Press Releases

FIRST CAPITAL REALTY ANNOUNCES SOLID Q2 2010 RESULTS

August 18, 2010

Also announces normal course issuer bid for each series of convertible debentures

Toronto, Ontario (August 6, 2010) – 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 metropolitan areas, announced today solid financial results for the three and six months ended June 30, 2010 as well as the filing of a notice of intention to commence a normal course issuer bid for each of its series of convertible unsecured subordinated debentures.

SIX MONTHS HIGHLIGHTS

Six Months Ended June 30 $ millions
  2010     2009
Enterprise value $ 4,840 $ 4,060
Debt to aggregate assets   51.4%   54.8%
Debt to total market capitalization   46.7%   56.4%
Property rental revenue $ 2352 $ 220.1
Net operating income (NOI) $ 150.6 $ 139.9

 

Six Months Ended June 30 $ millions per share
  2010   2009     2010   2009

Funds from operations (FFO) - Core Operations

$ 73.1 $ 71.0 $ 0.47 $ 0.48

FFO - EQY and Other Non-Recurring Items(1)

  0.6   6.3   0.00   0.05
Total FFO $ 73.7 $ 77.3 $ 0.47 $ 0.53
Weighted average diluted shares for FFO (000’s)   156,805   147,042        

Adjusted funds from operations (AFFO) - Core Operations(1)

$ 75.8 $ 72.6 $ 0.43 $ 0.45

AFFO - EQY and Other Non-Recurring Items

  1.8   3.0   0.01   0.02
Total AFFO $ 77.6 $ 75.6 $ 0.44 $ 0.47
Weighted average diluted shares for AFFO (000’s)   178,182   160,969        

Note:In this press release, all per share information is presented on a post-split basis, after giving effect to the May 2010, 3.2:2 stock split.

  • (1)See “Non-GAAP Supplemental Financial Measures” section of this press release.

 

  • Invested $263 million in acquisitions, development activities and property improvements
  • Added 776,000 square feet of gross leasable area from acquisitions, development and redevelopment coming on-line
  • Acquired three income-producing properties and additional interests in three existing shopping centres totalling 555,000 square feet, two properties adjacent to existing shopping centres totalling 54,000 square feet, three properties held for development, and three land parcels adjacent to existing properties for future development comprising a total of 5.6 acres
  • 2.9% same property NOI growth; 1.3% excluding redevelopment and expansion space
  • 9.4% increase on rate per square foot on 410,000 square feet of renewal leases
  • Occupancy of 96.4% compares to 96.1% at June 30, 2009. Vacancy includes 0.7% of space held for redevelopment
  • Gross new leasing totalled 419,000 square feet including development and redevelopment coming online; lease closures totalled 234,000 square feet and closures for redevelopment totalled 72,000 square feet
  • Completed new leasing on existing space totalling 272,000 square feet at an average rate of $18.74 per square foot
  • Lease rates on openings and redevelopment coming on-line increased by 16.7% versus all lease closures
  • Average lease rate per occupied square foot increased by 4.4% from June 30, 2009 to $16.05 at June 30, 2010

 

SECOND QUARTER HIGHLIGHTS

Three months ended June 30 $ millions per share
  2010   2009     2010   2009
Property rental revenue $ 117.1 $ 109.7        
Net operating income (NOI) $ 75.9 $ 71.6        

FFO – Core Operations

$ 35.8 $ 36.4 $ 0.23 $ 0.25

FFO - EQY and Other Non-Recurring Items(1)

  0.5   2.7   -   0.02
Total FFO $ 36.3 $ 39.1 $ 0.23 $ 0.27
Weighted average diluted shares for FFO (000’s)   157,823   148,196        

Adjusted funds from operations (AFFO) - Core Operations(1)

$ 36.2 $ 37.2 $ 0.20 $ 0.23

AFFO - EQY and Other Non-Recurring Items

  0.4   1.5   -   0.01
Total AFFO $ 36.6 $ 38.7 $ 0.20 $ 0.24
Weighted average diluted shares for AFFO (000’s)   179,547   161,633        
  • (1) Excludes dilution loss on Equity One investment in 2009.

  • Invested $149 million in acquisitions, development activities and property improvements
  • Added 497,000 square feet of gross leasable area from acquisitions, development and redevelopment coming on-line
  • Acquired two income-producing properties and additional interests in two existing shopping centres totalling 355,000 square feet, one property adjacent to an existing shopping centre totalling 26,000 square feet, one property held for development, and one land parcel adjacent to existing property for future development comprising a total of 0.6 acres
  • 0.6% same property NOI growth; (0.8)% excluding redevelopment and expansion space
  • 12.4% increase on 150,000 square feet of renewal leases
  • Gross new leasing totalled 223,000 square feet including development and redevelopment coming online; lease closures totalled 96,000 square feet and closures for redevelopment totalled 50,000 square feet

"We continue to deliver solid operating results following our strong performance in 2009, " said Dori J. Segal, President & CEO, "year-to-date, we have taken advantage of a number of acquisition opportunities that resulted in higher than planned investment activity as well as an increased level of financing with a clear bias to further extend our debt maturities”.

FINANCING AND CAPITAL MARKET HIGHLIGHTS

Year-to-date, the Company raised $300 million through the issuance of senior unsecured debentures, $75 million in secured financings and $89.2 million from equity issuances. As a result, as of August 5, 2010, cash on hand is approximately $76.0 million. The Company completed the following financing activities in the six months ended June 30, 2010:

  • issued $125 million principal amount senior unsecured debentures, Series H, with a coupon rate of 5.85%, maturing January 2017;
  • reduced the availability of the syndicated secured revolving credit facility to $250 million and reduced its $75 million secured revolving credit facility to $50 million;
  • issued $125 million principal amount senior unsecured debentures, Series I, in two tranches, April and June, with 5.70% interest coupon maturing November 2017. The $50 million tranche was completed in June at a 5.52% yield-to-maturity;
  • completed or committed on $75 million from two secured financing transactions at a weighted average interest rate of 5.23% and a weighted average term to maturity of 9.75 years;
  • issued, subsequent to quarter end, $50 million principal amount senior unsecured debentures, Series J, with a coupon rate of 5.25% (5.45% yield-to-maturity), maturing August 2018.

In addition, the Company completed the following equity issuances in the six months ended June 30, 2010:

  • 3.5 million common shares through an equity public offering at a price of $14.35 per common share for gross proceeds of $50.0 million;
  • 3.0 million common shares for total proceeds of $36.3 million through payment-in-kind of the interest due to holders of the 5.50% and 6.25% convertible debentures and through warrants, options and restricted share units exercised;
  • subsequent to quarter end, in connection with the equity public offering, the underwriters exercised part of their over-allotment option and purchased an additional 200,000 common shares at the offering price of $14.35 for gross proceeds of $2.9 million.

On May 27, 2010, the Company also completed the subdivision of its common shares at a ratio of 3.2 common shares for each two common shares. As at June 30, 2010 160,174,666 common shares were outstanding.

"The increase in financing activity resulted in a much stronger balance sheet, ample liquidity and a better maturity schedule" said Karen H. Weaver, Executive Vice President & CFO, "In the quarter and year-todate our results were impacted by the increased financing activity and by the timing of certain lease termination fees”.

Payment of Interest in Shares
The Company will pay the interest due on September 30, 2010 to holders of the 5.50%, 6.25% and 5.70% convertible unsecured subordinated debentures (FCR.DB.A, FCR.DB.B, FCR.DB.C and FCR.DB.D) by the issuance of common shares. The number of common shares to be issued per $1000.00 principal amount of debentures will be calculated by dividing the dollar amount of interest payable by an amount equal to 97% of the volume-weighted average 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 23, 2010. The interest payment will be approximately $10.7 million, plus any accrued and unpaid interest on debentures which are converted after the date hereof and on or before September 23, 2010.

It is the current intention of First Capital Realty to satisfy its obligations to pay principal and interest on its 5.50%, 6.25% and 5.70% convertible unsecured subordinated debentures by issuance of common shares.

Quarterly Dividend
The Company announced that it will pay a third quarter dividend of $0.20 per common share on October 14, 2010 to shareholders of record on September 28, 2010.

FINANCIAL RESULTS SUMMARY

FFO and AFFO presented herein are key financial measures used by the real estate industry to measure and compare the operating performance of real estate organizations. FFO and AFFO are non-GAAP supplemental financial measures and a complete reconciliation containing adjustments from GAAP net income to FFO and AFFO is included in this press release. See the section below titled “Non-GAAP Supplemental Financial Measures” for more information.

Funds from Operations (FFO)

(thousands of dollars, except per share amounts) Three months ended June 30, 2010 Three months ended June 30, 2009
  FFO - Core Operations FFO - EQY and Other Non-recurring Items   Total FFO   FFO - Core Operations   FFO - EQY and Other Nonrecurring Items   Total FFO
Net operating income $ 75,927 $ - $ 75,927 $ 71,557 $   $ 71,557
Interest expense   (35,044)   -   (35,044)   (29,361)   (2,069)   (31,430)
Corporate expenses   (5,463)   -   (5,463)   (5,552)   -   (5,552)
Interest and other income   1,020   -   1,020   805   -   805
Other gains (losses) and (expenses)(1)   231   470   701   -   17   17
Funds from operations from Equity One   -   -   -   -   5,586   5,586
Amortization of non-real estate assets   (822)   -   (822)   (1,029)   -   (1,029)
Current income taxes   -   -   -   -   (862)   (8621
FFO excluding dilution loss on Equity One investment   35,849   470   36,319   36,420   2,672   39,092
Deduct: Dilution loss on Equity One investment   -   -   -   -   (676)   (676)
FFO $ 5,849 $ 470 $ 36,319 $ 36,420   $ 1,996 $ 38,416
FFO per diluted share excluding dilution loss on Equity One investment(2) $ 0.23 $ - $ 0.23 $ 0.25   $ 0.02 $ 0.27
Deduct: Dilution loss on Equity One investment (2)   -   -   -   -   (0.01)   (0.011
FFO per diluted share (2) $ 0.23 $ - $ 0.23 $ 0.25   $ 0.01 $ 0.26
Weighted average diluted shares - FFO (2)   157,835,090   157,835,090   157,835,090   148,195,664   148,195,664   148,195,664

(1)Excludes gains on disposition of income-producing real estate.
(2) Prior periods restated to reflect the May 2010, 3.2:2 stock split.

(thousands of dollars, except per share amounts) Six months ended June 30, 2010 Six months ended June 30, 2009
    FFO - Core Operations   FFO - EQY and Other Non-recurring Items   Total FFO   FFO - Core Operations FFO - EQY and Other Nonrecurring Items Total FFO
Net operating income $ 150,602 $ - $ 150,602 $ 139,857 $ - $ 139,857
Interest expense   (69,197)   -   (69,197)   (57,573)   (4,137)   (61,710)
Corporate expenses   (10,852)   -   (10,852)   (11,001)   -   (11,001)
Interest and other income   2,300   -   2,300   1,394   -   1,394
Other gains (losses) and (expenses)(1)   1,903   544   2,447   118   (149)   (31)
Funds from operations from Equity One   -   -   -   -   12,456   12,456
Amortization of non-real estate assets   (1,635)   -   (1,635)   (1,753)   -   (1,753)
Current income taxes   -   -   -   -   (1,877)   (1,8771
FFO excluding dilution loss on Equity One investment   73,121   544   73,665   71,042   6,293   77,335
Deduct: Dilution loss on Equity One investment   -   -   -   -   (676)   (676)
FFO $ 73,121 $ 544 $ 73,665 $ 71,042 $ 5,617 $ 76,659
FFO per diluted share excluding dilution loss on Equity One investment(2) $ 0.47 $ -   $   0.47 $ 0.48 $ 0.05 $ 0.53
Deduct: Dilution loss on Equity One investment(2)   -   -   -   -   (0.01)   (0.01)
FFO per diluted share (2) $ 0.47 $ - $ 0.47 $ 0.48 $ 0.04 $ 0.52
Weighted average diluted shares - FFO (2)   156,804,885   156,804,885   156,804,885   147,041,974   147,041,974   147,041,974

(1) Excludes gains on disposition of income-producing real estate.
(2) Prior periods restated to reflect the May 2010, 3.2:2 stock split.

The Company’s funds from operations – core operations for the second quarter ended June 30, 2010 totalled $35.8 million or $0.23 per diluted common share which compares to $36.4 million or $0.25 per diluted common share for the three months ended June 30, 2009. The Company’s funds from operations – core operations for the six months ended June 30, 2010 totalled $73.1 million or $0.47 per diluted common share which compares to $71.0 million or $0.48 per diluted common share for the six months ended June 30, 2009. FFO – core operations, was positively affected by acquisitions and development coming on-line and same property NOI growth. This was offset by increased interest expense due to the increase in total debt related to growth in the Company’s core operations. During the first six months of 2010, the Company also carried undeployed cash on its balance sheet. On a per share basis, FFO decreased due to an increase in the number of weighted average diluted shares outstanding of 6.6% over the prior year period as a result of equity issuances during the last twelve months.

FFO – EQY and other non-recurring items includes other gains (losses) and (expenses) and in the prior year, the effect of Equity One and its related interest expense and income taxes. For the three months ended June 30, 2010, FFO – EQY and other non-recurring items totalled $0.5 million or $nil per diluted common share which compares to $2.7 million or $0.02 per diluted common share in the corresponding prior year period. For the six months ended June 30, 2010, FFO – EQY and other non-recurring items totalled $0.6 million or $nil per diluted common share which compares to $6.3 million or $0.05 per diluted common share in the corresponding prior year period.

In addition, FFO – EQY and other non-recurring items included items such as gains on marketable securities offset by losses on debt extinguishment and losses on terminations of hedges, specifically:

   

2010

  2009
Six months ended June 30 ($ in millions)   Core Operations   Nonrecurring items   Core Operations   Non recurring items
Losses on debt extinguishment $ - $  (0.5) $  - $  (0.7)
Realized loss on termination of hedges Unrealized gain on interest rate swaps     (1.6)   -   -
not designated as hedges   -   0.3   -   -
Gains on marketable securities   -   2.2   -   0.5
Gains on sales of land Gain on Royal Oak Shopping Centre   0.2   -   0.1   -
settlement   1.7   -   -   -
Dilution loss, Equity One   -   -   -   (0.6)
Other items, net   -   0.2   -   -
Total $  1.9 $ 0.6 $ 0.1 $  (0.8)

Adjusted Funds from Operations (AFFO)

(thousands of dollars, except per share amounts)   Three months ended June 30, 2010   Three months ended June 30, 2009
    AFFO - EQY and Other   AFFO - EQY and Other
    AFFO - Core Operations   Non-recurring Items   Total AFFO   AFFO - Core Operations   Non-recurring Items   Total AFFO
FFO excluding dilution loss on Equity One investment $ 35,849 $ 470 $ 36,319 $ 36,420 $ 2,672 $ 39,092
Add / (deduct): Interest expense payable in shares   5,573   -   5,573   3,423   -   3,423
Rental revenue recorded on a straight-line basis and market rent adjustments   (2,407)   -   (2,407)   (1,534)   -   (1,534)
Non-cash compensation expense   753   -   753   941   -   941
Revenue sustaining capital expenditures and leasing costs (1)   (3,331)   -   (3,331)   (2,682)   -   (2,682)
Funds from operations from Equity One   -   -   -   -   (5,587)   (5,587)
Dividends from Equity One (regular)   -   -   -   -   4,913   4,913
Return of capital portion of marketable securities - net   -   -   -   646   -   646
Change in cumulative unrealized gain on marketable securities   -   (316)   (316)   -   (414)   (414)
Gains on extinguishment of debt   -   -   -   -   (50)   (50)
Realized gains on termination of hedges   -   -   -   -   (14)   (14)
Unrealized losses on interest rate swaps not designated as hedges   -   288   288   -   -   -
Gain on disposition of land   (231)   -   (231)   -   -   -
AFFO $ 36,206 $ 442 $ 36,648 $ 37,214 $ 1,520 $ 38,734
AFFO per diluted share (2) $ 0.20 $ - $ 0.20 $ 0.23 $ 0.01 $ 0.24
Weighted average diluted shares - AFFO (2)(3)   179,547,106   179,547,106   179,547,106   161,632,702   161,632,702   161,632,702
(1) Estimated at $0.65 per square foot per annum on average gross leasable area for 2010 ($0.55 per square foot per annum in the second quarter of 2009).
(2) Prior periods restated to reflect the May 2010, 3.2:2 stock split.
(3) Includes the w eighted average outstanding shares that w ould result from the conversion of the convertible debentures.
  (thousands of dollars, except per share amounts)   Six months ended June 30, 2010   Six months ended June 30, 2009
      AFFO - EQY and Other   AFFO - EQY and Other
      AFFO - Core Operations   Non-recurring Items   Total AFFO   AFFO - Core Operations   Non-recurring Items   Total AFFO
  FFO excluding dilution loss on Equity One investment $ 73,121 $ 544 $ 73,665 $ 71,042 $ 6,293 $ 77,335
  Add / (deduct): Interest expense payable in shares   11,076   -   11,076   6,881   -   6,881
  Rental revenue recorded on a straight-line basis and market rent adjustments   (4,623)   -   (4,623)   (3,224)   -   (3,224)
  Non-cash compensation expense   1,418   (58)   1,360   1,813   -   1,813
  Revenue sustaining capital expenditures and leasing costs (1)   (6,588)   -   (6,588)   (5,109)   -   (5,109)
  Additional pre-settlement net cash from property acquisition   1,605   -   1,605   -   -   -
  Funds from operations from Equity One   -   -   -   -   (12,456)   (12,456)
  Dividends from Equity One (regular)   -   -   -   -   10,241   10,241
  Return of capital portion of marketable securities - net   -   -   -   1,282   -   1,282
  Change in cumulative unrealized gain on marketable securities   -   (430)   (430)   -   (1,766)   (1,766)
  Losses on extinguishment of debt   -   477   477   -   688   688
  Realized losses (gains) on termination of hedges   -   1,588   1,588   -   (14)   (14)
  Unrealized gain on interest rate swaps not designated as hedges   -   (335)   (335)   -   -   -
  Gain on disposition of land   (231)   -   (231)   (118)   .   (118)
  AFFO $ 75,778 $ 1,786 $ 77,564 $ 72,567 $ 2,986 $ 75,553
  AFFO per diluted share (2) $ 0.43 $ 0.01 $ 0.44 $ 0.45 $ 0.02 $ 0.47
  Weighted average diluted shares - AFFO (2)(3)   178,181,690   178,181,690   178,181,690   160,969,039   160,969,039   160,969,039
(1) Estimated at $0.65 per square foot per annum on average gross leasable area for 2010 ($0.55 per square foot per annum in the second quarter of 2009).
(2) Prior periods restated to reflect the May 2010, 3.2:2 stock split.
(3) Includes the w eighted average outstanding shares that w ould result from the conversion of the convertible debentures.

Management views AFFO as an effective measure of cash generated from operations. AFFO for the three months ended June 30, 2010 totalled $36.6 million or $0.20 per diluted common share compared to $38.7 million or $0.24 per diluted common share in the prior year period. AFFO is calculated by adjusting FFO for non-cash and other items including interest payable in shares, straight-line and market rent adjustments, non-cash compensation expense, actual costs incurred for capital expenditures and leasing costs for maintaining shopping centre infrastructures and gains or losses on debt and hedges. Land sales are excluded from AFFO. The Company’s proportionate share of Equity One FFO is excluded and only the regular cash dividends received are included in prior year’s AFFO. The weighted average diluted shares outstanding for AFFO is adjusted to assume conversion of the outstanding convertible debentures. Non-recurring AFFO items primarily consist of dividends from Equity One, net of the associated interest expense and realized gains on marketable securities.

Net Income

      Three months ended June 30   Six months ended June 30
  ($ thousands, except per share amounts)   2010   2009   2010   2009
  Net income $ 9,503   $9,093 $ 19,272 $ 18,175
  Earnings per share (diluted) $ 0.06 $ 0.06 $ 0.12 $ 0.13
  Weighted average common shares (diluted)   157,835,090   148,195,664   156,804,885   147,041,974

Net income for the three months ended June 30, 2010 was $9.5 million or $0.06 per share (basic and diluted) compared to $9.1 million or $0.06 per share (basic and diluted) for the prior year comparable period. Net income for the six months ended June 2010 was $19.3 million or $0.12 per share (basic and diluted) compared to $18.2 million or $0.13 per share (basic and diluted) for the prior year comparable period. The increase in net income is primarily due to the increase in NOI resulting from new acquisitions, development and redevelopment projects coming on-line, same property NOI growth, increased interest and other income, increased other gains (losses) and (expenses) offset by increased interest expense, increased amortization expense, and decreased income from Equity One as a result of the dividend-in-kind. In addition, there was an increase in the basic and weighted average diluted shares outstanding compared to the same prior year periods.

ACQUISITION AND DEVELOPMENT ACTIVITIES

During the second quarter of 2010, the Company invested $115.8 million in the acquisition of two income-producing properties and additional interests in two existing shopping centres totalling 355,000 square feet, one property adjacent to an existing shopping centre totalling 26,000 square feet, one property held for future development, and one land parcel adjacent to an existing property held for future development comprising a total of 0.6 acres. For the six months ended June 30, 2010, the Company invested $197.8 million on three income-producing properties and additional interests in three existing shopping centres totalling 555,000 square feet, two properties adjacent to existing shopping centres totalling 54,000 square feet, three properties held for future development, and three land parcels adjacent to existing properties held for future development comprising a total of 5.6 acres.

In addition, during the second quarter of 2010, the Company invested $35 million in active development projects and improvements to existing properties bringing the year-to-date total investment to $65 million. Development of 97,300 square feet was brought on-line in the second quarter of 2010 with 81,000 square feet leased at an average rate of $26.92 per square foot. Year-to-date the Company brought on-line 117,800 square feet of development space with 101,500 square feet leased at an average rate of $27.00 per square foot.

OPERATING SUMMARY

Net operating income for the three months ended June 30, 2010 totalled $75.9 million compared to $71.6 million for the three months ended June 30, 2009, an increase of $4.3 million or 6.0%. Same property NOI increased by 0.6% in the second quarter of 2010 compared to the same period in 2009, generating NOI growth of $0.4 million, primarily attributed to redevelopment and expansion space coming on-line and increases in lease rates and occupancy. Same property NOI includes $168,000 (three months ended June 30, 2009 - $1,902,000) of lease termination payments from five tenants comprising of 7,300 square feet.

Net operating income for the six months ended June 30, 2010 totalled $150.6 million compared to $139.9 million for the six months ended June 30, 2010, an increase of $10.7 million or 7.6%. Same property NOI increased by 2.9% for the six months ended June 30, 2010 compared to the same period in 2009, generating NOI growth of $3.9 million, primarily attributed to redevelopment and expansion space coming on-line and increases in lease rates and occupancy. Same property NOI for the six months ended June 30, 2010, excluding expansion or redevelopment space, increased by $1.6 million or 1.3% over the same period in 2009. Same property NOI includes $1,148,000 (six months ended June 30, 2009 - $2,095,000) of lease termination payments from 16 tenants comprising of 39,300 square feet.

Acquisitions completed in 2010 and 2009 contributed $2.3 million to NOI in the three months ended June 30, 2010, while greenfield development activities contributed a further $2.5 million in the three months ended June 30, 2010. Acquisitions completed in 2010 and 2009 contributed $3.7 million to NOI in the six months ended June 30, 2010, while greenfield development activities contributed a further $4.8 million in the six months ended June 30, 2010.

Gross new leasing in the second quarter of 2010 totalled 223,000 square feet including development and redevelopment space coming on-line. The Company achieved a 12.4% increase on 150,000 square feet of renewal leases over the expiring rates. For the six months ended June 30, 2010, gross new leasing totalled 419,000 square feet. Renewal leasing totalled 410,000 square feet with a 9.4% increase over expiring lease rates.

The average rate per occupied square foot at June 30, 2010 increased to $16.05. This compares to an average rate of $15.37 per square foot at June 30, 2009 and $15.85 at March 31, 2010.

Portfolio occupancy at June 30, 2010 of 96.4% compares to 96.3% at March 31, 2010 and 96.2% at December 31, 2009. Closures for redevelopment totalled 72,000 square feet for the first half of 2010..

OUTLOOK

Over the past several years, First Capital Realty has made significant progress in growing its business and generating accretive growth in funds from operations while enhancing the quality of its portfolio.

The current environment remains competitive with increasing transaction activity. Both debt and equity markets are accessible but continue to be challenging relative to pricing currently being asked by vendors of high quality, well located properties. The Company will continue to selectively acquire properties that are well-located and of high quality, where they add strategic value and/or operating synergies provided they will be accretive to FFO over the long term, and equity and debt capital can be priced and committed to maintain conservative leverage.

Development and redevelopment activities continue to provide the Company with opportunities to grow within its existing portfolio of assets. Once completed, these activities typically generate higher returns on investment.

With respect to acquisitions of both income-producing and development properties, the Company will continue to focus on maintaining the sustainability and growth potential of rental income to ensure that among other things, refinancing risk is minimized. This is particularly important given the current cost of capital.

Specifically, Management continues to focus on the following five areas to achieve its objectives in 2010:

  • same property net operating income growth, taking into account maintaining high occupancy;
  • development and redevelopment activities;
  • selective acquisitions;
  • increasing efficiency and productivity of operations; and
  • improving the cost of capital, for both debt and equity.

Overall, Management is confident that the quality of the Company’s balance sheet, the defensive nature of its assets and operations will continue to serve it well in the current environment.

2010 GUIDANCE

The Company reaffirms its FFO and AFFO per share guidance for 2010. All information presented on a per share basis has been adjusted to reflect the 3.2:2 common share split which took effect on May 27, 2010.

(per share amounts, except for projected FFO and shares outstanding) Low High
FFO Guidance
Projected diluted net income per share $0.25 $0.27
Adjustments 

Projected amortization and future income taxes

0.70 0.71
Projected FFO per share (1) $0.95 $0.98
Projected FFO $151.7M S156.6M
Projected weighted average shares outstanding for per share FFO calculations (l)

160.4M

AFFO Guidance

Projected FFO $151.7M S156.6M
Projected weighted average shares outstanding for per share AFFO calculations (including conversion of convertible debentures)(1)

181.7M

Projected FFO per share (using weighted average AFFO shares outstanding)(1) 0.83 0.86

Projected revenue sustaining capital expenditures (1)

(0.08) (0.08)

Projected non-cash items, net(1)

0.09 0.10
Projected AFFO per share (l) $0.84 $0.88

(1) Reflects the May 2010, 3.2:2 stock split.

Projections involve numerous assumptions such as rental income (including assumptions on timing of lease-up, development coming on-line and levels of percentage rent), interest rates, tenant defaults, corporate expenses, the level and timing of acquisitions of income-producing properties, the Company’s share price, the number of shares outstanding, and numerous other factors. Not all factors which affect our range of projected 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.

Guidance is based on specific assumptions, including:

  • Same property NOI growth of 1.0% to 1.5% (excluding redevelopment and expansion);
  • Development, redevelopment and expansion coming on-line of 400,000 to 450,000 square feet with approximate gross book value of $100 to $120 million;
  • Income-producing property acquisitions totalling $200 million (includes $165 million invested to- date);
  • Development property acquisitions totalling $60 million (includes $33 million invested to-date);
  • Revenue sustaining capital expenditure is expected to be approximately $0.65 per average square foot; and
  • No changes to convertible debentures outstanding.

The ranges presented represent Management’s estimate of results based upon these assumptions as of the date of this press release. The purpose of the Company’s guidance is to provide readers with Management’s view as to the expected financial performance of the Company for 2010, using factors that are commonly accepted and viewed as meaningful indicators of financial performance in the real estate industry.

Readers should refer to the section below titled “Forward-Looking Statements” for important information relating to our guidance, including risk factors.

NORMAL COURSE ISSUER BID FOR EACH SERIES OF CONVERTIBLE DEBENTURES

Subject to final acceptance of its notice of intention to make a normal course issuer bid by the Toronto Stock Exchange, First Capital Realty intends to make a normal course issuer bid (“NCIB”) for each series of its convertible unsecured subordinated debentures being (i) 5.50% convertible unsecured subordinated debentures due September 30, 2017, Class CDN (the “5.50% Debentures (Class CDN)”) (TSX:FCR.DB.A), (ii) 5.50% convertible unsecured subordinated debentures due September 30, 2017, Class US (the “5.50% Debentures (Class US)”) (TSX:FCR.DB.B), (iii) 6.25% convertible unsecured subordinated debentures due December 31, 2016 (the “6.25% Debentures”) (TSX:FCR.DB.C); and (iv) 5.70% convertible unsecured subordinated debentures due June 30, 2017 (the “5.70% Debentures”) (TSX:FCR.DB.D). All convertible debentures purchased under the NCIB will be cancelled.

As of August 4, 2010, First Capital Realty had $205,027,000 principal amount of 5.50% Debentures (Class CDN) outstanding, $21,723,000 principal amount of 5.50% Debentures (Class US) outstanding, $75,000,000 principal amount of 6.25% Debentures outstanding and $50,000,000 principal amount of 5.70% Debentures outstanding.

Under the NCIB, First Capital Realty may purchase such convertible debentures up to the following limits:

  Limit on Purchases (Principal Amount)
  Total Limit1 Daily Limit2
5.50% Debentures (Class CDN)

$10,251,300

$3,900

5.50% Debentures (Class US)

$1,086,100

$1,000

6.25% Debentures

$7,428,300

$41,200

5.70% Debentures

$4,985,000

$31,400

Notes:
1. Represents, in the case of each of the 5.50% Debentures (Class CDN) and (Class US), 5% of the issued and outstanding principal amount, and in the case of each of the 6.25% Debentures and 5.70% Debentures, 10% of the public float.
2. Represents the greater of $1,000 principal amount of the applicable convertible debentures and 25% of the average daily trading volume of such convertible debentures for the six month period ended July 31, 2010, excluding “block” purchase exceptions.

First Capital Realty believes that its convertible debentures have been trading in a range that may not fully reflect the value of the convertible debentures. As a result, First Capital Realty believes that the purchase of convertible debentures from time to time can be undertaken at prices that make the acquisition of such securities an appropriate use of the Company’s available funds. In addition, purchases under the NCIB may increase liquidity of the convertible debentures.

First Capital Realty intends to commence the NCIB on August 10, 2010. The NCIB will expire on August 9, 2011 or such earlier date as First Capital Realty completes its purchases pursuant to the NCIB. First Capital Realty has not purchased any of its convertible debentures in the past twelve months. All purchases made under the NCIB will be made through the facilities of the TSX or other Canadian marketplaces and in accordance with the rules of the TSX at market prices prevailing at the time of purchase. The actual amount of convertible debentures that may be purchased under the NCIB is subject to, and cannot exceed, limits referred to above and the timing of such purchases will be determined by First Capital Realty.

MANAGEMENT CONFERENCE CALL AND WEBCAST

First Capital Realty invites you to participate at its live conference call with senior management announcing our second quarter results on Friday, August 6, 2010 at 1:00 p.m. E.S.T.

Second quarter financial results will be released prior to the call and made available on First Capital Realty’s website in the News section. The Supplemental Package link will be on our Home Page at www.firstcapitalrealtv.ca or click on Investors, then Downloads.

Teleconference:

You may participate in the live conference toll free at 866-299-6657 or at 416-641-6135. To ensure your participation, please call five minutes prior to the scheduled start of the call. The call will be archived through August 13, 2010 and can be accessed by dialing toll free 800-408-3053 or 416-695-5800 with access code 1321844.

Webcast:

To access the webcast, go to First Capital Realty’s website at www.firstcapitalrealtv.ca, and click on the link for the webcast at the bottom of our Home Page. The webcast will be archived on our Home Page for 30 days and can be accessed, thereafter, in the Conference Calls section of our website.

Management’s presentation will be followed by a question and answer period. To ask a question, press ‘1' followed by ‘4’ on a touch-tone phone. 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 dialing 866-299-6657 or 416-641-6135. 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 metropolitan areas. The Company currently owns interests in 178 properties, including three under development, totalling approximately 21.3 million square feet of gross leasable area and nine sites in the planning stage for future retail development.

* * * *

Forward-Looking Statements

This press release, and in particular the “Outlook” and “2010 Guidance” sections hereof, contains forward-looking statements and information within the meaning of applicable securities legislation. Forward-looking statements can generally be identified by the expressions “anticipate”, “believe”, “plan”, “estimate”, “project”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “continue ” and similar expressions. The forward-looking statements 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 these forward-looking statements. All forward-looking statements in this press release are qualified by these cautionary statements.

Management believes that the expectations reflected in forward-looking statements are based upon reasonable assumptions; however, Management can give no assurance that actual results will be consistent with these forward-looking statements. These forward-looking statements 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 the Company’s Management’s Discussion and Analysis for the year ended December 31, 2009.

Factors that could cause actual results or events to differ materially from those expressed, implied or projected by forward- looking statements in addition to those described in the aforementioned “Risk and Uncertainties ” section 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 or re-lease space at current or anticipated rents, tenant bankruptcies, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions, construction, environmental matters, legal matters, reliance on key personnel, financial difficulties and defaults, changes in interest rates and credit spreads, changes in the U.S-Canadian foreign currency exchange rate, changes in operating costs, First Capital Realty’s ability to obtain insurance coverage at a reasonable cost and the availability of financing. The assumptions underlying the Company’s forward-looking statements contained in the “Outlook” and “2010 Guidance” sections 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.

Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement 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 securities laws.

These forward-looking statements are made as of August 5, 2010.


For further information:
Dori J. Segal, President & C.E.O., or
Karen H. Weaver, Executive Vice President & C.F.O.
First Capital Realty Inc.
85 Hanna Avenue, Suite 400 Toronto, Ontario, Canada M6K 3S3 Tel: (416)504-4114
Fax: (416)941-1655

www.firstcapitalrealtv.ca

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES

Funds from Operations and Adjusted Funds from Operations

In Management’s view, funds from operations (“FFO’j and adjusted funds from operations (“AFFO’j are commonly accepted and meaningful indicators of financial performance in the real estate industry. First Capital Realty believes that financial analysts, investors and shareholders are better served when the clear presentation of comparable period operating results generated from FFO and AFFO disclosures supplement Canadian generally accepted accounting principles ((iGAAP’j disclosure. These measures are the primary methods used in analyzing real estate organizations in Canada. The Company’s method of calculating FFO and AFFO may be different from methods used by other corporations or REITs (real estate investment trusts) and, accordingly, may not be comparable to such other corporations or REITs. FFO and AFFO are presented to assist investors in analyzing the Company’s performance. FFO and AFFO: (i) do not represent cash flow from operating activities as defined by GAAP, (ii) are not indicative of cash available to fund all liquidity requirements, including payment of dividends and capital for growth, and (iii) are not to be considered as alternatives to GAAP net income for the purpose of evaluating operating performance.

Funds from Operations (“FFO”)

First Capital Realty calculates FFO in accordance with the recommendations of the Real Property Association of Canada (u RealPac ”). The definition is meant to standardize the calculation and disclosure of FFO across real estate entities in Canada, modelled on the definition adopted by the National Association of Real Estate Investment Trusts (“NAREIT”) in the United States. FFO as defined by RealP ac differs in two respects from the definition adopted by NAREIT. Under the RealPac definition, future income taxes are excluded from FFO, whereas under the NAREIT definition, they are included. In addition, impairment losses on depreciable assets are excluded from the RealPac FFO definition, whereas the NAREIT definition includes them. As a result, when calculating FFO, the Company adjusts the FFO reported by Equity One to comply with the RealPac definition, when appropriate.

FFO is considered a meaningful additional measure of operating performance, as it excludes amortization of real estate assets. FFO also adjusts for certain items included in GAAP net income that may not be the most appropriate determinants of the long-term operating performance of the Company including gains and losses on depreciable real estate assets.

Net Operating Income

NOI is defined as property rental revenue less property operating costs. In Management’s opinion, N01 is useful in analyzing the operating performance of the Company’s shopping centre portfolio. NOI is not a measure defined by GAAP and as such there is no standard definition. As a result, NOI may not be comparable with similar measures presented by other entities. NOI is not to be construed as an alternative to net income or cash flow from operating activities determined in accordance with GAAP.

 

FIRST CAPITAL REALTY INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)   June 30   December 31
(thousands of dollars)   2010   2009
ASSETS        
Real Estate Investments        
Shopping centres $ 3,459,087 $ 3,288,759
Land and shopping centres under development   277,949   224,772
Deferred leasing costs   18,408   17,471
Intangible assets   23,939   22,549
    3,779,383   3,553,551
Loans, mortgages and other real estate assets   63,927   59,220
    3,843,310   3,612,771
Other assets   39,351   28,726
Amounts receivable   45,044   45,598
Cash and cash equivalents   44,183   4,548
  $ 3,971,888 $ 3,691,643
LIABILITIES        
Mortgages, loans and credit facilities $ 1,337,288 $ 1,354,668
Accounts payable and other liabilities   134,712   137,658
Intangible liabilities   18,296   13,193
Senior unsecured debentures   965,987   717,040
Convertible debentures   330,833   329,739
Future income tax liabilities, net   48,778   43,502
    2,835,894   2,595,800
SHAREHOLDERS' EQUITY   1,135,994   1,095,843
  $ 3,971,888 $ 3,691,643

FIRST CAPITAL REALTY INC.

CONSOLIDATED STATEMENTS OF EARNINGS

 

Three months ended

Six months ended

(unaudited)

 

June 30

 

June 30

June 30

 

June 30

(thousands of dollars, except per share amounts)

 

2010

 

2009

2010

 

2009

REVENUE

 

 

 

 

 

 

 

Property rental revenue

$

117,135

$

109,727

235,248

$

220,070

Interest and other income

 

1,020

 

805

2,300

 

1,394

 

 

118,155

 

110,532

237,548

 

221,464

EXPENSES

 

 

 

 

 

 

 

Property operating costs

 

41,208

 

38,170

84,646

 

80,213

Interest expense

 

35,044

 

31,431

69,197

 

61,710

Amortization

 

 

 

 

 

 

 

Shopping centres

 

21,754

 

20,501

43,936

 

41,051

Deferred leasing costs

 

916

 

853

1,930

 

1,782

Intangible assets

 

1,341

 

1,847

2,703

 

3,954

Deferred financing fees

 

428

 

607

857

 

935

Other assets

 

394

 

422

778

 

818

Corporate expenses

 

5,463

 

5,552

10,852

 

11,001

 

 

106,548

 

99,383

214,899

 

201,464

Income before the undernoted items

 

11,607

 

11,149

22,649

 

20,000

Equity income from Equity One, Inc.

 

-

 

3,369

-

 

7,399

Other gains (losses) and (expenses)

 

696

 

(659)

2,423

 

(496)

Income before income taxes

 

12,303

 

13,859

25,072

 

26,903

Income taxes

 

 

 

 

 

 

 

Current

 

-

 

862

-

 

1,877

Future

 

2,800

 

3,904

5,800

 

6,851

 

 

2,800

 

4,766

5,800

 

8,728

Net income

$

9,503

$

9,093

19,272

$

18,175

Earnings per common share, basic and diluted (1)

$

0.06

$

0.06

0.12

$

0.13

(1) Prior periods have been restated to reflect the May 2010, 3.2:2 stock split.

 

FIRST CAPITAL REALTY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

  Three months ended   Six months ended
(unaudited)   June 30   June 30   June 30   June 30
(thousands of dollars, except per share amounts)   2010   2009   2010   2009
NET INCOME $ 9,503 $ 9,093 $ 19,272 $ 78,175
OTHER COMPREHENSIVE INCOME (LOSS) Unrealized foreign currency (losses) gains on translating self-sustaining foreign operations                
Losses arising during the period   -   (4,668)   -   (3,010)
Reclassification adjustments for dilution loss on investment in Equity One, Inc.   -   1,699   -   1,699
    -   (2,999)   -   (1,341)
Other comprehensive income of Equity One, Inc.                
Gains arising during the period   -   981   -   4,346
Reclassification adjustments for dilution loss included in net income   -   29   -   29
    -   1,010   -   4,375
Unrealized gains on cash flow hedges of interest rates                
Unrealized gains arising during the period   90   9,131   90   6,822
Reclassification adjustments for losses (gains) included in net income   -   198   (1,093)   198
    90   9,329   (1,003)   7,020
Other comprehensive income (loss) before income taxes   90   15,789   (1,003)   18,924
Future income tax expense (recovery)   15   4,436   (160)   4,203
Other comprehensive income (loss)   75   11,353   (843)   14,721
COMPREHENSIVE INCOME $ 9.578 $ 20,446 $ 18,429 $ 32,896

FIRST CAPITAL REALTY INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

Three months ended

Six months ended
(unaudited)   June 30   June 30   June 30   June 30
(thousands of dollars)   2010   2009   2010   2009
CASH FLOW PROVIDED BY (USED IN):                
OPERATING ACTIVITIES                
Net income tems not affecting cash $ 9,503 $ 9,093 $ 19,272 $ 18,175
Amortization   24,833   24,230   50,204   48,540
Amortization of above- and below-market leases   (664)   (430)   (1,177)   (1,143)
Rent revenue recognized on a straight-line basis   (1,743)   (1,104)   (3,446)   (2,081)
Loss (gain) on disposition of shopping centres   5   -   24   (211)
Gains on disposition of land   (231)   -   (231)   (118)
Realized (gains) losses on sale of marketable securities   (360)   461   (1,739)   1,241
Change in cumulative unrealized gains on marketable securities held-for-trading   (316)   (414)   (430)   (1,766)
(Gain) loss on settlement of debt   -   (50)   477   688
Non-cash compensation expense   753   941   1,360   1,813
Less cash settlement of restricted share units   (1,243)   -   (1,243)   -
Convertible debenture interest paid in common shares   -   -   8,710   6,360
Non-cash interest expense   873   624   1,754   1,174
Equity income from Equity One, Inc.   -   (3,369)   -   (7,399)
Dilution loss on Equity One, Inc. investment   -   676   -   676
Unrealized losses (gains) on interest rate swaps not designated as hedges   288   -   (335)   -
Gain on foreign exchange   (82)   -   (47)   -
Future income taxes   2,800   3,904   5,800   6,851
Deferred leasing costs   (1,658)   (1,176)   (2,842)   (2,201)
Dividends received from Equity One, Inc.   -   4,913   -   10,241
Net change in non-cash operating items   13,578   (2,498)   1,935   (20,909)
Cash provided by operating activities   46,336   35,801   78,046   59,931
INVESTING ACTIVITIES                
Acquisition of shopping centres   (72,163)   (12,357)   (104,506)   (18,042)
Acquisition of land and shopping centres held for development   (4,679)   (7,960)   (25,846)   (9,359)
Net proceeds from property dispositions   208   -   408   70
Expenditures on shopping centres   (7,661)   (5,877)   (13,139)   (12,060)
Expenditures on land and shopping centres under development   (25,910)   (40,397)   (49,137)   (71,230)
Changes in accounts payable and accrued liabilities related to                
investing activities   (5,763)   (984)   (14,713)   (24,438)
Increase in loans and mortgages receivable   (59)   (333)   (149)   (1,026)
Investment in marketable securities   (11,696)   (58)   (22,247)   (2,745)
Return of capital from investments in marketable securities   63   646   (116)   1,282
Proceeds from disposition of marketable securities   7,068   5,308   16,916   8,603
Cash used in investing activities   (120,592)   (62,012)   (212,529)   (128,945)
FINANCING ACTIVITIES                
Mortgage financings, loans and credit facilities                
Borrowings, net of financing costs   43,491   218,066   72,642   485,909
Principal instalment payments   (8,589)   (10,157)   (17,222)   (20,235)
Other repayments on maturity   (71,582)   (149,209)   (142,674)   (335,395)
Issuance of senior unsecured debentures, net of issue costs   124,406   -   248,356   -
Issuance of common shares, net of issue costs   59,396   98   74,823   38
Purchase of senior unsecured debentures   -   (1,145)   -   (1,145)
Payment of dividends   (31,013)   (29,649)   (61,747)   (58,752)
Other financing activities   (20)   -   (60)   -
Cash provided by financing activities   116,089   28,004   174,118   70,420
Effect of currency rate movement on cash balances   -   (1,396)   -   (192)
Increase in cash and cash equivalents   41,833   397   39,635   1,214
Cash and cash equivalents, beginning of the period   2,350   8,080   4,548   7,263
Cash and cash equivalents, end of the period $ 44,183 $ 8,477 $ 44,183 $ 8,477
SUPPLEMENTARY INFORMATION                
Cash income taxes paid $ 19 $ 891 $ 19 $ 1,349
Cash interest paid $ 33,008 $ 32,157 $ 61,974 $ 62,744

FIRST CAPITAL REALTY INC.

CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS

(thousands of dollars, except per share amounts)

Three months ended

Six months ended
   

June 30

 

June 30

 

June 30

 

June 30

 

 

2010

 

2009

 

2010

 

2009

Net income for the period

$

9,503

$

9,093

$

19,272

$

18,175

Add (deduct):                
Amortization of shopping centres, deferred leasing costs and intangible assets  

24,011

 

23,201

 

48,569

 

46,787

Loss (gain) on disposition of income-producing shopping centres

 

5

 

-

 

24

 

(211)

Equity income from Equity One

 

-

 

(3,369)

 

-

 

(7,399)

Funds from operations from Equity One

 

-

 

5,587

 

-

 

12,456

Dilution loss on Equity One investment

 

-

 

676

 

-

 

676

Future income taxes

 

2,800

 

3,904

 

5,800

 

6,851

FFO excluding dilution loss on Equity One investment

 

36,319

 

39,092

 

73,665

 

77,335

Deduct: dilution loss on Equity One im^stment

 

-

 

(676)

 

-

 

(676)

FFO

$

36,319

$

38,416

$

73,665

$

76,659

FFO per diluted share excluding dilution loss on Equity One investment(1)

$

0.23

$

0.27

$

0.47

$

0.53

Deduct: dilution loss on Equity One im^stment(1)

 

.

 

(0.01)

 

_

 

(0.01)

FFO per diluted share

$

0.23

$

0.26

$

0.47

$

0.52

Weighted а\дэгаде diluted shares - FFO (1)

 

157,835,090

 

148,195,664

 

156,804,885

 

147,041,974

1) Prior periods have been restated to reflect the May 2010, 3.2:2 stock split.

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