KEY HIGHLIGHTS FROM THE FIRST QUARTER:
- Operating FFO per unit of
$0.36 - Strong leasing activity, including lease renewal spreads of 11%
- Improved Net Debt to EBITDA ratio to 9.3x
"The strong fundamentals underpinning
"The first quarter of 2024 was characterized by healthy leasing metrics, solid earnings growth and a stronger balance sheet, all of which will serve us well as we look ahead."
SELECTED FINANCIAL INFORMATION | Three months ended | |
2024 | 2023 | |
Operating FFO ($ millions) (1)(2) | ||
FFO ($ millions) (1) | ||
Operating FFO per diluted unit (1)(2) | ||
Other gains and (losses) included in FFO per diluted unit (1) | ||
FFO per diluted unit (1) | ||
Total Same Property NOI growth (1)(3) | 7.8 % | 4.0 % |
Total portfolio occupancy (4) | 96.2 % | 96.2 % |
Total Same Property occupancy (1)(4) | 96.2 % | 96.2 % |
Increase (decrease) in value of investment properties, net (1) | ( | |
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) | 213,988 | 215,262 |
(1) | Refer to "Non-IFRS Financial Measures" section of this press release. |
(2) | For the three months ended |
(3) | Prior periods as reported; not restated to reflect current period categories. |
(4) | As at |
FIRST QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
- Same Property NOI Growth: Total Same Property NOI increased 7.8% over the prior year period, inclusive of a
$5.5 million settlement with Nordstrom with respect to the early termination of its lease at OneBloor East inJune 2023 . Same Property NOI excluding bad debt expense (recovery) and lease termination fees increased 2.3%, primarily due to higher base rent in the first quarter of 2024 relative to the first quarter of 2023 and despite the trailing effects of Nordstrom's departure which adversely impacted growth in the quarter by approximately 140 basis points. Notwithstanding this short-term impact, OneBloor East is now 100% leased to an exceptional roster of tenants. - Portfolio Occupancy: On a quarter-over-quarter and year-over-year basis, total portfolio occupancy was stable at 96.2%, respectively.
- Lease Renewal Rate Increase: Net rental rates increased 11.0% on a volume of 466,000 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 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 1.2% or
$0.28 per square foot over the prior quarter to a record$23.62 per square foot, primarily due to tenant openings, net of closures, rent escalations and renewal lifts. - Property Investments:
First Capital invested approximately$78 million into its properties during the first quarter, primarily through development, redevelopment and the acquisition of the remaining 50% interest in Seton Gateway. Located inCalgary, Alberta on a 12.4 acre site within the Seton master-planned community, Seton Gateway is a 128,000 square foot open-air shopping centre that is anchored by a 45,000 square footSave-On-Foods store and a 18,500 square footShoppers Drug Mart . Across a strong roster of 25 necessity based tenants, Seton Gateway is 100% occupied and is expected to benefit from continued strong population growth in its trade-area over the foreseeable future. - Property Dispositions: Consistent with the capital allocation objective of crystallizing created value in certain development and density sites, and select income properties that are not multi-tenant grocery-anchored shopping centres,
First Capital completed approximately$147 million of previously announced property sales during the quarter. Dispositions included (i) the 50% interest in the Royal Orchard development site, located inThornhill, ON , (ii) Yonge-Davis Centre, located inNewmarket, ON , (iii) Circa Residences (68 residential rental suites), located inRichmond, BC , (iv) a 41.7% interest in1071 King St. W. , located inToronto, ON (reducing FCR's interest to 25%) and, (v)71 King St. W. , a small medical office building located inMississauga, ON . $300 Million Series B Senior Unsecured Debenture Offering: OnMarch 1, 2024 ,First Capital completed the issuance of$300 million aggregate principal amount of Series B senior unsecured debentures (the "Debentures") on a private placement basis. The Debentures were issued at par, bear interest at a rate of 5.572% per annum and mature onMarch 1, 2031 . Inclusive of the benefit of bond forward hedges, the REIT's all-in interest rate on the Debentures is 5.481% per annum. During the quarter, net proceeds from the offering were used to repay$250 million of floating rate unsecured term loans and for general Trust purposes.- Balance Sheet and Liquidity:
First Capital's March 31, 2024 net debt to Adjusted EBITDA multiple was 9.3x, an improvement from 9.9x atDecember 31, 2023 .First Capital's March 31, 2024 liquidity position was$867 million , including$698 million of availability on revolving credit facilities and$169 million of cash on a proportionate basis. - Operating FFO per Diluted Unit of
$0 .36: Operating Funds from Operations increased$24.3 million , or$0.11 per unit, over the prior year period. Supported by strong operating metrics and higher lease termination income, Operating FFO for the first quarter of 2024 also includes a$9.5 million ($0.04 per unit) assignment fee related to a small development parcel located inMontreal . Prior year Operating FFO for the first quarter of 2023 includes approximately$7 million ($0.03 per unit) of expenses related to unitholder activism. - FFO per Diluted Unit of
$0 .38: Funds From Operations of$81.6 million increased$28.1 million , or$0.13 per unit, over the prior year period. The increase was driven by higher Operating FFO of$24.3 million and a year-over-year increase in other gains (losses) and (expenses) of$3.8 million . - Net Income (Loss) Attributable to Unitholders: For the three months ended
March 31, 2024 ,First Capital recognized net income (loss) attributable to Unitholders of$74.8 million or$0.35 per diluted unit compared to$48.7 million or$0.23 per diluted unit for the prior year period. The increase in net income over prior year was primarily due to a year-over-year increase in NOI and interest & other income, collectively totaling$18.8 million on a proportionate basis, as well as an increase in the fair value of investment properties of$8.7 million . - Advancing ESG initiatives:
First Capital continued to demonstrate leadership in Environmental, Social and Governance ("ESG") matters throughout the first quarter, which included the following highlights:- Named one of "
Canada's Top Small and Medium Employers" for 2024 - Recognized by the Globe and Mail as one of "
Greater Toronto's Top Employers" for 2024 - Included in the Globe and Mail's "2024 Report on Business Women Lead Here" list
- Selected for inclusion in "The Career Directory" for 2024 as one of
Canada's Best Employers for recent graduates - Awarded "Gold 2024 Green Lease Leader Recognition" by the
Institute for Market Transformation (IMT) and theU.S. Department of Energy's Better Building Alliance - Listed as a top 30 Canadian company in Sustainalytics 'Road to Net Zero' Ranking for our strong low carbon transition rating management score
- Named one of "
FINANCIAL AND OTHER HIGHLIGHTS
As at | ||||
($ millions) | 2024 | 2023 | 2023 | |
Total assets (1) | ||||
Assets held for sale (1) | ||||
Unencumbered assets (2) | ||||
Net Asset Value per unit | ||||
Net debt to total assets (2)(3) | 44.9 % | 44.6 % | 45.0 % | |
Net debt to Adjusted EBITDA (2) | 9.3x | 10.4x | 9.9x | |
Weighted average term of fixed-rate debt (years) (2) | 3.3 | 3.5 | 3.3 |
(1) | Presented in accordance with IFRS. |
(2) | Reflects joint ventures proportionately consolidated. |
(3) | Total assets excludes cash balances. |
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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.
Operating Funds from Operations ("OFFO")
In addition to REALPAC FFO described above, Management also discloses OFFO. Management considers OFFO as its key operating performance measure that, when compared period over period, reflects the impact of certain factors on its core operations, such as changes in net operating income, interest expense, corporate expenses and interest and other income. OFFO excludes the impact of the items in other gains (losses) and (expenses) that are not considered part of
A reconciliation from net income (loss) attributable to Unitholders to FFO and OFFO can be found in the table below:
Three months ended | 2024 | 2023 | ||
Net income (loss) attributable to Unitholders | $ 74.8 | $ 48.7 | ||
Add (deduct): | ||||
(Increase) decrease in value of investment properties (1) | $ (2.1) | $ 6.6 | ||
(Increase) decrease in value of hotel property (1) | $ — | $ (3.6) | ||
Adjustment for equity accounted joint ventures (2) | $ 0.2 | $ 1.4 | ||
Adjustment for capitalized interest related to equity accounted joint ventures (2) | $ 1.0 | $ 0.8 | ||
Incremental leasing costs (3) | $ 2.0 | $ 2.0 | ||
Amortization expense (4) | $ — | $ 0.1 | ||
Increase (decrease) in value of Exchangeable Units (5) | $ — | $ (0.1) | ||
Increase (decrease) in value of unit-based compensation (6) | $ 2.3 | $ (2.5) | ||
Investment property selling costs (1) | $ 2.3 | $ 0.1 | ||
Deferred income taxes (recovery) (1) | $ 1.2 | $ (0.2) | ||
FFO | $ 81.6 | $ 53.5 | ||
Other gains (losses) and (expenses) (7) | $ (3.6) | $ 0.2 | ||
OFFO | $ 78.1 | $ 53.7 |
(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) | At FCR's proportionate interest, adjusted to exclude investment property selling costs 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) | ||||
Mortgages (1) | $ 1,423.1 | $ 1,432.6 | ||
Credit facilities (1) | 920.1 | 1,151.2 | ||
Senior unsecured debentures | 1,900.0 | 1,600.0 | ||
Total Debt (1) | $ 4,243.3 | $ 4,183.8 | ||
Cash and cash equivalents (1) | (168.9) | (92.5) | ||
Net Debt (1) (2) | $ 4,074.3 | $ 4,091.3 | ||
Equity market capitalization (3) | 3,334.3 | 3,254.9 | ||
Enterprise value (1) | $ 7,408.7 | $ 7,346.2 | ||
Trust Units outstanding (000's) | 212,242 | 212,184 | ||
Closing market price | $ 15.71 | $ 15.34 |
(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 (loss), 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:
Three months ended | 2024 | 2023 | |
Net income (loss) attributable to Unitholders | $ 74.8 | $ 48.7 | |
Add (deduct) (1): | |||
Deferred income tax expense (recovery) | 1.2 | (0.2) | |
Interest Expense | 40.1 | 38.3 | |
Amortization expense | 0.8 | 2.7 | |
(Increase) decrease in value of investment properties | (2.1) | 6.6 | |
(Increase) decrease in value of hotel property | — | (3.6) | |
Increase (decrease) in value of Exchangeable Units | — | (0.1) | |
Increase (decrease) in value of unit-based compensation | 2.3 | (2.5) | |
Incremental leasing costs | 2.0 | 2.0 | |
Other non-cash and/or non-recurring items | (1.3) | 0.3 | |
Adjusted EBITDA (1) | $ 117.8 | $ 92.4 |
(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 three-year Strategic Roadmap - Discipline|Stability|Growth. These forward-looking statements are not historical facts but, rather, reflect
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