Press Releases

FIRST CAPITAL REALTY ANNOUNCES STRONG 2008 YEAR END RESULTS

March 05, 2009

Strong portfolio fundamentals and substantial liquidity.

Toronto, Ontario (March 5, 2009) – 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 strong financial results for the year ended December 31, 2008.

YEAR HIGHLIGHTS

  Year Ended December  

($ millions, except per share amounts)

 

2008

 

2007

Percentage Change

Property rental revenue

$

410.2

$

376.9

8.8%

Net operating income (NOI)

$

259.6

$

242.4

7.1%

Funds from operations (FFO) excluding Equity One’s noncash impairment losses and dilution gain (1)

$

145.1

$

125.4

15.7%

FFO per diluted share excluding Equity One’s non-cash impairment losses and dilution gain (1)

$

1.66

$

1.60

3.8%

Adjusted funds from operations (AFFO)

$

139.9

$

121.6

15.0%

AFFO per diluted share

$

1.46

$

1.41

3.5%

Enterprise value

$

4,111

$

4,218

2.5%

Debt to aggregate assets

 

53.6%

 

56.4%

 

Debt to total market capitalization

 

52.5%

 

48.9%

 

Weighted average diluted shares for FFO (000’s)

 

87,260

 

78,428

11.3%

Weighted average diluted shares for AFFO (000’s)

 

95,587

 

86,305

10.8%

(1) See Funds from Operations section of this press release.

 

2008 OPERATING HIGHLIGHTS

  • Invested $330 million in development activities, property improvements and acquisitions
  • Added 1.1 million square feet of gross leasable area from development and redevelopment coming on line, and acquisitions
  • Acquired 4 income-producing properties totalling 292,000 square feet, 2 land sites and 8 land parcels adjacent to existing properties comprising a total of 22 acres and an additional interest in an existing land parcel for future development
  • 3.8% same property NOI growth; 2.1% excluding redevelopment and expansion space
  • 14% increase on rate per square foot on 1.2 million square feet of renewal leases
  • Occupancy of 96% compares to 95.8% at September 30, 2008 and 95.3% at December 31, 2007. Vacancy includes 1.4% of space held for redevelopment
  • Gross new leasing totalled 1.2 million square feet including development and redevelopment coming on line; lease closures totalled 395,000 square feet and closures for redevelopment totalled 207,000 square feet
  • Average lease rate per occupied square foot increased by 3.7% to $15.10 at December 31, 2008.
  • Completed new leasing on existing space totalling 419,000 square feet at an average rate of $18.37 per square foot, representing a 21.0% increase over expiring rates
  • Completed eight secured financing transactions for gross proceeds of $154.7 million at a weighted average interest rate of 5.54% and a weighted average term to maturity of 7.46 years. These transactions include six new mortgages and two top-ups of existing mortgages
  • Raised $225 million of equity issuing 10.3 million common shares, including equity offerings, dividend reinvestment plan, payment in shares of the interest due to holders of the 5.50% convertible debentures and options and warrants exercised

FOURTH QUARTER HIGHLIGHTS

  Three months ended December 31  

($ millions, except per share amounts)

 

2008

 

2007

Percentage Change

Property rental revenue

$

105.7

$

96.6

9.4%

Net operating income (NOI)

$

67.5

$

63.8

5.8%

Funds from operations (FFO) excluding Equity One’s noncash impairment losses and dilution gain (1)

$

37.8

$

32.9

14.9%

FFO per diluted share excluding Equity One’s non-cash impairment losses and dilution gain (1)

$

0.42

$

0.41

2.4%

Adjusted funds from operations (AFFO)

$

37.5

$

32.8

14.3%

AFFO per diluted share

$

0.38

$

0.37

2.7%

Weighted average diluted shares for FFO (000’s)

 

90,424

 

80,003

13.0%

Weighted average diluted shares for AFFO (000’s)

 

99,053

 

88,807

11.5%

(1) See Funds from Operations section of this press release.

 

FOURTH QUARTER OPERATING HIGHLIGHTS

  • Invested $98 million in development activities, property improvements and acquisitions
  • Added 510,000 square feet of gross leasable area from development and redevelopment coming on line and acquisitions
  • Acquired one income-producing property totalling 35,000 square feet, and an additional interest in an existing land parcel for future development
  • 3.7% same property NOI growth; 1.7% excluding redevelopment and expansion space
  • 15.4% increase on 507,000 square feet of renewal leases
  • Gross new leasing totalled 593,000 square feet including development and redevelopment coming on line; lease closures totalled 59,000 square feet and closures for redevelopment totalled 71,000 square feet

SUBSEQUENT EVENT HIGHLIGHTS

Completion of a three year, $75,000,000 Secured Revolving Credit Facility

On January 29, 2009, the Company closed on a three year, $75 million secured revolving credit facility with the Bank of Nova Scotia.

Completion of a three year, $450,000,000 Secured Revolving Credit Facility

On March 5, 2009 the Company closed on a three year, $450 million Secured Revolving Credit Facility with a syndicate of ten banks jointly led by RBC Capital Markets, TD Securities, and BMO Capital Markets. The syndicate consists of seven Canadian Banks and three Schedule III Chartered Banks. The new facility will be used to replace the Company’s existing three year $350 million Senior Unsecured Revolving Credit Facility maturing March 2010. The facility’s initial funding is expected to be at an interest rate of approximately 4.17%.

“We are very pleased to substantially increase our liquidity particularly during the current environment, which is a testament to the strength of our balance sheet and the defensive nature of our assets,” commented Karen H. Weaver, Executive Vice President and Chief Financial Officer.

Allied Properties Share Acquisition

On February 9, 2009 the Company announced it had agreed to acquire from institutional investors an aggregate of 1,766,800 units (“Units”) of Allied Properties Real Estate Investment Trust in exchange for common shares of First Capital Realty at a ratio of 0.81 First Capital Realty shares per Unit. The acquisitions closed February 17, 2009. Together with the Units owned by the Company that were acquired with cash, First Capital Realty owns 3,453,100 Units, representing approximately 11% of the issued and outstanding Units.

The Units have been acquired for investment purposes; however, First Capital Realty has indicated to Allied that it would like to engage in discussions with Allied to explore business opportunities, which may or may not result in a business combination; at this time no such discussions are underway. First Capital Realty does not currently intend to initiate a formal take-over bid for Allied. First Capital Realty may, in the future, take such actions in respect of its holdings as it may deem appropriate in light of the circumstances then existing, including the purchase of additional securities of Allied through open market purchases or privately negotiated transactions, or the sale of all or a portion of its holdings in the open market or in privately negotiated transactions to one or more purchasers.

Acquisition

On March 3, 2009 the Company acquired a 27,000 square foot building leased to a Sobeys supermarket situated on 1.9 acres of land located on Danforth Avenue, in Toronto, ON. The purchase price of $5.8 million, including closing costs, was satisfied in cash.

“With strong portfolio fundamentals and substantial liquidity we are well positioned to weather the current environment,” said Dori J. Segal, President & CEO. “We are careful and patient but we will move to take advantage of opportunities when they present themselves to us”.

FINANCING AND CAPITAL MARKET HIGHLIGHTS

In 2008, the Company raised $225 million of equity issuing 10.3 million common shares, through two equity offerings for a total of 6.7 million shares at an average gross price of $22.62 per share, the dividend reinvestment plan, payment in shares of the interest due to holders of the 5.50% convertible debentures and options and warrants exercised.

The Company also completed eight secured financing transactions for gross proceeds of $154.7 million at a weighted average interest rate of 5.54% and a weighted average term to maturity of 7.46 years. These transactions include six new mortgages and two top-ups of existing mortgages.

In addition, since January 1, 2009, the Company also completed four secured financing transactions for gross proceeds of $64 million at a weighted average interest rate of 5.95% and a weighted average term to maturity of 7.58 years. These transactions include three new mortgages and one top-up of an existing mortgage.

Quarterly Dividend

The Company announced that it will pay a first quarter dividend of $0.32 per common share on April 14, 2009 to shareholders of record on March 27, 2009.

FINANCIAL HIGHLIGHTS

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 supplemental non-GAAP financial measures and a complete reconciliation containing adjustments from GAAP net income to FFO and AFFO is included in this press release.

Funds from Operations (FFO)

FFO for the fourth quarter ended December 31, 2008 totalled $39.6 million or $0.44 per diluted common share and $140.5 million or $1.61 per diluted common share for the year ended December 31, 2008. This included $3.8 million representing the Company’s share of FFO from Equity One for the fourth quarter. Year-to-date Equity One contributed $12.5 million to the Company’s FFO.

The FFO reported by Equity One for the year ended December 31, 2008 included non-cash impairment losses on its investment in DIM Vastgoed N.V. as well as on certain development assets. The Company’s share of these losses is Cdn$1.0 million or $0.01 per diluted common share for the fourth quarter, and $7.5 million or $0.09 per diluted common share for the year.

The Company has also reported a one time dilution gain on its investment in Equity One of $2.9 million.

Funds from operations reported (excluding the non-cash impairment losses and dilution gain) for the three months ended December 31, 2008 totalled $37.8 million or $0.42 per diluted common share and increased from $32.9 million or $0.41 per diluted common share in the same period in 2007.

Gains on land sales amounted to $3.9 million for the year ended December 31, 2008 or $0.05 per diluted share.

FFO excluding the Equity One impairment losses and dilution gain for the year ended December 31, 2008 totalled $145.1 million or $1.66 per diluted common share, and increased from $125.4 million or $1.60 per diluted common share in the same period in 2007. The increase in FFO excluding the impairment losses and dilution gain for the quarter and year-to-date was primarily due to an increase in NOI resulting from development projects coming on line, same property NOI growth, property acquisitions, decreased interest expense and gains on land sales. The increase in per share amounts was achieved despite the increase in the basic and weighted average number of diluted common shares outstanding compared to the same prior year period.

Adjusted Funds from Operations (AFFO)

Management views AFFO as an effective measure of cash generated from operations. For the three months ended December 31, 2008, AFFO rose 2.7% to $0.38 per diluted common share from $0.37 per diluted common share in the same period in 2007. AFFO for the year ended 2008 totalled $139.9 million or $1.46 per diluted common share compared to $121.6 million or $1.41 per diluted common share in the prior year. AFFO is calculated by adjusting FFO for straight-line and market rent adjustments, non-cash compensation expenses, interest payable in shares, non-cash gains or losses on debt, hedges and land sales and actual costs incurred for capital expenditures and leasing costs for maintaining shopping centre infrastructure and current lease revenues. The Company’s proportionate share of Equity One FFO is excluded and only the regular cash dividends received are included in AFFO. The weighted average diluted shares outstanding for AFFO is adjusted to assume conversion of the outstanding convertible debentures.

Net Income

  Three months ended December 31 Year ended December 31

($ thousands, except per share amounts)

 

2008

 

2007

   

2008

 

2007

Net income

$

10,652

$

9,252

$

37,430

$

30,353

Earnings per share (diluted)

$

0.12

$

0.12

$

0.43

$

0.39

Weighted average common shares – diluted (000’s)

 

90,424

 

80,003

 

87,260

 

78,428

Net income in the fourth quarter of 2008 totalled $10.7 million or $0.12 per common share (basic and diluted) compared to $9.3 million or $0.12 per common share (basic and diluted) in the same period of 2007. For the year ended December 31, 2008, net income was $37.4 million or $0.43 per share (basic and diluted) compared to $30.4 million or $0.39 per common share (basic and diluted in the same period of 2007).

The increase in net income is primarily due to an increase in NOI resulting from development projects coming on line, same property NOI growth, acquisitions, decreased interest, gains on the sale of land offset by increased amortization expense and decreased income from Equity One. In addition, there was an increase in the basic and weighted average diluted shares outstanding compared to the prior year period.

DEVELOPMENT AND ACQUISITION HIGHLIGHTS

During the fourth quarter of 2008, the Company invested $87 million in active development projects and improvements to existing properties bringing the year to date total investment to $254 million.

Development and redevelopment of 475,000 square feet was brought on line in the fourth quarter, leased at an average rate of $19.62 per square foot. Year-to-date the Company brought on line 835,000 square feet of development and redevelopment space leased at an average rate of $19.70 per square foot.

In addition, during the fourth quarter of 2008 the Company invested $11.0 million in the acquisition of an income-producing property adding 35,000 square feet of gross leasable area and an additional interest in a single existing land parcel for future development. For the year ended December 31, 2008, the Company invested $76 million in four income-producing properties comprising 292,000 square feet and two land sites and eight land parcels adjacent to existing properties comprising a total of 22.0 acres of commercial land for future development and an additional interest in an existing land parcel for future development.

OPERATING HIGHLIGHTS

Net operating income for the three months ended December 31, 2008 totalled $67.5 million, compared to $63.8 million in the fourth quarter of 2007, an increase of $3.7 million or 5.8%. Same property NOI increased 3.7% generating NOI growth of $2.1 million in the fourth quarter 2008 over the fourth quarter of 2007, due primarily to redevelopment and expansion space and increases in lease rates and occupancy. Same property NOI in the fourth quarter of 2008, excluding expansion or redevelopment space, increased by $0.9 million or 1.7% over the same prior year period.

For the year ended December 31, 2008, acquisitions completed in 2008 and 2007 contributed $14 million to NOI, while greenfield development activities contributed a further $20 million. Same property net operating income increased 3.8%, generating growth in NOI of $8.1 million in 2008. Excluding redevelopment and expansion space, same property NOI grew by $4.1 million or 2.1% over 2007.

Gross new leasing in the fourth quarter of 2008 totalled 593,000 square feet including development and redevelopment space coming on line. The Company achieved a 15.4% increase on 507,000 square feet of renewal leases over the expiring rates. During 2008, gross new leasing totalled 1.2 million square feet. Renewal leasing totalled 1.2 million square feet with a 14% increase over expiring lease rates.

The average rate per occupied square foot at December 31, 2008 increased to $15.10. This compares to an average rate of $14.56 per square foot at December 31, 2007 and $14.84 at September 30, 2008.

Portfolio occupancy at December 31, 2008 of 96.0% compares to 95.8% at September 30, 2008 and 95.3% at December 31, 2007. Closures for redevelopment totalled 71,000 square feet for the fourth quarter of 2008 providing potential for future income growth through leasing and redevelopment activities.

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 extremely competitive, however the competition seems to have shifted to the capital side of the Company’s business. Both debt and equity markets are challenging relative to pricing currently being asked by the vendors. 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 in the current environment of increasing cost and scarcity of capital.

Specifically, Management will focus on the following four areas to achieve its objectives in 2009:

  • same property net operating income growth, taking into account maintaining high occupancy;
  • development and redevelopment activities;
  • increasing efficiency and productivity of operations; and
  • careful capital allocation to decrease dependence on capital markets.

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.

2008 actual results compared to 2008 guidance

The purpose of the Company’s guidance was to provide readers with 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 year-end 2008 results to the previously updated guidance follows. Given the current environment, the Company intends to issue 2009 specific guidance, at the earliest, in its first quarter earnings release.

  Guidance issued November 7, 2008 Actual Year Ended Dec 31, 2008

(per share amounts)

 

Low

 

High

   

Diluted net income (reported)

$

0.42

$

0.44

$0.43

Adjustments

 

 

 

 

 

FFO from Equity One, Inc. excluding non-cash impairment loss recorded YTD Q3

 

0.22

 

0.23

0.23

Effect of fourth quarter Equity One non-cash impairment losses

 

-

 

-

(0.01)

Equity income from Equity One, Inc.

 

(0.10)

 

(0.13)

(0.10)

Amortization and future income taxes

 

1.11

 

1.12

1.16

Gain on disposition of income-producing property

 

-

 

-

(0.02)

Dilution gain on investment in Equity One, Inc.

 

-

 

-

(0.03)

Funds from Operations (reported)

$

1.65

$

1.66

$1.66

The net income variance was primarily driven by the gain on disposition of an income-producing property in the fourth quarter and the dilution gain on the investment in Equity One, which were not anticipated in the guidance, offset by an increase in future income tax expense. The increase in future income taxes was attributed to the normal process of re-evaluating the Company’s future income tax assets and liabilities at year-end. Funds from operations as reported (excluding Equity One’s impairment losses and the dilution gain) was consistent with guidance. None of these variances is considered material by the Company.

MANAGEMENT CONFERENCE CALL AND WEBCAST

First Capital Realty invites you to participate at its live conference call with senior management announcing our 2008 year end results on Friday, March 6, 2009 at 1:00 p.m. E.S.T.

Year end financial results will be released prior to the call and made available on First Capital Realty’s website in the Pressroom section. The Supplemental Package link will be on our Home Page at www.firstcapitalrealty.ca or click on Investor Relations, investor 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 March 13, 2009 and can be accessed by dialing toll free 800-408-3053 or 416-695-5800 with access code 3281870.

Webcast:

To access the webcast, go to First Capital Realty’s website at www.firstcapitalrealty.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 our Conference Calls section of our website.

Slide Presentation:

A slide presentation to accompany management’s comments during the conference call will be available. To view the slides, please go to First Capital Realty’s website at www.firstcapitalrealty.ca and click on the link for the Conference Call at the top of our Home Page.

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 drugstoreanchored neighbourhood and community shopping centres, located predominantly in growing metropolitan areas. The Company currently owns interests in 172 properties, including 5 under development, totalling approximately 20.1 million square feet of gross leasable area and 6 land sites in the planning stage for future retail development. In addition, the Company owns 14.1 million shares of Equity One (approximately 18.5%), one of the largest shopping centre REITS in the southern U.S., that trades on the New York Stock Exchange under the ticker symbol EQY. Including its investment in Equity One, the Company has interests in 328 properties totalling approximately 36.1 million square feet of gross leasable area.

* * * *

Forward Looking Statements

This press release and in particular the “Outlook” section, 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”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “plan”, “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 current management’s discussion and analysis.

Factors that could cause actual results or events to differ materially from those expressed, implied or projected by forwardlooking statements in addition to those described in the “Risk Management” 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” section of this press release 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. The assumptions used in developing the Company’s guidance issued on November 7, 2008 are set out in the Company’s third quarter results press release which is available on SEDAR at www.sedar.com.

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 security laws.

These forward-looking statements are made as of March 5, 2009.

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 Ave., Suite 400
Toronto, Ontario, Canada M6K 3S3
Tel: (416) 504-4114
Fax: (416) 941-1655
www.firstcapitalrealty.ca

NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES

Funds from Operations and Adjusted Funds from Operations

In Management’s view, funds from operations (“FFO”) and adjusted funds from operations (“AFFO”) 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 (“GAAP”) 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 – RealPac Recommendations

First Capital Realty calculates FFO in accordance with the recommendations of the Real Property Association of Canada (“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 RealPac 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. Amortization expense assumes that the value of real estate assets diminishes predictably over time, which is clearly not a valid assumption. 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

Net operating income (“NOI”) is defined as property rental revenue less property operating costs. In Management’s opinion, net operating income is useful in analyzing the operating performance of the Company’s shopping centre portfolio. Net operating income is not a measure defined by GAAP and there is no standard definition of net operating income. As a result, net operating income may not be comparable with similar measures presented by other entities. Net operating income 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

December 31 (thousands of dollars) 2008 2007

ASSETS

       

Real Estate Investments

       

Shopping centres

$

2,968,785

$

2,718,078

Land and shopping centres under development

 

281,959

 

284,077

Deferred costs

 

76,800

 

79,606

Intangible assets

 

29,312

 

35,938

 

 

3,356,856

 

3,117,699

Investment in Equity One, Inc.

 

227,259

 

191,536

Loans, mortgages and other real estate assets

 

32,480

 

11,589

 

 

3,616,595

 

3,320,824

Other assets

 

38,926

 

32,395

Amounts receivable

 

45,501

 

36,008

Cash and cash equivalents

 

7,263

 

10,451

Future income tax assets

 

11,977

 

9,731

 

$

3,720,262

$

3,409,409

LIABILITIES

 

 

 

 

Mortgages, loans and credit facilities

$

1,573,530

$

1,471,114

Accounts payable and other liabilities

 

166,507

 

110,006

Intangible liabilities

 

17,264

 

17,795

Senior unsecured debentures

 

593,288

 

595,376

Convertible debentures

 

218,247

 

217,030

Future income tax liabilities

 

55,620

 

46,757

 

 

2,624,456

 

2,458,078

SHAREHOLDERS' EQUITY

 

1,095,806

 

951,331

 

$

3,720,262

$

3,409,409

 

FIRST CAPITAL REALTY INC.

CONSOLIDATED STATEMENTS OF EARNINGS

  Three months ended December 31 Year ended December 31
(thousands of dollars, except per share amounts)   2008   2007   2008   2007

REVENUE

 

 

 

 

 

 

 

 

Property rental revenue

$

105,695

$

96,643

$

410,192

$

376,891

Property rental revenue

$

4,428

$

469

$

9,422

$

5,550

 

 

110,123

 

97,112

 

419,614

 

382,441

EXPENSES

 

 

 

 

 

 

 

 

Property operating costs

 

38,163

 

32,832

 

150,601

 

134,446

Interest expense

 

28,621

 

28,882

 

113,685

 

116,043

Amortization

 

 

 

 

 

 

 

 

Shopping centres

 

15,342

 

14,505

 

60,253

 

55,118

Deferred costs

 

4,197

 

3,555

 

16,593

 

14,629

Intangible assets

 

1,706

 

2,242

 

7,783

 

8,217

Deferred financing fee

 

226

 

813

 

854

 

813

Other assets

 

366

 

264

 

1,305

 

1,051

Corporate expenses

 

5,614

 

5,165

 

21,577

 

23,544

 

 

94,235

 

88,258

 

372,651

 

353,861

Equity income from Equity One, Inc.

 

1,405

 

4,455

 

8,716

 

14,375

Income before income taxes

 

17,293

 

13,309

 

55,679

 

42,955

Income taxes

 

 

 

 

 

 

 

 

Current (recovery)

 

(380)

 

368

 

1,985

 

1,672

Future

 

7,021

 

3,689

 

16,264

 

10,930

 

 

6,641

 

4,057

 

18,249

 

12,602

Net income

$

10,652

$

9,252

$

37,430

$

30,353

Earnings per common share

 

 

 

 

 

 

 

 

Basic

$

0.12

$

0.12

$

0.43

$

0.39

Diluted

$

0.12

$

0.12

$

0.43

$

0.39

 

FIRST CAPITAL REALTY INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

  Three months ended December 31 Year ended December 31

(thousands of dollars)

 

2008

 

2007

 

2008

 

2007

NET INCOME

$

10,652

$

9,252

$

37,430

$

30,353

OTHER COMPREHENSIVE LOSS

 

 

 

 

 

 

 

 

Unrealized foreign currency gain (loss) on translating self-sustaining foreign operations

 

 

 

 

 

 

 

 

Gains (losses) arising during the period

 

8,680

 

(138)

 

12,043

 

(9,950)

Reclassification adjustment for dilution gain on investment in Equity One, Inc

 

(724)

 

-

 

(724)

 

-

 

 

7,956

 

(138)

 

11,319

 

(9,950)

Other comprehensive losses of Equity One, Inc

 

 

 

 

 

 

 

 

Losses arising during the period

 

(3,021)

 

-

 

(1,933)

 

(320)

Reclassification adjustment for dilution gain included in net income

 

(11)

 

-

 

(11)

 

-

 

 

(3,032)

 

-

 

(1,944)

 

(320)

Unrealized losses on cash flow hedges of interest rates

 

 

 

 

 

 

 

 

Unrealized losses arising during the period

 

(16,003)

 

(1,517)

 

(16,443)

 

(2,139)

Reclassification adjustment for gains included in net income

 

-

 

-

 

-

 

(597)

 

 

(16,003)

 

(1,517)

 

(16,443)

 

(2,736)

Change in cumulative unrealized (loss) gain on available-for-sale marketable securities

 

 

 

 

 

 

 

 

Unrealized (losses) gains arising during the period

 

(4,591)

 

103

 

(6,645)

 

(534)

Reclassification adjustment for gains included in net income

 

-

 

-

 

55

 

293

 

 

(4,591)

 

103

 

(6,590)

 

(241)

Other comprehensive loss before income taxes

 

(15,670)

 

(1,552)

 

(13,658)

 

(13,247)

Future income tax recovery

 

(4,957)

 

(421)

 

(5,832)

 

(1,044)

Other comprehensive loss

 

(10,713)

 

(1,131)

 

(7,826)

 

(12,203)

COMPREHENSIVE (LOSS) INCOME

$

(61)

$

8,121

$

29,604

$

18,150

 

FIRST CAPITAL REALTY INC.

CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS

 

Three months ended December 31

 

Year ended December 31

(thousands of dollars, except per share amounts)

 

2008

 

2007

 

2008

 

2007

Net income for the period

$

10,652

$

9,252

$

37,430

$

30,353

Add (deduct):

 

 

 

 

 

 

 

 

Amortization of shopping centres, deferred costs and intangible assets

 

21,245

 

20,302

 

84,629

 

77,964

Gain on disposition of income-producing shopping centres

 

(1,631)

 

-

 

(1,631)

 

(323)

Equity income from Equity One

 

(1,405)

 

(4,455)

 

(8,716)

 

(14,375)

Funds from operations from Equity One

 

3,753

 

4,116

 

12,502

 

20,807

Future income taxes

 

7,021

 

3,689

 

16,264

 

10,930

Funds from operations ("FFO")

 

39,635

 

32,904

 

140,478

 

125,356

Add: the Company's share of Equity One's non-cash impairment loss

 

1,023

 

-

 

7,503

 

-

Deduct: dilution gain on Equity One investment

 

(2,898)

 

-

 

(2,898)

 

-

FFO excluding Equity One's non-cash impairment loss and dilution gain on Equity One investment

$

37,760

$

32,904

$

145,083

$

125,356

FFO per diluted share

$

0.44

$

0.41

$

1.61

$

1.60

Add: the Company's share of Equity One's non-cash impairment loss

 

0.01

 

-

 

0.09

 

-

Deduct: dilution gain on Equity One investment

 

(0.03)

 

-

 

(0.04)

 

-

FFO per diluted share excluding Equity One's non-cash impairment loss and dilution gain on Equity One investment

$

0.42

$

0.41

$

1.66

$

1.60

Weighted average diluted shares - FFO

90,423,576

80,002,983

87,260,224

78,427,583

 

CONSOLIDATED STATEMENTS OF ADJUSTED FUNDS FROM OPERATIONS

  Three months ended December 31   Year ended December 31

(thousands of dollars, except per share amounts)

2008

2007

 

2008

2007

FFO excluding Equity One's non-cash impairment loss and dilution gain

$ 37,760

$ 32,904

$

145,083

$ 125,356

Add / (Deduct):

 

 

 

 

 

Rental revenue recorded on a straight-line basis and

 

 

 

 

 

market rent adjustments

(1,461)

(2,091)

 

(7,627)

(8,875)

Non-cash compensation expense

928

1,142

 

3,899

4,295

Interest expense payable in shares

3,540

3,595

 

14,031

13,160

Change in cumulative unrealized losses (gains) on

 

 

 

 

 

marketable securities

850

(273)

 

1,638

-

Dividend income - return of capital portion

409

21

 

623

339

Non-cash (gain) loss on extinguishment of debt

(438)

-

 

(438)

483

Funds from operations from Equity One excluding non-cash

 

 

 

 

 

impairment loss

(4,776)

(4,116)

 

(20,005)

(20,807)

Dividends from Equity One (Regular)

5,145

4,159

 

18,193

17,617

Gain on termination of hedge

290

-

 

290

-

Gain on interest rate swaps not designated as hedges

-

-

 

-

(643)

Gain on disposition of land

(3)

-

 

(3,945)

-

Revenue sustaining capital expenditures and leasing costs

(4,779)

(2,551)

 

(11,866)

(9,292)

Adjusted funds from operations ("AFFO")

$ 37,465

$ 32,790

$

139,876

$ 121,633

AFFO per diluted share

$ 0.38

$ 0.37

$

1.46

$ 1.41

Weighted average diluted shares for AFFO (1)

99,053,205

88,807,137

95,586,511

86,304,978

(1) Includes the weighted average outstanding shares that would result from the conversion of the convertible debentures.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

  Three months ended December 31   Year ended December 31

(thousands of dollars)

 

2008

 

2007

 

2008

 

2007

CASH FLOW PROVIDED BY (USED IN):

 

 

 

 

 

 

 

 

OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

$

10,652

$

9,252

 

37,430

$

30,353

Items not affecting cash

 

 

 

 

 

 

 

 

Amortization

 

21,837

 

21,379

 

86,788

 

79,828

Amortization of above- and below-market leases

 

(574)

 

(584)

 

(2,253)

 

(2,122)

Rent revenue recognized on a straight-line basis

 

(887)

 

(1,507)

 

(5,374)

 

(6,753)

Gains on land and property sales

 

(1,634)

 

-

 

(5,576)

 

(323)

Realized losses (gains) on sale of marketable securities

 

160

 

238

 

212

 

(2,504)

Change in cumulative unrealized losses (gains) on investment in

 

 

 

 

 

 

 

 

marketable securities

 

850

 

(273)

 

1,638

 

-

(Gain) loss on settlement of debt

 

(438)

 

-

 

(438)

 

483

Non-cash compensation expense

 

928

 

1,142

 

3,899

 

4,295

Interest paid in excess of effective interest on assumed mortgages

 

(294)

 

(507)

 

(1,436)

 

(1,890)

Debenture interest expense in excess of coupon

 

225

 

210

 

864

 

696

Convertible debenture interest paid in common shares

 

-

 

-

 

12,891

 

12,048

Other non-cash interest expense

 

617

 

7

 

2,466

 

2,480

Equity income from Equity One, Inc.

 

(1,405)

 

(4,455)

 

(8,716)

 

(14,375)

Dilution gain on investment in Equity One, Inc.

 

(2,898)

 

-

 

(2,898)

 

-

Future income taxes

 

7,021

 

3,689

 

16,264

 

10,930

Unrealized gains on interest rate swaps not designated as hedges

 

-

 

-

 

-

 

(643)

Deferred leasing costs

 

(1,021)

 

(702)

 

(4,033)

 

(3,429)

Settlement of restricted share units

 

(1,275)

 

(1,826)

 

(1,275)

 

(1,826)

Dividends received from Equity One, Inc.

 

5,145

 

4,159

 

18,193

 

17,617

Net change in non-cash operating items

 

22,855

 

20,062

 

(2,688)

 

6,543

Cash provided by operating activities

 

59,864

 

50,284

 

145,958

 

131,408

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Acquisition of shopping centres

 

(10,757)

 

(42,885)

 

(56,704)

 

(230,554)

Acquisition of land for development

 

(284)

 

(1,150)

 

(11,887)

 

(65,562)

Proceeds from disposition of shopping centres

 

-

 

-

 

-

 

6,400

Proceeds from disposition of land held for development

 

432

 

-

 

10,581

 

-

Expenditures on shopping centres

 

(8,813)

 

(6,597)

 

(22,222)

 

(23,718)

Expenditures on land and shopping centres under development

 

(77,179)

 

(49,414)

 

(227,775)

 

(143,744)

Changes in accounts payable and accrued liabilities related to expenditures on land and shopping centres under development

 

14,519

 

(4,570)

 

30,072

 

1,309

Investment in common shares of Equity One, Inc.

 

(1,263)

 

-

 

(1,263)

 

(2,254)

(Increase) decrease in loans and mortgages receivable

 

(227)

 

(309)

 

(1,507)

 

1,538

Investment in marketable securities

 

(14,869)

 

-

 

(37,110)

 

(32,556)

Return on capital from investment in marketable securities

 

304

 

21

 

623

 

339

Proceeds from disposition of marketable securities

 

5,292

 

7,399

 

7,474

 

45,031

Cash used in investing activities

 

(92,845)

 

(97,505)

 

(309,718)

 

(443,771)

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Mortgage financings, loans and credit facilities

 

 

 

 

 

 

 

 

Borrowings, net of financing costs

 

207,363

 

143,805

 

552,708

 

425,428

Principal instalment payments

 

(9,835)

 

(9,299)

 

(38,139)

 

(39,400)

Other repayments on maturity

 

(134,248)

 

(82,257)

 

(452,273)

 

(305,554)

Issuance of common shares, net of issue costs

 

1,306

 

1,667

 

149,797

 

5,976

(Purchase) issuance of senior unsecured debentures, net of issue costs

 

(2,543)

 

20

 

(2,543)

 

198,296

Issuance of convertible debentures, net of issue costs

 

-

 

(3)

 

-

 

53,299

Payment of dividends

 

(28,682)

 

(5,853)

 

(49,312)

 

(21,066)

Cash provided by financing activities

 

33,361

 

48,080

 

160,238

 

316,979

Effect of currency rate movement on cash balances

 

381

 

(590)

 

334

 

(975)

Increase (decrease) in cash and cash equivalents

 

761

 

269

 

(3,188)

 

3,641

Cash and cash equivalents, beginning of the period

 

6,501

 

10,182

 

10,451

 

6,810

Cash and cash equivalents, end of the period

$

7,263

$

10,451

$

7,263

$

10,451

SUPPLEMENTARY INFORMATION

 

 

 

 

 

 

 

 

Cash income taxes paid

$

611

$

26

$

2,251

$

787

Cash interest paid

$

30,774

$

32,010

$

120,183

$

115,948

 

Mail Lists
Or from All