Thank you. Good morning, and welcome to Choice Properties' Q2 2026 conference call.

I'm joined this morning by Rael Diamond, President and Chief Executive Officer, Erin Johnston, Chief Financial Officer, Niall Collins, Executive Vice President, Development and Construction, and David Muallim, Senior Vice President, Leasing and Operations. Rael and Erin will provide a recap of our second quarter operational results and highlights before we open the line for Q&A, where Niall and David will join to answer your questions.

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 expectations 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 we made in applying and making these statements can be found in our recently filed Q2 2026 financial statements and management discussion and analysis, which are available on our website and on SEDAR+. With that, I turn the call over to Rael.

Thank you, Simone, and good morning, everyone. We are pleased with our second quarter results, which reflect the strength of our portfolio and the disciplined execution of our strategy.

During the quarter, we continued to unlock value through strategic leasing across our necessity-based retail portfolio. We also capitalized on tenant demand to drive rental rate growth in our well-located industrial portfolio.

Across our portfolio, fundamentals held strong. Occupancy remains near full, leasing activity and spreads were robust, and same-asset NOI growth was solid.

Portfolio occupancy was 97.7%, down 40 basis points from the previous quarter. This primarily reflects planned vacancies tied to strategic repositioning initiatives, which I will discuss shortly.

Outside of these initiatives, operating performance was solid. Average leasing spreads were robust at 19%, supportive of our same-asset NOI growth of 2.8%.

In our retail portfolio, demand remained resilient across our core necessity-based tenant categories. Retail occupancy ended the quarter at 97.4%.

During the quarter, we completed 643,000 square feet of renewals and 83,000 square feet of new leasing. Renewal spreads were 12.4%, with increases across categories such as liquor, restaurants, and dollar stores.

This includes 318,000 square feet of fixed-rate option renewals. Excluding these fixed-rate renewals, the average retail renewal spread was very strong at approximately 20%.

Retention was 66%, primarily reflecting known non-renewals of two large spaces previously leased to Loblaw, totaling 172,000 square feet. Both spaces were utilized for storage or temporary uses and had single-digit gross rents, reflecting the flexible nature of their leases.

The first space was the 90,000-square-foot strategic repositioning at Bloor and Dundas that we mentioned last quarter, where we will be creating a multi-tenant configuration with commitments from Shoppers Drug Mart and GoodLife. During the quarter, we turned over the space to Shoppers Drug Mart for fixturing, with a target opening later this year.

Possession for GoodLife is targeted in early 2027. The second was an 82,000-square-foot space in Laval, where we are pursuing a similar backfill strategy and will provide progress in the coming quarters.

Excluding these two non-renewals, retention was approximately 80%, broadly in line with our historical levels. Backfilling of our Q2 vacancies is already well advanced, with approximately 50% of the space having been released at rents well above expiring rates.

We also made progress on the backfill of our three former Toys "R" Us locations. No Frills took possession and is now fixturing at Dartmouth Crossing, and we're in active discussions on our remaining two locations with our JV partner.

We expect to provide further updates on the remaining locations during our next conference call. In addition, subsequent to the quarter, we completed the renewal of our 2027 tranche of Loblaw leases, representing 50 locations and 3.6 million square feet.

All of the leases renewed were retail locations and were completed at an average spread of 8.8% and an average term of 5 years. These renewals provide steady cash flow growth and address approximately 67% of our 2027 retail lease maturities.

Our industrial portfolio also delivered healthy operating results during the quarter, with occupancy stable at 98.6%. We completed 353,000 square feet of renewals in the quarter, achieving a retention rate of 80.6%.

Activity was concentrated in Ontario and Alberta, with an average renewal spread of 20.2%. In the GTA, rent commenced in April at our recently completed NLS building in Choice Caledon Business Park.

Construction is also progressing well on Building D, with completion and occupancy targeted for the second half of 2027. Our team remains active in the market and continues to respond to RFPs for single and multi-tenant users interested in the site.

Looking ahead, our industrial portfolio remains well-positioned, supported by high-quality assets, strong tenant base, and locations in core urban markets across the country. We expect leasing momentum to support robust organic growth through the balance of the year.

While renewal spreads are expected to moderate in the second half as the mix of expiring leases changes, embedded mark-to-market opportunity remains a meaningful driver of future growth. Lastly, we also saw positive momentum in our mixed-use and residential portfolio.

Mixed-use occupancy increased 50 basis points, while leasing improved across our residential assets, supported by our focus on tenant retention. Turning now to transaction activity.

Transaction activity was relatively modest during the quarter, as our focus remained on advancing the proposed First Capital transaction and maintaining balance sheet flexibility. We completed a total of $14 million of transactions in Q2 and $30 million of transactions subsequent to quarter-end, bringing our total year-to-date capital recycling activity to approximately $55 million.

During the quarter, we acquired a retail property in Waterloo, Ontario for $7.4 million. The site is adjacent to one of our existing high-performing grocery-anchored retail properties.

Together, the properties create a significant land assembly along a major commercial corridor in a neighborhood benefiting from growth in student housing. Ownership of both properties unlocks an attractive intensification opportunity, enhancing the transaction's overall economics.

We are pursuing early-stage approvals for additional retail density to enhance the site's long-term value. We completed $6.8 million of dispositions during the quarter, and subsequent to quarter-end, we sold our remaining 50% interest in an Alberta retail property for $13.2 million.

Finally, we continue to make progress on our previously announced acquisition of First Capital. Last month, First Capital unitholders voted overwhelmingly in favor of the proposed transaction, and the Ontario Superior Court subsequently approved the plan of arrangement.

We continue to work constructively through the regulatory process, and closing remains on track. We will provide further updates as the process advances.

With that, I'll now turn the call over to Erin to discuss our financial results and capital allocation activity. Erin?

Thank you, Rael, and good morning, everyone. Q2 was another solid quarter for Choice's core business.

For the quarter, reported funds from operations, or FFO, was $192.9 million, or 26.7 cents per unit on a diluted basis, an increase of 0.8% year-over-year. This performance was driven by same-asset cash NOI growth of 2.8% and higher lease surrender revenue of $1.6 million.

Contributions from acquisitions and development transfers were offset by dispositions. Higher interest expense from refinancing, higher G&A, and lower investment income also tempered FFO growth.

Adjusting for the impact of non-recurring items, including lease surrender revenues of $1.6 million and the reduction in Allied distributions of $3.2 million, FFO growth was 1.5%. AFFO in the quarter was 21.7 cents per unit, down 6.1% from the prior year, which was largely related to timing of maintenance capital and tenant improvements.

Looking ahead, we expect 2026 capital spend to be broadly in line with the prior year. Turning to our property performance.

Same-asset cash NOI was healthy, increasing $6.9 million, or 2.8% over the prior year. Retail same-asset cash NOI increased by $3.7 million, or 1.9%.

Excluding bad debt expense primarily related to the Toys "R" Us termination, growth was 2.4%. Industrial same-asset cash NOI increased by $2.9 million, or 5.8%.

Excluding bad debt reversals in the current year, growth was 5.2%. Both asset classes performed well in the quarter and benefited from strong renewal spreads, higher base rents from new leasing, and contractual rent steps.

Mixed-use and residential same-asset cash NOI increased by approximately $0.3 million, or 4.1%, primarily due to lower operating costs. Moving to the balance sheet.

IFRS net asset value, or NAV, was $14.73 per unit, an increase of approximately $145 million, or 1.4% compared to the prior quarter. The increase reflected a $46 million net contribution from operations, a $105 million net fair value gain on investment properties, and an $8 million fair value gain on our investment in Allied Properties units.

As a reminder, under IFRS, we are required to mark-to-market this investment based on Allied's trading price at the end of each period. Fair value gains on investment properties were primarily driven by our retail portfolio, including the impact of the 2027 Loblaw renewals and cap rate adjustments supported by external appraisals.

We recorded a gain in our industrial portfolio, primarily supported by an external appraisal at our Ajax property. We also recorded a modest write-down in our mixed-use and residential portfolio, largely related to cap rate adjustments at certain Ontario residential assets.

Our balance sheet remains in excellent shape, with strong debt metrics and significant access to capital ahead of the expected closing of the FCR transaction. We have approximately $2 billion of available liquidity through our corporate facility and cash on hand.

This includes the recent $500 million increase to our credit facility, providing additional liquidity to support our increased scale following the closing of the transaction. We also have approximately $14.1 billion of unencumbered properties, and our debt-to-EBITDA ratio was unchanged from the prior quarter at 7.0 times.

Financing activity was modest during the quarter. This included the repayment of two mortgages totaling $64 million and securing a new construction facility for Building D at Choice Caledon.

Looking ahead, we remain encouraged by the state of the unsecured market and are well positioned to both refinance our next unsecured maturity in November along with the financing required to support the FCR transaction. Turning to our development activity.

During the quarter, we completed two retail land lease intensifications totaling 66,000 square feet for a blended yield of 27.2%. These projects included a 65,000-square-foot land lease with Nautica in Kingston, Ontario at a 28% yield, and a 1,000-square-foot land lease at a 50% owned site in Winnipeg to a QSR tenant at a 23% yield.

Together, these deliveries are another example of our ability to create value on excess land across our retail portfolio. Executing on our retail intensification pipeline and advancing the next phases of our Choice Caledon development remain key priorities for the balance of the year.

Looking ahead to the second half of 2026, we are prioritizing operational excellence across the portfolio while continuing to execute on our commercial development pipeline and value creation initiatives. We will also continue to progress towards the closing of the FCR transaction.

However, given the timing of closing remains uncertain, we are continuing to reference our outlook excluding the impact of the transaction. We are reiterating our outlook and expect to deliver stable occupancy, 2% to 3% same-asset cash NOI growth, and with FFO per unit diluted between $1.08 and $1.10 for the year.

With that, Rael, David, Niall, and I will be glad to answer your questions.

Thank you, and good morning. Solid quarter here, maybe I'll focus a bit on the pending FCR transaction.

How's the process coming along with the Competition Bureau, and when do you expect to receive the necessary approvals there?

Hi, Himanshu, it's Simone. The process is going really well.

As we said in our last call, we did a lot of work in advance of announcing the deal, and so at this point, everything is on track. We are still saying that it's going to be in the second half of the year that we expect to close, and more particularly in Q4.

Okay.

Then in terms of closing, is that the main hurdle now, or what other approvals or significant approvals are we looking for?

That is the main approval. As you would have seen in this past quarter, the First Capital's unitholder vote was overwhelmingly successful, and the court approved the plan of arrangement, it's just in the regulatory process now.

Got it. Thank you.

Then maybe, Erin, with respect to the debt financing required to close that transaction, how is the cost of financing trended since the announcement? Do you still expect, I think, mid-4 interest rate on that closing?

Yeah. Since the transaction, Himanshu, as it's been quite volatile in the underlying rates, but fortunately, spreads have held in quite well and are still hovering around 10-year lows, which is great, and we've heard that there continues to be demand, particularly for our name and our BBB (high) rating.

When I think about 10-year financing today, it's hovered between 4.7, 4.8 in the last couple weeks.

Okay. Do you have any hedging in place to fix the interest rate given a big debt financing coming at the end of the year?

I think there's some debt maturity for Choice as well, and then FCR, some maturity in January. Do you do any hedging in place?

We have the ability to hedge, Himanshu, close to our refinancing. We don't have any in place right now.

What I'd say is one of the reasons we also increased our line is we have that flexibility, and we're also being very thoughtful on when we go to market between now and closing and how we want to spread out that.

Okay. That's very helpful.

Then sticking to that balance sheet, your debt rating is obviously BBB (high), very, very strong. Is there a leverage threshold you need to maintain for that rating?

Does the transaction change anything with respect to debt rating?

Our credit ratings were affirmed right after the deal. The way that we're thinking about and the way this particularly DBRS is thinking about it is, as long as the transaction comes to fruition as we've said, i.e., the NOI comes online, we are fine, and then deleveraging will also support as we continue to pursue a higher rating.

Yeah. Okay.

No, that's a good point. Okay.

Thank you. Maybe just last one question and not regarding FCR, by the way.

On this Caledon Building D, any update on the lease-up? Also, I saw I think your expected yield was revised slightly higher.

Any reason for that?

Hi, Himanshu, it's Niall. As Rael mentioned, there's good buoyancy in the market, which we're really encouraged by.

Secondly, Building D is the only 1 million-square-foot project that's under construction right now, we feel really good about that. There is a number of offers that are going back and forth, we're encouraged that we'll be able to land one of these offers as soon as we can.

Thanks,

Niall. The yield?

That's gone up as well.

We have not updated the yield. It remains the same.

Around 6, low-6 percentage there.

Correct. Okay.

Okay. Thank you so much, and I'll turn it back.

Thank you. Again,

Thanks. Good morning.

Just on the FCR deal, I think you've cited that 4 cents of estimated dilution from an FFO standpoint. As you kind of work toward closing, are there any pieces that maybe could shift the outlook?

Pammi, the only things that would shift it are we're going to continue to update our debt assumptions, which we just spoke about, depending on financing. We'll refresh NOI based on new budgets that will be done, but those would be the material pieces.

Nothing big.

Would there be maybe any opportunities to maybe improve the recovery ratios, maybe from a G&A standpoint? I think you have modeled that into your forecast in terms of the additional G&A, but I'm just curious if there's any ways to maybe offset some of that.

I think it's too early to say, and our team's continuing to work through the impacts of integrating the two platforms. As we have better clarity, we'll share.

Okay. Just on the retail occupancy, can you maybe just go through the backfill of that releasing?

It sounds like, I think, Bloor-Dundas, I think you talked about last quarter, but that should be, including Sea Mar, I think all or most of it should be backfilled by early next year, but maybe some color on the Montreal vacancies that surfaced this quarter.

Hi, Pammi, David speaking here. As Rael mentioned, yeah, Bloor and Dundas of the Loblaw vacated this quarter.

We're actually very very encouraged with how quickly our team turned over that site in the sense of it vacated this quarter, and we got Shoppers in within the same quarter, very encouraged by that collaboration across the teams. In Laval, the site is requiring a bit of a rezoning process, it's going to take a little bit more time, but we are working through a similar type of a plan from a backfill perspective, and we should have more to share in upcoming quarters.

Okay. That space is more of a 2027 type releasing?

Yeah.

Okay. Then just lastly, on the industrial side, just with all these new issues, I guess, or these new tariffs that were announced, maybe just some broader color here.

Are you seeing any changes in terms of from a leasing velocity—it looks like leasing or occupancy held pretty steady—but in terms of as you look forward over the balance of the year, any shifts in tenant behavior or willingness to commit or maybe even just in terms of delays in any decision-making on some of your existing tenancies?

Hi, Pammi, it's Niall. In terms of new opportunities, no, there's been a consistency over the last number of quarters on moving forward with expansion opportunities as they arise.

Pammi, David speaking. In terms of the existing portfolio, we're actually fairly encouraged by where we're seeing our occupancy going towards end of the year.

As of now, it hasn't been an impact, but something that we're closely monitoring.

Okay. Thanks very much.

I'll turn it back.

Hi, good morning. Just wondering if we could talk a little bit about the disposition plan post the closing of the acquisition.

I'm assuming you've gotten an idea of what's in the acquired portfolio, what's in your own portfolio. Do you have sort of an idea of when investors should expect to see the start of that disposition process after the deal has closed?

Hey, Tal, hope you're doing well. Look, I would say the first thing is the team has a track record of bringing down the leverage post a major acquisition, as we did after the acquisition or the integration of CREIT.

We're busy working through it. I would tell you that there's likely more to be sold on the Choice portfolio than the First Capital portfolio because we were very selective on the assets we purchased, as Simone mentioned.

As soon as we have more color to share, we will share it. You'll likely see sales start happening, call it early of '27.

All right, that's great. Then something we haven't talked about in a while, but the market's started to change, but you obviously have a large residential pipeline potential within the Choice portfolio.

You're also going to be acquiring a portfolio that also has large residential opportunities. Have you thought about ways to extract value from that over time?

Are we sort of in the window where maybe you could consider starting to greenlight some residential developments, or would you look at trying to monetize some of that density value?

Look, I'd say a few things. One, we've said over the last few quarters that we agree things are starting to turn, that there's not a lot of new construction, the condo supply is slowly dwindling, we actually think there is an opportunity to lean in, and Niall's team has been really advancing the Grenville Grosvenor project, and if there was one to go first, it will be that one.

Then I'd say we're always looking at ways to extract value, and as right now the land market is just not there, and we don't think as a long-term owner with a strong balance sheet now would be the right time to try and sell density.

Okay. That's great.

Thanks very much, everybody.

Hey, guys. Good morning, everyone.

Just one question on the Loblaw's renewal, and I saw it went up to 8.8%, and that's a bit higher than previous years. I'm just wondering if this kind of mid-8, high-8 area is that the go-forward kind of trend that we should be expecting for those renewals, or is there anything one-time in there?

Hey, David speaking. What we're seeing is, as you observed, with the strength of the retail market, we've been seeing that rate or that increase go up over the last few years, we've been very very positive about that, which is what we've seen in the grocery market and all of the rest of our retail portfolio.

I think on a go-forward basis, it is a little early to tell based on the composition of the sites and the stores in the portfolio, but what we're seeing across the rest of our portfolio, we're hoping will continue to work its way through the renewals.

By the composition, you're just saying there could be more Toronto versus the actual portfolio broadly? Is that kind of what you're indicating?

In every year, because it was a tranche of stores, it is mixed across the country, but it's a mix of market sizes, store sizes, and then in some cases, rent levels. That was more of the comment on composition.

Okay. All right.

Thanks, guys. That's all for me.

Thank you, JL. Once again, our business and portfolio remain in excellent shape.

Thank you all for your interest in Choice Properties and for joining us this morning. We look forward to providing you another update on the business in the fall.