Choice Properties Real Estate Investment Trust Stock

Good morning. My name is Jael and I will be your conference operator today. At this time, I would like to welcome everyone to the Choice Properties Real Estate Investment Trust Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the call over to Simone Cole, General Counsel and Secretary. Please go ahead.

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+. And with that, I turn the call over to Rael.

Thank you, Simone, and good morning, everyone. We're 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%, supported by 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 2 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. 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 and we are pursuing a similar backfill strategy and will provide progress in the coming quarters. Excluding these 2 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 re-leased at rents well above expiring rates.

We also made progress on the backfill of our 3 former Toys "R" Us locations. No Frills took possession and is now fixturing at [indiscernible], and we're in active discussions on our remaining 2 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 40.2%. 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, our 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 (sic) [ $14.6 million ] of transactions in Q2 and $13 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 (sic) [ $7.8 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.

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

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 $0.267 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's distribution of $3.2 million, FFO growth was 1.5%. AFFO in the quarter was $0.217 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, $105 million net fair value gain on investment properties, and $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 7x.

Financing activity was modest during the quarter. This included the repayment of 2 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 2 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 Nautical 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.

[Operator Instructions] Your first question comes from the line of Himanshu Gupta of Scotiabank.

Solid quarter here, so 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?

Himanshu, it's Simone. So 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. And 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. And then in terms of closing, is that the main hurdle now? Or like what other approvals or significant approvals are you looking for?

Yes, so 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. So it's just in the regulatory process now.

Got it. And then maybe, Erin, with respect to the debt financing required to close the transaction, I mean, how's the cost of financing trended since the announcement? Do you still expect, like, I think mid-4 interest rate on that closing?

Yes, since the transaction, Himanshu, as you know, 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% and 4.8% in the last couple of weeks.

Okay. And do you have any hedging in place to fix the interest rate given like 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. So do you have any hedging in place?

So we have the ability to hedge, Himanshu, close to our refinancing. We don't have any in place right now. But 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. Okay. That's very helpful. And 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? I mean, does the transaction change anything with respect to debt rating?

So, our credit ratings were affirmed right after the deal. And the way that we're thinking about it and the way this particular 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 delevering will also support as we continue to pursue a higher rating.

Yes. Okay. No, that's a good point. Okay. And 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 higher, I mean slightly higher. Any reason for that?

Himanshu, it's Niall. As Rael mentioned, there's good buoyancy in the market, which we're really encouraged by. And secondly, Building D is the only 1 million square foot project that's under construction right now. So we feel really good about that. There is a number of offers that are going back and forth. So we're encouraged that we'll be able to land one of these offers as soon as we can.

Thanks, Niall...

In terms of the yield?

Yes, that's gone up as well.

We [indiscernible] have not updated our yield. It remains the same.

Okay, so around like 6%, low 6 percentage here?

Correct.

[Operator Instructions] Your next question comes from the line of Pammi Bir of RBC Capital Markets.

Just on the FCR deal, I think you cited that $0.04 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 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. So 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 teams continue to work through the impacts of integrating the 2 platforms. So as we have better clarity, we'll share.

Okay. Just on the retail occupancy, can you maybe just go through the backfill of that -- the re-leasing? It sounds like, I think Bloor and Dundas, I think you talked about it last quarter, but that should be income producing by, 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?

Pammi, David speaking here. Yes, so as Rael mentioned, yes, Bloor and Dundas of the Loblaw vacates this quarter. We're actually 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. So we're very encouraged by that collaboration across the teams.

In Laval, the site is requiring a bit of a rezoning process. So it's going to take a little bit more time, but we are working through a similar type of plan from a backfill perspective and we should have more to share in upcoming quarters.

Okay, so that space is more of a 2027 type re-leasing?

Yes.

Okay. And then just lastly, with the -- on the industrial side, just with all these new issues, I guess or new tariffs that were announced and maybe just some broader color here. Are you seeing any changes in terms of -- from a leasing velocity? It sounds like -- I mean, 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?

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.

And Pammi, David speaking. In terms of the existing portfolio, we're actually fairly encouraged by where we're seeing our occupancy going towards the end of the year. So as of now, it hasn't been an impact, but something that we're closely monitoring.

[Operator Instructions] Your next question comes from the line of Tal Woolley of CIBC Capital Markets.

Just wondering if we could talk a little bit about the disposition plan post the closing of the acquisition. Is -- I'm assuming you've gotten an idea of what's in the acquired portfolio, what's in your own portfolio. Do you have like sort of an idea of when investors should start -- expect to see the start of that disposition process after the deal has closed?

Tal, it's Rael. Hope you're doing well. So 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. But as soon as we have more color to share, we will share it. But you'll likely see sales start happening, call it early of '27.

All right. That's great. And then, something we haven't talked about in a while, but I mean, the market has -- 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? Is it going to be something where -- 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. So 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. So we actually think there is an opportunity to lean in. And Niall's team has been really advancing the Grenville and Grosvenor project. And if there was one to go first, it would be that way -- it would be that one.

And then I'd say we're always looking at ways to extract value. And as you know, 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.

Your next question comes from the line of Giuliano Thornhill of National Bank.

Just one question on the Loblaw's renewal. I saw it went up to like 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?

David speaking. So 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. So we've been 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.

And 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?

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

With no further questions, I will now turn the call back over to Rael Diamond, CEO, for closing remarks.

Thank you, Jael. 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.

This concludes today's conference call. You may now disconnect.

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 2026 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 is 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 am joined today on the webcast by Rael Diamond, our President and Chief Executive Officer and a member of the Board; Erin Johnston, our Chief Financial Officer; and Simone Cole, our Senior Vice President, General Counsel and Secretary. Other members of the Board of Trustees and 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 exercised 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 we will 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 16, 2026, 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 2025 annual financial statements, followed by three resolutions: first, to elect the Board of Trustees; second, to appoint Choice Properties external auditor for fiscal 2026 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 2025 annual report as updated in the 2026 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 2025 and acknowledge the efforts of the team at Choice Properties over the last year. 2025 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.

Looking ahead, we are excited about the potential for closing of the previously announced transaction to acquire best-in-class assets from First Capital. This transaction provides Choice with the opportunity to drive long-term growth and value to unitholders, solidifying Choice as Canada's leading REIT. 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 2026. I would now like to call upon Rael and Erin to present an update on the business.

Thank you, Gordon. Good morning, everyone. We are delighted to have you join us for our 2026 Annual Meeting. We are proud to have achieved another year of strong operational and financial results in 2025. Our performance demonstrated the strength of our necessity-based retail portfolio, our well-located industrial portfolio and our ability to create value through development. Together, these factors enabled us to deliver on our strategic priorities and meet our financial outlook.

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 the strength and stability of our business, we were pleased to announce our fourth consecutive annual distribution increase in the first quarter of 2026, demonstrating our commitment to sharing earnings growth with our unitholders.

In 2025, we further optimized our portfolio, completing $801 million of real estate transactions, including $460 million of acquisitions and $340 million of dispositions. We also continue to create value through development, transferring 17 new commercial projects totaling 836,000 square feet, which included the latest industrial phase at Choice Caledon Business Park. These projects were completed at an average yield of 7.4% and resulted in $47 million of value creation. As one of Canada's largest real estate companies, we have both the scale and the responsibility to make a meaningful impact for our people, our communities and the environment.

2025 was an important year for our ESG strategy. It was the first full year of our 3-year climate action road map and it marked a clear shift from commitment to delivery. We made real progress toward our net zero 2050 goal, expanded our social impact and place-making initiatives across the country and continue to embed ESG into how we run the business. I encourage you to read our 2025 ESG report available on our website. Looking across our business and our three strategic asset classes, our market-leading portfolio of necessity-based retail, industrial and mixed-use and residential is in exceptional shape.

Throughout 2025, leasing activity remains strong across our commercial properties, supported by the location and quality of our assets and depth of our tenant relationships. Our 44.5 million square feet retail portfolio delivered strong tenant demand and steady cash flow growth. Grocery-anchored necessity-based centers performed exceptionally well with strong leasing spreads and portfolio occupancy reaching 98% at year-end. In industrial, market conditions stabilized for high-quality assets in key locations. Our 22.2 million square foot portfolio remained highly resilient, ending the year at 98.8% and performed in line with expectations.

Across the portfolio, we continue to benefit from the significant mark-to-market on our in-place rents. Lastly, in our mixed-use and residential portfolio, we delivered stable performance in 2025, reflecting the high quality of our office assets, which are primarily leased to affiliate entities. While select residential properties have experienced some pressure from new supply, they continue to benefit from strong long-term fundamentals in urban markets.

Looking ahead to 2026, our business and portfolio are well positioned to withstand different economic cycles. Our disciplined approach to capital allocation and our prudent financial management provides us the capacity to continue pursuing exciting growth opportunities such as the one we announced two weeks ago. On April 16, we announced the acquisition of approximately $5 billion of urban necessity-based retail properties as part of a take-private transaction of First Capital REIT with our partner, KingSett Capital.

We're exceptionally excited about this transaction and what it means for our unitholders. This portfolio includes 101 high-quality properties located in some of the strongest markets in Canada. The transaction will meaningfully enhance our overall retail portfolio by increasing our exposure to urban markets and higher growth ancillary tenants. This transaction also improves our scale and capital markets presence, further solidifying Choice as Canada's leading REIT.

The transaction is subject to regulatory approvals. We expect it to close in the second half of the year and we will provide updates to all unitholders as we progress towards closing. Finally, I want to express my thanks to our colleagues. Everything we achieved this past year would not have been possible without your contributions. I'm particularly proud of our extremely collaborative culture here at Choice and our ability to deliver exceptional partnership and service to our tenants.

I'll now pass it over to Erin to provide an update on our financial position and development program.

Thank you, Rael. We were very pleased with our financial performance in 2025, having achieved each of our financial objectives. While the economic environment was highly uncertain when we set our outlook at the beginning of 2025, the fact that we met each of our core financial targets underscores the quality and resilience of our portfolio and our team's ability to deliver consistent results for unitholders. Supported by the strength of our portfolio, tenants and team, in 2025, we maintained our high occupancy, ending the year at 98.2%.

For the full year, same-asset cash NOI increased 2.2%, and we delivered total NOI growth of 4.7%, supported by our development deliveries and net acquisition activity. Funds from operations grew 3.6% year-over-year to $1.069 per unit and NAV per unit increased to $14.43 per unit, resulting in year-over-year growth of 2.6%. Turning to our developments. Our pipeline continues to be a reliable source of long-term cash flow growth and NAV creation for the REIT. In 2025, we invested $237 million in development and successfully transferred $222 million of assets to income producing, representing 836,000 square feet of new commercial GLA. These transfers resulted in approximately $47 million of value creation.

Beyond our 2025 deliveries, our team continued to advance the rest of our pipeline. At the end of 2025, we had 14 active development projects totaling 1.4 million square feet. This is in addition to the 17.4 million square feet of projects currently zoned and in planning. This development pipeline continues to provide us with a meaningful opportunity to add high-quality real estate to our portfolio. Last year, we continued to demonstrate prudent financial management, ending 2025 in a solid financial position with strong debt metrics and ample liquidity.

Our adjusted debt-to-EBITDA was 7x, and we maintained a strong liquidity position with $1.6 billion of available liquidity through our corporate facility and cash on hand and approximately $13.8 billion of unencumbered properties. We maintained our balanced maturity ladder and extended our weighted average term to maturity to 6.5 years at the end of 2025. Touching for a minute on our recently announced transaction. Our industry-leading balance sheet remains a key part of our strategy, allowing us to pursue opportunities such as the First Capital portfolio acquisition.

At closing of the transaction, our pro forma adjusted debt-to-EBITDA will be approximately 8.5x on an annualized basis. Our management team has a well-established track record of deleveraging following major transactions, and we are committed to reducing leverage to our long-term target of 7.5x following the closing of the transaction. Overall, our 2025 performance demonstrates our ability to deliver stable and consistent growth, and our balance sheet continues to provide us 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 strategic priorities. On behalf of Choice Properties, we thank you for your continued support and confidence. I would like to welcome Gordon back to address the meeting. Thank you.

Thank you, Rael and Erin. 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 the auditor's report to the unitholders for the year ended December 31, 2025. 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 or from SEDAR+. Simone, were there any questions or comments submitted in connection with this item?

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

Thank you, Simone. We'll now move to the three matters to be voted upon at this meeting. 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, Gordon. We have not received any questions related to this item.

Thank you. I have 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.

Thank you. 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'll now move to the appointment of the auditor and the authorization 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 Gordon. We have not received any questions related to this item.

Thanks, Simone. I will 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 2026 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 21 of the management proxy circular. Simone, were there any questions or comments submitted in connection with this advisory resolution?

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

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

Mr. Chairman, 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 would ask unitholders or their appointees to cast their votes through the online portal.

This brings us to the end of 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 cast, and we will report on the results towards the end of the meeting.

I would now like to open the meeting for any general questions. We will make every effort to answer all the 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, Gordon. We have not received any questions.

Thanks, Simone. As we have not received any questions, we will move to the voting results. We have received the preliminary voting results from the scrutineer on the three items of business. On the election of trustees, the voting results show that each trustee nominee received votes in favor from at least 95% 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% 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 2026 fiscal year.

On the advisory vote on Choice Properties' approach to executive compensation, approximately 96% 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 to -- and to Choice's 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 would like to thank you for taking the time to join us today.

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

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Choice Properties Real Estate Investment Trust First Quarter 2026 Earnings Call. [Operator Instructions]

I will now hand the call over to Simone Cole, General Counsel and Secretary. Please go ahead.

Thank you. Good morning, and welcome to Choice Properties Q1 2026 Conference Call. I'm joined this morning by Rael Diamond, President and Chief Executive Officer; Erin Johnston, Chief Financial Officer; Niall Collins, EVP, Development and Construction; and David Muallim, SVP, Leasing and Operations.

Rael and Erin will provide a brief recap of our first 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 exceptions that are not historical facts.

These statements are based on our current estimates and assumptions and are subject to the 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 applying in making these statements can be found in the recently filed Q1 2026 financial statements and management discussion and analysis, which are available on our website and on SEDAR+.

And with that, I turn the call over to Rael.

Thank you, Simone, and good morning, everyone. Welcome to our Q1 conference call. Before I begin my remarks on our strong first quarter results, I'd like to first briefly revisit the transformational transaction we announced 2 weeks ago.

On April 16, we announced that Choice, together with our partner, KingSett Capital, has agreed to acquire First Capital REIT for approximately $9.4 billion. At closing, Choice will acquire approximately $5 billion of First Capital's high-quality retail assets with KingSett acquiring the remaining assets. This is a highly compelling transaction. Opportunities to acquire assets of this quantity and scale are extremely rare, especially those that align so closely with our strategy. This acquisition further strengthens our portfolio and solidifies Choice as Canada's leading REIT. We look forward to providing updates on this transaction's progress throughout the year.

Turning now to our first quarter results. We delivered another healthy quarter of strong operating and financial results as our team continues to execute on our strategic priorities. In Q1, portfolio occupancy remained resilient at 98.1%, supported by exceptional renewal activity across our portfolio with average leasing spreads of 21.8%, driving same-asset NOI growth of 3%. We're encouraged by strong leasing momentum across the portfolio with healthy activity in both retail and industrial. We continue to backfill retail space, execute on value creation initiatives and drive industrial growth at near full occupancy.

Focusing on retail, we continue to see healthy demand across the portfolio from a variety of necessity-based retailers. During the quarter, we completed 364,000 square feet of renewals and 97,000 square feet of new leasing. Occupancy was largely unchanged at 97.9%. Renewal spreads remained very strong at 17.2%, led by Atlantic and Ontario regions. The spread was primarily driven by a 28,000 square foot renewal, representing the first market renewal in 15 years for this tenant, which has been paying well below market rents. Excluding this renewal, the average retail spread was still strong at 13.2% and in line with our expectations.

Retail retention was 75.8%. This was largely driven by the early termination of 2 Toys "R" Us locations and a strategic termination that is already backfilled at higher rents, totaling approximately 50,000 square feet. Excluding these terminations, retention was approximately 85%. This is broadly in line with our historical rates and consistent with our strategy of capturing value from tenant turnover in a strong retail leasing environment.

Over half the space vacated this quarter already has committed deals. These leases are expected to commence later this year. We're encouraged by backfilling progress at former Toys "R" Us locations as we are in advanced leasing discussions with multiple retailers. We also advanced several value creation initiatives within our retail portfolio during the quarter, including the revitalization of the retail space at Bloor-Dundas. Loblaw vacated 90,000 square feet of warehouse space in the former Zehrs in March of this year, and we're now repositioning the property to introduce a new Shoppers Drug Mart and a gridline alongside Loblaw's investment in a No Frills conversion.

This initiative is expected to generate approximately $2 million of incremental NOI at stabilization in the second half of 2027 and has created approximately $25 million in total incremental value. The revitalization does not introduce any additional lease encumbrances that would impact our longer-term redevelopment plans. Overall, these initiatives highlight the strength of our assets and our team's ability to identify and execute on value creation opportunities within our portfolio.

In industrial, market conditions remained resilient across the country with quarter end occupancy of 98.6%. During the quarter, we completed 103,000 square feet of renewals at a spread of 46.2%, driven primarily by Alberta and Atlantic portfolios. Retention in the quarter was 56.6%, largely driven by 73,000 square foot nonrenewal in Edmonton, where we were unable to accommodate the tenant's growth requirements. We also completed 24,000 square feet of new leasing in Alberta and Ontario that rents approximately 40% above our average in-place rates.

In the GTA, we continue to see a tightening of supply of high-quality large bay industrial product, as we continue to advance the next phase at Choice Caledon Business Park, we expect to be one of the only available options for new space over 750,000 square feet in the market next year. Lastly, in our mixed-use and residential portfolio, occupancy remained stable with favorable leasing at certain residential assets.

Moving to our transaction activity. We had minimal activity in the quarter. As announced on our Q4 call, we completed 2 retail acquisitions in Montreal and Edmonton, totaling $28 million. Beyond this, there was no additional transactions completed in the quarter. We are pleased to announce that Wittington Investments Limited has acquired our partners' 50% interest in our G2 purpose-built rental residential development in Downtown Toronto that we expect to break ground on this year. This partnership allows Choice to advance the project with a strategically aligned equity partner while delivering meaningful affordable housing to the city of Toronto.

Finally, I want to acknowledge the release of our 2025 environmental, social and governance report last night. This year's report highlights many of Choice's achievements over the last year, including the completion of the first full year of our 3 year climate action road map, advancing our pathway to net zero by 2050 and the expansion of our social impact and place-making initiatives nationwide. The report can be found in the Sustainability section of our website, and I encourage you to all take a read.

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

Thank you, Rael, and good morning, everyone. We are pleased with our financial performance in the first quarter. Our underlying business remains in excellent shape.

For the quarter, our reported funds from operations was $196 million or $0.271 on a per unit diluted basis, representing an increase of 2.7% year-over-year. This performance was driven by robust total cash NOI growth of 4.2%, which included strong same-asset cash NOI growth and contributions from net acquisitions and new developments and higher lease surrender revenue. This was partially offset by lower investment income, higher interest expense from refinancing activity, higher G&A expense and lower fee income.

Included in our results are certain nonrecurring items, including approximately $1.9 million of incremental lease surrender revenue compared to the prior year and $3.2 million of lower investment income related to Allied's distribution reduction. Excluding these items, FFO per unit growth was approximately 3.5%, reinforcing the continued strength of our core operations. AFFO in the quarter was $0.247 per unit, a decrease of 0.8% from the prior year, as FFO growth was offset by higher maintenance capital spend in the current year, which was largely timing related. Our AFFO payout ratio in the quarter was 78%.

Turning to our property performance. Same-asset cash NOI was strong, increasing $7.5 million or 3% over the prior year. By asset class, retail same-asset cash NOI increased $6 million or 3.2% and industrial same-asset cash NOI increased by $3 million or 6.2%. Key drivers for both were higher base rents from new leasing activity and contractual rent steps. Mixed-use and residential same-asset cash NOI decreased by approximately $1.5 million or 15.4%, primarily due to a property tax incentive received in the prior year.

Moving to the balance sheet. IFRS net asset value or NAV for the quarter was $14.53 per unit, representing an increase of approximately $67 million or 0.7% compared to year-end. The increase was driven by a $51 million net contribution from operations and a $66 million net fair value gain on investment properties, partially offset by a $49 million fair value loss on our investment in the units of Allied Properties. As a reminder, we are required under IFRS to mark-to-market this investment in Allied to its trading price at each period end.

The fair value gains on investment properties were primarily driven by our retail portfolio, which included cap rate adjustments in Ontario, Quebec and BC, supported by external appraisals and favorable leasing outcomes, particularly from backfilling initiatives and higher rents. This was complemented by a modest gain in our industrial portfolio.

We continue to maintain our industry-leading balance sheet with excellent debt metrics and significant access to capital, including approximately $1.6 billion of available liquidity through our corporate facility and cash on hand and approximately $14 billion of unencumbered properties. Our debt-to-EBITDA ratio was 7x and remained unchanged since year-end, with no material financing activity or debt maturities in the quarter.

Turning to our development activity. During the quarter, we completed 2 retail intensifications totaling 22,000 square feet for a blended yield of 8.9%. These projects included a 17,000 square foot Shoppers Drug Mart in Renfrew, Ontario at a 7.5% yield and a 5,000 square foot land lease to a QSR tenant in Ottawa at a 42% yield. These completions continue to demonstrate our ability to generate attractive returns by intensifying land at our existing neighborhood retail centers.

Looking ahead to the balance of the year, we will continue to prioritize operational excellence across the portfolio while also progressing towards the closing of the announced First Capital portfolio acquisition. As the timing of closing remains uncertain at this stage, when referencing our outlook, we are doing so excluding the financial impact of the transaction. Recall, we are expecting to maintain stable occupancy and deliver 2% to 3% same-asset cash NOI growth and FFO per unit diluted between $1.08 and $1.10 this year. While we expect earnings to grow, earnings growth to moderate slightly over the next 2 quarters as we lap acquisition-related favorability, the timing of lease surrender revenues compared to the prior year and the impact of Allied's distribution reduction, we remain on track to deliver on our full year outlook.

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

[Operator Instructions] Your first question comes from the line of Himanshu Gupta from Scotiabank.

So just on the lease surrender revenue, should we expect anything in Q2 as well? And then maybe can you elaborate, is it related to Toys "R" Us or you have been doing some rightsizing of Loblaw stores last year or anything related to that?

Himanshu, it's Erin. When we look at our lease surrender revenue this year, it's primarily related to Loblaw's rightsizing consistent with prior years. We expect it to be relatively the same as last year in terms of total dollar value, but most of it will be spread between Q3 and Q4.

Okay. And I mean, do you know like how many Loblaw stores are in pipeline for this rightsizing? And is it like mostly urban locations? What's the typical size reduction Loblaws is doing?

So in the last couple of years, we had between 2 and 4 per year. It depends on the site. And maybe I'll let Rael or David comment a bit on locations.

Yes. So for -- Himanshu, David speaking. So in terms of locations, it's mixed across the country. We have mostly larger stores, so call it superstores or Provigo that converts to a Maxi in Quebec. But essentially, for this year, we're thinking there'll be approximately 4 locations that will be rightsized.

Okay. 4 locations exactly. And then -- sorry, in terms of square footage, how much is the typical reduction, like 20,000, 30,000, what's the typical reduction in size?

Yes. It depends on the site and configuration, but about 30,000 is fairly standard.

Okay. Moving on, changing gears here on IFRS valuation. I think retail cap rate was brought down by slightly 2 basis points. Do you see this cap rate further going down as the First Capital transaction is closed? I would believe that should be a good positive mark on retail market valuation.

Himanshu, yes, we continue to see appraisals come in slightly tighter than what we have on our books quarter-after-quarter, which was most of our retail gains. I know our team as we bring in the first capital acquisition, we'll look at the values of those assets and ours. And so we'll update you when we know more, but...

Okay. Fair enough. Maybe the last question is on the leverage on the next year. In anticipation of increase in leverage, do you expect to do capital recycling this year or wait for this transaction to close? And any disposition targets you have post FCR for closing?

So why don't I start it, Himanshu, and then Erin will just add additional color. As we said on our earlier call in April, what we're thinking post the transaction, what we've modeled initially is just being balanced from a capital recycling point of view. And right now, we were, call it, unbalanced to the tune of roughly $100 million buying more than we were selling. But look, balance sheet strength has always been exceptionally important to us.

So as we have more to share on our plans on how we will delever and potentially delever quicker, we will share it with you. But I'd say for this year, outside of the major acquisition that we've already announced, like I think our acquisition activity will be very light. We will do some small trimming prior to the acquisition closing.

Erin, if you want to add anything?

No.

[Operator Instructions] Your next question comes from the line of Giuliano Thornhill from National Bank.

I just wanted to go back to those revitalization plans. I might have missed how much CapEx is associated to them? And I'm also just wondering on how are the leases being structured to actually get that pickup in NOI as there is a net reduction of $30,000 per foot or per box.

So David speaking. So this is in regards -- so I think the first question -- the second question was on rightsizing in the structuring. The first question was in relation to Rael's comment on Bloor-Dundas. So I can kind of tackle it in the 2 parts. So on the Bloor-Dundas part, the NOI increase is really driven by the new tenancies. The space was rolling off. Loblaw is essentially paying a gross rent to use the space for storage on a temporary basis. And then we backfilled it with, as Rael mentioned, Shoppers and GoodLife.

In terms of the second question for the rightsizing, so how the leases are structured is the tenants pay a market rent, the new tenants or the third-party tenants that are joining the sites pay a market rent. And then essentially, there's a termination payment with Loblaw that factors in the leasing cost and any differential between the in-place rent that Loblaw is paying and the market rent the new tenant is paying.

And so with occupancy in the industry still pretty high, are you anticipating that leasing spreads can continue to push higher on just broadly for the portfolio?

So in general, with the strength of the retail market, we anticipate strong leasing spreads. As Rael mentioned, this quarter, the spreads were a little bit higher as a result of the one tenant that drove up a lot of the increase. For the remaining quarters, we do expect to be in that low double-digit range, which is consistent with how we've been performing and with some strength in certain categories, for example, limited service eating, full service, which we've been driving very strong renewals on, but offset by a portion of our renewals that are tied to historical fixed rates in our old leases.

And then just with the FCR deal, once it does close, are you anticipating a kind of material improvement in your financial framework for cash NOI expectations at all? Because it is higher quality and obviously, pretty good locations.

It's Erin. When you think about our financial framework, we've always said 8% to 9% returns, and that was made up of 2% to 3% same-asset NOI growth and then 3% to 4%, which goes to 3% to 4% NAV plus the distribution. I'd say on that 2% to 3% same-asset cash NOI growth, it moves us slightly higher in that range. But the way we really see it is this is derisked stronger growth. And so moving forward, less -- more growth comes from same-asset cash NOI and then less of the contribution to the NAV growth comes from development.

Okay. And just one kind of last question for me. I'm just wondering, can you speak kind of to how this transaction fits within the broader ecosystem of kind of GWL and [ Chip ] just in terms of the alignment of kind of capital and long-term priorities for the entire platform? Because there are obviously strategic benefits to the coordination here.

Yes. Look, I would tell you that this was a Choice-driven transaction and it firmly fits within our strategy to acquire high-quality assets.

Your next question comes from the line of Brad Sturges from Raymond James.

Just on the FCR transaction, and I appreciate the comments on the prior call. Just curious on the -- I guess, the initial FFO guidance, how should we think about the potential operating synergies between the portfolio being acquired and the existing Choice platform and how that may have been baked into, I guess, the initial FFO guidance?

Brad, it's Erin. When we gave the initial FFO guidance, I'd say that what we've done is added on incremental costs to scale our platform. So that's adding a few people to our corporate teams as well as adding an incremental leasing team. Of course, the property people that we would have and hire would be absorbed by the properties, but we have not modeled in any incremental synergies related to the platform.

And I guess part of the path to seeing better accretion over the next few years, that would assume as the integration occurs, there would be sort of more operating synergies to be had as well as sort of capturing that rent growth embedded in the FCR portfolio.

Look, we're viewing this more as an asset transaction, as you know. So there may be a few synergies. But as Erin said, we're right now modeling just the incremental G&A that she described.

[Operator Instructions] And as there seems to be no further questions, I will now turn the call back over to Rael Diamond, CEO, for closing remarks.

Thank you, Rob. 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 this summer.

This concludes today's conference call. You may now disconnect.

Good morning. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Choice Properties Investor Call to discuss today's announced acquisition of First Capital REIT. [Operator Instructions] I would now like to turn the call over to Simone Cole, Senior Vice President, General Counsel and Secretary. Please go ahead.

Thank you, Sarah. Good morning, and welcome to the conference call announcing Choice Properties and KingSett Capital's transaction to acquire First Capital REIT. The news release announcing the transaction is available on our website at www.choicereit.ca. A corresponding PowerPoint presentation is available on the Events section of our website, and we encourage you to refer to it during this call. Please note that the comments made on today's call may contain forward-looking statements, and this information, by its nature, is subject to risks and uncertainties.

Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the Trust's relevant filings on SEDAR+. These documents are also available on our website. As a reminder, all amounts discussed on today's call are in Canadian dollars. Our presenters today are Rael Diamond, President and Chief Executive Officer; and Erin Johnston, Chief Financial Officer.

And now I'll pass the call over to Rael.

Thank you, Simone. Good morning, everyone. Thank you for joining us today. Today is an exciting day for Choice Properties and our stakeholders. This morning, we announced that together with our partner, KingSett Capital, we've agreed to acquire First Capital in a stock-and-cash transaction valued at approximately $9.4 billion, including assumed debt. At closing, Choice will acquire approximately $5 billion of First Capital's highest quality retail assets, while KingSett will acquire approximately $4.4 billion of assets and all outstanding First Capital units. The transaction delivers immediate value and liquidity to First Capital's unitholders, along with the opportunity to participate in the future growth of Choice.

This transaction is truly transformational for Choice. Opportunities to acquire assets of this quality and scale are extremely rare, especially when they are so closely aligned with our strategy. Since our IPO in 2013, we are focused on building a resilient, high-quality portfolio anchored by strong necessity-based tenants. We began with 425 properties. In a little over 10 years, we have delivered significant growth, supported by an industry-leading balance sheet. The key milestone came in 2018 with the acquisition of CREIT.

That transaction made us Canada's largest REIT and materially strengthened our platform and portfolio quality. From there, we continue to execute, completing $5.5 billion of property transactions and approximately 4 million square feet of development, all underpinned by financial discipline that enabled today's transaction. This marks the next step in our evolution and further solidifies Choice as Canada's leading REIT.

Now let's take a closer look at the transaction and why we believe it delivers meaningful value for our unitholders. First, this is a best-in-class retail portfolio. Second, this acquisition is highly complementary to our existing business. Third, these assets help position us for long-term growth. And finally, this opportunity further solidifies Choice Properties as Canada's leading REIT. As I said, the assets that we are acquiring consist of FCR's highest quality properties, primarily top-performing open-air shopping centers.

Portfolio totals over 8 million square feet of Gross Leasable Area with strong occupancy of 98%. These assets generate stable cash flows while providing clear visibility for future growth. We expect full-year NOI of approximately $235 million in 2027. Overall, this is a high-quality, well-leased portfolio that delivers immediate stability with a clear path to long-term growth. First Capital is well known for owning some of the best neighborhood shopping center assets.

As can be seen on the screen, the portfolio we are acquiring has greater exposure to major markets, higher population density within the 5-kilometer radius, greater exposure to necessity-based retail tenants and significantly less development than First Capital's overall portfolio. The partnership with KingSett clearly aligned the right assets with the right owners, reflecting our respective strategies and cost of capital and therefore, maximizing value for First Capital stakeholders. We look forward to continuing strong relationship with First Capital's tenants and partners.

On the screen are great examples of the broader portfolio that we are buying, which is characterized by high-quality assets in dense urban markets with strong fundamentals. We've included a complete list of properties in the Appendix of this presentation, which is posted on our website. As you can see, what makes these assets particularly compelling is not only their quality, but their location in Canada's most densely populated urban markets.

The portfolio is highly urban with 83% of exposure from Toronto, Vancouver, and Montreal and 92% VECTOM exposure, increasing our overall retail population density exposure by 16%. This transaction meaningfully increases our exposure to higher-growth third-party retail tenants. On a pro-forma basis, third-party retail exposure increases by nearly 50% based on Gross Leasable Area. At the same time, Loblaw remains a valued strategic partner and will represent approximately 61% pro-forma of our retail portfolio.

I'm now going to hand the call over to Erin to discuss the financial highlights of the transaction.

Thanks, Rael. Good morning, everyone. I echo Rael's excitement on today's announcement. This transaction meaningfully enhances Choice's overall portfolio, providing incremental scale and enhanced cash-flow growth while strengthening our capital-markets profile. The acquisition portfolio provides significant incremental scale, increasing our total IPP fair value and NOI by approximately 28% and 21%, respectively. We are confident that the combined portfolio will deliver enhanced cash-flow growth, supported by strong same-asset growth from the acquisition portfolio of approximately 3.5% over the near-term. With this transaction, we expect to maintain a strong capital structure and industry-leading balance sheet. We plan to finance the acquisition through a combination of debt and equity.

This includes the issuance of $1.7 billion of equity, the assumption of First Capital's $2.3 billion of outstanding unsecured debentures, and the assumption of approximately $400 million of existing in-place mortgages. The remaining consideration is expected to be financed via the issuance of new unsecured debentures. While modestly dilutive on a per-unit basis, the transaction is expected to deliver approximately $80 million of aggregate FFO contribution, meaningfully -- a meaningful upscale to the overall quality of Choice's portfolio. It will improve Choice's earnings profile and position Choice for higher long-term cash-flow growth.

Our industry-leading balance sheet and long-standing commitment to disciplined financial management allowed us to take advantage of this transformational opportunity. Post-transaction, we will continue to manage to a 10-year debt ladder with the First Capital unsecured debentures complementing our existing maturity profile. We plan to maintain ample liquidity and plan to increase the size of our corporate credit facility from $1.5 billion to $2 billion, and we remain committed to our strong investment-grade credit profile.

Supporting this, this morning, DBRS confirmed our credit rating of BBB high with a positive outlook, and we expect the First Capital unsecured debentures assumed by Choice will be upgraded to Choice's rating. On an annualized basis, our pro-forma debt-to-EBITDA will be approximately 8.5x on closing. Our near-term target is to reduce leverage to low-8x while remaining committed to a long-term debt-to-EBITDA target of 7.5x.

Our management team has a well-established track record of deleveraging following major transactions, and we are confident in our ability to deleverage post-transaction. We will do this via strong organic EBITDA growth generated by the combined portfolio and disciplined investment capital management, including balanced capital recycling and measured development spend. This is a highly executable plan that does not contemplate significant asset dispositions.

In addition, we have additional levers to accelerate deleveraging if required. Our equity contribution as part of this transaction will further strengthen our capital-markets profile. On a pro-forma basis, Choice will increase its public float by 26% through equity consideration of approximately $1.1 billion to First Capital unitholders and a $600 million private placement to George Weston Limited, our largest shareholder. This investment by George Weston demonstrates their support of this strategic transaction.

Our increased scale, combined with enhanced liquidity is expected to broaden our appeal to a more diverse and global investor base and solidify Choice as the largest Canadian REIT. Choice has consistently outperformed across market cycles. This outperformance is a testament to the quality of our portfolio, the strength of the platform we have built and our disciplined approach to financial management. It is these things that position us to continue to deliver strong unitholder returns through this transaction as well.

With that, I will turn the call back for Q&A.

[Operator Instructions] Your first question comes from Tal Woolley with CIBC.

Just wondering if you can speak to how many of the sites that you're acquiring are anchored by Loblaw and how many are anchored by Loblaw's competitors?

Give us one second. We have that information. I think there's 65 grocery stores in total where we believe. So, 50 grocery stores are anchored by competitors, and then there would be 65 Shoppers Drug Mart and Loblaw locations.

And do you expect any Competition Bureau questions as a result of that?

Tal, it's Simone. I mean, obviously, there will be a review, but we feel really confident in the work we've done for that.

Okay. And then, Erin, you made references to additional levers to deleveraging. Can you outline what some of those might be?

Yes. So right now, the way we run our plans is, one, as always, we're conservative in our modeling. So that's the first piece. The second piece is dispositions. Right now, we've continued to assume balanced capital-recycling; so we could -- instead of being balanced, we could sell more than we buy. And we also continue to have levers for development-spend.

And just finally, on the equity offering or, say, the investment by George Weston, I'm assuming that's on the same terms as [indiscernible] the same pricing as what's being offered to FCR shareholders.

The pricing for the investment by George Weston is based on a weighted average of last night's unit-price.

[Operator Instructions] Your next question comes from Mark Rothschild with Canaccord.

Congrats guys on the deal. Can you maybe just give us some more guidance, a little narrow with the timing of expected closing of the Transaction, assuming everything goes smoothly?

It's Simone. Yes, our hope it will be in the second-half of the year, Q4. That's our hope, but obviously, subject to regulatory approvals.

I'm sorry, do you say Q4?

That would be our hope, but just subject to regulatory approvals. Yes.

And leaving regulatory approval aside, is there any reason that it should drag out so long?

No. No.

And then maybe just on the way you looked at the transaction; it's initially dilutive, but obviously, a high-quality portfolio that should go over time. What is the expected timing on when you would expect it to be accretive? And how does that fit into your goals with bringing down leverage after this transaction?

So Mark, the way we think about it is it's about $0.04, as we said, dilutive initially. And then we expect to return to growing earnings in the second-year following the transaction. And the way you can think about it as well is post-CREIT, we had a lot of incremental dilution from asset dispositions. We don't need to do this in this scenario to get our leverage back down.

So, there will be no asset -- there shouldn't be asset sales to bring leverage down? It will just be organically?

Yes, primarily organic growth.

It's always a lever we can pull, but it's not a requirement there.

[Operator Instructions] This concludes the question-and-answer session. I will turn the call to Rael Diamond, CEO, for closing remarks.

Thank you, Sarah. As you can hear, we're exceptionally excited about this transaction as it meaningfully enhances our portfolio with high-quality, top-performing retail assets located in some of Canada's most attractive urban markets while increasing diversification through great exposure to third-party tenants. From a capital-markets perspective, the transaction increases our scale and improves trading liquidity, further strengthening our overall profile, solidifying Choice Properties as a leading real estate owner and operator in Canada.

Before we conclude, I want to recognize and thank our employees for their hard work and dedication. It is their commitment that has helped build Choice Properties into a leading REIT that it is today and has made this transaction possible. Thank you for your time today. Please feel free to reach out to us if you have any further questions.

This concludes today's conference call. Thank you for joining. You may now disconnect.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Choice Properties Real Estate Investment Trust Fourth Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Simone Cole, General Counsel and Secretary. Please go ahead.

Thank you. Good morning, and welcome to Choice Properties Q4 2025 Conference Call. I am joined this morning by Rael Diamond, President and Chief Executive Officer; Erin Johnston, Chief Financial Officer; David Muallim, Senior Vice President, Leasing and Operations; and Niall Collins, Executive Vice President, Development and Construction. Rael and Erin will provide a recap on our fourth quarter operational results and annual highlights before we open the lines 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 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 we have made in applying and making these statements can be found in the recently filed Q4 2025 financial statements and management discussion and analysis, which are available on our website and on SEDAR+.

And with that, I turn the call over to Rael.

Thank you, Simone, and good morning, everyone. Welcome to our Q4 conference call. Before I begin my comments, I want to provide an exciting update on our team. I'm pleased to share that David Muallim has returned to Choice Properties as SVP, Leasing and Operations. David brings exceptional experience back to Choice from his time at Loblaw overseeing their real estate leasing and new store development. Previous to that, David spent a decade with our organization, and we are very excited to welcome him back.

With David's return, Niall Collins is transitioning back to his primary role of EVP, Development and Construction, where he will be focused on delivering our robust development pipeline. I want to thank Niall for his leadership and the stability he provided leading both our operational and development teams over the past 2 years. This transition underscores the depth of our leadership team as we continue to execute on our strategy for unitholders.

With that, I'll now focus on our results. We are pleased to deliver another strong year of operational and financial results as our team continues to execute on our strategic priorities. Our full year performance in 2025 demonstrated the strength of our necessity-based retail portfolio, our well-located industrial portfolio and our ability to create value through development. Together, these factors enabled us to once again meet our earnings outlook, delivering same-asset cash NOI growth of 2.2% and FFO per unit growth of 3.6%.

We completed this while further strengthening our industry-leading balance sheet, ending the year with leverage at 7.0x. During the year, we remained extremely active in our capital recycling, completing $801 million of real estate transactions. This included $460 million of acquisitions and $341 million of dispositions for net acquisition activity of $119 million. We also continue to create value through our development, transferring 17 new commercial projects totaling 836,000 square feet. These projects were completed at an average yield of 7.4% and resulted in $47 million of value creation.

Given the strength and stability of our business and our strong performance in 2025, our Board of Trustees has approved our fourth consecutive distribution increase effective March 2026. This increase reflects our ongoing commitment to returning capital to unitholders.

Turning now to our fourth quarter results. The momentum in our business continued, and we finished the year in a solid position. Our portfolio occupancy increased 20 basis points to 98.2% in the fourth quarter, primarily due to new leasing in our industrial portfolio, combined with favorable renewal spreads of approximately 22%. This drove healthy same-asset NOI growth of 2.4%. Our leasing spreads in the quarter were completed on 1.6 million square feet, representing very strong retention rate of 92.4%. We also completed 233,000 square feet of new leasing, highlighted by positive absorption in Ontario retail and Alberta industrial portfolios.

In retail, we continue to see robust demand for necessity-based centers nationwide. In the quarter, we completed 596,000 square feet of renewals and 89,000 square feet of new leasing. This drove our retail occupancy up 20 basis points, ending the year at 98%. Renewal activity was particularly strong with leasing spreads of 16.8%, led by Atlantic and Quebec regions and tenants in the dollar store, liquor and office supplies categories. Looking ahead, our team views vacancies and potential backfills as opportunities to re-lease space at both higher rents and to higher covenant tenants.

Beyond our existing portfolio, we remain active in advancing retail intensifications and new greenfield developments at attractive risk-adjusted yields. Erin will speak more about our development completions shortly. Our industrial portfolio has remained remarkably resilient with occupancy increasing another 50 basis points in the quarter to end the year at 98.8%. The leasing progress is consistent with what we outlined at the beginning of the year. During the quarter, we had a very strong retention rate of 93.8%, completing over 1 million square feet of renewals at a spread of 26%.

Included in our leasing activity was 514,000 square feet of renewals in the GTA where the tenant had a fixed rate option, resulting in a spread of 17%. Excluding this renewal, our spreads averaged 40%. Our team also completed 138,000 square feet of new leasing at rents, 31% above our average in-place rents. This leasing activity highlights the significant mark-to-market and embedded growth in our industrial portfolio. We continue to see a stabilizing industrial market broadly for high-quality generic assets in the right markets and remain focused on advancing our industrial development pipeline at Choice Caledon Business Park.

Lastly, in our mixed-use and residential portfolio, we delivered stable performance in 2025, reflecting the high quality of our office assets, which are primarily leased to affiliate entities. While select residential properties have experienced some pressures from new supply, they remain supported by strong long-term fundamentals in urban markets, and we remain committed to our pipeline of high-quality transit-orientated residential developments.

Finally, touching on transaction activity in the quarter. We remain active on our capital recycling program, completing approximately $261 million of real estate transactions during the quarter. This included $67 million of acquisitions and $195 million of dispositions. Our most significant transaction in the quarter was a new 50-50 joint venture with Wittington across 2 office towers at Yonge and St. Clair in Midtown Toronto. This transaction included the third-party acquisition of 2 St. Clair Avenue East for $43 million at Choice's 50% share, excluding costs, while concurrently selling a 50% interest in the Western Center to Wittington for $76 million.

Overall, the transaction represents a net $33 million office disposition for Choice. This was a strategic transaction as the 2 buildings are directly adjacent and operate as an integrated complex with shared common areas, including a shared loading dock. Choice will manage both properties going forward. During the quarter, we also disposed of a nonstrategic industrial asset for $18 million and $101 million of retail assets that we disclosed last quarter. All dispositions were completed above IFRS values. We also acquired a retail center for $23 million in Peterborough and subsequent to the quarter, completed $28 million of additional retail acquisitions. Overall, 2025 marked an active year of capital recycling as our team remained focused on maintaining the quality of our market-leading portfolio while leveraging our balance sheet to grow our business through net acquisitions.

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

Thank you, Rael, and good morning, everyone. We are very pleased with our financial performance this year. As Rael noted earlier, we closed the year from -- with a position of strength, having achieved each of our financial objectives. When we set our 2025 outlook a year ago, the economic environment was highly uncertain. Our ability to each -- to meet each of our core financial targets underscores the quality and resilience of our portfolio and our team's ability to deliver consistent results for unitholders.

Turning to our fourth quarter results. Our reported funds from operations was $189.9 million or $0.262 on a per unit diluted basis, representing an increase of 0.8% year-over-year. FFO in the quarter was driven by year-over-year total cash NOI growth of 4.4%, which included higher same-asset NOI and contributions from transactions and completed developments. This was partially offset by the timing of lease surrender revenue, higher interest expense from refinancing activities and lower investment income.

AFFO in the quarter was $0.201 per unit, an increase of $0.05 year-over-year. This increase was largely driven by the timing of maintenance capital projects, which commenced earlier in the current year compared to the prior period. On a full year basis, our AFFO payout ratio of 88% was in line with prior year.

Turning to our property performance. Same-asset cash NOI increased by $5.9 million or 2.4% compared to the prior year. By asset class, retail same asset cash NOI increased $3.1 million or 1.6%. This was driven by higher base rents and recovery revenue. And excluding bad debt expense, year-over-year growth was 2.1%. Industrial same-asset cash NOI increased by $2.9 million or 6.2%, primarily due to higher rental rates on renewals, new leasing and contractual rent steps. Mixed-use and residential same asset cash NOI decreased by approximately $0.1 million or 1.8%, primarily as a result of lower rent at certain residential properties.

Moving to our balance sheet. IFRS net asset value or NAV for the quarter was $14.43 per unit, a decrease of $72 million or approximately 0.7% compared to the third quarter. The decrease was primarily driven by an $87 million fair value loss on our investment in the units of Allied Properties and a net fair value loss on investment properties of $29 million. This was partially offset by a net contribution from operations of $45 million. As a reminder, we're required under IFRS to mark-to-market our investment in Allied to its trading price at each period end.

The fair value changes on investment properties in the quarter were primarily driven by adjustments to select mixed-use and residential developments as well as certain existing residential assets to reflect current market conditions. This was partially offset by gains in the retail portfolio, which were supported by favorable leasing and cash flow assumptions related to backfilling certain sites with higher quality tenants and favorable cap rate adjustments, mainly in Ontario, reflecting continued demand for necessity-based retail centers.

On a full year basis, we continue to generate stable value across the portfolio, resulting in year-over-year NAV growth of $263 million or 2.6% on a per unit basis. We ended the year in solid financial position with strong debt metrics and ample access to capital, including $1.6 billion of available liquidity through our corporate facility and cash on hand and $13.8 billion of unencumbered properties. Our debt-to-EBITDA ratio was 7x and remained largely stable. We had no material financing or debt maturities in the quarter and with our next material maturity not occurring until our $350 million debenture in November.

Turning to our development activity. Our pipeline continues to be a reliable source of long-term cash flow growth and NAV creation for the REIT. In the quarter, development spend totaled approximately $40 million, and our team delivered 3 new commercial projects totaling 601,000 square feet at a blended yield of 7.8%. Our largest delivery in the quarter was the latest phase of Choice Caledon Business Park project totaling 530,000 square feet at our ownership share, which we completed at a yield of 7.9% and expect rents commencement to begin in April.

We also completed 2 retail intensifications, including a 54,000 square foot Costco Gas Bar in Edmonton completed through our 50% owned JV at a 6.1% yield and a 17,000 square foot Shoppers Drug Mart in Ontario at a 6.9% yield, leaving 8 additional Shoppers Drug Mart projects in our active pipeline and many more in various stages of planning. On a full year basis, our development spend totaled approximately $237 million, and we successfully transferred $222 million of assets to income-producing, representing 836,000 square feet of new commercial GLA. These transfers resulted in approximately $47 million of value creation for Choice.

Looking ahead, we remain confident in our strategy and financial plan. Our focus remains the same. We will continue to prioritize operational excellence supported by strong leasing execution while enhancing portfolio quality through disciplined capital recycling and delivering on our development pipeline to create value for unitholders. For the full year 2026, we expect to maintain stable occupancy and deliver 2% to 3% year-over-year growth in same-asset cash NOI.

Our business is expected to deliver annual FFO per unit diluted between $1.08 and $1.10 in 2026, supported by the strength of our core business, including strong same-asset NOI growth and contributions from transactions and development. This strong performance will be partially offset by the impact of Allied's distribution cut. We will continue to leverage our industry-leading balance sheet to support both our transaction and development activity while maintaining our debt-to-EBITDA below our long-term target of 7.5x. Lastly, given the strength of our business and performance in '25, as Rael mentioned, we are increasing our distribution to $0.78 per unit effective March 2026, which represents a 1.3% increase from the prior year.

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

[Operator Instructions] And your first question today comes from the line of Mark Rothschild from Canaccord Genuity.

It sounds like that industrial is doing pretty well for the types of properties you own. You're advancing on the development projects. Is this an area that you think you can expand on, grow this year? And do you feel confident enough to maybe start additional development projects?

So look, we said throughout the year that things are starting to stabilize, and we've definitely seen that in -- on the leasing front. We commenced the spec development last quarter, and it's a function of us having confidence in the market. We've seen lots of RFP activity. I think we need to see a little more traction on the RFP activity before we consider commencing another spec development. I think from a growth point of view, we'll continue to capture that mark-to-market that we spoke about. And our team is always looking for new investment opportunities, and we hope we can grow in that avenue, too, but nothing yet that we are underwriting actively. I don't know, Niall, if you want to add anything else?

Yes. Maybe just to add, we're delivering our spec building in early 2027 for really focusing on deliveries for that year or tenant inquiries for that year. We're starting to hear inquiries around 2028. And as we feel that they're getting some traction, we'll be able to pursue those opportunities as well.

Okay. Great. And maybe just...

Mark, sorry, just one thing quickly. Erin's...

Mark, just wanted to call out the prospect activity at Caledon has increased to Niall and Rael's point. And then just if we think about industrial for 2026, we would think about same asset growth being closer to that 4% range.

Okay. Great. And then maybe just one more in regards to office. The transaction you did sounds like more strategic than anything else. There has been some signs of an office recovery. Obviously, Allied has not participated in that yet. Do you have any thoughts on office investment at this time? Is it an asset class that you would ever -- would the REIT get back into in a more material way? Would you do something if you were confident in improvement? Or is that an asset class that Choice is just not looking to be heavily involved in going forward?

Yes. Look, Mark, if you go back a few years ago, we exited office because we felt we could never get real scale in the asset class. And it's unlikely for us to see that opportunity. So we are very focused on continuing to build out our retail, industrial and then over time, purpose-built rental. And there's enough investment opportunities in those 3 asset classes that we would not be pursuing office as an asset class.

Your next question comes from the line of Lorne Kalmar from Desjardins.

Just on the guidance side, and Erin, I'm sorry if I missed this. You guys are usually really tight and not that $0.03 isn't tight. But just wondering what has to happen to hit the low end versus the high end? Is it more of that lease term income you guys saw throughout 2025? Or is there something else we should be thinking about?

Lorne, I would think about our plan as right down the middle now. I know we gave an extra bit of range on guidance, but I think last year, we got the feedback that it was very tight. So I just thought we'd give ourselves the room. In order to outperform a couple of things that we need to see is leasing coming in stronger than expected on retail, same in industrial, maybe a little bit less downtime than is in plan. So there's definitely flex there. And then yes, if there was a little more lease termination income, that would help. But I think there's a bit of room for our team to outperform.

Okay. And then I think you talked to the SP-NOI growth range for industrial for retail, would that kind of be in the 2% to 3% range?

That's right.

Okay. And then just lastly, on Building D at Caledon, I noticed the yield is quite a bit lower. Maybe just some color around that and why you guys decided to move forward with it given the lower yield than what you guys were getting on the previous buildings.

Lorne, it's really a function of it being a spec building, and it needs to address a wide range of kind of tenant requirements. So we feel we've put in appropriate allowances to be able to capture those requirements. So as we continue to see costs moderate and hone in on a potential tenant, we feel we'll be able to improve those yields.

Your next question comes from the line of Brad Sturges from Raymond James.

Just to follow up on your commentary around the industrial segment and RFPs. Is it -- I guess I'm trying to understand that the comment around the need to see a little bit more activity on the RFP side. Is it a function of you're not -- have you seen a change in that market relative to last quarter? Or it's just -- it's a little bit too early to be thinking about 2028 yet given you're only starting to see that activity start to pick up now?

Well, it's more about supply coming into the market, which is falling off dramatically. And with Building D, it will be one of potentially 2, 1 million square feet buildings in the GTA, one actually being ready for occupancy now. So we're the only spec building underway. The activity we've seen over the last couple of months is a function of, I think people are getting used to a level of uncertainty and starting to make decisions around that. For 2028 deliveries, that's now going to be a function of how we see the current environment smoothing out, but we're encouraged by it.

Okay. And just following up on that, in terms of like just market rents for industrial for the type of assets you own and across your markets, what do you expect there this year in terms of time line to see a bit more stabilization, even maybe a positive inflection point on the market rent growth?

I think we see this year's -- 2026 spreads will be consistent with '25, which I think has been a very good year in itself.

Your next question comes from the line of Himanshu Gupta from Scotiabank.

On the same asset NOI outlook, and I think you mentioned 4% for industrial. Just wondering, are you being conservative here given the occupancy uptick you have seen year-to-date and then the mark-to-market opportunity as well?

Yes, it will be between 3% and 4%, Himanshu. And I'd say, as I was just answering the last question, there could be upside if our team sees stronger leasing on deals, $0.50 or $1 more or shorter downtime. But I'd say that every year is also dependent on the mix of what's renewing and what province it's renewing in. So to Niall's point, spreads will be relatively consistent with last year. And that 3% to 4% is very in line with how we view industrial long term.

Got it. Okay. Sticking to industrial here. Your industrial occupancy is obviously outperforming the broader Canadian market. What is causing that for that outperformance?

I think it's a combination of our quality of building and the age as well as the generic kind of properties of the building as well. It's not -- we're not -- we don't -- we're not factoring into some of the other issues that our portfolios are seeing.

And I know there's a section of Loblaw portfolio. On the third-party portfolio, are you more small to mid-bay, larger bay? How would you classify in terms of demand for these types of product?

I think when Niall is speaking about the market, Himanshu, and he'll chime in after this, he'll refer to the third-party portfolio because the Loblaw represents roughly just, call it, 30% of our income, and it's very stable. And I think we're seeing demand across the board in the small bay, mid-bay and then obviously, on RFP activity on the large distribution type buildings. But maybe, Niall, is there anything else you want to add?

No, I think it's large activities where we're seeing the most interest. There's a lot of competition in the smaller bay, and we're not really focused on that.

Got it. Okay. That's very helpful color. Last question is on capital recycling. Obviously, you have been very active on that front over the years. What more noncore disposition targets do you have for the year? And do you become like more active on net acquisitions here given the good balance sheet?

Look, Himanshu, I would say, for us, we always focus on quality. And every year, we start the year and we say there's not a lot of product to buy, and we have to obviously source the product and depends what comes to market. And if you think of 2025, we did roughly $800 million of total transactions, and we bought more than we sold. And we're entering '26, we've done a few small retail acquisitions. And we're hopeful that we can find more assets to buy and use the strength of the balance sheet. We just don't have great visibility right now.

As far as what we can still sell, I would say our portfolio is in phenomenal shape. And it's not that we're selling things that in our mind is bad quality. It's just on the lower end of spectrum maybe from a growth point of view, and we can use that capital and recycle it into new acquisitions. I would say the other area we're very focused on is the greenfield and just on the commercial development. Erin made reference to 8 Shoppers Drug Marts that are currently on construction. There's a significant pipeline behind that. We're also building, I think, 5 neighborhood shopping centers, and our team is underwriting another asset. So I think just that benefit of working with Loblaw to find those growth opportunities, we believe we'll be able to deploy capital in that area as well, which is very encouraging.

Your next question comes from the line of Giuliano Thornhill from National Bank.

Just one question back on the greenfield that you mentioned there. How big are these kind of retail sites? And where are they kind of working for Loblaws?

At the moment, we've got 4 that total about 350,000 square feet, and they range from about 40,000 to 160,000 square feet. They're largely Loblaw's anchored with either No Frills brand or some Shoppers brand. So they're very -- they're a large part of how we're anchoring our centers and going out and getting additional CRE leasing.

And kind of with the industrial, I guess, I don't want to say on pause, but now is the increasing focus going to be more of that retail nodes and larger sites going forward out to 2027?

Yes. We don't see industrial on pause because we're building the large 1 million foot facility. It's just -- from our point of view, it's just managing risk that you don't want to be doing too many of them at once. But as we said earlier, as we get leasing traction on the building, we'll consider other spec industrial buildings to keep the momentum.

Yes. And just to add, like Tullamore has a range of building typologies as well. So if there is a demand for a smaller size, we can also go forward with that, too.

I see. Okay. And just one last question. Just with the Bank of Canada potentially done cutting, there's rates may be going higher for longer. Are you seeing the narrowing of bid-ask spreads beginning to happen in transactions and potentially for the market to pick up yet?

Look, for the product that we've been buying and selling, there seems to have been strong demand. And I think the wider bid-ask spread is when a certain seller or a seller needs a certain price to clear or cover their debt. I think as time has gone by, they've become more realistic. But we think the transaction market has generally stabilized for the assets that we are investing in.

Your next question comes from the line of Sam Damiani from TD Cowen.

Congrats, David, on your return to Choice. Just on the -- so little bit one by one, my questions have been addressed here, but maybe just to drill a little bit deeper on the retail development. The active pipeline is down around 200,000 square feet. Now that doesn't include the Nepean site, which I assume you're going to move forward with. I wonder if you could just confirm that. But just given how tight retail leasing is today, do you see that sort of 200,000 to 300,000 square foot sort of activity annually meaningfully increasing potentially for choice in the coming years?

Just going to give some color and then I'll hand it over to Niall. What we include in our MD&A is active, our sites where we really are further along with our permits and zoning. But you'll see in our investor presentation as well, if we think about kind of the next 3 or 4 years, we've identified over 1 million square feet plus in our portfolio that we are able to build out and probably over 60 projects plus in the next 3 to 4 years. So very healthy pipeline there, and those will start to funnel into our MD&A as they become more real. But I'll let Niall comment on the detailed color.

Yes. So as I mentioned, Sam earlier, it's about 350,000 square feet, but there is also an additional 4 that we're bringing in as well as we kind of work through it. So what's in our active development is what's zoned and we can move forward with in the next 6 to 12 months. We will see additional projects coming into the pipeline, the active pipeline over the course of the year. So we're encouraged by what's going to happen over the next 3 years in our plan.

That's great. That's helpful. And maybe just shifting over to the rental residential segment. It's obviously seen a little bit of pressure. The occupancy is down, which you commented on in your opening remarks. But maybe to drill down a little bit more deeper, which sort of, I guess, clusters or markets are performing best for Choice right now? Is it between Toronto, North York, Brampton, Ottawa, Edmonton?

Look, Ontario, generally, we're seeing in Ottawa and Toronto, a similar pattern. However, that pattern, we think has leveled off. And as we saw the majority of the supply that was going to come off for shadow rental occur in '25, we think we're going to see the same type of growth pattern for a little bit longer and potentially see it improve over the next 12, 18 months.

And do you still feel confident you'll move forward with a new project potentially this year?

We do. We do. That will bridge the cycle in our view.

[Operator Instructions] Your next question comes from the line of Pammi Bir from RBC Capital Markets.

Just coming back to the, I guess, the new joint venture with Wittington, can you maybe just expand on that? And what was the -- maybe the motivation behind those transactions? And any color you can share just in terms of the longer-term play there?

Yes, Pammi, I think if you think of Yonge, St. Clair, essentially the block is owned by either Choice or Wittington. So Choice owning the office asset, Wittington owning all the development land. And the last piece of the block that wasn't owned was the corner, which is 2 St. Clair, which is a small office asset, but call it, more than 30% of the income comes from the ground floor retail. If you stand in the buildings, you actually don't know which one is 2 St. Clair and which one is 22 St. Clair.

So from our point of view, it just made logical sense to own them, obviously, own the office together. Office is obviously not completely strategic to Choice. We've said we do it when it's primarily through related entities. And what it did is it allowed us to reduce overall exposure, control operations and then from a group point of view, allowed full control of the block. 22 St. Clair is fully occupied and 2 St. Clair has a bit of leasing upside, which we're quite confident we will pick up that just given the pickup in office momentum at the moment.

Okay. Actually, that was actually one of my next questions just in terms of the occupancy there. So that's good to hear, and it all makes sense. Maybe just as a follow-up, are there other opportunities where a similar situation may arise that you might be looking at for -- in terms of 2026, where there's an opportunity to maybe consolidate some ownership that might be held by third parties or...

If you think of 2025, we actually consolidated ownership through some of our joint ventures where our partner wanted out. So I can think of an asset in Edmonton that we purchased our -- 2 assets in Edmonton, actually, we purchased one of our partners out. One of them we took back a Chapters box and we split and we leased it to No Frills and a Shoppers Drug Mart. So I think we're always looking for opportunities where one of our partners wants liquidity, where we can consolidate ownership. And then I think back a few years ago, if assets were not core or strategic to us, we always offer to our partner first. So we'll continue to look for those opportunities on high-quality assets.

Okay. And then just was there any -- like what range of sort of transaction activity was, I guess, incorporated into your guidance, if any?

So Pammi, in 2025, we bought more than we sold by about $120 million. I'd say in 2026, our plan would be to be kind of around $100 million, buying more than we're selling.

And with no further questions, I will now turn the call back over to Rael Diamond, CEO, for closing remarks.

Thank you, Rob. Once again, our portfolio and balance sheet remain in excellent position, and our teams are focused on executing on our strategic objectives in the year ahead. Thank you for your interest in Choice and for joining us this morning. We look forward to providing you another update on the business in the spring.

This concludes today's conference call. You may now disconnect.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Choice Properties Real Estate Investment Trust Third Quarter 2025 Earnings Call. [Operator Instructions]

I'd now like to hand the call over to Simone Cole, General Counsel and Secretary. Please go ahead.

Thank you. Good morning, and welcome to Choice Properties Q3 2025 Conference Call. I am joined this morning by Rael Diamond, President and Chief Executive Officer; Niall Collins, Chief Operating Officer; and Erin Johnston, Chief Financial Officer. Rael will start the call today by providing a brief recap on our third quarter performance, and provide an update on our transaction activity. Niall will discuss our operational results and our development pipeline, and Erin will conclude the call with a review of our financial results before we open the line for Q&A.

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 and exceptions that are not historical facts.

These statements are based on current estimates and assumptions and are subject to the 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 assumptions that were made in applying and making these statements can be found in the recently filed Q3 2025 financial statements and management discussion and analysis, which are available on our website and on SEDAR+.

Finally, new to this quarter, our call will feature presentation slides. If you've joined by webcast, you will see these slides presented on screen. If you have dialed into the call by phone, these slides will be available on our website following the call.

And with that, I turn the call over to Rael.

Thank you, Simone, and good morning, everyone. Welcome to our Q3 conference call. We delivered another strong quarter, driven by strong tenant demand in our national grocery-anchored retail portfolio and new leasing activity across our well-located industrial assets. We maintained near full occupancy of 98%, up 20 basis points from last quarter. We achieved healthy overall rent spreads of 10.8% during the quarter, which included a significant amount of Loblaw renewals that we'll speak more about shortly.

Our Loblaw leases continue to be a stable source of cash flow growth, and we're equally encouraged with the robust leasing activity from our third-party tenants in the quarter. Excluding the Loblaw renewals, our average rent spread was approximately 23%. This leasing activity underscores the strength of our overall portfolio and our team's ability to manage through uncertainty.

We delivered FFO per unit growth of 7.8% this quarter, supported in part by lease surrender revenue from our ongoing Loblaw rightsizing initiative. These initiatives remain a part of our active asset management strategy as we support Loblaw in evaluating its space requirements nationwide while creating opportunities to introduce other high-quality, strong covenant tenants that enhance the overall quality of our sites. Excluding lease surrender revenues and other nonrecurring items in both comparative periods, FFO per unit growth was a very strong 3.5%. Erin will provide more detail on our financial results and an update on our 2025 outlook later in the call.

Our strong performance this quarter comes amidst a backdrop of ongoing macroeconomic uncertainty driven by trade-related risks in Canada and abroad. Despite this, our portfolio continues to demonstrate its resilience and our commitment to prudent financial management has enabled our teams to execute on our growth initiatives.

Turning to our portfolio. We continue to see a tight retail market nationwide, fueling strong demand for our grocery-anchored neighborhood centers. We're also seeing particular strength among necessity-based and discount retail tenants. Our national portfolio is well positioned to continue capturing this momentum and benefit from these favorable market dynamics.

Our team remains active in new leasing initiatives at our existing assets, while our industry-leading balance sheet and strategic partnership with Loblaw enables us to continue delivering new retail space through intensifications and greenfield development. With a strategic focus on expanding our high-quality retail portfolio and a proven track record of execution, we are well equipped to deliver sustained growth and maximize value.

In the quarter, we delivered 7 new retail intensification projects at attractive yields, further intensifying our neighborhood centers, something Niall will expand on shortly. In addition to intensifying our existing sites, we also continue to leverage our balance sheet and relationship with Loblaw to pursue new greenfield opportunities.

During the quarter, we completed a $9 million acquisition of a 50% interest in a greenfield site in Ottawa. This 13-acre site will feature a new shopping center totaling approximately 120,000 square feet anchored by No Frills and a Shoppers Drug Mart, which we will develop and manage on behalf of our partner.

Our industrial portfolio remains in excellent shape, and our team delivered another strong quarter of leasing activity as occupancy increased 30 basis points to 98.3%. Leasing spreads were robust at nearly 38%, driven by third-party tenant renewals. While the overall industrial market continues to normalize, our portfolio remains well positioned to drive further growth given the meaningful gap between in-place and market rents.

We also maintained a significant industrial development pipeline, including approximately 220 acres of developable land remaining at Choice Caledon Business Park. In the quarter, we announced our intention to begin the next phase of our Caledon project on a speculative basis. This decision was supported by our conviction in the GTA industrial market, the location of our site, the competitive advantage provided by low land cost basis and the increased RFP activity we're experiencing on the site.

Lastly, in our mixed-use and residential portfolio, we saw a quarter of solid momentum. Our office portfolio is primarily leased to affiliate entities and occupancy in the quarter was largely stable. On the residential side, we continue to experience some pressure from new supply at certain assets. However, looking ahead, we continue to have a strong conviction in the quality of our residential product and are optimistic about the long-term residential fundamentals in major urban markets in Canada.

Turning to our transaction activity in the quarter. We remain focused on maintaining our portfolio quality through capital recycling, completing approximately $118 million in total real estate transactions during and subsequent to the quarter. This included the $9 million retail land acquisition in Ottawa that I mentioned previously and $109 million of noncore asset dispositions.

On the disposition front, we sold our 50% interest in a non-grocery-anchored shopping center in Edmonton for approximately $9 million. And subsequent to quarter end, we completed 3 additional dispositions, including a retail portfolio of 4 assets in Ontario for $67 million, a 50% interest in a retail asset in Camrose, Alberta for $23 million and a Canadian Tire land lease and COU at a retail site in Fort Saskatchewan, Alberta for approximately $10 million. All transactions were completed at or above IFRS values.

We expect to remain roughly balanced for the rest of the year, positioning us as net acquirers this year in line with our transaction activity to date. Our industry-leading balance sheet supports -- continues to support us being net acquirers in the future, complementing our existing cash flow growth and development growth pillars, and we will continue to maximize value for unitholders.

With that, I'll turn the call over to Niall to discuss our operational results in more detail. Niall?

Thank you, Rael. Good morning, everyone. As Rael mentioned, our portfolio delivered another solid quarter of operational results, and we continue to see strong tenant demand and leasing spreads across each of our portfolio types. Overall portfolio occupancy remained strong, ending the quarter at 98%. This was a 20 basis point increase to the prior quarter.

During the quarter, we had over 3.7 million square feet of lease expiries and renewed approximately 3.6 million square feet, resulting in a retention rate of 96%. Overall, the portfolio renewals were completed at an average rental spread of 10.8%. Excluding the Loblaw renewals, our renewal spread was a very healthy 23.1%. We also completed 291,000 square feet of new leasing, resulting in positive absorption of 135,000 square feet, largely driven by our Ontario industrial portfolio, Quebec retail portfolio.

Turning to each of our asset classes. In our necessity-based retail portfolio, occupancy was unchanged at 97.8%. During the quarter, approximately 3.2 million square feet of leases expired, including 2.8 million of Loblaw maturities. We renewed approximately 3.1 million square feet, including 2.7 million square feet from the Loblaw tranche for a retention of 97%. Given the lack of new retail supply, vacating tenants or early terminations have provided opportunities to backfill space at elevated rental rates with stronger covenants.

Lease renewal spreads averaged 9% above expiring rents and 12.9%, excluding the Loblaw tranche, with broad-based strength across all of our regions and categories led by value retailers.

We also completed 148,000 square feet of new leasing. Average rents over the lease term are 42% higher than our average in-place rents. This largely offsets the 95,000 square feet of expiries that did not renew in the quarter. Our team has already backfilled a portion of the space at rents 49% above previous rates and remain confident in the leasing activity on the remaining space.

Turning to our industrial portfolio. Occupancy increased 30 basis points from our last quarter to 98.3%. This quarter, 491,000 square feet expired, primarily in our Alberta and Atlantic portfolios, and we renewed 430,000 square feet for a healthy 87.6% retention rate. We had 2 vacancies in the quarter, one of which has already been backfilled for Q4 and negotiations are underway for the other property.

Lease renewal spreads remained strong, averaging 38.3% above prior rents, driven by the Alberta and Ontario portfolios. In the Ontario portfolio, we completed 1 renewal for 57,000 square feet at a rent spread of 183%. Excluding the 189,000 square feet of Loblaw renewal, the average renewal spread for the portfolio was approximately 62%. We also completed 142,000 square feet of new leasing against 61,000 square feet of vacates, resulting in positive absorption of 81,000 square feet. New leasing rents averaged over the lease term are 32% higher than our average in-place rents. Lastly, our mixed-use and residential portfolio continues to perform well with occupancy at 95.5%, which is up 10 basis points from the last quarter and has increased 140 basis points year-to-date, primarily from strong performance within our mixed-use assets.

Turning to our developments in the quarter. Our team continues to advance our development pipeline across each of our strategic asset classes with near-term focus on commercial development. This quarter, our team delivered 7 retail intensification projects totaling 107,000 square feet at a blended yield of 6.3%. Project deliveries included 2 Shoppers Drug Marts in Ontario and Alberta, totaling 34,000 square feet at yields in the mid-6s and 7s, and we have another 7 Shoppers Drug Marts currently in active development.

At T&T and CRU in Mississauga totaling 44,000 square feet, 2 CRU units in Alberta with an international cosmetic retailer, totaling 7,000 square feet at yields in the high 8% range. And finally, 2 ground leases at a property in Ontario and Alberta totaling 22,000 square feet at an average weighted yield of approximately 11%. One of the ground leases with Nautical with whom we have a deep relationship and the other ground leases with a tenant in the automotive sector.

As Rael mentioned earlier, this quarter highlights our team's ability to unlock incremental value from existing retail portfolio and land bank through intensifications and new development. These type of retail initiatives remain a cornerstone of our broader development strategy, and we will continue to actively pursue opportunities to deliver high-quality retail projects.

Looking ahead for the balance of the year, our major active development project continues to be our industrial pipeline at Choice Caledon Business Park. The NLS building totaling approximately 624,000 square feet, of which we own 85% was transferred to IPP on November 1 and rent commencement is on track for April 2026. With this delivery, our team is now focused on the next phase of our industrial development in Caledon.

This quarter, we announced our intention to begin construction of a 1 million square foot building on spec before the end of the year. Permits are submitted and delivery is scheduled for Q2 2027. Overall, our active development pipeline totals 12 projects of approximately 1 million square feet at an average forecasted yield of approximately 6.9%. Our development pipeline continues to be a reliable source of long-term cash flow and NAV growth for our portfolio.

I will now pass it over to Erin to discuss our financial performance.

Thank you, Niall, and good morning, everyone. We are very pleased to report another quarter of strong financial performance. Our reported funds from operations for the second quarter was $201.4 million or $0.278 on a per unit diluted basis, reflecting an increase of 7.8% compared to the third quarter of 2024. Included in our results this quarter, we had approximately $10 million of lease surrender revenue. Last year, we had approximately $5 million of lease surrender revenue and $3.3 million of nonrecurring G&A expenses related to outsourcing.

As Rael mentioned, our lease surrender revenue is mainly due to our rightsizing activities with Loblaw, where we are able to add high-quality third-party tenants to our sites and Loblaw is able to rightsize their store to a smaller footprint. These initiatives demonstrate the benefits of our strategic partnership with Loblaw and do not occur consistently throughout the year. Excluding these items, FFO per unit growth remained strong at 3.5%. FFO growth was primarily due to strong operational results and contributions from net acquisitions and development transfers over the last 12 months, partially offset by higher net interest expense.

AFFO this quarter was $0.192 per unit, which was impacted by the earlier timing of executing on our maintenance capital projects. On a full year basis, we expect our 2025 maintenance capital and AFFO payout ratio to be relatively consistent with the prior year.

Turning to our operational results. Same-asset cash NOI increased by $7 million or 2.8% compared to the third quarter of 2024, driven by higher base rents from rent steps and strong leasing activity. By asset class, retail same asset cash NOI increased by $5.8 million or 3.1%. The increase was primarily driven by leasing activity, which included the impact of our Loblaw lease renewals in the quarter and higher base rent on contractual rent steps. Retail growth was also favorably impacted by higher capital recovery revenue.

Industrial same-asset cash NOI increased by approximately $0.8 million or 1.6%. The increase was primarily due to higher base rent from contractual rent steps and leasing activity. Growth in the quarter was tempered by prior year property tax recoveries and other income items. Including prior year items, same-asset cash NOI growth would have been approximately 3.3%. Mixed-use and residential same-asset cash NOI increased by approximately $0.4 million or 4%.

Moving to our balance sheet. Our IFRS net asset value or NAV for the quarter was $14.53 per unit, an increase of $111 million or approximately 1% compared to the second quarter of 2025. NAV growth was driven by a net contribution from operations of $56 million, a net fair value gain on our investment properties of $13 million and a fair value gain on our investment in the units of Allied Properties. As a reminder, we are required under IFRS to mark-to-market the investment in Allied to its trading price at each period end.

Our fair value gain on investment properties in the quarter was primarily driven by cash flow growth, favorable leasing and backfill initiatives in our retail segment. This more than offset a fair value decrease related to certain asset-specific leasing adjustments in our industrial portfolio.

This quarter, we also completed several successful financings, most notably our $500 million dual tranche unsecured debenture offering in August. The transaction included a $350 million Series W unsecured debenture at a 4.628% coupon with a 10-year term and $150 million Series X debenture at a 5.369% coupon with a 30-year term. The dual tranche offering carried a weighted average coupon of approximately 4.85% and a 16-year average term, extending our debt maturity profile to 6.8 years.

Our team capitalized on a very strong credit environment with the issuances representing both the tightest ever 10- and 30-year spreads for Choice. We saw exceptional demand for these issuance with the combined offering being over 9x oversubscribed. This transaction continues to demonstrate our strong position in the market and our ability to source low-cost capital while also accessing the long end of the curve, providing the flexibility needed to prudently manage our balance sheet and maintain a well-structured debt ladder.

Proceeds from the offering were primarily used to repay maturing debt, including the redemption at par of our $200 million Series F unsecured debenture in September and approximately $100 million of mortgages that matured in the quarter. The remaining proceeds were used for general purposes and to pay the rebalances on our revolving credit facility.

Looking ahead to the remainder of the year, our team has largely addressed the few remaining maturities with our next significant debt maturity not occurring until our unsecured debenture due in November 2026. We ended the quarter in solid financial position with strong debt metrics, ample liquidity, including approximately $1.5 billion of available liquidity, including credit on our corporate facility and available cash and $13.7 billion of unencumbered properties.

Our debt-to-EBITDA ratio was 7.1x, which was down 0.1x from last quarter as we capture earnings related to our acquisition activity earlier in the year. Supported by our strong year-to-date operating performance, including our team's ability to execute on a transaction strategy and deliver on our rightsizing initiatives with Loblaw, we have increased our guidance for 2025 FFO per unit to approximately $1.06 to $1.07, representing year-over-year growth of approximately 3% to 4%.

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

[Operator Instructions] And our first question today comes from the line of Mark Rothschild from Canaccord.

It sounds like you're comfortable progressing with industrial development now. And I'm just curious your thoughts on undertaking new developments on larger mixed-use projects at a time when general residential development, especially in the condo market is stopped or slowing, projects take quite some time. Are you looking at advancing any of these projects now? Or still do the numbers maybe just not work right now?

Mark, it's Rael. Hope you well. Look, I think the way we think about it is we're a long-term owner of real estate. And if you start one of these projects now, you're only going to deliver it in 3 or 4 years, and you're going to be leasing it up in a very different environment than we are today. So given we take that long view, our balance sheet is strong. And there are quite a few available incentives at the moment our team is working on trying to capture. So we actually think we're going to be in a position to launch one of these in 2026 because we believe it's the right long-term investment. I don't know, Niall, if you want to add anything else.

Yes. Just to add to that, Mark, there's been a progressive decline in costs that come down approximately 15% over the last couple of years. So it's really improving the dynamics of how we're evaluating some of these performance. There is a lot of appetite in the market for new projects. So we think schedules will improve as well. So overall, we're seeing a change in dynamics that I think could be accretive very quickly.

But I guess, Rael, we should wait a little bit to hear your announcement on which project it is and what the plan is?

Yes. So we hope to have something in the early part of 2026.

Your next question comes from the line of Himanshu Gupta from Scotiabank.

So your retail occupancy continues to be strong. Should we expect occupancies to be stable from here? Or do you expect any uptick in the near term? And at the same time, any pockets of like softer leasing demand within the retail side?

Himanshu, it's Niall. Just to respond to that. On our retail going into Q4, we're expecting a little bit of growth in occupancy improving. And in our industrial portfolio, we see occupancy improving as well.

Okay. That's fantastic. And on the retail, I mean in the context of this population growth has slowed down and GDP growth also slowed down. So it sounds like no pocket of weakness you guys are seeing.

I'd say, look, there's a lot of catch-up from the immigration that has happened over the last number of years and retail and residential and industrial are still trying to catch up with that, particularly in retail.

Okay. Okay. That's fair enough. And maybe my next question is on that Caledon industrial property. I mean, it sounds like you're making progress on that 1 million square feet of development on spec. Do you have a sense of what kind of tenant demand will be there for that kind of product?

Yes. We're very encouraged by the responses we've been getting to RFPs. It's a mix of logistics, electronics. There's a lot of growth there. We're seeing build-to-suit as well as interest in our spec as well. So there's a good variety there for us.

And what kind of yields will you be underwriting on that project?

Similar yields that we've been achieving to date on our IPP portfolio. And our NLS project is transferring in the next quarter. We expect to see yields similar to that.

Got it. Okay. Maybe just last question. I mean, on your Allied holdings, and I know it's a small part of the NAV. Any thoughts if there's a distribution cut, what could be the impact on your FFO...

Look, Himanshu, I think just go back to what we've always said. We've always said that our view that the underlying real estate is great long-term real estate. We also recognize that office fundamentals are starting to improve. And then we don't need the capital right now. Look, we don't know exactly what the distribution cut is going to be until they officially announce it. But it's not going to have a material impact on our business. Our business is strong, and we'll provide an update when we know the magnitude of the cut.

Your next question comes from the line of Sam Damiani from TD Cowen.

Certainly interested to see the retail shopping center development kickoff in Nepean. I'm just wondering if, Niall, perhaps you could share a little bit of sort of thoughts about how you underwrote the opportunity and expected rents versus cost kind of yields. Like is this an opportunity that has opened up just in the recent year, let's say, with the rise in market rents? Is this an opportunity that could really expand more so in a bigger way across the country?

So, Sam, what I'd say, look, we have a number of opportunities for locations across Canada that we're working on for grocery stores and CRU. We are seeing rents improve to underwrite. But they're where they need to be for underwriting, so they're in the 50s. But we'll give you more input when we talk to you in Q4.

Okay. That's helpful. And maybe, Rael, I mean, since you guys have been acquiring these industrial outside storage assets over the last few years, the asset class has become more popular. Are you still seeing opportunities in that space to acquire going forward?

Sam, we haven't seen any real interesting new opportunities since we acquired the portfolio. I can tell you that numerous people have reached out to us to acquire portions of that portfolio at significantly higher values than we paid, which I think leads to your comment on the significant investor interest in the asset class.

Okay. That's helpful. And just lastly, Mark asked about, I guess, residential construction. So I look forward to, I guess, seeing some details when that's announced. But do you have any initial thoughts on the federal budget announced a couple of days ago and how that sort of impacts the way you look at building new rental residential in Canada?

Look, we've been digesting it as it's been coming out over the last couple of days. You can see that there's a lot of emphasis towards infrastructure, which we feel is very important for some of our very large master plan projects. We're not quite sure how the impact on DCs is going to be trickling down to the provinces and the municipalities. So I think we're waiting for more information to come out. And Build Canada Homes, we're waiting to see how that's going to work as well. So I think there's more information to come out as the budget gets discussed over the next couple of weeks.

Your next question comes from the line of Tal Woolley from CIBC Capital Markets.

I was just wondering on the retail business, where Loblaw is -- where you're sort of terminating some of these leases or looking to downsize, are they switching banners while they're doing it?

Tal, it's not necessarily them switching banners. I mean, they could. It's more they'll look at a store and say we have a store that's 150,000 to 160,000 square feet. Could we make the same amount or service -- do the same sales on a smaller footprint of, say, 120,000 square feet, 125,000 square feet. So it's more of that. And then what happens is Choice will go out to the market and see if we can find a third-party tenant. And only when we do, we'll tell Loblaw, we're okay for them to reduce the space. But if we don't have a good third-party tenant, we would never let them reduce the store footprint.

Sorry, go ahead. Pardon me, Rael. Go ahead.

I will tell you that the interesting thing, and maybe Niall can also comment is that our leasing team is saying that on the size that we're backfilling on the downsizing, there's really a lack of available space in the market. So we've had really strong tenant interest in that space, which has been a positive to offer that space to tenants.

Yes. And maybe add that I see, we had a lot of interest in our land bank and our opportunities and trying to find large space is difficult for our tenants that are looking to grow in a number of sectors. So rightsizing is definitely a solution and also some of our new developments for greenfield as well are providing opportunities for them, too.

And is there a theme on any of these? Like is it a certain region or a certain size store that sort of predominates this group?

No, I wouldn't call it on a theme. I think it's -- we've done ones in Toronto, in Montreal and in Alberta. But I don't think it's a regional theme. That's opportunity as well, refreshing the interior of their store, we work with them, too.

Your next question comes from the line of Giuliano Thornhill from National Bank Financial.

Just wondering on the 8.6% renewals with Loblaws. I'm just wondering what would be required to see this kind of reach the maximum and looking out like further out to 2027, kind of where is that trending?

It's Rael. Look, I think you have to understand there's 40, call it, 45-ish leases rolling a year. And the nature of our leases are that they can be no less than the expiry of -- the expiry rent and no more than 10% growth. So we actually think 8.5% is a really healthy lift given the nature of all the leases. And look, we don't have yet visibility on '27, and we're happy to share it when we have it. But I think it would be very difficult to get to the maximum 10% because it would imply that every single lease is at least 10% below market when it's rolling. And remember, these leases were set in 2013 at market rents.

Giuliano, just one thing to add is the geographic spread on these locations as well. It's across Canada and various markets.

Right. And then just going back to kind of Tal's line of questioning. Just how many more kind of opportunities do you think are for these larger developments? And where has kind of been the lack of grocery under construction in the country over the last little bit?

Look, I think one of our big competitive advantages is that we're working with Loblaw to say, where are you trying to expand and how can we help you find land. For example, just on the grocery side, we had announced, I think, 1 or 2 quarters ago that we were building, call it, 6 new grocery stores. And I think in pretty much most cases, we're building additional CRU as well. Like I don't want to lean too much into where the locations are. I can tell you where the 6 are, but I don't want to lean too much into where the locations of the future opportunities we're looking at with Loblaw. But Niall can maybe just comment on where the, call it, the 5 remaining are.

Look, currently, they're typically out West and in Ontario. And as we go through and look at our pipeline, we think we're going to see more coming in from Quebec as well. So it's a national -- we're seeing a national opportunity in Ontario, out west, Edmonton and Calgary and some opportunities in Quebec that we're evaluating at the moment.

Right. And then just lastly, there's a conservatory group was kind of put up for sale recently. I'm wondering if any of the assets there kind of catch your interest within the portfolio.

Look, I think we've just signed the NDA to get access to the data room. And hopefully, there will be something that fits our criteria, but nothing to share yet.

Your next question comes from the line of Pammi Bir from RBC Capital Markets.

Just on the lease termination income from Loblaw, just how many properties did that relate to? And then secondly, just to clarify, has all of that, I guess, terminated space been re-leased?

So Pammi -- sorry, this is Erin. It related to 3 properties, and we actually put in 5 different CRU tenants across those properties, it would be like Dollarama, Goodlife, LCBO, and it's all been re-leased. When we do these, they are re-leased before we go ahead and do them.

Okay. All right. And then should we -- as we think about just looking ahead for 2026 and maybe even beyond, is this process likely to continue maybe at the similar sort of volume annually? Or is this a bit of a unique period in terms of their rightsizing?

Yes. So I'd say we've had this for the last couple of years. I think there'll be a few in 2026 and maybe '27. I wouldn't expect large volumes to continue. It will all depend on tenant demand market and Loblaw looking at their stores and where they're renovating, but we do have some in '26.

Okay. And then just lastly, on the $100 million of dispositions, I guess, after the quarter, what was sort of the range or the cap rate range on those asset sales? And maybe just if you could comment on the likelihood of further capital recycling next year.

Yes. I think the average cap rate or the range, it was all close to a 7. So a 7% cap. And as we said on the call, look, our balance sheet is in great shape. And this year, we were unbalanced from a capital recycling point of view, i.e., purchasing more than we sold, and we've done a significant number of transactions. And I think we're in a position to continue to do that in future years as well.

And maybe as an extension to that, would that include perhaps monetizing some of the residential density as it gets owned? Or is that not really on the table at this stage?

I think in this environment, it's tough at the moment. It's something we may consider in the future, but not really something we're considering at the moment.

Your next question comes from the line of Gaurav Mathur from Green Street.

Just one question on the disposition activity so far. Is there -- is it fair to say that there's a lack of liquidity now in the market when compared to probably 9 to 12 months ago as you were looking through your capital recycling plans?

No. Look, I think from our standpoint, we wouldn't agree with that statement. We actually think for the product that we've been selling, there's been lots of liquidity. So used even the portfolio, there was roughly $100 million. The average asset size was each $25 million. And the pool of buyers, it's deep, it's institutions, it's advisers, sometimes even it's a private individual. So we actually -- for the product we've been selling, we haven't seen a lack of liquidity.

And by extension, would that also be applicable to the industrial market?

Again, if you look at this -- again, there hasn't been a lot of trading on the industrial market. There's been -- I think in -- I think this past quarter, there were 2 significant trades. And again, they were large assets with, from our point, seem to have good liquidity on it, too. And I will share with you as well on -- I'll also share with you when we sold the small bay portfolio earlier in the year, there was strong investor interest and appetite for more of that as well if we would be willing to sell more assets.

Your next question comes from the line of Sam Damiani from TD Cowen.

Just a quick follow-up on the Loblaw space that was given back and generated the lease surrender fees. That is all in respect of store downsizing. There were no stores completely closed. Is that correct?

That's correct, Sam.

And I will now turn the call back over to Rael Diamond, CEO, for some final closing remarks.

Thank you, Rob. As I mentioned at the start of our call, our portfolio and balance sheet are in excellent shape, and our team remains focused on achieving our growth objectives. Thank you all for your interest in Choice and for joining us this morning. We look forward to providing you another update on the business in the new year.

This concludes today's conference call. You may now disconnect.