KEY HIGHLIGHTS FROM THE THIRD QUARTER:
- FFO per unit of
$0.32 , representing year-over-year growth of 4.2% - Strong leasing activity, including: 1) lease renewal spreads of 12.4%, and 2) new leases at
One Bloor Street East subsequent to quarter-end - Continued improvement in Debt to EBITDA from execution of the Optimization Plan
"Strong fundamentals underpinning
"Execution of our Portfolio Optimization Plan remains well on track, with announced sales under the Plan now totaling
SELECTED FINANCIAL INFORMATION | |||||
Three months ended | Nine months ended | ||||
2023 | 2022 | 2023 | 2022 | ||
FFO (1) (2) ($ millions) | |||||
FFO per diluted unit (1) (2) | |||||
Other gains and (losses) included in FFO (per diluted unit) (1) | ( | ||||
Total Same Property NOI growth (1) (3) | 1.2 % | 5.3 % | 2.5 % | 4.4 % | |
Total portfolio occupancy (4) | 95.9 % | 95.7 % | |||
Total Same Property occupancy (1) (4) | 95.9 % | 95.9 % | |||
Increase (decrease) in value of investment properties, net (5) | ( | ( | ( | ( | |
Net income (loss) attributable to unitholders ($ millions) | ( | ( | ( | ( | |
Net income (loss) attributable to unitholders per diluted unit | ( | ( | ( | ( | |
Weighted average diluted units for FFO and net income (000s) | 213,952 | 216,008 | 214,407 | 219,195 |
(1) | Refer to "Non-IFRS Financial Measures" section of this press release. |
(2) | For the nine months ended |
(3) | Prior periods as reported; not restated to reflect current period categories. |
(4) | As at |
(5) | During the three months ended |
ENHANCED CAPITAL ALLOCATION & PORTFOLIO OPTIMIZATION PLAN
During the quarter, FCR completed approximately
A summary of announced dispositions under the Optimization Plan is provided in the table below:
Closing date | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023+ | Total |
Dispositions ($ millions) | ||||||
Premium to Carrying Value | 7 % | 4 % | 19 % | 16 % | 19 % | 14 % |
THIRD QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Same Property NOI Growth: Total Same Property NOI increased 1.2% over the prior year period, driven primarily by higher base rent. The performance of
FCR's One Bloor Street East property, whereNordstrom Rack effected an early lease termination in June as part of its CCAA filing, adversely impacted third quarter 2023 same property NOI growth by 140 basis points. Despite this short-term impact,First Capital has made significant leasing progress at OneBloor East . Subsequent to the third quarter, FCR signed a long-term lease for approximately 32,000 square feet of the former Nordstrom space with AVANT by Altea Active, an upscale wellness and fitness club, slated for possession in early 2024. FCR is in advanced negotiations with respect to leasing the remaining 8,000 square feet of the former Nordstrom space, being the premium ground floor area located directly at the corner ofYonge Street andBloor Street . Also, FCR has agreed to lease on a long-term basis, the remaining 20,000 square feet of available space at the property to Nike for a flagship store, and a soon-to-be announced prominent global retailer. - Portfolio Occupancy: On a quarter-over-quarter basis, total portfolio occupancy remained stable at 95.9%. On a year-over-year basis, total portfolio occupancy increased 0.2% from 95.7% at
September 30, 2022 to 95.9% atSeptember 30, 2023 . - Lease Renewal Rate Increase: During the quarter, net rental rates increased 12.4% on a volume of 477,000 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 13.5% when comparing the average rental rate over the renewal term to the rental rate in the last year of the expiring term.
- 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 a record$23.08 per square foot, primarily due to rent escalations and renewal lifts. - Property Investments:
First Capital invested approximately$48 million into its properties during the third quarter, primarily through development and redevelopment. - Normal course issuer bid ("NCIB"): During the third quarter, the Trust repurchased 0.2 million units for approximately
$2.0 million . Since instituting the NCIB inMay 2022 , the REIT has cumulatively repurchased 7.9 million trust units for approximately$120.1 million as ofSeptember 30, 2023 . - Balance Sheet and Liquidity: Excluding non-recurring costs related to Unitholder activism,
First Capital's September 30, 2023 net debt to Adjusted EBITDA multiple was 9.9x, an improvement from 10.9x atSeptember 30, 2022 .First Capital's September 30, 2023 liquidity position was$998 million , including$798 million of availability on revolving credit facilities and$200 million of cash on a proportionate basis. - Advancing ESG initiatives:
First Capital continued to demonstrate leadership in Environmental, Social and Governance ("ESG") matters throughout the third quarter, which included the following highlights:- Received 2023 GRESB Sector Leader Status in the Development Benchmark (
Peer Group :North America , Retail), with a score of 90 - Ranked 2nd in the 2023 GRESB Standing Investments Benchmark (
Peer Group :Canada , Retail Centres, Listed), with a score of 82 - Raised more than
$220,000 for Kids Help Phone as part ofFCR Thriving Neighbourhoods Foundation's second annual Commercial Real Estate Softball Classic tournament which was held in September
- Received 2023 GRESB Sector Leader Status in the Development Benchmark (
- FFO per Diluted Unit of
$0 .32: Funds From Operations of$68.6 million increased$2.0 million , or$0.01 per unit, over the prior year period. The increase was primarily driven by a year-over-year increase in interest and other income, totaling$4.6 million ($0.02 per unit) which includes$3.8 million recognized as part of a legal settlement related to forgone rent. Partially offsetting this income was approximately$0.9 million of restructuring costs included in corporate expenses. These costs were incurred in conjunction with the Trust's ongoing efforts to drive its performance-oriented culture, while pro-actively managing expenses. The comparative third quarter 2022 results included a purchase deposit taken into income of approximately$3.0 million ($0.01 per unit) included as a recovery in abandoned transaction costs. - Net Income (Loss) Attributable to Unitholders: For the three months ended
September 30, 2023 ,First Capital recognized net income (loss) attributable to Unitholders of($327.5) million or ($1.53 ) per diluted unit compared to($204.7) million or ($0.95 ) per diluted unit for the prior year period. The increase in net loss over prior year was primarily due to a decrease in the fair value of investment properties of$163.0 million , partially offset by a$31.7 million increase in deferred income tax recoveries. During the third quarter of 2023, interest rates across the mid-to longer durations of the yield curve shifted significantly, including an increase of approximately 75 basis points on the benchmark ten-yearGovernment of Canada bond. This material change in market interest rates was a key factor behind the$432.8 million fair value decrease in value of investment properties at FCR's interest recorded during the quarter.
FINANCIAL AND OTHER HIGHLIGHTS
As at | December | |||
($ millions) | 2023 | 2022 | 2022 | |
Total assets (1) | ||||
Assets held for sale (1) | ||||
Unencumbered assets (2) | ||||
Net Asset Value per unit | ||||
Population Density (3) | 295,000 | 300,000 | 300,000 | |
Net debt to total assets (2)(4) | 46.3 % | 45.4 % | 44.0 % | |
Net debt to Adjusted EBITDA (2) | 10.1 / 9.9 (5) | 10.9 | 10.2 | |
Weighted average term of fixed-rate debt (years) (2) | 3.1 | 3.6 | 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 10.1x as at |
GOVERNANCE UPDATE: BOARD COMMITTEES
Following a period of Board refreshment in which three new Trustees joined the
Audit and Risk Committee : The Audit Committee has been renamed as theAudit and Risk Committee .Ian Clarke has been appointed Chair of the Audit Committee replacingAl Mawani who will remain on the committee as a memberGovernance and Sustainability Committee : The Corporate Governance Committee has been renamed as theGovernance and Sustainability Committee .Al Mawani has been appointed Chair of theGovernance and Sustainability Committee replacing the Trust's Chair,Paul Douglas who will remain on the committee as a member- People and
Compensation Committee : The Compensation Committee has been renamed as the People andCompensation Committee andAnnalisa King remains Chair of the committee
SUBSEQUENT EVENTS
Unsecured Bank Term Loan
On
Redemption of
On
Credit Facilities
On
MANAGEMENT CONFERENCE CALL AND WEBCAST
Teleconference
You can participate in the live conference by dialing 416-406-0743 or toll-free 1-800-898-3989 with access code 6949753#. The call will be accessible for replay until
Webcast
To access the live audio webcast and conference call presentation, please go to
ABOUT FIRST CAPITAL REIT (TSX: FCR.UN)
NON-IFRS FINANCIAL MEASURES
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.
A reconciliation from net income (loss) attributable to Unitholders to FFO can be found in the table below:
($ millions) | Three months ended | Nine months ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Net income (loss) attributable to Unitholders | $ (327.5) | $ (204.7) | $ (307.9) | $ (202.4) | |||
Add (deduct): | |||||||
(Increase) decrease in value of investment properties (1) | $ 432.8 | $ 271.7 | $ 544.0 | $ 379.3 | |||
(Increase) decrease in value of hotel property (1) | $ — | $ — | $ (3.6) | $ — | |||
Adjustment for equity accounted joint ventures (2) | $ 0.1 | $ 0.3 | $ 1.8 | $ 1.9 | |||
Adjustment for capitalized interest related to equity accounted joint ventures (2) | $ 0.9 | $ 0.8 | $ 2.6 | $ 2.2 | |||
Incremental leasing costs (3) | $ 1.7 | $ 1.9 | $ 5.6 | $ 4.9 | |||
Amortization expense (4) | $ — | $ 0.1 | $ 0.2 | $ 0.4 | |||
Transaction costs (5) | $ — | $ — | $ — | $ 0.6 | |||
Increase (decrease) in value of Exchangeable Units (6) | $ (0.1) | $ — | $ (0.2) | $ (0.4) | |||
Increase (decrease) in value of unit-based compensation (7) | $ (2.2) | $ (0.3) | $ (8.2) | $ (9.6) | |||
Investment property selling costs (1) | $ 1.2 | $ 3.4 | $ 2.7 | $ 4.4 | |||
Deferred income taxes (recovery) (1) | $ (38.3) | $ (6.5) | $ (51.1) | $ 1.4 | |||
FFO | $ 68.6 | $ 66.6 | $ 185.9 | $ 182.6 |
(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
As at ($ millions) | ||||
Liabilities (principal amounts outstanding) | ||||
Bank indebtedness | $ — | $ 1.6 | ||
Mortgages (1) | 1,442.0 | 1,235.8 | ||
Credit facilities (1) | 1,001.3 | 1,098.2 | ||
Senior unsecured debentures | 1,900.0 | 1,900.0 | ||
Total Debt (1) | $ 4,343.4 | $ 4,235.6 | ||
Cash and cash equivalents (1) | (200.1) | (39.8) | ||
Net Debt (1) (2) | $ 4,143.3 | $ 4,195.8 | ||
Exchangeable Units | 0.8 | 1.0 | ||
Equity market capitalization (3) | 2,821.3 | 3,589.2 | ||
Enterprise value (1) | $ 6,965.3 | $ 7,786.0 | ||
Trust Units outstanding (000's) | 212,124 | 213,518 | ||
Closing market price | $ 13.30 | $ 16.81 |
(1) | At |
(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.
A reconciliation from net income (loss) attributable to Unitholders to Adjusted EBITDA can be found in the table below:
($ millions) | Three months ended | Nine months ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Net income (loss) attributable to Unitholders | $ (327.5) | $ (204.7) | $ (307.9) | $ (202.4) | |||
Add (deduct) (1): | |||||||
Deferred income tax expense (recovery) | (38.3) | (6.5) | (51.1) | 1.4 | |||
Interest Expense | 40.2 | 38.8 | 118.2 | 113.3 | |||
Amortization expense | 0.8 | 1.9 | 5.1 | 6.3 | |||
(Increase) decrease in value of investment properties | 432.8 | 271.7 | 544.0 | 379.3 | |||
(Increase) decrease in value of hotel property | — | — | (3.6) | — | |||
Increase (decrease) in value of Exchangeable Units | (0.1) | — | (0.2) | (0.4) | |||
Increase (decrease) in value of unit-based compensation | (2.2) | (0.3) | (8.2) | (9.6) | |||
Incremental leasing costs | 1.7 | 1.9 | 5.6 | 4.9 | |||
Abandoned transaction (costs) recovery | — | (2.9) | — | (2.9) | |||
Other non-cash and/or non-recurring items | 1.4 | 3.8 | 2.3 | 15.2 | |||
Adjusted EBITDA (1) | $ 108.8 | $ 103.5 | $ 304.2 | $ 305.1 |
(1) At |
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
SOURCE First Capital REIT
© Canada Newswire, source