TORONTO, April 29, 2021
/CNW/ - Choice Properties Real Estate Investment Trust ("Choice
Properties" or the "Trust") (TSX: CHP.UN) today announced its
consolidated financial results for the three months ended
March 31, 2021. The 2021 First
Quarter 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 to report a strong start to 2021 with stable and
expected financial and operational results for the first quarter,
as our portfolio of high-quality real estate assets continued to
produce solid earnings and rent collections," said Rael Diamond, President and Chief Executive
Officer of the Trust. "In addition, we advanced a key development
initiative and completed an important acquisition in the quarter.
We announced a new partnership with The Daniels Corporation to
revitalize and redevelop our Golden Mile Shopping Centre in
Toronto and we acquired
approximately 300 acres of future industrial development land in
the Greater Toronto Area,
providing us an opportunity to significantly increase our existing
industrial footprint."
Summary of GAAP Basis Financial Results
($ thousands except
where otherwise indicated)
(unaudited)
|
|
Three
Months
|
|
March 31,
2021
|
|
March 31,
2020
|
|
Change
|
Net income
(loss)
|
|
$
|
(62,198)
|
|
$
|
332,742
|
|
$
|
(394,940)
|
Net income (loss) per
unit diluted
|
|
|
(0.086)
|
|
|
0.475
|
|
|
(0.561)
|
|
|
|
|
|
|
|
|
|
|
Rental
revenue
|
|
|
326,539
|
|
|
324,911
|
|
|
1,628
|
Fair value gain
(loss) on Exchangeable Units(1)
|
|
|
(217,683)
|
|
|
386,062
|
|
|
(603,745)
|
Fair value gains
(losses) excluding Exchangeable Units(2)
|
|
|
59,220
|
|
|
(135,665)
|
|
|
194,885
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities
|
|
|
148,632
|
|
|
104,147
|
|
|
44,485
|
|
|
|
|
|
|
|
|
|
|
Weighted average
Units outstanding - diluted
|
|
|
722,930,485
|
|
|
700,625,695
|
|
|
22,304,790
|
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
Choice Properties had a net loss of
$62.2 million for the first quarter
of 2021 as compared to net income of $332.7
million in the first quarter of 2020. The decrease was
mainly due to an unfavourable change of $603.7 million in the adjustment to the fair
value on the Exchangeable Units, partially offset by a $209.1 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 $1.6 million on a GAAP basis
($1.9 million on a proportionate
share basis) as compared to bad debt expense of $0.9 million on a GAAP and proportionate share
basis in the first quarter of 2020.
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. During the three
months ended March 31, 2021, the
Trust recorded a bad debt expense of $1.9
million on a proportionate share basis that reflects the
support provided to tenants as well as the increased collectability
risk for certain tenants with amounts past due.
Summary of Proportionate Share(1) Financial
Results
As at or for the
period ended
($ thousands except
where otherwise indicated)
(unaudited)
|
|
Three
Months
|
|
March 31,
2021
|
|
March 31,
2020
|
|
Change
|
Rental
revenue(1)
|
|
$
|
341,608
|
|
$
|
340,417
|
|
$
|
1,191
|
Net Operating Income
("NOI"), cash basis(1)(3)
|
|
|
229,633
|
|
|
231,531
|
|
|
(1,898)
|
Same-Asset NOI, cash
basis(1)(3)
|
|
|
214,393
|
|
|
215,957
|
|
|
(1,564)
|
Adjustment to fair
value of investment properties(1)
|
|
|
60,895
|
|
|
(148,206)
|
|
|
209,101
|
|
|
|
|
|
|
|
|
|
|
Occupancy (% of
GLA)
|
|
|
97.0%
|
|
|
97.5%
|
|
|
(0.5)%
|
|
|
|
|
|
|
|
|
|
|
Funds from operations
("FFO")(2)
|
|
|
170,608
|
|
|
170,670
|
|
|
(62)
|
FFO(2) per
unit diluted
|
|
|
0.236
|
|
|
0.244
|
|
|
(0.008)
|
|
|
|
|
|
|
|
|
|
|
Adjusted funds from
operations ("AFFO")(2)
|
|
|
155,316
|
|
|
151,773
|
|
|
3,543
|
AFFO(2)
per unit diluted
|
|
|
0.215
|
|
|
0.217
|
|
|
(0.002)
|
AFFO(2)
payout ratio - diluted
|
|
|
86.1%
|
|
|
85.4%
|
|
|
0.7%
|
|
|
|
|
|
|
|
|
|
|
Cash distributions
declared
|
|
|
133,706
|
|
|
129,561
|
|
|
4,145
|
Weighted average
number of Units outstanding - diluted
|
|
|
722,930,485
|
|
|
700,625,695
|
|
|
22,304,790
|
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
March 31, 2021, Funds from Operations
("FFO", a non-GAAP measure) was $170.6
million or $0.236 per unit
diluted compared to $170.7 million or
$0.244 per unit diluted for the three
months ended March 31, 2020. Funds
from operations was relatively unchanged year-over-year, as an
increase in non-recurring lease surrender revenue and savings from
lower borrowing costs were partially offset by higher bad debt
expense and a decline in interest income due to fewer mortgages
receivable outstanding as compared to prior year. The results were
also impacted by a higher than usual amount of excess cash on the
balance sheet during the first quarter as a result of proceeds from
property dispositions in 2020 as part of capital recycling
initiatives.
The decline on a per unit basis was primarily due to the higher
weighted average number of units outstanding as a result of: (i)
the Trust units issued as consideration for the acquisition of two
assets from Wittington Properties Limited in July 2020 and (ii) the Exchangeable Units issued
as consideration for the acquisition of six assets from Weston
Foods (Canada) Inc. in
December 2020.
Transaction Activity
Since the end of the prior
quarter, the Trust completed $163.4
million of acquisitions and $88.9
million of dispositions on a proportionate share
basis(1). Notable transactions include:
- the acquisition of an 85% interest in approximately 300
developable acres of future industrial development land in
Caledon, Ontario, for $138.0 million. This purchase price comprised a
$100.0 million cash payment and a
commitment to pay the remaining $38.0
million balance contingent on certain milestones being met
over the development lifecycle;
- the acquisition of the Trust's 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%;
- the previously announced disposition of the Trust's 50%
interest in land held for development in Richmond Hill, Ontario, for aggregate proceeds
of $66.4 million; and
- the disposition of the Trust's 70% interest in a 20 acre land
parcel in Brampton, Ontario, for
$17.5 million.
The Trust has also made ongoing investments in its development
program with $20.6 million of
spending during the quarter on a proportionate share
basis(1). During the quarter, the Trust also transferred
$25.9 million of properties under
development to income producing status, delivering 35,000 square
feet of new GLA on a proportionate share basis(1).
Outlook and Impact of COVID-19
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 on the
longer-term impacts of the COVID-19 pandemic, Choice Properties
remains confident that its business model and disciplined approach
to financial management will continue to position it well.
Our diversified portfolio of retail, industrial and office
properties is 97.0% occupied and leased to high-quality tenants
across Canada. Our portfolio is
primarily leased to grocery stores, pharmacies or other
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 by our rent
collections, which were 98% for the first quarter.
We continue to advance our development initiatives, which
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 mixed-use
developments which will drive net asset value growth in the future.
The majority of our active development pipeline is focused on
growing our rental residential portfolio. We expect to complete
construction on two of our rental residential projects underway in
Toronto later this year and have
commenced construction on two additional high-rise residential
projects, including one project in Brampton located next to the Mount Pleasant GO
Station and one in the Westboro neighbourhood in Ottawa.
During the quarter we announced a new partnership with The
Daniels Corporation for the first phase of our plan to revitalize
and redevelop our Golden Mile Shopping Centre in Toronto. This project is adjacent to the new
Eglinton Crosstown light rail transit line and envisions the
transformation of our existing retail site into a mixed-use and
transit-oriented community. The first phase of the project will
include two condominium towers, a purpose-built rental building,
and ground floor retail and institutional uses. The project is in
the planning phase and we expect to commence construction in
2023.
Capital recycling remains an important part of our strategy as
we continue to seek opportunities to improve our portfolio quality.
In the first quarter, we completed the disposition of two parcels
of non-strategic development land. Proceeds from the dispositions
were used to acquire an 85% ownership interest in approximately 300
developable acres of future industrial development land in
Caledon, Ontario. The land is well
located and represents a unique opportunity for us to significantly
increase our existing footprint in a very strong industrial
market.
We have a strong balance sheet that positions us well to manage
broader market volatility brought about by the COVID-19 pandemic.
Our disciplined approach to financial management is based on a
conservative approach to leverage and financing risk by maintaining
strong leverage ratios and a staggered debt maturity profile. For
2021, the Trust has approximately $470
million of debt obligations coming due, a manageable amount
which we intend to refinance with longer term debt or repay with
excess cash on hand. From a liquidity perspective, the Trust has
approximately $1.7 billion of
available cash comprised of $1.5
billion as the unused portion of the Trust's revolving
credit facility and $178.0 million in
cash and cash equivalents, in addition to approximately
$12.4 billion in unencumbered
assets.
Update on Rent Collection
Rent collection for the
first 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 March 31,
2021, the Trust collected or expects to collect
approximately 98% of contractual rents:
%
Collected
|
First Quarter
2021
|
Retail
|
98%
|
Industrial
|
99%
|
Office
|
98%
|
Total
|
98%
|
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 $1.9 million in property
operating costs, on a proportionate share basis(1),
during the three months ended March 31,
2021, with a corresponding amount recorded as an expected
credit loss against its rent receivables.
($
thousands)
|
Three months
ended
March 31, 2021
|
As a
%
|
Total recurring
tenant billings
|
$
|
368,927
|
100.0%
|
Less: Amounts
received and deferrals repaid to date
|
|
(361,208)
|
97.9%
|
Balance
outstanding
|
|
7,719
|
2.1%
|
Total rents expected
to be collected pursuant to deferral arrangements
|
|
(749)
|
(0.2)%
|
Total rents to be
collected excluding collectible deferrals
|
|
6,970
|
1.9%
|
Less: Provision
recorded related to recurring tenant billings
|
|
(1,936)
|
(0.5)%
|
Balance expected to
be recovered in time
|
$
|
5,034
|
1.4%
|
The Trust's provision for recurring tenant billings for the
three months ended March 31, 2021, is
comprised of the following:
($
thousands)
|
Three months
ended
March 31, 2021
|
Provisions for
tenants with negotiated rent abatements
|
$
|
(511)
|
Provisions for
additional expected credit losses
|
|
(1,425)
|
Total provision
recorded related to recurring tenant billings
|
$
|
(1,936)
|
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 13, "Non-GAAP Financial
Measures", of the Choice Properties MD&A for the three months
ended March 31, 2021, and are
reconciled to the most comparable GAAP measure.
Choice Properties' unaudited interim period condensed
consolidated financial statements and MD&A for the three months
ended March 31, 2021 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 2021 First
Quarter Report to Unitholders, which includes the unaudited interim
period condensed consolidated financial statements and MD&A for
the Trust, and is available at www.choicereit.ca and on SEDAR at
www.sedar.com.
Conference Call and Webcast
Management will host a
conference call on Friday, April 30,
2021 at 9:00AM (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: 3856238. The link to the audio webcast will
be available on www.choicereit.ca in the "Investors" section under
"Events & Webcasts".
Annual and Special Meeting of Unitholders
Choice Properties' Annual and Special Meeting of Unitholders will
take place on Friday, April 30, 2021
at 11:00AM (ET). Due to the public
health impact of the COVID-19 pandemic and in consideration of the
health and safety of our Unitholders, employees and the broader
community, this year's meeting will be held in a virtual meeting
format only, by way of a live webcast. Unitholders can attend the
meeting by joining the live webcast online at
https://web.lumiagm.com/463063746. Refer to "How do I attend and
participate in the virtual Meeting?" in the Management Proxy
Circular which can be viewed online at www.choicereit.ca or under
Choice Properties' SEDAR profile at www.sedar.com, for detailed
instructions on how to attend and vote at the meeting. The webcast
of the meeting will be archived on our website following the
meeting. Please refer to the investors page at
www.choicereit.ca for additional details on the virtual
meeting.
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.
SOURCE Choice Properties Real Estate Investment Trust