FIRST CAPITAL REIT ANNOUNCES STRONG FOURTH QUARTER 2023 RESULTS ALONG WITH $116M OF NEW PROPERTY DISPOSITIONS AND LEASE COMMITMENTS FOR 100% OF ONE BLOOR EAST

TORONTO, Feb. 6, 2024 /CNW/ – First Capital Real Estate Investment Trust (“First Capital”, “FCR”, or the “Trust”) (TSX:FCR), announced financial results for the fourth quarter and year ended December 31, 2023. The 2023 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.sedarplus.ca.

KEY HIGHLIGHTS FROM THE FOURTH QUARTER:

Strong leasing activity, including lease renewal spreads of 13.5%
FFO per unit excluding Other Gains and (Losses) of $0.32
Improved Net Debt to EBITDA ratio to 9.8x
$116 million of new disposition announcements

“First Capital’s leading grocery-anchored portfolio delivered strong results with full-year 2023 lease renewal spreads accelerating to 12.1%, increased portfolio occupancy of 96.2% and an all-time high average in-place rent of $23.34 per square foot,” said Adam Paul, President and CEO.

“In the quarter we also advanced our Portfolio Optimization Plan, announcing new asset sales of $116 million at a significant premium to their carrying value.” Mr Paul continued, “More importantly, we are tracking ahead of targets with respect to the Plan’s key objectives of FFO per unit growth, while continuing to further strengthen FCR’s credit metrics.”

ENHANCED CAPITAL ALLOCATION & PORTFOLIO OPTIMIZATION PLAN

First Capital continues to execute on the Portfolio Optimization Plan to monetize over $1 billion by the end of 2024 of low-yielding assets where value enhancing goals have been achieved in order to reorient its portfolio by increasing short-to medium-term FFO growth while continuing to reduce debt. To date, First Capital has completed or has under firm agreement, approximately $633 million of dispositions under the Plan, with a cumulative in-place yield that is less than 3% and an average premium to IFRS carrying value of 21%.

During the quarter, FCR completed or entered into firm agreements for property dispositions of approximately $175 million, consisting of:

$58 million of previously announced dispositions completed during the quarter, including (i) a 25% interest in the Trust’s Yonge & Roselawn development site, Toronto, ON and (ii) a single tenant property located at 6455 West Boulevard, Vancouver, BC and
$116 million of new dispositions being announced today that are subject to firm agreements entered into by the Trust which include (i) it’s 50% interest in the Royal Orchard development site, located in Thornhill, ON, (ii) Circa Residences (68 residential rental suites), located in Richmond, BC, (iii) a 41.7% interest in 1071 King St. W., located in Toronto, ON reducing FCR’s interest to 25% and, (iv) 71 King St. W., a small medical office building located in Mississauga, ON. The aggregate sales price of these four properties reflects a 68% premium to their IFRS carrying value. The property sales are subject to all-cash purchase agreements with scheduled closing dates ranging from January to March 2024.

A summary of announced dispositions under the Optimization Plan is provided in the table below:

FOURTH QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS

Same Property NOI Growth: Total Same Property NOI decreased 1.8% over the prior year period, while Same Property NOI growth excluding bad debt expense (recovery) and lease termination fees increased 3.3%. The decline in Total Same Property NOI related primarily to a reduced contribution of $3.1 million from lease termination fees and lower bad debt recoveries in the fourth quarter of 2023 relative to the fourth quarter of 2022. Same Property NOI growth excluding bad debt expense (recovery) and lease termination fees benefited from higher current and prior year operating cost and realty tax recoveries and the positive impact of portfolio leasing activity, offset partially by ongoing vacancy related to the former Nordstrom Rack space at One Bloor East, which adversely impacted growth in the fourth quarter by 140 basis points. Notwithstanding this short-term impact, One Bloor East is now 100% leased to an exceptional roster of tenants, including AVANT by Altea Active (32,000 sf), Nike and Mango (20,300 sf), The Ballroom (18,300 sf), The Bank of Nova Scotia (8,000 sf) and Chick-fil-A (4,600 sf).
Portfolio Occupancy: On a quarter-over-quarter basis, total portfolio occupancy increased by 0.3%, to 96.2% at December 31, 2023, from 95.9% at September 30, 2023.
Lease Renewal Rate Increase: Net rental rates increased 13.5% on a volume of 672,000 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 15.9% 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 1.1% or $0.26 per square foot over the prior quarter to a record $23.34 per square foot, primarily due to tenant openings, net of closures, rent escalations and renewal lifts.
Property Investments: First Capital invested approximately $56 million into its properties during the fourth quarter, primarily through development and redevelopment.
Balance Sheet and Liquidity: Excluding non-recurring costs related to Unitholder activism, First Capital’s December 31, 2023 net debt to Adjusted EBITDA multiple was 9.8x, an improvement from 10.1x at December 31, 2022. First Capital’s December 31, 2023 liquidity position was $790 million, including $698 million of availability on revolving credit facilities and $92 million of cash on a proportionate basis.
FFO per Diluted Unit of $0.27: Funds From Operations of $58.0 million decreased $22.5 million, or $0.10 per unit, over the prior year period. The decrease was driven by a year-over-year decrease in other gains (losses) and (expenses), totaling $22.4 million ($0.10 per unit) which included a $13.2 million increase in unrealized mark to market (non-cash) losses on derivatives related to certain debt instruments in the fourth quarter of 2023 and the recognition of a net hedging gain of $12.8 million in the fourth quarter of 2022. FFO per unit excluding other gains (losses) and (expenses) was consistent with the prior year period at $0.32.
Net Income (Loss) Attributable to Unitholders: For the three months ended December 31, 2023, First Capital recognized net income (loss) attributable to Unitholders of $173.8 million or $0.81 per diluted unit compared to $42.4 million or $0.20 per diluted unit for the prior year period. The increase in net income over prior year …

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