First Capital Realty Inc. Annual Report 2007

FY2007 Annual Report · First Capital Realty Inc.
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LOCATION
LOCATION
LOCATION

Everything we now build is environmentally friendly 
Over 30 Projects underway will be LEED certified

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85 Hanna Avenue, Suite 400, Toronto, ON  M6K 3S3
Tel: 416.504.4114  Fax: 416.941.1655   
www.firstcapitalrealty.ca

Trees:
Waste:
Water:
Air:
Energy: 

SAVINGS
3 trees preserved for the future
130 lbs. solid waste not generated
1,014 gallons wastewater flow saved
244 lbs. net greenhouse gases prevented
2,000,000 BTUs energy not consumed

F I R S T   C A P I TA L   R E A LT Y   I N C .
2007 Annual Report

 
 
 
 
 
FIRST CAPITAL REALTY IS CANADA’S LEADING OWNER, DEVELOPER AND OPERATOR OF SUPERMARKET

AND DRUGSTORE-ANCHORED NEIGHBOURHOOD AND COMMUNITY SHOPPING CENTRES, LOCATED PREDOMI-
NANTLY IN GROWING METROPOLITAN AREAS. THE COMPANY CURRENTLY OWNS INTERESTS IN 161 PROPER-
TIES, INCLUDING SIX UNDER DEVELOPMENT, TOTALLING APPROXIMATELY 19.4 MILLION SQUARE FEET OF
GROSS LEASABLE AREA AND 14 LAND SITES IN THE PLANNING STAGE FOR FUTURE RETAIL DEVELOPMENT. IN
ADDITION, THE COMPANY OWNS 14 MILLION SHARES (19%) OF EQUITY ONE (NYSE: EQY), ONE OF THE
LARGEST SHOPPING CENTRE REITS IN SOUTHERN UNITED STATES. INCLUDING ITS INVESTMENTS IN EQUITY
ONE, THE COMPANY HAS INTERESTS IN 326 PROPERTIES TOTALLING APPROXIMATELY 36.5 MILLION SQUARE
FEET OF GROSS LEASABLE AREA. FIRST CAPITAL REALTY HAS AN ENTERPRISE VALUE OF OVER $4 BILLION. 

Stablilized properties

Under development/expansion

Expansion/development potential

Development sites

FIRST CAPITAL’S WELL-LOCATED PROPERTIES IN URBAN MARKETS

WITH STRONG DEMOGRAPHICS ATTRACT QUALITY TENANTS.

OUR TOP 40 TENANTS

Newmarket

Markham

Peterborough

Bowmanville

Ajax

Whitby

Pickering

London

Woodstock

Thamesford

Ingersoll

Brampton

Mississauga

Toronto

Oakville
Burlington

Cambridge

Waterloo

Kitchener

Brantford

Hamilton

St. Catharines

Lachenaie

Repentigny

Laval

Boucherville

Montréal

Longueuil

Beaconsfield

L’Ile Perrot

Chateauguay

Delson

St. Albert

Edmonton

Sherwood
Park 

Belmont

Tillsonburg

St. Thomas

LOCATION
LOCATION
LOCATION

North
Vancouver

West
Vancouver

Vancouver

Burnaby

Coquitlam

Richmond

Surrey

Delta

Langley

Abbotsford

U.S.A.

Gatineau

Hull

Ottawa

Beauport

Vanier

Québec

Sillery

Lévis

Sainte-Foy

Saint-Romuald

Charny

Cochrane

Airdrie

Calgary

Red Deer

Duncan, Vancouver Island

Lethbridge

A   M E S S A G E   T O   O U R   S H A R E H O L D E R S :

The year 2007 was in reality a “tale of two markets”. While the ﬁ rst half of the year continued the same market conditions we had seen in 

2006, in the second half of the year the ﬁ nancial world completely changed, driven by a slowing US economy and the so-called sub-prime 

credit crisis. Despite this sea-change in the ﬁ nancial markets, for First Capital Realty it was another year of record results. Our total investment 

in acquisitions, developments and property improvements was approximately $500 million. We grew our business across the country, and we 

saw improvements in all our operating and ﬁ nancial metrics: net operating income, funds from operations, occupancy, same property NOI 

and lease renewal rates. This performance is a direct consequence of executing our strategy of focused and disciplined acquisitions, proactive 

management and selective development activities. These attributes I believe have proven to be more important in the current environment.

While we are generally pleased with our results in 2007, as CEO my primary and most important responsibility is not to look back on the past, 

but rather to look forward to the future and continue to strengthen the foundation that ensures long term growth in the value of our investment 

in First Capital Realty. As I write this letter, I can tell you that this job is not getting any easier, but you have my commitment that it’s going to 

get done. 

In order to share with you our plans to meet this objective, as well as some of the human, corporate and real estate assets that make First 

Capital the great company it is, allow me ﬁ rst to look back in time when I entered the real estate business, as I think it is relevant to how we 

approach the current market environment.

I was a young and ambitious guy, an entrepreneur by nature, and the early 1990’s seemed like a good time to get into real estate as 

investment returns were pretty high. But there was one “minor” problem – capital was not readily available (sound familiar?). I remember very 

well a 1994 $8 million bond offering that took me almost two months to sell. I was so busy and preoccupied with raising money that it did not 

occur to me that real estate was priced attractively.  I simply tried to put my hand on every dollar I could ﬁ nd, and use this cash to buy and 

develop shopping centres. That was how we operated in the 1990’s. 

By 2003 First Capital was an established business. We owned 82 properties, and as a result capital became more available for us. For the 

next two years we raced to acquire properties as the window for accretive growth was wide open. We raised money and bought, developed 

and redeveloped a large number of shopping centres. 

Then, in 2006, while the cost of capital remained extremely attractive, it dawned on us that properties were not priced as attractively 

anymore, and that the spread over our cost of capital on mature and well leased urban properties that ﬁ t our criteria was getting very thin. 

All of a sudden real estate had become a popular business. The money to purchase assets was relatively easy to obtain, and all you had to 

do was buy. It seemed as though if you had a pulse you could raise money and buy real estate. Inevitably, our acquisition pace slowed down 

dramatically, and you will recall in my Message to Shareholders a year ago I stated that “unfortunately, this highly favourable environment is 

now over.”

How quickly things change. The second half of 2007, and as I write this letter continuing into 2008, has seen ﬁ nancial markets playing 

completely different music than the prior few years, and the tones are not pleasant. The cost of capital, both debt and equity, has increased, 

and the availability of capital has decreased. It seems from a bird’s eye view that real estate has gone out of favour.

So is the party over? For us I don’t think the party ever started, because we operated our business according to very clear principles, and we 

are going to continue to do so. These principles come from the years of collective experience possessed by our management team – we have 

seen the worst of times in the real estate business; we have been there. 

When I got into this business my mentor, our Chairman, Chaim Katzman, who has been in the business much longer than I have (he doesn’t 

like it when I remind him of this) told me two very important things.

2007 ANNUAL REPORT

1

A   M E S S A G E   T O   O U R   S H A R E H O L D E R S :   – continued

First, being successful in real estate is all about “staying power”. If you own good properties, if you manage them well, and if you are not too 

leveraged, you will do ﬁ ne through all economic cycles.

His second piece of advice was along those same lines. He told me that “real estate is a good business. It’s a little slow in the ﬁ rst 30 years, 

and after that it gets a lot better”. Real estate is a long-term business – you buy or develop a property and proactively manage it, ﬁ rst for its 

cash ﬂ ow, and if you are patient and hang in long enough, you will end up with a capital gain.

As an aside, Chaim now claims he told me it takes 50 years before things improve, but I know if he had said that, I would have not entered 

into business with him and would have done something else. In hindsight, I am happy I stuck around.

So why am I telling you all this?

In the past two decades I have participated in endless numbers of discussions and brainstorming sessions about where the market is going, 

where real estate prices are going, where interest rates are going and where is the economy heading. Prosperity? Recession? Slow down? 

“Frankly, my dear, I don’t give a damn” (Gone with the Wind). 

So why is it that on a certain level, we don’t care? It’s not that we don’t carefully monitor and assess what is going on in the ﬁ nancial world 

– it’s just that over the years we have learned that we have absolutely no way of affecting the economic environment. Instead, we concentrate 

on what we know and what we can affect, and that is the management of our business.

The foundation of our business has been, and continues to be based on a few key principles:

1.  Owning good real estate is a matter of LOCATION, LOCATION, LOCATION. It’s what we remind ourselves every morning when we get up, 

and with every property we look at and every transaction we bid on.

2.  Demographics are very important to us. Our properties will always be located in major urban centres that enjoy growth in population and 

income, on corners with high density, or simply put, in trade areas with high barriers to entry. We have learned that the harder it is to buy or 

develop a property, the easier it is to own it. On the other hand, the easier it is to buy or develop a property, the harder it is to own it.

3.  Be ﬁ nancially astute. We look at every deal and make sure there is a long term, risk adjusted appropriate return on capital invested. We also 

make sure we clearly understand the risk and opportunity of every transaction. Finally, and probably most importantly, we will not become 

too leveraged, and we will maintain a conservative ﬁ nancial position – it’s called “staying alive”.

4.  Look for sweat equity. We have spent our time and effort ﬁ nding properties that represent good long term value for our investment. Many 

were broken, poorly managed or under-capitalized properties where we added real value by applying our capital, time, skill and efforts to 

reposition them and grow our return over time.

As I look ahead to the future, it is also important for us, the shareholders to know that almost a third of our portfolio is actively undergoing 

signiﬁ cant value-added activity. Of our total 161 properties, 28 are currently under development or re-development, while another 24 are 

in pre-development planning stages. We also own 14 land sites for future development. These assets will continue to drive growth in our 

earnings for years to come. With respect to our stabilized property portfolio, the majority have been upgraded and renovated over the last few 

years, bringing tenants to their most current format.

2

2007 ANNUAL REPORT

At First Capital, we have followed these principles to build what we believe is the best portfolio of shopping centres in the country. But we have 

one more superior advantage, and that is our people. Over the years, we have come together to be a close group of skilled and dedicated 

people that consider First Capital their second home (possibly their ﬁ rst home in terms of the hours they spend). Once we locate a good piece 

of real estate, whether its land, a run-down shopping centre, assembling of a few lots or buildings into one asset, or a successful property that 

someone else has created, the deal gets valued by all the various parts of our team, including our acquisition, development, leasing, ﬁ nancing 

and property operation teams. Then, leveraging the diverse skills and talent of our people, we make an investment decision. It’s called 

accountability – the investment decision and the execution of the business plan for our assets are done by the same people. 

Real estate is a local business, so we have developed a strong and broad presence in major urban centres in each of central, western and 

eastern Canada. With this depth of market coverage, we are able to execute every type of deal as long as we end up with a successful 

shopping centre and an appropriate and growing return on our investment. This ﬂ exibility allows us to ﬁ nd opportunities where the money is 

made on the real estate and not on ﬁ nancial engineering. 

All our activities are also done while carefully avoiding taking high risks. This is another one of our strengths, and the beauty of our business. 

Over the last few months I have started to hear the word “cautious” used by many participants in our industry, and the concept of “risk” being 

re-evaluated in the ﬁ nancial markets. At First Capital, we have always been cautious, even with the signiﬁ cant growth we have generated over 

the last eight years. In our mind, FCR’s second name could stand for First Cautious Realty. Our game plan works even with higher cost of 

capital which I believe is where we are right now.

So am I optimistic? Not really. I am not paid to be optimistic, and that’s not why you keep me around. But I think it’s quite realistic to say 

that we are going to continue to make money in this business, and maybe we might ﬁ nd out that tougher times present some interesting 

opportunities for those who are truly committed to this business for the long term.

Its now time for me to get back to work, but before that, to my fellow co-workers who help me deliver a better future for all of us, I would like to 

express my appreciation. In addition, I would like to thank our tenants and service providers for their support, our investors for their continued 

trust, and also our Board of Directors, under the leadership of our Chairman, Chaim Katzman, for their counsel and guidance.

Sincerely,

Dori J. Segal

President and Chief Executive Ofﬁ cer

March 14, 2008

2007 ANNUAL REPORT

3

A N N U A L   R E P O R T   C O N T E N T S

  M A N A G E M E N T ’ S   D I S C U S S I O N   &   A N A LY S I S

I N T R O D U C T I O N  

  B U S I N E S S   O V E RV I E W   A N D   S T R AT E G Y  

  S U M M A RY   C O N S O L I D AT E D   I N F O R M AT I O N   A N D   H I G H L I G H T S  

  B U S I N E S S   A N D   O P E R AT I O N S   R E V I E W  

  R E S U LT S   O F   O P E R AT I O N S  

  C A P I TA L   S T R U C T U R E   A N D   L I Q U I D I T Y  

I N T E R N AT I O N A L   F I N A N C I A L   R E P O RT I N G   S TA N D A R D S   ( “ I F R S ” )  

  Q U A RT E R LY   A N A LY S I S  

  E V E N T S   S U B S E Q U E N T   T O   D E C E M B E R   3 1 ,   2 0 0 7  

  O U T L O O K  

  S U M M A RY   O F   S I G N I F I C A N T   A C C O U N T I N G   E S T I M AT E S   A N D   P O L I C I E S  

  S U M M A RY   O F   C H A N G E S   T O   S I G N I F I C A N T   A C C O U N T I N G   P O L I C I E S  

  C O N T R O L S   A N D   P R O C E D U R E S  

  R I S K S   A N D   U N C E RTA I N T I E S  

S H O P P I N G   C E N T R E   P O R T F O L I O  

C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S  

  M A N A G E M E N T ’ S   R E S P O N S I B I L I T Y  

  A U D I T O R S ’   R E P O RT  

  C O N S O L I D AT E D   B A L A N C E   S H E E T S  

  C O N S O L I D AT E D   S TAT E M E N T S   O F   E A R N I N G S  

  C O N S O L I D AT E D   S TAT E M E N T S   O F   C O M P R E H E N S I V E   I N C O M E  

  C O N S O L I D AT E D   S TAT E M E N T S   O F   S H A R E H O L D E R S ’   E Q U I T Y  

  C O N S O L I D AT E D   S TAT E M E N T S   O F   C A S H   F L O W S  

  N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S  

5

5

9

1 1

2 1

2 9

3 6

3 7

4 0

4 0

4 1

4 3

4 5

4 6

5 0

5 4

5 4

5 5

5 6

5 7

5 8

6 0

6 1

4

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S   O F   F I N A N C I A L   P O S I T I O N   A N D 
R E S U LT S   O F   O P E R AT I O N S

The ﬁ nancial data has been prepared in accordance with Canadian Generally Accepted Accounting Principles (“GAAP”) and all amounts are 

in Canadian dollars, unless otherwise noted.

I N T R O D U C T I O N

This Management’s Discussion and Analysis (“MD&A”) of the ﬁ nancial condition and results of operations for First Capital Realty Inc. (“First 

Capital Realty” or the “Company”) should be read in conjunction with the Company’s audited Consolidated Financial Statements and Notes 

for the years ended December 31, 2007 and 2006. Additional information, including the Company’s most recent Annual Information Form, is 

available on SEDAR’s website at www.sedar.com and on the Company’s website at www.ﬁ rstcapitalrealty.ca. The information contained in this 

MD&A is based on information available to Management as of March 6, 2008. 

B U S I N E S S   O V E R V I E W   A N D   S T R AT E G Y

First Capital Realty (TSX:FCR) is Canada’s leading owner, developer and operator of supermarket and drug store-anchored neighbourhood 

and community shopping centres located predominantly in growing metropolitan areas. As at December 31, 2007, the Company owned 

interests in 161 properties, including six under development totalling approximately 19.4 million square feet of gross leasable area and 13 

land sites in the planning stage for future retail development. The Company also invests in the United States through its holdings in Equity 

One, Inc. (NYSE:EQY) (“Equity One”), an owner, renovator, developer, and manager of neighbourhood and community shopping centres 

anchored by leading supermarkets, drug stores or discount retail stores in major metropolitan markets in the southern and northeastern 

United States. The Company owns 14.0 million shares, approximately 19% of Equity One. Including its investment in Equity One, the 

Company has interests in 326 properties totalling approximately 36.5 million square feet of gross leasable area.

First Capital Realty was incorporated in November 1993 and conducts its business directly and through subsidiaries.

First Capital Realty’s primary strategy is the creation of value over the long term by generating sustainable cash ﬂ ow and capital appreciation 

of its shopping centre portfolio. To achieve its strategic objectives in the future Management will continue to:

•   be focussed and disciplined in acquiring income-producing properties;

•   undertake selective development and redevelopment activities; and

•   proactively manage its existing shopping centre portfolio.

The Company targets speciﬁ c urban markets with stable and/or growing populations despite, and because of, the high barriers to entry. The 

Company intends to continue to operate primarily in and around its target urban markets of the Greater Toronto area including the Golden 

Horseshoe area and London; Calgary; Edmonton; the Greater Vancouver area including Vancouver Island; the Greater Montreal area; the 

Ottawa and Hull region and Quebec City. Management believes that urban retail properties typically will generate sustainable returns on 

investment, and over time, capital appreciation. The Company seeks to achieve critical mass in its target markets to generate economies of 

scale and operating synergies.

The Company targets well-located properties in urban markets with strong demographics that Management expects will attract quality tenants 

with long lease terms. Speciﬁ cally, Management looks for properties that are well located within dense urban areas that provide consumers 

with daily necessities including both products and services. In Management’s view, such tenants are somewhat less sensitive to economic 

cycles due to the high component of consumer non-discretionary spending for such products and services, making these tenants desirable 

for the Company’s type of properties. First Capital Realty also actively develops properties in its target markets across Canada, generating 

growth in markets where accretive acquisitions are often difﬁ cult to ﬁ nd.

2007 ANNUAL REPORT

5

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

The Company believes that a quality location is the single most important factor in acquiring, developing and operating a retail property over 

the long term. First Capital Realty assesses the quality of locations based on a number of factors in the trade area of a property including 

demographic trends,  potential for competitive retail space and existing and potential tenants in the market.

Once the Company has acquired a property in a speciﬁ c retail trade area it will look to acquire adjacent or nearby properties. These additional 

properties allow the Company to provide maximum ﬂ exibility to its tenant base to meet their changing formats and size requirements over the 

long-term. Adjacent properties also allow the Company to essentially expand or integrate its existing property, providing a better retail offering 

for consumers.

Income-Producing Portfolio

The Company’s properties are summarized as follows:

December 31 

Ontario 

Quebec 

Alberta 

British Columbia 

Other Provinces 

Total 

2007 

Gross Leasable 

Number of  

Area 

Properties (1) 

(000’s sq. ft.) 

61 

54 

25 

17 

4 

8,613 

5,215 

3,779 

1,593 

182 

161 

19,382 

Percent 

Occupied 

96.8% 

94.7% 

93.1% 

95.0% 

89.2% 

95.3% 

2006

Gross Leasable

Number of  

Area 

Properties  (1) 

(000’s sq. ft.) 

Percent

Occupied

61 

53 

23 

17 

4 

8,325 

4,963 

3,211 

1,485 

182 

158 

18,166 

96.6%

95.7%

94.7%

94.0%

88.8%

95.7%

(1)  Includes six properties under development in each of 2007 and 2006.

Eighty-six percent of these shopping centres are anchored by grocery stores and/or drug stores. The average size of the shopping centres is 

120,000 square feet with sizes ranging from 20,000 to over 500,000 square feet. The Company operates in key urban markets in the four 

largest provincial economies in Canada.

Management believes that one measure of the quality of a shopping centre is the ability of the centre to attract and retain quality tenants. 

The Company’s top ten tenants, ranked by percent of total annual minimum rent, and their respective credit ratings, portfolio presence and 

average remaining lease terms at December 31, 2007 are listed in the chart below: 

Tenant 

Sobeys 

Loblaws 

Shoppers Drug Mart 

Metro 

Zellers / Home Outﬁ tters 

Canadian Tire and Mark’s Work Wearhouse 

TD Canada Trust 

Canada Safeway 

Wal-Mart 

Royal Bank 

DBRS 

Credit Rating 

BBB(low) 

A(low) 

A(low) 

BBB 

— 

A(low) 

AA 

BBB 

AA 

AA 

Percent of  

Total Canadian 

Remaining

Gross Leasable 

Lease Term

Square Feet 

Area 

in Years

1,521,000 

1,412,000 

641,000 

996,000 

1,654,000 

782,000 

174,000 

375,000 

473,000 

137,000 

7.8% 

7.3% 

3.3% 

5.1% 

8.5% 

4.0% 

0.9% 

1.9% 

2.4% 

0.7% 

8,165,000 

41.9% 

12

9

9

11

10

10

6

7

12

5

10

Number 

of Stores 

43 

26 

50 

27 

18 

21 

34 

9 

4 

23 

255 

6

2007 ANNUAL REPORT

 
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2007, the Company’s top 40 tenants, including the top ten above, represented 57.9% of the Company’s annualized 

minimum rents and 59.7% of the gross leasable area in the Company’s portfolio. More than 74% of those rents in the top 40 are from tenants 

who have investment grade credit ratings and who represent many of Canada’s leading supermarket operators, drug store chains, discount 

retailers, banks and other familiar shopping destinations. Furthermore, over 45% of the Company’s total annualized minimum rents are from 

tenants who have investment grade credit ratings.

Acquisitions of Income-Producing Properties

Management seeks to acquire well-located neighbourhood and community shopping centres in the Company’s target urban markets that 

it believes will provide an appropriate return on investment over the long term. The Company typically makes acquisitions of individual 

properties that enhance the quality of its portfolio by virtue of their location, demographics and tenant base or that also have redevelopment 

opportunities. Through acquisitions, the Company expands its presence in its target urban markets in Canada, and continues to generate 

greater economies of scale and leasing and operating synergies. The Company also looks to acquire adjacent properties in a retail trade area 

where it has established a presence. In addition to one-off property transactions, Management will look for strategic or portfolio acquisitions, in 

both existing markets and markets where the Company may not yet have a presence. Historically, such portfolio opportunities with properties 

of the same quality as the Company’s are rare.

Development and Redevelopment

The Company also pursues selective development and redevelopment activities, either alone or with joint-venture partners, in order to 

actively participate in growth markets and to achieve a better return on its portfolio. Investments in development and redevelopment activities 

generally comprise approximately 6-8% of the Company’s total asset value at any given time. Typically new “greenﬁ eld” shopping centres are 

developed after obtaining anchor tenant lease commitments. Redevelopment projects at existing properties are carefully managed to minimize 

tenant downtime. These properties continue to operate during the planning, zoning and leasing phases of the project. The Company will 

sometimes carry vacant space for a planned future expansion of tenants or reconﬁ guration of a property. To facilitate its development activities 

the Company will acquire greenﬁ eld land sites in addition to sites or properties adjacent to existing properties. The Company strategically 

manages its development activities to reduce development risks. 

Since May 2006 all new development projects are being built according to LEED (Leadership in Energy and Environmental Design) 

certiﬁ cation standards. The LEED rating system is the internationally accepted benchmark for the design, construction, and operation of high 

performance green buildings.

Achieving LEED certiﬁ cation is the leading way for organizations to demonstrate that their building project is truly green. The certiﬁ cation 

promotes a whole building approach to sustainability by recognizing performance in ﬁ ve key areas of human and environmental health: 

sustainable site development, water savings, energy efﬁ ciency, materials selection and indoor environmental quality.

As of December 31, 2007, the Company has 32 “Green” development projects underway or in the planning stage.

Proactive Management

The Company views proactive management of its existing portfolio and newly acquired properties as an important part of its strategy. Proactive 

management encompasses continued investment in properties to ensure they remain attractive to quality retail tenants and their customers 

over the long term. Speciﬁ cally, Management strives to create and maintain the highest standards in lighting, parking, access and general 

appearance of its properties. The Company’s proactive management strategies have contributed to continued improvement in occupancy 

levels and average lease rates throughout the portfolio.

The Company is fully internalized and all important value creation activities including development management, leasing, leasing 

administration and legal, construction management and tenant co-ordination functions are directly managed and executed by experienced 

real estate professionals. Employees with these real estate capabilities are located in each of the Company’s ofﬁ ces in Toronto, Montreal, 

Calgary and Vancouver in order to effectively serve the major urban markets where First Capital Realty operates.

2007 ANNUAL REPORT

7

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

The Company has a joint venture with Brookﬁ eld LePage Johnson Controls Facility Management Services (“BLJC”) to provide basic 

property management services to its properties. The combination of the experienced property, accounting and administrative personnel 

from the Company’s properties and the property services and system infrastructure from BLJC allows for a higher quality of service for the 

Company’s tenants.

Equity One

The Company owns 14.0 million shares as of December 31, 2007 (2006 – 13.9 million shares) or approximately 19% (2006 – 19%) of 

Equity One, the assets of which are similar to those of the Company. Equity One is a self-managed, real estate investment trust (“REIT”) in the 

United States with acquisition, development, redevelopment, capital markets, property management and leasing expertise. Equity One owns 

or has interests in 165 properties in the U.S. totalling approximately 17.1 million square feet consisting of 152 shopping centres, six non-retail 

properties and seven development sites. 

Company Key Performance Measures

There are many factors that contribute to the successful operations of First Capital Realty’s business 

including rental rates, renewal rates, occupancy rates, tenant quality, availability of properties and 

development sites that meet the Company’s acquisition criteria, ﬁ nancing rates, tenant inducements, 

maintenance and general capital expenditure requirements, development costs and the economic 

environment. The Company quantiﬁ es the collective results of all of these factors into the two key 

measures: funds from operations per diluted share and the overall leverage level.

Funds from Operations per Diluted Share

A key objective is to generate absolute and accretive growth as measured by funds from operations per 

diluted share through the execution of its business strategy.

Overall Leverage Level

Another important objective is to continue to maintain ﬁ nancial discipline and sustainability of cash ﬂ ows 

through managing the debt to total market capitalization ratio, targeted to range from 45% to 60%, subject 

to market conditions and opportunities, while taking into consideration the total asset value of the Company 

and its debt covenants.

2007 Performance Compared to Objectives

Management focussed on the following four areas to achieve its objectives in 2007:

•   same property net operating income growth;

•  development and redevelopment activities;

•  increasing efﬁ ciency and productivity of operations; and,

•  improving the cost of capital.

Management believes it has met or exceeded its key 2007 objectives. 

8
5
.
1
$

0
6
.
1
$

8
4
.
1
$

05

06

07

FUNDS FROM OPERATIONS
PER DILUTED SHARE

%
9
.
8
4

%
7
.
4
4

%
7
.
3
4

05

06

07

DEBT TO MARKET
CAPITALIZATION

8

2007 ANNUAL REPORT

S U M M A RY   C O N S O L I D AT E D   I N F O R M AT I O N   A N D   H I G H L I G H T S

As at December 31 (thousands of dollars) 

Operation Information

  Number of properties (1) 

  Gross leasable area (square feet) 

  Development land pipeline, including ongoing development (acreage) (2) 

  Portfolio occupancy 

  Rate per occupied square foot 

  Gross leasable area coming on-line (square feet) 

  Same property net operating income (“NOI”) – increase over prior year 

  Same property NOI – with redevelopment and expansion – increase over prior year 

Financial Information

  Gross shopping centre investments (3) 

  Land and shopping centres under development 

  Real estate investments, net book value 

  Total assets 

  Mortgages, loans and credit facilities (4) 

  Senior unsecured debentures payable (4) 

  Convertible debentures payable (4) 

  Shareholders’ equity 

Capitalization and Leverage

  Shares outstanding 

  Enterprise value 

  Debt to market capitalization (5) 

  Debt to aggregate assets (5) 

Year ended December 31

(thousands of dollars, except per share amounts) 

  Revenues 

  Net operating income – Canada (6) 

  Net income 

  Basic earnings per share 

  Diluted earnings per share 

Equity One

  Equity income (Cdn$) 

  Dividends from Equity One (Cdn$) 

  Dividends from Equity One (US$) 

  Average exchange on dividends (US$ to Cdn$) 

Dividends

  Total dividends 

  Per common share

  –  regular 

  –  special 

  Dividends reinvested by shareholders (7) 

2007 

2006 

2005

161 

158 

133

  19,382,000 

  18,166,000 

  15,712,000

394 

95.3% 

269 

95.7% 

$ 

14.56 

$ 

13.95 

$ 

243

95.0%

13.61

521,400 

478,900 

339,000

3.4% 

4.9% 

3.7% 

6.3% 

—

—

$  3,061,424 

$  2,689,005 

$  2,124,271

$  284,077 

$ 

178,347 

$ 

136,475

$  3,303,029 

$  2,943,062 

$  2,380,113

$  3,409,409 

$  3,060,879 

$  2,469,288

$  1,471,114 

$  1,388,650 

$  1,297,040

$  595,376 

$  217,030 

$  951,331 

$ 

$ 

$ 

399,813 

192,189 

911,593 

$ 

$ 

$ 

100,000

96,990

842,544

  79,681,929 

  75,297,908 

  70,645,834

$  4,218,074 

$  4,080,426 

$  3,121,900

48.9% 

56.4% 

43.7% 

55.4% 

44.7%

54.2%

2007 

2006 

2005

$  382,924 

$  242,445 

$ 

$ 

$ 

$ 

$ 

$ 

30,353 

0.39 

0.39 

14,375 

17,617 

16,756 

1.05 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

332,897 

205,626 

45,959 

0.62 

0.62 

32,696 

33,265 

29,430 

1.13 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

$ 

268,642

165,049

29,196

0.72

0.50

17,475

18,221

15,207

1.20

$ 

98,688 

$ 

90,942 

$ 

87,617

$ 

$ 

$ 

1.26 

— 

76,316 

$ 

$ 

$ 

1.23 

— 

68,323 

$ 

$ 

$ 

1.20

0.20

45,200

2007 ANNUAL REPORT

9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Years ended December 31 

(thousands of dollars, except per share amounts) 

Funds from Operations (8)

  Funds from operations  

  Funds from operations per diluted share 

  Weighted average diluted shares – FFO 

Adjusted Funds from Operations (8)

  Adjusted funds from operations  

  Adjusted funds from operations per diluted share 

  Weighted average diluted shares – AFFO 

(1)  Includes properties currently under development.

(2)  Net of partners’ interests.

2007 

2006 

2005

$  125,356 

$ 

1.60 

$ 

$ 

117,186 

1.58 

$ 

$ 

94,666

1.48

  78,427,583 

  74,321,824 

  63,995,995

$  122,263 

$ 

1.42 

$ 

$ 

106,739 

1.36 

$ 

$ 

  86,304,978 

  78,272,322 

—

—

—

(3)  Gross shopping centre investments is comprised of the gross book value of shopping centres, deferred costs and intangible assets less intangible liabilities.

(4)  December 31, 2007 ﬁ gures are presented net of unamortized ﬁ nancing costs. See Changes in Accounting Policies.

(5)  Calculated on a trailing basis in accordance with the indentures governing the issuance of senior unsecured debentures, less non-cash compensation.

(6)  Net operating income is a non-Generally Accepted Accounting Principles (“GAAP”) measure of operating performance. See deﬁ nition of Net Operating Income.

(7)   2007 includes $19.6 million of dividends payable at December 31, 2007 that were reinvested in January 2008 and 2006 includes $18.3 million of dividends payable at 

December 31, 2006 that were reinvested in January 2007.

(8)   Funds from Operations and Adjusted Funds from Operations are a measure of operating performance that is not deﬁ ned by GAAP. See Deﬁ nition and Reconciliation of Funds 

From Operations.

Summary Consolidated Information and Highlights

The highlights of the growth and ﬁ nancial position of the Company are:

•    Gross shopping centre investments increased by 13.8% since December 31, 2006 while gross leasable area increased by 6.7%.

•   Investments in land and shopping centres under development increased by 59.3% since December 31, 2006 to $284 million, while the 

development acreage pipeline, including ongoing development, increased by 46.5% to 394 acres.

•   Net operating income increased by 17.9% over 2006 to $242.4 million.

•  FFO increased by 7.0% over 2006 to $125.4 million.

•  AFFO increased by 14.6% over 2006 to $122.3 million.

•   The enterprise value of the Company increased to $4.2 billion at December 31, 2007 from $4.1 billion at December 31, 2006 based on the 

closing share price.

•   The number of common shares outstanding increased by 5.8% to 79.7 million.

10

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
B U S I N E S S   A N D   O P E R AT I O N S   R E V I E W

Investments in Real Estate

The Company’s total investment in its acquisition, development and portfolio improvement activities is summarized as follows:

(millions of dollars) 

Gross real property investments, January 1 

Acquisition of income-producing properties 

Acquisition of additional interests in existing properties 

Acquisition of additional space and land parcels adjacent to existing properties 

Acquisition of land for development 

Development activities and portfolio improvements 

Disposition of shopping centre 

Other 

Gross real property investments, December 31 

Gross shopping centre investments 

Land and shopping centres under development 

Gross real property investments, December 31 

2007 

$ 

2,867 

$ 

190 

11 

62 

56 

171 

(7) 

(5) 

$ 

$ 

$ 

3,345 

3,061 

284 

$ 

$ 

3,345 

$ 

2006

2,261

404

10

62

23

109

—

(2)

2,867

2,689

178

2,867

The Company’s operating activities are comprised of acquisitions of income-producing properties, acquisitions of additional space and land 

parcels at or adjacent to existing income-producing properties, acquisitions of land sites for future development and redevelopment, capital 

improvements and leasing at the Company’s properties. These operating activities for 2007 and 2006, along with the Company’s interest in 

Equity One, are discussed below. 

Income-Producing Properties

In 2007, the Company acquired interests in six income-producing shopping centres comprising 937,000 square feet for $190.2 million. Of 

these properties, ﬁ ve were anchored by supermarkets. In addition, one of the supermarket-anchored centres also included a drug store as 

an additional anchor and three of the supermarkets contain a pharmacy. These acquisitions are in and around the Company’s target urban 

markets and demonstrate the Company’s continuing focus on these urban markets. The acquisitions, all of which were completed on an 

individual basis, are summarized in the table below. 

Quarter  Supermarket- 

Drug Store- 

Leasable Area 

 Acquisition Cost

Gross 

Property Name 

City 

Province 

Acquired 

Anchored 

Anchored 

(Square Feet) 

(in millions)

Westmount Shopping Centre 

Halton Hills Village 

Centre d’Achats VMR 

Laurelwood Shopping Centre 

Staples Gateway 

Longwood Station 

Total  

Edmonton 

Halton Hills 

Montreal 

Waterloo 

Edmonton 

Nanaimo 

AB 

ON 

QC 

ON 

AB 

BC 

Q1 

Q1 

Q1 

Q2 

Q2 

Q4 

✔ 
✔ 
✔ 
✔ 

— 
✔ 

5 

✔ 
✔ 

— 
✔ 

— 
✔ 

4 

463,000 

104,000 

132,000 

92,000 

40,000 

106,000 

937,000 

$ 

71.3

32.6

17.7

29.6

9.4

29.6

$ 

190.2

During the year, the Company also disposed of a 126,000 square foot retail property in Ontario for cash proceeds of $6.4 million, resulting in a 

gain of $0.3 million.

2007 ANNUAL REPORT

11

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Additional Space and Adjacent Land Parcels

In 2007, the Company acquired additional space at ten existing shopping centres and ﬁ ve land parcels at or adjacent to existing properties 

adding 195,000 square feet of gross leasable area and 4.7 acres of commercial land. Total expenditures on these additional interests and 

land parcels amounted to $62.1 million. These acquisitions are set out in the tables below.

Property Name 

City 

Province 

Additional space at existing shopping centres

Glenbrook Plaza (Richmond Square) 

560 Fairway (Fairway Plaza) 

Calgary 

Kitchener 

Pemberton II (Pemberton Plaza) 

North Vancouver 

Beacon Hill Plaza (Burlingwood SC) 

Burlington 

180 W. Esplanade (Time Marketplace) 

North Vancouver 

Pemberton III (Pemberton Plaza) 

North Vancouver 

4545-51 Kingston Road 

(Morningside Crossing) 

558 Queenston Road (Queenston Place) 

66 Bridgeport Road (Bridgeport Plaza)   

Westmount Village (Westmount SC) 

Total  

Toronto 

Hamilton 

Waterloo 

Edmonton 

AB 

ON 

BC 

ON 

BC 

BC 

ON 

ON 

ON 

AB 

Quarter 

Acquired 

Leasable Area 

Acquisition Cost

Acreage 

(Square Feet) 

(in millions)

Gross 

Q1 

Q2 

Q2 

Q3 

Q3 

Q3 

Q3 

Q3 

Q3 

Q4 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

55,000 

13,000 

5,000 

20,000 

9,000 

5,000 

15,000 

8,000 

11,000 

54,000 

$ 

13.1

3.5

3.0

4.9

4.6

2.1

5.5

1.4

1.9

12.7

52.7

195,000 

$ 

Gross 

Property Name 

City 

Province 

Quarter 

Acquired 

Leasable Area 

  Acquisition Cost

Acreage 

(Square Feet) 

(in millions)

Land parcels at or adjacent 

to existing properties

70 Livingston Avenue (Grimsby Square SC) 

Grimsby 

Olde Oakville Lumber Yard 

(Olde Oakville Market Place) 

9 Nicol Street Land (Port Place SC) 

Oakville 

Nanaimo 

72 Livingston Avenue (Grimsby Square SC) 

Grimsby 

120 Lynn Williams (Shops at King Liberty) 

Toronto 

Total  

Additional Interest in Existing Property

ON 

ON 

BC 

ON 

ON 

Q2 

Q2 

Q3 

Q4 

Q4 

0.15 

3.50 

0.40 

n/a 

0.61 

4.66 

— 

— 

— 

— 

— 

— 

$ 

0.3

4.5

2.6

0.4

1.6

9.4

$ 

In 2007, the Company acquired the remaining 50% interest in an income-producing shopping centre located in Whitby, Ontario for 

$11.2 million, including closing costs.

12

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land Sites for Development

During 2007 the Company invested $56.2 million in the acquisition of eight land sites, comprising 85.6 acres of commercial land for future 

development, as set out in the table below.

Property Name 

Pergola Land 

Creditview & Mayﬁ eld (1) 

54-70 Plains Road West 

415 St. Charles 

Rutherford Market Place 

Hunt Club Place (2) 

Burnhamthorpe & Trafalgar (1) 

Dickson Trail Crossing (3) 

Total  

(1)  Acquired prior to zoning process.

(2)  33% interest.

(3)  70% interest.

City 

Guelph 

Brampton 

Burlington 

Longueuil 

Vaughan 

Ottawa 

Oakville 

Airdrie 

Quarter 

Province 

ON 

ON 

ON 

QC 

ON 

ON 

ON 

AB 

Acquired 

Acreage 

Q1 

Q1 

Q3 

Q3 

Q3 

Q3 

Q3 

Q3 

27.8 

10.8 

1.3 

0.1 

16.0 

12.6 

12.5 

4.5 

85.6 

Acquisition Cost

(in millions)

$ 

12.2

3.4

1.8

1.7

29.7

—

4.5

2.9

$ 

56.2

Impact of 2007 Acquisitions on Continuing Operations

Management takes a highly disciplined approach to increasing the size and quality of the Company’s property portfolio, seeking acquisitions 

that are both operationally and ﬁ nancially accretive over the long term. Management looks for beneﬁ ts from economies of scale and operating 

synergies in order to strengthen the Company’s competitive position in its target urban markets. As well, Management seeks to enhance the 

tenant and geographic diversiﬁ cation of the portfolio.

Management believes that the 2007 acquisitions are in line with its business strategy and will contribute to the achievement of the Company’s 

objectives over the long term.

2007 Development Activities

Development is completed selectively, based on opportunities in the markets where the Company operates. Development activities are 

comprised of greenﬁ eld development of new shopping centres, redevelopment of existing shopping centres and expansion of space in existing 

shopping centres. All development activities are strategically managed to reduce risks and properties are developed after obtaining anchor 

lease commitments. 

2007 ANNUAL REPORT

13

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

In 2007, the Company developed 521,400 square feet of retail space as detailed below.

Property Name 

Development

Faubourg des Prairies (1) 

Clairﬁ elds Common 

King Liberty 

Shoppes on Dundas (1) 

Morningside Crossing (1) 

Carrefour Charlemagne (1) 

Cochrane City Centre 

Other space – various properties 

Redevelopment and Expansion

Galeries Normandie 

Promenades Levis 

Harbour Front Centre (1) 

Credit Valley Town Plaza 

Langley Crossing Shopping Centre (1) 

Eagleson Place 

Westmount Shopping Centre 

Maple Grove Village 

Westney Heights Plaza (1) 

Carrefour du Versant 

Olde Oakville Market Place 

Towerlane Mall (1) 

Other space – various properties 

Total  

City 

Province 

Square Feet 

Major Tenants 

Montreal 

Guelph 

Toronto 

Oakville 

Toronto 

Charlemagne 

Cochrane 

Montreal 

Levis 

Vancouver 

Mississauga  

Langley 

Ottawa 

Edmonton 

Oakville 

Ajax 

Gatineau 

Oakville 

Airdrie 

QC 

ON 

ON 

ON 

ON 

QC 

AB 

QC 

QC 

BC 

ON 

BC 

ON 

AB 

ON 

ON 

QC 

ON 

AB 

IGA, Familiprix

Food Basics

GoodLife Fitness, Starbucks

TD Canada Trust, 

Shoppers Drug Mart

TD Canada Trust, CIBC

Rousseau Sport

53,900 

51,500 

40,000 

28,100 

24,600 

22,500 

24,800 

6,800

252,200

79,300 

IGA Extra, Pharmaprix, 

Caisse Populaire

McDonald’s, Metro Expansion

Petsmart

Pharma Plus

Shoppers Drug Mart

Shoppers Drug Mart

Scotia Bank, Blockbuster

Pharma Plus

Shoppers Home Health Care

IGA

Royal Bank

Staples

24,700 

19,000 

17,800 

17,500 

16,900 

14,100 

10,900 

8,800 

8,000 

7,800 

7,100 

37,300

269,200

521,400

(1)  Constructed in accordance with Leadership in Energy and Environmental Design (LEED) certiﬁ cate guidelines.

The 2007 development of 521,400 square feet compares with 478,900 square feet developed in 2006. The developed space was 93.0% 

occupied when transferred to income-producing shopping centres at an average rental rate of $19.52 per square foot. As of December 31, 

2007, this developed space was 97.4% occupied. These successfully completed development projects illustrate the potential future value of 

investments in ongoing development initiatives that are not yet generating income, but are expected to contribute signiﬁ cantly to the growth of 

the Company.

At December 31, 2007, the Company owned 394 acres of land sites and parcels available for future development, compared with 269 acres 

in 2006. The pipeline of development acreage has increased as a result of new acquisitions and provides the Company with opportunities for 

growth in its existing portfolio and new development in its target urban markets. 

14

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company’s development sites and properties as at December 31, 2007 are summarized as follows:

Development properties under construction 

Redevelopment projects underway 

Expansion projects underway 

Properties held for development 

Land parcels adjacent to / part of existing properties 

Land parcels adjacent to / part of existing properties available

for expansion 

Other development related costs 

Total  

(1)  Net of partners’ interests.

Number of  

Sites/Properties   

Developable  

Square Feet  (1) 

Acreage  (1) 

(in thousands)  

6 

11 

5 

18 

22 

13 

— 

75 

31.3 

79.2 

8.6 

167.4 

78.5 

28.6 

— 

393.6 

363.8 

867.8 

126.6 

1,681.2 

569.1 

275.8 

— 

3,884.3 

Net

Book Value

 (in thousands)

$  57,623

56,670

21,928

95,755

41,176

—

10,925 

$  284,077

In 2007, the Company invested a total of $170.9 million in its active development projects as well as in certain improvements to its 

existing shopping centre portfolio. In the management of its development and expansion program, the Company utilizes dedicated internal 

professional staff. Direct and incremental costs of development, including applicable salaries and other direct costs of internal staff, are 

capitalized to the cost of the property under development.

At December 31, 2007, 13 land sites included in properties held for development and land parcels adjacent to/part of existing properties 

comprising our net interest of 142.5 acres and developable square feet totalling 1,379,000 square feet are in the planning stage of 

development. In addition, the Company is actively planning future redevelopment and/or expansion at 24 of its shopping centres.

The Company’s active development and property improvement initiatives continue to improve the physical building and appearance of its 

shopping centres. At December 31, 2007 the age of the Company’s portfolio was as follows:

5 years or newer 

42% 

6-10 years 

19% 

11-15 years 

15% 

16-20 years 

11% 

Over 20 years

13%

2007 ANNUAL REPORT

15

 
 
 
 
  
  
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

2006 Acquisitions

In 2006, First Capital Realty expanded its portfolio through various acquisitions as set out below.

Income-Producing Properties

The Company acquired interests in 25 income-producing shopping centres, comprising 1.8 million square feet, for $403.5 million. Of these 

properties, 12 were anchored by supermarkets and two were anchored by drug stores. In addition, seven of the supermarket-anchored 

centres also included drug stores as additional anchors and one of the supermarkets contains a pharmacy. The acquisitions are summarized 

in the following table.

Property Name 

Richmond Square 

Fairmount Shopping Centre 

Humbertown Shopping Centre 

TransCanada Centre 

801 & 861 York Mills 

Woodgrove Crossing 

Place Lorraine 

1842-1852 Queen Street East 

Kirkland Plaza 

Woolridge Linens ’n Things 

The Olive 

Queen Mary 

Plaza Actuel 

Cochrane City Centre 

Hyde Park Plaza 

Stoneybrook Plaza 

9630 Macleod Trail 

Staples Lougheed 

Terminal Park 

Olde Oakville Market Place 

Sunningdale Centre 

Port Place Shopping Centre 

Place Panama 

Kirkland & St. Charles 

  Shopping Centre 

Other acquisition 

Total  

City 

Province 

Acquired 

Anchored 

Anchored 

(Square Feet) 

(in millions)

Quarter  Supermarket- 

Drug Store- 

Leasable Area 

Acquisition Cost

Gross 

Calgary 

Calgary 

Toronto 

Calgary 

Toronto 

Nanaimo 

Lorraine 

Toronto 

Kirkland 

Coquitlam 

Vancouver 

Montreal 

Montreal 

Cochrane 

London 

London 

Calgary 

Burnaby 

Nanaimo 

Oakville 

London 

Nanaimo 

Brossard 

Kirkland 

Toronto 

AB 

AB 

ON 

AB 

ON 

BC 

QC 

ON 

QC 

BC 

BC 

QC 

QC 

AB 

ON 

ON 

AB 

BC 

BC 

ON 

ON 

BC 

QC 

QC 

ON 

Q1 

Q1 

Q1 

Q1 

Q2 

Q2 

Q2 

Q2 

Q2 

Q2 

Q3 

Q3 

Q3 

Q3 

Q3 

Q3 

Q3 

Q3 

Q4 

Q4 

Q4 

Q4 

Q4 

Q4 

Q4 

— 

— 
✔ 
✔ 

— 

— 
✔ 

— 
✔ 

— 
✔ 

— 

— 

— 
✔ 
✔ 

— 

— 
✔ 
✔ 
✔ 
✔ 
✔ 

— 

— 

12 

— 

— 
✔ 
✔ 

— 

— 

— 

— 

— 

— 

— 

— 

— 
✔ 
✔ 
✔ 

— 

— 
✔ 
✔ 
✔ 
✔ 

— 

✔ 

— 

10 

102,000 

58,000 

136,000 

186,000 

78,000 

60,000 

63,000 

14,000 

47,000 

38,000 

22,000 

6,400 

58,000 

35,000 

51,800 

55,300 

126,900 

32,000 

31,000 

88,000 

72,700 

146,700 

94,200 

114,200 

67,200 

$ 

19.6

10.4

47.0

38.1

21.6

14.3

7.3

6.2

6.7

12.5

9.4

1.9

9.3

9.1

13.0

13.2

24.6

12.0

8.4

36.6

24.9

20.0

9.3

21.0

7.1

1,783,400 

$ 

403.5

16

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional Space and Adjacent Land Parcels

The Company acquired additional space at 11 existing shopping centres and nine land parcels at or adjacent to existing properties adding 

235,100 square feet of gross leasable area and 17.3 acres of commercial land. Total expenditures on these additional interests and land 

parcels amounted to $62.4 million. These acquisitions are set out in the tables below.

Property Name 

City 

Province 

Additional space at existing shopping centres

Fairway Plaza 

Loblaws Plaza 

Appleby Mall 

Plaza Don Quichotte 

Wellington Corners 

Cochrane City Centre 

Kitchener 

Ottawa 

Burlington 

Ille Perot 

London 

Cochrane 

Carrefour Belvedere (Hooper Building)   

Sherbrooke 

Steeple Hill West 

1005 King Street West (King Liberty) 

1029 King Street West (King Liberty) 

Harvey’s Delson (Plaza Delson) 

Total  

Pickering 

Toronto 

Toronto 

Delson 

Land parcels at or adjacent to existing properties

Charlemagne Land (Carrefour Charlemagne)  Montreal 

Centre Commercial Maisonneuve 

Montreal 

Carrefour des Forges 

Drummondville 

355-359 & 349-351 St. Edouard

(Carrefour des Forges) 

Drummondville 

19970 – 80th Avenue (Jericho Centre)   

Langley 

Carrefour St. David 

Beauport 

Charlemagne Land (Carrefour Charlemagne)  Montreal 

68 Livingston (Grimsby Square SC) 

Cowpland Drive (Eagleson Place) 

Grimsby 

Ottawa 

Total  

Additional Interests in Existing Properties

ON 

ON 

ON 

QC 

ON 

AB 

QC 

ON 

ON 

ON 

QC 

QC 

QC 

QC 

QC 

BC 

QC 

QC 

ON 

ON 

Quarter 

Acquired 

Leasable Area 

Acquisition Cost

Acreage 

(Square Feet) 

(in millions)

Gross 

Q1 

Q1 

Q1 

Q2 

Q2 

Q3 

Q3 

Q3 

Q4 

Q4 

Q4 

Q1 

Q1 

Q1 

Q2 

Q2 

Q3 

Q3 

Q4 

Q4 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

2.3 

1.5 

0.8 

0.2 

4.1 

0.4 

1.3 

0.1 

6.6 

17.3 

64,000 

22,000 

15,000 

27,000 

4,000 

23,500 

48,000 

14,000 

8,000 

5,600 

4,000 

$ 

13.3

5.2

4.1

2.6

0.9

7.6

4.0

2.8

4.6

1.9

0.8

235,100 

$ 

47.8

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

$ 

5.5

3.1

0.6

0.4

2.4

0.8

0.5

0.3

1.0

$ 

14.6

In 2006, the Company acquired the remaining interests of 50% and 25% in Old Strathcona, Edmonton, Alberta and Dufferin Corners, 

Toronto, Ontario, respectively, for a total cost of $9.8 million.

2007 ANNUAL REPORT

17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Land Sites for Development

The Company invested $22.6 million in the acquisition of six land sites in 2006, comprising 40.7 acres of commercial land for future 

development, as set out in the table below.

City 

Montreal 

Laval 

Abbottsford 

Ottawa 

Abbottsford 

Brampton 

Province 

Quarter 

Acquired 

QC 

QC 

BC 

ON 

BC 

ON 

Q3 

Q3 

Q4 

Q4 

Q4 

Q4 

Acreage 

7.6 

0.8 

3.9 

23.8 

0.2 

4.4 

40.7 

Acquisition Cost

(in millions)

$ 

3.0

1.5

7.1

6.0

0.5

4.5

$ 

22.6

Property Name 

Faubourg des Prairies (1) 

Laval Place Fredo (1) 

Abbottsford Lands 

Kanata Lands (2) 

South Fraser Gate 

McVean Land 

Total  

(1)  Acquired prior to zoning process.

(2)  50% interest.

2006 Development Activities

In 2006, the Company developed 478,900 square feet of retail space in the following shopping centres.

City 

Province 

Square Feet 

Major Tenants 

Property Name 

Development

Carrefour Charlemagne (1) 

King Liberty Village 

Carrefour St. David (1) 

Clairﬁ elds Common 

Charlemagne 

Toronto 

Beauport 

Guelph 

QC 

ON 

QC 

ON 

Strandherd Crossing 

Ottawa 

  ON 

Redevelopment and Expansion

Promenades Levis 

Bowmanville Mall 

McLaughlin Corners 

West Lethbridge Town Centre (1) 

Red Deer Village 

Chemong Park Plaza 

Parkway Centre 

Other space – various projects 

Subtotal 

Eagleson Cope Drive 

Total  

Levis 

Bowmanville 

Brampton 

Lethbridge 

Red Deer 

Peterborough 

Peterborough 

QC 

ON 

ON 

AB 

AB 

ON 

ON 

Ottawa 

ON 

139,000 

45,000 

42,000 

34,000 

13,000 

273,000 

Rona

First Capital Realty,

Kasian Architecture

Metro

Shoppers Drug Mart, Scotiabank, 

TD Canada Trust

Dollar Blitz, Starbucks

25,000 

Pharmacie Jean Coutu,

Bank of Montreal

A&P

CitiFinancial, Hasty Market

Scotiabank

Mark’s Work Wearhouse

TD Canada Trust

Montana’s

Loblaws

23,000 

11,000 

7,000 

6,000 

5,000 

5,000 

21,000

 103,000

376,000

102,900 

478,900

(1)  Constructed in accordance with Leadership in Energy and Environmental Design (LEED) certiﬁ cate guidelines.

18

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed gross leasable area of 376,000 square feet was 100% occupied at December 31, 2006, at an average rate of $16.35 per square 

foot. In addition, a 102,900 square foot Loblaws was built by the tenant.

At December 31, 2006, the Company had 269 acres of land sites and parcels available for development. The Company’s development sites 

and properties as at December 31, 2006 are summarized as follows:

Development properties under construction 

Redevelopment projects underway 

Expansion projects underway 

Properties held for development 

Land parcels adjacent to / part of existing properties 

Land parcels adjacent to / part of existing properties available

for expansion 

Other development related costs 

Total  

(1)  Net of partners’ interests.

Number of 

Sites/Properties 

Developable  

Square Feet (1) 

Acreage (1) 

(in thousands)  

6 

5 

3 

11 

18 

16 

— 

59 

41.8 

13.9 

3.3 

125.6 

52.4 

31.5 

— 

268.5 

468.2 

188.5 

33.6 

1,176.5 

544.1 

348.4 

— 

2,759.3 

Net

Book Value

(in thousands)

$  43,832

17,491

5,758

49,498

45,665

—

16,103

$  178,347

The Company invested a total of $108.5 million in 2006 in its active development projects and in certain improvements to its existing 

shopping centre portfolio.

Expenditures on Land and Shopping Centres under Development and Shopping Centres

(thousands of dollars) 

Expenditures on:

Deferred leasing costs

  Revenue enhancing 

  Revenue sustaining 

  Other items and adjustments 

Shopping centres

  Revenue enhancing 

  Revenue sustaining 

  Property repositioning 

  Other items and adjustments 

Land and shopping centres under development 

Total  

2007 

2006

$ 

1,605 

$ 

1,927 

(103) 

3,429 

13,410 

7,365 

2,306 

637 

23,718 

143,744 

2,575

2,946

92

5,613

9,529

5,946

3,436

518

19,429

83,449

$  170,891 

$ 

108,491

Revenue sustaining capital expenditures are those capital expenditures required for maintaining shopping centre infrastructure and revenues 

from current leases. Typically, these costs average approximately $0.50 per square foot annually for the Company. In 2007 they totalled 

$0.49 per square foot. Revenue enhancing and repositioning are those expenditures which increase the revenue generating ability of the 

Company’s shopping centres. Management considers the potential effects on occupancy, rental rate per square foot and other factors when 

assessing whether an expenditure is revenue enhancing or sustaining.

2007 ANNUAL REPORT

19

 
 
 
 
 
  
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Leasing and Occupancy

In 2007, net new leasing, including new development space coming on line, totalled 605,500 square feet compared to 640,700 square feet in 

2006. This net new leasing will generate additional annual minimum rent of approximately $12.1 million as compared to $9.0 million in 2006. 

Lease renewals on 1,081,000 square feet were completed in 2007, as compared to 1,446,000 square feet of space in 2006. The renewals 

signed in 2007 will generate additional annual minimum rent 13.0% greater than the expiring rent, which compares to 2006 renewals signed 

at 5.5% greater than expiring rent. 

New leases and, to a lesser extent, renewed leases may require investments of capital for tenant installation costs which typically include 

tenant allowances and other leasing costs. 

With the impact of leasing during the year in the existing portfolio and development space, new acquisitions and increases from 

contractual rent steps, the average rate per occupied square foot increased to $14.56 at December 31, 2007 as compared with $13.95 at 

December 31, 2006. 

The occupancy level of the portfolio, including space for redevelopment, was 95.3% of total gross leasable area as at December 31, 2007 as 

compared with 95.7% at December 31, 2006.

OCCUPANCY 

Occupancy 

Under Redevelopment 

Vacant 

Equity One, Inc. (“Equity One”)

2007 

2006 

95.3% 

1.9% 

2.8% 

95.7% 

1.0% 

3.3% 

2005

95.0%

1.1%

3.9%

Equity One is a United States REIT traded on the New York Stock Exchange (“NYSE”) under the ticker symbol EQY. Equity One is a real estate 

investment trust that principally acquires, renovates, develops and manages neighbourhood and community shopping centres anchored by 

leading supermarkets, drug stores or discount retail store chains in the southern and northeastern United States metropolitan markets. Based 

in North Miami Beach, Florida, Equity One is a self-managed REIT with acquisition, development, redevelopment, capital markets, property 

management and leasing expertise. 

Equity One Property Portfolio 

Equity One owns or has interest in 165 properties comprising approximately 17.1 million square feet consisting of 152 shopping centres, six 

non-retail properties, and seven development parcels as at December 31, 2007. 

The investment in Equity One provides the Company with both geographic and property rental revenue diversiﬁ cation in growing urban 

markets in the United States. Fifty-nine percent of the total square footage owned by Equity One is located in Florida, with the balance of the 

properties in ten other states. Additionally, all of Equity One’s top ten tenants are represented by U.S.-based corporations that are distinct from 

the Company’s top ten tenants.

Information concerning Equity One is based on publicly available information and documents ﬁ led with the U.S. Securities and 

Exchange Commission.

Analysis of Investment in Equity One

The book value and market value of the Company’s investment in Equity One amounted to $192 million and $319 million (2006 – 

$229 million and $432 million), respectively, at December 31, 2007, using the year-end exchange rate of $0.99 (2006 – $1.17). First 

Capital Realty, through its wholly-owned U.S. subsidiaries, owned 14.0 million shares of Equity One as of December 31, 2007 (2006 

– 13.9 million shares). 

First Capital Realty’s investment in Equity One originated from an exchange of the Company’s U.S. shopping centre business for shares in 

Equity One in September 2001, which at the time had a book value of US$120 million. Since that time, Equity One has grown signiﬁ cantly, 

and the Company’s investment has increased with additional investments in shares. Equity One has paid dividends for 39 consecutive 

quarters, providing the Company with a source of stable cash income. At December 31, 2007, US$129.5 million of the outstanding debt was 

secured by the shares held in Equity One.

20

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
R E S U LT S   O F   O P E R AT I O N S

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 ﬁ nancial performance in the real estate industry. First Capital Realty believes that ﬁ nancial 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. 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 ﬂ ow from operating activities as deﬁ ned by GAAP, (ii) are not indicative of cash available to fund all liquidity requirements, 

including payment of dividends and capital for growth and (iii) should not 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 

deﬁ nition is meant to standardize the calculation and disclosure of FFO across real estate entities in Canada, modelled on the deﬁ nition 

adopted by the National Association of Real Estate Investment Trusts (“NAREIT”) in the United States. FFO as deﬁ ned by RealPac differs 

in two respects from the deﬁ nition adopted by NAREIT. Under the RealPac deﬁ nition, future income taxes are excluded from FFO, whereas 

under the NAREIT deﬁ nition, they are included. In addition, impairment losses are excluded from the RealPac FFO deﬁ nition, whereas the 

NAREIT deﬁ nition includes them. As a result, when calculating FFO, the Company adjusts the FFO reported by Equity One to comply with the 

RealPac deﬁ nition, when appropriate.

The Company’s GAAP net income is reconciled to funds from operations below:

(thousands of dollars) 

Net income for the year 

Add (deduct):

  Amortization of shopping centres, deferred costs and intangible assets 

  Gain on disposition of income-producing shopping centre 

  Current income tax on Equity One special dividend from gain on real estate 

  Equity income from Equity One 

  Funds from operations from Equity One 

  Future income taxes 

Funds from operations 

The components of FFO are: 

(thousands of dollars, except per share amounts) 

Net operating income 

Interest expense (1) 

Interest and other income, less debt settlement costs 

Corporate expenses 

Funds from operations from Equity One 

Amortization 

Current taxes 

Funds from operations 

Funds from operations per diluted share 

Weighted average diluted shares – FFO 

2007 

2006

$ 

30,353 

$ 

45,959

77,964 

(323) 

— 

(14,375) 

20,807 

10,930 

64,252

—

3,621

(32,696)

22,457

13,593

$  125,356 

$ 

117,186

2007 

2006

$  242,445 

$ 

205,626

(116,043) 

5,227 

(23,544) 

20,807 

(1,864) 

(1,672) 

(96,066)

6,917

(19,282)

22,457

(1,932)

(534)

$  125,356 

$ 

1.60 

$ 

$ 

117,186

1.58

  78,427,583 

  74,321,824

(1)   In 2006, amortization of deferred ﬁ nancing and deferred issue costs totalling $2.3 million was reclassiﬁ ed to interest expense from amortization for comparative purposes in 

accordance with the 2007 presentation.

2007 ANNUAL REPORT

21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Funds from Operations

Funds from operations for the year ended December 31, 2007 totalled $125.4 million, or $1.60 per diluted common share, compared to 

$117.2 million, or $1.58 per diluted common share in 2006. The increase in FFO was primarily due to increased net operating income 

resulting from same property NOI growth as well as acquisitions and development projects coming on line, partially offset by an increase 

in interest expense of $22.2 million, a decline in FFO from Equity One of $1.7 million, an increase in corporate expenses associated 

with transaction costs of $2.3 million related to unsuccessful and unfeasible acquisitions and an increase in non-cash compensation of 

$1.8 million.

FFO for the year ended December 31, 2007 included non-recurring items amounting to approximately $1.9 million or $0.02 per diluted 

common share compared to approximately $2.6 million or $0.03 per diluted common share in 2006.

Adjusted Funds from Operations (“AFFO”)

Management views AFFO as an effective measure of cash generated from operations. AFFO is calculated by adjusting FFO for amortization 

of non-cash ﬁ nancing 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 and hedges and actual costs incurred for capital expenditures and leasing costs 

for maintaining shopping centre infrastructure and revenues from current leases. The Company’s proportionate share of Equity One FFO is 

reversed and only the regular cash dividends received are included in AFFO.

(thousands of dollars, except per share amounts) 

FFO  

  Add / (Deduct):

  Amortization of deferred ﬁ nancing fees 

  Amortization of deferred debenture issue costs 

  Rental revenue recorded on a straight line basis and market rent adjustments 

  Non-cash compensation expense 

  Accretion and amortization of discount on debt 

Interest paid in excess of implicit interest on assumed mortgages 

Interest expense payable in shares 

  Non-cash loss on extinguishment of debt  

  Revenue sustaining capital expenditures and leasing costs 

  Funds from operations from Equity One 

  Dividends from Equity One (Regular) 

  Non-cash (gain) loss on interest rate swaps not designated as hedges 

Adjusted Funds from Operations (1) 

Adjusted Funds from Operations per diluted share 

Weighted average diluted shares for AFFO (2) 

(1)  Excludes the 2006 Equity One Special Dividend of $1.00 per share or $14.9 million and the related tax effect of $3.6 million.

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

2007 

2006

$  125,356 

$ 

117,186

2,058 

1,235 

(8,875) 

4,295 

696 

(1,890) 

12,030 

483 

(9,292) 

(20,807) 

17,617 

(643) 

$  122,263 

$ 

1.42 

$ 

$ 

2,329

850

(7,482)

2,543

242

(2,323)

5,981

—

(8,892)

(22,457)

18,373

389

106,739

1.36

  86,304,978 

  78,272,322

22

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In July 2007, the Canadian Institute of Chartered Accountants published guidelines entitled “Standardized Distributable Cash in Income 

Trusts and Other Flow Through Entities”. The Canadian Securities Administrators issued National Policy 41-201 “Income Trusts and Other 

Indirect Offerings”. Both documents address disclosures regarding the concept of Distributable Cash and Distributable Income. The 

Company’s dividend policy is not based on these methodologies and hence, the Company does not use the deﬁ nitions in these guidelines.

However, AFFO is similar in concept to Distributable Cash and therefore, the Company has set out a reconciliation from cash provided by 

operating activities (a GAAP measure) to AFFO below, in accordance with the guidelines.

(thousands of dollars) 

Cash provided by operating activities 

  Gains on sale of land 

  Realized gains on sale of marketable securities 

  Deferred leasing costs 

  Net change in non-cash operating items 

  Settlement of restricted share units 

Amortization of other assets 

Convertible debenture interest paid in common shares 

Convertible debenture interest payable in common shares 

Revenue sustaining capital expenditures and leasing costs 

Dividends from Equity One, Inc. (Special) 

Current income tax on Equity One, Inc. special dividend from gain on real estate 

Adjusted Funds from Operations  

Net Operating Income

2007 

2006

$  133,056 

$ 

115,173

— 

2,504 

3,429 

(8,191) 

1,826 

(1,051) 

(12,048) 

12,030 

(9,292) 

— 

— 

137

4,221

5,613

(831)

1,914

(1,011)

(4,295)

5,981

(8,892)

(14,892)

3,621

$  122,263 

$ 

106,739

Net operating income (“NOI”) is deﬁ ned 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 

deﬁ ned by GAAP and there is no standard deﬁ nition of net operating income. Accordingly, net operating income may not be comparable with 

similar measures presented by other entities. Net operating income should not be construed as an alternative to net income or cash ﬂ ow from 

operating activities determined in accordance with GAAP. 

2007 ANNUAL REPORT

23

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Net operating income increased in 2007 by $36.8 million to $242.4 million. The drivers of the increase in NOI are as follows:

(thousands of dollars) 

Same property NOI 

Development NOI

  Expansion and redevelopment space NOI 

  Same Property NOI with Expansion and Redevelopment  

  Development (Greenﬁ eld) 

2006 Acquisitions 

2007 Acquisitions 

Rental revenue recognized on a straight-line basis 

Market rent adjustments 

Dispositions and other 

NOI  

NOI

  Property rental revenue 

  Property operating costs 

NOI  

NOI Margin 

2007 

2006

$  169,421 

$ 

163,920

9,436 

178,857 

19,327 

27,735 

7,848 

6,753 

2,122 

(197) 

6,573

170,493

14,316

12,867

—

5,839

1,643

468

$  242,445 

$ 

205,626

$  376,891 

$ 

325,980

134,446 

120,354

$  242,445 

$ 

205,626

64.3% 

63.1%

Same property NOI (includes properties where the Company’s ownership and investment are substantially the same in the two calendar years) 

improved by 3.4%, or $5.5 million, during the year, due to increases in lease rates and occupancy. NOI on space under redevelopment or 

expansion increased from $6.6 million to $9.4 million. These activities comprise the redevelopment and expansion activities on the Company’s 

properties that were owned in the two calendar year period. On a combined basis this same property portfolio increased its NOI by 4.9% to 

$178.9 million.

In the normal course of operations, the Company receives payments from tenants as compensation for the termination of leases. In 2007, the 

Company received lease termination payments of $0.7 million or 0.2% of total property revenues as compared to $1.0 million, or 0.3% of total 

property revenues, in 2006. Lease termination income has ranged from 0.2% to 0.8% of total property revenues over the past ﬁ ve years. The 

lease termination payments are included in same property NOI.

The ratio of net operating income to gross rental revenues in 2007 of 64.3% reﬂ ects the inclusion of straight-line rents and market rent 

adjustments of $8.9 million. Excluding these items, the NOI margin is approximately 63.5%. Similarly, the 2006 ratio of net operating income 

to gross property revenues of 63.1% reﬂ ects the inclusion of straight-line rent and market rent adjustment amounts of $7.5 million in NOI. 

Excluding these items, the NOI margin was approximately 62.2% in 2006. Overall, the annualized NOI margin has increased over the past 

three years as the Company’s portfolio has grown and expanded in new markets.

Equity Income from Equity One 

The Company received dividends from Equity One of US$16.8 million or US$1.20 per share during the year ended December 31, 2007 

compared to US$29.4 million or US$2.20 per share in the year ended December 31, 2006. The Canadian dollar equivalent amounts are 

$17.6 million and $33.3 million, respectively.

24

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company’s share of Equity One’s net earnings, adjusted to Canadian GAAP, net of a provision for future tax on the undistributed 

earnings of Equity One, is recorded as equity income. For the year ended December 31, 2007, equity income from Equity One decreased 

to $14.4 million from $32.7 million in the prior year. In 2006, the equity income included the Company’s share in the gain (approximately 

$19.4 million, net of taxes) on the sale of Equity One’s Texas portfolio and other properties, offset by management transition and abandoned 

transaction costs incurred by Equity One. In 2006 Equity One sold 29 Texas properties to a third-party investor in two transactions which 

occurred in the second and fourth quarters of 2006. Equity One realized net proceeds of approximately US$329 million from the transaction. 

Equity One recorded a gain of approximately US$111 million, and paid a special dividend of US$1.00 per common share in the second 

quarter of 2006, which is included in dividends received of $2.20 per share. 

Interest and Other Income

(thousands of dollars) 

Realized gains on sale of marketable securities 

2007 

$ 

2,504 

$ 

Interest, dividend and distribution income from marketable securities and cash investments 

1,768 

Gains on land and property sales 

Realized gains on interest rate swaps not designated as hedges 

Unrealized gains (losses) on interest rate swaps not designated as hedges 

Interest income from development loans 

Income from non-recourse cash ﬂ ow participation loans 

Other (expense) income 

Total interest and other income 

Interest Expense

(thousands of dollars) 

Mortgages, loans and credit facilities

  Unsecured 

  Secured by Canadian properties 

  Secured by investment in Equity One and other investment 

Senior unsecured debentures and convertible debentures 

Amortization of deferred ﬁ nancing and deferred issue costs 

Total interest expense 

2006

4,221

1,335

137

—

(389)

683

538

392

323 

161 

643 

658 

— 

(24) 

$ 

6,033 

$ 

6,917

2007 

2006

$ 

4,040 

$ 

56,380 

10,387 

70,807 

42,756 

2,480 

—

64,944

9,734

74,678

19,131

—

$  116,043 

$ 

93,809

Effective January 1, 2007, amortization of ﬁ nancing costs for mortgages, term loans and debentures is included in interest expense. In 2006 it 

is included in amortization expense.

The increase in interest expense on mortgages, loans and credit facilities in 2007 was a result of an increase in the gross debt required 

to fund the growth of the property portfolio. During 2006 and 2007, a larger percentage of this additional debt was comprised of senior 

unsecured debentures. The Company’s ratio of debt to aggregate assets has increased from 55.4% at December 31, 2006 to 56.4% at 

December 31, 2007.

2007 ANNUAL REPORT

25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Interest Expense on Mortgages and Credit Facilities – Canada

(thousands of dollars) 

Interest expense 

Interest capitalized 

Interest paid in excess of implicit interest on assumed mortgages 

Less amortization of ﬁ nancing fees 

Change in accrued interest 

2007 

2006

$ 

61,342 

$ 

64,944

15,601 

1,890 

(1,061) 

73 

8,776

2,323

—

(429)

Total Canadian mortgage and credit facilities interest paid 

$ 

77,845 

$ 

75,614

The increase of $2.2 million in interest paid on Canadian mortgages and credit facilities in 2007 over 2006 is the result of increased borrowing 

by the Company to fund acquisitions and development activities in Canada. The effect of the increase in gross debt was partially offset by 

a decrease in the weighted average interest rate on the Company’s Canadian ﬁ xed rate borrowings, from 6.4% at December 31, 2006 to 

6.3% at December 31, 2007, as rates on new ﬁ nancings were lower than those on existing debt. The interest capitalized to properties under 

development in 2007 increased over 2006 as a result of increased development activity during the year.

Interest Expense on U.S. Loans and Credit Facilities

(thousands of dollars) 

Ending debt balance – December 31 (US$) 

Interest expense (US$) 

Less amortization of ﬁ nancing fees  

Interest expense excluding amortization of ﬁ nancing fees (US$) 

Average exchange rate 

Interest expense (Cdn$) 

Less amortization of ﬁ nancing fees 

Interest expense excluding amortization of ﬁ nancing fees (Cdn $) 

Change in accrued interest 

2007 

2006

$  148,480 

$ 

$ 

9,985 

(169) 

9,816 

$ 

1.07 

$ 

$ 

$ 

10,710 

$ 

(184) 

10,526 

407 

139,625

8,587

—

8,587

1.13

9,734

—

9,734

(623)

9,111

Total US$ loans and credit facilities interest paid (Cdn $) 

$ 

10,933 

$ 

Measured in U.S. currency, the interest expense on the U.S. loans and credit facilities excluding amortization of ﬁ nancing fees increased by 

14.3% in 2007 from 2006 as a result of the higher average debt balance and a higher average interest rate. The change in the U.S. exchange 

rate during 2007 partially offset this increase, resulting in an 8.1% increase in interest expense excluding amortization of ﬁ nancing fees when 

measured in Canadian currency. The Company uses U.S. dollar-denominated debt to ﬁ nance its U.S. dollar investments.

Interest on Senior Unsecured Debentures

(thousands of dollars) 

Interest expense on senior unsecured debentures 

Implicit interest rate in excess of coupon rate 

Less amortization of deferred issue costs 

Change in accrued interest 

Cash interest paid 

2007 

2006

$ 

30,831 

$ 

12,935

(41) 

(760) 

(2,989) 

$ 

27,041 

$ 

(27)

—

(3,340)

9,568

26

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The increase in interest expense from Senior Unsecured Debentures is due to the following debt issuances:

Series 

Date of Issue 

B  

C   

D  

E   

F   

March 30, 2006 

August 1, 2006 

September 18, 2006 

January 31, 2007 

April 5, 2007 

Interest on Convertible Debentures

(thousands of dollars) 

Interest expense on convertible debentures 

Implicit interest rate in excess of coupon rate 

Less amortization of deferred issue costs 

Change in accrued interest 

Less interest paid in common shares of the Company 

Cash interest paid 

Par Value 

$100 million  

$100 million 

$100 million 

$100 million 

$100 million 

Coupon Rate

5.25%

5.49%

5.34%

5.36%

5.32%

2007 

2006

$ 

13,160 

$ 

(655) 

(475) 

18 

(12,048) 

$ 

— 

$ 

6,196

(215)

—

(1,686)

(4,295)

—

The increase in convertible debenture interest expense is due to the interest on the $100 million and $50 million of par value 5.50% 

convertible unsecured subordinated debentures issued on November 30, 2006 and June 29, 2007, respectively.

Corporate Expenses

(thousands of dollars) 

Salaries, wages and beneﬁ ts 

Non-cash compensation 

Other general and administrative costs 

Capital taxes, net of recoveries from tenants 

Abandoned transaction costs 

Amounts capitalized to properties under development and deferred leasing costs 

2007 

2006

$ 

15,996 

$ 

13,833

4,295 

7,119 

1,824 

3,365 

2,543

6,252

1,959

1,092

(9,055) 

(6,397)

$ 

23,544 

$ 

19,282

Salaries, wages and beneﬁ ts along with stafﬁ ng levels have increased in response to portfolio growth and the general employment 

environment in the real estate industry and the markets where the Company operates.

Non-cash compensation is recognized over the respective vesting periods for options, restricted share units and deferred share units. 

These items are considered part of the total compensation for directors, senior management, employees and select service providers to 

the Company. Due to the grants of options and share units during 2006 and 2007, the non-cash compensation expense has increased 

from the prior year. Options and share units are designed to align the holders’ interests with the long-term interests of the Company and 

its shareholders. 

2007 ANNUAL REPORT

27

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Other general and administrative costs have increased with the Company’s growth and in response to the increasing costs of compliance in 

the regulatory environment for public companies.

Corporate expenses include $1.2 million of costs incurred in the second quarter of 2007 in respect of the Company’s unsuccessful takeover 

bid to acquire the outstanding shares of Sterling Centrecorp Inc. The Company also incurred $2.2 million of property acquisition costs for 

acquisitions that were not determined to be feasible during the year ended December 31, 2007, which compares to $1.1 million in the same 

period in 2006. 

The Company manages all of its acquisitions, development and redevelopment and leasing activities internally. Certain internal costs 

directly related to development and initial leasing of the properties, including salaries and related costs, are capitalized in accordance with 

GAAP to land and shopping centres under development, as incurred. Certain costs associated with the Company’s internal leasing staff are 

capitalized to deferred leasing costs and amortized over the lives of the related leases. Amounts capitalized to real estate investments for 

properties undergoing development or redevelopment and leasing costs (including leasing for development projects) during the year ended 

December 31, 2007 totalled $9.1 million compared to $6.4 million in the prior year comparative period. Amounts capitalized are based on 

speciﬁ c leasing activities and development projects underway. The increase in capitalized costs in 2007 is due to the growth of the portfolio 

and the increase in properties under development. 

Amortization Expense

(thousands of dollars) 

Shopping centres 

Deferred costs 

Intangible assets 

Amortization of real estate assets 

Deferred ﬁ nancing fees 

Other assets 

Total amortization 

2007 

2006

$ 

55,118 

$ 

14,629 

8,217 

77,964 

813 

1,051 

46,441

12,118

5,693

64,252

3,178

1,011

$ 

79,828 

$ 

68,441

Amortization of real estate assets increased due to the amortization of newly acquired properties and development coming on line. This 

is offset by amortization of deferred ﬁ nancing and deferred issue costs of $2.5 million for the year ended December 31, 2007 that were 

reclassiﬁ ed to interest expense in accordance with the changes in accounting standards.

Income Taxes

(thousands of dollars) 

2007 

2006

Provision for income taxes on income at the combined Canadian federal and provincial

income tax rate of 34.4% (2006 – 33.4%) 

$ 

14,784 

$ 

21,304

Increase (decrease) in the provision for income taxes due to the following items:

  U.S. operations 

  Non-deductible interest expense 

  Change in future income tax rate 

  Expenses not deductible for tax purposes 

  Other items 

Income taxes 

(40) 

240 

(5,250) 

1,697 

1,171 

(3,240)

81

(573)

990

(814)

$ 

12,602 

$ 

17,748

The total income tax expense has decreased compared to 2006 primarily due to decreases in future income tax rates resulting from federal 

rate reductions enacted in December 2007 as well as a decrease in net income before taxes. 

28

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income

(thousands of dollars, except per share amounts) 

Net income 

Net income per diluted share 

2007 

2006

$ 

$ 

30,353 

0.39 

$ 

$ 

45,959

0.62

The decrease in net income per share was primarily due to a decrease in equity income from Equity One, Inc. In 2006, Equity One recorded 

a gain on disposition of their Texas portfolio (the Company’s share being approximately $19.4 million, net of taxes), partially offset by a 

$2.7 million decrease in future income tax expense. Increases in net operating income were largely offset by increases in interest, corporate 

expenses and amortization of real estate assets in 2007. 

C A P I TA L   S T R U C T U R E   A N D   L I Q U I D I T Y

The real estate business is capital-intensive by nature. The Company’s capital structure is key to ﬁ nancing growth and providing sustainable 

cash dividends to shareholders. In the real estate industry, ﬁ nancial leverage is used to enhance rates of return on invested capital. 

Management believes that First Capital Realty’s blend of debt, convertible debentures and equity in its capital base provides stability and 

reduces risks, while generating an acceptable return on investment, taking into account the long-term business objectives of the Company.

In 2007, the Dominion Bond Rating Service Ltd. (“DBRS”) provided First Capital Realty with a credit rating upgrade to BBB with a stable 

trend from the previous rating of BBB(low) with a stable trend relating to the senior unsecured debentures. In 2006, Moody’s Investor 

Services, Inc. (“Moody’s”) provided First Capital Realty with a credit rating of Baa3 with a stable outlook relating to the senior unsecured 

debentures. A credit rating in the BBB category is generally an indication of adequate credit quality as deﬁ ned by DBRS. As deﬁ ned by 

Moody’s, a credit rating of Baa3 denotes that these debentures are subject to moderate credit risk and are of medium-grade and, as 

such, may possess certain speculative characteristics. A rating outlook, expressed as positive, stable, negative or developing, provides the 

respective rating agencies’ opinion regarding the outlook for the rating in question over the medium term. The credit ratings assigned are not 

recommendations to purchase, hold or sell these debentures. There can be no assurance that any rating will remain in effect for any given 

period of time or that any rating will not be withdrawn or revised by either or both Moodys or DBRS at any time.

Capital Employed

(thousands of dollars) 

Mortgages – Canada 

Loans and credit facilities – Canada 

Loans and credit facilities – U.S. 

Mortgages and credit facilities 

Senior unsecured debentures payable 

Convertible debentures payable 

Equity component of convertible debentures 

Other 

Convertible debentures principal 

Share capital 

Warrants 

Options and share units 

Accumulated other comprehensive income 

Cumulative currency translation 

Contributed surplus 

Deﬁ cit 

Total capital employed 

2007 

2006

$  1,145,828 

$  1,190,788

178,475 

146,811 

35,143

162,719

  1,471,114 

1,388,650

595,376 

217,030 

15,905 

65 

399,813

192,189

9,030

(1,219)

233,000 

200,000

  1,238,286 

1,128,926

140 

7,834 

(25,965) 

— 

19,513 

(304,382) 

935,426 

236

4,625

—

(14,170)

19,513

(236,567)

902,563

$  3,234,916 

$  2,891,026

2007 ANNUAL REPORT

29

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Mortgages, Loans and Credit Facilities

As at December 31, 2007, mortgages, loans and credit facilities increased primarily due to ﬁ nancing on acquisitions of shopping centres and 

development activities during the year. The weighted average interest rate on ﬁ xed rate mortgages, loans and credit facilities was 6.3% at 

December 31, 2007 compared to 6.4% at December 31, 2006.

(thousands of dollars) (1) 

Fixed rate mortgages 

Secured term loans

  Floating rate hedged (with interest rate swaps) 

  Floating rate 

Secured revolving credit facilities

  Floating rate 

Unsecured revolving credit facilities

  Floating rate 

Canada 

U.S. 

2007 

Total 

2006

Total

$  1,145,828 

$ 

— 

$  1,145,828 

$  1,190,438

— 

— 

— 

39,536 

88,440 

39,536 

88,440 

52,443

110,276

— 

— 

35,493

178,475 

18,835 

197,310 

—

$  1,324,303 

$  146,811 

$  1,471,114 

$  1,388,650

(1)  Amounts are presented net of ﬁ nancing costs and premiums and discounts.

At December 31, 2007, 77.9% (2006 – 85.7%) of the outstanding mortgage, loan and credit facility liabilities bore interest at ﬁ xed interest 

rates. This is due to the replacement of maturing mortgages with ﬂ oating rate revolving credit facilities. The ﬁ xed mortgage rates provide an 

effective matching for rental income from leases, which typically have ﬁ xed terms ranging from ﬁ ve to ten years, and incremental contractual 

rent steps during the term of the lease.

In Canada, the Company had ﬁ xed rate mortgages outstanding, as at December 31, 2007, in the aggregate amount of $1.146 billion as 

compared to $1.190 billion at the end of 2006. The decrease in the outstanding balance is the net result of $100 million in new ﬁ nancings 

primarily from ﬁ nancing assumed on acquisitions, top-up ﬁ nancing on existing properties with mortgages and one new mortgage offset by 

$144 million in repayments. The average remaining term of the mortgages outstanding has declined from 5.9 years at December 31, 2006 to 

5.6 years at December 31, 2007. This decrease is due primarily to the passage of time.

The Company’s unsecured revolving facility for $250 million was completed in March 2007 with a syndicate of six ﬁ nancial institutions. In 

October 2007 the Company completed an expansion of this facility to $350 million with a seventh bank joining the syndicate. The facility has 

a term to March 2010.

The Company has the ﬂ exibility under its unsecured credit facility to draw funds based on bank prime rates, bankers’ acceptances, LIBOR 

based advances or U.S. prime for U.S. dollar-denominated borrowings or Euro dollars. The bankers’ acceptances plus 110 basis points 

generally provide the Company with the least costly means of borrowing under this credit facility. The credit facility is being used primarily to 

ﬁ nance acquisition, development and redevelopment activities and for general corporate purposes. 

The U.S. dollar-denominated term loans and revolving credit facilities totalling Cdn$147.2 million are used to ﬁ nance the Company’s 

investment in Equity One and other investments and to reduce the Company’s exposure to ﬂ uctuations in foreign currency exchange rates. 

The debt service requirements of these term loans and revolving credit facilities are funded by the cash ﬂ ow generated by the dividends from 

Equity One. The outstanding U.S. loans and credit facilities increased from US$139.6 million at December 31, 2006 to US$148.5 million at 

December 31, 2007. 

The Company also completed a US$25 million revolving term credit facility with a U.S. ﬁ nancial institution. At December 31, 2007 the facility 

was undrawn. Draws under the facility bear interest at LIBOR plus 145 basis points. The revolving term facility matures June 2008.

30

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company’s objective is to manage its long-term debt by staggering maturity dates in order to mitigate against short-term volatility in 

the debt markets. At December 31, 2007, the Company had mortgages, loans and credit facilities aggregating $111.9 million coming due 

in 2008. Maturing amounts are comprised of $65.8 million of mortgages at an average interest rate of 5.97%, $30.4 million of scheduled 

amortization of principal balances and $15.7 million of U.S. term loans and revolving credit facilities. As the Company intends to renew or 

replace its bank credit facilities prior to their maturity dates and foresees no difﬁ culty in doing so, cash payment of the outstanding credit 

facilities at their maturity is not expected to be required. 

Senior Unsecured Debentures

The Company completed the issuance of $200 million of senior unsecured debentures, as described under “Interest Expense” in the year 

ended December 31, 2007.

The senior unsecured debentures are rated BBB with a stable trend by Dominion Bond Rating Services (“DBRS”) and Baa(3) with a stable 

outlook by Moody’s Investor Services. In the third quarter of 2007, DBRS upgraded the senior unsecured debentures from the previous rating 

of BBB (low) with a stable trend.

The six series of senior unsecured debentures require the Company to maintain certain covenants as deﬁ ned in their respective Trust Indentures.

The Company intends to continue to issue senior unsecured debentures and ﬁ nance its acquisitions, development activities and mortgage 

maturities. The Company believes that unsecured ﬁ nancing, in combination with its other sources of debt and equity capital, will provide the 

Company with a reduced cost of capital over the long term.

Debt and Principal Amortization Maturity Proﬁ le

(thousands of dollars) 

Mortgages 

Facilities 

Debentures 

 Credit Facilities 

Total 

% Due

Cdn Credit 

Unsecured 

Loans and

Senior 

U.S.

2008   

2009   

2010   

2011   

2012   

2013   

2014   

2015   

2016   

2017   

Thereafter 

Add:  unamortized deferred ﬁ nancing costs

and premium and discounts, net 

$ 

96,172  $ 

80,593 

—  $ 

— 

116,187 

178,475 

89,686 

133,394 

167,925 

215,977 

127,713 

41,769 

6,130 

69,249 

1,033 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

200,000 

100,000 

100,000 

200,000 

— 

— 

— 

— 

— 

—  $ 

15,717  $  111,889 

6,691 

87,284 

113,256 

407,918 

11,524 

301,210 

— 

— 

— 

— 

— 

— 

— 

233,394 

267,925 

415,977 

127,713 

41,769 

6,130 

69,249 

5.4%

4.2%

19.7%

14.5%

11.3%

12.9%

20.2%

6.2%

2.0%

0.3%

3.3%

(377)   

656 

—

$ 1,145,828  $  178,475  $  600,000  $  146,811  $ 2,071,114 

100.0%

2007 ANNUAL REPORT

31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Convertible Debentures 

(thousands of dollars) 

Interest Rate

Coupon 

Effective 

5.50% 

5.50% 

5.50% 

6.45% 

6.39% 

6.61% 

2007 

2006

Principal 

Liability 

Equity 

Principal 

Liability 

$ 

83,000  $ 

77,369  $ 

2,503  $ 

100,000  $ 

97,176  $ 

100,000 

50,000 

93,593 

46,068 

6,015 

7,387 

100,000 

— 

95,013 

— 

Equity

3,015

6,015

— 

$  233,000  $  217,030  $ 

15,905  $ 

200,000  $ 

192,189  $ 

9,030

On June 29, 2007, the Company issued via private placement, an additional $50 million principal amount of 5.50% convertible unsecured 

subordinated debentures maturing on September 30, 2017 at a price of $107 per $100 principal amount for total proceeds of $53.5 million. 

Gazit Canada Inc., the Company’s largest shareholder, acquired $49 million of the principal amount of these debentures on the same terms 

as the other investors.

These debentures are in addition to and part of the total $200 million of convertible debentures issued on December 19, 2005 and 

November 30, 2006. The 5.50% debentures are due September 30, 2017 and require interest payable semi-annually on March 31 and 

September 30. Holders of the 5.50% debentures have the right to convert them into common shares at a share price of $27.00 through to 

December 31, 2011 and $28.00 thereafter, to maturity. The Company may redeem the 5.50% debentures on or after December 31, 2009, 

but prior to January 1, 2012, provided the average trading price of the common shares for the 20 consecutive trading days ending ﬁ ve days 

prior to the redemption or maturity date is at 125% of the conversion price. The Company may redeem the 5.50% debentures after January 

1, 2012, but prior to maturity, at a price equal to the principal plus accrued interest. The Company has the option of repaying the 5.50% 

debentures on redemption by way of the issuance of common shares at 97% of a weighted average trading price of the Company’s common 

stock. The Company also has the option of paying the semi-annual interest through the issue of common shares. It is the current intention of 

the Company to satisfy its obligations to pay principal and interest on its 5.50% convertible unsecured subordinated debentures by issuing 

common shares. 

In 2007, 467,057 (2006 – 178,373) common shares were issued to pay interest to holders of convertible debentures.

Shareholders’ Equity

Shareholders’ equity amounted to $951 million as at December 31, 2007, as compared to $912 million at the end of 2006. Shareholders’ 

equity as at December 31, 2007 included $15.9 million (2006 – $9.0 million) representing the equity component of convertible debentures as 

discussed above.

As at December 31, 2007, the Company had 79,681,929 (2006 – 75,297,908) issued and outstanding common shares with a stated capital 

of $1.2 billion (2006 – $1.1 billion). During ﬁ scal 2007, a total of 4,384,021 common shares were issued as follows: 467,057 shares for 

interest payments on convertible debentures; 320,078 shares from the exercise of common share options and warrants; 73,383 shares 

from a private placement; 629,628 on conversion of convertible debentures; and 2,893,875 common shares under the Company’s dividend 

reinvestment plan (“DRIP”).

The Company adopted a “DRIP” in May 2005 enabling Canadian resident shareholders who hold at least 500 common shares to reinvest 

cash dividends into additional common shares to be purchased through the Company’s transfer agent directly from the Company without 

charge. Shareholders who elect to participate in the DRIP, reinvest in additional common shares at a discount of 2% of the weighted average 

trading price of the common shares on the TSX for the ﬁ ve consecutive trading days preceding the dividend payment date. Since inception, 

the quarterly participation rate in the DRIP averaged 76%.

32

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders’ equity as at December 31, 2007 included other comprehensive losses of $26.0 million, which primarily consisted of an 

unrealized currency translation adjustment in the amount of $24.1 million (2006 – $14.2 million). This amount represents the difference 

between the U.S. dollar exchange rate in effect at the date of the acquisition of the Company’s U.S. net assets, and the U.S. dollar exchange 

rate as at December 31, 2007 and 2006, respectively. The U.S. dollar exchange rate in effect at December 31, 2007 decreased to US$1.00 

= Cdn$0.99 from the exchange rate at December 31, 2006 of US$1.00 = Cdn$1.17. The impact of the decrease in the foreign exchange rate 

on the net assets held in the United States resulted in a $9.9 million change in the unrealized currency translation adjustment.

Shareholders’ equity as at December 31, 2007 included a deﬁ cit of $304.4 million (2006 – $236.6 million). The Company has historically 

paid dividends at levels consistent with general industry practice based on cash ﬂ ow from operations as opposed to net income.

Share Purchase Options

As of December 31, 2007, the Company issued and had outstanding 2,627,089 share purchase options, with an average exercise price of 

$24.27. The options are exercisable by the holder at any time after vesting up to ten years from the date of grant. The options have been 

issued at various times pursuant to the Company’s stock option plan to the employees, ofﬁ cers and directors of the Company and certain 

third-party service providers. The options granted permit the holder to acquire shares at an exercise price equal to the market price of such 

shares at the date the option is granted. The objective of granting options is to encourage the holder to acquire an ownership interest in the 

Company over a period of time which acts as a ﬁ nancial incentive for the holder to consider the long-term interests of the Company and 

its shareholders.

If all options outstanding at December 31, 2007 were exercised, 2,627,089 shares would be issued and the Company would receive proceeds 

of approximately $64 million.

Liquidity 

The Company’s primary sources of capital are cash generated from Canadian property operations, dividends from Equity One, loans, credit 

facilities, mortgage ﬁ nancing and top-ups and public equity and debt issues.

Primary uses of capital include acquisitions, development projects, debt principal repayments, payment of dividends to shareholders, capital 

improvements and the funding of leasing costs.

Cash ﬂ ow from operations is dependent on occupancy levels of properties, rental achieved, collections of rent and costs to maintain or lease 

space. The Company’s strategy is to maintain debt in the range of 45% to 60% to market capitalization. At December 31, 2007 this debt 

ratio was 48.9% based on the Company’s calculation. Maturing debt is generally repaid from proceeds reﬁ nancing such debt, issuing new 

unsecured debentures, ﬁ nancing unencumbered properties or issuing convertible debentures.

Cash and cash equivalents were $10.5 million at December 31, 2007 (2006 – $6.8 million). At December 31, 2007 the Company had 

undrawn credit facilities totalling $128.0 million and had approved credit facilities totalling $375.0 million, of which $325.0 million were 

available based on security provided to the banks. The Company also had unencumbered assets with a gross book value of approximately 

$1.4 billion. Management believes that it has sufﬁ cient resources to meet its operational and investing requirements in the near and 

longer term. 

The Company historically used secured mortgages, term loans and revolving credit facilities, senior unsecured debentures, convertible 

debentures and equity issues to ﬁ nance its growth. The actual level and type of future borrowings will be determined based on prevailing 

interest rates, various costs of debt and equity capital, capital market conditions and Management’s general view of the required leverage in 

the business.

2007 ANNUAL REPORT

33

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Cash Flows

(thousands of dollars) 

Cash provided by operating activities 

Cash used in investing activities 

Cash provided by ﬁ nancing activities 

Effect of currency rate movement 

Increase in cash and cash equivalents 

Operating Activities

2007 

2006

$  133,056 

$ 

115,173

(445,419) 

316,979 

(975) 

$ 

3,641 

$ 

(507,566)

393,511

357

1,475

The increase in cash provided by operating activities reﬂ ects the overall increase in cash ﬂ ow generated by the growth in the income-

producing shopping centre portfolio from acquisitions and development.

Investing Activities

The Company continues to make signiﬁ cant investments in its shopping centre portfolio. The overall level of investing activity in 2007 

is lower than the prior year. Details of the Company’s investments in acquisitions and developments are provided under “Business and 

Operations Review”.

Financing Activities

The overall level of ﬁ nancing activity in 2007 is also lower than the prior year as a result of the lower level of acquisition activity in 2007.

Contractual Obligations

(thousands of dollars) 

Mortgages

  Scheduled amortization 

  Payments on maturity 

Total mortgage obligations 

Canadian revolving credit facilities 

U.S. term loans 

U.S. revolving credit facilities 

Letters of credit 

Senior unsecured debentures 

Land leases 

Development and redevelopment 

Total 

  Less than 1 Year 

1-3 Years 

3-5 Years 

 More than 5 Years

Payments due by period 

$ 

204,624 

$ 

30,358 

$ 

57,281 

$ 

51,403 

$ 

65,582

940,171 

1,144,795 

178,475 

128,353 

18,835 

11,914 

600,000 

18,683 

158,256 

65,814 

96,172 

— 

15,717 

— 

11,914 

— 

769 

158,256 

139,499 

196,780 

178,475 

101,112 

18,835 

— 

— 

1,540 

— 

171,677 

223,080 

— 

11,524 

— 

— 

300,000 

1,540 

— 

563,181

628,763

—

—

—

—

300,000

14,834

—

Total contractual obligations 

$  2,259,311 

$ 

282,828 

$ 

496,742 

$ 

536,144 

$ 

943,597

The Company has pledged letters of credit totalling $11.9 million primarily related to its development activities.

The Company’s estimated costs to complete properties currently under development are $158.3 million. These obligations primarily consist of 

construction contracts and are expected to be funded from credit facilities as the work is completed.

The Company is liable for minimum land-lease payments of $0.8 million on certain of its properties in each year from 2008 to 2012 and 

$14.7 million thereafter. Total minimum land-lease payments are $18.7 million. The leases expire between 2023 and 2052. 

34

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingencies

The Company is involved in litigation and claims which arise from time to time in the normal course of business. In the opinion of 

Management, none of these, individually or in aggregate, would result in a liability that would have a signiﬁ cant adverse effect on the ﬁ nancial 

position of the Company.

On October 16, 2006, First Capital Realty and First Capital (Royal Oak) Corporation (a wholly-owned nominee subsidiary of First Capital 

Realty) were named as defendants in a lawsuit commenced by Rencor Developments Inc. and Rencor Developments (Royal Oak) Inc. 

(collectively, “Rencor”). First Capital Realty and Rencor are joint-venture partners in the Royal Oak Shopping Centre located in Calgary, 

Alberta, in which First Capital Realty owns a 60% undivided interest and Rencor owns the remaining 40% undivided interest. The Statement 

of Claim seeks damages for alleged breaches by First Capital Realty of certain agreements relating to the ownership and operation of the Royal 

Oak Shopping Centre. First Capital Realty believes the lawsuit to be frivolous and without merit and intends to vigorously defend against the 

allegations made in the Statement of Claim. Accordingly, as of December 31, 2007, First Capital Realty has not recorded any loss provision 

with respect to this claim in its ﬁ nancial statements.

Regardless of the merits of the claim by Rencor, one of the consequences of this lawsuit is that First Capital Realty will not, pending resolution 

of the lawsuit, be able to exercise its contractual option to acquire the 40% interest in the Royal Oak Shopping Centre that First Capital Realty 

does not currently own. This option is on ﬁ nancial terms that are favourable to First Capital Realty (a capitalization rate of 9.5%), and was 

expected to be exercised by First Capital Realty in January of 2007. The exercise by First Capital Realty of this contractual option in January 

2007 was expected to contribute approximately $900,000 annually to First Capital Realty’s FFO in 2007 and each year thereafter.

The Company is contingently liable, jointly and severally, for approximately $46.7 million (2006 – $48.2 million) to various lenders in 

connection with loans advanced to its joint-venture partners secured by the partners’ interest in the co-ownerships.

Dividends

The Company has maintained a policy of paying regular quarterly dividends to common shareholders since it commenced operations as a 

public company in 1994. Dividends are set taking into consideration the Company’s capital requirements, its alternative sources of capital and 

common industry cash distribution practices. 

In 2007, the Company paid regular dividends of $1.26 per common share (2006 – $1.23 per common share). The regular dividend payout 

ratio calculated as a percent of Funds from Operations per share was approximately 79% in 2007 compared to approximately 78% in 2006. 

The Company is currently paying a quarterly dividend of $0.32 per common share. Dividends declared totalled $98.2 million for the four 

quarters of 2007, of which $76.3 million were reinvested by shareholders pursuant to the DRIP, in common shares.

2007 ANNUAL REPORT

35

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

I N T E R N AT I O N A L   F I N A N C I A L   R E P O R T I N G   S TA N D A R D S   ( “ I F R S ” ) 

The Company’s major shareholder reports certain ﬁ nancial information under IFRS. The most signiﬁ cant difference between IFRS and 

Canadian generally accepted accounting principles (“Canadian GAAP”) for this purpose is that income-producing shopping centres 

(“Shopping Centres”) are presented at fair value under IFRS as opposed to cost less accumulated amortization under Canadian GAAP. In 

addition, the values of deferred costs, straight-line rents receivable and intangible assets and liabilities related to Shopping Centres are not 

presented separately under IFRS as their values are incorporated within the values of the Shopping Centres. Land and shopping centres 

under development (“Development Properties”) are presented at cost under both IFRS and Canadian GAAP. In addition, First Capital Realty’s 

future income tax liability increases as a result of the change in value of the Shopping Centres under IFRS. This information is set out in the 

table below:

(millions of dollars) 

IFRS value of Shopping Centres and Development Properties 

Canadian GAAP value of Shopping Centres and Development Properties (1) 

Difference between IFRS value and Canadian GAAP value 

Increase in future income taxes as a result of the difference in value   

Difference in value, net of taxes 

 2007 

$ 

4,012 

$ 

3,121 

891 

(159) 

$ 

732 

$ 

2006

3,413

2,705

708

(123)

585

(1) Includes the net book value of Shopping Centres, Development Properties, deferred costs, straight-line rents receivable and intangible assets and liabilities.

At December 31, 2007 approximately 97% (December 31, 2006 – 91%) of the total fair value was determined through independent 

appraisals conducted by a nationally recognized appraisal ﬁ rm. The Shopping Centres were appraised on an individual basis, with no portfolio 

effect considered. The remainder of the values of the Shopping Centres, which consisted primarily of recently completed development 

projects and acquisitions, were based upon the costs of these Shopping Centres to First Capital Realty. The independent appraisals were 

prepared to comply with the fair value model described in the IAS 40 – Investment Property and the International Valuation Standard.

The primary method of appraisal was the income approach, since purchasers typically focus on expected income. For each property, the 

appraisers conducted and placed reliance upon a) a direct capitalization method, which is the appraisers’ estimate of the relationship 

between value and stabilized income, normally in the ﬁ rst year and b) a discounted cash ﬂ ow method, which is the appraisers’ estimate of the 

present value of future cash ﬂ ows over a speciﬁ ed horizon, including the potential proceeds from a deemed disposition. The determination of 

these values required Management and the appraisers to make estimates and assumptions that affect the values presented, and actual values 

in a sales transaction may differ from the values shown above.

Based on these valuation methods, the aggregate weighted average stabilized capitalization rates on the Shopping Centres as at 

December 31, 2007 and 2006 were 6.56% and 6.81%, respectively. 

36

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q U A R T E R LY   F I N A N C I A L   I N F O R M AT I O N

(thousands of dollars, except

per share and other data)  

Property rental

revenue 

Property operating

  costs 

Net operating income 

Equity income from

  Equity One 

Net income 

Basic earnings per share 

Diluted earnings per share 

Weighted average diluted

  shares outstanding

2007 

2006

Q4 

Q3 

Q2 

Q1 

Q4 

Q3 

Q2 

Q1

96,643 

96,192 

93,547 

90,509 

87,815 

81,592 

78,634 

77,939

32,832 

63,811 

34,467 

61,725 

33,335 

60,212 

33,812 

56,697 

30,481 

57,334 

29,236 

52,356 

29,119 

49,515 

31,518

46,421

4,455 

9,252 

$ 0.12 

$ 0.12 

2,253 

6,940 

$ 0.09 

$ 0.09 

3,241 

6,286 

$ 0.08 

$ 0.08 

4,426 

7,875 

$ 0.10 

$ 0.10 

5,517 

12,035 

$ 0.16 

$ 0.16 

2,872 

6,542 

$ 0.09 

$ 0.09 

19,995 

20,686 

$ 0.28 

$ 0.28 

4,312

6,696

$ 0.09

$ 0.09

  – EPS 

80,002,983 79,000,640 77,904,479 76,791,907  76,024,888  74,997,493  77,690,795  72,168,535

Funds from operations 

32,904 

31,364 

30,049 

31,039 

32,688 

28,540 

28,933 

27,025

Funds from operations/

  share diluted 

$ 0.41 

$ 0.40 

$ 0.39 

$ 0.40 

$ 0.43 

$ 0.38 

$ 0.39 

$ 0.37

Weighted average diluted

  shares outstanding

  – FFO 

Dividend 

Total assets 

Total mortgages, loans and

80,002,983 79,000,640 77,904,479 76,791,907  76,024,888  74,997,493  73,987,091  72,168,535

$ 0.32 

$ 0.32 

$ 0.31 

$ 0.31 

$ 0.31 

$ 0.31 

$ 0.31 

$ 0.30

3,409,409  3,348,651  3,292,004  3,211,714 

3,060,879 

2,849,611 

2,714,534 

2,633,046

  credit facilities 

1,471,114  1,418,216  1,365,626  1,448,441 

1,388,650 

1,304,611 

1,378,861 

1,350,863

Shareholders’ equity 

951,331 

943,551 

938,159 

920,226 

911,593 

895,440 

890,214 

847,048

Other Data

Number of properties 

161 

163 

163 

161 

158 

151 

143 

137

Gross leasable area 

19,382,000 19,161,000 19,017,000 18,884,000  18,166,000  17,338,000  16,793,000  16,398,000

Occupancy % 

95.3% 

95.0% 

95.0% 

95.0% 

95.7% 

95.4% 

95.1% 

94.7%

The growth over the eight quarters in 2006 and 2007 in property rental revenue, property expenses and net operating income is primarily due 

to acquisitions and development coming on line.

Refer to the MD&A and the Quarterly Financial Statements for discussion and analysis relating to the four quarters in 2006 and the ﬁ rst three 

quarters in 2007. A discussion of the fourth quarter of 2007 follows.

2007 ANNUAL REPORT

37

 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Q4 2007 Operations and Results

During the fourth quarter of 2007, the Company acquired one income-producing shopping centre comprising of 106,000 square feet located 

in Nanaimo, British Columbia. The acquisition amount of $29.6 million, including closing costs, was paid in cash.

The Company also invested $14.7 million in acquiring additional space and two land parcels at, or adjacent, to existing properties adding 

54,000 square feet of gross leasable area and 0.6 acres of expansion land to the portfolio.

In the fourth quarter of 2007, 168,000 square feet of newly developed space came on line in the following shopping centres:

Property Name 

Development

Carrefour Charlemagne  

Faubourg des Prairies  

Shoppes on Dundas  

Other space – various projects 

Redevelopment and Expansion

Harbour Front Centre 

Galeries Normandie  

Eagleson Place 

Westmount Shopping Centre 

Westney Heights 

Olde Oakville Market Place 

Towerlane Mall 

Other space – various projects 

Total  

City 

Province 

Square Feet 

Major Tenants 

Charlemagne 

Montreal 

Oakville 

Vancouver 

Montreal 

Ottawa 

Edmonton 

Ajax 

Oakville 

Airdrie 

QC 

QC 

ON 

BC 

QC 

ON 

AB 

ON 

ON 

AB 

Rousseau Sport

Familiprix

TD Canada Trust

Petsmart

Pharmaprix

Shoppers Drug Mart

Scotia Bank, Blockbuster

Shoppers Home Health Care

Royal Bank of Canada

Staples

22,500 

8,700 

9,800 

10,900

51,900 

19,000 

27,000 

16,900 

14,100 

8,700 

7,800 

7,100 

15,500

116,100 

168,000

The 168,000 square feet of space developed and brought on line during the quarter was leased at an average rate of $21.40 per square foot.

In addition to acquisitions of income-producing properties and development assets, the Company invested $56.7 million during the fourth 

quarter in its active development projects as well as in certain improvements to existing properties.

Leasing activity in the fourth quarter of 2007 resulted in net new leasing of 191,500 square feet, including development projects coming on 

line. Renewal leasing totalled 261,200 square feet with a 19.7% increase over expiring rates. Portfolio occupancy at December 31, 2007 

increased to 95.3% from 95.0% at September 30, 2007. Properties acquired during the fourth quarter had an average lease rate per square 

foot of $17.58 and occupancy of 91.2%. The average rate per occupied square foot at December 31, 2007 increased to $14.56 from $14.35 

at September 30, 2007.

FFO per diluted share was $0.41 in the fourth quarter of 2007, compared to $0.43 in the fourth quarter of 2006. The decrease was due to the 

non-recurring items in Equity One and related current taxes in 2006 and a decrease in 2007 in revenue recognized on a straight-line basis of 

$1.6 million.

38

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(thousands of dollars, except per share amounts) 

REVENUE 

Property rental revenue 

Interest and other income 

EXPENSES 

Property operating costs  

Interest expense  

Amortization  

Corporate expenses 

Equity income from Equity One 

Income before income taxes  

Income taxes: 

  Current 

  Future 

Net income  

Earnings per common share

  Basic 

  Diluted 

Three months ended

December 31 

December 31

2007 

2006

$ 

96,643 

$ 

87,815

469 

97,112 

32,832 

28,882 

21,379 

5,165 

88,258 

4,455 

13,309 

368 

3,689 

4,057 

3,746

91,561

30,481

25,323

18,831

6,238

80,873

5,517

16,205

653

3,517

4,170

$ 

9,252 

$ 

12,035

$ 

$ 

0.12 

0.12 

$ 

$ 

0.16

0.16

Acquisitions during 2007, combined with the full impact of acquisitions in the prior year, contributed $10.4 million to NOI in the quarter, 

while development and redevelopment activities contributed a further $8.1 million. Same property NOI increased 3.2%, generating growth of 

$1.4 million in the three months ended December 31, 2007.

Interest and other income decreased due to $3.3 million of gains on marketable securities recognized in the fourth quarter of 2006. Interest 

expense and amortization expense increased due to the growth in the shopping centres from acquisition and development activity. Equity 

income decreased due to the sale of the Texas portfolio by Equity One in the second and fourth quarters of 2006.

2007 ANNUAL REPORT

39

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

E V E N T S   S U B S E Q U E N T   T O   D E C E M B E R   3 1 ,   2 0 0 7

Interest on Convertible Debentures

On February 13, 2008, the Company announced that it will pay the interest due on March 31, 2008 to holders of both classes of its 5.50% 

convertible unsecured subordinated debentures, due September 30, 2017, by the issuance of common shares. The number of common 

shares to be issued per $1,000 principal amount of debentures will be calculated by dividing the dollar amount of interest payable by an 

amount equal to 97% of the volume-weighted average trading price of the common shares of First Capital Realty on the Toronto Stock 

Exchange, calculated for the 20 consecutive trading days ending on March 24, 2008. The interest payment due is approximately $6.5 million.

It is the current intention of the Company to continue to satisfy its obligations to pay principal and interest on its 5.50% debentures by the 

issuance of common shares.

Quarterly Dividend

The Company announced that it will pay a ﬁ rst quarter dividend of $0.32 per common share on April 9, 2008 to shareholders of record on 

March 28, 2008. 

Current Outstanding Share Data

As at March 6, 2008, 80,550,792 common shares were issued and outstanding. There were no material changes since December 31, 2007, 

other than as described above in the amount of options, warrants or convertible debentures outstanding.

O U T L O O K

Certain statements included in this MD&A constitute forward-looking statements, including those identiﬁ ed 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 reﬂ ect 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 reﬂ ected 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”.

Factors that could cause actual results or events to differ materially from those expressed, implied or projected by forward-looking statements 

in addition to those described in the “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, ﬁ nancial difﬁ culties and defaults, 

changes in interest rates, 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 ﬁ nancing.

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 

reﬂ ect 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 6, 2008.

40

2007 ANNUAL REPORT

2008 Outlook

Over the past several years First Capital Realty has made signiﬁ cant 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.

Development and redevelopment activities continue to provide the Company with opportunities to grow within its existing portfolio and to 

participate in new growth markets. 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, reﬁ nancing risk is minimized. This is particularly 

important in the current environment of low capitalization rates and the increasing cost and scarcity of capital.

Speciﬁ cally, Management will focus on the following four areas to achieve its objectives in 2008:

•  same property net operating income growth;

•  development and redevelopment activities;

•  increasing efﬁ ciency and productivity of operations; and

•  capital preservation in order to decrease dependence on capital markets.

Overall, Management is conﬁ dent that the quality of the Company’s real estate will continue to generate sustainable and growing cash ﬂ ows 

while producing superior returns on investment over the long term.

Readers should refer to the Company’s 2007 year-end press release dated March 6, 2008 as ﬁ led on Sedar for earnings guidance for the year 

ending December 31, 2008.

S U M M A RY   O F   S I G N I F I C A N T   A C C O U N T I N G   E S T I M AT E S   A N D   P O L I C I E S

Summary of Critical Accounting Estimates

First Capital Realty’s signiﬁ cant accounting policies are described in Note 1 to the Consolidated Financial Statements. Management believes 

the policies which are most subject to estimation and Management’s judgment are those outlined below.

Property Acquisitions

For acquisitions subsequent to September 12, 2003, in accordance with the Canadian Institute of Chartered Accountants (“CICA”) Handbook 

Sections 1581 and 3062, Management is required to allocate the purchase price to land, building, tenant improvements, and intangibles 

such as the value of above-market and below-market leases, lease origination costs, tenant relationships and mortgages, if any.

Management uses estimates and judgments as well as third-party appraisals to determine the following:

•   The fair value of land as of the acquisition date.

•   The value of the depreciated replacement cost of buildings as of the acquisition date based on prevailing construction costs for buildings of 

a similar class and age.

•   The value of the above- and below-market leases based on the present value of the difference between the rents payable under the terms 

of the in-place leases and estimated market rents.

2007 ANNUAL REPORT

41

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

•   The value of deferred leasing costs, including tenant improvements, at depreciated replacement cost based on estimates of prevailing 

construction costs, taking into account the condition of tenants’ premises and year of improvement.

•   The value of lease origination costs based on estimates of the costs that would be required for the existing leases to be put in place under 

the same terms and conditions. These costs include leasing commissions, foregone rent and operating cost recoveries during an estimated 

lease-up period.

•   The value of the tenant relationships, if any, based on the net costs avoided if the tenants were to renew their leases at the end of the 

existing term, and the probability that the tenants will renew.

•   The fair value of debt assumed on acquisition by reference to prevailing market interest rates.

Estimates of fair values and market rates used could vary and impact reported ﬁ nancial results.

Impairment of Assets

Under Canadian GAAP, Management is required to write down to fair value any long-lived asset that is determined to have been permanently 

impaired. First Capital Realty’s long-lived assets consist of investments in income-producing properties and mortgages receivable. The fair 

value of investments in income-producing properties is dependent upon anticipated future cash ﬂ ows from operations over the anticipated 

holding period.

The review of anticipated cash ﬂ ows involves subjective assumptions of estimated occupancy, rental rates and a residual value. In addition to 

reviewing anticipated cash ﬂ ows, Management assesses changes in business climates and other factors which may affect the ultimate value 

of the property. These assumptions are subjective and may not be ultimately achieved.

The fair value of mortgages receivable depends upon the ﬁ nancial covenant of the issuer and the economic value of the underlying security.

In the event these factors result in a carrying value that exceeds the sum of the undiscounted cash ﬂ ows expected to result from the direct 

use and eventual disposition of the property, an impairment would be recognized. 

The estimates of future cash ﬂ ows and the impact of other factors could vary, and result in a different calculation of the impairment.

Amortization of Income Properties

Amortization is recorded on buildings using a straight-line basis over the expected useful economic life of the building, which is typically 

40 years. A signiﬁ cant portion of the acquisition cost of each property is allocated to the building. The allocation of the acquisition cost to 

the building and the determination of the useful life are based upon Management’s estimates. In the event the allocation to the building is 

inappropriate or the estimated useful life of the building proves incorrect, the computation of amortization will not be appropriately reﬂ ected 

over future periods. 

Fair Value of Financial Instruments

The Company is required to determine the fair value of its mortgage debt, senior unsecured debentures, loans, mortgages and marketable 

securities and its convertible debentures. In determining the fair value of the Company’s outstanding mortgages, Management uses internally 

developed models, which incorporate estimated market rates. In determining market rates, Management adds a credit spread to quoted 

rates on Canadian government bonds with similar maturity dates to the Company’s mortgages. The fair value of the Company’s convertible 

debentures is based on current trading prices. Estimates of market rates and the credit spread applicable to a speciﬁ c property could vary 

and result in a different disclosed fair value.

42

2007 ANNUAL REPORT

S U M M A RY   O F   C H A N G E S   T O   S I G N I F I C A N T   A C C O U N T I N G   P O L I C I E S 

Current accounting policy changes

Effective January 1, 2007, the Company adopted several new accounting standards issued by the Canadian Institute of Chartered 

Accountants (“CICA”). The standards are applied on a retroactive basis without restatement of prior periods.

(i)   Comprehensive income – CICA Section 1530

 Comprehensive income consists of net income and other comprehensive income (“OCI”). OCI includes unrealized gains and losses 

on ﬁ nancial assets classiﬁ ed as available-for-sale, unrealized foreign currency translation amounts arising from self-sustaining foreign 

operations, and changes in the fair value of the effective portion of hedging instruments. The Company’s consolidated ﬁ nancial 

statements now include consolidated statements of comprehensive income. The cumulative amount of other comprehensive income is 

presented as a new category in the consolidated statements of shareholders’ equity. The cumulative currency translation account has 

been reclassiﬁ ed to accumulated other comprehensive income.

(ii)  Financial instruments – recognition and measurement – CICA Section 3855

 Section 3855 establishes standards for recognizing and measuring ﬁ nancial assets, ﬁ nancial liabilities and non-ﬁ nancial derivatives. All 

ﬁ nancial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods depends on 

whether the ﬁ nancial instrument has been classiﬁ ed as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or 

other liabilities.

 Financial assets and liabilities classiﬁ ed as held-for-trading are required to be measured at fair value with gains and losses recognized 

in net income. The Company has currently classiﬁ ed certain of its marketable securities as held-for-trading. None of the Company’s 

liabilities are currently classiﬁ ed as held-for-trading. Previously, all of the Company’s marketable securities were recorded at cost.

Available-for-sale ﬁ nancial assets are required to be measured at fair value with unrealized gains and losses recognized in OCI.

Certain of the Company’s marketable securities are classiﬁ ed as available-for-sale.

 Financial assets classiﬁ ed as held-to-maturity, loans and receivables and ﬁ nancial liabilities (other than those held-for-trading) are 

required to be measured at amortized cost. This classiﬁ cation applies to the majority of the Company’s ﬁ nancial assets and liabilities 

including loans, mortgages, amounts receivable, accounts payable, credit facilities and debentures. The Company now applies the 

effective interest method of amortization for any transaction costs or fees, premiums or discounts to mortgages, loans and debentures 

and presents the amortization as non-cash interest expense. Mortgages, loans and debentures are now presented net of all issue costs, 

premiums and discounts. Previously, these costs were included in other assets and amortized on a straight-line basis.

 The classiﬁ cations above do not apply to the Company’s investment in Equity One, Inc., which continues to be accounted for using the 

equity method.

 Derivative instruments are recorded on the balance sheet at fair value including those derivatives that are embedded in a ﬁ nancial 

instrument or other contract but are not closely related to the host ﬁ nancial instrument or contract. Changes in the fair values of 

derivative instruments are required to be recognized in net income, except for derivatives that are designated as cash ﬂ ow hedges. The 

fair value changes for the effective portion of such cash ﬂ ow hedges are recognized in OCI. The Company has no signiﬁ cant derivative 

instruments other than its interest rate swaps.

 The standard speciﬁ cally excludes CICA Section 3065, Leases, from the deﬁ nition of ﬁ nancial instruments, except for derivatives that 

are embedded in a lease contract. 

2007 ANNUAL REPORT

43

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

(iii) Hedges – CICA Section 3865

 Section 3865 speciﬁ es the criteria under which hedge accounting can be applied and how hedge accounting should be executed 

for each of the permitted hedging strategies: fair value hedges, cash ﬂ ow hedges and hedges of a foreign currency exposure of a net 

investment in a self-sustaining foreign operation.

 As at the date of adoption of Section 3865, the Company had interest rate swaps which are now recorded in the balance sheet at 

fair value. The change in fair value with respect to the swaps that have been designated is recorded in other comprehensive income. 

The change in fair value with respect to swaps that are not designated as hedges under the section, as well as the ineffective portion 

of designated hedges, are recorded in net income with interest and other income. Previously, only the fair value of undesignated or 

ineffective hedges was recorded in net income.

(iv) Equity – CICA Section 3251

 This new section establishes standards for the presentation of equity and changes in equity during the reporting period. The following 

components of equity are now presented separately:

1) retained earnings or deﬁ cit;

2)  accumulated other comprehensive income;

3) the total of (1) and (2);

4) contributed surplus;

5) share capital

(v)  Accounting Changes – CICA Section 1506

 The new standard sets out the conditions that must be met for a change in accounting policy to be applied in accordance with GAAP, 

and sets out how such changes should be applied. As a result of this new standard, the Company has included additional disclosure in 

Note 2(b) of the ﬁ nancial statements addressing the impact of future accounting policy changes.

(vi) Effect of adopting CICA Section 1530, 3855 and 3865

 Shareholders’ equity was increased by $0.9 million on January 1, 2007 as a result of adopting these standards. Net income for the year 

ended December 31, 2007 increased by $144,000 as a result of applying the effective interest method and recognizing unrealized 

gains on marketable securities held for trading.

Future accounting policy changes

The CICA released four new accounting standards that are effective for the Company’s ﬁ scal year commencing January 1, 2008: Section 

1535, Capital Disclosures; Section 3862, Financial Instruments – Disclosures; Section 3863, Financial Instruments – Presentation, and 

Section 3064.

Section 1535 requires disclosure of an entity’s objectives, policies and processes for managing capital, and quantitative data about what the 

entity considers to be capital.

Sections 3862 and 3863 replace the existing Section 3861, Financial Instruments – Disclosure and Presentation. These new sections 

enhance disclosure requirements. These new sections require disclosures about the nature and extent of risks arising from ﬁ nancial 

instruments and how the entity manages those risks.

Section 3064 replaces the existing Section 3062, Goodwill and Other Intangible Assets and Section 3450, Research and Development Costs. 

This new standard will be effective for the Company in the ﬁ rst quarter of 2009.

44

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N T R O L S   A N D   P R O C E D U R E S

Disclosure Controls and Procedures

First Capital Realty Management maintains appropriate information systems, procedures and controls to ensure that information used 

internally and disclosed externally is complete, accurate, reliable and timely. The disclosure controls and procedures are designed to 

provide reasonable assurance that information required to be disclosed in its various reports are recorded, processed, summarized and 

reported accurately.

The Chief Executive Ofﬁ cer, and the Chief Financial Ofﬁ cer of the Company have evaluated, or caused the evaluation of under their direct 

supervision, the effectiveness of the Company’s disclosure controls and procedures (as deﬁ ned in Multilateral Instrument 52-109, Certiﬁ cation 

of Disclosure in Issuers’ Annual and Interim Filings) as at December 31, 2007, and have concluded that such disclosure controls and 

procedures were designed and operating effectively. 

Internal Controls Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal controls over ﬁ nancial reporting to provide reasonable 

assurance regarding the reliability of ﬁ nancial reporting and the preparation of ﬁ nancial statements for external purposes in accordance with 

Generally Accepted Accounting Principles.

Management evaluated the design of its internal controls and procedures over ﬁ nancial reporting as deﬁ ned under Multilateral Instrument 

52-109 for the year ended December 31, 2007. This evaluation was performed by the Chief Executive Ofﬁ cer and the Chief Financial Ofﬁ cer 

of the Company with the assistance of other Company Management and staff to the extent deemed necessary. Based on this evaluation, 

the Chief Executive Ofﬁ cer and Chief Financial Ofﬁ cer concluded that the internal controls and procedures over ﬁ nancial reporting were 

appropriately designed.

The Company did not make any material changes to the design of internal controls over ﬁ nancial reporting during the three months ended 

December 31, 2007 that have had a material effect on the Company’s internal controls over ﬁ nancial reporting. On an ongoing basis, the 

Company will continue to analyze its controls and procedures for potential areas of improvement.

In spite of its evaluation, Management does recognize that any controls and procedures, no matter how well designed and operated, can only 

provide reasonable assurance and not absolute assurance of achieving the desired control objectives. In the unforeseen event that lapses in 

the disclosure or internal controls and procedures occur and/or mistakes happen, the Company intends to take whatever steps necessary to 

minimize the consequences thereof.

2007 ANNUAL REPORT

45

M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

R I S K S   A N D   U N C E R TA I N T I E S

First Capital Realty, as an owner of income-producing properties and development land, is exposed to numerous business risks in the normal 

course of its business that can impact both short and long-term performance. Income-producing and development properties are affected by 

general economic conditions and local market conditions such as oversupply of similar properties or a reduction in tenant demand. It is the 

responsibility of Management, under the supervision of the Board of Directors, to identify and, to the extent possible, mitigate or minimize the 

impact of all such business risks. The major categories of risk the Company encounters in conducting its business and the manner in which 

it takes action to minimize the impact of these risks are outlined below. The Company’s Annual Information Form provides a more detailed 

discussion of these and other risks and can be found on SEDAR at www.sedar.com and the Company’s website www.ﬁ rstcapitalrealty.ca.

Operating Risk 

All real property investments are subject to a degree of risk. They are affected by various factors including changes in general economic 

conditions (such as the availability of long-term mortgage funds) and in local conditions (such as an oversupply of space or a reduction in 

demand for real estate in the area), the attractiveness of the properties to tenants, competition from other available space, the ability of the 

owner to provide adequate maintenance at an economic cost and various other factors. In addition, ﬂ uctuations in interest rates may affect 

the Company. The Company’s portfolio has major concentrations in Ontario, Quebec, Alberta and British Columbia. As a result, economic and 

real estate conditions in these regions will signiﬁ cantly affect the Company’s revenues and the value of its properties.

The value of real property and any improvements thereto may also depend on the credit and ﬁ nancial stability of the tenants. The Company’s 

income and funds available for distributions to shareholders would be adversely affected if a signiﬁ cant tenant or a number of smaller tenants 

were to become unable or unwilling to meet their obligations to the Company or if the Company was unable to lease a signiﬁ cant amount of 

available space in its properties on economically favourable lease terms. The Company is also subject to competition from other developers, 

managers and owners in seeking tenants.

46

2007 ANNUAL REPORT

The following chart summarizes the top 40 tenants of the Company, which together represent approximately 58% of the Company’s 

annualized minimum rent from its Canadian portfolio. 

Tenant   

Number 

of Stores 

Percent of Total 

Total Canadian 

DBRS 

S&P (1) 

Moody’s

Canadian Gross 

Annualized  

Organization 

Organization 

Organization

Square Feet 

Leasable Area 

Minimum Rent 

Credit Rating 

Credit Rating  Credit Rating

Percent of

Save-On-Foods 

LCBO 
Cara Operations  

Sobeys  
Loblaws 
Shoppers Drug Mart 

Zellers/Home Outﬁ tters 
Canadian Tire  
TD Canada Trust 
Canada Safeway 

Top Forty Tenants
  1 
  2 
  3 
  4  Metro 
  5 
  6 
  7 
  8 
  9  Wal-Mart 
10  Royal Bank 
11  Rona 
CIBC 
12 
Staples 
13 
14 
Scotiabank 
15  H.Y. Louie Group  
16  Rexall Family of Pharmacies 
17 
18 
19  Winners  
20 
21  Blockbuster 
22  Reitmans 
23  Rogers 
24 
SAQ 
25  Dollarama 
Tim Hortons 
26 
27 
Future Shop 
28  Bank of Montreal 
Linens ’n Things 
29 
30  Goodlife Fitness Club 
Yum! Brands 
31 
Forzani Group 
32 
Toys ’R’ Us (Canada) Ltd 
33 
Starbucks 
34 
35 
Subway 
36  Michael’s Arts & Crafts 
37 
Pharmacie Jean Coutu 
38  Uniprix 
39  McDonald’s 
40 
 Total: Top 40 Tenants 

The Source By Circuit City 

43 
26 
50 
27 
18 
21 
34 
9 
4 
23 
2 
23 
10 
21 
8 
15 
13 
24 
5 
4 
21 
31 
27 
18 
19 
34 
5 
18 
3 
5 
28 
7 
3 
23 
46 
4 
8 
7 
16 
24 
727 

1,521,000 
1,412,000 
641,000 
996,000 
1,654,000 
782,000 
174,000 
375,000 
473,000 
137,000 
257,000 
113,000 
232,000 
112,000 
210,000 
122,000 
111,000 
95,000 
177,000 
178,000 
105,000 
155,000 
95,000 
69,000 
163,000 
96,000 
140,000 
76,000 
107,000 
121,000 
58,000 
88,000 
113,000 
37,000 
56,000 
87,000 
93,000 
69,000 
43,000 
52,000 
11,595,000 

7.8% 
7.3% 
3.3% 
5.1% 
8.5% 
4.0% 
0.9% 
1.9% 
2.4% 
0.7% 
1.3% 
0.6% 
1.2% 
0.6% 
1.1% 
0.6% 
0.6% 
0.5% 
0.9% 
0.9% 
0.5% 
0.8% 
0.5% 
0.4% 
0.8% 
0.5% 
0.7% 
0.4% 
0.6% 
0.6% 
0.3% 
0.5% 
0.6% 
0.2% 
0.3% 
0.4% 
0.5% 
0.4% 
0.2% 
0.3% 
59.7% 

7.4% 
6.0% 
5.1% 
4.4% 
4.0%
3.6% 
1.9% 
1.6% 
1.3% 
1.2% 
1.1% 
1.1% 
1.1% 
1.1% 
1.1%
0.9%
0.9% 
0.8%
0.8% 
0.8%
0.8% 
0.8%
0.8% 
0.7% 
0.7% 
0.7% 
0.7% 
0.6% 
0.6% 
0.6% 
0.6% 
0.5%
0.5% 
0.5% 
0.5%
0.5% 
0.4% 
0.4%
0.4% 
0.4%
57.9%

BBB (low) 
A(low) 
A(low) 
BBB 

A(low) 
AA 
BBB 
AA 
AA 
BBB(high) 
AA 

AA 

AA 

BBB(low) 
A(high) 

AA 

BB+ 
BBB+ 
BBB+ 
BBB

BBB+ 
AA- 
BBB- 
AA 
AA- 
BBB- 
A+ 
BBB+ 
AA- 

AA 

A 

B- 

BBB- 
A+ 
B+ 

BBB 
A+ 
CCC+ 

Ba1

Aaa
Baa2
Aa2
Aaa

Aa2
Baa1
Aa1

Aa1

A3

Caa2

Ba1
Aa2
Ba2

Baa2
Aa1
Caa1

BBB- 

Baa2

B 
BBB+ 

B3
Baa1

B- 

A 

B2

A3

(1)  Standard and Poor’s 

2007 ANNUAL REPORT

47

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   D I S C U S S I O N   A N D   A N A LY S I S – continued

Lease Maturities

Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced or, if renewed or replaced, that 

rental increases will occur. There can also be no assurance that a tenant will be able to fulﬁ l its existing commitments under leases up to the 

expiry date. The failure to fulﬁ l existing obligations under leases or to achieve renewals and/or rental increases may have an adverse effect on 

the ﬁ nancial condition of First Capital Realty.

First Capital Realty’s lease maturities are spread on a property-by-property basis, which helps to generate a more stable cash ﬂ ow and mitigate 

risks related to changing market conditions. Lease expirations in each of the next ten years range from 1.2% to 11.0% of the annualized 

minimum rent in the Company’s portfolio.

The Company’s lease maturity proﬁ le at December 31, 2007 is as follows:

Date 

Month-to-month 

2008 

2009 

2010 

2011 

2012 

2013 

2014 

2015 

2016 

2017 

2018 

Thereafter 

Number 

of Stores 

55 

596 

433 

412 

375 

397 

194 

148 

154 

126 

124 

32 

133 

Occupied 

Square Feet 

201,000 

1,506,000 

1,425,000 

1,307,000 

1,496,000 

1,759,000 

1,487,000 

941,000 

1,259,000 

1,211,000 

1,159,000 

957,000 

3,755,000 

Total/Average 

3,179 

18,463,000 

Financing and Repayment of Indebtedness

Percent of Total 

Square Feet 

Annualized 

Percent of 

Minimum Rent 

Total Annualized 

at Expiration 

Minimum Rent 

Average Annual

Minimum Rent

per Square Foot

at Expiration

1.0% 

7.8% 

7.4% 

6.7% 

7.7% 

9.1% 

7.7% 

4.9% 

6.5% 

6.2% 

6.0% 

4.9% 

19.4% 

95.3% 

$ 

3,243,000 

22,300,000 

24,233,000 

21,790,000 

22,436,000 

30,201,000 

21,257,000 

14,303,000 

19,427,000 

17,398,000 

17,077,000 

11,392,000 

49,797,000 

$ 

1.2% 

8.1% 

8.8% 

7.9% 

8.2% 

11.0% 

7.7% 

5.2% 

7.1% 

6.3% 

6.2% 

4.1% 

18.2% 

16.16

14.80

17.00

16.67

14.99

17.17

14.29

15.20

15.43

14.36

14.74

11.90

13.27

$  274,854,000 

100.0% 

$ 

14.89

The Company has outstanding indebtedness in the form of mortgages, credit facilities, senior unsecured debentures and convertible 

debentures and, as such, is subject to the risks normally associated with debt ﬁ nancing, including the risk that the Company’s cash ﬂ ow will 

be insufﬁ cient to meet required payments of principal and interest. 

Debt service obligations reduce the funds available for operations, acquisitions, development activities and other business opportunities. 

There is a possibility that the Company’s internally generated cash may not be sufﬁ cient to repay all of its outstanding indebtedness. Upon the 

expiry of the term of the ﬁ nancing on any particular property owned by the Company, reﬁ nancing on a conventional mortgage loan basis may 

not be available in the amount required or may be available only on terms less favourable to the Company than the existing ﬁ nancing. This 

will be dependent upon the economic circumstances prevailing at such time. Also, a disruption in the capital markets could have an adverse 

impact on the Company’s ability to meet its obligations and grow its business. The Company may elect to repay certain indebtedness through 

reﬁ nancings or through the issuance of equity securities. The Company’s strategy of spreading the maturities of its debt is also helpful in 

mitigating its exposure to interest rate ﬂ uctuations. 

Credit Ratings

Changes or anticipated changes in the credit rating assigned by DBRS or Moody’s to the Company’s senior unsecured debentures may affect 

the Company’s access to ﬁ nancial markets and its cost of borrowing.

48

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk of Non-Collection of Straight-Line Rents Receivable

A signiﬁ cant portion of the Company’s straight-line rent receivables will be payable by the tenant at dates up to 15 years in the future. 

Because of the inherent uncertainty of predicting economic trends and changes, consumer trends and speciﬁ c tenant conditions, some or 

a signiﬁ cant portion of these straight-line rents receivable, which totalled $25.9 million at December 31, 2007, may not be collected. Under 

Canadian GAAP, the Company records allowances for doubtful accounts on straight-line rents on a tenant-by-tenant basis, using speciﬁ c, 

known facts and circumstances that exist in its portfolio at the time of the analysis. At December 31, 2007 the allowance for doubtful 

accounts related to straight-line rent receivables totalled $4.5 million. The current allowance for doubtful accounts may not be adequate for 

future write-offs of these straight-line rents receivable.

Acquisition, Expansion and Development Risk 

The key to the Company’s ongoing success will be its ability to create and enhance value through the skill, creativity and energy of its 

Management team and the opportunities which the market presents. First Capital Realty will continue to seek out acquisition, expansion and 

selective development opportunities that offer acceptable risk adjusted rates of return, although the Company may not succeed in identifying 

such opportunities or may not succeed in completing them. 

The Company competes for suitable real property investments with individuals, corporations, real estate investment companies, trusts and 

other institutions (both Canadian and foreign) which may seek real property investments similar to those desired by the Company. Many 

of these investors may also have ﬁ nancial resources, which are comparable to, or greater than, those of the Company. An increase in the 

availability of investment funds, and an increase of interest in real property investments, increases competition for real property investments, 

thereby increasing purchase prices and reducing the yield thereon.

The increasingly competitive real estate market has led to lower capitalization rates for new acquisitions in certain of the markets in which the 

Company operates. Lower capitalization rates mean a smaller spread between the Company’s cost of capital and return on acquisitions and 

may therefore have a negative impact on the Company’s earnings growth. 

Further, the Company’s development commitments are subject to those risks usually attributable to construction projects, which include: 

(i) construction or other unforeseeable delays; (ii) cost overruns; (iii) the failure of tenants to occupy and pay rent in accordance with existing 

lease agreements, some of which are conditional; and (iv) increase in interest rates during the life of the development.

Risks of Foreign Equity Investments and Borrowings

The Company holds a signiﬁ cant equity investment in Equity One and may acquire investments in other U.S. REITs or real estate investment 

vehicles from time to time. The value of the Company’s investments of this nature is subject to the risks inherent in investments in equity 

securities, including the risk that the ﬁ nancial condition of the issuers of the equity securities held by the Company may become impaired, 

or that the general condition of the stock market may deteriorate. The investee companies are also subject to risks associated with real 

property ownership which are similar to those described for the Company itself. Common stocks are also susceptible to general stock market 

ﬂ uctuations with potentially volatile increases and decreases in value as market conﬁ dence in, and perceptions of, their issuers change. 

In addition, given that the Company is a holder of U.S. equity securities and may not have sufﬁ cient access to borrowings denominated in 

U.S. dollars, the Company is subject to ﬂ uctuations in currency exchange rates or regulations, or the costs of currency conversion which may, 

from time to time, adversely impact its ﬁ nancial position and results of operations. 

Economic Conditions

The economic conditions in the markets in which the Company operates can have a signiﬁ cant impact on the Company’s ﬁ nancial success. 

Adverse changes in general or local economic conditions can result in some retailers being unable to sustain viable businesses and meet their 

lease obligations to the Company, and may also limit the Company’s ability to attract new or replacement tenants.

2007 ANNUAL REPORT

49

S H O P P I N G   C E N T R E   P O R T F O L I O

Location 

Year Built  Gross Leasable 
or Acquired 

Area 

Percent
Occupied 

Anchors and Major Tenants

Property 

ONTARIO

Adelaide Shoppers 

Ambassador Plaza 

Appleby Mall 

Bayview Lane Plaza 

Bowmanville Mall 

Brampton Corners 

Brantford Mall 

Bridgeport Plaza 

Brooklin Towne Centre 

London 

Windsor 

Burlington 

Markham 

Bowmanville 

Brampton 

Brantford 

Waterloo 

Whitby 

Burlingwood Shopping Centre 

Burlington 

Byron Village 

Cedarbrae Mall 

London 

Toronto 

Chartwell Shopping Centre 

Toronto 

Chemong Park Plaza 

Peterborough 

Clairﬁ elds Common 

College Square (3) 

Credit Valley Town Plaza 

Delta Centre 

Dufferin Corners 

Eagleson Cope Drive 

Eagleson Place 

Fairview Mall 

Guelph 

Ottawa 

Mississauga 

Cambridge 

Toronto 

Ottawa 

Ottawa 

St. Catharines 

2005 

1994 

2004 

2003 

2005 

2001 

1995 

1994 

2003 

2005 

2002 

1996 

2005 

2001 

2006 

2005 

2003 

1998 

2003 

2003 

2003 

1994 

19,000  

100.0% 

Shoppers Drug Mart, Wendy’s

151,000  

181,000  

46,000  

123,000  

99.2% 

98.1% 

46.0% 

94.7% 

Zellers, LCBO, CIBC, Scotiabank, Royal Bank of Canada, Rogers Video

 Fortino’s (Loblaws), Pharma Plus, LCBO, Bank of Montreal, TD Canada Trust, 
Home Hardware

Bank of Montreal

A&P, Shoppers Drug Mart, Dollarama, GoodLife Fitness

302,000  

100.0% 

 Fortino’s (Loblaws), Wal-Mart, Chapters, National Bank, Scotiabank, Kelsey’s, 
HSBC

328,000  

212,000  

88.9% 

99.5% 

Zehrs (Loblaws), Wal-Mart, Cineplex, LCBO, Reitmans

Sobeys, Zellers, Rogers Video, Tim Hortons

90,000  

100.0% 

Price Chopper (Sobeys), Shoppers Drug Mart, Scotiabank, Tim Hortons

67,000  

89,000  

509,000  

161,000  

68,000  

94.1% 

96.0% 

98.3% 

95.2% 

96.1% 

No Frills (Loblaws), Pharma Plus

A&P, Pharma Plus, LCBO, TD Canada Trust, Rogers Video

 Loblaws, Zellers, Canadian Tire, Toys ’R’ Us, LCBO, Scotia Bank, CIBC, 
Extreme Fitness, Dollarama, Business Depot (Staples), Mark’s Work Wearhouse

Price Chopper (Sobeys), Shoppers Drug Mart, CIBC, Bank of Montreal

Sobeys, Government of Canada, TD Canada Trust

85,000  

100.0% 

Shoppers Drug Mart, TD Canada Trust, Scotiabank, Food Basics, Starbucks

388,000  

100.0% 

 Loblaws, Home Depot, Pharma Plus, Rogers, Reitmans, LCBO, 
Bank of Montreal, The Beer Store, Tim Hortons

101,000  

79,000  

75,000  

98.5% 

98.5% 

94.7% 

Loblaws, Pharma Plus, CIBC, TD Canada Trust, Rogers Video, Tim Hortons

Price Chopper (Sobeys), Dollarama, Shoppers Home Health Care

Shoppers Drug Mart, TD Canada Trust, Royal Bank of Canada

103,000  

100.0% 

Real Canadian Superstore (Loblaws)

48,000  

389,000  

82.6% 

99.0% 

Shoppers Drug Mart, Rogers Video, The Beer Store, TD Canada Trust

 Food Basics (A&P), Zehrs (1) (Loblaws), Zellers, Chapters, Ofﬁ ce Depot, Future 
Shop, Winners, Mark’s Work Wearhouse, LCBO, CIBC, Scotiabank, Sport Chek

Fairway Plaza 

Kitchener 

2005 

246,000  

98.1% 

Gloucester City Centre 

Ottawa 

Grimsby Square Shopping Centre 

Grimsby 

Halton Hills Village 

Harwood Plaza 

Georgetown 

Ajax 

2003 

2005 

2007 

1999 

346,000  

143,000  

104,000  

220,000  

96.7% 

98.2% 

91.9% 

92.4% 

Humbertown Shopping Centre 

Toronto 

2006 

141,000  

96.5% 

 Food Basics (A&P), Winners/Home Sense, Sport Chek, Pier 1 Imports, 
Dollarama, GoodLife Fitness, Starbucks

Loblaws, Zellers, Pharma Plus, Scotiabank, CIBC, Tim Hortons

 Sobeys, Canadian Tire, Shoppers Drug Mart, Royal Bank of Canada, 
Mark’s Work Wearhouse, The Beer Store

A&P, TD Canada Trust, Tim Hortons

 Food Basics (A&P), Shoppers Drug Mart, Scotiabank, Blockbuster, 
GoodLife Fitness, Tim Hortons

 Loblaws, Scotiabank, Blockbuster, LCBO, Shoppers Drug Mart, 
Royal Bank of Canada

Hyde Park Plaza 

Laurelwood Shopping Centre 

Loblaws Plaza 

Maple Grove Village 

McLaughlin Corners (3) 

Meadowvale Town Centre 

Merchandise Building 

Midland Lawrence Plaza 

Morningside Crossing 

Norfolk Mall 

Northﬁ eld Centre 

Olde Oakville 

London 

Waterloo 

Ottawa 

Oakville 

Brampton 

Mississauga 

Toronto 

Toronto 

Toronto 

Tillsonburg 

Waterloo 

Oakville 

2006 

2007 

2005 

2003 

2002 

2003 

2004 

2002 

2007 

2004 

1999 

2006 

52,000  

100.0% 

Remark Farm, Shoppers Drug Mart, Bank of Montreal, Starbucks

92,000  

100.0% 

Sobeys, LCBO, TD Canada Trust, Starbucks

128,000  

100.0% 

Loblaws, Royal Bank of Canada, Shoppers Drug Mart

111,000  

93.3% 

Sobeys, Pharma Plus, CIBC, Rogers Video, Tim Hortons, The Beer Store

120,000  

100.0% 

A&P, Shoppers Drug Mart, Royal Bank of Canada, Rogers Video, Pizza Hut

385,000  

99.7% 

 Dominion (A&P), Canadian Tire, Shoppers Drug Mart, LCBO, TD Canada Trust, 
CIBC, Bank of Montreal, Blockbuster, Tim Hortons, Premier Fitness

53,000  

76,000  

73.3% 

94.5% 

Dominion (A&P)

Price Chopper (Sobeys), Part Source (Canadian Tire)

40,000  

100.0% 

TD Canada Trust, CIBC, Starbucks, Pizza Hut, Blockbuster

88,000  

99.5% 

Zehrs (Loblaws) (1), Wal-Mart, Dollarama

52,000  

100.0% 

Sobeys, Pharma Plus, Royal Bank of Canada, Rogers Video, Tim Hortons

96,000  

100.0% 

 Whole Foods, Shoppers Drug Mart, HSBC, Royal Bank of Canada, Starbucks, 
Blockbuster

Orleans Gardens (3) 

Ottawa 

2005 

111,000  

87.9% 

 Your Independent Grocer (Loblaws), CIBC, Rogers Video, Pharma Plus, 
Tim Hortons

Parkway Centre 

Queenston Place 

Sheridan Plaza 

Shoppes on Dundas 

Peterborough 

Hamilton 

Toronto 

Oakville 

1996 

1995 

1995 

2007 

253,000  

100.0% 

Price Chopper (Sobeys), Zellers, Winners, Reitmans, Sport Mart, Dollarama

172,000  

100.0% 

 Zellers, Mark’s Work Wearhouse, Pennington’s (Reitmans), Aaron’s Electronics, 
Hamilton Produce 

168,000  

100.0% 

Food Basics (A&P), Zellers

28,000  

100.0% 

Shoppers Drug Mart, TD Canada Trust

50

2007 ANNUAL REPORT

 
 
 
 
Property 

ONTARIO (cont’d)

Location 

Year Built  Gross Leasable 
or Acquired 

Area 

Percent
Occupied 

Anchors and Major Tenants

Shops at King Liberty 

Toronto 

2004 

198,000  

95.7% 

Stanley Park Mall 

Steeple Hill Shopping Centre 

Stoneybrook Plaza 

Strandherd Crossing 

Sunningdale Village 

Thickson Place 

Kitchener 

Pickering 

London 

Ottawa 

London 

Whitby 

Tillsonburg Town Centre (2) 

Tillsonburg 

University Plaza 

Waterloo Shoppers Drug Mart 

Wellington Corners 

Westney Heights Plaza 

Yonge-Davis Centre 

York Mills Gardens 

Windsor 

Waterloo 

London 

Ajax 

Newmarket 

Toronto 

1997 

2000 

2006 

2004 

2006 

1997 

1994 

2001 

2004 

1999 

2002 

2003 

2004 

190,000  

79,000  

98.7% 

78.0% 

 Dominion, LCBO, TD Canada Trust, Blockbuster, Starbucks, 
Royal Bank of Canada, GoodLife Fitness, First Capital Realty Inc.

Zehrs (Loblaws), Zellers, Pharma Plus, LCBO, TD Canada Trust

Price Chopper (Sobeys), Shoppers Drug Mart, Blockbuster

55,000  

100.0% 

Sobeys, Pharma Plus, TD Canada Trust

103,000  

100.0% 

 Loeb (Metro), Shoppers Drug Mart, Royal Bank of Canada, TD Canada Trust, 
Rogers Video, Starbucks

73,000  

99.0% 

No Frills, Shoppers Drug Mart, Starbucks

93,000  

100.0% 

A&P, Toys ’R’ Us (1), CIBC, TD Canada Trust

278,000  

89.4% 

 Zellers, Canadian Tire, Business Depot (Staples), Shoppers Drug Mart, LCBO, 
CIBC, TD Canada Trust, Rogers Video, Mark’s Work Wearhouse, Reitmans

150,000  

96.8% 

A&P, Canadian Tire, Shoppers Drug Mart, Bank of Montreal, Dollarama

15,000  

100.0% 

Shoppers Drug Mart

82,000  

98.5% 

Price Chopper (Sobeys), Shoppers Drug Mart, Starbucks

156,000  

100.0% 

 Sobeys, Shoppers Drug Mart, CIBC, Scotiabank, TD Canada Trust, Rogers Video, 
Sherwin Williams

51,000  

100.0% 

Sleep Country

169,000  

97.2% 

Longo’s Supermarket, Shoppers Drug Mart, TD Canada Trust, Rogers Video, 
Kelsey’s, Swiss Chalet, Wendy’s, Shoeless Joe’s, Starbucks, Pizza Hut, 
Royal Bank of Canada

1842-1852 Queen Street West 

Toronto 

2006 

14,000  

Total – ONTARIO 

QUEBEC

8,613,000  

87.7% 

96.8% 

Starbucks

Carrefour Charlemagne 

Carrefour des Forges 

Charlemagne 

Drummondville 

Centre D’Achats Ville Mont-Royal 

Mount Royal 

Carrefour Don Quichotte 

Carrefour du Versant 

Carrefour Soumande 

Carrefour St. David 

Carrefour St. Hubert 

Île Perrot 

Gatineau 

Québec City 

Québec City 

Longueuil 

Centre commercial Beaconsﬁ eld 

Beaconsﬁ eld 

2006 

2005 

2007 

2004 

2003 

2004 

2006 

2002 

2002 

 162,000  

100.0% 

Rona, Sports Rousseau

 55,000  

100.0% 

IGA (Sobeys), SAQ

 132,000  

 72,000  

94.7% 

84.5% 

Provigo, Scotiabank, Blockbuster

Metro, Familiprix, CIBC 

 87,000  

100.0% 

IGA (Sobeys), Dollarama, Familiprix, TD Canada Trust, SAQ, Tim Hortons

 140,000  

88.6% 

Toys ’R’ Us, Fruiterie 440

 49,000  

100.0% 

Metro Plus, TD Canada Trust, Starbucks

 157,000  

 116,000  

56.0% 

86.3% 

Jean Coutu, CIBC, SAQ, Dollarama

 Metro, Pharmaprix (Shoppers Drug Mart), SAQ, Royal Bank of Canada, 
Dollarama

 IGA (Sobeys), Jean Coutu, SAQ, Royal Bank of Canada, Blockbuster, Dollarama, 
Reitmans

Centre commercial Côte St. Luc 

Côte St. Luc 

2002 

 162,000  

95.3% 

Centre commercial Domaine 

Montréal 

Centre commercial Maisonneuve (2)  Montréal 

Centre commercial Van Horne 

Montréal 

2002 

2003 

2002 

 195,000  

97.9% 

Metro (3), Zellers, Rossy, CIBC, Dollarama, Uniprix, Reitmans, Tim Hortons

 114,000  

100.0% 

Provigo (Loblaws), Canadian Tire, TD CanadaTrust, SAQ, Brunet

 79,000  

95.0% 

 IGA (Sobeys), Pharmaprix (Shoppers Drug Mart), Royal Bank of Canada, 
Scotiabank, Tim Hortons

Centre commercial Wilderton 

Montréal 

2002 

 130,000  

95.2% 

Centre Kirkland / St. Charles  

Kirkland 

Centre Maxi Trois Rivières 

Trois Rivières 

Édiﬁ ce Gordon 

Édiﬁ ce Hooper 

Faubourg des Prairies  

Galeries Brien 

Galeries des Chesnaye 

Galeries Normandie 

Montréal 

Sherbrooke 

Montréal 

Repentigny 

Lachenaie 

Montréal 

IGA Tremblant 

Mont-Tremblant 

La Porte de Châteauguay 

Châteauguay 

La Porte de Gatineau 

Gatineau 

2006 

2003 

2005 

2005 

2007 

2002 

2005 

2002 

2004 

1995 

1994 

 114,000  

 122,000  

 19,000  

 141,000  

96.8% 

88.2% 

87.4% 

83.4% 

 Metro, Pharmaprix (Shoppers Drug Mart), SAQ, Royal Bank of Canada, 
Laurentian Bank, Femme Fitness, Dollarama

Uniprix, Bank of Montreal, Dollarama, CIBC, SAQ

 Maxi (Loblaws), Value Village, Jean Coutu, Bank of Montreal, Blockbuster, 
Tim Hortons

Pharmaprix (Shoppers Drug Mart)

IGA Extra (Sobeys), Familiprix

 54,000  

100.0% 

IGA (Sobeys), SAQ, Familiprix

 59,000  

100.0% 

IGA (Sobeys), Uniprix

 58,000  

 210,000  

90.7% 

89.3% 

IGA (Sobeys), Uniprix, SAQ,Desjardins

 IGA (Sobeys), Pharmaprix, Bank of Montreal, Desjardins, Royal Bank of Canada, 
SAQ, Baron Sports, Dollarama, Rona Express, Blockbuster

 38,000  

100.0% 

IGA (Sobeys)

 132,000  

100.0% 

Zellers, Blockbuster, Tim Hortons

 155,000  

96.3% 

Maxi (Loblaws), Toys ’R’ Us (1), Future Shop, CIBC, TD Canada Trust, SAQ,
Lazy Boy Furniture 

Le Campanîle & Place  
  de Commerce 

Montréal 

2003 

 105,000  

92.5% 

Pharmaprix (Shoppers Drug Mart), Bank of Montreal, IGA (Sobeys),
Jean Coutu

2007 ANNUAL REPORT

51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
S H O P P I N G   C E N T R E   P O R T F O L I O  –  continued

Property 

QUEBEC (cont’d)

Location 

Year Built  Gross Leasable 
or Acquired 

Area 

Percent
Occupied 

Anchors and Major Tenants

Les Galeries de Lanaudière (3) 

Lachenaie 

2002 

 269,000  

100.0% 

 Bureau en Gros (Staples), Winners, Future Shop, Sears, Home Depot (1), 
Pier 1 Imports, Reitmans, TD Canada Trust

Les Galeries de Repentigny 

Les Promenades du Parc 

Place Bordeaux (5) 

Place Cité Des Jeunes 

Place de la Colline 

Place des Cormiers 

Place Fleury 

Place Kirkland 

Place Lorraine 

Place Michelet 

Place Nelligan (4) 

Place Panama 

Place Pierre Boucher 

Place Pointe-aux-Trembles 

Place Provencher 

Place Roland Therrien 

Place Seigneuriale 

Place Viau 

Place Vilamont 

Plaza Actuel 

Plaza Delson 

Repentigny 

Longueuil 

Gatineau 

Gatineau 

Chicoutimi 

Sept-Îles 

Montréal 

Kirkland 

Lorraine 

Montréal 

Gatineau 

Brossard 

Boucherville 
Borough 

Montréal 

Montréal 

Longueuil 

Québec City 

Montréal 

Laval 

Longueuil 

Delson 

1997 

1997 

2002 

2001 

2004 

2004 

2002 

2006 

2006 

2005 

2002 

2006 

2004 

2002 

2004 

2000 

2004 

2002 

2002 

2006 

2002 

 121,000  

100.0% 

Super C (Metro), Pharmaprix (Shoppers Drug Mart), Tim Hortons

 105,000  

97.1% 

 IGA (Sobeys), Pharmaprix (Shoppers Drug Mart), Laurentian Bank, Blockbuster, 
National Bank, Tim Hortons

 29,000  

100.0% 

 Pharmaprix (Shoppers Drug Mart), National Bank

 58,000  

92.7% 

Metro, Uniprix

 52,000  

100.0% 

Maxi (Loblaws), Uniprix, Dollarama, McDonald’s

 75,000  

100.0% 

Provigo (Loblaws), Bureau en Gros (Staples), SAQ

 108,000  

100.0% 

 Metro, Pharmaprix (Shoppers Drug Mart), SAQ, Reitmans, Bank of Montreal

 47,000  

 61,000  

94.4% 

91.6% 

IGA (Sobeys), CIBC, Videotron

Provigo (Loblaws), National Bank, SAQ

 59,000  

100.0% 

IGA Extra (Sobeys), TD Canada Trust, A&W

 57,000  

100.0% 

IGA (Sobeys), Citiﬁ nancial

 94,000  

95.5% 

Loblaws (1)

 80,000  

 118,000  

92.6% 

93.4% 

Maxi (Loblaws), Pharmaprix (Shoppers Drug Mart), SAQ

Metro, Rossy, Jean Coutu

 46,000  

100.0% 

Bureau en Gros (Staples), Uniprix

 42,000  

100.0% 

Super C (Metro) (1), Scotiabank, Blockbuster

 54,000  

85.9% 

Metro, Royal Bank of Canada, Nautilus Plus

 152,000  

100.0% 

Zellers

 72,000  

95.9% 

Provigo (Loblaws), Jean Coutu, Laurentian Bank

 58,000  

100.0% 

Pontiac Buick, Pizza Hut, Rotisserie St-Hubert

 169,000  

97.3% 

 Loblaws, Pharmaprix (Shoppers Drug Mart), Cineplex, SAQ, National Bank, 
Tim Hortons, Harveys

Plaza Don Quichotte 

Île Perrot 

2004 

 134,000  

100.0% 

Plaza Laval Élysée 

Laval 

2004 

 63,000  

100.0% 

 IGA (Sobeys), SAQ, Caisse Populaire, Desjardins, Aubainerie, Laurentian Bank, 
Tim Hortons

 Provigo (Loblaws), Pharmaprix (Shoppers Drug Mart), Laurentian Bank, 
Tim Hortons 

Promenades Lévis 

Queen Mary 

Toys ’R’ Us / Pier 1 Imports 

Village des Valeurs 

Total – QUEBEC 

ALBERTA

Cochrane City Centre 

Eastview Shopping Centre 

Fairmount Shopping Centre 

Gateway Village 

Kingsland Shopping Centre 

Lakeview Plaza 

London Place West 

McKenzie Towne Centre 

Northgate Centre 

Old Strathcona 

Red Deer Village 

Richmond Square 

Royal Oak (6) 

Lévis 

Montréal 

Montréal 

Laval 

Cochrane 

Red Deer 

Calgary 

St. Albert 

Calgary 

Calgary 

Calgary 

Calgary 

Edmonton 

Edmonton 

Red Deer 

Calgary 

Calgary 

Sherwood Centre 

Sherwood Towne Centre 

Sherwood Park 

Sherwood Park 

2004 

2006 

2002 

2002 

2006 

2004 

2006 

1994 

2005 

2005 

1998 

2003 

1997 

2003 

1999 

2006 

2003 

1997 

1997 

 149,000  

96.8% 

Metro, Bank of Montreal, Jean Coutu, Easy Home, McDonald’s

 6,000  

100.0% 

Couche Tard, Tim Hortons

 52,000  

100.0% 

Toys ’R’ Us, Pier 1 Imports

 27,000  

100.0% 

Value Village

 5,215,000  

94.7% 

 60,000  

65.2% 

Shoppers Drug Mart, Blockbuster, Starbucks

 34,000  

100.0% 

IGA, Bank of Montreal, 7-Eleven

 58,000  

 105,000  

 46,000  

 64,000  

64.1% 

86.3% 

86.8% 

96.7% 

Royal Bank of Canada, Tim Hortons

Safeway, CIBC, Scotiabank, Tim Hortons

Shoppers Drug Mart, Starbucks

IGA (Sobeys), Super Drug Mart, Scotiabank

 72,000  

100.0% 

London Drugs, Bank of Montreal, Rogers Video

 115,000  

100.0% 

Sobeys, Rexall, Blockbuster

 511,000  

 78,000  

 217,000  

84.9% 

98.2% 

99.0% 

Safeway, Zellers, Future Shop, Royal Bank of Canada, Sport Mart

Canada Post, Dollarama

 Sobeys, Shoppers Drug Mart, Canadian Tire, Mark’s Work Wearhouse, 
Sport Mart, TD Canada Trust, HSBC, Rogers Video, Reitmans, Starbucks

 157,000  

99.2% 

Canadian Tire (1), Home Outﬁ tters, GoodLife Fitness

 336,000  

100.0% 

 Sobeys, Wal-Mart, London Drugs, Royal Bank of Canada, Blockbuster, 
Royal Oak Clinic, Reitmans, Petcetera, Home Outﬁ tters

 76,000  

75.5% 

Save-On-Foods (1), CIBC, Rogers Video

 120,000  

100.0% 

 Home Depot (1), Mark’s Work Wearhouse, Staples, Home Sense, 
Royal Bank of Canada, Michael’s

South Park Centre 

Edmonton 

1996 

 378,000  

96.9% 

 Canadian Tire, Zellers, Toys ’R’ Us (1), Ofﬁ ce Depot (Safeway), Linens ’n Things, 
Laura’s Shoppes, Sport Chek, Starbucks

52

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
Property 

Staples Gateway 

Towerlane Mall 

TransCanada Centre 

Tuscany Market 

Uplands Common 

Village Market 

Location 

Edmonton 

Airdrie 

Calgary 

Calgary 

North Lethbridge 

Sherwood Park 

West Lethbridge Towne Centre 

Lethbridge 

Year Built  Gross Leasable 
or Acquired 

Area 

Percent
Occupied 

Anchors and Major Tenants

2007 

2005 

2006 

2003 

2005 

1997 

1998 

 40,000  

100.0% 

Staples, Mark’s Work Wearhouse

 210,000  

 187,000  

88.3% 

98.7% 

Safeway, Staples, Saan Store, Super Drug Mart, TD Canada Trust, Blockbuster

Safeway, Rexall, Tim Hortons, Rogers Video

 86,000  

100.0% 

Sobeys, Rexall, Scotiabank, Starbucks

 53,000  

100.0% 

Sobeys

 115,000  

97.9% 

Safeway, London Drugs, Scotiabank, Tim Hortons

 96,000  

100.0% 

Safeway, Home Hardware, Blockbuster, Starbucks, Scotiabank

Westmount Shopping Centre 

Edmonton 

2007 

 439,000  

87.6% 

 Shoppers Drug Mart, Safeway, Scotia Bank, TD Canada Trust, Zellers, Dollarama, 
Tim Hortons, Blockbuster, Bank of Montreal

9630 Macleod Trail 

Total – ALBERTA 

BRITISH COLUMBIA

Calgary 

2006 

 127,000  

100.0% 

Rona

 3,779,000  

93.1% 

Broadmoor Shopping Centre 

Richmond 

Coronation Mall 

Harbour Front Centre 

Duncan 

Vancouver 

Langley Crossing Shopping Centre 

Langley 

Langley Mall 

Linens Buildings 

Longwood Station 

Pemberton Plaza 

Port Place Shopping Centre 

Scott 72 Centre 

Staples Lougheed 

Terminal Park 

Langley 

Coquitlam 

Nanaimo 

Vancouver 

Nanaimo 

Delta 

Burnaby 

Nanaimo 

Terra Nova Shopping Centre 

Richmond 

The Olive 

Time Marketplace 

West Oaks Mall (3) 

Vancouver 

Vancouver 

Abbotsford 

2005 

2005 

2005 

2005 

2005 

2006 

2007 

2005 

2006 

2004 

2006 

2006 

2005 

2006 

2004 

2004 

 43,000  

75.7% 

Royal Bank of Canada, Coast Capital Savings

 58,000  

100.0% 

Save-On-Foods, TD Canada Trust, Blockbuster, BC Liquor Store

 166,000  

 126,000  

99.3% 

88.4% 

Canadian Tire, Michael’s, Vancity, Kelsey’s, Mark’s Work Wearhouse, PetSmart

 Shoppers Drug Mart, Longe & McQuade, Dollar Max, BDO Dunwoody LLP, 
CitiFinancial

 132,000  

96.5% 

IGA Marketplace (H. Y. Louie Group), Army & Navy, TD Canada Trust

 38,000  

100.0% 

Linens ’n Things

 106,000  

 96,000  

 142,000  

 165,000  

95.3% 

96.0% 

85.5% 

92.9% 

Thrifty Foods, TD Canada Trust, Boston Pizza

Save-On-Foods, Vancity, Starbucks

London Drugs, BC Liquor Store, CIBC, Thrifty Foods

London Drugs, Staples, TD Canada Trust, Vancity, Starbucks

 32,000  

100.0% 

Staples Business Depot

 29,000  

100.0% 

Bank of Montreal, BC Liquor Store, Save-On-Foods (1)

 72,000  

100.0% 

 Save-On-Foods, Royal Bank of Canada, Coast Capital Savings, Pizza Hut, 
Starbucks

 21,000  

100.0% 

Capers Market

 43,000  

100.0% 

IGA Marketplace (H. Y. Louie Group), Shoppers Drug Mart

 266,000  

97.3% 

 Save-On-Foods, Linens ’n Things, London Drugs, Future Shop, Michael’s, 
Reitmans, CIBC, Pier 1 Imports, Sport Mart, Tim Hortons, Starbucks

Woodgrove Crossing 

Nanaimo 

2006 

 60,000  

100.0% 

Michael’s, Sleep Country, Petcetera

Total – BRITISH COLUMBIA 

1,593,000  

95.0% 

1997 

1999 

1999 

1997 

OTHERS 

Cole Harbour Shopping Centre 

Dartmouth, NS 

Regina, SK 

Regina, SK 

St. John’s, NF 

Regent Park Shopping Centre 

Registan Shopping Centre 

Ropewalk Lane 

Total – OTHERS 

TOTAL – CANADA: 12/31/2007 

(1)  Tenant (or other) owned. 

(2)  Interest is leasehold. 

(3)  50% interest owned by First Capital Realty Inc. 

(4)  75% interest owned by First Capital Realty Inc. 

(5)  80% interest owned by First Capital Realty Inc. 

(6)  60% interest owned by First Capital Realty Inc. 

 50,000  

100.0% 

Sobeys (1), Canadian Tire (1), Shoppers Drug Mart, TD Canada Trust 

 66,000  

 26,000  

 40,000  

 182,000  

19,382,000  

85.2% 

94.5% 

75.8% 

89.2% 

95.3% 

Safeway, Scotiabank

Safeway, Scotiabank

Government of NFLD, Tim Hortons

2007 ANNUAL REPORT

53

 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
M A N A G E M E N T ’ S   R E S P O N S I B I L I T Y   A N D   A U D I T O R S ’   R E P O R T

M A N A G E M E N T ’ S   R E S P O N S I B I L I T Y

The accompanying consolidated ﬁ nancial statements are the responsibility of Management and have been prepared in accordance with 

Canadian generally accepted accounting principles.

The preparation of ﬁ nancial statements necessarily involves the use of estimates based on Management’s judgment, particularly when 

transactions affecting the current accounting period cannot be ﬁ nalized with certainty until future periods. The consolidated ﬁ nancial 

statements have been properly prepared within reasonable limits of materiality and in light of information available up to February 28, 2008.

Management is also responsible for the maintenance of ﬁ nancial and operating systems, which include effective controls to provide 

reasonable assurance that the Company’s assets are safeguarded and that reliable ﬁ nancial information is produced.

The Board of Directors is responsible for ensuring that management fulﬁ lls its responsibilities through its Audit Committee whose members 

are not involved in day-to-day operations of the Company. Each quarter the Audit Committee meets with management and, as necessary, with 

the independent auditors, Deloitte & Touche LLP, to satisfy itself that Management’s responsibilities are properly discharged and to review and 

report to the Board on the consolidated ﬁ nancial statements.

As at December 31, 2007, our Chief Executive Ofﬁ cer and Chief Financial Ofﬁ cer evaluated, or caused the evaluation under their direct 

supervision, the disclosure controls and procedures and the internal controls over ﬁ nancial reporting (as deﬁ ned in Multilateral Instrument 

52-109, Certiﬁ cation of Disclosure in Issuers’ Annual and Interim Filings) and, based on that assessment, determined that the disclosure 

controls and procedures were designed and operating effectively and the internal controls over ﬁ nancial reporting were designed effectively.

In accordance with generally accepted auditing standards, the independent auditors conduct an examination each year in order to express a 

professional opinion on the consolidated ﬁ nancial statements.

Dori J. Segal 

President and Chief Executive Ofﬁ cer  

A U D I T O R S ’   R E P O R T

To the Shareholders of First Capital Realty Inc.

Karen H. Weaver, CPA

Chief Financial Ofﬁ cer 

We have audited the consolidated balance sheets of First Capital Realty Inc. as at December 31, 2007 and 2006 and the consolidated 

statements of earnings, comprehensive income, shareholders’ equity and cash ﬂ ows for the years then ended. These ﬁ nancial statements 

are the responsibility of the Company’s management. Our responsibility is to express an opinion on these ﬁ nancial statements based on 

our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and 

perform an audit to obtain reasonable assurance whether the ﬁ nancial statements are free of material misstatement. An audit includes 

examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁ nancial statements. An audit also includes assessing the 

accounting principles used and signiﬁ cant estimates made by management, as well as evaluating the overall ﬁ nancial statement presentation.

In our opinion, these consolidated ﬁ nancial statements present fairly, in all material respects, the ﬁ nancial position of the Company as at 

December 31, 2007 and 2006, and the results of its operations and its cash ﬂ ows for the years then ended in accordance with Canadian 

generally accepted accounting principles.

Toronto, Ontario 

February 28, 2008  

Chartered Accountants

Licensed Public Accountants

54

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D AT E D   B A L A N C E   S H E E T S

December 31 (thousands of dollars) 

ASSETS

Real Estate Investments

Shopping centres (note 3) 

Land and shopping centres under development (note 4) 

Deferred costs (note 5) 

Intangible assets (note 6) 

Investment in Equity One, Inc. (note 7) 

Loans, mortgages and other real estate assets (note 8) 

Other assets (note 9) 

Amounts receivable (note 10) 

Cash and cash equivalents  

Future income tax assets (note 18) 

LIABILITIES

Mortgages, loans and credit facilities (note 11) 

Accounts payable and other liabilities (note 12) 

Intangible liabilities (note 6) 

Senior unsecured debentures (note 13) 

Convertible debentures (note 14) 

Future income tax liabilities (note 18) 

SHAREHOLDERS’ EQUITY 

See accompanying notes to the consolidated ﬁ nancial statements

Approved by the Board of Directors:

2007 

2006

$  2,718,078 

$  2,423,801

284,077 

79,606 

35,938 

  3,117,699 

191,536 

11,589 

  3,320,824 

32,395 

36,008 

10,451 

9,731 

178,347

74,778

31,868

2,708,794

228,665

24,056

2,961,515

47,129

28,070

6,810

17,355

$  3,409,409 

$  3,060,879

$  1,471,114 

$  1,388,650

110,006 

17,795 

595,376 

217,030 

46,757 

  2,458,078 

951,331 

106,145

18,453

399,813

192,189

44,036

2,149,286

911,593

$  3,409,409 

$  3,060,879

Chaim Katzman 

Director  

Dori J. Segal

Director

2007 ANNUAL REPORT

55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D AT E D   S TAT E M E N T S   O F   E A R N I N G S

Years ended December 31 (thousands of dollars, except per share amounts) 

2007 

2006

REVENUE 

Property rental revenue 

Interest and other income (note 16) 

EXPENSES 

Property operating costs  

Interest expense (note 17)  

Amortization  

  Shopping centres 

  Deferred costs 

Intangible assets 

  Deferred ﬁ nancing fees 

  Other assets 

Corporate expenses 

Equity income from Equity One, Inc. (note 7 ) 

Loss on settlement of debt (note 11) 

Income before income taxes  

Income taxes (note 18): 

  Current 

  Future 

Net income  

Earnings per common share (note 19)

  Basic 

  Diluted 

See accompanying notes to the consolidated ﬁ nancial statements

$  376,891 

$ 

325,980

6,033 

382,924 

134,446 

116,043 

55,118 

14,629 

8,217 

813 

1,051 

23,544 

353,861 

14,375 

(483) 

42,955 

1,672 

10,930 

12,602 

$ 

30,353 

$ 

$ 

0.39 

0.39 

$ 

$ 

$ 

6,917

332,897

120,354

93,809

46,441

12,118

5,693

3,178

1,011

19,282

301,886

32,696

—

63,707

4,155

13,593

17,748

45,959

0.62

0.62

56

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D AT E D   S TAT E M E N T S   O F   C O M P R E H E N S I V E   I N C O M E

Years ended December 31 (thousands of dollars) 

2007 

2006

NET INCOME  

OTHER COMPREHENSIVE INCOME (note 2)

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

Other comprehensive loss of Equity One, Inc.  

Loss on cash ﬂ ow hedges of interest rates  

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

Reclassiﬁ cation of adjustment for gains and losses on cash ﬂ ow hedges of 

interest rates included in income 

Other comprehensive (loss) income before income taxes 

Future income tax recovery 

Other comprehensive (loss) income 

COMPREHENSIVE INCOME 

See accompanying notes to the consolidated ﬁ nancial statements

$ 

30,353 

$ 

45,959

(9,950) 

(320) 

(2,300) 

(241) 

(436) 

(13,247) 

(1,044) 

(12,203) 

407

—

—

—

—

407

— 

407

$ 

18,150 

$ 

46,366

2007 ANNUAL REPORT

57

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D AT E D   S TAT E M E N T S   O F   S H A R E H O L D E R S ’   E Q U I T Y

Other 

Accumulated 

Convertible 

Debentures 

Options, 

Deferred

  Comprehensive  Comprehensive 

Share 

Contributed 

Equity 

Share Units

(thousands of dollars) 

Deﬁ cit 

Income/(Loss) 

Income/(Loss) 

Capital 

Surplus 

Component 

and Warrants 

Total

(note 2) 

(note 15) 

(note 14) 

 (note 15) 

(note 15)

Shareholders’ equity,

  December 31, 2006 

$ (236,567)  $ (14,170)  $ (250,737)  $ 1,128,926 

$ 19,513 

$ 9,030 

$ 4,861  $ 911,593

Effect of changes in

  accounting policies on

  January 1, 2007 (note 2) 

520 

408 

928 

Changes during the period:

  Net income 

Issuance of common shares 

  Dividends 

  Dividends reinvested in

  common shares 

  Payment of interest on

  convertible debentures 

  Equity component on 

issuance of convertible

  debentures 

  Conversion of convertible

  debentures 

  Exercise of warrants 

  Options vested 

  Exercise of options 

  Deferred share units  

  Exercise of deferred

  share units 

  Restricted share units 

  Exercise of restricted 

  share units 

Issue costs 

  Other comprehensive

loss 

Shareholders’ equity, 

30,353 

— 

(98,688) 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

30,353 

— 

1,292 

(98,688) 

— 

— 

74,962 

— 

12,048 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

16,325 

1,503 

— 

3,385 

— 

162 

— 

— 

(317) 

— 

(12,203) 

(12,203) 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

928

30,353

1,292

(98,688)

— 

74,962

— 

12,048

7,387 

— 

7,387

(512) 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

(96) 

2,253 

(169) 

523 

(162) 

2,056 

15,813

1,407

2,253

3,216

523

—

2,056

(1,292) 

(1,292)

— 

(317)

— 

(12,203)

  December 31, 2007 

$ (304,382)  $ (25,965)  $ (330,347)  $ 1,238,286 

$ 19,513 

$ 15,905 

 $ 7,974  $ 951,331

See accompanying notes to the consolidated ﬁ nancial statements

58

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(thousands of dollars) 

Deﬁ cit 

Income/(Loss) 

Income/(Loss) 

(note 2) 

Other 

Accumulated 

  Comprehensive  Comprehensive 

Convertible 

Debentures 

Options, 

Deferred

Share 

Capital 

(note 15) 

Contributed 

Equity 

Share Units

Surplus 

Component 

and Warrants 

Total

 (note 14) 

(note 15)

Shareholders’ equity,

  December 31, 2005 

$ (191,584)  $ (14,577)  $ (206,161)  $ 1,022,701 

$ 19,513 

$ 3,015 

$ 3,476 

$ 842,544

Changes during the period:

  Net income 

45,959 

— 

45,959 

— 

Issuance of common

  shares 

  Dividends 

  Dividends reinvested in

  common shares 

  Payment of interest on

  convertible debentures 

  Equity component on issuance

  of convertible debentures 

  Options vested 

  Exercise of warrants 

  Exercise of options 

  Deferred share units  

  Restricted share units 

  Exercise of restricted 

  share units 

Issue costs 

  Other comprehensive

income 

Shareholders’ equity, 

— 

(90,942) 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

30,445 

(90,942) 

— 

— 

66,054 

— 

— 

— 

— 

— 

— 

— 

— 

— 

4,295 

— 

— 

4,165 

2,211 

— 

— 

— 

(945) 

407 

407 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

— 

6,015 

— 

— 

— 

— 

— 

— 

— 

— 

— 

45,959

— 

— 

30,445

(90,942)

— 

66,054

— 

4,295

— 

975 

(236) 

(73) 

756 

1,182 

(1,219) 

— 

— 

6,015

975

3,929

2,138

756

1,182

(1,219)

(945)

407

  December 31, 2006 

$ (236,567)  $ (14,170)  $ (250,737)  $ 1,128,926 

$ 19,513 

$ 9,030 

$ 4,861 

$ 911,593

See accompanying notes to the consolidated ﬁ nancial statements

2007 ANNUAL REPORT

59

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
C O N S O L I D AT E D   S TAT E M E N T S   O F   C A S H   F L O W S

Years ended December 31 (thousands of dollars) 

CASH FLOW PROVIDED BY (USED IN):

OPERATING ACTIVITIES

Net income 

Items not affecting cash (note 21a) 

Deferred leasing costs 

Settlement of restricted share units 

Dividends received from Equity One, Inc. (note 7)   

Net change in non-cash operating items (note 21b) 

Cash provided by operating activities 

INVESTING ACTIVITIES

Acquisition of shopping centres (note 3) 

Acquisition of land for development (note 4) 

Proceeds from disposition of shopping centre 

Proceeds from disposition of land for development  

Expenditures on shopping centres 

Expenditures on land and shopping centres under development   

Investment in common shares of Equity One, Inc. (note 7) 

Changes in loans, mortgages and other real estate assets (note 21c) 

Cash used in investing activities 

FINANCING ACTIVITIES

Mortgage ﬁ nancings, loans and credit facilities

  Borrowings, net of ﬁ nancing costs  

  Principal instalment payments 

  Repayments on maturity 

Issuance of common shares, net of issue costs 

Issuance of senior unsecured debentures, net of issue costs (note 13) 

Issuance of convertible debentures, net of issue costs (note 14)   

Payment of dividends 

Cash provided by ﬁ nancing activities 

Effect of currency rate movement on cash balances 

Increase in cash and cash equivalents 

Cash and cash equivalents, beginning of the year   

Cash and cash equivalents, end of the year (note 21d) 

See accompanying notes to the consolidated ﬁ nancial statements

2007 

2006

$ 

30,353 

$ 

82,150 

(3,429) 

(1,826) 

17,617 

8,191 

45,959

42,644

(5,613)

(1,914)

33,266

831

133,056 

115,173

(230,554) 

(65,562) 

6,400 

— 

(23,718) 

(143,744) 

(2,254) 

14,013 

(445,419) 

425,428 

(39,400) 

(305,554) 

5,976 

198,296 

53,299 

(21,066) 

316,979 

(975) 

3,641 

6,810 

$ 

10,451 

$ 

(361,329)

(34,227)

—

1,236

(19,429)

(83,449)

(16,936)

6,568

(507,566)

280,904

(36,412)

(260,446)

35,867

297,035

99,029

(22,466)

393,511

357

1,475

5,335

6,810

60

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S
December 31, 2007 and 2006

 1 .   S I G N I F I C A N T   A C C O U N T I N G   P O L I C I E S

First Capital Realty Inc. (the “Company”) is incorporated under the laws of Ontario to engage in the business of acquiring, developing, 

redeveloping, owning and operating neighbourhood and community shopping centres. The Company’s accounting policies and its standards 

of ﬁ nancial disclosure are in accordance with Canadian generally accepted accounting principles. The Company’s signiﬁ cant accounting 

policies are as follows: 

(a) Principles of Consolidation

The consolidated ﬁ nancial statements include the accounts of the Company, its wholly-owned subsidiaries, trusts, and the Company’s 

proportionate share of assets, liabilities, revenues and expenses of partnership, co-ownership and limited liability corporate ventures, which 

are accounted for using the proportionate consolidation method. The Company’s investment in Equity One, Inc. is accounted for on the equity 

basis as the Company exercises signiﬁ cant inﬂ uence over this investment.

(b) Shopping Centres 

Shopping centres are stated at cost less accumulated amortization.

The purchase price of shopping centre properties is allocated to land, building, deferred leasing costs and intangibles including lease 

origination costs associated with in-place leases, the value of above- and below-market leases, and the value of tenant relationships, if any.

Allocations of the purchase price are generally based on the following criteria:

(i)   

Land is recorded at its estimated fair value.

(ii) 

 Buildings are recorded at depreciated replacement cost based on estimates of prevailing construction costs for buildings of a similar 

class and age.

(iii) 

 Deferred leasing costs, including tenant improvements, are recorded at depreciated replacement cost based on estimates of prevailing 

construction costs, taking into account the condition of tenants’ premises.

(iv) 

 Lease origination costs are determined based on estimates of the costs that would be required for the existing leases to be put in place 

under the same terms and conditions. These costs include leasing commissions, foregone rent and operating cost recoveries during an 

estimated lease-up period.

(v) 

 Values ascribed to above- and below-market in-place leases are determined based on the present value of the difference between the 

rents payable under the terms of the in-place leases and estimated market rents.

(vi) 

 Tenant relationship values are determined based on the net costs avoided if the tenants were to renew their leases at the end of the 

existing term, adjusted for the estimated probability that the tenants will renew.

For practical reasons, the purchase price allocation of property acquisitions which occur at or near period end are estimated based on the 

Company’s history and are subsequently evaluated and adjusted as necessary.

(c) Land and Shopping Centres Under Development

Land and shopping centres under development are stated at cost. Cost includes all expenditures incurred in connection with the acquisition, 

development, redevelopment and initial leasing of the properties. These expenditures include acquisition costs, construction costs, initial 

leasing costs, other direct costs, building improvement costs and carrying costs. Carrying costs (including property taxes and interest on both 

speciﬁ c and general debt, incremental direct internal costs, net of operating results) are capitalized to the cost of the properties until the 

accounting completion date (which is deﬁ ned as the earlier of the completion of tenant improvements or one year from the cessation of major 

construction activity). Upon completion, the properties are classiﬁ ed as shopping centres.

2007 ANNUAL REPORT

61

N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

(d) Deferred Costs

Deferred costs include tenant inducements and leasing costs incurred through leasing activities and tenant improvements related to shopping 

centre acquisitions.

(e) Intangible Assets and Liabilities

Intangible assets and liabilities include lease origination costs associated with in-place leases, the value of the above- and below-market 

leases, and the value of customer relationships, allocated to existing tenants in acquired shopping centres.

(f) Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset 

may not be recoverable. If it is determined that the net cumulative future cash ﬂ ows of a long-lived asset is less than its carrying value, the 

long-lived asset is written down to its fair value. Cumulative future cash ﬂ ows represent the undiscounted estimated future cash ﬂ ow expected 

to be received from the long-lived asset. Assets reviewed for impairment under this policy include shopping centres, land and shopping 

centres under development, intangible assets, and furniture, ﬁ xtures and equipment.

(g) Furniture, Fixtures and Equipment

Furniture, ﬁ xtures and equipment are recorded at cost less accumulated amortization.

(h) Marketable Securities

Effective January 1, 2007, marketable securities are classiﬁ ed as either held-to-maturity, held for trading, or available-for-sale (note 2).

•  Held-to-maturity investments are measured at amortized cost. Losses due to impairment are included in current period net income.

•  Held for trading investments are measured at fair value. All gains and losses are included in net income in the period in which they arise.

•   Available-for-sale investments are measured at fair value. Revaluation gains and losses are included in other comprehensive income until 

the investment is sold.

Prior to 2007, marketable securities were stated at cost and were written down to market value if it was determined that there was a 

permanent impairment in value.

(i) Property Rental Revenue

Property rental revenue includes rents earned from tenants under lease agreements, including percentage participation rents, property 

tax and operating cost recoveries, and incidental income, including lease cancellation payments. Property rental revenue also includes the 

amortization of above- and below-market leases allocated on asset acquisitions. Tenant allowances are deducted from rental revenue on a 

straight-line basis over the term of the tenant’s lease. Revenue recognition begins on the lease commencement date.

The Company uses the straight-line method of recognizing rental revenue whereby the total amount of rental revenue to be received from 

leases is accounted for on a straight-line basis over the term of the lease. Accordingly, a deferred rent receivable is recorded from the tenants 

for the current difference between the straight-line rent recognized as rental revenue and the rent that is contractually due from the tenants.

(j) Amortization

Buildings and improvements are amortized on a straight-line basis, so as to fully amortize the properties over their estimated useful lives, 

which vary but do not exceed 40 years. 

Deferred costs, including leasing fees and tenant inducements incurred on securing leases, other than initial leases on shopping centres 

under development, are amortized over the term of such leases on a straight-line basis.

Lease origination costs associated with in-place leases are amortized over the remaining lives of the associated leases.

62

2007 ANNUAL REPORT

The value of tenant relationships is amortized over the expected term of the relationship. In the event a tenant vacates its leased space prior to 

the contractual termination of the lease, and no rental payments are being made on the lease, any unamortized balance relating to that lease 

is expensed immediately.

Effective January 1, 2007, commitment fees and other costs incurred in connection with debt ﬁ nancing are amortized using the effective 

interest method of amortization and presented as non-cash interest expense (note 2). Previously, these costs were amortized over the term of 

such ﬁ nancing on a straight-line basis.

Furniture, ﬁ xtures and equipment are amortized on a straight-line basis over estimated useful lives ranging from three to ten years.

(k) Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and short-term deposits with original maturities of three months or less.

(l) Foreign Currency

The Company carries on business in the United States through operationally and ﬁ nancially self-sustaining entities.

Assets and liabilities denominated in United States dollars are translated into Canadian dollars at year-end exchange rates. Revenues and 

expenses denominated in United States dollars are translated at the weighted average daily exchange rate for the periods being reported on. 

Effective January 1, 2007, the resulting net gains or losses are accumulated and included in a separate component of shareholders’ equity 

described as Other Comprehensive Income (OCI) (note 2). Prior to 2007, the net gain or losses were accumulated in a separate component of 

shareholders’ equity described as the cumulative currency translation adjustment.

(m) Derivative Financial Instruments

Derivative ﬁ nancial instruments are utilized by the Company in the management of its foreign currency and interest rate exposures. Derivative 

instruments are recorded on the balance sheet at fair value including those derivatives that are embedded in a ﬁ nancial instrument or other 

contract but are not closely related to the host ﬁ nancial instrument or contract. Changes in the fair values of derivative instruments are 

recognized in net income, except for derivatives that are designated as cash ﬂ ow hedges. The fair value changes for the effective portion of 

such cash ﬂ ow hedges are recognized in OCI. The Company has no signiﬁ cant derivative instruments other than its interest rate swaps. The 

Company documents its eligibility for hedge accounting and assesses the effectiveness of these relationships based on the degree of expected 

future offsetting cash ﬂ ows.

Interest rate swaps are recorded in the balance sheet at fair value. The change in fair value with respect to the swaps that have been 

designated is recorded in other comprehensive income. The change in fair value with respect to swaps that are not designated as hedges as 

well as the ineffective portion of designated hedges, are recorded in net income with interest and other income. Previously, only the fair value 

of undesignated or ineffective hedges was recorded in net income. The Company does not utilize derivative ﬁ nancial instruments for trading or 

speculative purposes.

(n) Convertible Debentures

The Company presents its convertible debentures in their liability and equity component parts where applicable, as follows:

(i)  

 The liability component represents the present value of interest and principal obligations to be satisﬁ ed by cash or common shares 

of the Company, where a variable number of common shares is required to settle the obligation, discounted at the rate of interest 

that would have been applicable to a debt-only instrument of comparable term and risk at the date of issue. As a result, the interest 

payments are treated as a reduction of the liability component and interest expense, calculated on the discount rate is recorded as an 

increase in the liability component. 

2007 ANNUAL REPORT

63

N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

(ii) 

 The equity component of the convertible debentures is included in Shareholders’ Equity in the consolidated balance sheets. The equity 

component consists of the value ascribed to the conversion right granted to the holder, which remains a ﬁ xed amount over the term of 

the debentures unless there are conversions. 

(o) Income Taxes

Income taxes are accounted for using the liability method. Under this method, future income taxes are recognized for the expected future tax 

consequences of differences between the carrying amount of balance sheet items and their corresponding tax values. Future income taxes 

are computed using substantively enacted corporate income tax rates for the years in which the differences are expected to reverse.

(p) Stock-Based Compensation Plans

The Company has stock-based compensation plans as described in note 15(d) and (e). The Company recognizes compensation expense for 

stock-based compensation awards at the fair value as at the granting date over the vesting period. 

(q) Use of Estimates

The preparation of the Company’s ﬁ nancial statements in conformity with Canadian generally accepted accounting principles requires 

management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent 

assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting year. Actual results 

could differ from such estimates. Signiﬁ cant estimates are required in the allocation of the purchase prices of shopping centre acquisitions, 

determining future cash ﬂ ows when assessing assets for impairment, determining the useful lives of assets for amortization purposes, 

determining the allocation of convertible debentures between debt and equity, future income taxes, assessing the allowance for doubtful 

accounts on trade accounts receivable and straight-line rent, the determination of the fair value of stock-based compensation and determining 

fair values of ﬁ nancial instruments.

2 .   C H A N G E S   I N   A C C O U N T I N G   P O L I C I E S

(a)  Current Accounting Policy Changes

Effective January 1, 2007, the Company adopted several new accounting standards issued by the Canadian Institute of Chartered 

Accountants (“CICA”). The standards are applied on a retroactive basis with no required restatement of prior periods.

(i)   Comprehensive income – CICA Section 1530

 Comprehensive income consists of net income and other comprehensive income (“OCI”). OCI includes unrealized gains and losses 

on ﬁ nancial assets classiﬁ ed as available-for-sale, unrealized foreign currency translation amounts arising from self-sustaining foreign 

operations, and changes in the fair value of the effective portion of hedging instruments. The Company’s consolidated ﬁ nancial 

statements now include consolidated statements of comprehensive income. The cumulative amount of other comprehensive income is 

presented as a new category in the consolidated statements of shareholders’ equity. The cumulative currency translation account has 

been reclassiﬁ ed to accumulated other comprehensive income.

(ii)  Financial instruments – recognition and measurement – CICA Section 3855

 Section 3855 establishes standards for recognizing and measuring ﬁ nancial assets, ﬁ nancial liabilities and non-ﬁ nancial derivatives. All 

ﬁ nancial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods depends on 

whether the ﬁ nancial instrument has been classiﬁ ed as held-for-trading, available-for-sale, held-to-maturity, loans and receivables, or 

other liabilities.

 Financial assets and liabilities classiﬁ ed as held-for-trading are required to be measured at fair value with gains and losses recognized 

in net income. The Company has classiﬁ ed certain of its marketable securities as held-for-trading. None of the Company’s liabilities are 

currently classiﬁ ed as held-for-trading. Previously, all of the Company’s marketable securities were recorded at cost.

64

2007 ANNUAL REPORT

 
 
 
 
 
 
 Available-for-sale ﬁ nancial assets are required to be measured at fair value with unrealized gains and losses recognized in OCI. 

Certain of the Company’s marketable securities are classiﬁ ed as available-for-sale.

 Financial assets classiﬁ ed as held-to-maturity, loans and receivables and ﬁ nancial liabilities (other than those held-for-trading) are 

required to be measured at amortized cost. This classiﬁ cation applies to the majority of the Company’s ﬁ nancial assets and liabilities 

including loans, mortgages, amounts receivable, accounts payable, loans and debentures. The Company now applies the effective 

interest method of amortization for any transaction costs or fees, premiums or discounts to mortgages, loans and debentures and 

presents the amortization as non-cash interest expense. Mortgages, loans and debentures are now presented net of all issue costs, 

premiums and discounts. Previously, these costs were included in other assets and amortized on a straight-line basis.

 The classiﬁ cations above do not apply to the Company’s investment in Equity One, Inc., which continues to be accounted for using the 

equity method.

 Derivative instruments are recorded on the balance sheet at fair value including those derivatives that are embedded in a ﬁ nancial 

instrument or other contract but are not closely related to the host ﬁ nancial instrument or contract. Changes in the fair values of 

derivative instruments are required to be recognized in net income, except for derivatives that are designated as cash ﬂ ow hedges. The 

fair value changes for the effective portion of such cash ﬂ ow hedges are recognized in OCI. The Company has no signiﬁ cant derivative 

instruments other than its interest rate swaps.

 The standard speciﬁ cally excludes CICA Section 3065, Leases, from the deﬁ nition of ﬁ nancial instruments, except for derivatives that 

are embedded in a lease contract. 

(iii) Hedges – CICA Section 3865

 Section 3865 speciﬁ es the criteria under which hedge accounting can be applied and how hedge accounting should be executed 

for each of the permitted hedging strategies: fair value hedges, cash ﬂ ow hedges and hedges of a foreign currency exposure of a net 

investment in a self-sustaining foreign operation.

 As at the date of adoption of Section 3865, the Company had interest rate swaps which are now recorded in the balance sheet at 

fair value. The change in fair value with respect to the swaps that have been designated is recorded in other comprehensive income. 

The change in fair value with respect to swaps that are not designated as hedges under the section, as well as the ineffective portion 

of designated hedges, are recorded in net income with interest and other income. Previously, only the fair value of undesignated or 

ineffective hedges was recorded in net income.

(iv) Equity – CICA Section 3251

 This new section establishes standards for the presentation of equity and changes in equity during the reporting period. The following 

components of equity are now presented separately:

1)  retained earnings or deﬁ cit;

2)   accumulated other comprehensive income;

3)  the total of (1) and (2);

4)  contributed surplus;

5)  share capital.

2007 ANNUAL REPORT

65

 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

(v)  Accounting Changes – CICA Section 1506

 The new standard sets out the conditions that must be met for a change in accounting policy to be applied in accordance with GAAP 

and sets out how such changes should be applied. As a result of this new standard, the Company has included additional disclosure in 

Note 2(b) of the ﬁ nancial statements addressing the impact of future accounting policy changes.

(vi) Effect of adopting CICA Sections 1530, 3855, 3865, 3251 and 1506

 Shareholders’ equity was increased by $0.9 million on January 1, 2007 as a result of adopting these standards. Net income for the year 

ended December 31, 2007 increased by $144,000 as a result of applying the effective interest method and recognizing unrealized 

gains on marketable securities held for trading.

(b) Future Accounting Policy Changes

(i)   Capital Disclosures

 On December 1, 2006, the CICA issued Handbook Section 1535 Capital Disclosures. Section 1535 speciﬁ es the disclosure of 

(i) an entity’s objectives, policies and processes for managing capital; (ii) quantitative data about what the entity regards as capital; 

(iii) whether the entity has complied with any capital requirements; and (iv) if it has not complied, the consequences of such non-

compliance. This new standard will be effective for the Company in the ﬁ rst quarter of 2008.

(ii)  Financial Instruments – Disclosures and Presentation

 On December 1, 2006, the CICA issued two new accounting standards: Handbook Section 3862 Financial Instruments – Disclosures, 

and Handbook Section 3863 Financial Instruments – Presentation. The new Sections 3862 and 3863 replace Handbook Section 

3861 Financial Instruments – Disclosure and Presentation, revising and enhancing disclosure requirements, and carrying forward, 

unchanged, existing presentation requirements. These new sections place increased emphasis on disclosures about the nature and 

extent of risks arising from ﬁ nancial instruments and how the entity manages those risks. These new standards will be effective for the 

Company in the ﬁ rst quarter of 2008.

(iii) Goodwill and Intangible Assets

 On January 31, 2008, the CICA issued a new accounting standard: Handbook Section 3064 Goodwill and Intangible Assets. 

Section 3064 will replace Handbook Section 3062 Goodwill and Other Intangible Assets and Handbook Section 3450 Research and 

Development Costs. This new standard will be effective for the Company in the ﬁ rst quarter of 2009.

The Company is currently in the process of evaluating the potential impact of these new standards to the consolidated ﬁ nancial statements.

66

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
3 .   S H O P P I N G   C E N T R E S

(thousands of dollars) 

Land 

Buildings and improvements 

Accumulated amortization 

The Company acquired interests in six (2006 – 25) income-producing shopping centres as follows:

(thousands of dollars) 

Allocation of purchase price:

  Shopping centres 

  Shopping centres under development 

  Deferred costs 

Intangible assets 

Intangible liabilities 

Total purchase price, including acquisition costs 

Less mortgages assumed on acquisition and vendor-take-back mortgages 

Difference between principal amount and fair value of assumed mortgage ﬁ nancing  

Net cash outlay for acquisitions 

The acquisitions were funded as follows:

  Cash and credit facilities 

  Proceeds from mortgages 

Net cash outlay for acquisitions 

2007 

2006

$  695,025 

$ 

613,367

  2,222,071 

  2,917,096 

1,958,536

2,571,903

(199,018) 

(148,102)

$  2,718,078 

$  2,423,801

2007 

2006

$  229,824 

$ 

434,056

8,040 

6,872 

12,745 

(1,921) 

255,560 

(24,602) 

(404) 

9,074

18,619

13,661

(8,378)

467,032

(102,767)

(2,936)

$  230,554 

$ 

361,329

$  230,554 

$ 

361,329

— 

—

$  230,554 

$ 

361,329

During the year ended December 31, 2007, the Company sold a shopping centre for proceeds of $6.4 million resulting in a gain of 

$0.3 million. 

4 .   L A N D   A N D   S H O P P I N G   C E N T R E S   U N D E R   D E V E L O P M E N T

The Company acquired land and shopping centres under development as follows:

(thousands of dollars) 

2007 

2006

Purchase price of land and shopping centres acquired for development or redevelopment 

$ 

65,562 

$ 

37,177

Less mortgages assumed on acquisition and vendor-take-back mortgages 

Net cash outlay for acquisitions, funded through cash and credit facilities 

— 

(2,950)

$ 

65,562 

$ 

34,227

During the year ended December 31, 2007, the Company completed developments with a book value of $149.1 million (2006 – 

$107.4 million) that were transferred to shopping centres.

In addition, during the year ended December 31, 2007, the Company transferred shopping centres with a book value of $38.2 million (2006 

– $22.3 million) to land and shopping centres under development. 

Interest expense and incremental direct internal costs capitalized to development properties during the year ended December 31, 2007 totalled 

$15.6 million (2006 – $8.8 million) and $6.7 million (2006 – $3.4 million), respectively. The costs to complete projects currently under 

development are estimated at $158.3 million.

2007 ANNUAL REPORT

67

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

5 .   D E F E R R E D   C O S T S

(thousands of dollars) 

2007 

Accumulated 

Amortization 

Cost 

Net Book

Value

Deferred leasing costs and tenant improvements incurred through

leasing activities 

$ 

66,760 

$ 

21,385 

$ 

45,375

Tenant improvement costs recorded on acquisition of shopping centres 

47,914 

13,683 

34,231 

$  114,674 

$ 

35,068 

$ 

79,606

(thousands of dollars) 

Deferred leasing costs and tenant improvements incurred through

leasing activities 

Tenant improvement costs recorded on acquisition of shopping centres 

2006 

Accumulated 

Amortization 

Cost 

Net Book

Value

$ 

$ 

55,512 

$ 

14,844 

$ 

40,668

42,245 

8,135 

34,110 

97,757 

$ 

22,979 

$ 

74,778

Incremental direct internal costs related to leasing activities totalling $2.4 million (2006 – $3.0 million) were capitalized during the year ended 

December 31, 2007.

6 .  

I N TA N G I B L E   A S S E T S   A N D   L I A B I L I T I E S

(thousands of dollars) 

Intangible Assets 

Lease origination costs 

Above-market in-place leases 

Tenant relationships 

Intangible Liabilities 

Below-market in-place leases 

(thousands of dollars) 

Intangible Assets 

Lease origination costs 

Above-market in-place leases 

Tenant relationships 

Intangible Liabilities 

Below-market in-place leases 

2007 

Accumulated 

Amortization 

Cost 

Net Book

Value

$ 

43,558 

$ 

14,447 

$ 

29,111

2,237 

7,063 

1,022 

1,451 

1,215

5,612

$ 

52,858 

$ 

16,920 

$ 

35,938

$ 

23,204 

$ 

5,409 

$ 

17,795

2006 

Accumulated 

Amortization 

Cost 

Net Book

Value

$ 

33,456 

$ 

7,787 

$ 

25,669

2,391 

5,499 

837 

854 

1,554

4,645

41,346 

$ 

9,478 

$ 

31,868

22,001 

$ 

3,548 

$ 

18,453

$ 

$ 

Values ascribed to above- and below-market in-place leases are amortized to property rental revenue.

68

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7 .  

I N V E S T M E N T   I N   E Q U I T Y   O N E ,   I N C .

(thousands of dollars) 

Investment in Equity One, Inc., beginning of year 

Other comprehensive loss of Equity One, Inc. opening adjustment 

Equity income 

Less dividends received 

Purchase of Equity One, Inc., common shares (a) 

Other comprehensive loss of Equity One, Inc. 

Cumulative currency effect 

Investment in Equity One, Inc., end of year (b) 

Ownership interest in Equity One at December 31 

2007 

2006

$  228,665 

$ 

211,830

(1,669) 

14,375 

(17,617) 

2,254 

(320) 

(34,152) 

—

32,696

(33,265)

16,936

—

468

$  191,536 

$ 

228,665

19% 

19%

Equity One, Inc. (“Equity One”) (NYSE:EQY), is a self-administered and self-managed real estate investment trust in the United States. The 

Company and Equity One are each indirectly controlled subsidiaries of Gazit-Globe Ltd. (“Gazit”), an Israeli corporation trading on the Tel Aviv 

Stock Exchange.

(a) 

 In 2007, the Company’s U.S. subsidiaries acquired 80,000 (2006 – 562,700) common shares of Equity One at an average price of 

US$26.43 (2006 – US$25.83) per share.

(b)    The closing price on the NYSE of Equity One’s common shares at December 31, 2007 was US$23.03 (2006 – US$26.66) per share. 

The book value per share of the Company’s investment in Equity One at December 31, 2007 was US$13.82 (2006 – US$14.11). 

At December 31, 2007, 73.3 million (2006 – 72.7 million) shares of Equity One were outstanding, of which 14.0 million (2006 

– 13.9 million) shares were held by the Company.

8 .   L O A N S ,   M O R T G A G E S   A N D   O T H E R   R E A L   E S TAT E   A S S E T S

(thousands of dollars) 

Loans and mortgages receivable from development partners (a) 

Real estate marketable securities 

2007 

2006

$ 

9,459 

$ 

2,130 

$ 

11,589 

$ 

11,031

13,025

24,056

(a) 

 The Company has funded its partners’ share of certain development activities. The loans bear interest at an average rate of 7.9% 

(2006 – 8.4%) and are repayable from the partners’ share of proceeds generated from reﬁ nancings or sales. The Company has taken 

assignments of the development partners’ equity interests in the development partnerships as security for the loans receivable.

The fair values of the Company’s loans, mortgages receivable and marketable securities approximate carrying values.

2007 ANNUAL REPORT

69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

9 .   O T H E R   A S S E T S

(thousands of dollars) 

2007 

2006

Deferred ﬁ nancing, issue and interest rate hedge costs 

(net of accumulated amortization of $549 (2006 – $7,066)) (a) 

$ 

1,643 

$ 

Prepaid expenses and deposits related to property operations 

Deposits and costs on properties under option 

Fixtures, equipment and computer hardware and software

(net of accumulated amortization of $1,984 (2006 – $1,004)) 

21,719 

3,825 

16,701

19,838

6,176

5,208 

4,414

$ 

32,395 

$ 

47,129

(a)   Effective January 1, 2007, mortgages, term loans and debentures are presented net of deferred ﬁ nancing and issue costs other than 

deferred ﬁ nancing costs on credit facilities (note 2).

1 0 .  A M O U N T S   R E C E I VA B L E

(thousands of dollars) 

Trade receivables 

Rent revenue recognized on a straight-line basis 

Corporate and other amounts receivable 

1 1 .  M O R T G A G E S ,   L O A N S   A N D   C R E D I T   FA C I L I T I E S

(thousands of dollars) 

Fixed rate mortgages 

Secured term loans

  Floating rate hedged (with interest rate swaps) 

  Floating rate 

Unsecured revolving credit facilities

  Floating rate 

2007 

2006

$ 

13,275 

$ 

21,463 

1,270 

11,962

14,998

1,110

$ 

36,008 

$ 

28,070

Canada 

2007 

U.S. 

Total

$  1,145,828 

$ 

— 

$  1,145,828

— 

— 

39,536 

88,440 

39,536

88,440

178,475 

18,835 

197,310

$  1,324,303 

$  146,811 

$  1,471,114 

Effective January 1, 2007, mortgages and term loans are presented net of deferred ﬁ nancing costs (note 2).

(thousands of dollars) 

Fixed rate mortgages 

Secured term loans

  Floating rate hedged (with interest rate swaps) 

  Floating rate 

Secured revolving credit facilities

  Floating rate 

Canada 

2006 

U.S. 

Total

$  1,190,438 

$ 

— 

$  1,190,438

— 

— 

52,443 

110,276 

52,443

110,276

35,493 

— 

35,493

$  1,225,931 

$ 

162,719 

$  1,388,650

Mortgages and term loans are secured by shopping centres and the investment in Equity One.

70

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
At December 31, 2007, the Company had $128.0 million of undrawn credit facilities available for acquisitions, development, and general 

corporate purposes. 

Of the net book value of real estate assets of $3.1 billion as at December 31, 2007, approximately $1.8 billion has been pledged as security 

under mortgages and the credit facilities. Real estate assets consist of shopping centres, land and shopping centres under development, 

deferred costs, intangible assets and intangible liabilities.

Canada

Fixed rate ﬁ nancing bears interest at a weighted coupon interest rate of 6.32% at December 31, 2007 (2006 – 6.36%) and matures in years 

ranging from 2008 to 2025. The weighted average effective interest rate on ﬁ xed rate ﬁ nancing at December 31, 2007 is 6.14% (2006 – 

6.17%). Floating rate ﬁ nancing bears interest at ﬂ oating rates determined by reference to Canadian prime lenders or bankers’ acceptance 

rates ranging from 5.50% to 6.10% and matures in 2010.

Principal repayments of Canadian dollar mortgages and credit facilities outstanding as at December 31, 2007 are as follows:

(thousands of dollars) 

Payments 

 Balance Maturing 

Total 

Interest Rate

Principal

Instalment 

  Weighted Coupon

2008 

2009 

2010 

2011 

2012 

Thereafter 

Add:  unamortized deferred ﬁ nancing costs and premiums and

discounts, net (note 2) 

$ 

30,358 

$ 

65,814 

$ 

29,052 

28,229 

26,794 

24,609 

65,582 

51,541 

266,433 

62,892 

108,785 

563,181 

96,172 

80,593 

294,662 

89,686 

133,394 

628,763 

204,624 

1,118,646 

1,323,270 

— 

— 

1,033 

$ 

204,624 

$  1,118,646 

$  1,324,303 

5.97%

6.13%

5.99%

7.14%

6.96%

6.11%

6.22%

—

—

On March 5, 2007, the Company completed a $250 million three-year unsecured revolving credit facility syndicated with six ﬁ nancial 

institutions. On October 4, 2007, the Company completed a $100 million increase on its unsecured revolving credit facility syndicated with 

seven ﬁ nancial institutions bringing the total availability to $350 million, with a term to March 2010. The Company’s existing secured credit 

facilities were cancelled or not renewed by the Company and as a result, $0.5 million of unamortized deferred ﬁ nancing costs were recorded 

as a loss on settlement of debt.

United States

Floating rate ﬁ nancing hedged (with interest rate swaps) is comprised of LIBOR swap agreements on a notional US$40 million (2006 

– US$45 million) at an average ﬁ xed rate of 4.55% (2006 – 4.37%) plus applicable spreads and matures by 2017. Floating rate ﬁ nancing 

of $65.9 million (US$66.5 million) bears interest at the LIBOR plus 145 basis points and matures in 2010. Floating rate ﬁ nancing of 

$13.8 million (US$13.9 million) bears interest at the LIBOR plus 140 basis points and matures in 2011. The remainder of the ﬂ oating rate 

debt bears interest at rates determined by U.S. prime lenders ranging from 5.25% to 8.10%. In 2006, ﬂ oating rate ﬁ nancing of $78.7 million 

(US$67.5 million) bore interest at LIBOR plus 145 basis points and the remainder of the ﬂ oating rate debt bore interest at rates determined by 

reference to bankers’ acceptance rates or U.S. prime lenders ranging from 6.25% to 8.75%.

2007 ANNUAL REPORT

71

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

Principal repayments of U.S. dollar ﬁ nancing outstanding as at December 31, 2007 are due as follows:

(thousands of dollars) 

2008 

2009 

2010 

2011 

Add: unamortized deferred ﬁ nancing costs and premiums and

  discounts, net (note 2) 

$ 

Principal 

Instalment 

Payments 

6,691 

6,691 

3,717 

186 

17,285 

Balance 

Maturing 

Total

$ 

9,026 

$ 

15,717

— 

109,539 

11,338 

129,903 

6,691

113,256

11,524

147,188

— 

— 

(377)

$ 

17,285 

$ 

129,903 

$ 

146,811

At December 31, 2007, the fair value of the Company’s mortgages, loans and credit facilities was approximately $1,493 million (2006 – 

$1,463 million). 

1 2 .  A C C O U N T S   PAYA B L E   A N D   O T H E R   L I A B I L I T I E S

(thousands of dollars) 

Trade payables and accruals 

Accrued interest 

Dividends payable 

Interest rate swaps at fair value 

Tenant deposits 

Differences between principal amounts and fair values of assumed mortgages 

Other liabilities 

2007 

2006

$ 

55,332 

$ 

17,836 

25,498 

695 

8,333 

— 

2,312 

50,314

14,798

23,342

389

6,470

8,573

2,259

$  110,006 

$ 

106,145

Effective January 1, 2007, the differences between principal amounts and fair values of assumed mortgages are presented with mortgages, 

loans and credit facilities (note 2).

1 3 .  S E N I O R   U N S E C U R E D   D E B E N T U R E S

(thousands of dollars) 

2007 

2006

Series 

Date of Issue 

Maturity Date 

Proceeds 

Coupon 

Effective

Cash 

Interest Rate

A 

B 

C 

D 

E 

F 

June 21, 2005 

June 21, 2012 

March 30, 2006 

March 30, 2011 

August 1, 2006 

December 1, 2011 

September 18, 2006 

April 1, 2013 

January 31, 2007 

January 31, 2014 

$ 

$ 

$ 

$ 

$ 

99,980 

99,830 

99,980 

99,980 

99,977 

April 5, 2007 

October 30, 2014 

$  100,002 

5.08% 

5.25% 

5.49% 

5.34% 

5.36% 

5.32% 

5.31% 

5.29% 

$ 

99,096 

$ 

100,000

5.51% 

5.67% 

5.51% 

5.52% 

5.47% 

99,227 

99,388 

99,240 

99,224 

99,201 

99,851

99,981

99,981

—

—

5.50% 

$  595,376 

$ 

399,813

72

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Each series was issued with a principal amount of $100 million, with interest payable semi-annually.

The fair value of the senior unsecured debentures is approximately $580 million at December 31, 2007 (2006 – $402 million).

1 4 .  C O N V E R T I B L E   D E B E N T U R E S

(thousands of dollars) 

2007 

2006

Date of Issue 

Maturity Date 

Coupon  Effective 

Principal   

Liability   

Equity 

Principal 

Liability 

Equity

Interest Rate

December 19, 2005 

September 30, 2017 

5.50%  6.45% 

$  83,000  $  77,369  $ 

2,503 

$  100,000  $ 

97,176  $ 

November 30, 2006 

September 30, 2017 

5.50%  6.39% 

  100,000   

93,593   

6,015 

100,000   

95,013   

June 29, 2007 

September 30, 2017 

5.50%  6.61% 

50,000   

46,068   

7,387 

—   

—   

3,015

6,015

—

$  233,000  $  217,030  $  15,905 

$  200,000  $  192,189  $ 

9,030

On November 30, 2006, the Company issued $100 million for total proceeds of $101 million, via private placement, of 5.50% convertible 

unsecured subordinated debentures due September 30, 2017, with the same terms and conditions as those issued on December 19, 2005. 

Fifty million dollars of the principal amount of these debentures were issued to subsidiaries of the Company’s major shareholder, Gazit-Globe 

on the same terms as the other investors. On June 29, 2007, the Company issued, via private placement, an additional $50 million principal 

of the 5.50% convertible debentures for total proceeds of $53.5 million. $49 million of the principal amount of these debentures were issued 

to subsidiaries of the Company’s major shareholder, Gazit. The debentures issued in 2005 and 2006 require interest payable semi-annually 

on March 31 and September 30. Holders of the debentures have the right to convert them into common shares at a share price of $27.00 

through to December 31, 2011, and $28.00 thereafter to maturity. The Company has the option of repaying the debentures on maturity 

through the issuance of common shares at 97% of a weighted average trading price of the Company’s common shares. The Company also 

has the option of paying the semi-annual interest through the issuance of common shares valued in the same fashion.

During the second quarter of 2007, $12 million principal of the convertible debentures were converted at the holder’s option into 444,443 

common shares. 

On December 15, 2007, an additional $5 million principal of the convertible debentures were converted at the holder’s option into 185,185 

common shares.

In 2007, 467,057 (2006 – 178,373) common shares were issued for $12.0 million (2006 – $4.3 million) to pay interest to holders of 

convertible debentures.

As at December 31, 2007, subsidiaries of the Company’s major shareholder, Gazit-Globe (“Gazit”), owned $118.7 million (2006 – 

$66.4 million) principal amount of the outstanding convertible debentures.

Based on TSX closing bid price, as at December 31, 2007, the market value of the principal amount of the convertible debentures was 

$221 million (2006 – $210 million).

2007 ANNUAL REPORT

73

 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

1 5 .  S H A R E H O L D E R S ’   E Q U I T Y

(a) Share Capital

The Company has an unlimited number of authorized preference shares and common shares. The preference shares may be issued from 

time to time in one or more series, each series comprising the number of shares, designations, rights, privileges, restrictions and conditions 

which the Board of Directors determines by resolution; preference shares are non-voting and rank in priority to the common shares with 

respect to dividends and distributions upon dissolution. No preference shares have been issued. The common shares carry one vote each 

and participate equally in the earnings of the Company and the net assets of the Company upon dissolution. Dividends are payable on the 

common shares as and when declared by the Board of Directors.

The following table sets forth the particulars of the issued and outstanding shares of the Company:

Issued and outstanding at December 31, 2005 

Issuance of common shares (b) 

Payment of interest on convertible debentures (note 14) 

Exercise of warrants (c) 

Exercise of options (d) 

Private placement of shares (b) 

Dividends reinvested in common shares (f) 

Issue costs 

Issued and outstanding at December 31, 2006 

Payment of interest on convertible debentures (note 14) 

Conversion of convertible debentures (note 14) 

Exercise of warrants (c) 

Exercise of deferred share units (e) 

Exercise of options (d) 

Private placement of shares (b) 

Dividends reinvested in common shares (f) 

Issue costs 

Issued and outstanding at December 31, 2007 

(b) Issuance of Common Shares

Number of 

Stated Capital

  Common Shares 

 (thousands of dollars)

  70,645,834 

$  1,022,701

1,135,000 

29,226

178,373 

332,890 

147,365 

70,000 

2,788,446 

— 

4,295

4,165

2,211

1,219

66,054

(945)

  75,297,908 

1,128,926

467,057 

629,628 

119,291 

7,789 

192,998 

73,383 

2,893,875 

— 

12,048

16,325

1,503

162

3,385

1,292

74,962

(317)

  79,681,929 

$  1,238,286

On December 14, 2007, the Company issued 73,383 shares to two members of the Company’s management at a price of $24.89 per share 

for gross proceeds of $1.8 million.

On April 11, 2006, the Company issued 1,000,000 common shares at a price of $25.75 per share for gross proceeds of $25.75 million.

On May 5, 2006, the Company completed the sale of 135,000 common shares at a price of $25.75 per share for gross proceeds of 

$3.48 million, pursuant to an over-allotment option, granted to underwriters, in connection with the April 11, 2006 share offering.

On December 14, 2006, the Company issued 70,000 shares to two members of the Company’s management at a price of $27.34 per share 

for gross proceeds of $1.9 million.

74

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c) Warrants

During 2007, a total of 119,291 (2006 – 332,890) share purchase warrants were exercised at $11.80 per share resulting in proceeds to the 

Company of $1.4 million (2006 – $3.9 million). The equity component of the warrants exercised totalling $0.1 million (2006 – $0.2 million) 

was transferred to share capital. 

At December 31, 2007, there were 175,913 outstanding share purchase warrants (2006 – 295,204 ) exercisable at $11.80 per share during 

a three-month exercise period commencing on June 1 and ending on August 31 in each year to 2008, on and subject to certain terms and 

conditions, and may be exercisable in certain other limited circumstances.

(d) Stock Options

As of December 31, 2007, the Company is authorized to grant up to 7,025,000 (2006 – 3,625,000) common share options to the employees, 

ofﬁ cers and directors of the Company and third-party service providers. As of December 31, 2007, 2,983,453 (2006 – 834,572) common 

share options are available to be granted. Options granted by the Company generally expire ten years from the date of grant and vest over 

three to ﬁ ve years. The outstanding options have exercise prices ranging from $12.42 to $27.57. In 2007, $2.3 million (2006 – $1.0 million) 

had been recorded as an expense due to the vesting of options granted after January 1, 2003.

Outstanding, beginning of year 

Granted 

Exercised 

Cancelled 

Outstanding, end of year 

Options vested, end of year 

Weighted average remaining life (years) 

2007 

2006

  Common Share 

 Weighted Average 

  Common Share 

  Weighted Average

Options 

Exercise Price 

Options 

Exercise Price

  1,568,968 

  1,322,052 

(192,998) 

(70,933) 

  2,627,089 

806,215 

8.3 

$ 

$ 

$ 

$ 

$ 

$ 

20.58 

27.57 

16.66 

24.81 

24.27 

19.19 

1,145,105 

620,682 

(147,365) 

(49,454) 

1,568,968 

580,626 

8.2

$ 

$ 

$ 

$ 

$ 

$ 

17.46

25.01

14.50

21.99

20.58

16.36

During the year ended December 31, 2007, the Company granted 1,322,052 options with a strike price of $27.57, which had an approximate 

fair value of $4.1 million at the time of issue. The options granted include 750,000 options granted to the President and Chief Executive 

Ofﬁ cer that vest one-ﬁ fth on each of the ﬁ ve anniversary dates following the grant date. The remaining options were granted to employees and 

vest one-third on each of the three anniversary dates following the grant date. 

The fair value associated with the options issued was calculated using the Binomial Model for option valuation, assuming an average volatility 

of 13% on the underlying shares, a ten-year term to expiry, and the ten-year weighted average risk-free interest rate (typically, the ten-year 

Canada bond rate at the grant date).

(e) Share Unit Plans

The Company’s share unit plans include a Directors Deferred Share Unit Plan (“DSUP”), an Employee Restricted Share Unit Plan (“Employee 

RSU Plan”) and a Chief Executive Ofﬁ cer Restricted Share Unit Plan (“CEO RSU Plan”). A total of 1,250,000 common shares have been 

reserved for issuance under these plans. 

As at December 31, 2007, 77,569 units (2006 – 64,240 units) have been granted under the DSUP, and $0.4 million (2006 – $0.4 million) 

has been recorded as an expense.

During 2007, 86,000 units (2006 – 76,000 units) were granted under the RSU plans, the number of units issued as a result of dividends 

declared on the common shares of the Company was 14,169 (2006 – 11,813), and 60,000 units (2006 – 70,000) were settled. At 

December 31, 2007, 242,725 units (2006 – 215,270 units) were outstanding under RSU plans. The Company recorded an expense of 

$1.6 million in 2007 (2006 – $1.2 million) for the grants under the CEO RSU Plan and Employee RSU Plan.

2007 ANNUAL REPORT

75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

(f) Dividend Reinvestment Plan

The Company’s Dividend Reinvestment Plan (“DRIP”) allows shareholders who hold at least 500 common shares to reinvest cash dividends 

into additional common shares at a 2% discount to the weighted average trading price of the common shares on the Toronto Stock Exchange 

for the ﬁ ve consecutive trading days preceding the dividend payment date.

1 6 .  I N T E R E S T   A N D   O T H E R   I N C O M E

(thousands of dollars) 

Realized gains on sale of marketable securities  

2007 

$ 

2,504 

$ 

Interest, dividend and distribution income from marketable securities and cash investments 

1,768 

Gains on land and property sales 

Realized gains on interest rate swaps not designated as hedges 

Unrealized gains (losses) on interest rate swaps not designated as hedges 

Interest income from development loans 

Income from non-recourse cash ﬂ ow participation loans 

Other (expense) income 

323 

161 

643 

658 

— 

(24) 

2006

4,221

1,335

137

—

(389)

683

538

392

1 7 .  I N T E R E S T

(thousands of dollars) 

Mortgage, loans and credit facilities 

Senior unsecured debentures 

Convertible debentures 

Other non-cash interest expense (note 2) 

Interest expense 

Convertible debenture interest paid in common shares (note 14) 

Change in accrued interest 

Implicit interest rate in excess of coupon rate on convertible and senior unsecured debentures 

Interest paid in excess of implicit interest on assumed mortgages 

Other non-cash interest expense 

Interest capitalized to land and shopping centres under development  

$ 

6,033 

$ 

6,917

2007 

2006

$ 

70,807 

$ 

30,071 

12,685 

2,480 

116,043 

(12,048) 

(2,362) 

(696) 

1,890 

(2,480) 

15,601 

74,678

12,935

6,196

—

93,809

(4,295)

(6,078)

(242)

2,323

—

8,776

Cash interest paid 

$  115,948 

$ 

94,293

Effective January 1, 2007, amortization of ﬁ nancing costs incurred for mortgages, loans and debentures is presented as non-cash interest 

expense (note 2).

76

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 8 .  I N C O M E   TA X E S

The Company’s business activities are carried out directly and through operating subsidiaries, partnership ventures and trusts in Canada 

and the United States. The income tax effect on operations depends on the tax legislation in each country and the operating results of each 

subsidiary, partnership ventures, and the parent company.

The following table summarizes the provision for income taxes:

(thousands of dollars) 

2007 

2006

Provision for income taxes on income at the combined Canadian federal and provincial

income tax rate of 34.4% (2006 – 33.4%) 

$ 

14,784 

$ 

21,304

Increase (decrease) in the provision for income taxes due to the following items:

  U.S. operations 

  Non-deductible interest expense 

  Change in future income tax rate 

  Expenses not deductible for tax purposes 

  Other items 

Income taxes 

The Company’s future income tax assets are summarized as follows:

(thousands of dollars) 

Losses available for carry-forward 

Canadian and U.S. minimum tax credits 

Other 

The Company’s future income tax liabilities are summarized as follows:

(thousands of dollars) 

Investments 

Shopping centres 

Other 

(40) 

240 

(5,250) 

1,697 

1,171 

(3,240)

81

(573)

990

(814)

$ 

12,602 

$ 

17,748

2007 

2006

$ 

7,890 

$ 

16,613

761 

1,080 

742

—

$ 

9,731 

$ 

17,355

2007 

2006

$ 

13,880 

$ 

25,178 

7,699 

13,880

24,369

5,787

$ 

46,757 

$ 

44,036

At December 31, 2007, the Company has tax-loss carry-forwards for Canadian income tax purposes of approximately $29.0 million (2006 

– $51.0 million), which have been recognized as future income tax assets and are available to reduce future Canadian taxable income. These 

tax-loss carry-forwards expire at various dates between December 31, 2008 and December 31, 2027.

2007 ANNUAL REPORT

77

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

1 9 .  P E R   S H A R E   C A L C U L AT I O N S

The following table sets forth the computation of per share amounts:

(thousands of dollars, except per share amounts) 

2007 

2006

Basic and diluted net income available to common shareholders 

$ 

30,353 

$ 

45,959

Denominator

Weighted average shares outstanding for basic per share amounts: 

  Outstanding warrants 

  Outstanding options  

Denominator for diluted net income available to common shareholders 

Basic and diluted earnings per share 

  77,996,827 

  73,773,554

132,477 

298,279 

251,070

297,200

  78,427,583 

  74,321,824

$ 

0.39 

$ 

0.62

The following securities were not included in the diluted per share calculation as the effect would have been anti-dilutive:

Common share options 

Convertible debentures – 5.5% 

Common share options 

Common share options 

Common share options 

Common share options 

2 0 .  R I S K   M A N A G E M E N T

Number of shares if

converted or exercised

Exercise Price 

2007 

 27.57 

  1,300,352 

2006

—

27.00 

25.75 

25.50 

25.00 

24.75 

  8,629,630 

7,407,406

— 

— 

— 

— 

114,212

22,000

133,620

335,930

$ 

$ 

$ 

$ 

$ 

$ 

In the normal course of its business, the Company is exposed to a number of risks that can affect its operating performance. These risks, and 

the actions taken to manage them, are as follows:

(a) Interest Rate Risk

The Company attempts to structure its ﬁ nancings so as to stagger the maturities of its debt, thereby mitigating its exposure to interest rate 

and other credit market ﬂ uctuations. A portion of the Company’s mortgages, loans and credit facilities are ﬂ oating rate instruments. From 

time to time, the Company may enter into interest rate swap contracts or other ﬁ nancial instruments to modify the interest rate proﬁ le of its 

outstanding debt without an exchange of the underlying principal amount. The fair value of the Company’s interest rate swaps and other 

contracts is a negative value of approximately $0.7 million (2006 – positive value of $1.6 million) due to changes in interest rates since the 

contracts were entered into.

(b) Credit Risk

Credit risk arises from the possibility that tenants and/or debtors may experience ﬁ nancial difﬁ culty and be unable to fulﬁ ll their lease 

commitments or loans. The Company mitigates the risk of credit loss by investing in well-located properties in urban markets that attract 

quality tenants, ensuring that its tenant mix is diversiﬁ ed and by limiting its exposure to any one tenant. A tenant’s success over the term of 

their lease and their ability to fulﬁ l their lease obligations, is subject to many factors. There can be no assurance that a tenant will be able to 

fulﬁ l all of its existing commitments and leases up to their expiry date.

78

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c) Currency Risk

The Company maintains its accounts in Canadian dollars. However, a portion of its operations are located in the United States and therefore, 

the Company is subject to foreign currency ﬂ uctuations which may, from time to time, impact its ﬁ nancial position and results. The Company’s 

U.S. operations are ﬁ nanced in part by U.S. dollar-denominated loans and credit facilities, which are serviced by the cash ﬂ ow generated by 

the Company’s dividends from Equity One. The Company also ﬁ nances a portion of its U.S. net investment through its Canadian company with 

U.S. dollar-denominated loans and credit facilities. In the normal course of business, the Company may enter into forward foreign exchange 

contracts, which may represent designated hedges of a portion of the net investment in the United States self-sustaining operations. While the 

U.S. dollar ﬁ nancings and forward contracts reduce the Company’s exposure to ﬂ uctuations in foreign currency exchange rates, not all of its 

net U.S. dollar currency risk has been hedged. As a result, a strengthening of the Canadian dollar would result in a reduction in the carrying 

value of the Company’s net assets in the United States, and a weakening of the Canadian dollar would increase the carrying value of the net 

assets in the United States.

(d) Fair Values of Financial Instruments

The fair values of the Company’s net working capital items approximate their recorded values at December 31, 2007 and 2006 due to their 

short-term nature. The fair values of the Company’s other ﬁ nancial assets and liabilities are disclosed in notes 11, 13 and 14.

(e) Liquidity Risk

Real estate investments are relatively illiquid. This will tend to limit our ability to sell components of our portfolio promptly in response to 

changing economic or investment conditions. If we were required to quickly liquidate our assets, there is a risk that we would realize sale 

proceeds of less than the current book value of our real estate investments.

2007 ANNUAL REPORT

79

N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

2 1 .  S U P P L E M E N TA L   C A S H   F L O W   I N F O R M AT I O N

(a) Items not affecting cash from operating activities

(thousands of dollars) 

Amortization 

Amortization of above- and below-market leases 

Rent revenue recognized on a straight-line basis 

Gains on land and property sales 

Realized gain on sale of marketable securities (note 16) 

Loss on settlement of debt (note 11) 

Non-cash compensation expense 

Interest paid in excess of coupon interest on assumed mortgages 

Debenture interest expense in excess of coupon 

Convertible debenture interest paid in common shares (note 14) 

Other non-cash interest expense (note 17) 

Equity income from Equity One, Inc. (note 7) 

Future income taxes 

Unrealized (gains) losses on interest rate swaps not designated as hedges 

(b) Net change in non-cash operating items

The net change in non-cash operating assets and liabilities consists of the following:

(thousands of dollars) 

Amounts receivable 

Prepaid expenses 

Accounts payable and accrued liabilities 

Tenant security and other deposits 

Other working capital changes 

(c) Changes in loans, mortgages and other real estate assets

(thousands of dollars) 

Decrease in loans and mortgages receivable 

Investment in marketable securities 

Proceeds from disposition of marketable securities 

(d) Cash and cash equivalents

(thousands of dollars) 

Cash 

Term deposits 

2007 

2006

$ 

79,828 

$ 

68,441

(2,122) 

(6,753) 

(323) 

(2,504) 

483 

4,295 

(1,890) 

696 

12,048 

2,480 

(14,375) 

10,930 

(643) 

(1,643)

(5,839)

(137)

(4,221)

—

2,543

(2,323)

242

4,295

—

(32,696)

13,593

389

$ 

82,150 

$ 

42,644

2007 

2006

$ 

(1,600) 

$ 

(2,356) 

8,716 

2,331 

1,100 

(4,936)

(1,715)

11,249

295

(4,062)

$ 

8,191 

$ 

831

2007 

2006

$ 

1,538 

$ 

3,560

(32,556) 

45,031 

$ 

14,013 

$ 

(30,627)

33,635

6,568

2007 

$ 

6,458 

$ 

3,993 

$ 

10,451 

$ 

2006

6,315

495

6,810

80

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(e) Interest and income taxes

(thousands of dollars) 

Cash income taxes paid 

Cash interest paid (note 17) 

2 2 .  S E G M E N T E D   I N F O R M AT I O N

2007 

787 

$ 

$  115,948 

2006

4,051

94,293

$ 

$ 

The Company and its subsidiaries operate in the shopping centre segment of the real estate industry in both Canada and the United States. 

Income by geographic segment for the year ended December 31, 2007, is summarized as follows:

(thousands of dollars) 

Property rental revenue 

Property operating costs 

Income before the undernoted items 

Equity income from Equity One, Inc. 

Interest and other income 

Interest expense 

Corporate expenses 

Loss on settlement of debt 

Income before amortization 

Amortization 

Income before income taxes 

Canada 

$  376,891 

$ 

134,446 

242,445 

— 

5,513 

106,376 

22,751 

483 

118,348 

79,777 

U.S. 

— 

— 

— 

14,375 

520 

9,667 

793 

— 

4,435 

51 

Total

$  376,891

134,446

242,445

14,375

6,033

116,043

23,544

483

122,783

79,828

$ 

38,571 

$ 

4,384 

$ 

42,955 

Income by geographic segment for the year ended December 31, 2006, is summarized as follows:

(thousands of dollars) 

Property rental revenue 

Property operating costs 

Income before the undernoted items 

Equity income from Equity One, Inc. 

Interest and other income 

Interest expense 

Corporate expenses 

Income before amortization 

Amortization 

Income before income taxes 

Canada 

$ 

325,980 

$ 

120,354 

205,626 

— 

6,903 

84,075 

18,818 

109,636 

68,232 

U.S. 

— 

— 

— 

32,696 

14 

9,734 

464 

22,512 

209 

$ 

41,404 

$ 

22,303 

$ 

Total

$ 

325,980

120,354

205,626

32,696

6,917

93,809

19,282

132,148

68,441

63,707

2007 ANNUAL REPORT

81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
N O T E S   T O   T H E   C O N S O L I D AT E D   F I N A N C I A L   S TAT E M E N T S – continued

2 3 .  P R O P O R T I O N AT E   C O N S O L I D AT I O N

The Company is a participant in 15 (2006 – 15) partnership, co-ownership and limited liability corporate ventures that own land, shopping 

centres, and shopping centres under development. The Company’s participation in these entities ranges from 33% to 80%.

The following amounts are included in the consolidated ﬁ nancial statements and represent the Company’s proportionate interest in the 

ﬁ nancial accounts of the joint ventures:

 (thousands of dollars) 

Assets 

Liabilities 

Revenues 

Expenses 

Net income 

Cash ﬂ ows provided by (used in):

  Operating activities 

Investing activities 

  Financing activities 

2007 

2006

$  163,619 

92,663 

26,192 

19,955 

$ 

$ 

$ 

168,107

105,470

25,726

20,770

4,956

6,237 

$ 

10,011 

2,083 

(10,508) 

$ 

$ 

$ 

8,467

(8,454)

(2,415)

$ 

$ 

$ 

$ 

$ 

$ 

Cash and cash equivalents held pursuant to terms of joint venture agreements amount to $4.0 million (2006 – $2.4 million).

The Company is contingently liable for certain of the obligations of the joint ventures and all of the net assets of the joint ventures are available 

for the purpose of satisfying such obligations and guarantees (note 24 (c)).

2 4 .  C O M M I T M E N T S   A N D   C O N T I N G E N C I E S

(a)   The Company is involved in litigation and claims which arise from time to time in the normal course of business. In the opinion of 

Management, none of these, individually or in aggregate, would result in a liability that would have a signiﬁ cant adverse effect on the 

ﬁ nancial position of the Company.

(b)   On October 16, 2006, First Capital Realty and First Capital (Royal Oak) Corporation (a wholly-owned nominee subsidiary of First Capital 

Realty) were named as defendants in a lawsuit commenced by Rencor Developments Inc. and Rencor Developments (Royal Oak) Inc. 

(collectively, “Rencor”). First Capital Realty and Rencor are joint venture partners in the Royal Oak Shopping Centre located in Calgary, 

Alberta, in which First Capital Realty owns a 60% undivided interest and Rencor owns the remaining 40% undivided interest. The 

Statement of Claim seeks damages for alleged breaches by First Capital Realty of certain agreements relating to the ownership and 

operation of the Royal Oak Shopping Centre. First Capital Realty believes the lawsuit to be frivolous and without merit and intends to 

vigorously defend against the allegations made in the Statement of Claim. Accordingly, as of December 31, 2007, First Capital Realty has 

not recorded any loss provision with respect to this claim in its ﬁ nancial statements. 

(c)   The Company is contingently liable, jointly and severally, for approximately $46.7 million (2006 – $48.2 million) to various lenders in 

connection with loans advanced to its joint venture partners secured by the partners’ interest in the co-ownerships. 

(d)   The Company is also contingently liable for letters of credit in the amount of $11.9 million (2006 – $5.5 million) issued in the ordinary 

course of business. 

(e)   The Company has obligations as lessee under long-term leases for land. Annual commitments under these ground leases are 

approximately $0.8 million with a total obligation of $18.7 million.

(f)  

 In two of the Company’s shopping centres, the grocery store anchor tenant has a right to purchase their premises on terms that are 

potentially favourable to the tenants.

82

2007 ANNUAL REPORT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 5 .  R E L AT E D   PA R T Y   T R A N S A C T I O N S

A subsidiary of the Company’s majority shareholder, Gazit-Globe (“Gazit”), reimburses the Company for certain accounting and administrative 

services provided by the Company. The total amount reimbursed during 2007 was $976,000 (2006 – $1,033,000) which primarily consists of 

appraisal and accounting costs related to International Financial Reporting Standards. At December 31, 2007, $26,300 due from Gazit was 

included in amounts receivable (2006 – $442,000) and collected subsequent to year end.

In addition, subsidiary companies of Gazit subscribe to the Company’s convertible debentures as described in Note 14.

2 6 .  C O M PA R AT I V E   A M O U N T S

Certain comparative amounts have been reclassiﬁ ed to reﬂ ect the presentation adopted in the current year.

2007 ANNUAL REPORT

83

S H A R E H O L D E R   I N F O R M AT I O N

 H E A D   O F F I C E
King Liberty Village

T O R O N T O   S T O C K   E X C H A N G E   L I S T I N G S
Common Shares:  

FCR

85 Hanna Avenue, Suite 400, Toronto, Ontario M6K 3S3

5.50% Convertible Cdn Debentures: 

Tel: 416 504 4114

Fax: 416 941 1655

M O N T R E A L   O F F I C E
2620 de Salaberry, Suite 201

Montreal, Quebec H3M 1L3

Tel: 514 332 0031

Fax: 514 332 5135

C A L G A RY   O F F I C E
Trans Canada Centre, Unit 158, 1440-52nd Street NE

Calgary, Alberta T2A 4T8

Tel: 403 257 6888

Fax: 403 257 6899

VA N C O U V E R   O F F I C E
Terra Nova Village

3671 Westminster Hwy, Suite 240

Richmond, British Columbia V7C 5V2

Tel: 604 278 0056

Fax: 604 278 3364

A N N U A L   S H A R E H O L D E R S ’   M E E T I N G
May 22, 2008

The Design Exchange

234 Bay Street

Toronto, Ontario

at 1:00 p.m. 

5.50% Convertible US Debentures: 

Warrants: 

T R A N S F E R   A G E N T
Computershare Trust Company of Canada

100 University Avenue, 11th Floor

Toronto, Ontario M5J 2Y1

(Toll Free) 1.800.564-6253

L E G A L   C O U N S E L
Torys LLP

Toronto, Ontario

Davies Ward Phillips & Vineberg LLP

Montreal, Quebec

A U D I T O R S
Deloitte & Touche LLP

Toronto, Ontario

O F F I C E R S
Dori J. Segal

President and CEO

Sylvie Lachance

Executive Vice President

Karen H. Weaver

Chief Financial Ofﬁ cer

Brian Kozak

Vice President, Western Canada

FCR.DB.A

FCR.DB.B

FCR.WT

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www.ﬁ rstcapitalrealty.ca

84

2007 ANNUAL REPORT

 
 
FIRST CAPITAL REALTY IS CANADA’S LEADING OWNER, DEVELOPER AND OPERATOR OF SUPERMARKET

AND DRUGSTORE-ANCHORED NEIGHBOURHOOD AND COMMUNITY SHOPPING CENTRES, LOCATED PREDOMI-
NANTLY IN GROWING METROPOLITAN AREAS. THE COMPANY CURRENTLY OWNS INTERESTS IN 161 PROPER-
TIES, INCLUDING SIX UNDER DEVELOPMENT, TOTALLING APPROXIMATELY 19.4 MILLION SQUARE FEET OF
GROSS LEASABLE AREA AND 14 LAND SITES IN THE PLANNING STAGE FOR FUTURE RETAIL DEVELOPMENT. IN
ADDITION, THE COMPANY OWNS 14 MILLION SHARES (19%) OF EQUITY ONE (NYSE: EQY), ONE OF THE
LARGEST SHOPPING CENTRE REITS IN SOUTHERN UNITED STATES. INCLUDING ITS INVESTMENTS IN EQUITY
ONE, THE COMPANY HAS INTERESTS IN 326 PROPERTIES TOTALLING APPROXIMATELY 36.5 MILLION SQUARE
FEET OF GROSS LEASABLE AREA. FIRST CAPITAL REALTY HAS AN ENTERPRISE VALUE OF OVER $4 BILLION. 

Stablilized properties

Under development/expansion

Expansion/development potential

Development sites

FIRST CAPITAL’S WELL-LOCATED PROPERTIES IN URBAN MARKETS

WITH STRONG DEMOGRAPHICS ATTRACT QUALITY TENANTS.

OUR TOP 40 TENANTS

Newmarket

Markham

Peterborough

Bowmanville

Ajax

Whitby

Pickering

London

Woodstock

Thamesford

Ingersoll

Brampton

Mississauga

Toronto

Oakville
Burlington

Cambridge

Waterloo

Kitchener

Brantford

Hamilton

St. Catharines

Lachenaie

Repentigny

Laval

Boucherville

Montréal

Longueuil

Beaconsfield

L’Ile Perrot

Chateauguay

Delson

St. Albert

Edmonton

Sherwood
Park 

Belmont

Tillsonburg

St. Thomas

LOCATION
LOCATION
LOCATION

North
Vancouver

West
Vancouver

Vancouver

Burnaby

Coquitlam

Richmond

Surrey

Delta

Langley

Abbotsford

U.S.A.

Gatineau

Hull

Ottawa

Beauport

Vanier

Québec

Sillery

Lévis

Sainte-Foy

Saint-Romuald

Charny

Cochrane

Airdrie

Calgary

Red Deer

Duncan, Vancouver Island

Lethbridge

LOCATION
LOCATION
LOCATION

Everything we now build is environmentally friendly 
Over 30 Projects underway will be LEED certified

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85 Hanna Avenue, Suite 400, Toronto, ON  M6K 3S3
Tel: 416.504.4114  Fax: 416.941.1655   
www.firstcapitalrealty.ca

Trees:
Waste:
Water:
Air:
Energy: 

SAVINGS
3 trees preserved for the future
130 lbs. solid waste not generated
1,014 gallons wastewater flow saved
244 lbs. net greenhouse gases prevented
2,000,000 BTUs energy not consumed

F I R S T   C A P I TA L   R E A LT Y   I N C .
2007 Annual Report