Toronto, Ontario (May 5, 2014) – First Capital Realty Inc. (“First Capital Realty”) (TSX: FCR) Canada’s leading owner, developer and manager of well located, high quality, urban retail-centered properties, announced today financial results for the three months ended March 31, 2014.
|Three months ended March 31||Year ended|
|2014||2013||December 31, 2013|
|Enterprise value (1)||$7,485||$7,573||$7,319|
|Net debt to total assets (1)||43.6%||41.7 %||42.9%|
|Net debt to enterprise value (1)||45.1%||41.1 %||44.3%|
|Weighted term of fixed-rate debt (years) (1)||5.7||5.7||5.3|
|Property rental revenue||$164||$159|
|Net operating income (“NOI”) (1)||$99||$98|
|Three months ended March 31||$ millions (except shares)||per share|
|Funds from Operations (FFO) (1)||$53.5||$52.9||$0.26||$0.25|
|FFO excluding other gains (losses) and (expenses)||$52.1||$51.9||$0.25||$0.25|
|Weighted average diluted shares for FFO (000s)||209,597||208,207|
|Adjusted Funds from Operations (AFFO) (1) (2)||$54.0||$54.3||$0.24||$0.24|
|AFFO excluding other gains (losses) and (expenses)||$53.5||$52.1||$0.24||$0.23|
|Weighted average diluted shares for AFFO (000s)||226,260||223,686|
|Net income attributable to common shareholders||$35.2||$52.7||$0.17||$0.25|
(1) See “Non-IFRS Supplemental Financial Measures” section of this press release.
(2) See "FFO and AFFO" section of this press release.
• Invested $114 million in development activities, acquisitions, property improvements and other real estate assets;
• Added 241,800 square feet of gross leasable area from acquisitions, development and redevelopment coming on line;
• Acquired a 50% interest in one shopping centre, six properties adjacent to existing shopping centres and one development land parcel, adding 206,800 square feet of gross leasable area and 0.8 acres of land for future development;
• Disposed of one free standing building for gross proceeds of $3.3 million and a reduction of gross leasable area of 26,800 square feet;
• 2.5% total same property NOI growth; 1.2% same property – stable NOI growth;
• 13.2% rate per square foot increase on 329,000 square feet of renewal leases;
• Occupancy of same property – stable of 96.5% as compared to 96.9% at December 31, 2013 and 96.4% at March 31, 2013;
• Total occupancy of 95.3% compared to 95.5% at December 31, 2013 and 95.1% at March 31, 2013;
• Gross new leasing totalled 142,000 square feet including development and redevelopment coming on line; lease closures totalled 167,000 square feet and closures for redevelopment totalled 29,000 square feet;
• Completed new leasing on existing space totalling 127,000 square feet at an average rate of $19.48 per square foot; lease rates on new development coming on line totaling 15,000 square feet at an average rate of $22.02 per square foot;
• Average lease rate per occupied square foot increased by $0.10 from December 31, 2013 to $18.06 at March 31, 2014, including acquisitions and dispositions;
• Weighted average debt maturity of 5.7 years at March 31, 2014 compared to 5.3 years at December 31, 2013 and 5.7 years at March 31, 2013.
“We continue to recycle capital into our high quality assets in growing urban markets,” said Dori J. Segal, President and CEO. “Our focus on this strategy and the future completion of our major developments will result in a much more valuable business for First Capital Realty.”
|Three months ended March 31|
|($ millions, except per share amounts)||2014||2013|
|Net income attributable to common shareholders||$35.2||$52.7|
|Net income per share attributable to common shareholders (diluted)||$0.17||$0.25|
Net income attributable to common shareholders for the three months ended March 31, 2014 was $35.2 million or $0.17 per share (diluted) compared to $52.7 million or $0.25 per share (diluted) for the three months ended March 31, 2013. The decrease in net income as compared to the first quarter of 2013 is primarily due to a $21.9 million difference in fair value gain on investment properties and the related reduction in deferred income taxes, offset by an increase in NOI resulting from net acquisitions, development and redevelopment projects coming on line and same property NOI growth.
FFO AND AFFO
FFO is considered a meaningful additional financial measure of operating performance, as it excludes fair value gains and losses on investment properties. FFO also adjusts for certain items included in IFRS net income that may not be the most appropriate determinants of the long-term operating performance of the Company including certain cash and non-cash gains and losses, incremental leasing costs, property taxes reflected ratably, as well as adjustments to non-controlling interest to reflect FFO attributable to the Company, and provides a perspective on the financial performance that is not immediately apparent from net income determined in accordance with IFRS. The weighted average number of diluted shares outstanding for FFO is calculated assuming conversion of only those convertible debentures outstanding that would have a dilutive effect upon conversion, at the holders' contractual conversion price.
FFO for the three months ended March 31, 2014 totalled $53.5 million or $0.26 per share (diluted) compared to $52.9 million or $0.25 per share (diluted) in the same prior year period. The increase in FFO is primarily due to the increase in NOI resulting from acquisitions, development and redevelopment projects coming on line, same property NOI growth and increased interest and other income from other real estate investments.
The effects of the increase in NOI and interest and other income were partially offset by increases in interest expense and corporate expenses. On a per share basis, the increases in FFO were offset by an increase in the weighted average number of common shares outstanding.
AFFO is calculated by adjusting FFO for non-cash and other items including interest payable in shares, straight-line rent adjustments, non-cash compensation expense, same property capital expenditures and leasing costs for maintaining shopping centre infrastructures, certain other gains or losses, and adjustments to non-controlling interest to reflect AFFO attributable to the Company. Residential inventory pre-sale costs are recognized in AFFO when the Company recognizes revenue from the sale of residential units. The weighted average number of diluted shares outstanding for AFFO is adjusted to assume conversion of the outstanding convertible debentures, calculated using the holders' contractual conversion price.
AFFO for the three months ended March 31, 2014 totalled $54.0 million or $0.24 per share (diluted) compared to $54.3 million or $0.24 per share (diluted) in the same prior year period. AFFO included $0.5 million of other net gains in the quarter compared to $2.1 million of other net gains in the same prior year period.
Refer to the Funds from Operations, Other Gains (Losses) and (Expenses), Adjusted Funds from Operations and Net Operating Income sections in the Company's MD&A for further information.
Property rental revenue, NOI, FFO and AFFO disclosed in this press release, include the Company's proportionate interest of its investment in joint venture presented using the equity method in the interim consolidated financial statements.
FINANCING AND CAPITAL MARKET HIGHLIGHTS
The Company completed the following financing activities for the three months ended March 31, 2014:
• Issued, in three transactions, $300 million of new unsecured debentures at a weighted average term of 10.6 years at issuances and a weighted average effective rate of 4.72%.
• Repaid on maturity and prepaid $105.3 million of mortgages payable with a weighted average interest rate of 5.70%. Related prepayment penalties totalled $0.3 million.
The purpose of the Company’s guidance is to provide Management’s view as to the expected financial performance of the Company using factors that are commonly accepted and viewed as meaningful indicators of financial performance in the real estate industry. A reconciliation of the Company’s current guidance to the previously provided guidance follows.
|(per share amounts, except for projected FFO, AFFO and shares outstanding)||2014 Guidance as at Q1||2014 Guidance as at Q1||Variance|
|Net income attributable to common shareholders ($ millions)||$155.7||$157.8||$163.9||$167.0||$(8.2)||$(9.2)|
|Projected net income per share (using weighted average FFO shares outstanding)||$0.74||$0.75||$0.78||$0.80||$(0.04)||$(0.05)|
Projected fair value increase, deferred income taxes, other gains and losses
|Projected FFO per share / FFO excluding other gains and losses (1)||$1.05||$1.07||$1.05||$1.07||$—||$—|
|Projected FFO ($ millions) (1)||$221.4||$224.4||$220.5||$225.0||$0.9||$(0.6)|
|Projected weighted average shares outstanding (in millions) for FFO share calculations||210.6||210.5||0.1|
|Projected FFO ($ millions)||$221.4||$224.4||$220.5||$225.0||$0.9||$(0.6)|
|Projected weighted average shares outstanding (in millions) for AFFO share calculations (including conversion of convertible debentures)||227.3||226.9||0.4|
|Projected FFO per share (using weighted average AFFO shares outstanding)||$0.97||$0.99||$0.97||$0.99||$—||$—|
Projected revenue sustaining capital expenditures (2)
Projected non-cash items, net
|Projected AFFO per share / AFFO excluding other gains and losses (1)||$0.99||$1.01||$0.99||$1.01||$—||$—|
(1) See “Non-IFRS Supplemental Financial Measures” section of this press release.
(2) See "FFO and AFFO" section of this press release.
The decrease in net income attributable to common shareholders for the Q1 guidance forecast is primarily due to the actual fair value loss on investment properties recorded in the first quarter.
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, investments in other real estate assets, the Company’s capital structure and cost of capital raised, the number of shares outstanding and numerous other factors. Not all factors which affect our range of projected net income, FFO and AFFO 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.
2014 guidance (as of Q1 2014) is based on the first quarter results and following major assumptions:
• Total same property NOI growth of 2.5% to 3.5%;
• Development, redevelopment and expansion coming on line of 200,000 to 220,000 square feet with a cost of $110 to $130 million including land cost;
• Income-producing acquisitions totalling approximately $150 million for the year assuming no accretion;
• Dispositions of approximately $200 to $250 million of investment properties;
• Revenue sustaining capital expenditures on same properties are expected to be approximately $0.86 - $0.87 per square foot on average, on the same property portfolio;
• No assumption for new equity capital; leverage assumption is +/- 50bps on average during the year;
• Corporate expenses and abandoned transaction costs are expected to be consistent, in the aggregate, with the prior year.
Readers should refer to the section below titled “Forward-Looking Statements” for important information regarding the risks and uncertainties associated with the Company’s guidance.
For further information on management’s outlook and view on the business environment please refer to the “Outlook and Business Environment” section in Management’s Discussion and Analysis for the three months ended March 31, 2014.
The Company announced that it will pay a second quarter dividend of $0.21 per common share on July 10, 2014 to shareholders of record on June 30, 2014.
REGULATORY FILINGS AND ADDITIONAL INFORMATION
First Capital Realty’s financial statements and MD&A for the three months ended March 31, 2014 will be filed today on the Company’s website at www.firstcapitalrealty.ca in the ‘Investors’ section, and on the Canadian Securities Administrators’ website at www.sedar.com.
MANAGEMENT CONFERENCE CALL AND WEBCAST
First Capital Realty invites you to participate in its live conference call with senior management announcing the Company's first quarter results on Tuesday, May 6, 2014 at 2.00 p.m. (ET).
You can participate in the live conference toll-free at 866-696-5910 or at 416-340-2217 with access code 435056. In order to ensure your participation, please dial-in five minutes prior to the scheduled start time of the call. The call will be archived through May 20, 2014 and can be accessed by dialing toll free 800- 408-3053 or 905-694-9451 with access code 67177624.
To access the webcast and corporate presentation, go to First Capital Realty's website at www.firstcapitalrealty.ca and click on the link for the webcast on our Home Page. The webcast will be archived on our home page for 30 days and can be accessed thereafter in the 'Investors' section of our website, under 'Conference Calls'.
Management’s presentation will be followed by a question and answer period. To ask a question, press ‘1’ followed by ‘4’ on 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’. 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 manager of well located, high quality urban retail-centered properties where people live and shop for everyday life. The Company currently owns interests in 164 properties, including one ground-up development project underway, totalling approximately 24.5 million square feet of gross leasable area and one land site in the planning stage for future retail development.
Non-IFRS Supplemental Financial Measures
First Capital Realty prepares and releases unaudited quarterly and audited consolidated annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). In this and other earnings releases and investor conference calls, as a complement to results provided in accordance with IFRS, the Company also discloses and discusses certain non-IFRS financial measures, including but not limited to NOI, FFO, AFFO, debt and enterprise value. These non-IFRS measures are further defined and discussed in First Capital Realty’s MD&A for the three months ended March 31, 2014, which should be read in conjunction with this news release. Since NOI, FFO and AFFO do not have standardized meanings prescribed by IFRS, they may not be comparable to similar measures reported by other issuers. The Company uses and presents these non-IFRS measures as Management believes they are commonly accepted and meaningful financial measures of operating performance in the real estate industry. A reconciliation of net income and such non-IFRS measures is included in the Company’s MD&A. These non-IFRS measures should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS as measures of First Capital Realty’s operating performance.
Forward-Looking Statement Advisory
This press release contains forward-looking statements and information within the meaning of applicable securities law. 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, rather, 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, including, without limitation, those set forth in the “2014 Guidance” section of this press release. Moreover, the assumptions underlying the Company’s forwardlooking statements contained in the “2014 Guidance” section of this press release also include that consumer demand will remain stable and demographic trends will continue.
Management believes that the expectations reflected in forward-looking statements are based upon reasonable assumptions; however, Management can give no assurance that the actual results or developments 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 First Capital Realty’s MD&A for the year ended December 31, 2013 and under “Risk Factors” in its current Annual Information Form. Factors that could cause actual results or events to differ materially from those expressed, implied or projected by forward-looking statements, in addition to those factors described in the aforementioned “Risks and Uncertainties” and “Risk Factors” sections, include, but are not limited to: general economic conditions; real property ownership; the availability of new competitive supply of retail properties which may become available either through construction, lease or sublease; First Capital Realty’s ability to maintain occupancy and to lease or re-lease space at current or anticipated rents; repayment of indebtedness and the availability of debt and equity financing; changes in interest rates and credit spreads; changes to credit ratings; tenant financial difficulties; defaults and bankruptcies; the relative illiquidity of real property; unexpected costs or liabilities related to acquisitions, development and construction; increases in operating costs and property taxes; residential development, sales and leasing; compliance with financial covenants; changes in governmental regulation; environmental liability and compliance costs; unexpected costs or liabilities related to dispositions; challenges associated with the integration of acquisitions into the Company; uninsured losses and First Capital Realty’s ability to obtain insurance coverage at a reasonable cost; risks in joint ventures; matters associated with significant shareholders; geographic concentration of assets; investments subject to credit and market risk; loss of key personnel; and the ability of health care tenants to maintain licences, certifications and accreditations.
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 applicable securities law.
All forward-looking statements in this press release are made as of the date hereof and are qualified by these cautionary statements.
* * * *
For further information:
Dori J. Segal, President & CEO, or
Karen H. Weaver, Executive Vice President & CFO
First Capital Realty Inc.
85 Hanna Avenue, Suite 400
Toronto, Ontario, Canada M6K 3S3
Tel: (416) 504-4114
TSX : FCR