TORONTO, May 2, 2023
/CNW/ - First Capital Real Estate Investment Trust ("First Capital"
or the "Trust") (TSX: FCR.UN), announced today financial results
for the quarter ended March 31, 2023. The 2023 First 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.
"We are pleased with First Capital's solid first quarter
operating results, which were underpinned by strength in leasing,
occupancy and NOI growth metrics," said Adam Paul, President & CEO. "Executing our
Optimization Plan remains a top strategic priority and we are
pleased with our progress of more than $360
million of our $1 billion
disposition target, at pricing that exceeds their aggregate IFRS
carrying value. Continued execution of the Plan, through the
monetization of specific assets in which our short-medium term
value enhancing objectives have been achieved, will further drive
FFO per unit growth, while simultaneously strengthening First
Capital's debt metrics."
SELECTED FINANCIAL
INFORMATION
|
|
|
|
Three months ended
March 31
|
|
2023
|
2022
|
FFO (1) (2)
($ millions)
|
$53.5
|
$54.8
|
FFO per diluted unit
(1) (2)
|
$0.25
|
$0.25
|
Other gains and
(losses) included in FFO (per diluted unit)
(1)
|
$0.00
|
($0.03)
|
|
|
|
Total Same Property NOI
growth (1) (3)
|
4.0 %
|
1.9 %
|
|
|
|
Total portfolio
occupancy (4)
|
96.2 %
|
95.5 %
|
Total Same Property
occupancy (1) (4)
|
96.3 %
|
95.9 %
|
|
|
|
Net income (loss)
attributable to unitholders ($ millions)
|
$48.7
|
$44.5
|
Net income (loss)
attributable to unitholders per diluted unit
|
$0.23
|
$0.20
|
Weighted average
diluted units for FFO and net income (000s)
|
215,262
|
220,906
|
(1)
|
Refer to "Non-IFRS
Financial Measures" section of this press release.
|
(2)
|
For the three months
ended March 31, 2023 FFO includes approximately $7 million or 3
cents per unit (March 31, 2022 - Nil) of non-recurring costs
related to the Unitholder activism.
|
(3)
|
Prior periods as
reported; not restated to reflect current period
categories.
|
(4)
|
As at March
31.
|
FIRST QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Same Property NOI Growth: Total Same Property NOI
increased 4.0% over the prior year period. The growth was primarily
due to higher base rent and variable revenues.
- Portfolio Occupancy: On a quarter-over-quarter basis,
total portfolio occupancy increased by 0.4%, to 96.2% at
March 31, 2023, from 95.8% at
December 31, 2022 due to net
openings. On a year-over-year basis, total portfolio occupancy
increased 0.7% from 95.5% at March 31,
2022 to 96.2% at March 31,
2023.
- Lease Renewal Rate Increase: During the quarter, net
rental rates increased 9.3% on a volume of 650,000 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 10.8% when comparing the 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 portfolio average
net rental rate increased by 0.5% or $0.11 per square foot over the prior quarter to
$23.06 per square foot, primarily due
to rent escalations and renewal lifts. First Capital's average net
rental rate has continued to reach record highs for the last 27
consecutive quarters.
- Property Investments: First Capital invested
$49.9 million into its properties
during the first quarter, primarily through development,
redevelopment and a strategic acquisition in Toronto. In January, First Capital acquired a
50% interest in 320-326 Bloor Street
West, Toronto, for
$15.7 million. The acquisition
completes First Capital's assembly at the northeast corner of
Bloor Street West and Spadina Road
and accordingly has submitted a rezoning application seeking
approximately 336,000 square feet of mixed-use high-rise density as
part of the Trust's entitlements program.
- Enhanced Capital Allocation and Portfolio Optimization
Plan: First Capital continues to execute on the Portfolio
Optimization Plan with an additional $184
million of impending dispositions. On April 11, 2023, FCR announced that it has entered
into firm agreements to sell four properties including, (i) the
Hazelton Hotel, together with its 50% interest in ONE Restaurant,
located in Toronto's Yorkville
neighbourhood; (ii) 5051 Yonge Street, a residential condominium
development site located in North
York (Toronto) at Hillcrest
Avenue; (iii) a residential development site of the final phase of
the intensification at Wilderton Shopping Centre, located in
Montreal and (iv) 5146-5164 Queen
Mary Road, located in Montreal.
Collectively, these assets represent a 3.3% yield on the aggregate
sales price. To date, First Capital has completed or has under firm
agreement, $360 million of
dispositions with a cumulative yield of less than 3% under the
Plan.
- FFO per Diluted Unit of $0.25: Funds From Operations of $53.5 million decreased $1.3 million year-over-year, while FFO per unit
of $0.25 remained consistent over the
prior year period. Operating results included a $3.3 million ($0.02
per unit) increase in NOI driven primarily by higher base rent and
variable revenues. NOI growth was more than offset by a
year-over-year increase in corporate expenses totaling $8.7 million ($0.04
per unit), which included approximately $7
million in legal, advisory and settlement costs related to
the Unitholder activism incurred during the quarter ended
March 31, 2023. First quarter other
gains (losses) and expenses of ($0.2
million) were $6.6 million
($0.03 per unit), lower on a
year-over-year basis.
- Net Income (Loss) Attributable to Unitholders: For the
three months ended March 31, 2023,
First Capital recognized net income (loss) attributable to
Unitholders of $48.7 million or
$0.23 per diluted unit compared to
$44.5 million or $0.20 per diluted unit for the prior year period.
The increase over prior year was primarily due to a $8.0 million decrease in income tax expense, and
an increase in the fair value of hotel property of $3.6 million, partially offset by a decrease in
the fair value of investment properties of $8.2 million.
FINANCIAL AND OTHER HIGHLIGHTS
As at
|
March 31
|
|
December
|
($
millions)
|
2023
|
2022
|
|
2022
|
Total assets
(1)
|
$9,642
|
$10,194
|
|
$9,582
|
Assets held for sale
(1)
|
$327
|
$253
|
|
$188
|
Unencumbered assets
(2)
|
$6,254
|
$7,485
|
|
$6,570
|
Net Asset Value per
unit
|
$23.48
|
$24.55
|
|
$23.48
|
Population Density
(3)
|
300,000
|
300,000
|
|
300,000
|
Net debt to total
assets (2)(4)
|
44.6 %
|
43.8 %
|
|
44.0 %
|
Net debt to Adjusted
EBITDA (2)
|
10.4 / 10.2
(5)
|
11.1
|
|
10.2
|
Weighted average term
of fixed-rate debt (years) (2)
|
3.5
|
4.0
|
|
3.4
|
(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.
|
(5)
|
Net debt to Adjusted
EBITDA was 10.4x as at March 31, 2023. Excluding non-recurring
costs related to Unitholder activism, the ratio was
10.2x.
|
GOVERNANCE UPDATE: BOARD COMMITTEES
Following the election of the Board of Trustees at the REIT's
annual and special meeting of unitholders on April 11, 2023, the committees of the Board have
been constituted as follows.
- Audit Committee: Al
Mawani will continue to serve as Chair of the Audit
Committee and Leonard Abramsky,
Ian Clarke, Dayna Gibbs, Ira
Gluskin and Richard Nesbitt
have been appointed as Audit Committee members.
- Compensation Committee: Annalisa
King has been appointed as Chair of the Compensation
Committee and Leonard Abramsky,
Sheila Botting, Ian Clarke and Ira
Gluskin have been appointed as Compensation Committee
members.
- Corporate Governance Committee: Paul Douglas has been appointed as Chair of the
Corporate Governance Committee and Sheila
Botting, Dayna Gibbs,
Annalisa King, Al Mawani and Richard
Nesbitt have been appointed as Corporate Governance
Committee members.
SUBSEQUENT EVENTS
Planned Dispositions
On April 11, 2023, the Trust
announced that it had entered into firm agreements to sell four
properties, including the Hazelton Hotel together with its 50%
interest in the ONE Restaurant, for an aggregate gross sales price
of $184 million.
MANAGEMENT CONFERENCE CALL AND WEBCAST
First Capital invites you to participate at 2:00 p.m. (ET) on Wednesday, May 3, 2023, in a
live conference call with senior management to discuss financial
results for the first quarter ended March 31, 2023.
First Capital's financial statements and MD&A for the first
quarter will be released prior to the call and will be available on
its website at www.fcr.ca in the 'Investors' section, and on the
Canadian Securities Administrators' website at www.sedar.com.
Teleconference
You can participate in the live conference by dialing
416-406-0743 or toll-free 1-800-898-3989 with access code 6415917#.
The call will be accessible for replay until May 10, 2023, by dialing 905-694-9451 or
toll-free 1-800-408-3053 with access code 3535747#.
Webcast
To access the live audio webcast and conference call
presentation, please go to First Capital's website or click on the
following link Q1 2023 Conference Call. The webcast
will be accessible for replay in the 'Investors' section of the
website.
ABOUT FIRST CAPITAL REIT (TSX: FCR.UN)
First Capital owns, operates and develops grocery-anchored,
open-air centres in neighbourhoods with the strongest demographics
in Canada.
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
March 31
|
|
2023
|
|
2022
|
Net income (loss)
attributable to Unitholders
|
$
48.7
|
|
$
44.5
|
Add
(deduct):
|
|
|
|
(Increase) decrease in
value of investment properties (1)
|
$
6.6
|
|
$
(1.6)
|
(Increase) decrease in
value of hotel property (1)
|
$
(3.6)
|
|
$
—
|
Adjustment for equity
accounted joint ventures (2)
|
$
1.4
|
|
$
0.7
|
Adjustment for
capitalized interest related to equity accounted joint ventures
(2)
|
$
0.8
|
|
$
0.7
|
Incremental leasing
costs (3)
|
$
2.0
|
|
$
1.6
|
Amortization expense
(4)
|
$
0.1
|
|
$
0.2
|
Transaction costs
(5)
|
$
—
|
|
$
0.6
|
Increase (decrease) in
value of Exchangeable Units (6)
|
$
(0.1)
|
|
$
(0.1)
|
Increase (decrease) in
value of unit-based compensation (7)
|
$
(2.5)
|
|
$
(0.4)
|
Investment property
selling costs (1)
|
$
0.1
|
|
$
0.7
|
Deferred income taxes
(recovery) (1)
|
$
(0.2)
|
|
$
7.9
|
FFO
|
$
53.5
|
|
$
54.8
|
(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 transaction costs incurred as part of a business
combination in accordance with the recommendations of
REALPAC.
|
(6)
|
Adjustment to
exclude distributions and fair value adjustments on Exchangeable
Units in accordance with the recommendations of
REALPAC.
|
(7)
|
Adjustment to
exclude fair value adjustments on unit-based compensation plans in
accordance with the recommendations of REALPAC.
|
Net Debt
Net debt is a measure used by Management in the computation of
certain debt metrics, providing information with respect to certain
financial ratios used in assessing First Capital's debt profile.
Net debt is calculated as the sum of principal amounts outstanding
on credit facilities and mortgages, bank indebtedness and the par
value of senior unsecured debentures reduced by the cash balances
at the end of the period on a proportionate basis.
As at
($
millions)
|
March 31,
2023
|
December 31,
2022
|
Liabilities
(principal amounts outstanding)
|
|
|
|
|
Bank
indebtedness
|
|
$
—
|
|
$
1.6
|
Mortgages
(1)
|
|
1,460.6
|
|
1,235.8
|
Credit facilities
(1)
|
|
971.9
|
|
1,098.2
|
Senior unsecured
debentures
|
|
1,900.0
|
|
1,900.0
|
Total Debt
(1)
|
|
$
4,332.4
|
|
$
4,235.6
|
Cash and cash
equivalents (1)
|
|
(84.4)
|
|
(39.8)
|
Net Debt (1)
(2)
|
|
$
4,248.0
|
|
$
4,195.8
|
Exchangeable
Units
|
|
0.9
|
|
1.0
|
Equity market
capitalization (3)
|
|
3,341.8
|
|
3,589.2
|
Enterprise value
(1)
|
|
$
7,590.8
|
|
$
7,786.0
|
Trust Units outstanding
(000's)
|
|
212,449
|
|
213,518
|
Closing market
price
|
|
$
15.73
|
|
$
16.81
|
(1)
|
At First Capital's
proportionate interest.
|
(2)
|
Net Debt is a
non-IFRS measure that is calculated as the sum of total debt
including principal amounts outstanding on credit facilities and
mortgages, bank indebtedness and the par value of senior unsecured
debentures reduced by the cash balances at the end of the period on
a proportionate basis.
|
(3)
|
Equity market
capitalization is the market value of FCR's units outstanding at a
point in time. The measure is not defined by IFRS, does not have a
standard definition and, as such, may not be comparable to similar
measures disclosed by other issuers.
|
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization ("Adjusted EBITDA")
Adjusted EBITDA is a measure used by Management in the
computation of certain debt metrics. Adjusted EBITDA, is calculated
as net income, adding back income tax expense, interest expense and
amortization and excluding the increase or decrease in the fair
value of investment properties, fair value gains or losses on
Exchangeable Units, fair value gains or losses on unit-based
compensation and other non-cash or non-recurring items on a
proportionate basis. FCR also adjusts for incremental leasing
costs, which is a recognized adjustment to FFO, in accordance with
the recommendations of REALPAC. Management believes Adjusted EBITDA
is useful in assessing the Trust's ability to service its debt,
finance capital expenditures and provide for distributions to its
Unitholders.
The following table reconciles First Capital's net income (loss)
to Adjusted EBITDA for the three months ended March 31, 2023 and 2022:
($
millions)
|
Three months ended
March 31
|
|
2023
|
|
2022
|
Net income (loss)
attributable to Unitholders
|
$
48.7
|
|
$
44.5
|
Add (deduct)
(1):
|
|
|
|
Deferred income tax
expense (recovery)
|
(0.2)
|
|
7.9
|
Interest
Expense
|
38.3
|
|
36.7
|
Amortization
expense
|
2.7
|
|
2.1
|
(Increase) decrease in
value of investment properties
|
6.6
|
|
(1.6)
|
(Increase) decrease in
value of hotel property
|
(3.6)
|
|
—
|
Increase (decrease) in
value of Exchangeable Units
|
(0.1)
|
|
(0.1)
|
Increase (decrease) in
value of unit-based compensation
|
(2.5)
|
|
(0.4)
|
Incremental leasing
costs
|
2.0
|
|
1.6
|
Other non-cash and/or
non-recurring items
|
0.3
|
|
8.1
|
Adjusted EBITDA
(1)
|
$
92.4
|
|
$
98.8
|
(1)
|
At First Capital's
proportionate interest.
|
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 execution and impact of
the Enhanced Capital Allocation & Portfolio Optimization Plan.
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 the ongoing pandemic, epidemics or other
outbreaks on First Capital which are described in First Capital's
MD&A for the year ended December 31,
2022 under the heading "Risks and Uncertainties - Ongoing
Pandemic, Epidemics or New Outbreaks". Additionally,
forward-looking statements are subject to those risks and
uncertainties discussed in First Capital's MD&A for the year
ended December 31, 2022 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.
SOURCE First Capital Real Estate Investment Trust