Press Releases

FIRST CAPITAL REALTY ANNOUNCES CONTINUED SOLID Q3 FINANCIAL RESULTS ALSO ANNOUNCES SENIOR MANAGEMENT APPOINTMENTS

November 07, 2008

Toronto, Ontario (November 7, 2008) – 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 third quarter ended September 30, 2008.

THIRD QUARTER 2008 HIGHLIGHTS:

($ millions, except per share amounts) 30 Sept 2008 30 Sept 2007 Percentage Change

Property rental revenue

$ 100.8

$ 96.2

4.8%

Net operating income (NOI)

$ 65.1

$ 61.7

5.5%

Funds from operations (FFO) excluding Equity One s non- cash impairment loss (1)

$ 38.5

$ 31.4

22.6%

FFO per diluted share excluding Equity One s non-cash impairment loss(1)

$ 0.43

$ 0.40

7.5%

Adjusted funds from operations (AFFO)

$ 36.7

$ 30.4

20.7%

AFFO per diluted share

$ 0.37

$ 0.35

5.7%

Enterprise value

$ 4,221

$ 4,274

Debt to aggregate assets (Properties at 8.3% Cap rate and EQY at $14 USD per share)

53.2%

56.4%

Debt to total market capitalization

49.3%

46.9%

Weighted average diluted shares for FFO (000's)

90,022

79,001

14.0%

Weighted average diluted shares for AFFO (000's)

98,648

87,813

12.3%

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

 

OPERATIONS HIGHLIGHTS:

  • Invested $110 million in development activities, property improvements and acquisitions

  • Added 425,000 square feet of gross leasable area from development and redevelopment coming on line and acquisitions

  • Acquired two income-producing properties totalling 208,000 square feet, two land parcels adjacent to existing properties comprising a total of 0.7 acres of commercial land for future development and an additional interest in an existing land parcel for future development

  • 3.3% same property NOI growth; 2.2% excluding redevelopment and expansion space

  • 9.3% increase on 221,000 square feet of renewal leases

  • Occupancy of 95.8% compares to 95.3% at December 31, 2007 and 95% at September 30, 2007. Vacancy includes 1.2% of space held for redevelopment

  • Gross new leasing totalled 345,000 square feet including development and redevelopment coming on line; lease closures totalled 87,000 square feet and closures for redevelopment totalled 36,000 square feet

  • Average lease rate per occupied square foot increased by 3.4% to $14.84 at September 30, 2008 compared to $14.35 at September 30, 2007

YEAR-TO-DATE 2008 HIGHLIGHTS:

($ millions, except per share amounts) Year-to-Date 30 Sept 2008 Year-to-Date 30 Sept 2007 Percentage Change

Property rental revenue

$304.5

$280.2

8.7%

Net operating income (NOI)

$192.1

$178.6

7.6%

Funds from operations (FFO) excluding Equity One s non- cash impairment loss(1)

107.3

$92.5

16.0%

FFO per diluted share excluding Equity One s non-cash impairment loss (1)

$1.25

$1.19

5.0%

Adjusted funds from operations (AFFO)

$103.5

$89.1

16.2%

AFFO per diluted share

$1.09

$1.04

4.8%

Weighted average diluted shares for FFO (000's)

86,232

77,902

10.7%

Weighted average diluted shares for AFFO (000's)

94,658

85,624

10.6%

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

 

OPERATIONS HIGHLIGHTS:

  • Invested $232 million in development activities, property improvements and acquisitions
  • Added 618,000 square feet of gross leasable area from development and redevelopment coming on line and acquisitions
  • Acquired three income-producing properties totalling 257,000 square feet, one land site and eight land parcels adjacent to existing properties comprising a total of 15.8 acres of commercial land for future development and an additional interest in an existing land parcel for future development
  • 3.9% same property NOI growth; 2.2% excluding redevelopment and expansion space
  • 13.1% increase on 725,000 square feet of renewal leases
  • Gross new leasing totalled 640,000 square feet including development and redevelopment coming on line; lease closures totalled 337,000 square feet and closures for redevelopment totalled 135,000 square feet
  • Lease rates on openings and redevelopment coming on line increased by 22.2% versus all lease closures
  • Raised $224 million of equity issuing 10.2 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
  • Sold three land parcels not intended for retail use for total proceeds of $10.5 million

"Our strong operating and financial performance continued in the third quarter with increased occupancies and average rents, and further gains in net operating income and funds from operations, said Dori J. Segal, President & CEO. Looking ahead, we continue to focus on our operations, leasing, expansions and redevelopment activities which, combined with our emphasis on providing the best retail formats of shopping for everyday life, should help us maintain our track record of consistent internal growth."

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

Funds from operations for the three months ended September 30, 2008 totalled $32.0 million or $0.36 per diluted common share and $100.8 million or $1.17 per diluted common share for the nine months ended September 30, 2008. The FFO reported by Equity One during the three months ended September 30, 2008 included a non-cash impairment loss on its investment in DIM Vastgoed N.V. The Company s share of this loss is Cdn$6.5 million or $0.07 per diluted common share. Funds from operations excluding the impairment loss for the three months ended September 30, 2008 totalled $38.5 million or $0.43 per diluted common share and increased from $31.4 million or $0.40 per diluted common share in the same period in 2007. FFO excluding the impairment loss for the nine months ended September 30, 2008 totalled $107.3 million or $1.25 per diluted common share, and increased from $92.5 million or $1.19 per diluted common share in the same period in 2007. The increase in FFO excluding the impairment loss for the quarter and year-to-date was primarily due to an increase in NOI resulting from acquisitions and development projects coming on line, same property NOI growth, decreased interest expense and corporate expenses and gains on land sales. In addition, there was an increase in the basic and weighted average diluted shares outstanding compared to the same prior year period. Gains on land sales amounted to $2.7 million in the three months ended September 30, 2008 and $3.9 million year-to-date ($0.03 and $0.045 per diluted share, respectively).

Adjusted Funds from Operations

Management views AFFO as an effective measure of cash generated from operations. For the three months ended September 30, 2008, AFFO rose 5.7% to $0.37 per diluted common share from $0.35 per diluted common share in the same period in 2007. AFFO for the first nine months of 2008 totalled $103.5 million or $1.09 per diluted common share compared to $89.1 million or $1.04 per diluted common share in the first nine months of 2007. AFFO is calculated by adjusting FFO for amortization of non-cash financing costs, accretion of debt discounts, 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 Sept 30 Nine months ended Sept 30
($ thousands, except per share amounts) 2008 2007 2008 2007

Net income

$ 8,249

$ 6,940

$ 26,778

$ 21,101

Earnings per share (diluted)

$ 0.09

$ 0.09

$ 0.31

$ 0.27

Weighted average common shares — diluted (000 s)

90,022

79,001

86,232

77,902

Net income for the three and nine months ended September 30, 2008 amounted to $8.2 million or nine cents per share (basic and diluted) and $26.8 million or 31 cents per share (basic and diluted), respectively. This compares to $6.9 million or nine cents per share (basic and diluted) and $21.1 million or 27 cents per share (basic and diluted), respectively, for the three and nine months ended September 30, 2007. The increase in net income is primarily due to an increase in NOI resulting from acquisitions and development projects coming on line, same property NOI growth, decreased interest and corporate expenses and 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 same prior year period.

DEVELOPMENT AND ACQUISITION HIGHLIGHTS

During the third quarter of 2008, the Company invested $66 million in active development projects and improvements to existing properties bringing the nine month total investment to $167 million.

Development of 166,900 square feet was brought on line in the third quarter, leased at an average rate of $18.91 per square foot. The Company also reopened 50,500 square feet of redeveloped space at an average rate of $21.68 per square foot. Year-to-date the Company brought on line 277,900 square feet with 259,000 square feet leased at an average rate of $19.37 per square foot and reopened 82,500 square feet of redeveloped space at an average rate of $20.89 per square foot.

In addition, the Company invested $44 million in the acquisition of two income-producing properties, two land parcels adjacent to existing properties and an additional interest in an existing land parcel for future development in the third quarter adding 208,000 square feet of gross leasable area and 0.7 acres of commercial land for future development. Through the first nine months of 2008, the Company invested $65.0 million in three income-producing properties comprising 257,000 square feet and one land site and eight land parcels adjacent to existing properties comprising a total of 15.8 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 September 30, 2008 totalled $65.1 million, compared to $61.7 million in the third quarter of 2007, an increase of $3.4 million or 5.5%. Same property NOI increased 3.3% generating NOI growth of $1.8 million in the third quarter 2008 over the third quarter of 2007, due primarily to redevelopment and expansion space and increases in lease rates and occupancy. Same property NOI in the third quarter of 2008, excluding expansion or redevelopment space increased by $1.1 million or 2.2% over the same prior year period.

Year-to-date, acquisitions completed in 2008 and 2007 contributed $9.3 million to NOI, while greenfield development activities contributed a further $13.8 million. Same property net operating income increased 3.9%, generating growth in NOI of $6.2 million in the nine month period ended September 30, 2008. Excluding redevelopment and expansion space, same property year-to-date NOI grew by $3.2 million or 2.2% over the same period in 2007.

Gross new leasing in the third quarter of 2008 totalled 345,000 square feet including development and redevelopment space coming on line. The Company achieved a 9.3% increase on 221,000 square feet of renewal leases over the expiring rates. For the nine months ended September 30, 2008, gross new leasing totalled 640,000 square feet. Renewal leasing totalled 725,000 square feet with a 13.1% increase over expiring lease rates.

The average rate per occupied square foot at September 30, 2008 increased to $14.84. This compares to an average rate of $14.56 per square foot at December 31, 2007 and $14.35 at September 30, 2007.

Portfolio occupancy at September 30, 2008 of 95.8% compares to 95.3% at December 31, 2007 and 95.0% at September 30, 2007. Closures for redevelopment totalled 36,000 square feet for the third quarter of 2008 providing potential for future income growth through leasing and redevelopment activities.

FINANCING AND CAPITAL MARKET HIGHLIGHTS

For the nine months ending September 30, 2008, First Capital Realty issued common shares to further enhance the Company s financial flexibility and provide capital for continued growth. In the aggregate, 10.2 million common shares were issued raising $224 million of equity primarily from the following activities:

  • On January 9, 2008, the Company issued 862,363 common shares at a net price of $22.79 to participants in the Dividend Reinvestment Plan ( DRIP );
  • On March 26, 2008, the Company issued 4,900,000 common shares at a price of $22.25 for gross proceeds of $109 million;
  • On March 31, 2008, the Company issued 301,432 common shares at a net price of $21.51 as payment of the interest due to holders of the 5.50% convertible debentures;
  • On April 9, 2008, the Company issued 908,107 common shares at a net price of $21.84 to participants in the DRIP.
  • On July 3, 2008, the Company completed the sale of 1,840,000 common shares at a price of $23.60 for gross proceeds of $43.4 million.
  • On July 10, 2008, the Company issued 914,578 common shares at a net price of $22.42 to participants in the DRIP; and
  • On September 30, 2008, the Company issued 299,229 common shares at a net price of $21.41 as payment of the interest due to holders of the 5.50% convertible debentures.

In addition, the Company completed six secured financing transactions for gross proceeds of $141 million at a weighted average interest rate of 5.44% and a weighted average term to maturity of 7.2 years. This includes three secured financing transactions completed subsequent to September 30, 2008 for gross proceeds of $48.3 million at a weighted average interest of 5.71% per year with a weighted average term to maturity of 9 years.

SUBSEQUENT EVENT HIGHLIGHTS

Acquisitions

On October 16, 2008, the Company acquired Gorge Shopping Centre, a 32,000 square foot shopping centre located in Victoria, BC. The purchase price of $10.6 million, including closing costs, was satisfied in cash.

Quarterly Dividend

The Company announced that it will pay a fourth quarter dividend of $0.32 per common share on January 10, 2009 to shareholders of record on December 29, 2008.

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.

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:

  • same property net operating income growth;
  • development and redevelopment activities;
  • increasing efficiency and productivity of operations; and
  • capital preservation in order to decrease dependence on capital markets.

Overall, Management is confident that the quality of the Company s balance sheet, real estate and operations will continue to serve it well in the current environment.

2008 GUIDANCE

(per share amounts) Low High

Projected diluted net income

$0.42

$0.44

Adjustments

 

 

Projected FFO from Equity One excluding Equity One's non-­cash impairment loss(1)

0.22

0.23

Projected equity income from Equity One

(0.10)

(0.13)

Projected amortization and future income taxes

1.11

1.12

Projected FFO excluding Equity One's non-cash impairment loss(1)

$1.65

$1.66

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

 

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, the U.S. - Canadian foreign currency exchange rate, corporate expenses, level and timing of acquisitions of income-producing properties, number of shares outstanding and numerous other factors. In addition, the projected range of funds from operations includes Equity One based on publicly available information. Not all factors which affect our range of projected funds from operations are determinable at this time and 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. Specific assumptions include same property NOI growth excluding redevelopment and expansion activities of 2-3%, income-producing property acquisitions totalling $50 million, development coming on line of 800,000 to 850,000 square feet with approximate gross book value of $200 million to $230 million and the current interest rate environment and current US-Canadian foreign exchange rate. The range presented represents Management s estimate of results based upon these assumptions as of the date of this press release.

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

MANAGEMENT CONFERENCE CALL AND WEBCAST

First Capital Realty invites you to participate at its live conference call with senior management announcing our third quarter results on Friday, November 7th , 2008 at 1:00p.m. EST.

Third quarter financial results will be released prior to the call and made available on First Capital Realty s website Homepage. The Supplemental Package link will be on our Home Page at www.firstcapitalrealty.ca or click on Investor Relations, 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 November 14, 2008 and can be accessed by dialing toll free 800-408-3053 or 416-695-5800 with access code 3272282.

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 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 the pound key # . 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 .

SENIOR MANAGEMENT APPOINTMENTS

Sylvie Lachance — Executive Vice President and Chief Operating Officer

Karen Weaver — Executive Vice President and Chief Financial Officer

Brian Kozak — Senior Vice President, Western Canada

In addition, First Capital Realty also announced today the following appointments to members of the Company s Senior Management Team:

Louis Voizard, Vice President - Eastern Canada, Jamie Chisholm, Vice President - Central Canada, and Peter Papagiannis, Vice President Property Management, will join the Company s Senior Management Team with increased levels of responsibility.

"We are very pleased to be strengthening our Senior Management Team with these key appointments, reflecting the significant growth we have generated over the last few years, our focus on achieving operating excellence in all areas of our business, and the significant depth and experience of our people," commented Dori J. Segal, President & CEO.

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 172 properties, including ten under development, totalling approximately 19.6 million square feet of gross leasable area and six land sites in the planning stage for future retail development. In addition, the Company owns 14.0 million shares of Equity One (approximately 18%), 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 330 properties totalling approximately 35.6 million square feet of gross leasable area.

* * * *

Forward Looking Statements

Certain statements included in this press release constitute forward-looking statements, including those identified by the expressions "anticipate, "believe", "plan”, "estimate, “expect”, “intend ’’and similar expressions to the extent they relate to the Company or its Management. 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.

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 “Risk Management ” in the Management’s Discussion and Analysis (“MD&A”) contained in the Company’s 2007 Annual Report which is available on SEDAR at www.sedar.com.

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 MD&A, 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, 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.

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 November 6, 2008.

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.firstcapitalrealty.ca

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