Choice Properties Real Estate Investment Trust (CHPUN) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Choice Properties Real Estate Investment Trust Annual Meeting of Unitholders. Please be advised that today's meeting is being recorded. I would now like to hand the meeting over to your speaker today, Gordon Currie. Thank you. Please go ahead.

Good morning, and welcome to the 2025 Annual Meeting of Unitholders of Choice Properties Real Estate Investment Trust. I'm Gordon Currie, and I serve as Chair of the Board of Trustees. It's my pleasure to welcome you to our Annual Meeting of Unitholders. For this year's virtual AGM, our goal is to once again approximate the experience of a meeting held in person, including the opportunity to participate in the meeting and for unitholders and proxy holders to vote and ask questions. I'm joined on the webcast today by Rael Diamond, our President and Chief Executive Officer and a member of the Board; Erin Johnston, our Chief Financial Officer; Niall Collins, our Chief Operating Officer; and Simone Cole, our Senior Vice President and General Counsel and Secretary. Other members of the Board of Trustees and senior management team and the senior management team are also attending remotely. I would now like to call to order this Annual Meeting of Unitholders. I will begin today's meeting by outlining how voting and questions will be addressed. Voting during today's meeting will be conducted through the online platform. When we are ready to table an item of business for a vote, you will see voting options appear on your screen, usually, and this year is no exception. The majority of unitholders have submitted their proxies or voting instructions in advance of the meeting. I wish to thank all those unitholders who exercise their right to vote in advance. If you have voted in advance of the meeting by submitting a proxy and do not wish to revoke your vote, then you do not need to do anything. The scrutineers will tabulate all the votes cast during the meeting, and we will report on the results of each resolution at the end of the meeting. If you wish to submit a question in writing, select the messaging tab on the top of your screen. To ask a verbal question, click on the request to speak icon at the top of the broadcast. When submitting a question, please identify whether it relates to a motion being considered as part of the formal business of the meeting or whether it is general in nature. We will address questions directly related to a particular motion at the appropriate time of the meeting and save general questions until after the formal business has been completed. Simone Cole, our Corporate Secretary, will receive and read the submitted questions, and either I or a member of the management team will respond. If you are logged into the meeting as a guest, you will be able to listen to the meeting, but you will not be able to vote or ask questions as only registered unitholders and duly registered proxy holders may do so. I will now proceed with the formal part of the meeting. I would ask Simone Cole to act as Secretary of the meeting. TSX Trust Company is acting as scrutineer of the meeting by way of its representatives, Emma Mckenzie and Lori Grinton. Only unitholders of record at the close of business on March 10, 2025, or their duly appointed proxies are entitled to take part in and vote at this meeting. To make the best use of our time, certain unitholders have been asked to move and second the motions, which are called for in the notice of meeting. A copy of the notice of meeting and proof of its mailing have been filed with the records of this meeting. The scrutineer's report indicates that a quorum is present. I now declare that this annual meeting has been properly called and is duly constituted for the transaction of the business for which it has been called. Today's agenda will begin with remarks from the Choice Properties management team. These will be followed by the submission of the 2024 annual financial statements followed by 3 resolutions: first, to elect the Board of Trustees; second, to appoint Choice Properties external auditor for the fiscal 2025 and to authorize the trustees to fix the external auditor's remuneration; and third, to consider an advisory resolution on Choice Properties' approach to executive compensation. At the conclusion of the formal items of business, we will move to our general question-and-answer period and the announcement of voting results. I would now like to bring your attention to the notice appearing on the screen. On behalf of those speaking today, I would like to note that today's remarks may include forward-looking statements and references to non-GAAP financial measures. Actual results could differ materially from the forecast, projections and conclusions in the forward-looking statements. Details regarding forward-looking statements and non-GAAP measures can be found in Choice Properties 2024 annual report as updated in the 2025 first quarter report to unitholders. I should also note that during the meeting, we may pause from time to time to review messages from the Secretary. Thank you in advance for your patience as we do so. Before I hand things over to Rael, I'd like to take a moment to reflect on 2024 and acknowledge the efforts of the team at Choice Properties over the last year. 2024 was another year of positive momentum for our business as we significantly advanced our strategic agenda, continued to demonstrate the stability of our portfolio and strength of our balance sheet and made meaningful progress on our transformational development pipeline. As Board Chair, I'm proud of our ability to deliver strong financial and operating performance and progress on our commitments to all stakeholders. I am confident in the team at Choice Properties and look forward to building on our positive momentum in 2025. With that, I'd like to now call upon Rael, Erin and Niall to present an update on the business.

Thank you, Gord. Good morning, everyone. We're delighted to have you join us for our 2025 Annual Meeting. We were proud to have achieved another year of strong operational and financial results in 2024. Our market-leading portfolio demonstrated its resilience and our disciplined approach to financial management enabled us to focus on both our day-to-day business and long-term strategy. In 2024, we delivered on our financial outlook and strategic priorities. We also continue to strengthen our foundation, which includes our industry-leading balance sheet our commitment to ESG, our strategic relationship with our largest tenant, Loblaw and our talented team. As a result of our strong performance and our solid financial position, we are pleased to announce our third annual distribution increase in the first quarter of 2025, demonstrating our commitment to sharing earnings growth with you, our unitholders. In 2024, we continue to enhance the quality of our portfolio through our capital recycling program. We completed over $425 million of real estate transactions, including $260 million of acquisitions and $165 million of dispositions, further optimizing our portfolio. We added approximately $300 million of high-quality real estate to our portfolio by advancing our development pipeline. This included 1.2 million square feet of new space across 14 projects featuring 12 retail intensification projects a Loblaw industrial ground lease at Choice Caledon Business Park and 1 purpose-built rental residential property. Our total investment of approximately $236 million was delivered at an average yield of 7%, resulting in significant NAV creation. In 2024, we made significant progress in our environmental, social and governance strategy. As one of Canada's largest real estate companies, we're uniquely positioned to impact people, communities and the environment. This year, we advanced our pathway to achieving net zero by 2050 and enhanced our social impact by focusing on community prosperity. Our ESG program is integral to our strategic framework, supporting our tenants, strengthening communities and building resilience through the business. I encourage you to read our 2024 ESG report available on our website. Looking ahead to 2025, we are positioned with a portfolio and platform that are built to withstand economic cycles. Our disciplined approach to capital allocation and balance sheet management provides us the capacity to continue to pursue growth opportunities, distinguishing us from our peers. Before I pass it to Niall, I want to express my thanks to our colleagues. Everything we achieved this past year would not have been possible without you. I'm especially proud of our deep culture of collaboration and our team's ability to continue to deliver best-in-class service to our tenants. I'll now pass it over to Niall, who will provide more color on our existing portfolio and our development program.

Thank you, and good morning. As Rael mentioned, 2024 was a strong year for our business. Our market-leading portfolio of essential retail, industrial, mixed-use and residential is in exceptional shape and operates at near full capacity. Throughout 2024, leasing activity across our 3 asset classes remains strong, supported by the location and quality of our assets, the resilience of our operating platform and the depth of our tenant relationships. Our 44.5 million square feet retail portfolio continues to provide steady cash flow growth as one of the largest and most resilient in Canada. Our grocery-anchored necessity-based retail assets performed exceptionally well. Our national footprint of neighborhood centers delivered rental growth with rates comparable to core urban areas, and our national tenants continue to seek out markets located where Canadians live and work. Our 20.9 million square feet well-located industrial portfolio also performed well in 2024. While rental growth rates have moderated after several years of robust growth, demand for high-quality industrial assets remain strong and supply in key markets is limited. Across the portfolio, we continue to benefit from rental growth on renewals based on our low in-place rents adjusting to market rates. We also increased our retail -- our residential portfolio delivering Mount Pleasant Village development consisting of 302 purpose-built rental units and 142 condo units, which Choice owns a 50% ownership. As Rael mentioned, our completed -- we completed several development projects in 2024. In addition to the residential project at Mount Pleasant Village, we transferred a Loblaw ground lease at Choice Caledon Business Park, totaling 921,000 square feet and 12 retail intensifications totaling 181,000 square feet. Beyond the project deliveries in 2024, our team is actively advancing a predevelopment pipeline. At the end of 2024, we had 20 active development projects. In addition, we have a substantial pipeline of future developments with 2 multiphase industrial projects totaling 4.2 million square feet and 12.6 million square feet of mixed-use residential projects at different stages of the predevelopment process. This development pipeline continues to provide us with a meaningful opportunity to add high-quality real estate to our portfolio. I will now turn the floor over to Erin to provide an update on our financial position.

Thank you, Niall. We are very pleased with our 2024 performance, delivering financial metrics that met or exceeded the financial targets reflected in our outlook. Supported by the strength of our portfolio, tenants and team, in 2024, we maintained high occupancy, ending the year at 97.6%, and we delivered strong leasing spreads of 20.2%. For the full year, same-asset cash NOI increased 3.2% and funds from operations grew 2.9% year-over-year to $1.032 per unit. In addition, NAV increased to $14.07 per unit, an increase of $0.40 or 2.9% year-over-year. In addition, this past year, we continue to demonstrate prudent financial management, ending 2024 with strong debt metrics and ample liquidity. Our adjusted debt to EBITDA net of cash at the end of the year was 6.9x, and we maintained a strong liquidity position with $1.5 billion available on our credit facility and approximately $13 billion of unencumbered properties. We maintained our balanced debt maturity ladder and extended our weighted average term to maturity to 6.1 years at the end of 2024. Overall, our 2024 performance demonstrates our ability to deliver stable and consistent growth, and our industry-leading balance sheet continues to provide us with the financial strength and flexibility to navigate challenges, seize opportunities and support our development pipeline. As we look ahead, we are positioned well to deliver on our financial plan. And on behalf of Choice Properties, we thank you for your continued support and confidence. I would like to welcome Gord back to address the meeting.

Thank you, Rael, Erin and Niall. I would now like to move to the first item of business and submit the annual audited consolidated financial statements of Choice Properties, together with the notes and auditor's report to the unitholders for the year ended December 31, 2024. These are included in the annual report, which was provided to unitholders and can also be retrieved from the Financial Reports section of Choice Properties website and from SEDAR+. Simone, were there any questions or comments submitted in connection with this item?

No, Gord. We have not received any questions related to this item.

Thank you, Simone. We'll now move to the 3 matters to be voted upon at this meeting. Before moving to the nomination and election of trustees, I am pleased to report that the Board has identified Jan Sucharda as a new trustee nominee standing for election today. Jan will strengthen and complement the current skills and capabilities of the Board by bringing expertise in real estate, finance, strategy and executive leadership. We look forward to his many contributions to Choice Properties. There are 11 nominees standing for election at this meeting. Our management proxy circular contains detailed biographies setting out the qualifications and backgrounds of the nominees. To facilitate the introduction of the nominees, I refer you to the slide on the webcast. I declare the polls open on all resolutions. Simone, were there any questions or comments submitted in connection with the nomination and election of trustees?

No Gord. We have not received any questions related to this item.

Thank you. I've taken the liberty of asking certain unitholders to make the motions for the matters to be voted on today. Could I please have a nomination for the election of trustees?

My name is Rose Tassone, and I am a unitholder. Mr. Chairman, I nominate the following persons for election as trustees of Choice Properties to hold office until the next Annual Meeting of Unitholders or until they resign or their successors are duly elected or appointed: L. Jay Cross, Gordon A.M. Currie, Rael L. Diamond, Diane Kazarian, Karen Kinsley, R. Michael Latimer, Nancy H.O. Lockhart, Dale R. Ponder, Jan Sucharda, Qi Tang, Cornell Wright.

My name is Kate Hutchinson, and I'm a unitholder. Mr. Chairman, I second the motion.

Choice Properties' Declaration of Trust requires that nominations of trustees by unitholders be received by the trustees at least 30 days in advance of the meeting in order to be valid. As no further nominations were received prior to the deadline, the nominations are closed. Rose, could you move a motion to that effect?

Mr. Chairman, I move that nominations be closed.

Mr. Chairman, I second the motion.

Thank you. If you have not already done so, I would ask unitholders or their appointees to cast their votes through the online portal. As a reminder, if you have already voted or sent in your proxy, there is no need to do anything unless you wish to change your vote. We will now move to the appointment of the auditors and the appointment of the trustees to fix the auditor's remuneration. Simone, were there any questions or comments submitted in connection with the appointment of the auditor?

No, Gord. We have not received any questions related to this item.

Thank you, Simone. I'll now entertain a motion for the appointment of the auditor and the authorization of the trustees to fix the auditor's remuneration.

Mr. Chairman, I move that PricewaterhouseCoopers LLP be appointed auditor of Choice Properties until the next Annual Meeting of Unitholders of Choice Properties and that the trustees be authorized to fix the auditor's remuneration for the 2025 fiscal year.

Mr. Chairman, I second the motion.

Thank you. If you have not already done so, I will ask unitholders or their appointees to cast their votes through the online portal. The next item of business is the advisory resolution regarding Choice Properties' approach to executive compensation. The resolution is more fully described on Page 20 of the management proxy circular. Simone, were there any questions or comments submitted in connection with this advisory resolution?

No, Gord. We've not received any questions related to this item.

Thanks, Simone. I will now entertain a motion to approve on an advisory basis, Choice Properties' approach to executive compensation.

Mr. Chairman, I approve that -- I move that the advisory resolution regarding Choice Properties' approach to executive compensation be approved.

Mr. Chairman, I second the motion.

Thank you. If you have not already done so, I will ask unitholders or their appointees to cast their votes through the online portal. This brings us to the end of the voting on the items of business before this meeting. I, therefore, declare the polls closed. Thank you for casting your votes. The scrutineers will tabulate the votes, and we will report on the results towards the end of the meeting. I'd now like to open the meeting for any general questions. We'll make every effort to answer all questions. However, in the interest of time, we will limit the question-and-answer period to 20 minutes. Any unanswered questions will be addressed after the meeting by members of our management team. Simone, have we received any questions?

No, Gord. We have not received any questions.

Well, as we've received no questions, we'll move to the voting results. We have received the preliminary voting results from the scrutineer on the 3 items of business. On the election of trustees, the voting results show that each trustee nominee received votes in favor from at least 94.7% of votes cast. Accordingly, I declare that the proposed trustee nominees have been duly elected to hold office until the next Annual Meeting of Unitholders or until they resign or their successors are duly elected or appointed. On the appointment of the auditor, the voting results show that approximately 99.7% of the votes cast were in favor of the appointment of PwC as the auditor of Choice Properties. I declare that PwC is appointed the auditor of Choice Properties and that the trustees are authorized to fix their remuneration for the 2025 fiscal year. And finally, on the advisory vote on Choice Properties' approach to executive compensation, approximately 95.2% of the votes cast were voted in favor of Choice Properties' approach to executive compensation. I declare this motion to be passed. The final voting results will be available after the meeting and posted to Choice Properties website and its SEDAR+ profile. As there is no further business, may I have a motion to terminate the meeting.

Mr. Chairman, I move that the meeting terminate.

Mr. Chairman, I second the motion.

Thank you. I now declare the meeting terminated. On behalf of the Board and management, I'd like to thank you for taking the time to join us today.

This concludes today's meeting. You may now disconnect. Thank you.