TORONTO, Feb. 8, 2022 /CNW/ - First Capital Real Estate
Investment Trust ("First Capital" or the "Trust") (TSX: FCR.UN),
announced today financial results for the fourth quarter and year
ended December 31, 2021. The 2021
Fourth Quarter Report is available in the Investors section of the
Trust's website at www.fcr.ca and has been filed on SEDAR at
www.sedar.com.
SELECTED FINANCIAL
INFORMATION
|
|
|
|
|
Three months
ended December 31
|
|
Year ended
December 31
|
|
2021
|
2020
|
|
2021
|
2020
|
FFO (1) ($
millions)
|
$
|
60.8
|
$
|
62.5
|
|
$
|
251.0
|
$
|
222.0
|
FFO per diluted unit
(1)
|
$
|
0.28
|
$
|
0.28
|
|
$
|
1.14
|
$
|
1.01
|
Other gains and
(losses) included in FFO (per diluted unit)
(1)
|
($0.02)
|
$
|
0.00
|
|
$
|
0.06
|
($0.02)
|
|
|
|
|
|
|
Total Same Property
NOI growth (1) (2)
|
3.2%
|
(4.3%)
|
|
5.7%
|
(7.1%)
|
|
|
|
|
|
|
Total portfolio
occupancy (3)
|
96.1%
|
96.2%
|
|
|
|
Total Same Property
occupancy (1) (3)
|
96.1%
|
96.1%
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to unitholders ($ millions)
|
$
|
28.6
|
$
|
37.3
|
|
$
|
460.1
|
$
|
2.7
|
Net income (loss)
attributable to unitholders per diluted unit
|
$
|
0.13
|
$
|
0.17
|
|
$
|
2.08
|
$
|
0.01
|
Weighted average
diluted units for FFO and net income (000s)
|
220,929
|
220,551
|
|
220,826
|
220,495
|
(1)
|
Refer to "Non-IFRS
Financial Measures" section of this press release.
|
(2)
|
Prior periods as
reported; not restated to reflect current period
categories.
|
(3)
|
As at December
31.
|
FOURTH QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Same Property NOI Growth: Total Same Property NOI
increased 3.2% primarily due to higher variable revenues, rent
escalations and a $1.0 million
decrease in bad debt expense over the prior year period. Total Same
Property NOI increased 2.2%, excluding bad debt expense and lease
termination fees, primarily due to rent escalations and higher
variable revenues.
- Portfolio Occupancy: December 31,
2021 portfolio occupancy of 96.1% increased 0.2% on a
quarter-over-quarter basis from 95.9% at September 30, 2021 primarily due to new tenant
possessions exceeding closures.
- Lease Renewal Rate Increase: Net rental rates for the
quarter increased 9.2% on 452,000 square feet of lease renewals,
when comparing the rental rate in the first year of the renewal
term to the rental rate in the last year of the expiring term. Net
rental rates on the leases renewed in the quarter increased 11.1%
when comparing average rental rate over the renewal term to the
rental rate in the last year of the expiring term.
- Growth in Average Net Rental Rate: The average net
rental rate increased by 0.8% or $0.18 per square foot over the prior quarter to
$22.42 per square foot, primarily due
to rent escalations, renewal lifts and dispositions.
- Collections: Overall, gross rent collections for the
fourth quarter totaled 98% to date.
- Property Investments: First Capital invested
$36.9 million into its properties
during the fourth quarter, primarily in development and
redevelopment activities in Toronto and Montreal.
- Property Dispositions: First Capital completed
$164.9 million of dispositions in the
fourth quarter. Asset sales included the Trust's 50% interest in
three properties in Calgary, a
100% interest in a shopping centre in Langley, BC and a 16.67% interest in the
residential portion of King High
Line located in Liberty
Village.
- FFO per Diluted Unit of $0.28: FFO per unit decreased by
approximately $0.01 over the same
prior year period. The decrease was primarily due to higher
unrealized losses on marketable securities and a prepayment penalty
for the early settlement of mortgages, totaling $4.0 million, or $0.02 per unit. This is partially offset by lower
interest expense of $2.2 million, or
$0.01 per unit, over the same prior
year period.
- Net Income (Loss) Attributable to Unitholders: For the
three months ended December 31, 2021,
First Capital recognized net income attributable to Unitholders of
$28.6 million or $0.13 per diluted unit compared to $37.3 million or $0.17 per unit for the same prior year period.
The decrease was primarily due to an increase in deferred income
tax expense of $16.3 million and
higher other losses and expenses of $12.8
million, partially offset by an increase in the fair value
of investment property of $18.6
million.
ANNUAL FINANCIAL AND OPERATIONAL HIGHLIGHTS
- Same Property NOI Growth: Total Same Property NOI
increased 5.7% due to rent escalations, higher variable revenues,
and a $12.9 million decrease in bad
debt expense over prior year. Total Same Property NOI increased
2.0%, excluding bad debt expense and lease termination fees,
primarily due to rent escalations and higher variable revenues.
- Portfolio Occupancy: On a year-over-year basis, total
portfolio occupancy was stable at 96.1% at December 31, 2021 compared to 96.2% at
December 31, 2020.
- Lease Renewal Rate Increase: Net rental rates for the
year increased 8.6% on 2,081,000 square feet of lease renewals when
comparing the rental rate in the last year of the expiring term
versus the first year of the renewal term. Net rental rates
increased 10.5% when comparing the rental rate in the last year of
the expiring term versus the average rental rate over the renewal
term.
- Growth in Average Net Rental Rate: The average net
rental rate increased $0.53 to
$22.42 per square foot representing
year over year growth of 2.4%. The strong growth was primarily due
to rent escalations, renewal lifts and dispositions.
- Collections: Overall, gross rent collections for the
year totaled 98% to date.
- Property Investments: First Capital invested
$188.2 million into its portfolio
during the year ended December 31,
2021, primarily in development, redevelopment and
acquisition activities in Toronto
and Montreal.
- Property Dispositions: Consistent with First Capital's
real estate strategy, the Trust completed $344.8 million of dispositions during 2021. In
addition, First Capital entered into a new strategic partnership
with Pemberton Group to develop the former Christie Cookie site in
Toronto (2150 Lakeshore Boulevard
West). The $156 million transaction
crystallized a significant gain for First Capital, and provided for
a sizeable increase in the fair value of the REIT's 50% interest in
the property. As at December 31,
2021, the Trust classified $151.3
million of investment properties as held for sale.
- Advancing ESG initiatives: First Capital continued to
demonstrate leadership in Environmental, Social and Governance
("ESG") matters throughout 2021, having:
-
- Ranked first in its retail sector peer group, FCR was awarded
Sector Leader Status in the 2021 Global Real Estate Sustainability
Benchmark ("GRESB")
- Incorporated sustainability-linked features and pricing
adjustments as part of a three year extension (to June 2026) of its syndicated $450 million unsecured operating facility
- Achieved LEED Gold at its property located at 25 Industrial
Street in Toronto (Leaside Village
expansion)
- Progressed numerous key initiatives through its Equity,
Diversity & Inclusion ("ED&I") Council and FCR Thriving
Neighbourhoods Foundation, including developing a three year
ED&I action plan and raising over $281,000 for Second Harvest as part of the
Foundation's fall fundraiser
- Received recognition for both the 2021 BOMA National and BOMA
International Outstanding Building of the Year in the open-air
retail category
- Continued growth in its longstanding Public Art Program, with
two new installations
- FFO per Diluted Unit of $1.14: FFO increased by $0.13 per diluted unit over the prior year
primarily due to a $13.8 million, or
$0.06 per unit, mark-to-market gain
on shares of a construction management company which completed an
initial public offering in May 2021,
and lower bad debt expense of $14.3
million, or $0.07 per
unit.
- Net Income (Loss) Attributable to Unitholders: For the
year ended December 31, 2021, First
Capital recognized net income of $460.1
million or $2.08 per diluted
unit compared to $2.7 million or
$0.01 per unit for the prior year.
The increase was primarily due to an increase in the fair value of
investment property of $384.3
million, and an $80.8 million
gain related to the exercise of a previously secured option to
purchase its partner's 50% interest in 2150 Lake Shore Boulevard
West.
"2021's solid operating and financial results continued to be
underpinned by our strategic focus on high-quality, grocery
anchored and mixed-use properties in neighbourhoods with strong
demographics," said Adam Paul,
President & CEO of First Capital.
"Accordingly, demand remained strong for FCR's properties
throughout the year. We disposed of $345
million of properties at prices well above IFRS fair values
and completed 2.9 million square feet of lease transactions,
including 2.1 million square feet of renewals at a healthy average
rent increase of 8.6%, contributing to another all-time high
in-place portfolio rent per square foot."
Mr. Paul continued, "Looking forward, advances in our density
and entitlements program, including our 2150 Lake Shore transaction
which was one of the highlights of the year, provide FCR with a
tremendous development pipeline for many years to come."
FINANCIAL AND OTHER HIGHLIGHTS
As at
|
December
31
|
($
millions)
|
2021
|
2020
|
Total assets
(1)
|
$
|
10,109
|
$
|
10,032
|
Assets held for sale
(1)
|
$
|
151
|
$
|
162
|
Unencumbered assets
(2)
|
$
|
7,394
|
$
|
7,003
|
Net Asset Value per
unit
|
$
|
24.28
|
$
|
22.34
|
Population Density
(3)
|
300,000
|
304,000
|
Net debt to total
assets (2)(4)
|
43.9%
|
47.3%
|
Weighted average term
of fixed-rate debt (years) (2)
|
4.0
|
4.6
|
(1)
|
Presented in
accordance with IFRS.
|
(2)
|
Reflects joint
ventures proportionately consolidated.
|
(3)
|
The portfolio's
average population density within a five kilometre radius of its
properties.
|
(4)
|
Total assets
excludes cash balances.
|
COVID-19 UPDATE
Throughout most of the fourth quarter, essential and
non-essential businesses were operating at near capacity, with
additional protection from proof of vaccination measures for
restaurants, gyms and other venues. In late November, healthcare
agencies first identified the new Omicron COVID variant which
quickly became the dominant strain worldwide. In late 2021 and
early 2022, provincial governments mandated temporary capacity
restrictions and lockdowns in an effort to slow the speed of the
Omicron variant. These restrictions have adversely impacted certain
tenants. In response to these restrictions, the Federal government
enacted new COVID-19 support measures on December 17, 2021 and introduced the Local
Lockdown Program and the Canada Work Lockdown Benefit. The Local
Lockdown Program provides wage and rent support for
organizations subject to a qualifying public health restriction,
regardless of sector.
Despite the continuing challenges facing many businesses as a
result of the pandemic, First Capital's high quality
grocery-anchored and mixed-use portfolio continues to produce solid
leasing activity, growth in its average net rental rate while 2021
has seen new leases signed with numerous growing retailers and
full-service restaurant operators. For the fourth quarter of 2021,
First Capital recorded bad debt expense of $1.4 million resulting in an annual total of
$8.5 million.
SUBSEQUENT EVENTS
Redemption of $200 million
of 4.43% Series O Senior Unsecured Debentures
On January 31, 2022, upon
maturity, First Capital repaid its 4.43% Series O Senior Unsecured
Debentures in the amount of $200.0
million.
MANAGEMENT CONFERENCE CALL AND WEBCAST
First Capital invites you to participate at 2:00 p.m. (ET) on
Wednesday, February 9, 2022, in a
live conference call with senior management to discuss First
Capital's results for the fourth quarter ended December 31, 2021.
Teleconference
You can participate in the live conference by dialing
416-340-2217 or toll-free 1-800-806-5484 with access code 8684605#.
The call will be accessible for replay until March 17, 2022 by dialing 905-694-9451 or
toll-free 1-800-408-3053 with access code 6079978#.
Webcast
To access the live audio webcast and conference call
presentation, please go to First Capital's website or click on the
following link: Q4 2021 Conference Call. The webcast
will be accessible for replay in the 'Investors' section of the
website.
Management's presentation will be followed by a question and
answer period. To ask a question, press '1' followed by '4' on a
touch-tone phone. The conference call coordinator is immediately
notified of all requests in the order in which they are made, and
will introduce each questioner. To cancel your request, press '1'
followed by '3'. For assistance at any point during the call, press
'*0'.
ABOUT FIRST CAPITAL REIT (TSX: FCR.UN)
First Capital is a leading owner, operator and developer of
grocery anchored and mixed-use real estate located in Canada's most densely populated cities. First
Capital's focus is on creating thriving urban neighbourhoods to
generate value for businesses, residents, communities and our
investors.
NON-IFRS FINANCIAL MEASURES
First Capital prepares and releases unaudited interim and
audited annual consolidated financial statements prepared in
accordance with International Financial Reporting Standards
("IFRS"). As a complement to results provided in accordance with
IFRS, First Capital discloses certain non-IFRS financial measures
in this press release, including but not limited to FFO, NOI, Same
Property NOI, and proportionate interest. Since these non-IFRS
measures do not have standardized meanings prescribed by IFRS, they
may not be comparable to similar measures reported by other
issuers. First Capital uses and presents the above non-IFRS
measures as management believes they are commonly accepted and
meaningful financial measures of operating performance.
Reconciliations of certain non-IFRS measures to their nearest IFRS
measures are included below. These non-IFRS measures should not be
construed as alternatives to net income or cash flow from operating
activities determined in accordance with IFRS as measures of First
Capital's operating performance.
Funds from Operations ("FFO")
FFO is a recognized measure that is widely used by the real
estate industry, particularly by publicly traded entities that own
and operate income-producing properties. First Capital calculates
FFO in accordance with the recommendations of the Real Property
Association of Canada ("REALPAC")
as published in its most recent guidance on "Funds from Operations
and Adjusted Funds From Operations for IFRS" dated January 2022. Management considers FFO a
meaningful additional financial measure of operating performance,
as it excludes fair value gains and losses on investment properties
as well as certain other items included in FCR's net income that
may not be the most appropriate determinants of the long-term
operating performance of FCR, such as investment property selling
costs; tax on gains or losses on disposals of properties; deferred
income taxes; distributions on Exchangeable Units; fair value gains
or losses on Exchangeable Units; fair value gains or losses on
unit-based compensation; and any gains, losses or transaction costs
recognized in business combinations. FFO provides a perspective on
the financial performance of FCR that is not immediately apparent
from net income determined in accordance with IFRS.
A reconciliation from net income (loss) attributable to
Unitholders to FFO can be found in the table below:
($
millions)
|
Three months ended
December 31
|
|
Year ended December
31
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net income (loss)
attributable to Unitholders
|
$
|
28.6
|
|
$
|
37.3
|
|
$
|
460.1
|
|
$
|
2.7
|
Add
(deduct):
|
|
|
|
|
|
|
|
(Increase) decrease in
value of investment properties (1)
|
$
|
(25.8)
|
|
$
|
(7.9)
|
|
$
|
(181.5)
|
|
$
|
195.8
|
(Increase) decrease in
value of hotel property (1)
|
$
|
2.2
|
|
$
|
5.1
|
|
$
|
1.1
|
|
$
|
9.4
|
Adjustment for equity
accounted joint ventures (2)
|
$
|
0.4
|
|
$
|
0.7
|
|
$
|
2.5
|
|
$
|
2.7
|
Incremental leasing
costs (3)
|
|
$
|
1.4
|
|
$
|
1.6
|
|
$
|
5.9
|
|
$
|
6.6
|
Amortization expense
(4)
|
$
|
0.5
|
|
$
|
0.5
|
|
$
|
1.9
|
|
$
|
1.4
|
Gain on below market
purchase
|
$
|
—
|
|
$
|
(7.4)
|
|
$
|
—
|
|
$
|
(7.4)
|
Transaction
costs
|
$
|
—
|
|
$
|
1.1
|
|
$
|
—
|
|
$
|
1.1
|
Distributions on
Exchangeable Units (5)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
0.7
|
Increase (decrease) in
value of Exchangeable Units (5)
|
$
|
0.1
|
|
$
|
—
|
|
$
|
0.5
|
|
$
|
(7.4)
|
Increase (decrease) in
value of unit-based compensation (6)
|
$
|
2.5
|
|
$
|
(1.7)
|
|
$
|
9.3
|
|
$
|
(11.5)
|
Gain on Option
(7)
|
$
|
—
|
|
$
|
—
|
|
$
|
(80.8)
|
|
$
|
—
|
Investment properties
selling costs (1)
|
$
|
3.1
|
|
$
|
0.6
|
|
$
|
7.1
|
|
$
|
3.9
|
Deferred income taxes
(recovery) (1)
|
$
|
47.8
|
|
$
|
32.7
|
|
$
|
24.8
|
|
$
|
23.9
|
FFO
|
$
|
60.8
|
|
$
|
62.5
|
|
$
|
251.0
|
|
$
|
222.0
|
(1)
|
At FCR's
proportionate interest.
|
(2)
|
Adjustment related
to FCR's equity accounted joint ventures in accordance with the
recommendations of REALPAC.
|
(3)
|
Adjustment to
capitalize incremental leasing costs in accordance with the
recommendations of REALPAC.
|
(4)
|
Adjustment to
exclude hotel property amortization in accordance with the
recommendations of REALPAC.
|
(5)
|
Adjustment to
exclude distributions and fair value adjustments on Exchangeable
Units in accordance with the recommendations of
REALPAC.
|
(6)
|
Adjustment to
exclude fair value adjustments on unit-based compensation plans in
accordance with the recommendations of REALPAC.
|
(7)
|
Adjustment to
exclude the gain on option in accordance with the recommendations
of REALPAC.
|
FORWARD-LOOKING STATEMENT ADVISORY
This press release contains forward-looking statements and
information within the meaning of applicable securities law,
including with respect to the anticipated impact of the COVID-19
pandemic and measures taken to mitigate the impact of the pandemic
and with respect to the reopening of the Canadian economy and
anticipated benefits. These forward-looking statements are not
historical facts but, rather, reflect First Capital's current
expectations and are subject to risks and uncertainties that could
cause the outcome to differ materially from current expectations.
Such risks and uncertainties include, among others, general
economic conditions; tenant financial difficulties, defaults and
bankruptcies; increases in operating costs, property taxes and
income taxes; First Capital's ability to maintain occupancy and to
lease or re-lease space at current or anticipated rents;
development, intensification and acquisition activities;
residential development, sales and leasing; risks in joint
ventures; environmental liability and compliance costs and
uninsured losses; and risks and uncertainties related to the impact
of COVID-19 on First Capital, including the length, spread and
severity of the pandemic, the nature and extent of measures taken
by all levels of government to mitigate against the severity and
spread of the virus, the changing retail environment, the impact of
the virus and responses thereto on: First Capital's tenants'
ability to pay rent in full or at all, an increase in vacancy,
domestic and global credit and capital markets, First Capital's
ability to access capital on favourable terms or at all, the health
and safety of First Capital's employees and its tenants' personnel,
and, domestic and global supply chains, among other risks relating
to COVID-19 which are described in First Capital's MD&A for the
year ended December 31, 2021 under
the heading "Risks and Uncertainties - COVID-19". Additionally,
forward-looking statements are subject to those risks and
uncertainties discussed in First Capital's MD&A for the year
ended December 31, 2021 and in its
current Annual Information Form. Readers, therefore, should not
place undue reliance on any such forward-looking statements.
First Capital undertakes no obligation to publicly update any
such forward-looking statement or to reflect new information or the
occurrence of future events or circumstances except as required by
applicable securities law. All forward-looking statements in this
press release are made as of the date hereof and are qualified by
these cautionary statements.
www.fcr.ca
TSX: FCR.UN
SOURCE First Capital Real Estate Investment Trust