\n
First Capital Real Estate Investment Trust<\/strong>, announced financial results for the fourth quarter and year ended December\u00a031, 2024<\/strong>. <\/p>\nThe REIT described the results as \u201cstrong.\u201d<\/p>\n
First Capital owns, operates and develops grocery-anchored, open-air centres in neighbourhoods with the strongest demographics in\u00a0Canada.<\/p>\n
KEY HIGHLIGHTS FROM THE FOURTH QUARTER:<\/strong><\/p>\n\n- Same Property NOI growth of 3.4%, excluding bad debt expense (recovery) and lease termination fees<\/li>\n
- Strong leasing activity, including lease renewal spreads of 12.7%<\/li>\n
- Total portfolio occupancy of 96.8%, representing an increase of 60 basis points year-over-year<\/li>\n
- Announced a 3% increase to monthly distributions on\u00a0December 16, 2024, effective\u00a0January 2025<\/li>\n<\/ul>\n
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Adam Paul<\/figcaption><\/figure>\n<\/div>\n\u201cEarly in 2024, we outlined our strategic plan to investors. I am pleased to say that we are tracking well against the metrics we presented and remain well positioned to achieve our three-year objectives,\u201d said\u00a0Adam Paul, President and CEO<\/strong>.<\/p>\n\u201cTouching specifically on two key metrics, FCR delivered 2024 normalized OFFO per unit growth of nearly 6% (15% reported) in 2024 versus the plan\u2019s annual average target of at least 3%.<\/p>\n
\u201cTurning to the balance sheet, debt to EBITDA also improved significantly throughout 2024 and is similarly tracking well against our plan.\u201d<\/p>\n
Here\u2019s some of the highlights of the financial results, according to the REIT.<\/p>\n
FOURTH QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS<\/strong> <\/p>\n\n- Same Property NOI Growth:\u00a0<\/strong>Total Same Property NOI increased 2.7% over the prior year period. Same Property NOI excluding bad debt expense (recovery) and lease termination fees increased 3.4%. The growth was primarily due to higher base rent.<\/li>\n
- Portfolio Occupancy:\u00a0<\/strong>On a quarter-over-quarter basis, total portfolio occupancy increased 0.3% to 96.8% at\u00a0December 31, 2024, from 96.5% at\u00a0September 30, 2024.<\/li>\n
- Lease Renewal Rate Increase<\/strong>: Net rental rates increased 12.7% on a volume of 749,000 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 18.5% when comparing the average rental rate over the renewal term to the rental rate in the last year of the expiring term owing to higher contractual growth rates negotiated for the renewed lease terms.<\/li>\n
- Average Net Rental Rate<\/strong>: The portfolio average net rental rate increased by 0.6% or\u00a0$0.15\u00a0per square foot over the prior quarter to a record\u00a0$24.00\u00a0per square foot, primarily due to renewal lifts and rent escalations.<\/li>\n
- Property Investments:<\/strong>\u00a0First Capital invested approximately\u00a0$57 million\u00a0into its properties during the fourth quarter, primarily through development and redevelopment.<\/li>\n
- Property Dispositions:\u00a0<\/strong>During the fourth quarter, First Capital continued to execute on its strategy, with\u00a0$105 million\u00a0of dispositions completed or under firm agreement, including (i) 1629-1633 The Queensway,\u00a0Etobicoke\u00a0(ii) its 50% interest in 200 West Esplanade,\u00a0North Vancouver\u00a0and (iii)\u00a0Sheridan Plaza,\u00a0Toronto\u00a0which is an all cash transaction and scheduled to close by the end of the first quarter of 2025.<\/li>\n
- Balance Sheet and Liquidity<\/strong>: First Capital\u2019s\u00a0December 31, 2024\u00a0net debt to Adjusted EBITDA multiple was 8.7x, an improvement from 9.9x at\u00a0December 31, 2023. First Capital\u2019s\u00a0December 31, 2024\u00a0liquidity position was approximately\u00a0$0.9 billion, including\u00a0$698 million\u00a0of availability on revolving credit facilities and\u00a0$159 million\u00a0of cash on a proportionate basis.<\/li>\n
- Operating FFO per Diluted Unit of\u00a0$0.32:<\/strong>\u00a0Operating Funds from Operations of\u00a0$67.7 million, or\u00a0$0.32\u00a0per unit, remained consistent with prior year. On a year-over-year basis, NOI increased\u00a0$5.1 million, or\u00a0$0.02\u00a0per unit, primarily driven by higher base rent, largely offset by higher interest expense and corporate G&A for a total of\u00a0$4.8 million, or\u00a0$0.02\u00a0per unit.<\/li>\n
- FFO per Diluted Unit of\u00a0$0.31:\u00a0<\/strong>Funds From Operations of\u00a0$67.5 million\u00a0increased\u00a0$9.4 million, or\u00a0$0.04\u00a0per unit, over prior year. The increase was primarily driven by a year-over-year increase in other gains (losses) and (expenses) of\u00a0$9.5 million. These other gains (losses) and (expenses) are comprised primarily of mark-to-market (non-cash) gains and losses related to derivative financial instruments employed by First Capital to reduce its borrowing costs and fix the rate of interest on certain variable-rate term loans. Over the life of each loan, the cumulative gain or loss on the related derivative instruments is expected to net to $Nil.<\/li>\n
- Announced 3% Distribution Increase:\u00a0<\/strong>On\u00a0December 16, 2024, the REIT\u2019s Board of Trustees approved a 3.0% distribution increase to a monthly rate of\u00a0$0.074167\u00a0per unit from\u00a0$0.072\u00a0formerly. Equating to an annualized rate of\u00a0$0.89\u00a0per unit, the increase was effective for the January distribution to unitholders of record as of\u00a0January 31, 2025, and will be paid on\u00a0February 18, 2025.<\/li>\n
- Net Income (Loss) Attributable to Unitholders:\u00a0<\/strong>For the three months ended\u00a0December 31, 2024, First Capital recognized net income (loss) attributable to Unitholders of\u00a0$32.1 million\u00a0or\u00a0$0.15\u00a0per diluted unit compared to\u00a0$173.8 million\u00a0or\u00a0$0.81\u00a0per diluted unit for the prior year period. The decrease in net income over prior year was primarily due to a\u00a0$167.6 million\u00a0increase in the fair value of investment property in the fourth quarter of 2023 versus a\u00a0$3.6 million\u00a0increase in fair value recognized in the fourth quarter of 2024, on a proportionate basis.<\/li>\n<\/ul>\n
ANNUAL OPERATIONAL AND FINANCIAL HIGHLIGHTS<\/strong><\/p>\n\n- Same Property NOI Growth<\/strong>: Total Same Property NOI increased 4.4% over prior year, inclusive of a\u00a0$5.5 million\u00a0settlement with Nordstrom with respect to the early termination of its lease at One Bloor East in\u00a0June 2023. Same Property NOI excluding bad debt expense (recovery) and lease termination fees increased 3.3%, primarily due to higher base rent in 2024 relative to 2023.<\/li>\n
- Portfolio Occupancy:\u00a0<\/strong>On a year-over-year basis, total portfolio occupancy increased by 0.6%, to 96.8% at\u00a0December 31, 2024, from 96.2% at\u00a0December 31, 2023.<\/li>\n
- Lease Renewal Rate Increase<\/strong>: Net rental rates increased 12.5% on 2,372,000 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 during 2024 increased 17.3% when comparing the average rental rate over the renewal term to the rental rate in the last year of the expiring term primarily owing to higher contractual growth rates negotiated for the renewed lease terms.<\/li>\n
- Growth in Average Net Rental Rate<\/strong>: The portfolio average net rental rate increased\u00a0$0.66\u00a0to a record\u00a0$24.00\u00a0per square foot representing year over year growth of 2.8%. The strong growth was primarily due to rent escalations, renewal lifts, acquisitions and dispositions.<\/li>\n
- Property Investments:<\/strong>\u00a0First Capital invested approximately\u00a0$223 million\u00a0into its properties during 2024, primarily through development, redevelopment and the acquisition of the remaining 50% interest in Seton Gateway.<\/li>\n
- Property Dispositions:\u00a0<\/strong>During 2024, First Capital completed or entered into firm agreements for\u00a0$317 million\u00a0of property disposition and related transactions. Reflecting FCR\u2019s disciplined approach to asset sales, the collective transaction values equated to an in-place yield that is less than 3% and an average premium to IFRS carrying value of more than 50%. FCR remains on track to meet the key objectives of its three-year business plan, where the ongoing disposition of development sites and select low-yielding income properties will be an important contributor. As at\u00a0December 31, 2024, the Trust classified\u00a0$197 million\u00a0of investment properties as held for sale.<\/li>\n
- Advancing ESG initiatives:<\/strong>\u00a0First Capital continued to demonstrate leadership in Environmental, Social and Governance (\u201cESG\u201d) matters throughout 2024, which included the following highlights:\n
\n- Recognized by the Globe and Mail as one of \u201cGreater Toronto\u2019s\u00a0Top Employers\u201d for 2024<\/li>\n
- Named one of \u201cCanada\u2019s\u00a0Top Small and Medium Employers\u201d for 2024<\/li>\n
- Included in the Globe and Mail\u2019s \u201c2024 Report on Business Women Lead Here\u201d list<\/li>\n
- Selected for inclusion in \u201cThe Career Directory\u201d for 2024 as one of\u00a0Canada\u2019s\u00a0Best Employers for recent graduates<\/li>\n
- Highest ranked public REIT in the Globe and Mail\u2019s comprehensive ranking of\u00a0Canada\u2019s\u00a0corporate boards for 2024<\/li>\n
- Awarded \u201cGold 2024 Green Lease Leader Recognition\u201d by the Institute for Market Transformation (IMT) and the U.S. Department of Energy\u2019s Better Building Alliance<\/li>\n
- Only REIT listed as a top 30 Canadian company in Sustainalytics \u2018Road to Net Zero\u2019 Ranking for our strong low carbon transition rating management score<\/li>\n
- Achieved a 19% reduction in Scope 1 & 2 absolute GHG emissions since 2019 base year (2019 to 2023)<\/li>\n
- Hosted our second Collaboration for Climate Action Forum in\u00a0November 2024, bringing together major retail tenants and peer landlords for a solutions focused discussion around the decarbonization of retail buildings in\u00a0Canada<\/li>\n
- Unveiled a new public art installation at Centre Wilderton in\u00a0Montreal\u00a0titled \u201cJASPER\u201d by\u00a0Michel Archambault\u00a0as part of FCR\u2019s long running Art Program which now stands at 33 public art installations across the portfolio<\/li>\n
- Raised more than\u00a0$400,000\u00a0for Community Food Centres Canada through FCR\u2019s Thriving Neighbourhoods Foundation in 2024<\/li>\n<\/ul>\n<\/li>\n
- Operating FFO per Diluted Unit of\u00a0$1.36:<\/strong>\u00a0Operating Funds from Operations of\u00a0$291.0 million\u00a0increased\u00a0$37.7 million\u00a0, or\u00a0$0.18\u00a0per unit, over prior year. The increase was primarily due to higher NOI of\u00a0$23.1 million\u00a0driven by base rent, straight-line rent and lease termination fees, partially offset by higher interest expense of\u00a0$11.4 million\u00a0due to the increased activity of debenture issuances in 2024 and higher interest rates. Additionally, interest and other income increased\u00a0$21.9 million\u00a0owing to the recognition of a\u00a0$9.5 million\u00a0assignment fee related to a small development parcel located in\u00a0Montreal\u00a0as well as a density bonus payment of\u00a0$11.3 million\u00a0in connection with a previously sold property, recognized in the first and third quarters of 2024, respectively.<\/li>\n
- FFO per Diluted Unit of\u00a0$1.35:\u00a0<\/strong>Funds from Operations of\u00a0$289.7 million\u00a0increased\u00a0$45.7 million, or\u00a0$0.21\u00a0per unit, over the prior year. The increase was primarily driven by higher Operating FFO of\u00a0$37.7 million\u00a0and a year-over-year increase in other gains (losses) and (expenses) of\u00a0$8.0 million.<\/li>\n
- Net Income (Loss) Attributable to Unitholders:\u00a0<\/strong>For the year ended\u00a0December 31, 2024, First Capital recognized net income (loss) attributable to Unitholders of\u00a0$204.9 million\u00a0or\u00a0$0.96\u00a0per diluted unit compared to\u00a0($134.1) million\u00a0or\u00a0($0.63)\u00a0per diluted unit for the prior year. The increase in net income was primarily due to a\u00a0$376.4 million\u00a0decrease in the fair value of investment property for the year ended 2023 versus a\u00a0$49.6 million\u00a0decrease in fair value recognized during the year ended 2024, on a proportionate basis.<\/li>\n<\/ul>\n
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