Choice Properties: Leasing Strength and a Measured March to the First Capital Close

Choice Properties delivered a second quarter that underscored the resilience of its necessity-based retail and well-located industrial portfolios. FFO per unit rose 0.8% year-over-year to $0.267, while same-asset cash NOI grew 2.8%. The standout was leasing: average leasing spreads hit 19%, with industrial renewal spreads of 40.2% and retail renewals at 12.4% (or ~20% excluding fixed-rate options). The company also completed the early renewal of a large tranche of Loblaw leases, a positive signal for near-term cash flow.

The FCR Transaction: On Track, Well-Capitalized

The transformative FCR transaction remains the centerpiece. With unitholder and court approvals secured, the primary hurdle is regulatory. General Counsel Simone Cole confirmed the timeline: ““We are still saying that it is going to be in the second half of the year that we expect to close. And more particularly in Q4.” — Simone Elizabeth-Jasmine Cole, Investor Relations or Corporate Communications · 2026-07-23” The company has bolstered its balance sheet with a $500M credit facility increase, bringing total liquidity to ~$2B, and unencumbered assets to $14.1B. CFO Erin Johnston noted that 10-year financing costs are hovering around 4.7%–4.8%, with spreads near decade lows. This financial flexibility is critical as the company prepares to integrate a larger portfolio.

Leasing Strength Across the Portfolio

Retail leasing remains robust, driven by grocery-anchored demand and limited new supply. The early renewal of 15 Loblaw locations (3.6M sq ft) at an 8.8% spread covers 67% of 2027 retail maturities. Renewal spreads are strengthening across the board, as David Muallim noted: ““with the strength of the retail market, we have been seeing that rate or that increase, go up over the last few years.” — David Muallim, Executive Vice President, Leasing · 2026-07-23” Industrial is equally strong, with the only 1M sq ft spec building under construction in the GTA. Niall Collins highlighted: ““Building D is the only 1 million square foot project that is under construction right now, so we feel really good about that.” — Niall Collins, Executive Vice President, Development and Construction · 2026-07-23” This confidence marks a shift from just six months ago, when management was hesitant to start another spec project without more RFP traction (as stated in the February 2026 call). The company is now actively responding to strong tenant demand, and the Choice Caledon business park is generating significant interest.

Development and Capital Allocation

Choice continues to extract value from its land bank. During the quarter, it completed two retail land leases at a blended 27.2% yield and acquired a Waterloo site adjacent to an existing grocery asset, positioning for future intensification. Dispositions have been modest ahead of FCR, but CEO Rael Diamond indicated sales could resume in early 2027: ““you will likely see sales start happening you know, call it, early 2027.” — Rael Lee Diamond, President and Chief Executive Officer · 2026-07-23” This aligns with the company's track record of deleveraging after major acquisitions, as seen post-CREIT. The portfolio's resilience is also evident in the industrial segment, which had earlier been viewed as vulnerable to tariff disruptions. In April 2025, Diamond said: ““we do not believe there is any material risk in our portfolio.” — Rael Diamond, President and Chief Executive Officer · 2025-04-24” That assessment has held true, with no impact on leasing velocity in the current quarter.

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.

Looking ahead, Choice is balancing operational excellence with strategic transformation. The FCR acquisition will increase scale meaningfully, but the company's ability to maintain high occupancy and strong renewal spreads will be key. With a fortress balance sheet and a proven leasing engine, Choice is well-positioned to navigate the current environment and emerge as a larger, more diversified REIT.