MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Table of Contents
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Introduction
Outlook and Current Business Environment
Non-IFRS Financial Measures
Operating Metrics
Summary Consolidated Information and Highlights
Business and Operations Review
Real Estate Investments
Investment Properties
2021 Acquisitions
2020 Acquisitions
2021 Dispositions
2020 Dispositions
Impact of Acquisitions and Dispositions
Capital Expenditures
Valuation of Investment Properties
Properties Under Development
Leasing and Occupancy
Top Forty Tenants
Lease Maturity Profile
Investment in Joint Ventures
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
Net Income Attributable to Unitholders
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Capital Structure and Liquidity
Total Capital Employed
Credit Ratings
Outstanding Debt and Principal Maturity Profile
Mortgages
Credit Facilities
Senior Unsecured Debentures
Unitholders' Equity
Liquidity
Cash Flows
Contractual Obligations
Contingencies
Non-IFRS Reconciliations and Financial Measures
Reconciliation of Consolidated Balance Sheets
to First Capital’s Proportionate Interest
Reconciliation of Consolidated Statements
of Income (Loss) to First Capital's Proportionate Interest
FFO and ACFO
NAV per unit
Distributions
Summary of Financial Results of Long-term Debt
Guarantors
Related Party Transactions
Subsequent Events
Quarterly Financial Information
Critical Accounting Estimates
Controls and Procedures
Risks and Uncertainties
Management’s Discussion and Analysis of
Financial Position and Results of Operations
INTRODUCTION
This Management’s Discussion and Analysis (“MD&A”) of the financial position and results of operations of First Capital
Real Estate Investment Trust (“First Capital”, “FCR” or the “Trust”) 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, 2021 and 2020. It should be read in conjunction with the Trust’s audited annual consolidated financial
statements for the years ended December 31, 2021 and 2020. Additional information, including First Capital's current
Annual Information Form, is available on the SEDAR website at www.sedar.com and on the FCR website at www.fcr.ca.
All dollar amounts are in thousands of Canadian dollars, unless otherwise noted. Historical results and percentage
relationships contained in First Capital’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 8, 2022.
Effective December 30, 2019, First Capital Realty Inc. (the "Company") completed its Plan of Arrangement (the
"Arrangement") to convert into a real estate investment trust ("REIT"). Under the Arrangement, Shareholders of the
Company received one trust unit ("Trust Unit") or one Class B Limited Partnership Unit ("Exchangeable Unit") of a
controlled limited partnership of the Trust, for each common share of the Company held. Consequently, any references
to common shares, Shareholders and per share amounts relate to periods prior to the conversion on December 30, 2019
and any references to Trust Units, Unitholders and per unit amounts relate to periods subsequent to December 30, 2019.
OUTLOOK AND CURRENT BUSINESS ENVIRONMENT
Throughout most of the fourth quarter, essential and non-essential businesses were operating at near capacity, with
additional protection from proof of vaccination measures for restaurants, gyms and other venues. In late November,
healthcare agencies first identified the new Omicron COVID variant which quickly became the dominant strain worldwide.
In late 2021 and early 2022, provincial governments mandated temporary capacity restrictions and lockdowns in an effort
to slow the speed of the Omicron variant. These restrictions have adversely impacted certain tenants. In response to
these restrictions, the Federal government enacted new COVID-19 support measures on December 17, 2021 and
introduced the Local Lockdown Program and the Canada Work Lockdown Benefit. The Local Lockdown Program provides
wage and rent support for organizations subject to a qualifying public health restriction, regardless of sector.
Despite the continuing challenges facing many businesses as a result of the pandemic, First Capital's high quality grocery-
anchored and mixed-use portfolio continues to produce solid leasing activity, growth in its average net rental rate while
2021 has seen new leases signed with numerous growing retailers and full-service restaurant operators.
Actively managing assets
First Capital operates a portfolio of assets primarily located in super urban neighbourhoods within Canada’s largest and
fastest growing cities. First Capital’s portfolio is built on a solid foundation of grocery-anchored properties with a curated
tenant mix that includes pharmacy, liquor, government and medical services, which are among the uses that were
classified as essential and remained open under the directives issued by the applicable governments across Canada. FCR’s
Property Operations Team continues to work together with its tenants to provide safe spaces for their employees and
customers. FCR will continue to focus on health and safety at its properties, substantially all of which are grocery and
pharmacy anchored, to minimize risk while continuing to serve neighbourhood needs and adapt to the current
environment and beyond. As an example, FCR expanded its Quick Shop program in 2020, by launching a Customer Quick
Pick-up program which facilitates curbside pickup at designated parking areas within its properties to enhance
convenience and safety for its tenants and their customers.
Supporting our tenants
First Capital recognizes that small businesses play an important role in the neighbourhoods where it operates. In late March
of 2020, FCR announced the launch of its Small Business Support Program ("SBSP"), to provide relief to a subset of
qualifying tenants in the form of two months' deferred rent. During the second quarter of 2020, the federal government
implemented the Canada Emergency Commercial Rental Assistance (“CECRA”) program, which largely replaced FCR's SBSP.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
The CECRA program operated from April through September 2020, abating 75% of the qualifying tenants' gross rent and
extending a forgivable government loan to the property owner equal to 50% of the gross rent. Under this program, FCR
abated $13.2 million of tenants' rent, net of the government's support, as a charge to bad debt expense in 2020.
In September 2020, to continue to assist businesses amid these difficult conditions, the federal government implemented a
rent support program, the Canada Emergency Rent Subsidy "CERS", that supported tenants directly. This rent subsidy
supported businesses that suffered a revenue drop, by subsidizing eligible expenses, including rent, property insurance,
property taxes and interest on commercial mortgages. The program subsidized up to 65% of eligible expenses and included
a 25% top-up for organizations temporarily shut down by a mandatory public health order up to a maximum of $75,000 per
location and an overall maximum of $300,000 for all locations including affiliated entities per four week claim period. The
program was available to qualifying tenants from September 27, 2020 to October 23, 2021.
The Tourism and Hospitality Recovery Program and the Hardest-Hit Business Recovery Program took effect October 24,
2021 and are available until May 7, 2022. The Tourism and Hospitality Recovery Program will provide help through wage
and rent subsidies for hotels, tour operators, travel agencies and restaurants with a subsidy rate of up to 75%. The Hardest-
Hit Business Recovery Program will provide support through wage and rent subsidies for other businesses that have faced
deep losses, with a subsidy rate of up to 50%. For these two programs, eligibility will require both a significant revenue loss
over 12 months during the pandemic and a revenue loss in the current month of application.
The Local Lockdown Program is currently available to organizations, regardless of sector that are subject to a qualifying
health restriction from October 24, 2021 to May 7, 2022. Businesses that have one or more locations subject to a public
health restriction for at least seven days in the claim period may be eligible for support at the same subsidy rates available
under the Tourism and Hospitality Recovery Program. To qualify, the public health restriction must cause the business to
cease activities that accounted for at least approximately 25% of their total revenues during the prior reference period. In
addition, the organization must have a current month revenue loss of at least 40%.
First Capital also provided savings to tenants from FCR's participation in the Canada Emergency Wage Subsidy ("CEWS")
program. The wage subsidy results in a reduction in property operations personnel costs that are passed on to tenants
through lower operating cost recoveries. The CEWS program was extended to October 23, 2021, however after July 3, 2021,
only applicants with a minimum revenue decline of 10% can participate.
First Capital remains committed to working with its tenants to assist them through the pandemic. However, despite the
assistance programs available, some tenants may fail, in which case a temporary increase in vacancy may occur. First Capital
recorded bad debt expense of $1.4 million and $8.5 million for the three months and year ended December 31, 2021.
To date, First Capital collected 98% of the gross rent due in the fourth quarter.
Managing the balance sheet
The full extent and duration of the financial impact of COVID-19 on communities and the economy remains uncertain.
Therefore, First Capital has taken the following proactive measures to provide greater financial strength and flexibility.
• On January 12, 2021, First Capital announced a reduction of its monthly distribution to Unitholders from $0.0716
per unit to $0.036 per unit (or $0.432 per unit annually). The reduction of the distribution will provide First Capital
with additional retained cash flow of approximately $95 million per annum and provide meaningful financial
flexibility to advance the Trust’s strategic objectives.
First Capital is continuing to maintain a strong balance sheet. As of February 8, 2022, the Trust's liquidity position
included approximately $661 million of cash and undrawn credit facilities with remaining debt maturities for 2022
totaling only $327 million. As at December 31, 2021, the Trust had unencumbered properties with an IFRS value of
approximately $7.4 billion and a net debt to asset ratio of 43.9%.
•
Lending activities
First Capital provides co-owner financing, priority mortgages and mezzanine loans to third parties in connection with certain
transactions and partnerships. These loans and mortgages receivable are secured and can provide FCR with the opportunity
to acquire full or partial interests in the underlying assets that are consistent with its investment strategy through rights,
options or negotiated transactions. Therefore, in addition to generating interest income and fees, these lending activities
provide an alternative means to obtaining purchase options and/or participation in projects which may otherwise have not
FIRST CAPITAL REIT ANNUAL REPORT 2021
2
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
been accessible. Additionally, from time to time, FCR partners with experienced real estate lenders and investment
companies whose primary business is lending which helps to mitigate risk.
FCR’s loans and mortgages receivable totaling $240.0 million (December 31, 2020 - $113.1 million) are secured primarily by
interests in investment properties or shares of entities owning investment properties which helps to mitigate the risk of
non-payment.
Disposition program
First Capital’s approach to property dispositions is centered around several objectives. The first is to sell 100% interests in
properties that are deemed to be inconsistent with its Super Urban Strategy, as properties in these markets do not benefit
from the same attractive long-term demographic growth drivers as the business overall. In addition, First Capital also has an
objective to sell 50% non-managing interests to institutional partners in certain stable but growing properties, to ultimately
expand its position in these markets without increasing investment capital. Finally, First Capital seeks to strategically
partner with organizations that offer expertise that is complementary to the REIT’s existing strengths in retail real estate
operations, master planning and entitlements, in order to maximize the potential value and reduce risk inherent in its large-
scale mixed-use projects. In April 2019, following the share repurchase transaction, First Capital increased its strategic
disposition target to $1.5 billion from $1.0 billion. Since the beginning of 2019, FCR has completed dispositions under this
strategy totaling approximately $1.4 billion or 95% of its target. FCR continues to pursue strategic disposition opportunities
as the property transaction market has demonstrated strong momentum in 2021 despite the on-going pandemic.
Development initiatives
Management continues to monitor the impacts of COVID-19 on the portfolio, including properties under development. As
of December 31, 2021, FCR had approximately 0.5 million square feet under active development, including residential
inventory. First Capital believes that the strategy to develop, own and operate properties that meet the needs of everyday
urban life in Canada’s most densely populated neighbourhoods will provide value over the long term in all the asset classes
in which it invests.
On September 17, 2021, the Pemberton Group ("Pemberton") subscribed to 50% ownership in a new strategic
partnership to develop the 28-acre site located at 2150 Lake Shore Boulevard West at Park Lawn Road in Toronto (the
"Development Site") into a sustainable and inclusive master-planned, mixed-use, transit-oriented neighbourhood. First
Capital exercised a previously secured option to purchase its former partner's 50% interest in the Development Site for
approximately $56 million at the same time Pemberton invested $156 million in the new partnership. The Trust has
maintained its 50% ownership interest in the property.
Outlook
Across Canada there are ongoing restrictions aimed at mitigating the transmission of COVID-19 and variants. These
restrictions continue to present challenges to many businesses, including some of our tenants. There are also ongoing
effects of the pandemic, including but not limited to social distancing recommendations, capacity limits in enclosed spaces
that remain lower than pre-COVID limits, higher operating costs for many businesses due to personal protective equipment
provisioning, and labour shortages in some instances. While the full impact on First Capital is still unknown, certain aspects
of the Trust’s business and operations that could potentially be impacted include rental income, occupancy, tenant
improvements, future demand for space, and market rents, all of which ultimately impact the underlying valuation of
investment properties. Refer to the "Risks and Uncertainties" section of this MD&A for a discussion about the risks
associated with the COVID-19 pandemic.
First Capital believes, based on its exceptionally high-quality portfolio which has always been focused on everyday
essentials, that it will continue to attract high tenant demand for its space and consequently low re-leasing risk for potential
vacancy because of COVID-19. This has proven true thus far with the limited space that has become vacant, some of which
has been re-leased.
First Capital will continue to be guided by its corporate responsibility and sustainability program, and values. The core
beliefs of collaboration, innovation, excellence, accountability, and passion continue to be demonstrated throughout all
areas of the organization.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
NON-IFRS FINANCIAL MEASURES
In addition to measures determined in accordance with International Financial Reporting Standards ("IFRS"), First Capital
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 real estate
entities, and should not be construed as an alternative to other financial measures determined in accordance with IFRS.
The following describe the non-IFRS measures First Capital currently uses in evaluating is financial performance.
Proportionate Interest
"Proportionate interest" or "Proportionate share" is defined by Management as First Capital’s proportionate share of
revenues, expenses, assets and liabilities in all of its real estate investments. Under IFRS, FCR's nine equity accounted
joint ventures are presented on one line item in the consolidated balance sheets and the consolidated statements of
income (loss), 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 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 FCR's proportionate interest provides a useful and more detailed view of the operation and performance
of First Capital'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 First Capital's debt metrics. In addition, FCR's
lenders require Management to calculate its debt metrics on a proportionate interest basis.
To achieve the proportionate presentation of its nine equity accounted joint ventures, Management allocates FCR'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, FCR exercises control over two
partially owned ventures and consolidates 100% of the revenues, expenses, assets, and liabilities in the consolidated
financial statements. In the reconciliations, the partially owned ventures are also presented as if they were
proportionately consolidated. To achieve the proportionate presentation of its partially owned ventures, Management
subtracts the non-controlling interest's share (the portion FCR doesn't own) of revenue, expenses, assets, and liabilities
on each relevant line item. FCR 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 FCR's legal claim to
such items.
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 First Capital’s portfolio.
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, ground-up development, properties under construction, and density and development land 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
FIRST CAPITAL REIT ANNUAL REPORT 2021
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MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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. First Capital calculates FFO in accordance
with the recommendations of the Real Property Association of Canada (“REALPAC”) as published in its most recent
guidance on "Funds from Operations and Adjusted Funds From Operations for IFRS" dated January 2022. 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 FCR's net income that may not be the most
appropriate determinants of the long-term operating performance of FCR, such as investment property selling costs; tax
on gains or losses on disposals of properties; deferred income taxes; distributions on Exchangeable Units; fair value gains
or losses on Exchangeable Units; fair value gains or losses on unit-based compensation; and any gains, losses or
transaction costs recognized in business combinations. FFO provides a perspective on the financial performance of FCR
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 First Capital began using in 2017 to measure
operating cash flow generated from the business. ACFO replaced FCR’s previously reported Adjusted Funds from
Operations (“AFFO”) as its supplementary cash flow metric. FCR calculates ACFO in accordance with the
recommendations of REALPAC as published in its most recent guidance on "Adjusted Cashflow From Operations (ACFO)
for IFRS" dated January 2022.
Management considers ACFO a meaningful metric to measure operating cash flows as it represents sustainable cash
available to pay distributions to Unitholders. 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 FCR'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 units outstanding for FFO
For purposes of calculating per unit amounts for FFO, the weighted average number of diluted units outstanding includes
the weighted average outstanding Trust Units and Exchangeable Units as at the end of the period; and assumes
conversion of all outstanding Deferred Units, Restricted Units, Performance Units and any dilutive Options as at the end
of the period.
FFO and ACFO Payout Ratios
FFO and ACFO payout ratios are supplementary non-IFRS measures used by Management to assess the sustainability of
First Capital's distribution payments. The FFO payout ratio is calculated using distributions declared per unit divided by
FFO per unit. The ACFO payout ratio is calculated on a rolling four quarter basis by dividing total cash distributions 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 principal or par value amounts of First Capital's net debt on a proportionate basis and
the market value of FCR's Trust Units and Exchangeable Units outstanding at the respective quarter end date. This
measure is used by FCR to assess the total amount of capital employed in generating returns to Unitholders.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
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 First Capital'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 on a proportionate basis.
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, fair value gains or losses on Exchangeable Units, fair value gains or losses on unit-based
compensation and other non-cash or non-recurring items on a proportionate basis. FCR also adjusts for incremental
leasing costs, which is a recognized adjustment to FFO, in accordance with the recommendations of REALPAC.
Management believes Adjusted EBITDA is useful in assessing the Trust's ability to service its debt, finance capital
expenditures and provide for distributions to its Unitholders.
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 First Capital to obtain various
forms of debt financing at a reasonable cost of capital.
Net Asset Value
Net Asset Value ("NAV") represents the proportionate share of First Capital's total assets less the proportionate share of
its total liabilities excluding deferred tax liabilities and Exchangeable Units.
NAV per unit represents NAV, as calculated above, divided by the number of diluted units outstanding as at the end of
the period. For purposes of calculating per unit amounts for NAV, the number of diluted units outstanding includes all
outstanding Trust Units and Exchangeable Units as at the end of the period and assumes conversion of all outstanding
Deferred Units, Restricted Units, Performance Units and any dilutive Options as at the end of the period. Management
believes that NAV is useful to financial statement users who consider it a key measure of the intrinsic value of the Trust.
OPERATING METRICS
First Capital presents certain operating metrics and portfolio statistics in the MD&A, which include neighbourhood count,
property category, GLA, occupancy, weighted average rate per occupied square foot, top 40 tenants, development
pipeline, and renewal activities. FCR uses these operating metrics to monitor and measure operational performance
period over period. To align FCR's GLA reporting with its ownership interest in its properties, unless otherwise noted, all
GLA is presented at FCR's ownership interest (19.7 million square feet at its ownership interest compared to 22.5 million
square feet at 100% as at December 31, 2021). First Capital's operating metrics and GLA excludes residential GLA totaling
364,000 square feet and hotel GLA of 49,000 square feet, at its ownership interest, as amounts are not significant at this
time.
In measuring performance or allocating resources, the Trust does not distinguish or group it's operations on a
geographical or any other basis and, accordingly, has a single reportable segment for disclosure purposes. As a result,
effective January 1, 2021, the Trust has one reportable segment for financial reporting purposes which comprises the
ownership, management and development of investment properties located across Canada.
FIRST CAPITAL REIT ANNUAL REPORT 2021
6
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
SUMMARY CONSOLIDATED INFORMATION AND HIGHLIGHTS
For the years ended December 31
Revenues, Income and Cash Flows (1)
Revenues and other income
NOI (2)
Increase (decrease) in value of investment properties, net
Increase (decrease) in value of hotel property
Net income (loss) attributable to Unitholders
Net income (loss) per unit attributable to Unitholders (diluted)
Weighted average number of units - diluted (in thousands)
Cash provided by operating activities
Distributions
Distributions declared
Distributions declared per unit
Dividends declared per common share
Cash distributions paid
As at December 31
Financial Information (1)
Investment properties (3)
Hotel property
Total assets
Mortgages (3)
Credit facilities
Senior unsecured debentures
Exchangeable Units
Unitholders' equity
Net Asset Value per unit (2)
Capitalization and Leverage
2021
2020
2019
$ 685,770
$ 685,138
$ 779,822
$ 412,538
$ 399,032
$ 460,397
$ 198,617
$
(185,700) $
61,037
$
(1,122) $
(9,432) $
—
$ 460,131
$
2.08
$
$
2,702
$ 401,345
0.01
$
1.74
220,826
220,495
230,810
$ 249,613
$ 219,505
$ 269,147
$
$
$
94,804
$ 188,027
$ 165,224
0.432
—
$
$
0.860
—
$
$
0.072
0.645
$ 102,618
$ 187,929
$ 203,830
2021
2020
2019
$ 9,126,839
$ 9,490,641
$ 9,752,130
$
85,400
$
88,000
$
62,199
$ 10,109,074
$ 10,032,463
$ 10,161,360
$ 1,173,175
$ 1,346,637
$ 1,327,021
$ 899,777
$ 915,928
$ 899,165
$ 2,348,145
$ 2,522,135
$ 2,497,213
$
1,947
$
1,399
$
25,010
$ 4,620,942
$ 4,227,164
$ 4,426,592
$
24.28
$
22.34
$
23.39
Trust Units outstanding (in thousands)
Exchangeable Units outstanding (in thousands)
Enterprise value (2)
Net debt to total assets (2) (4)
Weighted average term to maturity on mortgages, fixed rate unsecured term loans
and senior unsecured debentures (years)
219,541
219,315
217,954
103
103
1,210
$ 8,568,292
$ 7,657,576
$ 9,253,174
43.9%
47.2%
46.7%
4.0
4.6
5.1
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FIRST CAPITAL REIT ANNUAL REPORT 2021
As at December 31
Operational Information
Number of neighbourhoods
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)
Commercial pipeline (primarily retail)
Residential pipeline
Weighted average rate per occupied square foot
Commercial GLA developed and transferred online - at ownership interest (6)
Residential units developed and transferred online (6)
Same Property - stable NOI - increase (decrease) over prior period (2) (7)
Total Same Property NOI - increase (decrease) over prior period (2) (7)
For the years ended December 31
Funds from Operations (2) (4)
FFO
FFO per diluted unit
FFO payout ratio
Weighted average number of units - diluted (in thousands)
Adjusted Cash Flow from Operations (2) (4)
ACFO
ACFO payout ratio on a rolling four quarter basis
2021
2020
2019
146
150
156
22,485,000
22,822,000
23,528,000
19,657,000
19,991,000
20,927,000
96.0%
96.1%
96.1%
96.2%
97.2%
96.9%
1,720,000
1,803,000
2,258,000
21,752,000
22,038,000
22,778,000
$
22.42
$
21.89
$
21.25
194,000
33,000
201,000
399
5.1%
5.7%
193
(5.8%)
(7.1%)
247
2.7%
3.3%
2021
2020
2019
$ 250,989
$ 221,974
$
1.14
$
38.0%
1.01
85.4%
$
$
284,920
1.23
69.7%
220,826
220,495
230,810
$ 243,816
$ 203,047
$
252,416
42.1%
92.6%
80.8%
(1) As presented in First Capital's IFRS consolidated financial statements, except for weighted average number of diluted units and per unit amounts.
(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. Total assets excludes cash balances. Refer to the "Non-IFRS Financial Measures – Proportionate Interest" section of
this MD&A.
(5) At First Capital's ownership interest.
(6) During the twelve months ended December 31.
(7) Calculated based on the year-to-date NOI. Prior period amounts not restated for current period property categories.
FIRST CAPITAL REIT ANNUAL REPORT 2021
8
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
BUSINESS AND OPERATIONS REVIEW
Real Estate Investments
Investment Property Categories
First Capital categorizes its properties for the purposes of evaluating operating performance including Total Same
Property NOI. This enables FCR to better reflect its development, redevelopment and repositioning activities on its
properties, including density and land use intensification, and its completed and planned disposition activities. In
addition, FCR revises comparative information to reflect property categories consistent with current period status. The
property categories are as follows:
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.
Major redevelopment – includes properties in planning or recently completed multi-year redevelopment projects with
significant intensification, reconfiguration and building and tenant upgrades.
Ground-up development – consists of recently completed 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.
Properties under construction – consists of properties under major redevelopment or ground-up development that are
under active construction.
Density and Development land – comprises land sites where there are no development activities underway, except for
those in the planning stage and certain zoned or unzoned sites where specific density value has been ascribed.
Acquisitions and dispositions – consists of properties acquired during the period including those in close proximity to
existing properties. 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.
First Capital has applied the above property categorization to the fair value, capital expenditures as well as leasing and
occupancy activity on its portfolio, and to its Same Property NOI analysis to further assist in understanding FCR’s real
estate activities and its operating and financial performance.
Portfolio Overview
As at December 31, 2021, First Capital had interests in 146 neighbourhoods, which were 96.1% occupied with a total GLA
of 19.7 million square feet at FCR's ownership interest (22.5 million square feet at 100%) and a fair value of $9.5 billion.
This compares to 150 neighbourhoods, which were 96.2% occupied with a total GLA of 20.0 million square feet at FCR's
ownership interest (22.8 million square feet at 100%) and a fair value of $9.6 billion as at December 31, 2020.
The Same Property portfolio includes properties sub-categorized in Same Property – stable and Same Property with
redevelopment. The Same Property portfolio is comprised of 136 neighbourhoods with a total GLA of 18.9 million square
feet at FCR's ownership interest (21.7 million square feet at 100%) and a fair value of $8.5 billion. These properties
represent 93% of FCR's neighbourhood count, 96% of its GLA at FCR's ownership interest and 89% of its fair value as at
December 31, 2021.
The balance of FCR’s real estate assets consists of properties which are in various stages of redevelopment, properties
acquired in 2021 or 2020 and properties in close proximity to them, as well as properties held for sale.
9
FIRST CAPITAL REIT ANNUAL REPORT 2021
First Capital's portfolio based on property categorization is summarized as follows:
As at
Property Type (1)
Same Property – stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Ground-up development
Properties under construction
Acquisitions (3)
Density and Development land (4) (5)
Investment properties classified as
held for sale
Dispositions (6)
Total
December 31, 2021
Weighted
Average
Rate per
Occupied
Square
Foot
96.0% $ 22.76
% of Total
GLA
GLA
(000s
sq. ft.)
87.5% 17,492 $ 7,900
Fair
Value (2) Occupancy
December 31, 2020
Weighted
Average
Rate per
Occupied
Square
Foot
96.1% $ 22.49
GLA
(000s
sq. ft.)
Fair
Value (2) Occupancy
17,514 $ 8,001
% of Total
GLA
89.1%
7.1%
1,398
96.2%
2.0%
0.4%
—%
0.1%
0.2%
18,912
397
86
—
22
33
1.1%
207
477
8,478
113
265
16
71
437
151
97.9%
96.1%
94.8%
89.7%
—%
82.7%
99.2%
98.9%
18.12
22.41
21.44
32.68
—
51.72
15.90
19.37
7.0% 1,386
462
96.0%
17.63
94.5% 18,878
323
—
—
7
49
1.6%
—%
—%
0.1%
0.2%
8,362
96
144
124
50
433
96.1%
94.6%
—%
—%
39.1%
100.0%
22.13
18.14
—
—
40.28
15.95
1.1%
226
135
99.0%
19.32
—%
—
—
—%
—
2.5%
508
243
97.8%
17.04
100.0%
19,657 $ 9,531
96.1% $ 22.42
100.0% 19,991 $ 9,587
96.2% $ 21.89
(1) Prior periods restated to reflect current period property categories.
(2) At FCR's proportionate interest, including investment properties classified as held for sale and hotel property at net book value as at December 31, 2021 and December 31,
2020, respectively.
(3) Includes current year and prior year acquisitions.
(4) Approximately $5 million of density and development land is included in acquisitions as at December 31, 2021.
(5) Approximately $72 million (December 31, 2020 - $77 million) of density and development land is included in investment properties classified as held for sale as at
December 31, 2021.
(6) Comparative information presented relates to 2021 dispositions that have been completed and no longer form part of these metrics as at December 31, 2021.
First Capital’s portfolio by major market is summarized as follows:
As at
December 31, 2021
December 31, 2020
(millions of dollars,
except other data)
Area
Number
of
Neighbour-
hoods
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
Neighbour-
hoods
GLA
(000s
sq. ft.)
Fair
Value(1)
% of
Total
Fair
Value Occupancy
Weighted
Average
Rate per
Occupied
Square
Foot
% of
Annual
Minimum
Rent
Greater Toronto
50
6,862 $ 4,599
48%
96.0% $ 25.73
Greater Montreal
28
3,586
1,140
12%
Greater Calgary
15
2,380
1,081
11%
Greater Vancouver
15
1,613
1,032
11%
Greater Edmonton
Greater Ottawa
KW/Guelph (2)
Other
Total
11
2,256
13
1,182
5
1,047
9
731
754
379
338
208
8%
4%
4%
2%
95.9%
93.9%
96.3%
96.8%
98.4%
96.5%
98.1%
17.12
24.93
27.35
19.39
18.98
19.04
18.48
40%
14%
13%
10%
10%
5%
5%
3%
51
6,803 $ 4,624
48%
95.8% $
25.23
28
3,551
1,106
12%
17
2,688
1,147
12%
16
1,750
1,041
11%
11
2,246
13
1,180
5
1,047
9
726
764
370
332
203
8%
4%
3%
2%
96.3%
95.7%
95.9%
95.2%
97.9%
98.3%
98.7%
17.02
23.37
25.53
19.24
18.97
19.00
17.77
39%
14%
14%
10%
10%
5%
5%
3%
146
19,657 $ 9,531
100%
96.1% $ 22.42
100%
150
19,991 $ 9,587
100%
96.2% $
21.89
100%
(1) At FCR's proportionate interest, including investment properties classified as held for sale and hotel property at net book value as at December 31, 2021 and December 31,
2020, respectively.
(2) Includes Kitchener, Waterloo, and Guelph Area.
Among First Capital's real estate investment portfolio are forty-three (2020 - forty-two) assets each with a value greater
than $85 million or size greater than 300,000 square feet. Together, these forty-three assets comprise $6.3 billion (2020 -
$6.2 billion) or 66% (2020 - 65%) of FCR's aggregate $9.5 billion investment portfolio asset value (2020 - $9.6 billion).
These assets, as a percentage of FCR's aggregate value, reflect FCR's focus on larger, but fewer strategic assets in its
target urban markets.
FIRST CAPITAL REIT ANNUAL REPORT 2021
10
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Investment Properties
A continuity of First Capital’s investment in its property acquisitions, dispositions, development and portfolio
improvement activities is as follows:
(millions of dollars)
Balance at beginning of year
Acquisitions
Investment properties and additional adjacent spaces
Development activities and property improvements
Reclassification to residential development inventory
Increase (decrease) in value of investment properties, net
Dispositions
Reclassification to equity accounted joint ventures (1)
Other changes
Balance at end of year (2)
Year ended December 31, 2021
Consolidated
Balance Sheet
Adjustments for
Proportionate Interest
$
9,491 $
15
154
(92)
199
(367)
(274)
1
9,127 $
$
8 $
8
(9)
20
(18)
34
274
2
319 $
Proportionate
Interest (3)
9,499
23
145
(72)
181
(333)
—
3
9,446
(1)
(2)
In the third quarter of 2021, two properties were reclassified to investment in joint ventures as the legal ownership of these two properties changed or was restructured
as part of disposition transactions. The two properties are now beneficially owned in separate limited partnerships owned 50/50 by the Trust and their respective
partners.
Includes investment properties classified as held for sale as at December 31, 2021 totaling $151 million ($151 million at First Capital's share) of investment properties.
(3) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(millions of dollars)
Balance at beginning of year
Acquisitions (1)
Investment properties and additional adjacent spaces
Development activities and property improvements
Reclassification to residential development inventory
Increase (decrease) in value of investment properties, net
Dispositions
Other changes
Balance at end of year (2)
Year ended December 31, 2020
Consolidated
Balance Sheet
Adjustments for
Proportionate Interest
$
9,752 $
20
205
(58)
(186)
(251)
9
$
9,491 $
9 $
25
(15)
—
(10)
—
(1)
8 $
Proportionate
Interest (3)
9,761
45
190
(58)
(196)
(251)
8
9,499
(1) During the first quarter of 2020, one of the Trust’s wholly owned subsidiaries purchased a property from another consolidated subsidiary, that is subject to a non-controlling
interest. The Trust’s net effective ownership in the asset increased by 15.5% to 100%. The Trust’s acquisition cost for its incremental 15.5% interest was $25.4 million which is
reflected as a distribution to the non-controlling interest partner in the audited annual consolidated financial statements.
(2)
Includes investment properties classified as held for sale as at December 31, 2020 totaling $162 million ($162 million at First Capital's share) of investment properties.
(3) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
11
FIRST CAPITAL REIT ANNUAL REPORT 2021
2021 Acquisitions
Income-producing properties
During the year ended December 31, 2021, First Capital acquired four properties located in Toronto, as summarized in
the table below:
Count Property Name
1.
2.
3.
4.
8051 Yonge Street (Royal Orchard)
129 Jefferson Avenue (Liberty Village)
199 Avenue Road
897-901 Eglinton Avenue West
Total
City/Province
Toronto, ON
Toronto, ON
Toronto, ON
Toronto, ON
Quarter
Acquired
Interest
Acquired
GLA
(sq. ft.)
Acreage
Acquisition Cost
(in millions)
Q1
Q1
Q2
Q3
50%
100%
20%
50%
2,478
3,700
3,186
5,628
14,992
0.2 $
0.1
0.1
0.2
0.6 $
5.4
2.1
2.7
12.4
22.6
2020 Acquisitions
Income-producing properties
During the year ended December 31, 2020, First Capital acquired two super urban properties located in Toronto, the
remaining 40% interest in the Hazelton Hotel located in Yorkville, and an adjacent property in Montreal. Additionally, First
Capital acquired the remaining 15.5% interest in one downtown Toronto property held through Main & Main Urban
Realty LP ("MMUR"), as summarized in the table below:
Count Property Name
1.
2.
3.
4.
5.
Yonge & Roselawn Assembly (1)
1795 Rue Fleury
261 Queens Quay E (Bayside Village)
Hazelton Hotel (Yorkville Village) (2)
34 Montgomery Avenue
Total
City/Province
Toronto, ON
Montreal, QC
Toronto, ON
Toronto, ON
Toronto, ON
Quarter
Acquired
Interest
Acquired
GLA
(sq. ft.)
Acreage
Acquisition Cost
(in millions)
Q1
Q3
Q3
Q4
Q4
15.5%
100%
50%
40%
100%
—
0.3 $
4,193
23,979
4,506
—
0.2
1.6
—
0.1
32,678
2.2 $
25.4
1.7
15.3
31.7
3.2
77.3
(1) During the first quarter of 2020, one of the Trust’s wholly owned subsidiaries purchased a property from another consolidated subsidiary, that is subject to a non-controlling
interest. The Trust’s net effective ownership in the asset increased by 15.5% to 100%. The Trust’s acquisition cost for its incremental 15.5% interest was $25.4 million which is
reflected as a distribution to the non-controlling interest partner in the audited annual consolidated financial statements.
(2) 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 annual consolidated
financial statements for further details. GLA represents retail space only.
FIRST CAPITAL REIT ANNUAL REPORT 2021
12
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
2021 Dispositions
Consistent with First Capital's strategy of focusing on super urban neighbourhoods and partnering with strategic
institutional partners, First Capital completed $344.8 million of dispositions during 2021. In addition, First Capital entered
into a new strategic partnership with Pemberton Group to develop the former Christie Cookie site in Toronto (2150
Lakeshore Boulevard West). The $156 million transaction crystallized a significant gain for First Capital, and provided for a
sizeable increase in the fair value of the REIT's 50% interest in the property. These dispositions are summarized in the
table below:
Quarter
Sold
Interest Sold
GLA
(sq. ft.)
Acreage
Gross Sales
Price
(in millions)
Q2
Q2
Q3
Q3
Q3
Q4
Q4
Q4
Q4
Q4
Q4
Q4
Q4
Q4
100%
50%
50% (1)
100%
100%
31,000
2,294
109,809
249,875
20,551
100%
136,657
16.67%
53,822
50%
50%
50%
100%
100%
50%
50%
32,669
10,404
15,000
6,400
5,002
2,474
2.9
0.2
0.3
27.1
1.7
9.1
0.3
0.7
0.2
0.2
0.1
1.2
0.3
—
675,957
0.9
45.2 $
344.8
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Fairview Mall - Staples
Eagleson Place - expansion unit
Dundas & Aukland (Station Place)
Towerlane Centre & Airdrie Village Square
134, 146-150 Lakeshore Road West
(Lakeshore & Kerr)
Langley Mall
City/Province
St. Catharines
Ottawa, ON
Toronto, ON
Airdrie, AB
Oakville, ON
Langley, BC
King High Line (King's Club residential)
Toronto, ON
802, 812, 816-838 – 11th Avenue SW
(GM Glenbow)
731-739 – 10th Avenue SW
(Five Roses Building)
738 – 11th Avenue SW (Sherwin Block)
5095-5107 Queen Mary
Fairview Mall - Kelsey's
Eagleson Place - expansion unit
Humbertown Shopping Centre (land) (2)
Total
Calgary, AB
Calgary, AB
Calgary, AB
Montreal, QC
St. Catharines
Ottawa, ON
Toronto, ON
(1) 35% at FCR's proportionate share.
(2) Previously classified as Residential Inventory.
13
FIRST CAPITAL REIT ANNUAL REPORT 2021
2020 Dispositions
During the year ended December 31, 2020, First Capital disposed of its interests in two portfolios, eleven properties and
two land parcels, none of which were in super urban neighbourhoods. These dispositions are summarized in the table
below:
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
Greater Montreal Area Portfolio (1)
Plaza Laval Elysee
Gorge Shopping Centre
1610 The Queensway
Windsor Portfolio (2)
Carrefour Belvedere / Edifice Hooper
Place Panama Phase I (land)
Carrefour du Versant Ouest/Est
Lakeview Plaza
10. Meadowbrook Centre
11.
12.
13.
14.
15.
Place Nelligan
Burlingwood Shopping Centre
Place Cite des Jeunes
Beacon Hill Plaza
Place Lucerne (land)
Total
City/Province
Montreal, QC
Laval, QC
Victoria, BC
Toronto, ON
Windsor, ON
Sherbrooke, QC
Brossard, QC
Gatineau, QC
Calgary, AB
Edmonton, AB
Gatineau, QC
Burlington, ON
Gatineau, QC
Burlington, ON
Ville Mont-Royal, QC
(1) Includes Place Roland Therrien, Place Pointe-aux-Trembles, and Faubourg des Prairies.
(2) Includes Ambassador Plaza, and University Plaza.
Impact of Acquisitions and Dispositions
Quarter
Sold
Interest Sold
GLA
(sq. ft.)
Acreage
Gross Sales
Price
(in millions)
Q1
Q1
Q1
Q1
Q2
Q2
Q4
Q4
Q4
Q4
Q4
Q4
Q4
Q4
Q4
100%
100%
100%
100%
100%
100%
100%
50%
50%
50%
50%
50%
50%
50%
100%
226,300
19.8
64,700
37,000
2,200
5.3
1.7
0.5
285,900
41.5
98,000
—
57,600
34,700
35,400
36,900
23,400
33,100
10,200
—
8.6
3.2
7.4
2.6
3.1
3.3
2.0
2.2
0.9
0.8
945,400
102.9 $
251.4
The annualized NOI of properties acquired and disposed, at the time of acquisition or disposition, during the years ended
December 31, 2021 and 2020 is summarized in the table below:
For the year ended December 31
Greater Toronto Area
Greater Montreal Area
Greater Calgary Area
Greater Vancouver Area
Greater Edmonton Area
Greater Ottawa Area
KW/Guelph Area (1)
Other
Total
(1) Includes Kitchener, Waterloo, and Guelph Area.
Acquired
Disposed
2021
637
—
—
—
—
—
—
—
637
2020
1,915
—
—
—
—
—
—
—
1,915
$
$
2021
1,642
164
4,424
1,112
—
165
—
680
8,187
$
$
2020
778
3,800
1,034
703
814
2,041
—
3,713
12,883
$
$
$
$
FIRST CAPITAL REIT ANNUAL REPORT 2021
14
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Capital Expenditures
Capital expenditures are incurred by First Capital for maintaining and/or renovating its existing properties. In addition,
FCR also incurs expenditures for the purposes of expansion, redevelopment, ground-up development as well as
condominium and townhome development activities.
Revenue sustaining capital expenditures are required for maintaining First Capital’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 FCR’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 FCR’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. First Capital 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 FCR’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 and residential inventory by type are summarized in the table below:
Year ended December 31
2021
2020
Capital
Expenditures
Adjustments for
Proportionate
Interest
Proportionate
Interest (1)
Capital
Expenditures
Adjustments for
Proportionate
Interest
Revenue sustaining
Revenue enhancing
Expenditures recoverable from tenants
Development expenditures
Sub-total
Residential Inventory
Total
$
$
$
$
15,554 $
35,438
4,033
98,494
153,519 $
14,541 $
168,060 $
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
16 $
3
—
(8,991)
(8,972) $
6,545 $
(2,427) $
15,570 $
35,441
4,033
89,503
144,547 $
21,086 $
165,633 $
18,517 $
26,970
4,971
154,575
205,033 $
8,349 $
213,382 $
Proportionate
Interest (1)
18,556
27,261
4,971
139,173
189,961
8,386
198,347
39 $
291
—
(15,402)
(15,072) $
37 $
(15,035) $
Capital expenditures for the year ended December 31, 2021 were $165.6 million, which was $32.7 million lower than in
the prior year. At the onset of the pandemic, the Trust implemented a cost reduction program to manage elective capital
expenditures and defer certain planned development activities, in order to provide itself with greater financial flexibility.
As a result, spend has declined on new developments over the prior year.
15
FIRST CAPITAL REIT ANNUAL REPORT 2021
Valuation of Investment Properties
The approach selected for valuing investment properties depends on the type of property and other factors such as stage of
development. The components of First Capital's investment properties for the purposes of calculating fair values were as
follows as at December 31, 2021 and December 31, 2020:
As at and for the three and twelve months ended (millions of dollars)
December 31, 2021
Property Type
Same Property - stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Ground-up development
Properties under construction
Acquisitions
Density and Development Land (3) (4)
Investment properties classified as
held for sale
Dispositions
Total investment properties
NOI related to other investments
Total NOI
Adjustments for
Proportionate
Interest
Proportionate
Interest (1)
Fair Value
Valuation Method
DCF (2)
DCF (2)
$
$
DCF (2)
DCF (2)
DCF (2), Cost (2)
DCF (2), Cost (2)
Cost (2), comparable land sales
DCF (2), comparable land sales
7,939 $
428
8,367 $
113
183
16
29
268
151
N/A
—
9,127 $
$
62 $
(2)
60 $
—
82
—
8
169
—
—
319 $
Net Operating
Income (1)
94 $ 369
8,001 $
6
426
23
8,427 $ 100 $ 392
7
4
—
—
113
265
16
37
2
2
—
—
437
151
—
1
1
4
1
—
6
9,446 $ 106 $ 414
2
$ 107 $ 416
1
(1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(2) Discounted Cash Flow ("DCF") is a valuation method under the Income Approach. At cost where cost approximates fair value.
(3) Approximately $72 million ($72 million at First Capital's share) of density and development land is included in investment properties classified as held for sale.
(4) Approximately $5 million, at First Capital's share, of density and development land is included in acquisitions.
As at and for the three and twelve months ended (millions of dollars)
December 31, 2020
Adjustments for
Proportionate
Interest
Proportionate
Interest (2)
Fair Value
Property Type (1)
Same Property - stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Ground-up development
Properties under construction
Acquisitions
Density and Development Land (4)
Investment properties classified as
held for sale
Dispositions (5)
Total investment properties
NOI related to other investments
Total NOI
Valuation Method
DCF (3)
DCF (3)
$
$
DCF (3)
DCF (3)
DCF (3), Cost (3)
DCF (3), Cost (3)
Cost (3), comparable land sales
DCF (3), comparable land sales
N/A
$
7,838 $
411
8,249 $
96
145
146
15
440
135
265
9,491 $
62 $
(2)
60 $
—
—
(22)
—
(8)
—
(22)
8 $
Net Operating
Income (2)
93 $ 354
6
21
99 $ 375
6
2
—
—
2
2
1
—
—
1
7,900 $
409
8,309 $
96
145
124
15
432
135
1
4
3
243
14
9,499 $ 107 $ 403
(2)
(1)
$ 106 $ 401
(1) Prior periods restated to reflect current period property categories.
(2) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(3) Discounted Cash Flow ("DCF") is a valuation method under the Income Approach. At cost where cost approximates fair value.
(4) Approximately $77 million ($77 million at First Capital's share) of density and development land is included in investment properties classified as held for sale.
(5) Includes properties that were disposed of in 2021.
FIRST CAPITAL REIT ANNUAL REPORT 2021
16
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
The majority of the Trust's portfolio is valued under the Income Approach using the discounted cash flow ("DCF") method.
As at December 31, 2021, the weighted average valuation yields (stabilized overall capitalization, terminal, and discount
rates) used in valuing those investment properties under the Income Approach remained substantially unchanged from
December 31, 2020.
Throughout 2021, as part of its normal course internal valuations, the Trust adjusted the fair value of certain properties to
reflect the contractual sale price prior to disposition, as well as revaluations of development land. In addition, the Trust
made revisions to capitalization and discount rates for certain properties. As a result, an overall increase in the value of
investment properties was recorded in the amount of $198.6 million ($181.5 million at FCR's share) for the year ended
December 31, 2021.
At the onset of the pandemic which arose in the first quarter of 2020, an overall decrease in the value of investment
properties was recorded in the amount of $185.7 million ($195.8 million at FCR's share) for the year ended December 31,
2020. The decrease reflected the potential impact of COVID-19 on the cash flows in the valuation models. As part of a
comprehensive portfolio review, properties with greater exposure to tenants deemed non-essential under government
directives, and therefore potentially subject to prolonged closures, were identified. The short term cash flows in the 10 year
valuation models for each of these properties were adjusted for increased vacancy, lower rental rate growth, and other
market leasing assumptions such as slower lease up of existing vacancy.
The associated stabilized capitalization rates by major market for FCR's investment properties valued under the Income
Approach were as follows as at December 31, 2021 and December 31, 2020:
As at December 31, 2021
Area
Greater Toronto
Greater Montreal
Greater Calgary
Greater Vancouver
Greater Edmonton
Greater Ottawa
KW/Guelph (1)
Other
Weighted Average
As at December 31, 2020
Area
Greater Toronto
Greater Montreal
Greater Calgary
Greater Vancouver
Greater Edmonton
Greater Ottawa
KW/Guelph (1)
Other
Weighted Average
Stabilized Capitalization Rate
Weighted
Average
Median
Range
4.5%
5.6%
5.2%
4.3%
5.8%
5.8%
5.6%
5.9%
5.0%
4.8%
5.5%
5.3%
4.4%
5.8%
5.8%
5.6%
5.8%
5.3%
3.0%-7.0%
4.5%-7.0%
4.9%-6.0%
3.5%-5.3%
5.0%-6.5%
4.4%-6.3%
5.3%-6.3%
5.0%-7.0%
3.0%-7.0%
Stabilized Capitalization Rate
Weighted
Average
Median
Range
4.5%
5.7%
5.3%
4.4%
5.8%
6.0%
5.6%
6.0%
5.0%
4.8%
5.8%
5.3%
4.5%
5.8%
6.0%
5.6%
5.8%
5.4%
3.0%-7.0%
4.6%-7.5%
4.9%-7.0%
3.8%-5.3%
5.0%-6.5%
4.4%-6.8%
5.3%-6.3%
5.3%-7.0%
3.0%-7.5%
(1) Includes Kitchener, Waterloo, and Guelph Area.
Properties Under Development
As at December 31, 2021, the Trust's share of properties under construction as well as density and development land
totaled approximately $530 million. These non-income producing properties represent approximately 6% of the Trust's
17
FIRST CAPITAL REIT ANNUAL REPORT 2021
total portfolio value and consists of development land, adjacent land parcels, properties slated for redevelopment with
limited income and properties in active development. As at December 31, 2021, the invested cost of these non-income
producing properties was $424 million as compared to a fair value of $530 million. Cumulative gains of approximately $106
million have been recognized to date and are expected to grow over time as development projects are entitled, advanced
and completed.
Development and redevelopment activities are completed selectively, based on opportunities in First Capital’s properties
or in the markets where FCR operates. First Capital’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 commercial development activities are strategically managed to reduce risk, and properties
are generally developed after obtaining anchor tenant lease commitments. Individual commercial buildings within a
development are generally constructed only after obtaining lease commitments on a substantial portion of the space.
Development Pipeline
As at December 31, 2021, First Capital's portfolio is comprised of 19.7 million square feet of GLA at FCR'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, 2021, Management had identified approximately
23.5 million square feet of incremental density. This incremental density represents an opportunity that exceeds FCR's
existing portfolio.
Management undertakes a quarterly review of its entire portfolio and updates all of its future incremental density.
Management stratifies the density by expected 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. First Capital’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 First Capital with increased
opportunity to redevelop its generally low density properties. A breakdown of the properties under construction, density
and development land, and residential inventory within the portfolio by component and type is as follows:
As at December 31, 2021
Properties under construction
Density and development land
Medium term
Long term
Very long term
Residential inventory
Total development pipeline
Square feet (in thousands)
Value recognized (1)(2)
Commercial
Residential
Total (1) Recognized to date (2)
20
24
44
44 $
(in millions)
16
1,600
100
—
1,700
—
1,720
10,700
6,800
3,800
21,300
428
21,752
12,300
6,900
3,800
23,000
428
23,472
7,232 $
428 $
7,704 $
514
161
691
(1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(2) Represents the density that has been valued and included as part of the fair value of investment properties and the cost of residential inventory on the proportionate
balance sheet.
First Capital determines its course of action with respect to its potential residential density on a case by case basis given the
specifics of each property. First Capital’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 7.7 million or 33% of FCR's 23.5 million square feet of identified
incremental density has been at least partially included as part of the fair value of investment properties and the cost of
residential inventory on the proportionate balance sheet.
FIRST CAPITAL REIT ANNUAL REPORT 2021
18
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
The value of the Trust's density and development land recognized in the Trust's proportionate balance sheet totaling $514
million, or $71 per square foot, as presented below, consists of development land and adjacent land parcels, future pad
developments and properties slated for redevelopment with limited income. As of December 31, 2021, the invested cost of
the density and development land recognized in the Trust's proportionate balance sheet totaled $409 million representing
acquisition cost and pre-development costs to date.
As at December 31, 2021 (1)
(in millions)
Development land
IPP with density
Value of density and development land
Unzoned
Zoned
Total
Unzoned
Zoned
Total
Unencumbered
Encumbered
$
$
61 $
255
316
49
127
176
492 $
12 $
—
12
—
10
10
22 $
Fair Value
73
255
328
49
137
186
514
(1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The remaining 15.8 million square feet of identified incremental density may be included in the value of the property 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 centres or their parking
areas.
Development Pipeline by Urban Market
A breakdown of FCR's properties under construction, density and development land, and residential inventory by urban
market is as follows:
As at December 31, 2021
(in thousands of square feet)
Greater Toronto Area
Greater Montreal Area
Greater Vancouver Area
Greater Calgary Area
Greater Ottawa Area
Greater Edmonton Area
Total development pipeline
Incremental Density Pipeline
Total
% of Total
13,416
5,486
2,410
1,097
712
351
23,472
57.1%
23.4%
10.3%
4.7%
3.0%
1.5%
100.0%
Entitlements Program
First Capital has a program in place to seek entitlements for the incremental density within its portfolio. Entitlement
applications are submitted based on gross floor area (“GFA”).
As of December 31, 2021, entitlement submissions to date total approximately 15.1 million square feet representing 64%
of FCR's 23.5 million incremental density pipeline. To date, 8.0 million square feet has been zoned and the Trust expects
approximately 2.0 million of existing entitlement submissions to be zoned throughout 2022.
Entitlement Applications
1.
2.
3.
4.
Pre-2019 Entitlement Applications (1)
2019 Entitlement Applications
2020 Entitlement Applications
2021 Entitlement Applications
Total Entitlement Applications
000s of square feet submitted for
(at FCR's share):
Residential Commercial
Total
Existing
Incremental
2,986
8,086
2,540
1,477
707
966
309
22
3,693
9,052
2,849
1,499
15,089
2,004
17,093
175
516
135
126
952
3,518
8,536
2,714
1,373
Zoned
3,209
4,675
115
—
16,141
7,999
(1) Disposed of Place Panama (Phase I) in the fourth quarter of 2020 which included 1,047,000 square feet of previously zoned density.
19
FIRST CAPITAL REIT ANNUAL REPORT 2021
First Capital has 8.4 million square feet of additional incremental density which includes 8.3 million square feet primarily
related to the properties listed below, where entitlements have yet to be submitted, and 44 thousand feet currently
under active development (see active projects table).
Additional Incremental Density
Property
895 Lawrence
1.
Danforth Sobeys
2.
Cliffcrest Plaza
3.
Midland Lawrence Plaza
4.
Kingston Square W.
5.
Morningside (portion of shopping centre)
6.
Olde Oakville (future phases)
7.
Bayview Lane Plaza
8.
Yonge-Davis Centre
9.
Appleby Square
10.
Harwood Plaza
11.
1000 Wellington St.
12.
Centre Commercial Domaine
13.
Centre Commercial Van Horne
14.
Galeries Normandie
15.
Place Provencher
16.
Le Campanile & Place du Commerce
17.
Place Michelet
18.
Scott 72 Shopping Centre
19.
Semiahmoo (future phases)
20.
Newport Village
21.
22. Mount Royal Village East
23.
Gloucester City Centre (future phases)
Neighbourhood
City, Province
Ownership
Interest %
Don Mills
Danforth Village
Cliffcrest
Midland Park
Lawrence Ave. E. / Morningside Ave.
Lawrence Ave. E. / Morningside Ave.
South Oakville
Thornhill
Yonge St./Davis Dr. W.
Appleby
Harwood Ave. S. / Bayly St. W.
Griffintown
Longue-Pointe
Cote-Des-Neiges
Hwy. 15/Rue de Salaberry
Saint - Leonard
Nun's Island
Saint - Leonard
120 St./72 Ave.
South Surrey
Macleod Trail SE/Southland Dr. SE
Beltline
Gloucester
Toronto, ON
Toronto, ON
Toronto, ON
Toronto, ON
Toronto, ON
Toronto, ON
Oakville, ON
Markham, ON
Newmarket, ON
Burlington, ON
Ajax, ON
Montreal, QC
Montreal, QC
Montreal, QC
Montreal, QC
Montreal, QC
Montreal, QC
Montreal, QC
Delta, BC
Surrey, BC
Calgary, AB
Calgary, AB
Ottawa, ON
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
FCR continues to review each of its properties and has identified meaningful incremental density in properties that have not
progressed to the point of inclusion in First Capital's incremental density pipeline, that Management expects may be
included in the future. A sample of such properties include Macleod Plaza, Meadowvale Town Centre, Old Strathcona
Shopping Centre, Pemberton Plaza and future phases of Longstreet Shopping Centre, among others.
2021 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 relative to the total project. 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, 2021, First Capital completed the transfer of 194,000 square feet of new retail space
in addition to 399 residential units to the income-producing portfolio at a total cost of $196.5 million. All of the retail
space transferred was located in super urban neighbourhoods and 168,000 square feet became occupied at an average
rental rate of $31.74 per square foot.
For the year ended December 31, 2021, First Capital had tenant closures for redevelopment of 75,000 square feet at an
average rental rate of $19.36 per square foot.
FIRST CAPITAL REIT ANNUAL REPORT 2021
20
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Active Development and Redevelopment Activities
Construction on all projects has largely been unaffected by COVID-19 restrictions during 2021. The quality of First
Capital’s construction is consistent with its strategy of long-term ownership and value creation, and factors in FCR's high
standards in construction, materials, architecture, lighting, parking, access, pedestrian amenities, accessibility, as well as
development to Leadership in Energy and Environmental Design ("LEED") standards.
Committed Leases
First Capital has two projects under construction. At the Trust's share, these projects include approximately 44,000
square feet of space, of which 20,000 square feet is retail space and 24,000 square feet is residential rental apartments.
As construction on large projects occurs in phases, there continues to be ongoing lease negotiations in various stages
with retailers for the planned space. Leasing of residential apartments begins as the project is nearing completion.
Highlights of First Capital’s active projects as at December 31, 2021 are as follows:
As at December 31, 2021
Count/Project
200 West Esplanade, Vancouver, BC (2)
1.
2. Wilderton, Montreal, QC (3)
Major Tenants
(Residential rental units)
(Metro, Pharmaprix, Tim Hortons, SAQ)
Total properties under construction at FCR's share (4)
Ownership
Interest %
50%
100%
Square Feet
Under
Development
(in thousands)
Target
Completion
Date (1)
Fair Value
(in millions)
29 H2 2023
15 H2 2023
44
$
16
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
(2) The square feet under development consists of 9,000 square feet of retail and 48,000 square feet of residential space (75 rental units) for a total of 57,000 square feet on a
100% basis. FCR proportionately consolidates 50% of this property under IFRS.
(3) Target completion date reflects future phases.
(4) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Costs to Complete Active and Redevelopment Activities
Costs to complete the development, redevelopment and expansion activities underway are estimated to be $22.4 million.
Residential Inventory - active development
First Capital has four residential development projects representing approximately 428,000 square feet of incremental
density at FCR's ownership interest.
Highlights of First Capital’s active residential projects as at December 31, 2021 are as follows:
As at December 31, 2021
Count/Project
1.
2.
3.
4.
Rutherford Marketplace
Humbertown Condos (Phase 1)
400 King St. W.
138 Yorkville
Total Residential Inventory
City, Province
Vaughan, ON
Toronto, ON
Toronto, ON
Toronto, ON
Ownership
Interest %
Square Feet Under
Development
(in thousands)
Total Units
Target Completion
Date (1)
Value recognized
(in millions) (2)
50%
50%
35%
33%
50
209
612
65
936
64
122
151
91
428
H1 2022
H1 2025
H2 2025
H2 2026
$
161
(1) H1 and H2 refer to the first six months of the year and the last six months of the year, respectively.
(2) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
21
FIRST CAPITAL REIT ANNUAL REPORT 2021
Leasing and Occupancy
As at December 31, 2021, total portfolio occupancy increased 0.2% to 96.1%, while Same Property occupancy remained
flat at 96.1% compared to September 30, 2021 occupancy rates. Total portfolio occupancy decreased 0.1% to 96.1%,
primarily due to net closures versus openings, while Same Property occupancy remained flat at 96.1% compared to
December 31, 2020.
For the year ended December 31, 2021, the monthly average occupancy for the total portfolio was 95.9% compared to
96.2%, and the Same Property portfolio occupancy was 96.0% compared to 96.3% for the prior year, respectively.
Occupancy of First Capital's portfolio by property categorization was as follows:
As at
(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 (1)
Dispositions (2)
Density and Development land
Total (3)
Total
Occupied
Square Feet
16,808
1,368
18,176
376
77
205
18,834
19
—
33
18,886
% Occupied
December 31, 2021
Weighted
Average Rate
per Occupied
Square Foot
22.76
18.12
22.41
21.44
32.68
19.37
96.0% $
97.9%
96.1%
94.8%
89.7%
98.9%
96.1%
82.7%
—%
99.2%
96.1% $
22.40
51.72
—
15.90
22.42
Total
Occupied
Square Feet
16,817
1,331
18,148
305
—
223
18,676
3
497
49
19,225
% Occupied
December 31, 2020
Weighted
Average Rate
per Occupied
Square Foot
22.49
17.63
22.13
18.14
—
19.32
96.1% $
96%
96.1%
94.6%
—%
99%
96.1%
39.1%
97.8%
100.0%
96.2% $
22.03
40.28
17.04
15.95
21.89
(1) Includes current year and prior year acquisitions.
(2) Comparative information presented relates to 2021 dispositions that have been completed and no longer form part of these metrics as at December 31, 2021.
(3) At FCR's ownership interest.
FIRST CAPITAL REIT ANNUAL REPORT 2021
22
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
During the three months ended December 31, 2021, First Capital completed 452,000 square feet of lease renewals across
the portfolio. First Capital achieved an 9.2% lease renewal rate increase when comparing the per square foot net rental
rate in the first year of the renewal term to the per square foot net rental rate of the last year of the expiring term. For
the three months ended December 31, 2021, First Capital achieved a 11.1% lease renewal rate increase when comparing
the average net rental rate over the renewal term to the net rental rate in the last year of the expiring term.
The average rental rate per occupied square foot for the total portfolio increased 0.8% from $22.24 as at September 30,
2021 to $22.42 as at December 31, 2021 primarily due to dispositions, rent escalations and renewal lifts.
Changes in First Capital’s gross leasable area and occupancy for the total portfolio for the three months ended
December 31, 2021 are set out below:
Three months ended
December 31, 2021
Total Same Property
Major redevelopment, ground-up,
acquisitions, dispositions, density
& development land
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
September 30, 2021 (2)
18,158
96.1% $ 22.32
887
92.4% $ 20.60
7
—%
801
4.0%
19,853
95.9% $ 22.24
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments – tenants
coming online (3)
Redevelopments – tenant
possession
Demolitions
Reclassification
Total portfolio before Q4
2021 acquisitions
and dispositions
Acquisitions (at date of
acquisition)
Dispositions (at date of
disposition)
169
(159)
—
3
—
—
5
18.31
(18.74)
—
72.00
—
—
—
40
(6)
(26)
4
—
—
(3)
18.35
(5.74)
(21.60)
61.03
—
—
—
—
—
26
—
—
—
(33)
(209)
165
—
6
—
—
31
—
—
—
13
—
—
—
18.31
(18.26)
(21.60)
65.00
—
—
—
18,176
96.1% $ 22.41
896
93.9% $ 20.72
—
—%
794
4.0%
19,866
96.0% $ 22.33
—
—%
—
—%
—
—
—
—%
—
—
—%
—
—
—%
—
(186)
89.1%
(13.64)
—
—%
(23)
(209)
89.1%
(13.64)
December 31, 2021
18,176
96.1% $ 22.41
710
95.2% $ 22.58
—
—%
771
3.9%
19,657
96.1% $ 22.42
Renewals
Renewals – expired
442
(442)
Net change per square foot from renewals
% Increase on renewal of expiring rents
(first year of renewal term)
% increase on renewal of expiring rents
(average rate in renewal term)
10
(10)
$ 26.61
$ (24.37)
$ 2.24
9.2%
$ 26.00
$ (23.69)
$ 2.31
9.8%
452
(452)
$ 26.60
$ (24.36)
$ 2.24
9.2%
11.1%
(1) At FCR's ownership interest.
(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 – 2021 Development
and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
23
FIRST CAPITAL REIT ANNUAL REPORT 2021
During the year ended December 31, 2021, First Capital completed 2,081,000 square feet of lease renewals across the
portfolio. First Capital achieved an 8.6% lease renewal rate increase when comparing the per square foot net rental rate
in the first year of the renewal term to the per square foot net rental rate of the last year in the expiring term. For the
year ended December 31, 2021, First Capital achieved a 10.5% lease renewal rate increase when comparing the average
net rental rate over the renewal term to the net rental rate in the last year of the expiring term.
The average rental rate per occupied square foot for the total portfolio increased 2.4% from $21.89 as at December 31,
2020 to $22.42 as at December 31, 2021 primarily due to rent escalations, renewal lifts, and dispositions.
Changes in First Capital’s gross leasable area and occupancy for the total portfolio for the year ended December 31, 2021
are set out below:
Year ended December 31,
2021
Total Same Property
Major redevelopment, ground-up,
acquisitions, dispositions, density
& development land
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
December 31, 2020 (2)
18,148
96.1% $ 22.13
1,077
97.3% $ 17.83
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments – tenants
coming online (3)
Redevelopments – tenant
possession
Demolitions
Reclassification
Total portfolio before
2021 acquisitions
and dispositions
Acquisitions (at date of
acquisition)
Dispositions (at date of
disposition)
453
(417)
20.82
(22.89)
—
—
—
—
(8)
—
—
—
—
—
69
(69)
(75)
168
—
—
(1)
19.20
(14.99)
(19.36)
31.09
—
—
—
—
—
—
75
—
—
(4)
(71)
— %
766
3.8%
19,991
96.2% $ 21.89
(522)
486
—
26
—
—
67
—
—
—
20.60
(21.78)
(19.36)
194
31.74
—
(4)
(13)
—
—
—
18,176
96.1% $ 22.41
1,169
93.0% $ 20.04
—
—%
823
4.1%
20,168
95.9% $ 22.27
—
—%
—
—%
—
—
17
100.0%
51.70
—
—%
—
17
100.0% 51.70
(476)
90.2%
(17.38)
—
—%
(52)
(528)
90.2%
(17.38)
December 31, 2021
18,176
96.1% $ 22.41
710
95.2% $ 22.58
—
—%
771
3.9%
19,657
96.1% $ 22.42
Renewals
Renewals – expired
1,998
(1,998)
Net change per square foot from renewals
% Increase on renewal of expiring rents
(first year of renewal term)
% increase on renewal of expiring rents
(average rate in renewal term)
83
(83)
$ 21.19
$ (19.47)
$ 1.72
8.8%
% Increase in rate per square foot – openings
versus all closures
(9.1%)
$ 19.49
$ (19.11)
$ 0.38
2.0%
11.1%
2,081
(2,081)
$ 21.13
$ (19.46)
$ 1.67
8.6%
10.5%
(4.0%)
(1) At FCR's ownership interest.
(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 – 2021 Development
and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
FIRST CAPITAL REIT ANNUAL REPORT 2021
24
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Top Forty Tenants
As at December 31, 2021, 55.4% of First Capital's annualized minimum rent came from its top 40 tenants
(December 31, 2020 – 55.0%). Of these rents, 74.9% (December 31, 2020 – 76.6%) 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 First
Capital’s top 10 tenants was 5.7 years as at December 31, 2021, excluding contractual renewal options.
Canadian Tire
Tenant (1) (2)
Rank
Loblaw Companies Limited ("Loblaw")
1.
2.
Sobeys
3. Metro
4.
5. Walmart
6.
7.
8.
9.
10.
TD Canada Trust
Save-On-Foods
RBC Royal Bank
GoodLife Fitness
Dollarama
Top 10 Tenants Total
CIBC
11.
Lowe's
12.
13.
LCBO
14. Winners
15. McKesson
Longo's (3)
16.
Restaurant Brands International
17.
Scotiabank
18.
London Drugs
19.
BMO
20.
Nordstrom
21.
Recipe Unlimited
22.
Staples
23.
Starbucks
24.
25.
Petsmart
26. Michaels
27. Whole Foods Market
28.
29. McDonald's
Toys "R" Us
30.
Subway
31.
The Beer Store
32.
SAQ
33.
The Home Depot
34.
35.
Alcanna Inc.
36. Williams-Sonoma
37.
Equinox
38.
Pet Valu
39.
Goodwill
Indigo
40.
Top 40 Tenants Total
Pusateri's
Number
of Stores
93
50
35
21
12
43
9
39
24
47
Square Feet
(thousands)
1,936
1,389
879
670
1,163
196
324
202
466
420
Percent of Total
Gross Leasable
Area
10.2%
7.4%
4.7%
3.5%
6.2%
1.0%
1.7%
1.1%
2.5%
2.2%
Percent of Total
Annualized
Minimum Rent
10.4%
5.5%
3.2%
2.7%
2.4%
2.0%
1.8%
1.8%
1.7%
1.7%
DBRS Credit
Rating
BBB (high)
BBB (low)
BBB
BBB
AA
AA (high)
S&P Credit
Rating
BBB
BBB-
BBB
BBB
AA
AA-
AA (high)
AA-
Moody’s
Credit Rating
Aa2
Aa1
Aa2
BBB
BBB
Baa2
373
34
4
22
13
24
5
55
25
8
25
1
29
8
36
6
4
2
1
20
3
60
10
16
2
16
2
2
19
2
3
830
7,645
170
361
192
312
176
196
123
117
192
102
40
112
168
50
100
77
90
35
72
127
59
59
60
153
48
38
37
51
52
54
11,068
40.5%
0.9%
1.9%
1.0%
1.7%
0.9%
1.0%
0.7%
0.6%
1.0%
0.5%
0.2%
0.6%
0.9%
0.3%
0.5%
0.4%
0.5%
0.2%
0.4%
0.7%
0.3%
0.3%
0.3%
0.8%
0.3%
0.2%
0.2%
0.3%
0.3%
0.3%
58.7%
33.2%
1.4%
1.4%
1.3%
1.3%
1.3%
1.1%
1.1%
1.1%
1.0%
1.0%
0.8%
0.8%
0.7%
0.7%
0.7%
0.6%
0.6%
0.5%
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.3%
0.3%
0.3%
55.4%
AA
BBB (high)
AA (low)
AA
AA
BB
A+
BBB+
A+
A
BBB+
BB
A+
A+
BB+
B
BBB+
B
B
AA-
Aa2
Baa1
Aa3
A2
Baa2
Ba3
Aa2
Aa2
Ba1
B2
Baa1
B2
B1
A1
BBB+
Baa1
AA (low)
AA (low)
A
A+
AA-
A
Aa3
Aa2
A2
CCC
Caa3
(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.
(3) As of May 2021, Empire Company Ltd., the parent of Sobeys Inc., owns 51% of Longo's.
25
FIRST CAPITAL REIT ANNUAL REPORT 2021
Lease Maturity Profile
First Capital’s lease maturity profile for its portfolio as at December 31, 2021, excluding any contractual renewal options,
is as follows:
Maturity Date
Month-to-month tenants (1)
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Thereafter
Total or Weighted Average (2)
Number of
Stores
147
597
612
565
533
473
273
163
174
153
143
68
76
3,977
Occupied Square
Feet (thousands)
280
1,969
2,864
2,375
2,324
1,774
1,658
1,047
955
798
861
533
1,448
18,886
Percent of Total
Square Feet
1.4 %
10.0 %
14.6 %
12.1 %
11.8 %
9.0 %
8.4 %
5.3 %
4.9 %
4.1 %
4.4 %
2.7 %
7.4 %
96.1 %
$
Annualized
Minimum Rent at
Expiration
(thousands)
5,031
43,403
58,509
52,600
57,465
47,932
38,805
29,279
25,750
21,408
22,863
12,712
39,875
455,632
$
Percent of Total
Annualized
Minimum Rent
1.1 %
9.5 %
12.9 %
11.5 %
12.6 %
10.5 %
8.5 %
6.4 %
5.7 %
4.7 %
5.0 %
2.8 %
8.8 %
100.0 %
Average Annual
Minimum Rent
per Square Foot
at Expiration
17.94
22.05
20.43
22.14
24.73
27.01
23.41
27.97
26.98
26.82
26.55
23.85
27.53
24.12
$
$
(1) Includes tenants on over hold including renewals and extensions under negotiation, month-to-month tenants and tenants in space at properties with future redevelopment.
(2) At FCR's ownership interest, excluding M+M Realty LP ("MMUR").
The weighted average remaining lease term for the portfolio was 5.1 years as at December 31, 2021, excluding contractual
renewal options, but including month-to-month and other short-term leases.
Investment in Joint Ventures
As at December 31, 2021, First Capital had interests in nine joint ventures that it accounts for using the equity method. First
Capital's joint ventures are as follows:
Name of Entity
Aukland and Main Developments LP (1) Station Place
Name of Property/Business Activity
College Square General Partnership
College Square
Location
Toronto, ON
Ottawa, ON
Edenbridge Kingsway (Humbertown)
Humbertown Condos (Phase 1)
Toronto, ON
Fashion Media Group GP Ltd.
FC Access LP (2)
Toronto Fashion Week events
Toronto, ON
Whitby Mall (self storage operation) Whitby, ON
FC Urban Properties, LP
199 Avenue Road
Green Capital Limited Partnership
Royal Orchard
Lakeshore Development LP
2150 Lake Shore Blvd. W.
Toronto, ON
Markham, ON
Toronto, ON
Stackt Properties LP
Shipping Container marketplace
Toronto, ON
Effective Ownership
December 31, 2021
December 31, 2020
35.4%
50.0%
50.0%
78.0%
25.0%
20.0%
50.0%
50.0%
94.0%
70.9%
50.0%
50.0%
78.0%
25.0%
N/A
50.0%
N/A
94.0%
(1) As at December 31, 2020, Aukland and Main Developments LP was a consolidated subsidiary subject to a non-controlling interest of 29.1%, resulting in the Trust's effective
ownership of 70.9%. In the third quarter of 2021, the Trust's new partner in Station Place subscribed to 50% of the limited partnership units of Aukland and Main
Developments LP, reducing the Trust's effective ownership to 35.4%.
(2) During the third quarter of 2021, FC Access LP disposed of its self storage operations at Whitby Mall. The joint venture is in the process of being legally wound up.
First Capital has determined that these investments are joint ventures as all decisions regarding their activities are made
unanimously between First Capital and its partners.
FIRST CAPITAL REIT ANNUAL REPORT 2021
26
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
The following table reconciles the changes in First Capital's interests in its equity accounted joint ventures for the years
ended December 31, 2021 and 2020:
Balance at beginning of year
Contributions to equity accounted joint ventures
Distributions from equity accounted joint ventures
Reclassification to equity accounted joint ventures
Share of income (loss) from equity accounted joint ventures
Balance at end of year
December 31, 2021
$
$
52,570 $
17,110
(16,897)
298,165
(1,460)
349,488 $
December 31, 2020
59,498
3,889
(2,982)
—
(7,835)
52,570
On September 1, 2021, the Trust's new 50% partner in Station Place subscribed to 50% of the limited partnership units in
Aukland and Main Developments LP, the beneficial owner of the property, for $117.5 million.
On September 17, 2021, the Trust's new 50% partner in 2150 Lake Shore Boulevard West subscribed to 50% of the limited
partnership units in the newly formed Lakeshore Development LP for $156 million by way of $56 million in cash and $100
million in notes receivable. Concurrent with the subscription, the Trust's 50% interest in the Christie Cookie lands was
transferred into the new joint venture as well as the purchase of the former partner's 50% interest which was conveyed to
Lakeshore Development LP on closing.
On November 26, 2021, the Trust contributed 100% of the lands to the Edenbridge Kingsway (Humbertown) joint venture
which was previously classified as residential inventory for $24.7 million. The Trust’s joint venture partner contributed $12.3
million to the partnership, to pay for its portion of the land which was subsequently distributed to the Trust.
As of December 31, 2021, none of the Trust’s investments in joint ventures were determined to be impaired.
Loans, Mortgages and Other Assets
As at
Non-current
December 31, 2021
December 31, 2020
Loans and mortgages receivable classified as FVTPL (a)
$
1,486
$
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
122,321
5,801
129,608
6
116,152
25,976
142,134
1,968
37,612
12,580
52,160
6
73,548
3,715
77,269
$
271,742
$
129,429
(a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning
investment properties. As at December 31, 2021, these receivables bear interest at weighted average effective
interest rates of 5.4% (December 31, 2020 – 6.3%) and mature between 2022 and 2026. As of December 31, 2021,
none of the Trust's loans and mortgages receivable classified as amortized cost required a provision or were
determined to be impaired taking into account the COVID-19 environment.
(b) On September 17, 2021, the Trust's partner in 2150 Lake Shore Boulevard West subscribed to 50% of the units in the
newly formed Lakeshore Development LP for $156 million. The subscription price was satisfied through the payment
of $56 million in cash and $100 million in loans receivable. One half of the loan, or $50 million, is due on or before
December 31, 2022, and the remainder is due on or before September 17, 2026. The loan bears no interest until
December 31, 2022 and thereafter bears interest at the greater of prime plus 2.5% or 5%. At inception, a discount in
27
FIRST CAPITAL REIT ANNUAL REPORT 2021
the amount of $6.5 million was recognized and netted against the principal amount of the loan. This discount will be
accreted into interest income over the interest free period of the loan.
(c) From time to time, First Capital 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
First Capital’s net operating income for its portfolio is presented below:
Property rental revenue
Base rent (1)
Operating cost recoveries
Realty tax recoveries
Lease termination fees
Percentage rent
Straight-line rent adjustment
Prior year operating cost and tax recovery adjustments
Temporary tenants, storage, parking and other (2)
Total Property rental revenue
Property operating costs
Recoverable operating expenses
Recoverable realty tax expense
Prior year realty tax expense
Other operating costs and adjustments (3)
Total Property operating costs
NOI (4)
NOI margin
Three months ended December 31
Year ended December 31
% change
2021
2020
% change
2021
2020
$ 106,291
26,367
28,955
7
797
32
(594)
8,342
170,197
29,297
32,659
(513)
2,836
$ 107,882
24,765
29,779
895
1,239
529
(19)
4,988
170,058
27,474
33,567
19
3,352
0.1%
$ 426,146
100,865
118,842
1,541
2,528
2,082
(2,308)
25,194
674,890
111,951
134,899
(1,877)
17,379
$ 426,845
97,265
122,326
1,811
3,502
2,711
27
18,403
672,890
107,408
139,238
(284)
27,496
0.3%
64,279
64,412
262,352
273,858
0.3% $ 105,918
$ 105,646
3.4% $ 412,538
$ 399,032
62.2%
62.1%
61.1%
59.3%
(1)
(2)
(3)
Includes residential revenue.
Includes hotel property revenue.
Includes residential operating costs, hotel property operating costs and bad debt expense. For the three months and year ended December 31, 2021, bad debt expense
totaled $1.4 million and $8.5 million, respectively (three months and year ended December 31, 2020 - $2.6 million and $22.8 million, respectively).
(4) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
For the three months and year ended December 31, 2021, total NOI increased by $0.3 million and $13.5 million,
respectively, compared to the same prior year periods primarily due to higher variable revenues and lower bad debt
expense, partially offset by the impact of dispositions.
For the three months and year ended December 31, 2021, the NOI margin increased 0.1% and 1.8%, respectively,
compared to the same prior year periods due to lower bad debt expense, partially offset by lower lease termination fees.
For the three months and year ended December 31, 2021, property operating costs include $5.2 million and $20.8
million, respectively, (three months and year ended December 31, 2020 – $4.4 million and $16.4 million, respectively)
related to employee compensation. Employee compensation is presented net of subsidies received under the Canada
Emergency Wage Subsidy ("CEWS") program for the three months and year ended December 31, 2021 of Nil and $0.6
million, respectively, related to property operations personnel (three months and year ended December 31, 2020 - $0.5
million and $4.5 million, respectively). A portion of this wage subsidy will be passed on to tenants through lower
operating cost recoveries.
FIRST CAPITAL REIT ANNUAL REPORT 2021
28
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Same Property NOI Growth
First Capital’s net operating income for its portfolio by property category is presented below:
Property rental revenue
Base rent (1)
Operating cost recoveries
Realty tax recoveries
Lease termination fees
Percentage rent
Prior year operating cost and tax recovery adjustments
Temporary tenants, storage, parking and other (2)
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 (3)
Total Same Property operating costs
Total Same Property NOI (4)
Major redevelopment
Ground-up development
Acquisitions – 2021
Acquisitions – 2020
Investment properties classified as held for sale
Dispositions – 2021
Dispositions – 2020
Straight-line rent adjustment
Development land
NOI (4)
NOI margin
Three months ended December 31
Year ended December 31
% change
2021
2020
% change
2021
2020
$ 101,238
$ 100,530
25,646
23,506
28,050
28,148
7
734
(608)
43
814
(5)
7,873
4,645
162,940
157,681
28,227
25,828
31,104
30,878
(15)
3,130
51
3,582
62,446
60,339
$ 403,180
$ 395,431
97,110
91,794
114,101
115,019
1,493
2,386
(2,249)
956
2,974
457
22,001
16,902
638,022
623,533
106,657
100,560
125,933
127,678
(1,185)
(216)
15,487
25,599
246,892
253,621
3.2% $ 100,494
$ 97,342
5.7% $ 391,130
$ 369,912
1,928
1,748
110
(38)
964
457
28
32
195
2,101
679
—
(104)
1,086
2,202
869
529
942
5,399
3,149
170
165
4,021
5,800
29
2,082
593
5,611
1,684
—
(128)
4,036
7,680
5,925
2,711
1,601
0.3% $ 105,918
$ 105,646
3.4% $ 412,538
$ 399,032
62.2%
62.1%
61.1%
59.3%
(1)
(2)
(3)
Includes residential revenue.
Includes hotel property revenue.
Includes residential operating costs, hotel property operating costs and bad debt expense.
(4) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The components of SP NOI growth and comparisons to the same prior year period are as follows:
Same Property – Stable
Same Property with redevelopment (2)
Total Same Property NOI Growth (3)
Three months ended December 31
2020 (1)
(4.1%)
(6.0%)
(4.3%)
2021
1.9%
24.6%
3.2%
Year ended December 31
2020 (1)
2021
(5.8%)
5.1%
(18.0%)
15.4%
(7.1%)
5.7%
(1) Prior periods as reported; not restated to reflect current period property categories.
(2) Same property with redevelopment includes the Trust's hotel property which experienced a decline in NOI due to the impact of COVID-19 in 2020.
(3) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
29
FIRST CAPITAL REIT ANNUAL REPORT 2021
For the three months and year ended December 31, 2021, SP NOI increased by $3.2 million and $21.2 million, or 3.2%
and 5.7%, respectively, primarily due to higher variable revenues, rent escalations and lower bad debt expense over the
same prior year periods. Excluding bad debt expense and lease termination fees, SP NOI increased 2.2% and 2.0% for the
three months and year ended December 31, 2021, respectively.
Interest and Other Income
Interest, dividend and distribution income from
marketable securities and other investments
Interest income from loans and mortgages receivable
classified as FVTPL
Interest income from loans and mortgages receivable at
amortized cost
Fees and other income
Total
Three months ended December 31
Year ended December 31
2021
109
26
2,564
1,234
3,933
$
$
2020
292
116
1,677
1,207
3,292
$
$
$
$
2021
499
100
5,809
4,472
$
10,880
$
2020
1,082
922
6,791
3,453
12,248
For the three months ended December 31, 2021, interest and other income increased $0.6 million over the same prior
year period primarily due to higher interest income as a result of increased loans receivable activity quarter-over-quarter.
For the year ended December 31, 2021, interest and other income decreased $1.4 million over the prior year primarily
due to the repayment of loans & mortgages receivables bearing higher interest rates over the past year.
Interest Expense
First Capital’s interest expense by type is as follows:
Mortgages
Credit facilities
Senior unsecured debentures
Distributions on Exchangeable Units (1)
Interest capitalized
Three months ended December 31
Year ended December 31
2021
2020
$
11,658
$
13,381
$
6,250
23,851
12
(4,168)
6,667
25,816
22
(6,035)
$
2021
49,912
26,260
95,961
45
(19,508)
2020
52,142
28,796
100,854
650
(24,731)
Interest expense
$
37,603
$
39,851
$
152,670
$
157,711
(1) The distributions declared on the Exchangeable Units are accounted for as interest expense.
For the three months and year ended December 31, 2021, interest expense decreased by $2.2 million and $5.0 million,
respectively, primarily due to the repayment of mortgages as well as the Series N unsecured debentures on March 1,
2021, and lower capitalized interest.
During the years ended December 31, 2021 and 2020, approximately 11.3% or $19.5 million, and 13.6% or $24.7 million,
respectively, of interest expense was capitalized to real estate investments for properties undergoing development or
redevelopment projects. The decrease in capitalized interest is primarily due to the completion, or near completion, of
major development projects such as King High Line, Station Place and Wilderton.
FIRST CAPITAL REIT ANNUAL REPORT 2021
30
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Corporate Expenses
First Capital's corporate expenses are as follows:
Salaries, wages and benefits
Unit-based compensation
Other corporate costs
Total corporate expenses
Amounts capitalized to investment properties under
development
Corporate expenses
Three months ended December 31
Year ended December 31
$
$
2021
6,001
1,788
2,510
10,299
(1,539)
2020
5,086
2,535
2,196
9,817
(1,764)
2021
$
27,675
$
7,155
10,611
45,441
(7,234)
2020
22,985
7,673
10,277
40,935
(7,697)
$
8,760
$
8,053
$
38,207
$
33,238
For the three months and year ended December 31, 2021, gross corporate expenses, before capitalization, increased
by $0.5 million and $4.5 million, respectively. The increase was primarily due to higher compensation expense as a
result of lower wage subsidies received over the prior year periods for the three months and year ended December 31,
2021 of $0.5 million and $3.5 million, respectively.
First Capital 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, 2021 and 2020, approximately $7.2 million and $7.7 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.
Changes in capitalized corporate expenses are primarily the result of timing of completion of development and
redevelopment projects and First Capital’s current level of pre-development and early redevelopment activity.
Other Gains (Losses) and (Expenses)
First Capital's other gains, losses and expenses are as follows:
Three months ended December 31
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt
Gain on below market purchase (1)
Hotel transaction costs (2)
Pre-selling costs of residential inventory
Investment properties selling costs
Other
2021
2020
Consolidated
Statements of
Income (Loss)
Included in
FFO
Consolidated
Statements of
Income (Loss)
Included in
FFO
$
(2,276) $
(2,276) $
580 $
580
(1,139)
(1,139)
—
—
—
(27)
(3,093)
(5)
—
—
(27)
—
(5)
7,385
(1,121)
—
(611)
36
—
—
—
—
—
36
616
—
(210)
406
Total per consolidated statements of income (loss)
$
(6,540) $
(3,447) $
6,269 $
Other gains (losses) and (expenses) applicable to NCI
Other gains (losses) and (expenses) under equity accounted joint ventures (3)
Total at First Capital's proportionate interest (4)
8
8
(164)
(164)
—
(213)
$
(6,696) $
(3,603) $
6,056 $
(1) Adjustment to exclude gain on below market purchase of hotel property in accordance with the recommendations of REALPAC.
(2) Adjustment to transaction costs incurred as part of hotel property acquisition in accordance with the recommendations of REALPAC.
(3) Other gains (losses) and (expenses) under equity accounted joint ventures, included in FFO, is comprised of pre-selling costs of residential inventory of $0.2 million
(December 31, 2020 - $0.2 million).
(4) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
31
FIRST CAPITAL REIT ANNUAL REPORT 2021
Year ended December 31
2021
2020
Consolidated
Statements of
Income (Loss)
Included in
FFO
Consolidated
Statements of
Income (Loss)
Included in
FFO
Unrealized gain (loss) on marketable securities
$
14,786 $
14,786 $
(234) $
Net gain (loss) on prepayments of debt
Gain on below market purchase (1)
Hotel transaction costs (2)
Pre-selling costs of residential inventory
Investment properties selling costs
REIT conversion costs
Gain on Option
Other
(1,139)
(1,139)
—
—
—
—
(282)
7,385
(1,121)
(238)
(238)
(142)
(7,133)
—
80,822
—
—
—
(9)
(9)
(3,915)
(906)
—
73
(234)
(282)
—
—
(142)
—
(906)
—
73
Total per consolidated statements of income (loss)
$
87,089 $
13,400 $
858 $
(1,491)
Other gains (losses) and (expenses) applicable to NCI
Other gains (losses) and (expenses) under equity accounted joint ventures (3)
Total at First Capital's proportionate interest (4)
69
145
69
148
—
—
(1,825)
(1,884)
$
87,303 $
13,617 $
(967) $
(3,375)
(1) Adjustment to exclude gain on below market purchase of hotel property in accordance with the recommendations of REALPAC.
(2) Adjustment to transaction costs incurred as part of hotel property acquisition in accordance with the recommendations of REALPAC.
(3) Other gains (losses) and (expenses) under equity accounted joint ventures, included in FFO, is comprised of a gain on investment of $0.7 million, partially offset by pre-
selling costs of residential inventory of $0.6 million (December 31, 2020 - $1.9 million).
(4) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
For the three months ended December 31, 2021, First Capital recognized $6.5 million in other losses in its consolidated
statement of income (loss) compared to $6.3 million in other gains for the same prior year period. The $12.8 million
decrease is primarily due to a $7.4 million gain on below market purchase, partially offset by $1.1 million of transaction
costs related to the 40% acquisition of the Hazelton Hotel in the fourth quarter of 2020. Additionally, FCR recognized higher
unrealized losses on marketable securities, higher investment property selling costs, and a $1.1 million non-recurring loss
due to the early repayment of mortgages in the fourth quarter of 2021.
For the year ended December 31, 2021, FCR recognized $87.1 million in other gains in its consolidated statement of income
(loss) compared to $0.9 million in the prior year. The $86.2 million increase is primarily due to an $80.8 million gain on
option and higher unrealized gains on marketable securities. The unrealized gain on marketable securities primarily relates
to a $13.8 million mark-to-market on shares of a construction management company which completed an initial public
offering in May 2021.
In the third quarter of 2021, the Trust exercised its option to buy its former partner's 50% interest in 2150 Lake Shore
Boulevard West for $55.5 million. Concurrent with closing, the Trust entered into a new partnership and conveyed 50% of
the property to a new partner for $156 million. The gain on the option of $100.5 million was reduced by the derecognition
of $13.2 million in previously capitalized option costs and the discount recognized on the loans receivable of $6.5 million.
Income Taxes
For the three months and year ended December 31, 2021, deferred income tax expense (recovery) totaled $48.9
million and $25.9 million, respectively, compared to $32.7 million and $23.9 million, respectively, over the same prior
year periods. The increase of $16.3 million and $2.0 million, respectively, in deferred income tax expense was primarily
due to the increase in taxable income as a result of dispositions applicable to the Trust's corporate subsidiaries.
FIRST CAPITAL REIT ANNUAL REPORT 2021
32
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Net Income (Loss) Attributable to Unitholders
For the three months ended December 31, 2021, net income attributable to Unitholders was $28.6 million or $0.13 per
diluted unit compared to $37.3 million or $0.17 per diluted unit for the prior year. The $8.6 million decrease was primarily
due to an increase in deferred income tax expense of $16.3 million and higher other losses and expenses of $12.8 million,
partially offset by an increase in the fair value of investment property of $18.6 million.
For the year ended December 31, 2021, net income attributable to Unitholders was $460.1 million or $2.08 per diluted unit
compared to $2.7 million or $0.01 per diluted unit for the prior year. The $457.4 million increase was primarily due to an
increase in the fair value of investment property of $384.3 million, and an $80.8 million gain related to the exercise of a
previously secured option to purchase it's partner's 50% interest in 2150 Lake Shore Boulevard West.
CAPITAL STRUCTURE AND LIQUIDITY
Total Capital Employed
The real estate business is capital intensive by nature. First Capital’s capital structure is key to financing growth and
providing sustainable cash distributions to Unitholders. 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 FCR's capital
structure provides stability and reduces risk, while generating an acceptable return on investment, taking into account
the long-term business strategy of First Capital.
As at
Liabilities (principal amounts outstanding)
Bank indebtedness
Mortgages (1)
Credit facilities (1)
Senior unsecured debentures
Total Debt (1)
Cash and cash equivalents (1)
Net Debt (1) (2)
Exchangeable Units
Equity market capitalization (3)
Enterprise value (1)
Trust Units outstanding (000's)
Closing market price
December 31, 2021
December 31, 2020
$
2,476
$
238
1,216,872
893,958
2,350,000
1,390,466
881,414
2,525,000
$
4,463,306
$
4,797,118
(37,512)
(112,664)
$
4,425,794
$
4,684,454
1,947
1,399
4,140,551
2,971,723
$
8,568,292
$
7,657,576
219,541
219,315
$
18.86
$
13.55
(1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(2) Net Debt is a non-IFRS measure that is calculated as the sum of total debt including 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 on a proportionate basis.
(3) Equity market capitalization is the market value of FCR's units outstanding at a point in time. The measure 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.
Equity market capitalization increased from $3.0 billion at December 31, 2020 to $4.1 billion at December 31, 2021 due to
an increase in the Trust's unit price year-over-year.
33
FIRST CAPITAL REIT ANNUAL REPORT 2021
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure that 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, fair value
gains or losses on Exchangeable Units, fair value gains or losses on unit-based compensation and other non-cash or non-
recurring items on a proportionate basis. First Capital also adjusts for incremental leasing costs, which is a recognized
adjustment to FFO, in accordance with the recommendations of REALPAC.
The following table reconciles First Capital's net income (loss) to Adjusted EBITDA for the three months and years ended
December 31, 2021 and 2020:
Net income (loss) attributable to Unitholders
Add (deduct) (1):
Deferred income tax expense (recovery)
Interest Expense
Amortization expense
(Increase) decrease in value of investment properties
(Increase) decrease in value of hotel property
Increase (decrease) in value of Exchangeable Units
Increase (decrease) in value of unit-based compensation
Incremental leasing costs
Abandoned transaction costs
Other non-cash and/or non-recurring items
Adjusted EBITDA (1)
Three months ended December 31
Year ended December 31
2021
$
28,629
$
47,773
37,941
1,850
(25,833)
2,161
140
2,528
1,448
146
6,696
0
2020
2
37,268
32,650
40,185
2,277
(7,930)
5,082
30
(1,735)
1,611
—
(6,056)
2021
$
460,131
$
2020
2,702
24,782
154,013
8,473
(181,490)
1,122
548
9,286
5,859
248
(87,303)
23,921
159,059
8,303
195,823
9,432
(7,404)
(11,459)
6,571
90
967
$
103,479
$
103,382
$
395,669
$
388,005
(1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Key Metrics
The ratios below include measures not specifically defined in IFRS.
As at
Weighted average effective interest rate on mortgages, fixed rate unsecured term loans and
senior unsecured debentures
Weighted average maturity on mortgages, fixed rate unsecured term loans 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)
December 31, 2021
December 31, 2020
3.8%
4.0
43.9%
11.2
3.8%
4.6
47.3%
12.0
$ 7,394,398
$ 7,003,026
2.3
2.3
2.1
2.1
(1) Calculated with joint ventures proportionately consolidated in accordance with FCR's debt covenants. Total assets excludes cash balances. Refer to the "Non-IFRS Financial
Measures" section of this MD&A.
The Net debt to Adjusted EBITDA ratio decreased by 0.8 to 11.2, as of December 31, 2021, primarily due to a $258.7 million
decrease in net debt following the repayment of senior unsecured debentures and mortgages from the proceeds of asset
sales.
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;
• Net debt is calculated as Debt, as defined above, reduced by cash balances at the end of the period;
FIRST CAPITAL REIT ANNUAL REPORT 2021
34
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
• Adjusted EBITDA, is calculated as net income, adding back income tax expense; interest expense; and amortization and
excluding the increase or decrease in the value of investment properties, hotel property, Exchangeable units and unit-
based compensation; other gains (losses) and (expenses); and other non-cash or non-recurring items on a
proportionate basis. The Trust also adjusts for incremental leasing costs, which is a recognized adjustment to Funds
from Operations, in accordance with the recommendations of the 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 bank term loans, unsecured credit
facilities and senior unsecured debentures.
Credit Ratings
From November 2012 to March 2019, DBRS and Moody's rated FCR's unsecured debentures as BBB (high) and Baa2,
respectively. On April 16, 2019, FCR completed the share repurchase of 36,000,000 common shares from Gazit for gross
proceeds of $741.6 million. The repurchase was funded with senior unsecured bank term loans. As a result of the debt-
financed share repurchase transaction, both DBRS and Moody's downgraded the ratings of FCR's unsecured debentures
by one notch to BBB (DBRS) and Baa3 with a stable outlook (Moody's).
On November 6, 2019, S&P began rating FCR's senior unsecured debentures and assigned a public rating of BBB- with a
stable outlook, following which, FCR discontinued its Moody's rating services. On June 4, 2021, S&P affirmed FCR's Issuer
Rating and issue level debt rating at BBB-, but revised the outlook to negative from stable.
On June 23, 2021, DBRS confirmed FCR's Issuer Rating and Senior Unsecured Debentures rating at BBB 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.
As defined by S&P, a credit rating in the BBB category denotes that these debentures exhibit adequate protection
parameters and an acceptable capacity to meet its financial commitments. S&P indicates that BBB rated obligations are
more likely to weaken an obligor's capacity to meet its financial commitments if adverse economic conditions or changing
circumstances were to take place. A rating outlook provided by S&P, expressed as positive, stable, negative or developing,
is an opinion regarding the potential direction of a credit rating over the intermediate term (typically six months to two
years).
35
FIRST CAPITAL REIT ANNUAL REPORT 2021
Outstanding Debt and Principal Maturity Profile
The maturity profile including scheduled amortization of First Capital’s mortgages and credit facilities as well as its senior
unsecured debentures as at December 31, 2021 is summarized in the table below:
As at December 31, 2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
Mortgages (1)
Credit
Facilities/Bank
Indebtedness (2)
Senior
Unsecured
Debentures
Total
$
44,285 $
77,461 $
450,000
$
571,746
32,597
140,422
85,536
120,246
103,942
166,973
251,257
176,480
55,326
—
205,257
269,535
75,000
275,000
—
—
—
—
—
—
300,000
300,000
300,000
300,000
500,000
200,000
—
—
—
—
537,854
709,957
460,536
695,246
603,942
366,973
251,257
176,480
55,326
—
% Due
12.8%
12.2%
15.9%
10.4%
15.7%
13.7%
8.3%
5.7%
4.0%
1.3%
—%
$
1,177,064 $
902,253 $
2,350,000
$
4,429,317
100.0%
Add (deduct): unamortized deferred financing
costs, premiums and discounts, net
(3,889)
—
(1,855)
(5,744)
Total
$
1,173,175 $
902,253 $
2,348,145
$
4,423,573
(1) Principal amount outstanding for mortgages on a proportionate basis is $1,216,872.
(2) Principal amount outstanding for credit facilities and bank indebtedness on a proportionate basis is $893,958 and $2,476, respectively.
First Capital’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. First Capital also intends to maintain financial flexibility to support a
reasonable cost of debt and equity capital over the long term.
FIRST CAPITAL REIT ANNUAL REPORT 2021
36
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Mortgages
The changes in First Capital’s mortgages during the year ended December 31, 2021 are set out below:
Year ended December 31, 2021
Balance at beginning of year
Mortgage repayments
Scheduled amortization on mortgages
Amortization of financing costs and net premium
Balance at end of year
Amount
Weighted Average
Effective Interest Rate
$
1,346,637
(146,112)
(28,115)
765
$
1,173,175
3.6%
4.4%
—%
—%
3.5%
As at December 31, 2021, 100% (December 31, 2020 – 100%) of the outstanding mortgages bore interest at fixed interest
rates. The average remaining term of mortgages outstanding decreased from 6.0 years as at December 31, 2020 on $1.3
billion of mortgages to 5.8 years as at December 31, 2021 on $1.2 billion of mortgages after reflecting borrowing activity
and repayments during the period.
Mortgage Maturity Profile
The maturity profile including scheduled amortization of First Capital’s mortgages as at December 31, 2021 is summarized
in the table below:
As at December 31, 2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Scheduled
Amortization
Payments on
Maturity
Total
$
30,947
$
13,338
$
44,285
32,597
31,944
29,641
25,886
24,078
21,250
14,377
7,105
371
—
108,478
55,895
94,360
79,864
145,723
236,880
169,375
54,955
32,597
140,422
85,536
120,246
103,942
166,973
251,257
176,480
55,326
$
218,196
$ 958,868
$ 1,177,064
Weighted
Average
Effective
Interest Rate
3.7 %
N/A
3.8 %
3.4 %
3.2 %
3.6 %
3.8 %
3.5 %
3.3 %
3.5 %
3.5 %
Add: unamortized deferred financing costs and premiums and
discounts, net
Total
(3,889)
$ 1,173,175
37
FIRST CAPITAL REIT ANNUAL REPORT 2021
2022
Floating rate unsecured term
loan maturing 2023 (2)
Fixed rate unsecured term
loans maturing 2024 - 2026
Secured construction facilities
Maturing 2022
Maturing 2022
Secured Facilities
Maturing 2022
Maturing 2022
Maturing 2022
Credit Facilities
First Capital’s credit facilities as at December 31, 2021 are summarized in the table below:
As at December 31, 2021
Unsecured operating facilities
Revolving facility maturing
2026
Revolving facility maturing
2024 (1)
Borrowing
Capacity
Amounts
Drawn
Bank
Indebtedness and
Outstanding
Letters of Credit
Available to be
Drawn
$
450,000 $
— $
(8,593) $ 441,407
100,000
(69,535)
—
30,465
Revolving facility maturing
250,000
—
—
250,000
200,000
(205,257)
550,000
(550,000)
20,000
(19,984)
33,333
(33,333)
—
—
—
—
—
—
16
—
Interest Rates
Maturity Date
BA + 1.45% or
Prime + 0.45% or
US$ LIBOR + 1.45%
BA + 1.10% or
Prime + 0.25% or
US$ LIBOR + 1.10%
BA + 1.10% or
Prime + 0.25% or
US$ LIBOR + 1.10%
June 30, 2026
August 31, 2024
September 29, 2022
BA + 1.20%
April 15, 2023
3.29%
March 28, 2024
- April 15, 2026
BA + 2.50% or
Prime + 1.00%
2.79%
January 20, 2022
February 25, 2022
14,234
(10,600)
(1,320)
2,314
4,313
(4,313)
6,755
(6,755)
—
—
—
—
BA + 1.20% or
Prime + 0.20%
BA + 1.20% or
Prime + 0.20%
BA + 1.20% or
Prime + 0.20%
May 31, 2022
September 28, 2022
December 19, 2022
Total
$ 1,628,635 $
(899,777) $
(9,913) $ 724,202
(1) The Trust had drawn in U.S. dollars the equivalent of CAD$70.0 million which was revalued at CAD$69.5 million as at December 31, 2021.
(2) The Trust had drawn in U.S. dollars the equivalent of CAD$200.0 million which was revalued at CAD$205.3 million as at December 31, 2021.
First Capital 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. Concurrently with the U.S. dollar draws, the Trust enters into cross
currency swaps to exchange its U.S. dollar borrowings into Canadian dollar borrowings.
On September 1, 2021, First Capital extended and amended its $450.0 million unsecured revolving credit facilities while
also transitioning them into "Sustainability-Linked Credit facilities ("SLCs"). This demonstrates the continued integration
of sustainability priorities into FCR's strategic direction and its commitment to environmental, social and governance
("ESG") leadership in real estate operations, development and finance.
FIRST CAPITAL REIT ANNUAL REPORT 2021
38
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Senior Unsecured Debentures
As at December 31, 2021
Interest Rate
Remaining
Term to
Maturity
Principal
Outstanding
Series Maturity Date
Interest Payment Dates
Coupon
Effective
(years)
O
P
Q
R
S
T
U
V
A
January 31, 2022
December 5, 2022
October 30, 2023
August 30, 2024
July 31, 2025
May 6, 2026
July 12, 2027
January 22, 2027
March 1, 2028
Weighted Average or Total
January 31, July 31
June 5, December 5
April 30, October 30
February 28, August 30
January 31, July 31
May 6, November 6
January 12, July 12
January 22, July 22
March 1, September 1
4.43%
3.95%
3.90%
4.79%
4.32%
3.60%
3.75%
3.46%
3.45%
3.99%
4.59%
4.18%
3.97%
4.72%
4.24%
3.56%
3.82%
3.54%
3.54%
4.03%
0.1
0.9
1.8
2.7
3.6
4.4
5.5
5.1
6.2
3.4
$
200,000
250,000
300,000
300,000
300,000
300,000
300,000
200,000
200,000
$ 2,350,000
On March 1, 2021, upon maturity, First Capital repaid its 4.50% Series N Senior Unsecured Debentures in the amount of
$175.0 million.
Unitholders' Equity
Unitholders’ equity amounted to $4.6 billion as at December 31, 2021, compared to Unitholders' equity of $4.2 billion as at
December 31, 2020. The increase is primarily attributed to higher net income and other comprehensive income for the year
ended December 31, 2021.
As at February 7, 2022, there were 219.5 million Trust Units and 0.1 million Exchangeable Units outstanding.
Unit Options
As at December 31, 2021, First Capital had 6.3 million unit options outstanding, with an average exercise price of $19.75,
which, if exercised, would result in First Capital receiving proceeds of $125.2 million.
Liquidity
Liquidity risk exists due to the possibility of First Capital 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. First Capital 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 First Capital’s existing revolving credit facilities. If necessary, FCR is also able to obtain financing on its
unencumbered assets. The following table summarizes First Capital's liquidity position:
As at (millions of dollars)
Total available under credit facilities
Cash and cash equivalents
Unencumbered aggregate assets
December 31, 2021
December 31, 2020
$
$
$
724
35
7,394
$
$
$
823
100
7,003
39
FIRST CAPITAL REIT ANNUAL REPORT 2021
First Capital 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, 2021, and availability on existing credit facilities, address
substantially all of the contractual 2022 debt maturities and contractually committed costs to complete current
development projects.
Cash Flows
Cash flow from operating activities represents First Capital's primary source of liquidity for servicing debt and funding
planned revenue sustaining expenditures, corporate expenses and distributions to Unitholders. Interest and other income
and cash on hand are other sources of liquidity.
Three months ended December 31
Year ended December 31
2021
2020
2021
2020
Cash provided by (used in) operating activities
$
83,575
$
92,737
$
249,613
$
219,505
Cash provided by (used in) financing activities
Cash provided by (used in) investing activities
(161,267)
67,600
Net change in cash and cash equivalents
$
(10,092)
$
(60,620)
45,895
78,012
(470,245)
154,887
$
(65,745)
$
(154,790)
10,226
74,941
The following table presents the excess (shortfall) of cash provided by operating activities over distributions declared:
Cash provided by operating activities
Distributions declared
Excess (shortfall) of cash provided by operating activities
over distributions declared
Three months ended December 31
Year ended December 31
2021
2020
2021
2020
83,575
$
92,737
$
249,613
$
219,505
(23,710)
(47,152)
(94,804)
(188,027)
59,865
$
45,585
$
154,809
$
31,478
$
$
Cash provided by operating activities exceeded distributions declared for the three months and years ended December 31,
2021 and 2020.
FIRST CAPITAL REIT ANNUAL REPORT 2021
40
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Contractual Obligations
An analysis of First Capital’s contractual maturities of its material financial liabilities and other contractual commitments,
as at December 31, 2021 is set out below:
As at December 31, 2021
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
Other committed costs
Total contractual obligations
$
2022
30,947 $
13,338
77,461
450,000
147,647
1,208
9,337
39,365
Payments due by period
2023 to 2024
2025 to 2026
Thereafter
64,541 $
55,527 $
67,181 $
108,478
474,792
600,000
240,576
1,486
—
—
150,255
350,000
600,000
144,296
1,245
—
—
686,797
—
700,000
73,943
15,512
—
—
Total
218,196
958,868
902,253
2,350,000
606,462
19,451
9,337
39,365
$
769,303 $ 1,489,873 $ 1,301,323 $ 1,543,433 $ 5,103,932
(1)
Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2021 (assuming balances remain outstanding through to
maturity) and senior unsecured debentures, as well as standby credit facility fees.
First Capital had $29.7 million of outstanding letters of credit issued by financial institutions to support certain of FCR’s
contractual obligations and $2.5 million of bank overdrafts.
First Capital’s estimated cost to complete properties currently under development is $22.4 million, of which $9.3 million
($9.2 million at First Capital's interest) 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
(a) First Capital 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 FCR.
(b) First Capital is contingently liable, jointly and severally or as guarantor, for approximately $73.2 million
(December 31, 2020 – $70.5 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) First Capital is contingently liable by way of letters of credit in the amount of $29.7 million (December 31, 2020 –
$49.2 million), issued by financial institutions on FCR's behalf in the ordinary course of business.
(d) First Capital has obligations as lessee under long-term leases for land. Annual commitments under these ground
leases are approximately $1.2 million (December 31, 2020 – $1.2 million) with a total obligation of $19.5 million
(December 31, 2020 – $20.7 million).
41
FIRST CAPITAL REIT ANNUAL REPORT 2021
NON-IFRS RECONCILIATIONS AND FINANCIAL MEASURES
Reconciliation of Consolidated Balance Sheets to First Capital's Proportionate Interest
The following table provides a reconciliation of First Capital’s consolidated balance sheets, as presented in its audited
annual consolidated financial statements, to its proportionate interest.
As at
ASSETS
December 31, 2021
December 31, 2020
Consolidated
Balance
Sheet (1)
Adjustments for
Proportionate
Interest
Proportionate
Interest (2)
Consolidated
Balance
Sheet (1)
Adjustments for
Proportionate
Interest
Proportionate
Interest (2)
Investment properties
$
8,975,539
$ 319,015
$ 9,294,554 $
9,328,792
$
Residential development inventory
Hotel property
Loans, mortgages and other assets
Cash and cash equivalents
Amounts receivable
Other assets
Investment in joint ventures
Investment properties classified as held for
sale
Total assets
LIABILITIES
Mortgages
Credit facilities
Bank indebtedness
Senior unsecured debentures
Exchangeable Units
Deferred tax liabilities
Accounts payable and other liabilities
Total liabilities
EQUITY
Unitholders' equity
Non-controlling interest
Total equity
156,039
85,400
271,742
34,699
27,784
57,083
349,488
151,300
$ 10,109,074
$
5,056
—
108
2,813
665
21,858
(349,488)
—
27
161,095
85,400
271,850
37,512
28,449
78,941
—
74,190
88,000
129,429
100,444
46,296
50,893
52,570
8,696
5,779
—
2,050
12,220
644
11,086
(52,570)
$ 9,337,488
79,969
88,000
131,479
112,664
46,940
61,979
—
151,300
161,849
—
161,849
$ 10,109,101 $ 10,032,463
$
(12,095)
$ 10,020,368
$
1,173,175
$
39,731
$ 1,212,906 $
1,346,637
$
39,082
$ 1,385,719
915,928
(34,514)
881,414
899,777
2,476
2,348,145
1,947
740,309
274,163
5,439,992
(5,819)
—
—
—
(1,147)
15,402
48,167
893,958
2,476
238
2,348,145
2,522,135
1,947
739,162
289,565
1,399
698,528
291,171
5,488,159
5,776,036
—
—
—
—
12,600
17,168
238
2,522,135
1,399
698,528
303,771
5,793,204
4,620,942
—
4,620,942
4,227,164
—
4,227,164
48,140
(48,140)
—
29,263
(29,263)
—
4,669,082
(48,140)
4,620,942
4,256,427
(29,263)
4,227,164
Total liabilities and equity
$ 10,109,074
$
27
$ 10,109,101 $ 10,032,463
$
(12,095)
$ 10,020,368
(1) The consolidated balance sheets have been presented on a non-classified basis for purposes of this reconciliation.
(2) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
FIRST CAPITAL REIT ANNUAL REPORT 2021
42
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Reconciliation of Consolidated Statements of Income (Loss) to First Capital’s Proportionate Interest
The following table provides a reconciliation of First Capital's consolidated statements of income (loss) for the three
months ended December 31, 2021 and 2020, to its proportionate interest.
Three months ended December 31
2021
2020
Consolidated
Statements of
Income (Loss)
$
170,197 $
64,279
105,918
Adjustment to
proportionate
interest
2,639 $
1,986
653
Proportionate
interest (1)
172,836 $
66,265
106,571
Consolidated
Statements of
Income (Loss)
170,058 $
64,412
105,646
Adjustment to
proportionate
interest
2,049 $
1,472
577
Proportionate
interest (1)
172,107
65,884
106,223
3,933
(37,603)
(8,760)
(146)
(1,453)
(813)
(6,540)
(2,528)
(140)
(2,161)
262
(338)
25
—
(397)
813
(156)
—
—
—
4,195
(37,941)
(8,735)
(146)
(1,850)
—
(6,696)
3,292
(39,851)
(8,053)
—
(1,608)
(147)
6,269
(2,528)
1,735
304
(334)
5
—
(669)
147
(213)
—
3,596
(40,185)
(8,048)
—
(2,277)
—
6,056
1,735
(140)
(30)
—
(30)
(2,161)
(5,082)
—
(5,082)
25,996
(163)
25,833
7,446
484
7,930
(30,215)
75,703
48,920
46
699
(1,147)
(30,169)
76,402
47,773
(36,029)
69,617
32,653
(276)
301
(3)
(36,305)
69,918
32,650
26,783 $
1,846 $
28,629 $
36,964 $
304 $
37,268
28,629 $
(1,846)
26,783 $
— $
1,846
1,846 $
28,629 $
—
28,629 $
37,268 $
(304)
36,964 $
— $
304
304 $
37,268
—
37,268
0.13
0.13
$
$
0.17
0.17
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 unit-based
compensation
(Increase) decrease in value of
Exchangeable Units
Increase (decrease) in value of hotel
property
Increase (decrease) in value of investment
properties, net
Income (loss) before income taxes
Deferred income tax expense (recovery)
Net income (loss)
Net income (loss) attributable to:
Unitholders
Non-controlling interest
Net income (loss) per unit attributable to
Unitholders:
Basic
Diluted
$
$
$
$
$
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
43
FIRST CAPITAL REIT ANNUAL REPORT 2021
The following table provides a reconciliation of First Capital's consolidated statements of income (loss) for the years
ended December 31, 2021 and 2020, as presented in its audited annual consolidated financial statements, to its
proportionate interest.
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 unit-based
compensation
(Increase) decrease in value of
Exchangeable Units
Increase (decrease) in value of hotel
property
Increase (decrease) in value of investment
properties, net
Income (loss) before income taxes
Deferred income tax expense (recovery)
Net income (loss)
Net income (loss) attributable to:
Unitholders
Non-controlling interest
Net income (loss) per unit attributable to
Unitholders:
Basic
Diluted
$
$
$
$
$
$
Consolidated
Statements of
Income (Loss)
674,890 $
262,352
412,538
Adjustment for
proportionate
interest
9,010 $
5,395
3,615
2021
2020
Proportionate
interest (1)
683,900 $
267,747
416,153
Consolidated
Statements of
Income (Loss)
672,890 $
273,858
399,032
Adjustment for
proportionate
interest
7,579 $
5,573
2,006
Proportionate
interest (1)
680,469
279,431
401,038
10,880
(152,670)
(38,207)
(248)
(6,018)
(1,460)
87,089
(9,286)
(548)
(1,122)
955
(1,343)
29
—
(2,455)
1,460
214
11,835
(154,013)
(38,178)
(248)
(8,473)
—
87,303
12,248
(157,711)
(33,238)
(90)
(5,589)
(7,835)
858
1,396
(1,348)
(10)
—
(2,714)
7,835
(1,825)
13,644
(159,059)
(33,248)
(90)
(8,303)
—
(967)
—
—
—
(9,286)
11,459
—
11,459
(548)
7,404
—
7,404
(1,122)
(9,432)
—
(9,432)
198,617
(17,127)
181,490
(185,700)
(10,123)
(195,823)
87,027
499,565
25,929
473,636 $
(18,267)
(14,652)
(1,147)
(13,505) $
68,760
484,913
24,782
460,131 $
(367,626)
31,406
23,924
(6,789)
(4,783)
(3)
7,482 $
(4,780) $
(374,415)
26,623
23,921
2,702
460,131 $
13,505
473,636 $
— $
460,131 $
(13,505)
(13,505) $
—
460,131 $
2,702 $
4,780
7,482 $
— $
(4,780)
(4,780) $
2,702
—
2,702
2.10
2.08
$
$
0.01
0.01
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
FIRST CAPITAL REIT ANNUAL REPORT 2021
44
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
FFO and ACFO
Funds from Operations
A reconciliation from net income (loss) attributable to Unitholders to FFO can be found in the table below:
Three months ended December 31
Year ended December 31
2021
28,629
$
$
Net income (loss) attributable to Unitholders
Add (deduct):
(Increase) decrease in value of investment properties (1)
(Increase) decrease in value of hotel property (1)
Adjustment for equity accounted joint ventures (2)
Incremental leasing costs (3)
Amortization expense (4)
Gain on below market purchase
Transaction costs
Distributions on Exchangeable Units (5)
Increase (decrease) in value of Exchangeable Units (5)
Increase (decrease) in value of unit-based compensation (6)
Gain on Option (7)
Investment properties selling costs (1)
Deferred income taxes (recovery) (1)
FFO (8)
$
(25,833)
2,161
397
1,448
481
—
—
12
140
2,528
—
3,093
47,773
60,829
$
0
2020
2
37,268
(7,930)
5,082
669
1,611
499
(7,385)
1,121
22
30
(1,735)
—
614
32,650
62,516
2021
460,131
$
$
2020
2,702
(181,490)
1,122
2,455
5,859
1,937
—
—
45
548
9,286
(80,822)
7,136
24,782
250,989
$
195,823
9,432
2,714
6,571
1,432
(7,385)
1,121
650
(7,404)
(11,459)
—
3,856
23,921
221,974
$
(1) At FCR's proportionate interest.
(2) Adjustment related to FCR'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 distributions and fair value adjustments on Exchangeable Units in accordance with the recommendations of REALPAC.
(6) Adjustment to exclude fair value adjustments on unit-based compensation plans in accordance with the recommendations of REALPAC.
(7) Adjustment to exclude the gain on option in accordance with the recommendations of REALPAC.
(8) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
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 unit
Weighted average number of units – diluted
(in thousands)
Three months ended December 31
Year ended December 31
% change
2021
2020
% change
2021
2020
$ 106,571
4,195
(37,929)
(7,287)
(146)
$ 106,223
3,596
(40,163)
(6,437)
—
(972)
(3,603)
60,829
0.28
$
$
(1,109)
406
62,516
0.28
(2.7%) $
(2.8%) $
13.1%
12.9%
$ 416,153
11,835
(153,968)
(32,319)
(248)
(4,081)
13,617
$ 250,989
1.14
$
$ 401,038
13,644
(158,409)
(26,677)
(90)
(4,157)
(3,375)
$ 221,974
1.01
$
0.2%
220,929
220,551
0.2%
220,826
220,495
(1)
(2)
Includes an adjustment to capitalize interest related to FCR'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.
(3) Excludes certain amortization expense in accordance with the recommendations of REALPAC.
(4) At FCR's proportionate interest, adjusted to exclude investment properties selling costs in accordance with the recommendations of REALPAC.
(5) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
45
FIRST CAPITAL REIT ANNUAL REPORT 2021
For the three months ended December 31, 2021, FFO decreased by approximately $0.01 per diluted unit over the same
prior year period. The decrease was primarily due to higher unrealized losses on marketable securities and a prepayment
penalty for the early settlement of mortgages, totaling $4.0 million, or $0.02 per unit. This is partially offset by lower
interest expense of $2.2 million, or $0.01 per unit, over the same prior year period.
For the year ended December 31, 2021, FFO increased by $0.13 per diluted unit over prior year primarily due to a $13.8
million, or $0.06 per unit, mark-to-market gain on shares of a construction management company which completed an
initial public offering in May 2021, and lower bad debt expense of $14.3 million, or $0.07 per unit.
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):
Three months ended December 31
Year ended December 31
2021
83,575
$
2020
92,737
2021
249,613
$
2020
219,505
$
$
Working capital adjustments (1)
Adjustment for equity accounted joint ventures
Revenue sustaining capital expenditures
Recoverable capital expenditures
Leasing costs on properties under development
Non-controlling interest
ACFO (2)
$
(15,926)
387
(4,828)
(1,648)
362
(826)
61,096
(26,494)
203
(3,746)
(3,887)
403
284
59,500
$
12,826
2,322
(15,554)
(4,033)
1,465
(2,823)
243,816
$
3,357
1,062
(18,517)
(4,971)
1,643
968
203,047
$
(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 guidance on ACFO issued in January 2022.
(2) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
For the three months and year ended December 31, 2021, ACFO totaled $61.1 million and $243.8 million compared to
$59.5 million and $203.0 million for the same prior year periods, respectively. The $40.8 million increase in ACFO for the
year ended December 31, 2021 was primarily due to higher cash inflows from working capital and lower capital
expenditures.
ACFO Payout Ratio
First Capital's ACFO payout ratio for the four quarters ended December 31, 2021 is calculated as follow:
ACFO (1)
Cash distributions paid
ACFO payout ratio (1)
Year ended December 31, 2021
Q4 2021
Q3 2021
Q2 2021
$
243,816
$
61,096 $
70,710 $
69,398 $
102,618
23,710
23,704
23,696
42.1%
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
First Capital's ACFO payout ratio for the four quarters ended December 31, 2020 is calculated as follow:
ACFO (1)
Cash distributions paid
ACFO payout ratio (1)
Year ended December 31, 2020
Q4 2020
Q3 2020
Q2 2020
$
203,047
$
59,500 $
68,117 $
36,500 $
187,929
47,150
46,990
46,915
92.6%
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Q1 2021
42,612
31,508
Q1 2020
38,930
46,874
First Capital considers a rolling four quarter payout ratio (cash distributions / ACFO) to be more relevant than a payout
ratio in any given quarter due to seasonal fluctuations in ACFO. For the four quarters ended December 31, 2021, the
ACFO payout was 42.1% (December 31, 2020 - 92.6%).
FIRST CAPITAL REIT ANNUAL REPORT 2021
46
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Net Asset Value
The following table provides FCR's calculation of NAV for the years ended December 31, 2021 and 2020:
As at
Unitholders' equity
Exchangeable Units
Deferred tax liabilities
Net Asset Value (NAV) (1)
Units outstanding - diluted (1)
NAV per unit (1)
December 31, 2021
December 31, 2020
$
$
$
4,620,942 $
1,947
739,162
5,362,051 $
220,879
24.28 $
4,227,164
1,399
698,528
4,927,091
220,574
22.34
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The increase in NAV per unit from $22.34 to $24.28 is primarily due to an increase in the fair value of investment
properties of $181.5 million (at the Trust's share) over the past 12 months, an $80.8 million gain on option exercised in
Q3 2021 and retained FFO over the last year.
DISTRIBUTIONS
Distributions on the Trust Units are declared at the discretion of the Board of Trustees. In determining the annual level or
monthly amount of distributions, the Board of Trustees considers many factors including the macro economic and industry
specific environment, the impact and duration of the COVID-19 environment and applicable government programs,
common industry cash distribution practices, investor expectations, capital market conditions, forecasted cash flows and
debt metrics, anticipated capital requirements, estimated taxable income, and the overall financial condition of the Trust.
The Trust does not use net income, as calculated in accordance with IFRS, as the basis to determine the annual distribution
rate. Net income is impacted by non-cash adjustments, including fair value changes to investment properties and
Exchangeable Units, and is not equivalent to taxable income and therefore is expected to vary from the distributions
declared.
On January 12, 2021, First Capital announced a reduction of its monthly distribution to Unitholders from $0.0716 per unit to
$0.036 per unit, or $0.432 on an annualized basis. The decrease was effective for First Capital's January 2021 distribution,
payable to Unitholders in February 2021.
The following chart specifies distributions declared by First Capital:
(in dollars)
Distributions declared per unit
Three months ended December 31
Year ended December 31
2021
0.108
$
2020
0.215
2021
0.432
$
2020
0.860
$
$
SUMMARY OF FINANCIAL RESULTS OF LONG-TERM DEBT GUARANTORS
First Capital's senior unsecured debentures are guaranteed by the wholly owned subsidiaries of the Trust, 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, 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. These guarantees are intended to
eliminate structural subordination, which arises as a consequence of a significant portion of First Capital’s assets being
held primarily in two significant subsidiaries.
47
FIRST CAPITAL REIT ANNUAL REPORT 2021
The following tables present select consolidating summary information for First Capital for the periods identified below
presented separately for (i) First Capital (denoted as FCR), as issuer; (ii) guarantor subsidiaries; (iii) non-guarantor
subsidiaries; (iv) consolidation adjustments; and (v) the total consolidated amounts.
(millions of dollars)
Three months ended December 31
Property rental revenue
NOI (5)
Net income (loss) attributable to
Unitholders
(millions of dollars)
Property rental revenue
NOI (5)
Net income (loss) attributable to
Unitholders
(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
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
FCR (1)
71 $
47 $
Guarantors (2)
Non-Guarantors (3)
Consolidation Adjustments (4)
Total Consolidated
70 $
100 $
100 $
46 $
59 $
58 $
— $
— $
1 $
1 $
(1) $
— $
(1) $
170 $
1 $
106 $
170
106
29 $
37 $
81 $
110 $
(1) $
— $
(80) $
(110) $
29 $
37
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
FCR (1)
Guarantors (2)
Non-Guarantors (3)
Consolidation Adjustments (4)
Total Consolidated
278 $
290 $
400 $
387 $
182 $
182 $
231 $
218 $
1 $
— $
1 $
1 $
(4) $
— $
(5) $
(2) $
675 $
413 $
673
399
Year ended December 31
460 $
3 $
576 $
346 $
24 $
9 $
(600) $
(355) $
460 $
3
$
$
$
$
$
$
$
$
FCR (1)
203 $
(562) $
688 $
3,671 $
FCR (1)
225 $
(427) $
449 $
4,091 $
Guarantors (2)
Non-Guarantors (3)
352 $
10,966 $
100 $
976 $
81 $
130 $
2 $
38 $
Guarantors (2)
Non-Guarantors (3)
258 $
10,767 $
104 $
1,132 $
1 $
123 $
4 $
66 $
As at December 31, 2021
Consolidation
Adjustments (4)
Total Consolidated
(79) $
(982) $
1 $
(36) $
557
9,552
791
4,649
As at December 31, 2020
Consolidation
Adjustments (4)
Total Consolidated
(2) $
(913) $
(5) $
(65) $
482
9,550
552
5,224
(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
FCR on a consolidated basis.
(5) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
RELATED PARTY TRANSACTIONS
Subsidiaries of the Trust
The audited annual consolidated financial statements include the financial statements of First Capital Real Estate
Investment Trust and all of its subsidiaries, including First Capital Realty Inc., First Capital REIT Limited Partnership and
First Capital Holdings Trust. First Capital Realty Inc. and First Capital Holdings Trust are the significant subsidiaries of the
Trust and are wholly owned.
FIRST CAPITAL REIT ANNUAL REPORT 2021
48
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
SUBSEQUENT EVENTS
Redemption of $200 million of 4.43% Series O Senior Unsecured Debentures
On January 31, 2022, upon maturity, First Capital repaid its 4.43% Series O Senior Unsecured Debentures in the amount
of $200.0 million.
QUARTERLY FINANCIAL INFORMATION
(unit counts in thousands)
Property rental revenue
Net operating income (1)
Net income (loss) attributable to
Unitholders / Shareholders
Net income (loss) per unit / share
attributable to Unitholders /
Shareholders:
Basic
Diluted
FFO (1)
FFO per diluted unit / share (1)
Weighted average number of
diluted units / shares
outstanding
Cash provided by operating
activities
ACFO (1)
Distribution / Dividend declared
per unit / share
$
$
$
$
$
$
$
2021
2020
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
$ 170,197
$ 165,613
$ 167,168
$ 171,912
$ 170,058
$ 163,952
$ 162,744
$ 176,136
$ 105,918
$ 103,078
$ 102,593
$ 100,949
$ 105,646
$ 101,478
$
28,629
$ 181,526
$ 211,989
$
37,987
$
37,268
$
11,262
$
$
$
$
$
$
88,768
$ 103,140
10,530
$
(56,358)
0.05
0.05
47,462
0.22
$
$
$
$
(0.26)
(0.26)
53,856
0.24
0.13
0.13
60,829
0.28
$
$
$
$
0.83
0.82
59,047
0.27
$
$
$
$
0.97
0.96
76,104
0.35
$
$
$
$
0.17
0.17
55,009
0.25
$
$
$
$
0.17
0.17
62,516
0.28
$
$
$
$
0.05
0.05
58,140
0.26
220,929
220,899
220,863
220,667
220,551
220,522
220,492
220,470
83,575
61,096
0.108
$
$
$
50,590
70,710
0.108
$
$
$
71,152
69,398
0.108
$
$
$
44,296
42,612
0.108
$
$
$
92,737
59,500
0.215
$
$
$
43,469
68,117
0.215
$
$
$
46,249
36,500
0.215
$
$
$
37,050
38,930
0.215
Total assets
$ 10,109,074 $ 10,186,252 $ 10,189,522 $ 9,972,075
$ 10,032,463 $ 10,013,445 $ 10,037,370 $ 10,237,121
Total mortgages and credit
facilities
$ 2,072,952
$ 2,211,920
$ 2,370,499
$ 2,358,551
$ 2,262,565
$ 2,270,557
$ 2,434,042
$ 2,447,687
Unitholders' equity
$ 4,620,942
$ 4,608,489
$ 4,445,198
$ 4,254,796
$ 4,227,164
$ 4,233,905
$ 4,252,417
$ 4,298,037
Other
Number of neighbourhoods
146
148
150
150
150
150
149
151
GLA - at 100% (in thousands)
22,485
22,736
22,935
22,890
22,822
22,830
22,844
23,246
GLA - at ownership interest (in
thousands)
Monthly average occupancy %
Total portfolio occupancy %
19,657
19,853
20,092
20,053
19,991
20,232
20,250
20,651
96.0%
96.1%
95.9%
95.9%
95.8%
95.9%
96.0%
95.8%
96.0%
96.2%
96.1%
96.0%
96.3%
96.3%
96.5%
96.4%
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
49
FIRST CAPITAL REIT ANNUAL REPORT 2021
CRITICAL ACCOUNTING ESTIMATES
First Capital 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
In applying the Trust’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.
Hedge accounting
Where First Capital 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
First Capital retains its REIT status if it meets the prescribed conditions under the Income Tax Act (Canada) (the "Tax
Act"). Management uses judgment in its interpretation and application of these conditions. First Capital determined that
it qualifies as a REIT for the current period and expects to meet the prescribed conditions going forward. However, should
the Trust no longer meet the REIT conditions, substantial adverse tax consequences may result.
With respect to its corporate subsidiaries, the Trust 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 Trust reflects
the Trust's interpretation of the relevant tax laws. The Trust 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.
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.
Estimates and Assumptions
Valuation of Investment properties
First Capital'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 FCR, 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.
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.
Income producing properties 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
FIRST CAPITAL REIT ANNUAL REPORT 2021
50
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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 First Capital's properties after adjusting for factors specific to the
site, including its location, zoning, servicing and configuration.
Refer to Note 2(h) of the audited consolidated financial statements for the year ended December 31, 2021 for further
information on the estimates and assumptions made by Management in connection with the fair values of investment
properties.
Valuation of Financial Instruments
First Capital is required to determine the fair value of its loans, mortgages and credit facilities, senior unsecured
debentures, Exchangeable Units, unit-based compensation plans, loans and mortgages receivable, other equity
investments, 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
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;
• Exchangeable Units are based on the closing price of FCR's Trust Units at each period end;
• The fair value of the unit-based compensation plans are based on the following:
Unit Options: Fair value of each tranche is valued separately using a Black-Scholes option pricing model;
Deferred Units/Restricted Units: Fair value is based on the closing price of FCR's Trust Units at each period end; and
Performance Units: Fair value is calculated using a Monte-Carlo simulation model;
• Derivative instruments are determined using present value forward pricing and swap calculations at interest rates that
reflect current market conditions;
• 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;
• 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.
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.
COVID-19
The outbreak of coronavirus (“COVID-19”), which the World Health Organization has declared a global pandemic, and
government related action to shutdown large parts of the economy has impacted global commercial activity and
contributed to significant volatility in certain equity and debt markets. The extent and duration of the impact of COVID-19
on communities and the economy remains unclear. In the preparation of these audited annual consolidated financial
statements, the Trust has incorporated the potential impact of COVID-19 into its estimates and assumptions that affect
the carrying amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amount of
51
FIRST CAPITAL REIT ANNUAL REPORT 2021
earnings for the reporting periods using the best available information as of December 31, 2021 and 2020. Actual results
could differ from those estimates. The estimates and assumptions that the Trust considers critical and/or could be
impacted by COVID-19 include those underlying the valuation of investment properties, the valuation of its hotel
property, the net realizable value of residential inventory, the carrying amount of its investment in joint ventures, the
estimate of any expected credit losses on amounts receivable or loans and mortgages receivable and determining the
values of financial instruments for disclosure purposes.
Accounting Policy Changes
Refer to Note 2(b) and Note 2(t) of the audited annual consolidated financial statements for the years ended December
31, 2021 and 2020 for details on the impact of accounting policy changes including those related to the adoption of
amended IFRS pronouncements.
The IASB has issued amendments to existing standards. These changes are not yet adopted by First Capital and could
have an impact on future periods. These changes are described in detail below:
Amendment to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-
Current
In January 2020, the IASB issued amendments to IAS 1 to clarify the requirements for classifying liabilities as current or
non-current. The amendments clarify the classification of liabilities as current or non-current based on rights that are in
existence at the end of the reporting period and unaffected by expectations about whether an entity will exercise its right
to defer settlement of a liability. The amendments also clarify the definition of 'settlement' of a liability. The amendments
are effective January 1, 2023, with early adoption permitted. The amendments are to be applied retrospectively.
Management is currently assessing the impact of this amendment.
CONTROLS AND PROCEDURES
As at December 31, 2021, the Chief Executive Officer and the Chief Financial Officer of First Capital, with the assistance of
other staff and Management of FCR to the extent deemed necessary, have designed FCR’s disclosure controls and
procedures to provide reasonable assurance that information required to be disclosed in the various reports filed or
submitted by FCR 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, First Capital 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 First Capital have evaluated, or caused the evaluation of,
under their supervision, the effectiveness of FCR’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, 2021, and have concluded that such disclosure controls and procedures and internal
controls over financial reporting were operating effectively.
First Capital did not make any changes in its internal controls over financial reporting during the quarter ended
December 31, 2021 that have had, or are reasonably likely to have, a material effect on FCR's internal controls over
financial reporting. On an ongoing basis, FCR 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, First Capital intends to take the necessary steps to minimize the consequences thereof.
FIRST CAPITAL REIT ANNUAL REPORT 2021
52
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
RISKS AND UNCERTAINTIES
First Capital, 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 Trustees, to identify and, to the extent possible, mitigate or minimize the impact of all such business risks. The
major categories of risk First Capital encounters in conducting its business and some of the actions it takes to mitigate
these risks are outlined below. First Capital's most current Annual Information Form, which provides a detailed
description of these and other risks that may affect FCR, can be found on SEDAR at www.sedar.com and on FCR’s website
at www.fcr.ca.
Ongoing Pandemic, Epidemics or New Outbreaks
On March 11, 2020, the World Health Organization declared a global pandemic and it continues to impact Canadian society
at large with the emergence of new variants such as the Omicron variant. Although it is difficult to ascertain the ultimate
impacts of the pandemic (or any subsequent pandemic, epidemic or other outbreak) on First Capital’s operating results for
2022, the positive impact of high vaccination rates on the overall economy and an improved and more stable operating
environment support a strengthening outlook for FCR.
However, a substantial portion of First Capital’s tenants have been forced at various times throughout the pandemic to
close in accordance with government regulations or were or have been operating at a reduced capacity, which may
negatively impact their ability to pay rent in accordance with the terms of their lease. First Capital has received a large
number of rent deferral requests from tenants across the country and some of its tenants have withheld rent. Qualifying
small business tenants were granted an initial two months’ rent deferral as part of FCR’s Small Business Support Program
and other tenants have been or may be granted similar or more substantial rent relief on a case-by-case basis. A substantial
number of tenants elected to participate in government relief programs), including many that had initially been part of
FCR’s Small Business Support Program. There is no certainty as to the extent that government relief programs will benefit
First Capital or its tenants. The timing and extent to which certain non-essential businesses will be able to operate at full
capacity remains uncertain with the emergence of new variants and there is no certainty that these businesses will be
allowed to remain open should governmental authorities reinstate business closures. There is also no certainty as to the
adequate supply, availability and long-term efficacy of vaccines (including new variant-specific vaccines) and the
corresponding effect on First Capital and its tenants. Additionally, First Capital may be required to take further action that
negatively impacts its financial results and operations in response to directives of government and public health authorities
or that are in the best interests of the health and safety of its employees, tenants, partners and other stakeholders, as
necessary.
In addition to the changes described above and the macroeconomic impact of the pandemic, epidemic or other outbreak,
specific effects of the pandemic that may impact the FCR’s business operations, financial results and its ability to execute on
its strategy, may include: consumer demand for tenants’ products or services, changing consumer habits, a temporary or
long-term increase in vacancy, temporary or long-term stoppage of development projects, temporary or long-term
stoppage of construction projects, temporary or long-term labour shortages or disruptions, temporary or long-term impacts
on global supply chains, closures or slowdowns of government offices and increased risks to employee engagement, IT
systems and networks. Changes to operations in response to these and other effects of the pandemic on the economy and
consumer habits could materially adversely impact First Capital’s financial results and may negatively impact several aspects
of FCR’s business, including but not limited to: the fair value of its properties and other investments; the net realizable value
of residential inventory and ability to lease residential space; the performance of its hotel operations, the carrying amount
of its investment in joint ventures; its ability to execute on its strategy, including dispositions and acquisitions and surfacing
value from its density pipeline; tenants’ ability to pay rent in full or at all (including deferred rent); its ability to complete
construction required to transfer possession of leased premises to tenants; its ability to renew expiring leases and to lease
vacant space; its ability to collect on interest and loans receivables; its ability to meet deleveraging targets, maintain current
and/or achieve target debt metrics, maintain current credit ratings and to comply with debt covenants; its ability to make
distributions; its ability to maintain its balance sheet and to access capital on acceptable terms or at all. Additionally, health
and safety issues related to the pandemic as well as actions taken by FCR with respect to tenant defaults could also result in
53
FIRST CAPITAL REIT ANNUAL REPORT 2021
legal claims and proceedings against First Capital. Uncertain economic conditions resulting from the pandemic may, in the
short or long term, materially adversely impact operations and the financial performance of FCR.
The spread of the pandemic has caused economic uncertainty and increased volatility in financial markets, which has
negatively impacted the market price for FCR’s securities. Governments and central banks have responded with monetary
and fiscal interventions intended to stabilize economic conditions. However, it is not known how these interventions will
impact short or long-term debt and equity markets or the economy generally. Although the ultimate impact of the
pandemic on the global economy and its duration remains uncertain, disruptions caused by the pandemic may materially
adversely affect the performance of First Capital. Uncertain economic conditions resulting from the pandemic outbreak
may, in the short or long term, materially adversely impact First Capital’s tenants and/or the debt and equity markets, both
of which could adversely impact FCR’s operations and financial performance.
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 First Capital operates can also have a significant impact on
FCR’s tenants and, in turn, FCR’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 FCR, and may also limit FCR’s
ability to attract new or replacement tenants.
First Capital’s portfolio has major concentrations in Ontario, Alberta, Quebec and British Columbia. Moreover, within
each of these provinces, FCR’s portfolio is concentrated predominantly in selected urban markets. As a result, economic
and real estate conditions in these regions will significantly affect FCR’s revenues and the value of its properties.
Revenue from First Capital’s properties depends primarily on the ability of FCR’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 FCR’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 FCR, FCR’s financial position and results of operations would be adversely affected.
In the event of default by a tenant, FCR may experience delays and unexpected costs in enforcing its rights as landlord
under lease terms, which may also adversely affect FCR’s financial position and results of operations. FCR 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.
First Capital’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 First Capital's annual minimum rent experience financial
difficulty and are unable to pay rent or fulfill their lease commitments, FCR’s financial position, results of operation and
the value of its properties concerned would be adversely affected.
First Capital’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.
FIRST CAPITAL REIT ANNUAL REPORT 2021
54
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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 First Capital. In addition, the terms of any
subsequent lease may be less favourable to FCR than the existing lease.
Changes in lease accounting rules may require tenants to account for real property leases differently and, as a result, may
incentivize tenants to seek new and renewal leases on different terms. Tenants may favour shorter lease terms, fewer
renewals and a heavier weighting to variable as opposed to fixed rents, which could adversely affect the stability of First
Capital’s rental income, the level of secured financing available, the value of its properties and FCR’s financial position
and results of operations.
Financing, Interest Rates, Repayment of Indebtedness and Access to Capital
First Capital 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
FCR’s cash flow will be insufficient to meet required payments of principal and interest.
The amount of indebtedness outstanding could require FCR 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. FCR’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 FCR,
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 FCR than the existing financing. FCR 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. FCR has a total of $1.5 billion
principal amount of fixed rate interest-bearing instruments outstanding including mortgages, senior unsecured
debentures and secured credit facilities maturing between January 1, 2022 and December 31, 2024 at a weighted
average coupon interest rate of 4.0%. If these amounts were refinanced at an average interest rate that was 100 basis
points higher or lower than the existing rate, FCR’s annual interest cost would increase or decrease, respectively, by
$14.9 million. In addition, as at December 31, 2021, First Capital had $313.1 million at FCR's share, principal amount of
debt (or 7% of FCR’s aggregate debt as of such date) at floating interest rates.
First Capital 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, FCR 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.
Management and the Board have discretion under the Declaration of Trust to increase the amount of outstanding debt.
The decisions with regard to the incurrence and maintenance of debt are based on available investment opportunities for
which capital is required, the cost of debt in relation to such investment opportunities, whether secured or unsecured
debt is available, the effect of additional debt on existing financial ratios and the maturity of the proposed new debt
relative to maturities of existing debt. First Capital could become more highly leveraged, resulting in increased debt
service costs that could adversely affect cash flows and operating results. First Capital's intention is to gradually return its
leverage to levels prior to the share buy back that took place in 2019 and may do so in a number of ways, including by
disposing of selected assets. Any failure to gradually return its leverage to levels prior to the share buy back may have a
material adverse impact on First Capital's requirements, its financial position or its ability to achieve its business
objectives.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
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 “Capital Structure and Liquidity - 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
First Capital, may adversely affect a securityholder’s ability to sell its senior unsecured debentures or other securities of
FCR and may adversely affect FCR’s access to financial markets and its cost of borrowing.
Acquisition, Expansion, Development, Redevelopment and Strategic Dispositions
First Capital’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 FCR’s financial position and results of operations and its ability
to meet its obligations: (i) FCR may not be able to identify suitable properties to acquire or may be unable to complete
the acquisition of the properties identified; (ii) FCR 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) FCR’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 FCR’s total acquisition costs; (v) FCR’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, FCR’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 FCR’s development commitments relate to properties intended for sale, such as the residential portion of certain
projects, FCR is also subject to the risk that purchasers of such properties may become unable or unwilling to meet their
obligations to FCR or that FCR may not be able to close the sale of a significant number of units in a development project
on economically favourable terms.
In addition, FCR undertakes strategic property dispositions in order to recycle its capital and maintain an optimal portfolio
composition. FCR may be subject to unexpected costs or liabilities related to such dispositions, which could adversely
affect FCR's financial position and results of operations and its ability to meet its obligations.
Competition
The real estate business is competitive. Numerous other developers, managers and owners of retail properties compete
with First Capital in seeking tenants. Some of the properties located in the same markets as FCR’s properties may be
newer, better located and/or have stronger anchor tenants than FCR’s properties. The existence of developers, managers
and owners in the markets in which FCR operates, or any increase in supply of available space in such markets (due to
new construction, tenant insolvencies or other vacancy) and competition for FCR’s tenants could adversely affect FCR’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 FCR that is not easily assessed. Any of the aforementioned factors could
have an adverse effect on FCR’s financial position and results of operations.
FIRST CAPITAL REIT ANNUAL REPORT 2021
56
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Residential Development Sales and Leasing
First Capital 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 FCR'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, FCR 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 FCR'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
First Capital 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 FCR’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, FCR, 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 FCR
knows of, or is responsible for, the environmental contamination and whether the contamination occurred before or
after FCR 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 FCR’s results of operations or financial position. The
presence of contamination or the failure to remediate such substances, if any, may adversely affect FCR’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 FCR 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.
Partnerships
First Capital has investments in properties with non-affiliated partners through partnership, co-ownership and limited
liability corporate venture arrangements (collectively, “partnerships”). As a result, FCR 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 FCR’s sole best interests. Accordingly, FCR may not be able to favourably resolve any issues that arise with respect
to such decisions, or FCR may have to take legal action or provide financial or other inducements to partners to obtain
such resolution. In addition, FCR may be exposed to risks resulting from the actions, omissions or financial situation of a
partner, which may result in harm to FCR’s reputation or adversely affect the value of FCR’s investments.
Investments Subject to Credit and Market Risk
First Capital 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 also invests in marketable and other
securities. FCR 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 FCR’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 FCR will advance new Loans and Mortgages Receivable at the same rate or in
57
FIRST CAPITAL REIT ANNUAL REPORT 2021
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 FCR’s Loans and Mortgages Receivable unless and until
such time that FCR advances new loans.
Climate Change
Changing weather patterns and other effects of climate change have created uncertainty as to future trends and weather
conditions and could have an impact on FCR's properties, adversely impacting its results. First Capital's properties, tenants,
and communities may become impacted by more severe weather events and natural disasters, including increases in storm
intensity and rising water levels resulting in floods. Over time, these conditions could result in a decreased demand for
space in FCR’s impacted properties or, in extreme cases, it may impact FCR’s ability to operate the properties at all. Climate
change may also have indirect effects on First Capital’s business by increasing the cost of (or making unavailable) property
insurance on favourable terms, resulting in additional costs to repair or replace damaged properties or protect its
properties against such risks, which could negatively impact FCR’s earnings, liquidity or capital resources. The occurrence of
natural disasters or severe weather conditions can also delay new development projects. In addition, compliance with new
laws or regulations related to climate change may require First Capital to make improvements to its existing properties or
increase taxes and fee assessments, which could result in declining demand for FCR’s properties and increased expenses
and may adversely affect operating and financial results.
Cybersecurity
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of FCR’s
information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include
gaining unauthorized access to information systems to disrupt operations, corrupt data or steal confidential information. As
FCR’s reliance on technology has increased, so have the risks posed to its systems. First Capital's primary risks that could
directly result from the occurrence of a cyber incident include operational interruption, damage to its reputation, damage
to its business relationships with tenants as well as the disclosure of confidential information. Events such as these could
adversely affect First Capital’s financial position and results of operations.
Cash Distributions Are Not Guaranteed; Non-Cash Distributions
Distributions on the Trust Units are established by the Board of Trustees and are subject to change at the discretion of the
Board of Trustees. While First Capital’s distribution policy has been established pursuant to the Declaration of Trust and
may only be changed with the approval of a majority of Unitholders, the actual amount of distributions paid in respect of
the Trust Units will depend upon numerous factors, all of which are susceptible to a number of risks and other factors
beyond the control of First Capital. The market value of the Trust Units may deteriorate if First Capital is unable to meet its
distribution targets in the future, and that deterioration could be significant. In addition, the composition of the cash
distributions for tax purposes may change over time and could affect the after-tax return for Unitholders.
In addition, certain distributions declared by the Trustees on the Trust Units may be payable in cash, Trust Units or a
combination of cash and Trust Units. Immediately after any pro rata distribution of additional Trust Units to all Unitholders,
the number of the outstanding Trust Units may be automatically consolidated such that each such holder will hold after the
consolidation the same number of Trust Units as such holder held before the distribution of additional Trust Units (provided
that Unitholders not resident in Canada for Canadian federal income tax purposes may be subject to applicable withholding
taxes in connection therewith). Such an automatic consolidation may affect a Unitholder’s after-tax return relating to their
investment in Trust Units.
FIRST CAPITAL REIT ANNUAL REPORT 2021
58
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Unpredictability and Volatility of Trust Unit Price
A publicly-traded real estate investment trust will not necessarily trade at values determined by reference to the underlying
value of its business. The prices at which the Trust Units will trade cannot be predicted. The market price of the Trust Units
could be subject to significant fluctuations in response to variations in quarterly operating results, distributions and other
factors. The annual yield on the Trust Units as compared to the annual yield on other financial instruments may also
influence the price of the Trust Units in the public trading markets. In addition, the securities markets have experienced
significant price and volume fluctuations from time to time in recent years that often have been unrelated or
disproportionate to the operating performance of particular issuers. These broad fluctuations may adversely affect the
market price of the Trust Units.
Taxation Matters
The Trust or its subsidiary First Capital Realty Inc. ("FCR Inc.") may not qualify as a “mutual fund trust” or a "mutual fund
corporation" (as applicable) for purposes of the Tax Act, or it may cease to so qualify. If the Trust or FCR Inc. did not so
qualify for such purposes continuously throughout a taxation year, it would be subject to adverse tax consequences which
likely may materially reduce its ability to make distributions on the Trust Units. Furthermore, if the Trust or FCR Inc. was
considered to have been established primarily for the benefit of non-resident persons, it would be permanently disqualified
from qualifying as a “mutual fund trust” or a "mutual fund corporation" (as applicable) for such purposes.
There is a risk (for example, as a result of an unanticipated event) that the Trust will not qualify (under the exception for
real estate investment trusts from the rules applicable to SIFT trusts or SIFT partnerships in the Tax Act) as a “real estate
investment trust” under the Tax Act for one or more of its taxation years. Were this to occur, the level of monthly cash
distributions made on the Trust Units may be materially reduced. Furthermore, there is no assurance that the provisions of
the Tax Act regarding the exemption afforded to REITs from the SIFT rules will not change in a manner that adversely
impacts the Unitholders.
Although First Capital is of the view that all expenses to be claimed by it and its subsidiaries will be reasonable and
deductible and that the cost amount and capital cost allowance claims of entities indirectly owned by First Capital will have
been correctly determined, there can be no assurance that the Tax Act, or the interpretation of the Tax Act, will not change,
or that the Canada Revenue Agency (the “CRA”) will agree. If the CRA successfully challenges the deductibility of such
expenses or the allocation of such income, First Capital's taxable income, and indirectly the taxable income of Unitholders,
will increase or change.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
FS
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
61
62
65
66
67
68
69
70
70
70
79
81
82
83
84
85
85
87
89
89
90
90
91
94
94
95
95
95
96
97
99
101
102
103
104
105
105
105
Management's Responsibility
Independent Auditor's Report
Consolidated Balance Sheets
Consolidated Statements of Income (Loss)
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
1 Description of the Trust
2 Significant Accounting Policies
3 Investment Properties
4 Investment in Joint Ventures
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 Accounts Payable and Other Liabilities
13 Exchangeable Units
14 Unitholders' Equity
15 Unit-based Compensation Plans
16 Net Operating Income
17 Interest and Other Income
18 Interest Expense
19 Corporate Expenses
20 Other Gains (Losses) and (Expenses)
21 Income Taxes
22 Risk Management
23 Fair Value Measurement
24 Subsidiaries with Non-controlling Interest
25 Co-ownership Interests
26 Supplemental Other Comprehensive Income (Loss) Information
27 Supplemental Cash Flow Information
28 Commitments and Contingencies
29 Related Party Transactions
30 Subsequent Events
Management's Responsibility
First Capital Real Estate Investment Trust’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 8, 2022.
Management is also responsible for the maintenance of financial and operating systems, which include effective controls to
provide reasonable assurance that First Capital's assets are safeguarded, transactions are properly authorized and recorded,
and that reliable financial information is produced.
The Board of Trustees 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 Trustees who are not
involved in the day-to-day operations of First Capital. Each quarter, the Audit Committee meets with Management and, as
necessary, with the independent auditor, Ernst & Young LLP, to satisfy itself that Management’s responsibilities are
properly discharged and to review and report to the Board of Trustees on the consolidated financial statements.
In accordance with generally accepted auditing standards, the independent auditor conducts an examination each year in
order to express a professional opinion on the consolidated financial statements.
Adam E. Paul
President and Chief Executive Officer
Neil Downey
Executive Vice President, Enterprise Strategies and Chief Financial Officer
Toronto, Ontario
February 8, 2022
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FIRST CAPITAL REIT ANNUAL REPORT 2021
Independent Auditor's Report
To the Unitholders of
First Capital Real Estate Investment Trust
Opinion
We have audited the consolidated financial statements of First Capital Real Estate Investment Trust (the "Trust"), which
comprise the consolidated balance sheets as at December 31, 2021 and 2020, and the consolidated statements of income
(loss), consolidated statements of comprehensive income (loss), 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 Trust as at December 31, 2021 and 2020, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").
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 Trust 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.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
consolidated financial statements of the current period. These matters were addressed in the context of the audit of the
consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures performed to address the matters below, provide
the basis for our audit opinion on the accompanying consolidated financial statements.
Key Audit Matter
Valuation of Investment Properties
The Trust’s investment property portfolio has a fair value of $9.1
billion, which represents 90.3% of total assets at December 31,
2021.
The Trust employs a certified staff appraiser to value the
investment property portfolio. The valuation methodology for
these investment properties is primarily based on an income
approach, utilizing the direct capitalization method and/or the
discounted cash flow method.
How our audit addressed the key audit matter
With the assistance of our real estate valuation specialists, we
evaluated the appropriateness of the underlying valuation
methodology, and performed the following audit procedures,
among others:
We assessed the competence and objectivity of Management’s
valuation department, including the certified staff appraiser, by
reviewing the qualifications and expertise of the individuals
involved in the preparation and review of the valuations.
FIRST CAPITAL REIT ANNUAL REPORT 2021
62
Independent Auditor's Report
Key Audit Matter
How our audit addressed the key audit matter
The valuation of the Trust’s investment property portfolio is a key
audit matter given the inherently subjective nature of significant
assumptions including discount rates, stabilized capitalization
rates, terminal capitalization rates, and stabilized cash flows or net
operating income which are based on vacancy and leasing
assumptions, as applicable. These assumptions are influenced by
property-specific characteristics including location, type and
quality of the properties and tenancy agreements.
Note 2(h) of the consolidated financial statements describes the
accounting policy for investment properties, including the
valuation method and valuation inputs.
We selected a sample of properties where either the fair value
change from prior year or significant assumptions fell outside our
expectations, based on our understanding of the geographical real
estate market for the specific asset type. For this sample of
investment properties, we evaluated the significant assumptions
by comparison to the expected real estate market benchmark
range for similar assets and tenancies, in similar locations. We also
considered whether there were any additional asset-specific
characteristics that may impact the significant assumptions utilized
and whether these were appropriately considered in the overall
assessment of fair value.
We assessed the accuracy of Management’s historical fair value
estimates through comparison to transactions to acquire and
dispose of interests in investment properties completed by the
Trust.
Note 3(b) of the consolidated financial statements discloses the
sensitivity of the fair value of investment properties to a change in
stabilized capitalization rates and stabilized net operating income.
We evaluated the Trust’s critical accounting policies and related
disclosures in the consolidated financial statements to assess
appropriateness and conformity with IFRS.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion & Analysis; and
• The information, other than the consolidated financial statements and our auditor’s report thereon, 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 & 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
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 Trust’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 Trust or to cease operations, or has no realistic alternative
but to do so. Those charged with governance are responsible for overseeing the Trust’s financial reporting process.
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
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FIRST CAPITAL REIT ANNUAL REPORT 2021
Independent Auditor's Report
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:
• 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 Trust’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 Trust’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 Trust 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.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
The engagement partner on the audit resulting in this independent auditor’s report is Kim Tang.
Toronto, Canada
February 8, 2022
FIRST CAPITAL REIT ANNUAL REPORT 2021
64
Consolidated Balance Sheets
As at
(thousands of dollars)
ASSETS
Non-current Assets
Real Estate Investments
Investment properties
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
Exchangeable Units
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 current liabilities
Total liabilities
EQUITY
Unitholders' equity
Non-controlling interest
Total equity
Total liabilities and equity
Refer to accompanying notes to the consolidated financial statements.
Approved by the Board of Trustees:
Al Mawani
Trustee
Adam E. Paul
Trustee
65
FIRST CAPITAL REIT ANNUAL REPORT 2021
Note
December 31, 2021
December 31, 2020
3
4
5
6
8
27(d)
6
7
8
3(d)
10
10
11
13
12
21
10
10
10
11
12
14
24
$
8,975,539
349,488
85,400
129,608
9,540,035
12,174
9,552,209
$
9,328,792
52,570
88,000
52,160
9,521,522
28,555
9,550,077
34,699
142,134
156,039
27,784
44,909
405,565
151,300
556,865
$ 10,109,074
100,444
77,269
74,190
46,296
22,338
320,537
161,849
482,386
$ 10,032,463
$
1,129,500
824,792
1,898,677
1,947
53,497
740,309
4,648,722
2,476
43,675
74,985
449,468
220,666
791,270
5,439,992
$
1,256,333
854,661
2,347,170
1,399
65,998
698,528
5,224,089
238
90,304
61,267
174,965
225,173
551,947
5,776,036
4,620,942
48,140
4,669,082
$ 10,109,074
4,227,164
29,263
4,256,427
$ 10,032,463
Consolidated Statements of Income (Loss)
(thousands of dollars)
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 (loss) from joint ventures
Other gains (losses) and (expenses)
(Increase) decrease in value of unit-based compensation
(Increase) decrease in value of Exchangeable Units
Increase (decrease) in value of hotel property
Increase (decrease) in value of investment properties, net
Income (loss) before income taxes
Deferred income tax expense (recovery)
Net income (loss)
Net income (loss) attributable to:
Unitholders
Non-controlling interest
Refer to accompanying notes to the consolidated financial statements.
Year ended December 31
Note
2021
2020
$
674,890
$
672,890
16
17
18
19
4
20
15
13
5
3
21
14
24
262,352
412,538
273,858
399,032
10,880
(152,670)
(38,207)
(248)
(6,018)
(1,460)
87,089
(9,286)
(548)
(1,122)
198,617
87,027
499,565
25,929
473,636
460,131
13,505
473,636
$
$
$
12,248
(157,711)
(33,238)
(90)
(5,589)
(7,835)
858
11,459
7,404
(9,432)
(185,700)
(367,626)
31,406
23,924
7,482
2,702
4,780
7,482
$
$
$
FIRST CAPITAL REIT ANNUAL REPORT 2021
66
Consolidated Statements of Comprehensive Income
(Loss)
(thousands of dollars)
Net income (loss)
Other comprehensive income (loss)
Unrealized gain (loss) on revaluation of hotel property
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 (loss)
Comprehensive income (loss) attributable to:
Unitholders
Non-controlling interest
(1) Items that may subsequently be reclassified to net income (loss).
Refer to accompanying notes to the consolidated financial statements.
Year ended December 31
Note
2021
$
473,636
$
5
21
14
24
—
37,485
3,143
40,628
15,866
24,762
498,398
484,893
13,505
498,398
$
$
$
$
$
$
2020
7,482
(2,910)
(56,012)
2,203
(56,719)
(20,941)
(35,778)
(28,296)
(33,076)
4,780
(28,296)
67
FIRST CAPITAL REIT ANNUAL REPORT 2021
Consolidated Statements of Changes in Equity
(thousands of dollars)
December 31, 2020
Changes during the year:
Net income (loss)
Options, deferred units,
restricted units, and performance units,
net
Other comprehensive income (loss)
Contributions from (distributions to) non-
controlling interest, net
Distributions (Note 14(b))
December 31, 2021
(thousands of dollars)
December 31, 2019
Changes during the year:
Net income (loss)
Conversion of Exchangeable Units (Note 13)
Options, deferred units,
restricted units, and performance units,
net
Other comprehensive income (loss)
Contributions from (distributions to) non-
controlling interest, net
Distributions (Note 14(b))
December 31, 2020
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Trust Units
(Note 14(a))
Total
Unitholders'
Equity
Non-
Controlling
Interest
Total
Equity
$
1,376,162 $
(43,580) $
2,894,582 $
4,227,164 $
29,263 $
4,256,427
460,131
—
—
—
(94,804)
—
—
—
3,689
460,131
3,689
24,762
—
—
—
—
—
24,762
—
13,505
—
—
5,372
473,636
3,689
24,762
5,372
(94,804)
—
(94,804)
$
1,741,489 $
(18,818) $
2,898,271 $
4,620,942 $
48,140 $
4,669,082
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Trust Units
(Note 14(a))
Total
Unitholders’
Equity
Non-
Controlling
Interest
Total
Equity
$
1,561,487 $
(7,802) $
2,872,907 $
4,426,592 $
48,914 $
4,475,506
2,702
—
—
—
—
(188,027)
—
—
—
—
16,207
5,468
(35,778)
—
—
—
—
—
2,702
16,207
5,468
(35,778)
4,780
—
—
—
—
(24,431)
7,482
16,207
5,468
(35,778)
(24,431)
(188,027)
—
(188,027)
$
1,376,162 $
(43,580) $
2,894,582 $
4,227,164 $
29,263 $
4,256,427
Refer to accompanying notes to the consolidated financial statements.
FIRST CAPITAL REIT ANNUAL REPORT 2021
68
Consolidated Statements of Cash Flows
Year ended December 31
Note
2021
2020
$
473,636
$
7,482
3
5
18
4
18
27(a)
27(b)
10
10
10
10
11
11
24
3(c)
5
3(d)
4
4
3(a)
27(c)
(198,617)
1,122
152,670
6,018
1,460
(149,490)
(47,118)
9,932
249,613
—
(28,115)
(146,112)
(24,753)
—
185,700
9,432
157,711
5,589
7,835
(151,235)
8,213
(11,222)
219,505
115,236
(28,404)
(67,724)
18,730
198,870
(175,000)
(175,000)
—
981
(102,618)
5,372
(470,245)
(14,504)
—
319,068
16,897
(17,110)
(153,519)
(4,430)
8,485
154,887
(65,745)
100,444
(6,964)
2,826
(187,929)
(24,431)
(154,790)
(20,248)
(11,769)
232,453
2,982
(3,889)
(205,033)
(11,228)
26,958
10,226
74,941
25,503
27(d)
$
34,699
$
100,444
(thousands of dollars)
OPERATING ACTIVITIES
Net income (loss)
Adjustments for:
(Increase) decrease in value of investment properties, net
(Increase) decrease in value of hotel property
Interest expense
Amortization expense
Share of (profit) loss 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
Issuance of trust units, net of issue costs
Payment of distributions
Net contributions from (distributions to) non-controlling interest
Cash provided by (used in) financing activities
INVESTING ACTIVITIES
Acquisition of investment properties
Acquisition of Hotel property (net settled with loan repayment)
Net proceeds from property dispositions
Distributions from joint ventures
Contributions to joint ventures
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 year
Cash and cash equivalents, end of year
Refer to accompanying notes to the consolidated financial statements.
69
FIRST CAPITAL REIT ANNUAL REPORT 2021
Notes to the Consolidated Financial Statements
1. DESCRIPTION OF THE TRUST
First Capital Real Estate Investment Trust ("First Capital", "FCR", or the “Trust”) is an unincorporated, open-ended mutual
fund trust governed by the laws of Ontario, Canada, and established pursuant to a declaration of trust dated October 16,
2019, as may be amended from time to time (the "Declaration of Trust"). First Capital engages in the business of
acquiring, developing, redeveloping, owning and managing well-located, grocery anchored and mixed-use real estate
located in Canada's most densely populated cities. The Trust is listed on the Toronto Stock Exchange (“TSX”) under the
symbol “FCR.UN”, 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 to all years presented, unless otherwise noted.
In measuring performance or allocating resources, the Trust does not distinguish or group its operations on a
geographical or any other basis and, accordingly, has a single reportable segment for disclosure purposes. Reportable
segments have been aggregated based on Management's judgement, which considered the nature of operations, type of
tenants and that the aggregated segments would have similar long-term economic characteristics. As a result, effective
January 1, 2021, the Trust has one reportable segment for financial reporting purposes, which comprises the ownership,
management and development of investment properties located across Canada.
These audited annual consolidated financial statements were approved by the Board of Trustees and authorized for issue
on February 8, 2022.
(c) Basis of Consolidation
The consolidated financial statements include the financial statements of the Trust as well as the entities that are
controlled by the Trust (subsidiaries). The Trust controls an entity when the Trust 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 Trust. They are deconsolidated
from the date that control ceases. Inter-company transactions, balances and other transactions between consolidated
entities are eliminated.
(d) Trust Units
First Capital's Trust Units are redeemable at the option of the holder, and, therefore, are considered puttable instruments
in accordance with IAS 32, "Financial Instruments – Presentation" ("IAS 32"). Puttable instruments are required to be
accounted for as financial liabilities, except where certain conditions are met in accordance with IAS 32, in which case, the
puttable instruments may be presented as equity.
To be presented as equity, a puttable instrument must meet all of the following conditions: (i) it must entitle the holder
to a pro-rata share of the entity's net assets in the event of the entity's dissolution; (ii) it must be in the class of
instruments that is subordinate to all other instruments; (iii) all instruments in the class in (ii) above must have identical
features; (iv) other than the redemption feature, there can be no other contractual obligations that meet the definition of
a liability; and (v) the expected cash flows for the instrument must be based substantially on the profit or loss of the
entity or change in the fair value of the instrument.
FIRST CAPITAL REIT ANNUAL REPORT 2021
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
The Trust Units meet the conditions of IAS 32 and, accordingly, are presented as equity in the consolidated financial
statements.
Earnings per Unit
As First Capital's Trust Units are puttable instruments and, therefore, financial liabilities, they may not be considered as
equity for the purposes of calculating net income on a per unit basis under IAS 33, "Earnings per Share". Consequently,
the Trust has not reported earnings per unit.
(e) Exchangeable Units
The Class B Limited Partnership Units of First Capital REIT Limited Partnership, a subsidiary of the Trust, are exchangeable,
at the option of the holder, into Trust Units. The Exchangeable Units are considered a financial liability as there is a
contractual obligation for First Capital to deliver Trust Units (which, as noted in Note 2(d), are puttable instruments) upon
exchange. Exchangeable Units are required to be classified as financial liabilities at fair value through profit or loss
("FVTPL"). The distributions declared on the Exchangeable Units are accounted for as interest expense.
(f) Business combinations
At the time of acquisition of property, First Capital considers whether the acquisition represents the acquisition of a
business. The Trust 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 Trust recognizes any contingent consideration to be
transferred by the Trust at its acquisition date fair value. Goodwill is initially measured at cost, being the excess of the
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.
(g) Investments in joint arrangements
First Capital accounts for its investment in joint ventures using the equity method and accounts for investments in joint
operations by recognizing the Trust’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 consolidated balance sheets at cost plus post-acquisition
changes in the Trust’s share of the net assets of the joint ventures, less distributions received and less any impairment in
the value of individual investments. First Capital's consolidated statements of income (loss) reflect its share of the results
of operations of the joint ventures after tax, if applicable.
(h) Investment properties
Investment properties consist of income-producing properties 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 Trust is the lessee. The Trust classifies its investment
properties on its consolidated balance sheets as follows:
(i) Investment properties
Investment properties include First Capital's income producing portfolio, properties currently under development or
redevelopment, and any adjacent land parcels available for expansion but not currently under development. Also
included in investment properties is development land, which includes land parcels at various stages of development
planning, primarily for future retail or mixed-use occupancy.
71
FIRST CAPITAL REIT ANNUAL REPORT 2021
(ii) 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
Investment properties are recorded at fair value, which reflects current market conditions, at each reporting period end
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.
First Capital'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 Trust, 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.
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.
Valuation Inputs
First Capital's investment property is measured using Level 3 inputs (in accordance with the IFRS fair value hierarchy), as
not all significant inputs are based on observable market data (unobservable inputs). These unobservable inputs reflect
the Trust’s own assumptions of how market participants would price investment property, and are developed based on
the best information available, including the Trust’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.
FIRST CAPITAL REIT ANNUAL REPORT 2021
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(i) Investment properties
Investment properties that are income producing 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
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 First Capital’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
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 Trust 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 Trust makes no adjustments for portfolio
premiums and discounts, nor for any value attributable to the Trust's management platform.
(i) Hotel property
First Capital accounts for its hotel property as property, plant and equipment under the revaluation model. Hotel property
is recognized initially at fair value if acquired in a business combination and is subsequently carried at fair value at the
revaluation date less any accumulated impairment and subsequent accumulated amortization. The Trust amortizes these
assets on a straight-line basis over their relevant estimated useful lives. The estimated useful lives 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 typically performed annually, unless market conditions arise that would require
quarterly revaluations. Where the carrying amount of an asset is increased as a result of a revaluation, the increase is
recognized in other comprehensive income (loss) ("OCI") 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 OCI to the extent of any balance existing in revaluation surplus in respect of the asset, with the remainder
73
FIRST CAPITAL REIT ANNUAL REPORT 2021
recognized in net income. Revaluation gains are recognized in OCI, 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 First Capital's
consolidated statements of income (loss).
(j) 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 Trust’s other
borrowings to eligible expenditures. Borrowing costs are not capitalized on residential development inventory where no
development activity is taking place.
Transfers into residential inventory are based on a change in use, evidenced by the commencement of development
activities with a view to sell, at which point an investment property would be transferred to inventory. Transfers from
residential inventory to investment property are based on a change in used evidenced by Management's commitment to
use the property for rental income purposes and the establishment of an operating lease.
(k) Taxation
First Capital qualifies as a mutual fund trust under the Income Tax Act (Canada)(the "Act"). The Trust qualifies for the REIT
Exemption and, as such, the Trust itself will not be subject to income taxes provided it continues to qualify as a REIT for
purposes of the Act. A REIT is not taxable and not considered to be a Specified Investment Flow-Through Trust provided it
complies with certain tests and distributes all of its taxable income in a taxation year to its Unitholders. The Trust is a
flow-through vehicle and accounts only for income taxes pertaining to its corporate subsidiaries. The Trust's most
significant corporate subsidiary, First Capital Realty Inc., is a mutual fund corporation ("MFC").
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.
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, carryforward 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.
(l) Provisions
A provision is a liability of uncertain timing or amount. First Capital 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
FIRST CAPITAL REIT ANNUAL REPORT 2021
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
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.
(m) Unit-based Compensation Plans
Unit Options, Restricted Units (“RUs”), Performance Units (“PUs”), and Trustee Deferred Units (“DUs”) are issued by First
Capital from time to time as non-cash compensation. These unit-based compensation plans are measured at fair value at
the grant date and compensation expense is recognized in the consolidated statements of income (loss) consistent with
the vesting features of each plan. The unit-based compensation plans are accounted for as cash-settled awards as the
Trust is an open-ended trust making its units redeemable, and thus requiring outstanding Unit Options, RUs, PUs and DUs
to be recognized as a liability and carried at fair value. The liability is adjusted for changes in fair value with such
adjustments being recognized as compensation expense in the consolidated statements of income (loss) in the period in
which they occur. The liability balance is reduced as Unit Options are exercised or RUs, PUs and DUs are settled for Trust
Units and recorded in equity.
(n) Revenue recognition
First Capital retains 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 Trust 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.
First Capital'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 termination fees and percentage rent are considered lease
components and are in the scope of IFRS 16, "Leases" ("IFRS 16").
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.
Lease termination fees are earned from tenants in connection with the cancellation or early termination of their
remaining lease obligations, and are recognized when a lease termination agreement is signed and collection is
reasonably assured.
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 a performance obligation, meeting the criteria for over-time
recognition, and are recognized in the period that recoverable costs are incurred or services are performed.
(o) Financial instruments and derivatives
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 FVTPL, fair value through other comprehensive income (“FVOCI”) or amortized cost.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
Derivative instruments are recorded in the consolidated balance sheets at fair value, including those derivatives that are
embedded in financial or non-financial contracts.
First Capital 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 U.S. 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 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).
The following summarizes the Trust’s classification and measurement of financial assets and liabilities for the years ended
December 31, 2021 and 2020:
Financial assets
Other investments
Derivative assets
Loans and mortgages receivable
Loans and mortgages receivable (1)
Equity securities designated as FVTPL
Amounts receivable
Cash and cash equivalents
Restricted cash
Bond asset
Financial liabilities
Bank indebtedness
Mortgages
Credit facilities
Senior unsecured debentures
Exchangeable Units
Accounts payable and other liabilities
Unit-based compensation plans
Derivative liabilities
Classification &
Measurement
FVTPL
FVTPL
Amortized Cost
FVTPL
FVTPL
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
Amortized Cost
FVTPL
Amortized Cost
FVTPL
FVTPL
(1) The Loans whose cash flows are not solely payments of principal or interest are classified as FVTPL.
In determining fair values, the Trust 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 as follows:
(i) Level 1 Inputs – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Trust has the
ability to access at the measurement date. The Trust’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 Trust’s derivative assets and liabilities are
measured using Level 2 inputs; and
FIRST CAPITAL REIT ANNUAL REPORT 2021
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(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 Trust'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 Trust’s own
data. The Trust'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 Trust determines
whether transfers have occurred between levels in the hierarchy by reassessing 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.
(p) 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.
(q) Critical judgments in applying accounting policies
The following are the critical judgments that have been made in applying First Capital's accounting policies and that have
the most significant effect on the amounts in the consolidated financial statements:
(i) Investment properties
In applying the Trust’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 Trust 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
First Capital retains its REIT status if it meets the prescribed conditions under the Act. Management uses judgment in its
interpretation and application of these conditions. First Capital determined that it qualifies as a REIT for the current
period and expects to meet the prescribed conditions going forward. However, should the Trust no longer meet the REIT
conditions, substantial adverse tax consequences may result.
With respect to its corporate subsidiaries, the Trust 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 Trust reflects
the Trust's interpretation of the relevant tax laws. The Trust 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.
(r) Critical accounting estimates and assumptions
First Capital 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.
The outbreak of coronavirus (“COVID-19”), which the World Health Organization has declared a global pandemic, and
government related action to shutdown large parts of the economy has impacted global commercial activity and
contributed to significant volatility in certain equity and debt markets. The extent and duration of the impact of COVID-19
on communities and the economy remains unclear. In the preparation of these audited annual consolidated financial
statements, the Trust has incorporated the potential impact of COVID-19 into its 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 using the best available information as of December 31, 2021. Actual results could
differ from those estimates. The estimates and assumptions that the Trust considers critical and/or could be impacted by
77
FIRST CAPITAL REIT ANNUAL REPORT 2021
COVID-19 include those underlying the valuation of investment properties, the valuation of its hotel property, the net
realizable value of residential inventory, the carrying amount of its investment in joint ventures, the estimate of any
expected credit losses on amounts receivable or loans and mortgages receivable and determining the values of financial
instruments for disclosure purposes (Note 23).
Additional critical accounting estimates and assumptions include those used for estimating deferred taxes (Note 21), and
estimating the fair value of unit-based compensation arrangements (Note 15).
(s) Impacts of COVID-19
Rent Abatements
FCR accounts for rental abatements, in connection with tenants experiencing financial hardship as a result of COVID-19
and qualify under the Canada Emergency Commercial Rent Assistance ("CECRA") program, under the derecognition rules
of IFRS 9, "Financial Instruments". Financial assets, such as trade receivables, are derecognized when all or a portion of
outstanding amounts will be forgiven or abated and no further collection activities will be pursued. The forgiveness or
abatement of the tenant receivable is recognized in the period First Capital forgoes the contractual right to all or a
portion of the outstanding receivable and is recognized as a loss in the consolidated statements of income (loss), under
property operating costs.
Government Assistance
First Capital recognizes government assistance, in the form of grants or forgivable loans, when there is reasonable
assurance that the Trust will be able to comply with the conditions attached to the assistance and that the assistance will
be received. Government assistance that compensates FCR for expenses incurred is recognized in the consolidated
statements of income (loss), as a reduction of the related expense, in the periods in which the expenses are recognized.
(t) Adoption of Amended IFRS Pronouncements
Interbank Offered Rate ("IBOR") Benchmark Reform - Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4
and IFRS 16
The amendments provide temporary reliefs which address the financial reporting effects when an IBOR is replaced with
an alternative nearly risk-free interest rate ("RFR"). The amendments include the following practical expedients:
(i) A practical expedient to require contractual changes, or changes to cash flows that are directly required by the
reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest
(ii) Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the
hedging relationship being discontinued
(iii) Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR
instrument is designated as a hedge of a risk component
These amendments had no impact on the consolidated financial statements of First Capital. First Capital intends to use the
practical expedients in future periods if they become applicable.
(u) Future Changes in Accounting Policies
Amendment to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-
Current
In January 2020, the IASB issued amendments to IAS 1 to clarify the requirements for classifying liabilities as current or
non-current. The amendments clarify the classification of liabilities as current or non-current based on rights that are in
existence at the end of the reporting period and unaffected by expectations about whether an entity will exercise its right
to defer settlement of a liability. The amendments also clarify the definition of 'settlement' of a liability. The amendments
are effective January 1, 2023, with early adoption permitted. The amendments are to be applied retrospectively.
Management is currently assessing the impact of this amendment.
FIRST CAPITAL REIT ANNUAL REPORT 2021
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
3. INVESTMENT PROPERTIES
(a) Activity
The following tables summarize the changes in First Capital’s investment properties for the years ended December
31, 2021 and 2020 :
Income Producing
Properties
Properties under
Construction
Density &
Development Land
Total
Year ended December 31, 2021
Balance at beginning of year
$
8,786,149 $
221,116 $
483,376 $
9,490,641
Acquisitions
Capital expenditures
Developments transferred offline / online, net
Reclassification to residential development
inventory
Increase (decrease) in value of investment
properties, net
Straight-line rent and other changes
Dispositions
Reclassification to equity accounted joint ventures (1)
Balance at end of year
Investment properties
Investment properties classified as held for sale
Total
$
$
$
14,504
67,856
262,238
—
—
59,783
(278,306)
—
25,880
16,068
—
(92,286)
14,504
153,519
—
(92,286)
121,336
13,428
63,853
198,617
2,076
(366,732)
(117,500)
8,769,927 $
8,691,027 $
78,900
—
—
—
16,021 $
16,021 $
—
—
—
(156,000)
340,891 $
268,491 $
72,400
2,076
(366,732)
(273,500)
9,126,839
8,975,539
151,300
8,769,927 $
16,021 $
340,891 $
9,126,839
(1)
In the third quarter of 2021, two properties were reclassified to investment in joint ventures as the legal ownership of these two properties changed or was restructured
as part of disposition transactions. The two properties are now beneficially owned in separate limited partnerships owned 50/50 by the Trust and their respective
partners. See Note 4 for further information.
Income Producing
Properties
Properties under
Construction
Density &
Development Land
Total
Year ended December 31, 2020
Balance at beginning of year
$
8,973,501 $
264,577 $
514,052 $
9,752,130
Acquisitions
Capital expenditures
Developments transferred offline / online, net
Reclassification to residential development
inventory
Increase (decrease) in value of investment
properties, net
Straight-line rent and other changes
Dispositions
Balance at end of year
Investment properties
Investment properties classified as held for sale
Total
$
$
$
20,248
74,336
123,709
—
(198,679)
7,817
(214,783)
8,786,149 $
8,695,350 $
90,799
—
90,782
(134,286)
—
43
—
—
221,116 $
221,116 $
—
—
39,915
10,577
(57,519)
20,248
205,033
—
(57,519)
12,936
(185,700)
—
(36,585)
483,376 $
412,326 $
71,050
7,817
(251,368)
9,490,641
9,328,792
161,849
8,786,149 $
221,116 $
483,376 $
9,490,641
Investment properties with a fair value of $2.5 billion (December 31, 2020 – $2.8 billion) are pledged as security for
$1.2 billion (December 31, 2020 – $1.5 billion) in mortgages and secured credit facilities.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
(b) Investment property valuation
Stabilized overall capitalization, terminal, and discount rates for investment properties valued under the Income
Approach are set out in the table below:
As at
Weighted Average Total
Overall Capitalization Rate
Terminal Capitalization Rate
Discount Rate
December 31, 2021
December 31, 2020
5.0%
5.2%
5.7%
5.0%
5.2%
5.8%
The majority of the Trust's portfolio is valued under the Income Approach using the discounted cash flow ("DCF") method.
As at December 31, 2021, the weighted average valuation yields (stabilized overall capitalization, terminal, and discount
rates) used in valuing those investment properties under the Income Approach remained substantially unchanged from
December 31, 2020.
Throughout 2021, as part of its normal course internal valuations, the Trust adjusted the fair value of certain properties to
reflect the contractual sale price prior to disposition, as well as revaluations of development land. In addition, the Trust
made revisions to capitalization and discount rates for certain properties. As a result, an overall increase in the value of
investment properties was recorded in the amount of $198.6 million ($181.5 million at FCR's share) for the year ended
December 31, 2021.
At the onset of the pandemic which arose in the first quarter of 2020, an overall decrease in the value of investment
properties was recorded in the amount of $185.7 million ($195.8 million at FCR's share) for the year ended December 31,
2020. The decrease reflected the potential impact of COVID-19 on the cash flows in the valuation models. As part of a
comprehensive portfolio review, properties with greater exposure to tenants deemed non-essential under government
directives, and therefore potentially subject to prolonged closures, were identified. The short term cash flows in the 10 year
valuation models for each of these properties were adjusted for increased vacancy, lower rental rate growth, and other
market leasing assumptions such as slower lease up of existing vacancy.
The sensitivity of the fair values of investment properties to stabilized overall capitalization rates as at December 31, 2021 is
set out in the table below:
As at December 31, 2021
(Decrease) Increase in stabilized overall capitalization rate
(1.00%)
(0.75%)
(0.50%)
(0.25%)
0.25%
0.50%
0.75%
1.00%
(millions of dollars)
Resulting increase (decrease) in fair
value of investment properties
2,290
1,615
1,017
481
(435)
(831)
(1,191)
(1,522)
$
$
$
$
$
$
$
$
Additionally, a 1% increase or decrease in stabilized net operating income ("SNOI") would result in a $91 million increase or
a $91 million decrease, respectively, in the fair value of investment properties. 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 investment properties of $577 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 investment properties of $522
million.
FIRST CAPITAL REIT ANNUAL REPORT 2021
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(c) Investment properties – Acquisitions
For the years ended December 31, 2021 and 2020, First Capital acquired investment properties as follows:
Year ended December 31
Total purchase price, including acquisition costs (1)
Total cash paid
$
$
2021
14,504 $
14,504 $
2020
20,248
20,248
(1) During the first quarter of 2020, one of the Trust’s wholly owned subsidiaries purchased a property from another consolidated subsidiary, that is subject to a non-controlling
interest. The Trust’s net effective ownership in the asset increased by 15.5% to 100%. The Trust’s acquisition cost for its incremental 15.5% interest was $25.4 million which is
reflected as a distribution to the non-controlling interest partner in the consolidated financial statements.
(d) Investment properties classified as held for sale and dispositions
First Capital has certain investment properties classified as held for sale. These properties are considered to be non-core
assets and are as follows:
As at December 31
Aggregate fair value
$
2021
151,300 $
2020
161,849
The decrease of $10.5 million in investment properties classified as held for sale from December 31, 2020, primarily arose
from the disposition of investment properties, offset by fair value adjustments on certain properties as well as the
addition of new investment properties classified as held for sale, in line with First Capital's super urban strategy.
For the years ended December 31, 2021 and 2020, First Capital sold investment properties as follows:
Year ended December 31
Total selling price
Vendor take-back mortgage on sale
Property selling costs
Net cash proceeds
$
$
2021
366,732 $
(40,531)
(7,133)
319,068 $
2020
251,368
(15,000)
(3,915)
232,453
4. INVESTMENT IN JOINT VENTURES
As at December 31, 2021, First Capital had interests in nine joint ventures that it accounts for using the equity method. First
Capital's joint ventures are as follows:
Effective Ownership
Location
December 31, 2021
Name of Property/Business Activity
Name of Entity
Aukland and Main Developments LP (1) Station Place
College Square General Partnership
Edenbridge Kingsway (Humbertown)
Fashion Media Group GP Ltd.
FC Access LP (2)
FC Urban Properties, LP
Green Capital Limited Partnership
Lakeshore Development LP
Stackt Properties LP
(1) As at December 31, 2020, Aukland and Main Developments LP was a consolidated subsidiary subject to a non-controlling interest of 29.1%, resulting in the Trust's effective
Toronto, ON
Ottawa, ON
College Square
Toronto, ON
Humbertown Condos (Phase 1)
Toronto Fashion Week events
Toronto, ON
Whitby Mall (self storage operation) Whitby, ON
Toronto, ON
199 Avenue Road
Markham, ON
Royal Orchard
Toronto, ON
2150 Lake Shore Blvd. W.
Toronto, ON
Shipping Container marketplace
35.4%
50.0%
50.0%
78.0%
25.0%
20.0%
50.0%
50.0%
94.0%
70.9%
50.0%
50.0%
78.0%
25.0%
N/A
50.0%
N/A
94.0%
December 31, 2020
ownership of 70.9%. In the third quarter of 2021, the Trust's new partner in Station Place subscribed to 50% of the limited partnership units of Aukland and Main
Developments LP, reducing the Trust's effective ownership to 35.4%.
(2) During the third quarter of 2021, FC Access LP disposed of its self storage operations at Whitby Mall. The joint venture is in the process of being legally wound up.
First Capital has determined that these investments are joint ventures as all decisions regarding their activities are made
unanimously between First Capital and its partners.
On September 1, 2021, the Trust's new 50% partner in Station Place subscribed to 50% of the limited partnership units in
Aukland and Main Developments LP, the beneficial owner of the property, for $117.5 million.
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FIRST CAPITAL REIT ANNUAL REPORT 2021
On September 17, 2021, the Trust's new 50% partner in 2150 Lake Shore Boulevard West subscribed to 50% of the limited
partnership units in the newly formed Lakeshore Development LP for $156 million by way of $56 million in cash and $100
million in notes receivable. Concurrent with the subscription, the Trust's 50% interest in the Christie Cookie lands was
transferred into the new joint venture as well as the purchase of the former partner's 50% interest which was conveyed to
Lakeshore Development LP on closing.
On November 26, 2021, the Trust contributed 100% of the lands to the Edenbridge Kingsway (Humbertown) joint venture
which was previously classified as residential inventory for $24.7 million. The Trust’s joint venture partner contributed $12.3
million to the partnership, to pay for its portion of the land which was subsequently distributed to the Trust.
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%
First Capital's investment in equity accounted joint ventures
For the year ended
Property revenue
Property expenses
Increase (decrease) in value of investment properties, net
Other income and (expenses)
Income (loss) before income taxes
Current income tax expense (recovery)
Net income (loss) and total comprehensive income (loss) at 100%
First Capital's share of income in equity accounted joint ventures
December 31, 2021 December 31, 2020
$
921,985
$
206,891
(201,255)
720,730
(83,339)
123,552
$
349,488
$
52,570
December 31, 2021 December 31, 2020
$
17,369
$
15,429
(9,507)
(4,145)
(3,061)
656
—
656
(1,460)
$
$
(8,660)
(10,965)
(8,355)
(12,551)
—
$
$
(12,551)
(7,835)
During 2021, First Capital received distributions from its joint ventures of $16.9 million (2020 – $3.0 million) and made
contributions to its joint ventures of $17.1 million (2020 – $3.9 million).
As at December 31, 2021, there were no outstanding commitments or contingent liabilities for the nine equity accounted
joint ventures. Additionally, none of the Trust’s investments in joint ventures were determined to be impaired.
5. HOTEL PROPERTY
First Capital owns a 100% interest in the Hazelton Hotel ("hotel property") located in Toronto, Ontario. The hotel property is
a mixed-use luxury hotel located in Yorkville Village.
On October 1, 2020, First Capital acquired the remaining 40% interest in the hotel property. Prior to the acquisition, First
Capital owned a 60% interest in the hotel property. The total purchase price before closing costs was $30.6 million. The
transaction was accounted for as a business combination under IFRS 3 "Business Combinations". First Capital recognized a
gain on the purchase of the hotel property of $7.4 million and incurred transaction costs of $1.1 million, which were
expensed in 'Other gains (losses) and (expenses)' in the consolidated statements of income (loss) for the year ended
December 31, 2020.
The purchase price was based on a fixed price formula that resulted in a discount to the fair value on acquisition date. The
purchase price was satisfied primarily through the settlement of a loan in the amount of $20.0 million advanced from First
Capital to the co-owner.
FIRST CAPITAL REIT ANNUAL REPORT 2021
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
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 asset
Purchase price for net assets acquired (1)
Gain on below market purchase
$
$
34,604
2,476
78
37,158
778
(30,551)
7,385
(1)
Includes purchase price of $29.8 million and closing adjustments of $0.8 million.
The following table summarizes the changes in the net book value of the hotel property for the years ended December 31,
2021 and 2020.
Balance at beginning of year
Acquisition
Amortization
Additions
Revaluation of hotel property (1)
Balance at end of year
December 31, 2021
December 31, 2020
$
$
88,000
$
—
(1,937)
459
(1,122)
85,400
$
62,199
37,080
(1,432)
2,495
(12,342)
88,000
(1) The revaluation loss of $12.3 million, for the year ended December 31, 2020, was recognized partly through other comprehensive income (loss) to reverse previously
recognized gains on the hotel property of $2.9 million in accordance with the revaluation model accounting for the hotel. The remaining $9.4 million revaluation loss was
recognized in the consolidated statements of income (loss).
6. LOANS, MORTGAGES AND OTHER ASSETS
As at
Non-current
December 31, 2021 December 31, 2020
Loans and mortgages receivable classified as FVTPL (a)
$
1,486
$
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
122,321
5,801
129,608
6
116,152
25,976
142,134
1,968
37,612
12,580
52,160
6
73,548
3,715
77,269
$
271,742
$
129,429
(a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning
investment properties. As at December 31, 2021, these receivables bear interest at weighted average effective
interest rates of 5.4% (December 31, 2020 – 6.3%) and mature between 2022 and 2026. As of December 31, 2021,
none of the Trust's loans and mortgages receivable classified as amortized cost required a provision or were
determined to be impaired taking into account the COVID-19 environment.
(b) On September 17, 2021, the Trust's partner in 2150 Lake Shore Boulevard West subscribed to 50% of the units in the
newly formed Lakeshore Development LP for $156 million. The subscription price was satisfied through the payment
83
FIRST CAPITAL REIT ANNUAL REPORT 2021
of $56 million in cash and $100 million in loans receivable. One half of the loan, or $50 million, is due on or before
December 31, 2022, and the remainder is due on or before September 17, 2026. The loan bears no interest until
December 31, 2022 and thereafter bears interest at the greater of prime plus 2.5% or 5%. At inception, a discount in
the amount of $6.5 million was recognized and netted against the principal amount of the loan. This discount will be
accreted into interest income over the interest free period of the loan.
(c) From time to time, First Capital 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, 2021 are as follows:
2022
2023
2024
2025
2026
Sub-Total
Unamortized deferred financing fees and accrued interest
Total scheduled principal receipts of loans and mortgages receivable
Current
Non-current
Total
Scheduled
Receipts
$ 113,421
9,572
39,095
25,000
50,000
$ 237,088
2,877
$ 239,965
$ 116,158
123,807
$ 239,965
Weighted Average
Effective Interest
Rate
5.6 %
6.3 %
3.3 %
7.8 %
5.2 %
5.4 %
5.6 %
5.2 %
5.4 %
7. AMOUNTS RECEIVABLE
As at
Tenant receivables (net of allowance for expected credit losses of $17.2 million;
December 31, 2020 – $11.4 million)
Corporate and other amounts receivable
Total
December 31, 2021 December 31, 2020
$
$
27,032
752
27,784
$
$
45,439
857
46,296
First Capital determines its allowance for expected credit losses on a tenant-by-tenant basis considering lease terms, credit
risk, industry conditions, and the status of the tenant’s account as well as the impact of COVID-19 on tenant's ability to pay
any trade receivables outstanding at December 31, 2021.
The change in the allowance for expected credit losses is summarized below:
As at and for the twelve months ended
Allowance for expected credit losses, beginning of year
Receivables written off during the year
Additional provision recorded during the year
Allowance for expected credit losses, end of year
December 31, 2021 December 31, 2020
$
$
11,440
(4,232)
10,005
17,213
$
3,003
(1,367)
9,804
$
11,440
During the second and third quarters of 2020, the Trust provided rental abatements for 75% of gross rent to qualifying
tenants participating in the CECRA program. As a result, the qualifying tenant’s outstanding receivable was reduced and
recorded as a charge to bad debt expense. Concurrently, the Trust recognized the benefit of the government’s forgivable
loan covering 50% of gross rent as a reduction of bad debt expense. As such, the net charge to bad debt expense included
in property operating costs totaled $13.2 million for the year ended December 31, 2020, related to the CECRA program.
FIRST CAPITAL REIT ANNUAL REPORT 2021
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
8. OTHER ASSETS
As at
Non-current
Fixtures, equipment and computer hardware and software (net of accumulated
amortization of $22.3 million; December 31, 2020 – $18.2 million)
Deferred financing costs on credit facilities (net of accumulated amortization of
$7.5 million; December 31, 2020 – $6.3 million)
Environmental indemnity and insurance proceeds receivable
Bond asset
Derivatives at fair value
Total non-current
Current
Deposits and costs on investment properties under option
Prepaid expenses
Bond asset
Other deposits
Restricted cash
Derivatives at fair value
Total current
Total
9. CAPITAL MANAGEMENT
Note
December 31, 2021 December 31, 2020
$
7,671
$
9,958
12(a)
23
23
$
2,960
1,244
—
299
12,174
8,358
11,364
13,388
250
5,538
6,011
44,909
57,083
3,021
1,611
13,965
—
28,555
10,450
10,679
—
250
959
—
22,338
50,893
$
First Capital manages its capital, taking into account the long-term business objectives of the Trust, to provide stability
and reduce risk while generating an acceptable return on investment to Unitholders over the long term. The Trust’s
capital structure currently includes Trust Units, Exchangeable Units, senior unsecured debentures, mortgages, credit
facilities, bank term loans and bank indebtedness, which together provide First Capital with financing flexibility to meet
its capital needs. Primary uses of capital include development activities, acquisitions, capital improvements and leasing
costs. 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, property and capital market conditions and
Management’s general view of the required leverage in the business.
Components of the Trust’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 Trust’s interest)
Senior unsecured debentures
Exchangeable Units
Equity market capitalization (1)
Total capital employed
Trust Units outstanding (000's)
Closing market price
(1) Equity market capitalization is the market value of FCR's units outstanding at a point in time.
85
FIRST CAPITAL REIT ANNUAL REPORT 2021
December 31, 2021 December 31, 2020
$
2,476
1,177,064
899,777
39,808
2,350,000
4,469,125
1,947
4,140,551
$
238
1,351,291
915,928
39,175
2,525,000
4,831,632
1,399
2,971,723
$
8,611,623
$
7,804,754
219,541
219,315
$
18.86
$
13.55
First Capital is subject to financial covenants in agreements governing its senior unsecured debentures and its credit
facilities. In accordance with the terms of the Trust's credit agreements, all ratios are calculated with joint ventures
proportionately consolidated. As at December 31, 2021, First Capital remains in compliance with all of its applicable
financial covenants.
The following table summarizes a number of First Capital's key ratios:
As at
Net debt to total assets (1)
Unencumbered aggregate assets to unsecured debt, using 10 quarter average
capitalization rate (1)
Unitholders' equity, using four quarter average (billions) (2)
Secured indebtedness to total assets (2)
For the rolling four quarters ended
Interest coverage (Adjusted EBITDA to interest expense) (2)
Fixed charge coverage (Adjusted EBITDA to debt service) (2)
Measure/
Covenant
≥1.3
>$2.0B
<35%
>1.65
>1.50
December 31, 2021 December 31, 2020
$
43.9%
2.3
4.5
12.7%
2.3
2.0
$
47.3%
2.0
4.3
15.2%
2.1
1.8
(1) Total assets excludes cash balances.
(2) Calculations required under the Trust'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:
• Debt consists of principal amounts outstanding on credit facilities and mortgages, and the par value of senior
unsecured 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
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, Exchangeable Units and unit-based
compensation; other gains (losses) and (expenses); and other non-cash or non-recurring items. The Trust 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
expense; and
• 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 bank term loans, unsecured credit
facilities, and senior unsecured debentures.
FIRST CAPITAL REIT ANNUAL REPORT 2021
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
10. MORTGAGES AND CREDIT FACILITIES
As at
Fixed rate mortgages
Unsecured facilities
Secured facilities
Mortgages and credit facilities
Current
Non-current
Total
December 31, 2021 December 31, 2020
$
1,173,175
$
1,346,637
824,792
74,985
2,072,952
118,660
1,954,292
$
$
745,054
170,874
2,262,565
151,571
2,110,994
$
$
$
2,072,952
$
2,262,565
Mortgages and secured facilities are secured by First Capital's investment properties. As at December 31, 2021,
approximately $2.5 billion (December 31, 2020 – $2.8 billion) of investment properties out of $9.1 billion
(December 31, 2020 – $9.5 billion) (Note 3(a)) had been pledged as security under the mortgages and the secured
facilities.
As at December 31, 2021, mortgages bear coupon interest at a weighted average coupon rate of 3.4% (December 31, 2020
– 3.5%) and mature in the years ranging from 2022 to 2031. The weighted average effective interest rate on all mortgages
as at December 31, 2021 is 3.5% (December 31, 2020 – 3.6%).
Principal repayments of mortgages outstanding as at December 31, 2021 are as follows:
2022
2023
2024
2025
2026
2027 to 2031
Scheduled
Amortization
Payments on
Maturity
$
30,947 $
13,338 $
32,597
31,944
29,641
25,886
67,181
—
108,478
55,895
94,360
686,797
Total
44,285
32,597
140,422
85,536
120,246
753,978
$
218,196 $
958,868 $
1,177,064
Weighted
Average Effective
Interest Rate
3.7 %
N/A
3.8 %
3.4 %
3.2 %
3.5 %
3.5 %
Unamortized deferred financing costs and premiums, net
Total
(3,889)
$
1,173,175
87
FIRST CAPITAL REIT ANNUAL REPORT 2021
2022
Floating rate unsecured term
loan maturing 2023 (2)
Fixed rate unsecured term
loans maturing 2024 - 2026
Secured Construction Facilities
Maturing 2022
Maturing 2022
Secured Facilities
Maturing 2022
Maturing 2022
Maturing 2022
First Capital’s credit facilities as at December 31, 2021 are summarized in the table below:
As at December 31, 2021
Unsecured Operating Facilities
Revolving facility maturing
2026
Revolving facility maturing
2024 (1)
Borrowing
Capacity
Amounts
Drawn
Bank
Indebtedness and
Outstanding
Letters of Credit
Available to be
Drawn
$
450,000 $
— $
(8,593) $ 441,407
100,000
(69,535)
—
30,465
Revolving facility maturing
250,000
—
—
250,000
200,000
(205,257)
550,000
(550,000)
20,000
(19,984)
33,333
(33,333)
—
—
—
—
—
—
16
—
Interest Rates
Maturity Date
BA + 1.45% or
Prime + 0.45% or
US$ LIBOR + 1.45%
BA + 1.10% or
Prime + 0.25% or
US$ LIBOR + 1.10%
BA + 1.10% or
Prime + 0.25% or
US$ LIBOR + 1.10%
June 30, 2026
August 31, 2024
September 29, 2022
BA + 1.20%
April 15, 2023
3.29%
March 28, 2024
- April 15, 2026
BA + 2.50% or
Prime + 1.00%
January 20, 2022
2.79%
February 25, 2022
14,234
(10,600)
(1,320)
2,314
4,313
(4,313)
6,755
(6,755)
—
—
—
—
BA + 1.20% or
Prime + 0.20%
BA + 1.20% or
Prime + 0.20%
BA + 1.20% or
Prime + 0.20%
May 31, 2022
September 28, 2022
December 19, 2022
Total
$ 1,628,635 $
(899,777) $
(9,913) $ 724,202
(1) The Trust had drawn in U.S. dollars the equivalent of CAD$70.0 million which was revalued at CAD$69.5 million as at December 31, 2021.
(2) The Trust had drawn in U.S. dollars the equivalent of CAD$200.0 million which was revalued at CAD$205.3 million as at December 31, 2021.
First Capital 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. Concurrently with the U.S. dollar draws, the Trust enters into cross
currency swaps to exchange its U.S. dollar borrowings into Canadian dollar borrowings.
On September 1, 2021, First Capital extended and amended its $450.0 million unsecured revolving credit facilities while
also transitioning them into "Sustainability-Linked Credit facilities ("SLCs").
FIRST CAPITAL REIT ANNUAL REPORT 2021
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
11. SENIOR UNSECURED DEBENTURES
As at
Series Maturity Date
N March 1, 2021
O
P
Q
R
S
T
U
V
A
January 31, 2022
December 5, 2022
October 30, 2023
August 30, 2024
July 31, 2025
May 6, 2026
July 12, 2027
January 22, 2027
March 1, 2028
Weighted Average or Total
Current
Non-current
Total
Interest Rate
Coupon
Effective
4.50%
4.43%
3.95%
3.90%
4.79%
4.32%
3.60%
3.75%
3.46%
3.45%
3.99%
4.63%
4.59%
4.18%
3.97%
4.72%
4.24%
3.56%
3.82%
3.54%
3.54%
4.03%
December 31, 2021 December 31, 2020
Principal
Outstanding
$
— $
200,000
250,000
300,000
300,000
300,000
300,000
300,000
200,000
200,000
2,350,000 $
450,000 $
1,900,000
2,350,000 $
$
$
$
Liability
— $
199,975
249,493
299,644
300,507
300,801
300,487
298,950
199,261
199,027
2,348,145 $
449,468 $
1,898,677
2,348,145 $
Liability
174,965
199,667
248,966
299,460
300,684
301,008
300,585
298,783
199,129
198,888
2,522,135
174,965
2,347,170
2,522,135
Interest on the senior unsecured debentures is payable semi-annually and principal is payable on maturity.
On March 1, 2021, upon maturity, First Capital repaid its 4.50% Series N Senior Unsecured Debentures in the amount of
$175.0 million.
12. ACCOUNTS PAYABLE AND OTHER LIABILITIES
As at
Non-current
Asset retirement obligations (a)
Ground leases payable
Derivatives at fair value
Unit-based compensation plans
Deferred purchase price of investment property
Other liabilities
Total non-current
Current
Trade payables and accruals
Construction and development payables
Unit-based compensation plans
Distributions payable
Interest payable
Tenant deposits
Derivatives at fair value
Other liabilities
Total current
Total
89
FIRST CAPITAL REIT ANNUAL REPORT 2021
Note
December 31, 2021 December 31, 2020
23
15(c)
15(c)
14(b)
23
$
1,755
8,811
8,990
6,802
2,850
24,289
53,497
75,900
44,696
17,815
7,903
33,641
40,236
464
11
220,666
$
1,476
9,444
45,422
2,541
4,275
2,840
65,998
74,334
46,196
9,627
15,718
36,826
37,509
4,946
17
225,173
$
274,163
$
291,171
(a) First Capital has obligations for environmental remediation at certain sites within its property portfolio. FCR has also
recognized a related environmental indemnity and insurance proceeds receivable totaling $1.2 million (December 31,
2020 - $1.6 million) in other assets (Note 8).
13. EXCHANGEABLE UNITS
The Exchangeable Units are non-transferable, but are exchangeable, on a one-for-one basis, into First Capital Trust Units
at the option of the holder. Any Exchangeable Units outstanding on December 29, 2023 will be automatically exchanged
for Trust Units. Prior to such exchange, Exchangeable Units will, in all material respects, be economically equivalent to
Trust Units on a per unit basis. Distributions will be made on these Exchangeable Units in an amount equivalent to the
distributions that would have been made had the units been exchanged for Trust Units. Holders of Exchangeable Units
will receive special voting units that will entitle the holder to one vote at Unitholder meetings (Note 14).
The following table sets forth the particulars of First Capital's Exchangeable Units issued and outstanding:
As at
December 31, 2021
December 31, 2020
Balance at beginning of year
Converted to Trust Units
Fair value adjustment
Balance at end of year
14. UNITHOLDERS’ EQUITY
Number of
Exchangeable
Units
103 $
—
—
103 $
Number of
Exchangeable
Units
1,210 $
(1,107)
—
103 $
Value
1,399
—
548
1,947
Value
25,010
(16,207)
(7,404)
1,399
The Declaration of Trust authorizes the issuance of an unlimited number of Trust Units and special voting units:
Trust Units: Each Trust Unit is transferable and represents an equal, undivided beneficial interest in the Trust and any
distributions from the Trust and entitles the holder to one vote at a meeting of Unitholders. With certain restrictions, a
Unitholder has the right to require First Capital to redeem its Trust Units on demand. Upon receipt of a redemption
notice by First Capital, all rights to and under the Trust Units tendered for redemption shall be surrendered and the
holder thereof shall be entitled to receive a price per unit as determined by a market formula and shall be paid in
accordance with the conditions provided for in the Declaration of Trust.
Special Voting Units: Each Exchangeable Unit (Note 13) is accompanied by one special voting unit which provides the
holder thereof with a right to vote on matters respecting the Trust.
(a) Trust Units
The following table sets forth the particulars of First Capital's Trust Units outstanding:
As at
December 31, 2021
Value of
Trust Units
Number of
Trust Units
December 31, 2020
Value of
Trust Units
Number of
Trust Units
Balance at beginning of year
219,315 $
2,894,582
217,954 $
2,872,907
Exercise of options, and settlement of any restricted,
performance and deferred trust units
Conversion of Exchangeable Units
Balance at end of year
226
—
3,689
—
254
5,468
1,107
16,207
219,541 $
2,898,271
219,315 $
2,894,582
FIRST CAPITAL REIT ANNUAL REPORT 2021
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(b) Distributions
On January 12, 2021, First Capital announced the reduction of its monthly distribution to Unitholders from $0.0716 per unit
to $0.036 to provide the Trust with additional retained cash flow of approximately $95 million per annum.
First Capital declared monthly distributions totaling $0.432 per Trust Unit for the year ended December 31, 2021 (year
ended December 31, 2020 - $0.860 per Trust Unit).
15. UNIT-BASED COMPENSATION PLANS
(a) Unit Option Plan
As of December 31, 2021, First Capital is authorized to grant up to 19.7 million (December 31, 2020 – 19.7 million) Trust
Unit options to employees and officers. As of December 31, 2021, 6.6 million (December 31, 2020 – 4.6 million) unit
options are available to be granted to employees and officers. In addition, as at December 31, 2021, 6.3 million unit
options were outstanding (December 31, 2020 - 7.1 million). Options granted by First Capital expire 10 years from the
date of grant and vest over five years.
The outstanding options as at December 31, 2021 have exercise prices ranging from $15.53 - $21.24 (December 31,
2020 – $15.70 - $21.24).
As at
Exercise Price
Range ($)
15.53 - 19.29
19.30 - 20.05
20.06 - 21.19
21.20 - 21.24
15.53 - 21.24
Outstanding Options
December 31, 2021
Vested Options
Outstanding Options
December 31, 2020
Vested Options
Number of
Trust Units
Issuable
(in thousands)
1,609 $
1,515 $
1,749 $
1,464 $
6,337 $
Weighted
Average
Exercise
Price per
Trust Unit
17.27
19.86
20.67
21.24
19.75
Weighted
Average
Remaining
Life
(years)
5.2
5.3
6.2
8.2
6.2
Number of
Trust Units
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Trust Units
965 $ 18.43
1,167 $ 19.81
1,043 $ 20.49
293 $ 21.24
3,468 $ 19.75
Number of
Trust Units
Issuable
(in thousands)
1,213 $
1,925 $
2,161 $
1,804 $
7,103 $
Weighted
Average
Exercise
Price per
Trust Unit
18.33
19.86
20.68
21.24
20.20
Weighted
Average
Remaining
Life
(years)
3.0
5.1
5.9
7.5
5.6
Number of
Trust Units
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Trust Units
1,213 $ 18.33
1,110 $ 19.80
846 $ 20.40
—
3,169 $ 19.40
— $
During the year ended December 31, 2021, $1.0 million (year ended December 31, 2020 – $1.1 million) was
recorded as an expense related to stock options.
Year ended December 31
Outstanding at beginning of year
Granted (a)
Exercised (b)
Forfeited
Expired
Outstanding at end of year
Number of
Trust Units
Issuable
(in thousands)
7,103
644
(60)
(545)
(805)
$
2021
Weighted
Average
Exercise Price
20.20
15.53
16.41
20.59
20.05
Number of
Trust Units
Issuable
(in thousands)
5,584
1,804
(162)
(19)
(104)
$
2020
Weighted
Average
Exercise Price
19.70
21.24
17.48
17.43
16.44
6,337
$
19.75
7,103
$
20.20
91
FIRST CAPITAL REIT ANNUAL REPORT 2021
(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.
Year ended December 31
Grant date
Unit options granted (thousands)
Term to expiry
Exercise price
Weighted average volatility rate
Weighted average expected option life
Weighted average distribution yield
Weighted average risk free interest rate
Fair value (thousands)
2021
March 1, 2021
644
10 years
$15.53
22.0 %
7.3 years
4.70 %
1.10 %
$1,114
2020
February 28, 2020
1,804
10 years
$21.24
13.7 %
6.6 years
4.30 %
1.08 %
$1,373
(b) The weighted average market price at which options were exercised for the year ended December 31, 2021
was $16.72 (year ended December 31, 2020 – $21.71).
The assumptions used to measure the fair value of the unit options under the Black-Scholes model (level 2) as at
December 31, 2021 and 2020 were as follows:
As at December 31
Expected Trust Unit price volatility
Expected life of options
Expected distribution yield
Risk free interest rate
(b) Trust Unit arrangements
2021
2020
17.92% - 35.17% 22.93% - 50.12%
0.2 - 6.5 years
6.30%
0.07% - 0.44%
0.2 - 6.5 years
4.25%
0.16% - 1.28%
First Capital’s Trust Unit plans include a Trustees' Deferred Unit ("DU") plan and a Restricted Unit ("RU") plan that
provides for the issuance of Restricted Units and Performance Units ("PU"). Under the DU and RU arrangements, a
participant is entitled to receive one Trust Unit, or equivalent cash value for RU arrangements only, at First Capital’s
option, (i) in the case of a DU, upon redemption by the holder after the date that the holder ceases to be a Trustee of FCR
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 an RU, on the third anniversary of the grant date. Under the PU
arrangement, a participant is entitled to receive Nil – 2.0 Trust Units per PU granted, or equivalent cash value at First
Capital's option, on the third anniversary of the grant date. Holders of units granted under each plan receive distributions
in the form of additional units when First Capital declares distributions on its Trust Units.
Year ended December 31
(in thousands)
Outstanding at beginning of year
Granted (a) (b)
Distributions reinvested
Exercised
Forfeited
Outstanding at end of year
Expense recorded for the year
DUs
368
65
8
(121)
—
320
$1,299
2021
RUs / PUs
789
355
22
(244)
(25)
897
$5,365
DUs
289
59
20
—
—
368
$1,084
2020
RUs / PUs
663
295
44
(189)
(24)
789
$5,830
(a) The fair value of the DUs granted during the year ended December 31, 2021 was $1.1 million (year ended December
31, 2020 – $0.8 million), measured based on First Capital’s prevailing Trust Unit price on the date of grant. The fair
value of the RUs granted during the year ended December 31, 2021 was $3.1 million (year ended December 31, 2020 –
$3.5 million), measured based on First Capital’s Trust Unit price on the date of grant.
FIRST CAPITAL REIT ANNUAL REPORT 2021
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(b) The fair value of the PUs granted during the year ended December 31, 2021 was $2.8 million (year ended December 31,
2020 – $2.6 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 Unitholder return of First Capital's Trust Units relative
to the S&P/TSX Capped REIT Index and relative to a customized index of publicly-listed peers.
Year ended December 31
Grant date
PUs granted (thousands)
Term to expiry
Weighted average volatility rate
Weighted average correlation
Weighted average total Unitholder return
Weighted average risk free interest rate
Fair value (thousands)
2021
2020
March 1, 2021 February 28, 2020
131
3 years
13.8%
35.0%
(4.0%)
146
3 years
30.1%
72.4%
10.4%
0.34%
$2,771
1.11%
$2,573
(c) Increase (decrease) in the value of unit-based compensation
First Capital’s unit-based compensation plans are accounted for as cash-settled awards. Therefore, outstanding Unit
Options, Deferred Units, Restricted Units and Performance Units are recognized as a liability and carried at fair value
through profit and loss. As at December 31, 2021, the carrying value of the unit-based compensation liability was $24.6
million (December 31, 2020 – $12.2 million)(Note 12). For the year ended December 31, 2021, FCR recognized an increase
in the value of the unit-based compensation plans which resulted in a loss of $9.3 million in the consolidated statements of
income (loss) due to an increase in the Trust Unit's price year-over-year.
93
FIRST CAPITAL REIT ANNUAL REPORT 2021
16. NET OPERATING INCOME
Net Operating Income by Component
First Capital’s net operating income by component is presented below:
Property rental revenue
Base rent (1)
Operating cost recoveries
Realty tax recoveries
Lease termination fees
Percentage rent
Straight-line rent adjustment
Prior year operating cost and tax recovery adjustments
Temporary tenants, storage, parking and other (2)
Total Property rental revenue
Property operating costs
Recoverable operating expenses
Recoverable realty tax expense
Prior year realty tax expense
Other operating costs and adjustments (3)
Total Property operating costs
Total NOI
NOI margin
(1)
(2)
(3)
Includes residential revenue.
Includes hotel property revenue.
Includes residential operating costs, hotel property operating costs and bad debt expense.
Year ended December 31
% change
2021
2020
$
426,146
$
426,845
100,865
118,842
1,541
2,528
2,082
(2,308)
25,194
0.3%
674,890
111,951
134,899
(1,877)
17,379
262,352
97,265
122,326
1,811
3,502
2,711
27
18,403
672,890
107,408
139,238
(284)
27,496
273,858
3.4% $
412,538
$
399,032
61.1%
59.3%
Included in other operating costs and adjustments is bad debt expense for the year ended December 31, 2021 of
$8.5 million (year ended December 31, 2020 - $22.8 million).
For the year ended December 31, 2021, property operating costs include $20.8 million (year ended December 31, 2020 –
$16.4 million) related to employee compensation. Employee compensation is presented net of subsidies received under the
Canada Emergency Wage Subsidy ("CEWS") program for the year ended December 31, 2021 of $0.6 million related to
property operations personnel (year ended December 31, 2020 - $4.5 million). A portion of this wage subsidy will be passed
on to tenants through lower operating cost recoveries.
17. INTEREST AND OTHER INCOME
Interest, dividend and distribution income from marketable securities and other investments
Interest income from loans and mortgages receivable classified as FVTPL
Interest income from loans and mortgages receivable at amortized cost
Fees and other income
Total
$
Note
6
6
6
Year ended December 31
$
2021
499
100
5,809
4,472
2020
1,082
922
6,791
3,453
$
10,880
$
12,248
FIRST CAPITAL REIT ANNUAL REPORT 2021
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
18. INTEREST EXPENSE
Mortgages
Credit facilities
Senior unsecured debentures
Distributions on Exchangeable Units (1)
Total interest expense
Interest capitalized to investment properties under development
Interest expense
Change in accrued interest
Coupon interest rate in excess of effective interest rate on senior unsecured 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
(1) The distributions declared on the Exchangeable Units are accounted for as interest expense.
19. CORPORATE EXPENSES
Salaries, wages and benefits
Unit-based compensation
Other corporate costs
Total corporate expenses
Amounts capitalized to investment properties under development
Corporate expenses
Note
10
10
11
13
$
$
$
$
$
$
Year ended December 31
2020
2021
52,142
49,912
28,796
26,260
100,854
95,961
650
45
182,442
172,178
(19,508)
152,670
3,148
1,169
133
(7,630)
149,490
$
(24,731)
157,711
(1,524)
1,203
401
(6,556)
$
151,235
$
Year ended December 31
2020
2021
22,985
27,675
7,673
7,155
10,277
10,611
40,935
45,441
(7,697)
(7,234)
33,238
38,207
$
For the year ended December 31, 2021, salaries, wages and benefits include $0.3 million of wage subsidies received under
the CEWS program (year ended December 31, 2020 - $3.8 million).
20. OTHER GAINS (LOSSES) AND (EXPENSES)
Unrealized gain (loss) on marketable securities
Net gain (loss) on prepayments of debt
Gain on below market purchase (1)
Hotel acquisition transaction costs (1)
Pre-selling costs of residential inventory
Investment properties selling costs
REIT conversion costs
Gain on Option
Other
Total
(1)
In connection with acquisition of hotel property - Refer to Note 5.
Year ended December 31
2020
2021
$
$
14,786
(1,139)
—
—
(238)
(7,133)
—
80,822
(9)
87,089
$
$
(234)
(282)
7,385
(1,121)
(142)
(3,915)
(906)
—
73
858
In the third quarter of 2021, the Trust exercised its option to buy its former partner's 50% interest in 2150 Lake Shore
Boulevard West for $55.5 million. Concurrent with closing, the Trust entered into a new partnership and conveyed 50% of
95
FIRST CAPITAL REIT ANNUAL REPORT 2021
the property to a new partner for $156 million. The gain on the option of $100.5 million was reduced by the derecognition
of $13.2 million in previously capitalized option costs and the discount recognized on the loans receivable of $6.5 million
(Note 6 (b)).
21. INCOME TAXES
The Trust qualifies for the REIT Exemption and as such the Trust itself will not be subject to income taxes provided it
continues to qualify as a REIT for purposes of the Act. A REIT is not taxable and not considered to be a Specified Investment
Flow-Through Trust provided it complies with certain tests and distributes all of its taxable income in a taxation year to its
Unitholders. The Trust is a flow-through vehicle and accounts only for income taxes pertaining to its corporate subsidiaries.
The Trust's most significant corporate subsidiary, First Capital Realty Inc., is a Mutual Fund Corporation.
The sources of deferred tax balances and movements are as follows:
December 31, 2020
Net income
Recognized in OCI
Equity and other December 31, 2021
Deferred taxes related to non-capital losses $
(40,190) $
2,264 $
— $
Deferred tax liabilities related to difference
in tax and book basis primarily related to
real estate, net
738,718
23,665
15,866
8,713 $
(8,727)
(29,213)
769,522
Net deferred taxes
$
698,528 $
25,929 $
15,866 $
(14) $
740,309
As at December 31, 2021, the corporate subsidiaries of the Trust had approximately $80.8 million of non-capital losses
which expire between 2028 and 2041.
December 31, 2019
Net income
Recognized in OCI
Equity and other December 31, 2020
Deferred taxes related to non-capital losses $
— $
(35,442) $
(2,716) $
Deferred tax liabilities related to difference
in tax and book basis primarily related to
real estate, net
701,549
59,366
(18,225)
(2,032) $
(3,972)
(40,190)
738,718
Net deferred taxes
$
701,549 $
23,924 $
(20,941) $
(6,004) $
698,528
As at December 31, 2020, the corporate subsidiaries of the Trust had approximately $103.0 million of non-capital losses
which expire between 2028 and 2040.
The following reconciles the expected tax expense computed at the statutory tax rate to the actual tax expense for the
years ended December 31, 2021 and 2020.
Income tax computed at the Canadian statutory rate of Nil applicable to the Trust at December 31,
2021 and 2020
Increase (decrease) in income taxes due to:
Deferred income taxes (recoveries) applicable to corporate subsidiaries
Deferred income tax recovery related to temporary differences associated with investment
property applicable to corporate subsidiaries (1)
Impact of change in provincial income tax rate
Other
Deferred income taxes expense (recovery)
(1) Adjustment to rate differential applied to temporary differences.
Year ended December 31
2021
$
—
$
67,265
(45,001)
—
3,665
2020
—
22,481
—
481
962
$
25,929
$
23,924
FIRST CAPITAL REIT ANNUAL REPORT 2021
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
22. RISK MANAGEMENT
In the normal course of its business, First Capital 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
First Capital 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 FCR’s mortgages, loans and credit facilities are floating rate
instruments. From time to time, FCR 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.
Interest represents a significant cost in financing the ownership of real property. As at December 31, 2021, First Capital
has a total of $316.4 million 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, FCR’s annual interest cost would increase or decrease,
respectively, by $3.2 million.
First Capital has a total of $1.5 billion principal amount of fixed rate interest-bearing instruments outstanding including
mortgages, senior unsecured debentures and secured credit facilities maturing between January 1, 2022 and December
31, 2024 at a weighted average coupon interest rate of 4.0%. If these amounts were refinanced at an average interest
rate that was 100 basis points higher or lower than the existing rate, FCR’s annual interest cost would increase or
decrease, respectively, by $14.9 million.
As at December 31, 2021, First Capital’s loans and mortgages receivable that earn interest at variable rates total
$75.2 million. If the average variable interest rate was 100 basis points higher than the existing rate, FCR’s annual interest
income would increase by approximately $0.8 million, and if the variable interest rate were 100 basis points lower, FCR’s
annual interest income would decrease by $0.3 million.
First Capital’s loans and mortgages receivable that earn interest at fixed rates total $67.0 million. If the loans were
refinanced at 100 basis points higher or lower than the existing rate, FCR’s annual interest income would increase or
decrease by approximately $0.7 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. First Capital 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, 2021, Loblaw Companies Limited
(“Loblaw”) is FCR's largest tenant and accounts for 10.4% of FCR’s annualized minimum rent and has an investment grade
credit rating. Other than Loblaw, no other tenant accounts for more than 10% of the annualized minimum rent. 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. First
Capital 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.
First Capital’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:
(thousands of dollars)
Within 1 year
After 1 year, but not more than 5 years
More than 5 years
97
FIRST CAPITAL REIT ANNUAL REPORT 2021
2021
$
398,664
1,002,965
611,965
$ 2,013,594
(c) Liquidity risk
Real estate investments are relatively illiquid. This tends to limit First Capital’s ability to sell components of its portfolio
promptly in response to changing economic or investment conditions. If FCR 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 First Capital’s contractual maturities of its material financial liabilities and other contractual commitments
as at December 31, 2021 is set out below:
As at December 31, 2021
Payments due by period
2022
2023 to 2024
2025 to 2026
Thereafter
Total
Scheduled mortgage principal amortization
$
30,947 $
64,541 $
55,527 $
67,181 $
218,196
Mortgage principal repayments on maturity
13,338
108,478
150,255
686,797
958,868
Credit facilities and bank indebtedness
77,461
474,792
350,000
—
902,253
Senior unsecured debentures
Interest obligations (1)
Land leases (expiring between 2023 and 2061)
Contractually committed costs to complete current
development projects
Other committed costs
Total contractual obligations
450,000
600,000
600,000
700,000
2,350,000
147,647
240,576
144,296
73,943
606,462
1,208
1,486
1,245
15,512
19,451
9,337
39,365
—
—
—
—
—
—
9,337
39,365
$
769,303 $ 1,489,873 $ 1,301,323 $ 1,543,433 $ 5,103,932
(1)
Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2021 (assuming balances remain outstanding through to
maturity), and senior unsecured debentures, as well as standby credit facility fees.
First Capital manages its liquidity risk by staggering debt maturities; renegotiating expiring credit arrangements
proactively; using secured and unsecured credit facilities, mortgages and unsecured debentures; and issuing equity when
considered appropriate. As at December 31, 2021, there was $0.8 billion (December 31, 2020 – $0.7 billion) of cash
advances drawn against First Capital’s unsecured credit facilities.
In addition, as at December 31, 2021, First Capital had $29.7 million (December 31, 2020 – $49.2 million) of outstanding
letters of credit issued by financial institutions primarily to support certain of FCR’s contractual obligations and $2.5
million (December 31, 2020 – $0.2 million) of bank overdrafts.
(d) Unit price risk
First Capital is exposed to Trust Unit price risk as a result of the issuance of Exchangeable Units, which are economically
equivalent to and exchangeable for Trust Units, as well as the issuance of unit-based compensation. Exchangeable Units
and unit-based compensation liabilities are recorded at their fair value based on market trading prices. Exchangeable
Units and unit-based compensation negatively impact operating income when the Trust Unit price rises and positively
impact operating income when the Trust Unit price declines. An increase of $1 dollar in the underlying price of First
Capital's Trust Units would result in an increase to liabilities, and a decrease to net income as follows:
(i) Exchangeable Units $0.1 million (December 31, 2020 – $0.1 million); and
(ii) Unit-based compensation liabilities $3.5 million (December 31, 2020 – $2.3 million)
FIRST CAPITAL REIT ANNUAL REPORT 2021
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
23. FAIR VALUE MEASUREMENT
A comparison of the carrying amounts and fair values, by class, of First Capital’s financial instruments, other than those
whose carrying amounts approximate their fair values, is as follows:
Financial assets
FVTPL investments in securities
Loans and mortgages receivable classified as FVTPL
Loans and mortgages receivable classified as amortized cost
Bond asset
Other investments
Derivatives at fair value
Financial liabilities
Mortgages
Credit facilities
Senior unsecured debentures
Exchangeable Units
Unit-based compensation plans
Derivatives at fair value
Carrying Amount
Fair Value
Notes
2021
2020
2021
2020
6
6
6
8
6
8
10
10
11
13
15
12
$
25,976 $
3,715 $
25,976 $
1,492
1,974
1,492
3,715
1,974
238,473
111,160
239,135
110,045
13,388
13,965
13,388
5,801
6,310
12,580
—
5,801
6,310
13,965
12,580
—
$ 1,173,175 $ 1,346,637 $ 1,219,703 $ 1,446,711
899,777
915,928
899,777
915,928
2,348,145
2,522,135 2,437,878
2,693,223
1,947
24,617
9,454
1,399
1,947
12,168
24,617
50,368
9,454
1,399
12,168
50,368
The fair values of First Capital’s FVTPL investments in securities are based on quoted market prices. First Capital has an
investment in certain funds classified as Level 3, for which the fair values are based on the fair value of the properties
held in the funds.
The fair value of First Capital’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, 2021, the risk-adjusted interest rates ranged from 1.6% to 10.9%
(December 31, 2020 – 1.2% to 10.4%).
The fair value of First Capital’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, 2021, these rates ranged from 1.4% to 2.8%
(December 31, 2020 – 1.5% to 2.3%).
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 Trust uses, among
others, interest rate quotations provided by financial institutions. As at December 31, 2021, these rates ranged from 0.9%
to 3.0% (December 31, 2020 – 0.8% to 2.6%).
The fair value of the Exchangeable Units are based on the Trust's closing price as of December 31, 2021.
The fair value of the unit-based compensation plans are based on the following:
• Unit Option Plan: Fair value of each tranche is valued separately using a Black-Scholes option pricing model.
• Deferred Units/Restricted Units: Fair value is based on the Trust's closing price as of December 31, 2021.
• Performance Units: Fair Value is calculated using a Monte-Carlo simulation model.
99
FIRST CAPITAL REIT ANNUAL REPORT 2021
The fair value hierarchy of financial instruments in the consolidated balance sheets is as follows:
As at
December 31, 2021
December 31, 2020
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
25,976 $
—
—
—
—
—
—
$
Fair value of financial instruments measured at fair value
Financial Assets
FVTPL investments in securities
Loans and mortgages receivable
Other investments
Derivatives at fair value – assets
Financial Liabilities
Exchangeable Units
Unit-based compensation plans
Derivatives at fair value – liabilities
Fair value of financial instruments measured at amortized cost
Financial Assets
Loans and mortgages receivable
Bond asset
Financial Liabilities
Mortgages
Credit facilities
Senior unsecured debentures
$
— $
—
—
6,310
1,947
24,617
9,454
— $
1,492
5,801
—
3,715 $
—
—
—
— $
—
—
—
—
1,974
12,580
—
—
—
—
—
—
—
1,399
12,168
50,368
—
—
—
— $
—
13,388
— $ 239,135 $
—
—
—
1,219,703
899,777
2,437,878
—
—
—
—
— $
—
— $
13,965
110,045
—
—
—
—
1,446,711
915,928
2,693,223
—
—
—
First Capital 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 First Capital has applied hedge accounting,
the change in fair value for the effective portion of the derivative is recorded in OCI from the date of designation. For
those derivative instruments to which First Capital 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, 2021, the interest rates ranged from
1.6% to 3.4% (December 31, 2020 – 1.7% to 2.5%). The fair values of First Capital's asset (liability) hedging instruments
are as follows:
Designated as
Hedging Instrument Maturity as at December 31, 2021
December 31, 2021 December 31, 2020
Derivative assets
Bond forward contracts
Interest rate swaps
Cross currency swaps
Total
Derivative liabilities
Interest rate swaps
Cross currency swaps
Total
Yes
Yes
No
Yes
No
March 2022
August 2024 - January 2026
January 2022
April 2024 - March 2027
January 2022
$
$
$
$
754
299
5,257
6,310
8,990
464
9,454
$
$
$
$
$
—
—
—
—
45,422
4,946
50,368
As at December 31, 2021, the $40.9 million decrease in the fair value of outstanding derivative liabilities year-over-year is
primarily due to significant fluctuations in market rates (Canadian Bankers' Acceptance rate and Government of Canada
bond rate) relative to the market rates locked-in at inception of outstanding interest rate swaps.
FIRST CAPITAL REIT ANNUAL REPORT 2021
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
24. SUBSIDIARIES WITH NON-CONTROLLING INTEREST
As at December 31, 2021, First Capital has interests in two entities that it controls and consolidates 100% of the assets,
liabilities, revenues and expenses of each entity subject to a non-controlling interest.
Name of Entity
Main and Main Developments LP ("MMLP")
Maincore Equities Inc.
Primary Investment
46.875% Interest in MMUR (1)
46.875% Interest in MMUR (1)
(1) FCR has owned a 6.25% direct interest in M+M Realty LP ("MMUR") since 2014.
First Capital controls MMLP, a subsidiary in which it holds a 67% ownership interest.
Effective Ownership
December 31, 2021
December 31, 2020
67.0%
70.9%
67.0%
70.9%
During the first quarter of 2020, one of the Trust's wholly owned subsidiaries purchased a property from MMUR, which is
also a consolidated subsidiary. The entire proceeds from the sale were distributed to the limited partners, including
$24.4 million to the non-controlling interest partner.
Non-controlling interest in the equity and the results of these subsidiaries, before any inter-company eliminations, are as
follows:
December 31, 2021 December 31, 2020
$
160,145
$
95,319
1,170
96,489
—
23
23
377
160,522
3,860
483
4,343
156,179
48,140
$
$
$
$
$
$
$
$
$
96,466
29,263
Year ended December 31
2021
1
$
48,004
(4,649)
43,356
13,505
$
$
2020
4
32,360
(5,497)
26,867
4,780
Year ended December 31
2021
(331)
8,769
(8,509)
$
(71)
$
2020
(5,745)
361
5,291
(93)
As at
Non-current assets
Current assets
Total assets
Non-current liabilities
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 (used in) operating activities
Cash provided by (used in) financing activities
Cash provided by (used in) investing activities
Net increase (decrease) in cash and cash equivalents
101
FIRST CAPITAL REIT ANNUAL REPORT 2021
25. CO-OWNERSHIP INTERESTS
First Capital has co-ownership interests in several properties, as listed below, that are subject to joint control and represent
joint operations under IFRS 11, "Joint Arrangements". First Capital recognizes its share of the direct rights to the assets and
obligations for the liabilities of these co-ownerships in the consolidated financial statements.
Location
Property
Toronto, ON
101 Yorkville Avenue
2150 Lake Shore Blvd. West (Christie Cookie) (1)
Toronto, ON
Toronto, ON
897-901 Eglinton Avenue West
Calgary, AB
802, 812, 816-838 11th Avenue South West (Glenbow)
731-739 10th Avenue South West (Five Roses Building) Calgary, AB
Calgary, AB
738 11th Avenue South West (Sherwin Block)
Ottawa, ON
Gloucester City Centre
Gatineau, QC
Carrefour du Plateau
Ottawa, ON
Merivale Mall
Repentigny, QC
Galeries de Repentigny
Repentigny, QC
Galeries Brien Ouest/Est
St. Albert, AB
Gateway Village
Toronto, ON
King High Line - Residential
Toronto, ON
261 Queens Quay East (Bayside Village)
Midland, ON
Midland (land)
Vaughan, ON
Rutherford Marketplace (Residential Inventory)
Ottawa, ON
Hunt Club – Petrocan
Gatineau Portfolio (2)
Gatineau, QC
Ottawa, ON
Hunt Club Marketplace
Lachenaie, QC
Lachenaie Properties
South Oakville Properties (3)
Oakville, ON
Whitby, ON
Whitby Mall
Whitby, ON
Thickson Mall
St. Hubert Portfolio (4)
St. Hubert, QC
Ottawa Portfolio (4)
Ottawa, ON
West Island Portfolio (5)
Burlington Portfolio (6)
Seton Gateway
Sherwood Park (7)
The Edmonton Brewery District
138 Yorkville Avenue
Meadowbrook Centre
Lakeview Plaza
Beaconsfield, QC / Kirkland, QC
Burlington, ON
Calgary, AB
Sherwood Park, AB
Edmonton, AB
Toronto, ON
Edmonton, AB
Calgary, AB
Ownership Interest
December 31, 2021
50%
—%
50%
—%
—%
—%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
66.6%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
33.3%
50%
50%
December 31, 2020
50%
50%
—%
50%
50%
50%
50%
50%
50%
50%
50%
50%
66.6%
50%
50%
50%
50%
50%
66.6%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
33.3%
50%
50%
(1) On September 17, 2021, the Trust's new 50% partner in 2150 Lake Shore Boulevard West subscribed to 50% of the limited partnership units in the newly formed
Lakeshore Development LP. Concurrent with the subscription, the Trust's 50% interest in the Christie Cookie lands was transferred into the new joint venture and is now
included under investments in joint ventures, see Note 4.
(2) Gatineau Portfolio includes Place Cite des Jeunes, Place Nelligan, and Carrefour du Versant Ouest/Est.
(3) South Oakville Properties includes one property at 50% interest, with the remaining properties held at 100% interest.
(4) St. Hubert Portfolio includes Carrefour St-Hubert, Plaza Actuel, and Promenades du Parc. Ottawa Portfolio includes Loblaws Plaza, Eagleson Place, and Strandherd Crossing.
(5) West Island Portfolio includes Centre Commercial Beaconsfield, Plaza Beaconsfield, Centre St-Charles, Centre Kirkland, and Place Kirkland.
(6) Burlington Portfolio includes Burlingwood Shopping Centre and Beacon Hill Plaza.
(7) Sherwood Park includes Sherwood Centre, Sherwood Towne Square, Village Market, and Sherwood Centre 1000 Alder Avenue.
FIRST CAPITAL REIT ANNUAL REPORT 2021
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Property
West Springs Village
216 Elgin Street
221 - 227 Sterling
London Portfolio (1)
906-1st Avenue North East (Molson Building)
1071 King Street West
200 Esplanade (Empire Theatres)
400 King Street West (2)
1120 Kingston Road (2)
Location
Calgary, AB
Ottawa, ON
Toronto, ON
London, ON
Calgary, AB
Toronto, ON
North Vancouver, BC
Toronto, ON
Toronto, ON
Ownership Interest
December 31, 2021
December 31, 2020
50%
50%
35%
49.5%
75%
66.6%
50%
50%
60%
50%
50%
35%
49.5%
75%
66.6%
50%
50%
60%
(1) London Portfolio includes Wellington Corners, Sunningdale Village, Byron Village, Hyde Park Plaza, Stoneybrook Plaza, and Adelaide Shoppers.
(2) Co-ownership interests held by MMUR.
26. SUPPLEMENTAL OTHER COMPREHENSIVE INCOME (LOSS)
INFORMATION
(a) Accumulated other comprehensive income (loss)
Year ended December 31
Unrealized gains (losses) on cash flow
hedges
Unrealized gains (losses) on
revaluation of hotel property
Accumulated other comprehensive
income (loss)
Opening
Balance
January 1
Net Change
During
the Year
2021
Closing
Balance
December 31
Opening
Balance
January 1
Net Change
During
the Year
2020
Closing
Balance
December 31
(43,580)
24,762
(18,818)
(10,712)
(32,868)
(43,580)
—
—
—
2,910
(2,910)
—
$
(43,580) $
24,762 $
(18,818) $
(7,802) $
(35,778) $
(43,580)
(b) Tax effects relating to each component of other comprehensive income (loss)
Year ended December 31
Unrealized gains (losses) on cash flow
hedges
Reclassification of losses on cash flow
hedges to net income
Unrealized gains (losses) on
revaluation of hotel property
Before-Tax
Amount
Tax (Expense)
Recovery
2021
Net of Tax
Amount
Before-Tax
Amount
Tax (Expense)
Recovery
2020
Net of Tax
Amount
$
37,485 $
(14,639) $
22,846 $
(56,012) $
21,798 $
(34,214)
3,143
(1,227)
1,916
2,203
(857)
1,346
—
—
—
(2,910)
—
(2,910)
Other comprehensive income (loss)
$
40,628 $
(15,866) $
24,762 $
(56,719) $
20,941 $
(35,778)
103
FIRST CAPITAL REIT ANNUAL REPORT 2021
27. SUPPLEMENTAL CASH FLOW INFORMATION
(a) Items not affecting cash and other items
Straight-line rent adjustment
Investment properties selling costs
Unrealized (gain) loss on marketable securities classified as FVTPL
Gain on below market purchase (1)
Hotel transaction costs (1)
Gain on Option
Unit-based compensation expense
Increase (decrease) in value of Exchangeable Units
Increase (decrease) in value of unit-based compensation
Deferred income taxes expense (recovery)
Other non-cash items
Total
(1)
In connection with acquisition of hotel property - Refer to Note 5.
(b) Net change in non-cash operating items
The net change in non-cash operating assets and liabilities consists of the following:
Year ended December 31
Note
2021
16
20
20
20
20
20
15
13
15
21
$
(2,082) $
7,133
(14,786)
—
—
(80,822)
7,676
548
9,286
25,929
—
$
(47,118) $
2020
(2,711)
3,915
234
(7,385)
1,121
—
8,019
(7,404)
(11,459)
23,924
(41)
8,213
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
Other investments, net
Total
(d) Cash and cash equivalents
As at
Cash and cash equivalents
Year ended December 31
2021
2020
$
18,512 $
(14,775)
(686)
5,327
2,727
(15,948)
(1,303)
12,228
(602)
(6,770)
$
9,932 $
(11,222)
Year ended December 31
2020
2021
$
$
(45,275) $
54,455
(695)
8,485 $
(18,083)
45,319
(278)
26,958
December 31, 2021
December 31, 2020
$
34,699
$
100,444
FIRST CAPITAL REIT ANNUAL REPORT 2021
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
28. COMMITMENTS AND CONTINGENCIES
(a) First Capital 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 FCR.
(b) First Capital is contingently liable, jointly and severally or as guarantor, for approximately $73.2 million
(December 31, 2020 – $70.5 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) First Capital is contingently liable by way of letters of credit in the amount of $29.7 million (December 31, 2020 –
$49.2 million), issued by financial institutions on FCR's behalf in the ordinary course of business.
(d) First Capital has obligations as lessee under long-term leases for land. Annual commitments under these ground
leases are approximately $1.2 million (December 31, 2020 – $1.2 million) with a total obligation of $19.5 million
(December 31, 2020 – $20.7 million).
29. RELATED PARTY TRANSACTIONS
(a) Subsidiaries of the Trust
The audited annual consolidated financial statements include the financial statements of First Capital Real Estate
Investment Trust and all of its subsidiaries, including First Capital Realty Inc., First Capital REIT Limited Partnership and
First Capital Holdings Trust. First Capital Realty Inc. and First Capital Holdings Trust are the significant subsidiaries of the
Trust and are wholly owned.
(b) Compensation of Key Management Personnel
Aggregate compensation for Trustees 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
Unit-based compensation (non-cash compensation expense)
$
$
30. SUBSEQUENT EVENTS
Redemption of $200 million of 4.43% Series O Senior Unsecured Debentures
Year ended December 31
2020
2021
4,390
4,574
6,108
5,188
10,498
9,762
$
$
On January 31, 2022, upon maturity, First Capital repaid its 4.43% Series O Senior Unsecured Debentures in the amount
of $200.0 million.
105
FIRST CAPITAL REIT ANNUAL REPORT 2021