Choice Properties Q3 2026 Earnings: FFO Up 2.2%, and a $597.6 Million Gain That Is the Unit Price Falling
Choice Properties REIT released its Q3 2026 earnings after the close on Thursday November 12, and the number at the top of the income statement is the one to set aside first. Reported net income was $888,506 thousand against $242,649 thousand in the same quarter of 2025, and almost none of that difference came from collecting rent. All figures here are in Canadian dollars.
The operating business did roughly what it has done for two years. FFO per unit diluted rose 2.2% to $0.284, same-asset NOI on a cash basis rose 3.1%, and occupancy sat near full. The quarter’s genuine news sits further down: a $9.4 billion acquisition that has not closed, a payout ratio improved by a timing item the Trust itself identifies, and a distribution cut at a company Choice owns units in.
The gain is arithmetic on a falling unit price
George Weston Limited holds Exchangeable Units of the Trust, and under GAAP those units are a liability, not equity. The footnote on page 1 of the Q3 release states the mechanism plainly:
“Exchangeable Units are required to be classified as financial liabilities at fair value through profit and loss under GAAP. They are recorded at their fair value based on the market trading price of the Trust Units, which results in a negative impact to the financial results when the Trust Unit price rises and a positive impact when the Trust Unit price declines.”
There were 395,786,525 Exchangeable Units outstanding at September 30, 2026, all held directly or indirectly by George Weston, alongside 328,024,272 Trust Units, for 723,810,797 units in total (the Trust’s Q3 report, Units Outstanding note, and the release, pages 2 and 9). On our arithmetic the Exchangeable Units are 54.7% of all units outstanding.
The closing unit price fell from $16.34 at June 30 to $14.83 at September 30 (the Trust’s Q3 report, Selected Quarterly Information, PDF page 53). The Q3 fair value adjustment on those Exchangeable Units was a gain of $597,637 thousand (release, page 6). Multiply the $1.51 of price decline by 395,786,525 units and you get $597.6 million. The gain is that multiplication and nothing else.
The nine-month figure proves the point from the other side. Across nine months the same line is a loss of $7,916 thousand, because the unit price rose two cents over the period, from $14.81 at December 31, 2025 to $14.83. Two cents times 395,786,525 units is $7.9 million, and it reconciles exactly.
Page 3 of the release attributes the $645.9 million difference primarily to non-cash fair value changes and names four of them: a $530.4 million favourable change on the Exchangeable Units, a $139.4 million favourable adjustment on derivative financial assets related to the First Capital transaction, and a $54.6 million favourable change on investment properties, against a $74.8 million unfavourable change on the investment in real estate securities, which the release attributes to the change in Allied Properties REIT’s unit price. The Trust makes the same point in its own words on PDF page 53 of the report: net income “is impacted by fluctuations in adjustments to fair value of Exchangeable Units, investment properties, investment in real estate securities, and unit-based compensation”, and its results are therefore frequently not comparable from quarter to quarter.
Reported net income against FFO per unit, eight quarters. Source: Choice Properties REIT 2026 Third Quarter Report, Selected Quarterly Information, printed page 51 (PDF page 53).
The chart is the argument in one picture. Net income over the eight quarters swings from $791,916 thousand to negative $176,381 thousand and back to $888,506 thousand, while FFO per unit moves inside a two and a half cent band. The two large positive quarters are both quarters in which the unit price fell.
That swing reaches a retail investor as a per-unit number. Net income per unit diluted was $1.228 against $0.335 a year earlier (report, PDF page 53), and that is the line a screener carries into a trailing earnings figure. Read down the same column: the four quarters to September 30 are $1.228, negative $0.244, negative $0.120 and negative $0.074, which sum to $0.790. Three of the last four quarters printed a loss per unit, and the trailing line is positive only because of the quarter just reported. The Trust and its sector run on the $0.284 instead. If the way a liability line like this lands in reported profit is unfamiliar territory, our guide to reading financial statements covers where non-cash fair value items sit relative to the cash the business actually produced.
The operating quarter, side by side
| Measure | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| FFO per unit, diluted (non-GAAP) | $0.284 | $0.278 | +2.2%, the Trust’s |
| AFFO per unit, diluted (non-GAAP) | $0.214 | $0.192 | +11.5%, the Trust’s |
| FFO (non-GAAP) | $205,202K | $201,416K | +1.9%, the Trust’s |
| AFFO (non-GAAP) | $155,101K | $139,054K | +11.5%, computed |
| Rental revenue (GAAP) | $366,327K | $362,486K | +1.1%, computed |
| NOI, cash basis, proportionate share | $278,711K | $270,734K | +2.9%, the Trust’s |
| Same-Asset NOI, cash basis, proportionate share | $258,184K | $250,428K | +3.1%, the Trust’s |
| Distribution declared per unit | $0.195 | $0.193 | +1.0%, computed |
| AFFO payout ratio, diluted | 91.0% | 100.2% | the Trust’s |
| FFO payout ratio, diluted | 68.8% | 69.2% | the Trust’s |
Source: Choice Properties REIT Q3 2026 press release, pages 1 to 8, and the 2026 Third Quarter Report, PDF pages 4, 12, 51 and 53. Page references to the Third Quarter Report elsewhere in this piece are PDF pages of the document as the Trust posts it; its own printed page numbers run two lower. Both documents are the Trust’s own: the Q3 2026 press release and the 2026 Third Quarter Report.
Weighted average diluted units were unchanged at 723,810,797 in both quarters (release, pages 2 and 9), so the per-unit growth rate is the total growth rate, with no dilution effect working for or against it.
One qualification belongs beside the 2.2%. The release also reports FFO per unit diluted up 3.5% excluding lease surrender revenue and the reduction in Allied’s distribution, and those two exclusions are the whole of the 1.3-point difference. They are not the same size. Lease surrender revenue from Loblaw was $9,875 thousand against $9,629 thousand a year earlier (report, PDF page 54), a move of $246 thousand, or about $0.0003 a unit. Investment income, which is where Allied’s distributions land, fell to $2,125 thousand from $5,315 thousand (release, pages 6 and 7). That $3,190 thousand drop is about $0.0044 a unit, roughly 1.6 points on the $0.278 base, so the adjusted growth figure is almost entirely an Allied figure. Over nine months the gap narrows to nothing much: 1.7% reported against 1.8% adjusted.
Occupancy is the second qualification. Total occupancy was 97.8% at September 30, 2026, up from 97.7% at June 30 but down from 98.0% a year earlier (release, pages 1 and 3) and from 98.2% at December 31, 2025 (report, PDF page 40). By segment it was 97.5% retail, 98.6% industrial and 91.4% mixed-use and residential, the last covering the retail and office portion only (report, PDF page 5, footnote iii). Near full is fair. The twelve-month direction is still down.
Leasing is the part that is working
Long term renewal spreads were 11.2% in the quarter against 10.8% a year earlier, and 17.7% excluding Loblaw (release, pages 1 and 3). That spread compares the average rental rate across the renewal term against the expiring rate. By segment, retail was 9.6% and industrial 30.8%. The Trust’s own footnote prints a second basis beside it: measured on the first year of the renewal term rather than the average across it, the quarter’s spread was 10.1%, with retail at 9.0% and industrial at 22.5% (report, PDF page 39). Both sets are the Trust’s. The lower one is what shows up in year one.
Behind those spreads sit 696 income-producing properties, down from 702 a year earlier, and 68.4 million square feet of gross leasable area. The quarter’s largest piece of leasing was with the principal tenant. The Trust states on PDF page 40, and again on page 54, that “During the quarter, the Trust and Loblaw renewed a full tranche of 50 leases expiring in 2027 comprising 3.55 million square feet, at a weighted average spread of 8.8% and a weighted average extension term of 5.0 years.” Separately, the quarter’s retail detail shows 2,407 thousand square feet of Loblaw renewals at an 8.7% spread against third-party renewals at 12.8%. The effect of the tranche shows up in the lease maturity profile: of the GLA expiring in 2027, only 127 thousand square feet is Loblaw, against 2,771 thousand of third-party space (report, PDF page 41).
Tenant retention was 93.5% in the quarter, 96.2% in retail and 83.2% in industrial (report, PDF page 39), and same-asset cash NOI rose 2.5% in retail, 5.5% in industrial and 2.1% in mixed-use and residential (report, PDF pages 49 to 50).
Loblaw accounts for 59.2% of the Trust’s total GLA, against 59.4% at December 31, 2025 (report, PDF page 40), and 57.1% of rental revenue on a proportionate share basis (report, PDF page 54). That concentration is the central question with this name, and how it sits against the other large landlords in the sector is the work behind our ranking of retail REIT stocks by total return.
The payout improved for a reason worth naming
The AFFO payout ratio fell to 91.0% from 100.2%. The Trust’s explanation of the AFFO increase, on page 5 of its Q3 report, is that “The increase was primarily due to lower tenant improvement spend in the current year period.”
Its own capital expenditure table settles whether that is a saving or a calendar. Tenant improvements on a proportionate share basis were $2,983 thousand in the quarter against $14,031 thousand a year earlier, a fall of $11,048 thousand. Across nine months the same line reads $23,351 thousand against $24,474 thousand, a fall of $1,123 thousand (report, PDF page 52). An $11.0 million drop inside the quarter sits within a $1.1 million drop across nine months, so the spend moved rather than went away, and the Trust says as much on the same page: “The change in tenant improvements for the three and nine month periods was primarily due to the timing of spend in the current year.” The per-unit series agrees. AFFO per unit was $0.247 in Q1 2026 and $0.217 in Q2 2026, so Q3’s $0.214 is the lowest of the three quarters this year, measured against a weak $0.192 a year earlier.
AFFO per unit diluted against the distribution declared per unit, eight quarters. The line is the distribution. Source: Choice Properties REIT 2026 Third Quarter Report, Selected Quarterly Information, printed page 51 (PDF page 53), AFFO per unit cross-checked to printed page 67 (PDF page 69).
The Trust’s cash-based coverage measure carries the same argument further. ACFO payout was 95.8% in the quarter against 100.8% a year earlier, and its table shows $6,169 thousand of cash retained after distributions this quarter against a $1,058 thousand shortfall a year earlier (report, PDF page 26). This quarter covered its distribution in cash. The comparative quarter did not.
On our sum of the four quarters to Q3 2026, trailing AFFO per unit is $0.879 against an annualised distribution of $0.78, an 88.7% payout on our arithmetic, and the distribution declared exceeded AFFO per unit in two of the eight quarters charted. Where that leaves Choice against the rest of the sector on coverage is the question our ranking of Canadian REITs on distribution safety exists to answer.
Distributions declared per unit, four full fiscal years. Source: Choice Properties REIT 2026 Annual Information Form dated February 18, 2026, page 59, and 2025 Annual Information Form dated February 12, 2025, page 60.
Distributions declared per unit went $0.74, $0.75, $0.76 and $0.77 across fiscal 2022 to 2025, a 1.33% compound annual increase on our arithmetic. The 2026 Annual Information Form states the Board approved an increase to $0.065 per unit monthly from the March 2026 distribution, which annualises to $0.78.
The $9.4 billion acquisition that has not closed
Choice announced on April 16, 2026 that it would acquire First Capital REIT alongside KingSett Capital. The release describes it as a unit and cash transaction “valued at approximately $9.4 billion, including the assumption of certain debt”. The Trust’s share, as stated on page 24 of its Q3 report, is “approximately $5.0 billion of FCR’s high-quality retail assets”, with KingSett taking approximately $4.4 billion of assets and all of FCR’s issued and outstanding units.
The financing is the part that touches existing unitholders: approximately 68.6 million Trust Units to FCR unitholders and approximately 38.0 million Exchangeable or Trust Units to George Weston valued at approximately $0.6 billion, with $2.3 billion principal of FCR unsecured debentures and approximately $0.4 billion of existing mortgages assumed and the rest funded through new debt. FCR unitholders approved on June 23, 2026 and the Ontario Superior Court of Justice issued its final order on June 25, 2026. The transaction “is subject to other regulatory and customary approvals and closing conditions, and is expected to close in the fourth quarter of 2026 or the first quarter of 2027”.
Set those magnitudes beside each other, because this piece opened on a unit count that has not moved. The 106.6 million new units are a 14.7% increase on 723,810,797, on our arithmetic. What they help buy is roughly $5.0 billion of assets against total assets of $18,519,389 thousand at September 30 (report, PDF page 13), alongside $2.3 billion of assumed debentures and $0.4 billion of mortgages. It cuts across the concentration question too: roughly $5.0 billion of acquired retail added to the base lowers the Loblaw share of the portfolio rather than raising it. The Trust’s own guidance holds FFO per unit at $1.08 to $1.10 whether or not the deal closes in 2026, which is management saying the transaction is roughly neutral to FFO per unit in its first partial year.
That pending deal is also why NAV per unit has two readings. The obligation to issue those units is carried at fair value, moving with the unit price since the arrangements were entered into. On the income statement, the gain on that derivative asset was $139,350 thousand in the quarter. The figure taken out of NAV is a different one. The release’s footnote reads: “Excluding the fair value gain on derivative financial assets(4) of $129.1 million, NAV(2) per unit was $14.86 as at September 30, 2026.” So NAV per unit is $15.04 including the derivative financial assets and $14.86 excluding them (release, pages 3 and 11), and that $0.18 of difference across 723.8 million units comes to about $130 million: the $129.1 million, not the $139.4 million.
NAV per unit, as reported and excluding the FCR derivatives, against the closing unit price, eight quarters. The dashed series runs only for the two quarters the Trust restates. Source: Choice Properties REIT 2026 Third Quarter Report, Selected Quarterly Information, printed page 51 (PDF page 53), ex-derivative figures from footnote ii to that table.
NAV per unit has risen in every quarter but one across the eight charted, from $14.07 to $15.04. The final step deserves the same treatment as the headline earnings number. The Trust gives an ex-derivative reading for the last two quarters, and that is the comparable one: $14.86 at September 30 against $14.74 at June 30, a step of $0.12 rather than the $0.31 the headline series shows (report, PDF page 53). More than half of the quarter’s NAV gain is an item with no counterpart in any quarter before Q2 2026.
CHP.UN closed at C$15.10 on Thursday November 12, down 1.44% from Wednesday, a close that came before the results were released (market data as of the November 12, 2026 close, StockAnalysis). At that price the units are a shade above the September 30 NAV including the derivative assets and about 1.6% above the $14.86 excluding them, on our arithmetic, and the annualised C$0.78 distribution is a 5.17% yield.
Leverage is the part of the deal a unitholder should watch. Adjusted debt to EBITDAFV was 7.2x at quarter end against 7.1x a year earlier and 7.0x at December 31, 2025, with adjusted debt to total assets flat year over year at 40.6%. The Trust leads its own metrics panel with a second series, adjusted debt to EBITDAFV net of cash, and that one improved: 6.9x at September 30 against 7.1x a year earlier and 6.9x at December 31, 2025 (report, PDF pages 12 and 31). The 2026 outlook, excluding the transaction, targets “Strong leverage metrics, targeting Adjusted Debt to EBITDAFV of approximately 7.0x”. Including it, the Trust expects that if the deal closes in 2026 the ratio increases “to approximately 8.5x on an annualized basis”, with its same-asset NOI and FFO per unit targets unchanged.
Two things bear on whether 8.5x is a problem. The first is that it is not what the covenants measure. The ratios the debentures and the credit facility actually test are adjusted debt to total assets, capped at 60.0% excluding convertible debt and sitting at 40.6%, and debt service coverage, floored at 1.5x and sitting at 3.1x, and the Trust states that the EBITDAFV and interest coverage ratios are not covenant tests at all (report, PDF page 31). Leverage at 8.5x would be a change in the Trust’s own target rather than a covenant breach. The second is the rating agencies, which have seen the transaction: S&P holds Choice at BBB+ with a stable outlook, confirmed May 15, 2025, and DBRS at BBB (high) with a positive trend, confirmed April 16, 2026, which is the day the deal was announced.
What the fourth quarter settles
The Trust is targeting annual FFO per unit diluted of approximately $1.08 to $1.10 and same-asset cash NOI growth of approximately 2% to 3%. Nine-month FFO per unit is $0.821, so on our arithmetic the full-year range requires a fourth quarter between $0.259 and $0.279. Q4 2025 delivered $0.262 and the last four quarters sum to $1.084, so the low end is effectively in hand. The high end asks for $0.279 against an eight-quarter high of $0.284, which is the quarter just reported.
Working against that is a headwind the Trust has already flagged. Page 35 of the report states that “Subsequent to quarter end, Allied reduced its monthly distribution by 90%, effective with the November 2026 distribution.” Allied is the Trust’s investment in real estate securities, and those distributions are the investment income above. The same position cost the quarter three ways: the distribution reduction is the larger of the two exclusions behind the adjusted FFO growth figure, the holding’s fair value was the $74.8 million unfavourable swing in reported net income, and the 90% cut itself lands in Q4. The position is small. Investment in real estate securities was $83,845 thousand at September 30 against $157,888 thousand at December 31, 2025 (report, PDF page 13), under half a percent of total assets. The whole of that decline is fair value rather than selling: the nine-month adjustment to the fair value of the investment in real estate securities was negative $74,043 thousand (release, page 6), which is the carrying value difference exactly.
Rael Diamond, President and CEO, said Choice “delivered another strong quarter, with near-full occupancy and healthy Same-Asset NOI performance driving FFO growth”. On the operating evidence that is defensible. Management takes questions on its conference call at 10:00 AM Eastern this morning (release, page 4). What the next report decides is different: whether the First Capital transaction closes inside 2026 or slips to 2027, what leverage looks like on the other side of it, whether tenant improvement spend returning to normal pushes the AFFO payout back toward where it was a year ago, and how much the Allied cut takes out of a fourth quarter that has to clear $0.259 for the Trust to meet its own range.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Company figures from Choice Properties REIT’s own Q3 2026 press release and 2026 Third Quarter Report, both dated November 12, 2026, and from its 2026 and 2025 Annual Information Forms. Market data as of the November 12, 2026 close.
