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FIRST CAPITAL REALTY ANNOUNCES STRONG Q1 2011 RESULTS

^{Published on 2011-05-12 19:20:46 - Market Wire}
 

TORONTO, May 12 /CNW/ - 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 quarter ended March 31, 2011.

OPERATING HIGHLIGHTS

• Invested $146 million in acquisitions, development activities and property improvements;
• Added 752,000 square feet of gross leasable area from acquisitions, development and redevelopment coming on line;
• Acquired two shopping centres and two properties adjacent to existing shopping centres totalling 661,000 square feet and three development land parcels comprising a total of 0.8 acres;
• 2.6% same property NOI growth; 2.1% excluding redevelopments and expansions. Lease termination fees included in same property NOI totaled $0.3 million which compares to $1.0 million in the same prior year period;
• 9.9% rate per square foot increase on 576,000 square feet of renewal leases;
• Occupancy of 96.4% is the same as at December 31, 2010 and compares to 96.3% at March 31, 2010.  Vacancy includes 0.7% of space held for redevelopment;
• Gross new leasing totalled 278,000 square feet including development and redevelopment coming on line; lease closures totalled 175,000 square feet and closures for redevelopment totalled 64,000 square feet;
• Completed new leasing on existing space totalling 101,000 square feet at an average rate of $23.02 per square foot;
• Lease rates on openings and redevelopment coming on line increased by 26.0% versus all lease closures;
• Average lease rate per occupied square foot increased by 2.8% from March 31, 2010 to $16.30 at March 31, 2011 including first quarter acquisitions at an average lease rate of $12.39.

Main and Main Joint Venture

The Company has entered into a joint venture ("Main and Main Developments") with a private developer (who is currently a partner in other joint ventures with the Company) to assemble urban sites within the City of Toronto and to develop and operate them for retail and/or mixed use.  The Company has a 67% equity interest and consolidates the activities of the joint venture in its financial statements.  The joint venture agreement contemplates initially up to $100 million of acquisitions and development investment, including senior and mezzanine debt financing which the Company is committed to provide to the joint venture.  During the quarter, the joint venture completed the acquisition of one property for $2.4 million and has additional acquisitions underway.

"Firstly, we are very pleased with our operating and financial results in the quarter; we are also very excited about the potential of our joint venture, Main and Main Developments," stated Dori J. Segal, President & CEO.  "We believe there are significant opportunities in the City of Toronto retail and mixed-use sector, and over time we expect to see solid growth in this aspect of our business."

FINANCIAL HIGHLIGHTS

These results and all future results will be reported under International Financial Reporting Standards ("IFRS").  Comparative figures for 2010 have been restated to IFRS.  There have been no material changes to the Company's operating metrics, including Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") as a result of the adoption of IFRS.  A reconciliation of the 2010 results between Canadian GAAP and IFRS, as well as information on the effect of IFRS adoption, are available in the Company's financial statements and Management's Discussion and Analysis for the first quarter of 2011, which 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 ].

^{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)     Restated for the adoption of IFRS, where applicable
(2)     Calculated in accordance with the indenture in respect to the Company's senior unsecured debentures
(3)     See "Non-IFRS Supplemental Financial Measures" section of this press release}

FFO increased to $39.3 million or $0.24 per share (diluted) in the first quarter of 2011 from $36.1 million or $0.23 per share (diluted) in the same prior year period.  The increase is primarily due to the increase in NOI resulting from acquisitions, development and redevelopment projects coming on line, as well as same property NOI growth.  The effects of the increase in NOI were partially offset by an increase in interest expense resulting from financing activities to fund the portfolio growth.  FFO for the first quarter of 2011 included other gains, losses and lease termination income totalling $1.7 million compared to $2.7 million in the same prior year period.

AFFO decreased to $40.2 million or $0.22 per share (diluted) in the first quarter of 2011 from $40.9 million or $0.23 per share (diluted) in the same prior year period.  AFFO included $1.5 million of other gains, losses and lease termination income in the first quarter of 2011 compared to $5.6 million for the same prior year period.

NET INCOME

^{(1)    Prior period restated to reflect the May 2010, 3.2:2 stock split.}

Net income attributable to common shareholders for the three months ended March 31, 2011 was $46.4 million or $0.27 per share (diluted) compared to $20.4 million or $0.13 per share (diluted) for the three months ended March 31, 2010. The increase in net income is primarily due to the increase in the value of investment properties in the first quarter of 2011, as well as increases in NOI resulting from acquisitions, development and redevelopment projects coming on line and same property NOI growth. The effects of the increases in net income were partially offset by an increase in interest expense resulting from financing activities to fund portfolio growth, as well as increased deferred income tax expense due to the growth in net income. In addition, there was an increase in the weighted average basic and diluted shares outstanding compared to the same prior year period.

Financing and Capital Markets

The Company completed the following debt financing activities for the quarter ended March 31, 2011:

• Issued $150 million principal amount senior unsecured debentures, Series L, with a coupon rate of 5.48%, maturing July 2019;
• Issued $110 million principal amount senior unsecured debentures, Series M, with a coupon rate of 5.60% maturing April 2020;
• Repaid on maturity $99 million principal amount of senior unsecured debentures, Series B, with a coupon rate of 5.25%.

In addition, the Company completed the following equity issuances for the quarter ended March 31, 2011:

• 0.6 million common shares were issued as payment-in-kind of the interest, in the aggregate amount of $9.7 million, due to holders of the 5.50%, 5.70% and 6.25% convertible debentures, consistent with existing practice;
• 0.3 million common shares were issued through the exercise of options for proceeds of $3.6 million.

On April 28, 2011, the Company completed the issuance of $57.5 million principal amount of 5.40% convertible unsecured subordinated debentures, due January 2019. Consistent with existing practice, it is the Company's current intention to continue to satisfy its obligations of principal and interest payments in respect of all of its outstanding convertible debentures by the issuance of common shares.

The Company also announced today that it will pay a second quarter dividend of $0.20 per common share on July 12, 2011 to shareholders of record on June 29, 2011.

OUTLOOK

Over the past several years, First Capital Realty has made significant progress in growing its business across the country, generating modest accretion in funds from operations while dramatically enhancing the quality of its portfolio.

The current property acquisition environment remains competitive for assets of similar quality to those the Company owns, with increasing competition for transactions. Both equity and long-term debt markets are accessible but continue to represent tight spreads (if at all), relative to pricing currently being asked by vendors of high quality, well-located urban properties. The Company will continue to selectively acquire properties that are well-located and of high quality, when they add strategic value and/or operating synergies, provided that they will be accretive to FFO over the long term, and provided that equity and long-term 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. These activities typically generate higher returns on investment over the long term and improve the quality and growth of property rental income.

With respect to acquisitions of both income-producing and development properties, as well as in its existing portfolio, the Company will continue to focus on the quality, sustainability and growth potential of rental income. Consistent with First Capital Realty's past practices and in the normal course of business, First Capital Realty is engaged in discussions, and has various agreements, with respect to possible acquisitions of new properties and dispositions of existing properties in its portfolio. However, there can be no assurance that these discussions or agreements will result in acquisitions or dispositions, or if they do, what the final terms or timing of such acquisitions or dispositions would be. The Company expects to continue current discussions and actively pursue other acquisition, investment and disposition opportunities.

With respect to financing activities, the Company will continue to focus on maintaining access to all sources of long-term capital at the lowest possible price. In particular, the Company is focussed on both extending the term and staggering the maturity of its debt.

Specifically, Management has identified the following six areas to achieve its objectives going forward into 2011 and 2012:

• continued focus on proactive asset management that results in higher rent growth;
• development, redevelopment and repositioning activities on existing and newly acquired properties;
• selective acquisitions of strategic assets and adjacent sites;
• densification activities in the existing portfolio;
• increasing efficiency and productivity of operations; and
• improving the cost of both debt and equity capital.

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

2011 GUIDANCE

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 capital structure and 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.

2011 guidance is based on the following operating activity assumptions:

• Same property NOI growth of 1.5% to 2.5% (excluding redevelopment and expansion);
• Development, redevelopment and expansion coming on line of 550,000 to 700,000 square feet with approximate gross book value of $125 to $175 million;
• Income-producing property acquisitions totalling $250 million;
• General and administrative expenses will be similar to 2010;
• Revenue sustaining capital expenditures are expected to be approximately $0.65 per square foot on average;
• Capital structure on the balance sheet will be similar to 2010 with average leverage at ± 200 bps the average leverage carried in 2010;
• Stable property capitalization rates for the remainder of the year.

The information above represents Management's best estimate of operating and financing activities for 2011 as of the date of this press release.

Readers should refer to the section below titled "Forward-Looking Statements" for important information on risk factors.

REGULATORY FILINGS AND OTHER INFORMATION

First Capital Realty's financial statements and MD&A for the quarter ended March 31, 2011 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 ]. First Capital Realty's Corporate Presentation will also be available today on the Home Page on the Company's website.

MANAGEMENT CONFERENCE CALL AND WEBCAST

First Capital Realty invites you to participate in its live conference call with senior management announcing our first quarter results on Friday, May 13, 2011 at 2:00 p.m. E.D.T.

Teleconference:

You may participate in the live conference toll free at 866-299-6657 or at 416-641-6135.  To ensure your participation, please dial-in five minutes prior to the scheduled start of the call.  The call will be archived through May 27, 2011 and can be accessed by dialing toll free 800-408-3053 or 905-694-9451 with access code 1202364.

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'.

Webcast:

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

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 163 properties, including three under development, totalling approximately 22.4 million square feet of gross leasable area and seven sites 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 NOI, FFO and AFFO. These non-IFRS measures are further defined and discussed in First Capital Realty's MD&A for the quarter ended March 31, 2011, 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 Statements

This press release, and in particular the "Outlook" and "2011 Guidance" sections hereof, 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 "2011 Guidance" section of this press release.  Moreover, the assumptions underlying the Company's forward-looking statements contained in the "Outlook" and "2011 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. 

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, 2010 and under "Risk Factors" in First Capital Realty's 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 referenced above 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, the availability of debt and equity financing, changes in interest rates and credit spreads, changes in operating costs, tenant bankruptcies, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions, development and construction, environmental liability and compliance costs, legal matters, reliance on key personnel, tenant financial difficulties and defaults, changes in the U.S.-Canadian foreign currency exchange rate and First Capital Realty's ability to obtain insurance coverage at a reasonable cost.

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 of this press release and are qualified by these cautionary statements.