\n| \n Rental revenue<\/span><\/p>\n<\/td>\n | \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 183,084<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 170,339<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Net Operating Income (\u00ab\u00a0NOI\u00a0\u00bb)(1)<\/sup><\/span><\/p>\n<\/td>\n| \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 126,861<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 118,681<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Net Income (Loss)<\/span><\/p>\n<\/td>\n | \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 188,735<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n (1,538)<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Net Income (Loss) per unit diluted<\/span><\/p>\n<\/td>\n | \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 0.472<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n (0.004)<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Funds from Operations (\u00ab\u00a0FFO\u00a0\u00bb)(1)<\/sup> per unit diluted(2)<\/sup><\/span><\/p>\n<\/td>\n| \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 0.240<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 0.228<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Adjusted Funds from Operations (\u00ab\u00a0AFFO\u00a0\u00bb)(1)<\/sup> per unit diluted<\/span><\/p>\n<\/td>\n| \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 0.191<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 0.184<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Adjusted Funds from Operations(1)<\/sup> payout ratio<\/span><\/p>\n<\/td>\n| <\/td>\n | \n 85.1%<\/b><\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n 88.3%<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Distribution declared per unit<\/span><\/p>\n<\/td>\n | \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 0.162501<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 0.162501<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Total assets (in millions)<\/span><\/p>\n<\/td>\n | \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 8,465<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 7,719<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Debt to total assets(3)<\/sup><\/span><\/p>\n<\/td>\n| <\/td>\n | \n 45.1%<\/b><\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n 46.3%<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Debt service coverage(3)<\/sup><\/span><\/p>\n<\/td>\n| <\/td>\n | \n 3.5x<\/b><\/span><\/p>\n<\/td>\n | <\/td>\n | \n 3.4x<\/span><\/p>\n<\/td>\n<\/tr>\n\n| <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n | \n| <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n | <\/td>\n<\/tr>\n<\/table>\n<\/div>\n\n \n\n| \n (1)<\/span><\/span><\/p>\n<\/td>\n | \n See \u00ab\u00a0Non-GAAP Financial Measures\u00a0\u00bb beginning on page 4.<\/span><\/p>\n<\/td>\n<\/tr>\n\n| <\/td>\n | <\/td>\n<\/tr>\n | \n| \n (2)<\/span><\/span><\/p>\n<\/td>\n | \n FFO(1)<\/sup> per unit and payout ratio, for the three months ended June 30, 2014, were calculated using FFO(1)<\/sup> (excluding other adjustments). See Section 10, \u00ab\u00a0Non-GAAP Financial Measures\u00a0\u00bb, of this MD&A for details.<\/span><\/p>\n<\/td>\n<\/tr>\n\n| <\/td>\n | <\/td>\n<\/tr>\n | \n| \n (3)<\/span><\/span><\/p>\n<\/td>\n | \n Debt ratios include Class C LP Units but exclude Exchangeable Units. The ratios are non-GAAP financial measures calculated based on the trust indentures, as supplemented.<\/span><\/p>\n<\/td>\n<\/tr>\n<\/table>\n<\/div>\nFinancial Highlights for the Quarter:<\/b><\/p>\n\n- Net Operating Income<\/b>(1)<\/sup> \u2013 <\/b>Second quarter NOI(1)<\/sup> of $126.9 million<\/span> represented an increase of $8.2 million<\/span>, or 6.9%, over the second quarter of 2014. This increase was driven primarily by acquisitions, which contributed $7.3 million<\/span> to NOI(1)<\/sup>. Same Properties(1)<\/sup> NOI(1) <\/sup>of $117.0 million<\/span> increased by $0.9 million<\/span> or 0.8% over the second quarter of 2014. This improvement was attributable to an increase of $0.7 million<\/span> in base rent and net recoveries and $0.8 million<\/span> in revenue from the recovery of capital expenditures and interest, partially offset by a decrease in other income of $0.6 million<\/span>, and excludes NOI(1) <\/sup>of $0.2 million<\/span> contributed by newly developed GLA. <\/li>\n
- Net Income (Loss) before Fair Value Adjustments<\/b>(1)<\/sup> \u2013 Second quarter net income before fair value adjustments of $45.6 million<\/span> compared with a net loss before fair value adjustments of $12.8 million<\/span> reported in the second quarter of 2014. <\/li>\n
- Funds from Operations<\/b>(1)<\/sup> \u2013<\/b> Second quarter FFO(1)<\/sup> was $95.9 million<\/span> or $0.240<\/span> per unit, compared with $86.7 million<\/span> or $0.228<\/span> per unit in the second quarter of 2014, excluding a non-cash finance charge of 52.3 million. The year-over-year improvement in FFO(1)<\/sup> of $0.012<\/span> per unit was primarily driven by NOI(1)<\/sup> from acquisitions. <\/li>\n
- Adjusted Funds from Operations<\/b>(1) <\/sup>\u2013<\/b> Second quarter AFFO(1)<\/sup> was $76.4 million<\/span> or $0.191<\/span> per unit, compared with $69.8 million<\/span> or $0.184<\/span> per unit in the second quarter of 2014. Similar to FFO(1)<\/sup>, the improvement in AFFO(1)<\/sup> was primarily driven by NOI(1)<\/sup> from acquisitions partially offset by higher capital expenditures. <\/li>\n
- Distribution<\/b> \u2013 Distributions declared per unit during the quarter totaled $0.162501<\/span>, for an AFFO(1)<\/sup> payout ratio of 85.1% (2014 \u2013 88.3%).<\/li>\n<\/ul>\n
Operational Highlights for the Quarter:<\/b><\/p>\n\n- Accretive Acquisitions \u2013 <\/b>As previously announced, Choice Properties acquired a 38-property portfolio from Loblaw Companies Limited (\u00ab\u00a0Loblaw\u00a0\u00bb) for an aggregate purchase price of approximately $201.3 million<\/span>, excluding acquisition costs and a mark-to-market adjustment on the Exchangeable Units issued as partial consideration on the closing date of the acquisition. With an overall year-one capitalization rate of 7.19%, the acquisition will be immediately accretive. The portfolio spans the country, adds approximately 1.5 million square feet of GLA and is expected to provide an annual stabilized NOI1<\/sup> of approximately $14.5 million<\/span>. <\/li>\n
- Retail Development \u2013 <\/b>During the second quarter of 2015, Choice Properties continued to make headway with its development program, with ongoing progress for seven projects to be delivered to tenants by year-end 2015 and the completion of an intensification project involving a gas bar in Sudbury, Ontario<\/span>. Year-to-date, the Trust has completed three intensification projects with a weighted average yield of 9.8%. <\/li>\n
- Leasing Profile \u2013 <\/b>During the second quarter of 2015, Choice Properties entered into leases for 303,966 square feet of GLA with an average lease term of 5.0 years, including renewals of 238,106 square feet with an average increase in base rent of 9.8%. <\/li>\n
- Occupancy \u2013 <\/b>At June 30, 2015<\/span>, the Trust\u2019s portfolio occupancy rate was 98.5%, compared to 98.1% at December 31, 2014<\/span>.<\/li>\n<\/ul>\n
Capital Structure:<\/b><\/p>\n\n- Capacity to Invest for Further Growth \u2013 <\/b>As at June 30, 2015<\/span>, the Trust\u2019s debt service coverage ratio(2)<\/sup> was 3.5 times. With stable cash flow from operations and access to several funding options including a $500 million<\/span> unsecured revolving credit facility, the Trust believes it has the financial capacity to meet ongoing obligations and invest for further growth.<\/li>\n<\/ul>\n
Outlook<\/b><\/p>\n While the Canadian economy presents uncertainty given volatility in commodity pricing, the fluctuating Canadian dollar exchange rate and movements in interest rates, Choice Properties believes that the fundamentals of the retail real estate market remain stable. Even though the Canadian retail landscape continues to evolve, including changes in competitor make-up with ongoing exits and entrants into the marketplace, Choice Properties\u2019 grocery and drug store anchored real estate focus and its stable and reliable cash flows from long-term leases position it well to execute on potential opportunities to drive growth. With consistent cash flow from operations and a strong balance sheet, Choice Properties expects to meet its ongoing obligations, including providing its Unitholders with monthly distributions and to invest in growth. For the balance of the 2015 fiscal year, Choice Properties intends to continue focusing on: <\/p>\n \n- Acquiring accretive assets that meet its investment criteria and that are strategically aligned with its current portfolio; <\/li>\n
- Leveraging the excess density within its portfolio for at-grade intensification; <\/li>\n
- Accelerating greenfield and mixed-used development programs; and <\/li>\n
- Enhancing internally managed operations to strengthen relationships with tenants and to optimize cash flows and profitability within its portfolio. <\/li>\n<\/ul>\n
<\/p>\n \n \n\n| \n (1)<\/span><\/span><\/p>\n<\/td>\n | \n See \u00ab\u00a0Non-GAAP Financial Measures\u00a0\u00bb beginning on page 4.<\/span><\/p>\n<\/td>\n<\/tr>\n\n| <\/td>\n | <\/td>\n<\/tr>\n | \n| \n (2)<\/span><\/span><\/p>\n<\/td>\n | \n Debt ratios include Class C LP Units but exclude Exchangeable Units. The ratios are non-GAAP financial measures calculated based on the trust indentures, as supplemented.<\/span><\/p>\n<\/td>\n<\/tr>\n<\/table>\n<\/div>\nForward-Looking Statements<\/b><\/p>\n This press release contains forward-looking statements about Choice Properties\u2019 objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects and opportunities. Specific statements with respect to anticipated future results can be found in various sections of this press release and in the MD&A of Choice Properties\u2019 Second Quarter 2015 Report to Unitholders. Forward-looking statements are typically identified by words such as \u00ab\u00a0expect\u00a0\u00bb, \u00ab\u00a0anticipate\u00a0\u00bb, \u00ab\u00a0believe\u00a0\u00bb, \u00ab\u00a0foresee\u00a0\u00bb, \u00ab\u00a0could\u00a0\u00bb, \u00ab\u00a0estimate\u00a0\u00bb, \u00ab\u00a0goal\u00a0\u00bb, \u00ab\u00a0intend\u00a0\u00bb, \u00ab\u00a0plan\u00a0\u00bb, \u00ab\u00a0seek\u00a0\u00bb, \u00ab\u00a0strive\u00a0\u00bb , \u00ab\u00a0will\u00a0\u00bb, \u00ab\u00a0may\u00a0\u00bb, \u00ab\u00a0should\u00a0\u00bb and similar expressions, as they relate to Choice Properties and its management.<\/p>\n Forward-looking statements reflect Choice Properties\u2019 current estimates, beliefs and assumptions, which are based on management\u2019s perception of historic trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. Choice Properties\u2019 expectation of operating and financial performance is based on certain assumptions, including assumptions about future growth potential, prospects and opportunities, industry trends, future levels of indebtedness, current tax laws, current economic conditions and no new competition in the market that leads to reduced revenues and profitability. Management\u2019s 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.<\/p>\n Numerous risks and uncertainties could cause Choice Properties\u2019 actual results to differ materially from those expressed, implied or projected in the forward-looking statements, including, those described in the \u00ab\u00a0Enterprise Risks and Risk Management\u00a0\u00bb section of Choice Properties\u2019 2014 Annual Report. Such risks and uncertainties include:<\/p>\n \n- changes in economic conditions, including changes in interest rates, and the rate of inflation or deflation; <\/li>\n
- the inability of Choice Properties to maintain and leverage its relationship with Loblaw, including in respect of: (i) Loblaw\u2019s retained interest in Choice Properties; (ii) the services to be provided to Choice Properties (whether directly or indirectly) by Loblaw; (iii) expected transactions to be entered into between Loblaw and Choice Properties (including Choice Properties\u2019 acquisition of certain interests in properties held by Loblaw); and (iv) the Strategic Alliance Agreement between Choice Properties and Loblaw; <\/li>\n
- changes in Loblaw\u2019s business, activities or circumstances which may impact Choice Properties, including Loblaw\u2019s inability to make rent payments or perform its obligations under its leases; <\/li>\n
- failure to manage its growth effectively in accordance with its growth strategy or acquire assets on an accretive basis; <\/li>\n
- changes in timing to obtain municipal approvals, development costs, and tenant leasing and occupancy of properties under development or intensification; <\/li>\n
- changes in Choice Properties\u2019 capital expenditure and fixed cost requirements; <\/li>\n
- the inability of Choice Properties Limited Partnership to make distributions or other payments or advances; <\/li>\n
- the inability of Choice Properties to obtain financing; <\/li>\n
- changes in Choice Properties\u2019 degree of financial leverage; <\/li>\n
- changes in laws or regulatory regimes, which may affect Choice Properties, including changes in the tax treatment of the Trust and its distributions to Unitholders or the inability of the Trust to continue to qualify as a \u00ab\u00a0mutual fund trust\u00a0\u00bb and as a \u00ab\u00a0real estate investment trust\u00a0\u00bb, as such terms are defined in the Income Tax Act<\/i> (Canada<\/span>); and <\/li>\n
- changes in Choice Properties\u2019 competitiveness in the real estate market or the unavailability of desirable commercial real estate assets. <\/li>\n<\/ul>\n
This is not an exhaustive list of the factors that may affect Choice Properties\u2019 forward-looking statements. Other risks and uncertainties not presently known to Choice Properties could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in Choice Properties\u2019 materials filed with the Canadian securities regulatory authorities from time to time, including the Trust\u2019s 2014 Annual Information Form. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect Choice Properties\u2019 expectations only as of the date of this press release. Except as required by applicable law, Choice Properties does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.<\/p>\n Non-GAAP Financial Measures<\/b><\/p>\n Choice Properties uses the following non-GAAP financial measures: NOI, FFO, and AFFO. The Trust believes these non-GAAP financial measures provide useful information to both management and investors in measuring the financial performance and financial condition of the Trust for the reasons outlined below.<\/p>\n Management uses these and other non-GAAP financial measures to exclude the impact of certain expenses and income that must be recognized under GAAP when analyzing underlying operating performance, as the excluded items are not necessarily reflective of Choice Properties\u2019 underlying operating performance or impact the comparability of financial performance between periods. From time to time, the Trust may exclude additional items if it believes doing so would result in a more effective analysis of underlying operating performance. The exclusion of certain items does not imply that they are non-recurring.<\/p>\n These measures do not have a standardized meaning prescribed by GAAP and therefore they may not be comparable to similarly titled measures presented by other publicly traded REITs, and should not be construed as an alternative to other financial measures determined in accordance with GAAP.<\/p>\n Same Properties <\/b> Properties that were owned throughout both the current and comparative periods are grouped as same properties for comparative calculations.<\/p>\n Net Operating Income <\/b>NOI is defined as cash rental revenue from investment properties less property operating costs. NOI is a key performance indicator as it evaluates the results of the portfolio and represents a measure over which management has control. It is also a key input in determining the fair value of the portfolio. The Trust\u2019s method of calculating NOI may differ from other issuers\u2019 methods and, accordingly, may not be comparable to NOI reported by other issuers.<\/p>\n Net Income (Loss) before Fair Value Adjustments<\/b> Net Income (or net loss) as calculated under GAAP, excluding fair value adjustments on Exchangeable Units and investment properties.<\/p>\n Funds from Operations <\/b>FFO is not a term defined under IFRS and may not be comparable to similar measures used by other real estate entities. Except as otherwise noted, Choice Properties calculates its FFO in accordance with the Real Property Association of Canada White Paper on Funds from Operations for IFRS issued in April 2014<\/span>. The purpose of the White Paper was to provide reporting issuers and investors with greater guidance on the definition of FFO and to help promote more consistent disclosure from reporting issuers.<\/p>\nAn advantage of the FFO measure is improved comparability between Canadian and foreign real estate investment trusts. FFO adds back to net income (or net loss) items that do not arise from operating activities, such as fair value adjustments. FFO, however, still includes non-cash revenues related to accounting for straight-line rent and makes no deduction for the recurring capital expenditures necessary to sustain the existing earnings stream.<\/p>\n Funds from Operations Payout Ratio <\/b>FFO payout ratio is calculated as the distribution declared per unit divided by the FFO per unit diluted.<\/p>\n Adjusted Funds from Operations <\/b>AFFO is a supplemental measure of operating performance widely used in the real estate industry. Choice Properties views AFFO as an alternative measure of cash generated from operations and considers AFFO generated as one of its inputs in determining the appropriate level of distribution to Unitholders. Choice Properties calculates AFFO by adjusting FFO for non-cash income and expense items such as amortization of straight-line rents and finance charges. AFFO includes a reduction for capital expenditures for maintaining productive capacity required for sustaining property infrastructure and revenue from real estate properties and direct leasing costs. Property capital expenditures do not occur evenly over the fiscal year. The property capital expenditures in the AFFO calculation are adjusted to reflect an average annual spending level.<\/p>\n There is currently no standard industry-defined measure of AFFO. As such, Choice Properties\u2019 method of calculating AFFO may differ from that of other real estate entities and, accordingly, may not be comparable to such amounts reported by other issuers.<\/p>\n Adjusted Funds from Operations Payout Ratio <\/b>AFFO payout ratio is calculated as the distribution declared per unit divided by the AFFO per unit diluted.<\/p>\n Choice Properties Real Estate Investment Trust<\/b><\/p>\n Calculation of Non-GAAP Financial Measures<\/b><\/p>\n\n \n\n| \n
For the periods ended June 30
(in thousands of Canadian dollars, except per unit amounts)<\/span><\/p>\n(unaudited)<\/span><\/p>\n<\/td>\n
| <\/td>\n | \n Three Months<\/b><\/span><\/p>\n<\/td>\n | \n Six Months<\/b><\/span><\/p>\n<\/td>\n<\/tr>\n\n| <\/td>\n | <\/td>\n | \n 2015<\/b><\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n 2014<\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n 2015<\/b><\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n 2014<\/span><\/span><\/p>\n<\/td>\n | <\/td>\n<\/tr>\n | \n| \n Rental revenue<\/span><\/p>\n<\/td>\n | <\/td>\n | \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 183,084<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 170,339<\/span><\/span><\/p>\n<\/td>\n | \n $<\/b><\/span><\/span><\/p>\n<\/td>\n | \n 364,758<\/b><\/span><\/span><\/p>\n<\/td>\n | \n $<\/span><\/span><\/p>\n<\/td>\n | \n 337,384<\/span><\/span><\/p>\n<\/td>\n | <\/td>\n<\/tr>\n | \n| \n Reverse \u2013 Straight-line rental revenue<\/span><\/p>\n<\/td>\n | <\/td>\n | <\/td>\n | \n (9,311)<\/b><\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n (8,713)<\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n (18,130)<\/b><\/span><\/span><\/p>\n<\/td>\n | <\/td>\n | \n (17,275)<\/span><\/span><\/p>\n<\/td>\n<\/tr>\n\n| \n Property operating costs<\/span><\/p>\n<\/td>\n | <\/td>\n | <\/td>\n | \n
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