KEY HIGHLIGHTS FROM THE SECOND QUARTER:
- FFO per unit of
$0.30 , representing year-over-year growth of 7.6% - Strong leasing activity, including lease renewal spreads of 14%
- Announces
$91 million of new dispositions, bringing the total under the Plan to approximately$460 million
"Our high-quality, grocery-anchored retail portfolio delivered another quarter of solid results, including 8% growth in FFO per unit, supported by sustained strength in leasing and continued execution of our capital allocation initiatives" said
"Including those announced today, total dispositions under the Plan are now approximately
SELECTED FINANCIAL INFORMATION | |||||
Three months ended | Six months ended | ||||
2023 | 2022 | 2023 | 2022 | ||
FFO (1) (2) ($ 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) | 2.2 % | 6.0 % | 3.0 % | 4.0 % | |
Total portfolio occupancy (4) | 95.9 % | 95.6 % | |||
Total Same Property occupancy (1) (4) | 95.9 % | 95.7 % | |||
Increase (decrease) in value of investment properties, net | ( | ( | ( | ( | |
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) | 214,056 | 220,812 | 214,648 | 220,829 |
(1) | Refer to "Non-IFRS Financial Measures" section of this press release. |
(2) | For the six months ended |
(3) | Prior periods as reported; not restated to reflect current period categories. |
(4) | As at |
ENHANCED CAPITAL ALLOCATION & PORTFOLIO OPTIMIZATION PLAN
Execution of the Plan progressed well during and subsequent to the quarter as summarized below:
- Property Dispositions:
First Capital completed or entered into firm agreements for property dispositions of approximately$213 million , consisting of: $122 million of previously announced dispositions completed during the quarter, including (i) theHazelton Hotel , together with its 50% interest inONE Restaurant , located inToronto and (ii)5146-5164 Queen Mary Road , located inMontreal , and$91 million of new dispositions being announced today that are subject to firm agreements entered into by the Trust which include (i) remaining development land at Place Panama, located inBrossard (ii) Yonge-Davis Centre, located inNewmarket and (iii) 30,30A Hazelton Avenue , located inToronto . The aggregate sales price of these three properties reflects a 40% premium to their IFRS carrying value. The properties are debt-free and subject to all-cash purchase agreements with scheduled closing dates ranging fromAugust 2023 toJanuary 2024 .- Property Investments:
First Capital invested approximately$120 million into its properties during the second quarter, primarily through development, redevelopment and a strategic acquisition of the land under its Centre Commercial Maisonneuve property inMontreal for$55 million , in which it held a leasehold interest since 2003 that was set to expire. The Centre is a highly productive and exceptionally well-located open-air shopping centre, anchored by Canadian Tire and Loblaws. The tenant leases at the Centre were set to expire contemporaneously with the land lease, which provided an opportunity forFirst Capital to create significant value. During 2023,First Capital entered into a conditional agreement to acquire the land based on fair market value for the site as vacant. During the conditional period,First Capital negotiated new lease agreements with all the major tenants at market rents which tripled the weighted average net rent at the Property resulting in immediate value creation, consistent with the capital allocation objectives of the Plan.
SECOND QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Same Property NOI Growth: Total Same Property NOI increased 2.2% 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 decreased, as expected by 0.3%, to 95.9% at
June 30, 2023 , from 96.2% atMarch 31, 2023 primarily due to the closures of two large tenants whose rents were below market, namely,Nordstrom Rack at OneBloor East and Walmart atWestmount Shopping Centre which collectively represent nearly 70 basis points of portfolio vacancy. On a year-over-year basis, total portfolio occupancy increased 0.3% from 95.6% atJune 30, 2022 to 95.9% atJune 30, 2023 . - Lease Renewal Rate Increase: During the quarter, net rental rates increased 14.0% on a volume of 510,000 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 16.0% 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 decreased by 0.4% or
$0.09 per square foot over the prior quarter to$22.97 per square foot, primarily due to net closures, includingNordstrom Rack at OneBloor East as well as temporary tenants and dispositions, partially offset by rent escalations and renewal lifts. - Normal course issuer bid ("NCIB"): During the second quarter,
First Capital received TSX approval to renew its NCIB pursuant to which it may repurchase and cancel up to 10% of its public float or 21.1 million units untilMay 17, 2024 . Since instituting the NCIB inMay 2022 , the REIT has repurchased, cumulatively, 7.8 million trust units for approximately$118.1 million as ofJune 30, 2023 . - Balance Sheet and Liquidity: Excluding non-recurring costs related to Unitholder activism,
First Capital's June 30, 2023 net debt to Adjusted EBITDA multiple was 10.1x, an improvement from 10.9x atJune 30, 2022 .First Capital's June 30, 2023 liquidity position was$938 million , including$796 million of availability on revolving credit facilities and$142 million of cash on a proportionate basis. InJune 2023 ,First Capital extended the maturity date of its$450 million unsecured revolving operating facility by one-year, toJune 30, 2028 . - Advancing ESG initiatives:
First Capital continued to demonstrate leadership in Environmental, Social and Governance ("ESG") matters throughout the second quarter, which included the following highlights: - Released its 2022 ESG Report (FCR's 13th annual report) which presents the material issues and impacts of ESG activities for the past fiscal year as well as its assurance report on selected sustainability performance indicators
- Achieved a 9% reduction in Scope 1 & 2 GHG emissions since 2019 base year (2019-2022)
Awarded Outstanding Building of the Year ("TOBY") for theBarrymore Building inLiberty Village at the 2023 BOMA Toronto Awards- Awarded the TOBY for
85 Hanna Ave. inLiberty Village at the 2023BOMA International Awards - Completed its Board refreshment with three new Trustees and reconstituted the Board committees
- FFO per Diluted Unit of
$0 .30: Funds From Operations of$63.8 million increased$2.5 million , or$0.02 per unit, over the prior year period. The increase was primarily driven by a year-over-year increase in other gains (losses) and (expenses), totaling$3.9 million ($0.02 per unit). This was largely offset by a year-over-year increase in interest expense and corporate G&A, collectively totaling$2.9 million ($0.01 per unit). In addition, unit repurchases throughFirst Capital's NCIB resulted in a lower weighted average unit count, thus driving a further increase of approximately$0.01 in FFO per unit. - Net Income (Loss) Attributable to Unitholders: For the three months ended
June 30, 2023 ,First Capital recognized net income (loss) attributable to Unitholders of($29.0) million or ($0.14 ) per diluted unit compared to($42.1) million or ($0.19 ) per diluted unit for the prior year period. The net income increase over prior year was primarily due to a$12.8 million decrease in deferred income tax expense.
FINANCIAL AND OTHER HIGHLIGHTS
As at | December | |||
($ 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) | 44.5 % | 44.1 % | 44.0 % | |
Net debt to Adjusted EBITDA (2) | 10.3 / 10.1 (5) | 10.9 | 10.2 | |
Weighted average term of fixed-rate debt (years) (2) | 3.3 | 3.9 | 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 10.3x as at |
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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 | Six months ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Net income (loss) attributable to Unitholders | $ (29.0) | $ (42.1) | $ 19.7 | $ 2.4 | |||
Add (deduct): | |||||||
(Increase) decrease in value of investment properties (1) | $ 104.5 | $ 109.2 | $ 111.2 | $ 107.6 | |||
(Increase) decrease in value of hotel property (1) | $ — | $ — | $ (3.6) | $ — | |||
Adjustment for equity accounted joint ventures (2) | $ 0.4 | $ 0.9 | $ 1.7 | $ 1.6 | |||
Adjustment for capitalized interest related to equity accounted joint ventures (2) | $ 0.9 | $ 0.7 | $ 1.7 | $ 1.4 | |||
Incremental leasing costs (3) | $ 1.8 | $ 1.4 | $ 3.8 | $ 3.0 | |||
Amortization expense (4) | $ 0.1 | $ 0.1 | $ 0.2 | $ 0.3 | |||
Transaction costs (5) | $ — | $ — | $ — | $ 0.6 | |||
Increase (decrease) in value of Exchangeable Units (6) | $ (0.1) | $ (0.3) | $ (0.1) | $ (0.4) | |||
Increase (decrease) in value of unit-based compensation (7) | $ (3.5) | $ (8.9) | $ (5.9) | $ (9.3) | |||
Investment property selling costs (1) | $ 1.4 | $ 0.3 | $ 1.5 | $ 1.0 | |||
Deferred income taxes (recovery) (1) | $ (12.7) | $ 0.1 | $ (12.8) | $ 8.0 | |||
FFO | $ 63.8 | $ 61.2 | $ 117.3 | $ 116.0 |
(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 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) | 1,451.3 | 1,235.8 | ||
Credit facilities (1) | 985.8 | 1,098.2 | ||
Senior unsecured debentures | 1,900.0 | 1,900.0 | ||
Total Debt (1) | $ 4,337.1 | $ 4,235.6 | ||
Cash and cash equivalents (1) | (141.6) | (39.8) | ||
Net Debt (1) (2) | $ 4,195.5 | $ 4,195.8 | ||
Exchangeable Units | 0.9 | 1.0 | ||
Equity market capitalization (3) | 3,102.3 | 3,589.2 | ||
Enterprise value (1) | $ 7,298.7 | $ 7,786.0 | ||
Trust Units outstanding (000's) | 212,197 | 213,518 | ||
Closing market price | $ 14.62 | $ 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 | Six months ended | |||||
2023 | 2022 | 2023 | 2022 | ||||
Net income (loss) attributable to Unitholders | $ (29.0) | $ (42.1) | $ 19.7 | $ 2.4 | |||
Add (deduct) (1): | |||||||
Deferred income tax expense (recovery) | (12.7) | 0.1 | (12.8) | 8.0 | |||
Interest Expense | 39.7 | 37.8 | 78.0 | 74.5 | |||
Amortization expense | 1.6 | 2.2 | 4.3 | 4.4 | |||
(Increase) decrease in value of investment properties | 104.5 | 109.2 | 111.2 | 107.6 | |||
(Increase) decrease in value of hotel property | — | — | (3.6) | — | |||
Increase (decrease) in value of Exchangeable Units | (0.1) | (0.3) | (0.1) | (0.4) | |||
Increase (decrease) in value of unit-based compensation | (3.5) | (8.9) | (5.9) | (9.3) | |||
Incremental leasing costs | 1.8 | 1.4 | 3.8 | 3.0 | |||
Abandoned transaction (costs) recovery | — | — | — | 0.1 | |||
Other non-cash and/or non-recurring items | 0.7 | 3.4 | 0.9 | 11.5 | |||
Adjusted EBITDA (1) | $ 103.0 | $ 102.8 | $ 195.4 | $ 201.5 |
(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
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