revolving
credit facility and $223.7 million in
cash and cash equivalents, in addition to approximately
$12.2 billion in unencumbered
assets.
While the impact of the COVID-19 pandemic persists, we are
pleased with our financial results this past quarter, demonstrating
that our business model, stable tenant base and disciplined
approach to financial management continue to position us well.
Update on Rent Collection
As one of Canada's largest
landlords, the Trust continued to support its tenants who have been
negatively impacted by the pandemic by providing rent relief
through rent deferrals and other arrangements, including
participating in the CECRA program. Rent collection for the fourth
quarter was at the higher end of collections within the industry
and was primarily due to the stability of the Trust's
necessity-based portfolio.
For the three months ended December 31,
2020, the Trust collected or expects to collect
approximately 98% of contractual rents:
|
%
Collected
|
Fourth Quarter
2020
|
|
Retail
|
98%
|
|
Industrial
|
100%
|
|
Office(1)
|
97%
|
|
Total
|
98%
|
|
(1) Uncollected
portion primarily relates to retail tenants in office
buildings
|
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 such as the CECRA program, 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 under CECRA. 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 $3.5 million in property
operating costs, on a proportionate share basis(1),
during the three months ended December 31,
2020, with a corresponding amount recorded as an expected
credit loss against its rent receivables. Of the $3.5 million bad debt expense recorded in the
fourth quarter, approximately $1.6
million related to uncollected amounts from recurring
billings in the period, while the balance pertains to past due
amounts for a national retailer and smaller tenants that have
declared bankruptcy.
($
thousands)
|
Nine months
ended
December 31, 2020
|
As a
%
|
Total recurring
tenant billings
|
$
|
1,100,269
|
100.0
|
%
|
Less: CECRA
collections
|
(10,467)
|
1.0
|
%
|
Less: Amounts
received and deferrals repaid to date
|
(1,059,726)
|
96.3
|
%
|
Balance
outstanding
|
30,076
|
2.7
|
%
|
Total rents expected
to be collected pursuant to deferral arrangements
|
(5,194)
|
(0.4)
|
%
|
Total rents to be
collected excluding collectible deferrals
|
24,882
|
2.3
|
%
|
Less: Provision
recorded related to recurring tenant billings
|
(20,883)
|
(1.9)
|
%
|
Balance expected to
be recovered in time
|
$
|
3,999
|
0.4
|
%
|
The Trust's provision for recurring tenant billings for the nine
months ended December 31, 2020, is
comprised of the following:
($
thousands)
|
Nine months
ended
December 31, 2020
|
Provisions for
CECRA-eligible tenants (reflects 25% landlord share)
|
$
|
(5,371)
|
Provisions for
tenants with negotiated rent abatements
|
(10,510)
|
Provisions for
additional expected credit losses
|
(5,002)
|
Total provision
recorded related to recurring tenant billings
|
$
|
(20,883)
|
Due to continued uncertainty surrounding the pandemic, it is not
possible to reliably estimate the length and severity of COVID-19
related impacts on the financial results and operations of the
Trust and its tenants, as well as on consumer behaviours and the
economy in general. For more information on the risks presented to
the Trust by the COVID-19 pandemic, please see Section 12,
"Enterprise Risks and Risk Management" of the Trust's MD&A for
the year ended December 31, 2020 and
its Annual Information Form for the year ended December 31, 2020.
Non-GAAP Financial Measures and Additional Financial
Information
In addition to using performance measures
determined in accordance with International Financial Reporting
Standards ("IFRS" or "GAAP"), Choice Properties also measures its
performance using certain non-GAAP measures, and provides these
measures in this news release so that investors may do the same.
Such measures and related per-unit amounts are not defined by IFRS
and therefore should not be construed as alternatives to net income
or cash flow from operating activities determined in accordance
with IFRS. Furthermore, the supplemental measures used by
management may not be comparable to similar measures presented by
other real estate investment trusts or enterprises. These terms,
which include the proportionate share basis of accounting as it
relates to "equity accounted joint ventures", net operating income
("NOI"), funds from operations ("FFO") and adjusted funds from
operations ("AFFO"), are defined in Section 14, "Non-GAAP Financial
Measures", of the Choice Properties MD&A for the year ended
December 31, 2020, and are reconciled
to the most comparable GAAP measure.
Choice Properties' consolidated financial statements and
MD&A for the year ended December 31,
2020 are available on Choice Properties' website at
www.choicereit.ca and on SEDAR at www.sedar.com. Readers are
directed to these documents for financial details and a fulsome
discussion on Choice Properties' results.
Management's Discussion and Analysis and Consolidated
Financial Statements and Notes
Information appearing in
this news release is a select summary of results. This news release
should be read in conjunction with the Choice Properties 2020
Annual Report to Unitholders, which includes the consolidated
financial statements and MD&A for the Trust, and is available
at www.choicereit.ca and on SEDAR at www.sedar.com.
Conference Call and Webcast
Management will host a
conference call on Thursday, February 11,
2021 at 10:30AM (ET) with a
simultaneous audio webcast. To access via teleconference, please
dial (647) 427-7450 or (888) 231-8191. A playback will be made
available two hours after the event at (416) 849-0833 or (855)
859-2056, access code: 9790288. The link to the audio webcast will
be available on www.choicereit.ca in the "Investors" section under
"Events & Webcasts".
About Choice Properties Real Estate Investment Trust
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. For more information, visit Choice
Properties' website at www.choicereit.ca and Choice Properties'
issuer profile at www.sedar.com.
Cautionary Statements Regarding Forward-looking
Statements
This news release contains forward-looking
statements relating to Choice Properties' operations and the
environment in which the Trust operates, which are based on
management's expectations, estimates, forecasts and projections.
These statements are not guarantees of future performance and
involve risks and uncertainties that are difficult to control or
predict. Therefore, actual outcomes and results may differ
materially from those expressed in these forward-looking
statements. Readers, therefore, should not place undue reliance on
any such forward-looking statements. Further, a forward-looking
statement speaks only as of the date on which such statement is
made. Management undertakes no obligation to publicly update any
such statement, to reflect new information or the occurrence of
future events or circumstances, except as required by law.
Numerous risks and uncertainties could cause the Trust's actual
results to differ materially from those expressed, implied or
projected in the forward-looking statements, including those
described in Section 12, "Enterprise Risks and Risk Management" of
the Trust's MD&A for the year ended December 31, 2020, which includes detailed risks
and disclosure regarding COVID-19 and its impact on the Trust, and
those described in the Trust's Annual Information Form for the year
ended December 31, 2020.
For further information, please contact
investor@choicereit.ca
SOURCE Choice Properties Real Estate Investment Trust