Choice Properties Real Est Invstmnt Trst Q4 Earnings Call Highlights

Choice Properties Real Est Invstmnt Trst (TSE:CHP.UN) reported what management described as a strong year of operational and financial performance, supported by steady retail demand, resilient industrial fundamentals, and value creation from development activity. On the REIT’s fourth-quarter 2025 earnings call, executives also highlighted continued capital recycling and a fourth consecutive distribution increase approved by the board.

Leadership updates and 2025 highlights

CEO Rael Diamond opened the call by announcing that David Muallim has returned to Choice Properties as senior vice president, leasing and operations, following time at Loblaw where he oversaw real estate leasing and new store development. Diamond said Muallim’s return allows Niall Collins to transition back to his primary role as executive vice president, development and construction, with a focus on delivering the development pipeline.

For full-year 2025, Diamond said the REIT met its earnings outlook, delivering same-asset cash net operating income (NOI) growth of 2.2% and funds from operations (FFO) per unit growth of 3.6%. He added that Choice ended the year with leverage at 7.0x.

Management said it completed CAD 801 million of real estate transactions during the year, including CAD 460 million of acquisitions and CAD 341 million of dispositions, for net acquisition activity of CAD 119 million. The REIT also transferred 17 new commercial projects totaling 836,000 square feet, completed at an average yield of 7.4%, which management said resulted in CAD 47 million of value creation.

Fourth-quarter operating performance: occupancy, leasing, and NOI

In the fourth quarter, Choice said portfolio occupancy increased 20 basis points to 98.2%, primarily due to new leasing in the industrial portfolio. Diamond said favorable renewal spreads of approximately 22% helped drive same-asset NOI growth of 2.4% for the quarter. Leasing spreads were achieved on 1.6 million square feet of renewals, with a retention rate of 92.4%, and the REIT completed 233,000 square feet of new leasing.

Retail: Management said retail occupancy rose 20 basis points to end the year at 98%. During the quarter, the REIT completed 596,000 square feet of renewals and 89,000 square feet of new leasing. Diamond said renewal spreads were 16.8%, led by Atlantic and Quebec regions, and cited activity with tenants in the dollar store, liquor, and office supplies categories. He added that management views vacancies and backfills as opportunities to re-lease space at higher rents and to higher covenant tenants.

Industrial: Choice said industrial occupancy increased 50 basis points to 98.8% by year-end. The REIT reported a 93.8% retention rate and completed more than 1 million square feet of renewals at a spread of 26%. Management noted a 514,000-square-foot renewal in the Greater Toronto Area that included a fixed-rate option and produced a 17% spread; excluding that renewal, spreads averaged 40%. The REIT also completed 138,000 square feet of new leasing at rents 31% above average in-place rents, which executives said underscored mark-to-market and embedded growth in the portfolio.

Mixed-use and Residential: Diamond said mixed-use and residential delivered stable performance in 2025, supported by office assets that are primarily leased to affiliate entities. He noted that select residential properties experienced pressure from new supply, but management remains committed to transit-oriented residential development over the long term.

Financial results, NAV, and balance sheet

CFO Erin Johnston said fourth-quarter reported FFO was CAD 189.9 million, or CAD 0.262 per diluted unit, up 0.8% year over year. She attributed FFO performance to total cash NOI growth of 4.4%—including higher same-asset NOI and contributions from transactions and completed developments—partially offset by the timing of lease surrender revenue, higher interest expense from refinancing activities, and lower investment income.

Johnston reported adjusted funds from operations (AFFO) of CAD 0.201 per unit, which she said was an increase of CAD 0.05 year over year, largely due to the timing of maintenance capital projects. For the full year, she said the AFFO payout ratio was 88%, consistent with prior years.

Same-asset cash NOI increased CAD 5.9 million, or 2.4%, versus the prior year’s quarter. By asset class:

• Retail: up CAD 3.1 million, or 1.6%, driven by higher base rents and recovery revenue; excluding bad debt expense, growth was 2.1%.
• Industrial: up CAD 2.9 million, or 6.2%, driven by higher rental rates on renewals, new leasing, and contractual rent steps.
• Mixed-use and Residential: down about CAD 0.1 million, or 1.8%, primarily due to lower rent at certain residential properties.

On valuation, Johnston said IFRS net asset value (NAV) was CAD 14.43 per unit, down CAD 72 million (about 0.7%) from the third quarter. She said the decrease was primarily driven by a CAD 87 million fair value loss on the REIT’s investment in Allied Properties units and a net fair value loss on investment properties of CAD 29 million, partially offset by a net contribution from operations of CAD 45 million. Johnston also said that, on a full-year basis, NAV increased CAD 263 million year over year, representing 2.6% growth on a per-unit basis.

Choice ended the year with CAD 1.6 billion of available liquidity through its corporate facility and cash, and CAD 13.8 billion of unencumbered properties, according to Johnston. Debt-to-EBITDA was 7x, and she said there were no material financing or debt maturities in the quarter, with the next material maturity being a CAD 350 million debenture in November.

Development, transactions, and 2026 outlook

Johnston said fourth-quarter development spend was approximately CAD 40 million, and the REIT delivered three new commercial projects totaling 601,000 square feet at a blended yield of 7.8%. The largest was a phase of Choice Caledon Business Park totaling 530,000 square feet at the REIT’s ownership share, completed at a 7.9% yield, with rent commencement expected to begin in April. Two retail intensifications were also completed: a 54,000-square-foot Costco gas bar in Edmonton (in a 50%-owned JV) at a 6.1% yield, and a 17,000-square-foot Shoppers Drug Mart in Ontario at a 6.9% yield. Johnston said there are eight additional Shoppers Drug Mart projects in the active pipeline.

On transactions, Diamond said the REIT completed about CAD 261 million of real estate transactions in the quarter, including CAD 67 million of acquisitions and CAD 195 million of dispositions. He highlighted a new 50/50 joint venture with Wittington across two office towers at Yonge & St. Clair in Toronto, involving the third-party acquisition of 2 St. Clair Avenue East for CAD 43 million at Choice’s 50% share (excluding costs) and the concurrent sale of a 50% interest in the Weston Centre to Wittington for CAD 76 million. Management described the overall transaction as a net CAD 33 million office disposition for Choice, while maintaining operational control of both properties.

For 2026, management guided to 2% to 3% year-over-year growth in same-asset cash NOI, stable occupancy, and diluted FFO per unit between CAD 1.08 and CAD 1.10. Johnston said the outlook is supported by same-asset NOI growth and contributions from transactions and development, partially offset by the impact of Allied’s distribution cut. Management also said it intends to keep debt-to-EBITDA below its long-term target of 7.5x.

The REIT said its distribution will increase to CAD 0.78 per unit effective March 2026, representing a 1.3% increase from the prior year and marking its fourth consecutive distribution increase.

About Choice Properties Real Est Invstmnt Trst (TSE:CHP.UN)

Choice Properties Real Estate Investment Trust invests in, manages, and develops retail and commercial properties across Canada. The company’s portfolio primarily consists of shopping centers anchored by supermarkets and stand-alone supermarkets. The properties are mostly located in Ontario and Quebec, followed by Alberta, Nova Scotia, British Columbia, and New Brunswick. Choice Properties generate the majority of revenue from leasing properties to its tenants. The company’s principal tenant, the large-format retailer Loblaw Companies, contributes the vast majority of the total rent.