Current Water Technologies Inc. — Interim / Quarterly Report 2021

Apr 30, 2021

Loblaw Distribution Centre Surrey, BC

Financial Statements

Financial Results

Condensed Consolidated Balance Sheets	Condensed Consolidated Balance Sheets	65
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)		66
Condensed Consolidated Statements of Changes in Equity		67
Condensed Consolidated Statements of Cash Flows		68
Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements		69
Note 1.	Nature and Description of the Trust	69
Note 2.	Significant Accounting Policies	69
Note 3.	Investment Property and Other Transactions	70
Note 4.	Investment Properties	71
Note 5.	Equity Accounted Joint Ventures	74
Note 6.	Co-Ownership Property Interests	75
Note 7.	Subsidiaries	75
Note 8.	Financial Real Estate Assets	75
Note 9.	Mortgages, Loans and Notes Receivable	76
Note 10.	Intangible Assets	77
Note 11.	Accounts Receivable and Other Assets	78
Note 12.	Long Term Debt	79
Note 13.	Credit Facility	81
Note 14.	Unitholders' Equity	81
Note 15.	Income Taxes	83
Note 16.	Trade Payables and Other Liabilities	84
Note 17.	Unit-Based Compensation	84
Note 18.	Rental Revenue	87
Note 19.	Property Operating Costs	87
Note 20.	Interest Income	87
Note 21.	Fee Income	87
Note 22.	Net Interest Expense and Other Financing Charges	88
Note 23.	General and Administrative Expenses	88
Note 24.	Other Fair Value Gains (Losses), Net	88
Note 25.	Financial Instruments	89
Note 26.	Capital Management	90
Note 27.	Supplemental Cash Flow Information	90
Note 28.	Segment Information	91
Note 29.	Contingent Liabilities and Financial Guarantees	93
Note 30.	Related Party Transactions	94

Choice Properties REIT

2021 First Quarter Report 64

Choice Properties Real Estate Investment Trust Condensed Consolidated Balance Sheets

(in thousands of Canadian dollars) Note	As at As at March 31, 2021 December 31, 2020 $ 14,584,000 $ 14,389,000 552,158 573,649 68,373 68,373 225,602 263,946 28,750 29,000 117,212 116,055 162,575 207,219 $ 15,738,670 $ 15,647,242 $ 6,484,489 $ 6,485,521 5,366,865 5,149,182 497,126 489,999 12,348,480 12,124,702 3,390,190 3,514,739 — 7,801 3,390,190 3,522,540 $ 15,738,670 $ 15,647,242
Assets Investment properties 4 Equity accounted joint ventures 5 Financial real estate assets 8 Mortgages, loans and notes receivable 9 Intangible assets 10 Accounts receivable and other assets 11 Cash and cash equivalents 27 (c)
Total Assets
Liabilities and Equity Long term debt 12 Exchangeable Units 14 Trade payables and other liabilities 16
Total Liabilities
Equity Unitholders’ equity Non-controlling interests 7
Total Equity
Total Liabilities and Equity

Contingent Liabilities and Financial Guarantees (Note 29)

See accompanying notes to the unaudited interim period condensed consolidated financial statements

Approved on behalf of the Board of Trustees

[signed]

Galen G. Weston

Chair, Board of Trustees

[signed] Karen Kinsley Chair, Audit Committee

Choice Properties REIT

2021 First Quarter Report 65

Choice Properties Real Estate Investment Trust Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(in thousands of Canadian dollars) Note Net Operating Income Rental revenue 18 Property operating costs 19 Other Income and Expenses Interest income 20 Fee income 21 Net interest expense and other financing charges 22 General and administrative expenses 23 Share of income (loss) from equity accounted joint ventures 5 Amortization of intangible assets 10 Foreign exchange gain reclassified from other comprehensive income Acquisition transaction costs and other related expenses Other fair value gains (losses), net 24 Adjustment to fair value of Exchangeable Units 14 Adjustment to fair value of investment properties 4 Income (Loss) before income taxes Income tax expense 15 Net Income (Loss) Net Income (Loss) Other Comprehensive Income (Loss) Foreign exchange gain (loss) on currency translation Foreign exchange gain on currency translation reclassified to earnings Unrealized gain (loss) on designated hedging instruments 25 Other comprehensive income (loss) Comprehensive Income (Loss)

Three Months

March 31, 2021 March 31, 2020 $ 326,539 $ 324,911 (100,136) (98,820) 226,403 226,091 4,148 3,493 1,039 1,248 (133,563) (133,879) (9,574) (9,686) 8,069 (4,267) (250) (250) — 1,184 — (1,589) 477 633 (217,683) 386,062 58,743 (136,298) (62,191) 332,742 (7) — $ (62,198) $ 332,742 $ (62,198) $ 332,742 — 1,016 — (1,184) (708) (5,297) (708) (5,465) $ (62,906) $ 327,277

See accompanying notes to the unaudited interim period condensed consolidated financial statements

Choice Properties REIT

2021 First Quarter Report 66

Choice Properties Real Estate Investment Trust Condensed Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars) Note		Attributable to Choice Properties’ Unitholders	Attributable to Choice Properties’ Unitholders	Attributable to Choice Properties’ Unitholders		Non- controlling interests Total equity $ 7,801 $ 3,522,540 — (62,198) — (708) — (60,485) — 1,176 — (2,334) (7,801) (7,801) $ — $ 3,390,190
	Trust Units	Cumulative net income	Accumulated other comprehensive loss	Cumulative distributions to Unitholders	Total Unitholders’ equity
Equity, December 31, 2020 Net loss Other comprehensive loss Distributions Reclassification of vested Unit- Settled Restricted Units liability to equity 14 Units repurchased for unit- based compensation arrangements 14 Distribution to non-controlling interests 7	$ 3,652,620 — — — 1,176 (2,334) —	$ 811,734 (62,198) — — — — —	$ (4,986) — (708) — — — —	$ (944,629) — — (60,485) — — —	$ 3,514,739 (62,198) (708) (60,485) 1,176 (2,334) —
Equity, March 31, 2021	$ 3,651,462	$ 749,536	$ (5,694)	$ (1,005,114)	$ 3,390,190

(in thousands of Canadian dollars) Note		Attributable	to Choice Properties’ Unitholders	to Choice Properties’ Unitholders		Non- controlling interests Total equity $ 7,801 $ 3,098,018 — 332,742 — (5,465) — (57,399) — 4,841 — 1,700 — (2,346) $ 7,801 $ 3,372,091
	Trust Units	Cumulative net income	Accumulated other comprehensive income	Cumulative distributions to Unitholders	Total Unitholders’ equity
Equity, December 31, 2019 Net income Other comprehensive loss Distributions Units issued under unit-based compensation arrangements 14 Reclassification of vested Unit- Settled Restricted Units liability to equity 14 Units repurchased for unit- based compensation arrangements 14	$ 3,409,836 — — — 4,841 1,700 (2,346)	$ 361,049 332,742 — — — — —	$ (1,264) — (5,465) — — — —	$ (679,404) — — (57,399) — — —	$ 3,090,217 332,742 (5,465) (57,399) 4,841 1,700 (2,346)
Equity, March 31, 2020	$ 3,414,031	$ 693,791	$ (6,729)	$ (736,803)	$ 3,364,290

See accompanying notes to the unaudited interim period condensed consolidated financial statements

Choice Properties REIT

2021 First Quarter Report 67

Choice Properties Real Estate Investment Trust Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars) Note	Three Months
	March 31, 2021 March 31, 2020 $ (62,198)$ 332,742 133,563 133,879 (83,509) (92,078) (4,148) (3,493) 3,610 2,143 (8,069) 4,267 155,537 (254,093) 13,846 (19,220) 148,632 104,147 — (21,840) (17,931) (26,558) (140,303) (9,384) 70,841 8,147 (73,959) (71,515) 107,995 149,923 30,000 109,692 (23,357) 138,465 — 497,207 — (550,000) 18,705 (8,367) (20,531) 171 — 108,000 — 1,799 (1,282) (1,633) (2,334) (2,346) (96,191) (192,382) (60,485) (57,409) (7,801) — (169,919) (204,960) (44,644) 37,652 207,219 41,990 $ 162,575 $ 79,642
Operating Activities Net income (loss) Net interest expense and other financing charges 22 Interest paid Interest income 20 Interest income received Share of (income) loss from equity accounted joint ventures 5 Items not affecting cash and other items 27 (a) Net change in non-cash working capital 27 (b)
Cash Flows from Operating Activities
Investing Activities Acquisitions of investment properties 3 Additions to investment properties 4 Contributions to equity accounted joint ventures 5 Distributions from equity accounted joint ventures 5 Mortgages, loans and notes receivable advances 9 Mortgages, loans and notes receivable repayments 9 Proceeds from dispositions 3
Cash Flows from (used in) Investing Activities
Financing Activities Proceeds from issuance of debentures, net 12 Repayments of debentures 12 Net advances (repayments) of mortgages payable 12 Net advances on construction loans 12 Net advances (repayments) of credit facility 13 Cash received on exercise of options 17 Cash paid on vesting of restricted and performance units Repurchase of Units for unit-based compensation arrangement 14 Distributions paid on Exchangeable Units Distributions paid on Trust Units Distribution to non-controlling interests 7
Cash Flows from (used in) Financing Activities
Change in cash and cash equivalents Cash and cash equivalents, beginning of period
Cash and Cash Equivalents, End of Period 27 (c)

Supplemental disclosure of non-cash operating activities (Note 27)

See accompanying notes to the unaudited interim period condensed consolidated financial statements

Choice Properties REIT

2021 First Quarter Report 68

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 1. Nature and Description of the Trust

Choice Properties Real Estate Investment Trust (“Choice Properties” or the “Trust”) is an unincorporated, open-ended mutual fund trust governed by the laws of the Province of Ontario and established pursuant to a declaration of trust amended and restated as of May 2, 2018, as may be amended from time to time (the “Declaration of Trust”). Choice Properties, Canada’s preeminent diversified real estate investment trust, is the owner, manager and developer of a high-quality portfolio of commercial retail, industrial, office and residential properties across Canada. The principal, registered, and head office of Choice Properties is located at 22 St. Clair Avenue East, Suite 700, Toronto, Ontario, M4T 2S5. Choice Properties’ trust units (“Trust Units” or “Units”) are listed on the Toronto Stock Exchange (“TSX”) and are traded under the symbol “CHP.UN”.

Choice Properties commenced operations on July 5, 2013, when it issued Units and debt for cash pursuant to an initial public offering (the “IPO”) and completed the acquisition of 425 properties from Loblaw Companies Limited and its subsidiaries (“Loblaw”). Pursuant to a reorganization transaction on November 1, 2018, Loblaw spun out its 61.6% effective interest in Choice Properties to George Weston Limited (“GWL”). As at March 31, 2021, GWL held either directly or indirectly, a 61.8% effective interest in Choice Properties. Choice Properties’ ultimate parent is Wittington Investments, Limited (“Wittington”).

The principal subsidiaries of the Trust included in Choice Properties’ consolidated financial statements are Choice Properties Limited Partnership (the “Partnership”), Choice Properties GP Inc. (the “General Partner”) and CPH Master Limited Partnership (“CPH Master LP”).

Note 2. Significant Accounting Policies

The significant accounting policies and critical accounting estimates and judgments as disclosed in the 2020 audited annual consolidated financial statements for Choice Properties have been applied consistently in the preparation of these unaudited interim period condensed consolidated financial statements. The unaudited interim period condensed consolidated financial statements are presented in Canadian dollars.

Statement of Compliance

The unaudited interim period condensed consolidated financial statements of Choice Properties are prepared in accordance with International Financial Reporting Standards (“IFRS” or “GAAP”) and International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”, as issued by the International Accounting Standards Board (“IASB”). These unaudited interim period condensed consolidated financial statements should be read in conjunction with the Trust’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2020.

These unaudited interim period condensed consolidated financial statements were authorized for issuance by the Board of Trustees (“Board”) for Choice Properties on April 29, 2021.

Impact of COVID-19

The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in the federal and provincial governments enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses resulting in an economic slowdown. Global equity and capital markets have also experienced significant volatility. The governments have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

It is not possible to forecast with certainty the duration and full scope of the economic impact of COVID-19 and other consequential changes it will have on the Trust’s business and operations, both in the short term and in the long term. In a long term scenario, certain aspects of the Trust’s business and operations that could potentially be impacted include rental income, occupancy, tenant inducements, future demand for space, and market rents, which all ultimately impact the underlying valuation of investment property.

In the preparation of these unaudited interim period condensed consolidated financial statements, the Trust has incorporated the potential impact of COVID-19 into its estimates and assumptions that affect the carrying amounts of its assets and liabilities, and the reported amount of its results using the best available information as of March 31, 2021. Actual results could differ from those estimates. The estimates and assumptions that the Trust considers critical and/or could be impacted by COVID-19 include those underlying the valuation of investment properties, the carrying amount of its investment in equity accounted joint ventures, the estimate of any expected credit losses on its accounts receivable or mortgages, loans and notes receivable and determining the values of financial instruments for disclosure purposes.

Choice Properties REIT

2021 First Quarter Report 69

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 3. Investment Property and Other Transactions

The following table summarizes the investment properties acquired in the three months ended March 31, 2021:

($ thousands) Location Date of Acquisition Segment Ownership Interest Acquired Purchase Price Purchase Price incl. Related Costs	Consideration
	Mortgage Receivable Settlement Contingent Consideration(i) Cash
Equity accounted joint ventures Calgary, AB Feb 1 Industrial 50%(ii) $ 25,375 $ 25,375 Caledon, ON Mar 30 Land(iii) 85% 138,000 138,000	$ 4,846 $ — $ 20,529 — 38,000 100,000
Total acquisitions in equity accounted joint ventures $ 163,375 $ 163,375	$ 4,846 $ 38,000 $ 120,529

(i) The acquisition was funded through a $100,000 cash payment and a commitment to pay the remaining balance based on certain milestones being met over the development lifecycle.

(ii) Represents additional ownership interest acquired increasing the ownership interest in this property to 100%. As a result, this property has been transferred from an equity accounted joint venture to a consolidated investment property as of the acquisition date.

(iii) Land was acquired for future industrial development.

The following table summarizes the investment properties sold in the three months ended March 31, 2021:

The following table summarizes the investment properties sold in the three months ended March 31, 2021:
($ thousands except where otherwise indicated) Location Date of Disposition Segment Ownership Interest Sale Price excl. Selling Costs	Consideration
	Cash
Investment properties Brampton, ON Jan 19 Land(i) 70% $ 25,000 Brampton, ON Mar 31 Land 50% 5,000	$ 25,000 5,000
Dispositions of investment properties 30,000	30,000
Equity accounted joint ventures Richmond Hill, ON Feb 1 Land 50% 66,375	66,375
Total dispositions in equity accounted joint ventures 66,375	66,375
Total dispositions $ 96,375	$ 96,375

(i) On January 19, 2021, the Trust sold its 70% interest which resulted in a disposition of the property under development for $25,000 and a distribution to the subsidiary’s 30% non-controlling interest of $7,801.

Choice Properties REIT

2021 First Quarter Report 70

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 4. Investment Properties

($ thousands) Note	Income producing properties	Properties under development	Three months ended Year ended March 31, 2021 December 31, 2020 $ 14,389,000 $ 14,373,000 — 458,959 9,416 57,693 525 10,948 746 4,231 2,684 33,112 1,044 6,519 4,262 19,269 4,477 13,946 143,103 42,687 — — (30,000) (391,878) — (19,468) 58,743 (220,018) $ 14,584,000 $ 14,389,000
Balance, beginning of period Acquisitions - including purchase costs of $nil (2020 - $10,283) Capital expenditures Development capital(i) Building improvements Capitalized interest(ii) 22 Operating capital expenditures Property capital Direct leasing costs Tenant improvement allowances Amortization of straight-line rent Transfer from equity accounted joint ventures 5 Transfers from properties under development Dispositions 3 Disposition to equity accounted joint venture Adjustment to fair value of investment properties	$ 14,199,000 — — 525 — 2,684 1,044 4,262 4,477 143,103 12,508 — — 29,397	$ 190,000 — 9,416 — 746 — — — — — (12,508) (30,000) — 29,346
Balance, end of period	$ 14,397,000	$ 187,000

(i) Development capital included $901 of site intensification payments paid to Loblaw (December 31, 2020 - $995) (Note 30).

(ii) Interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.68% (December 31, 2020 - 3.70%).

Included in certain investment properties acquired from Loblaw is excess land with development potential. Choice Properties will compensate Loblaw, over time, with intensification payments determined by a site intensification payment grid as outlined in the Strategic Alliance Agreement (Note 30) should Choice Properties pursue activity resulting in the intensification of such excess land. The fair value of this excess land has been recorded in the unaudited interim period condensed consolidated financial statements.

Choice Properties REIT

2021 First Quarter Report 71

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Valuation Methodology and Process

The investment properties (including those owned through equity accounted joint ventures) are measured at fair value using valuations prepared by the Trust’s internal valuation team. The team reports directly to the Chief Financial Officer, with the valuation processes and results reviewed by Management at least once every quarter. The valuations exclude any portfolio premium or value for the management platform and reflect the highest and best use for each of the Trust's investment properties.

As part of Management's internal valuation program, the Trust considers external valuations performed by independent national real estate valuation firms for a cross-section of properties that represent different geographical locations and asset classes across the Trust's portfolio. On a quarterly basis, the valuation team reviews and updates, as deemed necessary, the valuation models to reflect current market data. Updates may be made to significant assumptions related to terminal capitalization rates, discount rates and future cash flow assumptions such as market rents, as well as current leasing and/or development activity, renewal probability, downtime on lease expiry, vacancy allowances, and expected maintenance costs.

When an external valuation is obtained, the internal valuation team assesses all major inputs used by the independent valuators in preparing their valuation reports and holds discussions with the independent valuators on the reasonableness of their assumptions. Where warranted, adjustments will be made to the internal valuations to reflect the assumptions contained in the external valuations. The Trust will record the internal value in its consolidated financial statements.

Income Producing Properties

Income producing properties are valued using the discounted cash flow method. Under the discounted cash flow method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life, generally over a minimum term of 10 years, including a terminal value based on the application of a terminal capitalization rate applied to estimated net operating income, a non-GAAP measure, in the terminal year. This method involves the projection of future cash flows for the specific asset. To the future cash flows a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. The terminal capitalization rate is separately determined and may differ from the discount rate.

The duration of the future cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, new and renewed leasing and related re-leasing, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the related asset class. The future cash flows are typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance costs, agent and commission costs and other operating and management expenses. The future cash flows, along with an estimate of the terminal value anticipated at the end of the projection period, are then discounted.

Properties Under Development

Properties under active development are generally valued with reference to market land values and costs invested to date. Where significant leasing and construction is in place and the future income stream is reasonably determinable, the development property is valued on a discounted cash flow basis which includes future cash outflow assumptions for future capital outlays, construction and development costs. Development risks such as planning, zoning, licenses, and building permits are considered in the valuation process. Properties not under active development, such as land parcels held for future development, are valued based on comparable sales of commercial land.

Impact of COVID-19

The Trust reviewed its future cash flow projections and the valuation of its properties in light of the COVID-19 pandemic during the three months ended March 31, 2021. The Trust expects that COVID-19 will have the most notable impact on its non-grocery anchored retail portfolio. The carrying value for the Trust’s investment properties reflects its best estimate for the highest and best use as at March 31, 2021.

It is not possible to forecast with certainty the duration and full scope of the economic impact of COVID-19 and other consequential changes it will have on the Trust’s business and operations, both in the short term and in the long term. In a long term scenario, certain aspects of the Trust’s business and operations that could potentially be impacted include rental income, occupancy, tenant inducements, future demand for space, and market rents, which all ultimately impact the underlying valuation of its investment properties.

Choice Properties REIT

2021 First Quarter Report 72

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Significant Valuation Assumptions

The following table highlights the significant assumptions used in determining the fair value of the Trust’s income producing properties by asset class:

As at March 31, 2021	As at March 31, 2021	As at December 31, 2020
Total Income Producing Properties Range	Weighted average 6.83% 6.07% 6.97% 6.23% 6.48% 5.71% 6.20% 5.31%	Range Weighted average 4.75% - 11.45% 6.83% 4.00% - 10.95% 6.07% 5.00% - 11.45% 6.97% 4.50% - 10.95% 6.23% 4.75% - 9.00% 6.50% 4.00% - 8.50% 5.73% 5.25% - 8.50% 6.21% 4.25% - 7.75% 5.32%
Discount rate 4.75% - 11.45% Terminal capitalization rate 4.00% - 10.95%
Retail
Discount rate 5.00% - 11.45% Terminal capitalization rate 4.50% - 10.95%
Industrial
Discount rate 4.75% - 9.00% Terminal capitalization rate 4.00% - 8.50%
Office
Discount rate 5.25% - 8.50% Terminal capitalization rate 4.25% - 7.75%

The significant assumptions and inputs used in the valuation techniques to estimate the fair value of income producing properties are classified as Level 3 in the fair value hierarchy as certain inputs for the valuation are not based on observable market data points.

Independent Appraisals

Properties are typically independently appraised at the time of acquisition. In addition, Choice Properties has engaged independent nationally-recognized valuation firms to appraise its investment properties such that the majority of the portfolio will be independently appraised at least once over a four-year period. When an independent appraisal is obtained, the internal valuation team assesses all major inputs used by the independent valuators in preparing their reports and holds discussions with them on the reasonableness of their assumptions. Where warranted, adjustments will be made to the internal valuations to reflect the assumptions contained in the external valuations. The Trust will record the internal value in its consolidated financial statements.

The properties independently appraised each year represent a subset of the property types and geographic distribution of the overall portfolio. A breakdown of the aggregate fair value of investment properties independently appraised each quarter, in accordance with the Trust’s policy, is as follows:

($ thousands except where otherwise indicated)		2021	2020
	Number of investment properties	Fair value $ 625,000 — — — $ 625,000	Number of investment properties Fair value 18 $ 765,000 18 850,000 18 675,000 21 715,000 75 $ 3,005,000
March 31 June 30 September 30 December 31	18 — — —
Total	18

Choice Properties REIT

2021 First Quarter Report 73

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Fair Value Sensitivity

The following table summarizes fair value sensitivity for the Trust’s income producing properties which are most sensitive to changes in terminal capitalization rates and discount rates:

Rate Sensitivity	Terminal Capitalization Rate Discount Rate Weighted Average Terminal Capitalization Rate Fair Value Change in Fair Value Weighted Average Discount Rate Fair Value Change in Fair Value	Terminal Capitalization Rate Discount Rate Weighted Average Terminal Capitalization Rate Fair Value Change in Fair Value Weighted Average Discount Rate Fair Value Change in Fair Value	Terminal Capitalization Rate Discount Rate Weighted Average Terminal Capitalization Rate Fair Value Change in Fair Value Weighted Average Discount Rate Fair Value Change in Fair Value
(0.75)% (0.50)% (0.25)% —% 0.25% 0.50% 0.75%	5.32 % $ 15,605,000 $ 1,208,000 6.08 % $ 15,292,000 $ 895,000 5.57 % 15,164,000 767,000 6.33 % 14,988,000 591,000 5.82 % 14,765,000 368,000 6.58 % 14,684,000 287,000 6.07 % 14,397,000 — 6.83 % 14,397,000 — 6.32 % 14,070,000 (327,000) 7.08 % 14,119,000 (278,000) 6.57 % 13,763,000 (634,000) 7.33 % 13,849,000 (548,000) 6.82 % 13,471,000 (926,000) 7.58 % 13,577,000 (820,000)
Note 5. Equity Accounted Joint Ventures Choice Properties accounts for its investments in joint ventures using the equity method. These investments hold primarily development properties and some income producing properties. The table below summarizes the Trust’s investment in joint ventures. As at March 31, 2021 As at December 31, 2020 Number of joint ventures Ownership interest Number of joint ventures Ownership interest Retail 15 25% - 75% 16 25% - 75% Industrial 1 50% 2 50% Residential 3 47% - 50% 3 47% - 50% Land, held for development 2 50% - 85% 1 50 % Total equity accounted joint ventures 21 22 Choice Properties’ investment in equity accounted joint ventures ($ thousands) $ 552,158 $ 573,649
		Number of joint ventures 15 1 3 2 21	Number of joint ventures Ownership interest 16 25% - 75% 2 50% 3 47% - 50% 1 50 % 22 $ 573,649
Retail Industrial Residential Land, held for development
Total equity accounted joint ventures
Choice Properties’ investment in equity accounted joint ventures ($ thousands)

Choice Properties accounts for its investments in joint ventures using the equity method. These investments hold primarily development properties and some income producing properties. The table below summarizes the Trust’s investment in joint ventures.

The following table reconciles the changes in cash flows from equity accounted joint ventures:

	Three months ended	Three months ended
($ thousands)		March 31, 2021
Balance, beginning of period	$	573,649
Contributions to equity accounted joint ventures		140,303
Distributions from equity accounted joint ventures		(70,841)
Total cash flow activities		69,462
Transfers from equity accounted joint venture to consolidated investments		(141,868)
Acquisition of equity accounted joint venture partner’s interest upon settlement of mortgage receivable		4,846
Contingent consideration payable recognized on acquisition within equity accounted joint venture		38,000
Share of income (loss) from equity accounted joint ventures		8,069
Total non-cash activities		(90,953)
Balance, end of period	$	552,158

Choice Properties REIT

2021 First Quarter Report 74

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 6. Co-Ownership Property Interests

Choice Properties has the following co-owned property interests and includes its proportionate share of the related assets, liabilities, revenue and expenses of these properties in the unaudited interim period condensed consolidated financial statements.

	As at March 31, 2021	As at March 31, 2021	As at December 31, 2020
	Number of co- owned properties	Ownership interest	Number of co- owned properties Ownership interest 39 50% - 75% 2 50% - 67% 6 50% 6 50% 1 50% 54
Retail Industrial Office Residential Land, held for development	39 2 6 6 1	50% - 75% 50% - 67% 50% 50% 50%
Total co-ownership property interests	54

Note 7. Subsidiaries

On November 7, 2014, Choice Properties acquired a 70% controlling interest in Choice Properties PRC Brampton Limited Partnership (“Brampton LP”), a subsidiary which holds land intended for future retail development in Brampton, Ontario. As a result, Choice Properties consolidated the results of this subsidiary and recognized a 30% non-controlling interest for the interests of PL Ventures Ltd., a subsidiary of PenEquity Realty Corporation (“PenEquity”). On January 19, 2021, Choice Properties sold its 70% interest in Brampton LP which resulted in a disposition of the property under development for $25,000 and a distribution to the subsidiary’s non-controlling interest of $7,801.

Note 8. Financial Real Estate Assets

($ thousands) Note	As at As at March 31, 2021 December 31, 2020 $ 68,373 $ 22,800 — 46,712 — 9 — (1,148) $ 68,373 $ 68,373
Balance, beginning of period Acquisitions Additions Interest income (loss) from financial real estate assets due to changes in value 20
Balance, end of period

Financial real estate assets are land and buildings purchased by the Trust that did not meet the criteria of a transfer of control under IFRS 15, “Revenue from Contracts with Customers”, due to the sale-leaseback arrangement with the seller of the asset. In accordance with IFRS 16, “Leases”, the Trust recognized these acquisitions as financial instruments under IFRS 9, “Financial Instruments”.

Choice Properties REIT

2021 First Quarter Report 75

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 9. Mortgages, Loans and Notes Receivable

($ thousands) Note	As at As at March 31, 2021 December 31, 2020 $ 98,499 $ 111,882 53,745 53,588 137 2,285 73,221 96,191 $ 225,602 $ 263,946 $ 111,672 $ 117,457 113,930 146,489 $ 225,602 $ 263,946
Mortgages receivable classified as amortized cost(i) Mortgages receivable classified as fair value through profit and loss ("FVTPL") Loans receivable classified as amortized cost(i) Notes receivable from related party classified as amortized cost(i) 30
Mortgages, loans and notes receivable
Classified as: Non-current Current

(i) The fair value of the mortgages, loans and notes receivable classified as amortized cost was $170,430 (December 31, 2020 - $208,700) (Note 25).

Mortgages and Loans Receivable

Mortgages and loans receivable represent amounts advanced under mezzanine loans, joint venture financing, vendor takeback financing and other arrangements. Choice Properties mitigates its risk by diversifying the number of entities and assets to which it loans funds.

	March 31, 2021 Weighted average effective interest rate Weighted average term to maturity (years) 7.41% 2.2 8.00% 3.4 7.41% 2.2	December 31, 2020
	Weighted average effective interest rate 7.41% 8.00% 7.41%	Weighted average effective interest rate Weighted average term to maturity (years) 7.31% 2.1 8.00 % 3.7 7.32% 2.2
Mortgages receivable Loans receivable
Total

Notes Receivable from Related Party

Non-interest bearing short-term notes totalling $96,191 were repaid by GWL in January 2021 (Note 30). Non-interest bearing short-term notes totalling $73,221 were issued during the three months ended March 31, 2021 to GWL (Note 30).

Schedules of Maturity and Cash Flow Activities

The schedule of repayment of mortgages, loans and notes receivable based on maturity and redemption rights is as follows:

($ thousands)		2021	2022	2023		2024	2025		Thereafter	Thereafter		Total
Principal repayments
Mortgages receivable	$	14,614 $	83,422 $		— $	46,874 $		—	$	6,239	$	151,149
Loans receivable		—	—		—	137		—		—		137
Notes receivable from related party		73,221	—		—	—		—		—		73,221
Total principal repayments		87,835	83,422		—	47,011		—		6,239		224,507
Interest accrued		1,095	—		—	—		—		—		1,095
Total repayments	$	88,930 $	83,422 $		— $	47,011 $		—	$	6,239	$	225,602

Choice Properties REIT

2021 First Quarter Report 76

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

The following table reconciles the changes in cash flows from investing activities for mortgages, loans and notes receivable:

			March 31, 2021 Notes receivable from related party Mortgages, loans and notes receivable $ 96,191 $ 263,946 73,221 73,959 (96,191) (107,995) — (2,148) (22,970) (36,184) — (4,846) — 2,686 — (2,160) $ 73,221 $ 225,602
($ thousands)	Mortgages receivable	Loans receivable
Balance, beginning of period Advances Repayments Interest received	$ 165,470 429 (9,358) (2,099)	$ 2,285 309 (2,446) (49)
Total cash flow activities	(11,028)	(2,186)
Settlement upon acquisition of investment property Interest accrued	(4,846) 2,648	— 38
Total non-cash activities	(2,198)	38
Balance, end of period	$ 152,244	$ 137

Choice Properties invests in mortgages and loans to facilitate acquisitions. Credit risks arise if the borrowers default on repayment of their mortgages and loans to the Trust. Choice Properties’ receivables, including mezzanine financings, are typically subordinate to prior ranking mortgage charges and generally represent equity financing for the Trust’s co-owners or development partners. Not all of the Trust’s mezzanine financing activities will result in acquisitions. At the time of advancing financing, the Trust’s co-owners or development partners would typically have some of the equity invested in the form of cash with the balance being financed by third-party lenders and Choice Properties.

The Trust has approximately $150 million of secured mortgages to other third-party borrowers. These loans are with borrowers who are strategic development partners of the Trust and have strong credit metrics. In the event of a large commercial real estate market correction, the fair market value of an underlying property may be unable to support the investment. The Trust mitigates this risk by obtaining guarantees and registered mortgage charges, which are often crosscollateralized on several different commercial properties that are in various stages of development.

Note 10. Intangible Assets

Choice Properties’ intangible assets relate to the third-party revenue streams associated with property and asset management contracts for co-ownership property interests and joint ventures. The Trust has the continuing rights, based on the co-ownership agreements, to property and asset management fees from investment properties where it manages the interests of co-owners. As at March 31, 2021, the carrying value, net of accumulated amortization of $1,250 (December 31, 2020 - $1,000), was $28,750 (December 31, 2020 - $29,000).

Choice Properties REIT

2021 First Quarter Report 77

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 11. Accounts Receivable and Other Assets

($ thousands) Note	As at As at March 31, 2021 December 31, 2020 $ 15,430 $ 19,341 18,476 13,375 19,702 19,405 8,766 13,474 8,501 13,721 43 — 733 780 14,214 10,070 5,102 185 17,370 17,846 3,940 4,081 1,981 1,981 2,954 1,419 — 377 $ 117,212 $ 116,055 $ 37,563 $ 38,104 79,649 77,951 $ 117,212 $ 116,055
Rent receivables(i)- net of expected credit loss of $17,819 (2020 - $20,041) Accrued recovery income Lease receivable Other receivables Cost-to-complete receivable 30 Due from related parties(ii) 30 Restricted cash Prepaid property taxes Prepaid insurance Other assets Right-of-use assets - net of accumulated amortization of $1,381 (2020 - $1,241) Deferred tax asset 15 Deferred acquisition costs and deposits on land Designated hedging derivatives 25
Accounts receivable and other assets
Classified as: Non-current Current

(i) Includes net rent receivable of $1,078 from Loblaw, $nil from GWL and $nil from Wittington (December 31, 2020 - $36, $13 and $131) (Note 30).

(ii) Other net receivables due from related parties includes $43 from GWL (December 31, 2020 - $nil) (Note 30).

Rent receivables

In determining the expected credit losses the Trust takes into account the payment history and future expectations of likely default events (i.e. asking for rental concessions or stating they will not be making rental payments on the due date) based on actual or expected insolvency filings or company voluntary arrangements and likely deferrals of payments due. These assessments are made on a tenant-by-tenant basis.

The Trust’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the assessments. As a result, the value of the expected credit loss is subject to a degree of uncertainty and is made on the basis of assumptions which may not prove to be accurate with the unprecedented uncertainty caused by COVID-19.

Choice Properties REIT

2021 First Quarter Report 78

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 12. Long Term Debt

($ thousands)	As at As at March 31, 2021 December 31, 2020 $ 5,256,475 $ 5,255,529 1,223,352 1,204,799 4,662 25,193 $ 6,484,489 $ 6,485,521 $ 5,853,033 $ 6,158,246 631,456 327,275 $ 6,484,489 $ 6,485,521
Senior unsecured debentures Mortgages payable Construction loans
Long term debt
Classified as: Non-current Current

Senior Unsecured Debentures

($ thousands)	As at As at March 31, 2021 December 31, 2020 $ 200,000 $ 200,000 200,000 200,000 200,000 200,000 250,000 250,000 100,000 100,000 300,000 300,000 350,000 350,000 550,000 550,000 750,000 750,000 750,000 750,000 400,000 400,000 100,000 100,000 500,000 500,000 200,000 200,000 300,000 300,000 125,000 125,000 5,275,000 5,275,000 (1,762) (2,014) (16,763) (17,457) $ 5,256,475 $ 5,255,529
Series Issuance / Assumption Date Maturity Date Effective Interest Rate
B Jul. 5, 2013 Jul. 5, 2023 4.90% D Feb. 8, 2014 Feb. 8, 2024 4.29% F Nov. 24, 2015 Nov. 24, 2025 4.06% G Mar. 7, 2016 Mar. 7, 2023 3.20% H Mar. 7, 2016 Mar. 7, 2046 5.27% I Jan. 12, 2018 Mar. 21, 2022 3.01% J Jan. 12, 2018 Jan. 10, 2025 3.55% K Mar. 8, 2018 Sep. 9, 2024 3.56% L Mar. 8, 2018 Mar. 8, 2028 4.18% M Jun. 11, 2019 Jun. 11, 2029 3.53% N Mar. 3, 2020 Mar. 4, 2030 2.98% O Mar. 3, 2020 Mar. 4, 2050 3.83% P May 22, 2020 May 21, 2027 2.85% 9 Jul. 4, 2013 Sep. 20, 2021 3.57% 10 Jul. 4, 2013 Sep. 20, 2022 3.84% D-C May 4, 2018 Jan. 18, 2023 3.30%
Total principal outstanding
Debt discounts and premiums - net of accumulated amortization of $15,774 (2020 - $15,522) Debt placement costs - net of accumulated amortization of $12,995 (2020 - $12,301)
Senior unsecured debentures

As at March 31, 2021, the senior unsecured debentures had a weighted average effective interest rate of 3.61% and a weighted average term to maturity of 5.7 years (December 31, 2020 - 3.61% and 6 years, respectively). Senior unsecured debentures Series B through Series P were issued by the Trust, Series D-C was assumed by the Trust on May 4, 2018, following the acquisition of Canadian Real Estate Investment Trust, and Series 9 and Series 10 were issued by the Partnership.

Choice Properties REIT

2021 First Quarter Report 79

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Mortgages Payable

Mortgages Payable
($ thousands)	As at As at March 31, 2021 December 31, 2020 $ 1,225,343 $ 1,206,638 (1,076) (934) (915) (905) $ 1,223,352 $ 1,204,799
Mortgage principal Net debt discounts and premiums - net of accumulated amortization of $5,744 (2020 - $5,602) Debt placement costs - net of accumulated amortization of $148 (2020 - $138)
Mortgages payable

As at March 31, 2021, the mortgages had a weighted average effective interest rate of 3.78% and a weighted average term to maturity of 5.5 years (December 31, 2020 - 3.83% and 5.5 years, respectively).

Construction Loans

As at March 31, 2021, $4,662 was outstanding on the construction loans (December 31, 2020 - $25,193), with a weighted average effective interest rate of 2.07% and a weighted average term to maturity of 0.5 years and is due on demand (December 31, 2020 - 2.42% and 0.3 years, respectively).

For the purpose of financing the development of certain retail, industrial and residential properties, various investments in equity accounted joint ventures and co-ownerships have variable rate non-revolving construction facilities in which certain subsidiaries of the Trust guarantee its own share. These construction loans, which mature throughout 2021 and 2022, have a maximum amount available to be drawn at the Trust’s ownership interest of $193,766, of which $188,077 relates to equity accounted joint ventures as at March 31, 2021 (December 31, 2020 - $226,145 and $198,002 respectively).

Schedules of Repayments and Cash Flow Activities

The schedule of principal repayment of long term debt, based on maturity, is as follows:

($ thousands)		2021 2022	2023	2024	2025	Thereafter	Total
Senior unsecured debentures	$	200,000 $ 600,000 $	575,000 $	750,000 $	550,000	$ 2,600,000	$ 5,275,000
Mortgages payable		86,397 217,479	110,054	157,955	153,254	500,204	1,225,343
Construction loans		4,662 —	—	—	—	—	4,662
Total	$	291,059 $ 817,479 $	685,054 $	907,955 $	703,254	$ 3,100,204	$ 6,505,005

The following table reconciles the changes in cash flows from financing activities for long term debt:

			March 31, 2021 Construction loans Long term debt $ 25,193 $ 6,485,521 — 26,571 (20,531) (28,397) (20,531) (1,826) — 110 — 684 — 794 $ 4,662 $ 6,484,489
($ thousands)	Senior unsecured debentures	Mortgages payable
Balance, beginning of period Issuances and advances Repayments	$ 5,255,529 — —	$ 1,204,799 26,571 (7,866)
Total cash flow activities	—	18,705
Amortization of debt discounts and premiums Amortization of debt placement costs	252 694	(142) (10)
Total non-cash activities	946	(152)
Balance, end of period	$ 5,256,475	$ 1,223,352

Choice Properties REIT

2021 First Quarter Report 80

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 13. Credit Facility

Choice Properties has a $1,500,000 senior unsecured committed revolving credit facility maturing May 4, 2023, provided by a syndicate of lenders. The credit facility bears interest at variable rates of either Prime plus 0.20% or Bankers’ Acceptance rate plus 1.20%. The pricing is contingent on Choice Properties’ credit ratings from either DBRS and S&P remaining at BBB (high). As at March 31, 2021, there were no drawings under the syndicated facility. The unamortized balance for debt placement costs at March 31, 2021 of $2,979 have been included in other assets (Note 11) (December 31, 2020 - $3,337).

The credit facility contains certain financial covenants. As at March 31, 2021, the Trust was in compliance with all its financial covenants for the credit facility.

Note 14. Unitholders' Equity

Trust Units (authorized - unlimited)

Each Trust Unit (“Unit”) represents a single vote at any meeting of Unitholders and entitles the Unitholder to receive a prorata share of all distributions. With certain restrictions, a Unitholder has the right to require Choice Properties to redeem its Units on demand. Upon receipt of a redemption notice by Choice Properties, all rights to and under the Units tendered for redemption shall be surrendered and the holder thereof shall be entitled to receive a price per unit as determined by a market formula and shall be paid in accordance with the conditions provided for in the Declaration of Trust.

Exchangeable Units (authorized - unlimited)

Exchangeable Units issued by the Partnership are economically equivalent to Units, receive distributions equal to the distributions paid on the Units and are exchangeable, at the holder’s option, to Units. All Exchangeable Units are held, directly or indirectly, by GWL.

The 70,881,226 Exchangeable Units issued on May 4, 2018, in connection with the acquisition of Canadian Real Estate Investment Trust contain voting and exchange restrictions which will expire based on the following schedule:

Voting and exchange rights restriction period expiration dates	Numbers of Exchangeable Units eligible for voting and transfer
July 5, 2027	22,988,505
July 5, 2028	22,988,505
July 5, 2029	24,904,216

Special Voting Units

Each Exchangeable Unit is accompanied by one Special Voting Unit which provides the holder thereof with a right to vote on matters respecting the Trust equal to the number of Units that may be obtained upon the exchange of the Exchangeable Units for which each Special Voting Unit is attached.

Choice Properties REIT

2021 First Quarter Report 81

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Units Outstanding

Note	As at March 31, 2021	As at March 31, 2021	As at December 31, 2020
($ thousands except where otherwise indicated)	Units	Amount	Units Amount 310,292,869 $ 3,409,836 16,500,000 208,935 2,277,457 29,425 (2,277,457) — 307,877 4,841 — 1,929 (159,083) (2,346) 326,941,663 $ 3,652,620 389,961,783 $ 5,424,368 5,824,742 79,100 — (354,286) 395,786,525 $ 5,149,182 722,728,188
Units, beginning of period Units issued to related party as part of investment properties acquisition 30 Distribution in Units Consolidation of Units Units issued under unit-based compensation arrangements 17 Reclassification of vested Unit-Settled Restricted Units liability to equity Units repurchased for unit-based compensation arrangements 17	326,941,663 — — — 174,455 — (174,455)	$ 3,652,620 — — — — 1,176 (2,334)
Units, end of period	326,941,663	$ 3,651,462
Exchangeable Units, beginning of period Units issued to related party as part of investment properties acquisition Adjustment to fair value of Exchangeable Units	395,786,525 — —	$ 5,149,182 — 217,683
Exchangeable Units, end of period	395,786,525	$ 5,366,865
Total Units and Exchangeable Units, end of period	722,728,188

Units Issued to Related Party as part of Investment Properties Acquisition

During the year ended December 31, 2020, the acquisition of two office assets from Wittington was satisfied in full by the issuance of 16,500,000 Units of Choice Properties, while the acquisition of six industrial assets from a wholly-owned subsidiary of GWL was satisfied in full by the issuance of 5,824,742 Exchangeable Units.

Distribution in Units and Consolidation of Units

As a result of the increase in taxable income generated primarily from dispositions completed in the year ended December 31, 2020, the Board declared a special non-cash distribution payable on December 31, 2020, of 2,277,457 Units at $0.09 per Unit totalling $29,425. Immediately following the issuance of Units, the Units were consolidated such that each Unitholder held the same number of Units after the consolidation as each Unitholder held prior to the special non-cash distribution.

Normal Course Issuer Bid (“NCIB”)

Choice Properties may from time to time purchase Units in accordance with the rules prescribed under applicable stock exchange or regulatory policies. On November 13, 2020, Choice Properties received approval from the TSX to purchase up to 25,846,904 Units during the twelve-month period from November 19, 2020 to November 18, 2021, by way of a NCIB over the facilities of the TSX or through alternative trading systems. Choice Properties intends to file a Notice of Intention to make a NCIB with the TSX upon the expiry of its current NCIB.

Units Issued under Unit-Based Compensation Arrangements

Units were issued as part of settlements under the Unit Option Plan and grants under the Unit-Settled Restricted Unit Plan, as applicable (Note 17).

Units Repurchased for Unit-Based Compensation Arrangement

The Trust acquired Units under its NCIB during the three months ended March 31, 2021 and the year ended December 31, 2020, which were then granted to certain employees in connection with the Unit-Settled Restricted Unit Plan, and are subject to vesting conditions and disposition restrictions.

Choice Properties REIT

2021 First Quarter Report 82

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Distributions

Choice Properties’ Board retains full discretion with respect to the timing and quantum of distributions, however the total income distributed will not be less than the amount necessary to ensure the Trust will not be liable to pay income taxes under Part I of the Income Tax Act (Canada) (Note 15). The taxable income allocated to the Trust and Exchangeable Unitholders may vary in certain taxation years. Over time, such differences, in aggregate, are expected to be minimal.

In the three months ended March 31, 2021, Choice Properties declared cash distributions of $0.185 per unit (March 31, 2020 - $0.185), or $133,706 in aggregate, including distributions to holders of Exchangeable Units, which are reported as interest expense (March 31, 2020 - $129,561). Distributions declared to Unitholders of record at the close of business on the last business day of a month are paid on or about the 15th day of the following month.

The holders of Exchangeable Units may elect to defer receipt of all, or a portion of distributions declared by the Partnership until the first date following the end of the fiscal year. If the holder elects to defer, the Partnership will loan the holder the amount equal to the deferred distribution without interest, and the loan will be due and payable in full on the first business day following the end of the fiscal year the loan was advanced.

Distribution Reinvestment Plan (“DRIP”)

Choice Properties instituted a DRIP that allows eligible Unitholders to elect to automatically reinvest their regular monthly cash distributions in additional Units and to receive a bonus distribution in Units equivalent to 3% of each distribution. On April 25, 2018, the Board suspended the DRIP commencing with the distribution declared in May 2018. The DRIP will remain suspended until further notice.

Base Shelf Prospectus

On March 4, 2020, Choice Properties filed a Short Form Base Shelf Prospectus allowing for the issuance of up to $2,000,000 of Units and debt securities, or any combination thereof over a 25-month period.

Note 15. Income Taxes

The Trust is taxed as a “mutual fund trust” and a REIT under the Income Tax Act (Canada) . The Trustees intend to distribute all of the Trust’s taxable income to the Unitholders and accordingly, the Trust is not taxable on its Canadian investment property income. The Trust is subject to taxation on certain taxable entities in Canada and the United States.

Income taxes recognized in the consolidated statements of income (loss) and comprehensive income (loss) was as follows:

($ thousands) Current income tax recovery (expense) Deferred income tax recovery (expense) Income tax expense	Three Months
	March 31, 2021 March 31, 2020 $ (7)$ — — — $ (7) $ —

A deferred income tax asset of $1,981 (Note 11) was recognized due to temporary differences between the carrying value and the tax basis of net assets held in the Trust’s taxable subsidiaries (December 31, 2020 - $1,981).

Choice Properties REIT

2021 First Quarter Report 83

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 16. Trade Payables and Other Liabilities

($ thousands) Note	As at As at March 31, 2021 December 31, 2020 $ 35,776 $ 20,493 111,620 108,016 38,654 38,655 62,804 59,765 33,598 57,171 99,052 121,264 38,000 — 10,298 12,930 20,344 20,344 4,073 4,224 20,284 19,867 16,517 20,710 6,106 6,560 $ 497,126 $ 489,999 $ 11,078 $ 13,734 486,048 476,265 $ 497,126 $ 489,999
Trade accounts payable Accrued liabilities and provisions Accrued acquisition transaction costs and other related expenses Accrued capital expenditures(i) Accrued interest expense Due to related party(ii) 30 Contingent consideration 3 Unit-based compensation 17 Distributions payable(iii) Right-of-use lease liabilities Tenant deposits Deferred revenue Designated hedging derivatives 25
Trade payables and other liabilities
Classified as: Non-current Current

(i) Includes payable to Loblaw of $13,693 for construction allowances (2020 - $7,869) (Note 30).

(ii) Includes distributions accrued on Exchangeable Units of $97,628 payable to GWL (2020 - $120,598); $1,350 payable for shared costs incurred by GWL, the Services Agreement expense and other related party charges (2020 - $332); and $74 of reimbursed contract revenue and other related party charges payable to Loblaw (2020 - $308).

(iii) Includes distributions payable to GWL of $3,124 and Wittington of $1,018 (December 31, 2020 - $3,124 and $1,018) (Note 30).

Note 17 . Unit-Based Compensation

($ thousands) Unit Option plan Restricted Unit plans Performance Unit plan Trustee Deferred Unit plan Unit-based compensation expense Recorded in: General and administrative expenses Adjustment to fair value of unit-based compensation	Three Months
	March 31, 2021 March 31, 2020 $ (161) $ (283) 506 778 145 57 334 78 $ 824 $ 630 $ 1,301 $ 1,263 (477) (633) $ 824 $ 630

As at March 31, 2021, the carrying value of the unit-based compensation liability was $10,298 (December 31, 2020 - $12,930) (Note 16).

Choice Properties REIT

2021 First Quarter Report 84

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Unit Option Plan

Choice Properties maintains a Unit Option plan for certain employees. Under this plan, Choice Properties may grant Unit Options totalling up to 19,744,697 Units, as approved at the annual and special meeting of Unitholders on April 29, 2015. The Unit Options vest in tranches over a period of four years. The following is a summary of Choice Properties’ Unit Option plan activity:

Outstanding Unit Options, beginning of period Exercised Cancelled Expired Outstanding Unit Options, end of period Unit Options exercisable, end of period	Three months ended March 31, 2021 Number of awards Weighted average exercise price/unit 1,082,640 $ 12.54 — $ — — $ — — $ — 1,082,640 $ 12.54 934,672 $ 12.60	Year ended December 31, 2020
	Number of awards	Number of awards Weighted average exercise price/unit 1,287,314 $ 12.51 (148,794) $ 12.09 (54,414) $ 13.15 (1,466) $ 13.93 1,082,640 $ 12.54 706,804 $ 12.56
	1,082,640 — — —
	1,082,640
	934,672

Restricted Unit Plans

Choice Properties has a Restricted Unit Plan and a Unit-Settled Restricted Unit Plan as described below.

Restricted Unit Plan

Restricted Units (“RU”) entitle certain employees to receive the value of the RU award in cash or Units at the end of the applicable vesting period, which is usually three years in length. The RU plan provides for the crediting of additional RUs in respect of distributions paid on Units for the period when a RU is outstanding. The fair value of each RU granted is measured based on the market value of a Trust Unit at the balance sheet date. No RUs had vested as at March 31, 2021 (December 31, 2020 - nil).

The following is a summary of Choice Properties’ RU plan activity:

(Number of awards)	Three months ended Year ended March 31, 2021 December 31, 2020 405,713 484,544 104,873 69,227 5,823 24,451 (100,179) (161,044) — (11,465) 416,230 405,713
Outstanding Restricted Units, beginning of period Granted Reinvested Exercised Cancelled
Outstanding Restricted Units, end of period

Unit-Settled Restricted Unit Plan

Under the terms of the Unit-Settled Restricted Unit (“URU”) plan, certain employees are granted URUs which are subject to vesting conditions and disposition restrictions. Typically, full vesting of the URUs will not occur until the employee has remained with Choice Properties for three or five years from the date of grant. Depending on the nature of the grant, the URUs are subject to a six- or seven-year holding period during which the Units cannot be disposed. There were 819,013 URUs vested but still subject to disposition restrictions as at March 31, 2021 (December 31, 2020 - 764,385).

The following is a summary of Choice Properties’ URU plan activity for units not yet vested:

(Number of awards)	Three months ended Year ended March 31, 2021 December 31, 2020 588,534 624,419 174,455 159,083 (141,055) (194,968) 621,934 588,534
Outstanding Unit-Settled Restricted Units, beginning of period Granted Vested
Outstanding Unit-Settled Restricted Units, end of period

Choice Properties REIT

2021 First Quarter Report 85

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Performance Unit Plan

Performance Units (“PU”) entitle certain employees to receive the value of the PU award in cash or Units at the end of the applicable performance period, which is usually three years in length, based on the Trust achieving certain performance conditions. The PU plan provides for the crediting of additional PUs in respect of distributions paid on Units for the period when a PU is outstanding. The fair value of each PU granted is measured based on the market value of a Trust Unit at the balance sheet date. There were no PUs vested as at March 31, 2021 (December 31, 2020 - nil).

The following is a summary of Choice Properties’ PU plan activity:

(Number of awards)	Three months ended Year ended March 31, 2021 December 31, 2020 135,695 103,868 77,356 59,273 2,157 7,241 (30,336) (40,205) — (3,543) — 9,061 184,872 135,695
Outstanding Performance Units, beginning of period Granted Reinvested Exercised Cancelled Added by performance factor
Outstanding Performance Units, end of period

Trustee Deferred Unit Plan

Non-management members of the Board are required to receive a portion of their annual retainer in the form of Deferred Units (“DU”) and may also elect to receive up to 100% of their remaining fees in DUs. Distributions paid earn fractional DUs, which are treated as additional awards. The fair value of each DU granted is measured based on the market value of a Unit at the balance sheet date. All DUs vest when granted, however, they cannot be exercised while Trustees are members of the Board.

The following is a summary of Choice Properties’ DU plan activity:

(Number of awards)	Three months ended Year ended March 31, 2021 December 31, 2020 368,290 277,139 21,754 76,632 5,182 17,338 (45,544) (2,819) 349,682 368,290
Outstanding Trustee Deferred Units, beginning of period Granted Reinvested Exercised
Outstanding Trustee Deferred Units, end of period

Choice Properties REIT

2021 First Quarter Report 86

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 18. Rental Revenue

Rental revenue is comprised of the following:

($ thousands)	Related Parties(i)	Third-party	Three months ended March 31, 2021	Related Parties(i)	Third-party Three months ended March 31, 2020 $ 87,085 $ 218,181 25,773 64,605 22,374 39,377 2,748 2,748 $ 137,980 $ 324,911
Base rent Property tax and insurance recoveries Operating cost recoveries Lease surrender and other revenue	$ 131,709 38,112 16,052 16	$ 88,856 26,293 21,963 3,538	$ 220,565 64,405 38,015 3,554	$ 131,096 38,832 17,003 —
Rental revenue	$ 185,889	$ 140,650	$ 326,539	$ 186,931

(i) Refer to Note 30, Related Party Transactions.

Choice Properties enters into long-term lease contracts with tenants for space in its properties. Initial lease terms are generally between three and ten years for commercial units and longer terms for food store anchors. Leases generally provide for the tenant to pay Choice Properties base rent, with provisions for contractual increases in base rent over the term of the lease, plus operating cost, property tax and insurance recoveries. Many of the leases with Loblaw are for stand-alone retail sites. Loblaw is directly responsible for the operating costs on such sites.

Note 19. Property Operating Costs

($ thousands)	Three Months
	March 31, 2021 March 31, 2020 $ 68,853 $ 68,213 29,135 29,198 2,148 1,409 $ 100,136 $ 98,820
Property taxes and insurance Recoverable operating costs Non-recoverable operating costs
Property operating costs

Included in non-recoverable operating expenses are expected credit losses of $1,640 for the three months ended March 31, 2021 (2020 - $862). Refer to Note 11 for discussion on rents receivable and the related expected credit losses.

Note 20. Interest Income

($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ 2,686 $ 3,111 1,100 370 362 12 $ 4,148 $ 3,493
Interest income on mortgages and loans receivable 9 Interest income earned from financial real estate assets 8 Other interest income
Interest income

Note 21. Fee Income

($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ 127 $ 220 912 1,028 $ 1,039 $ 1,248
Fees charged to related party 30 Fees charged to third-parties
Fee income

Choice Properties REIT

2021 First Quarter Report 87

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 22. Net Interest Expense and Other Financing Charges

Note 22. Net Interest Expense and Other Financing Charges
($ thousands) Note	Three Months March 31, 2021 March 31, 2020 $ 46,914 $ 46,359 12,086 12,373 897 3,016 39 64 110 (599) 1,042 1,223 73,221 72,143 134,309 134,579 (746) (700) $ 133,563 $ 133,879
Interest on senior unsecured debentures Interest on mortgages and construction loans Interest on credit facility Interest on right-of-use lease liabilities 16 Amortization of debt discounts and premiums 12 Amortization of debt placement costs 12,13 Distributions on Exchangeable Units(i) 30
Less: Capitalized interest(ii) 4
Net interest expense and other financing charges

(i) Represents interest on indebtedness due to related parties.

(ii) Interest was capitalized to qualifying development projects based on a weighted average interest rate of 3.68% (2020 - 3.72%).

Note 23. General and Administrative Expenses

($ thousands) Note Salaries, benefits and employee costs Investor relations and other public entity costs Professional fees Information technology costs Services Agreement expense charged by related party 30 Amortization of other assets Office related costs Other Total general and administrative expenses Less: Capitalized to investment properties Allocated to recoverable operating expenses General and administrative expenses

Three Months

March 31, 2021 March 31, 2020 $ 12,623 $ 12,393 603 652 1,099 777 1,504 962 799 774 288 10 390 789 93 346 17,399 16,703 (1,635) (1,437) (6,190) (5,580) $ 9,574 $ 9,686

Note 24. Other Fair Value Gains (Losses), Net

Note 24. Other Fair Value Gains (Losses), Net
($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ 477 $ 633 $ 477 $ 633
Adjustment to fair value of unit-based compensation 17
Other fair value gains (losses), net

Choice Properties REIT

2021 First Quarter Report 88

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 25. Financial Instruments

The following table presents the fair value hierarchy of financial assets and liabilities, excluding those classified as amortized cost that are short term in nature.

			As at March 31, 2021 Level 3 Total $ 53,745 $ 53,745 19,702 19,702 68,373 68,373 — — 170,430 170,430 — 162,575 — 5,366,865 — 10,298 — 6,106 — 6,857,668 — —			As at December 31, 2020
($ thousands) Note	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3 Total $ 53,588 $ 53,588 19,405 19,405 68,373 68,373 — 377 208,700 208,700 — 207,219 — 5,149,182 — 12,930 — 6,560 — 7,071,105 — —
Assets Fair value through profit and loss: Mortgages, loans and notes receivable 9 Lease receivable 11 Financial real estate assets 8 Designated hedging derivatives 11 Amortized cost: Mortgages, loans and notes receivable - SPPI 9 Cash and cash equivalents 27 (c) Liabilities Fair value through profit and loss: Exchangeable Units 14 Unit-based compensation 16 Designated hedging derivatives 16 Amortized cost: Long term debt 12 Credit facility 13	$ — — — — — 162,575 5,366,865 — — — —	$ — — — — — — — 10,298 6,106 6,857,668 —	$ 53,745 19,702 68,373 — 170,430 — — — — — —	$ — — — — — 207,219 5,149,182 — — — —	$ — — — 377 — — — 12,930 6,560 7,071,105 —

The carrying value of the Trust’s assets and liabilities approximated fair value except for long term debt. The fair value of Choice Properties’ senior unsecured debentures was calculated using market trading prices for similar instruments, whereas the fair values for the mortgages was calculated by discounting future cash flows using appropriate discount rates. There were no transfers between levels of the fair value hierarchy during the periods.

Designated Hedging Derivatives

Designated hedging derivatives consist of interest rate swaps to hedge the interest rate associated with an equivalent amount of variable rate mortgages. During the three months ended March 31, 2021, an interest rate swap was settled upon maturity of the underlying variable rate mortgage. As at March 31, 2021, the interest rates ranged from 1.8% to 4.4% (December 31, 2020 - 1.8% to 4.4%).

The impact of the hedging instruments on the consolidated balance sheets was as follows:

($ thousands)	Maturity Date	Notional Amount	As at As at March 31, 2021 December 31, 2020 $ — $ 377 6,106 6,560
Derivative assets Interest rate swaps Derivative liabilities Interest rate swaps	Mar 2022 - Sep 2026	$ — $ 193,700

During the three months ended March 31, 2021, the Trust recorded an unrealized fair value loss in OCI of $708 (March 31, 2020 - fair value loss of $5,297).

Note 26. Capital Management

In order to maintain or adjust its capital structure, Choice Properties may issue new Units and debt, repay debt, or adjust the amount of distributions paid to Unitholders. For further discussion on how Choice Properties manages its capital structure, refer to Note 28, “Capital Management”, of the 2020 audited annual consolidated financial statements.

Choice Properties REIT

2021 First Quarter Report 89

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 27. Supplemental Cash Flow Information

(a) Items not affecting cash and other items

(a) Items not affecting cash and other items
($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ (4,477)$ (4,025) 1,301 1,263 250 250 — (1,184) 217,683 (386,062) (58,743) 136,298 (477) (633) $ 155,537 $ (254,093)
Straight line rental revenue 4 Unit based compensation expense included in general and administrative expenses 17 Amortization of intangible assets 10 Foreign exchange gain reclassified from other comprehensive income Adjustment to fair value of Exchangeable Units 14 Adjustment to fair value of investment properties 4 Other fair value (gains) losses, net 24
Items not affecting cash and other items

(b) Net change in non-cash working capital

(b) Net change in non-cash working capital
($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ (1,157)$ (33,800) (358) — (377) (63) 7,127 (137,399) — 10 2,632 1,752 44,760 152,094 (38,000) — (1,235) — 454 (5,234) — 3,420 $ 13,846 $ (19,220)
Net change in accounts receivable and other assets 11 Add back (deduct): Net change in deferred financing costs included in other assets 11 Change to designated hedging derivative assets 11 Net change in trade payables and other liabilities 16 Add back (deduct): Net change in distributions payable 16 Net change in unit-based compensation liability 16 Net change to accrued interest expense Contingent consideration payable recognized on acquisition within equity accounted joint venture 3 Trade payables and other liabilities transferred from equity accounted joint venture 4, 5 Change to designated hedging derivative liabilities 16 Impact of currency translation
Net change in non-cash working capital

(c) Cash and cash equivalents

($ thousands)	As at As at March 31, 2021 December 31, 2020 $ 65,621 $ 72,248 96,954 134,971 $ 162,575 $ 207,219
Cash Short-term investments
Cash and cash equivalents

Choice Properties REIT

2021 First Quarter Report 90

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 28. Segment Information

Choice Properties operates in three reportable segments: retail, industrial and office. The segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, determined to be the Chief Executive Officer (“CEO”) of the Trust. The CEO measures and evaluates the performance of the Trust based on net operating income, cash basis.

Net operating income, cash basis, is defined as property rental revenue less straight line rental revenue, lease surrender revenue, direct property operating expenses and realty taxes and excludes certain expenses such as interest expense and indirect operating expenses in order to provide results that reflect a property’s operations before consideration of how it is financed or the costs of operating the entity in which it is held. The amounts are presented by property type below and included in these unaudited interim period condensed consolidated financial statements at the proportionate share. The remaining net income (loss) items and the balance sheet are reviewed on a consolidated basis by the CEO and therefore are not included in the segmented disclosure below.

The chart below presents net operating income for the three months ended March 31, 2021, in a manner consistent with internal reporting. The accounting policies of the segments presented here are the same as those described in Note 2.

($ thousands) Retail	Industrial	Office	Consolidation and eliminations(i) $ (15,069) 5,892 (9,177) 346 — (8,831)	Three months ended March 31, 2021
Rental revenue $ 261,109 Property operating costs (80,041)	$ 48,854 (12,735)	$ 31,645 (13,252)		$ 326,539 (100,136)
Net Operating Income, Accounting Basis 181,068 Less: Straight line rental revenue (1,340) Lease surrender revenue (615)	36,119 (1,678) (1)	18,393 (1,805) (508)		226,403 (4,477) (1,124)
Net Operating Income, Cash Basis 179,113 Add back: cash basis reconciling items Net operating income, accounting basis Interest income Fee income Net interest expense and other financing charges General and administrative expenses Share of income (loss) from equity accounted joint ventures Amortization of intangible assets Other fair value gains (losses), net Adjustment to fair value of Exchangeable Units Adjustment to fair value of investment properties	34,440	16,080		220,802 5,601
				226,403 4,148 1,039 (133,563) (9,574) 8,069 (250) 477 (217,683) 58,743
Income (Loss) before income taxes Income tax expense				(62,191) (7)
Net Income (Loss)				$ (62,198)

(i) Reconciling items adjust Choice Properties’ proportionate share of joint ventures to reflect the equity method of accounting under IFRS.

Choice Properties REIT

2021 First Quarter Report 91

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

The chart below presents net operating income for the three months ended March 31, 2020, in a manner consistent with internal reporting. The accounting policies of the segments presented here are the same as those described in Note 2.

($ thousands) Retail	Industrial	Office	Consolidation and eliminations(i) $ (15,506) 5,587 (9,919) 339 — (9,580)	Three months ended March 31, 2020
Rental revenue $ 269,271 Property operating costs (82,396)	$ 44,231 (12,003)	$ 26,915 (10,008)		$ 324,911 (98,820)
Net Operating Income, Accounting Basis 186,875 Less: Straight line rental revenue (3,020) Lease surrender revenue (9)	32,228 (837) —	16,907 (507) (106)		226,091 (4,025) (115)
		16,294		221,951 4,140
				226,091 3,493 1,248 (133,879) (9,686) (4,267) (250) 1,184 (1,589) 633 386,062 (136,298)
Income (Loss) before income taxes Income tax expense				332,742 —
Net Income (Loss)				$ 332,742

(i) Reconciling items adjust Choice Properties’ proportionate share of joint ventures to reflect the equity method of accounting under IFRS.

Choice Properties REIT

2021 First Quarter Report 92

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 29. Contingent Liabilities and Financial Guarantees

Choice Properties is involved in and potentially subject to various claims by third-parties arising from the normal course of conduct of its business including regulatory, property and environmental claims. In addition, Choice Properties is potentially subject to regular audits from federal and provincial tax authorities, and as a result of these audits may receive assessments and reassessments. Although such matters cannot be predicted with certainty, management currently considers Choice Properties’ exposure to such claims and litigation, to the extent not covered by Choice Properties’ insurance policies or otherwise provided for, not to be material to the unaudited interim period condensed consolidated financial statements, but they may have a material impact in future periods.

a. Legal Proceedings

Choice Properties is potentially the subject of various legal proceedings and claims that arise in the ordinary course of business. The outcome of all these proceedings and claims is uncertain. Based on information currently available, any proceedings and claims, individually and in the aggregate, are not expected to have a material impact on Choice Properties.

b. Guarantees

Choice Properties issues letters of credit to support guarantees related to its investment properties including maintenance and development obligations to municipal authorities. As at March 31, 2021, the aggregate gross potential liability related to these letters of credit totalled $33,668 including $1,543 posted by Loblaw with the Province of Ontario and City of Toronto on behalf of Choice Properties related to deferral of land transfer tax on properties acquired from Loblaw subsequent to the IPO (Note 30) (December 31, 2020 - $33,916 including $1,543 posted by Loblaw).

Choice Properties’ credit facility and senior unsecured debentures are guaranteed by each of the General Partner, the Partnership and any other person that becomes a subsidiary of Choice Properties (with certain exceptions). In the case of default by the Trust, the indenture trustee will be entitled to seek redress from the guarantors for the guaranteed obligations in the same manner and upon the same terms that it may seek to enforce the obligations of the Trust. These guarantees are intended to eliminate structural subordination, which would otherwise arise as a consequence of Choice Properties’ assets being primarily held in various subsidiaries of the Trust.

CPH Master LP guarantees certain debt assumed by purchasers in connection with past dispositions of properties made by Canadian Real Estate Investment Trust prior to being acquired by the Trust in May 2018. These guarantees will remain until the debt is modified, refinanced or extinguished. Credit risks arise in the event that the purchasers default on repayment of their debt. These credit risks are mitigated by the recourse which the Trust has under these guarantees, in which case the Trust would have a claim against the underlying property. The estimated amount of debt at March 31, 2021 subject to such guarantees, and therefore the maximum exposure to credit risk, was $35,411 with an estimated weighted average remaining term of 2.3 years (December 31, 2020 - $35,671 and 2.5 years, respectively).

c. Commitments

Choice Properties has entered into contracts for development and property capital projects and has other contractual obligations such as operating rents. The Trust is committed to future payments of approximately $339,000, of which $50,000 relates to equity accounted joint ventures as at March 31, 2021 (December 31, 2020 - $376,000 and $55,000, respectively).

d. Contingent Liabilities

The Trust held debt obligations in the amount of $190,505 in its equity accounted joint ventures as at March 31, 2021 (December 31, 2020 - $191,873). Generally, the Trust is only liable for its proportionate share of the obligations of the coownerships and equity accounted joint ventures in which it participates, except in limited circumstances. Credit risk arises in the event that the partners default on the payment of their proportionate share of such obligations. This credit risk is mitigated as the Trust generally has recourse under its co-ownership agreements and joint venture arrangements in the event of default of its partners, in which case the Trust’s claim would be against both the underlying real estate investments and the partners that are in default. Management believes that the assets of its co-ownerships and joint ventures are sufficient for the purpose of satisfying any obligation of the Trust should the Trust’s partner default.

Choice Properties REIT

2021 First Quarter Report 93

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Note 30. Related Party Transactions

Choice Properties’ parent corporation is GWL which as at March 31, 2021, held either directly or indirectly, a 61.8% effective interest in the Trust through ownership of 50,661,415 Units and all of the Exchangeable Units, which are economically equivalent to and exchangeable to Units. GWL is also the parent company of Loblaw, with ownership of 52.6% of Loblaw’s outstanding common shares as at March 31, 2021. Choice Properties’ ultimate parent is Wittington Investments, Limited.

In the normal course of operations, Choice Properties enters into various transactions with related parties. These transactions are measured at the exchange amount, which is the amount of consideration established and agreed upon by the related parties.

Transactions and Agreements with GWL

Services Agreement

For the three months ended March 31, 2021, GWL provided Choice Properties with corporate, administrative and other support services for an annualized cost of $3,095 (2020 - $3,095).

Distributions on Exchangeable Units and Notes Receivable

GWL, directly or indirectly, holds all of the Exchangeable Units issued by Choice Properties Limited Partnership, a subsidiary of Choice Properties. During the three months ended March 31, 2021, distributions declared on the Exchangeable Units totalled $73,221 (March 31, 2020 - $72,143). As at March 31, 2021, Choice Properties had distributions on Exchangeable Units payable to GWL of $97,628 (December 31, 2020 - $120,598).

Trust Unit Distributions

In the three months ended March 31, 2021, Choice Properties declared cash distributions of $9,372 on the Units held by GWL (March 31, 2020 - $9,372). As at March 31, 2021, $3,124 of Trust Unit distributions declared were payable to GWL (December 31, 2020 - $3,124). There were no non-cash distributions settled through the issuance of additional Trust Units during the three months ended March 31, 2021 and 2020.

Transaction Summary as Reflected in the Consolidated Financial Statements

Transactions with GWL recorded in the consolidated statements of income (loss) and comprehensive income (loss) were comprised as follows:

($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ 3,421 $ 827 (799) (774) (73,221) (72,143)
Rental revenue 18 Services Agreement expense 23 Interest expense and other financing charges 22

The balances due from (to) GWL and subsidiaries were as follows:

($ thousands) Note	As at As at March 31, 2021 December 31, 2020 $ 73,221 $ 96,191 — 13 43 — (5,366,865) (5,149,182) (1,350) (332) (97,628) (120,598) (3,124) (3,124) $ (5,395,703)$ (5,177,032)
Notes receivable 9 Rent receivable 11 Other receivables 11 Exchangeable Units 14 Accrued liabilities 16 Distributions payable on Exchangeable Units 16 Distributions payable 16
Due to GWL and subsidiaries

Choice Properties REIT

2021 First Quarter Report 94

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

Transactions and Agreements with Loblaw

Strategic Alliance Agreement

The Strategic Alliance Agreement creates a series of rights and obligations between Choice Properties and Loblaw intended to establish a preferential and mutually beneficial business and operating relationship. The Strategic Alliance Agreement expires on July 5, 2023. The Strategic Alliance Agreement provides Choice Properties with important rights that are expected to meaningfully contribute to the Trust’s growth. Subject to certain exceptions, rights include:

• Choice Properties has the right of first offer to purchase any property in Canada that Loblaw seeks to sell;

• Loblaw is generally required to present shopping centre property acquisitions in Canada to Choice Properties to allow the Trust a right of first opportunity to acquire the property itself; and

• Choice Properties has the right to participate in future shopping centre developments involving Loblaw.

Included in certain investment properties acquired from Loblaw is excess land with development potential. In accordance with the Strategic Alliance Agreement, Choice Properties will compensate Loblaw, over time, with intensification payments, as Choice Properties pursues development, intensification or redevelopment of such excess land. The payments to Loblaw are calculated in accordance with a payment grid that takes into account the region, market ranking and type of use for the property.

Property Management Agreement

Choice Properties provided Loblaw with property management services for Loblaw’s properties with third-party tenancies on a fee for service basis with automatic one-year renewals. The property management agreement was terminated effective December 31, 2020.

Sublease Administration Agreement

On July 17, 2017, in connection with Loblaw’s sale of substantially all of its gas bar operations, Choice Properties agreed to provide Loblaw with certain administrative services in respect of the subleases on a fee for service basis for an initial five-year term with automatic one-year renewals. The sublease administration agreement was terminated effective December 31, 2020.

Site Intensification Payments

Included in certain investment properties acquired from Loblaw is excess land with development potential. Choice Properties will compensate Loblaw, over time, with intensification payments, as Choice Properties pursues development, intensification or redevelopment of such excess lands. The payments to Loblaw are calculated in accordance with a payment grid, set out in the Strategic Alliance Agreement, that takes into account the region, market ranking and type of use for the property.

Choice Properties compensated Loblaw with intensification payments of $901 in connection with completed gross leasable area for which tenants took possession during the three months ended March 31, 2021 (December 31, 2020 - $995).

Letters of Credit

As at March 31, 2021, letters of credit totalling $1,543 were posted by Loblaw with the Province of Ontario and City of Toronto on behalf of Choice Properties related to deferral of land transfer tax on properties acquired from Loblaw (December 31, 2020 - $1,543) (Note 29).

Transaction Summary as Reflected in the Consolidated Financial Statements

Loblaw is the largest tenant for Choice Properties, representing approximately 55.8% of Choice Properties’ rental revenue for the three months ended March 31, 2021 (March 31, 2020 - 57.3%) and 55.2% of its gross leasable area as at March 31, 2021 (December 31, 2020 - 55.3%). Transactions with Loblaw recorded in the consolidated statements of income (loss) and comprehensive income (loss) were comprised as follows:

($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ 182,076 $ 186,104 65 220
Rental revenue 18 Fee income 21

Choice Properties REIT

2021 First Quarter Report 95

Notes to the Unaudited Interim Period Condensed Consolidated Financial Statements

The balances due from (to) Loblaw were as follows:

($ thousands) Note	As at As at March 31, 2021 December 31, 2020 $ 1,078 $ 36 (74) — (13,693) (7,869) — (308) $ (12,689)$ (8,141)
Rent receivable 11 Accrued liabilities 16 Construction allowances payable 16 Reimbursed contract payable 16
Due to Loblaw

Transactions and Agreements with Wittington

Property Management Agreement

Choice Properties provides Wittington with property management services for certain properties with third-party tenancies on a fee for service basis.

Trust Unit Distributions

In the three months ended March 31, 2021, Choice Properties declared cash distributions of $3,053 on the Units held by Wittington (March 31, 2020 - $nil). As at March 31, 2021, $1,018 of Trust Unit distributions declared were payable to Wittington (December 31, 2020 - $1,018). There were no non-cash distributions settled through the issuance of additional Trust Units during the three months ended March 31, 2021 and 2020.

Transaction Summary as Reflected in the Consolidated Financial Statements

Transactions with Wittington recorded in the consolidated statements of income (loss) and comprehensive income (loss) were comprised as follows:

($ thousands) Note	Three Months
	March 31, 2021 March 31, 2020 $ 392 $ — 62 —
Rental revenue 18 Fee income 21

The balances due from (to) Wittington and subsidiaries were as follows:

($ thousands) Note	As at As at March 31, 2021 December 31, 2020 $ — $ 131 8,501 13,721 (1,018) (1,018) $ 7,483 $ 12,834
Rent receivable 11 Cost-to-complete receivable 11 Distributions payable 16
Due from Wittington and subsidiaries

Choice Properties REIT

2021 First Quarter Report 96