First Capital Realty Inc.
Annual Report 2022

Plain-text annual report

2022 ANNUAL REPORT CORPORATE PROFILE First Capital Realty Inc. (TSX: FCR) is one of the largest owners, developers and operators of necessity-based real estate located in Canada’s most densely populated COMPANY PROFILE urban centres. As at December 31, 2019, the Company owned interests in XXX First Capital owns, operates and develops grocery-anchored, open-air centres in neighbourhoods with the strongest demographics in Canada. At December 31, 2019, First Capital Realty had an enterprise value of $X.X billion. Message from the President & CEO A year of solid progress on many fronts, amid new Dear fellow unitholder, 2022 was a year that started out with an air of pre-pandemic average. The increase in our average rental rate on lease renewals during 2022 was 9.5% emergence of new macro-economic and other challenges. was higher and more persistent than many had stable occupancy (95.8% at year-end 2022), aided by drove a strong 5.1% increase in 2022 same-property face of these forces, central banks around the world 2022 was subject to one of the most rapid increases in interest rates on record. While we remained focused on the leasing and in the capital markets broadly and the listed real estate sector as well. First Capital’s unit price was not immune. Through 2022, we stayed focused on our important strategy work that was underway and planned over the course of the year. In this regard, implement a series of deliberate unitholder-focused and began to implement important strategy work. We unitholders. many fronts. In May, we announced a normal course issuer bid (“NCIB”) program for up to 21.9 million trust units, greater than our 2017 through 2019, three-year the major disconnect between the intrinsic value inherent in the units and their trading price. Over the a weighted average cost per unit of $15.14 versus an IFRS NAV per unit at year end of $23.48. The capital months prior. In September we announced a doubling of the monthly and governance principles into our business and culture. One of our key accomplishments was the made to unitholders in early 2021. And secondly (and focused on the future. Last year we established our REIT status. target of 46%, and this was approved by the Science In late September, FCR announced its Enhanced work by Management and the Board on how best to unlock the value we have created in the business over the past few years. Through to the end of 2024, the than $1 billion of typically low- and no-yielding assets achieved, and the redeployment of that capital in ways that can generate a more meaningful near-term industry peers, to achieve our common goal of producing assets that contribute to key metrics such as EBITDA and FFO, and it will further strengthen the REIT’s balance sheet which remains a very important tenants and prominent retail property owners for a In 2022, FCR was named one of Canada’s 2022 the two-year target. These asset sales were also a year placement as one of Canada’s Top Small & merits of the Plan already were evident with FCR’s Employers. give us all pride however, is the enormous amount of “behind the scenes” work that our team members focus on every day to make FCR more than a just place to work, but rather a place where people embraced. This brings me to our ED&I work. Our ED&I Council is thrive, love what they do and grow their careers. First In February 2023, Paul Douglas assumed the role of Board Chair. Paul has been a highly valued independent Trustee since joining the Board in 2019. I also wish to highlight two new Board members – analysis, capital markets, corporate governance, As Chair, Paul replaced Bernie McDonnell who an Ally. These sessions provided lots of opportunity but the strength and depth of the Board gave us great base, and they generated precisely the types of we encouraged our employees to volunteer at least management, and unitholders, I’d like to thank Bernie for more than 15 years of dedicated service to First to the REIT through his leadership and stewardship, also wish to thank Andrea Stephen, another valuable and long-serving Board member who has also decided eleven years to the Board, Andrea made valuable would like to personally thank our employees, Board First Capital’s Board of Trustees. While this has been this year. These changes are all part First Capital’s ongoing and strategic approach to Board renewal. It is notable that since 2018, seven of the ten Trustees at First Capital, including the Chair, have joined the Board as part of year of progress for First Capital REIT. be achieved with the tremendous and dedicated Many things in the world have changed over the past thank. Finally, I wish to thank our Trustees for their counsel leadership and enthusiasm, and our unitholders for would be near impossible to recreate today. Strong pandemic, has been a constant in our business. In a real estate business like FCR’s, it is important to take Adam Paul I am very proud of what we have accomplished over Business and Strategy Overview Our business First Capital Real Estate Investment Trust, with $9.6 billion in assets, owns, operates and develops grocery-anchored, open-air centres in neighbourhoods with the strongest demographics in Canada. Our purpose Through the expertise and collaboration of our team, we create thriving properties which generate value for businesses, investors and our neighbourhoods. Thriving properties…Thriving neighbourhoods. Our grocery-anchored, open-air centres are designed to be vibrant places that meet the needs of everyday life- bring together people, retail shops and services, public art, and access to public YYZ TORONTO HEADQUARTERS FCR.UN LISTED ON TSX 145 NEIGHBOURHOODS 22.2M SQ. FT. OF GLA >2,400 TENANTS 371 EMPLOYEES Our values and our corporate responsibility and sustainability program guide our actions Read more about our approach to corporate responsibility and sustainability in our 2021 Environmental, Social & Governance Report Collaboration One Team, One Purpose Innovation Freedom to challenge Excellence Be the best at what you do Accountability Deliver what you promised Passion Love what you do We achieve this by: targeted super urban neighbourhoods with other uses to create thriving urban neighbourhoods to management in our incremental density pipeline through the development process certain other assets where been achieved sheet within Canada’s largest and fastest target markets, which helps generate economies of These neighbourhoods are located in Toronto, Montreal, Vancouver, Edmonton, Calgary and neighbourhoods and markets in which we operate. Within each of these markets, we own some of the desirable tenants with the highest rent growth Urban Markets % of Annual Minimum Rent* 48% 12% 11% 12% 7% 4% 4% 2% 3% 100% 100% Other Total *As at December 31, 2022 for everyday urban life % of Rent 124 17.4 Medical, Professional & Personal Services 1,292 15.6 QSR, Chains & Cafes 918 13.3 Other Necessity- Based Retailers 378 12.1 9.2 8.4 8.2 5 8 3.6 3.1 1.7 1.6 Pharmacies Other Tenants 119 466 Banks & Credit Unions 184 84 75 87 68 106 Value-Based Retailers Other Restaurants Daycare & Learning Centres As at December 31, 2022 24 million square feet of incremental density within our existing portfolio 31 public art installations across our portfolio our assets management of our competency and an important part of our strategy. Measuring our progress As we continue to advance our real estate strategy, we measure our progress through a number of key metrics. 300,000 by 2021. 99% 71 300,000 Corporate Responsibility And Sustainability Sustainability has always been integral to the responsible management of every aspect of our Disclosure Project’s (CDP) Climate Change inaugural Report on the Task Force for Climate- Related Financial Disclosures. We also respond and dynamic urban neighbourhoods and at the same our success and have well-developed programs Simply put, it makes good business sense. To support our commitment to sustainability subsidies. First Capital encourages employee assess and improve our environmental programs employees to become unitholders through a unit and investors, as well as our employees and the to transparency and ensuring that our sustainability Director of Sustainability who is responsible for neighbourhoods thrive. and sustainability report in 2009. Since 2010, we have had a third-party conduct assurance on selected sustainability performance indicators, including greenhouse gas emissions and energy use. We have followed and that the board of trustees (the “Board”) endorses the principle that the Board should have a that diverse Boards have enhanced decision-making Our strength in ESG standards and disclosure is validated through numerous ratings, including achieving: AA AWARDED PRIME STATUS FOR CORPORATE ESG PERFORMANCE Shareholder Services in 2022 Our ESG Priorities and Progress ENVIRONMENTAL use (2017-2021) retail buildings in Canada as of December 31, 2021 • • • • • • • • • • • • Formed an FCR TCFD Task Force made up of senior leaders from across SOCIAL Foster an engaged and • 2021 and 2020 • Strong gender diversity metrics achieved through all levels of the • • • Top Employers for 2021 and 2020 • Named one of Canada’s Top Small and Medium Employers for the third • Selected for inclusion in “The Career Directory” for 2021 as one • Michele Walkau, Senior Vice President, Brand & Culture selected as one of • 87% employee engagement score in our 2022 employee pulse survey • • • • • operate charitable giving and volunteer programs focused on community support food insecurity GOVERNANCE Monitor our our values • • • • • • • • directly with our Board At First Capital, we aspire to uphold our position as an industry leader in ESG. We strive for performance excellence at our properties and new developments, creating thriving, healthy, sustainable urban neighbourhoods. We foster a vibrant corporate culture that ensures equal opportunity and well-being for all create long-term value for all of our stakeholders. For more information on the Company’s ESG practices, please refer to the latest ESG report on the Company’s website at www.fcr.ca/esg. MD&A MANAGEMENT’S DISCUSSION AND ANALYSIS Table of Contents 1 1 4 7 8 10 10 12 13 13 13 14 14 15 16 17 23 26 27 27 28 29 29 31 31 32 32 33 34 Introduction Current Business Environment and Outlook Non-IFRS Financial Measures Operating Metrics Summary Consolidated Information and Highlights Business and Operations Review Real Estate Investments Investment Properties 2022 Acquisitions 2021 Acquisitions 2022 Dispositions 2021 Dispositions Impact of Acquisitions and Dispositions Capital Expenditures Valuation of Investment Properties Property Development Activities 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 34 34 36 36 37 38 39 39 40 40 41 41 42 42 43 45 47 48 48 49 49 49 50 53 54 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, AFFO 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, 2022 and 2021. It should be read in conjunction with the Trust’s audited annual consolidated financial statements for the years ended December 31, 2022 and 2021. 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 7, 2023. CURRENT BUSINESS ENVIRONMENT AND OUTLOOK Throughout 2022, challenges related to high and persistent inflation, driven by higher food and energy costs and broad year-over-year price increases across the CPI-basket, continued to impact the economy, consumer spending and interest rates. The persistence of inflationary forces amplified the Bank of Canada’s resolve towards a more restrictive monetary policy, including quantitative tightening and higher interest rates. In this regard, the Bank of Canada’s overnight lending rate increased by 425 basis points since the beginning of 2022, and in its January 2023 statement, the Governing Council stated that it “expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases. Governing Council is prepared to increase the policy rate further if needed to return inflation to the 2% target, and remains resolute in its commitment to restoring price stability for Canadians.” First Capital temporarily reduced its distribution in January 2021 to mitigate the risks associated with the ongoing COVID-19 pandemic at the time. Through the benefit of significant retained capital, the reduced distribution rate provided First Capital with additional financial flexibility through this period of heightened uncertainty. With the challenges related to the pandemic having subsided and their impacts on the FCR portfolio having largely passed, and the Trust’s requirement to distribute all its taxable income, FCR’s Board deemed it appropriate to return the monthly distribution rate to the pre-2021 level. Accordingly, on September 15, 2022, the Trust announced that its Board of Trustees approved an increase in FCR’s regular monthly distribution to $0.072 per unit, which equates to an annualized rate of approximately $0.86 per unit. While the health impacts of the SARS-CoV-2 virus across the population appears to have waned, and the virus is increasingly cited as endemic, the recurrence of variants of concern will remain a key public health risk that bears ongoing monitoring. First Capital’s high-quality grocery-anchored and mixed-use portfolio continues to be resilient and has a demonstrated track record of producing strong cash collections, solid leasing volumes, and growth in its average net rental rate through economic cycles. Enhanced Capital Allocation and Portfolio Optimization Plan Near the end of the third quarter, the Trust announced its Enhanced Capital Allocation and Portfolio Optimization Plan, which aims to monetize more than $1 billion of low-yielding and sought-after assets over a two-year period where value- enhancing goals have been achieved. The objective of the Enhanced Capital Allocation and Portfolio Optimization Plan is to capitalize on the successful strategies employed on specific assets that are now prime for monetization. This will re- orient the REIT’s portfolio by increasing short- to medium-term net operating income and FFO growth, while at the same time maintaining a prudent yet meaningful pipeline of development assets that provide significant flexibility to the REIT and, reducing debt. 1 FIRST CAPITAL REIT ANNUAL REPORT 2022 Creating a Focused Cycle of Strategic Monetization and Investment Through proactive management, the REIT has realized short- to medium-term value upside in a significant portion of its non-grocery anchored or no- and low-yielding assets and will continue to do so to maintain two steady pipelines: • Monetization Pipeline that will be continually refreshed as value-enhancing activities are completed for assets FCR • does not select for future development High Impact Development Pipeline for assets that will be developed by FCR independently or with strategic partners Active 2-Year Monetization Pipeline To achieve this strategic repositioning and portfolio optimization, First Capital is in the midst of undertaking a value maximizing sales process expected to generate gross proceeds of more than $1 billion by the end of 2024. The assets identified for disposition have a run rate yield of less than 2% on the expected monetization value. The Trust also expects to complete the rezoning of approximately 11 million square feet of density on a well-staggered basis over the next one, two and three years, which it anticipates will increase their value by approximately $700 million, based on current market density value for these properties. These properties will form a capital source to crystallize value created by the REIT and deploy that capital to more productive uses with a focus on EBITDA and FFO per unit growth and consequently balance sheet strength. Optimal Portfolio and Higher Impact Capital Allocation Through the Board approved plan, First Capital expects to deliver an attractive combination of income and growth through its cash distribution (paid monthly) and an anticipated multi-year FFO per unit growth rate of at least 4%. The development pipeline will be some of the most attractive development assets in the Canadian REIT sector with a focus on FCR’s best-in- class, grocery-anchored, necessity-based retail located in thriving neighbourhoods with superior demographics. The on-going execution of the Enhanced Capital Allocation and Portfolio Optimization Plan during the fourth quarter resulted in the sale of assets for an aggregate selling price of $179.3 million. During the quarter, the REIT disposed of its remaining 50% non-managing interest in the residential component of King High Line, located at 1100 King Street West in Toronto, for gross proceeds of $149.0 million. The sale price equated to a capitalization rate of less than 3% on in-place net operating income and it was a premium to the carrying value of the property. In addition, in late December 2022, the Trust disposed of a 25% interest in its Yonge & Roselawn development site located in mid-town Toronto for $30.3 million. As of December 31, 2022, the Trust has classified $187.7 million of its non-current assets as held for sale. Actively managing assets First Capital operates a portfolio of assets located in super urban and top-tier suburban 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. FCR’s Real Estate Services Team continues to focus on property improvements, customer amenities, and merchandising mix or tenant uses that are most in demand to serve the communities and neighbourhoods in which the Trust operates. Managing the balance sheet With the announcement of the Trust’s Enhanced Capital Allocation and Portfolio Optimization Plan, First Capital is well positioned to continue to strengthen its financial position through debt reduction and an improving cost of capital over the long-term, targeting a net debt to EBITDA ratio of less than 10x. As of February 7, 2023, the Trust's liquidity position included approximately $1.1 billion of cash and undrawn credit facilities with debt maturities for 2023 totaling $445 million. As at December 31, 2022, the Trust had unencumbered properties with an IFRS value of approximately $6.6 billion and a net debt to asset ratio of 44.0% as well as a net debt to Adjusted EBITDA ratio that improved to 10.2 from 11.2 year over year. FIRST CAPITAL REIT ANNUAL REPORT 2022 2  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Normal Course Issuer Bid ("NCIB") Since the beginning of 2019, the REIT has completed approximately $1.7 billion of dispositions, while continuing to invest meaningfully in the business. Collectively, these activities achieved several of First Capital’s strategic objectives, including strengthening the balance sheet and significantly improving the composition of the REIT’s real estate portfolio. Notably, FCR has met these objectives while selling properties at prices generally above their respective IFRS values. Commencing on May 18, 2022, First Capital implemented an NCIB pursuant to which it may repurchase its trust units for cancellation. The substantial disconnect that currently exists between the intrinsic value of the REIT’s units and their publicly traded price presents a significant opportunity to generate value through the repurchase of trust units. Therefore, from time to time, the purchase of FCR trust units at certain market prices below NAV presents an attractive use of the REIT’s capital that should afford additional value and liquidity for the issued and outstanding units, while benefiting remaining Unitholders by increasing their proportionate equity interest in the REIT. As of December 31, 2022, the REIT has repurchased 6.2 million Trust units for approximately $94.5 million. 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 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 $176.5 million (December 31, 2021 - $240.0 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 In addition to the Trust's Enhanced Capital Allocation and Portfolio Optimization Plan, First Capital’s approach to property dispositions is more broadly centered around several objectives. The first is to sell 100% interests in properties that are deemed to be inconsistent with its real estate strategy, as certain properties may not offer 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. Development initiatives Management continually monitors economic and capital market forces and their potential impact on the portfolio, including properties under development. As of December 31, 2022, FCR had approximately 0.6 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 for a 50% interest in the partnership. The Trust has maintained its 50% ownership interest in the property. Early in the second quarter, the Site Plan Application for Phase I of the redevelopment was submitted to the City of Toronto for approval. 3 FIRST CAPITAL REIT ANNUAL REPORT 2022 Outlook The global economy has proven resilient in the face of high inflation, supply chain disruptions, mobility restrictions in China, and Russia’s war on Ukraine. With the lag-effect of global central bank policy responses taking hold, there are signs that many economies are slowing, and that inflation is subsiding, albeit slowly. Canada’s inflation rate peaked last year at 8.1% in June, and it rounded out 2022 at 6.3% in December. Lower energy prices have provided much of the relief, yet there has been no reprieve in food and housing costs. Also operating with a lag, tight labour markets continue to serve as an underlying inflationary force. In its January 25, 2023, interest rate decision, the Bank of Canada Governing Council increased the policy interest rate by 25 basis points, to 4.50%. With that announcement, the Governing Council stated expectations of holding the policy rate steady, while it “assesses the impact of the cumulative interest rate increases”. Citing lower energy prices, improvements in global supply chains, and the dampening effects of higher interest rates on demand, the Bank of Canada expects that inflation will decline significantly this year. The Bank’s outlook is towards inflation of “around 3% in the middle of this year” and “and back to the 2% target in 2024”. If convincing signs of a path back to the 2% target emerge, this could have positive implications towards lower future interest rates. If not, the Bank continues to state its preparedness to increase the policy rate further if needed, as it remains “resolute in its commitment to restoring price stability for Canadians”. Certain aspects of the Trust’s business and operations that could potentially be impacted include rental income, occupancy, leasing terms and tenant improvements, future demand for space, and market rents, all of which impact the underlying value of investment properties. 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. 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. 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 FIRST CAPITAL REIT ANNUAL REPORT 2022 4  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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 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, AFFO and ACFO" section of this MD&A. 5 FIRST CAPITAL REIT ANNUAL REPORT 2022 Adjusted Funds from Operations Adjusted Funds from Operations ("AFFO") is a supplementary 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 AFFO 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 AFFO to be a meaningful financial measure of recurring economic earnings and relevant in understanding First Capital's ability to service it's debt, fund capital expenditures and pay distributions to Unitholders. AFFO is defined as FFO less amortization of straight-line rents, regular and recoverable maintenance capital expenditures, and incremental leasing costs. A reconciliation from FFO to AFFO can be found in the "Non-IFRS Reconciliations and Financial Measures — FFO, AFFO 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. 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 2023. 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, AFFO 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, AFFO and ACFO Payout Ratios FFO, AFFO 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 AFFO payout ratio is calculated using distributions declared per unit divided by AFFO 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. 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 6  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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 diluted unit represents NAV, as calculated above, adjusted for the exclusion of the unit-based compensation plan liability and for the proceeds to be received upon the exercise of outstanding options divided by the number of diluted units outstanding as at the end of the period. For purposes of calculating diluted 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 outstanding Deferred Units, Restricted Units, Performance Units and 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 (19.3 million square feet at its ownership interest compared to 22.2 million square feet at 100% as at December 31, 2022). First Capital's operating metrics and GLA excludes residential GLA totaling 203,000 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 its 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. 7 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 Cash distributions paid Cash distributions paid per unit As at December 31 Financial Information (1) Investment properties (3) Hotel property (3) Total assets Mortgages (3) Credit facilities Senior unsecured debentures Exchangeable Units Unitholders' equity Net Asset Value per unit (2) Capitalization and Leverage Trust Units outstanding (in thousands) Exchangeable Units outstanding (in thousands) Enterprise value (2) Net debt to total assets (2) (4) Net debt to Adjusted EBITDA (2) (4) Weighted average term to maturity on mortgages, fixed rate unsecured term loans and senior unsecured debentures (years) 2022 2021 2020 $ 712,966 $ 685,770 $ 685,138 $ 425,499 $ 412,538 $ 399,032 $ $ $ $ (409,716) $ 198,617 $ (185,700) 6,908 $ (1,122) $ (9.432) (159,997) $ 460,131 (0.73) $ 2.08 $ $ 2,702 0.01 218,162 220,826 220,495 $ 251,221 $ 249,613 $ 219,505 $ 124,191 $ 0.575 $ $ 94,804 $ 188,027 0.432 $ 0.860 $ 116,721 $ 102,618 $ 187,929 $ 0.539 $ 0.432 $ 0.860 2022 2021 2020 $ 8,627,788 $ 9,126,839 $ 9,490,641 $ 90,600 $ 85,400 $ 88,000 $ 9,581,938 $ 10,109,074 $ 10,032,463 $ 1,140,490 $ 1,173,175 $ 1,346,637 $ 1,104,614 $ 899,777 $ 915,928 $ 1,898,824 $ 2,348,145 $ 2,522,135 $ 1,009 $ 1,947 $ 1,399 $ 4,279,373 $ 4,620,942 $ 4,227,164 $ 23.48 $ 24.26 $ 22.32 213,518 219,541 219,315 60 103 103 $ 7,786,007 $ 8,568,292 $ 7,657,576 44.0% 10.2 3.4 43.9% 11.2 4.0 47.2% 12.0 4.6 FIRST CAPITAL REIT ANNUAL REPORT 2022 8 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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 2022 2021 2020 145 146 150 22,216,000 22,485,000 22,822,000 19,325,000 19,657,000 19,991,000 96.1% 95.8% 96.0% 96.1% 96.0% 96.2% 1,742,000 1,720,000 1,803,000 22,388,000 21,752,000 22,038,000 $ 22.95 $ 22.42 $ 21.89 15,000 194,000 33,000 — 5.2% 5.1% 399 5.1% 5.7% 193 (5.8%) (7.1%) 2022 2021 2020 $ 263,155 $ 250,989 $ 1.21 $ 47.7% 1.14 38.0% $ $ 221,974 1.01 85.4% Weighted average number of units - diluted (in thousands) 218,162 220,826 220,495 Adjusted Funds from Operations (2) (4) AFFO AFFO per diluted unit AFFO payout ratio $ 226,217 $ 223,512 $ 1.04 $ 55.4% 1.01 42.7% $ $ 189,187 0.86 100.2% Weighted average number of units - diluted (in thousands) 218,162 220,826 220,495 Adjusted Cash Flow from Operations (2) (4) ACFO ACFO payout ratio on a rolling four quarter basis $ 235,588 $ 243,816 $ 203,047 49.5% 42.1% 92.6% (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. 9 FIRST CAPITAL REIT ANNUAL REPORT 2022 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. Non-current assets 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, 2022, First Capital had interests in 145 neighbourhoods, which were 95.8% occupied with a total GLA of 19.3 million square feet at FCR's ownership interest (22.2 million square feet at 100%) and a fair value of $9.0 billion. This compares to 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 as at December 31, 2021. The Same Property portfolio includes properties sub-categorized in Same Property – stable and Same Property with redevelopment. The Same Property portfolio is comprised of 133 neighbourhoods with a total GLA of 18.3 million square feet at FCR's ownership interest (21.0 million square feet at 100%) and a fair value of $7.9 billion. These properties represent 92% of FCR's neighbourhood count, 95% of its GLA at FCR's ownership interest and 88% of its fair value as at December 31, 2022. The balance of FCR’s real estate assets consists of properties which are in various stages of redevelopment, properties acquired in 2022 or 2021 and properties in close proximity to them, as well as properties held for sale. FIRST CAPITAL REIT ANNUAL REPORT 2022 10 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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) Non-current assets classified as held for sale Dispositions (6) Total December 31, 2022 Weighted Average Rate per Occupied Square Foot 96.1% $ 22.96 % of Total GLA GLA (000s sq. ft.) 90.1% 17,705 $ 8,042 Fair Value (2) Occupancy December 31, 2021 Weighted Average Rate per Occupied Square Foot 96.0% $ 22.68 GLA (000s sq. ft.) Fair Value (2) Occupancy 17,687 $ 7,707 % of Total GLA 91.5% 3.1% 94.6% 3.9% 0.4% —% 0.5% 0.2% 0.4% —% 594 18,281 760 86 — 87 42 69 — 215 7,922 239 132 88 88 388 186 96.5% 96.2% 90.1% 88.3% —% 87.6% 93.4% 98.0% 21.32 22.91 21.18 32.17 — 27.59 28.93 33.73 3.3% 648 217 96.2% 19.57 93.4% 18,353 851 86 — 10 40 4.3% 0.4% —% 0.1% 0.2% 8,259 270 128 16 22 392 96.0% 97.3% 89.7% —% 100.0% 99.3% 22.57 18.21 32.68 — 52.83 21.69 0.4% 73 180 94.5% 28.91 — —% — 1.2% 244 264 99.1% 19.50 100.0% 19,325 $ 9,043 95.8% $ 22.95 100.0% 19,657 $ 9,531 96.1% $ 22.42 (1) Prior periods restated to reflect current period property categories. (2) At FCR's proportionate interest, including non-current assets classified as held for sale and hotel property as at December 31, 2022 and December 31, 2021, respectively. (3) Includes current year and prior year acquisitions. (4) Approximately $35 million (December 31, 2021 - $5 million) of density and development land is included in acquisitions as at December 31, 2022. (5) Approximately $83 million (December 31, 2021 - $79 million) of density and development land is included in non-current assets classified as held for sale as at December 31, 2022. (6) Comparative information presented relates to 2022 dispositions that have been completed and no longer form part of these metrics as at December 31, 2022. As at December 31, 2021, approximately $39 million of density and development land is included in dispositions. First Capital’s portfolio by major market is summarized as follows: As at December 31, 2022 December 31, 2021 (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 51 6,754 $ 4,366 48% 95.6% $ 26.51 Greater Montreal 28 3,606 1,085 12% Greater Calgary 15 2,374 998 11% Greater Vancouver 15 1,607 1,047 12% Greater Edmonton Greater Ottawa KW/Guelph (2) Other Total 10 2,215 12 1,021 5 9 991 757 664 329 344 210 7% 4% 4% 2% 94.9% 93.8% 97.1% 97.6% 97.9% 99.0% 93.6% 17.46 25.23 28.03 19.34 19.46 20.06 18.64 40% 14% 13% 10% 10% 5% 5% 3% 50 6,862 $ 4,599 48% 96.0% $ 25.73 28 3,586 1,140 12% 15 2,380 1,081 11% 15 1,613 1,032 11% 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% 145 19,325 $ 9,043 100% 95.8% $ 22.95 100% 146 19,657 $ 9,531 100% 96.1% $ 22.42 100% (1) At FCR's proportionate interest, including non-current assets classified as held for sale and hotel property as at December 31, 2022 and December 31, 2021, respectively. (2) Includes Kitchener, Waterloo, and Guelph Area. 11 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 Increase (decrease) in value of investment properties, net Dispositions Other changes Balance at end of year (1) Year ended December 31, 2022 Consolidated Balance Sheet Adjustments for Proportionate Interest $ 9,127 $ 64 125 (410) (277) (1) 8,628 $ $ 319 $ — 7 — — (2) 324 $ Proportionate Interest (2) 9,446 64 132 (410) (277) (3) 8,952 (1) Includes non-current assets classified as held for sale as at December 31, 2022 totaling $142 million ($140 million at First Capital's share) of investment properties. (2) 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 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 non-current assets 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 12 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 2022 Acquisitions Income-producing properties During the year ended December 31, 2022, as part of the Trust's strategy of expanding positions in key neighbourhoods, First Capital acquired interests in six Toronto properties and a 50% managing interest in a shopping centre located in Pickering, as summarized in the table below: Count Property Name 1. 2. 3. 4. 5. 6. 7. 272 Lawrence Avenue West 102 Atlantic Avenue 66 Montgomery Avenue 70 Montgomery Avenue Amberlea Shopping Centre 64 Montgomery Avenue 328 Bloor Street West Total 2021 Acquisitions City/Province Toronto, ON Toronto, ON Toronto, ON Toronto, ON Pickering, ON Toronto, ON Toronto, ON Quarter Acquired Interest Acquired GLA (sq. ft.) Acreage Acquisition Cost (in millions) Q1 Q1 Q1 Q2 Q3 Q3 Q4 100% 50% 100% 100% 50% 100% 50% 16,046 8,734 — — 50,088 — 2,117 76,985 0.4 $ 21.3 0.1 0.1 0.1 6.3 0.1 0.0 7.1 $ 7.6 2.5 3.6 23.0 2.5 3.3 63.8 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 8051 Yonge Street (Royal Orchard) City/Province Toronto, ON 129 Jefferson Avenue (Liberty Village) Toronto, ON 199 Avenue Road 897-901 Eglinton Avenue West Toronto, ON Toronto, ON 1. 2. 3. 4. Total 2022 Dispositions Quarter Acquired Interest Acquired GLA (sq. ft.) Acreage Acquisition Cost (in millions) Q1 Q1 Q2 Q3 50.0% 100% 20% 50% 2,478 3,700 3,186 5,628 0.2 $ 0.1 0.1 0.2 14,992 0.6 $ 5.4 2.1 2.7 12.4 22.6 During the year ended December 31, 2022, First Capital disposed of four income-producing properties, and four parcels of excess land for $277.4 million. These dispositions are summarized in the table below: City/Province St-Hubert, QC Edmonton, AB Gatineau, QC Markham, ON Milton, ON Brossard, QC Toronto, ON Toronto, ON Quarter Sold Interest Sold GLA (sq. ft.) Acreage Gross Sales Price (in millions) Q1 Q2 Q3 Q3 Q3 Q3 Q4 Q4 100% 100% 100% 100% 100% 100% 50% 25% — 39,879 161,496 43,052 — — 161,434 — 1.0 2.9 16.4 3.6 4.1 0.2 0.9 0.5 405,861 29.6 $ 277.4 Count Property Name 1. 2. 3. 4. 5. 6. 7. 8. Carrefour St-Hubert (land) Staples Gateway La Porte de Gatineau Bayview Lane Plaza Derry Heights Plaza (land) Place Portobello (land) King High Line residential Yonge & Roselawn (land) Total 13 FIRST CAPITAL REIT ANNUAL REPORT 2022 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: Count Property Name Fairview Mall - Staples Eagleson Place - expansion unit Dundas & Aukland (Station Place) City/Province St. Catharines, ON Ottawa, ON Toronto, ON Towerlane Centre & Airdrie Village Square Airdrie, AB 134, 146-150 Lakeshore Road West (Lakeshore & Kerr) Langley Mall King High Line residential 802, 812, 816-838 – 11th Avenue SW (GM Glenbow) 731-739 – 10th Avenue SW (Five Roses Building) Oakville, ON Langley, BC Toronto, ON Calgary, AB Calgary, AB 738 – 11th Avenue SW (Sherwin Block) Calgary, AB 5095-5107 Queen Mary Fairview Mall - Kelsey's Montreal, QC St. Catharines, ON Eagleson Place - expansion unit Humbertown Shopping Centre (land) (2) Ottawa, ON Toronto, ON 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Total (1) 35% at FCR's proportionate share. (2) Previously classified as Residential Inventory. Impact of Acquisitions and Dispositions 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% 100% 100% 100% 16.67% 50% 50% 50% 100% 100% 50% 50% 31,000 2,294 109,809 249,875 20,551 136,657 53,822 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 0.9 675,957 45.2 $ 344.8 The annualized NOI of properties acquired and disposed, at the time of acquisition or disposition, during the years ended December 31, 2022 and 2021 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 2022 1,699 — — — — — — — 1,699 $ $ $ $ 2021 637 — — — — — — — 637 2022 5,062 — — — 720 2,824 — — 8,606 $ $ 2021 1,642 164 4,424 1,112 — 165 — 680 8,187 $ $ FIRST CAPITAL REIT ANNUAL REPORT 2022 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 2022 2021 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 $ $ $ $ 20,694 $ 28,527 10,002 65,785 125,008 $ 26,289 $ 151,297 $ (1) Refer to the "Non-IFRS Financial Measures" section of this MD&A. 136 $ 43 — 6,533 6,712 $ 3,914 $ 10,626 $ 20,830 $ 28,570 10,002 72,318 131,720 $ 30,203 $ 161,923 $ 15,554 $ 35,438 4,033 98,494 153,519 $ 14,541 $ 168,060 $ Proportionate Interest (1) 15,570 35,441 4,033 89,503 144,547 21,086 165,633 16 $ 3 — (8,991) (8,972) $ 6,545 $ (2,427) $ Capital expenditures for the year ended December 31, 2022 were $161.9 million, which was $3.7 million lower than in the prior year. 15 FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022 and December 31, 2021: As at and for the three and twelve months ended (millions of dollars) December 31, 2022 Adjustments for Proportionate Interest Fair Value Proportionate Interest (1) Net Operating Income (1) 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) Valuation Method DCF (2) DCF (2) $ $ DCF (2), Cost (2) DCF (2), Cost (2) DCF (2), Cost (2) DCF (2), Cost (2) Cost (2), comparable land sales Non-current assets classified as held for sale DCF (2), comparable land sales 7,601 $ 215 7,816 $ 239 49 89 80 213 142 Dispositions Total investment properties NOI related to other investments Total NOI N/A — 8,628 $ $ 61 $ — 61 $ — 83 (1) 8 175 (2) — 324 $ 7,662 $ 102 $ 388 3 215 12 7,877 $ 105 $ 400 12 3 — 1 239 132 88 88 3 1 — — 388 140 — 1 1 2 1 — 7 8,952 $ 111 $ 426 4 $ 112 $ 430 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 $83 million ($83 million at First Capital's share) of density and development land is included in non-current assets classified as held for sale. (4) Approximately $30 million ($35 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, 2021 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)(5) Non-current assets classified as held for sale Dispositions (6) Total investment properties NOI related to other investments Total NOI Valuation Method DCF (3) DCF (3) $ $ DCF (3), Cost (3) DCF (3), Cost (3) DCF (3), Cost (3) DCF (3), Cost (3) Cost (3), comparable land sales Adjustments for Proportionate Interest Proportionate Interest (2) Fair Value 7,938 $ 217 8,155 $ 270 46 16 14 223 62 $ — 62 $ — 82 — 8 169 8,000 $ 217 8,217 $ 270 128 16 22 392 Net Operating Income (2) 94 $ 371 3 10 97 $ 381 14 1 — — 1 4 — — — — DCF (3), comparable land sales 139 (2) 137 1 2 N/A 264 9,127 $ $ — 319 $ 3 264 14 9,446 $ 105 $ 413 3 2 $ 107 $ 416 (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 $79 million ($79 million at First Capital's share) of density and development land is included in non-current assets classified as held for sale. (5) Approximately $5 million, at First Capital's share, of density and development land is included in acquisitions. (6) Includes properties that were disposed of in 2022. Approximately $38 million ($38 million at First Capital's share) of density and development land is included in dispositions. FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022, the weighted average valuation yields (stabilized overall capitalization, terminal, and discount rates) used in valuing those investment properties under the Income Approach increased from December 31, 2021. Throughout 2022, as part of its normal course internal valuations, the Trust made revisions to stabilized capitalization rates, discount rates, and terminal capitalization rates to reflect current market conditions and rising interest rates. As a result, an overall decrease in the value of investment properties was recorded in the amount of $409.7 million ($410.5 million at FCR's share) for the year ended December 31, 2022. 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, 2022 and December 31, 2021: As at December 31, 2022 Area Greater Toronto Greater Montreal Greater Calgary Greater Vancouver Greater Edmonton Greater Ottawa KW/Guelph (1) Other Weighted Average As at December 31, 2021 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 4.8% 5.9% 5.5% 4.4% 6.3% 5.9% 5.6% 5.9% 5.2% 4.9% 5.8% 5.6% 4.4% 6.0% 5.8% 5.5% 5.8% 5.5% 3.0%-7.3% 5.0%-7.3% 5.3%-6.3% 3.5%-5.3% 5.3%-7.0% 5.0%-6.8% 5.3%-6.0% 5.0%-7.0% 3.0%-7.3% 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% (1) Includes Kitchener, Waterloo, and Guelph Area. Property Development Activities As at December 31, 2022, the Trust's share of properties under construction, residential inventory and density and development land totaled approximately $760 million. These non-income producing properties represent approximately 8% of the Trust's 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, 2022, the invested cost of these non-income producing properties was $650 million as compared to a fair value of $760 million. Cumulative gains of approximately $110 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 17 FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022, First Capital's portfolio is comprised of 19.3 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, 2022, Management had identified approximately 24.1 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, 2022 Properties under construction Density and development land Medium term Long term Very long term Residential inventory Total development pipeline 242 1,300 100 100 1,500 — 1,742 Square feet (in thousands) Value recognized (1)(2) Commercial Residential Total (1) Recognized to date (2) 24 266 266 $ (in millions) 88 11,300 6,700 4,000 22,000 364 22,388 12,600 6,800 4,100 23,500 364 24,130 7,066 $ 364 $ 7,696 $ 506 166 760 (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 32% of FCR's 24.1 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. The value of the Trust's density and development land recognized in the Trust's proportionate balance sheet totaling $506 million, or $72 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, 2022, the invested cost of the density and development land recognized in the Trust's proportionate balance sheet totaled $407 million representing acquisition cost and pre-development costs to date. FIRST CAPITAL REIT ANNUAL REPORT 2022 18 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued As at December 31, 2022 (1) (in millions) Development land IPP with density Value of density and development land Unzoned Zoned Total Unzoned Zoned Total Unencumbered Encumbered $ $ 74 $ 256 330 73 91 164 494 $ 12 $ — 12 — — — 12 $ Fair Value 86 256 342 73 91 164 506 (1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A. The remaining 16.4 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 area. 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, 2022 (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 14,086 5,464 2,410 1,098 714 358 % of Total 58.3% 22.6% 10.0% 4.6% 3.0% 1.5% 24,130 100.0% 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, 2022, entitlement submissions to date total approximately 16.7 million square feet representing 69% of FCR's 24.1 million incremental density pipeline. To date, 7.6 million square feet has been zoned and the Trust expects up to 1.2 million square feet of existing entitlement submissions to be zoned during the first half of 2023. Entitlement Applications 1. 2. 3. 4. 5. Pre-2019 Entitlement Applications (1) 2019 Entitlement Applications 2020 Entitlement Applications 2021 Entitlement Applications 2022 Entitlement Applications Total Entitlement Applications Submitted Dispositions (2) 000's of square feet submitted for (at FCR's share): Residential Commercial Total Existing Incremental 2,986 8,086 2,540 1,477 1,638 707 966 309 22 35 3,693 9,052 2,849 1,499 1,673 175 516 135 126 78 3,518 8,536 2,714 1,373 1,595 Zoned 3,583 4,924 115 — — 16,727 2,039 18,766 1,030 17,736 8,622 — — — — (1,047) (1,047) Total Entitlement Applications Submitted - net 16,727 2,039 18,766 1,030 16,689 7,575 (1) As of December 31, 2022, all pre-2019 entitlement applications have been approved with final zoning as indicated above. (2) 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 2022 First Capital has 7.4 million square feet of additional incremental density which includes 6.8 million square feet primarily related to the properties listed below, where entitlements have yet to be submitted, and 0.6 million square feet currently under active development and redevelopment activities (see active projects table). Additional Incremental Density Property Danforth Sobeys 1. Cliffcrest Plaza 2. Kingston Square W. 3. Olde Oakville (future phases) 4. Yonge-Davis Centre 5. Appleby Square 6. Harwood Plaza 7. 1000 Wellington St. 8. Centre Commercial Domaine 9. Centre Commercial Van Horne 10. Galeries Normandie 11. Place Provencher 12. Le Campanile & Place du Commerce 13. Place Michelet 14. Scott 72 Shopping Centre 15. Semiahmoo (future phases) 16. Newport Village 17. 18. Mount Royal Village East 19. Gloucester City Centre (future phases) Neighbourhood City, Province Ownership Interest % Danforth Village Cliffcrest Lawrence Ave. E. / Morningside Ave. South Oakville 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 Oakville, 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% 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. 2022 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, 2022, First Capital completed the transfer of 15,000 square feet of new retail space marking the completion of the Wilderton (Phase 1) project at a total cost of $6.7 million. For the year ended December 31, 2022, First Capital had tenant closures for redevelopment of 192,000 square feet at an average rental rate of $4.80 per square foot. Approximately 94,000 square feet was demolished as of December 31, 2022. FIRST CAPITAL REIT ANNUAL REPORT 2022 20 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Active Development and Redevelopment Activities Consistent with its strategy of long-term ownership and value creation, First Capital’s developments are completed based on the highest standards in architecture, construction, choice of materials, lighting, parking, vehicular access, pedestrian amenities and accessibility, as well as development to Leadership in Energy and Environmental Design ("LEED") standards. Prospectively, First Capital’s development program also strives to achieve net zero carbon certification, where feasible. 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, 2022 are as follows: Estimated GLA upon completion (thousands of square feet) (2) Target Completion Date (1) Estimated Number of Residential Units (2) Residential (2) Commercial (2) Total (2) As at December 31, 2022 Project Stanley Park Mall, Kitchener, ON 200 West Esplanade, Vancouver, BC Cedarbrae Mall, Toronto, ON Edenbridge Condos, Toronto, ON 400 King St. W., Toronto, ON 138 Yorkville Ave., Toronto, ON Total at FCR's share (2) Ownership Interest % 100% 50% 100% 50% 35% 33% Type Retail H2 2023 Mixed-Use (rental) H1 2024 Retail H1 2024 Mixed-Use (condo) H2 2025 Mixed-Use (retail) H2 2025 Mixed-Use (condo) H2 2026 Mixed-Use (retail) H2 2026 Mixed-Use (condo) H1 2027 Mixed-Use (retail) H1 2027 (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. As at December 31, 2022 Project Investment at cost (1) (in millions) Incurred to Date (1) Estimated to Complete (1) Total (1) Properties under Construction (1) Stanley Park Mall, Kitchener, ON $ 10 $ 11 $ 21 $ 10 $ — $ 200 West Esplanade, Vancouver, BC Cedarbrae Mall, Toronto, ON (2) Edenbridge Condos, Toronto, ON (residential) Edenbridge Condos, Toronto, ON (retail) 400 King St. W., Toronto, ON (residential) 400 King St. W., Toronto, ON (retail) 138 Yorkville Ave., Toronto, ON (residential) 138 Yorkville Ave., Toronto, ON (retail) 16 33 35 1 66 4 65 12 11 22 81 5 104 13 TBD TBD 27 55 116 6 170 17 TBD TBD 16 43 — 1 — 6 — 12 — — 35 — 66 — 65 — Total at FCR's share (1) $ 242 $ 247 $ 489 $ 88 $ 166 $ 254 (1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A. (2) Includes an allocation of land and building with respect to the space under development within the existing shopping centre. 21 FIRST CAPITAL REIT ANNUAL REPORT 2022 — 38 — 105 — 217 — 22 — 382 — 24 — 122 — 151 — 91 — 388 61 5 136 — 4 — 12 — 24 242 Value recognized (1) (in millions) Residential Development Inventory (1) 61 29 136 122 4 151 12 91 24 630 Total (1) 10 16 43 35 1 66 6 65 12 Stanley Park Mall Stanley Park Mall, Kitchener, is the construction of a new purpose-built 61,000 square foot Canadian Tire store replacing the former 54,000 square foot Walmart. Demolition of the former building is complete and work to prepare the site and pad will commence shortly. Canadian Tire will open in their new space during the first half of 2024. 200 West Esplanade 200 West Esplanade, North Vancouver, is a 58,000 square foot mixed-use development that includes 75 rental apartments and approximately 9,000 square feet of retail GLA at grade. The building structure is now complete with plumbing and window installation underway. The Trust’s co-development partner in the project is Cressey Development Group. Cedarbrae Mall Cedarbrae Mall, Toronto, is an extensive retail renovation within the former Walmart box. Fronting Lawrence Avenue East, the reimagined two-storey space totaling 136,000 square feet will include substantial exterior improvements including upgraded retail facades, additional public space, site enhancements, and a new main entry to the mall. The 16 individual ground floor units will consist of several larger format spaces facing the exterior of the mall, as well as many small-sized interior-facing units catering to local businesses. Construction on the project is now underway. Edenbridge Condominiums Edenbridge on the Kingsway, Etobicoke, is a 9-storey condominium development that includes 209 luxury suites and approximately 7,000 square feet of retail GLA at grade. The project is located on the southeast corner of the REIT’s Humbertown Shopping Centre and 87% of the units have been pre-sold. Below-grade forming is progressing well on-site. The Trust’s 50% co-development partner in the project is Tridel. 400 King 400 King Street West, Toronto, is a 47-storey condominium development that includes 612 suites and approximately 34,000 square feet of street front retail GLA located over two levels. Demolition of the existing structure is complete, and excavation and shoring is underway. As of quarter end, 98% of the units have been pre-sold. The Trust’s co-development partners in the project are Plazacorp and Main & Main. 138 Yorkville 138 Yorkville Avenue, Toronto, is a 29-storey ultra-luxury condominium tower that includes 65 large-size suites and approximately 40,000 square feet of high-end retail at its base. Located on the northeast corner of Avenue Road and Yorkville Avenue, the property is situated prominently at the “gateway” to Toronto’s prestigious Yorkville neighbourhood, and it will be integrated into the REIT’s Yorkville Village and Hazelton Hotel properties. Demolition of the former structures is now complete and site excavation and shoring is expected to commence shortly. The Trust’s co-development partner in the project is Greybrook Realty Partners. FIRST CAPITAL REIT ANNUAL REPORT 2022 22 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Leasing and Occupancy As at December 31, 2022, total portfolio occupancy increased 0.1% to 95.8%, while Same Property occupancy increased 0.2% to 96.2% compared to September 30, 2022 occupancy rates. Total portfolio occupancy decreased 0.3% to 95.8%, primarily due to net closures versus openings, while Same Property occupancy increased 0.2% to 96.2% compared to December 31, 2021. For the year ended December 31, 2022, the monthly average occupancy for the total portfolio was 95.6% compared to 95.9%, and the Same Property portfolio occupancy was 95.9% compared to 95.9% 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 Non-current assets 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 17,005 573 17,578 685 76 67 18,406 76 — 39 18,521 % Occupied December 31, 2022 Weighted Average Rate per Occupied Square Foot 22.96 21.32 22.91 21.18 32.17 33.73 96.1% $ 96.5% 96.2% 90.1% 88.3% 98.0% 95.9% 87.6% —% 93.4% 95.8% $ 22.92 27.59 — 28.93 22.95 Total Occupied Square Feet 16,996 623 17,619 829 77 69 18,594 10 242 40 18,886 % Occupied December 31, 2021 Weighted Average Rate per Occupied Square Foot 22.68 19.57 22.57 18.21 32.68 28.91 96.0% $ 96.2% 96.0% 97.3% 89.7% 94.5% 96.0% 100.0% 99.1% 99.3% 96.1% $ 22.44 52.83 19.50 21.69 22.42 (1) Includes current year and prior year acquisitions. (2) Comparative information presented relates to 2022 dispositions that have been completed and no longer form part of these metrics as at December 31, 2022. (3) At FCR's ownership interest. 23 FIRST CAPITAL REIT ANNUAL REPORT 2022 During the three months ended December 31, 2022, First Capital completed 711,000 square feet of lease renewals across the portfolio. First Capital achieved an 9.9% 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, 2022, 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 0.7% from $22.80 as at September 30, 2022 to $22.95 as at December 31, 2022 primarily due to renewals lifts, and rent escalations. Changes in First Capital’s gross leasable area and occupancy for the total portfolio for the three months ended December 31, 2022 are set out below: Three months ended December 31, 2022 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) September 30, 2022 (2) 17,548 96.0% $ 22.77 938 90.3% $ 23.52 153 (121) 24.63 (26.96) — — — — (2) — — — — — 5 (1) — — — — — 81.31 (70.01) — — — — — 17,578 96.2% $ 22.91 942 90.4% $ 23.76 Tenant possession Tenant closures Tenant closures for redevelopment Developments – tenants coming online (3) Redevelopments – tenant possession Demolitions Reclassification Total portfolio before Q4 2022 acquisitions and dispositions Acquisitions (at date of acquisition) Dispositions (at date of disposition) Vacant Square Feet (thousands) % Total Square Feet (thousands) Occupied Square Feet % Weighted Average Rate per Occupied Square Foot 840 4.3% 19,326 95.7% $ 22.80 % —% (158) 122 — — — — (1) — — — — — — (3) 26.41 (27.48) — — — — — —% 803 4.2% 19,323 95.8% $ 22.95 — — — — — — — — — — —% — —% — — 1 65.8% 49.20 — —% — —% — — —% 1 — 2 65.8% 49.20 — —% — December 31, 2022 17,578 96.2% $ 22.91 943 90.4% $ 23.80 — —% 804 4.2% 19,325 95.8% $ 22.95 Renewals Renewals – expired 694 (694) 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) 17 (17) $ 25.60 $ (23.30) $ 2.30 9.9% $ 19.39 $ (17.35) $ 2.04 11.8% 711 (711) $ 25.45 $ (23.16) $ 2.29 9.9% 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 “Property Development Activities – 2022 Development and Redevelopment Coming Online and Space Going Offline” section of this MD&A. FIRST CAPITAL REIT ANNUAL REPORT 2022 24 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued During the year ended December 31, 2022, First Capital completed 2,615,000 square feet of lease renewals across the portfolio. First Capital achieved an 9.5% 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, 2022, First Capital achieved a 11.0% 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 $22.42 as at December 31, 2021 to $22.95 as at December 31, 2022 primarily due to renewal lifts, rent escalations, and dispositions. Changes in First Capital’s gross leasable area and occupancy for the total portfolio for the year ended December 31, 2022 are set out below: Year ended December 31, 2022 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, 2021 (2) 17,619 96.0% $ 22.57 1,267 97.1% $ 20.29 Tenant possession Tenant closures Tenant closures for redevelopment Developments – tenants coming online (3) Redevelopments – tenant possession Demolitions Reclassification Total portfolio before 2022 acquisitions and dispositions Acquisitions (at date of acquisition) Dispositions (at date of disposition) 428 (415) (54) — — — — 23.22 (28.97) (8.00) 39 (58) (138) — — — — 1 — — — 26.69 (16.96) (3.55) 32.50 — — — — — — 192 — — (94) (98) — % 771 3.9% 19,657 96.1% $ 22.42 (467) 473 — 14 — — 12 — — — 15 — (94) (86) 23.51 (27.49) (4.80) 32.50 — — — 17,578 96.2% $ 22.91 1,111 91.7% $ 23.18 — —% 803 4.1% 19,492 95.9% $ 22.92 — —% — —% — — 66 86.3% 20.64 — —% 11 77 86.3% 20.64 (234) 95.8% (19.98) — —% (10) (244) 95.8% (19.98) December 31, 2022 17,578 96.2% $ 22.91 943 90.4% $ 23.80 — —% 804 4.2% 19,325 95.8% $ 22.95 Renewals Renewals – expired 2,447 (2,447) 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) 168 (168) $ 21.97 $ (20.09) $ 1.88 9.4% $ 24.59 $ (22.16) $ 2.43 11.0% 2,615 (2,615) $ 22.14 $ (20.22) $ 1.92 9.5% 11.0% (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 “Property Development Activities – 2022 Development and Redevelopment Coming Online and Space Going Offline” section of this MD&A. 25 FIRST CAPITAL REIT ANNUAL REPORT 2022 Top Forty Tenants As at December 31, 2022, 55.1% of First Capital's annualized minimum rent came from its top 40 tenants (December 31, 2021 – 55.4%). Of these rents, 74.9% (December 31, 2021 – 74.9%) 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 5.3 years as at December 31, 2022, 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 Dollarama Save-On-Foods RBC Royal Bank GoodLife Fitness Number of Stores 95 50 36 19 11 43 50 9 38 23 Square Feet (thousands) 1,905 1,389 899 640 1,109 194 445 324 195 431 Percent of Total Gross Leasable Area 10.3% 7.5% 4.9% 3.5% 6.0% 1.0% 2.4% 1.7% 1.1% 2.3% Percent of Total Annualized Minimum Rent 10.4% 5.5% 3.3% 2.6% 2.3% 2.0% 1.9% 1.9% 1.7% 1.7% DBRS Credit Rating BBB (high) BBB BBB BBB AA AA (high) BBB S&P Credit Rating BBB BBB- BBB BBB AA AA- BBB AA (high) AA- Longo's (3) Restaurant Brands International Scotiabank BMO London Drugs Recipe Unlimited Nordstrom Petsmart Staples Top 10 Tenants Total CIBC 11. Lowe's 12. 13. LCBO 14. McKesson 15. Winners 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Whole Foods Market Starbucks 26. Pusateri's 27. 28. Toys "R" Us 29. McDonald's Subway 30. The Beer Store 31. 32. The Home Depot 33. Williams-Sonoma Alcanna Inc. 34. 35. Pet Valu 36. Michaels Goodwill 37. Indigo 38. Home Hardware 39. Bulk Barn 40. Top 40 Tenants Total 374 33 4 22 24 13 5 53 25 25 7 30 1 7 7 2 32 1 3 20 59 10 2 2 14 19 3 3 3 5 10 818 7,531 167 361 192 175 309 196 118 117 102 174 116 40 118 140 90 45 35 127 72 58 59 153 38 43 51 54 55 54 67 46 10,903 40.7% 0.9% 1.9% 1.0% 0.9% 1.7% 1.1% 0.6% 0.6% 0.6% 0.9% 0.6% 0.2% 0.6% 0.8% 0.5% 0.2% 0.2% 0.7% 0.4% 0.3% 0.3% 0.8% 0.2% 0.2% 0.3% 0.3% 0.3% 0.3% 0.4% 0.2% 58.7% 33.3% 1.4% 1.4% 1.4% 1.3% 1.3% 1.1% 1.1% 1.1% 1.0% 0.9% 0.8% 0.8% 0.7% 0.7% 0.6% 0.6% 0.5% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3% 0.3% 55.1% (1) The names noted above may be the names of the parent entities and are not necessarily the covenants under the leases. (2) Tenants noted include all banners of the respective retailer. (3) As of May 2021, Empire Company Ltd., the parent of Sobeys Inc., owns 51% of Longo's. Moody’s Credit Rating Aa2 Aa1 Baa2 Aa1 B2 Aa2 Baa1 Aa3 Baa1 A2 Ba3 Aa2 Aa2 Ba1 B1 B3 A1 Baa1 AA BBB (high) AA (low) AA AA BB A+ BBB+ A+ BBB+ A BB A+ A+ BB+ B+ B AA- BBB+ BBB+ Baa1 AA (low) A A+ A Aa3 A2 B- B2 FIRST CAPITAL REIT ANNUAL REPORT 2022 26 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Lease Maturity Profile First Capital’s lease maturity profile for its portfolio as at December 31, 2022, excluding any contractual renewal options, is as follows: Maturity Date Month-to-month tenants (1) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Thereafter Total or Weighted Average Number of Stores 184 548 586 567 483 539 282 177 145 145 145 59 63 3,923 Occupied Square Feet (thousands) 343 2,134 2,241 2,423 1,811 2,615 1,832 1,066 779 860 818 420 1,179 18,521 Percent of Total Square Feet 1.8 % 11.0 % 11.6 % 12.5 % 9.4 % 13.5 % 9.5 % 5.5 % 4.0 % 4.5 % 4.2 % 2.2 % 6.1 % 95.8 % $ Annualized Minimum Rent at Expiration (thousands) 7,558 44,215 50,695 58,759 48,551 65,502 46,277 26,812 20,883 22,675 21,716 10,929 33,922 458,494 $ Percent of Total Annualized Minimum Rent 1.6 % 9.6 % 11.1 % 12.8 % 10.6 % 14.3 % 10.1 % 5.8 % 4.6 % 5.0 % 4.7 % 2.4 % 7.4 % 100.0 % Average Annual Minimum Rent per Square Foot at Expiration 22.05 20.72 22.62 24.25 26.81 25.05 25.26 25.14 26.82 26.36 26.54 26.05 28.77 24.76 $ $ (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. The weighted average remaining lease term for the portfolio was 4.9 years as at December 31, 2022, excluding contractual renewal options, but including month-to-month and other short-term leases. Investment in Joint Ventures As at December 31, 2022, 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 Rd. Green Capital Limited Partnership Royal Orchard Lakeshore Development LP 2150 Lake Shore Blvd. W. Toronto, ON Markham, ON Toronto, ON Hazelton Food Services Partnership 116 Yorkville Ave. (ONE restaurant) Toronto, ON Stackt Properties LP Shipping Container marketplace Toronto, ON Effective Ownership December 31, 2022 December 31, 2021 35.4% 50.0% 50.0% 78.0% N/A 20.0% 50.0% 50.0% 50.0% 94.0% 35.4% 50.0% 50.0% 78.0% 25.0% 20.0% 50.0% 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. During the second quarter of 2022, the joint venture made final distributions and 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. 27 FIRST CAPITAL REIT ANNUAL REPORT 2022 The following table reconciles the changes in First Capital's interests in its equity accounted joint ventures for the years ended December 31, 2022 and 2021: 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, 2022 349,488 $ 12,491 (4,658) — (199) 357,122 $ December 31, 2021 52,570 17,110 (16,897) 298,165 (1,460) 349,488 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. On January 1, 2022, the Trust purchased 50% of the partnership units in the ONE Restaurant located in the Hazelton Hotel for $2.65 million. The acquisition was accounted for as a business combination, as such, transaction costs in the amount of $0.6 million were expensed in other gains (losses) and (expenses). Loans, Mortgages and Other Assets As at Non-current December 31, 2022 December 31, 2021 Loans and mortgages receivable classified as FVTPL (a) $ — $ 1,486 Loans and mortgages receivable classified as amortized cost (a)(b) Other investments Due from co-owners (c) 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 (d) Total current Total 136,352 9,595 22,703 168,650 1,506 38,641 3,334 43,481 122,321 5,801 — 129,608 6 116,152 25,976 142,134 $ 212,131 $ 271,742 (a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning investment properties. As at December 31, 2022, these receivables bear interest at weighted average effective interest rates of 6.9% (December 31, 2021 – 5.4%) and mature between 2023 and 2027. (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, was due and repaid before December 31, 2022, and the remainder is due on or before September 17, 2026. The loan was not subject to FIRST CAPITAL REIT ANNUAL REPORT 2022 28 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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 is accreted into interest income over the interest free period of the loan. (c) During the year ended December 31, 2022, the Trust contributed equity to one of its co-ownerships whereas its partners made draws on the co-ownership's new credit facility to fund the co-ownership's development project. The due from co-owners in the principal amount of $21.9 million equals the Trust's proportionate share of the co- ownership's credit facility draws. As there is no right of offset for these two financial instruments they are presented on a gross basis on the consolidated balance sheets. (d) 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 (recovery) Other operating costs and adjustments (3) Total Property operating costs NOI (4) NOI margin Three months ended December 31 Year ended December 31 % change 2022 2021 % change 2022 2021 $ 108,172 $ 106,291 26,700 28,871 3,586 928 (748) 26,367 28,955 7 797 32 $ 430,429 $ 426,146 106,162 100,865 117,061 118,842 4,113 2,633 (567) 1,541 2,528 2,082 (1,035) (594) 376 (2,308) 9,626 8,342 32,889 25,194 3.5% 176,100 170,197 2.7% 693,096 674,890 29,877 32,953 (316) 2,427 64,941 29,297 32,659 (513) 2,836 64,279 118,296 111,951 132,422 134,899 (361) 17,240 (1,877) 17,379 267,597 262,352 4.9% $ 111,159 $ 105,918 3.1% $ 425,499 $ 412,538 63.1% 62.2% 61.4% 61.1% (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, 2022, bad debt expense (recovery) totaled ($2.1) million and ($0.7) million, respectively (three months and year ended December 31, 2021 - $1.4 million and $8.5 million, respectively). (4) Refer to the "Non-IFRS Financial Measures" section of this MD&A. For the three months and year ended December 31, 2022, total NOI increased $5.2 million and $13.0 million, respectively, compared to the same prior year periods primarily due to lower bad debt expense, rent escalations, and higher lease termination fees, partially offset by the impact of dispositions. 29 FIRST CAPITAL REIT ANNUAL REPORT 2022 For the three months and year ended December 31, 2022, the NOI margin increased 0.9% and 0.3%, respectively, compared to the same prior year periods due to lower bad debt expense, and higher lease termination fees. For the three months and year ended December 31, 2022, property operating costs include $5.7 million and $23.4 million, respectively, (three months and year ended December 31, 2021 – $5.2 million and $20.8 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, 2022 of Nil related to property operations personnel (three months and year ended December 31, 2021 – Nil and $0.6 million, respectively). A portion of this wage subsidy was passed on to tenants through lower operating cost recoveries. 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 – 2022 Acquisitions – 2021 Non-current assets classified as held for sale Dispositions – 2022 Dispositions – 2021 Straight-line rent adjustment Development land NOI (4) NOI margin Three months ended December 31 Year ended December 31 % change 2022 2021 % change 2022 2021 $ 100,579 $ 98,529 25,584 27,592 3,581 850 25,030 27,400 7 619 $ 400,009 $ 392,397 100,814 94,875 110,543 111,515 4,107 2,466 1,493 2,084 (1,023) (613) 262 (2,257) 6,876 5,947 24,294 19,664 164,039 156,919 642,495 619,771 28,094 30,951 (318) 82 58,809 27,426 30,388 33 1,928 59,775 110,764 103,836 123,578 123,098 (442) 8,565 (1,131) 13,468 242,465 239,271 8.3% $ 105,230 $ 97,144 5.1% $ 400,030 $ 380,500 3,028 3,934 514 272 174 1,412 1,253 (142) (748) 166 477 — 110 1,024 2,401 479 32 317 12,030 1,842 506 589 3,867 6,792 (186) (567) 596 12,580 87 170 2,413 7,763 5,872 2,082 1,071 4.9% $ 111,159 $ 105,918 3.1% $ 425,499 $ 412,538 63.1% 62.2% 61.4% 61.1% (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. FIRST CAPITAL REIT ANNUAL REPORT 2022 30 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued The components of SP NOI growth and comparisons to the same prior year period are as follows: Same Property – Stable Same Property with redevelopment Total Same Property NOI Growth (2) (1) Prior periods as reported; not restated to reflect current period property categories. (2) Refer to the "Non-IFRS Financial Measures" section of this MD&A. Three months ended December 31 2021 (1) 1.9% 24.6% 3.2% 2022 8.5% 3.5% 8.3% Year ended December 31 2021 (1) 2022 5.1% 5.2% 15.4% 3.1% 5.7% 5.1% For the three months and year ended December 31, 2022, SP NOI increased by $8.1 million and $19.5 million, or 8.3% and 5.1%, respectively, primarily due to rent escalations, lower bad debt expense, and higher lease termination fees over the same prior year periods. Excluding bad debt expense (recovery) and lease termination fees, SP NOI increased 0.8% and 1.8% for the three months and year ended December 31, 2022, 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 2021 2022 Year ended December 31 2021 2022 $ 207 $ 109 $ 565 $ 19 3,824 1,425 5,475 $ 26 2,564 1,234 3,933 $ 76 13,889 5,340 19,870 $ $ 499 100 5,809 4,472 10,880 For the three months and year ended December 31, 2022, interest and other income increased $1.5 million and $9.0 million, respectively, compared to the same prior year periods primarily due to higher interest income as a result of higher outstanding loans and mortgages receivable and increased interest rates year-over-year, and income from the sale of residential townhouses recognized in the first quarter of 2022. 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 Interest expense $ $ Three months ended December 31 2021 11,658 6,250 23,851 12 (4,168) 37,603 2022 11,817 11,073 20,785 13 (5,055) 38,633 $ $ $ Year ended December 31 2021 2022 49,912 46,557 26,260 34,638 95,961 85,446 45 42 (19,508) (16,641) 152,670 150,042 $ $ $ (1) The distributions declared on the Exchangeable Units are accounted for as interest expense. For the three months ended December 31, 2022, interest expense increased $1.0 million compared to the same prior year period primarily due to higher outstanding credit facilities and increased interest rates year-over-year, partially offset by the repayment of senior unsecured debentures (Series O & Series P). For the year ended December 31, 2022, interest expense decreased $2.6 million over prior year primarily due to the repayment of mortgages and senior unsecured debentures (Series N, O and P), partially offset by higher outstanding credit facilities and increased interest rates year-over-year. During the years ended December 31, 2022 and 2021, approximately 10.0% or $16.6 million, and 11.3% or $19.5 million, respectively, of interest expense was capitalized to real estate investments under active development or redevelopment 31 FIRST CAPITAL REIT ANNUAL REPORT 2022 as well as for land or properties held for development. The decrease in capitalized interest is primarily due to the completion, or near completion, of major development projects such as Station Place and Wilderton. 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 2021 6,001 1,788 2,510 10,299 2022 6,782 2,063 4,774 13,619 $ $ Year ended December 31 2021 2022 27,675 29,542 7,155 7,393 10,611 15,496 45,441 52,431 $ (1,787) (1,539) (7,196) (7,234) $ 11,832 $ 8,760 $ 45,235 $ 38,207 For the three months and year ended December 31, 2022, gross corporate expenses, before capitalization, increased by $3.3 million and $7.0 million, respectively, over the same prior year periods. The increase in corporate expenses is primarily due to increased post pandemic spend on travel and business expenses, severance and reorganization costs as well as legal and advisory costs including those related to the Unitholder activism. First Capital manages substantially all 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, 2022 and 2021, approximately $7.2 million and $7.2 million, respectively, of compensation- related and other corporate expenses were capitalized to real estate investments for properties undergoing development or redevelopment projects. Amounts capitalized are based on development and pre-development projects underway. 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 2022 Unrealized gain (loss) on marketable securities Net gain (loss) on early settlement of debt (1)(2) Pre-selling costs of residential inventory Investment property selling costs Other Total per consolidated statements of income (loss) 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) Consolidated Statements of Income (Loss) $ (64) $ Included in FFO (64) $ 12,845 12,845 (8) (75) (4) (8) — (4) $ 12,694 $ 12,769 $ 2 (38) 12,658 $ 2 (38) 12,733 $ $ Consolidated Statements of Income (Loss) 2021 Included in FFO (2,276) (1,139) (27) — (5) (3,447) 8 (164) (3,603) (2,276) $ (1,139) (27) (3,093) (5) (6,540) $ 8 (164) (6,696) $ (1) During the second quarter of 2022, the Trust recognized a $13.5 million hedging gain in other comprehensive income in relation to the mortgage financing of the King High Line residential property. In the fourth quarter, the Trust's interest in the property was sold and the unamortized hedging gain of $13.1 million was reclassified to other gains (losses) and (expenses) upon assumption of the mortgage by the purchaser. In addition, $0.3 million of deferred financing costs related to the mortgage was also written off upon disposition of the property. (2) During the year ended December 31, 2021 the Trust incurred pre-payment penalties in the amount of $1.1 million in relation to the early settlement of debt. (3) Other gains (losses) and (expenses) under equity accounted joint ventures, included in FFO, is comprised of pre-selling costs of residential inventory of $38.0 thousand (December 31, 2021 - $0.2 million). (4) Refer to the "Non-IFRS Financial Measures" section of this MD&A. FIRST CAPITAL REIT ANNUAL REPORT 2022 32 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Year ended December 31 2022 Consolidated Statements of Income (Loss) Included in FFO Consolidated Statements of Income (Loss) 2021 Included in FFO Realized gain (loss) on sale of marketable securities $ 5,591 $ 5,591 $ — $ — Unrealized gain (loss) on marketable securities Net gain (loss) on early settlement of debt (1)(2) Transaction costs Gain (loss) on loan receivable modification Pre-selling costs of residential inventory Investment property selling costs Gain on Option Other (15,167) (15,167) 14,786 14,786 12,845 12,845 (1,139) (1,139) (572) (566) (31) (4,440) — 23 — (566) (31) — — 23 — — — — (238) (238) (7,133) 80,822 (9) — — (9) Total per consolidated statements of income (loss) $ (2,317) $ 2,695 $ 87,089 $ 13,400 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) 9 9 (282) (282) 69 145 69 148 $ (2,590) $ 2,422 $ 87,303 $ 13,617 (1) During the second quarter of 2022, the Trust recognized a $13.5 million hedging gain in other comprehensive income in relation to the mortgage financing of the King High Line residential property. In the fourth quarter, the Trust's interest in the property was sold and the unamortized hedging gain of $13.1 million was reclassified to other gains (losses) and (expenses) upon assumption of the mortgage by the purchaser. In addition, $0.3 million of deferred financing costs related to the mortgage was also written off upon disposition of the property. (2) During the year ended December 31, 2021 the Trust incurred pre-payment penalties in the amount of $1.1 million in relation to the early settlement of debt. (3) Other gains (losses) and (expenses) under equity accounted joint ventures, included in FFO, is comprised of pre-selling costs of residential inventory of $0.3 million (December 31, 2021 - gain on investment of $0.7 million, partially offset by pre-selling costs of residential inventory of $0.6 million). (4) Refer to the "Non-IFRS Financial Measures" section of this MD&A. For the three months ended December 31, 2022, First Capital recognized $12.7 million in other gains in its consolidated statement of income (loss) compared to $6.5 million in other losses for the same prior year period. The $19.2 million net change over prior year is primarily due to a $12.8 million net gain related to the hedging of the King High Line residential property that was disposed of in the fourth quarter of 2022 versus $1.1 million in prepayment penalties incurred in the fourth quarter of 2021. Additionally, the net change was also due to $3.0 million in lower investment property selling costs, and $2.2 million in lower unrealized losses on marketable securities. For the year ended December 31, 2022, First Capital recognized $2.3 million in other losses in its consolidated statement of income (loss) compared to $87.1 million in other gains for the prior year. The $89.4 million net change over prior year is primarily due to an $80.8 million gain recognized in the third quarter of 2021 related to the exercise of a previously secured option to purchase FCR's partner's 50% interest in 2150 Lake Shore Boulevard West, a $24.4 million negative fair value swing on marketable securities year-over-year, partially offset by a $14.0 million net gain on the early settlement of debt. Income Taxes For the three months and years ended December 31, 2022 and 2021, deferred income tax expense (recovery) totaled $5.8 million and $7.2 million, respectively, compared to $48.9 million and $25.9 million, respectively, over the same prior year periods. The decrease of $18.7 million for the year ended December 31, 2022, in deferred income tax expense was primarily due to a release in reserves of $12.2 million in the fourth quarter of 2022. 33 FIRST CAPITAL REIT ANNUAL REPORT 2022 Net Income (Loss) Attributable to Unitholders For the three months ended December 31, 2022, net income (loss) attributable to Unitholders was $42.4 million or $0.20 per diluted unit compared to $28.6 million or $0.13 per diluted unit for the same prior year period. The $13.7 million increase over prior year was primarily due to an increase in net operating income and other gains (losses) and (expenses) year-over-year, partially offset by higher corporate expenses and interest expense. For the year ended December 31, 2022, net income (loss) attributable to Unitholders was ($160.0) million or ($0.73) per diluted unit compared to $460.1 million or $2.08 per diluted unit for the prior year. The $620.1 million decrease was primarily due to a net year-over-year change in the fair value of investment property of $608.3 million. 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, 2022 December 31, 2021 $ 1,594 $ 2,476 1,235,767 1,098,235 1,900,000 1,216,872 893,958 2,350,000 $ 4,235,596 $ 4,463,306 (39,827) (37,512) $ 4,195,769 $ 4,425,794 1,009 1,947 3,589,229 4,140,551 $ 7,786,007 $ 8,568,292 213,518 219,541 $ 16.81 $ 18.86 (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. 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 34 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued The following table reconciles First Capital's net income (loss) to Adjusted EBITDA for the three months and years ended December 31, 2022 and 2021: Three months ended December 31 Year ended December 31 2022 42,372 $ $ 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) recovery Other non-cash and/or non-recurring items Adjusted EBITDA (1) $ 5,849 39,637 2,100 31,184 (6,908) 102 4,386 1,764 122 (12,658) 107,950 $ 0 2021 2 28,629 47,773 37,941 1,850 (25,833) 2,161 140 2,528 1,448 146 6,696 103,479 2022 (159,997) $ 2021 460,131 $ 7,287 152,930 8,364 410,474 (6,908) (321) (5,250) 6,626 (2,770) 2,590 413,025 24,782 154,013 8,473 (181,490) 1,122 548 9,286 5,859 248 (87,303) 395,669 $ $ (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, 2022 December 31, 2021 3.8% 3.4 44.0% 10.2 3.8% 4.0 43.9% 11.2 $ 6,569,548 $ 7,394,398 2.2 2.4 2.3 2.3 (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 1.0 to 10.2, as of December 31, 2022, primarily due to a $230.0 million decrease in net debt as well as a $17.4 million increase in EBITDA (on a rolling four quarter basis). 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; • 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. 35 FIRST CAPITAL REIT ANNUAL REPORT 2022 Credit Ratings On June 9, 2022, S&P affirmed FCR's Issuer Rating and issue level debt rating at BBB-, and revised the outlook to stable from negative. On June 23, 2022, 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). 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, 2022 is summarized in the table below: As at December 31, 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Mortgages (1) Credit Facilities/Bank Indebtedness (2) Senior Unsecured Debentures Total $ 32,597 $ 225,995 $ 300,000 $ 558,592 140,423 96,612 120,246 103,942 166,973 251,257 176,480 55,326 308,306 275,000 275,000 21,907 — — — — 300,000 300,000 300,000 500,000 200,000 — — — 748,729 671,612 695,246 625,849 366,973 251,257 176,480 55,326 % Due 13.4% 18.0% 16.2% 16.8% 15.1% 8.8% 6.1% 4.3% 1.3% $ 1,143,856 $ 1,106,208 $ 1,900,000 $ 4,150,064 100.0% Add (deduct): unamortized deferred financing costs, premiums and discounts, net (3,366) — (1,176) (4,542) Total $ 1,140,490 $ 1,106,208 $ 1,898,824 $ 4,145,522 (1) Principal amount outstanding for mortgages on a proportionate basis is $1,235,767. (2) Principal amount outstanding for credit facilities and bank indebtedness on a proportionate basis is $1,098,235 and $1,594, 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 2022 36 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Mortgages The changes in First Capital’s mortgages during the year ended December 31, 2022 are set out below: Year ended December 31, 2022 Balance at beginning of year Mortgage borrowings Mortgage repayments Scheduled amortization on mortgages Mortgages assumed by purchaser on sale of investment properties Amortization of financing costs and net premium Balance at end of year Amount Weighted Average Effective Interest Rate $ 1,173,175 91,075 (13,338) (30,946) (80,000) 524 $ 1,140,490 3.5% 5.1% 3.7% —% 4.9% —% 3.5% As at December 31, 2022, 100% (December 31, 2021 – 100%) of the outstanding mortgages bore interest at fixed interest rates. The average remaining term on mortgages outstanding remained consistent at 5.0 years as at December 31, 2022 on $1.1 billion of mortgages (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, 2022 is summarized in the table below: As at December 31, 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Scheduled Amortization Payments on Maturity Total $ 32,597 $ — $ 32,597 31,945 29,641 25,886 24,079 21,250 14,377 7,105 371 108,478 66,971 94,360 79,863 145,723 236,880 169,375 54,955 140,423 96,612 120,246 103,942 166,973 251,257 176,480 55,326 $ 187,251 $ 956,605 $ 1,143,856 Weighted Average Effective Interest Rate N/A 3.7 % 3.8 % 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 (3,366) $ 1,140,490 37 FIRST CAPITAL REIT ANNUAL REPORT 2022 Credit Facilities First Capital’s credit facilities as at December 31, 2022 are summarized in the table below: As at December 31, 2022 Unsecured operating facilities Revolving facility maturing 2026 - 2027 (1) Revolving facility maturing 2024 (2) Borrowing Capacity Amounts Drawn Bank Indebtedness and Outstanding Letters of Credit Available to be Drawn $ 450,000 $ — $ (5,593) $ 444,407 100,000 (100,564) — — Revolving facility maturing 250,000 (80,000) — 170,000 2023 Interest Rates Maturity Date BA + 1.45% or Prime + 0.45% or US$ LIBOR + 1.45% BA + 1.15% or Prime + 0.30% or US$ LIBOR + 1.15% BA + 1.15% or Prime + 0.30% or US$ LIBOR + 1.15% June 30, 2026 - June 30, 2027 August 31, 2024 October 31, 2023 Floating rate unsecured term loan maturing 2023 - 2025 (3) Fixed rate unsecured term loan maturing 2025 (4)(5) Fixed rate unsecured term loans maturing 2024 - 2026 (5) Secured construction facilities 200,000 (200,000) 100,000 (100,000) 550,000 (550,000) Maturing 2027 170,000 (21,907) Maturing 2025 Maturing 2024 71,450 — 19,321 (7,742) Maturing 2023 (5) 33,333 (33,333) Secured Facilities Maturing 2023 4,313 (4,313) Maturing 2023 6,755 (6,755) — — — — — — — — — — — — BA + 1.20% BA + 1.50% April 15, 2023 - April 15, 2025 5.00% January 9, 2025 3.29% March 28, 2024 - April 15, 2026 148,093 BA + 2.30% January 20, 2027 71,450 BA + 2.65% or Prime + 1.00% November 28, 2025 11,579 Prime - 0.25% June 1, 2024 — — — 2.79% February 24, 2023 BA + 1.20% or Prime + 0.20% BA + 1.20% or Prime + 0.20% September 28, 2023 December 19, 2023 Total $ 1,955,172 $ (1,104,614) $ (5,593) $ 845,529 (1) As at December 31, 2022, approximately $380.0 million of the unsecured revolving credit facility has been extended by one year and is due June 30, 2027. The remaining $70.0 million is due June 30, 2026. (2) The Trust has drawn in U.S. dollars the equivalent of CAD$100.0 million which was revalued at CAD$100.6 million as at December 31, 2022. (3) As at December 31, 2022, $100.0 million is due April 15, 2023 at a spread of BA + 1.20%, and the remaining $100.0 million is due April 15, 2025 at a spread of BA + 1.50%. (4) The Trust has the option to extend the unsecured term loan for an additional two years, to January 9, 2027. (5) The Trust has entered into BA-based interest rate swaps to economically convert these unsecured term loans and secured construction facility from variable rate BA-based debt instruments to fixed rate debt instruments over their respective terms to maturity. 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 2022 38 MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Senior Unsecured Debentures As at December 31, 2022 Interest Rate Remaining Term to Maturity Principal Outstanding Series Maturity Date Interest Payment Dates Coupon Effective (years) Q R S T V U A October 30, 2023 August 30, 2024 July 31, 2025 May 6, 2026 January 22, 2027 July 12, 2027 March 1, 2028 Weighted Average or Total April 30, October 30 February 28, August 30 January 31, July 31 May 6, November 6 January 22, July 22 January 12, July 12 March 1, September 1 3.90% 4.79% 4.32% 3.60% 3.46% 3.75% 3.45% 3.94% 3.97% 4.72% 4.24% 3.57% 3.54% 3.82% 3.54% 3.95% 0.8 1.7 2.6 3.3 4.1 4.5 5.2 3.0 300,000 300,000 300,000 300,000 200,000 300,000 200,000 $ 1,900,000 Interest on the senior unsecured debentures is payable semi-annually and principal is payable on maturity. On January 31, 2022, upon maturity, First Capital repaid its 4.43% Series O Senior Unsecured Debentures in the amount of $200.0 million. On December 5, 2022, upon maturity, First Capital repaid its 3.95% Series P Senior Unsecured Debentures in the amount of $250.0 million. Unitholders' Equity Unitholders’ equity amounted to $4.3 billion as at December 31, 2022, compared to Unitholders' equity of $4.6 billion as at December 31, 2021. The decrease is primarily attributed to a higher net loss, repurchase of Trust Units and higher distributions declared, partially offset by higher other comprehensive income for the year ended December 31, 2022. As at February 6, 2023, there were 213.5 million Trust Units and 0.1 million Exchangeable Units outstanding. Normal Course Issuer Bid (“NCIB”) On May 16, 2022, First Capital received TSX approval to commence a normal course issuer bid (“NCIB”) which will enable it to purchase for cancellation up to 21,910,353 of its outstanding Trust Units (“Units”). As of December 31, 2022, the Trust has acquired and cancelled 6.2 million Units at a weighted average purchase price of $15.14 per unit, for a total cost of $94.5 million. The excess of the purchase price over the carrying amount of the Units purchased, representing the unit price increase over the weighted average historical issuance price, was recorded as a reduction to retained earnings of $12.1 million. Unit Options As at December 31, 2022, First Capital had 6.3 million unit options outstanding, with an average exercise price of $19.76, which, if exercised, would result in First Capital receiving proceeds of $124.0 million. 39 FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022 December 31, 2021 $ $ $ 846 33 6,570 $ $ $ 724 35 7,394 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, 2022, and availability on existing credit facilities, address substantially all of the contractual 2023 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 2022 2021 Year ended December 31 2022 2021 Cash provided by (used in) operating activities $ 76,808 $ 83,575 $ 251,221 $ 249,613 Cash provided by (used in) financing activities Cash provided by (used in) investing activities (208,862) 135,772 (161,267) 67,600 (387,209) 133,983 (470,245) 154,887 Net change in cash and cash equivalents $ 3,718 $ (10,092) $ (2,005) $ (65,745) 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 2022 76,808 (46,120) 30,688 $ $ $ $ 2021 2022 2021 83,575 $ 251,221 $ 249,613 (23,710) (124,191) (94,804) 59,865 $ 127,030 $ 154,809 For the three months and years ended December 31, 2022 and 2021, cash provided by operating activities exceeded distributions declared. FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022 is set out below: As at December 31, 2022 Payments due by period Scheduled mortgage principal amortization $ 32,597 $ 61,586 $ 49,965 $ 43,103 $ 187,251 2023 2024 to 2025 2026 to 2027 Thereafter Total 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 (2) — 225,995 300,000 154,224 866 46,168 175,449 583,306 600,000 211,371 1,238 60,773 174,223 296,907 800,000 96,243 1,209 — 606,933 956,605 — 1,106,208 200,000 1,900,000 37,512 14,932 — 499,350 18,245 106,941 Total contractual obligations $ 759,850 $ 1,693,723 $ 1,418,547 $ 902,480 $ 4,774,600 (1) (2) Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2022 (assuming balances remain outstanding through to maturity) and senior unsecured debentures, as well as standby credit facility fees. Includes amounts related to equity accounted joint ventures. First Capital had $27.6 million of outstanding letters of credit issued by financial institutions to support certain of FCR’s contractual obligations and $1.6 million of bank overdrafts. As of December 31, 2022, contractually committed costs related to the Trust's development projects is $106.9 million ($92.8 million at First Capital's interest). 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 $149.9 million (December 31, 2021 – $73.2 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 $27.6 million (December 31, 2021 – $29.7 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 $0.9 million (December 31, 2021 – $1.2 million) with a total obligation of $18.2 million (December 31, 2021 – $19.5 million). 41 FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022 December 31, 2021 Consolidated Balance Sheet (1) Adjustments for Proportionate Interest Proportionate Interest (2) Consolidated Balance Sheet (1) Adjustments for Proportionate Interest Proportionate Interest (2) Investment properties $ 8,485,361 $ 326,152 $ 8,811,513 $ 8,975,539 $ 319,015 $ 9,294,554 Residential development inventory Hotel property Loans, mortgages and other assets Cash and cash equivalents Amounts receivable Other assets Investment in joint ventures Non-current assets classified as held for sale 157,883 45,300 212,131 32,694 25,970 77,750 357,122 187,727 8,163 — (6,503) 7,133 2,065 16,547 (357,122) 166,046 45,300 205,628 39,827 28,035 94,297 — (2,027) 185,700 156,039 85,400 271,742 34,699 27,784 57,083 349,488 151,300 $ 9,581,938 $ (5,592) $ 9,576,346 $ 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 — 151,300 $ 10,109,101 Total assets LIABILITIES Mortgages Credit facilities Bank indebtedness Senior unsecured debentures Exchangeable Units Deferred tax liabilities Mortgages on non-current assets classified as held for sale Accounts payable and other liabilities Total liabilities EQUITY Unitholders' equity Non-controlling interest Total equity $ 1,127,361 $ 91,665 $ 1,219,026 $ 1,173,175 $ 39,731 $ 1,212,906 1,104,614 (6,379) 1,098,235 1,594 1,898,824 1,009 769,388 13,129 330,724 5,246,643 — — — (1,230) — 1,594 899,777 2,476 1,898,824 2,348,145 1,009 768,158 13,129 1,947 740,309 — (5,819) — — — (1,147) — 893,958 2,476 2,348,145 1,947 739,162 — (33,726) 296,998 274,163 50,330 5,296,973 5,439,992 15,402 48,167 289,565 5,488,159 4,279,373 — 4,279,373 4,620,942 — 4,620,942 55,922 (55,922) — 48,140 (48,140) — 4,335,295 (55,922) 4,279,373 4,669,082 (48,140) 4,620,942 Total liabilities and equity $ 9,581,938 $ (5,592) $ 9,576,346 $ 10,109,074 $ 27 $ 10,109,101 (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 2022 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, 2022 and 2021, to its proportionate interest. Three months ended December 31 2022 2021 Consolidated Statements of Income (Loss) $ 176,100 $ 64,941 111,159 Adjustment to proportionate interest 5,788 $ 4,821 967 Proportionate interest (1) 181,888 $ 69,762 112,126 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 5,475 (38,633) (11,832) (122) (1,322) (387) 12,694 (4,386) (102) 6,908 373 (1,004) 44 — (778) 387 (36) — — — 5,848 (39,637) (11,788) (122) (2,100) — 12,658 3,933 (37,603) (8,760) (146) (1,453) (813) (6,540) 262 (338) 25 — (397) 813 (156) 4,195 (37,941) (8,735) (146) (1,850) — (6,696) (4,386) (2,528) — (2,528) (102) (140) 6,908 (2,161) — — (140) (2,161) (31,071) (113) (31,184) 25,996 (163) 25,833 (62,778) 48,381 5,849 (1,127) (160) — (63,905) 48,221 5,849 (30,215) 75,703 48,920 46 699 (1,147) (30,169) 76,402 47,773 42,532 $ (160) $ 42,372 $ 26,783 $ 1,846 $ 28,629 42,372 $ 160 42,532 $ — $ (160) (160) $ 42,372 $ — 42,372 $ 28,629 $ (1,846) 26,783 $ — $ 1,846 1,846 $ 28,629 — 28,629 0.20 0.20 $ $ 0.13 0.13 Property rental revenue Property operating costs Net operating income Other income and expenses Interest and other income Interest expense Corporate expenses Abandoned transaction (costs) recovery 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 2022 The following table provides a reconciliation of First Capital's consolidated statements of income (loss) for the years ended December 31, 2022 and 2021, as presented in its audited annual consolidated financial statements, to its proportionate interest. Year ended December 31 2022 2021 Property rental revenue Property operating costs Net operating income Other income and expenses Interest and other income Interest expense Corporate expenses Abandoned transaction (costs) recovery 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) Adjustment for proportionate interest $ 693,096 $ 267,597 425,499 20,744 $ 15,900 4,844 Proportionate interest (1) 713,840 $ 283,497 430,343 Consolidated Statements of Income (Loss) Adjustment for proportionate interest Proportionate interest (1) 674,890 $ 262,352 412,538 9,010 $ 5,395 3,615 683,900 267,747 416,153 19,870 (150,042) (45,235) 2,770 (5,673) (199) (2,317) 5,250 321 6,908 1,161 (2,888) 260 — (2,691) 199 (273) 21,031 (152,930) (44,975) 2,770 (8,364) — (2,590) 10,880 (152,670) (38,207) (248) (6,018) (1,460) 87,089 955 (1,343) 29 — (2,455) 1,460 214 11,835 (154,013) (38,178) (248) (8,473) — 87,303 — — — 5,250 (9,286) — (9,286) 321 6,908 (548) (1,122) — — (548) (1,122) (409,716) (758) (410,474) 198,617 (17,127) 181,490 (578,063) (152,564) 7,197 (159,761) $ (159,997) $ 236 (159,761) $ (0.74) (0.73) $ $ $ $ $ (4,990) (146) 90 (236) $ (583,053) (152,710) 7,287 (159,997) $ 87,027 499,565 25,929 473,636 $ (18,267) (14,652) (1,147) (13,505) $ 68,760 484,913 24,782 460,131 — $ (159,997) $ (236) (236) $ — (159,997) $ 460,131 $ 13,505 473,636 $ — $ (13,505) (13,505) $ 460,131 — 460,131 $ $ 2.10 2.08 (1) Refer to the "Non-IFRS Financial Measures" section of this MD&A. FIRST CAPITAL REIT ANNUAL REPORT 2022 44  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued FFO, AFFO and ACFO Funds from Operations A reconciliation from net income (loss) attributable to Unitholders to FFO can be found in the table below: 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) Adjustment for capitalized interest related to equity accounted joint ventures (2) Incremental leasing costs (3) Amortization expense (4) Transaction costs (5) Distributions on Exchangeable Units (6) Increase (decrease) in value of Exchangeable Units (6) Increase (decrease) in value of unit-based compensation (7) Gain on Option (8) Investment property selling costs (1) Deferred income taxes (recovery) (1) Three months ended December 31 2021 28,629 2022 42,372 0 2 $ $ Year ended December 31 2021 460,131 2022 (159,997) $ $ 31,184 (6,908) 778 817 (25,833) 2,161 397 — 410,474 (6,908) 2,691 3,010 (181,490) 1,122 2,455 — 5,859 1,937 — 45 548 9,286 (80,822) 7,136 24,782 250,989 $ 6,626 489 572 42 (321) (5,250) — 4,440 7,287 263,155 1,764 113 — 13 102 4,386 — 75 5,849 80,545 1,448 481 — 12 140 2,528 — 3,093 47,773 60,829 $ $ FFO (9) (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 transaction costs incurred as part of a business combination in accordance with the recommendations of REALPAC. (6) Adjustment to exclude distributions and fair value adjustments on Exchangeable Units in accordance with the recommendations of REALPAC. (7) Adjustment to exclude fair value adjustments on unit-based compensation plans in accordance with the recommendations of REALPAC. (8) Adjustment to exclude the gain on option in accordance with the recommendations of REALPAC. (9) 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)(2) Corporate expenses (3) Abandoned transaction (costs) recovery Amortization expense (4) Other gains (losses) and (expenses) (5) FFO (6) FFO per diluted unit Weighted average number of units – diluted (in thousands) $ $ Three months ended December 31 2021 106,571 4,195 (37,929) (7,287) (146) (972) (3,603) 60,829 0.28 2022 112,126 5,848 (38,807) (10,024) (122) (1,209) 12,733 80,545 0.37 $ $ $ $ % change 32.4% 36.0% % change $ 4.8% 6.1% $ $ $ Year ended December 31 2021 416,153 11,835 (153,968) (32,319) (248) (4,081) 13,617 250,989 1.14 2022 430,343 21,031 (149,878) (38,349) 2,770 (5,184) 2,422 263,155 1.21 $ $ (2.6%) 215,098 220,929 (1.2%) 218,162 220,826 (1) Includes an adjustment to capitalize interest related to FCR's equity accounted joint ventures in accordance with the recommendations of REALPAC. (2) Adjustment to exclude distributions on Exchangeable Units in accordance with the recommendations of REALPAC. (3) Includes an adjustment to capitalize incremental leasing costs in accordance with the recommendations of REALPAC. (4) Excludes certain amortization expense in accordance with the recommendations of REALPAC. (5) At FCR's proportionate interest, adjusted to exclude investment property selling costs in accordance with the recommendations of REALPAC. (6) Refer to the "Non-IFRS Financial Measures" section of this MD&A. 45 FIRST CAPITAL REIT ANNUAL REPORT 2022 For the three months ended December 31, 2022, FFO increased $19.7 million, or $0.10 per unit, over the same prior year period. The increase was primarily due to a year-over-year change in other gains (losses) and (expenses), totaling $16.3 million ($0.07 per unit), and a $5.6 million ($0.03 per unit), increase in NOI driven primarily by higher lease termination fees, lower bad debt expense as well as higher base rent. The year-over-year change in other gains (losses) and (expenses) includes a $12.8 million ($0.06 per unit) hedging gain related to the mortgage financing of the King High Line residential property. This hedging gain was reclassified from accumulated other comprehensive income upon assumption of the mortgage by the purchaser at the time of disposition. For the year ended December 31, 2022, FFO increased $12.2 million, or $0.07 per unit, over the prior year. The increase was primarily due to a $14.2 million ($0.06 per unit), increase in NOI driven primarily by higher base rent and lower bad debt expense, and a $9.2 million ($0.04 per unit), increase in interest and other income. The increase was partially offset by a year-over-year decrease in other gains (losses) and (expenses), totaling $11.2 million ($0.05 per unit). In addition, unit repurchases through First Capital's NCIB resulted in a lower weighted average unit count, thus driving a further increase of $0.01 in FFO per unit. Adjusted Funds from Operations A reconciliation from FFO to AFFO can be found in the table below: FFO (1) Add (deduct): Three months ended December 31 % change 2022 80,545 $ 2021 % change $ 60,829 $ Year ended December 31 2021 250,989 2022 263,155 $ Revenue sustaining capital expenditures Recoverable capital expenditures Incremental leasing costs Straight-line rent adjustment AFFO (1) AFFO per diluted unit Weighted average number of units – diluted (in thousands) (4,414) (2,645) (1,764) 732 72,454 0.34 $ $ (4,841) (1,648) (1,448) (25) 52,867 0.24 (20,830) (10,002) (6,626) 520 226,217 1.04 $ $ (15,570) (4,033) (5,859) (2,015) 223,512 1.01 1.2% 2.4% $ $ 37.0% 40.8% $ $ (2.6%) 215,098 220,929 (1.2%) 218,162 220,826 (1) Refer to the "Non-IFRS Financial Measures" section of this MD&A. For the three months ended December 31, 2022, AFFO per unit increased by approximately $0.10 over the same prior year period primarily due to higher FFO, or $0.10 per unit. For the year ended December 31, 2022, AFFO per unit increased by approximately $0.03 over prior year primarily due to higher FFO, or $0.07 per unit, largely offset by higher capital expenditures, or $0.05 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): Working capital adjustments (1) Adjustment for equity accounted joint ventures Revenue sustaining capital expenditures Recoverable capital expenditures Leasing costs on properties under development Realized gain (loss) on sale of marketable securities Non-controlling interest Three months ended December 31 2021 83,575 2022 76,808 $ $ Year ended December 31 2021 249,613 2022 251,221 $ $ (11,619) 601 (4,414) (2,645) 441 — 92 59,264 (15,926) 387 (4,828) (1,648) 362 — (826) 61,096 4,867 2,370 (20,694) (10,002) 1,656 5,591 579 235,588 12,826 2,322 (15,554) (4,033) 1,465 — (2,823) 243,816 ACFO (2) (1) Working capital adjustments primarily include adjustments for prepaid as well as accrued property taxes as their levels vary considerably over the course of the year as $ $ $ $ well as certain other adjustments as specified in the most recent REALPAC guidance on ACFO issued in January 2023. (2) Refer to the "Non-IFRS Financial Measures" section of this MD&A. FIRST CAPITAL REIT ANNUAL REPORT 2022 46  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued For the three months and year ended December 31, 2022, ACFO totaled $59.3 million and $235.6 million compared to $61.1 million and $243.8 million for the prior years, respectively. The $1.8 million and $8.2 million decrease in ACFO for the three months and year ended December 31, 2022, respectively, was primarily due to higher capital expenditures and changes in working capital, partially offset by interest expense savings as well as a realized gain on sale of marketable securities during the twelve month period. ACFO Payout Ratio First Capital's ACFO payout ratio for the four quarters ended December 31, 2022 is calculated as follows: ACFO (1) Cash distributions paid ACFO payout ratio (1) Year ended December 31, 2022 Q4 2022 Q3 2022 Q2 2022 $ 235,588 $ 59,264 $ 56,949 $ 76,274 $ 116,721 46,134 23,169 23,707 49.5% (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, 2021 is calculated as follows: 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. Q1 2022 43,101 23,711 Q1 2021 42,612 31,508 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, 2022, the ACFO payout was 49.5% (December 31, 2021 - 42.1%). Net Asset Value The following table provides FCR's calculation of NAV for the years ended December 31, 2022 and 2021: As at Unitholders' equity Exchangeable Units Deferred tax liabilities Net Asset Value (NAV) (1) Units outstanding (2) NAV per unit - diluted (3) December 31, 2022 December 31, 2021 $ $ $ 4,279,373 $ 1,009 768,158 5,048,540 $ 213,578 23.48 $ 4,620,942 1,947 739,162 5,362,051 219,645 24.26 (1) Refer to the "Non-IFRS Financial Measures" section of this MD&A. (2) Includes Trust Units and Exchangeable Units. (3) Adjusted for 1.5 million Deferred Units, Restricted Units and Performance Units and 6.3 million unit options outstanding with an average exercise price of $19.76 (implied option proceeds of $124.0 million) and the exclusion of the unit-based compensation plan liability. The decrease in NAV per diluted unit from $24.26 to $23.48 is primarily due to a year-to-date decrease in the fair value of investment property, partially offset by retained FFO for the year, the impact of the NCIB, and derivative gains related to interest rate swaps in other comprehensive income. 47 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 $0.07167 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. On September 15, 2022, First Capital announced the reinstatement of the Trust’s regular monthly distribution to $0.072 per unit commencing with the September 2022 distribution. The following chart specifies distributions declared by First Capital: (in dollars) 2022 2021 2022 Distributions declared per unit $ 0.215 $ 0.108 $ 0.575 $ 2021 0.432 Three months ended December 31 Year ended December 31 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. 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 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 FCR (1) 74 $ 50 $ Guarantors (2) Non-Guarantors (3) Consolidation Adjustments (4) Total Consolidated 71 $ 103 $ 100 $ 47 $ 61 $ 59 $ — $ — $ — $ — $ (1) $ — $ (1) $ 176 $ — $ 111 $ 170 106 42 $ 29 $ 102 $ 81 $ — $ (1) $ (102) $ (80) $ 42 $ 29 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 FCR (1) Guarantors (2) Non-Guarantors (3) Consolidation Adjustments (4) Total Consolidated 286 $ 278 $ 411 $ 400 $ 190 $ 182 $ 237 $ 231 $ — $ — $ 1 $ — $ (4) $ (2) $ (4) $ 693 $ — $ 425 $ 675 413 Year ended December 31 $ $ $ $ $ $ (160) $ 460 $ 172 $ 576 $ — $ 24 $ (172) $ (600) $ (160) $ 460 FIRST CAPITAL REIT ANNUAL REPORT 2022 48  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued (millions of dollars) Current assets Non-current assets Current liabilities Non-current liabilities (millions of dollars) Current assets Non-current assets Current liabilities Non-current liabilities $ $ $ $ $ $ $ $ FCR (1) 700 $ (1,349) $ 698 $ 3,485 $ FCR (1) 203 $ (562) $ 688 $ 3,671 $ Guarantors (2) Non-Guarantors (3) (223) $ 11,456 $ 98 $ 969 $ 116 $ 130 $ — $ 50 $ Guarantors (2) Non-Guarantors (3) 352 $ 10,966 $ 100 $ 976 $ 81 $ 130 $ 2 $ 38 $ As at December 31, 2022 Consolidation Adjustments (4) Total Consolidated (120) $ (1,128) $ 2 $ (55) $ 473 9,109 798 4,449 As at December 31, 2021 Consolidation Adjustments (4) Total Consolidated (79) $ (982) $ 1 $ (36) $ 557 9,552 791 4,649 (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. SUBSEQUENT EVENTS Alberta Neighbourhood Retail Portfolio - Mortgage Financing On January 26, 2023, First Capital secured $233.7 million of mortgage financing against a portfolio of six Alberta neighbourhood retail properties. Carrying a term of ten-years, the mortgages are due in January 2033. The mortgage portfolio bears interest at an effective interest rate of 5.4% per annum, payable monthly commencing February 26, 2023. QUARTERLY FINANCIAL INFORMATION 2022 2021 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 $ 176,100 $ 171,914 $ 172,606 $ 172,476 $ 170,197 $ 165,613 $ 167,168 $ 171,912 $ 111,159 $ 107,219 $ 106,141 $ 100,980 $ 105,918 $ 103,078 $ 102,593 $ 100,949 $ 42,372 $ (204,722) $ (42,102) $ 44,455 $ 28,629 $ 181,526 $ 211,989 $ 37,987 (unit counts in thousands) Property rental revenue Net operating income (1) Net income (loss) attributable to Unitholders Net income (loss) per unit attributable to Unitholders: Basic Diluted $ $ 0.20 0.20 $ $ (0.95) $ (0.19) $ (0.95) $ (0.19) $ 0.20 0.20 $ $ 0.13 0.13 $ $ 0.83 0.82 $ $ 0.97 0.96 $ $ 0.17 0.17 (1) Refer to the "Non-IFRS Financial Measures" section of this MD&A. 49 FIRST CAPITAL REIT ANNUAL REPORT 2022 (unit counts in thousands) FFO (1) FFO per diluted unit (1) Weighted average number of diluted units outstanding Cash provided by operating activities AFFO (1) AFFO per diluted unit (1) ACFO (1) Distribution declared per unit $ $ $ $ $ $ $ 2022 2021 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 80,545 0.37 $ $ 66,575 0.31 $ $ 61,241 0.28 $ $ 54,794 0.25 $ $ 60,829 0.28 $ $ 59,047 0.27 $ $ 76,104 0.35 $ $ 55,009 0.25 215,098 216,008 220,812 220,906 220,929 220,899 220,863 220,667 76,808 72,454 0.34 59,264 0.215 $ $ $ $ $ 52,810 54,489 0.25 56,949 0.144 $ $ $ $ $ 62,305 51,719 0.23 76,274 0.108 $ $ $ $ $ 59,298 47,554 0.22 43,101 0.108 $ $ $ $ $ 83,575 52,867 0.24 61,096 0.108 $ $ $ $ $ 50,590 53,319 0.24 70,710 0.108 $ $ $ $ $ 71,152 67,954 0.31 69,398 0.108 $ $ $ $ $ 44,296 49,372 0.22 42,612 0.108 Total assets $ 9,581,938 $ 9,829,570 $ 10,057,358 $ 10,194,026 $ 10,109,074 $ 10,186,252 $ 10,189,522 $ 9,972,075 Total mortgages and credit facilities $ 2,245,104 $ 2,225,576 $ 2,212,870 $ 2,280,587 $ 2,072,952 $ 2,211,920 $ 2,370,499 $ 2,358,551 Unitholders' equity $ 4,279,373 $ 4,291,030 $ 4,542,689 $ 4,665,001 $ 4,620,942 $ 4,608,489 $ 4,445,198 $ 4,254,796 Other Number of neighbourhoods 145 145 147 148 146 148 150 150 GLA - at 100% (in thousands) 22,216 22,213 22,339 22,456 22,485 22,736 22,935 22,890 GLA - at ownership interest (in thousands) Monthly average occupancy % Total portfolio occupancy % 19,325 19,326 19,501 19,619 19,657 19,853 20,092 20,053 95.6% 95.8% 95.5% 95.7% 95.4% 95.6% 95.7% 95.5% 96.0% 96.1% 95.9% 95.9% 95.8% 95.9% 96.0% 95.8% (1) Refer to the "Non-IFRS Financial Measures" section of this MD&A. 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 50  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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 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, 2022 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; 51 FIRST CAPITAL REIT ANNUAL REPORT 2022 • 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 earnings for the reporting periods using the best available information as of December 31, 2022 and 2021. 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) of the audited annual consolidated financial statements for the years ended December 31, 2022 and 2021 for details on the impact of accounting policy changes. 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: Amendments 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 has determined that there will be no impact to First Capital's consolidated financial statements upon adoption of these amendments. FIRST CAPITAL REIT ANNUAL REPORT 2022 52  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued Amendments to IAS 8, Definition of Accounting Estimates In February 2021, the IASB issued amendments to IAS 8 to introduce a definition of "Accounting Estimates". The amendments clarify the distinction between changes in accounting estimates and accounting policies as well as the correction of errors. Additionally, the IASB clarifies how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective January 1, 2023, with early adoption permitted. Management has determined that there will be no material impact to First Capital's consolidated financial statements upon adoption of these amendments. Amendments to IAS 1 and IFRS Practice Statement 2 In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their "significant" accounting policies with a requirement to disclose their "material" accounting policies. In addition, the IASB has provided guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments are effective January 1, 2023, with early adoption permitted. Management does not expect material changes to its accounting policy disclosures upon adoption of these amendments. CONTROLS AND PROCEDURES As at December 31, 2022, 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, 2022, 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, 2022 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. 53 FIRST CAPITAL REIT ANNUAL REPORT 2022 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. 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 inflation, 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. Should inflation remain high and more persistent than expected, any additional increases in interest rates may adversely affect consumer spending and debt levels, which may impact FCR’s tenants and/or FCR’s financial performance. 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 2022 54  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. 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 $1.6 billion principal amount of fixed rate interest-bearing instruments outstanding including mortgages, senior unsecured debentures and secured credit facilities maturing between January 1, 2023 and December 31, 2025 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 $15.8 million. In addition, as at December 31, 2022, First Capital had $414.9 million at FCR's share, principal amount of debt (or 10% 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 55 FIRST CAPITAL REIT ANNUAL REPORT 2022 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. 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. Acquisitions, Expansions, 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 FIRST CAPITAL REIT ANNUAL REPORT 2022 56  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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. Unitholder Activism Certain activist Unitholders have recently advocated for governance and strategic changes at First Capital. Responding to activist campaigns that contest or conflict with FCR’s governance and strategic direction can be costly and time- consuming, disrupting business operations and diverting the attention and resources of the Board of Trustees, management and employees. Unitholder activism may result in uncertainty relating to the leadership, governance and strategic direction of FCR, which could adversely affect or undermine FCR’s ability to execute on its real estate strategy, harm FCR’s business and create adverse volatility in the market price and trading volume of Trust Units. Events such as these could adversely affect FCR’s operating and financial results. 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. 57 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 58  MANAGEMENT’S DISCUSSION AND ANALYSIS – continued 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. 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. 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 59 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 60 FS CONSOLIDATED FINANCIAL STATEMENTS Table of Contents 62 63 66 67 68 69 70 71 71 71 80 82 83 84 85 85 86 87 89 89 90 90 91 94 95 95 95 96 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 7, 2023. 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 7, 2023 FIRST CAPITAL REIT ANNUAL REPORT 2022 62 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, 2022 and 2021, 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, 2022 and 2021, 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 $8.6 billion, which represents 90.0% of total assets at December 31, 2022. 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. 63 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 FIRST CAPITAL REIT ANNUAL REPORT 2022 64 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 Stephanie Lamont. Toronto, Canada February 7, 2023 65 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 Non-current assets 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 Exchangeable Units Accounts payable and other liabilities Mortgages on non-current assets classified as held for sale 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 Note December 31, 2022 December 31, 2021 3 4 5 6 8 27(d) 6 7 8 3(d) 10 10 11 13 12 21 10 10 10 11 13 12 3(d), 10 14 24 $ $ $ $ 8,485,361 357,122 45,300 168,650 9,056,433 52,132 9,108,565 32,694 43,481 157,883 25,970 25,618 285,646 187,727 473,373 9,581,938 1,095,724 880,213 1,598,989 — 104,798 769,388 4,449,112 1,594 31,637 224,401 299,835 1,009 225,926 784,402 13,129 797,531 5,246,643 4,279,373 55,922 4,335,295 9,581,938 $ 8,975,539 349,488 85,400 129,608 9,540,035 12,174 9,552,209 34,699 142,134 156,039 27,784 44,909 405,565 151,300 556,865 $ 10,109,074 $ 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 — 791,270 5,439,992 4,620,942 48,140 4,669,082 $ 10,109,074 FIRST CAPITAL REIT ANNUAL REPORT 2022 66  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) recovery 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 2022 2021 $ 693,096 $ 674,890 16 17 18 19 4 20 15 13 5 3 21 14 24 267,597 425,499 262,352 412,538 19,870 (150,042) (45,235) 2,770 (5,673) (199) (2,317) 5,250 321 6,908 (409,716) (578,063) (152,564) 7,197 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 $ (159,761) $ 473,636 $ (159,997) $ 460,131 236 13,505 $ (159,761) $ 473,636 67 FIRST CAPITAL REIT ANNUAL REPORT 2022 Consolidated Statements of Comprehensive Income (Loss) (thousands of dollars) Net income (loss) Other comprehensive income (loss) Unrealized gain (loss) on cash flow hedges (1) Reclassification of net (gains) 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 2022 2021 $ (159,761) $ 473,636 64,686 (10,072) 54,614 21,300 33,314 37,485 3,143 40,628 15,866 24,762 $ (126,447) $ 498,398 $ (126,683) $ 484,893 236 13,505 $ (126,447) $ 498,398 21 14 24 FIRST CAPITAL REIT ANNUAL REPORT 2022 68 Consolidated Statements of Changes in Equity (thousands of dollars) December 31, 2021 Changes during the year: Net income (loss) Conversion of Exchangeable Units Repurchase of Trust Units (Note 14(a)) 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, 2022 (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 Accumulated Other Comprehensive Income (Loss) Retained Earnings Trust Units (Note 14(a)) Total Unitholders' Equity Non- Controlling Interest Total Equity $ 1,741,489 $ (18,818) $ 2,898,271 $ 4,620,942 $ 48,140 $ 4,669,082 (159,997) 236 (159,761) (159,997) — (12,063) — — — (124,191) — — — — 33,314 — — 617 (82,393) (94,456) 3,144 3,144 33,314 — — 617 — — — — — — — 7,546 617 (94,456) 3,144 33,314 7,546 (124,191) — (124,191) $ 1,445,238 $ 14,496 $ 2,819,639 $ 4,279,373 $ 55,922 $ 4,335,295 Retained Earnings Accumulated Other Comprehensive Income (Loss) 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 — 13,505 473,636 — — 5,372 3,689 24,762 5,372 $ 1,741,489 $ (18,818) $ 2,898,271 $ 4,620,942 $ 48,140 $ 4,669,082 (94,804) — (94,804) Refer to accompanying notes to the consolidated financial statements. 69 FIRST CAPITAL REIT ANNUAL REPORT 2022 Consolidated Statements of Cash Flows (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 changes in other working capital 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) Repayment of senior unsecured debentures Settlement of hedges Repurchase of Trust Units Issuance of Trust Units, net of issue costs Payment of distributions Year ended December 31 Note 2022 2021 $ (159,761) $ 473,636 3 5 18 4 18 27(a) 27(b) 10 10 10 10 11 14(a) 409,716 (6,908) 150,042 5,673 199 (149,241) 11,702 (10,201) 251,221 90,766 (30,946) (13,338) 206,373 (450,000) 13,451 (94,456) 116 (198,617) 1,122 152,670 6,018 1,460 (149,490) (47,118) 9,932 249,613 — (28,115) (146,112) (24,753) (175,000) — — 981 (116,721) (102,618) Net contributions from (distributions to) non-controlling interest 24 7,546 5,372 Cash provided by (used in) financing activities (387,209) (470,245) INVESTING ACTIVITIES Acquisition of investment properties 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. 3(c) 3(d) 4 4 3(a) 27(c) (63,798) 187,963 4,658 (12,491) (125,008) 60,618 82,041 133,983 (2,005) 34,699 (14,504) 319,068 16,897 (17,110) (153,519) (4,430) 8,485 154,887 (65,745) 100,444 27(d) $ 32,694 $ 34,699 FIRST CAPITAL REIT ANNUAL REPORT 2022 70 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 owns, operates and develops grocery-anchored, open-air centres in neighbourhoods with the strongest demographics in Canada. 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 7, 2023. (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. 71 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 (loss) 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 72  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued (ii) Non-current assets classified as held for sale Non-current assets, including investment properties are 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, non- current assets, including investment properties continue to be measured at fair value and are 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. 73 FIRST CAPITAL REIT ANNUAL REPORT 2022 (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 FIRST CAPITAL REIT ANNUAL REPORT 2022 74  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 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 75 FIRST CAPITAL REIT ANNUAL REPORT 2022 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 76  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 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 (loss) 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, 2022 and 2021: 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 77 FIRST CAPITAL REIT ANNUAL REPORT 2022 (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 consolidated 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, 2022. Actual results could differ from those estimates. The estimates and assumptions that the Trust considers critical and/or could be impacted by FIRST CAPITAL REIT ANNUAL REPORT 2022 78  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 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) Future Changes in Accounting Policies Amendments 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 has determined that there will be no impact to First Capital's consolidated financial statements upon adoption of these amendments. Amendments to IAS 8, Definition of Accounting Estimates In February 2021, the IASB issued amendments to IAS 8 to introduce a definition of "Accounting Estimates". The amendments clarify the distinction between changes in accounting estimates and accounting policies as well as the correction of errors. Additionally, the IASB clarifies how entities use measurement techniques and inputs to develop accounting estimates. The amendments are effective January 1, 2023, with early adoption permitted. Management has determined that there will be no material impact to First Capital's consolidated financial statements upon adoption of these amendments. Amendments to IAS 1 and IFRS Practice Statement 2 In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their "significant" accounting policies with a requirement to disclose their "material" accounting policies. In addition, the IASB has provided guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments are effective January 1, 2023, with early adoption 79 FIRST CAPITAL REIT ANNUAL REPORT 2022 permitted. Management does not expect material changes to its accounting policy disclosures upon adoption of these amendments. 3. INVESTMENT PROPERTIES (a) Activity The following tables summarize the changes in First Capital’s investment properties for the years ended December 31, 2022 and 2021: Income-Producing Properties Properties under Construction Density & Development Land Total Year ended December 31, 2022 Balance at beginning of year $ 8,769,927 $ 16,021 $ 340,891 $ 9,126,839 Acquisitions Capital expenditures Developments transferred offline / online, net Increase (decrease) in value of investment properties, net Straight-line rent and other changes Dispositions Balance at end of year Investment properties Non-current assets classified as held for sale (1) Total $ $ $ 33,802 71,912 (21,525) (403,139) (738) (237,015) 8,213,224 $ 8,153,397 $ 59,827 — 27,583 39,474 5,951 — — 89,029 $ 89,029 $ — 29,996 25,513 (17,949) (12,528) — (40,388) 325,535 $ 242,935 $ 82,600 63,798 125,008 — (409,716) (738) (277,403) 8,627,788 8,485,361 142,427 8,213,224 $ 89,029 $ 325,535 $ 8,627,788 (1) See Note 5 Hotel Property for additional non-current assets classified as held for sale. 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 venture (1) Balance at end of year Investment properties Non-current assets 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 80  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued Investment properties with a fair value of $2.3 billion (December 31, 2021 – $2.5 billion) are pledged as security for $1.2 billion (December 31, 2021 – $1.2 billion) in mortgages and secured credit facilities. (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, 2022 December 31, 2021 5.2% 5.4% 5.9% 5.0% 5.2% 5.7% The majority of the Trust's portfolio is valued under the Income Approach using the discounted cash flow ("DCF") method. As at December 31, 2022, the weighted average valuation yields (stabilized overall capitalization, terminal, and discount rates) used in valuing those investment properties under the Income Approach increased from December 31, 2021. Throughout 2022, as part of its normal course internal valuations, the Trust made revisions to stabilized capitalization rates, discount rates, and terminal capitalization rates to reflect current market conditions and rising interest rates. As a result, an overall decrease in the value of investment properties was recorded in the amount of $409.7 million ($410.5 million at FCR's share) for the year ended December 31, 2022. The sensitivity of the fair values of investment properties to stabilized overall capitalization rates as at December 31, 2022 is set out in the table below: As at December 31, 2022 (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 2,047 1,449 914 434 (394) (754) (1,083) (1,385) $ $ $ $ $ $ $ $ Additionally, a 1% increase or decrease in stabilized net operating income ("SNOI") would result in a $86 million increase or a $86 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 $524 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 $476 million. (c) Investment properties – Acquisitions For the years ended December 31, 2022 and 2021, First Capital acquired investment properties as follows: Year ended December 31 Total purchase price, including acquisition costs Total cash paid $ $ 2022 63,798 $ 63,798 $ 2021 14,504 14,504 81 FIRST CAPITAL REIT ANNUAL REPORT 2022 (d) Non-current assets classified as held for sale and dispositions First Capital has certain non-current assets classified as held for sale. These properties are considered to be non-core assets and are as follows: As at Aggregate fair value (1) Mortgages secured by non-current assets classified as held for sale Weighted average effective interest rate of mortgages secured by non-current assets classified as held for sale (1) See Note 5 Hotel Property for additional non-current assets classified as held for sale. December 31, 2022 $ $ 142,427 13,129 December 31, 2021 151,300 — $ $ 2.8% N/A The decrease of $8.9 million in non-current assets classified as held for sale from December 31, 2021, primarily arose from the disposition of investment properties, partially offset by the addition of new properties classified as held for sale, in line with First Capital's Enhanced Capital Allocation and Portfolio Optimization Plan. For the years ended December 31, 2022 and 2021, First Capital sold investment properties as follows: Year ended December 31 Total selling price Mortgages assumed by purchaser on sale of investment properties Vendor take-back mortgage on sale Property selling costs Net cash proceeds (payments) 4. INVESTMENT IN JOINT VENTURES $ $ 2022 277,403 $ (80,000) (5,000) (4,440) 187,963 $ 2021 366,732 — (40,531) (7,133) 319,068 As at December 31, 2022, 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, 2022 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 Hazelton Food Services Partnership 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 116 Yorkville Ave. (ONE restaurant) Toronto, ON Shipping Container marketplace 35.4% 50.0% 50.0% 78.0% N/A 20.0% 50.0% 50.0% 50.0% 94.0% 35.4% 50.0% 50.0% 78.0% 25.0% 20.0% 50.0% 50.0% N/A 94.0% December 31, 2021 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. During the second quarter of 2022, the joint venture made final distributions and 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. 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 FIRST CAPITAL REIT ANNUAL REPORT 2022 82  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 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. On January 1, 2022, the Trust purchased 50% of the partnership units in the ONE Restaurant located in the Hazelton Hotel for $2.65 million. The acquisition was accounted for as a business combination, as such, transaction costs in the amount of $0.6 million were expensed in other gains (losses) and (expenses). 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 (loss) in equity accounted joint ventures December 31, 2022 December 31, 2021 $ 1,056,773 $ 921,985 (319,317) 737,456 (201,255) 720,730 $ 357,122 $ 349,488 December 31, 2022 December 31, 2021 $ 40,772 $ 17,369 (28,985) (1,603) (7,458) 2,726 — 2,726 (199) $ $ (9,507) (4,145) (3,061) 656 — 656 (1,460) $ $ During 2022, First Capital received distributions from its joint ventures of $4.7 million (2021 – $16.9 million) and made contributions to its joint ventures of $12.5 million (2021 – $17.1 million). As at December 31, 2022, there were approximately $37.6 million of outstanding commitments and no contingent liabilities for the nine equity accounted joint ventures. 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. The following table summarizes the changes in the net book value of the hotel property for the years ended December 31, 2022 and 2021. Balance at beginning of year Amortization Additions Revaluation of hotel property Reclassification to non-current assets classified as held for sale Balance at end of year 83 FIRST CAPITAL REIT ANNUAL REPORT 2022 December 31, 2022 December 31, 2021 $ $ 85,400 (1,910) 202 6,908 90,600 (45,300) 88,000 (1,937) 459 (1,122) 85,400 — $ 45,300 $ 85,400 6. LOANS, MORTGAGES AND OTHER ASSETS As at Non-current Loans and mortgages receivable classified as FVTPL (a) Loans and mortgages receivable classified as amortized cost (a)(b) Other investments Due from co-owners (c) 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 (d) Total current Total December 31, 2022 December 31, 2021 $ $ — 136,352 9,595 22,703 168,650 1,506 38,641 3,334 43,481 212,131 $ $ 1,486 122,321 5,801 — 129,608 6 116,152 25,976 142,134 271,742 (a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning investment properties. As at December 31, 2022, these receivables bear interest at weighted average effective interest rates of 6.9% (December 31, 2021 – 5.4%) and mature between 2023 and 2027. (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, was due and repaid before December 31, 2022, and the remainder is due on or before September 17, 2026. The loan was not subject to 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 is accreted into interest income over the interest free period of the loan. (c) During the year ended December 31, 2022, the Trust contributed equity to one of its co-ownerships whereas its partners made draws on the co-ownership's new credit facility to fund the co-ownership's development project. The due from co-owners in the principal amount of $21.9 million equals the Trust's proportionate share of the co- ownership's credit facility draws. As there is no right of offset for these two financial instruments they are presented on a gross basis on the consolidated balance sheets. (d) 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, 2022 are as follows: 2023 2024 2025 2026 2027 Sub-Total Unamortized deferred financing fees and accrued interest Total scheduled principal receipts of loans and mortgages receivable Current Non-current Total $ Scheduled Receipts 38,219 47,700 33,550 50,000 5,000 $ 174,469 2,030 $ 176,499 40,147 $ 136,352 $ 176,499 Weighted Average Effective Interest Rate 5.4 % 7.5 % 10.6 % 5.2 % 5.8 % 6.9 % 5.4 % 7.4 % 6.9 % FIRST CAPITAL REIT ANNUAL REPORT 2022 84  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 7. AMOUNTS RECEIVABLE As at Tenant receivables (net of allowance for expected credit losses of $9.5 million; December 31, 2021 – $17.2 million) Corporate and other amounts receivable Total December 31, 2022 December 31, 2021 $ $ 25,760 210 25,970 $ $ 27,032 752 27,784 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 the tenant's ability to pay any trade receivables outstanding at December 31, 2022. The change in the allowance for expected credit losses is summarized below: As at Allowance for expected credit losses, beginning of year Receivables written off during the year Additional provision and other adjustments recorded during the year Allowance for expected credit losses, end of year December 31, 2022 December 31, 2021 $ $ 17,213 (7,858) 144 9,499 $ $ 11,440 (4,232) 10,005 17,213 8. OTHER ASSETS As at Non-current Fixtures, equipment and computer hardware and software (net of accumulated amortization of $21.6 million; December 31, 2021 – $22.3 million) Deferred financing costs on credit facilities (net of accumulated amortization of $8.6 million; December 31, 2021 – $7.5 million) Environmental indemnity and insurance proceeds receivable Derivatives at fair value Total non-current Current Deposits and costs on investment properties under option Prepaid expenses Bond asset Other deposits Restricted cash Derivatives at fair value Total current Total Note December 31, 2022 December 31, 2021 $ 6,615 $ 7,671 12(a) 23 23 $ 3,460 663 41,394 52,132 5,595 14,590 — 250 2,716 2,467 25,618 77,750 2,960 1,244 299 12,174 8,358 11,364 13,388 250 5,538 6,011 44,909 57,083 $ 85 FIRST CAPITAL REIT ANNUAL REPORT 2022 9. CAPITAL MANAGEMENT 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 December 31, 2022 December 31, 2021 $ 1,594 1,143,856 1,104,614 91,911 1,900,000 4,241,975 1,009 3,589,229 $ 2,476 1,177,064 899,777 39,808 2,350,000 4,469,125 1,947 4,140,551 $ 7,832,213 $ 8,611,623 213,518 219,541 $ 16.81 $ 18.86 (1) Equity market capitalization is the market value of FCR's units outstanding at a point in time. 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, 2022, 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)(2) 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 ≤65% >1.3 >$2.0 ≤35% >1.65 >1.50 December 31, 2022 December 31, 2021 $ 44.0% 2.3 4.4 13.6% 2.4 2.1 $ 43.9% 2.3 4.5 12.7% 2.3 2.0 (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; FIRST CAPITAL REIT ANNUAL REPORT 2022 86  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued • 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. 10. MORTGAGES AND CREDIT FACILITIES As at Fixed rate mortgages Unsecured facilities Secured facilities Mortgages and credit facilities Current Mortgages on non-current assets classified as held for sale Non-current Total December 31, 2022 December 31, 2021 $ 1,140,490 $ 1,173,175 $ $ 1,030,564 74,050 2,245,104 256,038 13,129 1,975,937 824,792 74,985 $ $ 2,072,952 118,660 — 1,954,292 $ 2,245,104 $ 2,072,952 Mortgages and secured facilities are secured by First Capital's investment properties. As at December 31, 2022, approximately $2.3 billion (December 31, 2021 – $2.5 billion) of investment properties out of $8.6 billion (December 31, 2021 – $9.1 billion) (Note 3(a)) had been pledged as security under the mortgages and the secured facilities. As at December 31, 2022, mortgages bear coupon interest at a weighted average coupon rate of 3.4% (December 31, 2021 – 3.4%) and mature in the years ranging from 2024 to 2031. The weighted average effective interest rate on all mortgages as at December 31, 2022 is 3.5% (December 31, 2021 – 3.5%). Principal repayments of mortgages outstanding as at December 31, 2022 are as follows: 2023 2024 2025 2026 2027 2028 to 2031 Scheduled Amortization Payments on Maturity Weighted Average Effective Interest Rate Total $ 32,597 $ — $ 32,597 31,945 29,641 25,886 24,079 108,478 66,971 94,360 79,863 140,423 96,612 120,246 103,942 43,103 187,251 $ 606,933 956,605 $ 650,036 1,143,856 $ N/A 3.7 % 3.8 % 3.2 % 3.6 % 3.5 % 3.5 % Unamortized deferred financing costs and premiums, net Total (3,366) $ 1,140,490 87 FIRST CAPITAL REIT ANNUAL REPORT 2022 First Capital’s credit facilities as at December 31, 2022 are summarized in the table below: As at December 31, 2022 Unsecured Operating Facilities Revolving facility maturing 2026 - 2027 (1) Revolving facility maturing 2024 (2) Borrowing Capacity Amounts Drawn Bank Indebtedness and Outstanding Letters of Credit Available to be Drawn $ 450,000 $ — $ (5,593) $ 444,407 100,000 (100,564) — — Revolving facility maturing 250,000 (80,000) — 170,000 2023 Interest Rates Maturity Date BA + 1.45% or Prime + 0.45% or US$ LIBOR + 1.45% BA + 1.15% or Prime + 0.30% or US$ LIBOR + 1.15% BA + 1.15% or Prime + 0.30% or US$ LIBOR + 1.15% June 30, 2026 - June 30, 2027 August 31, 2024 October 31, 2023 Floating rate unsecured term loan maturing 2023 - 2025 (3) Fixed rate unsecured term loan maturing 2025 (4)(5) Fixed rate unsecured term loans maturing 2024 - 2026 (5) Secured Construction Facilities 200,000 (200,000) 100,000 (100,000) 550,000 (550,000) Maturing 2027 170,000 (21,907) Maturing 2025 Maturing 2024 71,450 — 19,321 (7,742) Maturing 2023 (5) 33,333 (33,333) Secured Facilities Maturing 2023 4,313 (4,313) Maturing 2023 6,755 (6,755) — — — — — — — — — — — — BA + 1.20% BA + 1.50% April 15, 2023 - April 15, 2025 5.00% January 9, 2025 3.29% March 28, 2024 - April 15, 2026 148,093 BA + 2.30% January 20, 2027 71,450 BA + 2.65% or Prime + 1.00% November 28, 2025 11,579 Prime - 0.25% June 1, 2024 — — — 2.79% February 24, 2023 BA + 1.20% or Prime + 0.20% BA + 1.20% or Prime + 0.20% September 28, 2023 December 19, 2023 Total $ 1,955,172 $ (1,104,614) $ (5,593) $ 845,529 (1) As at December 31, 2022, approximately $380.0 million of the unsecured revolving credit facility has been extended by one year and is due June 30, 2027. The remaining $70.0 million is due June 30, 2026. (2) The Trust has drawn in U.S. dollars the equivalent of CAD$100.0 million which was revalued at CAD$100.6 million as at December 31, 2022. (3) As at December 31, 2022, $100.0 million is due April 15, 2023 at a spread of BA + 1.20%, and the remaining $100.0 million is due April 15, 2025 at a spread of BA + 1.50%. (4) The Trust has the option to extend the unsecured term loan for an additional two years, to January 9, 2027. (5) The Trust has entered into BA-based interest rate swaps to economically convert these unsecured term loans and secured construction facility from variable rate BA-based debt instruments to fixed rate debt instruments over their respective terms to maturity. 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 2022 88  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 11. SENIOR UNSECURED DEBENTURES As at December 31, 2022 December 31, 2021 Series Maturity Date Coupon Effective Interest Rate O P Q R S T V U A January 31, 2022 December 5, 2022 October 30, 2023 August 30, 2024 July 31, 2025 May 6, 2026 January 22, 2027 July 12, 2027 March 1, 2028 Weighted Average or Total Current Non-current Total 4.43% 3.95% 3.90% 4.79% 4.32% 3.60% 3.46% 3.75% 3.45% 3.94% 4.59% 4.18% 3.97% 4.72% 4.24% 3.57% 3.54% 3.82% 3.54% 3.95% Principal Outstanding — $ — 300,000 300,000 300,000 300,000 200,000 300,000 200,000 1,900,000 $ 300,000 $ 1,600,000 1,900,000 $ $ $ $ $ Liability — $ — 299,835 300,323 300,588 300,386 199,397 299,124 199,171 1,898,824 $ 299,835 $ 1,598,989 1,898,824 $ Liability 199,975 249,493 299,644 300,507 300,801 300,487 199,261 298,950 199,027 2,348,145 449,468 1,898,677 2,348,145 Interest on the senior unsecured debentures is payable semi-annually and principal is payable on maturity. On January 31, 2022, upon maturity, First Capital repaid its 4.43% Series O Senior Unsecured Debentures in the amount of $200.0 million. On December 5, 2022, upon maturity, First Capital repaid its 3.95% Series P Senior Unsecured Debentures in the amount of $250.0 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 (b) 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 2022 Note December 31, 2022 December 31, 2021 23 15(c) 15(c) 14(b) 23 $ 1,152 8,136 — 6,758 1,425 87,327 104,798 76,291 49,117 16,964 15,373 28,736 39,436 — 9 225,926 $ 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 $ 330,724 $ 274,163 (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 $0.7 million (December 31, 2021 - $1.2 million) in other assets (Note 8). (b) Other liabilities includes a loan payable to one of the Trust's joint ventures in the amount of $53.2 million in relation to mortgage proceeds received by the joint venture. The loan proceeds were concurrently advanced to the Trust and to the joint venture's other limited partners by way of a new loan arrangement that cannot be eliminated in the consolidated financial statements under IFRS. 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, 2022 December 31, 2021 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 $ (43) — 60 $ Number of Exchangeable Units 103 $ — — 103 $ Value 1,947 (617) (321) 1,009 Value 1,399 — 548 1,947 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 Balance at beginning of year Trust Units repurchased Exercise of options, and settlement of any restricted, performance and deferred trust units Conversion of Exchangeable Units Balance at end of year Number of Trust Units December 31, 2022 Value of Trust Units 2,898,271 (82,393) 219,541 $ (6,238) Number of Trust Units 219,315 $ December 31, 2021 Value of Trust Units 2,894,582 — — 172 43 213,518 $ 3,144 617 2,819,639 226 — 219,541 $ 3,689 — 2,898,271 FIRST CAPITAL REIT ANNUAL REPORT 2022 90  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued On May 16, 2022, First Capital received TSX approval to commence a normal course issuer bid (“NCIB”) which will enable it to purchase for cancellation up to 21,910,353 of its outstanding Trust Units (“Units”). As of December 31, 2022, the Trust has acquired and cancelled 6.2 million Units at a weighted average purchase price of $15.14 per unit, for a total cost of $94.5 million. The excess of the purchase price over the carrying amount of the Units purchased, representing the unit price increase over the weighted average historical issuance price, was recorded as a reduction to retained earnings of $12.1 million. (b) Distributions On January 12, 2021, First Capital announced the reduction of its monthly distribution to Unitholders from $0.07167 per unit to $0.036 to provide the Trust with additional retained cash flow of approximately $95 million per annum. On September 15, 2022, First Capital announced the reinstatement of the Trust’s regular monthly distribution to $0.072 per unit commencing with the September 2022 distribution. First Capital declared monthly distributions totaling $0.575 per Trust Unit for the year ended December 31, 2022 (year ended December 31, 2021 - $0.432 per Trust Unit). 15. UNIT-BASED COMPENSATION PLANS (a) Unit Option Plan As of December 31, 2022, First Capital is authorized to grant up to 19.7 million (December 31, 2021 – 19.7 million) Trust Unit options to employees and officers. As of December 31, 2022, 6.7 million (December 31, 2021 – 6.6 million) unit options are available to be granted to employees and officers. In addition, as at December 31, 2022, 6.3 million unit options were outstanding (December 31, 2021 - 6.3 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, 2022 have exercise prices ranging from $15.53 - $21.24 (December 31, 2021 – $15.53 - $21.24). As at Exercise Price Range ($) 15.53 - 19.29 19.30 - 20.05 20.06 - 21.19 21.20 - 21.24 15.53 - 21.24 Outstanding Options December 31, 2022 Vested Options Outstanding Options December 31, 2021 Vested Options Number of Trust Units Issuable (in thousands) 1,553 $ 1,509 $ 1,749 $ 1,464 $ 6,275 $ Weighted Average Exercise Price per Trust Unit 17.24 19.86 20.67 21.24 19.76 Weighted Average Remaining Life (years) 4.1 3.9 4.9 6.8 4.9 Number of Trust Units Issuable (in thousands) Weighted Average Exercise Price per Trust Unit 1,067 $ 18.01 1,349 $ 19.84 1,388 $ 20.55 636 $ 21.24 4,440 $ 19.82 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 Unit 965 $ 18.43 1,167 $ 19.81 1,043 $ 20.49 293 $ 21.24 3,468 $ 19.75 During the year ended December 31, 2022, $0.7 million (year ended December 31, 2021 – $1.0 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 91 FIRST CAPITAL REIT ANNUAL REPORT 2022 Number of Trust Units Issuable (in thousands) 6,337 — (7) (15) (40) 6,275 2022 Weighted Average Exercise Price 19.75 — 17.90 19.34 17.90 19.76 $ $ Number of Trust Units Issuable (in thousands) 7,103 644 (60) (545) (805) 6,337 2021 Weighted Average Exercise Price 20.20 15.53 16.41 20.59 20.05 19.75 $ $ (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 (b) The weighted average market price at which options were exercised for the year ended December 31, 2022 was $18.17 (year ended December 31, 2021 – $16.72). The assumptions used to measure the fair value of the unit options under the Black-Scholes model (level 2) as at December 31, 2022 and 2021 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 2022 2021 20.50% - 32.62% 17.92% - 35.17% 0.2 - 6.5 years 4.25% 0.16% - 1.28% 0.2 - 6.0 years 5.12% 3.32% - 4.57% 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 320 77 12 (7) — 402 $1,416 2022 RUs / PUs 897 460 35 (284) (25) 1,083 $5,693 DUs 368 65 8 (121) — 320 $1,299 2021 RUs / PUs 789 355 22 (244) (25) 897 $5,365 (a) The fair value of the DUs granted during the year ended December 31, 2022 was $1.2 million (year ended December 31, 2021 – $1.1 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, 2022 was $4.7 million (year ended December 31, 2021 – $3.1 million), measured based on First Capital’s Trust Unit price on the date of grant. FIRST CAPITAL REIT ANNUAL REPORT 2022 92  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued (b) The fair value of the PUs granted during the year ended December 31, 2022 was $2.5 million (year ended December 31, 2021 – $2.8 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) 2022 May 9, 2022 177 3 years 31.1% 75.3% (15.6%) 2.66% $2,479 2021 March 1, 2021 146 3 years 30.1% 72.4% 10.4% 0.34% $2,771 (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, 2022, the carrying value of the unit-based compensation liability was $23.7 million (December 31, 2021 – $24.6 million)(Note 12). For the year ended December 31, 2022, FCR recognized a decrease in the value of the unit-based compensation plans which resulted in a revaluation gain of $5.3 million in the consolidated statements of income (loss) due to a decrease in the Trust Unit's price year-over-year. 93 FIRST CAPITAL REIT ANNUAL REPORT 2022 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 (recovery) Other operating costs and adjustments (3) Total Property operating costs Total NOI NOI margin Year ended December 31 % change 2022 2021 $ 430,429 $ 426,146 2.7% 106,162 117,061 4,113 2,633 (567) 376 32,889 693,096 118,296 132,422 (361) 17,240 267,597 100,865 118,842 1,541 2,528 2,082 (2,308) 25,194 674,890 111,951 134,899 (1,877) 17,379 262,352 3.1% $ 425,499 $ 412,538 61.4% 61.1% (1) (2) (3) Includes residential revenue. Includes hotel property revenue. Includes residential operating costs, hotel property operating costs and bad debt expense (recovery). Included in other operating costs and adjustments is bad debt expense (recovery) for the year ended December 31, 2022 of ($0.7) million (year ended December 31, 2021 – $8.5 million). For the year ended December 31, 2022, property operating costs include $23.4 million (year ended December 31, 2021 – $20.8 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, 2022 of Nil related to property operations personnel (year ended December 31, 2021 – $0.6 million). A portion of this wage subsidy was passed on to tenants through lower operating cost recoveries. FIRST CAPITAL REIT ANNUAL REPORT 2022 94  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 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 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 $ Note 6 6 6 Year ended December 31 $ 2022 565 76 13,889 5,340 2021 499 100 5,809 4,472 $ 19,870 $ 10,880 $ Note 10 10 11 13 Year ended December 31 $ 2022 46,557 34,638 85,446 42 166,683 (16,641) 2021 49,912 26,260 95,961 45 172,178 (19,508) $ 150,042 $ 152,670 4,863 1,284 17 (6,965) 3,148 1,169 133 (7,630) $ 149,241 $ 149,490 Year ended December 31 Salaries, wages and benefits Unit-based compensation Other corporate costs Total corporate expenses Amounts capitalized to investment properties under development 2022 $ 29,542 $ 7,393 15,496 52,431 (7,196) Corporate expenses $ 45,235 $ 2021 27,675 7,155 10,611 45,441 (7,234) 38,207 For the year ended December 31, 2022, salaries, wages and benefits include Nil of wage subsidies received under the CEWS program (year ended December 31, 2021 - $0.3 million). 95 FIRST CAPITAL REIT ANNUAL REPORT 2022 20. OTHER GAINS (LOSSES) AND (EXPENSES) Realized gain (loss) on sale of marketable securities Unrealized gain (loss) on marketable securities Net gain (loss) on early settlement of debt (1)(2) Transaction costs Gain (loss) on loan receivable modification Pre-selling costs of residential inventory Investment property selling costs Gain on Option (3) Other Total Year ended December 31 2021 2022 $ $ 5,591 (15,167) 12,845 (572) (566) (31) (4,440) — 23 (2,317) $ $ — 14,786 (1,139) — — (238) (7,133) 80,822 (9) 87,089 (1) During the second quarter of 2022, the Trust recognized a $13.5 million hedging gain in other comprehensive income in relation to the mortgage financing of the King High Line residential property. In the fourth quarter, the Trust's interest in the property was sold and the unamortized hedging gain of $13.1 million was reclassified to other gains (losses) and (expenses) upon assumption of the mortgage by the purchaser. In addition, $0.3 million of deferred financing costs related to the mortgage was also written off upon disposition of the property. (2) During the year ended December 31, 2021 the Trust incurred pre-payment penalties in the amount of $1.1 million in relation to the early settlement of debt. (3) 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 $156.0 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: Deferred taxes related to non-capital losses $ (29,213) $ 22,555 $ — $ (4,698) $ (11,356) December 31, 2021 Net income Recognized in OCI Equity and other December 31, 2022 Deferred tax liabilities related to difference in tax and book basis primarily related to real estate, net 769,522 (15,358) 21,300 5,280 780,744 Net deferred taxes $ 740,309 $ 7,197 $ 21,300 $ 582 $ 769,388 As at December 31, 2022, the corporate subsidiaries of the Trust had approximately $35.2 million of non-capital losses which expire between 2028 and 2042. Deferred taxes related to non-capital losses $ (40,190) $ 2,264 $ — $ 8,713 $ (29,213) December 31, 2020 Net income Recognized in OCI Equity and other December 31, 2021 Deferred tax liabilities related to difference in tax and book basis primarily related to real estate, net 738,718 23,665 15,866 (8,727) 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. FIRST CAPITAL REIT ANNUAL REPORT 2022 96  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued The following reconciles the expected tax expense computed at the statutory tax rate to the actual tax expense for the years ended December 31, 2022 and 2021. Income tax computed at the Canadian statutory rate of Nil applicable to the Trust at December 31, 2022 and 2021 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) Release of reserves Other Deferred income taxes expense (recovery) (1) Adjustment to rate differential applied to temporary differences. 22. RISK MANAGEMENT Year ended December 31 2022 $ — $ 2021 — 58,134 (38,237) (12,177) (523) $ 7,197 $ 67,265 (45,001) — 3,665 25,929 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, 2022, First Capital has a total of $421.3 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 $4.2 million. First Capital has a total of $1.6 billion principal amount of fixed rate interest-bearing instruments outstanding including mortgages, senior unsecured debentures and secured credit facilities maturing between January 1, 2023 and December 31, 2025 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 $15.8 million. As at December 31, 2022, First Capital’s loans and mortgages receivable that earn interest at variable rates total $125.3 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 $1.3 million, and if the variable interest rate were 100 basis points lower, FCR’s annual interest income would decrease by $0.8 million. First Capital’s loans and mortgages receivable that earn interest at fixed rates total $49.2 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 $0.5 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, 2022, Loblaw Companies Limited 97 FIRST CAPITAL REIT ANNUAL REPORT 2022 (“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 (c) Liquidity risk 2022 $ 394,431 1,001,822 531,891 $ 1,928,144 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, 2022 is set out below: As at December 31, 2022 Payments due by period 2023 2024 to 2025 2026 to 2027 Thereafter Total Scheduled mortgage principal amortization $ 32,597 $ 61,586 $ 49,965 $ 43,103 $ 187,251 Mortgage principal repayments on maturity — 175,449 174,223 606,933 956,605 Credit facilities and bank indebtedness 225,995 583,306 296,907 — 1,106,208 Senior unsecured debentures Interest obligations (1) Land leases (expiring between 2023 and 2061) Contractually committed costs to complete current development projects Total contractual obligations 300,000 600,000 800,000 200,000 1,900,000 154,224 211,371 96,243 37,512 499,350 866 1,238 1,209 14,932 18,245 46,168 60,773 — — 106,941 $ 759,850 $ 1,693,723 $ 1,418,547 $ 902,480 $ 4,774,600 (1) Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2022 (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, 2022, there was $1.0 billion (December 31, 2021 – $0.8 billion) of cash advances drawn against First Capital’s unsecured credit facilities. In addition, as at December 31, 2022, First Capital had $27.6 million (December 31, 2021 – $29.7 million) of outstanding letters of credit issued by financial institutions primarily to support certain of FCR’s contractual obligations and $1.6 million (December 31, 2021 – $2.5 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 FIRST CAPITAL REIT ANNUAL REPORT 2022 98  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued 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, 2021 – $0.1 million); and (ii) Unit-based compensation liabilities: $3.3 million (December 31, 2021 – $3.5 million) 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 2022 2021 2022 2021 6 6 6 8 6 8 10 10 11 13 15 12 $ 3,334 $ 25,976 $ 3,334 $ 25,976 1,506 1,492 1,506 1,492 174,993 238,473 178,178 239,135 — 13,388 — 13,388 9,595 43,861 5,801 6,310 9,595 43,861 5,801 6,310 $ 1,140,490 $ 1,173,175 $ 1,046,429 $ 1,219,703 1,104,614 899,777 1,104,614 899,777 1,898,824 2,348,145 1,775,836 2,437,878 1,009 23,722 1,947 1,009 24,617 23,722 — 9,454 — 1,947 24,617 9,454 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, 2022, the risk-adjusted interest rates ranged from 3.0% to 13.8% (December 31, 2021 – 1.6% to 10.9%). 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, 2022, these rates ranged from 5.4% to 6.4% (December 31, 2021 – 1.4% to 2.8%). 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, 2022, these rates ranged from 6.2% to 6.5% (December 31, 2021 – 0.9% to 3.0%). The fair value of the Exchangeable Units are based on the Trust's closing price as of December 31, 2022. 99 FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022. • Performance Units: Fair Value is calculated using a Monte-Carlo simulation model. The fair value hierarchy of financial instruments in the consolidated balance sheets is as follows: As at December 31, 2022 December 31, 2021 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 $ 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 $ 3,334 $ — — — — — — — $ — — $ — — 43,861 1,009 23,722 — — $ 1,506 9,595 — 25,976 $ — — — — $ — — 6,310 — — — — — — 1,947 24,617 9,454 — 1,492 5,801 — — — — — $ 178,178 $ — — — $ — — $ 13,388 239,135 — — — — 1,046,429 1,104,614 1,775,836 — — — — — — 1,219,703 899,777 2,437,878 — — — 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, 2022, the interest rates ranged from 3.3% to 6.2% (December 31, 2021 – 1.6% to 3.4%). The fair values of First Capital's asset (liability) hedging instruments are as follows: Designated as Hedging Instrument Maturity as at December 31, 2022 December 31, 2022 December 31, 2021 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 January 2023 April 2024 - March 2027 January 2023 N/A N/A $ $ $ $ 1,903 41,394 564 43,861 — — — $ $ $ $ 754 299 5,257 6,310 8,990 464 9,454 FIRST CAPITAL REIT ANNUAL REPORT 2022 100  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued As at December 31, 2022, the $37.6 million increase in the fair value of outstanding derivative assets year-over-year is primarily due to significant increases in market interest 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. 24. SUBSIDIARIES WITH NON-CONTROLLING INTEREST As at December 31, 2022, 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, 2022 December 31, 2021 67.0% 70.9% 67.0% 70.9% Non-controlling interest in the equity and the results of these subsidiaries, before any inter-company eliminations, are as follows: December 31, 2022 December 31, 2021 $ 184,375 $ 160,145 1,029 185,404 4,148 34 4,182 181,222 55,922 377 160,522 3,860 483 4,343 $ $ 156,179 48,140 Year ended December 31 2022 4 $ 1,290 (465) 829 236 $ $ 2021 1 48,004 (4,649) 43,356 13,505 Year ended December 31 2022 (1,215) $ 12,745 (11,470) 60 $ 2021 (331) 8,769 (8,509) (71) $ $ $ $ $ $ $ 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 2022 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. Ownership Interest Property 101 Yorkville Avenue 102 Atlantic Avenue 328 Bloor Street West 897-901 Eglinton Avenue West Yonge & Roselawn Amberlea Shopping Centre Gloucester City Centre Carrefour du Plateau Merivale Mall Galeries de Repentigny Galeries Brien Ouest/Est Gateway Village King High Line residential 261 Queens Quay East (Bayside Village) Midland (land) Rutherford Marketplace (Residential Inventory) Hunt Club – Petrocan Gatineau Portfolio (1) Hunt Club Marketplace Lachenaie Properties South Oakville Properties (2) Whitby Mall Thickson Mall St. Hubert Portfolio (3) Ottawa Portfolio (3) West Island Portfolio (4) Burlington Portfolio (5) Seton Gateway Sherwood Park (6) The Edmonton Brewery District 138 Yorkville Avenue Meadowbrook Centre Lakeview Plaza Location Toronto, ON Toronto, ON Toronto, ON Toronto, ON Toronto, ON Pickering, ON Ottawa, ON Gatineau, QC Ottawa, ON Repentigny, QC Repentigny, QC St. Albert, AB Toronto, ON Toronto, ON Midland, ON Vaughan, ON Ottawa, ON Gatineau, QC Ottawa, ON Lachenaie, QC Oakville, ON Whitby, ON Whitby, ON St. Hubert, QC Ottawa, ON December 31, 2022 50% 50% 50% 50% 75% 50% 50% 50% 50% 50% 50% 50% —% 50% 50% —% 50% 50% 66.6% 50% 50% 50% 50% 50% 50% Beaconsfield, QC / Kirkland, QC Burlington, ON Calgary, AB Sherwood Park, AB Edmonton, AB Toronto, ON Edmonton, AB Calgary, AB 50% 50% 50% 50% 50% 33.3% 50% 50% December 31, 2021 50% —% —% 50% 100% —% 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% (1) Gatineau Portfolio includes Place Cite des Jeunes, Place Nelligan, and Carrefour du Versant Ouest/Est. (2) South Oakville Properties includes one property at 50% interest, with the remaining properties held at 100% interest. (3) St. Hubert Portfolio includes Carrefour St-Hubert, Plaza Actuel, and Promenades du Parc. Ottawa Portfolio includes Loblaws Plaza, Eagleson Place, and Strandherd Crossing. (4) West Island Portfolio includes Centre Commercial Beaconsfield, Plaza Beaconsfield, Centre St-Charles, Centre Kirkland, and Place Kirkland. (5) Burlington Portfolio includes Burlingwood Shopping Centre and Beacon Hill Plaza. (6) Sherwood Park includes Sherwood Centre, Sherwood Towne Square, Village Market, and Sherwood Centre 1000 Alder Avenue. FIRST CAPITAL REIT ANNUAL REPORT 2022 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, 2022 December 31, 2021 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 2022 2021 Unrealized gains (losses) on cash flow hedges Accumulated other comprehensive income (loss) Opening Balance January 1 Net Change During the Year Closing Balance December 31 Opening Balance January 1 Net Change During the Year Closing Balance December 31 (18,818) 33,314 14,496 (43,580) 24,762 (18,818) $ (18,818) $ 33,314 $ 14,496 $ (43,580) $ 24,762 $ (18,818) (b) Tax effects relating to each component of other comprehensive income (loss) Year ended December 31 2022 2021 Unrealized gains (losses) on cash flow hedges Reclassification of (gains) losses on cash flow hedges to net income Before-Tax Amount Tax (Expense) Recovery Net of Tax Amount Before-Tax Amount Tax (Expense) Recovery Net of Tax Amount $ 64,686 $ (25,228) $ 39,458 $ 37,485 $ (14,639) $ 22,846 (10,072) 3,928 (6,144) 3,143 (1,227) 1,916 Other comprehensive income (loss) $ 54,614 $ (21,300) $ 33,314 $ 40,628 $ (15,866) $ 24,762 103 FIRST CAPITAL REIT ANNUAL REPORT 2022 27. SUPPLEMENTAL CASH FLOW INFORMATION (a) Items not affecting cash and other items Straight-line rent adjustment Investment property selling costs Realized (gain) loss on sale of marketable securities Unrealized (gain) loss on marketable securities classified as FVTPL (Gain) loss on loan receivable modification Net (gain) loss on early settlement of debt 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) Total (b) Net changes in other working capital items Note 16 20 20 20 20 20 20 15 13 15 21 The net changes in other working capital assets and liabilities consists of the following: Amounts receivable Prepaid expenses Trade payables and accruals Tenant security and other deposits Residential development inventory 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 Proceeds from disposition of marketable securities Total (d) Cash and cash equivalents As at Cash and cash equivalents 2022 567 $ 4,440 (5,591) 15,167 566 (12,845) Year ended December 31 2021 (2,082) 7,133 — (14,786) — — (80,822) 7,676 548 9,286 25,929 (47,118) — 7,772 (321) (5,250) 7,197 11,702 $ Year ended December 31 2021 18,512 (686) 5,327 2,727 — (15,948) 9,932 2022 1,814 $ (3,225) 3,254 (800) (1,845) (9,399) (10,201) $ 2022 (65,018) $ 137,787 Year ended December 31 2021 (45,275) 54,455 (695) — 8,485 (3,794) 13,066 82,041 $ $ $ $ $ $ $ December 31, 2022 32,694 $ December 31, 2021 34,699 $ FIRST CAPITAL REIT ANNUAL REPORT 2022 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 $149.9 million (December 31, 2021 – $73.2 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 $27.6 million (December 31, 2021 – $29.7 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 $0.9 million (December 31, 2021 – $1.2 million) with a total obligation of $18.2 million (December 31, 2021 – $19.5 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 Alberta Neighbourhood Retail Portfolio - Mortgage Financing Year ended December 31 2021 2022 4,574 4,626 5,188 5,457 9,762 10,083 $ $ On January 26, 2023, First Capital secured $233.7 million of mortgage financing against a portfolio of six Alberta neighbourhood retail properties. Carrying a term of ten-years, the mortgages are due in January 2033. The mortgage portfolio bears interest at an effective interest rate of 5.4% per annum, payable monthly commencing February 26, 2023. 105 FIRST CAPITAL REIT ANNUAL REPORT 2022 Unitholder Information 

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