Toronto, Ontario (August 7, 2012)– First Capital Realty Inc. (“First Capital Realty”) (TSX: FCR) Canada’s leading owner, developer and operator of supermarket and drugstore anchored neighbourhood and community shopping centres, located predominantly in growing urban markets, announced today strong financial results for the three and six months ended June 30, 2012.
SIX MONTHS HIGHLIGHTS
|Six months ended June 30||$ millions|
|Debt to total assets – IFRS basis||44.3%||47.3%|
|Debt to total market capitalization||43.9%||45.2%|
|Property rental revenue||280.0||258.8|
|Net operating income (NOI)(1)||178.8||165.2|
|Six months ended June 30||$ millions||per share|
|Funds from Operations (FFO)(1)||$92.2||$77.4||$0.51||$0.47|
|FFO excluding other gains (losses) and (expenses)||$89.9||$77.1||$0.50||$0.47|
|Weighted average diluted shares for FFO (000’s)||181,192||165,567||-||-|
|Adjusted Funds from Operations (AFFO)(1)||$92.3||$81.7||$0.47||$0.44|
|AFFO excluding other gains (losses) and (expenses)||$91.0||$80.2||$0.46||$0.43|
|Weighted average diluted shares for AFFO (000’s)||198,661||186,957||-||-|
|Net income attributable to common shareholders||$221.1||$217.2||$1.15||$1.21|
|Weighted average common shares – diluted (000’s)||198,661||186,957||-||-|
(1) See“Non-IFRSSupplemental Financial Measures” section of this press release
SECOND QUARTER HIGHLIGHTS
|Three months ended June 30||$ millions||per share|
|Property rental revenue||$140.7||$77.4|
|Net operating income (NOI) (1)||$91.1||$77.1||-||-|
|Funds from Operations (FFO)(1)||$47.9||165,567||$0.26||$0.23|
|FFO excluding other gains (losses) and (expenses)||$45.8||$80.2||$0.25||$0.24|
|Weighted average diluted shares for FFO (000’s)||181,906||186,957||-||-|
|Adjusted Funds from Operations (AFFO)(1)||$47.8||$217.2||$0.24||$0.22|
|AFFO excluding other gains (losses) and (expenses)||46.3||186,957||$0.23||$0.22|
|Weighted average diluted shares for AFFO (000’s)||200,311||-||-|
(1)See“Non-IFRSSupplemental Financial Measures” section of this press release
"This quarter and the next three is the busiest period in the Company’s history” said Dori J. Segal, President & CEO, "We are completing a large scale development pipeline, recycling capital into supply constrained markets and continuing to strengthen our overall capital position.”
|Three months ended June 30||Six months ended June 30|
|($ millions, except per share amounts)||2012||2011||2012||2011|
|Net income attributable to common shareholders||$122.0||$168.7||$221.1||$217.2|
|Net income per share attributable to
common shareholders (diluted)
|Weighted average common shares – diluted
Net income attributable to common shareholders for the three months ended June 30, 2012 was $122.0 million or $0.63 per share (diluted) compared to $168.7 million or $0.92 per share (diluted) for the three months ended June 30, 2011. Net income attributable to common shareholders for the six months ended June 30, 2012 was $221.1 million or $1.15 per share (diluted) compared to $217.2 million or $1.21 per share diluted for the six months ended June 30, 2011.
For the three months ended June 30, 2012, the decrease in net income is primarily due to the smaller increase in the value of investment properties in 2012 as compared to the prior year ($110.5 million for the three months ended June 30, 2012 compared to $163.5 million for the same prior year period) as well as increases in interest expense, corporate expenses and deferred income tax expense relating to the freeze during the second quarter of 2012 in the reduction of the income tax rate by the Province of Ontario on its general corporate income taxes. The decrease in net income was partially offset by the increase in NOI resulting from acquisitions, development and redevelopment projects coming on line and same property NOI growth. The increased weighted average number of common shares outstanding resulting from various financing activities also contributed to the decrease in net income per share attributable to common shareholders.
For the six months ended June 30, 2012, the increase in net income is primarily due to the increase in NOI resulting from acquisitions, development and redevelopment projects coming on line and same property NOI growth, partially offset by the increases in interest expense, corporate expenses and deferred income tax expense. The increased weighted average number of common shares outstanding resulting from various financing activities also contributed to the decrease in net income per share attributable to common shareholders.
FFO AND AFFO
In the second quarter of 2012, FFO increased to $47.9 million or $0.26 per share (diluted) from $38.0 million or $0.23 per share (diluted) in the same prior year period. In the second quarter, FFO included other net gains of $2.0 million compared to other net losses of $1.2 million in the same prior year period.Year-to-date,FFO increased to $92.2 million or $0.51 per share (diluted) from $77.4 million or $0.47 per share (diluted).Year-to-date,FFO included other net gains of $2.4 million compared to other net gains of $0.2 million in the six months ended June 30, 2011. The increase in FFO is primarily due to the increase in NOI resulting from acquisitions, development and redevelopment projects coming on line, same property NOI growth, increased interest income as well as higher othernon-recurringgains. The effect of the increase in NOI was partially offset by increases in interest expense, and corporate expenses primarily relating to staffing costs. The increase in the FFO per share amount was also partially offset by an increase in the weighted average number of common shares outstanding resulting from various financing activities.
AFFO was $47.8 million or $0.24 per share (diluted) in the second quarter of 2012 compared to $41.5 million or $0.22 per share (diluted) in the same prior year period. AFFO included $1.6 million of other net gains in the quarter compared to $0.3 million of other net gains for the same prior year period. AFFO was $92.3 million or $0.47 per share (diluted) in the six months ended June 30, 2012 compared to $81.7 million or $0.44 per share (diluted) in the same prior year period. AFFO included $1.3 million of other net gains compared to $1.6 million of other net gains for the same prior year period.
AFFO is calculated by adjusting FFO fornon-cashand other items including interest payable in shares,straight-linerent adjustments,non-cashcompensation expense, actual costs incurred for capital expenditures and leasing costs for maintaining shopping centre infrastructures and revenues and other gains or losses. Gains or losses on land sales and residential inventory unitspre-salecosts are also excluded from AFFO. The weighted average number of diluted shares outstanding for AFFO is adjusted to assume conversion of the outstanding convertible debentures.
Refer to the Funds from Operations, Other Gains (Losses) and (Expenses), Adjusted Funds from Operations and Net Operating Income sections in Management’s Discussion and Analysis for further information.
FINANCING AND CAPITAL MARKET HIGHLIGHTS
The Company completed the following financing activities for the six months ended June 30, 2012:
The Company announced today that it will pay a third quarter dividend of $0.21 per common share on October 11, 2012 to shareholders of record on September 28, 2012.
Payment of Interest in Shares
The Company will pay the interest due on September 30, 2012 to holders of its 6.25%, 5.70%, 5.40%, 5.25% (due January 31, 2019), 5.25% (due March 31, 2018), 4.95% and 4.75% convertible unsecured subordinated debentures (FCR.DB.C, FCR.DB.D, FCR.DB.E, FCR.DB.F, FCR.DB.G, FCR.DB.H and FCR.DB.I) by the issuance of common shares. The number of common shares to be issued per $1,000 principal amount of debentures will be calculated by dividing the dollar amount of interest payable by an amount equal to 97% of thevolume-weightedaverage trading price of the common shares of First Capital Realty on the Toronto Stock Exchange calculated for the 20 consecutive trading days ending on September 24, 2012. The interest payment will be approximately $11.0 million based upon convertible debentures outstanding as of August 7, 2012.
On August 3, 2012 the Company issued 2.5 million units (consisting of one common share of the Company and one common share purchase warrant) at $18.75 per unit for gross proceeds of $46.9 million. Each warrant entitles the holder to acquire one common share of the Company at a price of $19.75 per share for a period of 12 months following closing.
Acquisitions and Dispositions Subsequent to June 30, 2012
Redemption of Series D Senior Unsecured Debentures
On July 30, 2012, the Company announced that it has provided notice to holders of its outstanding 5.34% Series D senior unsecured debentures due April 1, 2013 (the “Debentures”) in respect of the redemption in full of the $97 million outstanding principal amount of the Debentures.
The Company has established August 29, 2012 as the redemption date. On the redemption date, the Debentures will be redeemed at a price of $1,023.33 for each $1,000 principal amount of Debentures outstanding, consisting of the Canada Yield Price (as defined in the trust Indenture pursuant to which the Debentures were issued) calculated on July 30, 2012, and will thereafter cease to be outstanding. In addition, accrued but unpaid interest will be paid on the Debentures to but excluding the redemption date.
Q2 2012 GUIDANCE
The purpose of the Company’s guidance is to provide Management’s view as to the expected financial performance of the Company using factors that are commonly accepted, and viewed as meaningful indicators of financial performance, in the real estate industry. A reconciliation of the Company’s current guidance to the previously provided guidance follows.
|(per share amounts, except for
projected FFO, AFFO and shares
as at Q2
as at Q1
|Projected diluted net income per
Projected fair value increase
and deferred income taxes
|Projected FFO per share||$0.97||$1.00||$0.96||$1.00||0.01||-|
|Projected FFO ($ millions)||$178.0||$183.4||$174.8||$182.1||$3.2||$1.3|
|Projected weighted average shares
outstanding for per share FFO
|Projected FFO ($ millions)||$178.0||$183.4||$174.8||$182.1||$3.2||$1.3|
|Projected weighted average shares
outstanding for per share AFFO
calculations (including conversion
of convertible debentures)
|Projected FFO per share (using
weighted average AFFO shares
|Projected revenue sustaining
Projected non-cash items, net
|Projected AFFO per share||$0.91||$0.94||$0.90||$0.94||0.01||-|
The variance in projected diluted net income per share from previous guidance to Q2 guidance primarily represents the actual increase in the value of investment properties recorded in the second quarter, net of associated deferred income taxes. The Company does not forecast changes in the values of investment properties when issuing guidance. These value changes are included in net income but not in FFO and AFFO.
Projections involve numerous assumptions such as rental income (including assumptions on timing oflease-up,development coming on line and levels of percentage rent), interest rates, tenant defaults, corporate expenses, the level and timing of acquisitions ofincome-producingproperties, investments in other real estate assets, the Company’s capital structure and share price, the number of shares outstanding and numerous other factors. Not all factors which affect our range of projected net income, funds from operations and adjusted funds from operations are determinable at this time; actual results may vary from the projected results in a material respect, and may be above or below the range presented in a material respect.
Q2 2012 guidance is based on the following operating activity assumptions inclusive ofyear-to-dateactivity:
Readers should refer to the section below titled“Forward-LookingStatements” for important information on risk factors.
For further information on management’s outlook and view on the business environment please refer to the “Outlook and Business Environment” section of the MD&A for the quarter ended June 30, 2012.
REGULATORY FILINGS AND ADDITIONAL INFORMATION
First Capital Realty’s financial statements and MD&A for the second quarter ended June 30, 2012 will be filed today on the Company’s website at www.firstcapitalrealty.cain the ‘Investors’ section, and on the Canadian Securities Administrators’ website at www.sedar.com.
MANAGEMENT CONFERENCE CALL AND WEBCAST
First Capital Realty invites you to participate in its live conference call with senior management announcing our second quarter results on Wednesday, August 8, 2012 at 11:00 a.m. (ET).
You can participate in the live conferencetoll-freeat866-696-5910or at416-340-2217.In order to ensure your participation, pleasedial-infive minutes prior to the scheduled start time of the call. The call will be archived through August 15, 2012 and can be accessed by dialing toll free800-408-3053or 905-694-9451with access code 6439641.
To access the webcast, go to First Capital Realty’s website at www.firstcapitalrealty.ca and click on the link for the webcast on our Home Page. The webcast will be archived on our home page for 30 days and can be accessed thereafter in the ‘Investors’ section of our website, under ‘Conference Calls’.
Management’s presentation will be followed by a question and answer period. To ask a question, press ‘1’ followed by ‘4’ on atouch-tonephone. The conference call coordinator is immediately notified of all requests in the order in which they are made, and will introduce each questioner. To cancel your request, press ‘1’ followed by ‘3’. If you hang up, you can reconnect by dialing866-696-5910or416-340-2217.For assistance at any point during the call, press ‘*0’.
ABOUT FIRST CAPITAL REALTY (TSX: FCR)
First Capital Realty is Canada’s leading owner, developer and operator of supermarket and drugstore anchored neighbourhood and community shopping centres, located predominantly in growing urban markets. The Company currently owns interests in 165 properties, including eight under greenfield development, totalling approximately 23.4 million square feet of gross leasable area and three sites in the planning stage for future retail development.
Non-IFRSSupplemental Financial Measures
First Capital Realty prepares and releases unaudited quarterly and audited consolidated annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, the Company also discloses and discusses certainnon-IFRSfinancial measures, including NOI, FFO and AFFO. Thesenon-IFRSmeasures are further defined and discussed in First Capital Realty’s MD&A for the quarter ended June 30, 2012, which should be read in conjunction with this news release. Since NOI, FFO and AFFO do not have standardized meanings prescribed by IFRS, they may not be comparable to similar measures reported by other issuers. The Company uses and presents thesenon-IFRSmeasures as Management believes they are commonly accepted and meaningful financial measures of operating performance in the real estate industry. A reconciliation of net income and suchnon-IFRSmeasures is included in the Company’s MD&A. Thesenon-IFRSmeasures should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS as measures of First Capital Realty’s operating performance.
This press release containsforward-lookingstatements and information within the meaning of applicable securities law.Forward-lookingstatements can be identified by the expressions “expects”, “believes”, “estimates”, “will”, “anticipates” and similar expressions.Forward-lookingstatements are not historical facts but reflect the Company’s current expectations regarding future results or events and are based on information currently available to Management. Certain material factors and assumptions were applied in providing theseforward-lookingstatements, including, without limitation, those set forth in the “2012 Guidance” section of this press release. Moreover, the assumptions underlying the Company’sforward-lookingstatements contained in the “2012 Guidance” section of this press release also include that consumer demand will remain stable, demographic trends will continue and there will continue to be barriers to entry in the markets in which the Company operates.
Management believes that the expectations reflected inforward-lookingstatements are based upon reasonable assumptions; however, Management can give no assurance that the actual results or developments will be consistent with theseforward-lookingstatements. Theseforward-lookingstatements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations, including the matters discussed under “Risks and Uncertainties” in First Capital Realty’s 2011 Annual Report and under “Risk Factors” in its current Annual Information Form. Factors that could cause actual results or events to differ materially from those expressed, implied or projected byforward-lookingstatements, in addition to those factors described in the aforementioned “Risks and Uncertainties” and “Risk Factors” sections, include, but are not limited to, general economic conditions, the availability of new competitive supply of retail properties which may become available either through construction or sublease, First Capital Realty’s ability to maintain occupancy and to lease orre-leasespace at current or anticipated rents, changes in interest rates and credit spreads, availability of debt and equity financing, tenant bankruptcies, tenant financial difficulties and defaults, unexpected costs or liabilities related to acquisitions, challenges associated with the integration of acquisitions into the Company, development and construction, environmental liability and compliance costs, the relative illiquidity of real property, legal matters, reliance on key personnel, changes in operating costs, First Capital Realty’s ability to obtain insurance coverage at a reasonable cost and changes in the U.S.– Canadian foreign currency exchange rate.
Readers, therefore, should not place undue reliance on any suchforward-lookingstatements. Further, aforward-lookingstatement speaks only as of the date on which such statement is made. First Capital Realty undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances except as required by applicable securities law.
Allforward-lookingstatements in this press release are made as of the date hereof and are qualified by these cautionary statements.
* * * *
For further information:
Dori J. Segal, President & CEO, or
Karen H. Weaver, Executive Vice President &
CFO First Capital Realty Inc.
85 Hanna Avenue, Suite 400
Toronto, Ontario, Canada M6K 3S3
TSX : FCR