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First
st
First
Capi
Capi
Capital
Realty
Inc.
2018 Annual Report
First Capital Realty Inc.
Shops at King Liberty
85 Hanna Ave., Suite 400
Toronto, Ontario M6K 3S3
T 416.504.4114
F 416.941.1655
fcr.ca
NOTE: Spine created using measurements of a previous Annual Report.
NOTE: Spine created using measurements of a previous Annual Report.
Please adjust accordingly.
Please adjust accordingly.
Shareholder Information
Head Office
Shops at King Liberty
85 Hanna Avenue, Suite 400
Toronto, Ontario M6K 3S3
Tel: 416 504 4114
Fax: 416 941 1655
Montreal Office
Place Viau
7600 boulevard Viau, Suite 113
Montréal, Québec H1S 2P3
Tel: 514 332 0031
Fax: 514 332 5135
Calgary Office
Mount Royal Block
815 – 17th Avenue SW, Suite 200
Calgary, Alberta T2T 0A1
Tel: 403 257 6888
Fax: 403 257 6899
Edmonton Office
Edmonton Brewery District
12068 – 104 Avenue, Suite 301
Edmonton, Alberta T5K 0K2
Tel: 780 475 3695
Vancouver Office
Shops at New West
800 Carnarvon Street, Suite 320
New Westminster, BC V3M 0G3
Tel: 604 278 0056
Fax: 604 242 0266
fcr.ca
CORPORATE PROFILE
First Capital Realty Inc. (TSX: FCR) is one of the largest owners, developers and operators
of necessity-based real estate located in Canada’s most densely populated urban centres.
As at December 31, 2018, the Company owned interests in 166 properties, totaling
approximately 25.5 million square feet of gross leasable area. At December 31, 2018,
First Capital Realty had an enterprise value of $9.2 billion. The common shares of the
Company trade on the Toronto Stock Exchange.
Transfer Agent
Computershare Trust Company
of Canada
100 University Avenue, 11th Floor
Toronto, Ontario M5J 2Y1
Toll-free: 1 800 564 6253
Shareholder In-
formation
Auditors
Ernst & Young LLP
Toronto, Ontario
Directors
Dori J. Segal
Chairman, First Capital Realty Inc.
Toronto, Ontario
Jon Hagan, C.P.A., C.A.
Consultant, JN Hagan Consulting
Barbados
Annalisa King
Corporate Director
Vancouver, British Columbia
Aladin (Al) W. Mawani, C.P.A., C.A
Corporate Director
Thornhill, Ontario
Bernard McDonell
Corporate Director
Apple Hill, Ontario
Adam E. Paul, C.P.A., C.A
President and Chief Executive Officer,
First Capital Realty Inc.
Toronto, Ontario
Andrea Stephen, C.P.A., C.A.
Corporate Director
Toronto, Ontario
Executive Leadership Team
Adam E. Paul
President and Chief Executive Officer
Kay Brekken
Executive Vice President and
Chief Financial Officer
Jordan Robins
Executive Vice President and
Chief Operating Officer
Carmine Francella
Senior Vice President, Leasing
Alison Harnick
Senior Vice President, General Counsel
and Corporate Secretary
Maryanne McDougald
Senior Vice President, Operations
Gregory J. Menzies
Project Lead, Yorkville Village
Jodi M. Shpigel
Senior Vice President, Development
Michele Walkau
Senior Vice President, Brand & Culture
Evolved
Urban
Investment
Strategy
First Capital Realty’s primary strategy is the
creation of value over the long term by
generating sustainable growth in cash flow
and capital appreciation of its portfolio.
In February of 2019, the company announced an evolved urban
investment strategy to:
• continue to invest in high-quality, mixed-use properties with a
focus on building large positions in targeted high growth urban
neighbourhoods; and to
• complete strategic dispositions to provide capital for the Company’s
investment programs.
This evolved strategy will result in:
• a deeper focus on super urban neighbourhood markets that fully
integrate retail with other uses e.g. Yorkville Village, Liberty Village,
Griffintown, Brewery District, Mount Royal and numerous others;
• surfacing substantial unrecognized value in the density pipeline,
primarily through the development process; and
• optimizing the portfolio by further concentrating investment capital
in dense, high growth neighbourhoods.
Evolved
Urban
Investment
Strategy
First Capital Realty’s primary strategy is the
creation of value over the long term by
generating sustainable growth in cash flow
and capital appreciation of its portfolio.
In February of 2019, the company announced an evolved urban
investment strategy to:
• continue to invest in high-quality, mixed-use properties with a
focus on building large positions in targeted high growth urban
neighbourhoods; and to
• complete strategic dispositions to provide capital for the Company’s
investment programs.
This evolved strategy will result in:
• a deeper focus on super urban neighbourhood markets that fully
integrate retail with other uses e.g. Yorkville Village, Liberty Village,
Griffintown, Brewery District, Mount Royal and numerous others;
• surfacing substantial unrecognized value in the density pipeline,
primarily through the development process; and
• optimizing the portfolio by further concentrating investment capital
in dense, high growth neighbourhoods.
FFO/SHARE
($)
NAV/SHARE
($)
POPULATION
(100,000s)
FFO/SHARE
($)
NAV/SHARE
($)
POPULATION
(100,000s)
+22.2% since Jan 1, 2016
+23.8% since Jan 1, 2016
Within 5 Km radius
+22.2% since Jan 1, 2016
+23.8% since Jan 1, 2016
Within 5 Km radius
1.21
1.16
1.11
22.59
21.85
19.53
250
215
207
186
1.21
1.16
1.11
22.59
21.85
19.53
250
215
207
186
16
17
18
All data as of December 31
16
17
18
15
16
17
18
16
17
18
All data as of December 31
16
17
18
15
16
17
18
Evolved Urban Investment Strategy
Evolved Urban Investment Strategy
HIGH-QUALITY PORTFOLIO
OF URBAN ASSETS
HIGH-QUALITY PORTFOLIO
OF URBAN ASSETS
Greater Toronto Area
Greater Montreal Area
Greater Calgary Area
Greater Vancouver Area
Greater Edmonton Area
Greater Ottawa Area
Other
Total
IFRS Fair Values as at December 31, 2018
40%
14%
12%
11%
9%
6%
8%
100%
Greater Toronto Area
Greater Montreal Area
Greater Calgary Area
Greater Vancouver Area
Greater Edmonton Area
Greater Ottawa Area
Other
Total
IFRS Fair Values as at December 31, 2018
40%
14%
12%
11%
9%
6%
8%
100%
NORTH AMERICAN
LEADER IN POPULATION
DENSITY
250K
153K
109K
US$120K
$113K
$100K
US Peers: Federal Realty and
Regency Centres
Canadian Peers: Riocan,
SmartCentres REIT,
Choice Properties (Retail only),
CT REIT, Crombie REIT
Sources: Sitewise, Environics
Analytics & Company Reports
NORTH AMERICAN
LEADER IN POPULATION
DENSITY
250K
153K
109K
US$120K
$113K
$100K
5 Km Population (2018)
5 Km Household Income (2018)
5 Km Population (2018)
5 Km Household Income (2018)
TRACK RECORD OF
INDUSTRY-LEADING
SAME PROPERTY
NOI GROWTH
6.8%
5 year average – 2.7%
10 year average – 3.2 %
3.4%
3.7%
3.2%
3.7%
2.5%
2.3%
3.1%
2.5%
1.1%
Total Same Property
NOI Growth
TRACK RECORD OF
INDUSTRY-LEADING
SAME PROPERTY
NOI GROWTH
6.8%
3.4%
3.7%
3.2%
3.7%
2.5%
2.3%
3.1%
2.5%
1.1%
Total Same Property
NOI Growth
09
10
11
12
13
14
15
16
17
18
09
10
11
12
13
14
15
16
17
18
GROWING AVERAGE
RENTAL RATE
$20.24
$19.69
$19.39
Weighted average
rental rate (psf)
$18.84
$18.42
22.6M SQ.FT.
OF INCREMENTAL DENSITY
TERM
ACTIVE
SHORT/MEDIUM
< 7 years
LONG
8–15 years
VERY LONG
> 15 years
TOTAL
(millions)
Retail/Commercial
Residential
Total (millions)
0.2
0.2
0.4
0.9
3.6
4.5
1.0
11.5
12.5
0.2
5.0
5.2
2.3
20.3
22.6
GROWING AVERAGE
RENTAL RATE
$20.24
$19.69
$19.39
Weighted average
rental rate (psf)
$18.84
$18.42
22.6M SQ.FT.
OF INCREMENTAL DENSITY
TERM
ACTIVE
SHORT/MEDIUM
< 7 years
LONG
8–15 years
VERY LONG
> 15 years
TOTAL
(millions)
Retail/Commercial
Residential
Total (millions)
0.2
0.2
0.4
0.9
3.6
4.5
1.0
11.5
12.5
0.2
5.0
5.2
2.3
20.3
22.6
14
15
16
17
18
As at December 31, 2018
Identified Incremental Density (SF)
14
15
16
17
18
As at December 31, 2018
Identified Incremental Density (SF)
US Peers: Federal Realty and
Regency Centres
Canadian Peers: Riocan,
SmartCentres REIT,
Choice Properties (Retail only),
CT REIT, Crombie REIT
Sources: Sitewise, Environics
Analytics & Company Reports
5 year average – 2.7%
10 year average – 3.2 %
Sustainable Cash Flow
Sustainable Cash Flow
HIGHLIGHTS
NECESSITY BASED
RETAIL SERVICES
Annual minimum rents
HIGHLIGHTS
NECESSITY BASED
RETAIL SERVICES
Annual minimum rents
Over 90% of revenue comes from necessity-based
retail
Population density of 250,000 within 5 Km radius
8 of the top 10 tenants have investment-grade
credit ratings
Track record of consistently high occupancy
Investment-grade credit ratings from Moody’s and DBRS
25 consecutive years of paying dividends
Sustainability leader – listed on Corporate Knights
Future 40 Responsible Corporate Leaders for
five consecutive years
Canada’s Most Gender Diverse Company*
Grocery stores
Pharmacies
Liquor stores
Banks & Credit Unions
Other necessity-based retailers
Other tenants
Restaurants & cafes
Medical professional & personal services
Fitness facilities
Daycare & learning centres
Total
18%
9%
3%
9%
18%
9%
14%
15%
4%
1%
100%
Over 90% of revenue comes from necessity-based
retail
Population density of 250,000 within 5 Km radius
8 of the top 10 tenants have investment-grade
credit ratings
Track record of consistently high occupancy
Investment-grade credit ratings from Moody’s and DBRS
25 consecutive years of paying dividends
Sustainability leader – listed on Corporate Knights
Future 40 Responsible Corporate Leaders for
five consecutive years
Canada’s Most Gender Diverse Company*
Grocery stores
Pharmacies
Liquor stores
Banks & Credit Unions
Other necessity-based retailers
Other tenants
Restaurants & cafes
Medical professional & personal services
Fitness facilities
Daycare & learning centres
Total
*As part of Canada’s First Gender Diversity ETF launched in 2017 (TSX:HERS)
*As part of Canada’s First Gender Diversity ETF launched in 2017 (TSX:HERS)
TOP 10 TENANTS
TOTAL PORTFOLIO OCCUPANCY
TOP 10 TENANTS
TOTAL PORTFOLIO OCCUPANCY
5 year average – 95.7%
10 Year average – 95.8%
5 year average – 95.7%
10 Year average – 95.8%
09
10
11
12
13
14
15
16
17
18
96.2%
96.4%
96.2%
95.5%
95.5%
96.0%
94.7%
94.9%
96.1%
96.7%
09
10
11
12
13
14
15
16
17
18
18%
9%
3%
9%
18%
9%
14%
15%
4%
1%
100%
96.2%
96.4%
96.2%
95.5%
95.5%
96.0%
94.7%
94.9%
96.1%
96.7%
Financial Highlights
Financial Highlights
As at December 31
(millions of dollars, except per share amounts)
Total assets
Total equity market capitalization(1)
Enterprise value(1)
Net debt to total assets
Annual dividend per common share
2018
$ 10,453
$ 4,804
$ 9,239
42.1%
$ 0.86
2017
$ 9,969
$ 5,065
$ 9,480
43.4%
$ 0.86
As at December 31
(millions of dollars, except per share amounts)
Total assets
Total equity market capitalization(1)
Enterprise value(1)
Net debt to total assets
Annual dividend per common share
Operating Highlights
Operating Highlights
As at December 31
(millions of dollars, except per share amounts)
Property Rental Revenue
Net Operating Income (“NOI”)(1)
Net Income Attributable to Common Shareholders
Funds from Operations (“FFO”)(1)
FFO
FFO per diluted share
FFO Payout Ratio
Cash Provided by Operating Activities
Adjusted Cash Flow from Operations (“ACFO”)(1)
ACFO
ACFO payout ratio
2018
$ 730
$ 455
$ 344
$ 303
$ 1.21
71.1%
$ 283
$ 267
79.6%
2017
$ 694
$ 438
$ 633
$ 284
$ 1.16
74.2%
$ 270
$ 244
86.0%
As at December 31
(millions of dollars, except per share amounts)
Property Rental Revenue
Net Operating Income (“NOI”)(1)
Net Income Attributable to Common Shareholders
Funds from Operations (“FFO”)(1)
FFO
FFO per diluted share
FFO Payout Ratio
Cash Provided by Operating Activities
Adjusted Cash Flow from Operations (“ACFO”)(1)
ACFO
ACFO payout ratio
2018
$ 10,453
$ 4,804
$ 9,239
42.1%
$ 0.86
2017
$ 9,969
$ 5,065
$ 9,480
43.4%
$ 0.86
2018
$ 730
$ 455
$ 344
$ 303
$ 1.21
71.1%
$ 283
$ 267
79.6%
2017
$ 694
$ 438
$ 633
$ 284
$ 1.16
74.2%
$ 270
$ 244
86.0%
(1) These measures are not defined by IFRS. Refer to the “Non-IFRS Financial Measures” section of the Company’s Management’s Discussion & Analysis for further information.
(1) These measures are not defined by IFRS. Refer to the “Non-IFRS Financial Measures” section of the Company’s Management’s Discussion & Analysis for further information.
Message from
the President & CEO
Message from
the President & CEO
Dear Fellow Shareholder,
I am pleased to report that 2018 extended a multi-
year period of very strong property and company
level results. We advanced many areas of our
business and are a stronger, better positioned
company today, than any other time in our history.
Dear Fellow Shareholder,
I am pleased to report that 2018 extended a multi-
year period of very strong property and company
level results. We advanced many areas of our
business and are a stronger, better positioned
company today, than any other time in our history.
A snapshot of 2018 can be summarized as
part of the year, 2019 has proved to be extremely
A snapshot of 2018 can be summarized as
part of the year, 2019 has proved to be extremely
follows:
eventful for First Capital.
follows:
eventful for First Capital.
• Invested over $390 million in urban proper-
In February, alongside the release of our 2018
ties through acquisitions and development;
results and further discussed on our year end
• Completed $290 million of development
properties that were transferred to our
income producing property portfolio;
• Closed on $250 million of dispositions;
• Grew same property NOI by 3.1% which
exceeded our five-year average;
conference call, we outlined our Evolved Urban
Investment Strategy and our plan to convert
into a real estate investment trust (REIT).
Subsequently, we announced a transformative
two-part transaction with Gazit-Globe, First
Capital’s founding shareholder (the Gazit
Transaction). The upcoming completion of the
• Achieved record occupancy at year end
Gazit Transaction marks a very significant
of 96.7%;
milestone in the Company’s evolution. It is also
• Increased lease renewal rates by 8.4% (10.9%
expected to deliver a number of meaningful
when compared to the average rent during
benefits to First Capital and our shareholders
renewal term);
• Grew FFO per share by 4.4% including
one-time costs related to our REIT conver-
sion plan (4.9% excluding REIT costs); and
which we outlined in our announcement and
the transaction prospectus.
Following these major announcements we
made earlier in 2019, our current priorities are
• Increased NAV per share by 3.3% to $22.59.
as follows:
Our business plan was well executed in 2018;
1. De-leveraging the balance sheet by selling
however, we are squarely focused on the future.
properties that are inconsistent with our
As this letter is being written, it is early April.
Evolved Urban Investment Strategy (following
Notwithstanding that we are still in the early
the upcoming closing of the share repurchase
THE KEY TO
OUR LONG-TERM
SUCCESS HAS
ALWAYS BEEN OUR
ABILITY TO EVOLVE
OUR STRATEGY TO
CAPITALIZE ON NEW
OPPORTUNITIES IN
CHANGING MARKET
CONDITIONS.
• Invested over $390 million in urban proper-
In February, alongside the release of our 2018
ties through acquisitions and development;
results and further discussed on our year end
• Completed $290 million of development
properties that were transferred to our
income producing property portfolio;
• Closed on $250 million of dispositions;
• Grew same property NOI by 3.1% which
exceeded our five-year average;
conference call, we outlined our Evolved Urban
Investment Strategy and our plan to convert
into a real estate investment trust (REIT).
Subsequently, we announced a transformative
two-part transaction with Gazit-Globe, First
Capital’s founding shareholder (the Gazit
Transaction). The upcoming completion of the
• Achieved record occupancy at year end
Gazit Transaction marks a very significant
of 96.7%;
milestone in the Company’s evolution. It is also
• Increased lease renewal rates by 8.4% (10.9%
expected to deliver a number of meaningful
when compared to the average rent during
benefits to First Capital and our shareholders
renewal term);
• Grew FFO per share by 4.4% including
one-time costs related to our REIT conver-
sion plan (4.9% excluding REIT costs); and
which we outlined in our announcement and
the transaction prospectus.
Following these major announcements we
made earlier in 2019, our current priorities are
• Increased NAV per share by 3.3% to $22.59.
as follows:
Our business plan was well executed in 2018;
1. De-leveraging the balance sheet by selling
however, we are squarely focused on the future.
properties that are inconsistent with our
As this letter is being written, it is early April.
Evolved Urban Investment Strategy (following
Notwithstanding that we are still in the early
the upcoming closing of the share repurchase
THE KEY TO
OUR LONG-TERM
SUCCESS HAS
ALWAYS BEEN OUR
ABILITY TO EVOLVE
OUR STRATEGY TO
CAPITALIZE ON NEW
OPPORTUNITIES IN
CHANGING MARKET
CONDITIONS.
Message from
the President & CEO
Message from
the President & CEO
component of the Gazit Transaction scheduled
strategy. We have expanded our partnership
component of the Gazit Transaction scheduled
strategy. We have expanded our partnership
I CONTINUE TO BE
EXCEPTIONALLY
PROUD OF THE
PASSIONATE,
ENGAGED AND
TALENTED GROUP
THAT COMPRISE
THE ENTIRE FIRST
CAPITAL TEAM WHO
I WOULD LIKE TO
SINCERELY THANK
AND RECOGNIZE.
for April 16, 2019);
2. Investing in selective super urban properties
where value add opportunities exist primarily
through development, redevelopment or
repositioning;
relationships and we appreciate our partners’
confidence in us. We also express thanks to our
service providers, our lenders, our advisors and
to the communities in which we operate.
3. Unlocking value in our very substantial and
Finally, thank you, our shareholders for the
growing incremental density pipeline; and
privilege of leading First Capital as we continue
to evolve our business during a very exciting
time for our company.
Respectfully,
4. Completing the conversion to a REIT.
We will be expanding on each of these and
providing updates accordingly at our upcoming
Annual Meeting of Shareholders being held on
June 4th, 2019 at 10:00 a.m. (Toronto time) at
our Yorkville Village property at 136 Yorkville
Avenue in Toronto. We hope to see you there.
The meaningful progress we are making is the
Adam Paul
result of contributions from many people. I
President & Chief Executive Officer
continue to be exceptionally proud of the
passionate, engaged and talented group that
comprise the entire First Capital team who I
would like to sincerely thank and recognize. I
would also like to thank our Board of Directors
for their ongoing guidance, support and the
active role they played in shaping our evolved
I CONTINUE TO BE
EXCEPTIONALLY
PROUD OF THE
PASSIONATE,
ENGAGED AND
TALENTED GROUP
THAT COMPRISE
THE ENTIRE FIRST
CAPITAL TEAM WHO
I WOULD LIKE TO
SINCERELY THANK
AND RECOGNIZE.
for April 16, 2019);
2. Investing in selective super urban properties
where value add opportunities exist primarily
through development, redevelopment or
repositioning;
relationships and we appreciate our partners’
confidence in us. We also express thanks to our
service providers, our lenders, our advisors and
to the communities in which we operate.
3. Unlocking value in our very substantial and
Finally, thank you, our shareholders for the
growing incremental density pipeline; and
privilege of leading First Capital as we continue
to evolve our business during a very exciting
time for our company.
Respectfully,
4. Completing the conversion to a REIT.
We will be expanding on each of these and
providing updates accordingly at our upcoming
Annual Meeting of Shareholders being held on
June 4th, 2019 at 10:00 a.m. (Toronto time) at
our Yorkville Village property at 136 Yorkville
Avenue in Toronto. We hope to see you there.
The meaningful progress we are making is the
Adam Paul
result of contributions from many people. I
President & Chief Executive Officer
continue to be exceptionally proud of the
passionate, engaged and talented group that
comprise the entire First Capital team who I
would like to sincerely thank and recognize. I
would also like to thank our Board of Directors
for their ongoing guidance, support and the
active role they played in shaping our evolved
KING HIGH LINE – RENDERING, TORONTO
KING HIGH LINE – TODAY, TORONTO
KING HIGH LINE – RENDERING, TORONTO
KING HIGH LINE – TODAY, TORONTO
DORI J. SEGAL DIRECTOR, GAZIT–GLOBE &
CHAIRMAN OF THE BOARD, FIRST CAPITAL REALTY INC.
CHAIM KATZMAN FOUNDER & CEO, GAZIT–GLOBE
DORI J. SEGAL DIRECTOR, GAZIT–GLOBE &
CHAIRMAN OF THE BOARD, FIRST CAPITAL REALTY INC.
CHAIM KATZMAN FOUNDER & CEO, GAZIT–GLOBE
To our
Founding
Shareholders
To our
Founding
Shareholders
On behalf of the Board of
Directors, the Executive
Leadership Team and all
employees, thank you
Gazit-Globe for making
First Capital Realty a true
leader in the Canadian real
estate industry.
On behalf of the Board of
Directors, the Executive
Leadership Team and all
employees, thank you
Gazit-Globe for making
First Capital Realty a true
leader in the Canadian real
estate industry.
Management’s
Discussion and Analysis
MD&A
Management’s
Discussion and Analysis
MD&A
MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table of Contents
1
1
2
6
9
11
13
14
16
16
19
19
20
21
21
22
22
23
23
28
29
32
33
33
34
34
36
36
36
37
38
Introduction
Forward-looking Statement Advisory
Business Overview and Strategy
Outlook and Current Business Environment
Corporate Responsibility & Sustainability
Non-IFRS Financial Measures
Operating Metrics
Summary Consolidated Information and Highlights
Business and Operations Review
Real Estate Investments
Investment Properties — Shopping Centres
2018 Acquisitions
2017 Acquisitions
2018 Dispositions
2017 Dispositions
Impact of Acquisitions and Dispositions
Capital Expenditures
Valuation of Investment Properties
Properties Under Development
Main and Main Urban Realty
Leasing and Occupancy
Top Forty Tenants
Lease Maturity Profile
Loans, Mortgages and Other Assets
Results of Operations
Net Operating Income
Interest and Other Income
Interest Expense
Corporate Expenses
Other Gains (Losses) and (Expenses)
Income Taxes
38
38
38
40
40
41
41
43
43
43
44
44
45
45
46
46
47
49
51
52
53
53
54
54
56
57
57
Net Income Attributable to Common Shareholders
Capital Structure and Liquidity
Total Capital Employed
Credit Ratings
Outstanding Debt and Principal Maturity Profile
Mortgages
Credit Facilities
Senior Unsecured Debentures
Convertible Debentures
Shareholders’ Equity
Liquidity
Cash Flows
Contractual Obligations
Contingencies
Non-IFRS Reconciliations and Financial Measures
Reconciliation of Consolidated Balance Sheets
to the Company’s Proportionate Interest
Reconciliation of Consolidated Statements
of Income to the Company's Proportionate Interest
FFO and ACFO
Dividends
Summary of Financial Results of Long-term Debt
Guarantors
Related Party Transactions
Subsequent Events
Quarterly Financial Information
Critical Accounting Estimates
Accounting Policy Changes
Controls and Procedures
Risks and Uncertainties
MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table of Contents
1
1
2
6
9
11
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Introduction
Forward-looking Statement Advisory
Business Overview and Strategy
Outlook and Current Business Environment
Corporate Responsibility & Sustainability
Non-IFRS Financial Measures
Operating Metrics
Summary Consolidated Information and Highlights
Business and Operations Review
Real Estate Investments
Investment Properties — Shopping Centres
2018 Acquisitions
2017 Acquisitions
2018 Dispositions
2017 Dispositions
Impact of Acquisitions and Dispositions
Capital Expenditures
Valuation of Investment Properties
Properties Under Development
Main and Main Urban Realty
Leasing and Occupancy
Top Forty Tenants
Lease Maturity Profile
Loans, Mortgages and Other Assets
Results of Operations
Net Operating Income
Interest and Other Income
Interest Expense
Corporate Expenses
Other Gains (Losses) and (Expenses)
Income Taxes
38
38
38
40
40
41
41
43
43
43
44
44
45
45
46
46
47
49
51
52
53
53
54
54
56
57
57
Net Income Attributable to Common Shareholders
Capital Structure and Liquidity
Total Capital Employed
Credit Ratings
Outstanding Debt and Principal Maturity Profile
Mortgages
Credit Facilities
Senior Unsecured Debentures
Convertible Debentures
Shareholders’ Equity
Liquidity
Cash Flows
Contractual Obligations
Contingencies
Non-IFRS Reconciliations and Financial Measures
Reconciliation of Consolidated Balance Sheets
to the Company’s Proportionate Interest
Reconciliation of Consolidated Statements
of Income to the Company's Proportionate Interest
FFO and ACFO
Dividends
Summary of Financial Results of Long-term Debt
Guarantors
Related Party Transactions
Subsequent Events
Quarterly Financial Information
Critical Accounting Estimates
Accounting Policy Changes
Controls and Procedures
Risks and Uncertainties
Management’s Discussion and Analysis of
Management’s Discussion and Analysis of
Financial Position and Results of Operations
Financial Position and Results of Operations
INTRODUCTION
INTRODUCTION
This Management’s Discussion and Analysis (“MD&A”) of the financial position and results of operations of First Capital
This Management’s Discussion and Analysis (“MD&A”) of the financial position and results of operations of First Capital
Realty Inc. (“First Capital Realty”, “FCR” or the “Company”) is intended to provide readers with an assessment of
Realty Inc. (“First Capital Realty”, “FCR” or the “Company”) is intended to provide readers with an assessment of
performance and summarize the financial position and results of operations for the three months and years ended
performance and summarize the financial position and results of operations for the three months and years ended
December 31, 2018 and 2017. It should be read in conjunction with the Company’s audited annual consolidated financial
December 31, 2018 and 2017. It should be read in conjunction with the Company’s audited annual consolidated financial
statements for the years ended December 31, 2018 and 2017. Additional information, including the Company's current
statements for the years ended December 31, 2018 and 2017. Additional information, including the Company's current
Annual Information Form, is available on the SEDAR website at www.sedar.com and on the Company’s website at
Annual Information Form, is available on the SEDAR website at www.sedar.com and on the Company’s website at
www.fcr.ca.
www.fcr.ca.
All dollar amounts are in thousands of Canadian dollars, unless otherwise noted. Historical results and percentage
All dollar amounts are in thousands of Canadian dollars, unless otherwise noted. Historical results and percentage
relationships contained in the Company’s unaudited interim and audited annual consolidated financial statements and
relationships contained in the Company’s unaudited interim and audited annual consolidated financial statements and
MD&A, including trends which might appear, should not be taken as indicative of its future operations. The information
MD&A, including trends which might appear, should not be taken as indicative of its future operations. The information
contained in this MD&A is based on information available to Management and is dated as of February 12, 2019.
contained in this MD&A is based on information available to Management and is dated as of February 12, 2019.
First Capital Realty was incorporated in November 1993 and conducts its business directly and through subsidiaries.
First Capital Realty was incorporated in November 1993 and conducts its business directly and through subsidiaries.
FORWARD-LOOKING STATEMENT ADVISORY
FORWARD-LOOKING STATEMENT ADVISORY
Certain statements contained in this MD&A constitute forward-looking statements. Other statements concerning First
Certain statements contained in this MD&A constitute forward-looking statements. Other statements concerning First
Capital Realty’s objectives and strategies and Management’s beliefs, plans, estimates and intentions also constitute
Capital Realty’s objectives and strategies and Management’s beliefs, plans, estimates and intentions also constitute
forward-looking statements. Forward-looking statements can generally be identified by the expressions “anticipate”,
forward-looking statements. Forward-looking statements can generally be identified by the expressions “anticipate”,
“believe”, “plan”, “estimate”, “project”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “continue” and
“believe”, “plan”, “estimate”, “project”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “continue” and
similar expressions. The forward-looking statements are not historical facts but, rather, reflect the Company’s current
similar expressions. The forward-looking statements are not historical facts but, rather, reflect the Company’s current
expectations regarding future results or events and are based on information currently available to Management. Certain
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. Forward-looking
material factors and assumptions were applied in providing these forward-looking statements. Forward-looking
information involves numerous assumptions such as rental income (including assumptions on timing of lease-up,
information involves numerous assumptions such as rental income (including assumptions on timing of lease-up,
development coming online and levels of percentage rent), interest rates, tenant defaults, borrowing costs (including the
development coming online and levels of percentage rent), interest rates, tenant defaults, borrowing costs (including the
underlying interest rates and credit spreads), the general availability of capital and the stability of the capital markets, the
underlying interest rates and credit spreads), the general availability of capital and the stability of the capital markets, the
ability of the Company to make loans at the same rate or in the same amount as repaid loans, amount of development
ability of the Company to make loans at the same rate or in the same amount as repaid loans, amount of development
costs, capital expenditures, operating costs and corporate expenses, level and timing of acquisitions of income-producing
costs, capital expenditures, operating costs and corporate expenses, level and timing of acquisitions of income-producing
properties, the Company's ability to complete dispositions and the timing, terms and anticipated benefits of any such
properties, the Company's ability to complete dispositions and the timing, terms and anticipated benefits of any such
dispositions, the Company's ability to redevelop, sell or enter into partnerships with respect to the future uncommitted
dispositions, the Company's ability to redevelop, sell or enter into partnerships with respect to the future uncommitted
incremental density it has identified in its portfolio, the Company's ability to convert into a real estate investment trust
incremental density it has identified in its portfolio, the Company's ability to convert into a real estate investment trust
("REIT"), number of shares outstanding and numerous other factors. Moreover, the assumptions underlying the Company’s
("REIT"), number of shares outstanding and numerous other factors. Moreover, the assumptions underlying the Company’s
forward-looking statements contained in the “Outlook and Current Business Environment” section of this MD&A also
forward-looking statements contained in the “Outlook and Current Business Environment” section of this MD&A also
include that consumer demand will remain stable, and demographic trends will continue.
include that consumer demand will remain stable, and demographic trends will continue.
Management believes that the expectations reflected in forward-looking statements are based upon reasonable
Management believes that the expectations reflected in forward-looking statements are based upon reasonable
assumptions; however, Management can give no assurance that actual results will be consistent with these forward-
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
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 in the “Risks and
actual results or events to differ materially from current expectations, including the matters discussed in the “Risks and
Uncertainties” section of this MD&A and the matters discussed under “Risk Factors” in the Company’s current Annual
Uncertainties” section of this MD&A and the matters discussed under “Risk Factors” in the Company’s current Annual
Information Form from time to time.
Information Form from time to time.
Factors that could cause actual results or events to differ materially from those expressed, implied or projected by
Factors that could cause actual results or events to differ materially from those expressed, implied or projected by
forward-looking statements, in addition to those factors referenced above, include, but are not limited to: general
forward-looking statements, in addition to those factors referenced above, include, but are not limited to: general
economic conditions; real property ownership; tenant financial difficulties, defaults and bankruptcies; the relative
economic conditions; real property ownership; tenant financial difficulties, defaults and bankruptcies; the relative
illiquidity of real property; increases in operating costs, property taxes and income taxes; First Capital Realty’s ability to
illiquidity of real property; increases in operating costs, property taxes and income taxes; First Capital Realty’s ability to
maintain occupancy and to lease or re-lease space at current or anticipated rents; the availability and cost of equity and
maintain occupancy and to lease or re-lease space at current or anticipated rents; the availability and cost of equity and
debt capital to finance the Company's business, including the repayment of existing indebtedness as well as development,
debt capital to finance the Company's business, including the repayment of existing indebtedness as well as development,
intensification and acquisition activities; changes in interest rates and credit spreads; organizational structure; changes to
intensification and acquisition activities; changes in interest rates and credit spreads; organizational structure; changes to
credit ratings; the availability of a new competitive supply of retail properties which may become available either through
credit ratings; the availability of a new competitive supply of retail properties which may become available either through
Management’s Discussion and Analysis of
Financial Position and Results of Operations
Management’s Discussion and Analysis of
Management’s Discussion and Analysis of
Financial Position and Results of Operations
Financial Position and Results of Operations
Management’s Discussion and Analysis of
Financial Position and Results of Operations
First Capital Realty was incorporated in November 1993 and conducts its business directly and through subsidiaries.
First Capital Realty was incorporated in November 1993 and conducts its business directly and through subsidiaries.
All dollar amounts are in thousands of Canadian dollars, unless otherwise noted. Historical results and percentage
All dollar amounts are in thousands of Canadian dollars, unless otherwise noted. Historical results and percentage
relationships contained in the Company’s unaudited interim and audited annual consolidated financial statements and
relationships contained in the Company’s unaudited interim and audited annual consolidated financial statements and
MD&A, including trends which might appear, should not be taken as indicative of its future operations. The information
MD&A, including trends which might appear, should not be taken as indicative of its future operations. The information
contained in this MD&A is based on information available to Management and is dated as of February 12, 2019.
contained in this MD&A is based on information available to Management and is dated as of February 12, 2019.
INTRODUCTION
INTRODUCTION
This Management’s Discussion and Analysis (“MD&A”) of the financial position and results of operations of First Capital
This Management’s Discussion and Analysis (“MD&A”) of the financial position and results of operations of First Capital
Realty Inc. (“First Capital Realty”, “FCR” or the “Company”) is intended to provide readers with an assessment of
Realty Inc. (“First Capital Realty”, “FCR” or the “Company”) is intended to provide readers with an assessment of
performance and summarize the financial position and results of operations for the three months and years ended
performance and summarize the financial position and results of operations for the three months and years ended
December 31, 2018 and 2017. It should be read in conjunction with the Company’s audited annual consolidated financial
December 31, 2018 and 2017. It should be read in conjunction with the Company’s audited annual consolidated financial
statements for the years ended December 31, 2018 and 2017. Additional information, including the Company's current
statements for the years ended December 31, 2018 and 2017. Additional information, including the Company's current
Annual Information Form, is available on the SEDAR website at www.sedar.com and on the Company’s website at
Annual Information Form, is available on the SEDAR website at www.sedar.com and on the Company’s website at
www.fcr.ca.
www.fcr.ca.
INTRODUCTION
This Management’s Discussion and Analysis (“MD&A”) of the financial position and results of operations of First Capital
Realty Inc. (“First Capital Realty”, “FCR” or the “Company”) is intended to provide readers with an assessment of
performance and summarize the financial position and results of operations for the three months and years ended
December 31, 2018 and 2017. It should be read in conjunction with the Company’s audited annual consolidated financial
statements for the years ended December 31, 2018 and 2017. Additional information, including the Company's current
Annual Information Form, is available on the SEDAR website at www.sedar.com and on the Company’s website at
www.fcr.ca.
All dollar amounts are in thousands of Canadian dollars, unless otherwise noted. Historical results and percentage
relationships contained in the Company’s unaudited interim and audited annual consolidated financial statements and
MD&A, including trends which might appear, should not be taken as indicative of its future operations. The information
contained in this MD&A is based on information available to Management and is dated as of February 12, 2019.
First Capital Realty was incorporated in November 1993 and conducts its business directly and through subsidiaries.
FORWARD-LOOKING STATEMENT ADVISORY
Certain statements contained in this MD&A constitute forward-looking statements. Other statements concerning First
Capital Realty’s objectives and strategies and Management’s beliefs, plans, estimates and intentions also constitute
forward-looking statements. Forward-looking statements can generally be identified by the expressions “anticipate”,
“believe”, “plan”, “estimate”, “project”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “continue” and
similar expressions. The forward-looking statements are not historical facts but, rather, reflect the Company’s current
expectations regarding future results or events and are based on information currently available to Management. Certain
material factors and assumptions were applied in providing these forward-looking statements. Forward-looking
information involves numerous assumptions such as rental income (including assumptions on timing of lease-up,
development coming online and levels of percentage rent), interest rates, tenant defaults, borrowing costs (including the
underlying interest rates and credit spreads), the general availability of capital and the stability of the capital markets, the
ability of the Company to make loans at the same rate or in the same amount as repaid loans, amount of development
costs, capital expenditures, operating costs and corporate expenses, level and timing of acquisitions of income-producing
properties, the Company's ability to complete dispositions and the timing, terms and anticipated benefits of any such
dispositions, the Company's ability to redevelop, sell or enter into partnerships with respect to the future uncommitted
incremental density it has identified in its portfolio, the Company's ability to convert into a real estate investment trust
("REIT"), number of shares outstanding and numerous other factors. Moreover, the assumptions underlying the Company’s
forward-looking statements contained in the “Outlook and Current Business Environment” section of this MD&A also
include that consumer demand will remain stable, and demographic trends will continue.
Management believes that the expectations reflected in forward-looking statements are based upon reasonable
assumptions; however, Management can give no assurance that 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 in the “Risks and
Uncertainties” section of this MD&A and the matters discussed under “Risk Factors” in the Company’s current Annual
Information Form from time to time.
Factors that could cause actual results or events to differ materially from those expressed, implied or projected by
forward-looking statements, in addition to those factors referenced above, include, but are not limited to: general
economic conditions; real property ownership; tenant financial difficulties, defaults and bankruptcies; the relative
illiquidity of real property; increases in operating costs, property taxes and income taxes; First Capital Realty’s ability to
maintain occupancy and to lease or re-lease space at current or anticipated rents; the availability and cost of equity and
debt capital to finance the Company's business, including the repayment of existing indebtedness as well as development,
intensification and acquisition activities; changes in interest rates and credit spreads; organizational structure; changes to
credit ratings; the availability of a new competitive supply of retail properties which may become available either through
FORWARD-LOOKING STATEMENT ADVISORY
FORWARD-LOOKING STATEMENT ADVISORY
Certain statements contained in this MD&A constitute forward-looking statements. Other statements concerning First
Certain statements contained in this MD&A constitute forward-looking statements. Other statements concerning First
Capital Realty’s objectives and strategies and Management’s beliefs, plans, estimates and intentions also constitute
Capital Realty’s objectives and strategies and Management’s beliefs, plans, estimates and intentions also constitute
forward-looking statements. Forward-looking statements can generally be identified by the expressions “anticipate”,
forward-looking statements. Forward-looking statements can generally be identified by the expressions “anticipate”,
“believe”, “plan”, “estimate”, “project”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “continue” and
“believe”, “plan”, “estimate”, “project”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “continue” and
similar expressions. The forward-looking statements are not historical facts but, rather, reflect the Company’s current
similar expressions. The forward-looking statements are not historical facts but, rather, reflect the Company’s current
expectations regarding future results or events and are based on information currently available to Management. Certain
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. Forward-looking
material factors and assumptions were applied in providing these forward-looking statements. Forward-looking
information involves numerous assumptions such as rental income (including assumptions on timing of lease-up,
information involves numerous assumptions such as rental income (including assumptions on timing of lease-up,
development coming online and levels of percentage rent), interest rates, tenant defaults, borrowing costs (including the
development coming online and levels of percentage rent), interest rates, tenant defaults, borrowing costs (including the
underlying interest rates and credit spreads), the general availability of capital and the stability of the capital markets, the
underlying interest rates and credit spreads), the general availability of capital and the stability of the capital markets, the
ability of the Company to make loans at the same rate or in the same amount as repaid loans, amount of development
ability of the Company to make loans at the same rate or in the same amount as repaid loans, amount of development
costs, capital expenditures, operating costs and corporate expenses, level and timing of acquisitions of income-producing
costs, capital expenditures, operating costs and corporate expenses, level and timing of acquisitions of income-producing
properties, the Company's ability to complete dispositions and the timing, terms and anticipated benefits of any such
properties, the Company's ability to complete dispositions and the timing, terms and anticipated benefits of any such
dispositions, the Company's ability to redevelop, sell or enter into partnerships with respect to the future uncommitted
dispositions, the Company's ability to redevelop, sell or enter into partnerships with respect to the future uncommitted
incremental density it has identified in its portfolio, the Company's ability to convert into a real estate investment trust
incremental density it has identified in its portfolio, the Company's ability to convert into a real estate investment trust
("REIT"), number of shares outstanding and numerous other factors. Moreover, the assumptions underlying the Company’s
("REIT"), number of shares outstanding and numerous other factors. Moreover, the assumptions underlying the Company’s
forward-looking statements contained in the “Outlook and Current Business Environment” section of this MD&A also
forward-looking statements contained in the “Outlook and Current Business Environment” section of this MD&A also
include that consumer demand will remain stable, and demographic trends will continue.
include that consumer demand will remain stable, and demographic trends will continue.
Factors that could cause actual results or events to differ materially from those expressed, implied or projected by
Factors that could cause actual results or events to differ materially from those expressed, implied or projected by
forward-looking statements, in addition to those factors referenced above, include, but are not limited to: general
forward-looking statements, in addition to those factors referenced above, include, but are not limited to: general
economic conditions; real property ownership; tenant financial difficulties, defaults and bankruptcies; the relative
economic conditions; real property ownership; tenant financial difficulties, defaults and bankruptcies; the relative
illiquidity of real property; increases in operating costs, property taxes and income taxes; First Capital Realty’s ability to
illiquidity of real property; increases in operating costs, property taxes and income taxes; First Capital Realty’s ability to
maintain occupancy and to lease or re-lease space at current or anticipated rents; the availability and cost of equity and
maintain occupancy and to lease or re-lease space at current or anticipated rents; the availability and cost of equity and
debt capital to finance the Company's business, including the repayment of existing indebtedness as well as development,
debt capital to finance the Company's business, including the repayment of existing indebtedness as well as development,
intensification and acquisition activities; changes in interest rates and credit spreads; organizational structure; changes to
intensification and acquisition activities; changes in interest rates and credit spreads; organizational structure; changes to
credit ratings; the availability of a new competitive supply of retail properties which may become available either through
credit ratings; the availability of a new competitive supply of retail properties which may become available either through
Management believes that the expectations reflected in forward-looking statements are based upon reasonable
Management believes that the expectations reflected in forward-looking statements are based upon reasonable
assumptions; however, Management can give no assurance that actual results will be consistent with these forward-
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
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 in the “Risks and
actual results or events to differ materially from current expectations, including the matters discussed in the “Risks and
Uncertainties” section of this MD&A and the matters discussed under “Risk Factors” in the Company’s current Annual
Uncertainties” section of this MD&A and the matters discussed under “Risk Factors” in the Company’s current Annual
Information Form from time to time.
Information Form from time to time.
INTRODUCTION
This Management’s Discussion and Analysis (“MD&A”) of the financial position and results of operations of First Capital
Realty Inc. (“First Capital Realty”, “FCR” or the “Company”) is intended to provide readers with an assessment of
performance and summarize the financial position and results of operations for the three months and years ended
December 31, 2018 and 2017. It should be read in conjunction with the Company’s audited annual consolidated financial
statements for the years ended December 31, 2018 and 2017. Additional information, including the Company's current
Annual Information Form, is available on the SEDAR website at www.sedar.com and on the Company’s website at
www.fcr.ca.
All dollar amounts are in thousands of Canadian dollars, unless otherwise noted. Historical results and percentage
relationships contained in the Company’s unaudited interim and audited annual consolidated financial statements and
MD&A, including trends which might appear, should not be taken as indicative of its future operations. The information
contained in this MD&A is based on information available to Management and is dated as of February 12, 2019.
First Capital Realty was incorporated in November 1993 and conducts its business directly and through subsidiaries.
FORWARD-LOOKING STATEMENT ADVISORY
Certain statements contained in this MD&A constitute forward-looking statements. Other statements concerning First
Capital Realty’s objectives and strategies and Management’s beliefs, plans, estimates and intentions also constitute
forward-looking statements. Forward-looking statements can generally be identified by the expressions “anticipate”,
“believe”, “plan”, “estimate”, “project”, “expect”, “intend”, “outlook”, “objective”, “may”, “will”, “should”, “continue” and
similar expressions. The forward-looking statements are not historical facts but, rather, reflect the Company’s current
expectations regarding future results or events and are based on information currently available to Management. Certain
material factors and assumptions were applied in providing these forward-looking statements. Forward-looking
information involves numerous assumptions such as rental income (including assumptions on timing of lease-up,
development coming online and levels of percentage rent), interest rates, tenant defaults, borrowing costs (including the
underlying interest rates and credit spreads), the general availability of capital and the stability of the capital markets, the
ability of the Company to make loans at the same rate or in the same amount as repaid loans, amount of development
costs, capital expenditures, operating costs and corporate expenses, level and timing of acquisitions of income-producing
properties, the Company's ability to complete dispositions and the timing, terms and anticipated benefits of any such
dispositions, the Company's ability to redevelop, sell or enter into partnerships with respect to the future uncommitted
incremental density it has identified in its portfolio, the Company's ability to convert into a real estate investment trust
("REIT"), number of shares outstanding and numerous other factors. Moreover, the assumptions underlying the Company’s
forward-looking statements contained in the “Outlook and Current Business Environment” section of this MD&A also
include that consumer demand will remain stable, and demographic trends will continue.
Management believes that the expectations reflected in forward-looking statements are based upon reasonable
assumptions; however, Management can give no assurance that 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 in the “Risks and
Uncertainties” section of this MD&A and the matters discussed under “Risk Factors” in the Company’s current Annual
Information Form from time to time.
Factors that could cause actual results or events to differ materially from those expressed, implied or projected by
forward-looking statements, in addition to those factors referenced above, include, but are not limited to: general
economic conditions; real property ownership; tenant financial difficulties, defaults and bankruptcies; the relative
illiquidity of real property; increases in operating costs, property taxes and income taxes; First Capital Realty’s ability to
maintain occupancy and to lease or re-lease space at current or anticipated rents; the availability and cost of equity and
debt capital to finance the Company's business, including the repayment of existing indebtedness as well as development,
intensification and acquisition activities; changes in interest rates and credit spreads; organizational structure; changes to
credit ratings; the availability of a new competitive supply of retail properties which may become available either through
FIRST CAPITAL REALTY ANNUAL REPORT 2018
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
FIRST CAPITAL REALTY ANNUAL REPORT 2018
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
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construction, lease or sublease; the Company's ability to: execute on its evolved urban investment strategy, including with
respect to dispositions, capitalize on competitive advantages, optimize portfolio assets and accelerate value delivered to
its investors and stakeholders, remain ahead of changing market conditions, surface unrecognized value, reach its
demographic targets and ensure the Company retains its best in class position; unexpected costs or liabilities related to
acquisitions, development and construction; geographic and tenant concentration; residential development, sales and
leasing; compliance with financial covenants; changes in governmental regulation; environmental liability and compliance
costs; unexpected costs or liabilities related to dispositions; challenges associated with the integration of acquisitions into
the Company; uninsured losses and First Capital Realty’s ability to obtain insurance coverage at a reasonable cost; risks in
joint ventures; matters associated with significant shareholders; investments subject to credit and market risk; loss of key
personnel; and the ability of tenants to maintain necessary licenses, certifications and accreditations. Furthermore, no
formal determination to convert to a REIT has been made by the Company at this time and no assurance can be given as
to whether such a reorganization will be undertaken by the Company, or the timing, or impact of such reorganization, or
its terms.
Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking
statement speaks only as of the date on which such statement is made. First Capital Realty undertakes no obligation to
publicly update any such statement or to reflect new information or the occurrence of future events or circumstances,
except as required by applicable securities law.
construction, lease or sublease; the Company's ability to: execute on its evolved urban investment strategy, including with
respect to dispositions, capitalize on competitive advantages, optimize portfolio assets and accelerate value delivered to
its investors and stakeholders, remain ahead of changing market conditions, surface unrecognized value, reach its
demographic targets and ensure the Company retains its best in class position; unexpected costs or liabilities related to
acquisitions, development and construction; geographic and tenant concentration; residential development, sales and
leasing; compliance with financial covenants; changes in governmental regulation; environmental liability and compliance
costs; unexpected costs or liabilities related to dispositions; challenges associated with the integration of acquisitions into
the Company; uninsured losses and First Capital Realty’s ability to obtain insurance coverage at a reasonable cost; risks in
joint ventures; matters associated with significant shareholders; investments subject to credit and market risk; loss of key
personnel; and the ability of tenants to maintain necessary licenses, certifications and accreditations. Furthermore, no
formal determination to convert to a REIT has been made by the Company at this time and no assurance can be given as
to whether such a reorganization will be undertaken by the Company, or the timing, or impact of such reorganization, or
its terms.
Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking
statement speaks only as of the date on which such statement is made. First Capital Realty undertakes no obligation to
publicly update any such statement or to reflect new information or the occurrence of future events or circumstances,
except as required by applicable securities law.
All forward-looking statements in this MD&A are made as of February 12, 2019 and are qualified by these cautionary
statements.
All forward-looking statements in this MD&A are made as of February 12, 2019 and are qualified by these cautionary
statements.
BUSINESS OVERVIEW AND STRATEGY
First Capital Realty Inc. (TSX: FCR) is one of the largest owners, developers and operators of necessity-based real estate
located in Canada’s most densely populated urban centres. As at December 31, 2018, the Company owned interests in
166 properties, totaling approximately 25.5 million square feet of gross leasable area.
BUSINESS OVERVIEW AND STRATEGY
First Capital Realty Inc. (TSX: FCR) is one of the largest owners, developers and operators of necessity-based real estate
located in Canada’s most densely populated urban centres. As at December 31, 2018, the Company owned interests in
166 properties, totaling approximately 25.5 million square feet of gross leasable area.
First Capital Realty’s primary strategy is the creation of value over the long term by generating sustainable growth in cash
flow and capital appreciation of its urban portfolio. To achieve the Company’s strategic objectives, Management continues
to:
First Capital Realty’s primary strategy is the creation of value over the long term by generating sustainable growth in cash
flow and capital appreciation of its urban portfolio. To achieve the Company’s strategic objectives, Management continues
to:
• undertake selective development, redevelopment and repositioning activities on its properties, including land use
• undertake selective development, redevelopment and repositioning activities on its properties, including land use
intensification;
intensification;
• be focused and disciplined in acquiring well-located properties to create super urban neighbourhoods, primarily where
there are value creation opportunities, including sites in close proximity to existing properties in the Company’s target
urban markets;
• be focused and disciplined in acquiring well-located properties to create super urban neighbourhoods, primarily where
there are value creation opportunities, including sites in close proximity to existing properties in the Company’s target
urban markets;
• raising capital to fund future growth through select dispositions;
• proactively manage its existing portfolio to drive rent growth;
• increase efficiency and productivity of operations; and
• maintain financial strength and flexibility to support a competitive cost of capital.
Neighbourhoods for Everyday Urban Life™
The Company primarily owns, develops and manages properties located in Canada’s key urban neighbourhood markets
that provide consumers with products and services that are part of their everyday life. Currently, over 90% of the
Company’s revenues come from tenants who provide these essential products and services, including grocery stores,
pharmacies, liquor stores, banks, restaurants, cafés, fitness centres, medical, childcare facilities and other professional
and personal services.
Management looks to implement a specific complementary tenant offering at each of its properties to best serve the
needs of the local community. The Company is highly focused on ensuring the competitive position of its assets in their
respective urban and retail trade areas and closely follows demographic profiles and shopping trends that may impact the
performance of its properties.
• raising capital to fund future growth through select dispositions;
• proactively manage its existing portfolio to drive rent growth;
• increase efficiency and productivity of operations; and
• maintain financial strength and flexibility to support a competitive cost of capital.
Neighbourhoods for Everyday Urban Life™
The Company primarily owns, develops and manages properties located in Canada’s key urban neighbourhood markets
that provide consumers with products and services that are part of their everyday life. Currently, over 90% of the
Company’s revenues come from tenants who provide these essential products and services, including grocery stores,
pharmacies, liquor stores, banks, restaurants, cafés, fitness centres, medical, childcare facilities and other professional
and personal services.
Management looks to implement a specific complementary tenant offering at each of its properties to best serve the
needs of the local community. The Company is highly focused on ensuring the competitive position of its assets in their
respective urban and retail trade areas and closely follows demographic profiles and shopping trends that may impact the
performance of its properties.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
2
FIRST CAPITAL REALTY ANNUAL REPORT 2018
2
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
In Management’s view, shopping centres, including mixed-use properties with a meaningful retail component, located in
urban markets with tenants who primarily provide non-discretionary goods and services, will be less sensitive to both
economic cycles and changing retail trends, thus adding to the stability and growth of cash flow over the long term.
Further, the Company will capitalize on the competitive advantages its assets offer as it increases population density
within its core portfolio, looking beyond asset class to create high quality, super urban neighbourhoods.
In Management’s view, shopping centres, including mixed-use properties with a meaningful retail component, located in
urban markets with tenants who primarily provide non-discretionary goods and services, will be less sensitive to both
economic cycles and changing retail trends, thus adding to the stability and growth of cash flow over the long term.
Further, the Company will capitalize on the competitive advantages its assets offer as it increases population density
within its core portfolio, looking beyond asset class to create high quality, super urban neighbourhoods.
Neighbourhoods for Everyday Urban Life™
Neighbourhoods for Everyday Urban Life™
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
3
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Super Urban Focus
The Company targets specific urban markets within cities in Canada with growing populations. Specifically, the Company
intends to continue to operate primarily in and around its target urban markets which include the Greater Toronto Area;
Greater Vancouver Area; Greater Montreal Area; Greater Edmonton Area; Greater Calgary Area; and the Greater Ottawa
Area.
The Company has achieved critical mass in its target markets, which helps generate economies of scale and operating
synergies, as well as deep local knowledge of its properties, tenants, neighbourhoods and markets in which it operates.
Within each of these markets, the Company owns and targets well-located properties with strong demographics that
Management expects will continue to get stronger over time, therefore attracting high quality tenants with rent growth
potential.
Super Urban Focus
The Company targets specific urban markets within cities in Canada with growing populations. Specifically, the Company
intends to continue to operate primarily in and around its target urban markets which include the Greater Toronto Area;
Greater Vancouver Area; Greater Montreal Area; Greater Edmonton Area; Greater Calgary Area; and the Greater Ottawa
Area.
The Company has achieved critical mass in its target markets, which helps generate economies of scale and operating
synergies, as well as deep local knowledge of its properties, tenants, neighbourhoods and markets in which it operates.
Within each of these markets, the Company owns and targets well-located properties with strong demographics that
Management expects will continue to get stronger over time, therefore attracting high quality tenants with rent growth
potential.
As the Company focuses investments on these super urban markets that fully integrate retail with other asset classes
Management believes it will continue to optimize its portfolio to maintain the Company’s best in class position.
As the Company focuses investments on these super urban markets that fully integrate retail with other asset classes
Management believes it will continue to optimize its portfolio to maintain the Company’s best in class position.
Urban Markets
Urban Markets
Evolved Investment Strategy
Evolved Investment Strategy
The Company is continuing to increase investment in high-quality, super urban, mixed-use properties with a focus on
building large positions in targeted high growth neighbourhoods. This will continue to enhance the Company’s
demographic profile through both investments and dispositions that are consistent with its investment strategy. The
Company is targeting to have average population density of more than 300,000 people within five kilometers of its
properties, within the next 24 months. This represents a 20% increase over its current average population density of
250,000.
The Company is continuing to increase investment in high-quality, super urban, mixed-use properties with a focus on
building large positions in targeted high growth neighbourhoods. This will continue to enhance the Company’s
demographic profile through both investments and dispositions that are consistent with its investment strategy. The
Company is targeting to have average population density of more than 300,000 people within five kilometers of its
properties, within the next 24 months. This represents a 20% increase over its current average population density of
250,000.
Acquisitions
Acquisitions
Management seeks to acquire well-located, high quality retail properties and sites in the Company’s target urban markets.
These properties are acquired to align with the evolved investment strategy, complement or add value to the existing
portfolio or provide opportunity for redevelopment or repositioning. Once the Company has acquired a property in a
specific trade area, with the appropriate population density, Management will look to acquire properties in close
proximity. Over time, these properties form super urban neighbourhoods that integrate retail with other asset classes,
and allow the Company to provide maximum flexibility to its tenant base to meet changing formats and size requirements
over the long term. Adjacent properties also allow the Company to expand or intensify its existing property. They also
provide more flexibility to offer the appropriate mix of uses, providing a better overall experience for consumers and
Management seeks to acquire well-located, high quality retail properties and sites in the Company’s target urban markets.
These properties are acquired to align with the evolved investment strategy, complement or add value to the existing
portfolio or provide opportunity for redevelopment or repositioning. Once the Company has acquired a property in a
specific trade area, with the appropriate population density, Management will look to acquire properties in close
proximity. Over time, these properties form super urban neighbourhoods that integrate retail with other asset classes,
and allow the Company to provide maximum flexibility to its tenant base to meet changing formats and size requirements
over the long term. Adjacent properties also allow the Company to expand or intensify its existing property. They also
provide more flexibility to offer the appropriate mix of uses, providing a better overall experience for consumers and
FIRST CAPITAL REALTY ANNUAL REPORT 2018
4
FIRST CAPITAL REALTY ANNUAL REPORT 2018
4
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
residents in the neighbourhood. Management believes that its adjacent site acquisitions, and increased population
density strategy, result in a stronger retail offering, more compelling neighbourhoods and, ultimately, a better long-term
return on investment, with a lower level of risk.
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. Management will continue to look for strategic
acquisitions, in both existing markets and strong trade areas within its existing urban markets where the Company does
not yet have a presence.
Lending Activities
The Company provides co-owner financing, priority mortgages and mezzanine loans to third parties in connection with
certain transactions and partnerships (collectively “Loans and Mortgages Receivable”). Such Loans and Mortgages
Receivable are secured and often provide the Company with the opportunity to acquire full or partial interests in the
underlying assets that are consistent with the Company’s investment strategy through rights, options or negotiated
transactions. Therefore, in addition to generating interest income and fees, the Company’s lending activities provide an
alternative means to obtaining purchase options and/or participation in projects which may otherwise have not been
accessible. Additionally, from time to time the Company partners with experienced real estate lenders and investment
companies whose primary business is lending which helps to mitigate risk.
Dispositions
To optimize the allocation of its capital and to advance its investment strategy, the Company selectively disposes of assets
and reinvests the proceeds into new urban acquisitions and the development of the incremental density within its portfolio.
The Company's development pipeline currently totals over 22.5 million square feet of incremental density.
The Company plans to complete strategic dispositions to provide capital for its investments program and to grow the value
of its portfolio. The Company has an objective to sell 100% interests in properties that are deemed to be inconsistent with
its evolved investment strategy. The Company also has an objective to sell 50% non-managing interests to institutional
partners in certain stable but growing properties, to ultimately expand the Company’s position in these markets without
increasing its investment capital. Combined, these properties represent approximately 10% of the Company's total portfolio.
Outcomes of achieving these objectives would be an increase in the weighting of large strategic assets and an incremental
density pipeline that exceeds the Company’s current leasable area of approximately 24 million square feet.
Development, Redevelopment and Land Use Intensification
The Company pursues selective development and redevelopment activities including land use intensification projects,
primarily on its own, but also with partners. Redevelopment activities are focused primarily on well-located properties in
dense urban neighbourhoods where Management believes the opportunity for value appreciation is greatest through the
redevelopment of the asset into its highest and best use. These properties are redeveloped and expanded over time in
conjunction with anchor tenant repositioning and changing retail environments. Redevelopment of existing properties
generally carries a lower market risk due to the urban locations in which they are situated, an existing tenant base and the
ability to increase density through land use intensification. Redevelopment projects are carefully managed to minimize
tenant downtime. When possible, tenants continue to operate during the planning, zoning and leasing phases of the project
with modest “holdover” income from tenants operating during this period. The Company will sometimes carry vacant space
in a property for a planned future expansion of tenants or reconfiguration of a property.
Management believes that the Company’s shopping centres, along with its portfolio of adjacent sites, give it a unique
opportunity to participate in urban land use intensification in its various markets. The land use intensification trend in the
Company’s target urban markets is driven by the costs for municipalities to expand infrastructure beyond existing urban
boundaries, the desire by municipalities to increase their tax base, environmental considerations and the migration of
people to vibrant urban centres, a secular trend that is occurring in most major cities around the world. The Company’s land
use intensification activities are focused on increasing super urban neighbourhood development, including increasing retail
space on a property and adding mixed-use density, including residential and office space. The Company has proven
development and redevelopment capabilities across the country to enable it to capitalize on these opportunities and
expects these land use intensification activities to increase over the next several years. To a lesser degree, the Company
develops new properties on ground-up sites.
residents in the neighbourhood. Management believes that its adjacent site acquisitions, and increased population
density strategy, result in a stronger retail offering, more compelling neighbourhoods and, ultimately, a better long-term
return on investment, with a lower level of risk.
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. Management will continue to look for strategic
acquisitions, in both existing markets and strong trade areas within its existing urban markets where the Company does
not yet have a presence.
Lending Activities
The Company provides co-owner financing, priority mortgages and mezzanine loans to third parties in connection with
certain transactions and partnerships (collectively “Loans and Mortgages Receivable”). Such Loans and Mortgages
Receivable are secured and often provide the Company with the opportunity to acquire full or partial interests in the
underlying assets that are consistent with the Company’s investment strategy through rights, options or negotiated
transactions. Therefore, in addition to generating interest income and fees, the Company’s lending activities provide an
alternative means to obtaining purchase options and/or participation in projects which may otherwise have not been
accessible. Additionally, from time to time the Company partners with experienced real estate lenders and investment
companies whose primary business is lending which helps to mitigate risk.
Dispositions
To optimize the allocation of its capital and to advance its investment strategy, the Company selectively disposes of assets
and reinvests the proceeds into new urban acquisitions and the development of the incremental density within its portfolio.
The Company's development pipeline currently totals over 22.5 million square feet of incremental density.
The Company plans to complete strategic dispositions to provide capital for its investments program and to grow the value
of its portfolio. The Company has an objective to sell 100% interests in properties that are deemed to be inconsistent with
its evolved investment strategy. The Company also has an objective to sell 50% non-managing interests to institutional
partners in certain stable but growing properties, to ultimately expand the Company’s position in these markets without
increasing its investment capital. Combined, these properties represent approximately 10% of the Company's total portfolio.
Outcomes of achieving these objectives would be an increase in the weighting of large strategic assets and an incremental
density pipeline that exceeds the Company’s current leasable area of approximately 24 million square feet.
Development, Redevelopment and Land Use Intensification
The Company pursues selective development and redevelopment activities including land use intensification projects,
primarily on its own, but also with partners. Redevelopment activities are focused primarily on well-located properties in
dense urban neighbourhoods where Management believes the opportunity for value appreciation is greatest through the
redevelopment of the asset into its highest and best use. These properties are redeveloped and expanded over time in
conjunction with anchor tenant repositioning and changing retail environments. Redevelopment of existing properties
generally carries a lower market risk due to the urban locations in which they are situated, an existing tenant base and the
ability to increase density through land use intensification. Redevelopment projects are carefully managed to minimize
tenant downtime. When possible, tenants continue to operate during the planning, zoning and leasing phases of the project
with modest “holdover” income from tenants operating during this period. The Company will sometimes carry vacant space
in a property for a planned future expansion of tenants or reconfiguration of a property.
Management believes that the Company’s shopping centres, along with its portfolio of adjacent sites, give it a unique
opportunity to participate in urban land use intensification in its various markets. The land use intensification trend in the
Company’s target urban markets is driven by the costs for municipalities to expand infrastructure beyond existing urban
boundaries, the desire by municipalities to increase their tax base, environmental considerations and the migration of
people to vibrant urban centres, a secular trend that is occurring in most major cities around the world. The Company’s land
use intensification activities are focused on increasing super urban neighbourhood development, including increasing retail
space on a property and adding mixed-use density, including residential and office space. The Company has proven
development and redevelopment capabilities across the country to enable it to capitalize on these opportunities and
expects these land use intensification activities to increase over the next several years. To a lesser degree, the Company
develops new properties on ground-up sites.
5
FIRST CAPITAL REALTY ANNUAL REPORT 2018
5
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Investments in redevelopment and development projects are generally less than 10% of the Company’s total assets (at
invested cost) at any given time. Development activities are strategically managed to reduce leasing risks by obtaining lease
commitments from anchor and major tenants prior to commencing construction. The Company also uses experts including
architects, engineers and urban planning consultants, and negotiates competitive fixed-price construction contracts.
Investments in redevelopment and development projects are generally less than 10% of the Company’s total assets (at
invested cost) at any given time. Development activities are strategically managed to reduce leasing risks by obtaining lease
commitments from anchor and major tenants prior to commencing construction. The Company also uses experts including
architects, engineers and urban planning consultants, and negotiates competitive fixed-price construction contracts.
These development and land use intensification activities provide the Company with an opportunity to use its existing
platform to sustain and increase cash flow and realize capital appreciation over the long term.
These development and land use intensification activities provide the Company with an opportunity to use its existing
platform to sustain and increase cash flow and realize capital appreciation over the long term.
Proactive Management
The Company views proactive management of its portfolio as a core competency and an important part of its strategy.
Proactive management means the Company continues to invest in properties to ensure that they remain competitive by
attracting high quality retail tenants and their customers over the long term. Specifically, Management strives to create and
maintain the highest standards in lighting, parking, access and general appearance of the Company’s properties including
the addition of public art and enhancing the connectivity to the local neighbourhood. The Company’s proactive
management strategies have historically contributed to improvements in occupancy levels and average lease rates
throughout the portfolio. The Company is fully internalized and all value creation activities, including development
management, leasing, property management, lease administration, legal, construction management and tenant co-
ordination functions, are directly managed and executed by experienced real estate professionals employed by the
Company.
The Company's executive leadership team is centralized at the Company’s head office location in Toronto, which ensures
that best practices, procedures and standards are applied consistently across the Company's operating markets. Property
management and operations are executed through local operating platforms in all major urban markets. Real estate
development and redevelopment, leasing, construction and to some degree acquisitions, are executed through local teams
located in the Company’s offices in Toronto, Montreal, and Calgary in order to effectively serve the major urban markets
where First Capital Realty operates. In addition, the Company’s management team possesses significant experience, which
contributes to the Company’s in-depth knowledge of its tenants and market trends.
Cost of Capital
The Company seeks to maintain financial strength and flexibility in order to support a competitive cost of debt and equity
capital over the long term. The Company’s capital structure is key to financing growth and providing sustainable cash
dividends to its shareholders. In the real estate industry, financial leverage is used to enhance rates of return on invested
capital. Management believes that First Capital Realty’s capital structure composition of senior unsecured debt, mortgage
debt, revolving credit facilities, bank indebtedness, and equity provides financing flexibility and reduces risks, while
generating an attractive risk-adjusted return on investment, taking into account the long-term business strategy of the
Company. The Company also recycles capital through the selective disposition of full or partial interests in properties.
When it is deemed appropriate, the Company will raise equity to finance its growth and strengthen its financial position.
Since November 2012, DBRS Limited (“DBRS”) has rated the Company’s senior unsecured debentures as BBB (high), and
Moody's has rated these debentures as Baa2. Management believes that this, along with the quality of the Company’s
real estate portfolio and other business attributes, contribute to reducing the Company’s cost of capital.
OUTLOOK AND CURRENT BUSINESS ENVIRONMENT
Since 2001, First Capital Realty has successfully grown its business across the country, focusing on key urban markets,
dramatically enhancing the quality of its portfolio and generating growth in funds from operations, while reducing
leverage and achieving an investment grade credit rating. The Company expects to continue to grow its portfolio of high
quality properties in urban markets in Canada’s busiest neighbourhoods in line with its long-term value creation strategy.
The Company defines a high quality property primarily by its location, taking into consideration the local demographics,
the supply and demand factors in each property trade area, and the ability to grow the property's cash flow.
Proactive Management
The Company views proactive management of its portfolio as a core competency and an important part of its strategy.
Proactive management means the Company continues to invest in properties to ensure that they remain competitive by
attracting high quality retail tenants and their customers over the long term. Specifically, Management strives to create and
maintain the highest standards in lighting, parking, access and general appearance of the Company’s properties including
the addition of public art and enhancing the connectivity to the local neighbourhood. The Company’s proactive
management strategies have historically contributed to improvements in occupancy levels and average lease rates
throughout the portfolio. The Company is fully internalized and all value creation activities, including development
management, leasing, property management, lease administration, legal, construction management and tenant co-
ordination functions, are directly managed and executed by experienced real estate professionals employed by the
Company.
The Company's executive leadership team is centralized at the Company’s head office location in Toronto, which ensures
that best practices, procedures and standards are applied consistently across the Company's operating markets. Property
management and operations are executed through local operating platforms in all major urban markets. Real estate
development and redevelopment, leasing, construction and to some degree acquisitions, are executed through local teams
located in the Company’s offices in Toronto, Montreal, and Calgary in order to effectively serve the major urban markets
where First Capital Realty operates. In addition, the Company’s management team possesses significant experience, which
contributes to the Company’s in-depth knowledge of its tenants and market trends.
Cost of Capital
The Company seeks to maintain financial strength and flexibility in order to support a competitive cost of debt and equity
capital over the long term. The Company’s capital structure is key to financing growth and providing sustainable cash
dividends to its shareholders. In the real estate industry, financial leverage is used to enhance rates of return on invested
capital. Management believes that First Capital Realty’s capital structure composition of senior unsecured debt, mortgage
debt, revolving credit facilities, bank indebtedness, and equity provides financing flexibility and reduces risks, while
generating an attractive risk-adjusted return on investment, taking into account the long-term business strategy of the
Company. The Company also recycles capital through the selective disposition of full or partial interests in properties.
When it is deemed appropriate, the Company will raise equity to finance its growth and strengthen its financial position.
Since November 2012, DBRS Limited (“DBRS”) has rated the Company’s senior unsecured debentures as BBB (high), and
Moody's has rated these debentures as Baa2. Management believes that this, along with the quality of the Company’s
real estate portfolio and other business attributes, contribute to reducing the Company’s cost of capital.
OUTLOOK AND CURRENT BUSINESS ENVIRONMENT
Since 2001, First Capital Realty has successfully grown its business across the country, focusing on key urban markets,
dramatically enhancing the quality of its portfolio and generating growth in funds from operations, while reducing
leverage and achieving an investment grade credit rating. The Company expects to continue to grow its portfolio of high
quality properties in urban markets in Canada’s busiest neighbourhoods in line with its long-term value creation strategy.
The Company defines a high quality property primarily by its location, taking into consideration the local demographics,
the supply and demand factors in each property trade area, and the ability to grow the property's cash flow.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
6
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Changing Consumer Habits
The Company continues to observe several demographic and other trends that may affect demand for retail goods and
services, including an increasing reliance by consumers on online information to influence their purchasing decisions and
an increasing desire to purchase products online, as well as an aging population which is increasingly focused on
convenience and health-related goods and services. There is also a shift in consumer demand driven by an increasing
number of ethnic consumers as a result of Canada's immigration policies.
Another trend that Management continues to observe is a desire for consumers to live in urban markets and to connect
with others through daily or frequent activity, including trips to grocery stores, fitness centres, cafés, restaurants as well
as other tenant categories in the Company's portfolio. With an evolved investment strategy, the Company will build on
this shift, with a deeper focus on urban markets that fully integrate retail with other asset classes.
In addition, the retail market is experiencing a change in the consumer mindset with a growing emphasis on customer
experience through events, digital innovation, sampling demonstrations and personalized premium service, allowing for
more integration and connection between retailers and consumers. Retailers have responded to these changes with a
renewed focus on improving the overall customer experience both online and in-store by leveraging technology.
Management is proactively responding to these consumer changes through its tenant mix, unit sizes, shopping centre
locations and designs.
Evolving Retail Landscape
Over the past several years, the Company has observed an increase in entry and/or expansion into the Canadian
marketplace by several major U.S. and international retailers including Marshalls, Top Shop, Nordstrom, Saks Fifth Avenue,
Uniqlo and others. Although such repositioning resulted in new opportunities for the Company, it also resulted in an
increasingly competitive retail landscape in Canada. In addition, many retailers have announced store closures and/or
bankruptcies, including Lowe's, Town Shoes, Sears Canada, and Express. Although the Company’s exposure to these
retailers is limited, these store closures have, in the short term, resulted in increased availability of retail space across
Canada and have the potential to impact retail rental rates and leasing fundamentals.
As a result of these ongoing changes, the Company remains highly focused on ensuring the competitive position of its
shopping centres in all of its various retail trade areas. Management will continue to closely follow demographic and
shopping trends, as well as retailer responses to these trends, and retail competition. The Company’s leasing strategy
takes these factors into consideration in each trade area and its proactive management strategy helps to ensure the
Company’s properties remain attractive to high quality tenants and their customers.
In Management’s view, well-designed shopping centres and mixed-use properties located in urban markets with tenants
providing non-discretionary goods and services, will be less sensitive to both economic cycles and evolving retail trends,
thus providing more stable and growing cash flow over the long term.
Growth
In 2018, total assets grew 4.9% to $10.5 billion while total net operating income grew 3.9% over the prior year. In
addition, the Same Property portfolio delivered net operating income growth of 3.1% compared to the prior year. The
growth in Same Property net operating income was primarily due to rent escalations and increased occupancy. As at
December 31, 2018, total portfolio occupancy increased 0.6% to 96.7% compared to 96.1% as at December 31, 2017. For
the year ended December 31, 2018, the monthly average occupancy for the total portfolio was 96.3% compared to 94.9%,
while the monthly average Same Property portfolio occupancy was 96.9% compared to 95.7% for the prior year,
respectively.
Urban municipalities where the Company operates continue to focus on increasing density within the existing boundaries of
infrastructure. This provides the Company with multiple development and redevelopment opportunities in its existing
portfolio of urban properties, which includes an inventory of adjacent land sites and development land. Management has
identified meaningful incremental density available for future redevelopment within its portfolio. As at December 31, 2018,
the Company had identified approximately 22.5 million square feet of incremental density available in the portfolio for
future development including 2.3 million square feet of commercial and 20.3 million square feet of residential space.
Changing Consumer Habits
The Company continues to observe several demographic and other trends that may affect demand for retail goods and
services, including an increasing reliance by consumers on online information to influence their purchasing decisions and
an increasing desire to purchase products online, as well as an aging population which is increasingly focused on
convenience and health-related goods and services. There is also a shift in consumer demand driven by an increasing
number of ethnic consumers as a result of Canada's immigration policies.
Another trend that Management continues to observe is a desire for consumers to live in urban markets and to connect
with others through daily or frequent activity, including trips to grocery stores, fitness centres, cafés, restaurants as well
as other tenant categories in the Company's portfolio. With an evolved investment strategy, the Company will build on
this shift, with a deeper focus on urban markets that fully integrate retail with other asset classes.
In addition, the retail market is experiencing a change in the consumer mindset with a growing emphasis on customer
experience through events, digital innovation, sampling demonstrations and personalized premium service, allowing for
more integration and connection between retailers and consumers. Retailers have responded to these changes with a
renewed focus on improving the overall customer experience both online and in-store by leveraging technology.
Management is proactively responding to these consumer changes through its tenant mix, unit sizes, shopping centre
locations and designs.
Evolving Retail Landscape
Over the past several years, the Company has observed an increase in entry and/or expansion into the Canadian
marketplace by several major U.S. and international retailers including Marshalls, Top Shop, Nordstrom, Saks Fifth Avenue,
Uniqlo and others. Although such repositioning resulted in new opportunities for the Company, it also resulted in an
increasingly competitive retail landscape in Canada. In addition, many retailers have announced store closures and/or
bankruptcies, including Lowe's, Town Shoes, Sears Canada, and Express. Although the Company’s exposure to these
retailers is limited, these store closures have, in the short term, resulted in increased availability of retail space across
Canada and have the potential to impact retail rental rates and leasing fundamentals.
As a result of these ongoing changes, the Company remains highly focused on ensuring the competitive position of its
shopping centres in all of its various retail trade areas. Management will continue to closely follow demographic and
shopping trends, as well as retailer responses to these trends, and retail competition. The Company’s leasing strategy
takes these factors into consideration in each trade area and its proactive management strategy helps to ensure the
Company’s properties remain attractive to high quality tenants and their customers.
In Management’s view, well-designed shopping centres and mixed-use properties located in urban markets with tenants
providing non-discretionary goods and services, will be less sensitive to both economic cycles and evolving retail trends,
thus providing more stable and growing cash flow over the long term.
Growth
In 2018, total assets grew 4.9% to $10.5 billion while total net operating income grew 3.9% over the prior year. In
addition, the Same Property portfolio delivered net operating income growth of 3.1% compared to the prior year. The
growth in Same Property net operating income was primarily due to rent escalations and increased occupancy. As at
December 31, 2018, total portfolio occupancy increased 0.6% to 96.7% compared to 96.1% as at December 31, 2017. For
the year ended December 31, 2018, the monthly average occupancy for the total portfolio was 96.3% compared to 94.9%,
while the monthly average Same Property portfolio occupancy was 96.9% compared to 95.7% for the prior year,
respectively.
Urban municipalities where the Company operates continue to focus on increasing density within the existing boundaries of
infrastructure. This provides the Company with multiple development and redevelopment opportunities in its existing
portfolio of urban properties, which includes an inventory of adjacent land sites and development land. Management has
identified meaningful incremental density available for future redevelopment within its portfolio. As at December 31, 2018,
the Company had identified approximately 22.5 million square feet of incremental density available in the portfolio for
future development including 2.3 million square feet of commercial and 20.3 million square feet of residential space.
7
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
Development activities continue to provide the Company with growth within its existing portfolio of assets. These activities
typically add density to the site and improve the quality of the property, which in turn leads to meaningful growth in
property rental income. The Company’s development activities primarily comprise redevelopments and expansions of
existing properties in established trade areas in its target urban markets and will continue to be optimized as the Company
concentrates investment capital towards higher population, greater density, urban neighbourhoods. These projects typically
carry risk that is associated more with project execution rather than market risk, as projects are located in well-established
urban communities with existing demand for goods and services. The Company has a long and successful track record of
development activities and will continue to manage carefully the risks associated with such projects.
During the year, the Company transferred 283,000 square feet of new urban retail space as well as common areas from
development to income-producing properties at a cost of $293.3 million. Occupied space was transferred at an average
net rental rate of $37.33 per square foot, well above the average rate for the entire portfolio of $20.24.
The Company’s evolved urban investment strategy will see the Company further focus investment in its highest value
urban market assets, surfacing unrecognized value, and ultimately, looking beyond asset class to create high quality, urban
neighbourhoods that Management believes will deliver value to investors, and ensure the Company grows its best in class
position.
Transaction Activity
The property acquisition environment remains extremely competitive for assets of similar quality to those owned by the
Company. There are typically multiple bids on high quality properties and asset valuations reflect strong demand for well-
located income-producing assets. In addition, well-located urban properties rarely trade in the market and attract
significant competition when they do. As a result, the urban property acquisitions completed by the Company typically do
not provide material accretion to the Company’s results in the immediate term. However, the Company will continue to
selectively acquire high quality, well-located properties that add strategic value and/or operating synergies, provided that
they will be accretive to FFO and net asset value over time. Therefore, the Company expects to focus on development and
redevelopment of existing assets as the primary means to grow the portfolio while continuing to make selective
acquisitions that complement the existing portfolio, when and if opportunities arise.
During the year, the Company acquired interests in sixteen properties, and one land parcel for $177.0 million, adding a
total of 213,400 square feet of gross leasable area to the portfolio. Additionally, the Company invested $214.3 million in
development and redevelopment activities.
The Company continues to evaluate its properties and to dispose of non-core properties. This allows the Company to
redeploy capital into its core urban redevelopment projects where population, rent growth and consumer trends
present the opportunity for better long-term growth.
During the year, the Company disposed of a 50.5% non-managing interest in a portfolio of six properties in London,
Ontario as well as three land parcels and partial interests in two properties for $132.0 million. The Company also
completed the sale of 19 properties that it owned through its joint venture interest in Main and Main Urban Realty
for approximately $116.8 million at the Company's interest.
Financing Activity
During the year, the Company repaid $134.9 million of mortgages with a weighted average effective interest rate of 5.6%
and secured $388.9 million of new mortgages with a weighted average effective interest rate of 3.7% and a weighted
average term of 11.4 years.
Development activities continue to provide the Company with growth within its existing portfolio of assets. These activities
typically add density to the site and improve the quality of the property, which in turn leads to meaningful growth in
property rental income. The Company’s development activities primarily comprise redevelopments and expansions of
existing properties in established trade areas in its target urban markets and will continue to be optimized as the Company
concentrates investment capital towards higher population, greater density, urban neighbourhoods. These projects typically
carry risk that is associated more with project execution rather than market risk, as projects are located in well-established
urban communities with existing demand for goods and services. The Company has a long and successful track record of
development activities and will continue to manage carefully the risks associated with such projects.
During the year, the Company transferred 283,000 square feet of new urban retail space as well as common areas from
development to income-producing properties at a cost of $293.3 million. Occupied space was transferred at an average
net rental rate of $37.33 per square foot, well above the average rate for the entire portfolio of $20.24.
The Company’s evolved urban investment strategy will see the Company further focus investment in its highest value
urban market assets, surfacing unrecognized value, and ultimately, looking beyond asset class to create high quality, urban
neighbourhoods that Management believes will deliver value to investors, and ensure the Company grows its best in class
position.
Transaction Activity
The property acquisition environment remains extremely competitive for assets of similar quality to those owned by the
Company. There are typically multiple bids on high quality properties and asset valuations reflect strong demand for well-
located income-producing assets. In addition, well-located urban properties rarely trade in the market and attract
significant competition when they do. As a result, the urban property acquisitions completed by the Company typically do
not provide material accretion to the Company’s results in the immediate term. However, the Company will continue to
selectively acquire high quality, well-located properties that add strategic value and/or operating synergies, provided that
they will be accretive to FFO and net asset value over time. Therefore, the Company expects to focus on development and
redevelopment of existing assets as the primary means to grow the portfolio while continuing to make selective
acquisitions that complement the existing portfolio, when and if opportunities arise.
During the year, the Company acquired interests in sixteen properties, and one land parcel for $177.0 million, adding a
total of 213,400 square feet of gross leasable area to the portfolio. Additionally, the Company invested $214.3 million in
development and redevelopment activities.
The Company continues to evaluate its properties and to dispose of non-core properties. This allows the Company to
redeploy capital into its core urban redevelopment projects where population, rent growth and consumer trends
present the opportunity for better long-term growth.
During the year, the Company disposed of a 50.5% non-managing interest in a portfolio of six properties in London,
Ontario as well as three land parcels and partial interests in two properties for $132.0 million. The Company also
completed the sale of 19 properties that it owned through its joint venture interest in Main and Main Urban Realty
for approximately $116.8 million at the Company's interest.
Financing Activity
During the year, the Company repaid $134.9 million of mortgages with a weighted average effective interest rate of 5.6%
and secured $388.9 million of new mortgages with a weighted average effective interest rate of 3.7% and a weighted
average term of 11.4 years.
On February 28, 2018, the Company redeemed its remaining 4.45% Series J convertible debentures for $55.1 million, at
par. The full redemption price and any accrued interest owing on the convertible debentures was satisfied in cash.
On February 28, 2018, the Company redeemed its remaining 4.45% Series J convertible debentures for $55.1 million, at
par. The full redemption price and any accrued interest owing on the convertible debentures was satisfied in cash.
On July 18, 2018, the Company issued 9.8 million common shares at a price of $20.50 for gross proceeds of $200.0 million
which were raised to fund the acquisition of several properties and two development projects in the Company's core
urban markets.
On July 18, 2018, the Company issued 9.8 million common shares at a price of $20.50 for gross proceeds of $200.0 million
which were raised to fund the acquisition of several properties and two development projects in the Company's core
urban markets.
On August 30, 2018 and November 30, 2018, the Company repaid its 5.25% Series J and 4.95% Series K senior unsecured
debentures totaling $150.0 million.
On August 30, 2018 and November 30, 2018, the Company repaid its 5.25% Series J and 4.95% Series K senior unsecured
debentures totaling $150.0 million.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
8
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Pursuit of REIT Conversion
The Company has engaged legal and tax advisors to assist it in developing a structure for the Company to convert into a
REIT. The Company believes a conversion will enhance long-term shareholder value by expanding its investor base and
investment profile by being eligible for inclusion in various REIT-specific indices, REIT ETF’s and REIT-dedicated investment
funds, enhancing comparability with the Company’s peers as well as providing a more efficient vehicle to deliver the
benefits of urban real estate ownership from the Company’s business to investors.
Any reorganization of the Company into a REIT will be subject to customary conditions, including the approval of the
shareholders of the Company. The Company will make further announcement when the detailed terms of a reorganization
are approved by the Board of Directors.
Income Tax
The Company completed $249 million of dispositions in 2018 which was higher than the $90 million it completed in 2017
and the three-year historical average of $84 million per year between 2015 and 2017. The decision to advance its
investment strategy and accelerate dispositions has resulted in increased taxable income and greater usage of the
Company’s non-capital losses. The Company’s non-capital losses declined by approximately $61 million during 2018. If the
Company continues as a corporation in 2019, depending on its level of taxable income, it could recognize current income tax
expense.
Pursuit of REIT Conversion
The Company has engaged legal and tax advisors to assist it in developing a structure for the Company to convert into a
REIT. The Company believes a conversion will enhance long-term shareholder value by expanding its investor base and
investment profile by being eligible for inclusion in various REIT-specific indices, REIT ETF’s and REIT-dedicated investment
funds, enhancing comparability with the Company’s peers as well as providing a more efficient vehicle to deliver the
benefits of urban real estate ownership from the Company’s business to investors.
Any reorganization of the Company into a REIT will be subject to customary conditions, including the approval of the
shareholders of the Company. The Company will make further announcement when the detailed terms of a reorganization
are approved by the Board of Directors.
Income Tax
The Company completed $249 million of dispositions in 2018 which was higher than the $90 million it completed in 2017
and the three-year historical average of $84 million per year between 2015 and 2017. The decision to advance its
investment strategy and accelerate dispositions has resulted in increased taxable income and greater usage of the
Company’s non-capital losses. The Company’s non-capital losses declined by approximately $61 million during 2018. If the
Company continues as a corporation in 2019, depending on its level of taxable income, it could recognize current income tax
expense.
Outlook
Outlook
Management is focused on the following areas to achieve its objectives through 2019 and into 2020:
• development, redevelopment and repositioning activities including land use intensification;
• selective acquisitions of strategic assets and sites in close proximity to existing properties in the Company’s target urban
markets;
• raising capital to fund future growth through select dispositions;
• proactive portfolio management that results in higher rent growth;
• increasing the efficiency and productivity of operations;
• maintaining financial strength and flexibility to support a competitive cost of capital over the long-term; and
• pursuing a REIT conversion
Management is focused on the following areas to achieve its objectives through 2019 and into 2020:
• development, redevelopment and repositioning activities including land use intensification;
• selective acquisitions of strategic assets and sites in close proximity to existing properties in the Company’s target urban
markets;
• raising capital to fund future growth through select dispositions;
• proactive portfolio management that results in higher rent growth;
• increasing the efficiency and productivity of operations;
• maintaining financial strength and flexibility to support a competitive cost of capital over the long-term; and
• pursuing a REIT conversion
Overall, Management is confident that the quality of the Company’s balance sheet and the defensive nature of its assets
will continue to serve it well in the current environment and into the future.
Overall, Management is confident that the quality of the Company’s balance sheet and the defensive nature of its assets
will continue to serve it well in the current environment and into the future.
CORPORATE RESPONSIBILITY AND SUSTAINABILITY
The Company builds value by creating and managing high quality properties with long-term appeal in neighbourhoods and
communities that the Company believes will have a strong and growing customer base well into the future. Since 2011, the
Company has published annual Corporate Responsibility and Sustainability ("CRS") Reports. These CRS reports are extensive
and comply with the Global Reporting Initiative ("GRI"), an international non-profit organization whose mandate is to
establish guidelines for CRS reports. The Company is proud to be Canada's first publicly traded real estate company to have
issued a GRI-compliant CRS report. The Company’s external auditor Ernst & Young LLP provides a statement of assurance on
the CRS report annually.
In 2018, the Company ranked 4th in Corporate Knights' 'Future 40 Responsible Corporate Leaders in Canada' and has made
the list for 5 consecutive years. For several years, the Company has responded to the Carbon Disclosure Project ("CDP"),
disclosing information to the investment community on the Company’s performance results in greenhouse gas emissions
("GHG"), energy use, and risks and opportunities from climate change and in 2018 also responded to the Global Real Estate
Sustainability Benchmark ("GRESB"). The Company employs a full-time Director of Sustainability who is responsible for
leading sustainability reporting initiatives and driving continuous environmental improvement.
CORPORATE RESPONSIBILITY AND SUSTAINABILITY
The Company builds value by creating and managing high quality properties with long-term appeal in neighbourhoods and
communities that the Company believes will have a strong and growing customer base well into the future. Since 2011, the
Company has published annual Corporate Responsibility and Sustainability ("CRS") Reports. These CRS reports are extensive
and comply with the Global Reporting Initiative ("GRI"), an international non-profit organization whose mandate is to
establish guidelines for CRS reports. The Company is proud to be Canada's first publicly traded real estate company to have
issued a GRI-compliant CRS report. The Company’s external auditor Ernst & Young LLP provides a statement of assurance on
the CRS report annually.
In 2018, the Company ranked 4th in Corporate Knights' 'Future 40 Responsible Corporate Leaders in Canada' and has made
the list for 5 consecutive years. For several years, the Company has responded to the Carbon Disclosure Project ("CDP"),
disclosing information to the investment community on the Company’s performance results in greenhouse gas emissions
("GHG"), energy use, and risks and opportunities from climate change and in 2018 also responded to the Global Real Estate
Sustainability Benchmark ("GRESB"). The Company employs a full-time Director of Sustainability who is responsible for
leading sustainability reporting initiatives and driving continuous environmental improvement.
The Company also takes a highly disciplined approach to the development and redevelopment of the Company’s properties
across Canada. In 2006, the Company embarked on the path towards sustainability by building new developments to
The Company also takes a highly disciplined approach to the development and redevelopment of the Company’s properties
across Canada. In 2006, the Company embarked on the path towards sustainability by building new developments to
9
FIRST CAPITAL REALTY ANNUAL REPORT 2018
9
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Leadership in Energy and Environmental Design ("LEED") standards subject to tenant acceptance. As at December 31, 2018,
123 projects comprising 3.8 million square feet of GLA were certified to LEED standards. The Company also has 77% of its
portfolio by GLA, certified to the Building Owners and Managers Association Building Environmental Standards ("BOMA
BEST"), validating our “best” practices for energy and environmental performance. Reducing energy and GHG emissions is a
key part of the Company’s sustainability program. In 2016, the Company made a commitment to reduce its 2018 energy
consumption and greenhouse gas emissions by 7.5% from a 2015 base year, weather-corrected, like-to-like portfolio. The
Company has been working hard to meet this goal by implementing operational best practices and energy conservation
measures, such as LED retrofits of parking lot and exterior lighting fixtures. At the end of 2018, the company had achieved a
three-year energy reduction of 7% and GHG reduction of 11%. All of these initiatives enhance the properties’ environmental
performance and many of them reduce operating costs, benefiting the Company's tenants and shareholders.
The Company is committed to connecting and contributing to the communities it serves and enhancing the experience in its
shopping centres. For the past 7 years, the Company has embarked on public art projects across the country and through
our collaboration with OCAD University, Emily Carr University of Art and Design, and Concordia University, the Company has
sponsored public art competitions and has successfully completed 27 sculpture installations in prominent locations
throughout our properties.
Management strives to maintain the highest levels of integrity and ethical business practices in all that it does. The
Company’s governance structure, Code of Conduct and Ethics, and all of its employee guidelines and policies are aimed at
ensuring that all employees remain good corporate citizens focused on building the long-term value of the Company.
The Company was pleased to be ranked as the most gender diverse company in Canada included in Canada’s first gender
diversity ETF, launched in 2017 by Evolve Funds. This ETF invests in the most gender diverse companies in North American
as ranked by Equileap’s1 extensive gender scorecard, which includes 19 criteria of gender balance and gender equality.
Leadership in Energy and Environmental Design ("LEED") standards subject to tenant acceptance. As at December 31, 2018,
123 projects comprising 3.8 million square feet of GLA were certified to LEED standards. The Company also has 77% of its
portfolio by GLA, certified to the Building Owners and Managers Association Building Environmental Standards ("BOMA
BEST"), validating our “best” practices for energy and environmental performance. Reducing energy and GHG emissions is a
key part of the Company’s sustainability program. In 2016, the Company made a commitment to reduce its 2018 energy
consumption and greenhouse gas emissions by 7.5% from a 2015 base year, weather-corrected, like-to-like portfolio. The
Company has been working hard to meet this goal by implementing operational best practices and energy conservation
measures, such as LED retrofits of parking lot and exterior lighting fixtures. At the end of 2018, the company had achieved a
three-year energy reduction of 7% and GHG reduction of 11%. All of these initiatives enhance the properties’ environmental
performance and many of them reduce operating costs, benefiting the Company's tenants and shareholders.
The Company is committed to connecting and contributing to the communities it serves and enhancing the experience in its
shopping centres. For the past 7 years, the Company has embarked on public art projects across the country and through
our collaboration with OCAD University, Emily Carr University of Art and Design, and Concordia University, the Company has
sponsored public art competitions and has successfully completed 27 sculpture installations in prominent locations
throughout our properties.
Management strives to maintain the highest levels of integrity and ethical business practices in all that it does. The
Company’s governance structure, Code of Conduct and Ethics, and all of its employee guidelines and policies are aimed at
ensuring that all employees remain good corporate citizens focused on building the long-term value of the Company.
The Company was pleased to be ranked as the most gender diverse company in Canada included in Canada’s first gender
diversity ETF, launched in 2017 by Evolve Funds. This ETF invests in the most gender diverse companies in North American
as ranked by Equileap’s1 extensive gender scorecard, which includes 19 criteria of gender balance and gender equality.
For more information on the Company’s Corporate Responsibility and Sustainability practices, please refer to the latest
CRS report on the Company's website at www.fcr.ca.
For more information on the Company’s Corporate Responsibility and Sustainability practices, please refer to the latest
CRS report on the Company's website at www.fcr.ca.
1
Equileap is an organization aiming to accelerate progress towards gender equality in the workplace, using the power of investments, grants and knowledge and is
headquartered in Amsterdam and London.
1
Equileap is an organization aiming to accelerate progress towards gender equality in the workplace, using the power of investments, grants and knowledge and is
headquartered in Amsterdam and London.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
10
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
NON-IFRS FINANCIAL MEASURES
In addition to measures determined in accordance with International Financial Reporting Standards ("IFRS"), the Company
uses non-IFRS financial measures to analyze its financial performance. In Management’s view, such non-IFRS financial
measures are commonly accepted and meaningful indicators of financial performance in the real estate industry and
provide useful supplemental information to both Management and investors. These measures do not have a standardized
meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other
corporations or Real Estate Investment Trusts ("REITs"), and should not be construed as an alternative to other financial
measures determined in accordance with IFRS.
The following describe the non-IFRS measures the Company currently uses in evaluating is financial performance.
Proportionate Interest
"Proportionate interest" or "Proportionate share" is defined by Management as the Company’s proportionate share of
revenues, expenses, assets and liabilities in all of its real estate investments. Under IFRS, the Company's five equity
accounted joint ventures are presented on one line item in the consolidated balance sheets and the consolidated
statements of income, in aggregate. In the "Non-IFRS Reconciliations and Financial Measures" section of this MD&A,
Management presents a consolidated balance sheet and income statement as if its joint ventures were proportionately
consolidated. In addition, Management presents certain tables relating to its shopping centre portfolio by geographic
region, enterprise value, and debt metrics on a proportionate basis to enhance the relevance of the information
presented. The presentation of financial information at the Company's proportionate interest provides a useful and more
detailed view of the operation and performance of the Company's business and how Management operates and manages
the business. This presentation also depicts the extent to which the underlying assets are leveraged, which are included in
the Company's debt metrics. In addition, the Company's lenders require Management to calculate its debt metrics on a
proportionate interest basis.
To achieve the proportionate presentation of its five equity accounted joint ventures, Management allocates the
Company's proportionate share of revenues, expenses, assets, and liabilities to each relevant line item which replaces the
one line presentation found in the IFRS consolidated financial statements. In addition, under IFRS, the Company exercises
control over a sixth partially owned venture and consolidates 100% of the revenues, expenses, assets, and liabilities in the
consolidated financial statements. In the reconciliations, the partially owned venture is also presented as if it was
proportionately consolidated. To achieve the proportionate presentation of its partially owned venture, Management
subtracts the non-controlling interest's share (the portion the Company doesn't own) of revenue, expenses, assets, and
liabilities on each relevant line item. The Company does not independently control its joint ventures that are accounted
for using the equity method, and the proportionate presentation of these joint ventures does not necessarily represent
the Company's legal claim to such items.
Where noted, certain sections of this MD&A exclude the Company's proportionate share of Main and Main Urban Realty's
("MMUR") financial information to enhance the relevance of the information presented, as MMUR's business operations
are not focused on operating stable income-producing properties at this time. Additionally, during 2018, MMUR
completed the sale of the majority of its portfolio (19 of 23 properties) for approximately $116.8 million at the Company's
interest.
NON-IFRS FINANCIAL MEASURES
In addition to measures determined in accordance with International Financial Reporting Standards ("IFRS"), the Company
uses non-IFRS financial measures to analyze its financial performance. In Management’s view, such non-IFRS financial
measures are commonly accepted and meaningful indicators of financial performance in the real estate industry and
provide useful supplemental information to both Management and investors. These measures do not have a standardized
meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other
corporations or Real Estate Investment Trusts ("REITs"), and should not be construed as an alternative to other financial
measures determined in accordance with IFRS.
The following describe the non-IFRS measures the Company currently uses in evaluating is financial performance.
Proportionate Interest
"Proportionate interest" or "Proportionate share" is defined by Management as the Company’s proportionate share of
revenues, expenses, assets and liabilities in all of its real estate investments. Under IFRS, the Company's five equity
accounted joint ventures are presented on one line item in the consolidated balance sheets and the consolidated
statements of income, in aggregate. In the "Non-IFRS Reconciliations and Financial Measures" section of this MD&A,
Management presents a consolidated balance sheet and income statement as if its joint ventures were proportionately
consolidated. In addition, Management presents certain tables relating to its shopping centre portfolio by geographic
region, enterprise value, and debt metrics on a proportionate basis to enhance the relevance of the information
presented. The presentation of financial information at the Company's proportionate interest provides a useful and more
detailed view of the operation and performance of the Company's business and how Management operates and manages
the business. This presentation also depicts the extent to which the underlying assets are leveraged, which are included in
the Company's debt metrics. In addition, the Company's lenders require Management to calculate its debt metrics on a
proportionate interest basis.
To achieve the proportionate presentation of its five equity accounted joint ventures, Management allocates the
Company's proportionate share of revenues, expenses, assets, and liabilities to each relevant line item which replaces the
one line presentation found in the IFRS consolidated financial statements. In addition, under IFRS, the Company exercises
control over a sixth partially owned venture and consolidates 100% of the revenues, expenses, assets, and liabilities in the
consolidated financial statements. In the reconciliations, the partially owned venture is also presented as if it was
proportionately consolidated. To achieve the proportionate presentation of its partially owned venture, Management
subtracts the non-controlling interest's share (the portion the Company doesn't own) of revenue, expenses, assets, and
liabilities on each relevant line item. The Company does not independently control its joint ventures that are accounted
for using the equity method, and the proportionate presentation of these joint ventures does not necessarily represent
the Company's legal claim to such items.
Where noted, certain sections of this MD&A exclude the Company's proportionate share of Main and Main Urban Realty's
("MMUR") financial information to enhance the relevance of the information presented, as MMUR's business operations
are not focused on operating stable income-producing properties at this time. Additionally, during 2018, MMUR
completed the sale of the majority of its portfolio (19 of 23 properties) for approximately $116.8 million at the Company's
interest.
Select financial information for MMUR is presented in the "Main & Main Urban Realty" section of this MD&A.
Select financial information for MMUR is presented in the "Main & Main Urban Realty" section of this MD&A.
Net Operating Income
Net Operating Income (“NOI”) is defined by Management as property rental revenue less property operating costs. NOI is
a commonly used metric for analyzing real estate performance in Canada by real estate industry analysts, investors and
Management. Management believes that NOI is useful in analyzing the operating performance of the Company’s
shopping centre portfolio.
Net Operating Income
Net Operating Income (“NOI”) is defined by Management as property rental revenue less property operating costs. NOI is
a commonly used metric for analyzing real estate performance in Canada by real estate industry analysts, investors and
Management. Management believes that NOI is useful in analyzing the operating performance of the Company’s
shopping centre portfolio.
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
Total Same Property NOI
Total Same Property NOI (“SP NOI”) is defined by Management as NOI from properties categorized as “Same Property —
stable” and “Same Property with redevelopment” (see definitions under “Real Estate Investments — Investment Property
Categories” section of this MD&A). NOI from properties that have been (i) acquired, (ii) disposed, (iii) included in major
redevelopment or ground-up development or (iv) held for sale are excluded from the determination of SP NOI. SP NOI is
presented on a cash basis, as it excludes straight-line rent. Management believes that SP NOI is a useful measure in
understanding period over period changes in cash NOI for its Same Property portfolio due to occupancy, rental rates,
operating costs and realty taxes. A reconciliation from SP NOI to total NOI can be found in the "Results of Operations - Net
Operating Income" section of this MD&A.
Same Property — Stable NOI
Same Property — stable NOI is defined by Management as NOI from stable properties where the only significant activities
are leasing and ongoing maintenance (see complete definition under “Real Estate Investments — Investment Property
Categories” section of this MD&A). Management believes that Same Property — stable NOI is a useful measure in
understanding period over period changes in cash NOI for its largest category of properties.
Funds from Operations
Funds from Operations ("FFO") is a recognized measure that is widely used by the real estate industry, particularly by
publicly traded entities that own and operate income-producing properties. The Company calculates FFO in accordance
with the recommendations of the Real Property Association of Canada (“REALPAC”) as published in its most recent “White
Paper on Funds From Operations and Adjusted Funds From Operations for IFRS” dated February 2018. Management
considers FFO a meaningful additional financial measure of operating performance, as it excludes fair value gains and
losses on investment properties as well as certain other items included in the Company's net income that may not be the
most appropriate determinants of the long-term operating performance of the Company, such as investment property
selling costs, deferred income taxes, and any gains, losses or transaction costs recognized in business combinations. FFO
provides a perspective on the financial performance of the Company that is not immediately apparent from net income
determined in accordance with IFRS. A reconciliation from net income to FFO can be found in the "Non-IFRS
Reconciliations and Financial Measures — FFO and ACFO" section of this MD&A.
Adjusted Cash Flow from Operations
Adjusted Cash Flow from Operations (“ACFO”) is a supplementary measure the Company began using in 2017 to measure
operating cash flow generated from the business. ACFO replaced the Company’s previously reported Adjusted Funds from
Operations (“AFFO”) as its supplementary cash flow metric. The Company calculates ACFO in accordance with the
recommendations of REALPAC as published in its most recent “White Paper on Adjusted Cashflow From Operations
(ACFO) for IFRS” dated February 2018.
Management considers ACFO a meaningful metric to measure operating cash flows as it represents sustainable cash
available to pay dividends to shareholders. ACFO includes a number of adjustments to cash flow from operations under
IFRS including, eliminating seasonal and non-recurring fluctuations in working capital, adding cash flows associated with
equity accounted joint ventures and deducting actual revenue sustaining capital expenditures and actual capital
expenditures recoverable from tenants. Lastly, ACFO includes an adjustment to exclude the non-controlling interest's
portion of cash flow from operations under IFRS, attributed to the Company's consolidated joint venture. A reconciliation
of cash flow from operations under IFRS to ACFO can be found in the "Non-IFRS Reconciliations and Financial Measures —
FFO and ACFO" section of this MD&A.
Weighted average share count for FFO
For purposes of calculating per share amounts for FFO, the weighted average number of diluted shares outstanding is
calculated assuming conversion of only those convertible debentures outstanding that would have a dilutive effect upon
conversion, at the holders' contractual conversion price. As of February 28, 2018, the Company no longer has any
convertible debentures outstanding.
Total Same Property NOI
Total Same Property NOI (“SP NOI”) is defined by Management as NOI from properties categorized as “Same Property —
stable” and “Same Property with redevelopment” (see definitions under “Real Estate Investments — Investment Property
Categories” section of this MD&A). NOI from properties that have been (i) acquired, (ii) disposed, (iii) included in major
redevelopment or ground-up development or (iv) held for sale are excluded from the determination of SP NOI. SP NOI is
presented on a cash basis, as it excludes straight-line rent. Management believes that SP NOI is a useful measure in
understanding period over period changes in cash NOI for its Same Property portfolio due to occupancy, rental rates,
operating costs and realty taxes. A reconciliation from SP NOI to total NOI can be found in the "Results of Operations - Net
Operating Income" section of this MD&A.
Same Property — Stable NOI
Same Property — stable NOI is defined by Management as NOI from stable properties where the only significant activities
are leasing and ongoing maintenance (see complete definition under “Real Estate Investments — Investment Property
Categories” section of this MD&A). Management believes that Same Property — stable NOI is a useful measure in
understanding period over period changes in cash NOI for its largest category of properties.
Funds from Operations
Funds from Operations ("FFO") is a recognized measure that is widely used by the real estate industry, particularly by
publicly traded entities that own and operate income-producing properties. The Company calculates FFO in accordance
with the recommendations of the Real Property Association of Canada (“REALPAC”) as published in its most recent “White
Paper on Funds From Operations and Adjusted Funds From Operations for IFRS” dated February 2018. Management
considers FFO a meaningful additional financial measure of operating performance, as it excludes fair value gains and
losses on investment properties as well as certain other items included in the Company's net income that may not be the
most appropriate determinants of the long-term operating performance of the Company, such as investment property
selling costs, deferred income taxes, and any gains, losses or transaction costs recognized in business combinations. FFO
provides a perspective on the financial performance of the Company that is not immediately apparent from net income
determined in accordance with IFRS. A reconciliation from net income to FFO can be found in the "Non-IFRS
Reconciliations and Financial Measures — FFO and ACFO" section of this MD&A.
Adjusted Cash Flow from Operations
Adjusted Cash Flow from Operations (“ACFO”) is a supplementary measure the Company began using in 2017 to measure
operating cash flow generated from the business. ACFO replaced the Company’s previously reported Adjusted Funds from
Operations (“AFFO”) as its supplementary cash flow metric. The Company calculates ACFO in accordance with the
recommendations of REALPAC as published in its most recent “White Paper on Adjusted Cashflow From Operations
(ACFO) for IFRS” dated February 2018.
Management considers ACFO a meaningful metric to measure operating cash flows as it represents sustainable cash
available to pay dividends to shareholders. ACFO includes a number of adjustments to cash flow from operations under
IFRS including, eliminating seasonal and non-recurring fluctuations in working capital, adding cash flows associated with
equity accounted joint ventures and deducting actual revenue sustaining capital expenditures and actual capital
expenditures recoverable from tenants. Lastly, ACFO includes an adjustment to exclude the non-controlling interest's
portion of cash flow from operations under IFRS, attributed to the Company's consolidated joint venture. A reconciliation
of cash flow from operations under IFRS to ACFO can be found in the "Non-IFRS Reconciliations and Financial Measures —
FFO and ACFO" section of this MD&A.
Weighted average share count for FFO
For purposes of calculating per share amounts for FFO, the weighted average number of diluted shares outstanding is
calculated assuming conversion of only those convertible debentures outstanding that would have a dilutive effect upon
conversion, at the holders' contractual conversion price. As of February 28, 2018, the Company no longer has any
convertible debentures outstanding.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
12
FIRST CAPITAL REALTY ANNUAL REPORT 2018
12
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
FFO and ACFO Payout Ratios
FFO and ACFO payout ratios are supplementary non-IFRS measures used by Management to assess the sustainability of
the Company's dividend payments. The FFO payout ratio is calculated using dividends declared per share divided by FFO
per share. The ACFO payout ratio is calculated on a rolling four quarter basis by dividing total cash dividends paid by ACFO
over the same period. Management considers a rolling four quarter ACFO payout ratio more relevant than a payout ratio
in any given quarter due to the impact of seasonal fluctuations in ACFO period over period.
Enterprise Value
Enterprise value is the sum of the carrying value of the Company's total debt on a proportionate basis and the market
value of the Company's shares outstanding at the respective quarter end date. This measure is used by the Company to
assess the total amount of capital employed in generating returns to shareholders.
Net Debt
Net debt is a measure used by Management in the computation of certain debt metrics, providing information with
respect to certain financial ratios used in assessing the Company's debt profile. Net debt is calculated as the sum of
principal amounts outstanding on credit facilities and mortgages, bank indebtedness and the par value of senior
unsecured debentures reduced by the cash balances at the end of the period. Convertible debentures outstanding prior
to February 28, 2018, were excluded as the Company had the option to satisfy its obligations of principal and interest
payments in respect of all of its outstanding convertible debentures by the issuance of common shares. As of February 28,
2018, the Company no longer has any convertible debentures outstanding.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, ("Adjusted EBITDA") is a measure used by
Management in the computation of certain debt metrics. Adjusted EBITDA, is calculated as net income, adding back
income tax expense, interest expense and amortization and excluding the increase or decrease in the fair value of
investment properties and other non-cash or non-recurring items. The Company also adjusts for incremental leasing
costs, which is a recognized adjustment to FFO, in accordance with the recommendations of REALPAC.
Unencumbered Aggregate Assets
Unencumbered aggregate assets represents the value of assets that have not been pledged as security under a credit
agreement or mortgage. The unencumbered aggregate asset value ratio is calculated as unencumbered aggregate assets
divided by the principal amount of unsecured debt, which consists of bank indebtedness, unsecured credit facilities and
senior unsecured debentures. This ratio is used by Management to assess the flexibility of the Company to obtain various
forms of debt financing at a reasonable cost of capital.
OPERATING METRICS
The Company presents certain operating metrics and portfolio statistics in the MD&A, which include property count,
property category, GLA, occupancy, weighted average rate per occupied square foot, top 40 tenants, development
pipeline, and renewal activities. The Company uses these operating metrics to monitor and measure operational
performance period over period. To align the Company's GLA reporting with its ownership interest in its properties, unless
otherwise noted, all GLA is presented at the Company's ownership interest (23.9 million square feet at its ownership
interest compared to 25.5 million square feet at 100% as at December 31, 2018). These metrics exclude the operating
metrics related to the Company's interest in MMUR as its business operations are not focused on operating stable
income-producing properties at this time. Furthermore, during 2018, MMUR completed the sale of the majority of its
portfolio (19 of 23 properties) for approximately $116.8 million at the Company's interest.
FFO and ACFO Payout Ratios
FFO and ACFO payout ratios are supplementary non-IFRS measures used by Management to assess the sustainability of
the Company's dividend payments. The FFO payout ratio is calculated using dividends declared per share divided by FFO
per share. The ACFO payout ratio is calculated on a rolling four quarter basis by dividing total cash dividends paid by ACFO
over the same period. Management considers a rolling four quarter ACFO payout ratio more relevant than a payout ratio
in any given quarter due to the impact of seasonal fluctuations in ACFO period over period.
Enterprise Value
Enterprise value is the sum of the carrying value of the Company's total debt on a proportionate basis and the market
value of the Company's shares outstanding at the respective quarter end date. This measure is used by the Company to
assess the total amount of capital employed in generating returns to shareholders.
Net Debt
Net debt is a measure used by Management in the computation of certain debt metrics, providing information with
respect to certain financial ratios used in assessing the Company's debt profile. Net debt is calculated as the sum of
principal amounts outstanding on credit facilities and mortgages, bank indebtedness and the par value of senior
unsecured debentures reduced by the cash balances at the end of the period. Convertible debentures outstanding prior
to February 28, 2018, were excluded as the Company had the option to satisfy its obligations of principal and interest
payments in respect of all of its outstanding convertible debentures by the issuance of common shares. As of February 28,
2018, the Company no longer has any convertible debentures outstanding.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization, ("Adjusted EBITDA") is a measure used by
Management in the computation of certain debt metrics. Adjusted EBITDA, is calculated as net income, adding back
income tax expense, interest expense and amortization and excluding the increase or decrease in the fair value of
investment properties and other non-cash or non-recurring items. The Company also adjusts for incremental leasing
costs, which is a recognized adjustment to FFO, in accordance with the recommendations of REALPAC.
Unencumbered Aggregate Assets
Unencumbered aggregate assets represents the value of assets that have not been pledged as security under a credit
agreement or mortgage. The unencumbered aggregate asset value ratio is calculated as unencumbered aggregate assets
divided by the principal amount of unsecured debt, which consists of bank indebtedness, unsecured credit facilities and
senior unsecured debentures. This ratio is used by Management to assess the flexibility of the Company to obtain various
forms of debt financing at a reasonable cost of capital.
OPERATING METRICS
The Company presents certain operating metrics and portfolio statistics in the MD&A, which include property count,
property category, GLA, occupancy, weighted average rate per occupied square foot, top 40 tenants, development
pipeline, and renewal activities. The Company uses these operating metrics to monitor and measure operational
performance period over period. To align the Company's GLA reporting with its ownership interest in its properties, unless
otherwise noted, all GLA is presented at the Company's ownership interest (23.9 million square feet at its ownership
interest compared to 25.5 million square feet at 100% as at December 31, 2018). These metrics exclude the operating
metrics related to the Company's interest in MMUR as its business operations are not focused on operating stable
income-producing properties at this time. Furthermore, during 2018, MMUR completed the sale of the majority of its
portfolio (19 of 23 properties) for approximately $116.8 million at the Company's interest.
13
FIRST CAPITAL REALTY ANNUAL REPORT 2018
13
FIRST CAPITAL REALTY ANNUAL REPORT 2018
SUMMARY CONSOLIDATED INFORMATION AND HIGHLIGHTS
SUMMARY CONSOLIDATED INFORMATION AND HIGHLIGHTS
Revenues, Income and Cash Flows (1)
Revenues and other income
NOI (2)
Increase (decrease) in value of investment properties, net
Net income attributable to common shareholders
Net income per share attributable to common shareholders (diluted)
Weighted average number of common shares – diluted – IFRS
(in thousands)
Cash provided by operating activities
Dividends
Dividends
Dividends per common share
As at December 31
Financial Information (1)
Investment properties – shopping centres (3)
Investment properties – development land (3)
Hotel property
Total assets
Mortgages (3)
Credit facilities
Senior unsecured debentures
Convertible debentures
Shareholders’ equity
Capitalization and Leverage
2018
2017
2016
$
$
$
$
$
$
$
$
756,024
454,773
102,389
343,606
1.37
250,802
283,012
215,537
0.860
$
$
$
$
$
$
$
$
722,860
437,510
458,363
633,089
2.55
249,413
270,159
210,433
0.860
$
$
$
$
$
$
$
$
695,925
421,997
218,078
382,714
1.59
246,428
256,598
204,233
0.860
2018
2017
2016
$ 9,690,179
78,096
$
$
58,604
$ 10,453,055
$ 1,285,908
$
626,172
$ 2,447,278
$
$ 4,978,242
$ 9,317,306
79,053
$
$
$ 9,968,552
$ 1,060,339
$
581,627
$ 2,595,966
54,293
$ 4,647,071
$ 8,453,348
67,149
$
—
— $
$ 9,104,553
997,165
$
$
251,481
$ 2,546,442
$
207,633
$ 4,195,263
— $
Revenues, Income and Cash Flows (1)
Revenues and other income
NOI (2)
Increase (decrease) in value of investment properties, net
Net income attributable to common shareholders
Net income per share attributable to common shareholders (diluted)
Weighted average number of common shares – diluted – IFRS
(in thousands)
Cash provided by operating activities
Dividends
Dividends
Dividends per common share
As at December 31
Financial Information (1)
Investment properties – shopping centres (3)
Investment properties – development land (3)
Hotel property
Total assets
Mortgages (3)
Credit facilities
Senior unsecured debentures
Convertible debentures
Shareholders’ equity
Capitalization and Leverage
2018
2017
2016
$
$
$
$
$
$
$
$
756,024
454,773
102,389
343,606
1.37
250,802
283,012
215,537
0.860
$
$
$
$
$
$
$
$
722,860
437,510
458,363
633,089
2.55
249,413
270,159
210,433
0.860
$
$
$
$
$
$
$
$
695,925
421,997
218,078
382,714
1.59
246,428
256,598
204,233
0.860
2018
2017
2016
$ 9,690,179
78,096
$
$
58,604
$ 10,453,055
$ 1,285,908
$
626,172
$ 2,447,278
$
$ 4,978,242
$ 9,317,306
79,053
$
$
$ 9,968,552
$ 1,060,339
$
581,627
$ 2,595,966
54,293
$ 4,647,071
$ 8,453,348
67,149
$
—
— $
$ 9,104,553
997,165
$
$
251,481
$ 2,546,442
$
207,633
$ 4,195,263
— $
Shares outstanding (in thousands)
Enterprise value (2)
Net debt to total assets (2) (4)
Weighted average term to maturity on mortgages and senior unsecured debentures
(years)
254,828
$ 9,239,000
244,431
$ 9,480,000
243,507
$ 9,162,000
42.1%
5.5
43.4%
5.4
42.6%
5.3
Shares outstanding (in thousands)
Enterprise value (2)
Net debt to total assets (2) (4)
Weighted average term to maturity on mortgages and senior unsecured debentures
(years)
254,828
$ 9,239,000
244,431
$ 9,480,000
243,507
$ 9,162,000
42.1%
5.5
43.4%
5.4
42.6%
5.3
FIRST CAPITAL REALTY ANNUAL REPORT 2018
14
FIRST CAPITAL REALTY ANNUAL REPORT 2018
14
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
As at December 31
Operational Information
Number of properties
GLA (square feet) – at 100%
GLA (square feet) – at ownership interest
Occupancy – Same Property – stable (2)
Total portfolio occupancy
Development pipeline and adjacent land (GLA) (5) (6)
Commercial pipeline (primarily retail)
Residential pipeline
Average rate per occupied square foot
GLA developed and brought online - at ownership interest
Same Property – stable NOI – increase (decrease) over prior period (2) (7)
Total Same Property NOI – increase (decrease) over prior period (2) (7)
Funds from Operations (2) (4)
FFO
FFO per diluted share
FFO payout ratio
2018
166
2017
2016
161
160
25,456,000
23,854,000
25,390,000
25,278,000
23,991,000
23,820,000
97.1%
96.7%
96.9%
96.1%
96.3%
94.9%
2,287,000
2,862,000
2,993,000
20,262,000
18,856,000
10,856,000
20.24
$
19.69
$
283,000
131,000
2.7%
3.1%
2.0%
2.5%
19.30
202,000
0.8%
1.1%
$
$
302,971
1.21
71.1%
$
$
284,110
1.16
74.2%
262,544
1.11
77.4%
$
$
$
As at December 31
Operational Information
Number of properties
GLA (square feet) – at 100%
GLA (square feet) – at ownership interest
Occupancy – Same Property – stable (2)
Total portfolio occupancy
Development pipeline and adjacent land (GLA) (5) (6)
Commercial pipeline (primarily retail)
Residential pipeline
Average rate per occupied square foot
GLA developed and brought online - at ownership interest
Same Property – stable NOI – increase (decrease) over prior period (2) (7)
Total Same Property NOI – increase (decrease) over prior period (2) (7)
Funds from Operations (2) (4)
FFO
FFO per diluted share
FFO payout ratio
2018
166
2017
2016
161
160
25,456,000
23,854,000
25,390,000
25,278,000
23,991,000
23,820,000
97.1%
96.7%
96.9%
96.1%
96.3%
94.9%
2,287,000
2,862,000
2,993,000
20,262,000
18,856,000
10,856,000
20.24
$
19.69
$
283,000
131,000
2.7%
3.1%
2.0%
2.5%
19.30
202,000
0.8%
1.1%
$
$
302,971
1.21
71.1%
$
$
284,110
1.16
74.2%
262,544
1.11
77.4%
$
$
$
Weighted average number of common shares – diluted – FFO (in thousands)
250,474
245,153
236,243
Weighted average number of common shares – diluted – FFO (in thousands)
250,474
245,153
236,243
Adjusted Cash Flow from Operations (2) (4)
ACFO
ACFO payout ratio on a rolling four quarter basis
$
267,168
$
243,645
$
231,985
79.6%
86.0%
86.1%
(1) As presented in the Company's IFRS consolidated financial statements.
(2) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(3) Includes properties and mortgages classified as held for sale.
(4) Reflects joint ventures proportionately consolidated. Refer to the "Non-IFRS Financial Measures – Proportionate Interest" section of this MD&A.
(5) At the Company's ownership interest. Square footage does not include potential development on properties held by the Company’s MMUR joint venture. Refer to the
“Business and Operations Review – Main and Main Urban Realty” section of this MD&A.
(6) Beginning in the fourth quarter of 2017, the Company has included very long term projects that have an expected commencement date beyond 15 years.
(7) Calculated based on the year-to-date NOI. Prior period amounts not restated for current period property categories.
Adjusted Cash Flow from Operations (2) (4)
ACFO
ACFO payout ratio on a rolling four quarter basis
$
267,168
$
243,645
$
231,985
79.6%
86.0%
86.1%
(1) As presented in the Company's IFRS consolidated financial statements.
(2) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(3) Includes properties and mortgages classified as held for sale.
(4) Reflects joint ventures proportionately consolidated. Refer to the "Non-IFRS Financial Measures – Proportionate Interest" section of this MD&A.
(5) At the Company's ownership interest. Square footage does not include potential development on properties held by the Company’s MMUR joint venture. Refer to the
“Business and Operations Review – Main and Main Urban Realty” section of this MD&A.
(6) Beginning in the fourth quarter of 2017, the Company has included very long term projects that have an expected commencement date beyond 15 years.
(7) Calculated based on the year-to-date NOI. Prior period amounts not restated for current period property categories.
15
FIRST CAPITAL REALTY ANNUAL REPORT 2018
15
FIRST CAPITAL REALTY ANNUAL REPORT 2018
BUSINESS AND OPERATIONS REVIEW
Real Estate Investments
Investment Property Categories
BUSINESS AND OPERATIONS REVIEW
Real Estate Investments
Investment Property Categories
The Company categorizes its properties for the purposes of evaluating operating performance including Total Same
Property NOI. This enables the Company to better reflect its development, redevelopment and repositioning activities on
its properties, including land use intensification, and its completed and planned disposition activities. In addition, the
Company revises comparative information to reflect property categories consistent with current period status. The
property categories are as follows:
The Company categorizes its properties for the purposes of evaluating operating performance including Total Same
Property NOI. This enables the Company to better reflect its development, redevelopment and repositioning activities on
its properties, including land use intensification, and its completed and planned disposition activities. In addition, the
Company revises comparative information to reflect property categories consistent with current period status. The
property categories are as follows:
Total Same Property consisting of:
Total Same Property consisting of:
Same Property – stable – includes stable properties where the only significant activities are leasing and ongoing
maintenance. Properties that will be undergoing a redevelopment in a future period, including adjacent parcels of
land, and those having planning activities underway are also in this category until such development activities
commence. At that time, the property will be reclassified to either Same Property with redevelopment or to major
redevelopment.
Same Property with redevelopment – includes properties that are largely stable, including adjacent parcels of land,
but are undergoing incremental redevelopment or expansion activities (pads or building extensions) which intensify
the land use. Such redevelopment activities often include façade, parking, lighting and building upgrades.
Same Property – stable – includes stable properties where the only significant activities are leasing and ongoing
maintenance. Properties that will be undergoing a redevelopment in a future period, including adjacent parcels of
land, and those having planning activities underway are also in this category until such development activities
commence. At that time, the property will be reclassified to either Same Property with redevelopment or to major
redevelopment.
Same Property with redevelopment – includes properties that are largely stable, including adjacent parcels of land,
but are undergoing incremental redevelopment or expansion activities (pads or building extensions) which intensify
the land use. Such redevelopment activities often include façade, parking, lighting and building upgrades.
Major redevelopment – includes properties in planning or undergoing multi-year redevelopment projects with significant
intensification, reconfiguration and building and tenant upgrades.
Major redevelopment – includes properties in planning or undergoing multi-year redevelopment projects with significant
intensification, reconfiguration and building and tenant upgrades.
Ground-up development – consists of new construction, either on a vacant land parcel typically situated in an urban area
or on an urban land site with conversion of an existing vacant building to retail use.
Ground-up development – consists of new construction, either on a vacant land parcel typically situated in an urban area
or on an urban land site with conversion of an existing vacant building to retail use.
Acquisitions and dispositions – consists of properties acquired during the period including those in close proximity to
existing shopping centres. Dispositions include information for properties disposed of in the period.
Acquisitions and dispositions – consists of properties acquired during the period including those in close proximity to
existing shopping centres. Dispositions include information for properties disposed of in the period.
Investment properties classified as held for sale – consists of properties that meet the held for sale criteria under IFRS.
Investment properties classified as held for sale – consists of properties that meet the held for sale criteria under IFRS.
Investment properties – development land – comprises land sites where there are no development activities underway,
except for those in the planning stage.
The Company has applied the above property categorization to the fair value, capital expenditures as well as leasing and
occupancy activity on its shopping centre portfolio, and to its Same Property NOI analysis to further assist in
understanding the Company’s real estate activities and its operating and financial performance.
Investment properties – development land – comprises land sites where there are no development activities underway,
except for those in the planning stage.
The Company has applied the above property categorization to the fair value, capital expenditures as well as leasing and
occupancy activity on its shopping centre portfolio, and to its Same Property NOI analysis to further assist in
understanding the Company’s real estate activities and its operating and financial performance.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
16
FIRST CAPITAL REALTY ANNUAL REPORT 2018
16
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Portfolio Overview
Portfolio Overview
As at December 31, 2018, the Company had interests in 166 properties, which were 96.7% occupied with a total GLA of
25.5 million square feet (23.9 million square feet at the Company's ownership interest) and a fair value of $9.7 billion as
well as development land with a fair value of $78.1 million. This compares to 161 properties, which were 96.1% occupied
with a total GLA of 25.4 million square feet (24.0 million square feet at the Company's ownership interest) and a fair value
of $9.3 billion and $79.1 million, respectively, as at December 31, 2017. As at December 31, 2018, the average size of the
properties is approximately 153,000 square feet, ranging from approximately 6,200 to over 548,000 square feet.
The Same Property portfolio includes properties sub-categorized in Same Property – stable and Same Property with
redevelopment. The Same Property portfolio is comprised of 146 properties with a GLA of 21.9 million square feet
(20.6 million square feet at the Company's ownership interest) and a fair value of $7.6 billion. These properties represent
88.0% of the Company's property count, 86.2% of its GLA at the Company's ownership interest and 78.1% of its fair value
as at December 31, 2018.
As at December 31, 2018, the Company had interests in 166 properties, which were 96.7% occupied with a total GLA of
25.5 million square feet (23.9 million square feet at the Company's ownership interest) and a fair value of $9.7 billion as
well as development land with a fair value of $78.1 million. This compares to 161 properties, which were 96.1% occupied
with a total GLA of 25.4 million square feet (24.0 million square feet at the Company's ownership interest) and a fair value
of $9.3 billion and $79.1 million, respectively, as at December 31, 2017. As at December 31, 2018, the average size of the
properties is approximately 153,000 square feet, ranging from approximately 6,200 to over 548,000 square feet.
The Same Property portfolio includes properties sub-categorized in Same Property – stable and Same Property with
redevelopment. The Same Property portfolio is comprised of 146 properties with a GLA of 21.9 million square feet
(20.6 million square feet at the Company's ownership interest) and a fair value of $7.6 billion. These properties represent
88.0% of the Company's property count, 86.2% of its GLA at the Company's ownership interest and 78.1% of its fair value
as at December 31, 2018.
The balance of the Company’s real estate assets consists of properties which are in various stages of redevelopment,
properties acquired in 2018 or 2017 and properties in close proximity to them, as well as properties held for sale.
The balance of the Company’s real estate assets consists of properties which are in various stages of redevelopment,
properties acquired in 2018 or 2017 and properties in close proximity to them, as well as properties held for sale.
The Company's portfolio based on property categorization is summarized as follows:
The Company's portfolio based on property categorization is summarized as follows:
As at
Number
of
Properties
Same Property – stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Ground-up development
Acquisitions – 2018
Acquisitions – 2017
Investment properties classified as held for sale
Dispositions – 2018
132
14
146
10
1
6
2
1
—
17,545
3,025
20,570
2,325
147
202
287
323
—
GLA
(000s
sq. ft.) Occupancy
December 31, 2018
Weighted
Average
Rate per
Occupied
Square
Foot
97.1% $ 19.76
19.12
97.3%
97.1%
93.0%
98.8%
93.9%
94.1%
97.5%
—%
19.67
24.31
29.93
24.91
32.63
10.91
—
Number of
Properties
GLA
(000s
sq. ft.) Occupancy
December 31, 2017
Weighted
Average
Rate per
Occupied
Square
Foot
19.52
18.46
96.9% $
96.7%
96.9%
90.3%
97.4%
—%
93.7%
90.5%
96.8%
19.37
23.15
29.70
—
29.99
10.47
16.62
132
14
146
10
1
—
2
1
1
17,538
2,978
20,516
2,287
112
—
269
367
440
As at
Number
of
Properties
Same Property – stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Ground-up development
Acquisitions – 2018
Acquisitions – 2017
Investment properties classified as held for sale
Dispositions – 2018
132
14
146
10
1
6
2
1
—
17,545
3,025
20,570
2,325
147
202
287
323
—
GLA
(000s
sq. ft.) Occupancy
December 31, 2018
Weighted
Average
Rate per
Occupied
Square
Foot
97.1% $ 19.76
19.12
97.3%
97.1%
93.0%
98.8%
93.9%
94.1%
97.5%
—%
19.67
24.31
29.93
24.91
32.63
10.91
—
Number of
Properties
GLA
(000s
sq. ft.) Occupancy
December 31, 2017
Weighted
Average
Rate per
Occupied
Square
Foot
19.52
18.46
96.9% $
96.7%
96.9%
90.3%
97.4%
—%
93.7%
90.5%
96.8%
19.37
23.15
29.70
—
29.99
10.47
16.62
132
14
146
10
1
—
2
1
1
17,538
2,978
20,516
2,287
112
—
269
367
440
Total
166
23,854
96.7% $ 20.24
161
23,991
96.1% $
19.69
Total
166
23,854
96.7% $ 20.24
161
23,991
96.1% $
19.69
17
FIRST CAPITAL REALTY ANNUAL REPORT 2018
17
FIRST CAPITAL REALTY ANNUAL REPORT 2018
The Company’s portfolio by geographic region is summarized as follows:
The Company’s portfolio by geographic region is summarized as follows:
As at
December 31, 2018
December 31, 2017
As at
December 31, 2018
December 31, 2017
(millions of dollars,
except other data)
Central Region
Greater Toronto
Area
Golden Horseshoe
Area
London/Windsor
Area (2)
Eastern Region
Greater Montreal
Area
Greater Ottawa
Area
Quebec City
Other
Western Region
Greater Calgary
Area
Greater Vancouver
Area
Greater Edmonton
Area
Red Deer
Number
of
Properties
GLA
(000s
sq. ft.)
Fair
Value(1)
% of
Total
Fair
Value Occupancy
Weighted
Average
Rate per
Occupied
Square
Foot
% of
Annual
Minimum
Rent
Number
of
Properties
GLA
(000s
sq. ft.)
Fair
Value(1)
% of
Total
Fair
Value Occupancy
Weighted
Average
Rate per
Occupied
Square
Foot
% of
Annual
Minimum
Rent
50
6,956 $ 3,949
40%
97.0% $
23.93
8
1,601
439
4%
98.8%
16.39
7
65
504
116
1%
9,061
4,504
45%
97.9%
97.4%
14.31
22.03
35%
6%
1%
42%
47
6,806 $ 3,593
38%
97.2% $
22.97
8
1,601
446
5%
99.0%
16.21
7
62
733
179
2%
9,140
4,218
45%
94.6%
97.3%
15.49
21.18
34%
6%
2%
42%
32
4,384
1,278
14%
95.3%
16.73
15%
32
4,441
1,235
13%
93.0%
16.37
15%
13
1,902
588
6%
96.6%
18.24
5
2
995
219
186
45
52
7,500
2,097
2%
—%
22%
94.1%
88.4%
95.3%
11.27
14.21
16.33
17
2,694
1,181
12%
97.2%
22.61
19
2,033
1,108
11%
97.3%
24.18
1
49
243
77
7,293
3,229
33%
9%
1%
98.1%
19.27
96.5%
97.5%
21.58
21.94
7%
2%
1%
13%
10%
9%
1%
33%
12
1,990
569
6%
97.1%
17.17
5
2
994
220
190
44
2%
—%
21%
93.6%
94.6%
94.2%
11.10
13.93
15.78
25%
51
7,645
2,038
16
2,505
1,119
12%
96.9%
22.71
19
2,145
1,111
12%
96.1%
23.44
1
48
244
80
7,206
3,140
34%
9%
1%
97.1%
19.39
92.0%
96.6%
20.28
21.78
7%
2%
1%
25%
12%
11%
9%
1%
33%
(millions of dollars,
except other data)
Central Region
Greater Toronto
Area
Golden Horseshoe
Area
London/Windsor
Area (2)
Eastern Region
Greater Montreal
Area
Greater Ottawa
Area
Quebec City
Other
Western Region
Greater Calgary
Area
Greater Vancouver
Area
Greater Edmonton
Area
Red Deer
Number
of
Properties
GLA
(000s
sq. ft.)
Fair
Value(1)
% of
Total
Fair
Value Occupancy
Weighted
Average
Rate per
Occupied
Square
Foot
% of
Annual
Minimum
Rent
Number
of
Properties
GLA
(000s
sq. ft.)
Fair
Value(1)
% of
Total
Fair
Value Occupancy
Weighted
Average
Rate per
Occupied
Square
Foot
% of
Annual
Minimum
Rent
50
6,956 $ 3,949
40%
97.0% $
23.93
47
6,806 $ 3,593
38%
97.2% $
22.97
1,601
439
4%
98.8%
16.39
1,601
446
5%
99.0%
16.21
504
116
1%
65
9,061
4,504
45%
97.9%
97.4%
14.31
22.03
733
179
2%
62
9,140
4,218
45%
94.6%
97.3%
15.49
21.18
8
7
8
7
32
4,384
1,278
14%
95.3%
16.73
15%
32
4,441
1,235
13%
93.0%
16.37
15%
13
1,902
588
6%
96.6%
18.24
5
2
995
219
186
45
52
7,500
2,097
2%
—%
22%
94.1%
88.4%
95.3%
11.27
14.21
16.33
17
2,694
1,181
12%
97.2%
22.61
19
2,033
1,108
11%
97.3%
24.18
1
49
243
77
7,293
3,229
33%
9%
1%
98.1%
19.27
96.5%
97.5%
21.58
21.94
12
1,990
569
6%
97.1%
17.17
5
2
994
220
190
44
2%
—%
21%
93.6%
94.6%
94.2%
11.10
13.93
15.78
25%
51
7,645
2,038
16
2,505
1,119
12%
96.9%
22.71
19
2,145
1,111
12%
96.1%
23.44
1
48
244
80
7,206
3,140
34%
9%
1%
97.1%
19.39
92.0%
96.6%
20.28
21.78
35%
6%
1%
42%
7%
2%
1%
13%
10%
9%
1%
33%
34%
6%
2%
42%
7%
2%
1%
25%
12%
11%
9%
1%
33%
12
2,323
863
12
2,312
830
12
2,323
863
12
2,312
830
Total
166
23,854 $ 9,830
100%
96.7% $
20.24
100%
161
23,991 $ 9,396
100%
96.1% $
19.69
100%
Total
166
23,854 $ 9,830
100%
96.7% $
20.24
100%
161
23,991 $ 9,396
100%
96.1% $
19.69
100%
(1) At the Company's proportionate interest, excluding development land and the fair value of MMUR's shopping centre properties of $43 million as at December 31, 2018
(1) At the Company's proportionate interest, excluding development land and the fair value of MMUR's shopping centre properties of $43 million as at December 31, 2018
and $58 million as at December 31, 2017. Includes hotel property at net book value as at December 31, 2018.
(2) In the first quarter of 2018, the Company disposed of a 50.5% non-managing interest in a portfolio of six properties in London, Ontario.
and $58 million as at December 31, 2017. Includes hotel property at net book value as at December 31, 2018.
(2) In the first quarter of 2018, the Company disposed of a 50.5% non-managing interest in a portfolio of six properties in London, Ontario.
Among the Company's real estate investment portfolio are thirty-seven (2017 - thirty-three) retail assets each with a
value greater than $85 million or size greater than 300,000 square feet. Together, these thirty-seven retail assets
comprise $5.3 billion (2017 - $4.7 billion) or 55% (2017 - 50%) of the Company's aggregate $9.7 billion shopping centre
portfolio asset value (2017 - $9.3 billion). These assets, as a percentage of the Company's aggregate value, reflects the
Company's focus on larger, but fewer strategic assets in its target urban markets.
Among the Company's real estate investment portfolio are thirty-seven (2017 - thirty-three) retail assets each with a
value greater than $85 million or size greater than 300,000 square feet. Together, these thirty-seven retail assets
comprise $5.3 billion (2017 - $4.7 billion) or 55% (2017 - 50%) of the Company's aggregate $9.7 billion shopping centre
portfolio asset value (2017 - $9.3 billion). These assets, as a percentage of the Company's aggregate value, reflects the
Company's focus on larger, but fewer strategic assets in its target urban markets.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
18
FIRST CAPITAL REALTY ANNUAL REPORT 2018
18
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Investment Properties – Shopping Centres
A continuity of the Company’s investments in its shopping centre acquisitions, dispositions, development and portfolio
improvement activities is as follows:
Investment Properties – Shopping Centres
A continuity of the Company’s investments in its shopping centre acquisitions, dispositions, development and portfolio
improvement activities is as follows:
(millions of dollars)
Balance at beginning of year
Acquisitions
$
Year ended December 31
2017
8,453
2018
9,317
$
(millions of dollars)
Balance at beginning of year
Acquisitions
$
Year ended December 31
2017
8,453
2018
9,317
$
Shopping centres and additional adjacent spaces
Development activities and property improvements
Reclassifications from development land
Increase (decrease) in value of investment properties, net
Dispositions
Reclassification to equity accounted joint ventures (1)
Other changes
Balance at end of year (2)
(1) The Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
(2) Includes investment properties classified as held for sale as at December 31, 2018 and 2017 totaling $66 million and $91 million, respectively.
259
11
88
(123)
—
8
9,690
130
$
287
226
—
452
(90)
(14)
3
9,317
$
Shopping centres and additional adjacent spaces
Development activities and property improvements
Reclassifications from development land
Increase (decrease) in value of investment properties, net
Dispositions
Reclassification to equity accounted joint ventures (1)
Other changes
Balance at end of year (2)
(1) The Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
(2) Includes investment properties classified as held for sale as at December 31, 2018 and 2017 totaling $66 million and $91 million, respectively.
259
11
88
(123)
—
8
9,690
130
$
287
226
—
452
(90)
(14)
3
9,317
$
2018 Acquisitions
Income-producing properties and Additional Adjacent Spaces
During the year ended December 31, 2018, the Company acquired sixteen properties, as summarized in the table below:
2018 Acquisitions
Income-producing properties and Additional Adjacent Spaces
During the year ended December 31, 2018, the Company acquired sixteen properties, as summarized in the table below:
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
121 Scollard St. (Yorkville Village)
731, 739 - 10th Avenue SW (GM Glenbow)
812 - 11th Avenue SW (GM Glenbow)
Molson Building
Hazelton Hotel (Yorkville Village) (1)
775 King Street West (Liberty Village)
6555 West Boulevard (Kerrisdale Village)
1525 Avenue Road
221 - 227 Sterling Road (Bloor & Sterling)
216 Elgin Street
Yorkville Village adjacent property
290 Lawrence Avenue West (Avenue & Lawrence)
19683 Seton Crescent SE (Seton Gateway)
332 Bloor Street West (Bloor & Spadina)
4509 Kingston Road (Morningside Crossing)
816-838 11th Avenue SW (GM Glenbow)
Total
City/Province
Toronto, ON
Calgary, AB
Calgary, AB
Calgary, AB
Toronto, ON
Toronto, ON
Vancouver, BC
Toronto, ON
Toronto, ON
Ottawa, ON
Toronto, ON
Toronto, ON
Calgary, AB
Toronto, ON
Toronto, ON
Calgary, AB
Quarter
Acquired
Interest
Acquired
GLA
(sq. ft.)
Acquisition Cost
(in millions)
Count Property Name
Q1
Q1
Q1
Q2
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q4
Q4
Q4
Q4
Q4
100%
50%
50%
75%
60%
100%
100%
100%
35%
50%
100%
100%
100%
100%
100%
50%
4,500 $
10,400
5,500
12,800
6,700
18,000
30,400
3,200
29,400
6,200
3,100
5,800
62,100
7,700
3,900
3,700
213,400 $
8.4
6.0
1.8
5.4
45.0
23.7
19.4
12.0
6.8
5.7
2.2
12.2
11.0
10.6
2.6
2.4
175.2
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
121 Scollard St. (Yorkville Village)
731, 739 - 10th Avenue SW (GM Glenbow)
812 - 11th Avenue SW (GM Glenbow)
Molson Building
Hazelton Hotel (Yorkville Village) (1)
775 King Street West (Liberty Village)
6555 West Boulevard (Kerrisdale Village)
1525 Avenue Road
221 - 227 Sterling Road (Bloor & Sterling)
216 Elgin Street
Yorkville Village adjacent property
290 Lawrence Avenue West (Avenue & Lawrence)
19683 Seton Crescent SE (Seton Gateway)
332 Bloor Street West (Bloor & Spadina)
4509 Kingston Road (Morningside Crossing)
816-838 11th Avenue SW (GM Glenbow)
Total
City/Province
Toronto, ON
Calgary, AB
Calgary, AB
Calgary, AB
Toronto, ON
Toronto, ON
Vancouver, BC
Toronto, ON
Toronto, ON
Ottawa, ON
Toronto, ON
Toronto, ON
Calgary, AB
Toronto, ON
Toronto, ON
Calgary, AB
Quarter
Acquired
Interest
Acquired
GLA
(sq. ft.)
Acquisition Cost
(in millions)
Q1
Q1
Q1
Q2
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Q4
Q4
Q4
Q4
Q4
100%
50%
50%
75%
60%
100%
100%
100%
35%
50%
100%
100%
100%
100%
100%
50%
4,500 $
10,400
5,500
12,800
6,700
18,000
30,400
3,200
29,400
6,200
3,100
5,800
62,100
7,700
3,900
3,700
213,400 $
8.4
6.0
1.8
5.4
45.0
23.7
19.4
12.0
6.8
5.7
2.2
12.2
11.0
10.6
2.6
2.4
175.2
(1) The acquisition of the hotel property was accounted for as a business combination under IFRS 3 "Business Combinations". Refer to Note 5 of the audited consolidated
(1) The acquisition of the hotel property was accounted for as a business combination under IFRS 3 "Business Combinations". Refer to Note 5 of the audited consolidated
financial statements for further details. GLA represents retail space only.
financial statements for further details. GLA represents retail space only.
19
FIRST CAPITAL REALTY ANNUAL REPORT 2018
19
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Development Properties
During the year ended December 31, 2018, the Company acquired one adjacent land parcel, as summarized in the table
below:
Development Properties
During the year ended December 31, 2018, the Company acquired one adjacent land parcel, as summarized in the table
below:
Count Property Name
Development lands
2194 Lake Shore Blvd. West (former Christie Cookie
1.
site)
Total development lands
2017 Acquisitions
City/Province
Quarter
Acquired
Interest
Acquired
Acreage
Acquisition Cost
(in millions)
Toronto, ON
Q1
50%
0.2 $
0.2 $
1.8
1.8
Count Property Name
Development lands
2194 Lake Shore Blvd. West (former Christie Cookie
1.
site)
Total development lands
2017 Acquisitions
City/Province
Quarter
Acquired
Interest
Acquired
Acreage
Acquisition Cost
(in millions)
Toronto, ON
Q1
50%
0.2 $
0.2 $
1.8
1.8
Income-producing Properties – Shopping Centres and Additional Adjacent Spaces
During the year ended December 31, 2017, the Company acquired six properties in close proximity to existing shopping
centres as well as increased its interest in two existing properties, as summarized in the table below:
Income-producing Properties – Shopping Centres and Additional Adjacent Spaces
During the year ended December 31, 2017, the Company acquired six properties in close proximity to existing shopping
centres as well as increased its interest in two existing properties, as summarized in the table below:
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
McKenzie Scotiabank (McKenzie Towne Centre)
Domaine Metro Land (Centre Domaine) (1)
4455-4457 Kingston Rd. (Morningside Crossing)
1507 Avenue Rd. (Avenue & Lawrence)
300 Hunt Club Rd. (Hunt Club Marketplace) (2)
1 Bloor St. East
1642 Merivale Rd. (Merivale Mall)
Yorkville Village adjacent properties
Total
City/Province
Calgary, AB
Montreal, QC
Toronto, ON
Toronto, ON
Ottawa, ON
Toronto, ON
Ottawa, ON
Toronto, ON
Quarter
Acquired
Interest
Acquired
GLA
(sq. ft.)
Acquisition Cost
(in millions)
Q2
Q2
Q2
Q3
Q3
Q4
Q4
Q4
100%
50%
100%
100%
33%
100%
100%
100%
7,300 $
—
7,100
3,000
41,900
85,000
219,200
900
364,400 $
6.5
2.6
1.7
6.7
9.1
200.3
59.4
0.9
287.2
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
McKenzie Scotiabank (McKenzie Towne Centre)
Domaine Metro Land (Centre Domaine) (1)
4455-4457 Kingston Rd. (Morningside Crossing)
1507 Avenue Rd. (Avenue & Lawrence)
300 Hunt Club Rd. (Hunt Club Marketplace) (2)
1 Bloor St. East
1642 Merivale Rd. (Merivale Mall)
Yorkville Village adjacent properties
Total
City/Province
Calgary, AB
Montreal, QC
Toronto, ON
Toronto, ON
Ottawa, ON
Toronto, ON
Ottawa, ON
Toronto, ON
Quarter
Acquired
Interest
Acquired
GLA
(sq. ft.)
Acquisition Cost
(in millions)
Q2
Q2
Q2
Q3
Q3
Q4
Q4
Q4
100%
50%
100%
100%
33%
100%
100%
100%
7,300 $
—
7,100
3,000
41,900
85,000
219,200
900
364,400 $
6.5
2.6
1.7
6.7
9.1
200.3
59.4
0.9
287.2
(1) The Company acquired an additional 50% interest in the property, increasing its total ownership interest to 100%.
(2) The Company acquired an additional 33% interest in the property, increasing its total ownership interest to 66%.
(1) The Company acquired an additional 50% interest in the property, increasing its total ownership interest to 100%.
(2) The Company acquired an additional 33% interest in the property, increasing its total ownership interest to 66%.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
20
FIRST CAPITAL REALTY ANNUAL REPORT 2018
20
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
2018 Dispositions
During the year ended December 31, 2018, the Company disposed of a 50.5% non-managing interest in a portfolio of six
properties in London, Ontario as well as three land parcels, a partial interest in the Vancouver property planned for
redevelopment and its interest in West Oaks Shopping Centre for $132.0 million, as summarized in the table below:
2018 Dispositions
During the year ended December 31, 2018, the Company disposed of a 50.5% non-managing interest in a portfolio of six
properties in London, Ontario as well as three land parcels, a partial interest in the Vancouver property planned for
redevelopment and its interest in West Oaks Shopping Centre for $132.0 million, as summarized in the table below:
Count Property Name
2.
1.
5.
4.
3.
6.
Eagleson Cope Drive (land)
Wellington Corners
Sunningdale Village
Byron Village
Hyde Park Plaza
Stoneybrook Plaza
Adelaide Shoppers
130 Michael Cowpland Drive (land)
200 West Esplanade
9.
10. West Oaks Shopping Centre
11.
1071 King Street W. (land)
Total
7.
8.
City/Province
Ottawa, ON
London, ON
London, ON
London, ON
London, ON
London, ON
London, ON
Ottawa, ON
Vancouver, BC
Abbotsford, BC
Toronto, ON
Quarter
Sold
Interest Sold
GLA
(sq. ft.)
Acreage
Gross Sales
Price
(in millions)
Count Property Name
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q3
Q4
Q4
100%
50.5%
50.5%
50.5%
50.5%
50.5%
50.5%
100%
50%
50%
33%
102,900
11.2
40,800
36,600
44,000
26,100
27,900
9,700
—
19,200
132,500
—
439,700
7.0
6.0
6.0
5.0
4.9
1.7
1.4
0.2
9.3
0.2
52.9 $
132.0
2.
1.
3.
4.
5.
6.
Eagleson Cope Drive (land)
Wellington Corners
Sunningdale Village
Byron Village
Hyde Park Plaza
Stoneybrook Plaza
Adelaide Shoppers
130 Michael Cowpland Drive (land)
200 West Esplanade
9.
10. West Oaks Shopping Centre
11.
1071 King Street W. (land)
Total
7.
8.
City/Province
Ottawa, ON
London, ON
London, ON
London, ON
London, ON
London, ON
London, ON
Ottawa, ON
Vancouver, BC
Abbotsford, BC
Toronto, ON
Quarter
Sold
Interest Sold
GLA
(sq. ft.)
Acreage
Gross Sales
Price
(in millions)
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q3
Q4
Q4
100%
50.5%
50.5%
50.5%
50.5%
50.5%
50.5%
100%
50%
50%
33%
102,900
11.2
40,800
36,600
44,000
26,100
27,900
9,700
—
19,200
132,500
—
439,700
7.0
6.0
6.0
5.0
4.9
1.7
1.4
0.2
9.3
0.2
52.9 $
132.0
2017 Dispositions
During the year ended December 31, 2017, the Company disposed of interests in eight properties, three land parcels, as
well as a surplus building, as summarized in the table below:
2017 Dispositions
During the year ended December 31, 2017, the Company disposed of interests in eight properties, three land parcels, as
well as a surplus building, as summarized in the table below:
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
746 Baseline Rd.
McLaughlin Corners East
Carrefour St. Hubert (adjacent land)
Pemberton II, 1640 Bridgman Ave.
2525-2529 Danforth Ave.
McKenzie Professional Centre
Victoria Professional Centre
Cook Street Plaza
Royal Orchard (1)
Place Adoncour
9900 No. 3 Road & 8031 Williams Rd.
(adjacent land)
Devenish Land Parcel (Mount Royal West)
(adjacent land)
Total
City/Province
London, ON
Mississauga, ON
Longueuil, QC
North Vancouver, BC
Toronto, ON
Saanich, BC
Victoria, BC
Victoria, BC
Thornhill, ON
Longueuil, QC
Richmond, BC
Calgary, AB
Quarter
Sold
Interest Sold
GLA
(sq. ft.)
Acreage
Gross Sales
Price
(in millions)
Q1
Q1
Q1
Q2
Q3
Q3
Q3
Q3
Q4
Q4
Q4
Q4
100%
50%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
48,600
7,800
—
4,900
1,000
44,200
39,600
8,200
21,100
58,000
—
—
2.0
1.5
2.2
0.2
0.3
2.0
1.6
0.4
1.9
2.5
0.8
0.4
233,400
15.8 $
90.1
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
746 Baseline Rd.
McLaughlin Corners East
Carrefour St. Hubert (adjacent land)
Pemberton II, 1640 Bridgman Ave.
2525-2529 Danforth Ave.
McKenzie Professional Centre
Victoria Professional Centre
Cook Street Plaza
Royal Orchard (1)
Place Adoncour
9900 No. 3 Road & 8031 Williams Rd.
(adjacent land)
Devenish Land Parcel (Mount Royal West)
(adjacent land)
Total
City/Province
London, ON
Mississauga, ON
Longueuil, QC
North Vancouver, BC
Toronto, ON
Saanich, BC
Victoria, BC
Victoria, BC
Thornhill, ON
Longueuil, QC
Richmond, BC
Calgary, AB
Quarter
Sold
Interest Sold
GLA
(sq. ft.)
Acreage
Gross Sales
Price
(in millions)
Q1
Q1
Q1
Q2
Q3
Q3
Q3
Q3
Q4
Q4
Q4
Q4
100%
50%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
48,600
7,800
—
4,900
1,000
44,200
39,600
8,200
21,100
58,000
—
—
2.0
1.5
2.2
0.2
0.3
2.0
1.6
0.4
1.9
2.5
0.8
0.4
233,400
15.8 $
90.1
(1) The Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
(1) The Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
21
FIRST CAPITAL REALTY ANNUAL REPORT 2018
21
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Impact of Acquisitions and Dispositions
The annualized NOI of properties acquired and disposed, at the time of acquisition or disposition, during the years ended
December 31, 2018 and 2017 is summarized in the table below:
Impact of Acquisitions and Dispositions
The annualized NOI of properties acquired and disposed, at the time of acquisition or disposition, during the years ended
December 31, 2018 and 2017 is summarized in the table below:
For the year ended December 31
Central Region
Eastern Region
Western Region
Total
Acquired
Disposed
2018
1,765
241
2,947
4,953
$
$
2017
10,268
4,412
317
14,997
$
$
2018
3,656
570
2,722
6,948
$
$
2017
1,442
1,072
1,199
3,713
$
$
Capital Expenditures
Capital expenditures are incurred by the Company for maintaining and/or renovating its existing properties. In addition,
the Company also incurs expenditures for the purposes of expansion, redevelopment and development activities.
Revenue sustaining capital expenditures are required for maintaining the Company’s property infrastructure and revenues
from leasing of existing space. Revenue sustaining capital expenditures are generally not recoverable from tenants.
However, certain leases provide the ability to recover from tenants, over time, a portion of capital expenditures to
maintain the physical aspects of the Company’s properties. Revenue sustaining capital expenditures generally include
tenant improvement costs related to new and renewal leasing, and capital expenditures required to maintain the physical
aspects of the properties, such as roof replacements and resurfacing of parking lots.
Revenue enhancing capital expenditures are those expenditures that increase the revenue generating ability of the
Company’s properties. Revenue enhancing capital expenditures are incurred in conjunction with or in contemplation of a
development or redevelopment strategy, a strategic repositioning after an acquisition, or in advance of a planned
disposition to maximize the potential sale price. The Company owns and actively seeks to acquire older, well-located
properties in urban locations, where expenditures tend to be higher when they are subsequently repaired or redeveloped
to meet the Company’s standards.
Capital expenditures incurred in development and redevelopment projects include pre-development costs, direct
construction costs, leasing costs, tenant improvements, borrowing costs, overhead including applicable salaries and direct
costs of internal staff directly attributable to the projects under active development.
For the year ended December 31
Central Region
Eastern Region
Western Region
Total
Acquired
Disposed
2018
1,765
241
2,947
4,953
$
$
2017
10,268
4,412
317
14,997
$
$
2018
3,656
570
2,722
6,948
$
$
2017
1,442
1,072
1,199
3,713
$
$
Capital Expenditures
Capital expenditures are incurred by the Company for maintaining and/or renovating its existing properties. In addition,
the Company also incurs expenditures for the purposes of expansion, redevelopment and development activities.
Revenue sustaining capital expenditures are required for maintaining the Company’s property infrastructure and revenues
from leasing of existing space. Revenue sustaining capital expenditures are generally not recoverable from tenants.
However, certain leases provide the ability to recover from tenants, over time, a portion of capital expenditures to
maintain the physical aspects of the Company’s properties. Revenue sustaining capital expenditures generally include
tenant improvement costs related to new and renewal leasing, and capital expenditures required to maintain the physical
aspects of the properties, such as roof replacements and resurfacing of parking lots.
Revenue enhancing capital expenditures are those expenditures that increase the revenue generating ability of the
Company’s properties. Revenue enhancing capital expenditures are incurred in conjunction with or in contemplation of a
development or redevelopment strategy, a strategic repositioning after an acquisition, or in advance of a planned
disposition to maximize the potential sale price. The Company owns and actively seeks to acquire older, well-located
properties in urban locations, where expenditures tend to be higher when they are subsequently repaired or redeveloped
to meet the Company’s standards.
Capital expenditures incurred in development and redevelopment projects include pre-development costs, direct
construction costs, leasing costs, tenant improvements, borrowing costs, overhead including applicable salaries and direct
costs of internal staff directly attributable to the projects under active development.
Capital expenditures on investment properties by type and property category are summarized in the table below:
Capital expenditures on investment properties by type and property category are summarized in the table below:
Year ended December 31
Revenue sustaining
Revenue enhancing
Expenditures recoverable from tenants
Development expenditures
Total
Total Same
Property
Other Property
Categories
15,523 $
18,911
6,210
23,474
64,118 $
— $
13,565
1,735
190,840
206,140 $
$
$
2018
Total
15,523 $
32,476
7,945
214,314
270,258 $
2017
Total
21,781
42,699
9,701
157,724
231,905
Year ended December 31
Revenue sustaining
Revenue enhancing
Expenditures recoverable from tenants
Development expenditures
Total
Total Same
Property
Other Property
Categories
15,523 $
18,911
6,210
23,474
64,118 $
— $
13,565
1,735
190,840
206,140 $
$
$
2018
Total
15,523 $
32,476
7,945
214,314
270,258 $
2017
Total
21,781
42,699
9,701
157,724
231,905
During the year ended December 31, 2018, capital expenditures totaled $270.3 million compared to $231.9 million for the
prior year. The $38.4 million increase was primarily due to increased development spend related to King High Line, the
Yorkville street assets, and Mount Royal West development projects, partially offset by lower spend on revenue
enhancing and revenue sustaining expenditures.
During the year ended December 31, 2018, capital expenditures totaled $270.3 million compared to $231.9 million for the
prior year. The $38.4 million increase was primarily due to increased development spend related to King High Line, the
Yorkville street assets, and Mount Royal West development projects, partially offset by lower spend on revenue
enhancing and revenue sustaining expenditures.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
22
FIRST CAPITAL REALTY ANNUAL REPORT 2018
22
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Valuation of Investment Properties
During the year ended December 31, 2018, the weighted average stabilized capitalization rate of the Company’s investment
property portfolio remained unchanged from 5.3% as at December 31, 2017. The net increase in the fair value of investment
properties of $102.4 million was primarily due to stabilized NOI growth and to a lesser extent the compression of stabilized
capitalization rates in select urban markets for the year ended December 31, 2018.
Valuation of Investment Properties
During the year ended December 31, 2018, the weighted average stabilized capitalization rate of the Company’s investment
property portfolio remained unchanged from 5.3% as at December 31, 2017. The net increase in the fair value of investment
properties of $102.4 million was primarily due to stabilized NOI growth and to a lesser extent the compression of stabilized
capitalization rates in select urban markets for the year ended December 31, 2018.
The values of the Company’s shopping centres and associated stabilized capitalization rates by region were as follows as at
December 31, 2018 and December 31, 2017:
The values of the Company’s shopping centres and associated stabilized capitalization rates by region were as follows as at
December 31, 2018 and December 31, 2017:
As at December 31, 2018
(millions of dollars)
Central Region
Eastern Region
Western Region
Total or Weighted Average
As at December 31, 2017
(millions of dollars)
Central Region
Eastern Region
Western Region
Total or Weighted Average
Stabilized Capitalization Rate
Number of
Properties
Weighted
Average
65
52
49
166
5.0%
5.9%
5.2%
5.3%
Median
Range
Fair Value
5.3%
6.0%
5.3%
5.5%
3.0%-7.0% $
4.4%-7.8%
3.8%-6.3%
3.0%-7.8% $
4,431
2,030
3,229
9,690
Stabilized Capitalization Rate
Number of
Properties
Weighted
Average
62
51
48
161
5.1%
5.9%
5.2%
5.3%
Median
Range
Fair Value
5.3%
6.0%
5.3%
5.5%
3.8%-7.0% $
5.0%-7.0%
3.8%-6.0%
3.8%-7.0% $
4,204
1,973
3,140
9,317
As at December 31, 2018
(millions of dollars)
Central Region
Eastern Region
Western Region
Total or Weighted Average
As at December 31, 2017
(millions of dollars)
Central Region
Eastern Region
Western Region
Total or Weighted Average
Stabilized Capitalization Rate
Number of
Properties
Weighted
Average
65
52
49
166
5.0%
5.9%
5.2%
5.3%
Median
Range
Fair Value
5.3%
6.0%
5.3%
5.5%
3.0%-7.0% $
4.4%-7.8%
3.8%-6.3%
3.0%-7.8% $
4,431
2,030
3,229
9,690
Stabilized Capitalization Rate
Number of
Properties
Weighted
Average
62
51
48
161
5.1%
5.9%
5.2%
5.3%
Median
Range
Fair Value
5.3%
6.0%
5.3%
5.5%
3.8%-7.0% $
5.0%-7.0%
3.8%-6.0%
3.8%-7.0% $
4,204
1,973
3,140
9,317
Properties Under Development
Development and redevelopment activities are completed selectively, based on opportunities in the Company’s
properties or in the markets where the Company operates. The Company’s development activities include redevelopment
of stable properties, major redevelopment, and ground-up projects. Additionally, properties under development include
land with future development potential. All development activities are strategically managed to reduce risk, and
properties are generally developed after obtaining anchor tenant lease commitments. Individual buildings within a
development are generally constructed only after obtaining commitments on a substantial portion of the space.
Properties Under Development
Development and redevelopment activities are completed selectively, based on opportunities in the Company’s
properties or in the markets where the Company operates. The Company’s development activities include redevelopment
of stable properties, major redevelopment, and ground-up projects. Additionally, properties under development include
land with future development potential. All development activities are strategically managed to reduce risk, and
properties are generally developed after obtaining anchor tenant lease commitments. Individual buildings within a
development are generally constructed only after obtaining commitments on a substantial portion of the space.
Development Pipeline
Development Pipeline
As at December 31, 2018, the Company's portfolio is comprised of 23.9 million square feet of GLA at the Company's
ownership interest. Substantially all of this GLA is located in Canada's six largest urban growth markets which are
undergoing significant land use intensification. As such, Management has identified meaningful incremental density
available for future development within its existing portfolio. As at December 31, 2018, Management had identified
approximately 22.5 million square feet of incremental density. This incremental density represents an opportunity that is
almost as large as the Company's existing portfolio.
Management undertakes a quarterly review of its entire portfolio and updates all of its future uncommitted incremental
density. Management stratifies the density by project commencement time frame. Medium term includes project
commencement expected within the next 7 years, long term between 8 and 15 years and very long term beyond 15
years. The Company’s incremental density is classified by type between commercial and residential. Commercial density
primarily consists of retail density.
As a substantial part of the portfolio is located in urban markets where significant land use intensification continues to
occur, Management expects future incremental density will continue to grow and provide the Company with increased
opportunity to redevelop its generally low density properties.
As at December 31, 2018, the Company's portfolio is comprised of 23.9 million square feet of GLA at the Company's
ownership interest. Substantially all of this GLA is located in Canada's six largest urban growth markets which are
undergoing significant land use intensification. As such, Management has identified meaningful incremental density
available for future development within its existing portfolio. As at December 31, 2018, Management had identified
approximately 22.5 million square feet of incremental density. This incremental density represents an opportunity that is
almost as large as the Company's existing portfolio.
Management undertakes a quarterly review of its entire portfolio and updates all of its future uncommitted incremental
density. Management stratifies the density by project commencement time frame. Medium term includes project
commencement expected within the next 7 years, long term between 8 and 15 years and very long term beyond 15
years. The Company’s incremental density is classified by type between commercial and residential. Commercial density
primarily consists of retail density.
As a substantial part of the portfolio is located in urban markets where significant land use intensification continues to
occur, Management expects future incremental density will continue to grow and provide the Company with increased
opportunity to redevelop its generally low density properties.
23
FIRST CAPITAL REALTY ANNUAL REPORT 2018
23
FIRST CAPITAL REALTY ANNUAL REPORT 2018
A breakdown of the active development and incremental density within the portfolio by component and type is as follows:
A breakdown of the active development and incremental density within the portfolio by component and type is as follows:
As at December 31, 2018
Active Development
Same Property with redevelopment
Major redevelopment
Ground-up development
Future uncommitted incremental density
Medium term
Long term
Very long term
Total development pipeline
Square feet (in thousands)
Commercial
Residential
Total
10
96
81
187
900
1,000
200
2,100
2,287
—
—
162
162
3,600
11,500
5,000
20,100
20,262
10
96
243
349
4,500
12,500
5,200
22,200
22,549
As at December 31, 2018
Active Development
Same Property with redevelopment
Major redevelopment
Ground-up development
Future uncommitted incremental density
Medium term
Long term
Very long term
Total development pipeline
Square feet (in thousands)
Commercial
Residential
Total
10
96
81
187
900
1,000
200
2,100
2,287
—
—
162
162
3,600
11,500
5,000
20,100
20,262
10
96
243
349
4,500
12,500
5,200
22,200
22,549
The Company determines its course of action with respect to the 20.1 million square feet of uncommitted potential
residential density on a case by case basis given the specifics of each property. The Company’s course of action for each
property may include selling the property, selling the residential density rights, entering into a joint venture with a partner
to develop the property or undertaking the development of the property on its own. Approximately 2.9 million of the
Company's 22.5 million square feet of identified incremental density has been included as part of the fair value of
investment properties on the consolidated balance sheet. The 2.9 million square feet is comprised of 0.3 million square
feet in active development which is valued as part of the overall property and 2.6 million of uncommitted incremental
density valued at approximately $157 million. The remaining 19.6 million square feet of identified incremental density is
expected to be included in the future, based on certain factors including the expiry or removal of tenant encumbrances
and zoning approvals. The majority of the incremental residential density is located above income producing shopping
centers or their parking areas. As such, the Company takes a measured approach with a view to maximizing long term
value when obtaining zoning approvals based on the redevelopment plans for its portfolio as a whole.
In addition to the Company's development pipeline, information regarding the active development and the development
potential of the Company's Main and Main Developments joint venture can be found in the "Main and Main Urban
Realty" section of this MD&A.
The Company determines its course of action with respect to the 20.1 million square feet of uncommitted potential
residential density on a case by case basis given the specifics of each property. The Company’s course of action for each
property may include selling the property, selling the residential density rights, entering into a joint venture with a partner
to develop the property or undertaking the development of the property on its own. Approximately 2.9 million of the
Company's 22.5 million square feet of identified incremental density has been included as part of the fair value of
investment properties on the consolidated balance sheet. The 2.9 million square feet is comprised of 0.3 million square
feet in active development which is valued as part of the overall property and 2.6 million of uncommitted incremental
density valued at approximately $157 million. The remaining 19.6 million square feet of identified incremental density is
expected to be included in the future, based on certain factors including the expiry or removal of tenant encumbrances
and zoning approvals. The majority of the incremental residential density is located above income producing shopping
centers or their parking areas. As such, the Company takes a measured approach with a view to maximizing long term
value when obtaining zoning approvals based on the redevelopment plans for its portfolio as a whole.
In addition to the Company's development pipeline, information regarding the active development and the development
potential of the Company's Main and Main Developments joint venture can be found in the "Main and Main Urban
Realty" section of this MD&A.
Invested Cost of Properties Under Development
Invested Cost of Properties Under Development
As at December 31, 2018, the Company had $584.0 million of properties under development and development land
parcels at invested cost, representing approximately 6.0% of the value of the total investment property portfolio.
As at December 31, 2018, the Company had $584.0 million of properties under development and development land
parcels at invested cost, representing approximately 6.0% of the value of the total investment property portfolio.
A breakdown of invested cost on development activities is as follows:
A breakdown of invested cost on development activities is as follows:
As at December 31, 2018
Same Property with redevelopment
Major redevelopment
Ground-up development
Total development and redevelopment activities
Total development land, adjacent land parcels, and other (3)
Total
(1) Includes 162,000 square feet of residential rental apartments.
(2) Square footage relates to active development only.
(3) Includes all other property categories.
Number of
Projects
2
3
2
7
Invested Cost (in millions)
Square Feet (1) (2)
(in thousands)
Active
Development
Pre-
Development
10 $
96
243
349 $
4 $
61
171
236 $
$
$
— $
77
2
79 $
269 $
348 $
Total
4
138
173
315
269
584
As at December 31, 2018
Same Property with redevelopment
Major redevelopment
Ground-up development
Total development and redevelopment activities
Total development land, adjacent land parcels, and other (3)
Total
(1) Includes 162,000 square feet of residential rental apartments.
(2) Square footage relates to active development only.
(3) Includes all other property categories.
Number of
Projects
2
3
2
7
Invested Cost (in millions)
Square Feet (1) (2)
(in thousands)
Active
Development
Pre-
Development
10 $
96
243
349 $
4 $
61
171
236 $
$
$
— $
77
2
79 $
269 $
348 $
Total
4
138
173
315
269
584
FIRST CAPITAL REALTY ANNUAL REPORT 2018
24
FIRST CAPITAL REALTY ANNUAL REPORT 2018
24
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
2018 Development and Redevelopment Coming Online and Space Going Offline
2018 Development and Redevelopment Coming Online and Space Going Offline
Development and redevelopment coming online includes both leased and unleased space transferred from development
to income-producing properties at completion of construction. Costs transferred to income-producing properties often
involves judgment in cost allocations related to the space transferred in the period. Therefore, the cost per square foot
transferred in any one period may not be indicative of the total project cost per square foot.
During the year ended December 31, 2018, the Company completed the transfer of 283,000 square feet of new urban
retail space as well as common areas from development to the income-producing portfolio at a cost of
$293.3 million. Of the space transferred, 253,000 square feet became occupied at an average rental rate of $37.33 per
square foot, well above the average rate for the portfolio of $20.24.
Development and redevelopment coming online includes both leased and unleased space transferred from development
to income-producing properties at completion of construction. Costs transferred to income-producing properties often
involves judgment in cost allocations related to the space transferred in the period. Therefore, the cost per square foot
transferred in any one period may not be indicative of the total project cost per square foot.
During the year ended December 31, 2018, the Company completed the transfer of 283,000 square feet of new urban
retail space as well as common areas from development to the income-producing portfolio at a cost of
$293.3 million. Of the space transferred, 253,000 square feet became occupied at an average rental rate of $37.33 per
square foot, well above the average rate for the portfolio of $20.24.
For the year ended December 31, 2018, the Company had tenant closures for redevelopment of 100,000 square feet at an
average rental rate of $10.18 per square foot. Of the 100,000 square feet, 34,000 square feet was demolished.
For the year ended December 31, 2018, the Company had tenant closures for redevelopment of 100,000 square feet at an
average rental rate of $10.18 per square foot. Of the 100,000 square feet, 34,000 square feet was demolished.
Active Development and Redevelopment Activities
Active Development and Redevelopment Activities
The Company’s properties with development and redevelopment activities currently in progress are expected to have a
weighted average going-in NOI yield of 5.1% upon completion. This yield is derived from the expected going-in run rate
based on stabilized leasing and operations following completion of the development, and includes all building cost, land
cost incremental to the development, interest and other carrying costs, as well as capitalized staff compensation and
other expenses. However, actual rates of return could differ if development costs are higher or lower than currently
forecasted costs, if final lease terms are higher or lower than forecasted base rent, operating cost or property tax
recoveries, or if there are other unforeseen events that cause actual results to differ from assumptions. The quality of the
Company’s construction is consistent with its strategy of long-term ownership and value creation, and factors in the
Company's high standards in construction, materials, architecture, lighting, parking, access, pedestrian amenities,
accessibility, as well as development to LEED standards.
Development and redevelopment projects may occur in phases with the completed component of the project included in
income-producing properties and the incomplete component included in properties under development. The following
tables show this split, where applicable, by showing the total invested cost in two categories: under development and
income-producing property. In addition, the following tables reflect square footage of the space under development and
invested cost at the Company's ownership interest.
The Company’s properties with development and redevelopment activities currently in progress are expected to have a
weighted average going-in NOI yield of 5.1% upon completion. This yield is derived from the expected going-in run rate
based on stabilized leasing and operations following completion of the development, and includes all building cost, land
cost incremental to the development, interest and other carrying costs, as well as capitalized staff compensation and
other expenses. However, actual rates of return could differ if development costs are higher or lower than currently
forecasted costs, if final lease terms are higher or lower than forecasted base rent, operating cost or property tax
recoveries, or if there are other unforeseen events that cause actual results to differ from assumptions. The quality of the
Company’s construction is consistent with its strategy of long-term ownership and value creation, and factors in the
Company's high standards in construction, materials, architecture, lighting, parking, access, pedestrian amenities,
accessibility, as well as development to LEED standards.
Development and redevelopment projects may occur in phases with the completed component of the project included in
income-producing properties and the incomplete component included in properties under development. The following
tables show this split, where applicable, by showing the total invested cost in two categories: under development and
income-producing property. In addition, the following tables reflect square footage of the space under development and
invested cost at the Company's ownership interest.
Same Property with Redevelopment
Same Property with Redevelopment
The Company currently has two projects under active development in the Same Property with redevelopment property
category. Of the 10,000 square feet under active redevelopment, 7,400 square feet is subject to committed leases.
The Company currently has two projects under active development in the Same Property with redevelopment property
category. Of the 10,000 square feet under active redevelopment, 7,400 square feet is subject to committed leases.
Highlights of the Company’s Same Property with redevelopment projects as at December 31, 2018 are as follows:
Highlights of the Company’s Same Property with redevelopment projects as at December 31, 2018 are as follows:
As at December 31, 2018
Count/Project and Major Tenant(s)
Active development
South Park Centre, Edmonton, AB
1.
(Jollibee)
2.
Lakeview Plaza, Calgary, AB
(Pet Valu)
Invested Cost (in millions)
Square Feet Under
Development
(in thousands)
Target
Completion
Date (1)
Total
Estimated incl.
Land
Under
Development
Estimated
Cost to
Complete
5
5
10
H1 2019
H1 2019
3
3
2
2
$
6 $
4 $
1
1
2
As at December 31, 2018
Count/Project and Major Tenant(s)
Active development
South Park Centre, Edmonton, AB
1.
(Jollibee)
2.
Lakeview Plaza, Calgary, AB
(Pet Valu)
Total Same Property with redevelopment
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
Total Same Property with redevelopment
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
Invested Cost (in millions)
Square Feet Under
Development
(in thousands)
Target
Completion
Date (1)
Total
Estimated incl.
Land
Under
Development
Estimated
Cost to
Complete
5
5
10
H1 2019
H1 2019
3
3
2
2
$
6 $
4 $
1
1
2
25
FIRST CAPITAL REALTY ANNUAL REPORT 2018
25
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Major Redevelopment
Major Redevelopment
The Company has three projects under active development in the major redevelopment property category. Of the
approximately 96,000 square feet under active redevelopment, 58,000 square feet is subject to committed leases at a
weighted average rate of $24.40 per square foot. As construction on redevelopment projects occurs in phases, there
continues to be ongoing negotiations in various stages with certain retailers for the remaining planned space.
Highlights of the Company’s major redevelopment projects underway as at December 31, 2018, including costs for
completed phases, are as follows:
The Company has three projects under active development in the major redevelopment property category. Of the
approximately 96,000 square feet under active redevelopment, 58,000 square feet is subject to committed leases at a
weighted average rate of $24.40 per square foot. As construction on redevelopment projects occurs in phases, there
continues to be ongoing negotiations in various stages with certain retailers for the remaining planned space.
Highlights of the Company’s major redevelopment projects underway as at December 31, 2018, including costs for
completed phases, are as follows:
As at December 31, 2018
As at December 31, 2018
Count / Property and Major Tenant(s)
Active development
3080 Yonge Street, Toronto, ON
1.
(Loblaws, Tim Hortons, Anatomy Fitness)
2.
Semiahmoo Shopping Centre, Surrey, BC
(Crunch Fitness, Winners, CEFA Day Care)
3. Wilderton, Montreal, QC (2)
(Metro, Pharmaprix, Tim Hortons, SAQ)
Square feet (in thousands)
Invested Cost (in millions)
Planned
Upon
Completion
Completed
or Existing
Under
Development
Target
Completion
Date (1)
Total
Estimated
incl. Land
Under
Development
Income-
producing
property
Estimated
Cost to
Complete
245
288
132
227
227
115
18
H2 2019
$
135 $
19 $
112
61
H2 2019
17
H2 2022
127
58
30
12
76
17
4
21
29
Count / Property and Major Tenant(s)
Active development
3080 Yonge Street, Toronto, ON
1.
(Loblaws, Tim Hortons, Anatomy Fitness)
2.
Semiahmoo Shopping Centre, Surrey, BC
(Crunch Fitness, Winners, CEFA Day Care)
3. Wilderton, Montreal, QC (2)
(Metro, Pharmaprix, Tim Hortons, SAQ)
Square feet (in thousands)
Invested Cost (in millions)
Planned
Upon
Completion
Completed
or Existing
Under
Development
Target
Completion
Date (1)
Total
Estimated
incl. Land
Under
Development
Income-
producing
property
Estimated
Cost to
Complete
245
288
132
227
227
115
18
H2 2019
$
135 $
19 $
112
61
H2 2019
17
H2 2022
127
58
30
12
76
17
4
21
29
Total Major Redevelopment
665
569
96
$
320 $
61 $
205 $
54
Total Major Redevelopment
665
569
96
$
320 $
61 $
205 $
54
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
(2) Target completion date reflects future phases.
Ground-up Development
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
(2) Target completion date reflects future phases.
Ground-up Development
The Company has two projects under active development in the ground-up development property category. These
projects are comprised of approximately 243,000 square feet of space currently under development, of which 81,000
square feet is retail space and 162,000 square feet is residential rental apartments. A total of 30,900 square feet of the
retail space currently under development is subject to committed leases at a weighted average rate of $26.60 per square
foot. As construction on ground-up developments occurs in phases, there continues to be ongoing negotiations in various
stages with retailers for the planned space. Leasing of the residential space began in the second half of 2018 and will
continue in 2019.
The Company has two projects under active development in the ground-up development property category. These
projects are comprised of approximately 243,000 square feet of space currently under development, of which 81,000
square feet is retail space and 162,000 square feet is residential rental apartments. A total of 30,900 square feet of the
retail space currently under development is subject to committed leases at a weighted average rate of $26.60 per square
foot. As construction on ground-up developments occurs in phases, there continues to be ongoing negotiations in various
stages with retailers for the planned space. Leasing of the residential space began in the second half of 2018 and will
continue in 2019.
Highlights of the Company’s ground-up projects underway as at December 31, 2018, including costs for completed
phases, are as follows:
Highlights of the Company’s ground-up projects underway as at December 31, 2018, including costs for completed
phases, are as follows:
As at December 31, 2018
Count/Project and Major Tenant(s)
Active development
Square feet (in thousands)
Invested Cost (in millions)
Planned Upon
Completion
Completed or
Existing
Under
Development
Target
Completion
Date (1)
Total
Estimated incl.
Land
Under
Development
Income-
producing
property
Estimated
Cost to
Complete
As at December 31, 2018
Count/Project and Major Tenant(s)
Active development
Square feet (in thousands)
Invested Cost (in millions)
Planned Upon
Completion
Completed or
Existing
Under
Development
Target
Completion
Date (1)
Total
Estimated incl.
Land
Under
Development
Income-
producing
property
Estimated
Cost to
Complete
1. The Brewery District, Edmonton, AB (2) (3)
151
121
30
H2 2019 $
99 $
19 $
77 $
(Loblaws City Market, GoodLife Fitness, Winners)
2. King High Line (Shops at King Liberty),
239
26
213
H2 2019
199
152
29
Toronto, ON (2) (4)
(Longo's, Canadian Tire, Shoppers Drug Mart, Winners, Kids & Company)
Total Ground-up Development
390
147
243
$
298 $
171 $
106 $
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
(2) The Company has a 50% ownership interest in the property.
(3) Target completion date relates to buildings currently under construction.
3
18
21
1. The Brewery District, Edmonton, AB (2) (3)
151
121
30
H2 2019 $
99 $
19 $
77 $
(Loblaws City Market, GoodLife Fitness, Winners)
2. King High Line (Shops at King Liberty),
239
26
213
H2 2019
199
152
29
Toronto, ON (2) (4)
(Longo's, Canadian Tire, Shoppers Drug Mart, Winners, Kids & Company)
Total Ground-up Development
390
147
243
$
298 $
171 $
106 $
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
(2) The Company has a 50% ownership interest in the property.
(3) Target completion date relates to buildings currently under construction.
3
18
21
FIRST CAPITAL REALTY ANNUAL REPORT 2018
26
FIRST CAPITAL REALTY ANNUAL REPORT 2018
26
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
(4) The square feet under development comprises 51,000 square feet of retail and 162,000 square feet of residential space. The Company and its development partner have
entered into a binding agreement to sell, upon substantial completion, a 1/3 managing interest in the residential component of the property to Canadian Apartment
Properties REIT.
(4) The square feet under development comprises 51,000 square feet of retail and 162,000 square feet of residential space. The Company and its development partner have
entered into a binding agreement to sell, upon substantial completion, a 1/3 managing interest in the residential component of the property to Canadian Apartment
Properties REIT.
Ground-up Development - Equity-Accounted Joint Ventures
In addition to the projects listed above, information regarding the ground-up development related to the Company's equity
accounted investment can be found in the "Main and Main Urban Realty" section of this MD&A.
Ground-up Development - Equity-Accounted Joint Ventures
In addition to the projects listed above, information regarding the ground-up development related to the Company's equity
accounted investment can be found in the "Main and Main Urban Realty" section of this MD&A.
Residential Inventory
Residential Inventory
The Company has commenced a residential development project to build and sell fifty townhomes on land adjacent to the
Company's Rutherford Marketplace property. The development is being managed by the Company's 50% development
partner, who purchased 50% of the land in the fourth quarter of 2016. Total invested cost in the project at the Company's
share is approximately $9.5 million at December 31, 2018. Total invested cost at completion is estimated to be $22.5 million
with a target completion date in the first half of 2020.
The Company has commenced a residential development project to build and sell fifty townhomes on land adjacent to the
Company's Rutherford Marketplace property. The development is being managed by the Company's 50% development
partner, who purchased 50% of the land in the fourth quarter of 2016. Total invested cost in the project at the Company's
share is approximately $9.5 million at December 31, 2018. Total invested cost at completion is estimated to be $22.5 million
with a target completion date in the first half of 2020.
Costs to Complete Active and Redevelopment Activities
Costs to Complete Active and Redevelopment Activities
Costs to complete the development, redevelopment and expansion activities underway are estimated to be
approximately $122 million. Costs to complete Same Property related developments are planned at $2 million. Costs to
complete major redevelopments and ground-up developments, respectively, are planned at $32 million and $21 million in
2019, and $22 million thereafter. Costs to complete developments in other property categories are planned at $45
million.
Costs to complete the development, redevelopment and expansion activities underway are estimated to be
approximately $122 million. Costs to complete Same Property related developments are planned at $2 million. Costs to
complete major redevelopments and ground-up developments, respectively, are planned at $32 million and $21 million in
2019, and $22 million thereafter. Costs to complete developments in other property categories are planned at $45
million.
27
FIRST CAPITAL REALTY ANNUAL REPORT 2018
27
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Main and Main Urban Realty
MMUR, an equity accounted joint venture, is a Toronto and Ottawa urban development partnership between the
Company, Main and Main Developments (itself, a partially owned venture between the Company and a private developer)
and a prominent Canadian institutional investor. The Company's net economic interest in MMUR is 37.7%. Main and Main
Developments was retained to provide asset and property management services for the real estate portfolio.
In the year ended December 31, 2018, MMUR completed the sale of 19 of its 23 properties for approximately $116.8
million at the Company's interest, and a portion of the loan to one of its joint venture partners was repaid. As at
December 31, 2018, MMUR has one property classified as held for sale with an expected closing date within the next
several months.
As at December 31, 2018 the Company's total investment in MMUR is approximately $36.3 million via its direct and
indirect interests which includes a loan to one of its joint venture partners.
Main and Main Urban Realty
MMUR, an equity accounted joint venture, is a Toronto and Ottawa urban development partnership between the
Company, Main and Main Developments (itself, a partially owned venture between the Company and a private developer)
and a prominent Canadian institutional investor. The Company's net economic interest in MMUR is 37.7%. Main and Main
Developments was retained to provide asset and property management services for the real estate portfolio.
In the year ended December 31, 2018, MMUR completed the sale of 19 of its 23 properties for approximately $116.8
million at the Company's interest, and a portion of the loan to one of its joint venture partners was repaid. As at
December 31, 2018, MMUR has one property classified as held for sale with an expected closing date within the next
several months.
As at December 31, 2018 the Company's total investment in MMUR is approximately $36.3 million via its direct and
indirect interests which includes a loan to one of its joint venture partners.
The following table summarizes key information about MMUR's portfolio.
The following table summarizes key information about MMUR's portfolio.
As at
Number of assemblies
Number of income-producing properties
Projects in active development / pre-development phase
GLA (square feet) (1)
Development pipeline and adjacent land (GLA) (1)
Retail pipeline (1)
Residential pipeline (1)
Total investment properties - development (1)
Total investment properties - held for sale (1) (2)
Residential development inventory (1)
Total assets (1)
Credit facilities (1)
Credit facilities secured by investment properties held for sale (1)
December 31, 2018
4
1
2/1
26,100
December 31, 2017
23
8
2 / 13
156,100
32,983
244,946
44,657 $
43,305 $
— $
95,918 $
5,643 $
18,553 $
32,983
244,946
27,240
150,107
10,219
194,249
12,195
60,635
$
$
$
$
$
$
As at
Number of assemblies
Number of income-producing properties
Projects in active development / pre-development phase
GLA (square feet) (1)
Development pipeline and adjacent land (GLA) (1)
Retail pipeline (1)
Residential pipeline (1)
Total investment properties - development (1)
Total investment properties - held for sale (1) (2)
Residential development inventory (1)
Total assets (1)
Credit facilities (1)
Credit facilities secured by investment properties held for sale (1)
December 31, 2018
4
1
2/1
26,100
December 31, 2017
23
8
2 / 13
156,100
32,983
244,946
44,657 $
43,305 $
— $
95,918 $
5,643 $
18,553 $
32,983
244,946
27,240
150,107
10,219
194,249
12,195
60,635
$
$
$
$
$
$
Twelve months ended
December 31, 2018
Revenue and other income (1)
Expenses and property selling costs (1)
Increase (decrease) in value of investment properties (1)
Development expenditures (1)
Other capital expenditures (1)
(1) At the Company's 37.7% interest in MMUR.
(2) As at December 31, 2018 one income-producing property was held for sale. As at December 31, 2017 twenty properties were held for sale.
4,888 $
4,654 $
14,659 $
16,057 $
116 $
$
$
$
$
$
December 31, 2017
5,109
2,939
23,435
11,132
575
Twelve months ended
December 31, 2018
Revenue and other income (1)
Expenses and property selling costs (1)
Increase (decrease) in value of investment properties (1)
Development expenditures (1)
Other capital expenditures (1)
(1) At the Company's 37.7% interest in MMUR.
(2) As at December 31, 2018 one income-producing property was held for sale. As at December 31, 2017 twenty properties were held for sale.
4,888 $
4,654 $
14,659 $
16,057 $
116 $
$
$
$
$
$
December 31, 2017
5,109
2,939
23,435
11,132
575
Ground-up Development
Through the Company's ownership interest in MMUR, the Company has commenced construction of a 40-storey
residential rental tower and retail podium at Dundas and Aukland in Toronto, with a total expected GLA of 347,000 square
feet, of which 295,000 is residential space and 52,000 is retail space. Total estimated costs for the project at the
Company's ownership interest are $56.5 million and at December 31, 2018 estimated costs to complete are $41.6 million
with a target completion date in the first half of 2021.
Ground-up Development
Through the Company's ownership interest in MMUR, the Company has commenced construction of a 40-storey
residential rental tower and retail podium at Dundas and Aukland in Toronto, with a total expected GLA of 347,000 square
feet, of which 295,000 is residential space and 52,000 is retail space. Total estimated costs for the project at the
Company's ownership interest are $56.5 million and at December 31, 2018 estimated costs to complete are $41.6 million
with a target completion date in the first half of 2021.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
28
FIRST CAPITAL REALTY ANNUAL REPORT 2018
28
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Leasing and Occupancy
As at December 31, 2018, total portfolio occupancy improved 0.2% to 96.7% while the Same Property portfolio occupancy
was up 0.1% compared to September 30, 2018. The increase was primarily due to new tenants taking possession of
approximately 224,000 square feet of space. Total portfolio occupancy increased 0.6% to 96.7% while the Same Property
portfolio occupancy increased 0.2% to 97.1% compared to December 31, 2017.
Leasing and Occupancy
As at December 31, 2018, total portfolio occupancy improved 0.2% to 96.7% while the Same Property portfolio occupancy
was up 0.1% compared to September 30, 2018. The increase was primarily due to new tenants taking possession of
approximately 224,000 square feet of space. Total portfolio occupancy increased 0.6% to 96.7% while the Same Property
portfolio occupancy increased 0.2% to 97.1% compared to December 31, 2017.
For the year ended December 31, 2018, the monthly average occupancy for the total portfolio was 96.3% compared to
94.9%, and the Same Property portfolio occupancy was 96.9% compared to 95.7% for the prior year, respectively.
For the year ended December 31, 2018, the monthly average occupancy for the total portfolio was 96.3% compared to
94.9%, and the Same Property portfolio occupancy was 96.9% compared to 95.7% for the prior year, respectively.
Occupancy of the Company's portfolio by property categorization was as follows:
Occupancy of the Company's portfolio by property categorization was as follows:
As at
December 31, 2018
December 31, 2017
As at
December 31, 2018
December 31, 2017
(square feet in thousands)
Same Property – stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Ground-up development
Investment properties classified as held for sale
Total portfolio before acquisitions and dispositions
Acquisitions – 2018
Acquisitions – 2017
Dispositions – 2018
Total (1)
(1) At the Company's ownership interest, excluding MMUR.
Total Occupied
Square Feet
% Occupied
Weighted
Average Rate
per Occupied
Square Foot
Total
Occupied
Square Feet
Weighted
Average Rate
per Occupied
Square Foot
% Occupied
17,039
2,943
19,982
2,162
145
315
22,604
190
271
—
97.1% $
97.3%
97.1%
93.0%
98.8%
97.5%
96.7%
93.9%
94.1%
—%
23,065
96.7% $
19.76
19.12
19.67
24.31
29.93
10.91
20.05
24.91
32.63
—
20.24
16,993
2,880
19,873
2,066
109
332
22,380
—
251
426
96.9% $
96.7%
96.9%
90.3%
97.4%
90.5%
96.1%
—%
93.7%
96.8%
23,057
96.1% $
19.52
18.46
19.37
23.15
29.70
10.47
19.63
—
29.99
16.62
19.69
(square feet in thousands)
Same Property – stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Ground-up development
Investment properties classified as held for sale
Total portfolio before acquisitions and dispositions
Acquisitions – 2018
Acquisitions – 2017
Dispositions – 2018
Total (1)
(1) At the Company's ownership interest, excluding MMUR.
Total Occupied
Square Feet
% Occupied
Weighted
Average Rate
per Occupied
Square Foot
Total
Occupied
Square Feet
Weighted
Average Rate
per Occupied
Square Foot
% Occupied
17,039
2,943
19,982
2,162
145
315
22,604
190
271
—
97.1% $
97.3%
97.1%
93.0%
98.8%
97.5%
96.7%
93.9%
94.1%
—%
23,065
96.7% $
19.76
19.12
19.67
24.31
29.93
10.91
20.05
24.91
32.63
—
20.24
16,993
2,880
19,873
2,066
109
332
22,380
—
251
426
96.9% $
96.7%
96.9%
90.3%
97.4%
90.5%
96.1%
—%
93.7%
96.8%
23,057
96.1% $
19.52
18.46
19.37
23.15
29.70
10.47
19.63
—
29.99
16.62
19.69
29
FIRST CAPITAL REALTY ANNUAL REPORT 2018
29
FIRST CAPITAL REALTY ANNUAL REPORT 2018
During the three months ended December 31, 2018, the Company completed 825,000 square feet of lease renewals
across the portfolio. The Company achieved a 9.2% lease renewal rate increase when comparing the per square foot net
rental rate in the last year of the expiring term to the per square foot net rental rate in the first year of the renewal term.
For the three months ended December 31, 2018, the Company achieved a 11.9% lease renewal rate increase when
comparing the net rental rate in the last year of the expiring term to the average net rental rate over the renewal term.
The average rental rate per occupied square foot for the total portfolio increased from $20.14 as at September 30, 2018
to $20.24 as at December 31, 2018 primarily due to rent escalations, renewal lifts and developments coming online.
Management believes that the weighted average rental rate per square foot for the portfolio would be in the range of
$25.00 to $27.00, if the portfolio were at market.
During the three months ended December 31, 2018, the Company completed 825,000 square feet of lease renewals
across the portfolio. The Company achieved a 9.2% lease renewal rate increase when comparing the per square foot net
rental rate in the last year of the expiring term to the per square foot net rental rate in the first year of the renewal term.
For the three months ended December 31, 2018, the Company achieved a 11.9% lease renewal rate increase when
comparing the net rental rate in the last year of the expiring term to the average net rental rate over the renewal term.
The average rental rate per occupied square foot for the total portfolio increased from $20.14 as at September 30, 2018
to $20.24 as at December 31, 2018 primarily due to rent escalations, renewal lifts and developments coming online.
Management believes that the weighted average rental rate per square foot for the portfolio would be in the range of
$25.00 to $27.00, if the portfolio were at market.
Changes in the Company’s gross leasable area and occupancy for the total portfolio for the three months ended
December 31, 2018 are set out below:
Changes in the Company’s gross leasable area and occupancy for the total portfolio for the three months ended
December 31, 2018 are set out below:
Three months ended
December 31, 2018
Total Same Property
Major redevelopment, ground-
up, acquisitions and dispositions
Vacancy
Total Portfolio (1)
Three months ended
December 31, 2018
Total Same Property
Major redevelopment, ground-
up, acquisitions and dispositions
Vacancy
Total Portfolio (1)
September 30, 2018 (2)
19,941
97.0% $ 19.56
3,034
93.7% $ 23.93
September 30, 2018 (2)
19,941
97.0% $ 19.56
3,034
93.7% $ 23.93
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Under
Redevelop-
ment
Square Feet
(thousands)
178
(149)
—
9
—
—
(1)
15.75
(16.37)
—
30.61
—
—
—
46
(20)
(7)
64
8
—
2
22.18
(20.39)
(35.00)
29.52
9.93
—
—
Vacant
Square Feet
(thousands)
Total
Square Feet
(thousands)
Occupied
Square
Feet %
%
%
Weighted
Average Rate
per Occupied
Square Foot
0.2%
779
3.3% 23,797
96.5% $ 20.14
(224)
169
—
13
—
—
28
—
—
—
86
—
(7)
27
17.08
(16.84)
(35.00)
29.65
9.93
—
—
43
—
—
7
—
(8)
(7)
(2)
19,978
97.1% $ 19.66
3,127
93.7% $ 24.10
33
0.1%
765
3.2% 23,903
96.7% $ 20.26
4
—
100%
24.30
80
100.0%
14.80
—%
—
(124)
93.4%
21.32
—
—
—
(9)
84
100.0%
15.22
(133)
93.4%
21.32
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments –
tenants coming
online (3)
Redevelopments –
tenant possession
Demolitions
Reclassification
Total portfolio before
Q4 2018 acquisitions
and dispositions
Acquisitions (at date
of acquisition)
Dispositions (at date
of disposition)
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Under
Redevelop-
ment
Square Feet
(thousands)
178
(149)
—
9
—
—
(1)
15.75
(16.37)
—
30.61
—
—
—
46
(20)
(7)
64
8
—
2
22.18
(20.39)
(35.00)
29.52
9.93
—
—
Vacant
Square Feet
(thousands)
Total
Square Feet
(thousands)
Occupied
Square
Feet %
%
%
Weighted
Average Rate
per Occupied
Square Foot
0.2%
779
3.3% 23,797
96.5% $ 20.14
(224)
169
—
13
—
—
28
—
—
—
86
—
(7)
27
17.08
(16.84)
(35.00)
29.65
9.93
—
—
43
—
—
7
—
(8)
(7)
(2)
19,978
97.1% $ 19.66
3,127
93.7% $ 24.10
33
0.1%
765
3.2% 23,903
96.7% $ 20.26
4
—
100%
24.30
80
100.0%
14.80
—%
—
(124)
93.4%
21.32
—
—
—
(9)
84
100.0%
15.22
(133)
93.4%
21.32
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments –
tenants coming
online (3)
Redevelopments –
tenant possession
Demolitions
Reclassification
Total portfolio before
Q4 2018 acquisitions
and dispositions
Acquisitions (at date
of acquisition)
Dispositions (at date
of disposition)
December 31, 2018
19,982
97.1% $ 19.67
3,083
93.9% $ 23.97
33
0.1%
756
3.2% 23,854
96.7% $ 20.24
December 31, 2018
19,982
97.1% $ 19.67
3,083
93.9% $ 23.97
33
0.1%
756
3.2% 23,854
96.7% $ 20.24
Renewals
Renewals – expired
739
(739)
$ 19.29
$ (17.54)
86
(86)
Net change per square foot from renewals
$
1.75
% Increase on renewal of expiring rents
(first year of renewal term)
% increase on renewal of expiring rents
(average rate in renewal term)
10.0%
$ 16.17
$ (15.79)
$
0.38
2.4%
825
(825)
$ 18.96
$ (17.36)
$
1.60
9.2%
11.9%
Renewals
Renewals – expired
739
(739)
$ 19.29
$ (17.54)
86
(86)
Net change per square foot from renewals
$
1.75
% Increase on renewal of expiring rents
(first year of renewal term)
% increase on renewal of expiring rents
(average rate in renewal term)
10.0%
$ 16.17
$ (15.79)
$
0.38
2.4%
825
(825)
$ 18.96
$ (17.36)
$
1.60
9.2%
11.9%
(1) At the Company's ownership interest, excluding MMUR.
(2) Opening balances have been adjusted to reflect the current period presentation.
(3) For further discussion of development and redevelopment coming online and under development vacancy, refer to the “Properties Under Development – 2018 Development
and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
(1) At the Company's ownership interest, excluding MMUR.
(2) Opening balances have been adjusted to reflect the current period presentation.
(3) For further discussion of development and redevelopment coming online and under development vacancy, refer to the “Properties Under Development – 2018 Development
and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
30
FIRST CAPITAL REALTY ANNUAL REPORT 2018
30
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
During the year ended December 31, 2018, the Company completed 2,868,000 square feet of lease renewals across the
portfolio. The Company achieved a 8.4% lease renewal rate increase when comparing the per square foot net rental rate
in the last year of the expiring term to the per square foot net rental rate in the first year of the renewal term. For the
year ended December 31, 2018, the Company achieved a 10.9% lease renewal rate increase when comparing the net
rental rate in the last year of the expiring term to the average net rental rate over the renewal term.
During the year ended December 31, 2018, the Company completed 2,868,000 square feet of lease renewals across the
portfolio. The Company achieved a 8.4% lease renewal rate increase when comparing the per square foot net rental rate
in the last year of the expiring term to the per square foot net rental rate in the first year of the renewal term. For the
year ended December 31, 2018, the Company achieved a 10.9% lease renewal rate increase when comparing the net
rental rate in the last year of the expiring term to the average net rental rate over the renewal term.
The average rental rate per occupied square foot for the total portfolio increased from $19.69 as at December 31, 2017
to $20.24 as at December 31, 2018 primarily due to rent escalations, renewal lifts and developments coming online.
The average rental rate per occupied square foot for the total portfolio increased from $19.69 as at December 31, 2017
to $20.24 as at December 31, 2018 primarily due to rent escalations, renewal lifts and developments coming online.
Changes in the Company’s gross leasable area and occupancy for the total portfolio for the year ended December 31, 2018
are set out below:
Changes in the Company’s gross leasable area and occupancy for the total portfolio for the year ended December 31, 2018
are set out below:
Year ended December
31, 2018
Total Same Property
Major redevelopment, ground-
up, acquisitions and dispositions
Vacancy
Total Portfolio (1)
Year ended December
31, 2018
Total Same Property
Major redevelopment, ground-
up, acquisitions and dispositions
Vacancy
Total Portfolio (1)
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Under
Redevelop-
ment
Square Feet
(thousands)
Vacant
Square Feet
(thousands)
%
%
Total
Square Feet
(thousands)
Occupied
Square
Feet %
Weighted
Average Rate
per Occupied
Square Foot
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Occupied
Square Feet
(thousands)
%
Weighted
Average Rate
per Occupied
Square Foot
Under
Redevelop-
ment
Square Feet
(thousands)
Vacant
Square Feet
(thousands)
%
%
Total
Square Feet
(thousands)
Occupied
Square
Feet %
Weighted
Average Rate
per Occupied
Square Foot
December 31, 2017 (2)
19,873
96.9% $ 19.37
3,184
91.6% $ 21.72
151
0.6%
783
3.3% 23,991
96.1% $ 19.69
December 31, 2017 (2)
19,873
96.9% $ 19.37
3,184
91.6% $ 21.72
151
0.6%
783
3.3% 23,991
96.1% $ 19.69
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments –
tenants coming
online (3)
Redevelopments –
tenant possession
Demolitions
Reclassifications
Total portfolio before
2018 acquisitions
and dispositions
Acquisitions (at date of
acquisition)
Dispositions (at date of
disposition)
December 31, 2018
477
(432)
—
44
—
—
11
18.82
(17.12)
—
123
(119)
(100)
32.75
209
—
—
—
19
—
—
20.28
(19.71)
(10.18)
38.28
7.95
—
—
—
—
100
—
(19)
(107)
(92)
(600)
551
—
30
—
—
(3)
—
—
—
283
—
(107)
(84)
19.12
(17.68)
(10.18)
37.33
7.95
—
—
19,973
97.1% $ 19.66
3,316
94.1% $ 23.00
33
0.1%
761
3.2% 24,083
96.7% $ 20.14
9
100%
20.52
192
95.3%
24.26
— 99.0%
—
(425)
96.8%
16.55
—
—
9
(14)
210
95.5%
24.09
(439)
96.8%
16.55
19,982
97.1% $ 19.67
3,083
93.9% $ 23.97
33
0.1%
756
3.2% 23,854
96.7% $ 20.24
Renewals
Renewals – expired
2,490
(2,490)
$ 18.66
$ (17.21)
378
(378)
Net change per square foot from renewals
$
1.45
% Increase on renewal of expiring rents
(first year of renewal term)
% increase on renewal of expiring rents
(average rate in renewal term)
% Increase in rate per square foot – openings
versus all closures
8.4%
9.9%
$ 18.08
$ (16.70)
$
1.38
8.3%
21.2%
2,868
(2,868)
$ 18.58
$ (17.14)
$
1.44
8.4%
10.9%
13.6%
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments –
tenants coming
online (3)
Redevelopments –
tenant possession
Demolitions
Reclassifications
Total portfolio before
2018 acquisitions
and dispositions
Acquisitions (at date of
acquisition)
Dispositions (at date of
disposition)
December 31, 2018
477
(432)
—
44
—
—
11
18.82
(17.12)
—
123
(119)
(100)
32.75
209
—
—
—
19
—
—
20.28
(19.71)
(10.18)
38.28
7.95
—
—
—
—
100
—
(19)
(107)
(92)
(600)
551
—
30
—
—
(3)
—
—
—
283
—
(107)
(84)
19.12
(17.68)
(10.18)
37.33
7.95
—
—
19,973
97.1% $ 19.66
3,316
94.1% $ 23.00
33
0.1%
761
3.2% 24,083
96.7% $ 20.14
9
100%
20.52
192
95.3%
24.26
— 99.0%
—
(425)
96.8%
16.55
—
—
9
(14)
210
95.5%
24.09
(439)
96.8%
16.55
19,982
97.1% $ 19.67
3,083
93.9% $ 23.97
33
0.1%
756
3.2% 23,854
96.7% $ 20.24
Renewals
Renewals – expired
2,490
(2,490)
$ 18.66
$ (17.21)
378
(378)
Net change per square foot from renewals
$
1.45
% Increase on renewal of expiring rents
(first year of renewal term)
% increase on renewal of expiring rents
(average rate in renewal term)
% Increase in rate per square foot – openings
versus all closures
8.4%
9.9%
$ 18.08
$ (16.70)
$
1.38
8.3%
21.2%
2,868
(2,868)
$ 18.58
$ (17.14)
$
1.44
8.4%
10.9%
13.6%
(1) At the Company's ownership interest, excluding MMUR.
(2) Opening balances have been adjusted to reflect the current period presentation.
(3) For further discussion of development and redevelopment coming online and under development vacancy, refer to the “Properties Under Development – 2018
Development and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
(1) At the Company's ownership interest, excluding MMUR.
(2) Opening balances have been adjusted to reflect the current period presentation.
(3) For further discussion of development and redevelopment coming online and under development vacancy, refer to the “Properties Under Development – 2018
Development and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
31
FIRST CAPITAL REALTY ANNUAL REPORT 2018
31
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Top Forty Tenants
As at December 31, 2018, 55.1% of the Company’s annualized minimum rent came from its top 40 tenants
(December 31, 2017 – 55.1%). Of these rents, 67.7% (December 31, 2017 – 63.3%) came from tenants that have
investment grade credit ratings and who represent many of Canada’s leading grocery stores, pharmacies, national and
discount retailers, financial institutions and other familiar retailers. The weighted average remaining lease term for the
Company’s top 10 tenants was 6.9 years as at December 31, 2018, excluding contractual renewal options.
Top Forty Tenants
As at December 31, 2018, 55.1% of the Company’s annualized minimum rent came from its top 40 tenants
(December 31, 2017 – 55.1%). Of these rents, 67.7% (December 31, 2017 – 63.3%) came from tenants that have
investment grade credit ratings and who represent many of Canada’s leading grocery stores, pharmacies, national and
discount retailers, financial institutions and other familiar retailers. The weighted average remaining lease term for the
Company’s top 10 tenants was 6.9 years as at December 31, 2018, excluding contractual renewal options.
Rank
Number
of Stores
Save-On-Foods
Square Feet
(thousands)
Percent of Total
Annualized
Tenant (1) (2)
Minimum Rent
Loblaw Companies Limited ("Loblaw")
10.0%
1.
6.1%
Sobeys
2.
3.9%
Metro
3.
Canadian Tire
2.8%
4.
2.7%
Walmart
5.
TD Canada Trust
2.1%
6.
RBC Royal Bank
1.9%
7.
1.9%
Dollarama
8.
GoodLife Fitness
1.8%
9.
1.5%
CIBC
10.
Top 10 Tenants Total
34.7%
1.5%
11.
1.3%
12. McKesson
1.2%
LCBO
13.
1.1%
Lowe's
14.
Restaurant Brands International
1.1%
15.
1.1%
Scotiabank
16.
London Drugs
1.0%
17.
1.0%
BMO
18.
0.8%
Longo's
19.
0.8%
20.
Staples
0.8%
21. Winners
Recipe Unlimited
0.8%
22.
0.7%
Nordstrom
23.
0.7%
Starbucks
24.
0.6%
25.
SAQ
0.6%
26. Michaels
0.5%
27.
28. Whole Foods Market
0.5%
0.4%
29.
0.4%
30.
0.4%
31. McDonald's
Toys "R" Us
0.4%
32.
Yum! Brands
0.4%
33.
Alcanna Inc.
0.4%
34.
The Home Depot
0.4%
35.
0.3%
36. Williams-Sonoma
Pet Valu
0.3%
37.
Bulk Barn
0.3%
38.
0.3%
Equinox
39.
National Bank
0.3%
40.
Top 40 Tenants Total
55.1%
(1) The names noted above may be the names of the parent entities and are not necessarily the covenants under the leases.
(2) Tenants noted include all banners of the respective retailer.
Percent of
Total Gross
Leasable Area
9.4%
8.1%
5.6%
3.7%
6.2%
1.0%
1.0%
2.2%
2.4%
0.9%
40.5%
1.4%
1.0%
0.9%
1.5%
0.6%
0.6%
0.9%
0.5%
0.7%
1.0%
1.1%
0.5%
0.2%
0.3%
0.4%
0.3%
0.3%
0.4%
0.1%
0.3%
0.4%
0.5%
0.2%
0.2%
0.6%
0.2%
0.2%
0.2%
0.2%
0.1%
56.3%
2,231
1,924
1,327
887
1,491
243
248
536
565
207
9,659
323
230
209
361
152
139
218
122
178
237
274
127
40
67
105
77
78
90
35
69
87
127
50
56
153
38
53
58
38
35
13,485
100
56
48
26
15
50
45
54
26
38
458
9
26
23
4
61
27
9
29
5
10
11
30
1
45
21
4
70
2
1
12
22
3
30
15
2
2
19
12
2
8
973
Pusateri's
The Beer Store
Subway
DBRS Credit
Rating
S&P Credit
Rating
Moody’s
Credit Rating
BBB
BB (high)
BBB
BBB (high)
AA
AA
AA
BBB
BBB
BB+
BBB
BBB+
AA
AA-
AA-
Aa2
Aa1
Aa2
AA
A+
Aa2
AA (low)
A (low)
AA
AA
BBB (high)
A (high)
BBB+
A+
BBB+
B+
A+
A+
B+
A+
BBB+
BBB+
AA-
BB-
Baa2
AA3
Baa1
B1
Aa2
Aa2
B1
A2
Baa1
Baa1
Aa2
Ba2
A+
A3
AA (low)
A+
BBB+
BB
A
B
A
A
AA (low)
Aa3
Baa1
Ba3
A2
B2
Aa3
Rank
Number
of Stores
Save-On-Foods
Square Feet
(thousands)
Percent of Total
Annualized
Tenant (1) (2)
Minimum Rent
Loblaw Companies Limited ("Loblaw")
10.0%
1.
6.1%
Sobeys
2.
3.9%
Metro
3.
Canadian Tire
2.8%
4.
2.7%
Walmart
5.
TD Canada Trust
2.1%
6.
RBC Royal Bank
1.9%
7.
1.9%
Dollarama
8.
GoodLife Fitness
1.8%
9.
1.5%
CIBC
10.
Top 10 Tenants Total
34.7%
1.5%
11.
1.3%
12. McKesson
1.2%
LCBO
13.
1.1%
Lowe's
14.
Restaurant Brands International
1.1%
15.
1.1%
Scotiabank
16.
London Drugs
1.0%
17.
1.0%
BMO
18.
0.8%
Longo's
19.
0.8%
20.
Staples
0.8%
21. Winners
Recipe Unlimited
0.8%
22.
0.7%
Nordstrom
23.
0.7%
Starbucks
24.
0.6%
25.
SAQ
0.6%
26. Michaels
0.5%
27.
28. Whole Foods Market
0.5%
0.4%
29.
0.4%
30.
0.4%
31. McDonald's
Toys "R" Us
0.4%
32.
Yum! Brands
0.4%
33.
Alcanna Inc.
0.4%
34.
The Home Depot
0.4%
35.
0.3%
36. Williams-Sonoma
Pet Valu
0.3%
37.
Bulk Barn
0.3%
38.
0.3%
Equinox
39.
National Bank
0.3%
40.
Top 40 Tenants Total
55.1%
(1) The names noted above may be the names of the parent entities and are not necessarily the covenants under the leases.
(2) Tenants noted include all banners of the respective retailer.
Percent of
Total Gross
Leasable Area
9.4%
8.1%
5.6%
3.7%
6.2%
1.0%
1.0%
2.2%
2.4%
0.9%
40.5%
1.4%
1.0%
0.9%
1.5%
0.6%
0.6%
0.9%
0.5%
0.7%
1.0%
1.1%
0.5%
0.2%
0.3%
0.4%
0.3%
0.3%
0.4%
0.1%
0.3%
0.4%
0.5%
0.2%
0.2%
0.6%
0.2%
0.2%
0.2%
0.2%
0.1%
56.3%
2,231
1,924
1,327
887
1,491
243
248
536
565
207
9,659
323
230
209
361
152
139
218
122
178
237
274
127
40
67
105
77
78
90
35
69
87
127
50
56
153
38
53
58
38
35
13,485
100
56
48
26
15
50
45
54
26
38
458
9
26
23
4
61
27
9
29
5
10
11
30
1
45
21
4
70
2
1
12
22
3
30
15
2
2
19
12
2
8
973
Pusateri's
The Beer Store
Subway
DBRS Credit
Rating
S&P Credit
Rating
Moody’s
Credit Rating
BBB
BB (high)
BBB
BBB (high)
AA
AA
AA
BBB
BBB
BB+
BBB
BBB+
AA
AA-
AA-
Aa2
Aa1
Aa2
AA
A+
Aa2
AA (low)
A (low)
AA
AA
BBB (high)
A (high)
BBB+
A+
BBB+
B+
A+
A+
B+
A+
BBB+
BBB+
AA-
BB-
Baa2
AA3
Baa1
B1
Aa2
Aa2
B1
A2
Baa1
Baa1
Aa2
Ba2
A+
A3
AA (low)
A+
BBB+
BB
A
B
A
A
AA (low)
Aa3
Baa1
Ba3
A2
B2
Aa3
FIRST CAPITAL REALTY ANNUAL REPORT 2018
32
FIRST CAPITAL REALTY ANNUAL REPORT 2018
32
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Lease Maturity Profile
The Company’s lease maturity profile for its portfolio as at December 31, 2018, excluding any contractual renewal
options, is as follows:
Lease Maturity Profile
The Company’s lease maturity profile for its portfolio as at December 31, 2018, excluding any contractual renewal
options, is as follows:
$
Number of
Stores
Occupied Square
Feet (thousands)
Maturity Date
Month-to-month tenants (1)
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Thereafter
Total or Weighted Average (2)
$
(1) Includes tenants on over hold including renewals and extensions under negotiation, month-to-month tenants and tenants in space at properties with future
Percent of Total
Square Feet
1.6%
8.9%
11.7%
9.4%
13.0%
14.7%
8.4%
4.3%
4.1%
4.9%
4.8%
2.7%
8.2%
Percent of Total
Annualized
Minimum Rent
1.5%
8.7%
11.4%
9.5%
13.9%
13.4%
8.0%
5.1%
5.2%
5.5%
6.2%
3.2%
8.4%
Annualized
Minimum Rent at
Expiration
(thousands)
7,324
43,416
57,008
47,508
69,359
67,171
39,837
25,683
25,814
27,310
30,800
16,003
43,214
188
692
654
539
626
614
292
201
172
178
176
79
84
4,495
391
2,128
2,793
2,240
3,098
3,505
2,010
1,031
978
1,180
1,139
636
1,936
500,447
100.0%
23,065
96.7%
$
$
Average Annual
Minimum Rent
per Square Foot
at Expiration
18.74
20.41
20.41
21.21
22.39
19.16
19.82
24.90
26.41
23.15
27.05
25.17
22.31
21.70
$
Number of
Stores
Occupied Square
Feet (thousands)
Maturity Date
Month-to-month tenants (1)
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Thereafter
Total or Weighted Average (2)
$
(1) Includes tenants on over hold including renewals and extensions under negotiation, month-to-month tenants and tenants in space at properties with future
Percent of Total
Square Feet
1.6%
8.9%
11.7%
9.4%
13.0%
14.7%
8.4%
4.3%
4.1%
4.9%
4.8%
2.7%
8.2%
Percent of Total
Annualized
Minimum Rent
1.5%
8.7%
11.4%
9.5%
13.9%
13.4%
8.0%
5.1%
5.2%
5.5%
6.2%
3.2%
8.4%
Annualized
Minimum Rent at
Expiration
(thousands)
7,324
43,416
57,008
47,508
69,359
67,171
39,837
25,683
25,814
27,310
30,800
16,003
43,214
188
692
654
539
626
614
292
201
172
178
176
79
84
4,495
391
2,128
2,793
2,240
3,098
3,505
2,010
1,031
978
1,180
1,139
636
1,936
500,447
100.0%
23,065
96.7%
$
$
Average Annual
Minimum Rent
per Square Foot
at Expiration
18.74
20.41
20.41
21.21
22.39
19.16
19.82
24.90
26.41
23.15
27.05
25.17
22.31
21.70
redevelopment.
(2) At the Company's ownership interest, excluding MMUR.
redevelopment.
(2) At the Company's ownership interest, excluding MMUR.
The weighted average remaining lease term for the portfolio was 6.5 years as at December 31, 2018, excluding contractual
renewal options, but including month-to-month and other short-term leases.
The weighted average remaining lease term for the portfolio was 6.5 years as at December 31, 2018, excluding contractual
renewal options, but including month-to-month and other short-term leases.
Loans, Mortgages and Other Assets
As at
Non-current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
Other investments
Total non-current
Current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
FVTPL investments in securities (c)
Total current
Total
December 31, 2018 December 31, 2017
$
$
$
$
$
20,511
57,003
15,834
93,348
87,106
160,043
23,562
270,711
364,059
$
$
$
$
$
—
130,576
2,587
133,163
—
125,265
21,720
146,985
280,148
Loans, Mortgages and Other Assets
As at
Non-current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
Other investments
Total non-current
Current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
FVTPL investments in securities (c)
Total current
Total
December 31, 2018 December 31, 2017
$
$
$
$
$
20,511
57,003
15,834
93,348
87,106
160,043
23,562
270,711
364,059
$
$
$
$
$
—
130,576
2,587
133,163
—
125,265
21,720
146,985
280,148
(a) Loans and mortgages receivable are primarily secured by interests in investment properties or shares of entities
owning investment properties. Effective January 1, 2018, the Company reclassified certain loans and mortgages
receivable to FVTPL from amortized cost upon adoption of IFRS 9.
(b) As at December 31, 2018, the Company’s loans and mortgages receivable included $131.3 million representing the
Company's share of $208.5 million of priority ranking mortgages on a development project at the southwest corner
of Yonge Street and Bloor Street in Toronto, Ontario. A portion of the balance is due on September 1, 2019 with the
remainder due on September 1, 2020 subject to early prepayment and extension provisions.
(a) Loans and mortgages receivable are primarily secured by interests in investment properties or shares of entities
owning investment properties. Effective January 1, 2018, the Company reclassified certain loans and mortgages
receivable to FVTPL from amortized cost upon adoption of IFRS 9.
(b) As at December 31, 2018, the Company’s loans and mortgages receivable included $131.3 million representing the
Company's share of $208.5 million of priority ranking mortgages on a development project at the southwest corner
of Yonge Street and Bloor Street in Toronto, Ontario. A portion of the balance is due on September 1, 2019 with the
remainder due on September 1, 2020 subject to early prepayment and extension provisions.
33
FIRST CAPITAL REALTY ANNUAL REPORT 2018
33
FIRST CAPITAL REALTY ANNUAL REPORT 2018
(c) From time to time, the Company invests in publicly traded real estate and related securities. These securities are
recorded at market value. Realized and unrealized gains and losses on FVTPL securities are recorded in other gains
(losses) and (expenses).
(c) From time to time, the Company invests in publicly traded real estate and related securities. These securities are
recorded at market value. Realized and unrealized gains and losses on FVTPL securities are recorded in other gains
(losses) and (expenses).
RESULTS OF OPERATIONS
Net Operating Income
The Company’s net operating income for its portfolio is presented below:
RESULTS OF OPERATIONS
Net Operating Income
The Company’s net operating income for its portfolio is presented below:
Three months ended December 31
2017
2018
% change
% change
Year ended December 31
2017
2018
Three months ended December 31
2017
2018
% change
% change
Year ended December 31
2017
2018
Property rental revenue
Base rent
Operating cost recoveries
Realty tax recoveries
Lease surrender fees
Percentage rent
Prior year operating cost and tax recovery
adjustments
Temporary tenants, storage, parking and
other
Total Same Property rental revenue
Property operating costs
Recoverable operating expenses
Recoverable realty tax expense
Prior year realty tax expense
Other operating costs and adjustments
Total Same Property operating costs
Total Same Property NOI (1)
Major redevelopment
Ground-up development
Acquisitions – 2018
Acquisitions – 2017
Investment properties classified as held for sale
Dispositions – 2018
Dispositions – 2017
Straight-line rent adjustment
Development land
NOI (1)
NOI margin
$
97,517
$
94,518
$ 385,468
$ 374,224
22,168
29,192
51
935
(655)
21,192
28,573
170
811
(486)
87,828
117,333
1,958
3,049
(1,695)
83,523
113,848
1,568
2,236
(1,364)
2,866
3,266
11,467
11,443
152,074
148,044
605,408
585,478
24,284
31,883
(782)
(286)
55,099
24,009
31,390
(1,404)
(43)
53,952
96,438
127,160
(2,759)
(645)
92,629
123,866
(3,097)
(1,522)
220,194
211,876
3.1% $
96,975
$
94,092
3.1% $ 385,214
$ 373,602
11,009
668
1,472
1,788
775
572
(73)
1,323
6
11,071
931
—
815
725
1,683
237
1,566
217
43,689
2,769
3,065
6,385
3,247
3,325
(2)
7,062
19
44,688
2,722
—
1,135
3,274
6,665
2,505
2,684
235
2.9% $ 114,515
$ 111,337
3.9% $ 454,773
$ 437,510
62.0%
62.8%
62.3%
63.0%
Property rental revenue
Base rent
Operating cost recoveries
Realty tax recoveries
Lease surrender fees
Percentage rent
Prior year operating cost and tax recovery
adjustments
Temporary tenants, storage, parking and
other
Total Same Property rental revenue
Property operating costs
Recoverable operating expenses
Recoverable realty tax expense
Prior year realty tax expense
Other operating costs and adjustments
Total Same Property operating costs
Total Same Property NOI (1)
Major redevelopment
Ground-up development
Acquisitions – 2018
Acquisitions – 2017
Investment properties classified as held for sale
Dispositions – 2018
Dispositions – 2017
Straight-line rent adjustment
Development land
NOI (1)
NOI margin
$
97,517
$
94,518
$ 385,468
$ 374,224
22,168
29,192
51
935
(655)
21,192
28,573
170
811
(486)
87,828
117,333
1,958
3,049
(1,695)
83,523
113,848
1,568
2,236
(1,364)
2,866
3,266
11,467
11,443
152,074
148,044
605,408
585,478
24,284
31,883
(782)
(286)
55,099
24,009
31,390
(1,404)
(43)
53,952
96,438
127,160
(2,759)
(645)
92,629
123,866
(3,097)
(1,522)
220,194
211,876
3.1% $
96,975
$
94,092
3.1% $ 385,214
$ 373,602
11,009
668
1,472
1,788
775
572
(73)
1,323
6
11,071
931
—
815
725
1,683
237
1,566
217
43,689
2,769
3,065
6,385
3,247
3,325
(2)
7,062
19
44,688
2,722
—
1,135
3,274
6,665
2,505
2,684
235
2.9% $ 114,515
$ 111,337
3.9% $ 454,773
$ 437,510
62.0%
62.8%
62.3%
63.0%
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
34
FIRST CAPITAL REALTY ANNUAL REPORT 2018
34
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
For the three months and year ended December 31, 2018, total NOI increased by $3.2 million and $17.3 million,
respectively, compared to the prior years primarily due to SP NOI growth and increases in straight-line rent due to higher
occupancy levels and new tenants taking possession of recently completed space. NOI margins have decreased by 0.8%
and 0.7%, respectively, for the three months and year ended December 31, 2018 compared to the same prior year
periods primarily due to lower prior year tax adjustments, higher operating costs, and lower margins on NOI related to
the hotel property.
For the three months and year ended December 31, 2018, total NOI increased by $3.2 million and $17.3 million,
respectively, compared to the prior years primarily due to SP NOI growth and increases in straight-line rent due to higher
occupancy levels and new tenants taking possession of recently completed space. NOI margins have decreased by 0.8%
and 0.7%, respectively, for the three months and year ended December 31, 2018 compared to the same prior year
periods primarily due to lower prior year tax adjustments, higher operating costs, and lower margins on NOI related to
the hotel property.
Same Property NOI Growth
Same Property NOI Growth
The components of SP NOI growth and comparisons to the same prior year period are as follows:
The components of SP NOI growth and comparisons to the same prior year period are as follows:
Same Property – Stable
Same Property with redevelopment
Total Same Property NOI Growth
3.1%
(1) Prior periods as reported; not restated to reflect current period property categories.
Three months ended December 31
2017 (1)
2.0%
3.4%
2018
2.1%
9.7%
Year ended December 31
2017 (1)
2.0%
5.4%
2018
2.7%
6.0%
2.2%
3.1%
2.5%
Same Property – Stable
Same Property with redevelopment
Total Same Property NOI Growth
3.1%
(1) Prior periods as reported; not restated to reflect current period property categories.
Three months ended December 31
2017 (1)
2.0%
3.4%
2018
2.1%
9.7%
Year ended December 31
2017 (1)
2.0%
5.4%
2018
2.7%
6.0%
2.2%
3.1%
2.5%
For the three months and year ended December 31, 2018, SP NOI increased by $2.9 million and $11.6 million, or 3.1% for
both periods primarily due to rent escalations, increased occupancy, and pad developments coming online.
For the three months and year ended December 31, 2018, SP NOI increased by $2.9 million and $11.6 million, or 3.1% for
both periods primarily due to rent escalations, increased occupancy, and pad developments coming online.
NOI by Region
NOI is presented by region as follows:
Three months ended December 31, 2018
Property rental revenue
Property operating costs
NOI
Three months ended December 31, 2017
Property rental revenue
Property operating costs
NOI
Year ended December 31, 2018
Property rental revenue
Property operating costs
NOI
Year ended December 31, 2017
Property rental revenue
Property operating costs
NOI
$
$
$
$
$
$
$
$
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
78,282 $
46,192 $
60,596 $
(480) $
184,590
31,089
20,236
20,315
(1,565)
70,075
NOI by Region
NOI is presented by region as follows:
Three months ended December 31, 2018
Property rental revenue
Property operating costs
47,193 $
25,956 $
40,281 $
1,085 $
114,515
NOI
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
74,621 $
45,394 $
57,809 $
(618) $
177,206
29,213
19,317
18,729
(1,390)
65,869
Three months ended December 31, 2017
Property rental revenue
Property operating costs
45,408 $
26,077 $
39,080 $
772 $
111,337
NOI
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
304,426 $
190,384 $
237,095 $
(2,310) $
729,595
118,559
82,401
79,755
(5,893)
274,822
185,867 $
107,983 $
157,340 $
3,583 $
454,773
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
288,416 $
180,856 $
227,966 $
(2,779) $
694,459
108,493
78,048
75,910
(5,502)
256,949
179,923 $
102,808 $
152,056 $
2,723 $
437,510
Year ended December 31, 2018
Property rental revenue
Property operating costs
NOI
Year ended December 31, 2017
Property rental revenue
Property operating costs
NOI
(1) Other items principally consist of intercompany eliminations.
(1) Other items principally consist of intercompany eliminations.
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
78,282 $
46,192 $
60,596 $
(480) $
184,590
31,089
20,236
20,315
(1,565)
70,075
47,193 $
25,956 $
40,281 $
1,085 $
114,515
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
74,621 $
45,394 $
57,809 $
(618) $
177,206
29,213
19,317
18,729
(1,390)
65,869
45,408 $
26,077 $
39,080 $
772 $
111,337
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
304,426 $
190,384 $
237,095 $
(2,310) $
729,595
118,559
82,401
79,755
(5,893)
274,822
185,867 $
107,983 $
157,340 $
3,583 $
454,773
Central
Region
Eastern
Region
Western
Region
Other (1)
Total
288,416 $
180,856 $
227,966 $
(2,779) $
694,459
108,493
78,048
75,910
(5,502)
256,949
179,923 $
102,808 $
152,056 $
2,723 $
437,510
$
$
$
$
$
$
$
$
35
FIRST CAPITAL REALTY ANNUAL REPORT 2018
35
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Interest and Other Income
For the three months and year ended December 31, 2018, the Company's interest and other income totaled $6.2 million
and $26.4 million, compared to $7.6 million and $28.4 million, respectively, for the same prior year periods. The decrease
of $2.0 million over prior year was primarily due to lower interest earned as a result of lower loans and mortgages
receivable outstanding, partially offset by higher dividends and distribution income from marketable securities.
Interest and Other Income
For the three months and year ended December 31, 2018, the Company's interest and other income totaled $6.2 million
and $26.4 million, compared to $7.6 million and $28.4 million, respectively, for the same prior year periods. The decrease
of $2.0 million over prior year was primarily due to lower interest earned as a result of lower loans and mortgages
receivable outstanding, partially offset by higher dividends and distribution income from marketable securities.
Interest Expense
The Company’s interest expense by type is as follows:
Interest Expense
The Company’s interest expense by type is as follows:
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Interest capitalized
Interest expense
$
$
Three months ended December 31
2017
11,525
3,435
2018
12,227
5,100
$
$
Year ended December 31
2017
47,244
10,890
2018
46,212
18,652
$
27,756
—
(5,929)
39,154
30,071
730
(5,910)
39,851
$
113,284
446
(25,354)
115,798
5,150
(21,671)
$
153,240
$
157,411
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Interest capitalized
Interest expense
$
$
Three months ended December 31
2017
11,525
3,435
2018
12,227
5,100
$
$
Year ended December 31
2017
47,244
10,890
2018
46,212
18,652
$
27,756
—
(5,929)
39,154
30,071
730
(5,910)
39,851
$
113,284
446
(25,354)
115,798
5,150
(21,671)
$
153,240
$
157,411
For the three months ended December 31, 2018, interest expense decreased by $0.7 million primarily due to a reduction
in outstanding unsecured and convertible debentures, partially offset by higher interest on credit facility borrowings and
higher interest on mortgages.
For the three months ended December 31, 2018, interest expense decreased by $0.7 million primarily due to a reduction
in outstanding unsecured and convertible debentures, partially offset by higher interest on credit facility borrowings and
higher interest on mortgages.
For the year ended December 31, 2018, interest expense decreased by $4.2 million primarily due to the early redemption
of higher rate convertible debentures.
For the year ended December 31, 2018, interest expense decreased by $4.2 million primarily due to the early redemption
of higher rate convertible debentures.
During the years ended December 31, 2018 and 2017, approximately 14.2% or $25.4 million, and 12.1% or $21.7 million,
respectively, of interest expense was capitalized to real estate investments for properties undergoing development or
redevelopment projects. The increase in capitalized interest of $3.7 million is due to higher cumulative development
expenditures and increased draws on construction facilities compared to the same prior year periods. Amounts
capitalized are dependent on interest expense paid, on the phase and magnitude of development and redevelopment
projects actively underway as well as the portfolio weighted average interest rate.
During the years ended December 31, 2018 and 2017, approximately 14.2% or $25.4 million, and 12.1% or $21.7 million,
respectively, of interest expense was capitalized to real estate investments for properties undergoing development or
redevelopment projects. The increase in capitalized interest of $3.7 million is due to higher cumulative development
expenditures and increased draws on construction facilities compared to the same prior year periods. Amounts
capitalized are dependent on interest expense paid, on the phase and magnitude of development and redevelopment
projects actively underway as well as the portfolio weighted average interest rate.
Corporate Expenses
The Company's corporate expenses is as follows:
Corporate Expenses
The Company's corporate expenses is as follows:
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
Salaries, wages and benefits
Non-cash compensation
Other corporate costs
Total corporate expenses
Amounts capitalized to investment properties under
$
6,523
1,155
3,048
10,726
(1,814)
$
$
$
6,743
1,128
3,166
11,037
(1,750)
27,418
4,805
12,408
44,631
(7,537)
27,756
4,258
11,630
43,644
(7,202)
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
Salaries, wages and benefits
Non-cash compensation
Other corporate costs
Total corporate expenses
Amounts capitalized to investment properties under
$
6,523
1,155
3,048
10,726
(1,814)
$
$
$
6,743
1,128
3,166
11,037
(1,750)
27,418
4,805
12,408
44,631
(7,537)
27,756
4,258
11,630
43,644
(7,202)
development
Corporate expenses
$
8,912
$
9,287
$
37,094
$
36,442
development
Corporate expenses
$
8,912
$
9,287
$
37,094
$
36,442
For the year ended December 31, 2018, corporate expenses increased by $0.7 million compared to the prior year
primarily due to higher non-cash compensation.
For the year ended December 31, 2018, corporate expenses increased by $0.7 million compared to the prior year
primarily due to higher non-cash compensation.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
36
FIRST CAPITAL REALTY ANNUAL REPORT 2018
36
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
The Company manages all of its acquisitions, development and redevelopment and leasing activities internally. Certain
internal costs directly related to development, including salaries and related costs for planning, zoning, construction
and so forth, are capitalized in accordance with IFRS to development projects as incurred. During the years ended
December 31, 2018 and 2017, approximately 16.9% or $7.5 million and 16.5% or $7.2 million, respectively, of
compensation-related and other corporate expenses were capitalized to real estate investments for properties
undergoing development or redevelopment projects. Amounts capitalized are based on development and pre-
development projects underway, and have increased due to a greater average number of development projects
underway in 2018 vs the prior year.
The Company manages all of its acquisitions, development and redevelopment and leasing activities internally. Certain
internal costs directly related to development, including salaries and related costs for planning, zoning, construction
and so forth, are capitalized in accordance with IFRS to development projects as incurred. During the years ended
December 31, 2018 and 2017, approximately 16.9% or $7.5 million and 16.5% or $7.2 million, respectively, of
compensation-related and other corporate expenses were capitalized to real estate investments for properties
undergoing development or redevelopment projects. Amounts capitalized are based on development and pre-
development projects underway, and have increased due to a greater average number of development projects
underway in 2018 vs the prior year.
Other Gains (Losses) and (Expenses)
The Company's other gains, losses and expenses is as follows:
Other Gains (Losses) and (Expenses)
The Company's other gains, losses and expenses is as follows:
Three months ended December 31
2018
2017
Three months ended December 31
Consolidated
Statement of
Income
Included in
FFO
Consolidated
Statement of
Income
Included in
FFO
Realized gain (loss) on sale of marketable securities
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt
Proceeds from Target
Investment properties selling costs
REIT conversion costs
Other
Total per consolidated statement of income
Other gains (losses) and (expenses) under equity accounted joint ventures
Total at the Company's proportionate interest (3)
$
$
$
43 $
(876)
—
—
(660)
(942)
179
(2,256) $
(29)
43 $
(876)
—
—
—
(942)
179
(1,596) $
—
(2,285) $
(1,596) $
Year ended December 31
2018
(1,165) $
1,408
(1,165)
1,408
312
474
(113)
—
264
1,180 $
—
1,180 $
312
474
—
—
263
1,292
—
1,292
2017
Realized gain (loss) on sale of marketable securities
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt (non-cash)
Gain on below market purchase (1)
Transaction costs (2)
Proceeds from Target
Investment properties selling costs
REIT conversion costs
Other
Total per consolidated statement of income
Other gains (losses) and (expenses) under equity accounted joint ventures
Total at the Company's proportionate interest (3)
Consolidated
Statement of
Income
Included in
FFO
Consolidated
Statement of
Income
Included in
FFO
$
$
$
4,232 $
(623)
(726)
13,975
(2,052)
—
(2,556)
(1,540)
23
4,232 $
(623)
(726)
—
—
—
—
(1,540)
23
(1,165) $
3,313
(3,032)
—
—
474
(1,667)
—
171
10,733 $
1,366 $
(1,906) $
(1,259)
(697)
(8)
(1,165)
3,313
(3,032)
—
—
474
—
—
170
(240)
—
9,474 $
669 $
(1,914) $
(240)
2018
2017
Consolidated
Statement of
Income
Included in
FFO
Consolidated
Statement of
Income
Included in
FFO
Realized gain (loss) on sale of marketable securities
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt
Proceeds from Target
Investment properties selling costs
REIT conversion costs
Other
Total per consolidated statement of income
Other gains (losses) and (expenses) under equity accounted joint ventures
Total at the Company's proportionate interest (3)
$
$
$
43 $
(876)
—
—
(660)
(942)
179
(2,256) $
(29)
43 $
(876)
—
—
—
(942)
179
(1,596) $
—
(2,285) $
(1,596) $
Year ended December 31
2018
(1,165) $
1,408
(1,165)
1,408
312
474
(113)
—
264
1,180 $
—
1,180 $
312
474
—
—
263
1,292
—
1,292
2017
Realized gain (loss) on sale of marketable securities
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt (non-cash)
Gain on below market purchase (1)
Transaction costs (2)
Proceeds from Target
Investment properties selling costs
REIT conversion costs
Other
Total per consolidated statement of income
Other gains (losses) and (expenses) under equity accounted joint ventures
Total at the Company's proportionate interest (3)
Consolidated
Statement of
Income
Included in
FFO
Consolidated
Statement of
Income
Included in
FFO
$
$
$
4,232 $
(623)
(726)
13,975
(2,052)
—
(2,556)
(1,540)
23
4,232 $
(623)
(726)
—
—
—
—
(1,540)
23
(1,165) $
3,313
(3,032)
—
—
474
(1,667)
—
171
10,733 $
1,366 $
(1,906) $
(1,259)
(697)
(8)
(1,165)
3,313
(3,032)
—
—
474
—
—
170
(240)
—
9,474 $
669 $
(1,914) $
(240)
(1) Exclude gain on below market purchase of hotel property in FFO in accordance with the recommendations of REALPAC.
(2) Exclude transaction costs incurred as part of hotel property acquisition in FFO in accordance with the recommendations of REALPAC.
(3) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(1) Exclude gain on below market purchase of hotel property in FFO in accordance with the recommendations of REALPAC.
(2) Exclude transaction costs incurred as part of hotel property acquisition in FFO in accordance with the recommendations of REALPAC.
(3) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
37
FIRST CAPITAL REALTY ANNUAL REPORT 2018
37
FIRST CAPITAL REALTY ANNUAL REPORT 2018
For the three months ended December 31, 2018, the Company recognized $2.3 million in other losses and expenses in its
consolidated statement of income compared to $1.2 million in other gains and expenses in 2017. The loss in the quarter
was primarily due to net losses on marketable securities of $0.8 million, REIT conversion costs of $0.9 million, and
investment property selling costs of $0.7 million. For the year ended December 31, 2018, the Company recognized $10.7
million in other gains in its consolidated statement of income compared to $1.9 million in other losses and expenses in
the prior year. The gain for the year ended December 31, 2018 was primarily due to $11.9 million in net gains recognized
on the purchase of the Hazelton Hotel, and net gains on marketable securities of $3.6 million, partially offset by
investment property selling costs of $2.6 million, REIT conversion costs of $1.5 million, and a $0.7 million non-cash loss on
the early redemption of the Series J convertible debentures.
For the three months ended December 31, 2018, the Company recognized $2.3 million in other losses and expenses in its
consolidated statement of income compared to $1.2 million in other gains and expenses in 2017. The loss in the quarter
was primarily due to net losses on marketable securities of $0.8 million, REIT conversion costs of $0.9 million, and
investment property selling costs of $0.7 million. For the year ended December 31, 2018, the Company recognized $10.7
million in other gains in its consolidated statement of income compared to $1.9 million in other losses and expenses in
the prior year. The gain for the year ended December 31, 2018 was primarily due to $11.9 million in net gains recognized
on the purchase of the Hazelton Hotel, and net gains on marketable securities of $3.6 million, partially offset by
investment property selling costs of $2.6 million, REIT conversion costs of $1.5 million, and a $0.7 million non-cash loss on
the early redemption of the Series J convertible debentures.
The other loss of $1.3 million under equity accounted joint ventures for the year ended December 31, 2018 was primarily
due to fees and selling costs related to the sale of the majority of the MMUR portfolio.
The other loss of $1.3 million under equity accounted joint ventures for the year ended December 31, 2018 was primarily
due to fees and selling costs related to the sale of the majority of the MMUR portfolio.
Income Taxes
For the three months and year ended December 31, 2018, deferred income tax expense totaled $16.4 million and
$79.2 million, compared to $17.6 million and $125.1 million respectively, over the same prior year periods. The
decrease in deferred income tax expense of $1.2 million and $46.0 million for the three months and year ended
December 31, 2018, respectively, is primarily a result of lower gains on the fair value of investment properties over the
same prior year periods.
As at December 31, 2018 the Company has approximately $49.9 million of non-capital losses which expire between
2026 and 2038. This balance declined from approximately $111.3 million at December 31, 2017 as the Company
generated higher taxable income primarily as a result of increased dispositions in 2018 ($249 million versus $90 million
of dispositions in 2017).
Net Income Attributable to Common Shareholders
For the three months ended December 31, 2018, net income attributable to common shareholders was $64.3 million
or $0.25 per diluted share compared to $74.8 million or $0.30 per diluted share for the prior year. The $10.5 million
decrease in net income attributable to common shareholders was primarily due to a lower share of profit from joint
ventures of $6.7 million and lower fair value gains of $6.0 million, partially offset by higher NOI of $3.2 million.
For the year ended December 31, 2018, net income attributable to common shareholders was $343.6 million or $1.37 per
diluted share compared to $633.1 million or $2.55 per diluted share for the prior year. The $289.5 million decrease in net
income attributable to common shareholders was primarily due to lower fair value gains net of deferred taxes of $310.0
million and a lower share of profit from joint ventures of $12.4 million, partially offset by higher NOI of $17.3 million, and
higher other gains (losses) and (expenses) of $12.6 million.
CAPITAL STRUCTURE AND LIQUIDITY
Total Capital Employed
The real estate business is capital intensive by nature. The Company’s capital structure is key to financing growth and
providing sustainable cash dividends to shareholders. In the real estate industry, financial leverage is used to enhance rates
of return on invested capital. Management believes that the combination of debt and equity in First Capital Realty’s capital
structure provides stability and reduces risk, while generating an acceptable return on investment, taking into account the
long-term business strategy of the Company.
Income Taxes
For the three months and year ended December 31, 2018, deferred income tax expense totaled $16.4 million and
$79.2 million, compared to $17.6 million and $125.1 million respectively, over the same prior year periods. The
decrease in deferred income tax expense of $1.2 million and $46.0 million for the three months and year ended
December 31, 2018, respectively, is primarily a result of lower gains on the fair value of investment properties over the
same prior year periods.
As at December 31, 2018 the Company has approximately $49.9 million of non-capital losses which expire between
2026 and 2038. This balance declined from approximately $111.3 million at December 31, 2017 as the Company
generated higher taxable income primarily as a result of increased dispositions in 2018 ($249 million versus $90 million
of dispositions in 2017).
Net Income Attributable to Common Shareholders
For the three months ended December 31, 2018, net income attributable to common shareholders was $64.3 million
or $0.25 per diluted share compared to $74.8 million or $0.30 per diluted share for the prior year. The $10.5 million
decrease in net income attributable to common shareholders was primarily due to a lower share of profit from joint
ventures of $6.7 million and lower fair value gains of $6.0 million, partially offset by higher NOI of $3.2 million.
For the year ended December 31, 2018, net income attributable to common shareholders was $343.6 million or $1.37 per
diluted share compared to $633.1 million or $2.55 per diluted share for the prior year. The $289.5 million decrease in net
income attributable to common shareholders was primarily due to lower fair value gains net of deferred taxes of $310.0
million and a lower share of profit from joint ventures of $12.4 million, partially offset by higher NOI of $17.3 million, and
higher other gains (losses) and (expenses) of $12.6 million.
CAPITAL STRUCTURE AND LIQUIDITY
Total Capital Employed
The real estate business is capital intensive by nature. The Company’s capital structure is key to financing growth and
providing sustainable cash dividends to shareholders. In the real estate industry, financial leverage is used to enhance rates
of return on invested capital. Management believes that the combination of debt and equity in First Capital Realty’s capital
structure provides stability and reduces risk, while generating an acceptable return on investment, taking into account the
long-term business strategy of the Company.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
38
FIRST CAPITAL REALTY ANNUAL REPORT 2018
38
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
As at
Liabilities (principal amounts outstanding)
December 31, 2018
December 31, 2017
As at
Liabilities (principal amounts outstanding)
December 31, 2018
December 31, 2017
Bank indebtedness
Mortgages
Credit facilities
Mortgages under equity accounted joint ventures (at the Company's proportionate interest) (1)
Credit facilities under equity accounted joint venture (at the Company's proportionate interest) (1)
Senior unsecured debentures
Convertible debentures
$
7,226
1,287,247
626,172
41,081
24,195
2,450,000
—
$
3,144
1,060,342
581,627
41,987
72,830
2,600,000
55,093
Equity capitalization (2)
Common shares (based on closing per share price of $18.85; December 31, 2017 – $20.72)
Enterprise value (1)
(1)
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
4,803,505
9,239,426
$
5,064,612
9,479,635
$
Bank indebtedness
Mortgages
Credit facilities
Mortgages under equity accounted joint ventures (at the Company's proportionate interest) (1)
Credit facilities under equity accounted joint venture (at the Company's proportionate interest) (1)
Senior unsecured debentures
Convertible debentures
$
7,226
1,287,247
626,172
41,081
24,195
2,450,000
—
$
3,144
1,060,342
581,627
41,987
72,830
2,600,000
55,093
Equity capitalization (2)
Common shares (based on closing per share price of $18.85; December 31, 2017 – $20.72)
Enterprise value (1)
(1)
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
4,803,505
9,239,426
$
5,064,612
9,479,635
$
(2) Equity capitalization is the market value of the Company's shares outstanding at a point in time. The measures is not defined by IFRS, does not have a standard definition and,
(2) Equity capitalization is the market value of the Company's shares outstanding at a point in time. The measures is not defined by IFRS, does not have a standard definition and,
as such, may not be comparable to similar measures disclosed by other issuers.
Key Metrics
The ratios below include measures not specifically defined in IFRS.
as such, may not be comparable to similar measures disclosed by other issuers.
Key Metrics
The ratios below include measures not specifically defined in IFRS.
As at
Weighted average effective interest rate on mortgages and senior unsecured debentures
Weighted average maturity on mortgages and senior unsecured debentures (years)
Net debt to total assets (1)
Net debt to Adjusted EBITDA (1)
Unencumbered aggregate assets (1)
Unencumbered aggregate assets to unsecured debt, based on fair value (1)
Adjusted EBITDA interest coverage (1)
(1) Calculated with joint ventures proportionately consolidated in accordance with the Company's debt covenants. Refer to the "Non-IFRS Financial Measures" section of this
5.5
42.1%
9.6
$ 7,270,358
2.5
2.5
5.4
43.4%
9.7
7,374,086
2.4
2.5
4.2%
4.4%
December 31, 2018
December 31, 2017
$
As at
Weighted average effective interest rate on mortgages and senior unsecured debentures
Weighted average maturity on mortgages and senior unsecured debentures (years)
Net debt to total assets (1)
Net debt to Adjusted EBITDA (1)
Unencumbered aggregate assets (1)
Unencumbered aggregate assets to unsecured debt, based on fair value (1)
Adjusted EBITDA interest coverage (1)
(1) Calculated with joint ventures proportionately consolidated in accordance with the Company's debt covenants. Refer to the "Non-IFRS Financial Measures" section of this
5.5
42.1%
9.6
$ 7,270,358
2.5
2.5
5.4
43.4%
9.7
7,374,086
2.4
2.5
4.2%
4.4%
December 31, 2018
December 31, 2017
$
MD&A.
MD&A.
Measures used in these ratios are defined below:
• Debt consists of principal amounts outstanding on credit facilities and mortgages, and the par value of senior unsecured
Measures used in these ratios are defined below:
• Debt consists of principal amounts outstanding on credit facilities and mortgages, and the par value of senior unsecured
debentures;
debentures;
• Net debt is calculated as Debt, as defined above, reduced by cash balances at the end of the period;
• Net debt is calculated as Debt, as defined above, reduced by cash balances at the end of the period;
• Adjusted EBITDA, is calculated as net income, adding back income tax expense, interest expense and amortization and
excluding the increase or decrease in the fair value of investment properties, other gains (losses) and (expenses) and
other non-cash or non-recurring items. The Company also adjusts for incremental leasing costs which is a recognized
adjustment to FFO, in accordance with the recommendations of REALPAC.
• Unencumbered assets include the value of assets that have not been pledged as security under any credit agreement or
mortgage. The unencumbered asset value ratio is calculated as unencumbered assets divided by the principal amount
of the unsecured debt, which consists of the bank indebtedness, unsecured credit facilities and senior unsecured
debentures.
• Adjusted EBITDA, is calculated as net income, adding back income tax expense, interest expense and amortization and
excluding the increase or decrease in the fair value of investment properties, other gains (losses) and (expenses) and
other non-cash or non-recurring items. The Company also adjusts for incremental leasing costs which is a recognized
adjustment to FFO, in accordance with the recommendations of REALPAC.
• Unencumbered assets include the value of assets that have not been pledged as security under any credit agreement or
mortgage. The unencumbered asset value ratio is calculated as unencumbered assets divided by the principal amount
of the unsecured debt, which consists of the bank indebtedness, unsecured credit facilities and senior unsecured
debentures.
39
FIRST CAPITAL REALTY ANNUAL REPORT 2018
39
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Credit Ratings
Since November 2012, DBRS has rated the Company’s senior unsecured debentures as BBB (high) with a stable trend.
According to DBRS, a credit rating in the BBB category is generally an indication of adequate credit quality and an
acceptable capacity for the payment of financial obligations. DBRS indicates that BBB rated obligations may be vulnerable
to future events. A rating trend, expressed as positive, stable or negative, provides guidance in respect of DBRS’ opinion
regarding the outlook for the rating in question.
Since November 2012, Moody’s has rated the Company’s senior unsecured debentures as Baa2 with a stable outlook. As
defined by Moody’s, a credit rating of Baa2 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 provided by Moody’s,
expressed as positive, stable, negative or developing, is an opinion regarding the outlook for the rating in question over
the medium term.
Outstanding Debt and Principal Maturity Profile
The maturity profile of the Company’s mortgages and credit facilities as well as its senior unsecured debentures as at
December 31, 2018 is summarized in the table below:
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Thereafter
Add (deduct): unamortized deferred financing costs,
premiums and discounts, net
$
Mortgages
120,859 $
90,318
95,582
171,727
22,490
83,607
76,038
163,645
91,807
154,449
7,574
209,151
1,287,247
(1,339)
Credit
Facilities/Bank
Indebtedness
112,099 $
201,517
—
11,068
308,714
—
—
—
—
—
—
—
633,398
—
Senior
Unsecured
Debentures
150,000
175,000
175,000
450,000
300,000
300,000
300,000
300,000
300,000
—
—
—
2,450,000
(2,722)
$
Total
382,958
466,835
270,582
632,795
631,204
383,607
376,038
463,645
391,807
154,449
7,574
209,151
4,370,645
(4,061)
% Due
8.8%
10.7%
6.2%
14.5%
14.4%
8.8%
8.6%
10.6%
9.0%
3.5%
0.2%
4.7%
100.0%
Credit Ratings
Since November 2012, DBRS has rated the Company’s senior unsecured debentures as BBB (high) with a stable trend.
According to DBRS, a credit rating in the BBB category is generally an indication of adequate credit quality and an
acceptable capacity for the payment of financial obligations. DBRS indicates that BBB rated obligations may be vulnerable
to future events. A rating trend, expressed as positive, stable or negative, provides guidance in respect of DBRS’ opinion
regarding the outlook for the rating in question.
Since November 2012, Moody’s has rated the Company’s senior unsecured debentures as Baa2 with a stable outlook. As
defined by Moody’s, a credit rating of Baa2 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 provided by Moody’s,
expressed as positive, stable, negative or developing, is an opinion regarding the outlook for the rating in question over
the medium term.
Outstanding Debt and Principal Maturity Profile
The maturity profile of the Company’s mortgages and credit facilities as well as its senior unsecured debentures as at
December 31, 2018 is summarized in the table below:
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Thereafter
Add (deduct): unamortized deferred financing costs,
premiums and discounts, net
$
Mortgages
120,859 $
90,318
95,582
171,727
22,490
83,607
76,038
163,645
91,807
154,449
7,574
209,151
1,287,247
(1,339)
Credit
Facilities/Bank
Indebtedness
112,099 $
201,517
—
11,068
308,714
—
—
—
—
—
—
—
633,398
—
Senior
Unsecured
Debentures
150,000
175,000
175,000
450,000
300,000
300,000
300,000
300,000
300,000
—
—
—
2,450,000
(2,722)
$
Total
382,958
466,835
270,582
632,795
631,204
383,607
376,038
463,645
391,807
154,449
7,574
209,151
4,370,645
(4,061)
% Due
8.8%
10.7%
6.2%
14.5%
14.4%
8.8%
8.6%
10.6%
9.0%
3.5%
0.2%
4.7%
100.0%
Total
$ 1,285,908 $
633,398 $ 2,447,278
$ 4,366,584
Total
$ 1,285,908 $
633,398 $ 2,447,278
$ 4,366,584
The Company’s strategy is to manage its long-term debt by staggering maturity dates in order to mitigate risk associated
with short-term volatility in the debt markets. The Company also intends to maintain financial flexibility to support a
reasonable cost of debt and equity capital over the long term.
The Company’s strategy is to manage its long-term debt by staggering maturity dates in order to mitigate risk associated
with short-term volatility in the debt markets. The Company also intends to maintain financial flexibility to support a
reasonable cost of debt and equity capital over the long term.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
40
FIRST CAPITAL REALTY ANNUAL REPORT 2018
40
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Mortgages
Mortgages
The changes in the Company’s mortgages during the year ended December 31, 2018 are set out below:
The changes in the Company’s mortgages during the year ended December 31, 2018 are set out below:
Year ended December 31, 2018
Balance at beginning of period
Mortgage borrowings
Mortgage repayments
Scheduled amortization on mortgages
Amortization of financing costs and net premium
Balance at end of period
Amount
1,060,339
388,908
(134,902)
(27,108)
(1,329)
1,285,908
$
$
Weighted Average
Effective Interest Rate
4.3%
3.7%
5.6%
—%
—%
4.0%
Year ended December 31, 2018
Balance at beginning of period
Mortgage borrowings
Mortgage repayments
Scheduled amortization on mortgages
Amortization of financing costs and net premium
Balance at end of period
Amount
1,060,339
388,908
(134,902)
(27,108)
(1,329)
1,285,908
$
$
Weighted Average
Effective Interest Rate
4.3%
3.7%
5.6%
—%
—%
4.0%
As at December 31, 2018, 100% (December 31, 2017 – 100%) of the outstanding mortgages bore interest at fixed interest
rates. The average remaining term of mortgages outstanding increased from 4.7 years as at December 31, 2017 on $1.1
billion of mortgages to 6.2 years as at December 31, 2018 on $1.3 billion of mortgages after reflecting borrowing activity
and repayments during the period.
As at December 31, 2018, 100% (December 31, 2017 – 100%) of the outstanding mortgages bore interest at fixed interest
rates. The average remaining term of mortgages outstanding increased from 4.7 years as at December 31, 2017 on $1.1
billion of mortgages to 6.2 years as at December 31, 2018 on $1.3 billion of mortgages after reflecting borrowing activity
and repayments during the period.
Mortgage Maturity Profile
Mortgage Maturity Profile
The maturity profile of the Company’s mortgages as at December 31, 2018 is summarized in the table below:
The maturity profile of the Company’s mortgages as at December 31, 2018 is summarized in the table below:
As at December 31, 2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Thereafter
Add: unamortized deferred financing costs and premiums and
discounts, net
Total
Scheduled
Amortization
24,628
22,425
22,185
23,773
22,490
22,337
20,143
15,587
11,943
8,726
7,574
7,741
209,552
$
$
Payments on
Maturity
$
96,231
67,893
73,397
147,954
—
61,270
55,895
148,058
79,864
145,723
—
201,410
$ 1,077,695
Weighted
Average
Effective
Interest Rate
6.5%
4.4%
4.6%
3.9%
N/A
4.0%
3.5%
3.2%
3.6%
3.8%
N/A
3.6%
4.0%
$
Total
120,859
90,318
95,582
171,727
22,490
83,607
76,038
163,645
91,807
154,449
7,574
209,151
$ 1,287,247
(1,339)
$ 1,285,908
As at December 31, 2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Thereafter
Add: unamortized deferred financing costs and premiums and
discounts, net
Total
Scheduled
Amortization
24,628
22,425
22,185
23,773
22,490
22,337
20,143
15,587
11,943
8,726
7,574
7,741
209,552
$
$
Payments on
Maturity
$
96,231
67,893
73,397
147,954
—
61,270
55,895
148,058
79,864
145,723
—
201,410
$ 1,077,695
Weighted
Average
Effective
Interest Rate
6.5%
4.4%
4.6%
3.9%
N/A
4.0%
3.5%
3.2%
3.6%
3.8%
N/A
3.6%
4.0%
$
Total
120,859
90,318
95,582
171,727
22,490
83,607
76,038
163,645
91,807
154,449
7,574
209,151
$ 1,287,247
(1,339)
$ 1,285,908
Credit Facilities
The credit facilities provide liquidity primarily for financing acquisitions, development and redevelopment activities and
for general corporate purposes.
The Company has the flexibility under its unsecured credit facilities to draw funds based on Canadian bank prime rates and
Canadian bankers’ acceptances (“BA rates”) for Canadian dollar-denominated borrowings, and LIBOR rates or U.S. prime
rates for U.S. dollar-denominated borrowings. As of December 31, 2018, the Company had drawn US$368.7 million, as well
as CAD$7.2 million in bank indebtedness on its unsecured credit facilities. Concurrently with the U.S. dollar draws, the
Company entered into cross currency swaps to exchange its U.S. dollar borrowings into Canadian dollar borrowings.
Credit Facilities
The credit facilities provide liquidity primarily for financing acquisitions, development and redevelopment activities and
for general corporate purposes.
The Company has the flexibility under its unsecured credit facilities to draw funds based on Canadian bank prime rates and
Canadian bankers’ acceptances (“BA rates”) for Canadian dollar-denominated borrowings, and LIBOR rates or U.S. prime
rates for U.S. dollar-denominated borrowings. As of December 31, 2018, the Company had drawn US$368.7 million, as well
as CAD$7.2 million in bank indebtedness on its unsecured credit facilities. Concurrently with the U.S. dollar draws, the
Company entered into cross currency swaps to exchange its U.S. dollar borrowings into Canadian dollar borrowings.
41
FIRST CAPITAL REALTY ANNUAL REPORT 2018
41
FIRST CAPITAL REALTY ANNUAL REPORT 2018
During the first quarter of 2018, the Company entered into a new borrowing tranche under an existing credit facility with
a borrowing capacity of CAD$50 million, key terms of which are presented in the table below. The Company also extended
the maturity of its $15.9 million secured facility to March 31, 2019 on substantially the same terms.
During the first quarter of 2018, the Company entered into a new borrowing tranche under an existing credit facility with
a borrowing capacity of CAD$50 million, key terms of which are presented in the table below. The Company also extended
the maturity of its $15.9 million secured facility to March 31, 2019 on substantially the same terms.
During the second quarter of 2018, the Company extended the maturities of its $800 million unsecured facility and $7.5
million secured facility to, June 30, 2023 and April 30, 2019, respectively.
During the second quarter of 2018, the Company extended the maturities of its $800 million unsecured facility and $7.5
million secured facility to, June 30, 2023 and April 30, 2019, respectively.
In the third quarter of 2018, the Company entered into two new secured credit facilities with a borrowing capacity of CAD
$20.7 million and CAD$4.3 million, respectively, key terms of which are presented in the table below. The Company also
extended the maturity of its $7.5 million secured facility to October 30, 2019.
In the fourth quarter of 2018, the Company entered into one new secured facility with a borrowing capacity of CAD$6.8
million, key terms of which are presented in the table below. The Company also extended the maturity of its $115 million
secured construction facility to August 13, 2019.
In the third quarter of 2018, the Company entered into two new secured credit facilities with a borrowing capacity of CAD
$20.7 million and CAD$4.3 million, respectively, key terms of which are presented in the table below. The Company also
extended the maturity of its $7.5 million secured facility to October 30, 2019.
In the fourth quarter of 2018, the Company entered into one new secured facility with a borrowing capacity of CAD$6.8
million, key terms of which are presented in the table below. The Company also extended the maturity of its $115 million
secured construction facility to August 13, 2019.
The Company’s credit facilities, including its proportionate share of facilities under the equity accounted joint ventures, as
at December 31, 2018 are summarized in the table below:
The Company’s credit facilities, including its proportionate share of facilities under the equity accounted joint ventures, as
at December 31, 2018 are summarized in the table below:
As at December 31, 2018
Unsecured operating facilities
Revolving facility maturing
2023 (1)
Non-revolving facility
maturing 2020 (2)
Additional
Tranche (3)
Secured construction facilities
Maturing 2019
Maturing 2019
Credit facilities under equity
accounted joint ventures
Secured Facilities
Maturing 2019
Maturing 2019
Maturing 2019
Maturing 2022
Maturing 2022
Borrowing
Capacity
Amounts
Drawn
Bank
Indebtedness
and Outstanding
Letters of Credit
Available to be
Drawn
$
800,000 $
(301,488) $
(23,843) $
474,669
150,000
(150,519)
(17,560)
50,000
(50,998)
—
—
—
115,000
(74,452)
(668)
39,880
15,907
(15,572)
24,470
(24,195)
—
—
335
275
20,734
(2,700)
(793)
17,241
11,875
(11,875)
7,500
4,313
6,755
(7,500)
(4,313)
(6,755)
—
—
—
—
—
—
—
Interest Rates
Maturity Date
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.10% or
Prime + 0.10% or
US$ LIBOR + 1.10%
June 30, 2023
October 31, 2020
October 31, 2020
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
Between
Prime - 0.15% and
BA + 2.5%
August 13, 2019
March 31, 2019
Between March
2019 and January
2020
As at December 31, 2018
Unsecured operating facilities
Revolving facility maturing
2023 (1)
Non-revolving facility
maturing 2020 (2)
Additional
Tranche (3)
Secured construction facilities
Maturing 2019
Maturing 2019
Credit facilities under equity
accounted joint ventures
Secured Facilities
Maturing 2019
December 31, 2019
September 27, 2019
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
September 28, 2022
December 19, 2022
October 30, 2019
Maturing 2019
Maturing 2019
Maturing 2022
Maturing 2022
Borrowing
Capacity
Amounts
Drawn
Bank
Indebtedness
and Outstanding
Letters of Credit
Available to be
Drawn
$
800,000 $
(301,488) $
(23,843) $
474,669
150,000
(150,519)
(17,560)
50,000
(50,998)
—
—
—
115,000
(74,452)
(668)
39,880
15,907
(15,572)
24,470
(24,195)
—
—
335
275
20,734
(2,700)
(793)
17,241
11,875
(11,875)
7,500
4,313
6,755
(7,500)
(4,313)
(6,755)
—
—
—
—
—
—
—
Interest Rates
Maturity Date
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.10% or
Prime + 0.10% or
US$ LIBOR + 1.10%
June 30, 2023
October 31, 2020
October 31, 2020
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
Between
Prime - 0.15% and
BA + 2.5%
August 13, 2019
March 31, 2019
Between March
2019 and January
2020
December 31, 2019
September 27, 2019
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
September 28, 2022
December 19, 2022
October 30, 2019
Total
$
1,206,554 $
(650,367) $
(42,864) $
532,400
Total
$
1,206,554 $
(650,367) $
(42,864) $
532,400
(1) The Company had drawn in U.S. dollars the equivalent of CAD$294.8 million which was revalued at CAD$301.5 million as at December 31, 2018.
(2) The Company had drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$150.5 million as at December 31, 2018. Maximum borrowing
capacity for the letters of credit is CAD$35.0 million of which $17.6 million has been drawn as at December 31, 2018.
(3) The Company had drawn in U.S. dollars the equivalent of CAD$50.0 million which was revalued at CAD$51.0 million as at December 31, 2018.
(1) The Company had drawn in U.S. dollars the equivalent of CAD$294.8 million which was revalued at CAD$301.5 million as at December 31, 2018.
(2) The Company had drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$150.5 million as at December 31, 2018. Maximum borrowing
capacity for the letters of credit is CAD$35.0 million of which $17.6 million has been drawn as at December 31, 2018.
(3) The Company had drawn in U.S. dollars the equivalent of CAD$50.0 million which was revalued at CAD$51.0 million as at December 31, 2018.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
42
FIRST CAPITAL REALTY ANNUAL REPORT 2018
42
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Senior Unsecured Debentures
As at December 31, 2018
Series Maturity Date
July 30, 2019
April 30, 2020
March 1, 2021
January 31, 2022
December 5, 2022
October 30, 2023
August 30, 2024
July 31, 2025
May 6, 2026
July 12, 2027
Weighted Average or Total
L
M
N
O
P
Q
R
S
T
U
Convertible Debentures
(i)
Interest
Interest Payment Dates
January 30, July 30
April 30, October 30
March 1, September 1
January 31, July 31
June 5, December 5
April 30, October 30
August 30, February 28
January 31, July 31
November 6, May 6
January 12, July 12
Interest Rate
Coupon
5.48%
5.60%
4.50%
4.43%
3.95%
3.90%
4.79%
4.32%
3.60%
3.75%
4.32%
Effective
5.61%
5.60%
4.63%
4.59%
4.18%
3.97%
4.72%
4.24%
3.56%
3.82%
4.36%
Remaining
Term to
Maturity
(years)
0.6
1.3
2.2
3.1
3.9
4.8
5.7
6.6
7.4
8.5
5.0
Principal
Outstanding
150,000
175,000
175,000
200,000
250,000
300,000
300,000
300,000
300,000
300,000
2,450,000
$
Senior Unsecured Debentures
As at December 31, 2018
Series Maturity Date
July 30, 2019
April 30, 2020
March 1, 2021
January 31, 2022
December 5, 2022
October 30, 2023
August 30, 2024
July 31, 2025
May 6, 2026
July 12, 2027
Weighted Average or Total
L
M
N
O
P
Q
R
S
T
U
Convertible Debentures
(i)
Interest
Interest Payment Dates
January 30, July 30
April 30, October 30
March 1, September 1
January 31, July 31
June 5, December 5
April 30, October 30
August 30, February 28
January 31, July 31
November 6, May 6
January 12, July 12
Interest Rate
Coupon
5.48%
5.60%
4.50%
4.43%
3.95%
3.90%
4.79%
4.32%
3.60%
3.75%
4.32%
Effective
5.61%
5.60%
4.63%
4.59%
4.18%
3.97%
4.72%
4.24%
3.56%
3.82%
4.36%
Remaining
Term to
Maturity
(years)
0.6
1.3
2.2
3.1
3.9
4.8
5.7
6.6
7.4
8.5
5.0
Principal
Outstanding
150,000
175,000
175,000
200,000
250,000
300,000
300,000
300,000
300,000
300,000
2,450,000
$
During the year ended December 31, 2018, no common shares (year ended December 31, 2017 – 0.1 million common
shares) were issued to pay accrued interest to holders of the convertible debentures (year ended December 31, 2017 –
$2.4 million).
During the year ended December 31, 2018, no common shares (year ended December 31, 2017 – 0.1 million common
shares) were issued to pay accrued interest to holders of the convertible debentures (year ended December 31, 2017 –
$2.4 million).
During the year ended December 31, 2018, the Company paid $1.0 million (year ended December 31, 2017 – $3.9 million)
in cash to pay accrued interest to holders of convertible debentures.
During the year ended December 31, 2018, the Company paid $1.0 million (year ended December 31, 2017 – $3.9 million)
in cash to pay accrued interest to holders of convertible debentures.
(ii) Principal Redemption
(ii) Principal Redemption
On February 28, 2018, the Company redeemed its remaining 4.45% Series J convertible debentures for $55.1 million, at
par. The full redemption price and any accrued interest owing on the convertible debentures was satisfied in cash. The
Company no longer has any convertible debentures outstanding.
On February 28, 2018, the Company redeemed its remaining 4.45% Series J convertible debentures for $55.1 million, at
par. The full redemption price and any accrued interest owing on the convertible debentures was satisfied in cash. The
Company no longer has any convertible debentures outstanding.
Shareholders’ Equity
Shareholders’ equity amounted to $5.0 billion as at December 31, 2018, compared to $4.6 billion as at December 31, 2017.
During the year ended December 31, 2018, a total of 10.4 million common shares were issued as follows:
9.8 million shares from a public offering and 0.6 million shares from the exercise of common share options and settlement
of restricted, and deferred share units.
Shareholders’ Equity
Shareholders’ equity amounted to $5.0 billion as at December 31, 2018, compared to $4.6 billion as at December 31, 2017.
During the year ended December 31, 2018, a total of 10.4 million common shares were issued as follows:
9.8 million shares from a public offering and 0.6 million shares from the exercise of common share options and settlement
of restricted, and deferred share units.
As at February 11, 2019, there were 254.9 million common shares outstanding.
As at February 11, 2019, there were 254.9 million common shares outstanding.
Share Purchase Options
Share Purchase Options
As at December 31, 2018, the Company had 4.7 million share purchase options outstanding, with an average exercise
price of $19.27, which, if exercised, would result in the Company receiving proceeds of $91.3 million.
As at December 31, 2018, the Company had 4.7 million share purchase options outstanding, with an average exercise
price of $19.27, which, if exercised, would result in the Company receiving proceeds of $91.3 million.
43
FIRST CAPITAL REALTY ANNUAL REPORT 2018
43
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Liquidity
Liquidity
Liquidity risk exists due to the possibility of the Company not being able to generate sufficient cash flow, and/or not
having access to sufficient debt and equity capital to fund its ongoing operations and growth and to refinance or meet
existing payment obligations. The Company manages its liquidity risk by staggering debt maturities, renegotiating expiring
credit arrangements proactively, using revolving credit facilities, maintaining a large pool of unencumbered assets, and
issuing equity when deemed appropriate.
Sources of liquidity primarily consist of cash flow from operations, cash and cash equivalents, and available capacity under
the Company’s existing revolving credit facilities. If necessary, the Company is also able to obtain financing on its
unencumbered assets. The following table summarizes the Company's liquidity position:
Liquidity risk exists due to the possibility of the Company not being able to generate sufficient cash flow, and/or not
having access to sufficient debt and equity capital to fund its ongoing operations and growth and to refinance or meet
existing payment obligations. The Company manages its liquidity risk by staggering debt maturities, renegotiating expiring
credit arrangements proactively, using revolving credit facilities, maintaining a large pool of unencumbered assets, and
issuing equity when deemed appropriate.
Sources of liquidity primarily consist of cash flow from operations, cash and cash equivalents, and available capacity under
the Company’s existing revolving credit facilities. If necessary, the Company is also able to obtain financing on its
unencumbered assets. The following table summarizes the Company's liquidity position:
As at (millions of dollars)
Total available under credit facilities
Cash and cash equivalents
Unencumbered aggregate assets
December 31, 2018
December 31, 2017
$
$
$
532
16
7,270
$
$
$
504
12
7,374
As at (millions of dollars)
Total available under credit facilities
Cash and cash equivalents
Unencumbered aggregate assets
December 31, 2018
December 31, 2017
$
$
$
532
16
7,270
$
$
$
504
12
7,374
The Company has historically used mortgages, credit facilities, senior unsecured debentures, convertible debentures and
equity issuances to finance its growth and repay debt. 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
view of the appropriate leverage for the business. Management believes that it has sufficient resources to meet its
operational and investing requirements in the near and longer term based on the availability of capital.
Planned and completed financings subsequent to December 31, 2018, and availability on existing credit facilities, address
substantially all of the contractual 2019 debt maturities and contractually committed costs to complete current
development projects.
Cash Flows
Cash flow from operating activities represents the Company's primary source of liquidity for servicing debt and funding
planned revenue sustaining expenditures, corporate expenses and dividends to shareholders. Interest and other income
and cash on hand are other sources of liquidity.
Cash provided by operating activities
Cash provided by financing activities
Cash used in investing activities
Net change in cash and cash equivalents
Three months ended December 31
2017
2018
Year ended December 31
2018
2017
$
$
114,128
43,433
(157,558)
3
$
$
107,364
$
(11,856)
(101,460)
283,012
39,330
(318,315)
(5,952)
$
4,027
$
$
270,159
55,495
(326,364)
(710)
The Company has historically used mortgages, credit facilities, senior unsecured debentures, convertible debentures and
equity issuances to finance its growth and repay debt. 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
view of the appropriate leverage for the business. Management believes that it has sufficient resources to meet its
operational and investing requirements in the near and longer term based on the availability of capital.
Planned and completed financings subsequent to December 31, 2018, and availability on existing credit facilities, address
substantially all of the contractual 2019 debt maturities and contractually committed costs to complete current
development projects.
Cash Flows
Cash flow from operating activities represents the Company's primary source of liquidity for servicing debt and funding
planned revenue sustaining expenditures, corporate expenses and dividends to shareholders. Interest and other income
and cash on hand are other sources of liquidity.
Cash provided by operating activities
Cash provided by financing activities
Cash used in investing activities
Net change in cash and cash equivalents
Three months ended December 31
2017
2018
Year ended December 31
2018
2017
$
$
114,128
43,433
(157,558)
3
$
$
107,364
$
(11,856)
(101,460)
283,012
39,330
(318,315)
(5,952)
$
4,027
$
$
270,159
55,495
(326,364)
(710)
The following table presents the excess (shortfall) of cash provided by operating activities over dividends declared:
The following table presents the excess (shortfall) of cash provided by operating activities over dividends declared:
Cash provided by operating activities
Dividends declared
Excess (shortfall) of cash provided by operating
activities over dividends declared
Three months ended December 31
2017
2018
Year ended December 31
2018
2017
$
114,128
$
107,364
$
283,012
$
270,159
(54,973)
(52,700)
(215,537)
(210,433)
59,155
54,664
67,475
59,726
Cash provided by operating activities
Dividends declared
Excess (shortfall) of cash provided by operating
activities over dividends declared
Three months ended December 31
2017
2018
Year ended December 31
2018
2017
$
114,128
$
107,364
$
283,012
$
270,159
(54,973)
(52,700)
(215,537)
(210,433)
59,155
54,664
67,475
59,726
Cash provided by operating activities exceeded dividends declared for the three months and years ended December 31,
2018 and 2017.
Cash provided by operating activities exceeded dividends declared for the three months and years ended December 31,
2018 and 2017.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
44
FIRST CAPITAL REALTY ANNUAL REPORT 2018
44
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Contractual Obligations
An analysis of the Company’s contractual maturities of its material financial liabilities and other contractual commitments,
as at December 31, 2018 is set out below:
Contractual Obligations
An analysis of the Company’s contractual maturities of its material financial liabilities and other contractual commitments,
as at December 31, 2018 is set out below:
As at December 31, 2018
Scheduled mortgage principal amortization
Mortgage principal repayments on maturity
Credit facilities and bank indebtedness
Senior unsecured debentures
Interest obligations (1)
Land leases (expiring between 2023 and 2061)
Contractually committed costs to complete current
development projects
$
2019
24,628 $
96,231
112,099
150,000
166,685
1,250
39,245
Payments due by period
2022 to 2023
2020 to 2021
Thereafter
Total
44,610 $
46,263 $
94,051 $
141,290
201,517
350,000
276,648
2,239
15,294
147,954
319,782
750,000
209,154
1,912
—
692,220
—
1,200,000
202,315
18,180
—
209,552
1,077,695
633,398
2,450,000
854,802
23,581
54,539
As at December 31, 2018
Scheduled mortgage principal amortization
Mortgage principal repayments on maturity
Credit facilities and bank indebtedness
Senior unsecured debentures
Interest obligations (1)
Land leases (expiring between 2023 and 2061)
Contractually committed costs to complete current
development projects
$
2019
24,628 $
96,231
112,099
150,000
166,685
1,250
39,245
Payments due by period
2022 to 2023
2020 to 2021
Thereafter
Total
44,610 $
46,263 $
94,051 $
141,290
201,517
350,000
276,648
2,239
15,294
147,954
319,782
750,000
209,154
1,912
—
692,220
—
1,200,000
202,315
18,180
—
209,552
1,077,695
633,398
2,450,000
854,802
23,581
54,539
Other committed costs
Total contractual obligations
(1) Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2018 (assuming balances remain outstanding through to
82,955
673,093 $ 1,031,598 $ 1,475,065 $ 2,206,766 $ 5,386,522
82,955
—
—
—
$
Other committed costs
Total contractual obligations
(1) Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2018 (assuming balances remain outstanding through to
82,955
673,093 $ 1,031,598 $ 1,475,065 $ 2,206,766 $ 5,386,522
82,955
—
—
—
$
maturity) and senior unsecured debentures, as well as standby credit facility fees.
maturity) and senior unsecured debentures, as well as standby credit facility fees.
The Company has $35.7 million of outstanding letters of credit issued by financial institutions to support certain of the
Company’s contractual obligations and $7.2 million of bank overdrafts.
The Company has $35.7 million of outstanding letters of credit issued by financial institutions to support certain of the
Company’s contractual obligations and $7.2 million of bank overdrafts.
The Company’s estimated cost to complete properties currently under development is $122.3 million, of which $54.5 million
is contractually committed. The balance of the costs to complete will only be committed once leases are signed and/or
construction is underway. These contractual and potential obligations primarily consist of construction contracts and
additional planned development expenditures and are expected to be funded in the normal course as the work is
completed.
The Company’s estimated cost to complete properties currently under development is $122.3 million, of which $54.5 million
is contractually committed. The balance of the costs to complete will only be committed once leases are signed and/or
construction is underway. These contractual and potential obligations primarily consist of construction contracts and
additional planned development expenditures and are expected to be funded in the normal course as the work is
completed.
Contingencies
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 contingencies, individually or in the aggregate, would result in a liability that
would have a material adverse effect on the financial position of the Company. The Company is contingently liable, jointly
and severally, for approximately $152.2 million (December 31, 2017 – $119.1 million) to various lenders in connection
with certain obligations, including loans advanced to its partners secured by the partners’ interest in the entity and
underlying assets.
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 contingencies, individually or in the aggregate, would result in a liability that
would have a material adverse effect on the financial position of the Company. The Company is contingently liable, jointly
and severally, for approximately $152.2 million (December 31, 2017 – $119.1 million) to various lenders in connection
with certain obligations, including loans advanced to its partners secured by the partners’ interest in the entity and
underlying assets.
45
FIRST CAPITAL REALTY ANNUAL REPORT 2018
45
FIRST CAPITAL REALTY ANNUAL REPORT 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Reconciliation of Consolidated Statements of Income to the Company’s Proportionate Interest
The following table provides a reconciliation of the Company's consolidated statements of income for the three months
ended December 31, 2018, to its proportionate interest.
Reconciliation of Consolidated Statements of Income to the Company’s Proportionate Interest
The following table provides a reconciliation of the Company's consolidated statements of income for the three months
ended December 31, 2018, to its proportionate interest.
Three months ended December 31
2018
2017
Three months ended December 31
2018
2017
Property rental revenue
Property operating costs
Net operating income
Other income and expenses
Interest and other income
Interest expense
Corporate expenses
Abandoned transaction costs
Amortization expense
Share of profit from joint ventures
Other gains (losses) and (expenses)
Increase (decrease) in value of investment
properties, net
Income before income taxes
Deferred income taxes
Net income
Net income attributable to:
Common shareholders
Non-controlling interest
Consolidated
Statements of
Income
Adjustment to
proportionate
interest
Proportionate
interest (1)
Consolidated
Statements of
Income
Adjustment to
proportionate
interest
Proportionate
interest (1)
$
184,590 $
70,075
114,515
2,089 $ 186,679 $
550
1,539
70,625
116,054
177,206 $
65,869
111,337
2,360 $
721
1,639
179,566
66,590
112,976
6,150
(39,154)
(8,912)
(53)
(1,020)
268
(2,256)
10,972
(34,005)
80,510
16,394
11
(515)
292
—
—
(268)
(29)
(840)
6,161
(39,669)
(8,620)
(53)
(1,020)
—
(2,285)
10,132
7,586
(39,851)
(9,287)
(42)
(503)
6,966
1,180
17,010
(1,349)
(35,354)
(16,941)
190
—
80,700
16,394
94,396
17,627
(33)
(669)
141
1
—
(6,966)
—
3,951
(3,575)
(1,936)
—
64,116 $
190 $
64,306 $
76,769 $
(1,936) $
7,553
(40,520)
(9,146)
(41)
(503)
—
1,180
20,961
(20,516)
92,460
17,627
74,833
64,306 $
(190)
64,116 $
— $
190
190 $
64,306 $
—
64,306 $
74,833 $
1,936
76,769 $
— $
(1,936)
(1,936) $
74,833
—
74,833
$
$
$
Property rental revenue
Property operating costs
Net operating income
Other income and expenses
Interest and other income
Interest expense
Corporate expenses
Abandoned transaction costs
Amortization expense
Share of profit from joint ventures
Other gains (losses) and (expenses)
Increase (decrease) in value of investment
properties, net
Income before income taxes
Deferred income taxes
Net income
Net income attributable to:
Common shareholders
Non-controlling interest
Consolidated
Statements of
Income
Adjustment to
proportionate
interest
Proportionate
interest (1)
Consolidated
Statements of
Income
Adjustment to
proportionate
interest
Proportionate
interest (1)
$
184,590 $
70,075
114,515
2,089 $ 186,679 $
550
1,539
70,625
116,054
177,206 $
65,869
111,337
2,360 $
721
1,639
179,566
66,590
112,976
6,150
(39,154)
(8,912)
(53)
(1,020)
268
(2,256)
10,972
(34,005)
80,510
16,394
11
(515)
292
—
—
(268)
(29)
(840)
6,161
(39,669)
(8,620)
(53)
(1,020)
—
(2,285)
10,132
7,586
(39,851)
(9,287)
(42)
(503)
6,966
1,180
17,010
(1,349)
(35,354)
(16,941)
190
—
80,700
16,394
94,396
17,627
(33)
(669)
141
1
—
(6,966)
—
3,951
(3,575)
(1,936)
—
64,116 $
190 $
64,306 $
76,769 $
(1,936) $
7,553
(40,520)
(9,146)
(41)
(503)
—
1,180
20,961
(20,516)
92,460
17,627
74,833
64,306 $
(190)
64,116 $
— $
190
190 $
64,306 $
—
64,306 $
74,833 $
1,936
76,769 $
— $
(1,936)
(1,936) $
74,833
—
74,833
$
$
$
Net income per share attributable to common shareholders:
0.25
0.25
Basic
Diluted
$
$
$
$
0.31
0.30
Net income per share attributable to common shareholders:
0.25
0.25
Basic
Diluted
$
$
$
$
0.31
0.30
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
47
FIRST CAPITAL REALTY ANNUAL REPORT 2018
47
FIRST CAPITAL REALTY ANNUAL REPORT 2018
The following table provides a reconciliation of the Company's consolidated statements of income, as presented in its
audited annual consolidated financial statements, to its proportionate interest.
The following table provides a reconciliation of the Company's consolidated statements of income, as presented in its
audited annual consolidated financial statements, to its proportionate interest.
Year ended December 31
2018
2017
Year ended December 31
Property rental revenue
Property operating costs
Net operating income
Other income and expenses
Interest and other income
Interest expense
Corporate expenses
Abandoned transaction costs
Amortization expense
Share of profit from joint ventures
Other gains (losses) and (expenses)
Increase (decrease) in value of investment
properties, net
Income before income taxes
Deferred income taxes
Net income
Net income attributable to:
Common shareholders
Non-controlling interest
Consolidated
Statements of
Income
Adjustment for
proportionate
interest
Proportionate
interest (1)
Consolidated
Statements of
Income
Adjustment for
proportionate
interest
Proportionate
interest (1)
$
729,595 $
274,822
454,773
8,312 $
2,752
5,560
737,907 $
277,574
460,333
694,459 $
256,949
437,510
9,101 $
3,193
5,908
703,560
260,142
443,418
26,429
(153,240)
(37,094)
(177)
(3,235)
30,411
10,733
102,389
(23,784)
430,989
79,151
351,838 $
343,606 $
8,232
351,838 $
$
$
$
1,930
(2,209)
1,171
(1)
—
(30,411)
(1,259)
16,985
28,359
(155,449)
(35,923)
(178)
(3,235)
—
9,474
119,374
28,401
(157,411)
(36,442)
(151)
(1,963)
42,860
(1,906)
458,363
449
(2,466)
990
(10)
—
(42,860)
(8)
26,940
28,850
(159,877)
(35,452)
(161)
(1,963)
—
(1,914)
485,303
(13,794)
(8,234)
(2)
(8,232) $
(37,578)
422,755
79,149
343,606 $
331,751
769,261
125,101
644,160 $
(16,965)
(11,057)
14
(11,071) $
314,786
758,204
125,115
633,089
— $
343,606 $
(8,232)
(8,232) $
—
343,606 $
633,089 $
11,071
644,160 $
— $
(11,071)
(11,071) $
633,089
—
633,089
Property rental revenue
Property operating costs
Net operating income
Other income and expenses
Interest and other income
Interest expense
Corporate expenses
Abandoned transaction costs
Amortization expense
Share of profit from joint ventures
Other gains (losses) and (expenses)
Increase (decrease) in value of investment
properties, net
Income before income taxes
Deferred income taxes
Net income
Net income attributable to:
Common shareholders
Non-controlling interest
2018
2017
Consolidated
Statements of
Income
Adjustment for
proportionate
interest
Proportionate
interest (1)
Consolidated
Statements of
Income
Adjustment for
proportionate
interest
Proportionate
interest (1)
$
729,595 $
274,822
454,773
8,312 $
2,752
5,560
737,907 $
277,574
460,333
694,459 $
256,949
437,510
9,101 $
3,193
5,908
703,560
260,142
443,418
26,429
(153,240)
(37,094)
(177)
(3,235)
30,411
10,733
102,389
(23,784)
430,989
79,151
351,838 $
343,606 $
8,232
351,838 $
$
$
$
1,930
(2,209)
1,171
(1)
—
(30,411)
(1,259)
16,985
28,359
(155,449)
(35,923)
(178)
(3,235)
—
9,474
119,374
28,401
(157,411)
(36,442)
(151)
(1,963)
42,860
(1,906)
458,363
449
(2,466)
990
(10)
—
(42,860)
(8)
26,940
28,850
(159,877)
(35,452)
(161)
(1,963)
—
(1,914)
485,303
(13,794)
(8,234)
(2)
(8,232) $
(37,578)
422,755
79,149
343,606 $
331,751
769,261
125,101
644,160 $
(16,965)
(11,057)
14
(11,071) $
314,786
758,204
125,115
633,089
— $
343,606 $
(8,232)
(8,232) $
—
343,606 $
633,089 $
11,071
644,160 $
— $
(11,071)
(11,071) $
633,089
—
633,089
Net income per share attributable to common shareholders:
1.38
1.37
Basic
Diluted
$
$
$
$
2.59
2.55
Net income per share attributable to common shareholders:
1.38
1.37
Basic
Diluted
$
$
$
$
2.59
2.55
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
48
FIRST CAPITAL REALTY ANNUAL REPORT 2018
48
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
FFO and ACFO
Funds from Operations
A reconciliation from net income attributable to common shareholders to FFO can be found in the table below:
Net income attributable to common shareholders
Add (deduct):
(Increase) decrease in value of investment properties (1)
Adjustment for equity accounted joint ventures (2)
Incremental leasing costs (3)
Amortization expense (4)
Gain on below market purchase (5)
Transaction costs (6)
Investment properties selling costs (1)
Deferred income taxes (1)
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
$
64,306
$
74,833
$
343,606
$
633,089
(10,132)
346
1,616
161
—
—
689
16,394
(20,961)
525
1,049
—
—
—
112
17,627
(119,374)
1,544
6,438
413
(13,975)
2,052
3,118
79,149
(485,303)
3,146
6,389
—
—
—
1,674
125,115
FFO and ACFO
Funds from Operations
A reconciliation from net income attributable to common shareholders to FFO can be found in the table below:
Net income attributable to common shareholders
Add (deduct):
(Increase) decrease in value of investment properties (1)
Adjustment for equity accounted joint ventures (2)
Incremental leasing costs (3)
Amortization expense (4)
Gain on below market purchase (5)
Transaction costs (6)
Investment properties selling costs (1)
Deferred income taxes (1)
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
$
64,306
$
74,833
$
343,606
$
633,089
(10,132)
346
1,616
161
—
—
689
16,394
(20,961)
525
1,049
—
—
—
112
17,627
(119,374)
1,544
6,438
413
(13,975)
2,052
3,118
79,149
(485,303)
3,146
6,389
—
—
—
1,674
125,115
FFO (7)
$
73,380
$
73,185
$
302,971
$
284,110
FFO (7)
$
73,380
$
73,185
$
302,971
$
284,110
(1) At the Company's proportionate interest.
(2) Adjustment to capitalize interest related to the Company's equity accounted joint ventures in accordance with the recommendations of REALPAC.
(3) Adjustment to capitalize incremental leasing costs in accordance with the recommendations of REALPAC.
(4) Adjustment to exclude hotel property amortization in accordance with the recommendations of REALPAC.
(5) Adjustment to exclude gain on below market purchase of hotel property in accordance with the recommendations of REALPAC.
(6) Adjustment to exclude transaction costs incurred as part of hotel property acquisition in accordance with the recommendations of REALPAC.
(7) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(1) At the Company's proportionate interest.
(2) Adjustment to capitalize interest related to the Company's equity accounted joint ventures in accordance with the recommendations of REALPAC.
(3) Adjustment to capitalize incremental leasing costs in accordance with the recommendations of REALPAC.
(4) Adjustment to exclude hotel property amortization in accordance with the recommendations of REALPAC.
(5) Adjustment to exclude gain on below market purchase of hotel property in accordance with the recommendations of REALPAC.
(6) Adjustment to exclude transaction costs incurred as part of hotel property acquisition in accordance with the recommendations of REALPAC.
(7) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The components of FFO at proportionate interest are as follows:
The components of FFO at proportionate interest are as follows:
Net operating income
Interest and other income
Interest expense (1)
Corporate expenses (2)
Abandoned transaction costs
Amortization expense (3)
Other gains (losses) and (expenses) (4)
FFO (5)
FFO per diluted share
Weighted average number of common shares
– diluted – FFO (in thousands)
Three months ended December 31
Year ended December 31
% change
2018
2017
% change
2018
2017
$ 116,054
$ 112,976
$ 460,333
$ 443,418
6,161
(39,323)
(7,004)
(53)
(859)
(1,596)
0.3 % $
73,380
(3.7)% $
0.29
$
$
7,553
(39,995)
(8,097)
(41)
(503)
1,292
73,185
0.30
28,359
(153,905)
(29,485)
(178)
(2,822)
669
28,850
(156,731)
(29,063)
(161)
(1,963)
(240)
6.6% $ 302,971
$ 284,110
4.4% $
1.21
$
1.16
4.2 %
255,821
245,422
2.2%
250,474
245,153
(1)
(2)
(3)
(4)
(5)
Includes an adjustment to capitalize interest related to the Company's equity accounted joint ventures in accordance with the recommendations of REALPAC.
Includes an adjustment to capitalize incremental leasing costs in accordance with the recommendations of REALPAC.
Excludes hotel property amortization in accordance with the recommendations of REALPAC.
At the Company's proportionate interest, adjusted to exclude gain on below market purchase and transaction costs related to the hotel property as well as investment
properties selling costs in accordance with the recommendations of REALPAC.
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Net operating income
Interest and other income
Interest expense (1)
Corporate expenses (2)
Abandoned transaction costs
Amortization expense (3)
Other gains (losses) and (expenses) (4)
FFO (5)
FFO per diluted share
Weighted average number of common shares
– diluted – FFO (in thousands)
Three months ended December 31
Year ended December 31
% change
2018
2017
% change
2018
2017
$ 116,054
$ 112,976
$ 460,333
$ 443,418
6,161
(39,323)
(7,004)
(53)
(859)
(1,596)
0.3 % $
73,380
(3.7)% $
0.29
$
$
7,553
(39,995)
(8,097)
(41)
(503)
1,292
73,185
0.30
28,359
(153,905)
(29,485)
(178)
(2,822)
669
28,850
(156,731)
(29,063)
(161)
(1,963)
(240)
6.6% $ 302,971
$ 284,110
4.4% $
1.21
$
1.16
4.2 %
255,821
245,422
2.2%
250,474
245,153
(1)
(2)
(3)
(4)
(5)
Includes an adjustment to capitalize interest related to the Company's equity accounted joint ventures in accordance with the recommendations of REALPAC.
Includes an adjustment to capitalize incremental leasing costs in accordance with the recommendations of REALPAC.
Excludes hotel property amortization in accordance with the recommendations of REALPAC.
At the Company's proportionate interest, adjusted to exclude gain on below market purchase and transaction costs related to the hotel property as well as investment
properties selling costs in accordance with the recommendations of REALPAC.
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
49
FIRST CAPITAL REALTY ANNUAL REPORT 2018
49
FIRST CAPITAL REALTY ANNUAL REPORT 2018
For the three months ended December 31, 2018, FFO totaled $73.4 million or $0.29 per diluted share compared to
$73.2 million or $0.30 per diluted share in the same prior year period. The $0.2 million increase in FFO over the prior year
period is primarily due to NOI increasing by $3.1 million largely due to growth in SP NOI, partially offset by a $2.9 million
increase in other losses due to non-recurring gains realized in the fourth quarter of 2017.
For the year ended December 31, 2018, FFO totaled $303.0 million or $1.21 per diluted share compared to $284.1 million
or $1.16 per diluted share for the prior year. The $18.9 million increase in FFO was due to NOI increasing by $16.9 million
primarily due to growth in SP NOI and an increase in straight-line rent due to a greater number of tenants in fixturing over
the prior year. In addition, FFO also increased due to a $2.8 million decrease in interest expense primarily due to the early
redemptions of higher rate convertible debentures.
Adjusted Cash Flow from Operations
A reconciliation of cash provided by operating activities to ACFO is presented below:
For the three months ended December 31, 2018, FFO totaled $73.4 million or $0.29 per diluted share compared to
$73.2 million or $0.30 per diluted share in the same prior year period. The $0.2 million increase in FFO over the prior year
period is primarily due to NOI increasing by $3.1 million largely due to growth in SP NOI, partially offset by a $2.9 million
increase in other losses due to non-recurring gains realized in the fourth quarter of 2017.
For the year ended December 31, 2018, FFO totaled $303.0 million or $1.21 per diluted share compared to $284.1 million
or $1.16 per diluted share for the prior year. The $18.9 million increase in FFO was due to NOI increasing by $16.9 million
primarily due to growth in SP NOI and an increase in straight-line rent due to a greater number of tenants in fixturing over
the prior year. In addition, FFO also increased due to a $2.8 million decrease in interest expense primarily due to the early
redemptions of higher rate convertible debentures.
Adjusted Cash Flow from Operations
A reconciliation of cash provided by operating activities to ACFO is presented below:
Cash provided by operating activities
Add (deduct):
Working capital adjustments (1)
Adjustment for equity accounted joint ventures
Revenue sustaining capital expenditures
Recoverable capital expenditures
Leasing costs on properties under development
Realized gain (loss) on sale of marketable securities
Non-controlling interest
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
$
114,128
$
107,364
$
283,012
$
270,159
(34,157)
1,130
(5,456)
(4,780)
405
43
59
71,372
(33,544)
1,907
(6,531)
(5,114)
262
(1,165)
(178)
63,001
(1,181)
3,546
(15,523)
(7,945)
1,610
4,232
(583)
267,168
(1,301)
6,168
(21,781)
(9,701)
1,597
(1,165)
(331)
243,645
Cash provided by operating activities
Add (deduct):
Working capital adjustments (1)
Adjustment for equity accounted joint ventures
Revenue sustaining capital expenditures
Recoverable capital expenditures
Leasing costs on properties under development
Realized gain (loss) on sale of marketable securities
Non-controlling interest
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
$
114,128
$
107,364
$
283,012
$
270,159
(34,157)
1,130
(5,456)
(4,780)
405
43
59
71,372
(33,544)
1,907
(6,531)
(5,114)
262
(1,165)
(178)
63,001
(1,181)
3,546
(15,523)
(7,945)
1,610
4,232
(583)
267,168
(1,301)
6,168
(21,781)
(9,701)
1,597
(1,165)
(331)
243,645
ACFO (2)
(1) Working capital adjustments primarily include adjustments for prepaid as well as accrued property taxes as their levels vary considerably over the course of the year as well
$
$
$
$
ACFO (2)
(1) Working capital adjustments primarily include adjustments for prepaid as well as accrued property taxes as their levels vary considerably over the course of the year as well
$
$
$
$
as certain other adjustments as specified in the most recent REALPAC whitepaper on ACFO issued in February 2018.
(2)
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
as certain other adjustments as specified in the most recent REALPAC whitepaper on ACFO issued in February 2018.
(2)
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
For the three months and year ended December 31, 2018, ACFO totaled $71.4 million and $267.2 million compared to
$63.0 million and $243.6 million for the prior year periods, respectively. For the three months ended December 31, 2018,
the increase in ACFO of $8.4 million was primarily due to higher NOI and lower capital expenditures. For the year ended
December 31, 2018, the increase in ACFO of $23.5 million was primarily due to higher NOI, lower capital expenditures and
higher realized gains on the sale of the Company's marketable securities.
For the three months and year ended December 31, 2018, ACFO totaled $71.4 million and $267.2 million compared to
$63.0 million and $243.6 million for the prior year periods, respectively. For the three months ended December 31, 2018,
the increase in ACFO of $8.4 million was primarily due to higher NOI and lower capital expenditures. For the year ended
December 31, 2018, the increase in ACFO of $23.5 million was primarily due to higher NOI, lower capital expenditures and
higher realized gains on the sale of the Company's marketable securities.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
50
FIRST CAPITAL REALTY ANNUAL REPORT 2018
50
Q1 2018
50,302
52,553
Q1 2017
49,681
52,330
ACFO (1)
Cash dividends paid
ACFO payout ratio (1)
(1)
ACFO (1)
Cash dividends paid
ACFO payout ratio (1)
(1)
Q1 2018
50,302
52,553
Q1 2017
49,681
52,330
ACFO (1)
Cash dividends paid
ACFO payout ratio (1)
(1)
ACFO (1)
Cash dividends paid
ACFO payout ratio (1)
(1)
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
ACFO Payout Ratio
The Company's ACFO payout ratio for the four quarters ended December 31, 2018 is calculated as follow:
ACFO Payout Ratio
The Company's ACFO payout ratio for the four quarters ended December 31, 2018 is calculated as follow:
Year ended December 31, 2018
Q4 2018
Q3 2018
Q2 2018
$
267,168
212,651
$
79.6%
71,372 $
54,782
71,464 $
52,680
74,030 $
52,636
Year ended December 31, 2018
Q4 2018
Q3 2018
Q2 2018
$
267,168
212,651
$
79.6%
71,372 $
54,782
71,464 $
52,680
74,030 $
52,636
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The Company's ACFO payout ratio for the four quarters ended December 31, 2017 is calculated as follow:
The Company's ACFO payout ratio for the four quarters ended December 31, 2017 is calculated as follow:
Year ended December 31, 2017
Q4 2017
Q3 2017
Q2 2017
$
243,645
209,620
$
86.0%
63,001 $
52,452
72,221 $
52,443
58,742 $
52,395
Year ended December 31, 2017
Q4 2017
Q3 2017
Q2 2017
$
243,645
209,620
$
86.0%
63,001 $
52,452
72,221 $
52,443
58,742 $
52,395
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The Company considers a rolling four quarter payout ratio (cash dividends / ACFO) to be more relevant than a payout ratio
in any given quarter due to seasonal fluctuations in ACFO. The Company's ACFO payout ratio improved to 79.6% in 2018
versus 86.0% in 2017.
The Company considers a rolling four quarter payout ratio (cash dividends / ACFO) to be more relevant than a payout ratio
in any given quarter due to seasonal fluctuations in ACFO. The Company's ACFO payout ratio improved to 79.6% in 2018
versus 86.0% in 2017.
DIVIDENDS
The Company has paid regular quarterly dividends to common shareholders since it commenced operations as a public
company in 1994. Dividends on the common shares are declared at the discretion of the Board of Directors and are set from
time to time after taking into consideration the Company’s capital requirements, its alternative sources of capital and
common industry cash distribution practices.
DIVIDENDS
The Company has paid regular quarterly dividends to common shareholders since it commenced operations as a public
company in 1994. Dividends on the common shares are declared at the discretion of the Board of Directors and are set from
time to time after taking into consideration the Company’s capital requirements, its alternative sources of capital and
common industry cash distribution practices.
(in dollars)
Dividend per common share
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
$
0.215
$
0.215
$
0.860
$
0.860
(in dollars)
Dividend per common share
Three months ended December 31
2017
2018
Year ended December 31
2017
2018
$
0.215
$
0.215
$
0.860
$
0.860
51
FIRST CAPITAL REALTY ANNUAL REPORT 2018
51
FIRST CAPITAL REALTY ANNUAL REPORT 2018
SUMMARY OF FINANCIAL RESULTS OF LONG-TERM DEBT GUARANTORS
The Company's senior unsecured debentures are guaranteed by the wholly owned subsidiaries of First Capital Realty,
other than nominee subsidiaries and inactive subsidiaries. All such current and future wholly owned subsidiaries will
provide a guarantee of the debentures. In the case of default by First Capital Realty, the indenture trustee will, subject to
the indenture, be entitled to seek redress from such wholly owned subsidiaries for the guaranteed obligations in the same
manner and upon the same terms that it may seek to enforce the obligations of First Capital Realty. These guarantees are
intended to eliminate structural subordination, which arises as a consequence of a significant portion of First Capital
Realty’s assets being held primarily in one significant subsidiary.
The following tables present select consolidating summary information for the Company for the periods identified below
presented separately for (i) First Capital Realty (denoted as FCR), as issuer; (ii) guarantor subsidiaries; (iii) non-guarantor
subsidiaries; (iv) consolidation adjustments; and (v) the total consolidated amounts.
(millions of dollars)
Property rental revenue
NOI (5)
Net income attributable to
common shareholders
$
2018
2017
2018
2017
2018
2017
2018
Year ended December 31
2018
2017
2017
FCR (1)
309 $
204
Guarantors (2)
Non-Guarantors (3)
Consolidation Adjustments (4)
Total Consolidated
290 $
195
423 $
252
407 $
244
1 $
2
6 $
3
(3) $
(3)
(9) $
(4)
730 $
455
344
633
172
462
25
40
(197)
(502)
344
694
438
633
(millions of dollars)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
(millions of dollars)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
$
$
FCR (1)
162 $
9,409
467
4,096
FCR (1)
134 $
9,200
483
4,154
Guarantors (2)
Non-Guarantors (3)
308 $
5,159
184
730
68 $
67
6
34
Guarantors (2)
Non-Guarantors (3)
As at December 31, 2018
Consolidation
Adjustments (4)
Total Consolidated
(94) $
(4,626)
(2)
(70)
444
10,009
655
4,790
As at December 31, 2017
Consolidation
Adjustments (4)
Total Consolidated
165 $
4,984
86
582
232 $
42
6
103
(228) $
(4,560)
(2)
(139)
303
9,666
573
4,700
SUMMARY OF FINANCIAL RESULTS OF LONG-TERM DEBT GUARANTORS
The Company's senior unsecured debentures are guaranteed by the wholly owned subsidiaries of First Capital Realty,
other than nominee subsidiaries and inactive subsidiaries. All such current and future wholly owned subsidiaries will
provide a guarantee of the debentures. In the case of default by First Capital Realty, the indenture trustee will, subject to
the indenture, be entitled to seek redress from such wholly owned subsidiaries for the guaranteed obligations in the same
manner and upon the same terms that it may seek to enforce the obligations of First Capital Realty. These guarantees are
intended to eliminate structural subordination, which arises as a consequence of a significant portion of First Capital
Realty’s assets being held primarily in one significant subsidiary.
The following tables present select consolidating summary information for the Company for the periods identified below
presented separately for (i) First Capital Realty (denoted as FCR), as issuer; (ii) guarantor subsidiaries; (iii) non-guarantor
subsidiaries; (iv) consolidation adjustments; and (v) the total consolidated amounts.
(millions of dollars)
Property rental revenue
NOI (5)
Net income attributable to
common shareholders
$
2018
2017
2018
2017
2018
2017
2018
Year ended December 31
2018
2017
2017
FCR (1)
309 $
204
Guarantors (2)
Non-Guarantors (3)
Consolidation Adjustments (4)
Total Consolidated
290 $
195
423 $
252
407 $
244
1 $
2
6 $
3
(3) $
(3)
(9) $
(4)
730 $
455
344
633
172
462
25
40
(197)
(502)
344
694
438
633
(millions of dollars)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
(millions of dollars)
Current assets
Non-current assets
Current liabilities
Non-current liabilities
$
$
FCR (1)
162 $
9,409
467
4,096
FCR (1)
134 $
9,200
483
4,154
Guarantors (2)
Non-Guarantors (3)
308 $
5,159
184
730
68 $
67
6
34
Guarantors (2)
Non-Guarantors (3)
As at December 31, 2018
Consolidation
Adjustments (4)
Total Consolidated
(94) $
(4,626)
(2)
(70)
444
10,009
655
4,790
As at December 31, 2017
Consolidation
Adjustments (4)
Total Consolidated
165 $
4,984
86
582
232 $
42
6
103
(228) $
(4,560)
(2)
(139)
303
9,666
573
4,700
(1) This column represents FCR and all of its subsidiaries; FCR's subsidiaries are presented under the equity method.
(2) This column represents the aggregate of all Guarantor subsidiaries.
(3) This column represents the aggregate of all Non-Guarantor subsidiaries.
(4) This column includes the necessary amounts to eliminate the inter-company balances between FCR, the Guarantors, and Non-Guarantors to arrive at the information for
the Company on a consolidated basis.
(5) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(1) This column represents FCR and all of its subsidiaries; FCR's subsidiaries are presented under the equity method.
(2) This column represents the aggregate of all Guarantor subsidiaries.
(3) This column represents the aggregate of all Non-Guarantor subsidiaries.
(4) This column includes the necessary amounts to eliminate the inter-company balances between FCR, the Guarantors, and Non-Guarantors to arrive at the information for
the Company on a consolidated basis.
(5) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
52
FIRST CAPITAL REALTY ANNUAL REPORT 2018
52
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
RELATED PARTY TRANSACTIONS
Significant Shareholder
Gazit-Globe Ltd. (“Gazit”) is a significant shareholder of the Company, and, as of December 31, 2018, beneficially owned
31.3% (December 31, 2017 – 32.6%) of the common shares of the Company. Norstar Holdings Inc. is the ultimate
controlling party of Gazit.
Corporate and other amounts receivable include amounts due from Gazit. Gazit reimburses the Company for certain
accounting and administrative services provided to it by the Company. Such amounts consist of the following:
RELATED PARTY TRANSACTIONS
Significant Shareholder
Gazit-Globe Ltd. (“Gazit”) is a significant shareholder of the Company, and, as of December 31, 2018, beneficially owned
31.3% (December 31, 2017 – 32.6%) of the common shares of the Company. Norstar Holdings Inc. is the ultimate
controlling party of Gazit.
Corporate and other amounts receivable include amounts due from Gazit. Gazit reimburses the Company for certain
accounting and administrative services provided to it by the Company. Such amounts consist of the following:
Reimbursements for professional services
Year ended December 31
2018
2017
$
186
$
228
Reimbursements for professional services
Year ended December 31
2018
2017
$
186
$
228
As at December 31, 2018, amounts due from Gazit were $40 thousand (December 31, 2017 – $30 thousand).
As at December 31, 2018, amounts due from Gazit were $40 thousand (December 31, 2017 – $30 thousand).
Joint Ventures
During the three months and year ended December 31, 2018, the Company earned fee income of $0.2 million
(December 31, 2017 – $0.5 million) and $4.5 million (December 31, 2017 – $2.4 million), respectively, from its joint
ventures. Also during the year ended December 31, 2018, the Company advanced $2.1 million (December 31, 2017 –
$1.2 million) to one of its joint ventures.
Subsidiaries of the Company
The audited annual consolidated financial statements include the financial statements of First Capital Realty and First
Capital Holdings Trust. First Capital Holdings Trust is the only significant subsidiary of First Capital Realty and is wholly
owned by the Company.
Joint Ventures
During the three months and year ended December 31, 2018, the Company earned fee income of $0.2 million
(December 31, 2017 – $0.5 million) and $4.5 million (December 31, 2017 – $2.4 million), respectively, from its joint
ventures. Also during the year ended December 31, 2018, the Company advanced $2.1 million (December 31, 2017 –
$1.2 million) to one of its joint ventures.
Subsidiaries of the Company
The audited annual consolidated financial statements include the financial statements of First Capital Realty and First
Capital Holdings Trust. First Capital Holdings Trust is the only significant subsidiary of First Capital Realty and is wholly
owned by the Company.
SUBSEQUENT EVENTS
First Quarter Dividend
SUBSEQUENT EVENTS
First Quarter Dividend
The Company announced that it will pay a first quarter dividend of $0.215 per common share on April 18, 2019 to
shareholders of record on March 29, 2019.
The Company announced that it will pay a first quarter dividend of $0.215 per common share on April 18, 2019 to
shareholders of record on March 29, 2019.
53
FIRST CAPITAL REALTY ANNUAL REPORT 2018
53
FIRST CAPITAL REALTY ANNUAL REPORT 2018
QUARTERLY FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION
2018
2017
2018
2017
(share counts in thousands)
Property rental revenue
Net operating income (1)
Net income attributable to
common shareholders
Net income per share attributable
to common shareholders:
Basic
Diluted
Weighted average number of
diluted common shares
outstanding – IFRS
FFO (1)
FFO per diluted share (1)
Weighted average number of
diluted common shares
outstanding – FFO
$
$
$
$
$
$
$
Q4
184,590
114,515
64,306
0.25
0.25
255,821
73,380
0.29
255,821
$
114,128
Cash provided by operating
activities
ACFO (1)
Dividend per common share
Total assets
$10,453,055
Total mortgages and credit facilities $ 1,912,080
Shareholders’ equity
$ 4,978,242
71,372
0.215
$
$
Q3
182,368
114,800
131,427
0.52
0.52
254,100
76,510
0.30
254,100
72,049
71,464
0.215
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Q2
Q1
Q4
Q3
Q2
Q1
181,852
$ 180,785
$ 177,206
$ 170,670
$ 171,729
$ 174,853
113,816
$ 111,642
$ 111,337
$ 110,610
$ 108,678
$ 106,884
81,929
$
65,944
$
74,833
$
83,046
$ 271,539
$ 203,671
0.33
0.33
246,196
79,148
0.32
$
$
$
$
0.27
0.27
247,044
73,933
0.30
$
$
$
$
0.31
0.30
248,266
73,185
0.30
$
$
$
$
0.34
0.34
248,626
73,720
0.30
$
$
$
$
1.11
1.09
250,516
70,580
0.29
$
$
$
$
0.83
0.82
250,232
66,625
0.27
246,196
245,717
245,422
245,137
245,186
244,820
51,356
74,030
0.215
$
$
$
45,479
$ 107,364
50,302
0.215
$
$
63,001
0.215
$
$
$
85,956
72,221
0.215
$
$
$
30,867
58,742
0.215
$
$
$
45,970
49,681
0.215
$10,317,034
$10,070,477
$ 9,980,267
$9,968,552
$ 9,861,267
$ 9,688,357
$9,334,216
$ 1,678,862
$ 1,691,387
$ 1,694,732
$1,641,966
$ 1,456,226
$ 1,609,827
$1,527,179
$ 4,981,511
$ 4,703,593
$ 4,669,877
$4,647,071
$ 4,618,170
$ 4,577,648
$4,352,882
(share counts in thousands)
Property rental revenue
Net operating income (1)
Net income attributable to
common shareholders
Net income per share attributable
to common shareholders:
Basic
Diluted
Weighted average number of
diluted common shares
outstanding – IFRS
FFO (1)
FFO per diluted share (1)
Weighted average number of
diluted common shares
outstanding – FFO
$
$
$
$
$
$
$
Q4
184,590
114,515
64,306
0.25
0.25
255,821
73,380
0.29
255,821
$
114,128
Cash provided by operating
activities
ACFO (1)
Dividend per common share
Total assets
$10,453,055
Total mortgages and credit facilities $ 1,912,080
Shareholders’ equity
$ 4,978,242
71,372
0.215
$
$
Q3
182,368
114,800
131,427
0.52
0.52
254,100
76,510
0.30
254,100
72,049
71,464
0.215
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Q2
Q1
Q4
Q3
Q2
Q1
181,852
$ 180,785
$ 177,206
$ 170,670
$ 171,729
$ 174,853
113,816
$ 111,642
$ 111,337
$ 110,610
$ 108,678
$ 106,884
81,929
$
65,944
$
74,833
$
83,046
$ 271,539
$ 203,671
0.33
0.33
246,196
79,148
0.32
$
$
$
$
0.27
0.27
247,044
73,933
0.30
$
$
$
$
0.31
0.30
248,266
73,185
0.30
$
$
$
$
0.34
0.34
248,626
73,720
0.30
$
$
$
$
1.11
1.09
250,516
70,580
0.29
$
$
$
$
0.83
0.82
250,232
66,625
0.27
246,196
245,717
245,422
245,137
245,186
244,820
51,356
74,030
0.215
$
$
$
45,479
$ 107,364
50,302
0.215
$
$
63,001
0.215
$
$
$
85,956
72,221
0.215
$
$
$
30,867
58,742
0.215
$
$
$
45,970
49,681
0.215
$10,317,034
$10,070,477
$ 9,980,267
$9,968,552
$ 9,861,267
$ 9,688,357
$9,334,216
$ 1,678,862
$ 1,691,387
$ 1,694,732
$1,641,966
$ 1,456,226
$ 1,609,827
$1,527,179
$ 4,981,511
$ 4,703,593
$ 4,669,877
$4,647,071
$ 4,618,170
$ 4,577,648
$4,352,882
Other
Number of properties
GLA - at 100% (in thousands)
GLA - at ownership interest (in
thousands)
Monthly average occupancy %
Total portfolio occupancy %
166
25,456
166
25,519
162
25,327
161
161
25,267
25,390
159
25,168
160
160
25,217
25,215
23,854
23,797
23,700
23,648
23,991
23,751
23,798
23,791
96.6%
96.7%
96.4%
96.5%
96.2%
96.3%
96.0%
96.2%
95.4%
96.1%
95.0%
95.3%
94.8%
95.0%
94.6%
94.5%
Other
Number of properties
GLA - at 100% (in thousands)
GLA - at ownership interest (in
thousands)
Monthly average occupancy %
Total portfolio occupancy %
166
25,456
166
25,519
162
25,327
161
161
25,267
25,390
159
25,168
160
160
25,217
25,215
23,854
23,797
23,700
23,648
23,991
23,751
23,798
23,791
96.6%
96.7%
96.4%
96.5%
96.2%
96.3%
96.0%
96.2%
95.4%
96.1%
95.0%
95.3%
94.8%
95.0%
94.6%
94.5%
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
CRITICAL ACCOUNTING ESTIMATES
The Company makes estimates and assumptions that affect the carrying amounts of assets and liabilities, disclosure of
contingent assets and liabilities and the reported amount of earnings for the reporting periods. Actual results could differ
from those estimates. Management believes that the policies that are most subject to estimation and Management’s
judgment are those outlined below.
CRITICAL ACCOUNTING ESTIMATES
The Company makes estimates and assumptions that affect the carrying amounts of assets and liabilities, disclosure of
contingent assets and liabilities and the reported amount of earnings for the reporting periods. Actual results could differ
from those estimates. Management believes that the policies that are most subject to estimation and Management’s
judgment are those outlined below.
Judgments
Investment properties
Judgments
Investment properties
In applying the Company’s policy with respect to investment properties, judgment is applied in determining whether
certain costs are additions to the carrying amount of the property and, for properties under development, identifying the
point at which capitalization of borrowing and other costs ceases.
In applying the Company’s policy with respect to investment properties, judgment is applied in determining whether
certain costs are additions to the carrying amount of the property and, for properties under development, identifying the
point at which capitalization of borrowing and other costs ceases.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
54
FIRST CAPITAL REALTY ANNUAL REPORT 2018
54
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Hedge accounting
Hedge accounting
Where the Company undertakes to apply cash flow hedge accounting, it must determine whether such hedges are
expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to
determine that they actually have been highly effective throughout the reporting periods for which they were designated.
Where the Company undertakes to apply cash flow hedge accounting, it must determine whether such hedges are
expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to
determine that they actually have been highly effective throughout the reporting periods for which they were designated.
Income taxes
Income taxes
The Company exercises judgment in estimating deferred tax assets and liabilities. Income tax laws may be subject to
different interpretations, and the income tax expense recorded by the Company reflects the Company’s interpretation of
the relevant tax laws. The Company is also required to estimate the timing of reversals of temporary differences between
accounting and taxable income in determining the appropriate rate to apply in calculating deferred taxes.
The Company exercises judgment in estimating deferred tax assets and liabilities. Income tax laws may be subject to
different interpretations, and the income tax expense recorded by the Company reflects the Company’s interpretation of
the relevant tax laws. The Company is also required to estimate the timing of reversals of temporary differences between
accounting and taxable income in determining the appropriate rate to apply in calculating deferred taxes.
Estimates and Assumptions
Valuation of Investment properties
Estimates and Assumptions
Valuation of Investment properties
The Company's policy in determining the fair value of its investment properties at the end of each reporting period,
includes the following approaches:
The Company's policy in determining the fair value of its investment properties at the end of each reporting period,
includes the following approaches:
1. Internal valuations - by a certified staff appraiser employed by the Company, in accordance with professional appraisal
standards and IFRS. Every investment property has an internal valuation completed at least once a year.
1. Internal valuations - by a certified staff appraiser employed by the Company, in accordance with professional appraisal
standards and IFRS. Every investment property has an internal valuation completed at least once a year.
2. Value updates - primarily consisting of management's review of the key assumptions from previous internal valuations
and updating the value for changes in the property cash flow, physical condition and changes in market conditions.
2. Value updates - primarily consisting of management's review of the key assumptions from previous internal valuations
and updating the value for changes in the property cash flow, physical condition and changes in market conditions.
External appraisals are obtained periodically by Management. These appraisals are used as data points, together with
other market information accumulated by Management, in arriving at its conclusions on key assumptions and values.
External appraisals are completed by an independent appraisal firm, in accordance with professional appraisal standards
and IFRS.
Shopping centres are appraised primarily based on an income approach that reflects stabilized cash flows or net operating
income from existing tenants with the property in its existing state, since purchasers typically focus on expected income.
Internal valuations are conducted using and placing reliance on both the direct capitalization method and the discounted
cash flow method (including the estimated proceeds from a potential future disposition).
Properties undergoing development, redevelopment or expansion are valued either (i) using the discounted cash flow
method, with a deduction for costs to complete the project, or (ii) at cost, when cost approximates fair value. Stabilized
capitalization rates, discount rates and terminal capitalization rates, as applicable, are adjusted to reflect lease-up
assumptions and construction risk, when appropriate. Adjacent land parcels held for future development are valued
based on comparable sales of commercial land.
The primary method of appraisal for development land is the comparable sales approach, which considers recent sales
activity for similar land parcels in the same or similar markets to estimate a value on either a per acre basis or on a basis
of per square foot buildable. Such values are applied to the Company's properties after adjusting for factors specific to the
site, including its location, zoning, servicing and configuration.
Refer to Note 2(f) of the audited consolidated financial statements for the year ended December 31, 2018 for further
information on the estimates and assumptions made by Management in connection with the fair values of investment
properties.
External appraisals are obtained periodically by Management. These appraisals are used as data points, together with
other market information accumulated by Management, in arriving at its conclusions on key assumptions and values.
External appraisals are completed by an independent appraisal firm, in accordance with professional appraisal standards
and IFRS.
Shopping centres are appraised primarily based on an income approach that reflects stabilized cash flows or net operating
income from existing tenants with the property in its existing state, since purchasers typically focus on expected income.
Internal valuations are conducted using and placing reliance on both the direct capitalization method and the discounted
cash flow method (including the estimated proceeds from a potential future disposition).
Properties undergoing development, redevelopment or expansion are valued either (i) using the discounted cash flow
method, with a deduction for costs to complete the project, or (ii) at cost, when cost approximates fair value. Stabilized
capitalization rates, discount rates and terminal capitalization rates, as applicable, are adjusted to reflect lease-up
assumptions and construction risk, when appropriate. Adjacent land parcels held for future development are valued
based on comparable sales of commercial land.
The primary method of appraisal for development land is the comparable sales approach, which considers recent sales
activity for similar land parcels in the same or similar markets to estimate a value on either a per acre basis or on a basis
of per square foot buildable. Such values are applied to the Company's properties after adjusting for factors specific to the
site, including its location, zoning, servicing and configuration.
Refer to Note 2(f) of the audited consolidated financial statements for the year ended December 31, 2018 for further
information on the estimates and assumptions made by Management in connection with the fair values of investment
properties.
55
FIRST CAPITAL REALTY ANNUAL REPORT 2018
55
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Valuation of Financial Instruments
Valuation of Financial Instruments
The Company is required to determine the fair value of its loans, mortgages and credit facilities, senior unsecured
debentures, loans and mortgages receivable, other equity investments and marketable securities and derivatives. The fair
values of the marketable securities are based on quoted market prices. The fair values of the other financial instruments
are calculated using internally developed models as follows:
The Company is required to determine the fair value of its loans, mortgages and credit facilities, senior unsecured
debentures, loans and mortgages receivable, other equity investments and marketable securities and derivatives. The fair
values of the marketable securities are based on quoted market prices. The fair values of the other financial instruments
are calculated using internally developed models as follows:
• Mortgages and credit facilities are calculated based on market interest rates plus a risk-adjusted spread on discounted
• Mortgages and credit facilities are calculated based on market interest rates plus a risk-adjusted spread on discounted
cash flows.
cash flows.
• Senior unsecured debentures are based on closing bid risk-adjusted spreads and current underlying Government of
Canada bond yields on discounted cash flows, also incorporating interest rate quotations provided by financial
institutions.
• Senior unsecured debentures are based on closing bid risk-adjusted spreads and current underlying Government of
Canada bond yields on discounted cash flows, also incorporating interest rate quotations provided by financial
institutions.
• Derivative instruments are determined using present value forward pricing and swap calculations at interest rates that
• Derivative instruments are determined using present value forward pricing and swap calculations at interest rates that
reflect current market conditions.
reflect current market conditions.
• Loans and mortgages receivable are calculated based on current market rates plus borrower level risk-adjusted spreads
• Loans and mortgages receivable are calculated based on current market rates plus borrower level risk-adjusted spreads
on discounted cash flows, adjusted for allowances for non-payment and collateral related risk.
on discounted cash flows, adjusted for allowances for non-payment and collateral related risk.
• Equity investments in certain funds are based on the fair value of the properties held in the funds. The fair value of the
• Equity investments in certain funds are based on the fair value of the properties held in the funds. The fair value of the
equity investment in a private entity approximates its cost.
equity investment in a private entity approximates its cost.
Estimates of risk-adjusted credit spreads applicable to a specific financial instrument and its underlying collateral could
vary and result in a different disclosed fair value.
Estimates of risk-adjusted credit spreads applicable to a specific financial instrument and its underlying collateral could
vary and result in a different disclosed fair value.
Income Taxes
Income Taxes
For the determination of deferred tax assets and liabilities where investment property is measured using the fair value
model, the presumption is that the carrying amount of an investment property is recovered through sale, as opposed to
presuming that the economic benefits of the investment property will be substantially consumed through use over time.
For the determination of deferred tax assets and liabilities where investment property is measured using the fair value
model, the presumption is that the carrying amount of an investment property is recovered through sale, as opposed to
presuming that the economic benefits of the investment property will be substantially consumed through use over time.
Additional critical accounting estimates and assumptions include estimating the fair value of share-based compensation.
Additional critical accounting estimates and assumptions include estimating the fair value of share-based compensation.
ACCOUNTING POLICY CHANGES
Refer to Note 3 of the audited annual consolidated financial statements for the years ended December 31, 2018 and 2017
for details on the impact of accounting policy changes related to the adoption of new and amended IFRS
pronouncements.
ACCOUNTING POLICY CHANGES
Refer to Note 3 of the audited annual consolidated financial statements for the years ended December 31, 2018 and 2017
for details on the impact of accounting policy changes related to the adoption of new and amended IFRS
pronouncements.
The IASB has issued new standards and amendments to existing standards. These changes are not yet adopted by the
Company and could have an impact on future periods. These changes are described in detail below:
The IASB has issued new standards and amendments to existing standards. These changes are not yet adopted by the
Company and could have an impact on future periods. These changes are described in detail below:
Leases
Leases
IFRS 16, “Leases” (“IFRS 16”), was issued in January 2016, and replaces IAS 17, “Leases” (“IAS 17”). IFRS 16 eliminates the
classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single
lessee accounting model. Certain leases will be exempt from these requirements. The most significant effect expected of
the new requirements will be an increase in lease assets and financial liabilities for lessees with material off-balance sheet
leases. Lessor accounting requirements under IFRS 16 are carried forward from IAS 17 and accordingly, leases will
continue to be classified and accounted for as operating or finance leases by lessors.
IFRS 16 is required for annual periods beginning on or after January 1, 2019. The Company has assessed the impact of
IFRS 16 to its consolidated financial statements and has concluded that leases with tenants will continue to be accounted
for as operating leases consistent with current accounting standards.
IFRS 16, “Leases” (“IFRS 16”), was issued in January 2016, and replaces IAS 17, “Leases” (“IAS 17”). IFRS 16 eliminates the
classification of leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single
lessee accounting model. Certain leases will be exempt from these requirements. The most significant effect expected of
the new requirements will be an increase in lease assets and financial liabilities for lessees with material off-balance sheet
leases. Lessor accounting requirements under IFRS 16 are carried forward from IAS 17 and accordingly, leases will
continue to be classified and accounted for as operating or finance leases by lessors.
IFRS 16 is required for annual periods beginning on or after January 1, 2019. The Company has assessed the impact of
IFRS 16 to its consolidated financial statements and has concluded that leases with tenants will continue to be accounted
for as operating leases consistent with current accounting standards.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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56
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Uncertainty over income tax treatments
Uncertainty over income tax treatments
IFRIC 23, "Uncertainty over Income Tax Treatments", was issued in June 2017 as a clarification to requirements under IAS
12 "Income Taxes". IFRIC 23 clarifies the application of various recognition and measurement requirements when there is
uncertainty over income tax treatments. This interpretation is effective for annual reporting periods beginning on or after
January 1, 2019. The Company has assessed the impact of IFRIC 23 and has concluded that there will be no impact to its
consolidated financial statements on adoption of these amendments.
CONTROLS AND PROCEDURES
As at December 31, 2018, the Chief Executive Officer and the Chief Financial Officer of the Company, with the assistance
of other staff and Management of the Company to the extent deemed necessary, have designed the Company’s disclosure
controls and procedures to provide reasonable assurance that information required to be disclosed in the various reports
filed or submitted by the Company under securities legislation is recorded, processed, summarized and reported
accurately and have designed internal controls over financial reporting to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
In the design of its internal controls over financial reporting, the Company used the 2013 framework published by the
Committee of Sponsoring Organizations of the Treadway Commission.
The Chief Executive Officer and the Chief Financial Officer of the Company have evaluated, or caused the evaluation of,
under their supervision, the effectiveness of the Company’s disclosure controls and procedures and its internal controls
over financial reporting (each as defined in National Instrument 52-109-Certification of Disclosure in Issuers’ Annual and
Interim Filings) as at December 31, 2018, and have concluded that such disclosure controls and procedures and internal
controls over financial reporting were operating effectively.
The Company did not make any changes in its internal controls over financial reporting during the quarter ended
December 31, 2018 that have had, or are reasonably likely to have, a material effect on the Company's internal controls
over financial reporting. On an ongoing basis, the Company will continue to analyze its controls and procedures for
potential areas of improvement.
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 controls and procedures or internal controls over financial reporting occur and/or
mistakes happen, the Company intends to take the necessary steps to minimize the consequences thereof.
RISKS AND UNCERTAINTIES
First Capital Realty, as an owner of income-producing properties and development properties, 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 some of the actions it
takes to mitigate these risks are outlined below. The Company’s most current Annual Information Form, which provides a
detailed description of these and other risks that may affect the Company, can be found on SEDAR at www.sedar.com and
on the Company’s website at www.fcr.ca.
Economic Conditions and Ownership of Real Estate
Real property investments are affected by various factors including changes in general economic conditions (such as the
availability of long-term mortgage and unsecured debenture financings, fluctuations in interest rates and unemployment
levels) and in local market 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 real estate developers, managers and owners in
seeking tenants, the ability of the owner to provide adequate maintenance at an economic cost, and various other
factors. The economic conditions in the markets in which the Company operates can also have a significant impact on the
IFRIC 23, "Uncertainty over Income Tax Treatments", was issued in June 2017 as a clarification to requirements under IAS
12 "Income Taxes". IFRIC 23 clarifies the application of various recognition and measurement requirements when there is
uncertainty over income tax treatments. This interpretation is effective for annual reporting periods beginning on or after
January 1, 2019. The Company has assessed the impact of IFRIC 23 and has concluded that there will be no impact to its
consolidated financial statements on adoption of these amendments.
CONTROLS AND PROCEDURES
As at December 31, 2018, the Chief Executive Officer and the Chief Financial Officer of the Company, with the assistance
of other staff and Management of the Company to the extent deemed necessary, have designed the Company’s disclosure
controls and procedures to provide reasonable assurance that information required to be disclosed in the various reports
filed or submitted by the Company under securities legislation is recorded, processed, summarized and reported
accurately and have designed internal controls over financial reporting to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
In the design of its internal controls over financial reporting, the Company used the 2013 framework published by the
Committee of Sponsoring Organizations of the Treadway Commission.
The Chief Executive Officer and the Chief Financial Officer of the Company have evaluated, or caused the evaluation of,
under their supervision, the effectiveness of the Company’s disclosure controls and procedures and its internal controls
over financial reporting (each as defined in National Instrument 52-109-Certification of Disclosure in Issuers’ Annual and
Interim Filings) as at December 31, 2018, and have concluded that such disclosure controls and procedures and internal
controls over financial reporting were operating effectively.
The Company did not make any changes in its internal controls over financial reporting during the quarter ended
December 31, 2018 that have had, or are reasonably likely to have, a material effect on the Company's internal controls
over financial reporting. On an ongoing basis, the Company will continue to analyze its controls and procedures for
potential areas of improvement.
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 controls and procedures or internal controls over financial reporting occur and/or
mistakes happen, the Company intends to take the necessary steps to minimize the consequences thereof.
RISKS AND UNCERTAINTIES
First Capital Realty, as an owner of income-producing properties and development properties, 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 some of the actions it
takes to mitigate these risks are outlined below. The Company’s most current Annual Information Form, which provides a
detailed description of these and other risks that may affect the Company, can be found on SEDAR at www.sedar.com and
on the Company’s website at www.fcr.ca.
Economic Conditions and Ownership of Real Estate
Real property investments are affected by various factors including changes in general economic conditions (such as the
availability of long-term mortgage and unsecured debenture financings, fluctuations in interest rates and unemployment
levels) and in local market 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 real estate developers, managers and owners in
seeking tenants, the ability of the owner to provide adequate maintenance at an economic cost, and various other
factors. The economic conditions in the markets in which the Company operates can also have a significant impact on the
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
Company’s tenants and, in turn, the Company’s financial 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.
The Company’s portfolio has major concentrations in Ontario, Alberta, Quebec and British Columbia. Moreover, within
each of these provinces, the Company’s portfolio is concentrated predominantly in selected urban markets. As a result,
economic and real estate conditions in these regions will significantly affect the Company’s revenues and the value of its
properties.
Revenue from the Company’s properties depends primarily on the ability of the Company’s tenants to pay the full amount
of rent and other charges due under their leases on a timely basis. Leases comprise any agreements relating to the
occupancy or use of the Company’s real property. There can be no assurance that tenants and other parties will be willing
or able to perform their obligations under any such leases. If a significant tenant or a number of smaller tenants were to
become unable or unwilling to meet their obligations to the Company, the Company’s financial position and results of
operations would be adversely affected. In the event of default by a tenant, the Company may experience delays and
unexpected costs in enforcing its rights as landlord under lease terms, which may also adversely affect the Company’s
financial position and results of operations. The Company may also incur significant costs in making improvements or
repairs to a property required in order to re-lease vacated premises to a new tenant.
The Company’s portfolio has more concentration with certain tenants. In the event that one or more tenants that
individually or collectively account for an important amount of the Company’s annual minimum rent experience financial
difficulty and are unable to pay rent or fulfill their lease commitments, the Company’s financial position, results of
operation and the value of its properties concerned would be adversely affected.
First Capital Realty’s net income could be adversely affected in the event of a downturn in the business, or the bankruptcy
or insolvency, of any anchor store or anchor tenant. Anchor tenants generally occupy large amounts of leasable area, pay
a significant portion of the total rents at a property and contribute to the success of other tenants by drawing significant
numbers of customers to a property. The closing of one or more anchor stores at a property could have a significant
adverse effect on that property.
Lease Renewals and Rental Increases
Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. Expiries of
certain leases will occur in both the short and long term, including expiry of leases of certain significant tenants, and
although certain lease renewals and/or rental increases are expected to occur in the future, there can be no assurance
that such renewals or rental increases will in fact occur. The failure to achieve renewals and/or rental increases may have
an adverse effect on the financial position and results of operations of the Company. In addition, the terms of any
subsequent lease may be less favourable to the Company than the existing lease.
Financing, Interest Rates, Repayment of Indebtedness and Access to Capital
The Company has outstanding indebtedness in the form of mortgages, credit facilities, senior unsecured debentures and
bank indebtedness and, as such, is subject to the risks normally associated with debt financing, including the risk that the
Company’s cash flow will be insufficient to meet required payments of principal and interest.
The amount of indebtedness outstanding could require the Company to dedicate a substantial portion of its cash flow
from operations to service its debt, thereby reducing funds available for operations, acquisitions, development activities
and other business opportunities that may arise. The Company’s internally generated cash may not be sufficient to repay
all of its outstanding indebtedness. Upon the expiry of the term of the financing on any particular property owned by the
Company, refinancing 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 financing. The Company may elect to repay
certain indebtedness through the issuance of equity securities or the sale of assets, where appropriate.
Interest rates have a significant effect on the profitability of commercial properties as interest represents a significant
cost in the ownership of real property where debt financing is used as a source of capital. The Company has a total of
$806.8 million principal amount of fixed rate interest-bearing instruments outstanding including mortgages and senior
Company’s tenants and, in turn, the Company’s financial 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.
The Company’s portfolio has major concentrations in Ontario, Alberta, Quebec and British Columbia. Moreover, within
each of these provinces, the Company’s portfolio is concentrated predominantly in selected urban markets. As a result,
economic and real estate conditions in these regions will significantly affect the Company’s revenues and the value of its
properties.
Revenue from the Company’s properties depends primarily on the ability of the Company’s tenants to pay the full amount
of rent and other charges due under their leases on a timely basis. Leases comprise any agreements relating to the
occupancy or use of the Company’s real property. There can be no assurance that tenants and other parties will be willing
or able to perform their obligations under any such leases. If a significant tenant or a number of smaller tenants were to
become unable or unwilling to meet their obligations to the Company, the Company’s financial position and results of
operations would be adversely affected. In the event of default by a tenant, the Company may experience delays and
unexpected costs in enforcing its rights as landlord under lease terms, which may also adversely affect the Company’s
financial position and results of operations. The Company may also incur significant costs in making improvements or
repairs to a property required in order to re-lease vacated premises to a new tenant.
The Company’s portfolio has more concentration with certain tenants. In the event that one or more tenants that
individually or collectively account for an important amount of the Company’s annual minimum rent experience financial
difficulty and are unable to pay rent or fulfill their lease commitments, the Company’s financial position, results of
operation and the value of its properties concerned would be adversely affected.
First Capital Realty’s net income could be adversely affected in the event of a downturn in the business, or the bankruptcy
or insolvency, of any anchor store or anchor tenant. Anchor tenants generally occupy large amounts of leasable area, pay
a significant portion of the total rents at a property and contribute to the success of other tenants by drawing significant
numbers of customers to a property. The closing of one or more anchor stores at a property could have a significant
adverse effect on that property.
Lease Renewals and Rental Increases
Upon the expiry of any lease, there can be no assurance that the lease will be renewed or the tenant replaced. Expiries of
certain leases will occur in both the short and long term, including expiry of leases of certain significant tenants, and
although certain lease renewals and/or rental increases are expected to occur in the future, there can be no assurance
that such renewals or rental increases will in fact occur. The failure to achieve renewals and/or rental increases may have
an adverse effect on the financial position and results of operations of the Company. In addition, the terms of any
subsequent lease may be less favourable to the Company than the existing lease.
Financing, Interest Rates, Repayment of Indebtedness and Access to Capital
The Company has outstanding indebtedness in the form of mortgages, credit facilities, senior unsecured debentures and
bank indebtedness and, as such, is subject to the risks normally associated with debt financing, including the risk that the
Company’s cash flow will be insufficient to meet required payments of principal and interest.
The amount of indebtedness outstanding could require the Company to dedicate a substantial portion of its cash flow
from operations to service its debt, thereby reducing funds available for operations, acquisitions, development activities
and other business opportunities that may arise. The Company’s internally generated cash may not be sufficient to repay
all of its outstanding indebtedness. Upon the expiry of the term of the financing on any particular property owned by the
Company, refinancing 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 financing. The Company may elect to repay
certain indebtedness through the issuance of equity securities or the sale of assets, where appropriate.
Interest rates have a significant effect on the profitability of commercial properties as interest represents a significant
cost in the ownership of real property where debt financing is used as a source of capital. The Company has a total of
$806.8 million principal amount of fixed rate interest-bearing instruments outstanding including mortgages and senior
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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58
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
unsecured debentures maturing between January 1, 2019 and December 31, 2021 at a weighted average coupon
interest rate of 5.3%. If these amounts were refinanced at an average interest rate that was 100 basis points higher or
lower than the existing rate, the Company’s annual interest cost would respectively increase or decrease by $8.1
million. In addition, as at December 31, 2018, the Company had $657.6 million principal amount of debt (or 15% of the
Company’s aggregate debt as of such date) at floating interest rates.
The Company seeks to reduce its interest rate risk by staggering the maturities of long-term debt and limiting the use of
floating rate debt so as to minimize exposure to interest rate fluctuations. Moreover, from time to time, the Company may
enter into interest rate swap transactions to modify the interest rate profile of its current or future variable rate debts
without an exchange of the underlying principal amount.
Credit Ratings
Any credit rating that is assigned to the senior unsecured debentures may not remain in effect for any given period of
time or may be lowered, withdrawn or revised by one or more of the rating agencies if, in their judgment, circumstances
so warrant. Refer to “Corporate Structure - Credit Ratings”. Any lowering, withdrawal or revision of a credit rating may
have an adverse effect on the market price of the senior unsecured debentures and the other securities of the Company,
may adversely affect a securityholder’s ability to sell its senior unsecured debentures or other securities of the Company
and may adversely affect the Company’s access to financial markets and its cost of borrowing.
Acquisition, Expansion, Development, Redevelopment and Strategic Dispositions
The Company’s acquisition and investment strategy and market selection process may not ultimately be successful and
may not provide positive returns on investment. The acquisition of properties or portfolios of properties entails risks that
include the following, any of which could adversely affect the Company’s financial position and results of operations and
its ability to meet its obligations: (i) the Company may not be able to identify suitable properties to acquire or may be
unable to complete the acquisition of the properties identified; (ii) the Company may not be able to successfully integrate
any acquisitions into its existing operations; (iii) properties acquired may fail to achieve the occupancy or rental rates
projected at the time of the acquisition decision, which may result in the properties’ failure to achieve the returns
projected; (iv) the Company’s pre-acquisition evaluation of the physical condition of each new investment may not detect
certain defects or identify necessary repairs, which could significantly increase the Company’s total acquisition costs; (v)
the Company’s investigation of a property or building prior to acquisition, may fail to reveal various liabilities, which could
reduce the cash flow from the property or increase its acquisition cost; and (vi) representations and warranties obtained
from third party vendors may not adequately protect against unknown, unexpected or undisclosed liabilities and any
recourse against such vendors may be limited by the financial capacity of such vendors.
Further, the Company’s development and redevelopment commitments are subject to those risks usually attributable to
construction projects, which include: (i) construction or other unforeseen 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; (iv) the
inability to achieve projected rental rates or anticipated pace of lease-ups; and (v) an increase in interest rates during the
life of the development or redevelopment.
Where the Company’s development commitments relate to properties intended for sale, such as the residential portion of
certain projects, the Company is also subject to the risk that purchasers of such properties may become unable or
unwilling to meet their obligations to the Company or that the Company may not be able to close the sale of a significant
number of units in a development project on economically favourable terms.
In addition, the Company undertakes strategic property dispositions in order to recycle its capital and maintain an optimal
portfolio composition. The Company may be subject to unexpected costs or liabilities related to such dispositions, which
could adversely affect the Company's financial position and results of operations and its ability to meet its obligations.
unsecured debentures maturing between January 1, 2019 and December 31, 2021 at a weighted average coupon
interest rate of 5.3%. If these amounts were refinanced at an average interest rate that was 100 basis points higher or
lower than the existing rate, the Company’s annual interest cost would respectively increase or decrease by $8.1
million. In addition, as at December 31, 2018, the Company had $657.6 million principal amount of debt (or 15% of the
Company’s aggregate debt as of such date) at floating interest rates.
The Company seeks to reduce its interest rate risk by staggering the maturities of long-term debt and limiting the use of
floating rate debt so as to minimize exposure to interest rate fluctuations. Moreover, from time to time, the Company may
enter into interest rate swap transactions to modify the interest rate profile of its current or future variable rate debts
without an exchange of the underlying principal amount.
Credit Ratings
Any credit rating that is assigned to the senior unsecured debentures may not remain in effect for any given period of
time or may be lowered, withdrawn or revised by one or more of the rating agencies if, in their judgment, circumstances
so warrant. Refer to “Corporate Structure - Credit Ratings”. Any lowering, withdrawal or revision of a credit rating may
have an adverse effect on the market price of the senior unsecured debentures and the other securities of the Company,
may adversely affect a securityholder’s ability to sell its senior unsecured debentures or other securities of the Company
and may adversely affect the Company’s access to financial markets and its cost of borrowing.
Acquisition, Expansion, Development, Redevelopment and Strategic Dispositions
The Company’s acquisition and investment strategy and market selection process may not ultimately be successful and
may not provide positive returns on investment. The acquisition of properties or portfolios of properties entails risks that
include the following, any of which could adversely affect the Company’s financial position and results of operations and
its ability to meet its obligations: (i) the Company may not be able to identify suitable properties to acquire or may be
unable to complete the acquisition of the properties identified; (ii) the Company may not be able to successfully integrate
any acquisitions into its existing operations; (iii) properties acquired may fail to achieve the occupancy or rental rates
projected at the time of the acquisition decision, which may result in the properties’ failure to achieve the returns
projected; (iv) the Company’s pre-acquisition evaluation of the physical condition of each new investment may not detect
certain defects or identify necessary repairs, which could significantly increase the Company’s total acquisition costs; (v)
the Company’s investigation of a property or building prior to acquisition, may fail to reveal various liabilities, which could
reduce the cash flow from the property or increase its acquisition cost; and (vi) representations and warranties obtained
from third party vendors may not adequately protect against unknown, unexpected or undisclosed liabilities and any
recourse against such vendors may be limited by the financial capacity of such vendors.
Further, the Company’s development and redevelopment commitments are subject to those risks usually attributable to
construction projects, which include: (i) construction or other unforeseen 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; (iv) the
inability to achieve projected rental rates or anticipated pace of lease-ups; and (v) an increase in interest rates during the
life of the development or redevelopment.
Where the Company’s development commitments relate to properties intended for sale, such as the residential portion of
certain projects, the Company is also subject to the risk that purchasers of such properties may become unable or
unwilling to meet their obligations to the Company or that the Company may not be able to close the sale of a significant
number of units in a development project on economically favourable terms.
In addition, the Company undertakes strategic property dispositions in order to recycle its capital and maintain an optimal
portfolio composition. The Company may be subject to unexpected costs or liabilities related to such dispositions, which
could adversely affect the Company's financial position and results of operations and its ability to meet its obligations.
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
Competition
Competition
The real estate business is competitive. Numerous other developers, managers and owners of retail properties compete
with the Company in seeking tenants. Some of the properties located in the same markets as the Company’s properties
may be newer, better located and/or have stronger anchor tenants than the Company’s properties. The existence of
developers, managers and owners in the markets in which the Company operates, or any increase in supply of available
space in such markets (due to new construction, tenant insolvencies or other vacancy) and competition for the Company’s
tenants could adversely affect the Company’s ability to lease space in its properties in such markets and on the rents
charged or concessions granted. In addition, the internet and other technologies increasingly play a more significant role
in consumer preferences and shopping patterns, which presents an evolving competitive risk to the Company that is not
easily assessed. Any of the aforementioned factors could have an adverse effect on the Company’s financial position and
results of operations.
Residential Development Sales and Leasing
The Company is and expects to be increasingly involved in the development of mixed-use properties that include
residential condominiums and rental apartments. These developments are often carried out with an experienced
residential developer as the Company's partner. Purchaser demand for residential condominiums is cyclical and is
significantly affected by changes in general and local economic and industry conditions, such as employment levels,
availability of financing for homebuyers, interest rates, consumer confidence, levels of new and existing homes for sale,
demographic trends and housing demand.
As a residential landlord in its properties that include rental apartments, the Company is subject to the risks inherent in
the multi-unit residential rental property industry. In addition to the risks highlighted above, these include exposure to
private individual tenants (as opposed to commercial tenants in the Company's retail properties), fluctuations in
occupancy levels, the inability to achieve economic rents (including anticipated increases in rent), controlling bad debt
exposure, rent control regulations, increases in operating costs including the costs of utilities (residential leases are often
“gross” leases under which the landlord is not able to pass on costs to its residents), the imposition of increased taxes or
new taxes and capital investment requirements.
Environmental Matters
The Company maintains comprehensive environmental insurance and conducts environmental due diligence upon the
acquisition of new properties. There is, however, a risk that the value of any given property in the Company’s portfolio could
be adversely affected as a result of unforeseen or uninsured environmental matters or changes in governmental regulations.
Under various federal, provincial and local laws, the Company, as an owner, and potentially as a person in control of or
managing real property, could potentially be liable for costs of investigation, remediation and monitoring of certain
contaminants, hazardous or toxic substances present at or released from its properties or disposed of at other locations,
whether the Company knows of, or is responsible for, the environmental contamination and whether the contamination
occurred before or after the Company acquired the property. The costs of investigation, removal or remediation of
hazardous or toxic substances are not estimable, may be substantial and could adversely affect the Company’s results of
operations or financial position. The presence of contamination or the failure to remediate such substances, if any, may
adversely affect the Company’s ability to sell such real estate or to borrow using such real estate as collateral and could
potentially also result in claims, including proceedings by government regulators or third-party lawsuits. Environmental
legislation can change rapidly and the Company may become subject to more stringent environmental laws in the future,
and compliance with more stringent environmental laws, or increased enforcement of the same, could have a material
adverse effect on its business, financial position or results of operations.
The real estate business is competitive. Numerous other developers, managers and owners of retail properties compete
with the Company in seeking tenants. Some of the properties located in the same markets as the Company’s properties
may be newer, better located and/or have stronger anchor tenants than the Company’s properties. The existence of
developers, managers and owners in the markets in which the Company operates, or any increase in supply of available
space in such markets (due to new construction, tenant insolvencies or other vacancy) and competition for the Company’s
tenants could adversely affect the Company’s ability to lease space in its properties in such markets and on the rents
charged or concessions granted. In addition, the internet and other technologies increasingly play a more significant role
in consumer preferences and shopping patterns, which presents an evolving competitive risk to the Company that is not
easily assessed. Any of the aforementioned factors could have an adverse effect on the Company’s financial position and
results of operations.
Residential Development Sales and Leasing
The Company is and expects to be increasingly involved in the development of mixed-use properties that include
residential condominiums and rental apartments. These developments are often carried out with an experienced
residential developer as the Company's partner. Purchaser demand for residential condominiums is cyclical and is
significantly affected by changes in general and local economic and industry conditions, such as employment levels,
availability of financing for homebuyers, interest rates, consumer confidence, levels of new and existing homes for sale,
demographic trends and housing demand.
As a residential landlord in its properties that include rental apartments, the Company is subject to the risks inherent in
the multi-unit residential rental property industry. In addition to the risks highlighted above, these include exposure to
private individual tenants (as opposed to commercial tenants in the Company's retail properties), fluctuations in
occupancy levels, the inability to achieve economic rents (including anticipated increases in rent), controlling bad debt
exposure, rent control regulations, increases in operating costs including the costs of utilities (residential leases are often
“gross” leases under which the landlord is not able to pass on costs to its residents), the imposition of increased taxes or
new taxes and capital investment requirements.
Environmental Matters
The Company maintains comprehensive environmental insurance and conducts environmental due diligence upon the
acquisition of new properties. There is, however, a risk that the value of any given property in the Company’s portfolio could
be adversely affected as a result of unforeseen or uninsured environmental matters or changes in governmental regulations.
Under various federal, provincial and local laws, the Company, as an owner, and potentially as a person in control of or
managing real property, could potentially be liable for costs of investigation, remediation and monitoring of certain
contaminants, hazardous or toxic substances present at or released from its properties or disposed of at other locations,
whether the Company knows of, or is responsible for, the environmental contamination and whether the contamination
occurred before or after the Company acquired the property. The costs of investigation, removal or remediation of
hazardous or toxic substances are not estimable, may be substantial and could adversely affect the Company’s results of
operations or financial position. The presence of contamination or the failure to remediate such substances, if any, may
adversely affect the Company’s ability to sell such real estate or to borrow using such real estate as collateral and could
potentially also result in claims, including proceedings by government regulators or third-party lawsuits. Environmental
legislation can change rapidly and the Company may become subject to more stringent environmental laws in the future,
and compliance with more stringent environmental laws, or increased enforcement of the same, could have a material
adverse effect on its business, financial position or results of operations.
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MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Partnerships
Partnerships
The Company has investments in properties with non-affiliated partners through partnership, co-ownership and limited
liability corporate venture arrangements (collectively, “partnerships”). As a result, the Company does not control all
decisions regarding those properties and may be required to take actions that are in the interest of the partners
collectively, but not in the Company’s sole best interests. Accordingly, the Company may not be able to favourably resolve
any issues that arise with respect to such decisions, or the Company may have to take legal action or provide financial or
other inducements to partners to obtain such resolution. In addition, the Company may be exposed to risks resulting from
the actions, omissions or financial situation of a partner, which may result in harm to the Company’s reputation or
adversely affect the value of the Company’s investments.
Significant Shareholders
Chaim Katzman, the former Chairman of the Board and currently a director of First Capital Realty, and several of the
Company's shareholders affiliated with Mr. Katzman (the “Gazit Group”), including Gazit-Globe and related entities,
beneficially own approximately 31.3% of the outstanding Common Shares. Gazit-Globe is a public company listed on the
New York Stock Exchange ("NYSE") and the Tel-Aviv Stock Exchange ("TASE"). Mr. Katzman is the Chief Executive Officer
and Vice Chairman of Gazit-Globe and its controlling shareholder, Norstar Holdings Inc., a corporation listed on the TASE
(“Norstar”). Additional information concerning Gazit-Globe is available in its public disclosure. Dori J. Segal, the Chairman
of the Board of the Company, is also a director of Gazit-Globe and Norstar. Mr. Katzman as well as Mr. Segal, directly and
indirectly, own shares of Norstar. As a result, Mr. Katzman owns or exercises control over approximately 53.26% of the
outstanding common shares of Gazit-Globe. Mr. Segal directly owns 811,800 common shares of Gazit-Globe, representing
approximately 0.43% of the outstanding common shares of Gazit-Globe. In addition, he also holds 2,965,505 stock options
and if all these options were exercised, he would own approximately 1.95% of the outstanding common shares of Gazit
Globe.
The market price of the common shares could decline materially if the Company's significant shareholders sell some or all
of their Common Shares or are perceived by the market as intending to sell such common shares. In addition, so long as
the Gazit Group maintains a significant interest in the Company, it may be able to exercise significant influence over the
outcome of any matter submitted to a vote of shareholders of the Company which requires the approval of a simple
majority of shareholders voting at the meeting. The Gazit Group will also be able to exercise significant influence in the
event of a take-over bid for First Capital Realty. This level of ownership may discourage third parties from seeking to
acquire control of the Company, which in turn may adversely affect the market price of the Common Shares.
Moreover, members of the Gazit Group have pledged a substantial portion of their common shares to secure revolving
credit facilities made available to them by commercial banks. The occurrence of an event of default thereunder could
result in a sale of such pledged Common Shares that could cause the Company's Common Share price to decline
materially or may have a material adverse effect on the Company. Many of the occurrences that could result in a default
under the Gazit Group credit facilities, including among other things, foreclosure of the pledged Common Shares, are out
of the Company's control and are unrelated to its operations.
The foregoing information regarding the Gazit Group has been provided by the Gazit Group and has not been
independently verified. There can be no assurances that such information is complete, and as such there may be
additional relevant information not included in the foregoing.
Investments Subject to Credit and Market Risk
The Company provides co-owner financing, priority mortgages and mezzanine loans to third parties in connection with
certain transactions and partnerships (“Loans and Mortgages Receivable”). First Capital Realty also invests in marketable
and other securities. The Company is exposed to customary risks in the event that the values of its Loans and Mortgages
Receivable and/or its investments, in marketable and other securities, decrease due to overall market conditions, business
failure, and/or other non-performance/defaults by the counterparties or investees. Not all lending activities will translate
into acquisitions or equity participation in a project and the value of the assets securing the Company’s Loans and
Mortgages Receivable is dependent on real estate market conditions and in the event of a large market correction, their
value may be unable to support the investments. There can also be no assurance the Company will advance new Loans and
The Company has investments in properties with non-affiliated partners through partnership, co-ownership and limited
liability corporate venture arrangements (collectively, “partnerships”). As a result, the Company does not control all
decisions regarding those properties and may be required to take actions that are in the interest of the partners
collectively, but not in the Company’s sole best interests. Accordingly, the Company may not be able to favourably resolve
any issues that arise with respect to such decisions, or the Company may have to take legal action or provide financial or
other inducements to partners to obtain such resolution. In addition, the Company may be exposed to risks resulting from
the actions, omissions or financial situation of a partner, which may result in harm to the Company’s reputation or
adversely affect the value of the Company’s investments.
Significant Shareholders
Chaim Katzman, the former Chairman of the Board and currently a director of First Capital Realty, and several of the
Company's shareholders affiliated with Mr. Katzman (the “Gazit Group”), including Gazit-Globe and related entities,
beneficially own approximately 31.3% of the outstanding Common Shares. Gazit-Globe is a public company listed on the
New York Stock Exchange ("NYSE") and the Tel-Aviv Stock Exchange ("TASE"). Mr. Katzman is the Chief Executive Officer
and Vice Chairman of Gazit-Globe and its controlling shareholder, Norstar Holdings Inc., a corporation listed on the TASE
(“Norstar”). Additional information concerning Gazit-Globe is available in its public disclosure. Dori J. Segal, the Chairman
of the Board of the Company, is also a director of Gazit-Globe and Norstar. Mr. Katzman as well as Mr. Segal, directly and
indirectly, own shares of Norstar. As a result, Mr. Katzman owns or exercises control over approximately 53.26% of the
outstanding common shares of Gazit-Globe. Mr. Segal directly owns 811,800 common shares of Gazit-Globe, representing
approximately 0.43% of the outstanding common shares of Gazit-Globe. In addition, he also holds 2,965,505 stock options
and if all these options were exercised, he would own approximately 1.95% of the outstanding common shares of Gazit
Globe.
The market price of the common shares could decline materially if the Company's significant shareholders sell some or all
of their Common Shares or are perceived by the market as intending to sell such common shares. In addition, so long as
the Gazit Group maintains a significant interest in the Company, it may be able to exercise significant influence over the
outcome of any matter submitted to a vote of shareholders of the Company which requires the approval of a simple
majority of shareholders voting at the meeting. The Gazit Group will also be able to exercise significant influence in the
event of a take-over bid for First Capital Realty. This level of ownership may discourage third parties from seeking to
acquire control of the Company, which in turn may adversely affect the market price of the Common Shares.
Moreover, members of the Gazit Group have pledged a substantial portion of their common shares to secure revolving
credit facilities made available to them by commercial banks. The occurrence of an event of default thereunder could
result in a sale of such pledged Common Shares that could cause the Company's Common Share price to decline
materially or may have a material adverse effect on the Company. Many of the occurrences that could result in a default
under the Gazit Group credit facilities, including among other things, foreclosure of the pledged Common Shares, are out
of the Company's control and are unrelated to its operations.
The foregoing information regarding the Gazit Group has been provided by the Gazit Group and has not been
independently verified. There can be no assurances that such information is complete, and as such there may be
additional relevant information not included in the foregoing.
Investments Subject to Credit and Market Risk
The Company provides co-owner financing, priority mortgages and mezzanine loans to third parties in connection with
certain transactions and partnerships (“Loans and Mortgages Receivable”). First Capital Realty also invests in marketable
and other securities. The Company is exposed to customary risks in the event that the values of its Loans and Mortgages
Receivable and/or its investments, in marketable and other securities, decrease due to overall market conditions, business
failure, and/or other non-performance/defaults by the counterparties or investees. Not all lending activities will translate
into acquisitions or equity participation in a project and the value of the assets securing the Company’s Loans and
Mortgages Receivable is dependent on real estate market conditions and in the event of a large market correction, their
value may be unable to support the investments. There can also be no assurance the Company will advance new Loans and
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Mortgages Receivable at the same rate or in the same amount repaid, which could negatively impact future earnings.
Additionally, repayment of one or more of the current loans outstanding would result in an immediate decrease of the
Company’s Loans and Mortgages Receivable unless and until such time that the Company advances new loans.
Mortgages Receivable at the same rate or in the same amount repaid, which could negatively impact future earnings.
Additionally, repayment of one or more of the current loans outstanding would result in an immediate decrease of the
Company’s Loans and Mortgages Receivable unless and until such time that the Company advances new loans.
Organizational Structure
Organizational Structure
The Company currently does not pay income tax principally due to its ability to reduce taxable income through unclaimed
Capital Cost Allowance (“CCA”) and non-capital losses. The Company is pursuing converting into a REIT. However,
transactions undertaken by the Company prior to any REIT conversion, including dispositions, could result in higher taxable
income and the use of non-capital losses sooner than estimated and may result in the Company recognizing current income
tax expense before a REIT conversion is completed. If the Company continues as a corporation in 2019, depending on its
level of taxable income, it could recognize current income tax expense. Additionally, the Company may recognize current
income tax expense even if it converts into a REIT, depending on a number of factors including the timing of the conversion,
the resulting organizational structure and the amount of dispositions that increase its annual taxable income above its
annual distributions. Any reorganization of the Company into a REIT will be subject to customary conditions, including the
approval of the shareholders of the Company. No assurance can be given as to whether such reorganization will be
undertaken by the Company, the timing or impact of such reorganization or its terms.
The Company currently does not pay income tax principally due to its ability to reduce taxable income through unclaimed
Capital Cost Allowance (“CCA”) and non-capital losses. The Company is pursuing converting into a REIT. However,
transactions undertaken by the Company prior to any REIT conversion, including dispositions, could result in higher taxable
income and the use of non-capital losses sooner than estimated and may result in the Company recognizing current income
tax expense before a REIT conversion is completed. If the Company continues as a corporation in 2019, depending on its
level of taxable income, it could recognize current income tax expense. Additionally, the Company may recognize current
income tax expense even if it converts into a REIT, depending on a number of factors including the timing of the conversion,
the resulting organizational structure and the amount of dispositions that increase its annual taxable income above its
annual distributions. Any reorganization of the Company into a REIT will be subject to customary conditions, including the
approval of the shareholders of the Company. No assurance can be given as to whether such reorganization will be
undertaken by the Company, the timing or impact of such reorganization or its terms.
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CONSOLIDATED FINANCIAL STATEMENTS
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Management's Responsibility
Independent Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
1 Description of the Company
2 Significant Accounting Policies
3 Adoption of New and Amended IFRS Pronouncements
4 Investment Properties
5 Hotel Property
6 Loans, Mortgages and Other Assets
7 Amounts Receivable
8 Other Assets
9 Capital Management
10 Mortgages and Credit Facilities
11 Senior Unsecured Debentures
12 Convertible Debentures
13 Accounts Payable and Other Liabilities
14 Shareholders' Equity
15 Net Operating Income
16 Interest and Other Income
17 Interest Expense
18 Corporate Expenses
19 Other Gains (Losses) and (Expenses)
20 Income Taxes
21 Per Share Calculations
22 Risk Management
23 Fair Value Measurement
24 Investment in Joint Ventures
25 Subsidiary with Non-controlling Interest
26 Co-ownership Interests
27 Supplemental Other Comprehensive Income (Loss) Information
28 Supplemental Cash Flow Information
29 Commitments and Contingencies
30 Related Party Transactions
31 Subsequent Events
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Management's Responsibility
Independent Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
1 Description of the Company
2 Significant Accounting Policies
3 Adoption of New and Amended IFRS Pronouncements
4 Investment Properties
5 Hotel Property
6 Loans, Mortgages and Other Assets
7 Amounts Receivable
8 Other Assets
9 Capital Management
10 Mortgages and Credit Facilities
11 Senior Unsecured Debentures
12 Convertible Debentures
13 Accounts Payable and Other Liabilities
14 Shareholders' Equity
15 Net Operating Income
16 Interest and Other Income
17 Interest Expense
18 Corporate Expenses
19 Other Gains (Losses) and (Expenses)
20 Income Taxes
21 Per Share Calculations
22 Risk Management
23 Fair Value Measurement
24 Investment in Joint Ventures
25 Subsidiary with Non-controlling Interest
26 Co-ownership Interests
27 Supplemental Other Comprehensive Income (Loss) Information
28 Supplemental Cash Flow Information
29 Commitments and Contingencies
30 Related Party Transactions
31 Subsequent Events
Management’s Responsibility
Management’s Responsibility
The Company’s consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) are the
responsibility of Management and have been prepared in accordance with International Financial Reporting Standards
(“IFRS”).
The preparation of consolidated financial statements and the MD&A necessarily involves the use of estimates based on
Management’s judgment, particularly when transactions affecting the current accounting period cannot be finalized with
certainty until future periods. In addition, in preparing this financial information, Management must make determinations
as to the relevancy of information to be included, and estimates and assumptions that affect the reported information. The
MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital
resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from the present
assessment of this information because future events and circumstances may not occur as expected. The consolidated
financial statements have been properly prepared within reasonable limits of materiality and in light of information
available up to February 12, 2019.
Management is also responsible for the maintenance of financial and operating systems, which include effective controls to
provide reasonable assurance that the Company’s assets are safeguarded, transactions are properly authorized and
recorded, and that reliable financial information is produced.
The Board of Directors is responsible for ensuring that Management fulfills its responsibilities, including the preparation and
presentation of the consolidated financial statements and all of the information in the MD&A, and the maintenance of
financial and operating systems, through its Audit Committee, that is comprised of independent directors who are not
involved in the day-to-day operations of the Company. Each quarter, the Audit Committee meets with Management and, as
necessary, with the independent auditors, Ernst & Young LLP, to satisfy itself that Management’s responsibilities are
properly discharged and to review and report to the Board of Directors on the consolidated financial statements.
The Company’s consolidated financial statements and Management’s Discussion and Analysis (“MD&A”) are the
responsibility of Management and have been prepared in accordance with International Financial Reporting Standards
(“IFRS”).
The preparation of consolidated financial statements and the MD&A necessarily involves the use of estimates based on
Management’s judgment, particularly when transactions affecting the current accounting period cannot be finalized with
certainty until future periods. In addition, in preparing this financial information, Management must make determinations
as to the relevancy of information to be included, and estimates and assumptions that affect the reported information. The
MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital
resources, operating trends, risks and uncertainties. Actual results in the future may differ materially from the present
assessment of this information because future events and circumstances may not occur as expected. The consolidated
financial statements have been properly prepared within reasonable limits of materiality and in light of information
available up to February 12, 2019.
Management is also responsible for the maintenance of financial and operating systems, which include effective controls to
provide reasonable assurance that the Company’s assets are safeguarded, transactions are properly authorized and
recorded, and that reliable financial information is produced.
The Board of Directors is responsible for ensuring that Management fulfills its responsibilities, including the preparation and
presentation of the consolidated financial statements and all of the information in the MD&A, and the maintenance of
financial and operating systems, through its Audit Committee, that is comprised of independent directors who are not
involved in the day-to-day operations of the Company. Each quarter, the Audit Committee meets with Management and, as
necessary, with the independent auditors, Ernst & Young LLP, to satisfy itself that Management’s responsibilities are
properly discharged and to review and report to the Board of Directors on the consolidated financial statements.
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 financial statements.
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 financial statements.
Adam E. Paul
President and Chief Executive Officer
Kay Brekken
Executive Vice President and Chief Financial Officer
Adam E. Paul
President and Chief Executive Officer
Kay Brekken
Executive Vice President and Chief Financial Officer
Toronto, Ontario
February 12, 2019
Toronto, Ontario
February 12, 2019
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Independent Auditor’s Report
Independent Auditor’s Report
To the Shareholders of
First Capital Realty Inc.
Opinion
To the Shareholders of
First Capital Realty Inc.
Opinion
We have audited the consolidated financial statements of First Capital Realty Inc. and its subsidiaries (the Company),
which comprise the consolidated balance sheets as at December 31, 2018 and 2017, and the consolidated statements of
income, consolidated statements of comprehensive income, consolidated statements of changes in equity and
consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects the consolidated
financial position of the Company as at December 31, 2018 and 2017, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs).
We have audited the consolidated financial statements of First Capital Realty Inc. and its subsidiaries (the Company),
which comprise the consolidated balance sheets as at December 31, 2018 and 2017, and the consolidated statements of
income, consolidated statements of comprehensive income, consolidated statements of changes in equity and
consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects the consolidated
financial position of the Company as at December 31, 2018 and 2017, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that
are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Company in accordance with the ethical requirements that
are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Other information
Other information
Management is responsible for the other information. The other information comprises:
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis
• Management’s Discussion and Analysis
•
The information, other than the consolidated financial statements and our auditor’s report thereon, included in the
Annual Report.
•
The information, other than the consolidated financial statements and our auditor’s report thereon, included in the
Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is
to read the other information, and in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact
in this auditor's report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we will
perform on this other information, we conclude there is a material misstatement of other information, we are required to
report that fact to those charged with governance.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is
to read the other information, and in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact
in this auditor's report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we will
perform on this other information, we conclude there is a material misstatement of other information, we are required to
report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRSs, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
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Independent Auditor’s Report
Independent Auditor’s Report
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
•
Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue
as a going concern.
•
Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Kim Tang.
The engagement partner on the audit resulting in this independent auditor’s report is Kim Tang.
Toronto, Canada
February 12, 2019
Toronto, Canada
February 12, 2019
FIRST CAPITAL REALTY ANNUAL REPORT 2018
66
FIRST CAPITAL REALTY ANNUAL REPORT 2018
66
Consolidated Balance Sheets
Consolidated Balance Sheets
Note
December 31, 2018
December 31, 2017
Note
December 31, 2018
December 31, 2017
As at
(thousands of dollars)
ASSETS
Non-current Assets
Real Estate Investments
Investment properties – shopping centres
Investment properties – development land
Investment in joint ventures
Hotel property
Loans, mortgages and other assets
Total real estate investments
Other non-current assets
Total non-current assets
Current Assets
Cash and cash equivalents
Loans, mortgages and other assets
Residential development inventory
Amounts receivable
Other assets
Investment properties classified as held for sale
Total current assets
Total assets
LIABILITIES
Non-current Liabilities
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Other liabilities
Deferred tax liabilities
Total non-current liabilities
Current Liabilities
Bank indebtedness
Mortgages
Credit facilities
Senior unsecured debentures
Accounts payable and other liabilities
Total liabilities
EQUITY
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
Refer to accompanying notes to the consolidated financial statements.
Approved by the Board of Directors:
Al Mawani
Director
Adam E. Paul
Director
67
FIRST CAPITAL REALTY ANNUAL REPORT 2018
$
$
$
4
4
24
5
6
8
28(d)
6
7
8
4(d)
10
10
11
12
13
20
10
10
10
11
13
$
$
$
9,623,905
58,709
144,375
58,604
93,348
9,978,941
30,369
10,009,310
15,534
270,711
9,510
36,391
25,938
358,084
85,661
443,745
10,453,055
1,164,804
514,073
2,297,387
—
20,838
793,300
4,790,402
7,226
121,104
112,099
149,891
264,261
654,581
—
654,581
5,444,983
14
25
4,978,242
29,830
5,008,072
10,453,055
$
$
9,226,206
72,041
202,231
—
133,163
9,633,641
32,008
9,665,649
11,507
146,985
5,483
25,437
15,379
204,791
98,112
302,903
9,968,552
903,807
558,555
2,446,291
54,293
16,914
720,431
4,700,291
3,144
149,453
23,072
149,675
240,154
565,498
7,079
572,577
5,272,868
4,647,071
48,613
4,695,684
9,968,552
As at
(thousands of dollars)
ASSETS
Non-current Assets
Real Estate Investments
Investment properties – shopping centres
Investment properties – development land
Investment in joint ventures
Hotel property
Loans, mortgages and other assets
Total real estate investments
Other non-current assets
Total non-current assets
Current Assets
Cash and cash equivalents
Loans, mortgages and other assets
Residential development inventory
Amounts receivable
Other assets
Investment properties classified as held for sale
Total current assets
Total assets
LIABILITIES
Non-current Liabilities
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Other liabilities
Deferred tax liabilities
Total non-current liabilities
Current Liabilities
Bank indebtedness
Mortgages
Credit facilities
Senior unsecured debentures
Accounts payable and other liabilities
Total liabilities
EQUITY
Shareholders’ equity
Non-controlling interest
Total equity
Total liabilities and equity
Refer to accompanying notes to the consolidated financial statements.
Approved by the Board of Directors:
Al Mawani
Director
Adam E. Paul
Director
67
FIRST CAPITAL REALTY ANNUAL REPORT 2018
$
$
$
4
4
24
5
6
8
28(d)
6
7
8
4(d)
10
10
11
12
13
20
10
10
10
11
13
$
$
$
9,623,905
58,709
144,375
58,604
93,348
9,978,941
30,369
10,009,310
15,534
270,711
9,510
36,391
25,938
358,084
85,661
443,745
10,453,055
1,164,804
514,073
2,297,387
—
20,838
793,300
4,790,402
7,226
121,104
112,099
149,891
264,261
654,581
—
654,581
5,444,983
14
25
4,978,242
29,830
5,008,072
10,453,055
$
$
9,226,206
72,041
202,231
—
133,163
9,633,641
32,008
9,665,649
11,507
146,985
5,483
25,437
15,379
204,791
98,112
302,903
9,968,552
903,807
558,555
2,446,291
54,293
16,914
720,431
4,700,291
3,144
149,453
23,072
149,675
240,154
565,498
7,079
572,577
5,272,868
4,647,071
48,613
4,695,684
9,968,552
Mortgages on investment properties classified as held for sale
Total current liabilities
4(d), 10
Mortgages on investment properties classified as held for sale
Total current liabilities
4(d), 10
Consolidated Statements of Income
Consolidated Statements of Income
Year ended December 31
Year ended December 31
Note
2018
$
729,595 $
Note
2018
$
729,595 $
(thousands of dollars, except per share amounts)
Property rental revenue
Property operating costs
Net operating income
Other income and expenses
Interest and other income
Interest expense
Corporate expenses
Abandoned transaction costs
Amortization expense
Share of profit from joint ventures
Other gains (losses) and (expenses)
Increase (decrease) in value of investment properties, net
Income before income taxes
Deferred income taxes
Net income
Net income attributable to:
Common shareholders
Non-controlling interest
Net income per share attributable to common shareholders:
Basic
Diluted
2017
694,459
256,949
437,510
28,401
(157,411)
(36,442)
(151)
(1,963)
42,860
(1,906)
458,363
331,751
769,261
125,101
644,160
633,089
11,071
644,160
(thousands of dollars, except per share amounts)
Property rental revenue
Property operating costs
Net operating income
Other income and expenses
Interest and other income
Interest expense
Corporate expenses
Abandoned transaction costs
Amortization expense
Share of profit from joint ventures
Other gains (losses) and (expenses)
Increase (decrease) in value of investment properties, net
Income before income taxes
Deferred income taxes
Net income
Net income attributable to:
Common shareholders
Non-controlling interest
274,822
454,773
26,429
(153,240)
(37,094)
(177)
(3,235)
30,411
10,733
102,389
(23,784)
430,989
79,151
351,838 $
343,606 $
8,232
351,838 $
15
16
17
18
24
19
4
20
25
21
21
$
$
$
$
$
2017
694,459
256,949
437,510
28,401
(157,411)
(36,442)
(151)
(1,963)
42,860
(1,906)
458,363
331,751
769,261
125,101
644,160
633,089
11,071
644,160
274,822
454,773
26,429
(153,240)
(37,094)
(177)
(3,235)
30,411
10,733
102,389
(23,784)
430,989
79,151
351,838 $
343,606 $
8,232
351,838 $
15
16
17
18
24
19
4
20
25
21
21
$
$
$
$
$
1.38 $
1.37 $
2.59
2.55
Basic
Diluted
Net income per share attributable to common shareholders:
1.38 $
1.37 $
2.59
2.55
Refer to accompanying notes to the consolidated financial statements.
Refer to accompanying notes to the consolidated financial statements.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
68
FIRST CAPITAL REALTY ANNUAL REPORT 2018
68
Consolidated Statements of Comprehensive Income
Consolidated Statements of Comprehensive Income
(thousands of dollars)
Net income
Other comprehensive income (loss)
Unrealized gain (loss) on cash flow hedges (1)
Reclassification of net losses on cash flow hedges to net income
Deferred tax expense (recovery)
Other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to:
Common shareholders
Non-controlling interest
Year ended December 31
Note
2018
2017
$
351,838
$
644,160
27
27
20
25
$
$
$
(7,638)
1,468
(6,170)
(1,642)
(4,528)
347,310
339,078
8,232
347,310
14,350
1,642
15,992
4,254
11,738
655,898
644,827
11,071
655,898
$
$
$
(thousands of dollars)
Net income
Other comprehensive income (loss)
Unrealized gain (loss) on cash flow hedges (1)
Reclassification of net losses on cash flow hedges to net income
Deferred tax expense (recovery)
Other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to:
Common shareholders
Non-controlling interest
Year ended December 31
Note
2018
2017
$
351,838
$
644,160
27
27
20
25
$
$
$
(7,638)
1,468
(6,170)
(1,642)
(4,528)
347,310
339,078
8,232
347,310
14,350
1,642
15,992
4,254
11,738
655,898
644,827
11,071
655,898
$
$
$
(1) Items that may subsequently be reclassified to net income.
Refer to accompanying notes to the consolidated financial statements.
(1) Items that may subsequently be reclassified to net income.
Refer to accompanying notes to the consolidated financial statements.
69
FIRST CAPITAL REALTY ANNUAL REPORT 2018
69
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Consolidated Statements of Changes in Equity
Consolidated Statements of Changes in Equity
(thousands of dollars)
December 31, 2017
Changes during the year:
Net income
Issuance of common shares
Issue costs, net of tax
Dividends
Options, deferred share units,
restricted share units, and performance
share units, net
Other comprehensive gain (loss)
Contributions from (distributions to) non-
controlling interest, net
(thousands of dollars)
December 31, 2016
Changes during the year:
Net income
Issue costs, net of tax
Dividends
Interest on convertible debentures paid in
common shares
Conversion of convertible debentures
Options, deferred share units,
restricted share units, and performance
share units, net
Other comprehensive gain (loss)
Contributions from (distributions to) non-
controlling interest, net
343,606
—
—
(215,537)
—
—
—
633,089
—
(210,433)
—
—
—
—
—
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Share Capital
Contributed
Surplus and
Other Equity
Items
Total
Shareholders’
Equity
Non-
Controlling
Interest
Total
Equity
(Note 14(a))
(Note 14(b))
$ 1,445,519 $
40 $ 3,159,542 $
41,970 $ 4,647,071 $
48,613 $ 4,695,684
—
—
—
—
—
—
200,019
(6,169)
—
11,556
—
—
—
—
343,606
200,019
(6,169)
(215,537)
2,224
13,780
8,232
—
—
—
—
—
351,838
200,019
(6,169)
(215,537)
13,780
(4,528)
(4,528)
—
—
—
—
—
(4,528)
—
(27,015)
(27,015)
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Share Capital
Contributed
Surplus and
Other Equity
Items
Total
Shareholders’
Equity
Non-
Controlling
Interest
Total
Equity
(Note 14(a))
(Note 14(b))
$ 1,445,519 $
40 $ 3,159,542 $
41,970 $ 4,647,071 $
48,613 $ 4,695,684
—
—
—
—
—
—
200,019
(6,169)
—
11,556
—
—
—
—
343,606
200,019
(6,169)
(215,537)
2,224
13,780
8,232
—
—
—
—
—
351,838
200,019
(6,169)
(215,537)
13,780
(4,528)
(4,528)
—
—
—
—
—
(4,528)
—
(27,015)
(27,015)
December 31, 2018
$ 1,573,588 $
(4,488) $ 3,364,948 $
44,194 $ 4,978,242 $
29,830 $ 5,008,072
December 31, 2018
$ 1,573,588 $
(4,488) $ 3,364,948 $
44,194 $ 4,978,242 $
29,830 $ 5,008,072
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Share Capital
Contributed
Surplus and
Other Equity
Items
Total
Shareholders’
Equity
Non-
Controlling
Interest
Total
Equity
$ 1,022,863 $
(11,698) $ 3,142,399 $
41,699 $ 4,195,263 $
37,820 $ 4,233,083
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Share Capital
Contributed
Surplus and
Other Equity
Items
Total
Shareholders’
Equity
Non-
Controlling
Interest
Total
Equity
$ 1,022,863 $
(11,698) $ 3,142,399 $
41,699 $ 4,195,263 $
37,820 $ 4,233,083
633,089
11,071
644,160
—
—
—
—
—
—
—
(176)
—
2,442
107
14,770
—
—
—
—
(176)
(210,433)
2,442
(3)
274
104
15,044
—
—
—
—
—
(176)
(210,433)
2,442
104
15,044
11,738
—
—
—
—
—
11,738
—
—
(278)
11,738
(278)
633,089
11,071
644,160
—
—
—
—
—
—
—
(176)
—
2,442
107
14,770
—
—
—
—
(176)
(210,433)
2,442
(3)
274
104
15,044
—
—
—
—
—
(176)
(210,433)
2,442
104
15,044
11,738
—
—
—
—
—
11,738
—
—
(278)
11,738
(278)
December 31, 2017
$ 1,445,519 $
40 $ 3,159,542 $
41,970 $ 4,647,071 $
48,613 $ 4,695,684
December 31, 2017
$ 1,445,519 $
40 $ 3,159,542 $
41,970 $ 4,647,071 $
48,613 $ 4,695,684
Refer to accompanying notes to the consolidated financial statements.
Refer to accompanying notes to the consolidated financial statements.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
70
FIRST CAPITAL REALTY ANNUAL REPORT 2018
70
(thousands of dollars)
December 31, 2017
Changes during the year:
Net income
Issuance of common shares
Issue costs, net of tax
Dividends
Options, deferred share units,
restricted share units, and performance
share units, net
Other comprehensive gain (loss)
Contributions from (distributions to) non-
controlling interest, net
(thousands of dollars)
December 31, 2016
Changes during the year:
Net income
Issue costs, net of tax
Dividends
Interest on convertible debentures paid in
common shares
Conversion of convertible debentures
Options, deferred share units,
restricted share units, and performance
share units, net
Other comprehensive gain (loss)
Contributions from (distributions to) non-
controlling interest, net
343,606
—
—
(215,537)
—
—
—
633,089
—
(210,433)
—
—
—
—
—
Consolidated Statements of Cash Flows
Consolidated Statements of Cash Flows
(thousands of dollars)
OPERATING ACTIVITIES
Net income
Adjustments for:
(Increase) decrease in value of investment properties, net
Interest expense
Amortization expense
Share of profit of joint ventures
Cash interest paid associated with operating activities
Items not affecting cash and other items
Net change in non-cash operating items
Cash provided by (used in) operating activities
FINANCING ACTIVITIES
Mortgage borrowings, net of financing costs
Mortgage principal instalment payments
Mortgage repayments
Credit facilities, net advances (repayments)
Issuance of senior unsecured debentures, net of issue costs
Repayment of senior unsecured debentures
Settlement of hedges
Repayment of convertible debentures
Repurchase of convertible debentures
Issuance of common shares, net of issue costs
Payment of dividends
Cash provided by (used in) financing activities
INVESTING ACTIVITIES
Acquisition of shopping centres
Acquisition of development land
Acquisition of Hotel property (net settled with loan repayment)
Net proceeds from property dispositions
Distributions from joint ventures
Contributions to joint ventures
Net contributions from (distributions to) non-controlling interest
Capital expenditures on investment properties
Changes in investing-related prepaid expenses and other liabilities
Changes in loans, mortgages and other assets
Cash provided by (used in) investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Refer to accompanying notes to the consolidated financial statements.
Year ended December 31
Note
2018
2017
$
351,838
$
644,160
4
17
24
17
28(a)
28(b)
10
10
10
10
11
11
12(b)
4(c)
4(c)
5
4(d)
28(c)
28(d) $
(102,389)
153,240
3,235
(30,411)
(151,169)
65,042
(6,374)
283,012
387,875
(26,993)
(134,971)
29,562
—
(150,000)
(149)
(55,092)
—
201,749
(212,651)
39,330
(458,363)
157,411
1,963
(42,860)
(152,130)
129,293
(9,315)
270,159
160,066
(28,733)
(90,966)
322,835
298,254
(250,000)
1,618
(157,325)
(112)
9,478
(209,620)
55,495
(130,153)
(65,669)
(1,794)
(2,052)
99,923
110,924
(25,067)
(27,015)
(266,355)
13,790
(90,516)
(318,315)
4,027
11,507
15,534
$
—
—
88,407
5,922
(4,870)
(278)
(231,905)
(7,420)
(110,551)
(326,364)
(710)
12,217
11,507
(thousands of dollars)
OPERATING ACTIVITIES
Net income
Adjustments for:
(Increase) decrease in value of investment properties, net
Interest expense
Amortization expense
Share of profit of joint ventures
Cash interest paid associated with operating activities
Items not affecting cash and other items
Net change in non-cash operating items
Cash provided by (used in) operating activities
FINANCING ACTIVITIES
Mortgage borrowings, net of financing costs
Mortgage principal instalment payments
Mortgage repayments
Credit facilities, net advances (repayments)
Issuance of senior unsecured debentures, net of issue costs
Repayment of senior unsecured debentures
Settlement of hedges
Repayment of convertible debentures
Repurchase of convertible debentures
Issuance of common shares, net of issue costs
Payment of dividends
Cash provided by (used in) financing activities
INVESTING ACTIVITIES
Acquisition of shopping centres
Acquisition of development land
Acquisition of Hotel property (net settled with loan repayment)
Net proceeds from property dispositions
Distributions from joint ventures
Contributions to joint ventures
Net contributions from (distributions to) non-controlling interest
Capital expenditures on investment properties
Changes in investing-related prepaid expenses and other liabilities
Changes in loans, mortgages and other assets
Cash provided by (used in) investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Refer to accompanying notes to the consolidated financial statements.
Year ended December 31
Note
2018
2017
$
351,838
$
644,160
4
17
24
17
28(a)
28(b)
10
10
10
10
11
11
12(b)
4(c)
4(c)
5
4(d)
28(c)
28(d) $
(102,389)
153,240
3,235
(30,411)
(151,169)
65,042
(6,374)
283,012
387,875
(26,993)
(134,971)
29,562
—
(150,000)
(149)
(55,092)
—
201,749
(212,651)
39,330
(458,363)
157,411
1,963
(42,860)
(152,130)
129,293
(9,315)
270,159
160,066
(28,733)
(90,966)
322,835
298,254
(250,000)
1,618
(157,325)
(112)
9,478
(209,620)
55,495
(130,153)
(65,669)
(1,794)
(2,052)
99,923
110,924
(25,067)
(27,015)
(266,355)
13,790
(90,516)
(318,315)
4,027
11,507
15,534
$
—
—
88,407
5,922
(4,870)
(278)
(231,905)
(7,420)
(110,551)
(326,364)
(710)
12,217
11,507
71
FIRST CAPITAL REALTY ANNUAL REPORT 2018
71
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
1. DESCRIPTION OF THE COMPANY
First Capital Realty Inc. ("First Capital Realty", "FCR", or the “Company”) is a corporation existing under the laws of
Ontario, Canada, and engages in the business of acquiring, developing, redeveloping, owning and managing well-located,
high quality urban retail-centered properties. The Company is listed on the Toronto Stock Exchange (“TSX”) under the
symbol “FCR”, and its head office is located at 85 Hanna Avenue, Suite 400, Toronto, Ontario, M6K 3S3.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”).
(b) Basis of presentation
The audited annual consolidated financial statements are prepared on a going concern basis and have been presented in
Canadian dollars rounded to the nearest thousand, unless otherwise indicated. The accounting policies set out below
have been applied consistently in all material respects. Changes in standards effective for the current year as well as for
future accounting periods are described in Note 3 – “Adoption of New and Amended IFRS Pronouncements”.
Comparative information in the financial statements includes reclassification of certain balances to provide consistency
with current period classification, for further details refer to Note 3(a) - IFRIC Agenda Decision on IAS 7, "Statement of
Cash Flows".
Additionally, management, in measuring the Company's performance or making operating decisions, distinguishes its
operations on a geographical basis. The Company operates in Canada and has three operating segments: Eastern, which
includes operations primarily in Quebec and Ottawa; Central, which includes the Company’s Ontario operations excluding
Ottawa; and Western, which includes operations in Alberta and British Columbia. Operating segments are reported in a
manner consistent with internal reporting provided to the chief operating decision maker, who is the President and Chief
Executive Officer.
1. DESCRIPTION OF THE COMPANY
First Capital Realty Inc. ("First Capital Realty", "FCR", or the “Company”) is a corporation existing under the laws of
Ontario, Canada, and engages in the business of acquiring, developing, redeveloping, owning and managing well-located,
high quality urban retail-centered properties. The Company is listed on the Toronto Stock Exchange (“TSX”) under the
symbol “FCR”, and its head office is located at 85 Hanna Avenue, Suite 400, Toronto, Ontario, M6K 3S3.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”).
(b) Basis of presentation
The audited annual consolidated financial statements are prepared on a going concern basis and have been presented in
Canadian dollars rounded to the nearest thousand, unless otherwise indicated. The accounting policies set out below
have been applied consistently in all material respects. Changes in standards effective for the current year as well as for
future accounting periods are described in Note 3 – “Adoption of New and Amended IFRS Pronouncements”.
Comparative information in the financial statements includes reclassification of certain balances to provide consistency
with current period classification, for further details refer to Note 3(a) - IFRIC Agenda Decision on IAS 7, "Statement of
Cash Flows".
Additionally, management, in measuring the Company's performance or making operating decisions, distinguishes its
operations on a geographical basis. The Company operates in Canada and has three operating segments: Eastern, which
includes operations primarily in Quebec and Ottawa; Central, which includes the Company’s Ontario operations excluding
Ottawa; and Western, which includes operations in Alberta and British Columbia. Operating segments are reported in a
manner consistent with internal reporting provided to the chief operating decision maker, who is the President and Chief
Executive Officer.
These audited annual consolidated financial statements were approved by the Board of Directors and authorized for issue
on February 12, 2019.
These audited annual consolidated financial statements were approved by the Board of Directors and authorized for issue
on February 12, 2019.
(c) Basis of consolidation
The consolidated financial statements include the financial statements of the Company as well as the entities that are
controlled by the Company (subsidiaries). The Company controls an entity when the Company is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are
deconsolidated from the date that control ceases. Inter-company transactions, balances and other transactions between
consolidated entities are eliminated.
(d) Business combinations
At the time of acquisition of property, the Company considers whether the acquisition represents the acquisition of a
business. The Company accounts for an acquisition as a business combination where an integrated set of activities is
acquired in addition to the property.
The cost of a business combination is measured as the aggregate of the consideration transferred at acquisition date fair
value. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at fair value at the acquisition date. The Company recognizes any contingent consideration to be
transferred by the Company at its acquisition date fair value. Goodwill is initially measured at cost, being the excess of the
(c) Basis of consolidation
The consolidated financial statements include the financial statements of the Company as well as the entities that are
controlled by the Company (subsidiaries). The Company controls an entity when the Company is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are
deconsolidated from the date that control ceases. Inter-company transactions, balances and other transactions between
consolidated entities are eliminated.
(d) Business combinations
At the time of acquisition of property, the Company considers whether the acquisition represents the acquisition of a
business. The Company accounts for an acquisition as a business combination where an integrated set of activities is
acquired in addition to the property.
The cost of a business combination is measured as the aggregate of the consideration transferred at acquisition date fair
value. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured initially at fair value at the acquisition date. The Company recognizes any contingent consideration to be
transferred by the Company at its acquisition date fair value. Goodwill is initially measured at cost, being the excess of the
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
purchase price over the fair value of the net identifiable assets acquired and liabilities assumed. Acquisition-related costs
are expensed in the period incurred.
purchase price over the fair value of the net identifiable assets acquired and liabilities assumed. Acquisition-related costs
are expensed in the period incurred.
When the acquisition of property does not represent a business, it is accounted for as an acquisition of a group of assets
and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair
values, and no goodwill is recognized. Acquisition-related costs are capitalized to investment property at the time the
acquisition is completed.
(e) Investments in joint arrangements
The Company accounts for its investment in joint ventures using the equity method and accounts for investments in joint
operations by recognizing the Company’s direct rights to assets, obligations for liabilities, revenues and expenses. Under
the equity method, the interest in the joint venture is carried in the balance sheet at cost plus post-acquisition changes in
the Company’s share of the net assets of the joint ventures, less distributions received and less any impairment in the
value of individual investments. The Company's income statement reflects its share of the results of operations of the
joint ventures after tax, if applicable.
(f) Investment properties
Investment properties consist of shopping centres and development land that are held to earn rental income or for capital
appreciation, or both. Investment properties also include properties that are being constructed or developed for future
use, as well as ground leases to which the Company is the lessee. The Company classifies its investment properties on its
consolidated balance sheets as follows:
(i) Shopping centres
Shopping centres include the Company's shopping centre portfolio, properties currently under development or
redevelopment, and any adjacent land parcels available for expansion but not currently under development.
(ii) Development land
Development land includes land parcels which are not part of one of the Company’s existing shopping centres and which
are at various stages of development planning, primarily for future retail or mixed-use occupancy.
(iii) Investment properties classified as held for sale
Investment property is classified as held for sale when it is expected that the carrying amount will be recovered principally
through sale rather than from continuing use. For this to be the case, the property must be available for immediate sale in
its present condition, subject only to terms that are usual and customary for sales of such property, and its sale must be
highly probable, generally within one year. Upon designation as held for sale, the investment property continues to be
measured at fair value and is presented separately on the consolidated balance sheets.
When the acquisition of property does not represent a business, it is accounted for as an acquisition of a group of assets
and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair
values, and no goodwill is recognized. Acquisition-related costs are capitalized to investment property at the time the
acquisition is completed.
(e) Investments in joint arrangements
The Company accounts for its investment in joint ventures using the equity method and accounts for investments in joint
operations by recognizing the Company’s direct rights to assets, obligations for liabilities, revenues and expenses. Under
the equity method, the interest in the joint venture is carried in the balance sheet at cost plus post-acquisition changes in
the Company’s share of the net assets of the joint ventures, less distributions received and less any impairment in the
value of individual investments. The Company's income statement reflects its share of the results of operations of the
joint ventures after tax, if applicable.
(f) Investment properties
Investment properties consist of shopping centres and development land that are held to earn rental income or for capital
appreciation, or both. Investment properties also include properties that are being constructed or developed for future
use, as well as ground leases to which the Company is the lessee. The Company classifies its investment properties on its
consolidated balance sheets as follows:
(i) Shopping centres
Shopping centres include the Company's shopping centre portfolio, properties currently under development or
redevelopment, and any adjacent land parcels available for expansion but not currently under development.
(ii) Development land
Development land includes land parcels which are not part of one of the Company’s existing shopping centres and which
are at various stages of development planning, primarily for future retail or mixed-use occupancy.
(iii) Investment properties classified as held for sale
Investment property is classified as held for sale when it is expected that the carrying amount will be recovered principally
through sale rather than from continuing use. For this to be the case, the property must be available for immediate sale in
its present condition, subject only to terms that are usual and customary for sales of such property, and its sale must be
highly probable, generally within one year. Upon designation as held for sale, the investment property continues to be
measured at fair value and is presented separately on the consolidated balance sheets.
Valuation method
Valuation method
Investment properties are recorded at fair value, which reflects current market conditions, at each balance sheet date.
Gains and losses from changes in fair values are recorded in net income in the period in which they arise.
Investment properties are recorded at fair value, which reflects current market conditions, at each balance sheet date.
Gains and losses from changes in fair values are recorded in net income in the period in which they arise.
The determination of fair values requires management to make estimates and assumptions that affect the values
presented, such that actual values in sales transactions may differ from those presented.
The Company's policy in determining the fair value of its investment properties at the end of each reporting period,
includes the following approaches:
The determination of fair values requires management to make estimates and assumptions that affect the values
presented, such that actual values in sales transactions may differ from those presented.
The Company's policy in determining the fair value of its investment properties at the end of each reporting period,
includes the following approaches:
1. Internal valuations - by a certified staff appraiser employed by the Company, in accordance with professional appraisal
standards and IFRS. Every investment property has an internal valuation completed at least once a year.
1. Internal valuations - by a certified staff appraiser employed by the Company, in accordance with professional appraisal
standards and IFRS. Every investment property has an internal valuation completed at least once a year.
2. Value updates - primarily consisting of management's review of the key assumptions from previous internal valuations
and updating the value for changes in the property cash flow, physical condition and changes in market conditions.
2. Value updates - primarily consisting of management's review of the key assumptions from previous internal valuations
and updating the value for changes in the property cash flow, physical condition and changes in market conditions.
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External appraisals are obtained periodically by Management. These appraisals are used as data points, together with
other market information accumulated by Management, in arriving at its conclusions on key assumptions and values.
External appraisals are completed by an independent appraisal firm, in accordance with professional appraisal standards
and IFRS.
The selection of the approach for each property is made based upon the following criteria:
• Property type – this includes an evaluation of a property's complexity, stage of development, time since acquisition, and
other specific opportunities or risks associated with the property. Stable properties and recently acquired properties
will generally receive a value update, while properties under development will typically be valued using internal
valuations until completion.
• Market risks – specific risks in a region or a trade area may warrant an internal valuation for certain properties.
• Changes in overall economic conditions – significant changes in overall economic conditions may increase the number
of external or internal appraisals performed.
External appraisals are obtained periodically by Management. These appraisals are used as data points, together with
other market information accumulated by Management, in arriving at its conclusions on key assumptions and values.
External appraisals are completed by an independent appraisal firm, in accordance with professional appraisal standards
and IFRS.
The selection of the approach for each property is made based upon the following criteria:
• Property type – this includes an evaluation of a property's complexity, stage of development, time since acquisition, and
other specific opportunities or risks associated with the property. Stable properties and recently acquired properties
will generally receive a value update, while properties under development will typically be valued using internal
valuations until completion.
• Market risks – specific risks in a region or a trade area may warrant an internal valuation for certain properties.
• Changes in overall economic conditions – significant changes in overall economic conditions may increase the number
of external or internal appraisals performed.
• Business needs – financings or acquisitions and dispositions may require an external appraisal.
• Business needs – financings or acquisitions and dispositions may require an external appraisal.
Valuation Inputs
Valuation Inputs
The Company’s investment property is measured using Level 3 inputs (in accordance with IFRS fair value hierarchy), as not
all significant inputs are based on observable market data (unobservable inputs). These unobservable inputs reflect the
Company’s own assumptions of how market participants would price investment property, and are developed based on
the best information available, including the Company’s own data. These significant unobservable inputs include:
• Stabilized cash flows or net operating income, which is based on the location, type and quality of the properties and
supported by the terms of any existing lease, other contracts, or external evidence such as current market rents for
similar properties, adjusted for estimated vacancy rates based on current and expected future market conditions after
expiry of any current lease and expected maintenance costs.
• Stabilized capitalization rates, discount rates and terminal capitalization rates, which are based on location, size and
quality of the properties and taking into account market data at the valuation date. Stabilized capitalization rates are
used for the direct capitalization method and discount and terminal capitalization rates are used in the discounted cash
flow method described below.
• Costs to complete for properties under development.
(i) Shopping centres
The Company’s investment property is measured using Level 3 inputs (in accordance with IFRS fair value hierarchy), as not
all significant inputs are based on observable market data (unobservable inputs). These unobservable inputs reflect the
Company’s own assumptions of how market participants would price investment property, and are developed based on
the best information available, including the Company’s own data. These significant unobservable inputs include:
• Stabilized cash flows or net operating income, which is based on the location, type and quality of the properties and
supported by the terms of any existing lease, other contracts, or external evidence such as current market rents for
similar properties, adjusted for estimated vacancy rates based on current and expected future market conditions after
expiry of any current lease and expected maintenance costs.
• Stabilized capitalization rates, discount rates and terminal capitalization rates, which are based on location, size and
quality of the properties and taking into account market data at the valuation date. Stabilized capitalization rates are
used for the direct capitalization method and discount and terminal capitalization rates are used in the discounted cash
flow method described below.
• Costs to complete for properties under development.
(i) Shopping centres
Shopping centres are appraised primarily based on an income approach that reflects stabilized cash flows or net operating
income from existing tenants with the property in its existing state, since purchasers typically focus on expected income.
Internal valuations are conducted using and placing reliance on both the direct capitalization method and the discounted
cash flow method (including the estimated proceeds from a potential future disposition).
Shopping centres are appraised primarily based on an income approach that reflects stabilized cash flows or net operating
income from existing tenants with the property in its existing state, since purchasers typically focus on expected income.
Internal valuations are conducted using and placing reliance on both the direct capitalization method and the discounted
cash flow method (including the estimated proceeds from a potential future disposition).
(ii) Properties under development
(ii) Properties under development
Properties undergoing development, redevelopment or expansion are valued either (i) using the discounted cash flow
method, with a deduction for costs to complete the project, or (ii) at cost, when cost approximates fair value. Stabilized
capitalization rates, discount rates and terminal capitalization rates, as applicable, are adjusted to reflect lease-up
assumptions and construction risk, when appropriate. Adjacent land parcels held for future development are valued
based on comparable sales of commercial land.
The primary method of appraisal for development land is the comparable sales approach, which considers recent sales
activity for similar land parcels in the same or similar markets to estimate a value on either a per acre basis or on a basis
of per square foot buildable. Such values are applied to the Company’s properties after adjusting for factors specific to the
site, including its location, zoning, servicing and configuration.
The cost of development properties includes direct development costs, including internal development costs, realty taxes
and borrowing costs attributable to the development. Borrowing costs associated with expenditures on properties under
development or redevelopment are capitalized. Borrowing costs are also capitalized on land or properties acquired
specifically for development or redevelopment when activities necessary to prepare the asset for development or
Properties undergoing development, redevelopment or expansion are valued either (i) using the discounted cash flow
method, with a deduction for costs to complete the project, or (ii) at cost, when cost approximates fair value. Stabilized
capitalization rates, discount rates and terminal capitalization rates, as applicable, are adjusted to reflect lease-up
assumptions and construction risk, when appropriate. Adjacent land parcels held for future development are valued
based on comparable sales of commercial land.
The primary method of appraisal for development land is the comparable sales approach, which considers recent sales
activity for similar land parcels in the same or similar markets to estimate a value on either a per acre basis or on a basis
of per square foot buildable. Such values are applied to the Company’s properties after adjusting for factors specific to the
site, including its location, zoning, servicing and configuration.
The cost of development properties includes direct development costs, including internal development costs, realty taxes
and borrowing costs attributable to the development. Borrowing costs associated with expenditures on properties under
development or redevelopment are capitalized. Borrowing costs are also capitalized on land or properties acquired
specifically for development or redevelopment when activities necessary to prepare the asset for development or
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
redevelopment are in progress. The amount of borrowing costs capitalized is determined first by reference to borrowings
specific to the project, where relevant, and otherwise by applying a weighted average cost of borrowings to eligible
expenditures after adjusting for borrowings associated with other specific developments. Where borrowings are
associated with specific developments, the amount capitalized is the gross cost incurred on those borrowings, less any
interest income earned on funds not yet employed in construction funding.
Capitalization of borrowing costs and all other costs commences when the activities necessary to prepare an asset for
development or redevelopment begin, and continue until the date that construction is complete and all necessary
occupancy and related permits have been received, whether or not the space is leased. If the Company is required as a
condition of a lease to construct tenant improvements that enhance the value of the property, then capitalization of costs
continues until such improvements are completed. Capitalization ceases if there are prolonged periods when
development activity is interrupted.
redevelopment are in progress. The amount of borrowing costs capitalized is determined first by reference to borrowings
specific to the project, where relevant, and otherwise by applying a weighted average cost of borrowings to eligible
expenditures after adjusting for borrowings associated with other specific developments. Where borrowings are
associated with specific developments, the amount capitalized is the gross cost incurred on those borrowings, less any
interest income earned on funds not yet employed in construction funding.
Capitalization of borrowing costs and all other costs commences when the activities necessary to prepare an asset for
development or redevelopment begin, and continue until the date that construction is complete and all necessary
occupancy and related permits have been received, whether or not the space is leased. If the Company is required as a
condition of a lease to construct tenant improvements that enhance the value of the property, then capitalization of costs
continues until such improvements are completed. Capitalization ceases if there are prolonged periods when
development activity is interrupted.
As required by IFRS in determining investment property fair value, the Company makes no adjustments for portfolio
premiums and discounts, nor for any value attributable to the Company's management platform.
As required by IFRS in determining investment property fair value, the Company makes no adjustments for portfolio
premiums and discounts, nor for any value attributable to the Company's management platform.
(g) Hotel property
The Company accounts for its hotel property as property, plant, and equipment under the revaluation model. The hotel
property is recognized initially at cost, or fair value if acquired in a business combination and subsequently carried at fair
value at the revaluation date less any accumulated impairment and subsequent accumulated amortization. The Company
amortizes these assets on a straight-line basis over their relevant estimated useful lives. The estimated useful life of the
assets range from 3 to 40 years. The fair value of the hotel property is based on an income approach and determined using a
discounted cash flow model.
Revaluation of the hotel property is performed annually at December 31, the end of the fiscal year. Where the carrying
amount of an asset is increased as a result of a revaluation, the increase is recognized in other comprehensive income and
accumulated in equity within revaluation surplus, unless the increase reverses a previously recognized revaluation loss
recorded through prior period net income, in which case that portion of the increase is recognized in net income. Where the
carrying amount of an asset is decreased, the decrease is recognized in other comprehensive income to the extent of any
balance existing in revaluation surplus in respect of the asset, with the remainder recognized in net income. Revaluation
gains are recognized in other comprehensive income, and are not subsequently recycled into profit or loss. The cumulative
revaluation surplus is transferred directly to retained earnings when the asset is derecognized.
(g) Hotel property
The Company accounts for its hotel property as property, plant, and equipment under the revaluation model. The hotel
property is recognized initially at cost, or fair value if acquired in a business combination and subsequently carried at fair
value at the revaluation date less any accumulated impairment and subsequent accumulated amortization. The Company
amortizes these assets on a straight-line basis over their relevant estimated useful lives. The estimated useful life of the
assets range from 3 to 40 years. The fair value of the hotel property is based on an income approach and determined using a
discounted cash flow model.
Revaluation of the hotel property is performed annually at December 31, the end of the fiscal year. Where the carrying
amount of an asset is increased as a result of a revaluation, the increase is recognized in other comprehensive income and
accumulated in equity within revaluation surplus, unless the increase reverses a previously recognized revaluation loss
recorded through prior period net income, in which case that portion of the increase is recognized in net income. Where the
carrying amount of an asset is decreased, the decrease is recognized in other comprehensive income to the extent of any
balance existing in revaluation surplus in respect of the asset, with the remainder recognized in net income. Revaluation
gains are recognized in other comprehensive income, and are not subsequently recycled into profit or loss. The cumulative
revaluation surplus is transferred directly to retained earnings when the asset is derecognized.
The revenue and operating expenses of the hotel property are included within net operating income in the Company's
consolidated statements of income.
The revenue and operating expenses of the hotel property are included within net operating income in the Company's
consolidated statements of income.
(h) Residential development inventory
Residential development inventory which is developed for sale is recorded at the lower of cost and estimated net
realizable value. Residential development inventory is reviewed for impairment at each reporting date. An impairment
loss is recognized in net income when the carrying value of the property exceeds its net realizable value. Net realizable
value is based on projections of future cash flows which take into account the development plans for each project and
management’s best estimate of the most probable set of anticipated economic conditions.
The cost of residential development inventory includes borrowing costs directly attributable to projects under active
development. The amount of borrowing costs capitalized is determined first by reference to borrowings specific to the
project, where relevant, and otherwise by applying a weighted average capitalization rate for the Company’s other
borrowings to eligible expenditures. Borrowing costs are not capitalized on residential development inventory where no
development activity is taking place.
(i) Taxation
Current income tax assets and liabilities are measured at the amount expected to be received from or paid to tax
authorities based on the tax rates and laws enacted or substantively enacted at the consolidated balance sheet dates.
(h) Residential development inventory
Residential development inventory which is developed for sale is recorded at the lower of cost and estimated net
realizable value. Residential development inventory is reviewed for impairment at each reporting date. An impairment
loss is recognized in net income when the carrying value of the property exceeds its net realizable value. Net realizable
value is based on projections of future cash flows which take into account the development plans for each project and
management’s best estimate of the most probable set of anticipated economic conditions.
The cost of residential development inventory includes borrowing costs directly attributable to projects under active
development. The amount of borrowing costs capitalized is determined first by reference to borrowings specific to the
project, where relevant, and otherwise by applying a weighted average capitalization rate for the Company’s other
borrowings to eligible expenditures. Borrowing costs are not capitalized on residential development inventory where no
development activity is taking place.
(i) Taxation
Current income tax assets and liabilities are measured at the amount expected to be received from or paid to tax
authorities based on the tax rates and laws enacted or substantively enacted at the consolidated balance sheet dates.
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Deferred tax liabilities are measured by applying the appropriate tax rate to temporary differences between the carrying
amounts of assets and liabilities, and their respective tax basis. The appropriate tax rate is determined by reference to the
rates that are expected to apply to the year and the jurisdiction in which the assets are expected to be realized or the
liabilities settled.
Deferred tax assets are recorded for all deductible temporary differences, carry forward of unused tax credits and unused
tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, unused tax credits and unused tax losses can be utilized. For the determination of deferred tax assets and
liabilities where investment property is measured using the fair value model, the presumption is that the carrying amount
of an investment property is recovered through sale, as opposed to presuming that the economic benefits of the
investment property will be substantially consumed through use over time.
Deferred tax liabilities are measured by applying the appropriate tax rate to temporary differences between the carrying
amounts of assets and liabilities, and their respective tax basis. The appropriate tax rate is determined by reference to the
rates that are expected to apply to the year and the jurisdiction in which the assets are expected to be realized or the
liabilities settled.
Deferred tax assets are recorded for all deductible temporary differences, carry forward of unused tax credits and unused
tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, unused tax credits and unused tax losses can be utilized. For the determination of deferred tax assets and
liabilities where investment property is measured using the fair value model, the presumption is that the carrying amount
of an investment property is recovered through sale, as opposed to presuming that the economic benefits of the
investment property will be substantially consumed through use over time.
Current and deferred income taxes are recognized in correlation to the underlying transaction either in OCI or directly in
equity.
Current and deferred income taxes are recognized in correlation to the underlying transaction either in OCI or directly in
equity.
(j) Provisions
A provision is a liability of uncertain timing or amount. The Company records provisions, including asset retirement
obligations, when it has a present legal or constructive obligation as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not
recognized for future operating losses. Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a discount rate that reflects current market assessments of the time value of money
and the risks specific to the obligation. Provisions are remeasured at each consolidated balance sheet date using the
current discount rate. The increase in the provision due to passage of time is recognized as interest expense.
(k) Share-based payments
Equity-settled share-based compensation, including stock options, restricted share units, performance share units and
deferred share units, is measured at the fair value of the grants on the grant date. The fair value of options is estimated
using an accepted option pricing model, as appropriate to the instrument. The cost of equity-settled share-based
compensation is recognized in the consolidated statements of income consistent with the vesting features of each grant.
(l) Revenue recognition
The Company has not transferred substantially all of the risks and benefits of ownership of its investment properties and,
therefore, accounts for leases with its tenants as operating leases.
Revenue recognition under a lease commences when the tenant has a right to use the leased asset, which is typically
when the space is turned over to the tenant to begin fixturing. Where the Company is required to make additions to the
property in the form of tenant improvements that enhance the value of the property, revenue recognition begins upon
substantial completion of those improvements.
The Company's revenues are earned from lease contracts with tenants and include both a lease component and a non-
lease component.
(j) Provisions
A provision is a liability of uncertain timing or amount. The Company records provisions, including asset retirement
obligations, when it has a present legal or constructive obligation as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not
recognized for future operating losses. Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a discount rate that reflects current market assessments of the time value of money
and the risks specific to the obligation. Provisions are remeasured at each consolidated balance sheet date using the
current discount rate. The increase in the provision due to passage of time is recognized as interest expense.
(k) Share-based payments
Equity-settled share-based compensation, including stock options, restricted share units, performance share units and
deferred share units, is measured at the fair value of the grants on the grant date. The fair value of options is estimated
using an accepted option pricing model, as appropriate to the instrument. The cost of equity-settled share-based
compensation is recognized in the consolidated statements of income consistent with the vesting features of each grant.
(l) Revenue recognition
The Company has not transferred substantially all of the risks and benefits of ownership of its investment properties and,
therefore, accounts for leases with its tenants as operating leases.
Revenue recognition under a lease commences when the tenant has a right to use the leased asset, which is typically
when the space is turned over to the tenant to begin fixturing. Where the Company is required to make additions to the
property in the form of tenant improvements that enhance the value of the property, revenue recognition begins upon
substantial completion of those improvements.
The Company's revenues are earned from lease contracts with tenants and include both a lease component and a non-
lease component.
Base rent, straight-line rent, realty tax recoveries, lease surrender fees and percentage rent are considered lease
components and are in the scope of IAS 17 Leases ("IAS 17").
Base rent, straight-line rent, realty tax recoveries, lease surrender fees and percentage rent are considered lease
components and are in the scope of IAS 17 Leases ("IAS 17").
The total amount of contractual base rent to be received from operating leases is recognized on a straight-line basis over
the term of the lease, including any fixturing period. A receivable, which is included in the carrying amount of an
investment property, is recorded for the difference between the straight-line rental revenue recorded and the contractual
amount received.
The total amount of contractual base rent to be received from operating leases is recognized on a straight-line basis over
the term of the lease, including any fixturing period. A receivable, which is included in the carrying amount of an
investment property, is recorded for the difference between the straight-line rental revenue recorded and the contractual
amount received.
Realty tax recoveries are variable recoveries relating to the leased property and do not transfer a good or service to the
lessee and as a result are recognized as costs are incurred and chargeable to tenants.
Realty tax recoveries are variable recoveries relating to the leased property and do not transfer a good or service to the
lessee and as a result are recognized as costs are incurred and chargeable to tenants.
Lease surrender fees are earned from tenants in connection with the cancellation or early termination of their remaining
lease obligations, and is recognized when a lease termination agreement is signed and collection is reasonably assured.
Lease surrender fees are earned from tenants in connection with the cancellation or early termination of their remaining
lease obligations, and is recognized when a lease termination agreement is signed and collection is reasonably assured.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Percentage rents are recognized when the sales thresholds set out in the leases have been met.
Percentage rents are recognized when the sales thresholds set out in the leases have been met.
Operating cost recoveries relate to the property management services provided to maintain the property and are
considered non-lease components subject to the guidance in IFRS 15 Revenue from Contracts with Customers ("IFRS 15").
The property management services are considered one performance obligation, meeting the criteria for over time
recognition and are recognized in the period that recoverable costs are incurred or services are performed.
(m) Financial instruments and derivatives
Effective January 1, 2018 in accordance with IFRS 9, “Financial Instruments” (“IFRS 9”) all financial instruments are
required to be measured at fair value on initial recognition. Measurement in subsequent periods depends on whether the
financial instrument has been classified as fair value through profit or loss (“FVTPL”), fair value through other
comprehensive income (“FVOCI”) or amortized cost.
Prior to January 1, 2018 in accordance with IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”) all
financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods
depends on whether the financial instrument has been classified as fair value through profit or loss (“FVTPL”), available-
for-sale (“AFS”), held-to-maturity, loans and receivables or other liabilities.
Operating cost recoveries relate to the property management services provided to maintain the property and are
considered non-lease components subject to the guidance in IFRS 15 Revenue from Contracts with Customers ("IFRS 15").
The property management services are considered one performance obligation, meeting the criteria for over time
recognition and are recognized in the period that recoverable costs are incurred or services are performed.
(m) Financial instruments and derivatives
Effective January 1, 2018 in accordance with IFRS 9, “Financial Instruments” (“IFRS 9”) all financial instruments are
required to be measured at fair value on initial recognition. Measurement in subsequent periods depends on whether the
financial instrument has been classified as fair value through profit or loss (“FVTPL”), fair value through other
comprehensive income (“FVOCI”) or amortized cost.
Prior to January 1, 2018 in accordance with IAS 39, “Financial Instruments: Recognition and Measurement” (“IAS 39”) all
financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent periods
depends on whether the financial instrument has been classified as fair value through profit or loss (“FVTPL”), available-
for-sale (“AFS”), held-to-maturity, loans and receivables or other liabilities.
Derivative instruments are recorded in the consolidated balance sheets at fair value, including those derivatives that are
embedded in financial or non-financial contracts.
Derivative instruments are recorded in the consolidated balance sheets at fair value, including those derivatives that are
embedded in financial or non-financial contracts.
The Company enters into forward contracts, interest rate swaps, and cross currency swaps to hedge its risks associated
with movements in interest rates and the movement in the Canadian to US dollar exchange rate. Derivatives are carried as
assets when the fair value is positive and as liabilities when the fair value is negative. Hedge accounting is discontinued
prospectively when the hedging relationship is terminated, when the instrument no longer qualifies as a hedge, or when
the hedged item is sold or terminated. In cash flow hedging relationships, the portion of the change in the fair value of
the hedging derivative that is considered to be effective is recognized in other comprehensive income (“OCI”) while the
portion considered to be ineffective is recognized in net income. Unrealized hedging gains and losses in accumulated
other comprehensive income (“AOCI”) are reclassified to net income in the periods when the hedged item affects net
income. Gains and losses on derivatives are immediately reclassified to net income when the hedged item is sold or
terminated or when it is determined that a hedged forecasted transaction is no longer probable.
The Company enters into forward contracts, interest rate swaps, and cross currency swaps to hedge its risks associated
with movements in interest rates and the movement in the Canadian to US dollar exchange rate. Derivatives are carried as
assets when the fair value is positive and as liabilities when the fair value is negative. Hedge accounting is discontinued
prospectively when the hedging relationship is terminated, when the instrument no longer qualifies as a hedge, or when
the hedged item is sold or terminated. In cash flow hedging relationships, the portion of the change in the fair value of
the hedging derivative that is considered to be effective is recognized in other comprehensive income (“OCI”) while the
portion considered to be ineffective is recognized in net income. Unrealized hedging gains and losses in accumulated
other comprehensive income (“AOCI”) are reclassified to net income in the periods when the hedged item affects net
income. Gains and losses on derivatives are immediately reclassified to net income when the hedged item is sold or
terminated or when it is determined that a hedged forecasted transaction is no longer probable.
Changes in the fair value of derivative instruments, including embedded derivatives, that are not designated as hedges for
accounting purposes, are recognized in other gains (losses) and (expenses).
Changes in the fair value of derivative instruments, including embedded derivatives, that are not designated as hedges for
accounting purposes, are recognized in other gains (losses) and (expenses).
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
The following summarizes the Company’s classification and measurement of financial assets and liabilities:
The following summarizes the Company’s classification and measurement of financial assets and liabilities:
December 31, 2018
Classification &
Measurement (IFRS 9)
December 31, 2017
Classification (IAS 39)
Measurement (IAS 39)
December 31, 2018
Classification &
Measurement (IFRS 9)
December 31, 2017
Classification (IAS 39)
Measurement (IAS 39)
FVTPL
FVTPL
Amortized Cost
FVTPL
FVTPL
Amortized Cost
Amortized Cost
Amortized Cost
Financial assets
Other investments/Investments designated as AFS
Derivative assets
Loans and mortgages receivable
Loans and mortgages receivable (1)
Equity securities designated as FVTPL
Amounts receivable
Cash and cash equivalents
Restricted cash
Financial liabilities
Bank indebtedness
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Accounts payable and other liabilities
Derivative liabilities
(1) The Loans whose cash flows are solely payments of principal or interest are classified as FVTPL.
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
FVTPL
AFS
FVTPL
Loans and receivables
N/A
FVTPL
Loans and receivables
Loans and receivables
Loans and receivables
Other liabilities
Other liabilities
Other liabilities
Other liabilities
Other liabilities
Other liabilities
FVTPL
Fair Value
Fair Value
Amortized Cost
N/A
Fair Value
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Fair Value
FVTPL
FVTPL
Amortized Cost
FVTPL
FVTPL
Amortized Cost
Amortized Cost
Amortized Cost
Financial assets
Other investments/Investments designated as AFS
Derivative assets
Loans and mortgages receivable
Loans and mortgages receivable (1)
Equity securities designated as FVTPL
Amounts receivable
Cash and cash equivalents
Restricted cash
Financial liabilities
Bank indebtedness
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Accounts payable and other liabilities
Derivative liabilities
(1) The Loans whose cash flows are solely payments of principal or interest are classified as FVTPL.
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
FVTPL
AFS
FVTPL
Loans and receivables
N/A
FVTPL
Loans and receivables
Loans and receivables
Loans and receivables
Other liabilities
Other liabilities
Other liabilities
Other liabilities
Other liabilities
Other liabilities
FVTPL
Fair Value
Fair Value
Amortized Cost
N/A
Fair Value
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Fair Value
In determining fair values, the Company evaluates counterparty credit risks and makes adjustments to fair values and
credit spreads based upon changes in these risks.
Fair value measurements recognized in the consolidated balance sheets are categorized using a fair value hierarchy that
reflects the significance of inputs used in determining the fair values:
(i) Level 1 Inputs – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has
the ability to access at the measurement date. The Company’s investments in equity securities are measured using
Level 1 inputs;
(ii) Level 2 Inputs – inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices). The Company’s derivative assets and liabilities
are measured using Level 2 inputs; and
(iii) Level 3 Inputs – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
These unobservable inputs reflect the Company's own assumptions about the data that market participants would
use in pricing the asset or liability, and are developed based on the best information available, including the
Company’s own data. The Company's loans and mortgages receivable classified as FVTPL and other investments are
measured using Level 3 inputs.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level
input that is significant to the fair value measurement as a whole) at the end of each reporting period.
(n) Cash and cash equivalents
Cash and cash equivalents include cash and short-term investments with original maturities at the time of acquisition of
three months or less.
In determining fair values, the Company evaluates counterparty credit risks and makes adjustments to fair values and
credit spreads based upon changes in these risks.
Fair value measurements recognized in the consolidated balance sheets are categorized using a fair value hierarchy that
reflects the significance of inputs used in determining the fair values:
(i) Level 1 Inputs – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has
the ability to access at the measurement date. The Company’s investments in equity securities are measured using
Level 1 inputs;
(ii) Level 2 Inputs – inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e., as prices) or indirectly (i.e., derived from prices). The Company’s derivative assets and liabilities
are measured using Level 2 inputs; and
(iii) Level 3 Inputs – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
These unobservable inputs reflect the Company's own assumptions about the data that market participants would
use in pricing the asset or liability, and are developed based on the best information available, including the
Company’s own data. The Company's loans and mortgages receivable classified as FVTPL and other investments are
measured using Level 3 inputs.
For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level
input that is significant to the fair value measurement as a whole) at the end of each reporting period.
(n) Cash and cash equivalents
Cash and cash equivalents include cash and short-term investments with original maturities at the time of acquisition of
three months or less.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
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78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(o) Critical judgments in applying accounting policies
The following are the critical judgments that have been made in applying the Company’s accounting policies and that
have the most significant effect on the amounts in the consolidated financial statements:
(i) Investment properties
In applying the Company’s policy with respect to investment properties, judgment is applied in determining whether
certain costs are additions to the carrying amount of the property and, for properties under development, identifying the
point at which capitalization of borrowing and other costs ceases.
(ii) Hedge accounting
Where the Company undertakes to apply cash flow hedge accounting, it must determine whether such hedges are
expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to
determine that they actually have been highly effective throughout the reporting periods for which they were designated.
(iii) Income taxes
The Company exercises judgment in estimating deferred tax assets and liabilities. Income tax laws may be subject to
different interpretations, and the income tax expense recorded by the Company reflects the Company’s interpretation of
the relevant tax laws. The Company is also required to estimate the timing of reversals of temporary differences between
accounting and taxable income in determining the appropriate rate to apply in calculating deferred taxes.
(p) Critical accounting estimates and assumptions
The Company makes estimates and assumptions that affect the carrying amounts of assets and liabilities, disclosure of
contingent assets and liabilities and the reported amount of earnings for the reporting periods. Actual results could differ
from those estimates. The estimates and assumptions that the Company considers critical include those underlying the
valuation of investment properties, as set out above, which describes the process by which investment properties are
valued, and the determination of which properties are externally and internally appraised and how often.
Additional critical accounting estimates and assumptions include those used for determining the values of financial
instruments for disclosure purposes (Note 23), estimating deferred taxes, and estimating the fair value of share-based
compensation (Note 14).
(o) Critical judgments in applying accounting policies
The following are the critical judgments that have been made in applying the Company’s accounting policies and that
have the most significant effect on the amounts in the consolidated financial statements:
(i) Investment properties
In applying the Company’s policy with respect to investment properties, judgment is applied in determining whether
certain costs are additions to the carrying amount of the property and, for properties under development, identifying the
point at which capitalization of borrowing and other costs ceases.
(ii) Hedge accounting
Where the Company undertakes to apply cash flow hedge accounting, it must determine whether such hedges are
expected to be highly effective in achieving offsetting changes in cash flows and are assessed on an ongoing basis to
determine that they actually have been highly effective throughout the reporting periods for which they were designated.
(iii) Income taxes
The Company exercises judgment in estimating deferred tax assets and liabilities. Income tax laws may be subject to
different interpretations, and the income tax expense recorded by the Company reflects the Company’s interpretation of
the relevant tax laws. The Company is also required to estimate the timing of reversals of temporary differences between
accounting and taxable income in determining the appropriate rate to apply in calculating deferred taxes.
(p) Critical accounting estimates and assumptions
The Company makes estimates and assumptions that affect the carrying amounts of assets and liabilities, disclosure of
contingent assets and liabilities and the reported amount of earnings for the reporting periods. Actual results could differ
from those estimates. The estimates and assumptions that the Company considers critical include those underlying the
valuation of investment properties, as set out above, which describes the process by which investment properties are
valued, and the determination of which properties are externally and internally appraised and how often.
Additional critical accounting estimates and assumptions include those used for determining the values of financial
instruments for disclosure purposes (Note 23), estimating deferred taxes, and estimating the fair value of share-based
compensation (Note 14).
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
3. ADOPTION OF NEW AND AMENDED IFRS PRONOUNCEMENTS
(a) IFRS Amendments
The Company adopted the following International Financial Reporting Standards pronouncements listed below as of
January 1, 2018, in accordance with their respective transitional provisions.
3. ADOPTION OF NEW AND AMENDED IFRS PRONOUNCEMENTS
(a) IFRS Amendments
The Company adopted the following International Financial Reporting Standards pronouncements listed below as of
January 1, 2018, in accordance with their respective transitional provisions.
Financial instruments
Financial instruments
IFRS 9, addresses the classification and measurement of all financial assets and financial liabilities and introduces a new
expected credit loss impairment model as well as a substantially reformed model for hedge accounting.
IFRS 9, addresses the classification and measurement of all financial assets and financial liabilities and introduces a new
expected credit loss impairment model as well as a substantially reformed model for hedge accounting.
Financial Assets
Financial Assets
The Company’s business model for its loans and mortgages receivable is focused primarily on collecting contractual
principal and interest payments. These financial assets are assessed to evaluate if their contractual cash flows are
comprised of solely payments of principal and interest (“SPPI”). SPPI payments are those which would typically be
expected from basic lending arrangements. The majority of the Company’s loans and mortgages receivable would qualify
as SPPI arrangements, and therefore are measured at amortized cost.
In addition, the Company also enters into lending arrangements that include options to purchase the underlying collateral
which is typically investment property that the Company may want to acquire in future periods. Where the contractual
terms introduce exposure to risk or variability of cash flows that are inconsistent with a basic lending arrangement, the
related financial asset is classified and measured at fair value through profit or loss (“FVTPL”).
The Company’s business model for its loans and mortgages receivable is focused primarily on collecting contractual
principal and interest payments. These financial assets are assessed to evaluate if their contractual cash flows are
comprised of solely payments of principal and interest (“SPPI”). SPPI payments are those which would typically be
expected from basic lending arrangements. The majority of the Company’s loans and mortgages receivable would qualify
as SPPI arrangements, and therefore are measured at amortized cost.
In addition, the Company also enters into lending arrangements that include options to purchase the underlying collateral
which is typically investment property that the Company may want to acquire in future periods. Where the contractual
terms introduce exposure to risk or variability of cash flows that are inconsistent with a basic lending arrangement, the
related financial asset is classified and measured at fair value through profit or loss (“FVTPL”).
Allowance for Credit Losses
Allowance for Credit Losses
An allowance for credit losses ("ACL") is established for all financial assets, except for financial assets classified or
designated as FVTPL. The ACL is a discounted probability-weighted estimate of the cash shortfalls expected to result from
defaults over the relevant time horizon. Expected credit losses are based on a range of possible outcomes and consider all
available reasonable and supportable information including historical credit loss experience, and expectations about
future cash flows.
An allowance for credit losses ("ACL") is established for all financial assets, except for financial assets classified or
designated as FVTPL. The ACL is a discounted probability-weighted estimate of the cash shortfalls expected to result from
defaults over the relevant time horizon. Expected credit losses are based on a range of possible outcomes and consider all
available reasonable and supportable information including historical credit loss experience, and expectations about
future cash flows.
Recognition and Measurement
Recognition and Measurement
All financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent
periods for financial instruments classified at FVTPL are recognized in other gains (losses) and (expenses). Financial
instruments classified at amortized cost are subsequently measured using the effective interest method.
All financial instruments are required to be measured at fair value on initial recognition. Measurement in subsequent
periods for financial instruments classified at FVTPL are recognized in other gains (losses) and (expenses). Financial
instruments classified at amortized cost are subsequently measured using the effective interest method.
Hedge Accounting
Hedge Accounting
The Company has chosen as its accounting policy to continue to apply the hedge accounting requirements under IAS 39,
“Financial Instruments: Recognition and Measurement” instead of the requirements under IFRS 9.
The Company has chosen as its accounting policy to continue to apply the hedge accounting requirements under IAS 39,
“Financial Instruments: Recognition and Measurement” instead of the requirements under IFRS 9.
Impact upon adoption of IFRS 9
Impact upon adoption of IFRS 9
The Company has applied the new standard effective January 1, 2018. As permitted by the transition provisions of IFRS 9,
the Company elected not to restate comparative period results; accordingly, all comparative period information is
presented in accordance with our previous accounting policies, as described in Note 2(m). Upon adoption, the impact to
the consolidated financial statements included changes to the classification and measurement of some of its loans and
mortgages receivable, and available for sale financial assets to fair value through profit and loss. Furthermore, for trade
and other receivables, the Company has applied the standard’s simplified approach for determining impairment and has
calculated an ACL based on lifetime expected credit losses. The Company has established processes in place for
determining ACL that are based on the Company’s historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
The adoption of the standard did not have an impact on the carrying amount of the Company’s financial assets or liabilities.
Additional disclosures required upon adoption of the standard are included in Note 6 and 23. The table below summarizes
the impact of IFRS 9 on the classification and measurement on the Company’s financial assets and liabilities.
The Company has applied the new standard effective January 1, 2018. As permitted by the transition provisions of IFRS 9,
the Company elected not to restate comparative period results; accordingly, all comparative period information is
presented in accordance with our previous accounting policies, as described in Note 2(m). Upon adoption, the impact to
the consolidated financial statements included changes to the classification and measurement of some of its loans and
mortgages receivable, and available for sale financial assets to fair value through profit and loss. Furthermore, for trade
and other receivables, the Company has applied the standard’s simplified approach for determining impairment and has
calculated an ACL based on lifetime expected credit losses. The Company has established processes in place for
determining ACL that are based on the Company’s historical credit loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
The adoption of the standard did not have an impact on the carrying amount of the Company’s financial assets or liabilities.
Additional disclosures required upon adoption of the standard are included in Note 6 and 23. The table below summarizes
the impact of IFRS 9 on the classification and measurement on the Company’s financial assets and liabilities.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
80
FIRST CAPITAL REALTY ANNUAL REPORT 2018
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Summary of impact upon adoption of IFRS 9, "Classification and measurement"
Summary of impact upon adoption of IFRS 9, "Classification and measurement"
(thousands of dollars)
Financial assets
Investment in limited partnership
Derivative assets
Loans and mortgages receivable
Loans and mortgages receivable(1)
Equity securities designated as FVTPL
Amounts receivable
Cash and cash equivalents
Restricted cash
Financial liabilities
Bank indebtedness
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Accounts payable and other liabilities
Derivative liabilities
IFRS 9
January 1, 2018
IAS 39
December 31, 2017
Measurement category Carrying Amount Measurement category Carrying Amount
FVTPL
FVTPL
Amortized Cost
FVTPL
FVTPL
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
FVTPL
$
2,587 FVOCI
16,435 FVTPL
153,271 Amortized Cost
102,570 Amortized Cost
21,720 FVTPL
25,437 Amortized Cost
11,507 Amortized Cost
50 Amortized Cost
3,144 Amortized Cost
1,060,339 Amortized Cost
581,627 Amortized Cost
2,595,966 Amortized Cost
54,293 Amortized Cost
245,725 Amortized Cost
11,343 FVTPL
$
$
$
2,587
16,435
255,841
—
21,720
25,437
11,507
50
3,144
1,060,339
581,627
2,595,966
54,293
245,725
11,343
(thousands of dollars)
Financial assets
Investment in limited partnership
Derivative assets
Loans and mortgages receivable
Loans and mortgages receivable(1)
Equity securities designated as FVTPL
Amounts receivable
Cash and cash equivalents
Restricted cash
Financial liabilities
Bank indebtedness
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Accounts payable and other liabilities
Derivative liabilities
IFRS 9
January 1, 2018
IAS 39
December 31, 2017
Measurement category Carrying Amount Measurement category Carrying Amount
FVTPL
FVTPL
Amortized Cost
FVTPL
FVTPL
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
FVTPL
$
2,587 FVOCI
16,435 FVTPL
153,271 Amortized Cost
102,570 Amortized Cost
21,720 FVTPL
25,437 Amortized Cost
11,507 Amortized Cost
50 Amortized Cost
3,144 Amortized Cost
1,060,339 Amortized Cost
581,627 Amortized Cost
2,595,966 Amortized Cost
54,293 Amortized Cost
245,725 Amortized Cost
11,343 FVTPL
$
$
$
2,587
16,435
255,841
—
21,720
25,437
11,507
50
3,144
1,060,339
581,627
2,595,966
54,293
245,725
11,343
(1) The Loans whose cash flows are not solely payments of principal or interest were reclassified to FVTPL.
(1) The Loans whose cash flows are not solely payments of principal or interest were reclassified to FVTPL.
Revenue from contracts with customers
IFR5 15 provides a single, principles-based five-step model that applies to all contracts with customers with limited
exceptions. In addition, the standard specifies how to account for incremental costs of obtaining a contract and the costs
directly related to fulfilling a contract. IFRS 15 does not apply to lease contracts within the scope of IAS 17.
The majority of the Company’s revenues are earned from lease contracts with tenants and are accounted for under IAS
17. Base rent, straight-line rent, realty tax recoveries, lease surrender fees and percentage rent are considered lease
components and revenue recognition remains consistent with the accounting policies outlined in Note 2(l).
All other revenue from tenants such as operating cost recoveries are considered non-lease components and are subject to
the guidance in IFRS 15 and are recognized in the period that services are performed and are chargeable to tenants.
Revenue from contracts with customers
IFR5 15 provides a single, principles-based five-step model that applies to all contracts with customers with limited
exceptions. In addition, the standard specifies how to account for incremental costs of obtaining a contract and the costs
directly related to fulfilling a contract. IFRS 15 does not apply to lease contracts within the scope of IAS 17.
The majority of the Company’s revenues are earned from lease contracts with tenants and are accounted for under IAS
17. Base rent, straight-line rent, realty tax recoveries, lease surrender fees and percentage rent are considered lease
components and revenue recognition remains consistent with the accounting policies outlined in Note 2(l).
All other revenue from tenants such as operating cost recoveries are considered non-lease components and are subject to
the guidance in IFRS 15 and are recognized in the period that services are performed and are chargeable to tenants.
Impact upon adoption of IFRS 15
Impact upon adoption of IFRS 15
The Company has applied the new standard using the full retrospective method. Upon adoption, the pattern of revenue
recognition remains unchanged, as noted above, and the impact to the consolidated financial statements is limited to
additional disclosure on the disaggregation of the Company’s various revenue streams. Additional disclosures required upon
adoption of the standard are included in Note 15.
The Company has applied the new standard using the full retrospective method. Upon adoption, the pattern of revenue
recognition remains unchanged, as noted above, and the impact to the consolidated financial statements is limited to
additional disclosure on the disaggregation of the Company’s various revenue streams. Additional disclosures required upon
adoption of the standard are included in Note 15.
Investment property
Investment property
The amendments to IAS 40, "Investment Property", clarify the accounting guidance and evidence required when an entity
transfers to, or from, investment property. The Company has adopted the amendments and will apply the guidance
prospectively.
The amendments to IAS 40, "Investment Property", clarify the accounting guidance and evidence required when an entity
transfers to, or from, investment property. The Company has adopted the amendments and will apply the guidance
prospectively.
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
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FIRST CAPITAL REALTY ANNUAL REPORT 2018
IFRIC Agenda Decision on IAS 7, "Statement of Cash Flows"
IFRIC Agenda Decision on IAS 7, "Statement of Cash Flows"
In June 2018, the IFRS Interpretations Committee issued an agenda decision on the classification of short-term loans and
credit facilities in the statement of cash flows. The Committee concluded that in situations where short-term
arrangements such as bank overdrafts that are not repayable on demand and do not often fluctuate from being negative
to positive should not be included as components of cash and cash equivalents. As a result, the Company no longer
includes bank indebtedness as a part of cash and cash equivalents, but rather as a form of financing activity. Comparative
information in the consolidated statements of cash flows have been reclassified to conform with the current period’s
presentation.
(b) Recent Accounting Pronouncements Not Yet Adopted
The IASB has issued new standards and amendments to existing standards. These changes are not yet adopted by the
Company and are described in detail below:
In June 2018, the IFRS Interpretations Committee issued an agenda decision on the classification of short-term loans and
credit facilities in the statement of cash flows. The Committee concluded that in situations where short-term
arrangements such as bank overdrafts that are not repayable on demand and do not often fluctuate from being negative
to positive should not be included as components of cash and cash equivalents. As a result, the Company no longer
includes bank indebtedness as a part of cash and cash equivalents, but rather as a form of financing activity. Comparative
information in the consolidated statements of cash flows have been reclassified to conform with the current period’s
presentation.
(b) Recent Accounting Pronouncements Not Yet Adopted
The IASB has issued new standards and amendments to existing standards. These changes are not yet adopted by the
Company and are described in detail below:
Leases
Leases
IFRS 16, “Leases” (“IFRS 16”), was issued in January 2016, and replaces IAS 17. IFRS 16 eliminates the classification of
leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee
accounting model. Certain leases will be exempt from these requirements. The most significant effect expected of the
new requirements will be an increase in lease assets and financial liabilities for lessees with material off-balance sheet
leases. Lessor accounting requirements under IFRS 16 are carried forward from IAS 17 and accordingly, leases will
continue to be classified and accounted for as operating or finance leases by lessors.
IFRS 16 is required for annual periods beginning on or after January 1, 2019. The Company has assessed the impact of
IFRS 16 to its consolidated financial statements and has concluded that there is no significant impact as leases with
tenants will continue to be accounted for as operating leases consistent with current accounting standards.
Uncertainty over income tax treatments
IFRIC 23, "Uncertainty over Income Tax Treatments", was issued in June 2017 as a clarification to requirements under IAS
12 "Income Taxes". IFRIC 23 clarifies the application of various recognition and measurement requirements when there is
uncertainty over income tax treatments. This interpretation is effective for annual reporting periods beginning on or after
January 1, 2019. The Company has assessed the impact of IFRIC 23 and has concluded that there will be no impact to its
consolidated financial statements on adoption of these amendments.
IFRS 16, “Leases” (“IFRS 16”), was issued in January 2016, and replaces IAS 17. IFRS 16 eliminates the classification of
leases as either operating leases or finance leases as is required by IAS 17 and, instead, introduces a single lessee
accounting model. Certain leases will be exempt from these requirements. The most significant effect expected of the
new requirements will be an increase in lease assets and financial liabilities for lessees with material off-balance sheet
leases. Lessor accounting requirements under IFRS 16 are carried forward from IAS 17 and accordingly, leases will
continue to be classified and accounted for as operating or finance leases by lessors.
IFRS 16 is required for annual periods beginning on or after January 1, 2019. The Company has assessed the impact of
IFRS 16 to its consolidated financial statements and has concluded that there is no significant impact as leases with
tenants will continue to be accounted for as operating leases consistent with current accounting standards.
Uncertainty over income tax treatments
IFRIC 23, "Uncertainty over Income Tax Treatments", was issued in June 2017 as a clarification to requirements under IAS
12 "Income Taxes". IFRIC 23 clarifies the application of various recognition and measurement requirements when there is
uncertainty over income tax treatments. This interpretation is effective for annual reporting periods beginning on or after
January 1, 2019. The Company has assessed the impact of IFRIC 23 and has concluded that there will be no impact to its
consolidated financial statements on adoption of these amendments.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
82
FIRST CAPITAL REALTY ANNUAL REPORT 2018
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
4. INVESTMENT PROPERTIES
(a) Activity
The following tables summarize the changes in the Company’s investment properties for the year ended December
31, 2018 and year ended December 31, 2017:
Balance at beginning of year
Acquisitions
Capital expenditures
Reclassifications between
shopping centres and
development land
Increase (decrease) in value of
investment properties, net
Straight-line rent and other
Central
Region
Eastern
Region
Western
Region
Year ended December 31, 2018
Development
Land
Shopping
Centres
Total
$
4,263,757 $
1,980,077 $
3,152,525 $
9,396,359
$
9,317,306 $
79,053
80,371
171,586
—
5,680
34,580
—
45,896
60,189
—
131,947
266,355
—
130,153
258,813
10,742
1,794
7,542
(10,742)
48,506
18,931
30,952
98,389
87,792
10,597
139
4,218
2,883
7,240
8,388
(1,148)
4. INVESTMENT PROPERTIES
(a) Activity
The following tables summarize the changes in the Company’s investment properties for the year ended December
31, 2018 and year ended December 31, 2017:
Balance at beginning of year
Acquisitions
Capital expenditures
Reclassifications between
shopping centres and
development land
Increase (decrease) in value of
investment properties, net
Straight-line rent and other
Central
Region
Eastern
Region
Western
Region
Year ended December 31, 2018
Development
Land
Shopping
Centres
Total
$
4,263,757 $
1,980,077 $
3,152,525 $
9,396,359
$
9,317,306 $
79,053
80,371
171,586
—
5,680
34,580
—
45,896
60,189
—
131,947
266,355
—
130,153
258,813
10,742
1,794
7,542
(10,742)
48,506
18,931
30,952
98,389
87,792
10,597
139
4,218
2,883
7,240
8,388
(1,148)
(75,000)
(6,075)
(50,940)
(132,015)
(123,015)
(9,000)
(75,000)
(6,075)
(50,940)
(132,015)
(123,015)
(9,000)
4,489,359 $
2,037,411 $
3,241,505 $
9,768,275
4,489,359 $
2,037,411 $
3,241,505 $
9,768,275
changes
Dispositions
Balance at end of year
Investment properties
Investment properties classified as held for sale
$
Total
Balance at beginning of year
Acquisitions
Capital expenditures
Increase (decrease) in value of
investment properties, net
Straight-line rent and other
changes
Dispositions
Reclassification to equity
accounted joint venture (1)
Central
Region
Eastern
Region
Western
Region
$
3,711,238 $
209,716
133,135
248,831
1,825,533 $
71,012
30,736
67,215
2,983,726 $
6,478
68,034
142,316
Total
8,520,497
287,206
231,905
458,362
$
8,453,348 $
287,206
226,242
452,121
627
817
1,019
2,463
2,463
(25,790)
(14,000)
(15,236)
—
(49,048)
—
(90,074)
(14,000)
(90,074)
(14,000)
$
$
$
9,690,179 $
9,623,905 $
66,274
9,690,179 $
78,096
58,709
19,387
78,096
Year ended December 31, 2017
Development
Land
Shopping
Centres
67,149
—
5,663
6,241
—
—
—
79,053
72,041
7,012
79,053
changes
Dispositions
Balance at end of year
Investment properties
Investment properties classified as held for sale
$
Total
Balance at beginning of year
Acquisitions
Capital expenditures
Increase (decrease) in value of
investment properties, net
Straight-line rent and other
changes
Dispositions
Reclassification to equity
accounted joint venture (1)
Central
Region
Eastern
Region
Western
Region
$
3,711,238 $
209,716
133,135
248,831
1,825,533 $
71,012
30,736
67,215
2,983,726 $
6,478
68,034
142,316
Total
8,520,497
287,206
231,905
458,362
$
8,453,348 $
287,206
226,242
452,121
627
817
1,019
2,463
2,463
(25,790)
(14,000)
(15,236)
—
(49,048)
—
(90,074)
(14,000)
(90,074)
(14,000)
$
$
$
9,690,179 $
9,623,905 $
66,274
9,690,179 $
78,096
58,709
19,387
78,096
Year ended December 31, 2017
Development
Land
Shopping
Centres
67,149
—
5,663
6,241
—
—
—
79,053
72,041
7,012
79,053
Balance at end of year
Investment properties
Investment properties classified as held for sale
Total
$
4,263,757 $
1,980,077 $
3,152,525 $
9,396,359
$
$
$
9,317,306 $
9,226,206 $
91,100
9,317,306 $
Balance at end of year
Investment properties
Investment properties classified as held for sale
Total
$
4,263,757 $
1,980,077 $
3,152,525 $
9,396,359
$
$
$
9,317,306 $
9,226,206 $
91,100
9,317,306 $
(1) The Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
(1) The Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
Investment properties with a fair value of $3.0 billion (December 31, 2017 – $2.6 billion) are pledged as security for
$1.9 billion (December 31, 2017 – $1.6 billion) in mortgages and credit facilities.
Investment properties with a fair value of $3.0 billion (December 31, 2017 – $2.6 billion) are pledged as security for
$1.9 billion (December 31, 2017 – $1.6 billion) in mortgages and credit facilities.
83
FIRST CAPITAL REALTY ANNUAL REPORT 2018
83
FIRST CAPITAL REALTY ANNUAL REPORT 2018
(b) Investment property valuation
(b) Investment property valuation
Stabilized overall capitalization, terminal, and discount rates by region for investment properties – shopping centres are
set out in the table below:
Stabilized overall capitalization, terminal, and discount rates by region for investment properties – shopping centres are
set out in the table below:
As at
December 31, 2018
December 31, 2017
As at
December 31, 2018
December 31, 2017
($ millions)
Overall Capitalization Rate
Terminal Capitalization Rate
Discount Rate
Fair Value
Central
Region
5.0%
5.2%
5.7%
Weighted Average
Eastern
Region
Western
Region
5.9%
6.2%
6.8%
5.2%
5.4%
6.0%
Total
5.3%
5.5%
6.1%
Central
Region
5.1%
5.1%
5.8%
Weighted Average
Eastern
Region
Western
Region
5.9%
6.0%
6.6%
5.2%
5.3%
5.8%
Total
5.3%
5.4%
6.0%
$
4,431
$
2,030
$
3,229
$
9,690
$
4,204
$
1,973
$
3,140
$
9,317
($ millions)
Overall Capitalization Rate
Terminal Capitalization Rate
Discount Rate
Fair Value
Central
Region
5.0%
5.2%
5.7%
Weighted Average
Eastern
Region
Western
Region
5.9%
6.2%
6.8%
5.2%
5.4%
6.0%
Total
5.3%
5.5%
6.1%
Central
Region
5.1%
5.1%
5.8%
Weighted Average
Eastern
Region
Western
Region
5.9%
6.0%
6.6%
5.2%
5.3%
5.8%
Total
5.3%
5.4%
6.0%
$
4,431
$
2,030
$
3,229
$
9,690
$
4,204
$
1,973
$
3,140
$
9,317
The sensitivity of the fair values of shopping centres to stabilized overall capitalization rates as at December 31, 2018 is set
out in the table below:
The sensitivity of the fair values of shopping centres to stabilized overall capitalization rates as at December 31, 2018 is set
out in the table below:
As at December 31, 2018
(Decrease) Increase in stabilized overall capitalization rate
(0.75%)
(0.50%)
(0.25%)
0.25%
0.50%
0.75%
(millions of dollars)
Resulting increase (decrease) in fair
value of shopping centres
1,461
923
439
(399)
(763)
$
$
$
$
$
$
(1,097)
As at December 31, 2018
(Decrease) Increase in stabilized overall capitalization rate
(0.75%)
(0.50%)
(0.25%)
0.25%
0.50%
0.75%
(millions of dollars)
Resulting increase (decrease) in fair
value of shopping centres
1,461
923
439
(399)
(763)
$
$
$
$
$
$
(1,097)
Additionally, a 1% increase or decrease in stabilized net operating income ("SNOI") would result in a $88 million increase or
a $88 million decrease, respectively, in the fair value of shopping centres. SNOI is not a measure defined by IFRS. SNOI
reflects stable property operations, assuming a certain level of vacancy, capital and operating expenditures required to
maintain a stable occupancy rate. The average vacancy rates used in determining SNOI for non-anchor tenants generally
range from 2% to 5%. A 1% increase in SNOI coupled with a 0.25% decrease in the stabilized capitalization rate would result
in an increase in the fair value of shopping centres of $531 million, and a 1% decrease in SNOI coupled with a 0.25%
increase in the stabilized capitalization rate would result in a decrease in the fair value of shopping centres of $483 million.
Additionally, a 1% increase or decrease in stabilized net operating income ("SNOI") would result in a $88 million increase or
a $88 million decrease, respectively, in the fair value of shopping centres. SNOI is not a measure defined by IFRS. SNOI
reflects stable property operations, assuming a certain level of vacancy, capital and operating expenditures required to
maintain a stable occupancy rate. The average vacancy rates used in determining SNOI for non-anchor tenants generally
range from 2% to 5%. A 1% increase in SNOI coupled with a 0.25% decrease in the stabilized capitalization rate would result
in an increase in the fair value of shopping centres of $531 million, and a 1% decrease in SNOI coupled with a 0.25%
increase in the stabilized capitalization rate would result in a decrease in the fair value of shopping centres of $483 million.
(c) Investment properties – Acquisitions
During the years ended December 31, 2018 and 2017, the Company acquired shopping centres and development land for
rental income and future development and redevelopment opportunities as follows:
(c) Investment properties – Acquisitions
During the years ended December 31, 2018 and 2017, the Company acquired shopping centres and development land for
rental income and future development and redevelopment opportunities as follows:
Year ended December 31
Total purchase price, including acquisition costs
Debt assumption on acquisition
Deposit on investment property applied
Total cash paid
$
Shopping
Centres
130,153
—
—
$
130,153
2018
Development
Land
1,794
—
—
$
$
$
Shopping
Centres
287,206
(32,337)
(189,200)
1,794
$
65,669
2017
Development
Land
$
$
—
—
—
—
Year ended December 31
Total purchase price, including acquisition costs
Debt assumption on acquisition
Deposit on investment property applied
Total cash paid
$
Shopping
Centres
130,153
—
—
$
130,153
2018
Development
Land
1,794
—
—
$
$
$
Shopping
Centres
287,206
(32,337)
(189,200)
1,794
$
65,669
2017
Development
Land
$
$
—
—
—
—
FIRST CAPITAL REALTY ANNUAL REPORT 2018
84
FIRST CAPITAL REALTY ANNUAL REPORT 2018
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(d) Investment properties classified as held for sale
(d) Investment properties classified as held for sale
The Company has certain investment properties classified as held for sale. These properties are considered to be non-core
assets and are as follows:
The Company has certain investment properties classified as held for sale. These properties are considered to be non-core
assets and are as follows:
As at
Aggregate fair value
Mortgages secured by investment properties classified as held for sale
Weighted average effective interest rate of mortgages secured by investment properties
classified as held for sale
December 31, 2018
December 31, 2017
$
$
85,661 $
— $
N/A
98,112
7,079
6.7%
As at
Aggregate fair value
Mortgages secured by investment properties classified as held for sale
Weighted average effective interest rate of mortgages secured by investment properties
classified as held for sale
December 31, 2018
December 31, 2017
$
$
85,661 $
— $
N/A
98,112
7,079
6.7%
The decrease of $12.5 million in investment properties classified as held for sale from December 31, 2017, primarily arose
from the dispositions completed in the period and changes in fair value.
The decrease of $12.5 million in investment properties classified as held for sale from December 31, 2017, primarily arose
from the dispositions completed in the period and changes in fair value.
For the years ended December 31, 2018 and 2017, the Company sold shopping centres and development land as follows:
For the years ended December 31, 2018 and 2017, the Company sold shopping centres and development land as follows:
Total selling price
Vendor take-back mortgage on sale
Property selling costs
Total cash proceeds
Year ended December 31
2018
2017
132,015 $
90,074
(29,536)
—
(2,556)
(1,667)
99,923 $
88,407
$
$
Total selling price
Vendor take-back mortgage on sale
Property selling costs
Total cash proceeds
Year ended December 31
2018
2017
132,015 $
90,074
(29,536)
—
(2,556)
(1,667)
99,923 $
88,407
$
$
(e) Reconciliation of investment properties to total assets
Shopping centres and development land by region and a reconciliation to total assets are set out in the tables below:
(e) Reconciliation of investment properties to total assets
Shopping centres and development land by region and a reconciliation to total assets are set out in the tables below:
As at December 31, 2018
Total shopping centres and development land (1)
Cash and cash equivalents
Loans, mortgages and other assets
Other assets
Amounts receivable
Investment in joint ventures
Hotel property
Residential development inventory
Total assets
As at December 31, 2017
Total shopping centres and development land (1)
Cash and cash equivalents
Loans, mortgages and other assets
Other assets
Amounts receivable
Investment in joint ventures
Residential development inventory
Total assets
(1) Includes investment properties classified as held for sale.
Central
Region
Eastern
Region
Western
Region
Total
$ 4,489,359
$ 2,037,411
$ 3,241,505
$ 9,768,275
15,534
364,059
56,307
36,391
144,375
58,604
9,510
10,453,055
$
Central
Region
Eastern
Region
Western
Region
Total
$ 4,263,757
$ 1,980,077
$ 3,152,525
$
9,396,359
11,507
280,148
47,387
25,437
202,231
5,483
$
9,968,552
As at December 31, 2018
Total shopping centres and development land (1)
Cash and cash equivalents
Loans, mortgages and other assets
Other assets
Amounts receivable
Investment in joint ventures
Hotel property
Residential development inventory
Total assets
As at December 31, 2017
Total shopping centres and development land (1)
Cash and cash equivalents
Loans, mortgages and other assets
Other assets
Amounts receivable
Investment in joint ventures
Residential development inventory
Total assets
(1) Includes investment properties classified as held for sale.
Central
Region
Eastern
Region
Western
Region
Total
$ 4,489,359
$ 2,037,411
$ 3,241,505
$ 9,768,275
15,534
364,059
56,307
36,391
144,375
58,604
9,510
10,453,055
$
Central
Region
Eastern
Region
Western
Region
Total
$ 4,263,757
$ 1,980,077
$ 3,152,525
$
9,396,359
11,507
280,148
47,387
25,437
202,231
5,483
$
9,968,552
85
FIRST CAPITAL REALTY ANNUAL REPORT 2018
85
FIRST CAPITAL REALTY ANNUAL REPORT 2018
5. HOTEL PROPERTY
On July 4, 2018, the Company acquired a 60% non-managing interest in the Hazelton Hotel ("hotel property") located in
Toronto, Ontario. The hotel property is a mixed-use luxury hotel located in Yorkville Village. The total purchase price before
closing costs was $45.0 million.
The Company acquired an interest in a joint operation and exercises joint control over the assets, liabilities, and
operations of the hotel property. The transaction was accounted for as a business combination under IFRS 3 "Business
Combinations". The Company recognized a gain on the purchase of the hotel property of $14.0 million and incurred
transaction costs of $2.1 million, which have been expensed in 'Other gains (losses) and (expenses)' in the Company's
consolidated statements of income.
5. HOTEL PROPERTY
On July 4, 2018, the Company acquired a 60% non-managing interest in the Hazelton Hotel ("hotel property") located in
Toronto, Ontario. The hotel property is a mixed-use luxury hotel located in Yorkville Village. The total purchase price before
closing costs was $45.0 million.
The Company acquired an interest in a joint operation and exercises joint control over the assets, liabilities, and
operations of the hotel property. The transaction was accounted for as a business combination under IFRS 3 "Business
Combinations". The Company recognized a gain on the purchase of the hotel property of $14.0 million and incurred
transaction costs of $2.1 million, which have been expensed in 'Other gains (losses) and (expenses)' in the Company's
consolidated statements of income.
The purchase price was below market value as a result of a call option held by the Company on the property. The purchase
price was settled through the repayment of a mortgage receivable owed to the Company by the vendor.
The purchase price was below market value as a result of a call option held by the Company on the property. The purchase
price was settled through the repayment of a mortgage receivable owed to the Company by the vendor.
The following table summarizes the allocation of the purchase price to the fair value of each major asset acquired and net
liability assumed as at the acquisition date.
The following table summarizes the allocation of the purchase price to the fair value of each major asset acquired and net
liability assumed as at the acquisition date.
Land and Building
Furniture, Fixtures & Equipment
Working capital, net
Identifiable assets acquired
Deferred tax liability
Purchase price for net assets acquired
Gain on below market purchase
$
58,800
217
641
59,658
(643)
(45,040)
$
13,975
Land and Building
Furniture, Fixtures & Equipment
Working capital, net
Identifiable assets acquired
Deferred tax liability
Purchase price for net assets acquired
Gain on below market purchase
$
58,800
217
641
59,658
(643)
(45,040)
$
13,975
6. LOANS, MORTGAGES AND OTHER ASSETS
As at
Non-current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
Other investments
Total non-current
Current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
FVTPL investments in securities (c)
Total current
Total
December 31, 2018
December 31, 2017
$
$
$
$
$
20,511
57,003
15,834
93,348
87,106
160,043
23,562
270,711
364,059
$
$
$
$
$
—
130,576
2,587
133,163
—
125,265
21,720
146,985
280,148
6. LOANS, MORTGAGES AND OTHER ASSETS
As at
Non-current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
Other investments
Total non-current
Current
Loans and mortgages receivable classified as FVTPL (a)
Loans and mortgages receivable classified as amortized cost (a)(b)
FVTPL investments in securities (c)
Total current
Total
December 31, 2018
December 31, 2017
$
$
$
$
$
20,511
57,003
15,834
93,348
87,106
160,043
23,562
270,711
364,059
$
$
$
$
$
—
130,576
2,587
133,163
—
125,265
21,720
146,985
280,148
(a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning
investment properties. As at December 31, 2018, these receivables bear interest at weighted average effective interest
rates of 9.7% (December 31, 2017 – 7.9%) and mature between 2019 and 2029. Effective January 1, 2018, the
Company reclassified certain loans and mortgages receivable to FVTPL from amortized cost upon adoption of IFRS 9.
(b) As at December 31, 2018, the Company’s loans and mortgages receivable included $131.3 million representing the
Company's share of $208.5 million of priority ranking mortgages on a development project at the southwest corner of
Yonge Street and Bloor Street in Toronto, Ontario. A portion of the balance is due on September 1, 2019 with the
remainder due on September 1, 2020 subject to early prepayment and extension provisions.
(a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning
investment properties. As at December 31, 2018, these receivables bear interest at weighted average effective interest
rates of 9.7% (December 31, 2017 – 7.9%) and mature between 2019 and 2029. Effective January 1, 2018, the
Company reclassified certain loans and mortgages receivable to FVTPL from amortized cost upon adoption of IFRS 9.
(b) As at December 31, 2018, the Company’s loans and mortgages receivable included $131.3 million representing the
Company's share of $208.5 million of priority ranking mortgages on a development project at the southwest corner of
Yonge Street and Bloor Street in Toronto, Ontario. A portion of the balance is due on September 1, 2019 with the
remainder due on September 1, 2020 subject to early prepayment and extension provisions.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
86
FIRST CAPITAL REALTY ANNUAL REPORT 2018
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(c) From time to time, the Company invests in publicly traded real estate and related securities. These securities are
recorded at market value. Realized and unrealized gains and losses on FVTPL securities are recorded in other gains
(losses) and (expenses).
Scheduled principal receipts of loans and mortgages receivable and the weighted average effective floating or fixed
interest rates as at December 31, 2018 are as follows:
(c) From time to time, the Company invests in publicly traded real estate and related securities. These securities are
recorded at market value. Realized and unrealized gains and losses on FVTPL securities are recorded in other gains
(losses) and (expenses).
Scheduled principal receipts of loans and mortgages receivable and the weighted average effective floating or fixed
interest rates as at December 31, 2018 are as follows:
2019
2020
2021
2022
2023
2024 to 2028
Unamortized deferred financing fees and accrued interest
Current
Non-current
Total
7. AMOUNTS RECEIVABLE
As at
Trade receivables (net of allowances for doubtful accounts of $2.5 million;
December 31, 2017 – $2.6 million)
Corporate and other amounts receivable
Total
Scheduled
Receipts
243,529
52,353
4,650
—
1,711
18,800
321,043
3,620
324,663
247,149
77,514
324,663
$
$
$
$
$
Weighted
Average Effective
Interest Rate
9.7%
11.9%
4.8%
—%
5.5%
5.5%
9.7%
9.7%
9.8%
9.7%
December 31, 2018
December 31, 2017
$
$
30,862
5,529
36,391
$
$
23,698
1,739
25,437
2019
2020
2021
2022
2023
2024 to 2028
Unamortized deferred financing fees and accrued interest
Current
Non-current
Total
7. AMOUNTS RECEIVABLE
As at
Trade receivables (net of allowances for doubtful accounts of $2.5 million;
December 31, 2017 – $2.6 million)
Corporate and other amounts receivable
Total
Scheduled
Receipts
243,529
52,353
4,650
—
1,711
18,800
321,043
3,620
324,663
247,149
77,514
324,663
$
$
$
$
$
Weighted
Average Effective
Interest Rate
9.7%
11.9%
4.8%
—%
5.5%
5.5%
9.7%
9.7%
9.8%
9.7%
December 31, 2018
December 31, 2017
$
$
30,862
5,529
36,391
$
$
23,698
1,739
25,437
The Company determines its allowance for doubtful accounts on a tenant-by-tenant basis considering lease terms,
industry conditions, and the status of the tenant’s account, among other factors.
The Company determines its allowance for doubtful accounts on a tenant-by-tenant basis considering lease terms,
industry conditions, and the status of the tenant’s account, among other factors.
87
FIRST CAPITAL REALTY ANNUAL REPORT 2018
87
FIRST CAPITAL REALTY ANNUAL REPORT 2018
8. OTHER ASSETS
As at
Non-current
Fixtures, equipment and computer hardware and software (net of accumulated
amortization of $10.1 million; December 31, 2017 - $7.2 million)
Deferred financing costs on credit facilities (net of accumulated amortization of $4.5
million; December 31, 2017 - $3.9 million)
Environmental indemnity and insurance proceeds receivable
Derivatives at fair value
Total non-current
Current
Deposits and costs on investment properties under option
Prepaid expenses
Other deposits
Restricted cash
Derivatives at fair value
Total current
Total
Note
December 31, 2018
December 31, 2017
$
13,352
$
12,686
13(a)
23
23
2,327
4,707
9,983
30,369
6,080
6,535
316
462
12,545
25,938
56,307
$
$
$
$
2,379
6,247
10,696
32,008
1,587
7,654
349
50
5,739
15,379
47,387
$
$
$
$
9. CAPITAL MANAGEMENT
The Company manages its capital, taking into account the long-term business objectives of the Company, to provide
stability and reduce risk while generating an acceptable return on investment to shareholders over the long term. The
Company’s capital structure currently includes common shares, senior unsecured debentures, mortgages, credit facilities
and bank indebtedness, which together provide the Company with financing flexibility to meet its capital needs. Primary
uses of capital include development activities, acquisitions, capital improvements, leasing costs and debt principal
repayments. The actual level and type of future financings to fund these capital requirements will be determined based
on prevailing interest rates, various costs of debt and/or equity capital, capital market conditions and management’s
general view of the required leverage in the business.
8. OTHER ASSETS
As at
Non-current
Fixtures, equipment and computer hardware and software (net of accumulated
amortization of $10.1 million; December 31, 2017 - $7.2 million)
Deferred financing costs on credit facilities (net of accumulated amortization of $4.5
million; December 31, 2017 - $3.9 million)
Environmental indemnity and insurance proceeds receivable
Derivatives at fair value
Total non-current
Current
Deposits and costs on investment properties under option
Prepaid expenses
Other deposits
Restricted cash
Derivatives at fair value
Total current
Total
Note
December 31, 2018
December 31, 2017
$
13,352
$
12,686
13(a)
23
23
2,327
4,707
9,983
30,369
6,080
6,535
316
462
12,545
25,938
56,307
$
$
$
$
2,379
6,247
10,696
32,008
1,587
7,654
349
50
5,739
15,379
47,387
$
$
$
$
9. CAPITAL MANAGEMENT
The Company manages its capital, taking into account the long-term business objectives of the Company, to provide
stability and reduce risk while generating an acceptable return on investment to shareholders over the long term. The
Company’s capital structure currently includes common shares, senior unsecured debentures, mortgages, credit facilities
and bank indebtedness, which together provide the Company with financing flexibility to meet its capital needs. Primary
uses of capital include development activities, acquisitions, capital improvements, leasing costs and debt principal
repayments. The actual level and type of future financings to fund these capital requirements will be determined based
on prevailing interest rates, various costs of debt and/or equity capital, capital market conditions and management’s
general view of the required leverage in the business.
Components of the Company’s capital are set out in the table below:
Components of the Company’s capital are set out in the table below:
As at
Liabilities (principal amounts outstanding)
Bank indebtedness
Mortgages
Credit facilities
Mortgages under equity accounted joint ventures (at the Company’s interest)
Credit facilities under equity accounted joint venture (at the Company's interest)
Senior unsecured debentures
Convertible debentures
Equity Capitalization
Common shares (based on closing per share price of $18.85; December 31, 2017 – $20.72)
Total capital employed
December 31, 2018
December 31, 2017
$
7,226
1,287,247
626,172
41,081
34,135
2,450,000
—
$
3,144
1,060,342
581,627
41,987
102,748
2,600,000
55,093
4,803,505
5,064,612
$ 9,249,366
$ 9,509,553
As at
Liabilities (principal amounts outstanding)
Bank indebtedness
Mortgages
Credit facilities
Mortgages under equity accounted joint ventures (at the Company’s interest)
Credit facilities under equity accounted joint venture (at the Company's interest)
Senior unsecured debentures
Convertible debentures
Equity Capitalization
Common shares (based on closing per share price of $18.85; December 31, 2017 – $20.72)
Total capital employed
December 31, 2018
December 31, 2017
$
7,226
1,287,247
626,172
41,081
34,135
2,450,000
—
$
3,144
1,060,342
581,627
41,987
102,748
2,600,000
55,093
4,803,505
5,064,612
$ 9,249,366
$ 9,509,553
FIRST CAPITAL REALTY ANNUAL REPORT 2018
88
FIRST CAPITAL REALTY ANNUAL REPORT 2018
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
The Company is subject to financial covenants in agreements governing its senior unsecured debentures and its credit
facilities. In accordance with the terms of the Company's credit agreements, all ratios are calculated with joint ventures
proportionately consolidated. As at December 31, 2018, the Company remains in compliance with all of its applicable
financial covenants.
The Company is subject to financial covenants in agreements governing its senior unsecured debentures and its credit
facilities. In accordance with the terms of the Company's credit agreements, all ratios are calculated with joint ventures
proportionately consolidated. As at December 31, 2018, the Company remains in compliance with all of its applicable
financial covenants.
The following table summarizes a number of the Company's key ratios:
The following table summarizes a number of the Company's key ratios:
As at
Net debt to total assets
Unencumbered aggregate assets to unsecured debt, using 10 quarter average
capitalization rate (1)
Shareholders’ equity, using four quarter average (billions) (1)
Secured indebtedness to total assets (1)
For the rolling four quarters ended
Interest coverage (Adjusted EBITDA to interest expense) (1)
Fixed charge coverage (Adjusted EBITDA to debt service) (1)
Measure/
Covenant
December 31, 2018
December 31, 2017
$
42.1%
2.3
4.8
14.0%
2.5
2.2
43.4%
2.1
4.5
12.7%
2.5
2.1
$
>$2.0B
<35%
>1.65
>1.50
As at
Net debt to total assets
Unencumbered aggregate assets to unsecured debt, using 10 quarter average
capitalization rate (1)
Shareholders’ equity, using four quarter average (billions) (1)
Secured indebtedness to total assets (1)
For the rolling four quarters ended
Interest coverage (Adjusted EBITDA to interest expense) (1)
Fixed charge coverage (Adjusted EBITDA to debt service) (1)
Measure/
Covenant
December 31, 2018
December 31, 2017
$
42.1%
2.3
4.8
14.0%
2.5
2.2
43.4%
2.1
4.5
12.7%
2.5
2.1
$
>$2.0B
<35%
>1.65
>1.50
(1) Calculations required under the Company's credit facility agreements or indentures governing the senior unsecured debentures.
(1) Calculations required under the Company's credit facility agreements or indentures governing the senior unsecured debentures.
The above ratios include measures not specifically defined in IFRS. Certain calculations are required pursuant to debt
covenants and are meaningful measures for this reason. Measures used in these ratios are defined below:
The above ratios include measures not specifically defined in IFRS. Certain calculations are required pursuant to debt
covenants and are meaningful measures for this reason. Measures used in these ratios are defined below:
• Debt consists of principal amounts outstanding on credit facilities and mortgages, and the par value of senior unsecured
• Debt consists of principal amounts outstanding on credit facilities and mortgages, and the par value of senior unsecured
debentures;
debentures;
• Net debt is calculated as Debt, as defined above, reduced by cash balances at the end of the period;
• Secured indebtedness includes mortgages and any draws under the secured facilities that are collateralized against
• Net debt is calculated as Debt, as defined above, reduced by cash balances at the end of the period;
• Secured indebtedness includes mortgages and any draws under the secured facilities that are collateralized against
investment property.
investment property.
• Adjusted EBITDA, is calculated as net income, adding back income tax expense, interest expense and amortization and
excluding the increase or decrease in the fair value of investment properties, other gains (losses) and (expenses) and
other non-cash or non-recurring items. The Company also adjusts for incremental leasing costs, which is a recognized
adjustment to Funds from Operations, in accordance with the recommendations of the Real Property Association of
Canada.
• Adjusted EBITDA, is calculated as net income, adding back income tax expense, interest expense and amortization and
excluding the increase or decrease in the fair value of investment properties, other gains (losses) and (expenses) and
other non-cash or non-recurring items. The Company also adjusts for incremental leasing costs, which is a recognized
adjustment to Funds from Operations, in accordance with the recommendations of the Real Property Association of
Canada.
• Fixed charges include regular principal and interest payments and capitalized interest in the calculation of interest
• Fixed charges include regular principal and interest payments and capitalized interest in the calculation of interest
expense.
expense.
• Unencumbered assets include the value of assets that have not been pledged as security under any credit agreement or
mortgage. The unencumbered asset value ratio is calculated as unencumbered assets divided by the principal amount
of the unsecured debt, which consists of the bank indebtedness, unsecured credit facilities, and senior unsecured
debentures.
• Unencumbered assets include the value of assets that have not been pledged as security under any credit agreement or
mortgage. The unencumbered asset value ratio is calculated as unencumbered assets divided by the principal amount
of the unsecured debt, which consists of the bank indebtedness, unsecured credit facilities, and senior unsecured
debentures.
89
FIRST CAPITAL REALTY ANNUAL REPORT 2018
89
FIRST CAPITAL REALTY ANNUAL REPORT 2018
10. MORTGAGES AND CREDIT FACILITIES
10. MORTGAGES AND CREDIT FACILITIES
As at
Fixed rate mortgages
Unsecured facilities
Secured facilities
Mortgages and credit facilities
Current
Mortgages on investment properties classified as held for sale
Non-current
Total
December 31, 2018
December 31, 2017
$ 1,285,908
503,005
123,167
$ 1,912,080
233,203
$
—
1,678,877
$ 1,912,080
$ 1,060,339
485,727
95,900
$ 1,641,966
172,525
$
7,079
1,462,362
$ 1,641,966
As at
Fixed rate mortgages
Unsecured facilities
Secured facilities
Mortgages and credit facilities
Current
Mortgages on investment properties classified as held for sale
Non-current
Total
December 31, 2018
December 31, 2017
$ 1,285,908
503,005
123,167
$ 1,912,080
233,203
$
—
1,678,877
$ 1,912,080
$ 1,060,339
485,727
95,900
$ 1,641,966
172,525
$
7,079
1,462,362
$ 1,641,966
Mortgages and secured facilities are secured by the Company's investment properties. As at December 31, 2018,
approximately $3.0 billion (December 31, 2017 – $2.6 billion) of investment properties out of $9.8 billion
(December 31, 2017 – $9.4 billion) (Note 4(a)) had been pledged as security under the mortgages and the secured
facilities.
Mortgages and secured facilities are secured by the Company's investment properties. As at December 31, 2018,
approximately $3.0 billion (December 31, 2017 – $2.6 billion) of investment properties out of $9.8 billion
(December 31, 2017 – $9.4 billion) (Note 4(a)) had been pledged as security under the mortgages and the secured
facilities.
As at December 31, 2018, mortgages bear coupon interest at a weighted average coupon rate of 4.0% (December 31, 2017 –
4.3%) and mature in the years ranging from 2019 to 2031. The weighted average effective interest rate on all mortgages as
at December 31, 2018 is 4.0% (December 31, 2017 – 4.3%).
As at December 31, 2018, mortgages bear coupon interest at a weighted average coupon rate of 4.0% (December 31, 2017 –
4.3%) and mature in the years ranging from 2019 to 2031. The weighted average effective interest rate on all mortgages as
at December 31, 2018 is 4.0% (December 31, 2017 – 4.3%).
Principal repayments of mortgages outstanding as at December 31, 2018 are as follows:
Principal repayments of mortgages outstanding as at December 31, 2018 are as follows:
2019
2020
2021
2022
2023
2024 to 2031
Unamortized deferred financing costs and premiums, net
Total
Scheduled
Amortization
Payments on
Maturity
24,628 $
22,425
22,185
23,773
22,490
94,051
209,552 $
96,231 $
67,893
73,397
147,954
—
692,220
1,077,695 $
$
$
$
Total
120,859
90,318
95,582
171,727
22,490
786,271
1,287,247
(1,339)
1,285,908
Weighted
Average Effective
Interest Rate
6.5%
4.4%
4.6%
3.9%
N/A
3.6%
4.0%
2019
2020
2021
2022
2023
2024 to 2031
Unamortized deferred financing costs and premiums, net
Total
Scheduled
Amortization
Payments on
Maturity
24,628 $
22,425
22,185
23,773
22,490
94,051
209,552 $
96,231 $
67,893
73,397
147,954
—
692,220
1,077,695 $
$
$
$
Total
120,859
90,318
95,582
171,727
22,490
786,271
1,287,247
(1,339)
1,285,908
Weighted
Average Effective
Interest Rate
6.5%
4.4%
4.6%
3.9%
N/A
3.6%
4.0%
The Company has the ability under its unsecured credit facilities to draw funds based on Canadian bank prime rates and
Canadian bankers’ acceptances (“BA rates”) for Canadian dollar-denominated borrowings, and LIBOR rates or U.S. prime
rates for U.S. dollar-denominated borrowings. As of December 31, 2018, the Company had drawn US$368.7 million, as well
as CAD$7.2 million in bank indebtedness on its unsecured credit facilities. Concurrently with the U.S. dollar draws, the
Company entered into cross currency swaps to exchange its U.S. dollar borrowings into Canadian dollar borrowings.
During the first quarter of 2018, the Company entered into a new borrowing tranche under an existing credit facility with
a borrowing capacity of CAD$50 million, key terms of which are presented in the table below. The Company also extended
the maturity of its $15.9 million secured facility to March 31, 2019 on substantially the same terms.
The Company has the ability under its unsecured credit facilities to draw funds based on Canadian bank prime rates and
Canadian bankers’ acceptances (“BA rates”) for Canadian dollar-denominated borrowings, and LIBOR rates or U.S. prime
rates for U.S. dollar-denominated borrowings. As of December 31, 2018, the Company had drawn US$368.7 million, as well
as CAD$7.2 million in bank indebtedness on its unsecured credit facilities. Concurrently with the U.S. dollar draws, the
Company entered into cross currency swaps to exchange its U.S. dollar borrowings into Canadian dollar borrowings.
During the first quarter of 2018, the Company entered into a new borrowing tranche under an existing credit facility with
a borrowing capacity of CAD$50 million, key terms of which are presented in the table below. The Company also extended
the maturity of its $15.9 million secured facility to March 31, 2019 on substantially the same terms.
In the second quarter of 2018, the Company extended the maturities of its $800 million unsecured facility and $7.5
million secured facility to, June 30, 2023 and April 30, 2019, respectively.
In the second quarter of 2018, the Company extended the maturities of its $800 million unsecured facility and $7.5
million secured facility to, June 30, 2023 and April 30, 2019, respectively.
In the third quarter of 2018, the Company entered into two new secured credit facilities with a borrowing capacity of CAD
$20.7 million and CAD$4.3 million, respectively, key terms of which are presented in the table below. The Company also
extended the maturity of its $7.5 million secured facility to October 30, 2019.
In the third quarter of 2018, the Company entered into two new secured credit facilities with a borrowing capacity of CAD
$20.7 million and CAD$4.3 million, respectively, key terms of which are presented in the table below. The Company also
extended the maturity of its $7.5 million secured facility to October 30, 2019.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
90
FIRST CAPITAL REALTY ANNUAL REPORT 2018
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
In the fourth quarter of 2018, the Company entered into one new secured facility with a borrowing capacity of CAD$6.8
million, key terms of which are presented in the table below. The Company also extended the maturity of its $115 million
secured construction facility to August 13, 2019.
In the fourth quarter of 2018, the Company entered into one new secured facility with a borrowing capacity of CAD$6.8
million, key terms of which are presented in the table below. The Company also extended the maturity of its $115 million
secured construction facility to August 13, 2019.
The Company’s credit facilities as at December 31, 2018 are summarized in the table below:
The Company’s credit facilities as at December 31, 2018 are summarized in the table below:
As at December 31, 2018
Unsecured Operating Facilities
Borrowing
Capacity
Amounts
Drawn
Bank Indebtedness
and Outstanding
Letters of Credit
Available to be
Drawn
Interest Rates
Maturity Date
Revolving facility
maturing 2023 (1)
Non-revolving facility
maturing 2020 (2)
Additional
Tranche (3)
$
800,000 $
(301,488) $
(23,843) $
474,669
150,000
(150,519)
(17,560)
50,000
(50,998)
—
—
—
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.10% or
Prime + 0.10% or
US$ LIBOR + 1.10%
June 30, 2023
October 31, 2020
October 31, 2020
Secured Construction Facilities
115,000
(74,452)
(668)
39,880
15,907
(15,572)
—
335
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
August 13, 2019
March 31, 2019
As at December 31, 2018
Unsecured Operating Facilities
Borrowing
Capacity
Amounts
Drawn
Bank Indebtedness
and Outstanding
Letters of Credit
Available to be
Drawn
Interest Rates
Maturity Date
Revolving facility
maturing 2023 (1)
Non-revolving facility
maturing 2020 (2)
Additional
Tranche (3)
$
800,000 $
(301,488) $
(23,843) $
474,669
150,000
(150,519)
(17,560)
50,000
(50,998)
—
—
—
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.20% or
Prime + 0.20% or
US$ LIBOR + 1.20%
BA + 1.10% or
Prime + 0.10% or
US$ LIBOR + 1.10%
June 30, 2023
October 31, 2020
October 31, 2020
Secured Construction Facilities
Maturing 2019
Maturing 2019
115,000
(74,452)
(668)
39,880
15,907
(15,572)
—
335
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
August 13, 2019
March 31, 2019
20,734
(2,700)
(793)
17,241
11,875
(11,875)
7,500
(7,500)
4,313
(4,313)
6,755
(6,755)
—
—
—
—
—
—
—
Secured Facilities
Maturing 2019
December 31, 2019
September 27, 2019
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
September 28, 2022
December 19, 2022
October 30, 2019
Maturing 2019
Maturing 2019
Maturing 2022
Maturing 2022
20,734
(2,700)
(793)
17,241
11,875
(11,875)
7,500
(7,500)
4,313
(4,313)
6,755
(6,755)
—
—
—
—
—
—
—
December 31, 2019
September 27, 2019
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
BA + 1.125% or
Prime + 0.125%
September 28, 2022
December 19, 2022
October 30, 2019
Maturing 2019
Maturing 2019
Secured Facilities
Maturing 2019
Maturing 2019
Maturing 2019
Maturing 2022
Maturing 2022
Total
$
1,182,084 $
(626,172) $
(42,864) $
532,125
Total
$
1,182,084 $
(626,172) $
(42,864) $
532,125
(1) The Company had drawn in U.S. dollars the equivalent of CAD$294.8 million which was revalued at CAD$301.5 million as at December 31, 2018.
(2) The Company had drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$150.5 million as at December 31, 2018. Maximum borrowing
capacity for the letters of credit is CAD$35.0 million of which $17.6 million has been drawn as at December 31, 2018.
(3) The Company had drawn in U.S. dollars the equivalent of CAD$50 million which was revalued at CAD$51.0 million as at December 31, 2018.
(1) The Company had drawn in U.S. dollars the equivalent of CAD$294.8 million which was revalued at CAD$301.5 million as at December 31, 2018.
(2) The Company had drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$150.5 million as at December 31, 2018. Maximum borrowing
capacity for the letters of credit is CAD$35.0 million of which $17.6 million has been drawn as at December 31, 2018.
(3) The Company had drawn in U.S. dollars the equivalent of CAD$50 million which was revalued at CAD$51.0 million as at December 31, 2018.
91
FIRST CAPITAL REALTY ANNUAL REPORT 2018
91
FIRST CAPITAL REALTY ANNUAL REPORT 2018
11. SENIOR UNSECURED DEBENTURES
As at
Series Maturity Date
Interest Rate
Coupon
Effective
J
K
August 30, 2018
November 30, 2018
July 30, 2019
L
M April 30, 2020
N March 1, 2021
O
January 31, 2022
December 5, 2022
October 30, 2023
August 30, 2024
July 31, 2025
S
T May 6, 2026
Q
R
P
U
July 12, 2027
Weighted Average or Total
Current
Non-current
Total
5.25%
4.95%
5.48%
5.60%
4.50%
4.43%
3.95%
3.90%
4.79%
4.32%
3.60%
3.75%
4.32%
5.66%
5.17%
5.61%
5.60%
4.63%
4.59%
4.18%
3.97%
4.72%
4.24%
3.56%
3.82%
4.36%
$
$
$
December 31, 2018 December 31, 2017
As at
December 31, 2018 December 31, 2017
11. SENIOR UNSECURED DEBENTURES
Principal
Outstanding
— $
—
150,000
175,000
175,000
200,000
250,000
300,000
300,000
300,000
300,000
300,000
Liability
— $
—
149,891
174,994
174,553
199,091
247,976
299,114
301,016
301,401
300,775
298,467
Liability
49,868
99,807
149,712
174,991
174,361
198,824
247,512
298,951
301,172
301,587
300,865
298,316
2,450,000 $
2,447,278 $
150,000
2,300,000
149,891
2,297,387
2,450,000 $
2,447,278 $
2,595,966
149,675
2,446,291
2,595,966
Series Maturity Date
Interest Rate
Coupon
Effective
J
K
August 30, 2018
November 30, 2018
July 30, 2019
L
M April 30, 2020
N March 1, 2021
O
January 31, 2022
December 5, 2022
October 30, 2023
August 30, 2024
July 31, 2025
S
T May 6, 2026
Q
R
P
U
July 12, 2027
Weighted Average or Total
Current
Non-current
Total
5.25%
4.95%
5.48%
5.60%
4.50%
4.43%
3.95%
3.90%
4.79%
4.32%
3.60%
3.75%
4.32%
5.66%
5.17%
5.61%
5.60%
4.63%
4.59%
4.18%
3.97%
4.72%
4.24%
3.56%
3.82%
4.36%
$
$
$
Principal
Outstanding
— $
—
150,000
175,000
175,000
200,000
250,000
300,000
300,000
300,000
300,000
300,000
Liability
— $
—
149,891
174,994
174,553
199,091
247,976
299,114
301,016
301,401
300,775
298,467
Liability
49,868
99,807
149,712
174,991
174,361
198,824
247,512
298,951
301,172
301,587
300,865
298,316
2,450,000 $
2,447,278 $
150,000
2,300,000
149,891
2,297,387
2,450,000 $
2,447,278 $
2,595,966
149,675
2,446,291
2,595,966
Interest on the senior unsecured debentures is payable semi-annually and principal is payable on maturity.
Interest on the senior unsecured debentures is payable semi-annually and principal is payable on maturity.
12. CONVERTIBLE DEBENTURES
12. CONVERTIBLE DEBENTURES
As at
December 31, 2018
December 31, 2017
As at
December 31, 2018
December 31, 2017
Series Maturity Date
J
February 28, 2020
Weighted Average or Total
Current
Non-current
Total
Interest Rate
Coupon
Effective
Principal
Liability
Equity
Principal
Liability
Equity
4.45%
4.45%
5.34%
5.34%
—
— $
—
—
—
— $
—
—
—
55,093
54,293
— $ 55,093 $ 54,293 $
386
386
—
—
55,093
54,293
— $
— $
— $ 55,093 $ 54,293 $
386
$
$
Series Maturity Date
J
February 28, 2020
Weighted Average or Total
Current
Non-current
Total
Interest Rate
Coupon
Effective
Principal
Liability
Equity
Principal
Liability
Equity
4.45%
4.45%
5.34%
5.34%
—
— $
—
—
—
— $
—
—
—
55,093
54,293
— $ 55,093 $ 54,293 $
386
386
—
—
55,093
54,293
— $
— $
— $ 55,093 $ 54,293 $
386
$
$
(a) Principal and interest
During the year ended December 31, 2018, no common shares (year ended December 31, 2017 – 0.1 million common
shares) were issued to pay accrued interest to holders of the convertible debentures (year ended December 31, 2017 –
$2.4 million).
(a) Principal and interest
During the year ended December 31, 2018, no common shares (year ended December 31, 2017 – 0.1 million common
shares) were issued to pay accrued interest to holders of the convertible debentures (year ended December 31, 2017 –
$2.4 million).
During the year ended December 31, 2018, the Company paid $1.0 million (year ended December 31, 2017 – $3.9 million)
in cash to pay accrued interest to holders of convertible debentures.
During the year ended December 31, 2018, the Company paid $1.0 million (year ended December 31, 2017 – $3.9 million)
in cash to pay accrued interest to holders of convertible debentures.
(b) Principal redemption
On February 28, 2018, the Company redeemed its remaining 4.45% Series J convertible debentures for $55.1 million, at
par. The full redemption price and any accrued interest owing on the convertible debentures was satisfied in cash.
(b) Principal redemption
On February 28, 2018, the Company redeemed its remaining 4.45% Series J convertible debentures for $55.1 million, at
par. The full redemption price and any accrued interest owing on the convertible debentures was satisfied in cash.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
92
FIRST CAPITAL REALTY ANNUAL REPORT 2018
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
13. ACCOUNTS PAYABLE AND OTHER LIABILITIES
13. ACCOUNTS PAYABLE AND OTHER LIABILITIES
As at
Note
December 31, 2018 December 31, 2017
As at
Note
December 31, 2018 December 31, 2017
Non-current
Asset retirement obligations (a)
Ground leases payable
Derivatives at fair value
Deferred purchase price of investment property – shopping centre
Deferred income
Total non-current
Current
Trade payables and accruals
Construction and development payables
Dividends payable
Interest payable
Tenant deposits
Derivatives at fair value
Other liabilities
Total current
Total
23
23
$
$
$
$
$
2,642
10,405
666
7,125
—
20,838
67,295
62,563
54,788
36,056
37,451
5,706
402
264,261
285,099
$
$
$
$
$
5,179
9,010
844
1,783
98
16,914
61,538
47,603
52,553
37,145
30,816
10,499
—
240,154
257,068
Non-current
Asset retirement obligations (a)
Ground leases payable
Derivatives at fair value
Deferred purchase price of investment property – shopping centre
Deferred income
Total non-current
Current
Trade payables and accruals
Construction and development payables
Dividends payable
Interest payable
Tenant deposits
Derivatives at fair value
Other liabilities
Total current
Total
23
23
$
$
$
$
$
2,642
10,405
666
7,125
—
20,838
67,295
62,563
54,788
36,056
37,451
5,706
402
264,261
285,099
$
$
$
$
$
5,179
9,010
844
1,783
98
16,914
61,538
47,603
52,553
37,145
30,816
10,499
—
240,154
257,068
(a) The Company has obligations for environmental remediation at certain sites within its property portfolio. The Company
has also recognized a related environmental indemnity and insurance proceeds receivable totaling $4.7 million in other
assets (Note 8).
(a) The Company has obligations for environmental remediation at certain sites within its property portfolio. The Company
has also recognized a related environmental indemnity and insurance proceeds receivable totaling $4.7 million in other
assets (Note 8).
14. SHAREHOLDERS’ EQUITY
(a) Share capital
The authorized share capital of the Company consists of an unlimited number of authorized common shares and
preference shares. The common shares carry one vote each and participate equally in the income 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 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.
14. SHAREHOLDERS’ EQUITY
(a) Share capital
The authorized share capital of the Company consists of an unlimited number of authorized common shares and
preference shares. The common shares carry one vote each and participate equally in the income 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 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 following table sets forth the particulars of the issued and outstanding common shares of the Company:
The following table sets forth the particulars of the issued and outstanding common shares of the Company:
Year ended December 31
2018
Note
Number of
Common Shares
Stated Capital
Number of
Common Shares
Year ended December 31
2018
Note
Number of
Common Shares
Stated Capital
Number of
Common Shares
Issued and outstanding at beginning of year
Payment of interest on convertible debentures
Conversion of convertible debentures
Exercise of options, and settlement of any restricted,
performance and deferred share units
Issuance of common shares
Share issue costs and other, net of tax effect
Issued and outstanding at end of year
12
12
244,431 $
—
—
640
9,757
—
3,159,542
—
—
11,556
200,019
(6,169)
2017
Stated Capital
3,142,399
2,442
107
14,770
243,507 $
124
4
796
—
—
—
(176)
Issued and outstanding at beginning of year
Payment of interest on convertible debentures
Conversion of convertible debentures
Exercise of options, and settlement of any restricted,
performance and deferred share units
Issuance of common shares
Share issue costs and other, net of tax effect
Issued and outstanding at end of year
12
12
244,431 $
—
—
640
9,757
—
3,159,542
—
—
11,556
200,019
(6,169)
2017
Stated Capital
3,142,399
2,442
107
14,770
243,507 $
124
4
796
—
—
—
(176)
254,828 $
3,364,948
244,431 $
3,159,542
254,828 $
3,364,948
244,431 $
3,159,542
93
FIRST CAPITAL REALTY ANNUAL REPORT 2018
93
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Quarterly dividends declared per common share were $0.860 for the year ended December 31, 2018 (year ended December
31, 2017 – $0.860).
Quarterly dividends declared per common share were $0.860 for the year ended December 31, 2018 (year ended December
31, 2017 – $0.860).
(b) Contributed surplus and other equity items
Contributed surplus and other equity items comprise the following:
Year ended December 31
2018
Contributed
Surplus
Convertible
Debentures
Equity
Component
Stock-based
Compensation
Plan Awards
Total
Contributed
Surplus
Convertible
Debentures
Equity
Component
Stock-based
Compensation
Plan Awards
2017
Total
(b) Contributed surplus and other equity items
Contributed surplus and other equity items comprise the following:
Year ended December 31
2018
Contributed
Surplus
Convertible
Debentures
Equity
Component
Stock-based
Compensation
Plan Awards
Total
Contributed
Surplus
Convertible
Debentures
Equity
Component
Stock-based
Compensation
Plan Awards
2017
Total
Balance at beginning of year
Redemption of convertible
debentures
Repurchase of convertible
debentures
Options vested
Exercise of options
Deferred share units
Restricted share units
Performance share units
Settlement of any restricted,
performance and deferred share
units
$
24,517 $
386
386 $
(386)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17,067 $ 41,970 $
—
—
1,121
(709)
785
1,576
2,394
—
—
1,121
(709)
785
1,576
2,394
1
—
(272)
—
—
—
(2,943)
(2,943)
—
20,954 $
3,834
4,224 $
(3,837)
16,521 $ 41,699
(3)
—
(1)
—
—
—
—
—
—
—
—
896
(1,235)
749
2,234
1,447
896
(1,507)
749
2,234
1,447
(3,545)
(3,545)
Balance at beginning of year
Redemption of convertible
debentures
Repurchase of convertible
debentures
Options vested
Exercise of options
Deferred share units
Restricted share units
Performance share units
Settlement of any restricted,
performance and deferred share
units
$
24,517 $
386
386 $
(386)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17,067 $ 41,970 $
—
—
1,121
(709)
785
1,576
2,394
—
—
1,121
(709)
785
1,576
2,394
1
—
(272)
—
—
—
(2,943)
(2,943)
—
20,954 $
3,834
4,224 $
(3,837)
16,521 $ 41,699
(3)
—
(1)
—
—
—
—
—
—
—
—
896
(1,235)
749
2,234
1,447
896
(1,507)
749
2,234
1,447
(3,545)
(3,545)
Balance at end of year
$
24,903 $
— $
19,291 $ 44,194 $
24,517 $
386 $
17,067 $ 41,970
Balance at end of year
$
24,903 $
— $
19,291 $ 44,194 $
24,517 $
386 $
17,067 $ 41,970
(c) Stock options
As of December 31, 2018, the Company is authorized to grant up to 19.7 million (December 31, 2017 – 19.7 million)
common share options to the employees, officers and directors of the Company. As of December 31, 2018, 4.4 million
(December 31, 2017 – 5.5 million) common share options are available to be granted to the employees, officers and
directors of the Company. In addition, as at December 31, 2018, 4.7 million common share options were outstanding.
Options granted by the Company expire 10 years from the date of grant and vest over five years.
The outstanding options as at December 31, 2018 have exercise prices ranging from $9.81 – $20.24
(December 31, 2017 – $9.81 – $20.24).
(c) Stock options
As of December 31, 2018, the Company is authorized to grant up to 19.7 million (December 31, 2017 – 19.7 million)
common share options to the employees, officers and directors of the Company. As of December 31, 2018, 4.4 million
(December 31, 2017 – 5.5 million) common share options are available to be granted to the employees, officers and
directors of the Company. In addition, as at December 31, 2018, 4.7 million common share options were outstanding.
Options granted by the Company expire 10 years from the date of grant and vest over five years.
The outstanding options as at December 31, 2018 have exercise prices ranging from $9.81 – $20.24
(December 31, 2017 – $9.81 – $20.24).
As at
December 31, 2018
December 31, 2017
As at
December 31, 2018
December 31, 2017
Outstanding Options
Vested Options
Outstanding Options
Vested Options
Outstanding Options
Vested Options
Outstanding Options
Vested Options
Exercise Price
Range ($)
9.81 – 18.56
18.57 – 19.78
19.79 – 20.05
20.06 – 20.24
9.81 – 20.24
Number of
Common
Shares
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Common
Share
Weighted
Average
Remaining
Life
(years)
Number of
Common Shares
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Common
Share
Number of
Common
Shares
Issuable
(in thousands)
1,239 $ 17.70
1,200 $ 19.38
1,302 $ 20.02
995 $ 20.09
4,736 $ 19.27
4.9
6.1
8.9
8.1
7.0
954 $ 17.51
705 $ 19.24
76 $ 19.96
228 $ 20.11
1,963 $ 18.53
933 $
1,171 $
1,015 $
1,014 $
4,133 $
Weighted
Average
Exercise
Price per
Common
Share
16.49
18.60
19.63
20.09
18.74
Weighted
Average
Remaining
Life
(years)
Number of
Common
Shares
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Common
Share
3.6
6.0
7.9
9.1
6.7
833 $ 16.33
688 $ 18.67
242 $ 19.62
29 $ 20.24
1,792 $ 17.74
Exercise Price
Range ($)
9.81 – 18.56
18.57 – 19.78
19.79 – 20.05
20.06 – 20.24
9.81 – 20.24
Number of
Common
Shares
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Common
Share
Weighted
Average
Remaining
Life
(years)
Number of
Common Shares
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Common
Share
Number of
Common
Shares
Issuable
(in thousands)
1,239 $ 17.70
1,200 $ 19.38
1,302 $ 20.02
995 $ 20.09
4,736 $ 19.27
4.9
6.1
8.9
8.1
7.0
954 $ 17.51
705 $ 19.24
76 $ 19.96
228 $ 20.11
1,963 $ 18.53
933 $
1,171 $
1,015 $
1,014 $
4,133 $
Weighted
Average
Exercise
Price per
Common
Share
16.49
18.60
19.63
20.09
18.74
Weighted
Average
Remaining
Life
(years)
Number of
Common
Shares
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Common
Share
3.6
6.0
7.9
9.1
6.7
833 $ 16.33
688 $ 18.67
242 $ 19.62
29 $ 20.24
1,792 $ 17.74
During the year ended December 31, 2018, $1.1 million (year ended December 31, 2017 – $0.9 million) was recorded as
an expense related to stock options.
During the year ended December 31, 2018, $1.1 million (year ended December 31, 2017 – $0.9 million) was recorded as
an expense related to stock options.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
94
FIRST CAPITAL REALTY ANNUAL REPORT 2018
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Year ended December 31
Outstanding at beginning of year
Granted (a)
Exercised (b)
Forfeited
Expired
Outstanding at end of year
Number of
Common Shares
Issuable
(in thousands)
4,132
1,197
(505)
(88)
—
$
4,736
$
2018
Weighted
Average
Exercise Price
18.74
20.03
16.75
19.59
—
19.27
Number of
Common Shares
Issuable
(in thousands)
4,206
869
(827)
(114)
(1)
$
4,133
$
2017
Weighted
Average
Exercise Price
18.15
20.07
17.12
18.91
17.67
18.74
Year ended December 31
Outstanding at beginning of year
Granted (a)
Exercised (b)
Forfeited
Expired
Outstanding at end of year
Number of
Common Shares
Issuable
(in thousands)
4,132
1,197
(505)
(88)
—
$
4,736
$
2018
Weighted
Average
Exercise Price
18.74
20.03
16.75
19.59
—
19.27
Number of
Common Shares
Issuable
(in thousands)
4,206
869
(827)
(114)
(1)
$
4,133
$
2017
Weighted
Average
Exercise Price
18.15
20.07
17.12
18.91
17.67
18.74
(a) The fair value associated with the options issued was calculated using the Black-Scholes model for option valuation
based on the assumptions in the following table and is recognized as compensation expense over the vesting period.
(a) The fair value associated with the options issued was calculated using the Black-Scholes model for option valuation
based on the assumptions in the following table and is recognized as compensation expense over the vesting period.
Grant date
Share options granted (thousands)
Term to expiry
Exercise price
Weighted average volatility rate
Weighted average expected option life
Weighted average dividend yield
Weighted average risk free interest rate
Fair value (thousands)
2018
March 2, 2018
1,197
10 years
$20.03
13.5%
5.5 years
4.33%
2.01%
$1,395
2017
March 17, 2017
869
10 years
$20.07
15.0%
6 years
4.26%
1.31%
$1,125
Grant date
Share options granted (thousands)
Term to expiry
Exercise price
Weighted average volatility rate
Weighted average expected option life
Weighted average dividend yield
Weighted average risk free interest rate
Fair value (thousands)
2018
March 2, 2018
1,197
10 years
$20.03
13.5%
5.5 years
4.33%
2.01%
$1,395
2017
March 17, 2017
869
10 years
$20.07
15.0%
6 years
4.26%
1.31%
$1,125
(b) The weighted average market share price at which options were exercised for the year ended December 31,
(b) The weighted average market share price at which options were exercised for the year ended December 31,
2018 was $20.19 (year ended December 31, 2017 – $20.42).
2018 was $20.19 (year ended December 31, 2017 – $20.42).
(d) Share unit plans
The Company’s share unit plans include a Directors' Deferred Share Unit ("DSU") Plan and a Restricted Share Unit ("RSU")
Plan that provides for the issuance of Restricted Share Units and Performance Share Units ("PSU"). Under the DSU and
RSU plans, a participant is entitled to receive one common share, or equivalent cash value, at the Company’s option, (i) in
the case of a DSU, upon redemption by the holder after the date that the holder ceases to be a director of the Company
and any of its subsidiaries (the “Retirement Date”) but no later than December 15 of the first calendar year commencing
after the Retirement Date, and (ii) in the case of a RSU, on December 15 of the third calendar year following the year of
grant for RSUs granted prior to June 1, 2015, and, for all subsequent RSUs granted, on the third anniversary of the grant
date. Under the PSU plan, a participant is entitled to receive 0.5 – 1.5 common shares per PSU granted, or equivalent cash
value at the Company's option, on the third anniversary of the grant date. Holders of units granted under each plan
receive dividends in the form of additional units when the Company declares dividends on its common shares.
(d) Share unit plans
The Company’s share unit plans include a Directors' Deferred Share Unit ("DSU") Plan and a Restricted Share Unit ("RSU")
Plan that provides for the issuance of Restricted Share Units and Performance Share Units ("PSU"). Under the DSU and
RSU plans, a participant is entitled to receive one common share, or equivalent cash value, at the Company’s option, (i) in
the case of a DSU, upon redemption by the holder after the date that the holder ceases to be a director of the Company
and any of its subsidiaries (the “Retirement Date”) but no later than December 15 of the first calendar year commencing
after the Retirement Date, and (ii) in the case of a RSU, on December 15 of the third calendar year following the year of
grant for RSUs granted prior to June 1, 2015, and, for all subsequent RSUs granted, on the third anniversary of the grant
date. Under the PSU plan, a participant is entitled to receive 0.5 – 1.5 common shares per PSU granted, or equivalent cash
value at the Company's option, on the third anniversary of the grant date. Holders of units granted under each plan
receive dividends in the form of additional units when the Company declares dividends on its common shares.
Year ended December 31
(in thousands)
Outstanding at beginning of year
Granted (a) (b)
Dividends declared
Exercised
Forfeited
Outstanding at end of year
Expense recorded for the year
DSUs
301
28
12
(52)
—
289
$549
2018
RSUs / PSUs
482
221
27
(111)
(31)
588
$3,555
DSUs
275
28
12
(14)
—
301
$502
2017
RSUs / PSUs
468
191
25
(182)
(20)
482
$3,339
Year ended December 31
(in thousands)
Outstanding at beginning of year
Granted (a) (b)
Dividends declared
Exercised
Forfeited
Outstanding at end of year
Expense recorded for the year
DSUs
301
28
12
(52)
—
289
$549
2018
RSUs / PSUs
482
221
27
(111)
(31)
588
$3,555
DSUs
275
28
12
(14)
—
301
$502
2017
RSUs / PSUs
468
191
25
(182)
(20)
482
$3,339
95
FIRST CAPITAL REALTY ANNUAL REPORT 2018
95
FIRST CAPITAL REALTY ANNUAL REPORT 2018
(a) The fair value of the DSUs granted during the year ended December 31, 2018 was $0.5 million (year ended December
31, 2017 – $0.5 million), measured based on the Company’s prevailing share price on the date of grant. The fair value
of the RSUs granted during the year ended December 31, 2018 was $1.6 million (year ended December 31, 2017 –
$1.6 million), measured based on the Company’s share price on the date of grant.
(b) The fair value of the PSUs granted during the year ended December 31, 2018 was $2.9 million (year ended December
31, 2017 – $2.2 million). The fair value is calculated using the Monte-Carlo simulation model based on the assumptions
below as well as a market adjustment factor based on the total shareholder return of the Company's common shares
relative to the S&P/TSX Capped REIT Index.
(a) The fair value of the DSUs granted during the year ended December 31, 2018 was $0.5 million (year ended December
31, 2017 – $0.5 million), measured based on the Company’s prevailing share price on the date of grant. The fair value
of the RSUs granted during the year ended December 31, 2018 was $1.6 million (year ended December 31, 2017 –
$1.6 million), measured based on the Company’s share price on the date of grant.
(b) The fair value of the PSUs granted during the year ended December 31, 2018 was $2.9 million (year ended December
31, 2017 – $2.2 million). The fair value is calculated using the Monte-Carlo simulation model based on the assumptions
below as well as a market adjustment factor based on the total shareholder return of the Company's common shares
relative to the S&P/TSX Capped REIT Index.
Grant date
PSUs granted (thousands)
Term to expiry
Weighted average volatility rate
Weighted average correlation
Weighted average total shareholder return
Weighted average risk free interest rate
Fair value (thousands)
2018
2017
March 2, 2018 March 17, 2017
112
3 years
14.3%
40.4%
0.5%
140
3 years
14.7%
37.3%
-3.3%
1.87%
$2,866
0.95%
$2,238
Grant date
PSUs granted (thousands)
Term to expiry
Weighted average volatility rate
Weighted average correlation
Weighted average total shareholder return
Weighted average risk free interest rate
Fair value (thousands)
2018
2017
March 2, 2018 March 17, 2017
112
3 years
14.3%
40.4%
0.5%
140
3 years
14.7%
37.3%
-3.3%
1.87%
$2,866
0.95%
$2,238
The fair value of awards granted under the above plans is recognized as compensation expense over the respective vesting
periods.
The fair value of awards granted under the above plans is recognized as compensation expense over the respective vesting
periods.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
96
FIRST CAPITAL REALTY ANNUAL REPORT 2018
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
15. NET OPERATING INCOME
Net Operating Income by Component
The Company’s net operating income by component is presented below:
15. NET OPERATING INCOME
Net Operating Income by Component
The Company’s net operating income by component is presented below:
Property rental revenue
Base rent
Operating cost recoveries
Realty tax recoveries
Lease surrender fees
Percentage rent
Straight-line rent adjustment
Prior year operating cost and tax recovery adjustments
Temporary tenants, storage, parking and other
Total Property rental revenue
Property operating costs
Recoverable operating expenses
Recoverable realty tax expense
Prior year realty tax expense
Other operating costs and adjustments
Total Property operating costs
Total NOI
NOI margin
Net Operating Income by Segment
Net operating income is presented by segment as follows:
% change
Year ended December 31
2017
2018
$ 452,445
$ 436,173
107,604
137,909
1,983
4,351
7,062
(2,320)
20,561
5.1%
729,595
122,300
156,084
(3,100)
(462)
102,214
134,168
1,612
3,325
2,684
(1,678)
15,961
694,459
117,177
149,663
(4,228)
(5,663)
274,822
256,949
3.9% $ 454,773
$ 437,510
62.3%
63.0%
Property rental revenue
Base rent
Operating cost recoveries
Realty tax recoveries
Lease surrender fees
Percentage rent
Straight-line rent adjustment
Prior year operating cost and tax recovery adjustments
Temporary tenants, storage, parking and other
Total Property rental revenue
Property operating costs
Recoverable operating expenses
Recoverable realty tax expense
Prior year realty tax expense
Other operating costs and adjustments
Total Property operating costs
Total NOI
NOI margin
Net Operating Income by Segment
Net operating income is presented by segment as follows:
% change
Year ended December 31
2017
2018
$ 452,445
$ 436,173
107,604
137,909
1,983
4,351
7,062
(2,320)
20,561
5.1%
729,595
122,300
156,084
(3,100)
(462)
102,214
134,168
1,612
3,325
2,684
(1,678)
15,961
694,459
117,177
149,663
(4,228)
(5,663)
274,822
256,949
3.9% $ 454,773
$ 437,510
62.3%
63.0%
Year ended December 31, 2018
Property rental revenue
Property operating costs
Net operating income
Year ended December 31, 2017
Property rental revenue
Property operating costs
Net operating income
$
$
$
$
Central
Region
Eastern
Region
Western
Region
Subtotal
Other (1)
304,426 $
190,384 $
237,095 $
731,905 $
(2,310) $
118,559
82,401
79,755
280,715
(5,893)
Total
729,595
274,822
185,867 $
107,983 $
157,340 $
451,190 $
3,583 $
454,773
Central
Region
Eastern
Region
Western
Region
Subtotal
Other (1)
288,416 $
180,856 $
227,966 $
697,238 $
(2,779) $
108,493
78,048
75,910
262,451
(5,502)
Total
694,459
256,949
179,923 $
102,808 $
152,056 $
434,787 $
2,723 $
437,510
Year ended December 31, 2018
Property rental revenue
Property operating costs
Net operating income
Year ended December 31, 2017
Property rental revenue
Property operating costs
Net operating income
$
$
$
$
Central
Region
Eastern
Region
Western
Region
Subtotal
Other (1)
304,426 $
190,384 $
237,095 $
731,905 $
(2,310) $
118,559
82,401
79,755
280,715
(5,893)
Total
729,595
274,822
185,867 $
107,983 $
157,340 $
451,190 $
3,583 $
454,773
Central
Region
Eastern
Region
Western
Region
Subtotal
Other (1)
288,416 $
180,856 $
227,966 $
697,238 $
(2,779) $
108,493
78,048
75,910
262,451
(5,502)
Total
694,459
256,949
179,923 $
102,808 $
152,056 $
434,787 $
2,723 $
437,510
(1) Other items principally consist of intercompany eliminations.
(1) Other items principally consist of intercompany eliminations.
For the year ended December 31, 2018, property operating costs include $20.7 million (year ended December 31, 2017 –
$20.2 million) related to employee compensation.
For the year ended December 31, 2018, property operating costs include $20.7 million (year ended December 31, 2017 –
$20.2 million) related to employee compensation.
97
FIRST CAPITAL REALTY ANNUAL REPORT 2018
97
FIRST CAPITAL REALTY ANNUAL REPORT 2018
16. INTEREST AND OTHER INCOME
16. INTEREST AND OTHER INCOME
Interest, dividend and distribution income from marketable securities
Interest income from loans and mortgages receivable classified as FVTPL (1)
Interest income from loans, deposit and mortgages receivable at amortized cost
Fees and other income
Total
Note
6
6
6
$
$
Year ended December 31
2018
2017
1,994
5,060
11,323
8,052
26,429
$
$
936
—
19,070
8,395
28,401
Interest, dividend and distribution income from marketable securities
Interest income from loans and mortgages receivable classified as FVTPL (1)
Interest income from loans, deposit and mortgages receivable at amortized cost
Fees and other income
Total
Note
6
6
6
$
$
Year ended December 31
2018
2017
1,994
5,060
11,323
8,052
26,429
$
$
936
—
19,070
8,395
28,401
(1) Effective January 1, 2018, the Company reclassified certain loans and mortgages receivable to FVTPL from amortized cost upon adoption of IFRS 9.
(1) Effective January 1, 2018, the Company reclassified certain loans and mortgages receivable to FVTPL from amortized cost upon adoption of IFRS 9.
17. INTEREST EXPENSE
17. INTEREST EXPENSE
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Total interest expense
Interest capitalized to investment properties under development
Interest expense
Convertible debenture interest paid in common shares
Change in accrued interest
Effective interest rate less than (in excess of) coupon interest rate on senior unsecured and
convertible debentures
Coupon interest rate in excess of effective interest rate on assumed mortgages
Amortization of deferred financing costs
Cash interest paid associated with operating activities
Note
10
10
11
12
12
Year ended December 31
2018
2017
$
46,212
18,652
113,284
446
178,594
(25,354)
$
47,244
10,890
115,798
5,150
179,082
(21,671)
$
153,240
$
157,411
—
1,089
1,177
967
(5,304)
(2,442)
870
911
1,332
(5,952)
$
151,169
$
152,130
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Total interest expense
Interest capitalized to investment properties under development
Interest expense
Convertible debenture interest paid in common shares
Change in accrued interest
Effective interest rate less than (in excess of) coupon interest rate on senior unsecured and
convertible debentures
Coupon interest rate in excess of effective interest rate on assumed mortgages
Amortization of deferred financing costs
Cash interest paid associated with operating activities
18. CORPORATE EXPENSES
18. CORPORATE EXPENSES
Salaries, wages and benefits
Non-cash compensation
Other corporate costs
Total corporate expenses
Amounts capitalized to investment properties under development
Corporate expenses
Year ended December 31
2017
2018
$
$
27,418
4,805
12,408
44,631
(7,537)
37,094
$
$
27,756
4,258
11,630
43,644
(7,202)
36,442
Salaries, wages and benefits
Non-cash compensation
Other corporate costs
Total corporate expenses
Amounts capitalized to investment properties under development
Corporate expenses
Note
10
10
11
12
12
Year ended December 31
2018
2017
$
46,212
18,652
113,284
446
178,594
(25,354)
$
47,244
10,890
115,798
5,150
179,082
(21,671)
$
153,240
$
157,411
—
1,089
1,177
967
(5,304)
(2,442)
870
911
1,332
(5,952)
$
151,169
$
152,130
Year ended December 31
2017
2018
$
$
27,418
4,805
12,408
44,631
(7,537)
37,094
$
$
27,756
4,258
11,630
43,644
(7,202)
36,442
FIRST CAPITAL REALTY ANNUAL REPORT 2018
98
FIRST CAPITAL REALTY ANNUAL REPORT 2018
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
19. OTHER GAINS (LOSSES) AND (EXPENSES)
19. OTHER GAINS (LOSSES) AND (EXPENSES)
Realized gain (loss) on sale of marketable securities
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt (non-cash)
Gain on below market purchase (1)
Transaction costs (1)
Proceeds from Target (2)
Investment properties selling costs
REIT conversion costs
Other
Total
Year ended December 31
2018
2017
$
4,232
$
(623)
(726)
13,975
(2,052)
—
(2,556)
(1,540)
23
(1,165)
3,313
(3,032)
—
—
474
(1,667)
—
171
Realized gain (loss) on sale of marketable securities
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt (non-cash)
Gain on below market purchase (1)
Transaction costs (1)
Proceeds from Target (2)
Investment properties selling costs
REIT conversion costs
Other
Year ended December 31
2018
2017
$
4,232
$
(623)
(726)
13,975
(2,052)
—
(2,556)
(1,540)
23
(1,165)
3,313
(3,032)
—
—
474
(1,667)
—
171
$
10,733
$
(1,906)
Total
$
10,733
$
(1,906)
(1) In connection with acquisition of hotel property - Refer to Note 5.
(2) In connection with proceeds recognized under Target Canada's CCAA plan of arrangement related to the closure of two Target stores in the Company's portfolio in 2015.
(1) In connection with acquisition of hotel property - Refer to Note 5.
(2) In connection with proceeds recognized under Target Canada's CCAA plan of arrangement related to the closure of two Target stores in the Company's portfolio in 2015.
20. INCOME TAXES
The sources of deferred tax balances and movements are as follows:
20. INCOME TAXES
The sources of deferred tax balances and movements are as follows:
December 31, 2017
Net income
Recognized in OCI
Equity and other December 31, 2018
December 31, 2017
Net income
Recognized in OCI
Equity and other December 31, 2018
Deferred taxes related to non-capital losses
Deferred tax liabilities related to difference
in tax and book basis primarily related to
real estate, net
Net deferred taxes
$
$
(29,383) $
749,814
17,875 $
61,276
(40) $
(1,602)
(1,498) $
(3,142)
(13,046)
806,346
720,431 $
79,151 $
(1,642) $
(4,640) $
793,300
Deferred taxes related to non-capital losses
Deferred tax liabilities related to difference
in tax and book basis primarily related to
real estate, net
Net deferred taxes
$
$
(29,383) $
749,814
17,875 $
61,276
(40) $
(1,602)
(1,498) $
(3,142)
(13,046)
806,346
720,431 $
79,151 $
(1,642) $
(4,640) $
793,300
As at December 31, 2018, the Company had approximately $49.9 million of non-capital losses which expire between 2026
and 2038.
As at December 31, 2018, the Company had approximately $49.9 million of non-capital losses which expire between 2026
and 2038.
December 31, 2016
Net income
Recognized in OCI
Equity and other December 31, 2017
December 31, 2016
Net income
Recognized in OCI
Equity and other December 31, 2017
Deferred taxes related to non-capital losses $
Deferred tax liabilities related to difference
in tax and book basis primarily related to
real estate, net
Net deferred taxes
$
(30,249) $
623,542
1,493 $
123,608
431 $
3,823
(1,058) $
(1,159)
(29,383)
749,814
593,293 $
125,101 $
4,254 $
(2,217) $
720,431
Deferred taxes related to non-capital losses $
Deferred tax liabilities related to difference
in tax and book basis primarily related to
real estate, net
Net deferred taxes
$
(30,249) $
623,542
1,493 $
123,608
431 $
3,823
(1,058) $
(1,159)
(29,383)
749,814
593,293 $
125,101 $
4,254 $
(2,217) $
720,431
As at December 31, 2017, the Company had approximately $111.3 million of non-capital losses which expire between 2026
and 2037.
As at December 31, 2017, the Company had approximately $111.3 million of non-capital losses which expire between 2026
and 2037.
99
FIRST CAPITAL REALTY ANNUAL REPORT 2018
99
FIRST CAPITAL REALTY ANNUAL REPORT 2018
The following reconciles the Company’s expected tax expense computed at the statutory tax rate to its actual tax expense
for the year ended December 31, 2018 and 2017:
The following reconciles the Company’s expected tax expense computed at the statutory tax rate to its actual tax expense
for the year ended December 31, 2018 and 2017:
Income tax expense at the Canadian federal and provincial income tax rate of 26.7%
(December 31, 2017 - 26.6%)
Increase (decrease) in income taxes due to:
Non-taxable portion of capital gains and other
Impact of change in statutory income tax rate
Non-controlling interests in income of consolidated limited partnership
Other
Year ended December 31
2017
2018
$
115,074 $
204,623
(31,681)
—
(2,198)
(2,044)
(76,413)
1,792
(2,945)
(1,956)
Income tax expense at the Canadian federal and provincial income tax rate of 26.7%
(December 31, 2017 - 26.6%)
Increase (decrease) in income taxes due to:
Non-taxable portion of capital gains and other
Impact of change in statutory income tax rate
Non-controlling interests in income of consolidated limited partnership
Other
Deferred income taxes
$
79,151 $
125,101
Deferred income taxes
21. PER SHARE CALCULATIONS
The following table sets forth the computation of per share amounts:
(in thousands)
Net income attributable to common shareholders
Adjustment for dilutive effect of convertible debentures, net of tax
Income for diluted per share amounts
Weighted average number of shares outstanding for basic per share amounts
Options, restricted, performance and deferred share units
Convertible debentures
Weighted average diluted share amounts
Year ended December 31
2018
2017
$
$
343,606
328
343,934
249,349
1,126
327
250,802
$
$
633,089
3,427
636,516
244,754
399
4,260
249,413
21. PER SHARE CALCULATIONS
The following table sets forth the computation of per share amounts:
(in thousands)
Net income attributable to common shareholders
Adjustment for dilutive effect of convertible debentures, net of tax
Income for diluted per share amounts
Weighted average number of shares outstanding for basic per share amounts
Options, restricted, performance and deferred share units
Convertible debentures
Weighted average diluted share amounts
Year ended December 31
2017
2018
$
115,074 $
204,623
(31,681)
—
(2,198)
(2,044)
(76,413)
1,792
(2,945)
(1,956)
$
79,151 $
125,101
Year ended December 31
2018
2017
$
$
343,606
328
343,934
249,349
1,126
327
250,802
$
$
633,089
3,427
636,516
244,754
399
4,260
249,413
The following securities were not included in the diluted net income per share calculation as the effect would have been
anti-dilutive:
The following securities were not included in the diluted net income per share calculation as the effect would have been
anti-dilutive:
Year ended December 31
(in dollars, number of options in thousands)
Common share options
Number of Shares if Exercised
Exercise Price
$20.24
2018
145
2017
—
Year ended December 31
(in dollars, number of options in thousands)
Common share options
Number of Shares if Exercised
Exercise Price
$20.24
2018
145
2017
—
22. RISK MANAGEMENT
In the normal course of its business, the Company is exposed to a number of risks that can affect its operating
performance. Certain of these risks, and the actions taken to manage them, are as follows:
(a) Interest rate risk
The Company structures its financings so as to stagger the maturities of its debt, thereby mitigating its exposure to
interest rate and other credit market fluctuations. A portion of the Company’s mortgages, loans and credit facilities are
floating rate instruments. From time to time, the Company may enter into interest rate swap contracts, bond forwards or
other financial instruments to modify the interest rate profile of its outstanding debt or highly probable future debt
issuances without an exchange of the underlying principal amount.
22. RISK MANAGEMENT
In the normal course of its business, the Company is exposed to a number of risks that can affect its operating
performance. Certain of these risks, and the actions taken to manage them, are as follows:
(a) Interest rate risk
The Company structures its financings so as to stagger the maturities of its debt, thereby mitigating its exposure to
interest rate and other credit market fluctuations. A portion of the Company’s mortgages, loans and credit facilities are
floating rate instruments. From time to time, the Company may enter into interest rate swap contracts, bond forwards or
other financial instruments to modify the interest rate profile of its outstanding debt or highly probable future debt
issuances without an exchange of the underlying principal amount.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
100
FIRST CAPITAL REALTY ANNUAL REPORT 2018
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Interest represents a significant cost in financing the ownership of real property. As at December 31, 2018, the Company
has a total of $0.6 billion of outstanding debt bearing interest at variable rates. If the average variable interest rate was
100 basis points higher or lower than the existing rate, the Company’s annual interest cost would increase or decrease,
respectively, by $6.3 million.
The Company has a total of $0.8 billion principal amount of fixed rate interest-bearing instruments outstanding including
mortgages and senior unsecured debentures maturing between January 1, 2019 and December 31, 2021 at a weighted
average coupon interest rate of 5.3%. If these amounts were refinanced at an average interest rate that was 100 basis
points higher or lower than the existing rate, the Company’s annual interest cost would increase or decrease, respectively,
by $8.1 million.
As at December 31, 2018, the Company’s loans and mortgages receivable that earn interest at variable rates total
$142.0 million. If the average variable interest rate was 100 basis points higher than the existing rate, the Company’s
annual interest income would increase by approximately $1.4 million, and if the variable interest rate were 100 basis
points lower, the Company’s annual interest income would decrease by approximately $1.1 million.
The Company’s loans and mortgages receivable that earn interest at fixed rates total $179.0 million. If the loans were
refinanced at 100 basis points higher or lower than the existing rate, the Company’s annual interest income would
increase or decrease by approximately $1.8 million.
(b) Credit risk
Credit risk arises from the possibility that tenants and/or debtors may experience financial difficulty and be unable or
unwilling to fulfill their lease commitments or loan obligations. The Company mitigates the risk of credit loss from tenants
by investing in well-located properties in urban markets that attract high quality tenants, ensuring that its tenant mix is
diversified, and by limiting its exposure to any one tenant. As at December 31, 2018, Loblaw Companies Limited
(“Loblaw”) is the Company's largest tenant and accounts for 10.0% of the Company’s annualized minimum rent and has
an investment grade credit rating. A tenant’s success over the term of its lease and its ability to fulfill its lease obligations
is subject to many factors. There can be no assurance that a tenant will be able to fulfill all of its existing commitments
and leases up to the expiry date. The Company mitigates the risk of credit loss from debtors by undertaking a number of
activities typical in lending arrangements including obtaining registered mortgages on the real estate properties.
Interest represents a significant cost in financing the ownership of real property. As at December 31, 2018, the Company
has a total of $0.6 billion of outstanding debt bearing interest at variable rates. If the average variable interest rate was
100 basis points higher or lower than the existing rate, the Company’s annual interest cost would increase or decrease,
respectively, by $6.3 million.
The Company has a total of $0.8 billion principal amount of fixed rate interest-bearing instruments outstanding including
mortgages and senior unsecured debentures maturing between January 1, 2019 and December 31, 2021 at a weighted
average coupon interest rate of 5.3%. If these amounts were refinanced at an average interest rate that was 100 basis
points higher or lower than the existing rate, the Company’s annual interest cost would increase or decrease, respectively,
by $8.1 million.
As at December 31, 2018, the Company’s loans and mortgages receivable that earn interest at variable rates total
$142.0 million. If the average variable interest rate was 100 basis points higher than the existing rate, the Company’s
annual interest income would increase by approximately $1.4 million, and if the variable interest rate were 100 basis
points lower, the Company’s annual interest income would decrease by approximately $1.1 million.
The Company’s loans and mortgages receivable that earn interest at fixed rates total $179.0 million. If the loans were
refinanced at 100 basis points higher or lower than the existing rate, the Company’s annual interest income would
increase or decrease by approximately $1.8 million.
(b) Credit risk
Credit risk arises from the possibility that tenants and/or debtors may experience financial difficulty and be unable or
unwilling to fulfill their lease commitments or loan obligations. The Company mitigates the risk of credit loss from tenants
by investing in well-located properties in urban markets that attract high quality tenants, ensuring that its tenant mix is
diversified, and by limiting its exposure to any one tenant. As at December 31, 2018, Loblaw Companies Limited
(“Loblaw”) is the Company's largest tenant and accounts for 10.0% of the Company’s annualized minimum rent and has
an investment grade credit rating. A tenant’s success over the term of its lease and its ability to fulfill its lease obligations
is subject to many factors. There can be no assurance that a tenant will be able to fulfill all of its existing commitments
and leases up to the expiry date. The Company mitigates the risk of credit loss from debtors by undertaking a number of
activities typical in lending arrangements including obtaining registered mortgages on the real estate properties.
The Company’s leases typically have lease terms between 5 and 20 years and may include clauses to enable periodic
upward revision of the rental rates, and lease contract extension at the option of the lessee.
The Company’s leases typically have lease terms between 5 and 20 years and may include clauses to enable periodic
upward revision of the rental rates, and lease contract extension at the option of the lessee.
Future minimum rentals receivable under non-cancellable operating leases as at December 31 are as follows:
Future minimum rentals receivable under non-cancellable operating leases as at December 31 are as follows:
(thousands of Canadian dollars)
Within 1 year
After 1 year, but not more than 5 years
More than 5 years
$
2018
430,700
1,161,341
747,231
$ 2,339,272
(thousands of Canadian dollars)
Within 1 year
After 1 year, but not more than 5 years
More than 5 years
$
2018
430,700
1,161,341
747,231
$ 2,339,272
101
FIRST CAPITAL REALTY ANNUAL REPORT 2018
101
FIRST CAPITAL REALTY ANNUAL REPORT 2018
(c) Liquidity risk
Real estate investments are relatively illiquid. This tends to limit the Company’s ability to sell components of its portfolio
promptly in response to changing economic or investment conditions. If the Company were required to quickly liquidate
its assets, there is a risk that it would realize sale proceeds of less than the current value of its real estate investments.
(c) Liquidity risk
Real estate investments are relatively illiquid. This tends to limit the Company’s ability to sell components of its portfolio
promptly in response to changing economic or investment conditions. If the Company were required to quickly liquidate
its assets, there is a risk that it would realize sale proceeds of less than the current value of its real estate investments.
An analysis of the Company’s contractual maturities of its material financial liabilities and other contractual commitments
as at December 31, 2018 is set out below:
An analysis of the Company’s contractual maturities of its material financial liabilities and other contractual commitments
as at December 31, 2018 is set out below:
As at December 31, 2018
Payments Due by Period
As at December 31, 2018
Payments Due by Period
Scheduled mortgage principal amortization
Mortgage principal repayments on maturity
Credit facilities and bank indebtedness
Senior unsecured debentures
Interest obligations (1)
Land leases (expiring between 2023 and 2061)
Contractual committed costs to complete current
development projects
Other committed costs
Total contractual obligations
$
$
2019
2020 to 2021
2022 to 2023
Thereafter
24,628 $
96,231
112,099
150,000
166,685
1,250
39,245
44,610 $
46,263 $
94,051 $
141,290
201,517
350,000
276,648
2,239
15,294
147,954
319,782
750,000
209,154
1,912
—
692,220
—
1,200,000
202,315
18,180
—
Total
209,552
1,077,695
633,398
2,450,000
854,802
23,581
54,539
82,955
673,093 $ 1,031,598 $ 1,475,065 $ 2,206,766 $ 5,386,522
82,955
—
—
—
Scheduled mortgage principal amortization
Mortgage principal repayments on maturity
Credit facilities and bank indebtedness
Senior unsecured debentures
Interest obligations (1)
Land leases (expiring between 2023 and 2061)
Contractual committed costs to complete current
development projects
Other committed costs
Total contractual obligations
$
$
2019
2020 to 2021
2022 to 2023
Thereafter
24,628 $
96,231
112,099
150,000
166,685
1,250
39,245
44,610 $
46,263 $
94,051 $
141,290
201,517
350,000
276,648
2,239
15,294
147,954
319,782
750,000
209,154
1,912
—
692,220
—
1,200,000
202,315
18,180
—
Total
209,552
1,077,695
633,398
2,450,000
854,802
23,581
54,539
82,955
673,093 $ 1,031,598 $ 1,475,065 $ 2,206,766 $ 5,386,522
82,955
—
—
—
(1) Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2018 (assuming balances remain outstanding through to
(1) Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2018 (assuming balances remain outstanding through to
maturity), and senior unsecured debentures, as well as standby credit facility fees.
maturity), and senior unsecured debentures, as well as standby credit facility fees.
The Company manages its liquidity risk by staggering debt maturities; renegotiating expiring credit arrangements
proactively; using unsecured credit facilities; and issuing equity when considered appropriate. As at December 31, 2018,
there was $503.0 million (December 31, 2017 – $485.7 million) of cash advances drawn against the Company’s unsecured
credit facilities.
In addition, as at December 31, 2018, the Company has $35.7 million (December 31, 2017 – $34.9 million) of outstanding
letters of credit issued by financial institutions primarily to support certain of the Company’s contractual obligations and
$7.2 million (December 31, 2017 – $3.1 million) of bank overdrafts.
23. FAIR VALUE MEASUREMENT
A comparison of the carrying amounts and fair values, by class, of the Company’s financial instruments, other than those
whose carrying amounts approximate their fair values, is as follows:
The Company manages its liquidity risk by staggering debt maturities; renegotiating expiring credit arrangements
proactively; using unsecured credit facilities; and issuing equity when considered appropriate. As at December 31, 2018,
there was $503.0 million (December 31, 2017 – $485.7 million) of cash advances drawn against the Company’s unsecured
credit facilities.
In addition, as at December 31, 2018, the Company has $35.7 million (December 31, 2017 – $34.9 million) of outstanding
letters of credit issued by financial institutions primarily to support certain of the Company’s contractual obligations and
$7.2 million (December 31, 2017 – $3.1 million) of bank overdrafts.
23. FAIR VALUE MEASUREMENT
A comparison of the carrying amounts and fair values, by class, of the Company’s financial instruments, other than those
whose carrying amounts approximate their fair values, is as follows:
Carrying Amount
Fair Value
Notes
2018
2017
2018
2017
Carrying Amount
Fair Value
Notes
2018
2017
2018
2017
$
23,562 $
Financial assets
FVTPL investments in securities
Loans and mortgages receivable classified as FVTPL (1)
Loans and mortgages receivable classified as amortized cost
Other investments
Derivatives at fair value
Financial liabilities
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Derivatives at fair value
(1) Effective January 1, 2018, the Company reclassified certain loans and mortgages receivable to FVTPL from amortized cost upon adoption of IFRS 9.
$ 1,285,908 $ 1,060,339 $ 1,288,695 $ 1,072,212
581,627
2,696,511
55,644
11,343
21,720 $
—
255,841
2,587
16,435
21,720
—
255,447
2,587
16,435
626,172
2,477,968
—
6,372
626,172
2,447,278
—
6,372
581,627
2,595,966
54,293
11,343
107,617
217,046
11,834
22,528
107,617
216,791
11,834
22,528
10
10
11
12
13
23,562 $
6
6
6
6
8
$
23,562 $
Financial assets
FVTPL investments in securities
Loans and mortgages receivable classified as FVTPL (1)
Loans and mortgages receivable classified as amortized cost
Other investments
Derivatives at fair value
Financial liabilities
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
Derivatives at fair value
(1) Effective January 1, 2018, the Company reclassified certain loans and mortgages receivable to FVTPL from amortized cost upon adoption of IFRS 9.
$ 1,285,908 $ 1,060,339 $ 1,288,695 $ 1,072,212
581,627
2,696,511
55,644
11,343
21,720 $
—
255,841
2,587
16,435
21,720
—
255,447
2,587
16,435
626,172
2,447,278
—
6,372
626,172
2,477,968
—
6,372
581,627
2,595,966
54,293
11,343
107,617
217,046
11,834
22,528
107,617
216,791
11,834
22,528
10
10
11
12
13
23,562 $
6
6
6
6
8
FIRST CAPITAL REALTY ANNUAL REPORT 2018
102
FIRST CAPITAL REALTY ANNUAL REPORT 2018
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
The fair values of the Company’s FVTPL investments in securities are based on quoted market prices. The Company has
other investments in certain funds and a private entity classified as Level 3, for which the fair values are based on the fair
value of the properties held in the funds. The private entity fair value approximates its cost.
The fair value of the Company’s loans and mortgages receivable classified as Level 3, are calculated based on current
market rates plus borrower level risk-adjusted spreads on discounted cash flows, adjusted for allowances for non-payment
and collateral related risk. As at December 31, 2018, the risk-adjusted interest rates ranged from 4.1% to 15.6%
(December 31, 2017 – 3.9% to 15.0%).
The fair value of the Company’s mortgages and credit facilities payable are calculated based on current market rates plus
risk-adjusted spreads on discounted cash flows. As at December 31, 2018, these rates ranged from 3.3% to 3.7%
(December 31, 2017 – 2.4% to 3.6%).
The fair value of the senior unsecured debentures are based on closing bid risk-adjusted spreads and current underlying
Government of Canada bond yields on discounted cash flows. For the purpose of this calculation, the Company uses,
among others, interest rate quotations provided by financial institutions. As at December 31, 2018, these rates ranged
from 2.6% to 4.1% (December 31, 2017 – 1.8% to 3.8%).
The fair values of the Company’s FVTPL investments in securities are based on quoted market prices. The Company has
other investments in certain funds and a private entity classified as Level 3, for which the fair values are based on the fair
value of the properties held in the funds. The private entity fair value approximates its cost.
The fair value of the Company’s loans and mortgages receivable classified as Level 3, are calculated based on current
market rates plus borrower level risk-adjusted spreads on discounted cash flows, adjusted for allowances for non-payment
and collateral related risk. As at December 31, 2018, the risk-adjusted interest rates ranged from 4.1% to 15.6%
(December 31, 2017 – 3.9% to 15.0%).
The fair value of the Company’s mortgages and credit facilities payable are calculated based on current market rates plus
risk-adjusted spreads on discounted cash flows. As at December 31, 2018, these rates ranged from 3.3% to 3.7%
(December 31, 2017 – 2.4% to 3.6%).
The fair value of the senior unsecured debentures are based on closing bid risk-adjusted spreads and current underlying
Government of Canada bond yields on discounted cash flows. For the purpose of this calculation, the Company uses,
among others, interest rate quotations provided by financial institutions. As at December 31, 2018, these rates ranged
from 2.6% to 4.1% (December 31, 2017 – 1.8% to 3.8%).
The fair values of the convertible debentures are based on the TSX closing bid prices.
The fair values of the convertible debentures are based on the TSX closing bid prices.
The fair value hierarchy of financial instruments on the audited annual consolidated balance sheets is as follows:
The fair value hierarchy of financial instruments on the audited annual consolidated balance sheets is as follows:
As at
December 31, 2018
December 31, 2017
As at
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
December 31, 2018
December 31, 2017
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Measured at fair value
Financial Assets
FVTPL investments in securities
Loans and mortgages receivable
Other investments
Derivatives at fair value – assets
Financial Liabilities
Derivatives at fair value – liabilities
Measured at amortized cost
Financial Assets
Loans and mortgages receivable
Financial Liabilities
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
$
23,562 $
—
—
—
— $
—
—
22,528
— $
107,617
11,834
—
21,720 $
—
—
—
— $
—
—
16,435
—
—
2,587
—
—
6,372
—
—
11,343
—
$
— $
— $
216,791 $
— $
— $
255,447
— 1,288,695
—
626,172
— 2,477,968
—
—
—
—
—
—
— 1,072,212
—
581,627
— 2,696,511
—
55,644
—
—
—
—
Measured at fair value
Financial Assets
FVTPL investments in securities
Loans and mortgages receivable
Other investments
Derivatives at fair value – assets
Financial Liabilities
Derivatives at fair value – liabilities
Measured at amortized cost
Financial Assets
Loans and mortgages receivable
Financial Liabilities
Mortgages
Credit facilities
Senior unsecured debentures
Convertible debentures
$
23,562 $
—
—
—
— $
—
—
22,528
— $
107,617
11,834
—
21,720 $
—
—
—
— $
—
—
16,435
—
—
2,587
—
—
6,372
—
—
11,343
—
$
— $
— $
216,791 $
— $
— $
255,447
— 1,288,695
—
626,172
— 2,477,968
—
—
—
—
—
—
— 1,072,212
—
581,627
— 2,696,511
—
55,644
—
—
—
—
The Company enters into derivative instruments including bond forward contracts, interest rate swaps and cross currency
swaps as part of its strategy for managing certain interest rate risks as well as currency risk in relation to movements in
the Canadian to U.S. exchange rate. For those derivative instruments to which the Company has applied hedge
accounting, the change in fair value for the effective portion of the derivative is recorded in other comprehensive income
from the date of designation. For those derivative instruments to which the Company does not apply hedge accounting,
the change in fair value is recognized in other gains (losses) and (expenses).
The fair value of derivative instruments is determined using present value forward pricing and swap calculations at
interest rates that reflect current market conditions. The models also take into consideration the credit quality of
counterparties, interest rate curves and forward rate curves. As at December 31, 2018, the interest rates ranged from
2.0% to 4.5% (December 31, 2017 – 2.0% to 4.0%). The fair values of the Company's asset (liability) hedging instruments
are as follows:
The Company enters into derivative instruments including bond forward contracts, interest rate swaps and cross currency
swaps as part of its strategy for managing certain interest rate risks as well as currency risk in relation to movements in
the Canadian to U.S. exchange rate. For those derivative instruments to which the Company has applied hedge
accounting, the change in fair value for the effective portion of the derivative is recorded in other comprehensive income
from the date of designation. For those derivative instruments to which the Company does not apply hedge accounting,
the change in fair value is recognized in other gains (losses) and (expenses).
The fair value of derivative instruments is determined using present value forward pricing and swap calculations at
interest rates that reflect current market conditions. The models also take into consideration the credit quality of
counterparties, interest rate curves and forward rate curves. As at December 31, 2018, the interest rates ranged from
2.0% to 4.5% (December 31, 2017 – 2.0% to 4.0%). The fair values of the Company's asset (liability) hedging instruments
are as follows:
103
FIRST CAPITAL REALTY ANNUAL REPORT 2018
103
FIRST CAPITAL REALTY ANNUAL REPORT 2018
Designated as
Hedging Instrument Maturity as at December 31, 2018
December 31, 2018 December 31, 2017
Designated as
Hedging Instrument Maturity as at December 31, 2018
December 31, 2018 December 31, 2017
Derivative assets
Bond forward contracts
Interest rate swaps
Cross currency swaps
Total
Derivative liabilities
Bond forward contracts
Interest rate swaps
Cross currency swaps
Total
Yes
Yes
No
Yes
Yes
No
February 2019
June 2025 - March 2027
January 2019 - February 2019
January 2019 - February 2019
March 2022 - July 2024
$
$
$
$
4,125
9,983
8,420
22,528
5,706
666
—
6,372
$
$
$
$
5,739
10,696
—
16,435
365
844
10,134
11,343
Derivative assets
Bond forward contracts
Interest rate swaps
Cross currency swaps
Total
Derivative liabilities
Bond forward contracts
Interest rate swaps
Cross currency swaps
Total
Yes
Yes
No
Yes
Yes
No
February 2019
June 2025 - March 2027
January 2019 - February 2019
January 2019 - February 2019
March 2022 - July 2024
$
$
$
$
4,125
9,983
8,420
22,528
5,706
666
—
6,372
$
$
$
$
5,739
10,696
—
16,435
365
844
10,134
11,343
24. INVESTMENT IN JOINT VENTURES
As at December 31, 2018, the Company had interests in five joint ventures that it accounts for using the equity method. The
Company's joint ventures are as follows:
24. INVESTMENT IN JOINT VENTURES
As at December 31, 2018, the Company had interests in five joint ventures that it accounts for using the equity method. The
Company's joint ventures are as follows:
Name of Entity
M+M Urban Realty LP ("MMUR") (1) Commercial/residential
Name of Property/Business
Activity
properties (2)
Location
Toronto and Ottawa, ON
December 31, 2018
53.1%
December 31, 2017
53.1%
Effective Ownership
Name of Entity
M+M Urban Realty LP ("MMUR") (1) Commercial/residential
Name of Property/Business
Activity
properties (2)
Location
Toronto and Ottawa, ON
December 31, 2018
53.1%
December 31, 2017
53.1%
Effective Ownership
College Square General Partnership College Square
Ottawa, ON
Green Capital Limited Partnership
Royal Orchard (3)
Markham, ON
50.0%
50.0%
50.0%
50.0%
College Square General Partnership College Square
Ottawa, ON
Green Capital Limited Partnership
Royal Orchard (3)
Markham, ON
50.0%
50.0%
50.0%
50.0%
Stackt Properties LP
Fashion Media Group GP Ltd.
(1) MMUR is a joint venture between the Company, Main and Main Developments LP ("MMLP", further described in Note 25) and an institutional investor.
(2) For the years ended December 31, 2018 and 2017, MMUR owned 4 and 23 properties, respectively.
(3) On December 14, 2017, the Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
Shipping Container marketplace Toronto, ON
Toronto, ON
Toronto Fashion Week events
94.0%
72.0%
N/A
50.0%
Stackt Properties LP
Fashion Media Group GP Ltd.
(1) MMUR is a joint venture between the Company, Main and Main Developments LP ("MMLP", further described in Note 25) and an institutional investor.
(2) For the years ended December 31, 2018 and 2017, MMUR owned 4 and 23 properties, respectively.
(3) On December 14, 2017, the Company sold a 50% interest in its Royal Orchard property and now owns its remaining 50% interest through an equity accounted joint venture.
Shipping Container marketplace Toronto, ON
Toronto, ON
Toronto Fashion Week events
94.0%
72.0%
N/A
50.0%
The Company has determined that these investments are joint ventures as all decisions regarding their activities are made
unanimously between the Company and its partners.
The Company has determined that these investments are joint ventures as all decisions regarding their activities are made
unanimously between the Company and its partners.
Summarized financial information of the joint ventures’ financial position and performance is set out below:
Summarized financial information of the joint ventures’ financial position and performance is set out below:
As at
Total assets
Total liabilities
Net assets at 100%
The Company's investment in equity accounted joint ventures
$
December 31, 2018 December 31, 2017
674,476
(262,397)
412,079
432,365
(136,701)
295,664
$
$
144,375
$
202,231
As at
Total assets
Total liabilities
Net assets at 100%
The Company's investment in equity accounted joint ventures
$
December 31, 2018 December 31, 2017
674,476
(262,397)
412,079
432,365
(136,701)
295,664
$
$
144,375
$
202,231
FIRST CAPITAL REALTY ANNUAL REPORT 2018
104
FIRST CAPITAL REALTY ANNUAL REPORT 2018
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
For the year ended
Property revenue
Property expenses
Increase in value of investment properties, net
Other income and expenses
Income before income taxes
Current income tax expense (recovery)
Net income and total comprehensive income at 100%
The Company's share of income in equity accounted joint ventures
$
$
December 31, 2018 December 31, 2017
21,223
(7,727)
66,610
(3,387)
76,719
36
76,683
42,860
18,222
(6,374)
41,919
(4,856)
48,911
(7)
48,918
30,411
$
$
$
$
For the year ended
Property revenue
Property expenses
Increase in value of investment properties, net
Other income and expenses
Income before income taxes
Current income tax expense (recovery)
Net income and total comprehensive income at 100%
The Company's share of income in equity accounted joint ventures
$
$
December 31, 2018 December 31, 2017
21,223
(7,727)
66,610
(3,387)
76,719
36
76,683
42,860
18,222
(6,374)
41,919
(4,856)
48,911
(7)
48,918
30,411
$
$
$
$
During the year ended December 31, 2018, MMUR completed the sale of the majority of its portfolio (19 of 23
properties) for approximately $310 million.
During the year ended December 31, 2018, MMUR completed the sale of the majority of its portfolio (19 of 23
properties) for approximately $310 million.
During 2018, the Company received distributions from its joint ventures of $110.9 million (2017 - $5.9 million) and made
contributions to its joint ventures of $25.1 million (2017 - $4.9 million).
During 2018, the Company received distributions from its joint ventures of $110.9 million (2017 - $5.9 million) and made
contributions to its joint ventures of $25.1 million (2017 - $4.9 million).
As at December 31, 2018 and 2017, Main and Main Urban Realty had outstanding commitments related to acquisitions,
subject to customary closing conditions, as well as capital commitments for an aggregate amount of $56.0 million
(December 31, 2017 – $26.6 million). There were no outstanding commitments for College Square, Royal Orchard, Stackt LP
or Fashion Media Group GP Ltd. as at December 31, 2018. The Company's share of these outstanding commitments relating
to its joint ventures at its interest is $29.8 million. Main and Main Urban Realty, College Square, Royal Orchard, Stackt LP and
Fashion Media Group GP Ltd. did not have any contingent liabilities as at December 31, 2018 and 2017.
As at December 31, 2018 and 2017, Main and Main Urban Realty had outstanding commitments related to acquisitions,
subject to customary closing conditions, as well as capital commitments for an aggregate amount of $56.0 million
(December 31, 2017 – $26.6 million). There were no outstanding commitments for College Square, Royal Orchard, Stackt LP
or Fashion Media Group GP Ltd. as at December 31, 2018. The Company's share of these outstanding commitments relating
to its joint ventures at its interest is $29.8 million. Main and Main Urban Realty, College Square, Royal Orchard, Stackt LP and
Fashion Media Group GP Ltd. did not have any contingent liabilities as at December 31, 2018 and 2017.
105
FIRST CAPITAL REALTY ANNUAL REPORT 2018
105
FIRST CAPITAL REALTY ANNUAL REPORT 2018
25. SUBSIDIARY WITH NON-CONTROLLING INTEREST
The Company, through its direct and indirect investment, owns on a consolidated basis a 53.1% interest in M+M Urban
Realty LP ("MMUR"), a joint venture between the Company, Main and Main Developments LP ("MMLP") and an
institutional investor. The Company's indirect interest in MMUR is held through its partially owned venture interest in
MMLP.
The Company contractually controls MMLP, a subsidiary in which it holds a 67% ownership interest, until such time that
all loans receivable from its partner have been paid in full. At such time that the loans receivable to the Company are
repaid, all decisions regarding the activities of MMLP will require unanimous consent of the partners.
In the year ended December 31, 2018, MMUR completed the sale of the majority of its portfolio (19 of 23 properties) for
approximately $310 million. The net proceeds from the sale, after repayment of debt were distributed to the joint venture
partners, including MMLP, which was then distributed to the Company and to the non-controlling interest. As a result, the
Company received net distributions of $74.2 million representing its direct and indirect interests while the non-controlling
interest partner received $30.5 million.
25. SUBSIDIARY WITH NON-CONTROLLING INTEREST
The Company, through its direct and indirect investment, owns on a consolidated basis a 53.1% interest in M+M Urban
Realty LP ("MMUR"), a joint venture between the Company, Main and Main Developments LP ("MMLP") and an
institutional investor. The Company's indirect interest in MMUR is held through its partially owned venture interest in
MMLP.
The Company contractually controls MMLP, a subsidiary in which it holds a 67% ownership interest, until such time that
all loans receivable from its partner have been paid in full. At such time that the loans receivable to the Company are
repaid, all decisions regarding the activities of MMLP will require unanimous consent of the partners.
In the year ended December 31, 2018, MMUR completed the sale of the majority of its portfolio (19 of 23 properties) for
approximately $310 million. The net proceeds from the sale, after repayment of debt were distributed to the joint venture
partners, including MMLP, which was then distributed to the Company and to the non-controlling interest. As a result, the
Company received net distributions of $74.2 million representing its direct and indirect interests while the non-controlling
interest partner received $30.5 million.
Non-controlling interest in the equity and the results of this subsidiary, before any inter-company eliminations, are as
follows:
Non-controlling interest in the equity and the results of this subsidiary, before any inter-company eliminations, are as
follows:
December 31, 2018
December 31, 2017
December 31, 2018
December 31, 2017
Non-current assets
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Non-controlling interests
Revenue
Share of profit from joint ventures
Expenses
Net income
Non-controlling interests
Cash provided by operating activities
Cash used in financing activities
Cash provided by (used in) investing activities
Net increase (decrease) in cash and cash equivalents
$
$
$
$
$
$
$
$
$
84,070
6,440
90,510
117
117
90,393
29,830
$
$
$
$
145,894
1,907
147,801
488
488
147,313
48,613
Year ended December 31
2018
5,155
23,075
(3,283)
24,947
8,232
2017
2,967
34,267
(3,684)
33,550
11,071
$
$
$
Year ended December 31
2018
1,768
(82,578)
81,078
268
2017
1,391
(844)
(2,156)
(1,609)
$
$
Non-current assets
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Non-controlling interests
Revenue
Share of profit from joint ventures
Expenses
Net income
Non-controlling interests
Cash provided by operating activities
Cash used in financing activities
Cash provided by (used in) investing activities
Net increase (decrease) in cash and cash equivalents
$
$
$
$
$
$
$
$
$
84,070
6,440
90,510
117
117
90,393
29,830
$
$
$
$
145,894
1,907
147,801
488
488
147,313
48,613
Year ended December 31
2018
5,155
23,075
(3,283)
24,947
8,232
2017
2,967
34,267
(3,684)
33,550
11,071
$
$
$
Year ended December 31
2018
1,768
(82,578)
81,078
268
2017
1,391
(844)
(2,156)
(1,609)
$
$
FIRST CAPITAL REALTY ANNUAL REPORT 2018
106
FIRST CAPITAL REALTY ANNUAL REPORT 2018
106
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
26. CO-OWNERSHIP INTERESTS
The Company has co-ownership interests in several properties, as listed below, that are subject to joint control and
represent joint operations under IFRS 11. The Company recognizes its share of the direct rights to the assets and obligations
for the liabilities of these co-ownerships in the consolidated financial statements.
26. CO-OWNERSHIP INTERESTS
The Company has co-ownership interests in several properties, as listed below, that are subject to joint control and
represent joint operations under IFRS 11. The Company recognizes its share of the direct rights to the assets and obligations
for the liabilities of these co-ownerships in the consolidated financial statements.
Property
101 Yorkville Avenue
2150 Lake Shore Blvd. West
816-838 11th Ave. (Glenbow)
King High Line
McLaughlin Corners
Midland (land)
Rutherford Marketplace (Residential Inventory)
Hunt Club – Petrocan
Kanata Terry Fox (land)
Hunt Club Marketplace
Lachenaie Properties
South Oakville Properties (1)
Whitby Mall
Thickson Mall
Bow Valley Crossing (land)
Seton Gateway
Sherwood Park
The Edmonton Brewery District
West Oaks Mall
West Springs Village
216 Elgin Street
221 - 227 Sterling
London Portfolio (2)
Molson's Building
1071 King Street West
200 Esplanade (Empire Theatres)
Location
Toronto, ON
Toronto, ON
Calgary, AB
Toronto, ON
Brampton, ON
Midland, ON
Vaughan, ON
Ottawa, ON
Ottawa, ON
Ottawa, ON
Lachenaie, QC
Oakville, ON
Whitby, ON
Whitby, ON
Calgary, AB
Calgary, AB
Sherwood Park, AB
Edmonton, AB
Abbotsford, BC
Calgary, AB
Ottawa, ON
Toronto, ON
London, ON
Calgary, AB
Toronto, ON
North Vancouver, BC
Ownership Interest
December 31, 2018
50%
50%
50%
50%
50%
50%
50%
50%
50%
66.6%
50%
50%
50%
50%
75%
50%
50%
50%
—%
50%
50%
35%
49.5%
75%
66.6%
50%
December 31, 2017
50%
50%
50%
50%
50%
50%
50%
50%
50%
66.6%
50%
50%
50%
50%
75%
50%
50%
50%
50%
50%
N/A
N/A
100%
N/A
100%
100%
Property
101 Yorkville Avenue
2150 Lake Shore Blvd. West
816-838 11th Ave. (Glenbow)
King High Line
McLaughlin Corners
Midland (land)
Rutherford Marketplace (Residential Inventory)
Hunt Club – Petrocan
Kanata Terry Fox (land)
Hunt Club Marketplace
Lachenaie Properties
South Oakville Properties (1)
Whitby Mall
Thickson Mall
Bow Valley Crossing (land)
Seton Gateway
Sherwood Park
The Edmonton Brewery District
West Oaks Mall
West Springs Village
216 Elgin Street
221 - 227 Sterling
London Portfolio (2)
Molson's Building
1071 King Street West
200 Esplanade (Empire Theatres)
Location
Toronto, ON
Toronto, ON
Calgary, AB
Toronto, ON
Brampton, ON
Midland, ON
Vaughan, ON
Ottawa, ON
Ottawa, ON
Ottawa, ON
Lachenaie, QC
Oakville, ON
Whitby, ON
Whitby, ON
Calgary, AB
Calgary, AB
Sherwood Park, AB
Edmonton, AB
Abbotsford, BC
Calgary, AB
Ottawa, ON
Toronto, ON
London, ON
Calgary, AB
Toronto, ON
North Vancouver, BC
Ownership Interest
December 31, 2018
50%
50%
50%
50%
50%
50%
50%
50%
50%
66.6%
50%
50%
50%
50%
75%
50%
50%
50%
—%
50%
50%
35%
49.5%
75%
66.6%
50%
December 31, 2017
50%
50%
50%
50%
50%
50%
50%
50%
50%
66.6%
50%
50%
50%
50%
75%
50%
50%
50%
50%
50%
N/A
N/A
100%
N/A
100%
100%
(1) South Oakville Properties includes one property at 50% interest, with the remaining properties held at 100% interest.
(2) London Portfolio includes Wellington Corners, Sunningdale Village, Byron Village, Hyde Park Plaza, Stoneybrook Plaza, and Adelaide Shoppers.
(1) South Oakville Properties includes one property at 50% interest, with the remaining properties held at 100% interest.
(2) London Portfolio includes Wellington Corners, Sunningdale Village, Byron Village, Hyde Park Plaza, Stoneybrook Plaza, and Adelaide Shoppers.
107
FIRST CAPITAL REALTY ANNUAL REPORT 2018
107
FIRST CAPITAL REALTY ANNUAL REPORT 2018
27. SUPPLEMENTAL OTHER COMPREHENSIVE INCOME (LOSS)
INFORMATION
(a) Accumulated other comprehensive income (loss)
Year ended December 31
2018
Unrealized gains (losses) on
investments in equity securities
Unrealized gains (losses) on cash
flow hedges
Accumulated other comprehensive
income (loss)
$
$
Opening
Balance
January 1
Net Change
During
the Year
Closing
Balance
December 31
Opening
Balance
January 1
Net Change
During
the Year
45 $
— $
45 $
45 $
— $
(5)
(4,528)
(4,533)
(11,743)
11,738
40 $
(4,528) $
(4,488) $
(11,698) $
11,738 $
2017
Closing
Balance
December 31
45
(5)
40
27. SUPPLEMENTAL OTHER COMPREHENSIVE INCOME (LOSS)
INFORMATION
(a) Accumulated other comprehensive income (loss)
Year ended December 31
2018
Unrealized gains (losses) on
investments in equity securities
Unrealized gains (losses) on cash
flow hedges
Accumulated other comprehensive
income (loss)
$
$
Opening
Balance
January 1
Net Change
During
the Year
Closing
Balance
December 31
Opening
Balance
January 1
Net Change
During
the Year
45 $
— $
45 $
45 $
— $
(5)
(4,528)
(4,533)
(11,743)
11,738
40 $
(4,528) $
(4,488) $
(11,698) $
11,738 $
2017
Closing
Balance
December 31
45
(5)
40
(b) Tax effects relating to each component of other comprehensive (loss) income
(b) Tax effects relating to each component of other comprehensive (loss) income
Year ended December 31
Unrealized gains (losses) on cash
flow hedges
Reclassification of losses on cash
flow hedges to net income
Before-Tax
Amount
Tax (Expense)
Recovery
2018
Net of Tax
Amount
Before-Tax
Amount
Tax (Expense)
Recovery
2017
Net of Tax
Amount
(7,638)
2,032
(5,606)
14,350
(3,817)
10,533
1,468
(390)
1,078
1,642
(437)
1,205
Year ended December 31
Unrealized gains (losses) on cash
flow hedges
Reclassification of losses on cash
flow hedges to net income
Before-Tax
Amount
Tax (Expense)
Recovery
2018
Net of Tax
Amount
Before-Tax
Amount
Tax (Expense)
Recovery
2017
Net of Tax
Amount
(7,638)
2,032
(5,606)
14,350
(3,817)
10,533
1,468
(390)
1,078
1,642
(437)
1,205
Other comprehensive income (loss)
$
(6,170) $
1,642 $
(4,528) $
15,992 $
(4,254) $
11,738
Other comprehensive income (loss)
$
(6,170) $
1,642 $
(4,528) $
15,992 $
(4,254) $
11,738
28. SUPPLEMENTAL CASH FLOW INFORMATION
(a) Items not affecting cash and other items
28. SUPPLEMENTAL CASH FLOW INFORMATION
(a) Items not affecting cash and other items
Straight-line rent adjustment
Investment properties selling costs
Realized (gain) loss on sale of marketable securities
Unrealized (gain) loss on marketable securities classified as FVTPL
Gain on below market purchase (1)
Transaction costs (1)
Net (gain) loss on prepayments of debt
Non-cash compensation expense
Deferred income taxes
Other non-cash items
Total
(1) In connection with acquisition of hotel property - Refer to Note 5.
Note
$
19
19
19
19
19
19
20
Year ended December 31
2017
2018
$
(7,062)
2,556
(4,232)
623
(13,975)
2,052
726
5,226
79,151
(23)
(2,684)
1,667
1,165
(3,313)
—
—
3,032
4,534
125,101
(209)
$
65,042
$
129,293
Straight-line rent adjustment
Investment properties selling costs
Realized (gain) loss on sale of marketable securities
Unrealized (gain) loss on marketable securities classified as FVTPL
Gain on below market purchase (1)
Transaction costs (1)
Net (gain) loss on prepayments of debt
Non-cash compensation expense
Deferred income taxes
Other non-cash items
Total
(1) In connection with acquisition of hotel property - Refer to Note 5.
Note
$
19
19
19
19
19
19
20
Year ended December 31
2017
2018
$
(7,062)
2,556
(4,232)
623
(13,975)
2,052
726
5,226
79,151
(23)
(2,684)
1,667
1,165
(3,313)
—
—
3,032
4,534
125,101
(209)
$
65,042
$
129,293
FIRST CAPITAL REALTY ANNUAL REPORT 2018
108
FIRST CAPITAL REALTY ANNUAL REPORT 2018
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(b) Net change in non-cash operating items
The net change in non-cash operating assets and liabilities consists of the following:
(b) Net change in non-cash operating items
The net change in non-cash operating assets and liabilities consists of the following:
Amounts receivable
Prepaid expenses
Trade payables and accruals
Tenant security and other deposits
Other working capital changes
Total
(c) Changes in loans, mortgages and other assets
Advances of loans and mortgages receivable
Repayments of loans and mortgages receivable and deposits
Other investments, net
Investment in marketable securities, net
Proceeds from disposition of marketable securities
Total
(d) Cash and cash equivalents
$
$
$
$
$
Year ended December 31
2017
(4,262)
(935)
(5,008)
4,214
(3,324)
(9,315)
2018
(10,954)
1,120
3,838
6,668
(7,046)
(6,374)
$
Year ended December 31
2017
(115,902)
10,718
$
2018
(112,015)
29,001
(9,269)
(96,221)
97,988
(90,516)
1,236
(17,910)
11,307
$
(110,551)
Amounts receivable
Prepaid expenses
Trade payables and accruals
Tenant security and other deposits
Other working capital changes
Total
(c) Changes in loans, mortgages and other assets
Advances of loans and mortgages receivable
Repayments of loans and mortgages receivable and deposits
Other investments, net
Investment in marketable securities, net
Proceeds from disposition of marketable securities
Total
(d) Cash and cash equivalents
$
$
$
$
$
Year ended December 31
2017
(4,262)
(935)
(5,008)
4,214
(3,324)
(9,315)
2018
(10,954)
1,120
3,838
6,668
(7,046)
(6,374)
$
Year ended December 31
2017
(115,902)
10,718
$
2018
(112,015)
29,001
(9,269)
(96,221)
97,988
(90,516)
1,236
(17,910)
11,307
$
(110,551)
As at
Cash and cash equivalents (1)
(1) Principally consisting of cash related to co-ownerships and properties managed by third parties.
December 31, 2018
15,534
$
December 31, 2017
11,507
$
As at
Cash and cash equivalents (1)
(1) Principally consisting of cash related to co-ownerships and properties managed by third parties.
December 31, 2018
15,534
$
December 31, 2017
11,507
$
29. COMMITMENTS AND CONTINGENCIES
(a) The Company is involved in litigation and claims which arise from time to time in the normal course of business. None
of these contingencies, individually or in aggregate, would result in a liability that would have a significant adverse
effect on the financial position of the Company.
(b) The Company is contingently liable, jointly and severally or as guarantor, for approximately $152.2 million
(December 31, 2017 – $119.1 million) to various lenders in connection with certain third-party obligations, including,
without limitation, loans advanced to its joint arrangement partners secured by the partners’ interest in the joint
arrangements and underlying assets.
(c) The Company is contingently liable by way of letters of credit in the amount of $35.7 million (December 31, 2017 –
$34.9 million), issued by financial institutions on the Company's behalf in the ordinary course of business.
(d) The Company has obligations as lessee under long-term leases for land. Annual commitments under these ground
leases are approximately $1.2 million (December 31, 2017 – $1.2 million) with a total obligation of $23.6 million
(December 31, 2017 – $24.1 million).
(e) The Company is involved, in the normal course of business, in discussions, and has various agreements, with respect
to possible acquisitions of new properties and dispositions of existing properties in its portfolio. None of these
commitments or contingencies, individually or in aggregate, would have a significant impact on the financial position
of the Company.
29. COMMITMENTS AND CONTINGENCIES
(a) The Company is involved in litigation and claims which arise from time to time in the normal course of business. None
of these contingencies, individually or in aggregate, would result in a liability that would have a significant adverse
effect on the financial position of the Company.
(b) The Company is contingently liable, jointly and severally or as guarantor, for approximately $152.2 million
(December 31, 2017 – $119.1 million) to various lenders in connection with certain third-party obligations, including,
without limitation, loans advanced to its joint arrangement partners secured by the partners’ interest in the joint
arrangements and underlying assets.
(c) The Company is contingently liable by way of letters of credit in the amount of $35.7 million (December 31, 2017 –
$34.9 million), issued by financial institutions on the Company's behalf in the ordinary course of business.
(d) The Company has obligations as lessee under long-term leases for land. Annual commitments under these ground
leases are approximately $1.2 million (December 31, 2017 – $1.2 million) with a total obligation of $23.6 million
(December 31, 2017 – $24.1 million).
(e) The Company is involved, in the normal course of business, in discussions, and has various agreements, with respect
to possible acquisitions of new properties and dispositions of existing properties in its portfolio. None of these
commitments or contingencies, individually or in aggregate, would have a significant impact on the financial position
of the Company.
109
FIRST CAPITAL REALTY ANNUAL REPORT 2018
109
FIRST CAPITAL REALTY ANNUAL REPORT 2018
30. RELATED PARTY TRANSACTIONS
(a) Significant Shareholder
Gazit-Globe Ltd. (“Gazit”) is a significant shareholder of the Company and, as of December 31, 2018, beneficially owns
31.3% (December 31, 2017 – 32.6%) of the common shares of the Company. Norstar Holdings Inc. is the ultimate
controlling party of Gazit.
Corporate and other amounts receivable include amounts due from Gazit. Gazit reimburses the Company for certain
accounting and administrative services provided to it by the Company. Such amounts consist of the following:
Year ended December 31
2018
2017
30. RELATED PARTY TRANSACTIONS
(a) Significant Shareholder
Gazit-Globe Ltd. (“Gazit”) is a significant shareholder of the Company and, as of December 31, 2018, beneficially owns
31.3% (December 31, 2017 – 32.6%) of the common shares of the Company. Norstar Holdings Inc. is the ultimate
controlling party of Gazit.
Corporate and other amounts receivable include amounts due from Gazit. Gazit reimburses the Company for certain
accounting and administrative services provided to it by the Company. Such amounts consist of the following:
Year ended December 31
2018
2017
$
186
$
228
Reimbursements for professional services
$
186
$
228
Reimbursements for professional services
As at December 31, 2018, amounts due from Gazit were $40 thousand (December 31, 2017 – $30 thousand).
As at December 31, 2018, amounts due from Gazit were $40 thousand (December 31, 2017 – $30 thousand).
(b) Joint ventures
During the year ended December 31, 2018, the Company earned fee income of $4.5 million (December 31, 2017 –
$2.4 million) from its joint ventures.
During the year ended December 31, 2018, the Company also advanced $2.1 million (December 31, 2017 – $1.2 million)
to one of its joint ventures.
(c) Subsidiaries of the Company
These audited annual consolidated financial statements include the financial statements of First Capital Realty and all of
First Capital Realty's subsidiaries, including First Capital Holdings Trust. First Capital Holdings Trust is the only significant
subsidiary of First Capital Realty and is wholly owned by the Company.
(d) Compensation of Key Management Personnel
Aggregate compensation for directors and the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer
included in corporate expenses is as follows:
(b) Joint ventures
During the year ended December 31, 2018, the Company earned fee income of $4.5 million (December 31, 2017 –
$2.4 million) from its joint ventures.
During the year ended December 31, 2018, the Company also advanced $2.1 million (December 31, 2017 – $1.2 million)
to one of its joint ventures.
(c) Subsidiaries of the Company
These audited annual consolidated financial statements include the financial statements of First Capital Realty and all of
First Capital Realty's subsidiaries, including First Capital Holdings Trust. First Capital Holdings Trust is the only significant
subsidiary of First Capital Realty and is wholly owned by the Company.
(d) Compensation of Key Management Personnel
Aggregate compensation for directors and the Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer
included in corporate expenses is as follows:
Salaries and short-term employee benefits
Share-based compensation (non-cash compensation expense)
$
$
31. SUBSEQUENT EVENTS
First Quarter Dividend
Year ended December 31
2018
2017
4,551
4,268
3,912
3,162
8,463
7,430
$
$
Salaries and short-term employee benefits
Share-based compensation (non-cash compensation expense)
$
$
31. SUBSEQUENT EVENTS
First Quarter Dividend
Year ended December 31
2018
2017
4,551
4,268
3,912
3,162
8,463
7,430
$
$
The Company announced that it will pay a first quarter dividend of $0.215 per common share on April 18, 2019 to
shareholders of record on March 29, 2019.
The Company announced that it will pay a first quarter dividend of $0.215 per common share on April 18, 2019 to
shareholders of record on March 29, 2019.
FIRST CAPITAL REALTY ANNUAL REPORT 2018
110
FIRST CAPITAL REALTY ANNUAL REPORT 2018
110
Shareholder Information
Head Office
Shops at King Liberty
85 Hanna Avenue, Suite 400
Toronto, Ontario M6K 3S3
Tel: 416 504 4114
Fax: 416 941 1655
Montreal Office
Place Viau
7600 boulevard Viau, Suite 113
Montréal, Québec H1S 2P3
Tel: 514 332 0031
Fax: 514 332 5135
Calgary Office
Mount Royal Block
815 – 17th Avenue SW, Suite 200
Calgary, Alberta T2T 0A1
Tel: 403 257 6888
Fax: 403 257 6899
Edmonton Office
Edmonton Brewery District
12068 – 104 Avenue, Suite 301
Edmonton, Alberta T5K 0K2
Tel: 780 475 3695
Vancouver Office
Shops at New West
800 Carnarvon Street, Suite 320
New Westminster, BC V3M 0G3
Tel: 604 278 0056
Fax: 604 242 0266
fcr.ca
CORPORATE PROFILE
First Capital Realty Inc. (TSX: FCR) is one of the largest owners, developers and operators
of necessity-based real estate located in Canada’s most densely populated urban centres.
As at December 31, 2018, the Company owned interests in 166 properties, totaling
approximately 25.5 million square feet of gross leasable area. At December 31, 2018,
First Capital Realty had an enterprise value of $9.2 billion. The common shares of the
Company trade on the Toronto Stock Exchange.
Transfer Agent
Computershare Trust Company
of Canada
100 University Avenue, 11th Floor
Toronto, Ontario M5J 2Y1
Toll-free: 1 800 564 6253
Shareholder In-
formation
Auditors
Ernst & Young LLP
Toronto, Ontario
Directors
Dori J. Segal
Chairman, First Capital Realty Inc.
Toronto, Ontario
Jon Hagan, C.P.A., C.A.
Consultant, JN Hagan Consulting
Barbados
Annalisa King
Corporate Director
Vancouver, British Columbia
Aladin (Al) W. Mawani, C.P.A., C.A
Corporate Director
Thornhill, Ontario
Bernard McDonell
Corporate Director
Apple Hill, Ontario
Adam E. Paul, C.P.A., C.A
President and Chief Executive Officer,
First Capital Realty Inc.
Toronto, Ontario
Andrea Stephen, C.P.A., C.A.
Corporate Director
Toronto, Ontario
Executive Leadership Team
Adam E. Paul
President and Chief Executive Officer
Kay Brekken
Executive Vice President and
Chief Financial Officer
Jordan Robins
Executive Vice President and
Chief Operating Officer
Carmine Francella
Senior Vice President, Leasing
Alison Harnick
Senior Vice President, General Counsel
and Corporate Secretary
Maryanne McDougald
Senior Vice President, Operations
Gregory J. Menzies
Project Lead, Yorkville Village
Jodi M. Shpigel
Senior Vice President, Development
Michele Walkau
Senior Vice President, Brand & Culture
F
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8
8
8
First
Capital
Realty
Inc.
2018 Annual Report
First Capital Realty Inc.
Corporate Head Office
Shops at King Liberty
85 Hanna Ave., Suite 400
Toronto, Ontario M6K 3S3
T 416.504.4114
F 416.941.1655
fcr.ca
NOTE: Spine created using measurements of a previous Annual Report.
NOTE: Spine created using measurements of a previous Annual Report.
Please adjust accordingly.
Please adjust accordingly.