Choice Properties Real Estate Investment Trust (PPRQF) Q2 2026 Earnings Call Highlights: Strong …

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• Portfolio Occupancy: 97.7%, down 40 basis points from the previous quarter.

• Average Leasing Spreads: 19%, supported by same asset NOI growth of 2.8%.

• Retail Occupancy: 97.4%.

• Renewal Spreads: 12.4%, with retail renewal spread at approximately 20% excluding fixed rate renewals.

• Retention Rate: 66%, excluding two non-renewals, retention was approximately 80%.

• Investment Portfolio Occupancy: Stable at 98.6%.

• Investment Portfolio Renewal Spread: 40.2%.

• Funds from Operations (FFO): $192.9 million, or $0.267 per unit on a diluted basis, an increase of 0.8% year-over-year.

• Adjusted Funds from Operations (AFFO): $0.217 per unit, down 6.1% from the prior year.

• Same-Asset Cash NOI Growth: 2.8% over the prior year.

• Retail Same-Asset Cash NOI Growth: 1.9%, or 2.4% excluding bad debt expense.

• Industrial Same-Asset Cash NOI Growth: 5.8%, or 5.2% excluding bad debt reversals.

• Mixed-Use and Residential Same-Asset Cash NOI Growth: 4.1%.

• IFRS Net Asset Value (NAV): $14.73 per unit, an increase of approximately 1.4% compared to the prior quarter.

• Available Liquidity: Approximately $2 billion through corporate facility and cash on hand.

• Debt-to-EBITDA Ratio: Unchanged from the prior quarter at seven times.

• Development Yield: 27.2% blended yield from two retail land lease intensifications.

Release Date: July 23, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Choice Properties Real Estate Investment Trust (PPRQF) reported strong portfolio fundamentals with a high occupancy rate of 97.7%, despite a slight decrease due to strategic repositioning.

• The company achieved robust leasing spreads of 19% and same-asset NOI growth of 2.8%, indicating strong demand and effective management.

• Retail occupancy remained high at 97.4%, with significant renewal activity and strong renewal spreads, particularly in categories like liquor, restaurants, and dollar stores.

• The industrial portfolio is well-positioned with stable occupancy at 98.6% and a high average renewal spread of 40.2%, supporting future growth.

• Choice Properties Real Estate Investment Trust (PPRQF) maintains a strong balance sheet with approximately $2 billion in available liquidity and a debt-to-EBITDA ratio of seven times, ensuring financial flexibility.

Negative Points

• Portfolio occupancy decreased by 40 basis points from the previous quarter, primarily due to planned vacancies tied to strategic repositioning initiatives.

• AFFO per unit decreased by 6.1% year-over-year, largely due to the timing of maintenance capital and tenant improvements.

• Higher interest expenses from refinancing and increased G&A expenses tempered FFO growth, impacting overall financial performance.

• The company faces uncertainties related to the closing of the First Capital transaction, with regulatory approvals still pending.

• The retail segment experienced non-renewals of two large spaces previously leased to Loblaw, impacting retention rates and requiring strategic backfilling efforts.

Q & A Highlights

Q: How is the process with the Competition Bureau regarding the First Capital Realty (FCR) transaction, and when do you expect to receive the necessary approvals? A: Simone Cole, Senior Vice President, General Counsel, Secretary, stated that the process is going well, with expectations to close in the second half of the year, particularly in Q4. The main approval needed is from the regulatory process, as the First Capital unit holder vote and court approval have already been secured.

Q: How has the cost of debt financing trended since the FCR transaction announcement, and do you expect a mid-four interest rate at closing? A: Erin Johnston, Chief Financial Officer, noted that while underlying rates have been volatile, spreads have remained stable. The 10-year financing rate has been between 4.7% and 4.8% recently, and there is strong demand for their BBB high rating.

Q: Is there a leverage threshold to maintain your BBB high debt rating, and does the FCR transaction affect this? A: Erin Johnston explained that credit ratings were affirmed post-deal announcement. As long as the transaction proceeds as planned, with NOI coming online, the leverage will be managed, supporting the pursuit of a higher rating.

Q: Can you provide an update on the leasing of Caledon Building D and the expected yield? A: Rael Diamond, President and CEO, mentioned that there is strong market demand, and Building D is the only 1 million square foot project under construction. Offers are being negotiated, and the expected yield remains in the low 6% range.

Q: Regarding the FCR deal, are there any opportunities to improve recovery ratios or offset additional G&A costs? A: Erin Johnston stated that it is too early to determine, but teams are working through the integration impacts. Updates will be provided as more clarity is achieved.

Q: Can you discuss the backfill of retail vacancies and the timeline for re-leasing? A: David Newallum, Senior Vice President, Leasing and Operations, noted that the Bloor and Dundas site was quickly turned over to Shoppers Drug Mart. The Laval site requires rezoning, with plans for backfill in progress, aiming for completion by 2027.

Q: Are there any changes in leasing velocity or tenant behavior in the industrial sector due to new tariffs? A: Rael Diamond and David Newallum indicated that there has been consistent interest in expansion opportunities, and current occupancy trends are encouraging, with no significant impact observed yet.

Q: What is the disposition plan post-FCR acquisition, and when should investors expect it to start? A: Rael Diamond mentioned that more sales are likely from the Choice portfolio than the First Capital portfolio. Dispositions are expected to begin in early 2027.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.