Thank you. Good morning, and welcome to Choice Properties Q1, 2022 conference call.

I'm joined here this morning by Rael Diamond President and Chief Executive Officer; Mario Barrafato, Chief Financial Officer, and Ana Radic, Executive Vice President Leasing and operation. Before we begin today's call, I would like to remind you that by discussing our financial and operating performance and in responding to your questions, we may make forward-looking statements, including statements regarding Choice Properties objectives, strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, intentions, outlook, and similar statements concerning anticipated future events, results, circumstances, performance, or exceptions that are not historical facts.

These statements are based on our current estimates and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from the conclusions in these forward-looking statements. Additional information on the material risks that can impact our financial results and estimates and the assumptions that were made in implying and making these statements can be found in the recently filed Q1 2022 financial statements and management discussion and analysis which are available on our website and on SEDAR.

I will now turn the call over to Rael.

Thank you, Doris, and good morning, everyone. Thank you for taking the time to join our Q1 conference call.

We are pleased to report a strong start to the year. Our portfolio and financial position is strong as reflected in our 4.8% increase in net asset value per unit in the quarter.

This is driven by continued demand for essential retail, strong investor market dynamics, and progress in our development pipeline. In addition to our Q1 results, we released our 2021 environmental, social, and governance report.

The report sets out ambitious ESG goals that will guide our activities in the future. We are pleased with the progress we've made in 2021 and look forward to reporting on progress over time.

There is much to be done, but we are energized by the challenge. Joining me on today's call is Ana Radic who will provide an update on our strong operational results and positive leasing momentum and Mario Barrafato who will provide an update on our solid financial results.

Before they do so, I will provide an update on our transaction and development activity. Q1 was a significant quarter for Choice.

We successfully executed our strategic sales of six office properties to Allied Properties REIT, continued our ongoing capital recycling initiatives, and made progress on our active and future development pipeline. sale to Allied.

Last year, we made the strategic decision to focus our time and capital on the opportunities available in our four core business areas. Essential retail, industrial, our growing residential platform, and our robust development pipeline.

This means we'll eventually exit office as an asset class. During the quarter, we introduced the unique transaction to accelerate our exit from office, and closed on the sale of six office properties to Allied Properties REIT ' for consideration of $740 million.

As part of the consideration, we received crust units that represents an 8.5% ownership interest in Allied and a $200 million promissory note set to mature at the end of 2023. This exchange was beneficial in many ways.

First, we reduced our direct exposure to office to approximately 3.5%. Second, we created financial flexibility as we are able to redeploy the capital from Allied units into our core business segments over time, and build our residential program.

And finally, we are focusing our effort on the asset classes, where we have scale. This is a significant advantage as it creates operating efficiencies, provides further investment opportunities, and helps us attract tops out.

With the closure of this transaction, we will no longer be reporting office as a standalone asset class. Our operating and reporting will focus on three core segments: being retail, industrial, and finally, a new segment, mixed-use and residential.

We are incredibly pleased with the outcome of this transaction as it is a win-win transaction for both Choice and Allied. Turning to our developments.

At the beginning of the year, we purchased our development partner share and including buying out an option that they had in each of our recently completed, purpose-built rental projects, Liberty House and the Brixton for $18.7 million and $17.1 million respectively, increasing our total ownership to 30% in each of these assets. On the consideration phase, approximately 55% relates to the auction nullification.

In addition, we continue to look for opportunity to intensify our hot-quality retail portfolio. And in the quarter, we transferred two commercial projects for approximately 23,000 square feet to income-producing properties.

We also made progress on our existing development pipeline and further expanded our future industrial pipeline. Industrial continues to be our strongest performing asset class, and we continue to direct capital to further grow our future industrial pipeline.

Since January, we had two significant developments related to our future industrial portfolio. First, we commenced construction at our industrial center development in South Surrey, British Columbia.

A new generation logistics facility targeting LEED Silver certification upon completion in 2023. This development will deliver 350,000 square feet of High quality industrial space to prime industrial nerd and current rent anticipate -- we anticipate a yield of approximately 7.5%.

Secondly, in April, we acquired an additional 97 acre parcel of land adjacent to the future industrial site in Caledon we acquired in 2021, bringing the total future net developable industrial land in this multi-phase industrial park to approximately 380 acres. This additional land was completed at a track for profit per hectare.

Our development partner is currently working through the rezoning approval process with the town of Caledon to permit approximately 5.5 million square feet of future industrial space. Looking ahead, in addition to our future industrial land, we have 11 development projects representing over 10.5 million square feet in different stages of the rezoning and planning process.

This development pipeline provides us with tremendous opportunities in both the near and long term to add high-quality assets to our portfolio, and create long-term value. I'm now going to pass the call over to Anna (ph).

Anna (ph)?

Thank you, Rael, and good morning, everyone. As Rael mentioned, our operational results for the quarter were strong due to increased consumer traffic and retailer confidence across the retail portfolio and sustained high demand from Industrial users.

We continue to see positive momentum, particularly in new leasing activity commencing in future periods. Despite having tenant retention that was lower than usual, our period-end occupancy remained strong at 97% compared to 97.1% last quarter.

We completed a 127,000 square feet of new leasing commencing in the quarter. We had approximately 825,000 square feet of lease expiries in the quarter, and we renewed 359,000 square feet at leasing spreads, 5.3% higher than expiring rents.

retention at 43.5% with lower than in past quarters, resulting in negative absorption of 339,000 square feet. We released 450,000 square feet of this vacated space at more favorable rents commencing in future periods.

The majority being industrial space in the GTA and in Calgary. Turning to our asset classes.

Our approximately 45 million square foot retail portfolio, which consists of open-air centers with necessity-based tenants once again delivered stable results. Retail occupancy declined slightly to 97.4% down ten basis points from the prior quarter due to temporary vacancy that has been back-filled.

We completed 270,000 square feet of renewals in the quarter. At rents 6.5% above expiring, reflecting tenant retention of 72%.

We also had 43,000 square feet of new retail deals commencing in the quarter. The desire for retailers to locate in our necessity-based centers remains strong actively looking to open new locations and expand their store networks.

There has been strong interests from pharmacies, fitness, furniture, decor, discount stores, and quick service restaurants all eager to expand and upgrade existing locations. We completed several little deals with retailers this industry during the quarter.

Industrial fundamentals remains strong in 2022. The acceleration of e-commerce in Canada and the shortage of available space has continued to create a supply demand imbalance for distribution and logistic warehouses, driving increases in rental rates across the country.

The GTA availability rate was down 10 basis points from the fourth quarter of 2021. While Edmonton and Calgary saw the largest quarterly decreases in availability, falling 110 basis points and 80 basis points respectively.

The national availability dropped to 1.6%, an all-time historic low. Occupancy in our industrial portfolio decreased to 100 basis points in the quarter, finishing at 97.1% occupied.

This was due to 390,000 square feet expiring in the quarter of which 66,000 was renewed. The declining vacancy is mainly attributable to two large anticipated lease expiries, one in Alberta and the other is Ontario.

We have been able to capitalize on strong industrial market fundamentals, and these spaces had been released affected Q2 of this year at new rents, significantly exceeding the expiring rents. 170,000 square feet of this space, which is in Calgary, has been released .

113,000 square feet was in the GTA, and at least commencing April 1st with rental spreads, 150% higher than the expiry and limited landlord capital required. With this transaction, the GTA our 6.6 million square foot Ontario portfolio remains fully occupied on a committed basis.

The calorie market continues to improve and it's benefiting from the growth in logistics tenants, as well as greater economic certainty fueling demand for spaces, 10 thousand square feet and under. We also completed 55 thousand square feet of new deals in Alberta which took effect in the quarter.

We are pleased with the improved leasing conditions in Alberta and the fact that our Western Canadian portfolio at 95.1% leased is outperforming the market. The Halifax Industrial market also continues to thrive with vacancy rate hitting a record low of 1.9% in the quarter.

During the quarter, we renew at 20 thousand square foot tenant at rents 31% above expiry. Demand for rental residential continues to increase as the lifting of pandemic restrictions brings resident back into urban centers.

Our rental residential portfolio consist of three stabilized assets, which ended the quarter at approximately 96% leased. Our two newest assets, the Brixton and Liberty House, located in the West -- Queen West and Liberty Village neighborhood, respectively, are 61% leased.

We expect the Brixton to reach stabilized occupancy by the third quarter of this year, and Liberty House by the second quarter of next year, if not sooner. Our operating results in the quarter were strong, reflecting the strength and resilience of our portfolio.

We remain confident that our portfolio will continue to deliver solid operating results through the balance of 2022. I will now pass the call over to Mario to discuss our financial performance.

Thank you, Ana, and good morning, everyone. As Rael mentioned, we are pleased with our strong start to 2022 with continued high rent collections and positive leasing momentum.

Our reported Funds From Operations for the first quarter was 175.1 million or $0.242 per unit. On a gross dollar basis, our FFO for the quarter increased by $5 -- $4.5 million compared to the prior year.

And this was primarily due to higher same asset net operating income, partially offset by the impact of net disposition activity over the trailing 12 months. In addition, we had a decline in interest expense due to lower leverage, and we also had higher interest income from new mezzanine loan advances.

Included in FFO was $1.6 million non-recurring NOI from successful realty tax appeals. On a per-unit basis, diluted FFO was $0.242.

This was up 2.5% compared to $0.236 in the first quarter of 2021. We're please we've been able to maintain stable occupancy and consistent same asset results for six consecutive quarters.

Same asset cash NOI increased by 3.2% compared with the first quarter of 2021. By asset class, retail increased by $7.2 million or 4.2%.

These increases reflect contractual rent steps and higher tax and capital recoveries, as well as a reduction in bad debt expense of $1.1 million and the non-recurring tax appeal I mentioned earlier. I ndustrial increased by $757, 000 or 2.2% and this was driven by positive demand fundamentals, partially offset by the temporary vacancies that Anna mentioned.

Mixed-use increased by $444,000 or 5% and this was driven by positive lease in our residential assets, coupled with a decline in bad debt expense of $300,000. This was partially offset by the challenges in our remaining office portfolio.

When including the $1.7 million of total bad debts, total same asset cash NOI increased by 2.6%. Our business continues to be supported by our industry-leading balance sheet and disciplined approach to financial management.

We reported a significant increase to our net asset value in the quarter with a total increase of $452 million or 4.8%, marking the seventh consecutive quarter, we've recognized NAP growth. This was driven by investment property, fair value gains, and contributions from operations.

We're pleased to report that fair value gains in our investment properties were $418 million, driven by strong fundamentals for Industrial real estate, both income producing and development properties. As well, our reported gains reflected demand for essential retail, and the progress in our development pipeline.

The fair value gains in the quarter demonstrate the strength of our overall portfolio and the future value creation potential of our development pipeline. We continue to improve our debt metrics this quarter and maintain ample liquidity.

Our leverage was 39.5% at the end of the quarter, an improvement of 2.8% compared to Q1 of 2021. Our debt-to-EBITDA ratio was 7.2 times consistent with that of the fourth quarter, and down from the 7.6 times reported in the first quarter of 2021.

From liquidity perspective, we maintain approximately $1.5 billion in available cash comprised of $1.4 billion of available credit and $35 million in cash and cash equivalents. And this is further supported by approximately $12.4 billion of unencumbered properties.

Lastly, we continue to expect that our portfolio through strategic acquisitions and trimming of non-core assets through our capital recycling program and our development program. Excluding the sale of our office properties, which relative to earlier, we successfully and opportunistically sold approximately $55 million of income producing properties deemed non-strategic to our core portfolio, while acquiring approximately $65 million of properties in the quarter.

Since the start of the year, there has been a significant increase in interest rates with the Bank of Canada already hiking the overnight rate by 75 basis points and several further hikes anticipated for the remainder of '22. Additionally, longer-term rates have increased with the Bank of Canada 10-year benchmark yield increasing by 120 basis points from the beginning of 2022 to approximately 2.8% currently.

In the said high rate environment, our priorities will remain the same. We'll maintain a high level of liquidity and a balanced debt maturity ladder.

Our current strong liquidity profile provides us flexibility in refinancing the approximately $620 million of debt obligations coming due in the remainder of 2022. We are fortunate to have access to several sources of capital, including unsecured debentures, commercial mortgages, CMHC financing, and property dispositions.

So overall, we are incredibly pleased with our strong start to 2022. We continued to deliver stable and resilient operating results while driving strong net asset value growth.

The resilience in our earnings in conjunction with our conservative balance sheet and our commitment to prudent financial management will allow us to navigate through market volatility and a rising interest rate environment. And with that, I would now like to turn the call back to the Operator for questions.

Hi, good morning.

Good morning.

Just jot it down for me, . Just a couple of questions from me.

So just for your Golden Mile, firstly, to commence through that project at the time . And secondly, just looking at the recent moves in interest rates and inflation, hasn't all in your desire to proceed with the project?

Jay, thank you for your question. The timing was a little unclear in your question.

It is our intention to be in a position to start construction in 2023 -- end of 2023. And obviously, we're going to have to assess the status of construction processing at that time.

But overall, we're very, very excited by the project. We take -- obviously, it's a transformational development.

We've actually done some commercial leasing and we think ultimately very enthused and we'll have to assess that at the time in 2023.

Perfect. Understood.

And also just back in with Golden Mile. Just in terms of the calls in contracts, when you expect contracts to be negotiated in with that projects?

So we haven't even get engaged. Our partner is Daniel is on that project on the first phase, and we will work with them on the construction management and process.

And lastly, obviously closer to the time and pull it in mid-2023, we'll have better clarity.

Okay. Thanks for the color.

I'll turn it back.

Thanks. Good morning, guys.

property and why which is definitely a bit above where your previous we indicated where you expected for the year, but what some non-recurring income in there. But would you increase at all what you think from maybe you can get previously said 1.5% to 2%.

Do you think that you can do better? And how much of that would change based on the sale of our fixed assets?

Maybe I can start and Anna can fill the blanks. It's usually like we were our targeted 1.5% to 2% given that much of our portfolio, long-term leases with contractual rent steps.

But, and then, I mentioned what we're seeing is a bit more robust activity in our, kind of, non Loblaw portfolio. So I think we will be actually closer to that above 2% in the retail for this year.

On an overall basis, because the Industrial has this transition and tenancies with some downtime, we won't see a lot of growth in Industrial this year, but the table beats will be set for 2023. And then, as far as office goes, yes, like pretty much we transitioned from having NOI from those office properties to now having distribution, a steady distribution.

So that will stabilize the FFO, but there will be nothing in NOI except for those five properties that are remaining. And again, with them being in the situation they're in with Calgary, we're seeing some decline in NOI there.

But overall, we still think this year for the whole portfolio, which should be between 1.5% and 2%. So pretty strong given that there's not much contribution from Industrial.

Would you increase from that 1% up to 2% that you normally -- that you had set previously because of the sale of the office assets?

Yeah. Because there would have been some decline in NLI for I think so, yes.

So probably not of two markets that would have been some declined, but again, office wouldn't have that big of an impact compared to the whole portfolio.

Okay, great, thanks. I don't know if you disclosed, but in your disclosure metric I saw, but can you let us know what the leasing spreads were in the retail portfolio?

Yeah, the spreads in the retail were 7.1% over expiring rents.

Okay. And if you want to also for Industrial.

For Industrial, we had very limited lease rollover. So they were actually flat.

We had just the 60,000 or so square feet rolling in Alberta because we had those two big spaces that we release so they aren't in our spreads.

Anna, maybe speak to the rent spreads we're seeing on those bigger spaces for forward leasing.

Yes, on the forward leasing as I said, in the GTA, we're seeing spreads of sometimes 100% 250% above expiring and we're also starting to see strong rental rate lifts in Alberta, 20% to 30%. And I think it's important to note that for the deals that we're reporting in industrial, they had occurred in the quarter, excuse me.

They were done a year ago, right? the markets really moving quickly.

So you're going to expect to see higher spreads from us in future quarters.

Great, thanks a lot.

So for if it's flat, I didn't answer your question. I feel bad Mark.

I did everything.

Yes. I sort of got that, yes.

I understand.

Thanks.

Thank you so much.

Thanks. Good morning.

I'm looking at the IFRS cap rates that you have by asset class and I know there's a reclassification with a new category of mixed-used residential other office. I'm just wondering if you've heard any reclassification from retail into mixed-use, or is it really mostly an office bucket for now?

No. There wouldn't have been a big reclassifications.

Mostly, the the mixed-use is just a handful of properties and it's mostly office that has retail and .

Yes, we the majority of it is office that some will allow turn bulbs frac to have the next year out of office and retail at 22 say Claire and Bathurst Lake Shore. That is anchored by grocery store and other retail store long-term bowls.

And then our residential portfolio, which has retail as well as residential.

Okay. So it will be office properties that have the other components that you now basically call mixed use.

Is that correct?

Right. And then --

So basically in our life line on the participants?

No.

Okay. Gotcha.

And then with sales to our Allied of the fixed assets, I'm just wondering your thoughts on the office portfolio as it stands at 3.5%. Is it a point where you're pretty satisfied that you're holding?

I know in the individual announced that you talked about the remainder being mostly core to . Is there anything else in the office portfolio that you view as non-core?

Yeah, Jenny. In total, we earned 8 office assets or 8 assets than the previously office, and we break it up as three assets that are call and those are primarily leased to Western group entities and then five assets that we will sell up the time.

And then 5 assets of two and help S1 in Montreal and two in Calgary. And we sell them at the right time.

Okay. Great.

I just wanted to turn over to Industrial, obviously an asset class that you want to continue growing in. It's nice to see the improvement in Alberta.

And I'm just wondering about your thoughts on Calgary versus Edmonton just given the I guess, proximity of the two markets, like how do you see those markets evolving? If there's increased interest in logistics and warehousing in Calgary, because that really focused on Calgary.

You think it'll be evenly spread out between Calgary and Edmonton? How do you see that playing out over time?

Well, the demand from logistics is greater in Calgary definitely. Obviously, there is still some element of that e-commerce servicing of that sort of Edmonton and North market.

But the larger hubs are in Calgary, so it's hard to see right now how that will spill over into Edmonton.

Do you see it at the Virgin, in sort of the outlook for accounting and I mentioned because of the greater weighting towards logistics, or do you think Edmonton rate ball too, we don't see more of a service of to the oil industry, or just more of a book life market with most of the logistics being saved Calgary in the next proximity.

No, I do think there is a bit of a divergence that, yes, for sure, like logistics, users ' favorite Calgary. So sorry if I wasn't clear previously.

And I do think with the spike in oil prices we're seeing and more optimism in general in Calgary. That's helping the Edmonton market as well whether it was also driven by smaller businesses and the oil and gas sectors.

So that market is improving as well as of Calgary.

Okay. Thanks.

Thank you very much.

Hi, good morning, everybody.

Morning, Tal.

Just a sort of a question around how you're sort of preventing your development like when we look at the projects under active development, and it's got an expected total spend. Like once it's under construction, about how much of the budget is actually locked in by that point?

Total of the bulk of the budget is actually, when we left it as asset development, the bulk of the budget is actually up 10. So, for example, the big item that became active in the quarter was the Choice investor sets in Vancouver.

And we're around 90% locked in at that point.

Okay. Got it.

And when -- like how long prior to construction do you start locking in all of those items?

So it's really very fluid at the moment. Previously, contractors would hold process for you for a longer period of time.

What we're seeing is we're seeing people or contractors basically give you a very limited time to whole process. So it's just very fluid at the moment, just given the changing process impacts on supply chain, etc.

So you don't have that opportunity to lock it in on some components ahead of time. But we are very fortunate that we have a very strong team who've been really for taking, and for example, the groups that have been caught building a rental building or residential tower without appliances.

So we've achieved pre -planned, for example, on AutoWeb project, we have already purchased all the appliances and they're sitting in a warehouse. So we've been very fortunate that we have a very strong group who's forward thinking and had been obviously looking up our risks and trying to lock-in process or protect costs as much as they can.

Okay. And then if we think about on the industrial side, like obviously, the stuff you've got under development right now, you're seeing yields roughly 6% to 8% range, which is great given how strong the Industrial market is.

When we look out to the stuff you still got in , do you think you can still achieve those types of yield going forward?

We recognize there has been an increase in construction cost generally across the board. The good thing on Industrial rent has kept up basic, not outpaced wake construction pricing up is, without huge competitive advantage is our land price.

Like if you just look at the assembly, we've done in Caledon, where land may be trading at sometimes $2 or $3 million an acre, we've assembled that land at . So, we have a huge competitive advantage at land processing, which will translate into premium yields that we can deliver the industrial assets too.

Okay. So you see the full impacts that you can give like really the advantage over -- if you we're just going to market and trying the by-the-way into a project today.

It's the land, it's the land price, and then the land size.

Okay.

So they know many groups control on call it 380 hectare of developable land in the GTA, like I can't think of any groups I guess.

Go it. And then just on the -- just tell us on the tenant buyers, I just want to make sure, FGF brands that the group that by the Western Food assets.

That is correct.

And then just on the retail side, are you getting a sense like a lot of very big on trying to operate with our click-and-collect model as sort of e-commerce grows across the country. Are you getting a sense for like what sort of changes they may be looking at making to the restore footprint across their banners over?

Is there anything you can share there?

Nothing that we can share yet. We can't comment obviously on Loblaw, but we worked with Loblaw, to facilitate if it's parking spots or portions -- portions of the store that has manual MXZ will go through there to modify it, but nothing else that we can really comment on.

We'll just continue to work together to relation our we have a very strong relationship and we obviously want to help them in their space needs.

Okay. Thanks very much, gentlemen.

Thank you.

Thank you, Shantell (ph). So just to summarize, we're very pleased with our first quarter results.

We're in such a great position, we have a high-quality portfolio, phenomenal development pipeline. And said, this is really supported by our industry-leading balance sheet.

Thank you for the interest to investment in Choice and for joining us this morning.