2023
ANNUAL REPORT
Our operations
COMPANY PROFILE
First Capital owns, operates and develops grocery-anchored, open-air centres in neighbourhoods with the
strongest demographics in Canada.
CORPORATE PROFILE
First Capital Realty Inc. (TSX: FCR) is one of the largest owners, developers and
operators of necessity-based real estate located in Canada’s most densely populated
urban centres. As at December 31, 2019, the Company owned interests in XXX
properties, totaling approximately XX.X million square feet of gross leasable area.
At December 31, 2019, First Capital Realty had an enterprise value of $X.X billion.
The common shares of the Company trade on the Toronto Stock Exchange.
Message from the
President & CEO
A year of strong operating performance and
Dear fellow unitholder,
2023 was a solid year for our business. Although
and consequently, interest rates remained higher-
for-longer, the fundamentals underpinning grocery-
anchored retail continued to get even stronger over
the course of the year. This fundamental strength,
combined with the efforts of our talented and
passionate team, resulted in our business performing
very well.
Through 2023 we stayed focused on our properties,
leasing, and operations, and we made solid progress
on our portfolio rebalancing and capital allocation
efforts. This work has placed FCR’s business in an even
stronger position.
Solid fundamentals underpinning our business got
even stronger
One of the main drivers of the strengthening
fundamentals underlying our business has been
our tenants. Over the last 2 years alone, Canada’s
population has grown by 2.1 million people. That’s
a staggering number for a country of our size,
representing a 5.4% increase.
First Capital’s properties are located in
neighbourhoods within Canada’s largest markets,
which are precisely the areas that are attracting most
of this growth. This population increase creates more
demand for everything, particularly the necessity-
based goods and services that our tenants sell.
Against this backdrop, there has been almost no new
supply of grocery anchored centres for several years.
There are two main barriers to entry for new supply
in the neighbourhoods our properties are located.
the urban nature of our portfolio. And for sites that
do exist, high density residential is typically the
highest valued use. The second barrier is economic.
Replacement costs, mainly from higher construction
last few years. They are well in excess of current
market values for grocery anchored centres, which
makes it highly unlikely there will be any notably new
supply over the foreseeable future.
This combination of high population growth and a
lack of new supply continues to reduce the square
front – this too is having an impact. Some 75% of our
top-20 tenants are public companies and because of
have largely remained intact. This means that store
improved. Therefore, it should come as no surprise
that the vast majority of FCR’s tenants across every
major category is expanding their physical store
network.
These are the strengthening fundamental
underpinnings of our business. And we do not expect
these conditions to change anytime soon.
Continued solid operating performance, led by
leasing
During 2023 we leased 3.5 million square feet on a
platform-wide basis. This continued the strong leasing
cadence from the prior year. With the constructive
fundamental backdrop referenced above, FCR’s
portfolio occupancy of 96.2% improved by 40 basis
points and our leasing team achieved an average
increase in our rental rate on lease renewals of 12.1%
(at FCR’s share) during 2023. This “lift” once again led
all our peers, and it was also an improvement relative
to the 9.5% increase in 2022 and 8.6% increase in
2021. With the strong leasing performance, another
statistic that also leads our peers is average rental rate
per occupied square foot, which reached another all-
time high of $23.34 at year-end.
Very good progress on capital allocation initiatives
While we remained focused on the leasing and
operating elements of our portfolio, we were also
highly focused upon executing The Optimization Plan
(“the Plan”) that we announced in September 2022.
The Plan is centered around the monetization of
more than $1 billion of typically low- and no-yielding
assets in which our value-enhancing objectives have
been achieved, and the redeployment of that capital
in ways that can generate a more meaningful impact,
including debt reduction, new higher-return real
estate investments, and unit repurchases. Executing
upon the Plan serves to re-balance FCR’s portfolio to
a higher proportion of income producing assets that
contribute to key metrics such as EBITDA and FFO.
As well, it simultaneously further strengthens the
REIT’s balance sheet, which remains a very important
investors of higher FFO with an even stronger balance
sheet is an objective that our Board and Management
team are fully committed to.
By year-end 2023 we were pleased to report that
FCR had either sold or agreed to sell assets for gross
proceeds of more than $630 million. Collectively,
these sales were at prices that meaningfully exceeded
their carrying value, and consistent with the Plan,
the “lost” income yield on the gross sales proceeds
was less than 3%. The Plan is delivering upon its key
objectives. FFO is tracking well against our target
of greater than $1.20 per unit in 2024, and Net
Debt to Adjusted EBITDA is tracking ahead of the
Plan’s objectives. FCR’s year-end 2023 net debt was
approximately $350 million lower than at the Plan’s
announcement date, while the Net Debt to Adjusted
EBITDA multiple of 9.9x, improved by approximately
1x.
As we move into New Year 2024, it is now evident that
the key elements of the Plan will extend well beyond
the end of this year. In this regard, the key elements
will become integral to the FCR capital allocation
model for the next several years, and possibly
beyond.
Advancing our culture and ESG priorities
Throughout 2023, we continued to advance our ESG
priorities, further embedding environmental, social
and governance principles into our business and
culture.
First Capital has committed to ambitious science-
based greenhouse gas (GHG) reduction targets of
46% by 2030 and net-zero by 2050. These targets
were approved by the Science Based Target Initiative
(“SBTi”) in November 2022. Throughout 2023, our
focus was to lay the groundwork to ensure successful
delivery on these targets by creating net-zero plans
for our assets. To achieve this, FCR became an early
software that has enabled us to create net-zero
pathways for our assets with speed, scale, and cost
laid out for over 95% of our applicable assets (by
GLA), which will provide powerful insights as we move
into the next phase of our greenhouse gas reduction
planning.
Concluding
In concluding, we made meaningful progress in 2023
for First Capital REIT.
The fundamentals supporting our business continue
to strengthen – in fact, they may be the best we have
ever seen.
Our strong execution with exceptionally high
standards for property operations and leasing
continues to be a constant across our platform.
We are executing well under our Optimization Plan,
which we see as the “template” for the FCR capital
allocation model for the next several years, and
possibly beyond.
our liquidity remains excellent.
While we have a lot of work to do to achieve our goals
for our investors, I am immensely proud of what we
have accomplished over this past year. All of this can
only be achieved with the tremendous talent and
efforts of the entire First Capital team, who I sincerely
thank.
Finally, I wish to thank our Trustees for their counsel
and guidance, our executive team for its continued
leadership and enthusiasm, and our unitholders for
your continued support.
Respectfully,
Adam Paul
We know that getting to net zero cannot be done in
isolation. We require collaboration and partnership
with our national tenants and industry peers, to
achieve our common goal of net zero. Also extending
the important work that commenced in the prior
year (through our November 2022 Collaboration for
Climate Action initiative), in 2023 we continued to
foster this important collaboration though our more
formalized Collaboration for Climate Action Working
Group, which is focused on creating solutions to some
of the common barriers to decarbonizing open air
retail real estate.
the work that our team members do to advance our
Equity, Diversity and Inclusion mission of creating an
inclusive culture of belonging, where all employees
have an equal opportunity to thrive, love what they do
and grow their careers. We pay particular attention
to spotlighting employees and panels of employees
who share their lived experiences, foster authentic
discussions and we collectively learn and grow
together.
As we have done in prior years, during 2023 we once
again encouraged our employees to volunteer at least
one day towards a charity that matters to them in a
neighbourhood in which we operate. Our ambitious
2023 target was for 85% participation, and our team
demonstrated their passion by eclipsing that goal with
a participation rate of 93%. This equated to more than
1,400 in hours volunteered as well as an exceptional
level of employee engagement in supporting the local
communities where we operate.
efforts, the FCR Thriving Neighbourhoods Foundation
team raised more than $525,000 in support of Kids
Help Phone over the past two years. I would like to
personally thank our employees, Board members
and corporate friends who continue to support our
Foundation.
Business and
Strategy Overview
Our business
First Capital Real Estate Investment Trust, with $9.2 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- they bring together people, retail shops and services, as well as public art, with the
Our operations
YYZ
TORONTO
HEADQUARTERS
FCR.UN
LISTED ON TSX
142
NEIGHBOURHOODS
22.3M
SQ. FT. OF GLA
>2,400
TENANTS
372
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 2022
Environmental, Social &
Governance Report
Collaboration
One Team,
One Purpose
Innovation
Freedom to challenge
the status quo
Excellence
Be the best
at what you do
Accountability
Deliver what
you promised
Passion
Love what you do
Our investment strategy
Creating thriving properties in urban neighbourhoods that
appreciation of our best in class portfolio.
We achieve this by:
Investing in high-quality,
grocery-anchored and
mixed-use properties in
targeted urban
and top-tier suburban
neighbourhoods
Fully integrating retail
with other uses to
create thriving properties
Optimizing the portfolio
through active asset
management
Surfacing substantial
unrecognized value in
our incremental density
pipeline through the
development process
Orienting our capital allocation
towards more impactful uses,
through the monetization of a
portion of our growing roster of
density entitlements and
certain other assets where
value-creation objectives have
been achieved
Actively managing our balance
sheet
competitive cost of capital
Our target markets
within Canada’s largest and fastest growing cities.
These neighbourhoods are located in Toronto, Montreal, Vancouver, Edmonton, Calgary and Ottawa. We have
achieved critical mass in each of our target markets, which helps generate economies of scale and operating
synergies, as well as deep local knowledge of our properties, tenants, neighbourhoods and markets in which we
operate.
Within each of these markets, we own some of the best located properties in neighbourhoods with strong
demographics that we expect will continue to get stronger over time, thereby attracting the most desirable
tenants with the highest rent growth potential and the most compelling opportunities for value creation.
Urban Markets
% of Annual Minimum Rent*
Greater Toronto Area
Greater Montreal Area
Greater Calgary Area
Greater Vancouver Area
Greater Edmonton Area
Greater Ottawa Area
Kitchener/Waterloo/Guelph Area
Other
Total
*As at December 31, 2023
40%
14%
13%
10%
10%
5%
5%
3%
48%
12%
11%
12%
7%
4%
4%
2%
100%
100%
Creating thriving properties for everyday urban life
Currently, over 90% of our revenues come from retail tenants who provide the essential products and services
centres, medical services, childcare facilities and other professional and personal services. In each of our
properties, we strive to assemble the right mix of complementary uses to best serve the local community and
contribute to thriving urban and top-tier suburban neighbourhoods.
# of Locations
% of AMR
Grocery Stores
123
17.1
Medical, Professional
& Personal Services
1,292
15.5
QSR, Chains & Cafes
927
13.0
Other Necessity-
Based Retailers
380
12.4
9.2
8.1
7.9
5 7
4.5
3.0
1.9
1.7
Pharmacies
118
Banks & Credit Unions
185
Other Tenants
466
Value-Based Retailers
Fitness Facilities
Liquor Stores
Other Restaurants
Daycare &
Learning Centres
87
85
87
73
107
As at December 31, 2023
24 million square feet of
incremental density within
our existing portfolio
Actively managing our assets
We view proactive management of our portfolio as a core
competency and an important part of our strategy.
Proactive management means we continually invest in our properties to ensure they retain their market leading
position. We strive to maintain the highest standards in design, appearance and customer amenities in our
properties including the addition of public art installations and enhancing connectivity to transit and the local
community. We are highly focused on maximizing the value and competitive position of our properties, by
proactively evolving our tenant mix to attract the right tenants with the highest rent growth potential.
procedures and standards are applied consistently across our operating markets through local teams.
32 public art
installations
across our portfolio
Measuring our progress
As we continue to advance our real estate strategy,
we measure our progress through a number of key
metrics.
Portfolio Metrics
We measure an urban or top-tier suburban property based on its proximity to transit,
its “Walk Score”, and most importantly its population density. We expect to continue
to maintain industry-leading metrics, through our investment and disposition activity.
99%
84
Currently, over 99% of our properties
are located within a 5-minute walk to
public transit.
Our portfolio has a “Walk Score” of 84. It is considered “Very
Walkable”, which is the second highest level achievable, where most
errands can be accomplished on foot.
295,000
of each of our properties, up 90,000 or 44% from December
2016 making us a leader amongst our North American peers
on this metric.
Corporate Responsibility
And Sustainability
Corporate Responsibility and Sustainability
(“sustainability’) at First Capital encompasses
all aspects of our environmental, social and
governance (ESG) practices.
Sustainability has always been integral to the
responsible management of every aspect of our
business and the mitigation of various risks. By taking
a holistic approach to ESG, we are focused on reducing
our environmental impact while creating thriving
and dynamic urban neighbourhoods and at the same
time, delivering long-term value for our stakeholders.
Simply put, it makes good business sense.
To support our commitment to sustainability
leadership, we have in place robust capabilities to
measure and report on our progress and to continually
assess and improve our environmental programs
each year. We recognize that our leadership in
sustainability practices is important to our tenants
and investors, as well as our employees and the
communities in which we operate. We are committed
to transparency and ensuring that our sustainability
reporting is accurate, meaningful and accessible to
all stakeholder groups. We employ a full-time Vice
President of ESG who is responsible for leading
sustainability reporting initiatives and driving
continuous ESG engagement and improvement across
our organization, including through co-chairing our
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
used the Global Reporting Initiative (GRI) framework
for corporate responsibility reporting since 2011.
In addition to GRI, we include disclosures aligned with
the Sustainability Accounting Standards Board (SASB),
the United Nations Sustainable Development Goals
(UNSDGs), and the Task Force on Climate-related
Financial Disclosures (TCFD). We also respond
annually to the Global Real Estate Sustainability
Benchmark (GRESB) survey and the Carbon
Disclosure Project’s (CDP) Climate Change
questionnaire.
We recognize that our employees are at the core of
our success and have well-developed programs
promoting career development and supporting
continuing education, including through tuition
subsidies. First Capital encourages employee
engagement and innovation through a value awards
program, among other initiatives and also encourages
employees to become unitholders through a unit
purchase plan. First Capital is committed to the
highest ethical standards, upholding a strict Anti-
Corruption Compliance Policy and Code of Conduct
and Ethics. As an entity with a social conscience, we
are committed to giving back to communities in which
we operate by participating in charitable initiatives
that support vulnerable parts of the population through
our FCR Thriving Neighbourhoods Foundation and by
promoting environmental improvements that help
neighbourhoods thrive.
We believe that sound and effective governance
is essential to our performance and have adopted
ensures that effective governance practices are
followed and that the Board of Trustees (the “Board”)
functions independently of Management. First Capital
endorses the principle that the Board should have a
balance of skills, experience and diversity. We believe
that diverse Boards have enhanced decision-making
abilities that lead to improved oversight and promote
better overall governance.
Our strength in ESG standards and disclosure
is validated through numerous ratings,
including achieving:
Received Sector Leader Status in the 2023 GRESB Real Estate
Development Benchmark with a score of 90
AAA
‘AAA’ rating, in the Morgan Stanley Capital International (MSCI)
ESG Ratings assessment in 2023
Awarded Gold 2022 Green Lease Leader Recognition by the Institute
for Market Transformation (IMT) and the U.S. Department of Energy’s
Better Building Alliance
Awarded Prime status for Corporate ESG Performance
by Institutional Shareholder Services in 2023
Our ESG Priorities and Progress
ENVIRONMENTAL
Reduce our carbon
emissions and energy
use
• Greenhouse gas (GHG) emissions reduction target approved by Science
Based Target Initiative (SBTi): 46% reduction in Scope 1 & 2 emissions by
2030 (2019 base year), with long term goal of reaching net-zero by 2050,
or sooner
• 9% reduction in Scope 1 & 2 GHG emissions since 2019 base year (2019-
2022)
• Hosted our inaugural Collaboration for Climate Action Forum, bringing
together major national retail tenants and prominent retail property
owners for a solutions-focused discussion around the decarbonization of
retail buildings in Canada
Promote sustainable
transportation
• > 99% of our portfolio within a 5-minute walk of public transit
• Average Walk Score for our portfolio is 84 (very walkable)
• Over 300 electric vehicle charging stations installed across our portfolio;
FCR supports the expansion of EV infrastructure in Canada and we
continue to annually increase our network of EV charging stations at our
properties
Achieve green building
• Achieve Building Owners and Managers Association’s Building
• Certify all new construction projects to Leadership in Energy and
Environmental Design (LEED) standards (subject to tenant acceptance);
as of December 31, 2023
• First Canadian Retail REIT to achieve the WELL Health-Safety Rating for
Facility Operations & Management from the International WELL Building
Institute (IWBI) at 35 of our buildings totalling 7.1 million square feet
• Actively working to better understand the risks of climate change,
incorporating this into our business continuity planning and in turn,
increasing the resiliency of our properties and communities
•
Effectively manage
climate change risk
and resilience
Force on Climate-Related Financial Disclosures (TCFD); TCFD report
included within our 2022 ESG Report
• Formed an FCR TCFD Task Force made up of senior leaders from across
business functions. The Task Force performed a climate scenario analysis to
related risks and opportunities
SOCIAL
• Strong gender diversity metrics achieved through all levels of the
organization; 55% of management positions are held by females
Foster an engaged and
diverse workforce
• Established employee-led Equity, Diversity & Inclusion (ED&I) Council and
launched the Building an FCR for Everyone 2021-2023 ED&I Action Plan
• Recognized by the Globe and Mail as one of the Greater Toronto’s Top
• Named one of Canada’s 2022 Greenest Employers by Mediacorp Canada
and the Globe and Mail
Be one of the best
places to work
• Named one of Canada’s Top Small and Medium Employers for three
consecutive years (2020 – 2022)
• Selected for inclusion in “The Career Directory” for 2021 & 2022 as one
of Canada’s Best Employers for Recent Graduates
• 82% employee engagement score in 2023
a good corporate
citizen in the
communities we
operate
• Launched the FCR Thriving Neighbourhoods Foundation in 2020 and
have since raised over $925,000 in donations through employee-led
and mental health initiatives (Kids Help Phone)
• In September 2023, held FCR Thriving Neighbourhoods Foundation’s
second annual Commercial Real Estate Softball Classic tournament and
raised over $220,000 for Kids Help Phone
• In 2023, 93% of FCR staff volunteered to support local charities in our
communities
• Long-standing support of public arts, now with 32 installations
across our portfolio
GOVERNANCE
Have a strong
governance
framework in
place that:
Strive to be a
governance leader
by making it a
priority to:
•
our values
• Ensures effective governance practices are followed
• Ensures the Board functions independently of management
• Ensures diversity is considered in determining optimal
board composition
• Continuously adopt new and improved governance practices
• Follow recommendations as governance standards evolve
Monitor our
progress:
• Reviewing our annual governance scores from ISS, the Globe and
Mail Board Games and other similar rankings with our Board
• Providing opportunities for our unitholders to communicate
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
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
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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
2023 Acquisitions
2022 Acquisitions
2023 Dispositions
2022 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
Hotel Property
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
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50
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Net Income (Loss) Attributable to Unitholders
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
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, 2023 and 2022. It should be read in conjunction with the Trust’s audited annual consolidated financial
statements for the years ended December 31, 2023 and 2022. Additional information, including First Capital's current
Annual Information Form, is available on the SEDAR+ website at www.sedarplus.ca 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 6, 2024.
CURRENT BUSINESS ENVIRONMENT AND OUTLOOK
Throughout 2023, both globally and in Canada, inflation continued to be a key concern as measures of core inflation
remained elevated and major central banks remain committed to restoring price stability. In the fourth quarter of 2023
inflation in Canada held steady at 3.1% for October and November before increasing to 3.4% in December. The increase
in December was largely driven by the price of gasoline, air travel, passenger vehicles as well as food prices, although
year-over-year increases in the latter has been in a gradually decelerating trend.
Economic growth in Canada stalled through the second and third quarters of 2023 with Gross Domestic Product “GDP”
contracting at a rate of 1.1% in the third quarter as the impact of higher interest rates continues to work its way through
the economy. In light of strong population growth in Canada over the past year, several estimates place the third quarter
contraction at approximately 4% on a per capita basis. Higher interest rates are clearly restraining spending, with
consumption growth in the last two quarters at close to zero, which should ease price pressures. Wage growth has
continued at a solid 4-5% rate of growth, yet there are signs that the labour market is weakening with a lag effect amid
slower job creation versus labour force growth as well as a decline in job vacancies.
Although the headline inflation rate of 3.4% continues to exceed the Bank of Canada’s target of 2%, the fourth quarter
data suggests the Canadian economy is no longer in excess demand. With the return to target taking longer than
anticipated, the Bank of Canada has held the overnight rate at 5.0% since July 2023. Approximately two-thirds of
Canadian residential mortgages are up for renewal in 2024 through 2026. Current market interest rates (overnight rate,
the Prime rate, and longer-term bond yields) are such that aggregate mortgage payments will be increasing, thus acting
as a potentially sizable drag on consumption and economic growth. The Bank of Canada Governing Council is still
concerned about risks to the outlook for inflation and remains prepared to raise the policy rate further if needed. The
Governing Council wants to see further and sustained easing in core inflation and continues to focus on the balance
between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.
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 over the
longer term.
Enhanced Capital Allocation and Portfolio Optimization Plan
During the third quarter of 2022, 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 through the end of 2024 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 2023
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 had a run rate yield of less than 2% on the expected monetization value. In addition, the Trust
currently expects to complete the rezoning of approximately 6 million square feet of density on a well-staggered basis over
the next three years, which it anticipates will increase their value by approximately $450 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%. Additionally, the
Trust will continue to maintain a robust development pipeline which will include 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.
During the fourth quarter of 2023, First Capital continued to execute on the Portfolio Optimization Plan with $58 million of
dispositions completed, including (i) a 25% interest in the Trust's Yonge & Roselawn development site and (ii) a single
tenant property located at 6455 West Boulevard, Vancouver. Additionally, First Capital has approximately $116 million of
new dispositions that are subject to firm agreements entered into by the Trust which include (i) it's 50% interest in the
Royal Orchard development site, located in Thornhill, ON, (ii) Circa Residences (68 residential rental suites), located in
Richmond, BC, (iii) a 41.7% interest in 1071 King St. W., located in Toronto, ON reducing FCR's interest to 25% and, (iv) 71
King St. W., a small medical office building located in Mississauga, ON. To date, First Capital has completed or has under
firm agreement, approximately $633 million of dispositions under the Plan, with a cumulative yield of less than 3% and an
average premium to IFRS carrying value of 21%, demonstrating strong progress on the initiatives that are aimed at driving
FFO per unit growth, while further strengthening First Capital’s debt metrics.
As of December 31, 2023, the Trust has classified $226.9 million, at First Capital's share, of its assets as held for sale.
Actively managing assets
First Capital operates a portfolio of assets located in 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, having initially targeted a net debt to EBITDA ratio of less than 10x by the end of 2024. As at December 31, 2023,
First capital's net debt to EBITDA ratio was 9.9x. The Trust expects further improvement in net debt to EBITDA during 2024.
As of February 6, 2024, the Trust's liquidity position included approximately $940 million of cash and undrawn credit
facilities with debt maturities for 2024 totaling approximately $490 million on a proportionate basis. As at December 31,
2023, the Trust had unencumbered properties with an IFRS value of approximately $6.0 billion and a net debt to asset ratio
FIRST CAPITAL REIT ANNUAL REPORT 2023
2
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
of 45.0% as well as a net debt to Adjusted EBITDA ratio that improved to 9.9x (9.8x excluding non-recurring costs related to
Unitholder activism) from 10.2x (10.1x excluding non-recurring costs related to Unitholder activism) year over year.
Normal Course Issuer Bid ("NCIB")
Since the beginning of 2019, the REIT has completed approximately $2.0 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. On May 16, 2023, First Capital received
TSX approval for the renewal of its NCIB pursuant to which it may repurchase and cancel up to 21,148,491 of its outstanding
units until May 17, 2024. Cumulatively from May 2022 to December 31, 2023, the REIT has repurchased 7.9 million Trust
units for approximately $120.1 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.
As of December 31, 2023, FCR’s loans and mortgages receivable totaling $131.2 million (December 31, 2022 - $176.5
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
The Trust's current property disposition program is focused on executing upon the objectives of the Enhanced Capital
Allocation and Portfolio Optimization Plan. On a longer-term basis, First Capital's approach to property dispositions is more
broadly centered around the following 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. First Capital also 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, 2023, FCR had approximately 0.7 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 the assets in which it invests.
Outlook
The global economy including Canada’s has proven resilient in the face of high inflation. At the same time, labour markets
remain tight and measures of core inflation in many advanced economies suggest persistent price pressures, especially for
food and services. Economic growth has shown signs of weakening as growth in consumption has slowed as higher interest
rates and increasingly restrictive monetary policy continue to work their way through to consumers and the economy more
broadly. With approximately two-thirds of Canadian residential mortgages being up for renewal in 2024 through 2026 at
3
FIRST CAPITAL REIT ANNUAL REPORT 2023
current interest rates that will subject borrowers to payment increases, it appears there will be more “fiscal drag” ahead for
consumption and economic growth. Moreover, a general tightening in the banking sector, particularly in the United States,
is also expected to continue to remain a challenging element within corporate credit/lending conditions. With Canada’s
inflation rate continuing to hover in the 3.0% to 3.5% range, reaching the Bank of Canada's 2% target may prove challenging
this year, as prices for certain services, food and rent remain elevated, as does wage growth.
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. In the current environment, the Trust continues to achieve strong leasing
metrics with a robust new and renewal lease pipeline coupled with upward trending market rental rates. 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 eight 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 eight equity accounted joint ventures, Management allocates FCR's
proportionate share of revenues, expenses, assets, and liabilities to each relevant line item which replaces the one line
presentation found in the IFRS consolidated financial statements. In addition, under IFRS, FCR exercises control over two
partially owned ventures and consolidates 100% of the revenues, expenses, assets, and liabilities in the consolidated
financial statements. In the reconciliations, the partially owned ventures are also presented as if they were
proportionately consolidated. To achieve the proportionate presentation of its partially owned ventures, Management
subtracts the non-controlling interest's share (the portion FCR doesn't own) of revenue, expenses, assets, and liabilities
on each relevant line item. FCR does not independently control its joint ventures that are accounted for using the equity
method, and the proportionate presentation of these joint ventures does not necessarily represent FCR's legal claim to
such items.
FIRST CAPITAL REIT ANNUAL REPORT 2023
4
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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 at FCR's proportionate interest 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 (loss) 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 (loss) determined in accordance with IFRS. A reconciliation from net
income (loss) to FFO can be found in the "Non-IFRS Reconciliations and Financial Measures — FFO, AFFO and ACFO"
section of this MD&A.
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.
5
FIRST CAPITAL REIT ANNUAL REPORT 2023
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.
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 (loss), 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.
FIRST CAPITAL REIT ANNUAL REPORT 2023
6
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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 (19.4 million square feet at its ownership interest compared to 22.3 million
square feet at 100% as at December 31, 2023). First Capital's operating metrics and GLA excludes residential GLA totaling
204,000 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.
7
FIRST CAPITAL REIT ANNUAL REPORT 2023
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)
2023
2022
2021
$
$
$
$
$
$
712,856
$
712,966
$ 685,770
425,257
$
425,499
$ 412,538
(423,598) $
(409,716) $ 198,617
3,646
$
6,908
$
(1,122)
(134,056) $
(159,997) $ 460,131
(0.63) $
(0.73) $
2.08
214,268
218,162
220,826
$
227,734
$
251,221
$ 249,613
$
$
$
$
183,561
0.864
183,657
0.864
$
$
$
$
124,191
0.576
$
$
94,804
0.432
116,721
$ 102,618
0.540
$
0.432
2023
2022
2021
$ 8,239,260
$ 8,627,788
$ 9,126,839
$
—
$
90,600
$
85,400
$ 9,185,450
$ 9,581,938
$ 10,109,074
$ 1,338,041
$ 1,140,490
$ 1,173,175
$ 1,153,907
$ 1,104,614
$ 899,777
$ 1,598,941
$ 1,898,824
$ 2,348,145
$
—
$
1,009
$
1,947
$ 3,933,377
$ 4,279,373
$ 4,620,942
$
21.95
$
23.48
$
24.26
212,184
213,518
219,541
—
60
103
$ 7,346,245
$ 7,786,007
$ 8,568,292
45.0%
9.9 / 9.8 (5)
44.0%
10.2 / 10.1 (5)
3.3
3.4
43.9%
11.2
4.0
FIRST CAPITAL REIT ANNUAL REPORT 2023
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) (6)
Commercial pipeline (primarily retail)
Residential pipeline
Weighted average rate per occupied square foot
Commercial GLA developed and transferred online - at ownership interest (7)
Residential units developed and transferred online (6)
Cost of GLA developed and brought online – at FCR's share
Same Property - stable NOI - increase (decrease) over prior period (2) (8)
Total Same Property NOI - increase (decrease) over prior period (2) (8)
For the years ended December 31
Funds from Operations (2) (4)
FFO
FFO per diluted unit
FFO payout ratio
Weighted average number of units - diluted (in thousands)
Adjusted Funds from Operations (2) (4)
AFFO
AFFO per diluted unit
AFFO payout ratio
Weighted average number of units - diluted (in thousands)
Adjusted Cash Flow from Operations (2) (4)
ACFO
ACFO payout ratio on a rolling four quarter basis
2023
2022
2021
142
145
146
22,298,000
22,216,000
22,485,000
19,368,000
19,325,000
19,657,000
96.3%
96.2%
96.1%
95.8%
96.0%
96.1%
1,063,000
1,742,000
1,720,000
22,654,000
22,388,000
21,752,000
$
23.34
$
22.95
$
22.42
142,000
15,000
194,000
38
—
399
$
88,323
$
6,714
$
277,077
1.2%
1.3%
5.2%
5.1%
5.1%
5.7%
2023
2022
2021
$
$
$
$
$
$
243,977
1.14
75.9%
263,155
1.21
47.8%
$
$
250,989
1.14
38.0%
214,268
218,162
220,826
$
$
202,654
0.95
91.3%
226,217
1.04
55.5%
$
$
223,512
1.01
42.7%
214,268
218,162
220,826
$
233,363
$
235,452
$
243,816
78.7%
49.6%
42.1%
(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) Net debt to Adjusted EBITDA was 9.9x as at December 31, 2023 (10.2x - December 31, 2022). Excluding non-recurring costs related to Unitholder activism, the ratio was
9.8x (10.1x - December 31, 2022).
(6) At First Capital's ownership interest.
(7) During the twelve months ended December 31.
(8) Calculated based on the year-to-date NOI. Prior period amounts not restated for current period property categories.
9
FIRST CAPITAL REIT ANNUAL REPORT 2023
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.
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, 2023, First Capital had interests in 142 neighbourhoods, which were 96.2% occupied with a total GLA
of 19.4 million square feet at FCR's ownership interest (22.3 million square feet at 100%) and a fair value of $8.6 billion.
This compares to 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 as at December 31, 2022.
The Same Property portfolio includes properties sub-categorized in Same Property – stable and Same Property with
redevelopment. The Same Property portfolio is comprised of 128 neighbourhoods with a total GLA of 18.0 million square
feet at FCR's ownership interest (20.8 million square feet at 100%) and a fair value of $7.4 billion. These properties
represent 90% of FCR's neighbourhood count, 93% of its GLA at FCR's ownership interest and 86% of its fair value as at
December 31, 2023.
The balance of FCR’s real estate assets consists of properties which are in various stages of redevelopment, properties
acquired in 2023 or 2022 and properties in close proximity to them, as well as properties held for sale.
FIRST CAPITAL REIT ANNUAL REPORT 2023
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
Properties under construction (3)
Acquisitions (4)
Density and Development land (5) (6)
Investment properties classified as
held for sale
Dispositions (7)
Total
December 31, 2023
Weighted
Average
Rate per
Occupied
Square
Foot
96.3% $ 23.53
% of Total
GLA
GLA
(000s
sq. ft.)
90.4% 17,468 $ 7,704
Fair
Value (2) Occupancy
December 31, 2022
Weighted
Average
Rate per
Occupied
Square
Foot
96.1% $ 23.17
GLA
(000s
sq. ft.)
Fair
Value (2) Occupancy
17,552 $ 7,296
% of Total
GLA
90.6%
2.4%
93.0%
4.8%
—%
1.0%
0.4%
461
18,013
924
—
199
72
141
7,437
343
88
143
378
98.7%
96.3%
95.0%
—%
95.9%
97.1%
18.02
23.38
21.65
—
26.93
25.86
2.4%
457
139
98.7%
17.31
92.8% 17,925
852
—
189
95
4.4%
—%
1.0%
0.4%
7,843
280
88
64
363
96.2%
89.6%
—%
94.8%
96.5%
23.01
22.45
—
13.70
25.73
0.8%
160
227
83.6%
22.30
0.8%
157
145
89.5%
21.96
—%
—
—
—%
—
0.6%
107
260
98.7%
31.09
100.0%
19,368 $ 8,616
96.2% $ 23.34
100.0% 19,325 $ 9,043
95.8% $ 22.95
(1) Prior periods restated to reflect current period property categories.
(2) At FCR's proportionate interest, including investment properties classified as held for sale and hotel property at net book value as at December 31, 2023 and December 31,
2022, respectively.
(3) Approximately $36 million (December 31, 2022 - $Nil) of properties under construction is included in investment properties classified as held for sale as at December 31,
2023.
(4) Includes current year and prior year acquisitions.
(5) Approximately $47 million (December 31, 2022 - $33 million) of density and development land is included in acquisitions as at December 31, 2023.
(6) Approximately $90 million (December 31, 2022 - $33 million) of density and development land is included in investment properties classified as held for sale as at
December 31, 2023.
(7) Comparative information presented relates to 2023 dispositions that have been completed and no longer form part of these metrics as at December 31, 2023.
First Capital’s portfolio by major market is summarized as follows:
As at
December 31, 2023
December 31, 2022
(millions of dollars,
except other data)
Area
Number
of
Neighbour-
hoods
GLA
(000s
sq. ft.)
Fair
Value(1)
% of
Total
Fair
Value Occupancy
Weighted
Average
Rate per
Occupied
Square
Foot
% of
Annual
Minimum
Rent
Number
of
Neighbour-
hoods
GLA
(000s
sq. ft.)
Fair
Value(1)
% of
Total
Fair
Value Occupancy
Weighted
Average
Rate per
Occupied
Square
Foot
% of
Annual
Minimum
Rent
Greater Toronto
50
6,865 $ 4,101
48%
96.6% $ 26.60
Greater Montreal
27
3,582
1,046
12%
Greater Calgary
15
2,352
949
11%
Greater Vancouver
14
1,583
994
12%
Greater Edmonton
Greater Ottawa
KW/Guelph (2)
Other
Total
10
2,219
12
1,021
5
9
990
756
621
340
352
213
7%
4%
4%
2%
95.3%
94.3%
96.0%
96.0%
98.2%
98.7%
97.3%
18.50
25.72
28.41
19.43
20.05
20.52
18.36
40%
14%
13%
10%
10%
5%
5%
3%
51
6,754 $ 4,366
48%
95.6% $
26.51
28
3,606
1,085
12%
15
2,374
998
11%
15
1,607
1,047
12%
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%
142
19,368 $ 8,616
100%
96.2% $ 23.34
100%
145
19,325 $ 9,043
100%
95.8% $
22.95
100%
(1) At FCR's proportionate interest, including investment properties classified as held for sale and hotel property at net book value as at December 31, 2023 and December 31,
2022, respectively.
(2) Includes Kitchener, Waterloo, and Guelph Area.
11
FIRST CAPITAL REIT ANNUAL REPORT 2023
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, 2023
Consolidated
Balance Sheet
Adjustments for
Proportionate Interest
Proportionate
Interest (2)
$
8,628 $
324 $
8,952
78
143
(424)
(186)
—
$
8,239 $
—
6
48
—
(1)
377 $
78
149
(376)
(186)
(1)
8,616
(1)
Includes assets classified as held for sale as at December 31, 2023 totaling $168 million ($227 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
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
Proportionate
Interest (2)
$
9,127 $
319 $
9,446
64
125
(410)
(277)
(1)
—
7
—
—
(2)
64
132
(410)
(277)
(3)
$
8,628 $
324 $
8,952
(1)
Includes 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.
2023 Acquisitions
Income-producing properties and other
During the year ended December 31, 2023, First Capital acquired $78.1 million of income-producing properties including
a 0.3 acre parking lot located in Liberty Village during the fourth quarter, as summarized in the table below:
Count Property Name
1.
2.
3.
4
320 - 326 Bloor Street West
Centre Commercial Maisonneuve
Molson Building
30 Hanna Avenue (parking lot)
Total
City/Province
Toronto, ON
Montreal, QC
Calgary, AB
Toronto, ON
Quarter
Acquired
Interest
Acquired
GLA
(sq. ft.)
Acreage
Acquisition Cost
(in millions)
Q1
Q2
Q3
Q4
50%
100%
25%
100%
8,979
114,514
720
—
0.2 $
8.6
0.1
0.3
124,213
9.2 $
15.7
55.2
1.9
5.3
78.1
FIRST CAPITAL REIT ANNUAL REPORT 2023
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
2023 Dispositions
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)
0.4 $
21.3
Q1
Q1
Q1
Q2
Q3
Q3
Q4
100%
50%
100%
100%
50%
100%
50%
16,046
8,734
—
—
50,088
—
2,117
0.1
0.1
0.1
6.3
0.1
—
76,985
7.1 $
7.6
2.5
3.6
23.0
2.5
3.3
63.8
During the year ended December 31, 2023, First Capital completed $296.7 million of dispositions, as summarized in the
table below:
Count Property Name
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Yorkville Condo
Carre Queen-Mary
Yorkville Condo
Hazelton Hotel (Yorkville Village) (1)
Yorkville Condo
30, 30A Hazelton Ave.
Wilderton Centre (land)
Place Panama (land)
5051-5061 Yonge St. (Hillcrest Plaza)
Yorkville Condo
Yonge & Roselawn (land)
6455 West Boulevard
Total
City/Province
Toronto, ON
Montreal, QC
Toronto, ON
Toronto, ON
Toronto, ON
Toronto, ON
Montreal, QC
Brossard, QC
Toronto, ON
Toronto, ON
Toronto, ON
Vancouver, BC
Quarter
Sold
Interest Sold
GLA
(sq. ft.)
Acreage
Gross Sales
Price
(in millions)
Q1
Q2
Q2
Q2
Q3
Q3
Q3
Q3
Q3
Q4
Q4
Q4
100%
100%
100%
1,417
35,863
862
100%/50%
60,766
100%
100%
100%
100%
100%
100%
25%
100%
729
11,783
—
—
37,307
813
—
30,395
—
0.3
—
—
—
0.1
1.5
3.2
0.7
—
0.5
—
179,935
6.3 $
296.7
(1) First Capital sold its 100% and 50% interests in the Hazelton Hotel and ONE Restaurant, respectively.
13
FIRST CAPITAL REIT ANNUAL REPORT 2023
2022 Dispositions
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:
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
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
Impact of Acquisitions and Dispositions
The annualized NOI of properties acquired and disposed, at the time of acquisition or disposition, during the years ended
December 31, 2023 and 2022 is summarized in the table below:
Acquired
Disposed
For the year ended December 31
Greater Toronto Area
Greater Montreal Area
Greater Vancouver Area
Greater Edmonton Area
Greater Ottawa Area
Total
Capital Expenditures
$
2023
204
3,634
—
—
—
2022
2023
2022
$
1,699
$
6,140
$
5,062
—
—
—
—
372
984
—
—
—
—
720
2,824
8,606
$
3,838
$
1,699
$
7,496
$
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.
FIRST CAPITAL REIT ANNUAL REPORT 2023
14
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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
2023
2022
Capital
Expenditures
Adjustments for
Proportionate
Interest
Proportionate
Interest (1)
Capital
Expenditures
Adjustments for
Proportionate
Interest
Proportionate
Interest (1)
Revenue sustaining
Revenue enhancing
Expenditures recoverable from tenants
Development expenditures
$
24,340 $
17 $
24,357 $
20,694 $
136 $
30,686
9,966
78,031
380
—
5,407
31,066
9,966
83,438
28,527
10,002
65,785
43
—
6,533
20,830
28,570
10,002
72,318
Sub-total
Residential Inventory
Total
$
$
$
143,023 $
5,804 $
148,827 $
125,008 $
6,712 $
131,720
34,242 $
11,854 $
46,096 $
26,289 $
3,914 $
30,203
177,265 $
17,658 $
194,923 $
151,297 $
10,626 $
161,923
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Capital expenditures for the year ended December 31, 2023 were $194.9 million, which was $33.0 million higher than the
prior year, in large part due to increased development activities related to the Trust's condo development projects
primarily in Toronto.
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, 2023 and December 31, 2022:
As at and for the three and twelve months ended (millions of dollars)
December 31, 2023
Property Type
Same Property - stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Properties under construction (3)
Acquisitions
Density and Development Land (4) (5)
Assets classified as held for sale
Dispositions
N/A
Total investment properties
NOI related to other investments
Total NOI
Valuation Method
DCF (2)
DCF (2)
Adjustments for
Proportionate
Interest
Fair Value
Proportionate
Interest (1)
Net Operating
Income (1)
$
$
7,146 $
150 $
7,296 $ 99 $ 390
141
—
141
3
8
7,287 $
150 $
7,437 $ 102 $ 398
DCF (2), Cost (2)
DCF (2), Cost (2)
DCF (2), Cost (2)
Cost (2), comparable land sales
DCF (2), comparable land sales
343
87
143
211
168
—
—
1
—
167
59
—
343
5
20
88
—
—
143
378
227
—
1
1
1
1
4
2
4
2
$
8,239 $
377 $
8,616 $ 111 $ 430
(1)
2
$ 110 $ 432
(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 $36 million ($36 million at First Capital's share) of properties under construction is included in assets classified as held for sale.
(4) Approximately $30 million ($90 million at First Capital's share) of density and development land is included in assets classified as held for sale.
(5) Approximately $47 million ($47 million at First Capital's share) of density and development land is included in acquisitions.
15
FIRST CAPITAL REIT ANNUAL REPORT 2023
As at and for the three and twelve months ended (millions of dollars)
December 31, 2022
Property Type (1)
Same Property - stable
Same Property with redevelopment
Total Same Property
Major redevelopment
Properties under construction
Acquisitions
Density and Development Land (4)(5)
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)
Cost (3), comparable land sales
DCF (3), comparable land sales
N/A
$
Adjustments for
Proportionate
Interest
Fair Value
7,557 $
139
7,696 $
280
89
64
203
127
169
8,628 $
147 $
—
147 $
—
(1)
—
160
18
—
324 $
Proportionate
Interest (2)
Net Operating
Income (2)
7,704 $ 102 $ 386
2
139
280
8
7,843 $ 104 $ 394
15
3
88 — —
2
1
64
3
1
363
1
1
145
169
3
9
8,952 $ 111 $ 426
4
$ 112 $ 430
1
(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 $13 million ($33 million at First Capital's share) of density and development land is included in assets classified as held for sale.
(5) Approximately $33 million ($33 million at First Capital's share) of density and development land is included in acquisitions.
(6) Includes properties that were disposed of in 2023.
The majority of the Trust's portfolio is valued under the Income Approach using the discounted cash flow ("DCF") method.
As at December 31, 2023, the weighted average valuation yields (stabilized overall capitalization, terminal capitalization and
discount rates) used in valuing those investment properties under the Income Approach increased from December 31,
2022.
Throughout 2023, as part of its normal course internal valuations, the Trust made revisions to capitalization and discount
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 $423.6 million ($376.4 million at FCR's share) for the year ended
December 31, 2023.
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, 2023 and December 31, 2022:
As at December 31, 2023
Area
Greater Toronto
Greater Montreal
Greater Calgary
Greater Vancouver
Greater Edmonton
Greater Ottawa
KW/Guelph (1)
Other
Weighted Average
(1) Includes Kitchener, Waterloo, and Guelph Area.
Stabilized Capitalization Rate
Weighted
Average
Median
Range
5.1%
6.0%
5.9%
4.7%
6.5%
5.8%
5.6%
5.9%
5.5%
5.0%
6.0%
6.0%
4.5%
6.0%
5.9%
5.5%
5.9%
5.5%
3.8%-7.3%
5.3%-7.3%
5.5%-6.8%
3.5%-5.3%
5.5%-7.5%
5.3%-6.3%
5.3%-6.0%
5.3%-6.8%
3.5%-7.5%
FIRST CAPITAL REIT ANNUAL REPORT 2023
16
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
As at December 31, 2022
Area
Greater Toronto
Greater Montreal
Greater Calgary
Greater Vancouver
Greater Edmonton
Greater Ottawa
KW/Guelph (1)
Other
Weighted Average
(1) Includes Kitchener, Waterloo, and Guelph Area.
Property Development Activities
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%
4.8%
5.9%
5.5%
4.3%
6.0%
5.9%
5.5%
5.8%
5.3%
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%
As at December 31, 2023, the Trust's share of properties under construction, residential inventory and density and
development land totaled approximately $851 million. These non-income producing properties represent approximately
10% 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, 2023, the invested cost of
these non-income producing properties was $685 million as compared to a fair value of $851 million. Cumulative gains of
approximately $166 million have been recognized to date and are expected to grow over time as development projects are
entitled, advanced and completed.
Development and redevelopment activities are completed selectively, based on opportunities in First Capital’s properties
or in the markets where FCR operates. First Capital’s development activities include redevelopment of stable properties,
major redevelopment, and ground-up projects. Additionally, properties under development include land with future
development potential. All commercial development activities are strategically managed to reduce risk, and properties
are generally developed after obtaining anchor tenant lease commitments. Individual commercial buildings within a
development are generally constructed only after obtaining lease commitments on a substantial portion of the space.
Development Pipeline
As at December 31, 2023, First Capital's portfolio is comprised of 19.4 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, 2023, Management had identified approximately
23.7 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.
17
FIRST CAPITAL REIT ANNUAL REPORT 2023
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, 2023
Square feet (in thousands)
Commercial
Residential
Total (1) Recognized to date (2)
Value recognized (1)(2)
(in millions)
Properties under construction
Density and development land
Medium term
Long term
Very long term
Residential inventory
Total development pipeline
163
900
100
(100)
900
—
1,063
189
352
352 $
124
11,200
4,500
6,400
22,100
365
22,654
12,100
4,600
6,300
23,000
365
23,717
7,065 $
365 $
7,782 $
515
212
851
(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 7.8 million or 33% of FCR's 23.7 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 $515
million, or $73 per buildable 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, 2023, the
invested cost of the density and development land recognized in the Trust's proportionate balance sheet totaled
$357 million representing acquisition cost and pre-development costs to date.
As at December 31, 2023 (1)
(in millions)
Development land
IPP with density
Value of density and development land
Unzoned
Zoned
Total
Unzoned
Zoned
Total
Unencumbered
Encumbered
$
$
59 $
221
280
114
40
154
434 $
12 $
—
12
69
—
69
81 $
Fair Value
71
221
292
183
40
223
515
(1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The remaining 15.9 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.
FIRST CAPITAL REIT ANNUAL REPORT 2023
18
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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, 2023
(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
14,424
4,697
2,349
979
705
563
% of Total
60.8%
19.8%
9.9%
4.1%
3.0%
2.4%
23,717
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, 2023, entitlement submissions to date total approximately 17.3 million square feet representing 73%
of FCR's 23.7 million incremental density pipeline. To date, 8.5 million square feet has been zoned and the Trust expects
up to 2 million square feet of existing entitlement submissions to be zoned in 2024.
Entitlement Applications (1)
1.
2.
3.
4.
5.
6.
Pre-2019 Entitlement Applications (2)
2019 Entitlement Applications
2020 Entitlement Applications
2021 Entitlement Applications
2022 Entitlement Applications
2023 Entitlement Applications
Total Entitlement Applications Submitted
Dispositions (3)
000's of square feet submitted for (at FCR's share):
Residential Commercial
Total
Existing
Incremental
2,986
8,310
2,903
1,431
1,646
1,563
707
1,020
219
18
35
69
3,693
9,330
3,122
1,449
1,681
1,632
18,839
2,068
20,907
175
317
143
103
78
106
922
3,518
9,013
2,979
1,346
1,603
1,526
Zoned
3,583
5,851
963
494
—
—
19,985
10,891
(2,215)
(570)
(2,785)
(79)
(2,706)
(2,410)
Total Entitlement Applications Submitted - net
16,624
1,498
18,122
843
17,279
8,481
(1) Certain prior period entitlement application data has been updated to reflect subsequent resubmissions.
(2) As at December 31, 2023, all pre-2019 entitlement applications have been approved with final zoning as indicated above.
(3) Includes properties that have been fully or partially disposed of for which entitlements had been previously submitted and zoning received.
19
FIRST CAPITAL REIT ANNUAL REPORT 2023
First Capital has approximately 6.4 million square feet of additional incremental density which includes 5.7 million square
feet primarily related to the properties listed below, where entitlements have yet to be submitted, and 0.7 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.
Appleby Square
5.
Harwood Plaza
6.
1000 Wellington St.
7.
Centre Commercial Domaine
8.
Galeries Normandie
9.
Place Provencher
10.
Le Campanile & Place du Commerce
11.
Place Michelet
12.
Scott 72 Shopping Centre
13.
Semiahmoo (future phases)
14.
15.
Newport Village
16. Mount Royal Village East
17.
Gloucester City Centre (future phases)
Neighbourhood
City, Province
Ownership
Interest %
Danforth Village
Cliffcrest
Lawrence Ave. E. / Morningside Ave.
South Oakville
Appleby
Harwood Ave. S. / Bayly St. W.
Griffintown
Longue-Pointe
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
Burlington, ON
Ajax, ON
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%
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.
2023 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, 2023, First Capital completed the transfer of 142,000 square feet of new retail space
in addition to 38 residential rental units (24,000 square feet at FCR's share) to the income-producing portfolio at a total
value of $88.3 million which includes an allocation for land. The retail space transferred became occupied at an average
rental rate of $18.37 per square foot or approximately $2.6 million in annual NOI.
FIRST CAPITAL REIT ANNUAL REPORT 2023
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, 2023 are as follows:
As at December 31, 2023
Project
Stanley Park Mall, Kitchener, ON
Cedarbrae Mall, Toronto, ON
Ownership
Interest %
100%
100%
Humbertown Shopping Centre - Phase I, Toronto, ON
100%
Edenbridge Condos, Toronto, ON
50%
400 King St. W., Toronto, ON
Yonge & Roselawn, Toronto, ON
138 Yorkville Ave., Toronto, ON
Total at FCR's share (2)
Type
Retail
Retail
Retail
Target
Completion
Date (1)
H1 2024
H1 2024
H2 2024
Mixed-Use (condo)
H1 2026
Mixed-Use (retail)
H1 2026
Mixed-Use (condo)
H2 2026
35%
Mixed-Use (retail)
50% (3) Mixed-Use (rental)
H2 2026
H1 2027
33%
Mixed-Use (condo)
H2 2028
Mixed-Use (retail)
H2 2028
Estimated GLA/GFA upon completion
(thousands of square feet) (2)
Estimated Number
of Residential
Units (2) Residential (2) Commercial (2)
Total (2)
—
—
—
105
—
217
—
276
22
—
620
—
—
—
122
—
151
—
189
92
—
554
62
7
24
—
4
—
12
33
—
21
163
62
7
24
122
4
151
12
222
92
21
717
(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.
(3) As at December 31, 2023, 25% of this project is classified as held for sale.
As at December 31, 2023
Project
Stanley Park Mall, Kitchener, ON
Cedarbrae Mall, Toronto, ON (2)(3)
Humbertown Shopping Centre - Phase I, Toronto, ON
Edenbridge Condos, Toronto, ON (residential)
Edenbridge Condos, Toronto, ON (retail)
400 King St. W., Toronto, ON (residential)
400 King St. W., Toronto, ON (retail)
Yonge & Roselawn, Toronto, ON
138 Yorkville Ave., Toronto, ON (residential)
138 Yorkville Ave., Toronto, ON (retail)
Total at FCR's share (1)
Investment at cost (1)
(in millions)
Value recognized (1)
(in millions)
Incurred
to Date (1)
Estimated to
Complete (1)
Properties
Under
Construction (1)
Income-
Producing
Properties (1)
Residential
Development
Inventory (1)
Total (1)
Total (1)
$
20 $
1 $
21 $
20 $
— $
— $
2
8
54
2
64
6
82
76
14
1
10
63
1
107
7
215
TBD
TBD
3
18
117
3
171
13
297
TBD
TBD
5
8
—
2
—
3
72
—
14
33
—
—
—
—
—
—
—
—
—
—
54
—
82
—
—
76
—
20
38
8
54
2
82
3
72
76
14
$
328 $
405 $
733 $
124 $
33 $
212 $
369
(1) At First Capital's proportionate interest. Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(2) First Capital completed the transfer of 129,000 square feet of new retail space at a total cost of approximately $55 million.
(3) 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 2023
Stanley Park Mall
Stanley Park Mall, Kitchener, is the construction of a new purpose-built 62,000 square foot Canadian Tire store replacing
the former 54,000 square foot Walmart. The pad was successfully turned over to the tenant this Spring. Canadian Tire will
open in their new space during the first half of 2024.
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 includes 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 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 nearing completion, with 129,000 square
feet of completed space already turned over to the new tenants.
Humbertown Shopping Centre - Phase I
Humbertown Shopping Centre, Toronto, is the first phase of a transformational retail redevelopment which will include
the expansion of several key tenants into their desired size and formats within this established neighbourhood shopping
centre. Phase One consists of a full-scale renovation of the south wing of the centre, including removal of the enclosed
interior areas, creation of 9 new exterior-facing retail units, a new pedestrian breezeway and complete façade upgrade.
Two additional phases are contemplated to follow. When the multi-phase redevelopment is completed, Humbertown
Shopping Centre will be modernized and repositioned to serve the ongoing needs of this community.
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 89% of the units have been pre-sold. Structural forming of the 6th floor has begun.
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. Structural forming of the 4th floor 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.
Yonge & Roselawn
Yonge and Roselawn, Toronto, is a two-tower mixed-use development project located just north of the Yonge & Eglinton
intersection. The project includes 552 purpose-built rental residential units between the two buildings, reaching 21 and
27 storeys, respectively. A substantial 2-storey retail podium is included at grade, incorporating two existing heritage
facades along the Yonge streetfront. In addition to the inclusion of a new public park on the site, the project includes an
extensive geothermal heating and cooling system and is targeting Net Zero Carbon and LEED Gold certifications.
Geothermal drilling is complete and shoring work is underway on-site. The Trust’s co-development partner in the project
is Woodbourne.
138 Yorkville
138 Yorkville Avenue, Toronto, is a 31-storey ultra-luxury condominium tower that includes approximately 69 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 shopping centre. Site excavation and shoring is
underway. The Trust’s co-development partner in the project is Greybrook Realty Partners.
FIRST CAPITAL REIT ANNUAL REPORT 2023
22
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Leasing and Occupancy
Total portfolio occupancy increased to 96.2% at December 31, 2023 from 95.8% at December 31, 2022 primarily due to
vacant space taken off-line for redevelopment. Total portfolio occupancy increased 0.3% in the fourth quarter of 2023
from 95.9% at September 30, 2023 primarily due to tenant openings, net of closures.
For the year ended December 31, 2023, the monthly average occupancy for the total portfolio was 95.9% compared to
95.6%, and the Same Property portfolio occupancy was 96.1% 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
Assets classified as held for sale
Total portfolio before acquisitions and dispositions
Acquisitions (1)
Dispositions (2)
Density and Development land
Total (3)
December 31, 2023
December 31, 2022
Total
Occupied
Square Feet
% Occupied
Weighted
Average Rate
per Occupied
Square Foot
Total
Occupied
Square Feet
Weighted
Average Rate
per Occupied
Square Foot
% Occupied
16,898
96.3% $
454
17,352
878
134
18,364
191
—
71
98.7%
96.3%
95.0%
83.6%
96.2%
95.9%
—%
97.1%
18,626
96.2% $
23.53
18.02
23.38
21.65
22.30
23.29
26.93
—
25.86
23.34
16,790
96.1% $
451
17,241
764
140
18,145
180
106
90
98.7%
96.2%
89.6%
89.5%
95.8%
94.8%
98.7%
96.5%
18,521
95.8% $
23.17
17.31
23.02
22.45
21.96
22.98
13.70
31.09
25.73
22.95
(1) Includes current year and prior year acquisitions.
(2) Comparative information presented relates to 2023 dispositions that have been completed and no longer form part of these metrics as at December 31, 2023.
(3) At FCR's ownership interest.
23
FIRST CAPITAL REIT ANNUAL REPORT 2023
During the three months ended December 31, 2023, First Capital completed 672,000 square feet of lease renewals across
the portfolio. First Capital achieved a 13.5% 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 of the expiring term. For
the three months ended December 31, 2023, First Capital achieved a 15.9% 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 1.1% from $23.08 as at September 30,
2023 to $23.34 as at December 31, 2023 primarily due to tenant openings, net of closures, rent escalations and renewals
lifts.
Changes in First Capital’s gross leasable area and occupancy for the total portfolio for the three months ended
December 31, 2023 are set out below:
Three months ended
December 31, 2023
Total Same Property
Major redevelopment, ground-up,
acquisitions, dispositions, density
& development land
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, 2023 (2)
17,266
96.0% $ 23.12
1,333
94.8% $ 22.59
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments – tenants
coming online (3)
Redevelopments – tenant
possession
Demolitions
Reclassification
146
(64)
—
4
—
—
—
40.68
(22.37)
—
52.00
—
—
—
9
(39)
—
12
—
—
(11)
15.53
(17.50)
—
17.87
—
—
—
Total portfolio before Q4
2023 acquisitions
and dispositions
17,352
96.3% $ 23.38
1,304
94.1% $ 22.97
—
—
—
—
—
—
—
—
—
Vacancy
Total Portfolio (1)
Vacant
Square Feet
(thousands)
%
Total
Square Feet
(thousands)
Occupied
Square
Feet %
Weighted
Average Rate
per Occupied
Square Foot
801
4.1%
19,400
95.9% $ 23.08
%
—%
(155)
103
—
4
—
—
(11)
—
—
—
20
—
—
(22)
39.20
(20.53)
—
26.86
—
—
—
—%
742
3.8%
19,398
96.2% $ 23.35
Acquisitions (at date of
acquisition)
Dispositions (at date of
disposition)
—
—%
—
—%
—
—
—
—%
—
—
—%
(30) 100.0%
(32.58)
—
—%
—
—
—
—%
—
(30) 100.0%
(32.58)
December 31, 2023
17,352
96.3% $ 23.38
1,274
93.9% $ 22.74
—
—%
742
3.8%
19,368
96.2% $ 23.34
Renewals
Renewals – expired
663
(663)
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)
9
(9)
$ 20.17
$ (17.77)
$ 2.40
13.5%
$ 27.89
$ (24.76)
$ 3.13
12.6%
672
(672)
$ 20.26
$ (17.85)
$ 2.41
13.5%
15.9%
(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 – 2023
Development and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
FIRST CAPITAL REIT ANNUAL REPORT 2023
24
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
During the year ended December 31, 2023, First Capital completed 2,308,000 square feet of lease renewals across the
portfolio. First Capital achieved a 12.1% 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, 2023, First Capital achieved a 13.9% 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 1.7% from $22.95 as at December 31,
2022 to $23.34 as at December 31, 2023 primarily due to rent escalations and renewal lifts.
Changes in First Capital’s gross leasable area and occupancy for the total portfolio for the year ended December 31, 2023
are set out below:
Year ended December 31,
2023
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, 2022 (2)
17,241
96.2% $ 23.01
1,280
91.5% $ 22.11
Tenant possession
Tenant closures
Tenant closures for
redevelopment
Developments – tenants
coming online (3)
Redevelopments – tenant
possession
Demolitions
Reclassification
Total portfolio before
2023 acquisitions
and dispositions
Acquisitions (at date of
acquisition)
Dispositions (at date of
disposition)
447
(441)
—
7
—
—
97
29.54
(24.49)
—
91
(91)
(31)
15.16
(18.70)
(21.83)
43.29
130
16.97
—
—
—
—
—
(121)
—
—
—
—
—
—
20
—
—
—
(20)
— %
804
4.2%
19,325
95.8% $ 22.95
(538)
532
11
5
—
—
(72)
—
—
—
27.10
(23.49)
(21.83)
142
18.37
—
—
(116)
—
—
—
17,351
96.3% $ 23.38
1,258
93.9% $ 22.66
—
—%
742
3.8%
19,351
96.2% $ 23.33
1
100.0%
9.16
122
99.2%
31.56
—
—%
—
—%
—
(106)
98.7%
(31.97)
—
—%
1
(1)
124
99.2%
31.43
(107)
98.7%
(31.97)
December 31, 2023
17,352
96.3% $ 23.38
1,274
93.9% $ 22.74
—
—%
742
3.8%
19,368
96.2% $ 23.34
Renewals
Renewals – expired
2,230
(2,230)
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)
78
(78)
$ 20.82
$ (18.59)
$ 2.23
12.0%
$ 16.38
$ (14.31)
$ 2.07
14.5%
2,308
(2,308)
$ 20.67
$ (18.44)
$ 2.23
12.1%
13.9%
(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 – 2023
Development and Redevelopment Coming Online and Space Going Offline” section of this MD&A.
25
FIRST CAPITAL REIT ANNUAL REPORT 2023
Top Forty Tenants
As at December 31, 2023, 54.9% of First Capital's annualized minimum rent came from its top 40 tenants
(December 31, 2022 – 55.1%). Of these rents, 73.0% (December 31, 2022 – 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, 2023, excluding contractual renewal options.
Canadian Tire
TD Canada Trust
Dollarama
GoodLife Fitness
Save-On-Foods
RBC Royal Bank
Tenant (1) (2)
Rank
Loblaw Companies Limited ("Loblaw")
1.
2.
Sobeys
3. Metro
4.
5. Walmart
6.
7.
8.
9.
10.
Top 10 Tenants Total
RONA
11.
CIBC
12.
13.
LCBO
14. McKesson
15. Winners
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26. Whole Foods Market
27.
28. McDonald's
Pusateri's
29.
Subway
30.
The Beer Store
31.
32.
The Home Depot
33. Williams-Sonoma
Alcanna Inc.
34.
Pet Valu
35.
Bulk Barn
36.
CLSC (3)
37.
38. Michaels
39.
Goodwill
Indigo
40.
Top 40 Tenants Total
Scotiabank
Longo's
Restaurant Brands International
BMO
London Drugs
Recipe Unlimited
Petsmart
Altea Active
Staples
Toys "R" Us
Starbucks
Number
of Stores
94
50
35
19
10
43
51
26
8
35
371
4
33
22
24
13
27
5
53
25
7
28
7
1
7
4
2
32
20
1
59
10
2
2
14
19
13
1
3
5
3
817
Square Feet
(thousands)
1,917
1,389
885
639
1,018
194
455
479
293
186
7,455
361
166
192
175
306
124
196
118
102
174
106
118
31
140
141
90
45
72
35
58
59
153
38
43
51
57
73
54
57
54
10,844
Percent of Total
Gross Leasable
Area
10.3%
7.5%
4.8%
3.4%
5.5%
1.0%
2.4%
2.6%
1.6%
1.0%
40.1%
1.9%
0.9%
1.0%
0.9%
1.6%
0.7%
1.1%
0.6%
0.5%
0.9%
0.6%
0.6%
0.2%
0.8%
0.8%
0.5%
0.2%
0.4%
0.2%
0.3%
0.3%
0.8%
0.2%
0.2%
0.3%
0.3%
0.4%
0.3%
0.3%
0.3%
58.2%
Percent of Total
Annualized
Minimum Rent
10.5%
5.5%
3.2%
2.9%
2.1%
2.0%
1.9%
1.8%
1.7%
1.6%
33.2%
1.4%
1.4%
1.3%
1.3%
1.3%
1.1%
1.1%
1.1%
1.0%
0.9%
0.8%
0.7%
0.7%
0.7%
0.6%
0.6%
0.6%
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%
54.9%
DBRS Credit
Rating
BBB (high)
BBB
BBB (high)
BBB
AA
AA (high)
BBB
S&P Credit
Rating
BBB
BBB-
BBB
BBB
AA
AA-
BBB
Moody’s
Credit Rating
Aa2
Aa1
Baa2
B2
AA (high)
AA-
Aa1
AA
AA (low)
AA
AA
A+
A+
BBB+
A
A+
BB
A+
B+
B-
AA-
BBB+
BBB+
AA (low)
A
A+
A
Aa2
Aa3
Baa1
A2
Aa2
Ba3
Aa2
B1
B3
A1
Baa1
Baa1
Aa3
A2
AA (low)
AA-
CCC+
Aa2
B3
(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) Centre local de services communautaires.
FIRST CAPITAL REIT ANNUAL REPORT 2023
26
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Lease Maturity Profile
First Capital’s lease maturity profile for its portfolio as at December 31, 2023, excluding any contractual renewal options,
is as follows:
Maturity Date
Month-to-month tenants (1)
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Thereafter
Total or Weighted Average
Number of
Locations
140
489
598
524
578
578
330
155
147
146
141
70
60
3,956
Occupied Square
Feet (thousands)
236
1,604
2,484
1,885
2,676
3,067
1,819
811
845
879
668
441
1,211
18,626
Percent of Total
Square Feet
1.2 %
8.3 %
12.8 %
9.7 %
13.8 %
15.8 %
9.4 %
4.2 %
4.4 %
4.5 %
3.5 %
2.3 %
6.3 %
96.2 %
$
Annualized
Minimum Rent at
Expiration
(thousands)
4,753
40,131
59,791
50,058
67,686
72,821
40,585
21,793
22,663
22,249
18,681
13,921
38,025
473,157
$
Percent of Total
Annualized
Minimum Rent
1.0 %
8.5 %
12.6 %
10.6 %
14.3 %
15.4 %
8.6 %
4.6 %
4.8 %
4.7 %
4.0 %
2.9 %
8.0 %
100.0 %
Average Annual
Minimum Rent
per Square Foot
at Expiration
20.15
25.02
24.07
26.56
25.29
23.74
22.32
26.85
26.83
25.30
27.98
31.57
31.40
25.40
$
$
(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 5.0 years as at December 31, 2023, excluding contractual
renewal options, but including month-to-month and other short-term leases.
Investment in Joint Ventures
As at December 31, 2023, First Capital had interests in eight joint ventures that it accounts for using the equity method.
First Capital's joint ventures are as follows:
Name of Entity
Name of Property/Business Activity
Location
December 31, 2023
December 31, 2022
Effective Ownership
Aukland and Main Developments LP
Station Place
College Square General Partnership
College Square
Toronto, ON
Ottawa, ON
Edenbridge Kingsway (Humbertown)
Humbertown Condos (Phase 1)
Toronto, ON
Fashion Media Group GP Ltd.
Toronto Fashion Week events
FC Urban Properties, LP
199 Avenue Rd.
Green Capital Limited Partnership
Royal Orchard
Toronto, ON
Toronto, ON
Markham, ON
Lakeshore Development LP
Hazelton Food Services Partnership (1) 116 Yorkville Ave. (ONE restaurant)
2150 Lake Shore Blvd. W.
Toronto, ON
Toronto, ON
Stackt Properties LP
Shipping Container marketplace
Toronto, ON
35.4%
50.0%
50.0%
78.0%
20.0%
50.0%
50.0%
—%
94.0%
35.4%
50.0%
50.0%
78.0%
20.0%
50.0%
50.0%
50.0%
94.0%
(1) During the second quarter of 2023, the Trust disposed of its 50% interest of the partnership units in the ONE Restaurant located in the Hazelton Hotel.
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 2023
The following table reconciles the changes in First Capital's interests in its equity accounted joint ventures for the years
ended December 31, 2023 and 2022:
Balance at beginning of year
Contributions to equity accounted joint ventures
Distributions from equity accounted joint ventures
Disposition of equity accounted joint venture
Share of profit (loss) from equity accounted joint ventures
December 31, 2023
December 31, 2022
$
357,122 $
349,488
6,554
(4,599)
(3,074)
48,501
12,491
(4,658)
—
(199)
Balance at end of year
$
404,504 $
357,122
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) during the first quarter of 2022.
On June 9, 2023, the Trust sold its 50% interest of the partnership units in the ONE Restaurant for $5.0 million. The sale was
subject to working capital and closing adjustments of $0.9 million with the Trust receiving net proceeds of $4.1 million. The
total gain on investment of $1.0 million was recognized in other gains (losses) and (expenses) during the second quarter of
2023.
Hotel Property
First Capital owned 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,
2023 and 2022:
Balance at beginning of year
Amortization
Additions
Revaluation of hotel property (1)
Disposition
Reclassification to assets classified as held for sale
Balance at end of year
December 31, 2023 December 31, 2022
$
90,600
$
85,400
(821)
906
14,315
(105,000)
—
—
—
$
(1,910)
202
6,908
—
90,600
(45,300)
$
45,300
(1) The revaluation gain of $14.3 million was recognized primarily through other comprehensive income (loss) of $10.7 million in accordance with the revaluation model
accounting for the hotel. The remaining $3.6 million revaluation gain was recognized in the consolidated statements of income (loss) to recover cumulative losses historically
recorded to the consolidated statements of income (loss).
On June 9, 2023, First Capital sold it's 100% interest in the hotel property. The total sale price before closing costs was
$105.0 million. First Capital recognized a cumulative gain on the sale of the hotel property of $8.9 million that was
recognized in retained earnings in accordance with the Trust's accounting policy for the hotel. The Trust also incurred
closing costs of $1.2 million, which were expensed in 'Other gains (losses) and (expenses)' in the consolidated statements of
income (loss) for the year ended December 31, 2023.
FIRST CAPITAL REIT ANNUAL REPORT 2023
28
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
The following table summarizes the invested cost of the assets sold and net gain recognized in retained earnings as at the
disposition date:
Sale price
Closing adjustments (1)
Sale price, net
Hotel Property, invested cost
Working capital, net (1)
Net gain on disposal of hotel property (2)
Sale price, net
Property selling costs
Net proceeds received
$
$
$
$
$
105,000
(1,023)
103,977
(94,331)
(741)
8,905
103,977
(1,202)
102,775
(1) Excludes cash.
(2)
In accordance with the revaluation model accounting for the hotel property, the gain of $8.9 million was transferred directly to retained earnings upon sale.
Loans, Mortgages and Other Assets
As at
Non-current
December 31, 2023
December 31, 2022
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
57,509
11,393
41,944
110,846
—
73,718
2,801
76,519
$
136,352
9,595
22,703
168,650
1,506
38,641
3,334
43,481
$
187,365
$
212,131
(a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning
investment properties. As at December 31, 2023, these receivables bear interest at weighted average effective
interest rates of 8.6% (December 31, 2022 – 6.9%) and mature between 2024 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 was repaid on January 16, 2023. The loan was not subject to interest
until December 31, 2022 and thereafter was subject to 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 was accreted into interest income over the interest free period of the loan.
(c) The Trust has 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 $38.9 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.
29
FIRST CAPITAL REIT ANNUAL REPORT 2023
(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
2023
2022
% change
2023
2022
$ 107,872
$ 108,172
27,867
29,342
525
670
13
26,700
28,871
3,586
928
(748)
(333)
(1,035)
$ 429,050
$ 430,429
110,891
106,162
117,634
117,061
878
3,079
(414)
1,050
4,113
2,633
(567)
376
5,228
9,626
25,813
32,889
(2.8%) 171,184
176,100
(0.7%) 687,981
693,096
30,736
32,882
(1,256)
66
62,428
29,877
32,953
(316)
2,427
64,941
123,606
118,296
133,208
132,422
(1,408)
7,318
(361)
17,240
262,724
267,597
(2.2%) $ 108,756
$ 111,159
(0.1%) $ 425,257
$ 425,499
63.5%
63.1%
61.8%
61.4%
(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, 2023, bad debt expense
(recovery) totaled ($0.4) million and ($1.6) million, respectively (three months and year ended December 31, 2022 - ($2.1) million and ($0.7) million, respectively).
(4) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
For the three months and year ended December 31, 2023, total NOI decreased $2.4 million and $0.2 million, respectively,
compared to the same prior year periods. The decrease for the three months and year ended December 31, 2023 related
primarily to significantly lower contributions from lease termination fees and lower bad debt recoveries in the fourth
quarter of 2023 relative to the fourth quarter of 2022. Excluding bad debt expense (recovery) and lease termination fees,
total NOI increased $2.4 million and $2.1 million, respectively, compared to the same prior year periods.
For the three months and year ended December 31, 2023, the NOI margin increased 0.4% to 63.5% and 61.8%,
respectively, compared to the same prior year periods primarily due to the disposition of the Hazelton Hotel and the ONE
Restaurant which operated at lower margins and the positive impact of portfolio leasing activity.
For the three months and year ended December 31, 2023, property operating costs include $5.9 million and
$24.5 million, respectively, (three months and year ended December 31, 2022 – $5.7 million and $23.4 million,
respectively) related to employee compensation.
FIRST CAPITAL REIT ANNUAL REPORT 2023
30
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Same Property NOI Growth
First Capital’s net operating income for its portfolio by property category is presented below:
Property rental revenue
Base rent (1)
Operating cost recoveries
Realty tax recoveries
Lease termination fees
Percentage rent
Prior year operating cost and tax recovery
adjustments
Temporary tenants, storage, parking and other (2)
Total Same Property rental revenue
Property operating costs
Recoverable operating expenses
Recoverable realty tax expense
Prior year realty tax expense
Other operating costs and adjustments (3)
Total Same Property operating costs
Total Same Property NOI (4)
Major redevelopment
Acquisitions – 2023
Acquisitions – 2022
Assets classified as held for sale
Dispositions – 2023
Dispositions – 2022
Straight-line rent adjustment
Development land
NOI at First Capital's proportionate interest (4)
NOI related to equity accounted joint ventures & NCI
NOI per consolidated statements of income (loss)
NOI margin
Three months ended December 31
Year ended December 31
% change
2023
2022
% change
2023
2022
$ 101,973
25,777
27,592
525
638
$ 100,476
25,042
27,380
3,586
798
$ 405,842
103,083
110,799
823
2,406
$ 397,384
98,522
109,781
4,113
2,218
(25)
(900)
1,090
329
4,716
161,196
4,568
160,950
18,382
642,425
17,232
629,579
28,376
30,709
(510)
497
59,072
(1.8%) $ 102,124
4,814
887
330
974
128
667
28
(168)
(2.1%) $ 109,784
(1,028)
$ 108,756
27,600
30,783
(18)
(1,409)
56,956
$ 103,994
3,726
305
264
941
2,523
1,100
(732)
5
$ 112,126
(967)
$ 111,159
113,733
124,009
(507)
5,189
242,424
1.3% $ 400,001
18,096
2,990
1,343
3,804
3,161
892
(366)
1,815
0.3% $ 431,736
(6,479)
$ 425,257
108,296
122,686
(43)
3,851
234,790
$ 394,789
14,556
1,282
499
3,353
8,327
6,611
(520)
1,446
$ 430,343
(4,844)
$ 425,499
63.5%
63.1%
61.8%
61.4%
(1)
(2)
(3)
Includes residential revenue.
Includes hotel property revenue.
Includes residential operating costs, hotel property operating costs and bad debt expense.
(4) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
The components of Same Property ("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
2022 (1)
8.5%
3.5%
8.3%
2023
(2.4%)
34.6%
(1.8%)
Year ended December 31
2022 (1)
2023
5.2%
1.2%
3.1%
6.9%
5.1%
1.3%
For the three months ended December 31, 2023, SP NOI decreased by $1.9 million, or 1.8%, over the prior year period,
while SP NOI growth excluding bad debt expense (recovery) and lease termination fees increased 3.3%. The decline in
31
FIRST CAPITAL REIT ANNUAL REPORT 2023
total SP NOI related primarily to significantly lower contributions from lease termination fees and lower bad debt
recoveries in the fourth quarter of 2023 relative to the fourth quarter of 2022. SP NOI growth excluding bad debt expense
(recovery) and lease termination fees benefited from higher current and prior year operating cost and realty tax
recoveries and the positive impact of portfolio leasing activity, offset partially by ongoing vacancy related to the former
Nordstrom Rack space at One Bloor East, which adversely impacted growth in the fourth quarter by 140 basis points.
For the year ended December 31, 2023, SP NOI increased by $5.2 million, or 1.3% over prior year, driven primarily by
higher base rent, partially offset by lower lease termination fees. Excluding bad debt expense (recovery) and lease
termination fees, SP NOI growth increased 2.5%. Vacancy related to the former Nordstrom Rack space at One Bloor East
impacted 2023 annual SP NOI growth by approximately 70 basis points.
Interest and Other Income
Interest, dividend and distribution income from marketable
securities and other investments
Interest income from loans and mortgages receivable
classified as FVTPL
Interest income from loans and mortgages receivable at
amortized cost
Fees and other income
Total
Three months ended December 31
Year ended December 31
2023
2022
2023
$
2,509
$
207
$
5,491
$
—
2,744
1,165
19
3,824
1,425
79
10,543
8,762
$
6,418
$
5,475
$
24,875
$
2022
565
76
13,889
5,340
19,870
For the three months and year ended December 31, 2023, interest and other income increased $0.9 million and $5.0
million, respectively, compared to the same prior year periods primarily due to higher bank interest income earned as a
result of interest rate increases and higher cash balances outstanding year-over-year, and higher distribution income
from other investments, partially offset by lower interest income as a result of lower loans and mortgage receivable
balances outstanding year-over-year. Additionally, other income of $3.8 million was recognized in the third quarter of
2023 as part of a legal settlement.
Interest Expense
First Capital’s interest expense by type is as follows:
Three months ended December 31
Year ended December 31
Mortgages
Credit facilities
Senior unsecured debentures
Distributions on Exchangeable Units (1)
Interest capitalized
Interest expense
2023
2022
2023
$
14,094
$
11,817
$
55,613
$
13,263
16,847
9
(5,214)
11,073
20,785
13
(5,055)
45,988
72,988
48
(20,541)
(16,641)
$
38,999
$
38,633
$
154,096
$
150,042
2022
46,557
34,638
85,446
42
(1) The distributions declared on the Exchangeable Units are accounted for as interest expense.
For the three months and year ended December 31, 2023, interest expense increased $0.4 million and $4.1 million,
respectively, compared to the same prior year periods primarily due to new mortgage borrowings, higher outstanding
credit facilities (term loans), and higher interest rates year-over-year, partially offset by the repayment of senior
unsecured debentures (Series O, Series P & Series Q).
During the years ended December 31, 2023 and 2022, approximately 11.8% or $20.5 million, and 10.0% or $16.6 million,
respectively, of interest expense was capitalized to real estate investments under active development or redevelopment
as well as for land or properties held for development.
FIRST CAPITAL REIT ANNUAL REPORT 2023
32
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Corporate Expenses
First Capital's corporate expenses are as follows:
Salaries, wages and benefits
Unit-based compensation
Other corporate costs
Total corporate expenses
Amounts capitalized to investment properties under
development
Corporate expenses
$
Three months ended December 31
2022
6,782
2,063
4,774
13,619
2023
7,154
2,416
3,202
12,772
$
$
$
Year ended December 31
2022
2023
29,542
32,060
7,393
9,363
15,496
20,310
52,431
61,733
(1,818)
(1,787)
(7,831)
(7,196)
$
10,954
$
11,832
$
53,902
$
45,235
For the three months ended December 31, 2023, gross corporate expenses, before capitalization, decreased by $0.8
million, over the same prior year period. The decrease in corporate expenses is primarily due to lower legal and
advisory costs related to the Unitholder activism over prior year, partially offset by higher compensation expense.
For the year ended December 31, 2023, gross corporate expenses, before capitalization, increased by $9.3 million, over
the same prior year period. The increase in corporate expenses is primarily due to higher compensation expense as a
result of annual merit increases, higher employee vacancy in 2022 as well as approximately $5 million in higher legal,
advisory and settlement costs related to the Unitholder activism year-over-year.
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, 2023 and 2022, approximately $7.8 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
2023
Unrealized gain (loss) on marketable securities
Net gain (loss) on early settlement of debt
Pre-selling costs of residential inventory
Investment property selling costs
Gain (loss) on foreign currency translation
Gain (loss) on mark-to-market of derivatives (1)
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 (2)
Total at First Capital's proportionate interest (3)
Consolidated
Statements of
Income (Loss)
$
$
$
(275) $
—
(9)
(663)
10,919
(20,270)
(10,298) $
3
(23)
(10,318) $
Included in
FFO
(275) $
—
(9)
—
10,919
(20,270)
(9,635) $
3
(24)
(9,656) $
Consolidated
Statements of
Income (Loss)
2022
Included in
FFO
(64)
12,845
(8)
—
7,067
(7,071)
12,769
2
(38)
12,733
(64) $
12,845
(8)
(75)
7,067
(7,071)
12,694 $
2
(38)
12,658 $
(1) The Trust enters into cross-currency swap derivatives to manage interest rate risk and foreign currency risk on its US denominated variable rate debt instruments.
(2) Other gains (losses) and (expenses) under equity accounted joint ventures, included in FFO, is comprised of pre-selling costs of residential inventory of $24.0 thousand
(December 31, 2022 - $38.0 thousand).
(3) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
33
FIRST CAPITAL REIT ANNUAL REPORT 2023
Year ended December 31
2023
2022
Consolidated
Statements of
Income (Loss)
Included in
FFO
Consolidated
Statements of
Income (Loss)
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)
Transaction costs
Gain on Investment (2)
Gain (loss) on loan receivable modification
Pre-selling costs of residential inventory
Investment property selling costs
Gain (loss) on foreign currency translation
Gain (loss) on mark-to-market of derivatives (3)
(533)
(533)
(15,167)
(15,167)
—
—
—
—
1,007
1,007
—
(36)
(3,336)
—
(36)
—
12,845
12,845
(572)
—
(566)
(31)
(4,440)
—
—
(566)
(31)
—
8,659
8,659
4,251
4,251
(18,008)
(18,008)
(4,228)
(4,228)
Total per consolidated statements of income (loss)
$
(12,247) $
(8,911) $
(2,317) $
2,695
Other gains (losses) and (expenses) applicable to NCI
Other gains (losses) and (expenses) under equity accounted joint ventures (4)
Total at First Capital's proportionate interest (5)
11
11
9
9
(410)
(409)
(282)
(282)
$
(12,646) $
(9,309) $
(2,590) $
2,422
(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 of 2022, 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) On June 9, 2023, the Trust sold its 50% interest of the partnership units in the ONE Restaurant.
(3) The Trust enters into cross-currency swap derivatives to manage interest rate risk and foreign currency risk on its US denominated variable rate debt instruments.
(4) Other gains (losses) and (expenses) under equity accounted joint ventures, included in FFO, is comprised of pre-selling costs of residential inventory of $0.4 million
(December 31, 2022 - $0.3 million).
(5) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
For the three months ended December 31, 2023, First Capital recognized $10.3 million in other losses in its consolidated
statements of income (loss) compared to $12.7 million in other gains for the same prior year period. The $23.0 million net
change over prior year is primarily due to the non-recurring $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, $13.2 million increase in unrealized losses on
the mark to market of derivatives, partially offset by a $3.9 million gain on foreign currency translation.
For the year ended December 31, 2023, First Capital recognized $12.2 million in other losses in its consolidated statements
of income (loss) compared to $2.3 million in other losses for the prior year. The $9.9 million net change over prior year is
primarily due to the non-recurring $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, a $13.8 million increase in unrealized losses on the mark to market of
derivatives, partially offset by a $9.0 million lower net loss related to marketable securities and a $4.4 million increase in
gains on foreign currency translation. Additionally, the Trust incurred $1.1 million of non-recurring losses and expenses in
2022, and a $1.0 million gain on the sale of ONE Restaurant recognized in the second quarter of 2023.
Income Taxes
For the three months and years ended December 31, 2023 and 2022, deferred income tax expense (recovery) totaled
$46.3 million and ($4.8) million, respectively, compared to $5.8 million and $7.2 million, respectively, over the same
prior year periods. The decrease of $12.0 million for the year ended December 31, 2023, in deferred income tax
expense was primarily due to a decrease in taxable temporary differences applicable to the Trust's corporate
subsidiaries.
FIRST CAPITAL REIT ANNUAL REPORT 2023
34
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Net Income (Loss) Attributable to Unitholders
For the three months ended December 31, 2023, net income (loss) attributable to Unitholders was $173.8 million or
$0.81 per diluted unit compared to $42.4 million or $0.20 per diluted unit for the same prior year period. The $131.4
million increase in net income over prior year was primarily due to an increase in the fair value of investment
properties of $167.6 million recognized in the fourth quarter of 2023 versus a $31.2 million fair value decrease in the
fourth quarter of 2022, partially offset by a $40.5 million increase in deferred income tax expense and a $23.0 million
decrease in other gains (losses) and (expenses) on a proportionate basis.
For the year ended December 31, 2023, net income (loss) attributable to Unitholders was ($134.1) million or ($0.63)
per diluted unit compared to ($160.0) million or ($0.73) per diluted unit for the prior year. The $25.9 million decrease
in net loss was primarily due to lower fair value decreases on investment property of $34.1 million year over year
partially offset by higher corporate expenses of $8.7 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, 2023 December 31, 2022
$
—
$
1,594
1,432,611
1,151,226
1,600,000
1,235,767
1,098,235
1,900,000
$ 4,183,837
$ 4,235,596
(92,499)
(39,827)
$ 4,091,338
$ 4,195,769
—
1,009
3,254,907
3,589,229
$ 7,346,245
$ 7,786,007
212,184
213,518
$
15.34
$
16.81
(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.
35
FIRST CAPITAL REIT ANNUAL REPORT 2023
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure that is calculated as net income (loss), adding back income tax expense, interest
expense and amortization and excluding the increase or decrease in the fair value of investment properties, fair value
gains or losses on Exchangeable Units, fair value gains or losses on unit-based compensation and other non-cash or non-
recurring items on a proportionate basis. First Capital also adjusts for incremental leasing costs, which is a recognized
adjustment to FFO, in accordance with the recommendations of REALPAC.
The following table reconciles First Capital's net income (loss) to Adjusted EBITDA for the three months and years ended
December 31, 2023 and 2022:
Three months ended December 31
Net income (loss) attributable to Unitholders
Add (deduct) (1):
Deferred income tax expense (recovery)
Interest Expense
Amortization expense
2023
$
173,801
$
46,328
40,005
660
(Increase) decrease in value of investment properties
(167,606)
(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
—
123
1,920
1,800
6
0
2022
2
42,372
5,849
39,637
2,100
31,184
(6,908)
102
4,386
1,764
122
Other non-cash and/or non-recurring items
10,318
(12,658)
Year ended December 31
2023
2022
$
(134,056)
$
(159,997)
(4,779)
158,195
5,754
376,403
(3,646)
(88)
(6,237)
7,366
24
12,646
7,287
152,930
8,364
410,474
(6,908)
(321)
(5,250)
6,626
(2,770)
2,590
Adjusted EBITDA (1)
$
107,355
$
107,950
$
411,582
$
413,025
(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
December 31, 2023 December 31, 2022
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)
3.9%
3.3
45.0%
9.9
3.8%
3.4
44.0%
10.2
$ 6,009,993
$ 6,569,548
2.3
2.3
2.2
2.4
(1) Calculated with joint ventures proportionately consolidated in accordance with FCR's debt covenants. Total assets excludes cash balances. Refer to the "Non-IFRS Financial
Measures" section of this MD&A.
The Net debt to Adjusted EBITDA ratio decreased by 0.3 to 9.9, as of December 31, 2023, primarily due to a $104.4 million
decrease in net debt.
Measures used in these ratios are defined below:
• Debt consists of principal amounts outstanding on credit facilities and mortgages, and the par value of senior
unsecured debentures;
• Net debt is calculated as Debt, as defined above, reduced by cash balances at the end of the period;
FIRST CAPITAL REIT ANNUAL REPORT 2023
36
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
• Adjusted EBITDA, is calculated as net income (loss), adding back income tax expense; interest expense; and
amortization and excluding the increase or decrease in the value of investment properties, hotel property,
Exchangeable units and unit-based compensation; other gains (losses) and (expenses); and other non-cash or non-
recurring items on a proportionate basis. The Trust also adjusts for incremental leasing costs, which is a recognized
adjustment to Funds from Operations, in accordance with the recommendations of the REALPAC;
• Unencumbered assets include the value of assets that have not been pledged as security under any credit agreement
or mortgage. The unencumbered asset value ratio is calculated as unencumbered assets divided by the principal
amount of the unsecured debt, which consists of the bank indebtedness, unsecured bank term loans, unsecured credit
facilities and senior unsecured debentures.
Credit Ratings
On June 23, 2023, DBRS confirmed FCR's Issuer Rating and Senior Unsecured Debentures rating at BBB with a stable
trend.
On November 9, 2023, S&P withdrew its BBB- issuer credit rating on First Capital and its BBB- issue-level ratings on its
unsecured debentures at the issuer's request. At the time of the withdrawal, S&P's outlook was stable.
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.
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, 2023 is summarized in the table below:
As at December 31, 2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Mortgages (1)
Credit
Facilities/Bank
Indebtedness (2)
Senior
Unsecured
Debentures
Total
$
144,019 $
28,051 $
300,000
$
472,070
100,393
124,220
108,121
171,366
255,876
181,337
60,433
5,369
190,683
466,310
420,602
38,944
—
200,000
—
—
—
—
300,000
300,000
500,000
200,000
—
—
—
—
—
866,703
844,822
647,065
371,366
455,876
181,337
60,433
5,369
190,683
% Due
11.5%
21.2%
20.6%
15.8%
9.1%
11.1%
4.4%
1.5%
0.1%
4.7%
$
1,341,817 $
1,153,907 $
1,600,000
$
4,095,724
100.0%
Add (deduct): unamortized deferred financing
costs, premiums and discounts, net
(3,776)
—
(1,059)
(4,835)
Total
$
1,338,041 $
1,153,907 $
1,598,941
$
4,090,889
(1) Principal amount outstanding for mortgages on a proportionate basis is $1,432,611.
(2) Principal amount outstanding for credit facilities and bank indebtedness on a proportionate basis is $1,151,226 and $Nil, 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.
37
FIRST CAPITAL REIT ANNUAL REPORT 2023
Mortgages
The changes in First Capital’s mortgages during the year ended December 31, 2023 are set out below:
Year ended December 31, 2023
Balance at beginning of year
Mortgage borrowings
Scheduled amortization on mortgages
Amortization of financing costs and net premium
Balance at end of year
Amount
Weighted Average
Effective Interest Rate
$
1,140,490
233,700
(35,739)
(410)
$
1,338,041
3.5%
5.1%
—%
—%
3.8%
As at December 31, 2023, 100% (December 31, 2022 – 100%) of the outstanding mortgages bore interest at fixed interest
rates. The average remaining term on mortgages outstanding was 4.8 years as at December 31, 2023 on $1.3 billion of
mortgages (5.0 years as at December 31, 2022 on $1.1 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, 2023 is summarized
in the table below:
As at December 31, 2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Scheduled
Amortization
Payments on
Maturity
Total
$
35,541
$ 108,478
$ 144,019
33,423
29,860
28,258
25,643
18,996
11,962
5,477
5,369
460
66,970
94,360
79,863
145,723
236,880
169,375
54,956
—
190,223
100,393
124,220
108,121
171,366
255,876
181,337
60,433
5,369
190,683
$
194,989
$ 1,146,828
$ 1,341,817
Weighted
Average
Effective
Interest Rate
3.7 %
3.8 %
3.2 %
3.6 %
3.8 %
3.5 %
3.3 %
3.5 %
N/A
5.1 %
3.8 %
Add: unamortized deferred financing costs and premiums and
discounts, net
Total
(3,776)
$ 1,338,041
FIRST CAPITAL REIT ANNUAL REPORT 2023
38
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
Credit Facilities
First Capital’s credit facilities as at December 31, 2023 are summarized in the table below:
As at December 31, 2023
Unsecured Operating Facilities
Borrowing
Capacity
Amounts
Drawn
Bank
Indebtedness
and Outstanding
Letters of Credit
Available to
be Drawn
Interest Rates
Maturity Date
Revolving unsecured operating
$ 100,000 $
— $
— $ 100,000
facility
Revolving unsecured operating
150,000
facility
Revolving unsecured operating
450,000
facility
—
—
—
150,000
(2,230) 447,770
BA + 1.25% or
Prime + 0.25% or
SOFR + 1.35%
BA + 1.25% or
Prime + 0.25% or
SOFR + 1.35%
BA + 1.45% or
Prime + 0.45% or
SOFR + 1.55%
5.00%
—
— CORRA + 1.80% or
Prime + 0.50%
3,694 CORRA + 1.75% or
Prime + 0.45% or
SOFR + 1.55%
3.39%
—
April 20, 2025
August 31, 2025
June 30, 2028
January 9, 2025
April 15, 2025
November 29, 2025
April 14, 2025
-April 14, 2026
—
4,398
—
3.27%
April 15, 2026
5.985%
October 20, 2026
3.17%
January 31, 2029
2,338
Prime - 0.25%
June 1, 2024
—
—
—
—
—
—
—
—
Fixed rate unsecured term loan (1)(2)
Floating rate unsecured term loan
100,000
(100,000)
100,000
(100,000)
Floating rate unsecured term loan (3)
150,000
(146,306)
Fixed rate unsecured term loans (2)(4)
250,000
(250,000)
Fixed rate unsecured term loan (2)
Fixed rate unsecured term loan (2)(5)(8)
Fixed rate unsecured term loan (2)
100,000
(100,000)
150,000
(145,602)
200,000
(200,000)
Secured Construction Facilities
Secured construction facility
Secured construction facility
19,321
62,665
(16,983)
(45,004)
(537)
17,124
BA + 2.50% or
Prime + 1.00%
BA + 2.30%
October 1, 2025
February 1, 2027
Secured construction facility (6)
171,750
(38,944)
(295) 104,143
Secured Facilities
Secured facility
Secured facility
4,313
(4,313)
6,755
(6,755)
—
—
—
BA + 1.45% or
Prime + 0.45%
— CORRA + 1.75% or
Prime + 0.45%
September 27, 2024
December 19, 2024
Sub-Total
Proportionate Adjustments - Secured Construction Facilities
$ 2,014,804 $ (1,153,907) $
(3,062) $ 829,467
Secured construction facility (7)
71,450
(8,659)
—
62,791
Secured construction facility
applicable to NCI
(50,014)
11,340
86
(30,326)
Total
$ 2,036,240 $ (1,151,226) $
(2,976) $ 861,932
BA + 2.65% or
Prime + 1.00%
November 28, 2025
(1) The Trust has the option to extend the unsecured term loan for an additional two years, to January 9, 2027.
(2) These unsecured term loans are variable rate debt instruments. The Trust has entered into swaps which fix the rate of interest over their respective terms to maturity.
(3) The Trust has drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$146.3 million as at December 31, 2023.
(4) As at December 31, 2023, $75.0 million of the unsecured term loans is due April 14, 2025. The remaining $175.0 million is due April 14, 2026.
(5) The Trust has drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$145.6 million as at December 31, 2023.
(6) The available to be drawn amount is reduced by the Trust's equity injections into the project where it has chosen not to draw on the facility and other adjustments in
accordance with the facility agreement.
(7) This secured construction facility relates to one of the Trust's joint ventures that is equity accounted.
(8) The Trust has the option to extend the unsecured term loan for an additional two years, to October 20, 2028.
39
FIRST CAPITAL REIT ANNUAL REPORT 2023
First Capital has the ability under its unsecured credit facilities to draw funds based on Canadian bank prime rates,
Canadian bankers’ acceptances (“BA rates”) and Canadian Overnight Repo Rate Average (“CORRA rates”) for Canadian
dollar-denominated borrowings, and secured overnight financing rates (“SOFR 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.
Senior Unsecured Debentures
As at December 31, 2023
Interest Rate
Remaining
Term to
Maturity
Principal
Outstanding
Series Maturity Date
Interest Payment Dates
Coupon
Effective
(years)
R
S
T
V
U
A
August 30, 2024
February 28, August 30
July 31, 2025
May 6, 2026
January 22, 2027
July 12, 2027
March 1, 2028
January 31, July 31
May 6, November 6
January 22, July 22
January 12, July 12
March 1, September 1
Weighted Average or Total
4.79%
4.32%
3.60%
3.46%
3.75%
3.45%
3.95%
4.72%
4.24%
3.57%
3.54%
3.82%
3.54%
3.95%
0.7
1.6
2.4
3.1
3.5
4.2
2.4
300,000
300,000
300,000
200,000
300,000
200,000
$ 1,600,000
Interest on the senior unsecured debentures is payable semi-annually and principal is payable on maturity.
On October 30, 2023, upon maturity, First Capital repaid its 3.90% Series Q Senior Unsecured Debentures in the amount of
$300.0 million.
Unitholders' Equity
Unitholders’ equity amounted to $3.9 billion as at December 31, 2023, compared to Unitholders' equity of $4.3 billion as at
December 31, 2022. The decrease is primarily attributed to higher other comprehensive losses, the repurchase of Trust
Units, and higher distributions, partially offset by lower net losses for the year ended December 31, 2023.
As at February 5, 2024, there were 212.2 million Trust Units outstanding.
Normal Course Issuer Bid (“NCIB”)
On May 16, 2023, First Capital received TSX approval for the renewal of its Normal Course Issuer Bid ("NCIB") pursuant to
which it may repurchase and cancel up to 21,148,491 of its outstanding Units until May 17, 2024.
For the year ended December 31, 2023, the Trust acquired and cancelled 1.7 million Units (December 31, 2022 - 6.2 million)
at a weighted average purchase price of $15.19 per unit (December 31, 2022 - $15.14), for a total cost of $25.7 million
(December 31, 2022 - $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 $3.4 million (December 31, 2022 - $12.1 million). On a cumulative basis, as of December 31, 2023, the
Trust has acquired and cancelled 7.9 million Units at a weighted average purchase price of $15.15 per unit, for a total cost
of $120.1 million.
Unit Options
As at December 31, 2023, First Capital had 5.6 million unit options outstanding, with an average exercise price of $19.79,
which, if exercised, would result in First Capital receiving proceeds of $111.3 million.
FIRST CAPITAL REIT ANNUAL REPORT 2023
40
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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, 2023
December 31, 2022
$
$
$
829
87
6,010
$
$
$
846
33
6,570
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, 2023, and availability on existing credit facilities, address
substantially all of the contractual 2024 debt maturities and contractually committed costs to complete current
development projects.
Cash Flows
Cash flow from operating activities represents First Capital's primary source of liquidity for servicing debt and funding
planned revenue sustaining expenditures, corporate expenses and distributions to Unitholders. Interest and other income
and cash on hand are other sources of liquidity.
Three months ended December 31
Year ended December 31
2023
2022
2023
2022
Cash provided by (used in) operating activities
$
90,083
$
76,808
$
227,734
$
251,221
Cash provided by (used in) financing activities
Cash provided by (used in) investing activities
(196,065)
(85)
(208,862)
135,772
Net change in cash and cash equivalents
$
(106,067)
$
3,718
$
(256,700)
83,693
54,727
(387,209)
133,983
$
(2,005)
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
2023
90,083
(45,823)
44,260
$
$
$
$
2022
2023
2022
76,808
$
227,734
$
251,221
(46,120)
(183,561)
(124,191)
30,688
$
44,173
$
127,030
For the three months and years ended December 31, 2023 and 2022, cash provided by operating activities exceeded
distributions declared.
41
FIRST CAPITAL REIT ANNUAL REPORT 2023
Contractual Obligations
An analysis of First Capital’s contractual maturities of its material financial liabilities and other contractual commitments,
as at December 31, 2023 is set out below:
As at December 31, 2023
Payments due by period
2024
2025 to 2026
2027 to 2028
Thereafter
Total
Scheduled mortgage principal amortization
$
35,541 $
63,283 $
53,901 $
42,264 $
194,989
Mortgage principal repayments on maturity
Credit facilities and bank indebtedness
Senior unsecured debentures
Interest obligations (1)
Land leases (expiring between 2027 and 2061)
Contractually committed costs to complete current
development projects (2)
Other committed costs
Total contractual obligations
108,478
28,051
300,000
161,411
679
42,761
161,330
886,912
600,000
211,023
1,284
58,101
33,450
—
225,586
651,434
1,146,828
38,944
200,000
1,153,907
700,000
92,093
1,279
—
—
0
1,600,000
59,894
15,723
—
—
524,421
18,965
100,862
33,450
$
710,371 $ 1,981,933 $ 1,111,803 $
969,315 $ 4,773,422
(1)
(2)
Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2023 (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 $28.6 million of outstanding letters of credit issued by financial institutions to support certain of FCR’s
contractual obligations and $Nil of bank overdrafts.
As of December 31, 2023, contractually committed costs related to the Trust's development projects is $100.9 million
($88.0 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 $168.1 million
(December 31, 2022 – $149.9 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 $28.6 million (December 31, 2022 –
$27.6 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 $0.7 million (December 31, 2022 – $0.9 million) with a total obligation of $19.0 million
(December 31, 2022 – $18.2 million).
FIRST CAPITAL REIT ANNUAL REPORT 2023
42
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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, 2023
December 31, 2022
Consolidated
Balance
Sheet (1)
Adjustments for
Proportionate
Interest
Proportionate
Interest (2)
Consolidated
Balance
Sheet (1)
Adjustments for
Proportionate
Interest
Proportionate
Interest (2)
Investment properties
$
8,070,985
$ 318,570
$ 8,389,555 $
8,485,361
$ 326,152
$ 8,811,513
Residential development inventory
192,125
20,017
212,142
Hotel property
—
—
—
Loans, mortgages and other assets
187,365
(12,107)
175,258
Cash and cash equivalents
Amounts receivable
Other assets
Investment in joint ventures
Assets classified as held for sale
Total assets
LIABILITIES
Mortgages
Credit facilities
Bank indebtedness
Senior unsecured debentures
Exchangeable Units
Deferred tax liabilities
Mortgages classified as held for sale
87,421
20,393
54,382
404,504
168,275
5,078
1,899
1,814
(404,504)
58,602
92,499
22,292
56,196
—
226,877
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
$
9,185,450
$
(10,631)
$ 9,174,819 $
9,581,938
$
(5,592)
$ 9,576,346
$
1,329,043
$
90,682
$ 1,419,725 $
1,127,361
$
91,665
$ 1,219,026
1,153,907
(2,681)
1,151,226
1,104,614
(6,379)
1,098,235
—
1,598,941
—
753,020
8,998
—
—
—
(1,231)
—
—
1,594
1,598,941
1,898,824
—
751,789
8,998
310,763
1,009
769,388
13,129
330,724
—
—
—
(1,230)
—
(33,726)
1,594
1,898,824
1,009
768,158
13,129
296,998
Accounts payable and other liabilities
345,384
(34,621)
Total liabilities
EQUITY
Unitholders' equity
Non-controlling interest
Total equity
5,189,293
52,149
5,241,442
5,246,643
50,330
5,296,973
3,933,377
—
3,933,377
4,279,373
—
4,279,373
62,780
(62,780)
—
55,922
(55,922)
—
3,996,157
(62,780)
3,933,377
4,335,295
(55,922)
4,279,373
Total liabilities and equity
$
9,185,450
$
(10,631)
$ 9,174,819 $
9,581,938
$
(5,592)
$ 9,576,346
(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.
43
FIRST CAPITAL REIT ANNUAL REPORT 2023
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, 2023 and 2022, to its proportionate interest.
Three months ended December 31
2023
2022
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
Consolidated
Statements of
Income (Loss)
Adjustment to
proportionate
interest
Proportionate
interest (1)
Consolidated
Statements of
Income (Loss)
Adjustment to
proportionate
interest
Proportionate
interest (1)
$
171,184 $
3,716 $
174,900 $
176,100 $
5,788 $
181,888
62,428
108,756
2,688
1,028
65,116
64,941
4,821
69,762
109,784
111,159
967
112,126
6,418
245
6,663
5,475
373
5,848
(38,999)
(1,006)
(40,005)
(38,633)
(1,004)
(39,637)
(10,954)
(6)
(587)
62
—
(10,892)
(11,832)
(6)
(122)
44
—
(11,788)
(122)
(73)
(660)
(1,322)
(778)
(2,100)
Share of profit from joint ventures
45,406
(45,406)
—
(387)
Other gains (losses) and (expenses)
(10,298)
(20)
(10,318)
12,694
387
(36)
—
12,658
(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)
(1,920)
(123)
—
—
—
—
(1,920)
(4,386)
—
(4,386)
(123)
(102)
—
6,908
—
—
(102)
6,908
123,384
44,222
167,606
(31,071)
(113)
(31,184)
112,321
221,077
46,328
(1,976)
110,345
(62,778)
(1,127)
(63,905)
(948)
220,129
—
46,328
48,381
5,849
(160)
48,221
—
5,849
Net income (loss)
$
174,749 $
(948) $
173,801 $
42,532 $
(160) $
42,372
Net income (loss) attributable to:
Unitholders
Non-controlling interest
Net income (loss) per unit attributable to
Unitholders:
Basic
Diluted
$
173,801 $
— $
173,801 $
42,372 $
— $
42,372
948
(948)
—
160
(160)
—
$
174,749 $
(948) $
173,801 $
42,532 $
(160) $
42,372
$
$
0.82
0.81
$
$
0.20
0.20
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
FIRST CAPITAL REIT ANNUAL REPORT 2023
44
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
The following table provides a reconciliation of First Capital's consolidated statements of income (loss) for the years ended
December 31, 2023 and 2022, as presented in its audited annual consolidated financial statements, to its proportionate
interest.
Year ended December 31
2023
2022
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
Consolidated
Statements of
Income (Loss)
Adjustment for
proportionate
interest
Proportionate
interest (1)
Consolidated
Statements of
Income (Loss)
Adjustment for
proportionate
interest
Proportionate
interest (1)
$
687,981 $
19,730 $
707,711 $
693,096 $
20,744 $
713,840
262,724
425,257
13,251
6,479
275,975
431,736
267,597
15,900
283,497
425,499
4,844
430,343
24,875
1,275
26,150
19,870
1,161
21,031
(154,096)
(4,099)
(158,195)
(150,042)
(2,888)
(152,930)
(53,902)
(24)
232
—
(53,670)
(45,235)
260
(44,975)
(24)
2,770
—
2,770
Amortization expense
(3,897)
(1,857)
(5,754)
(5,673)
(2,691)
(8,364)
Share of profit from joint ventures
48,501
(48,501)
—
(199)
Other gains (losses) and (expenses)
(12,247)
(399)
(12,646)
(2,317)
199
(273)
—
(2,590)
(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
6,237
88
3,646
—
—
—
6,237
5,250
—
5,250
88
321
3,646
6,908
—
—
321
6,908
(423,598)
47,195
(376,403)
(409,716)
(758)
(410,474)
(564,417)
(6,154)
(570,571)
(578,063)
(4,990)
(583,053)
Income (loss) before income taxes
Deferred income tax expense (recovery)
(139,160)
(4,796)
325
17
(138,835)
(152,564)
(146)
(152,710)
(4,779)
7,197
90
7,287
Net income (loss)
$
(134,364) $
308 $
(134,056) $
(159,761) $
(236) $
(159,997)
Net income (loss) attributable to:
Unitholders
Non-controlling interest
Net income (loss) per unit attributable to
Unitholders:
Basic
Diluted
$
(134,056) $
— $
(134,056) $
(159,997) $
— $
(159,997)
(308)
308
—
236
(236)
—
$
(134,364) $
308 $
(134,056) $
(159,761) $
(236) $
(159,997)
$
$
(0.63)
(0.63)
$
$
(0.74)
(0.73)
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
45
FIRST CAPITAL REIT ANNUAL REPORT 2023
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)
Investment property selling costs (1)
Deferred income taxes (recovery) (1)
Three months ended December 31
Year ended December 31
2023
173,801
$
$
0
2
2022
42,372
2023
(134,056) $
2022
(159,997)
$
(167,606)
—
73
933
31,184
(6,908)
778
817
376,403
(3,646)
1,857
410,474
(6,908)
2,691
3,582
3,010
1,800
—
—
9
123
1,920
662
46,328
58,043
1,764
113
—
13
102
4,386
75
5,849
80,545
7,366
190
—
48
(88)
(6,237)
3,337
(4,779)
243,977
6,626
489
572
42
(321)
(5,250)
4,440
7,287
263,155
$
$
FFO (8)
(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) 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
Year ended December 31
% change
$
(27.9%) $
(27.5%) $
2023
109,784
6,663
(39,063)
(9,092)
(6)
(587)
(9,656)
58,043
0.27
$
$
$
2022
% change
112,126
5,848
(38,807)
(10,024)
(122)
(1,209)
12,733
80,545
0.37
$
(7.3%) $
(5.6%) $
2023
431,736
26,150
(154,565)
(46,304)
(24)
(3,707)
(9,309)
243,977
1.14
$
$
$
2022
430,343
21,031
(149,878)
(38,349)
2,770
(5,184)
2,422
263,155
1.21
(0.6%)
213,855
215,098
(1.8%)
214,268
218,162
(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.
FIRST CAPITAL REIT ANNUAL REPORT 2023
46
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
For the three months and year ended December 31, 2023, FFO decreased $22.5 million and $19.2 million, or $0.10 and
$0.07 per diluted unit, respectively, over the same prior year periods. The decrease for the three months ended
December 31, 2023 was driven by a year-over-year decrease in other gains (losses) and (expenses), totaling $22.4 million
($0.10 per unit) which included a $13.2 million increase in unrealized losses on the mark to market of derivatives in the
fourth quarter of 2023 and the recognition of a net hedging gain of $12.8 million in the fourth quarter of 2022. FFO per
unit excluding other gains (losses) and (expenses) was consistent with the prior year period.
The decrease for the year ended December 31, 2023 was primarily due to a year-over-year decrease in other gains
(losses) and (expenses), totaling $11.7 million ($0.05 per unit), and a year-over-year increase in corporate expenses
totaling $8.0 million ($0.04 per unit), which included approximately $7 million in legal, advisory and settlement costs
related to the Unitholder activism. In addition, unit repurchases through First Capital's NCIB resulted in a lower weighted
average unit count, thus driving an increase of $0.02 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):
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)
Three months ended December 31
Year ended December 31
% change
2023
58,043
$
2022 % change
$
80,545
2023
243,977
$
2022
263,155
$
(8,232)
(4,105)
(1,800)
(28)
43,878
0.21
$
$
(4,414)
(2,645)
(1,764)
732
72,454
0.34
(10.4%) $
(8.8%) $
(24,357)
(9,966)
(7,366)
366
202,654
0.95
$
$
(20,830)
(10,002)
(6,626)
520
226,217
1.04
(39.4%) $
(39.1%) $
(0.6%)
213,855
215,098
(1.8%)
214,268
218,162
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
For the three months and year ended December 31, 2023, AFFO decreased $28.6 million and $23.6 million, or $0.13 and
$0.09 per diluted unit, respectively, primarily due to lower FFO and higher capital expenditures year-over-year.
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
2023
2022
Year ended December 31
2022
2023
$
90,083
$
76,808
$
227,734
$
251,221
(12,488)
512
(8,232)
(4,105)
450
—
126
66,346
(11,619)
601
(4,414)
(2,645)
441
—
92
59,264
35,900
2,506
(24,357)
(9,966)
1,842
—
(296)
233,363
4,867
2,370
(20,830)
(10,002)
1,656
5,591
579
235,452
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.
47
FIRST CAPITAL REIT ANNUAL REPORT 2023
For the three months and year ended December 31, 2023, ACFO totaled $66.3 million and $233.4 million compared to
$59.3 million and $235.5 million for the prior years, respectively. The $2.1 million decrease in ACFO for the year ended
December 31, 2023 was primarily due to a non-recurring $5.6 million realized gain on sale of marketable securities during
the second quarter of 2022, partially offset by changes in working capital year-over-year.
ACFO Payout Ratio
First Capital's ACFO payout ratio for the four quarters ended December 31, 2023 is calculated as follows:
ACFO (1)
Cash distributions paid
ACFO payout ratio (1)
Year ended December 31, 2023
Q4 2023
Q3 2023
Q2 2023
$
233,363
$
66,346 $
55,458 $
72,787 $
183,657
45,819
45,845
45,868
78.7%
(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, 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
$
235,452
$
59,264 $
56,935 $
76,244 $
116,721
46,134
23,169
23,707
49.6%
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
Q1 2023
38,772
46,125
Q1 2022
43,009
23,711
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, 2023, the
ACFO payout was 78.7% (December 31, 2022 - 49.6%).
Net Asset Value
The following table provides FCR's calculation of NAV for the years ended December 31, 2023 and 2022:
As at
Unitholders' equity
Exchangeable Units
Deferred tax liabilities
Net Asset Value (NAV) (1)
Units outstanding (2)
NAV per unit - diluted (3)
December 31, 2023
December 31, 2022
$
$
$
3,933,377 $
—
751,789
4,685,166 $
212,184
21.95 $
4,279,373
1,009
768,158
5,048,540
213,578
23.48
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
(2)
Includes Trust Units and Exchangeable Units.
(3) Adjusted for 1.7 million Deferred Units, Restricted Units and Performance Units and 5.6 million unit options outstanding with an average exercise price of $19.79 (implied
option proceeds of $111.3 million) and the exclusion of the unit-based compensation plan liability.
The decrease in NAV per diluted unit from $23.48 to $21.95 is primarily driven by a decrease in the fair value of
investment property largely due to the increase in capitalization and discount rates to reflect current market conditions
and rising interest rates, and other comprehensive losses, partially offset by retained FFO for the year.
FIRST CAPITAL REIT ANNUAL REPORT 2023
48
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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 (loss), as calculated in accordance with IFRS, as the basis to determine the annual
distribution rate. Net income (loss) 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 doubling 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)
2023
2022
2023
Distributions declared per unit
$
0.216
$
0.216
$
0.864
$
2022
0.576
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
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
FCR (1)
72 $
46 $
Guarantors (2)
Non-Guarantors (3)
Consolidation Adjustments (4)
Total Consolidated
74 $
100 $
103 $
50 $
63 $
61 $
— $
— $
— $
— $
(1) $
— $
(1) $
171 $
— $
109 $
176
111
174 $
42 $
235 $
102 $
2 $
— $
(237) $
(102) $
174 $
42
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
FCR (1)
Guarantors (2)
Non-Guarantors (3)
Consolidation Adjustments (4)
Total Consolidated
288 $
286 $
404 $
411 $
179 $
190 $
248 $
237 $
1 $
1 $
— $
— $
(5) $
(3) $
(4) $
(2) $
688 $
425 $
693
425
Year ended December 31
$
$
$
$
$
$
(134) $
(160) $
364 $
172 $
— $
— $
(364) $
(172) $
(134) $
(160)
49
FIRST CAPITAL REIT ANNUAL REPORT 2023
(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)
619 $
4,162 $
644 $
6,694 $
FCR (1)
700 $
(1,349) $
698 $
3,485 $
Guarantors (2)
Non-Guarantors (3)
(51) $
5,574 $
55 $
(2,198) $
121 $
173 $
1 $
75 $
Guarantors (2)
Non-Guarantors (3)
As at December 31, 2023
Consolidation
Adjustments (4)
Total Consolidated
(122) $
(1,291) $
(2) $
(80) $
567
8,618
698
4,491
As at December 31, 2022
Consolidation
Adjustments (4)
Total Consolidated
(223) $
11,456 $
98 $
969 $
116 $
130 $
— $
50 $
(120) $
(1,128) $
2 $
(55) $
473
9,109
798
4,449
$
$
$
$
$
$
$
$
(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.
QUARTERLY FINANCIAL INFORMATION
(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
FFO (1)
FFO per diluted unit (1)
Weighted average number of
diluted units outstanding
Cash provided by operating
activities
AFFO (1)
2023
2022
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
$ 171,184 $ 168,883 $ 171,904 $ 176,010 $ 176,100 $ 171,914 $ 172,606 $ 172,476
$ 108,756 $ 106,938 $ 106,510 $ 103,053 $ 111,159 $ 107,219 $ 106,141 $ 100,980
$ 173,801 $ (327,546) $
(29,049) $
48,738 $
42,372 $ (204,722) $
(42,102) $
44,455
$
$
$
$
$
$
0.82 $
(1.54) $
(0.14) $
0.23 $
0.20 $
(0.95) $
(0.19) $
0.81 $
(1.53) $
(0.14) $
0.23 $
0.20 $
(0.95) $
(0.19) $
0.20
0.20
58,043 $
68,615 $
63,784 $
53,535 $
80,545 $
66,575 $
61,241 $
54,794
0.27 $
0.32 $
0.30 $
0.25 $
0.37 $
0.31 $
0.28 $
0.25
213,855
213,952
214,056
215,262
215,098
216,008
220,812
220,906
90,083 $
41,910 $
67,022 $
28,719 $
76,808 $
52,810 $
62,305 $
59,298
43,878 $
58,961 $
55,897 $
43,918 $
72,454 $
54,489 $
51,719 $
47,554
(1) Refer to the "Non-IFRS Financial Measures" section of this MD&A.
FIRST CAPITAL REIT ANNUAL REPORT 2023
50
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
2023
2022
(unit counts in thousands)
AFFO per diluted unit (1)
ACFO (1)
Distribution declared per unit
$
$
$
Q4
Q3
Q2
Q1
Q4
Q3
Q2
Q1
0.21 $
0.28 $
0.26 $
0.20 $
0.34 $
0.25 $
0.23 $
0.22
66,346 $
55,458 $
72,787 $
38,772 $
59,264 $
56,935 $
76,244 $
43,009
0.216 $
0.216 $
0.216 $
0.216 $
0.216 $
0.144 $
0.108 $
0.108
Total assets
$ 9,185,450 $ 9,163,855 $ 9,596,650 $ 9,641,604 $ 9,581,938 $ 9,829,570 $ 10,057,358 $ 10,194,026
Total mortgages and credit
facilities
$ 2,491,948 $ 2,353,650 $ 2,349,517 $ 2,343,579 $ 2,245,104 $ 2,225,576 $ 2,212,870 $ 2,280,587
Unitholders' equity
$ 3,933,377 $ 3,820,718 $ 4,194,618 $ 4,268,128 $ 4,279,373 $ 4,291,030 $ 4,542,689 $ 4,665,001
Other
Number of neighbourhoods
142
143
144
145
145
145
147
148
GLA - at 100% (in thousands)
22,298
22,307
22,334
22,322
22,216
22,213
22,339
22,456
GLA - at ownership interest
(in thousands)
19,368
19,400
19,425
19,415
19,325
19,326
19,501
19,619
Monthly average occupancy %
Total portfolio occupancy %
95.9%
96.2%
95.8%
95.9%
96.0%
95.9%
95.8%
96.2%
95.6%
95.8%
95.5%
95.7%
95.4%
95.6%
95.7%
95.5%
(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.
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.
51
FIRST CAPITAL REIT ANNUAL REPORT 2023
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 certified staff appraisers 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, 2023 for further
information on the estimates and assumptions made by Management in connection with the fair values of investment
properties.
Valuation of Financial Instruments
First Capital is required to determine the fair value of its loans, mortgages and credit facilities, senior unsecured
debentures, Exchangeable Units, unit-based compensation plans, loans and mortgages receivable, other equity
investments, marketable securities and derivatives. The fair values of the marketable securities are based on quoted
market prices. The fair values of the other financial instruments are calculated using internally developed models as
follows:
• Mortgages and credit facilities are calculated based on market interest rates plus a risk-adjusted spread on discounted
cash flows;
• Senior unsecured debentures are based on closing bid risk-adjusted spreads and current underlying Government of
Canada bond yields on discounted cash flows, also incorporating interest rate quotations provided by financial
institutions;
• Exchangeable Units are based on the closing price of FCR's Trust Units at each period end;
• The fair value of the unit-based compensation plans are based on the following:
FIRST CAPITAL REIT ANNUAL REPORT 2023
52
MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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.
Material Accounting Policy Changes
Refer to Note 2(s) of the audited annual consolidated financial statements for the years ended December 31, 2023 and
2022 for details on the impact of material accounting policy changes.
CONTROLS AND PROCEDURES
As at December 31, 2023, 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, 2023, 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, 2023 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 2023
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 the SEDAR+ website at www.sedarplus.ca 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 (loss) 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 2023
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 $1.9 billion
principal amount of fixed rate interest-bearing instruments outstanding including mortgages, senior unsecured
debentures and secured credit facilities maturing between January 1, 2024 and December 31, 2026 at a weighted
average coupon interest rate of 4.1%. 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
$18.6 million. In addition, as at December 31, 2023, First Capital had $322.6 million at FCR's share, principal amount of
debt (or 8% 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 2023
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
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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
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 involved in the development of mixed-use properties that include residential condominiums and rental
apartments. These developments are often carried out with an experienced residential developer as FCR's partner.
Purchaser demand for residential condominiums is cyclical and is significantly affected by changes in general and local
economic and industry conditions, such as employment levels, availability of financing for homebuyers, interest rates,
consumer confidence, levels of new and existing homes for sale, demographic trends and housing demand.
As a residential landlord in its properties that include rental apartments, FCR is subject to the risks inherent in the multi-
unit residential rental property industry. In addition to the risks highlighted above, these include exposure to private
individual tenants (as opposed to commercial tenants in FCR's retail properties), fluctuations in occupancy levels, the
inability to achieve economic rents (including anticipated increases in rent), controlling bad debt exposure, rent control
regulations, increases in operating costs including the costs of utilities (residential leases are often “gross” leases under
which the landlord is not able to pass on costs to its residents), the imposition of increased taxes or new taxes and capital
investment requirements.
Environmental Matters
First Capital maintains comprehensive environmental insurance and conducts environmental due diligence upon the
acquisition of new properties. There is, however, a risk that the value of any given property in FCR’s portfolio could be
adversely affected as a result of unforeseen or uninsured environmental matters or changes in governmental regulations.
Under various federal, provincial and local laws, FCR, as an owner, and potentially as a person in control of or managing
real property, could potentially be liable for costs of investigation, remediation and monitoring of certain contaminants,
hazardous or toxic substances present at or released from its properties or disposed of at other locations, whether FCR
knows of, or is responsible for, the environmental contamination and whether the contamination occurred before or
after FCR acquired the property. The costs of investigation, removal or remediation of hazardous or toxic substances are
not estimable, may be substantial and could adversely affect FCR’s results of operations or financial position. The
presence of contamination or the failure to remediate such substances, if any, may adversely affect FCR’s ability to sell
such real estate or to borrow using such real estate as collateral and could potentially also result in claims, including
proceedings by government regulators or third-party lawsuits. Environmental legislation can change rapidly and FCR may
become subject to more stringent environmental laws in the future, and compliance with more stringent environmental
laws, or increased enforcement of the same, could have a material adverse effect on its business, financial position or
results of operations.
Partnerships
First Capital has investments in properties with non-affiliated partners through partnership, co-ownership and limited
liability corporate venture arrangements (collectively, “partnerships”). As a result, FCR does not control all decisions
regarding those properties and may be required to take actions that are in the interest of the partners collectively, but
not in FCR’s sole best interests. Accordingly, FCR may not be able to favourably resolve any issues that arise with respect
to such decisions, or FCR may have to take legal action or provide financial or other inducements to partners to obtain
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FIRST CAPITAL REIT ANNUAL REPORT 2023
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 and Carbon Reduction Initiatives
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.
As the Trust continues to work towards achieving its science-based targets and net-zero commitment and to meet its 2030
carbon emissions reduction goals, its progress may be deterred by challenges such as the availability of the necessary
technology or the cost of adopting carbon reduction initiatives. This could result in the Trust being unable to meet its
decarbonization goals. The failure or perceived failure by the Trust to execute its carbon reduction initiatives, maintain its
environmental and sustainability practices or comply with emerging and evolving regulatory requirements or stakeholder
expectations could result in fines or adversely affect the Trust’s reputation, operations or financial performance.
Cybersecurity
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of FCR’s
information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include
gaining unauthorized access to information systems to disrupt operations, corrupt data or steal confidential information. As
FCR’s reliance on technology has increased, so have the risks posed to its systems. First Capital's primary risks that could
directly result from the occurrence of a cyber incident include operational interruption, damage to its reputation, damage
to its business relationships with tenants as well as the disclosure of confidential information. Events such as these could
adversely affect First Capital’s financial position and results of operations.
Cash Distributions Are Not Guaranteed; Non-Cash Distributions
Distributions on the Trust Units are established by the Board of Trustees and are subject to change at the discretion of the
Board of Trustees. While First Capital’s distribution policy has been established pursuant to the Declaration of Trust and
may only be changed with the approval of a majority of Unitholders, the actual amount of distributions paid in respect of
the Trust Units will depend upon numerous factors, all of which are susceptible to a number of risks and other factors
beyond the control of First Capital. The market value of the Trust Units may deteriorate if First Capital is unable to meet its
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MANAGEMENT’S DISCUSSION AND ANALYSIS – continued
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.
Certain proposed amendments to the Tax Act would have the effect of denying the deductibility of net interest and
financing expenses in certain circumstances, including the computation of taxable income by a trust. If these proposed
amendments are enacted as proposed, the Trust or its subsidiaries would not be subject to these deduction limitations as it
currently meets the exemption conditions. However, there is no assurance that this legislation will not change such that the
amount of interest and financing expenses deducted by the Trust may be reduced and/or the Trust may be required to
include in its income its share of denied net interest and financing expenses.
Pandemics, Epidemics or Other Outbreaks
A pandemic, epidemic or other outbreak (collectively, a “public health crisis”) could have a materially adverse impact on the
Trust’s financial position and results of operations. A substantial portion of First Capital’s tenants could be forced to close in
accordance with government regulations or operate at a reduced capacity, which may negatively impact their ability to pay
rent in accordance with the terms of their lease. 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 risks described above and the potential macroeconomic impact, specific effects of a public health crisis
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,
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FIRST CAPITAL REIT ANNUAL REPORT 2023
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 a public health crisis 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.
A public health crisis may cause economic uncertainty and increased volatility in financial markets, which may negatively
impact the market price for FCR’s securities and could adversely impact FCR’s operations and financial performance.
FIRST CAPITAL REIT ANNUAL REPORT 2023
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FS
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
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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 Material Accounting Policy Information
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
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 6, 2024.
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 6, 2024
FIRST CAPITAL REIT ANNUAL REPORT 2023
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, 2023 and 2022, 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 material accounting policy information.
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, 2023 and 2022, and its consolidated financial performance
and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards
("IFRSs").
Basis for opinion
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 $8.2
billion, which represents 89.7% of total assets as at December 31,
2023.
The Trust employs certified staff appraisers 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 two certified staff appraisers, by
reviewing the qualifications and expertise of the individuals
involved in the preparation and review of the valuations.
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FIRST CAPITAL REIT ANNUAL REPORT 2023
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 and 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 and Analysis prior to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact
in this auditor's report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If, based on the work we
will perform on this other information, we conclude there is a material misstatement of other information, we are required
to report that fact to those charged with governance.
Responsibilities of Management and those charged with governance for the consolidated financial statements
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 2023
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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 6, 2024
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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
Assets classified as held for sale
Total current assets
Total assets
LIABILITIES
Non-current Liabilities
Mortgages
Credit facilities
Senior unsecured debentures
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 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:
lan Clarke,
Trustee
Adam E. Paul,
Trustee
Note
December 31, 2023
December 31, 2022
$
$
$
3
4
5
6
8
27(d)
6
7
8
3(d)
10
10
11
12
21
10
10
10
11
13
12
3(d), 10
14
24
$
8,070,985
404,504
—
110,846
8,586,335
31,711
8,618,046
87,421
76,519
192,125
20,393
22,671
399,129
168,275
567,404
9,185,450
1,185,872
1,125,856
1,298,810
127,376
753,020
4,490,934
—
143,171
28,051
300,131
—
218,008
689,361
8,998
698,359
5,189,293
3,933,377
62,780
3,996,157
9,185,450
$
$
$
$
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
FIRST CAPITAL REIT ANNUAL REPORT 2023
66
Consolidated Statements of Income (Loss)
Year ended December 31
Note
2023
2022
$
687,981
$
693,096
262,724
425,257
267,597
425,499
16
17
18
19
4
20
15
13
5
3
21
24,875
(154,096)
(53,902)
(24)
(3,897)
48,501
(12,247)
6,237
88
3,646
(423,598)
(564,417)
(139,160)
(4,796)
$
(134,364)
14 $
(134,056)
24
(308)
$
(134,364)
$
$
$
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
(159,761)
(159,997)
236
(159,761)
(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.
67
FIRST CAPITAL REIT ANNUAL REPORT 2023
Consolidated Statements of Comprehensive Income
(Loss)
(thousands of dollars)
Net income (loss)
Other comprehensive income (loss)
Unrealized gain (loss) on revaluation of hotel property (1)
Reclassification of net (gain) loss on revaluation of hotel property to retained earnings
Unrealized gain (loss) on cash flow hedges (2)
Reclassification of net (gain) loss on cash flow hedges to net income (loss)
Deferred tax expense (recovery)
Other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Unitholders
Non-controlling interest
(1) Item that will not be reclassified to net income (loss).
(2) Items that may subsequently be reclassified to net income (loss).
Refer to accompanying notes to the consolidated financial statements.
Year ended December 31
Note
2023
2022
$
(134,364)
$
(159,761)
5
5
21
14
24
10,669
(10,669)
(32,727)
3,845
(28,882)
(11,264)
(17,618)
$
(151,982)
$
$
(151,674)
(308)
(151,982)
$
$
$
—
—
64,686
(10,072)
54,614
21,300
33,314
(126,447)
(126,683)
236
(126,447)
FIRST CAPITAL REIT ANNUAL REPORT 2023
68
Consolidated Statements of Changes in Equity
Disposal of Hotel Property (Note 5)
8,905
(10,669)
(thousands of dollars)
December 31, 2022
Changes during the year:
Net income (loss)
Conversion of Exchangeable Units (Note 13)
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, 2023
(thousands of dollars)
December 31, 2021
Changes during the year:
Net income (loss)
Conversion of Exchangeable Units (Note 13)
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
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Trust Units
(Note 14(a))
Total
Unitholders'
Equity
Non-
Controlling
Interest
Total
Equity
$
1,445,238 $
14,496 $
2,819,639 $
4,279,373 $
55,922 $
4,335,295
(134,056)
—
(3,354)
—
—
—
—
—
—
—
(6,949)
—
(183,561)
—
921
(22,339)
(25,693)
5,106
5,106
(134,056)
(308)
(134,364)
—
—
—
—
921
(25,693)
5,106
(6,949)
7,166
(6,949)
—
7,166
(1,764)
(183,561)
—
—
(1,764)
(183,561)
$
1,133,172 $
(3,122) $
2,803,327 $
3,933,377 $
62,780 $
3,996,157
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
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)
—
(12,063)
—
—
—
(124,191)
—
—
—
—
33,314
—
—
(82,393)
(94,456)
(159,997)
236
(159,761)
617
3,144
33,314
—
—
—
—
617
(94,456)
3,144
33,314
—
7,546
7,546
(124,191)
—
(124,191)
$
1,445,238 $
14,496 $
2,819,639 $
4,279,373 $
55,922 $
4,335,295
—
921
—
—
—
—
—
617
3,144
—
—
—
Refer to accompanying notes to the consolidated financial statements.
69
FIRST CAPITAL REIT ANNUAL REPORT 2023
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 from 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
Net contributions from (distributions to) non-controlling interest
Cash provided by (used in) financing activities
INVESTING ACTIVITIES
Acquisition of investment properties
Disposition of Hotel property, net of selling costs
Net proceeds from property dispositions
Net proceeds from sale of joint ventures
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.
Year ended December 31
Note
2023
2022
$
(134,364)
$
(159,761)
3
5
18
4
18
27(a)
27(b)
10
10
10
10
11
423,598
(3,646)
154,096
3,897
(48,501)
(150,112)
11,087
(28,321)
227,734
232,542
(35,739)
—
53,671
(300,000)
(4,990)
14(a)
(25,693)
—
(183,657)
7,166
(256,700)
(76,490)
102,775
176,113
4,081
4,599
(6,554)
(143,023)
(31,598)
53,790
83,693
54,727
32,694
87,421
24
3(c)
5
3(d)
4
4
4
3(a)
27(c)
27(d) $
409,716
(6,908)
150,042
5,673
199
(149,241)
11,679
(10,178)
251,221
90,766
(30,946)
(13,338)
206,373
(450,000)
13,451
(94,456)
116
(116,721)
7,546
(387,209)
(63,798)
—
187,963
—
4,658
(12,491)
(125,008)
60,618
82,041
133,983
(2,005)
34,699
32,694
$
FIRST CAPITAL REIT ANNUAL REPORT 2023
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. MATERIAL ACCOUNTING POLICY INFORMATION
(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. Individual
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. 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 6, 2024.
(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 2023
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 up until December 29, 2023. 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
FIRST CAPITAL REIT ANNUAL REPORT 2023
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
in investment properties is development land, which includes land parcels at various stages of development planning,
primarily for future retail or mixed-use occupancy.
(ii) Assets classified as held for sale
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 sale of such property,
and its sale must be highly probable, generally within one year. Upon designation as held for sale, 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 (loss) 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 certified staff appraisers 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
73
FIRST CAPITAL REIT ANNUAL REPORT 2023
used for the direct capitalization method and discount and terminal capitalization rates are used in the discounted cash
flow method described below.
• Costs to complete for properties under development.
(i) 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
FIRST CAPITAL REIT ANNUAL REPORT 2023
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
increase reverses a previously recognized revaluation loss recorded through prior period net income (loss), in which case
that portion of the increase is recognized in net income (loss). 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 recognized in net income (loss). 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 (loss) 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 use, 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 an 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.
75
FIRST CAPITAL REIT ANNUAL REPORT 2023
(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
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.
FIRST CAPITAL REIT ANNUAL REPORT 2023
76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(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.
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 (loss). Unrealized hedging gains and losses in accumulated other comprehensive
income (loss) are reclassified to net income (loss) in the periods when the hedged item affects net income (loss). Gains
and losses on derivatives are immediately reclassified to net income (loss) 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, 2023 and 2022:
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:
77
FIRST CAPITAL REIT ANNUAL REPORT 2023
(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
(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. Actual results could differ
from those estimates. The estimates and assumptions that the Trust considers critical include those underlying the
FIRST CAPITAL REIT ANNUAL REPORT 2023
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
valuation of investment properties, as set out above, which describes the process by which investment properties are
valued, and the determination of which properties are externally and internally appraised and how often.
Additional critical accounting estimates and assumptions include those used for determining the values of financial
instruments for disclosure purposes (Note 23), estimating deferred taxes (Note 21) and estimating the fair value of unit-
based compensation arrangements (Note 15).
(s) Adoption of Amended IFRS Pronouncements
Amendments to IAS 1, Presentation of Financial Statements - Classification of Liabilities as Current or Non-
Current and Non-Current Liabilities with Covenants
Effective January 1, 2023, the Trust early adopted the amendments to IAS 1, issued in January 2020, which 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. On October 31, 2022, the IASB issued Non-Current Liabilities with Covenants
(further amendments to IAS 1). These amendments specify that covenants to be complied with after the reporting date
do not affect the classification of debt as current or non-current as of the reporting date. These amendments are
effective in the same period the entity adopts the January 2020 amendments which for the Trust is January 1, 2023.
The amendments had no material impact on the consolidated financial statements of First Capital.
Amendments to IAS 8, Definition of Accounting Estimates
Effective January 1, 2023, the Trust adopted the amendments to IAS 8 which 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 had no material impact on the consolidated financial statements of First Capital.
Amendments to IAS 1 and IFRS Practice Statement 2
Effective January 1, 2023, the Trust adopted the 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 had no material impact on the consolidated financial statements of First Capital.
Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
The International Accounting Standards Board ("IASB") has provided relief in two phases to address accounting issues
that may arise from market-wide reform of an interest rate benchmark. Entities should be aware of the potential financial
reporting implications of the Canadian Dollar Offered Rate ("CDOR") transition, including but not limited to:
(i) Accounting for modifications of CDOR based contracts, and applying, when possible, the "economically equivalent"
practical expedient;
(ii) Assessing at inception of a hedge if the Canadian Overnight Repo Rate Average ("CORRA") is an eligible risk
component, when it is not contractually specified in the hedged item;
(iii) Demonstrating whether CORRA is an eligible risk component of the prime rate when designating CORRA as the
hedged risk in a prime-rate instrument;
(iv) Evaluating whether instruments indexed to CORRA should be disclosed as being at level 2 or level 3 in the fair value
hierarchy disclosure; and
79
FIRST CAPITAL REIT ANNUAL REPORT 2023
(v) Providing additional disclosures, including: the nature and extent of CDOR exposures, how financial performance
risks are managed and the progress of the entity in completing the transition.
The amendments had no material impact on the consolidated financial statements of First Capital. First Capital intends to
use the practical expedients in future periods if they become applicable.
3. INVESTMENT PROPERTIES
(a) Activity
The following tables summarize the changes in First Capital’s investment properties for the years ended December
31, 2023 and 2022:
Balance at beginning of year
$
8,213,224 $
89,029 $
325,535 $
8,627,788
Income-Producing
Properties
Properties under
Construction
Density &
Development Land
Total
Year ended December 31, 2023
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
Assets classified as held for sale
Total
62,324
67,043
(2,628)
(462,839)
30
(49,611)
7,827,543 $
7,725,176 $
102,367
—
48,854
(9,234)
(5,307)
—
—
123,342 $
87,492 $
35,850
15,740
27,126
11,862
44,548
—
78,064
143,023
—
(423,598)
30
(136,436)
(186,047)
288,375 $
258,317 $
30,058
8,239,260
8,070,985
168,275
7,827,543 $
123,342 $
288,375 $
8,239,260
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
Assets classified as held for sale (1)
Total
33,802
71,912
(21,525)
—
27,583
39,474
29,996
25,513
(17,949)
63,798
125,008
—
(403,139)
5,951
(12,528)
(409,716)
(738)
(237,015)
8,213,224 $
8,153,397 $
59,827
—
—
89,029 $
89,029 $
—
—
(40,388)
325,535 $
242,935 $
82,600
(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 assets classified as held for sale.
Investment properties with a fair value of $2.9 billion (December 31, 2022 – $2.3 billion) are pledged as security for
$1.5 billion (December 31, 2022 – $1.2 billion) in mortgages and secured credit facilities.
FIRST CAPITAL REIT ANNUAL REPORT 2023
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(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, 2023
December 31, 2022
5.5%
5.6%
6.3%
5.2%
5.4%
5.9%
The majority of the Trust's portfolio is valued under the Income Approach using the discounted cash flow ("DCF") method.
As at December 31, 2023, the weighted average valuation yields (stabilized overall capitalization, terminal capitalization and
discount rates) used in valuing those investment properties under the Income Approach increased from December 31,
2022.
Throughout 2023, as part of its normal course internal valuations, the Trust made revisions to capitalization and discount
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 $423.6 million ($376.4 million at FCR's share) for the year ended
December 31, 2023.
The sensitivity of the fair values of investment properties to stabilized overall capitalization rates as at December 31, 2023 is
set out in the table below:
As at December 31, 2023
(Decrease) Increase in stabilized overall capitalization rate
(millions of dollars)
Resulting increase (decrease) in fair
value of investment properties
(1.00%)
(0.75%)
(0.50%)
(0.25%)
0.25%
0.50%
0.75%
1.00%
$
$
$
$
$
$
$
$
1,820
1,293
818
390
(355)
(681)
(981)
(1,257)
Additionally, a 1% increase or decrease in stabilized net operating income ("SNOI") would result in a $81 million increase or
a $81 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 $475 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 $433
million.
81
FIRST CAPITAL REIT ANNUAL REPORT 2023
(c) Investment properties – Acquisitions
For the years ended December 31, 2023 and 2022, First Capital acquired investment properties as follows:
Year ended December 31
Total purchase price, including acquisition costs
Settlement of loans receivable on acquisition
Total cash paid
$
$
2023
78,064 $
(1,574)
76,490 $
2022
63,798
—
63,798
(d) Assets classified as held for sale and dispositions
First Capital has certain assets classified as held for sale. These assets typically include a mix of properties where FCR's
value-enhancing objectives have been achieved or those that are considered to be non-core to the business, and are as
follows:
As at
Aggregate fair value (1)
Mortgages secured by assets classified as held for sale
Weighted average effective interest rate of mortgages secured by assets classified as held for
sale
(1) See Note 5 Hotel Property for additional assets classified as held for sale.
December 31, 2023
December 31, 2022
$
$
168,275
8,998
$
$
142,427
13,129
3.2%
2.8%
The increase of $25.8 million in assets classified as held for sale from December 31, 2022 primarily arose from the
addition of new investment properties classified as held for sale, largely offset by dispositions, in line with First Capital's
Enhanced Capital Allocation and Portfolio Optimization Plan.
For the years ended December 31, 2023 and 2022, 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
4. INVESTMENT IN JOINT VENTURES
2023
$
186,047 $
—
(7,800)
(2,134)
2022
277,403
(80,000)
(5,000)
(4,440)
$
176,113 $
187,963
As at December 31, 2023, First Capital had interests in eight joint ventures that it accounts for using the equity method.
First Capital's joint ventures are as follows:
Name of Entity
Name of Property/Business Activity
Location
December 31, 2023
December 31, 2022
Effective Ownership
Aukland and Main Developments LP
College Square General Partnership
Edenbridge Kingsway (Humbertown)
Fashion Media Group GP Ltd.
FC Urban Properties, LP
Green Capital Limited Partnership
Lakeshore Development LP
Hazelton Food Services Partnership (1) 116 Yorkville Ave. (ONE restaurant)
Stackt Properties LP
(1) During the second quarter of 2023, the Trust disposed of its 50% interest of the partnership units in the ONE Restaurant located in the Hazelton Hotel.
Station Place
College Square
Humbertown Condos (Phase 1)
Toronto Fashion Week events
199 Avenue Road
Royal Orchard
2150 Lake Shore Blvd. W.
Toronto, ON
Ottawa, ON
Toronto, ON
Toronto, ON
Toronto, ON
Markham, ON
Toronto, ON
Toronto, ON
Toronto, ON
35.4%
50.0%
50.0%
78.0%
20.0%
50.0%
50.0%
—%
94.0%
Shipping Container marketplace
35.4%
50.0%
50.0%
78.0%
20.0%
50.0%
50.0%
50.0%
94.0%
FIRST CAPITAL REIT ANNUAL REPORT 2023
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
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.
The following table reconciles the changes in First Capital's interests in its equity accounted joint ventures for the years
ended December 31, 2023 and 2022:
Balance at beginning of year
Contributions to equity accounted joint ventures
Distributions from equity accounted joint ventures
Disposition of equity accounted joint venture
Share of profit (loss) from equity accounted joint ventures
December 31, 2023
December 31, 2022
$
357,122 $
349,488
6,554
(4,599)
(3,074)
48,501
12,491
(4,658)
—
(199)
Balance at end of year
$
404,504 $
357,122
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) during the first quarter of 2022.
On June 9, 2023, the Trust sold its 50% interest of the partnership units in the ONE Restaurant for $5.0 million. The sale was
subject to working capital and closing adjustments of $0.9 million with the Trust receiving net proceeds of $4.1 million. The
total gain on investment of $1.0 million was recognized in other gains (losses) and (expenses) during the second quarter of
2023.
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)
December 31, 2023 December 31, 2022
$ 1,113,381
$ 1,056,773
(281,891)
831,490
(319,317)
737,456
$
404,504
$
357,122
December 31, 2023 December 31, 2022
$
38,291
$
40,772
(21,923)
89,377
(3,466)
(28,985)
(1,603)
(7,458)
2,726
(199)
Net income (loss) and total comprehensive income (loss) at 100%
First Capital's share of profit (loss) from equity accounted joint ventures
$
$
102,279
48,501
$
$
During 2023, First Capital received distributions from its joint ventures of $4.6 million (2022 – $4.7 million) and made
contributions to its joint ventures of $6.6 million (2022 – $12.5 million).
As at December 31, 2023, there were approximately $32.8 million of outstanding commitments and no contingent liabilities
for the eight equity accounted joint ventures.
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FIRST CAPITAL REIT ANNUAL REPORT 2023
5. HOTEL PROPERTY
First Capital owned 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,
2023 and 2022:
Balance at beginning of year
Amortization
Additions
Revaluation of hotel property (1)
Disposition
Reclassification to assets classified as held for sale
Balance at end of year
December 31, 2023 December 31, 2022
$
90,600
$
85,400
(821)
906
14,315
(105,000)
—
—
—
$
(1,910)
202
6,908
—
90,600
(45,300)
$
45,300
(1) The revaluation gain of $14.3 million was recognized primarily through other comprehensive income (loss) of $10.7 million in accordance with the revaluation model
accounting for the hotel. The remaining $3.6 million revaluation gain was recognized in the consolidated statements of income (loss) to recover cumulative losses historically
recorded to the consolidated statements of income (loss).
On June 9, 2023, First Capital sold it's 100% interest in the hotel property. The total sale price before closing costs was
$105.0 million. First Capital recognized a cumulative gain on the sale of the hotel property of $8.9 million that was
recognized in retained earnings in accordance with the Trust's accounting policy for the hotel. The Trust also incurred
closing costs of $1.2 million, which were expensed in 'Other gains (losses) and (expenses)' in the consolidated statements of
income (loss) for the year ended December 31, 2023.
The following table summarizes the invested cost of the assets sold and net gain recognized in retained earnings as at the
disposition date:
Sale price
Closing adjustments (1)
Sale price, net
Hotel Property, invested cost
Working capital, net (1)
Net gain on disposal of hotel property (2)
Sale price, net
Property selling costs
Net proceeds received
$
$
$
$
$
105,000
(1,023)
103,977
(94,331)
(741)
8,905
103,977
(1,202)
102,775
(1) Excludes cash.
(2)
In accordance with the revaluation model accounting for the hotel property, the gain of $8.9 million was transferred directly to retained earnings upon sale.
FIRST CAPITAL REIT ANNUAL REPORT 2023
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
6. LOANS, MORTGAGES AND OTHER ASSETS
As at
Non-current
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, 2023 December 31, 2022
$
$
57,509
11,393
41,944
110,846
—
73,718
2,801
76,519
187,365
$
$
136,352
9,595
22,703
168,650
1,506
38,641
3,334
43,481
212,131
(a) Loans and mortgages receivable are secured by interests in investment properties or shares of entities owning
investment properties. As at December 31, 2023, these receivables bear interest at weighted average effective
interest rates of 8.6% (December 31, 2022 – 6.9%) and mature between 2024 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 was repaid on January 16, 2023. The loan was not subject to interest
until December 31, 2022 and thereafter was subject to 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 was accreted into interest income over the interest free period of the loan.
(c) The Trust has 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 $38.9 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, 2023 are as follows:
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
85
FIRST CAPITAL REIT ANNUAL REPORT 2023
Scheduled
Receipts
Weighted Average
Effective Interest Rate
$
70,657
42,461
7,800
5,000
$ 125,918
5,309
$ 131,227
$
73,718
57,509
$ 131,227
6.5 %
11.5 %
12.9 %
5.8 %
8.6 %
6.5 %
11.2 %
8.6 %
7. AMOUNTS RECEIVABLE
As at
Tenant receivables (net of allowance for expected credit losses of $6.2 million; December
31, 2022 – $9.5 million)
Corporate and other amounts receivable
Total
December 31, 2023 December 31, 2022
$
20,063
$
25,760
330
210
$
20,393
$
25,970
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, among other factors.
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 (recovery) and other adjustments recorded during the year
December 31, 2023 December 31, 2022
$
9,499
$
17,213
(2,236)
(1,060)
(7,858)
144
9,499
Allowance for expected credit losses, end of year
$
6,203
$
8. OTHER ASSETS
As at
Non-current
Fixtures, equipment and computer hardware and software (net of accumulated
amortization of $24.8 million; December 31, 2022 – $21.6 million)
Deferred financing costs on credit facilities (net of accumulated amortization of
$9.8 million; December 31, 2022 – $8.6 million)
Environmental indemnity and insurance proceeds receivable
Derivatives at fair value
Other non-current assets
Total non-current
Current
Deposits and costs on investment properties under option
Prepaid expenses
Other deposits
Restricted cash
Derivatives at fair value
Total current
Total
Note
December 31, 2023 December 31, 2022
$
7,182
$
6,615
12(a)
23
23
$
4,628
525
18,608
768
31,711
3,746
10,723
250
2,858
5,094
22,671
54,382
3,460
663
41,394
—
52,132
5,595
14,590
250
2,716
2,467
25,618
77,750
$
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
FIRST CAPITAL REIT ANNUAL REPORT 2023
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
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)
Credit facility under equity accounted joint venture (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, 2023 December 31, 2022
$
—
1,341,817
1,153,907
90,794
8,659
1,600,000
4,195,177
—
3,254,907
$
1,594
1,143,856
1,104,614
91,911
—
1,900,000
4,241,975
1,009
3,589,229
$
7,450,084
$
7,832,213
212,184
213,518
$
15.34
$
16.81
(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, 2023, 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
December 31, 2023 December 31, 2022
≤65%
>1.3
>$2.0
≤35%
>1.65
>1.50
$
45.0%
2.4
4.1
16.8%
2.3
1.9
$
44.0%
2.3
4.4
13.6%
2.4
2.1
(1) Total assets excludes cash balances.
(2) Calculations required under the Trust's credit facility agreements or indentures governing the senior unsecured debentures.
The above ratios include measures not specifically defined in IFRS. Certain calculations are required pursuant to debt
covenants and are meaningful measures for this reason. Measures used in these ratios are defined below:
• Debt consists of principal amounts outstanding on credit facilities and mortgages, and the par value of senior
unsecured debentures;
• Net debt is calculated as Debt, as defined above, reduced by cash balances at the end of the period;
• Secured indebtedness includes mortgages and any draws under the secured facilities that are collateralized against
investment property;
• Adjusted EBITDA, is calculated as net income (loss), 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
87
FIRST CAPITAL REIT ANNUAL REPORT 2023
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 classified as held for sale
Non-current
Total
December 31, 2023 December 31, 2022
$
1,338,041
$
1,140,490
$
$
1,041,908
111,999
2,491,948
171,222
8,998
2,311,728
$
$
1,030,564
74,050
2,245,104
256,038
13,129
1,975,937
$
2,491,948
$
2,245,104
Mortgages and secured facilities are secured by First Capital's investment properties. As at December 31, 2023,
approximately $2.9 billion (December 31, 2022 – $2.3 billion) of investment properties out of $8.2 billion
(December 31, 2022 – $8.6 billion) (Note 3(a)) had been pledged as security under the mortgages and the secured
facilities.
As at December 31, 2023, mortgages bear coupon interest at a weighted average coupon rate of 3.7% (December 31, 2022
– 3.4%) and mature in the years ranging from 2024 to 2033. The weighted average effective interest rate on all mortgages
as at December 31, 2023 is 3.8% (December 31, 2022 – 3.5%).
Principal repayments of mortgages outstanding as at December 31, 2023 are as follows:
2024
2025
2026
2027
2028
2029 to 2033
Scheduled
Amortization
Payments on
Maturity
Weighted
Average Effective
Interest Rate
Total
$
35,541 $
108,478 $
144,019
33,423
29,860
28,258
25,643
66,970
94,360
79,863
145,723
100,393
124,220
108,121
171,366
42,264
194,989 $
651,434
1,146,828 $
693,698
1,341,817
$
3.7 %
3.8 %
3.2 %
3.6 %
3.8 %
3.9 %
3.8 %
Unamortized deferred financing costs and premiums, net
Total
(3,776)
$
1,338,041
FIRST CAPITAL REIT ANNUAL REPORT 2023
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
First Capital’s credit facilities as at December 31, 2023 are summarized in the table below:
As at December 31, 2023
Unsecured Operating Facilities
Borrowing
Capacity
Amounts
Drawn
Bank
Indebtedness
and Outstanding
Letters of Credit
Available to
be Drawn
Interest Rates
Maturity Date
Revolving unsecured operating
$ 100,000 $
— $
— $ 100,000
facility
Revolving unsecured operating
150,000
facility
Revolving unsecured operating
450,000
facility
—
—
—
150,000
(2,230) 447,770
BA + 1.25% or
Prime + 0.25% or
SOFR + 1.35%
BA + 1.25% or
Prime + 0.25% or
SOFR + 1.35%
BA + 1.45% or
Prime + 0.45% or
SOFR + 1.55%
5.00%
—
— CORRA + 1.80% or
Prime + 0.50%
3,694 CORRA + 1.75% or
Prime + 0.45% or
SOFR + 1.55%
3.39%
—
April 20, 2025
August 31, 2025
June 30, 2028
January 9, 2025
April 15, 2025
November 29, 2025
April 14, 2025
-April 14, 2026
—
4,398
—
3.27%
April 15, 2026
5.985%
October 20, 2026
3.17%
January 31, 2029
2,338
Prime - 0.25%
June 1, 2024
—
—
—
—
—
—
—
—
Fixed rate unsecured term loan (1)(2)
Floating rate unsecured term loan
100,000
(100,000)
100,000
(100,000)
Floating rate unsecured term loan (3)
150,000
(146,306)
Fixed rate unsecured term loans (2)(4)
250,000
(250,000)
Fixed rate unsecured term loan (2)
Fixed rate unsecured term loan (2)(5)(8)
Fixed rate unsecured term loan (2)
100,000
(100,000)
150,000
(145,602)
200,000
(200,000)
Secured Construction Facilities
Secured construction facility
Secured construction facility
19,321
62,665
(16,983)
(45,004)
(537)
17,124
BA + 2.50% or
Prime + 1.00%
BA + 2.30%
October 1, 2025
February 1, 2027
Secured construction facility (6)
171,750
(38,944)
(295) 104,143
Secured Facilities
Secured facility
Secured facility
Sub-Total
Secured Construction Facility
Secured construction facility (7)
4,313
(4,313)
6,755
(6,755)
—
—
—
BA + 1.45% or
Prime + 0.45%
— CORRA + 1.75% or
Prime + 0.45%
September 27, 2024
December 19, 2024
$ 2,014,804 $ (1,153,907) $
(3,062) $ 829,467
71,450
(8,659)
—
62,791
BA + 2.65% or
Prime + 1.00%
November 28, 2025
Total
$ 2,086,254 $ (1,162,566) $
(3,062) $ 892,258
(1) The Trust has the option to extend the unsecured term loan for an additional two years, to January 9, 2027.
(2) These unsecured term loans are variable rate debt instruments. The Trust has entered into swaps which fix the rate of interest over their respective terms to maturity.
(3) The Trust has drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$146.3 million as at December 31, 2023.
(4) As at December 31, 2023, $75.0 million of the unsecured term loans is due April 14, 2025. The remaining $175.0 million is due April 14, 2026.
(5) The Trust has drawn in U.S. dollars the equivalent of CAD$150.0 million which was revalued at CAD$145.6 million as at December 31, 2023.
(6) The available to be drawn amount is reduced by the Trust's equity injections into the project where it has chosen not to draw on the facility and other adjustments in
accordance with the facility agreement.
(7) This secured construction facility relates to one of the Trust's joint ventures that is equity accounted.
(8) The Trust has the option to extend the unsecured term loan for an additional two years, to October 20, 2028.
First Capital has the ability under its unsecured credit facilities to draw funds based on Canadian bank prime rates,
Canadian bankers’ acceptances (“BA rates”) and Canadian Overnight Repo Rate Average (“CORRA rates”) for Canadian
dollar-denominated borrowings, and secured overnight financing rates (“SOFR rates”) or U.S. prime rates for U.S. dollar-
89
FIRST CAPITAL REIT ANNUAL REPORT 2023
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.
11. SENIOR UNSECURED DEBENTURES
As at
December 31, 2023 December 31, 2022
Series Maturity Date
January 22, 2027
July 12, 2027
October 30, 2023
Q
August 30, 2024
R
July 31, 2025
S
T May 6, 2026
V
U
A March 1, 2028
Weighted Average or Total
Current
Non-current
Total
Interest Rate
Coupon
Effective
3.90%
4.79%
4.32%
3.60%
3.46%
3.75%
3.45%
3.95%
3.97%
4.72%
4.24%
3.57%
3.54%
3.82%
3.54%
3.95%
Principal
Outstanding
—
300,000
300,000
300,000
200,000
300,000
200,000
1,600,000 $
300,000 $
1,300,000
1,600,000 $
$
$
$
Liability
—
300,131
300,366
300,282
199,537
299,305
199,320
1,598,941 $
300,131 $
1,298,810
1,598,941 $
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
Interest on the senior unsecured debentures is payable semi-annually and principal is payable on maturity.
On October 30, 2023, upon maturity, First Capital repaid its 3.90% Series Q Senior Unsecured Debentures in the amount of
$300.0 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
Note
December 31, 2023 December 31, 2022
23
15(c)
15(c)
14(b)
23
$
1,365
8,438
21,891
6,586
—
89,096
$
1,152
8,136
—
6,758
1,425
87,327
127,376
104,798
67,727
47,878
15,422
15,277
27,061
40,948
3,695
—
76,291
49,117
16,964
15,373
28,736
39,436
—
9
218,008
345,384
$
225,926
330,724
$
(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 $0.5 million (December 31,
2022 - $0.7 million) in other assets (Note 8).
FIRST CAPITAL REIT ANNUAL REPORT 2023
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(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, 2023
December 31, 2022
Balance at beginning of year
Converted to Trust Units (1)
Fair value adjustment
Balance at end of year
Number of
Exchangeable
Units
60 $
(60)
—
— $
Number of
Exchangeable
Units
103 $
(43)
—
60 $
Value
1,009
(921)
(88)
—
Value
1,947
(617)
(321)
1,009
(1) Effective December 29, 2023, all remaining Exchangeable Units were exchanged for Trust Units, on a one-for-one basis (refer to Note 14(a) below).
14. UNITHOLDERS’ EQUITY
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
December 31, 2023
Value of
Trust Units
Number of
Trust Units
December 31, 2022
Value of
Trust Units
Number of
Trust Units
213,518 $
2,819,639
219,541 $
2,898,271
(1,692)
298
60
(22,339)
5,106
(6,238)
172
(82,393)
3,144
921
43
617
212,184 $
2,803,327
213,518 $
2,819,639
91
FIRST CAPITAL REIT ANNUAL REPORT 2023
On May 16, 2023, First Capital received TSX approval for the renewal of its Normal Course Issuer Bid ("NCIB") pursuant to
which it may repurchase and cancel up to 21,148,491 of its outstanding Units until May 17, 2024.
For the year ended December 31, 2023, the Trust acquired and cancelled 1.7 million Units (December 31, 2022 - 6.2 million)
at a weighted average purchase price of $15.19 per unit (December 31, 2022 - $15.14), for a total cost of $25.7 million
(December 31, 2022 - $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 $3.4 million (December 31, 2022 - $12.1 million). On a cumulative basis, as of December 31, 2023, the
Trust has acquired and cancelled 7.9 million Units at a weighted average purchase price of $15.15 per unit, for a total cost
of $120.1 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 doubling of the Trust’s regular monthly distribution to $0.072 per unit
commencing with the September 2022 distribution.
First Capital declared monthly distributions totaling $0.864 per Trust Unit for the year ended December 31, 2023 (year
ended December 31, 2022 - $0.576 per Trust Unit).
15. UNIT-BASED COMPENSATION PLANS
(a) Unit Option Plan
First Capital's unit option plan was terminated in 2021 following the final grants issued on March 1, 2021. Any options
granted prior to termination of the plan expire 10 years from the date of grant and vest over five years. As at
December 31, 2023, 5.6 million unit options were outstanding (December 31, 2022 - 6.3 million).
The outstanding options as at December 31, 2023 have exercise prices ranging from $15.53 - $21.24 (December 31,
2022 – $15.53 - $21.24).
As at
December 31, 2023
December 31, 2022
Outstanding Options
Vested Options
Outstanding Options
Vested Options
Number of
Trust Units
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Trust Unit
Weighted
Average
Remaining
Life
(years)
Number of
Trust Units
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Trust Unit
Number of
Trust Units
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Trust Unit
Weighted
Average
Remaining
Life
(years)
Number of
Trust Units
Issuable
(in thousands)
Weighted
Average
Exercise
Price per
Trust Unit
1,243 $
16.95
1,366 $
19.87
1,632 $
20.68
1,380 $
21.24
5,621 $
19.79
4.0
3.3
4.2
6.2
4.4
880 $ 17.54
1,553 $
17.24
1,366 $ 19.87
1,509 $
19.86
1,451 $ 20.62
1,749 $
20.67
828 $ 21.24
1,464 $
21.24
4,525 $ 19.91
6,275 $
19.76
4.1
3.9
4.9
6.8
4.9
1,067 $ 18.01
1,349 $ 19.84
1,388 $ 20.55
636 $ 21.24
4,440 $ 19.82
Exercise Price
Range ($)
15.53 - 19.29
19.30 - 20.05
20.06 - 21.19
21.20 - 21.24
15.53 - 21.24
During the year ended December 31, 2023, $0.4 million (year ended December 31, 2022 – $0.7 million) was
recorded as an expense related to stock options.
FIRST CAPITAL REIT ANNUAL REPORT 2023
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Year ended December 31
Number of
Trust Units
Issuable
(in thousands)
2023
Weighted
Average
Exercise Price
Number of
Trust Units
Issuable
(in thousands)
2022
Weighted
Average
Exercise Price
Outstanding at beginning of year
6,275
$
19.76
6,337
$
Exercised (a)
Forfeited
Expired
Outstanding at end of year
—
(3)
(651)
5,621
$
—
19.15
19.46
19.79
(7)
(15)
(40)
6,275
$
19.75
17.90
19.34
17.90
19.76
(a) The weighted average market price at which options were exercised for the year ended December 31, 2023
was $Nil (year ended December 31, 2022 – $18.17).
The assumptions used to measure the fair value of the unit options under the Black-Scholes model (level 2) as at
December 31, 2023 and 2022 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
2023
2022
17.15% - 30.07% 20.50% - 32.62%
0.2 - 6.0 years
5.12%
3.32% - 4.57%
0.0 - 5.5 years
5.61%
3.12% - 4.88%
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
402
102
24
(78)
—
450
$1,847
2023
RUs / PUs
1,083
427
71
(287)
(33)
1,261
$7,362
DUs
320
77
12
(7)
—
402
$1,416
2022
RUs / PUs
897
460
35
(284)
(25)
1,083
$5,693
(a) The fair value of the DUs granted during the year ended December 31, 2023 was $1.5 million (year ended December
31, 2022 – $1.2 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, 2023 was $4.9 million (year ended December 31, 2022 –
$4.7 million), measured based on First Capital’s Trust Unit price on the date of grant.
(b) The fair value of the PUs granted during the year ended December 31, 2023 was $3.0 million (year ended December 31,
2022 – $2.5 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.
93
FIRST CAPITAL REIT ANNUAL REPORT 2023
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)
2023
February 16, 2023
154
3 years
32.5%
76.5%
6.6%
3.87%
$3,038
2022
May 9, 2022
177
3 years
31.1%
75.3%
(15.6%)
2.66%
$2,479
(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, 2023, the carrying value of the unit-based compensation liability was $22.0
million (December 31, 2022 – $23.7 million)(Note 12). For the year ended December 31, 2023, FCR recognized a decrease in
the value of the unit-based compensation plans which resulted in a revaluation gain of $6.2 million in the consolidated
statements of income (loss) due to a decrease in the Trust Unit's price year-over-year.
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
(1)
(2)
(3)
Includes residential revenue.
Includes hotel property revenue.
Includes residential operating costs, hotel property operating costs and bad debt expense (recovery).
Year ended December 31
% change
2023
2022
$
429,050
$
430,429
110,891
117,634
878
3,079
(414)
1,050
25,813
(0.7%)
687,981
123,606
133,208
(1,408)
7,318
262,724
106,162
117,061
4,113
2,633
(567)
376
32,889
693,096
118,296
132,422
(361)
17,240
267,597
(0.1%) $
425,257
$
425,499
61.8%
61.4%
FIRST CAPITAL REIT ANNUAL REPORT 2023
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Included in other operating costs and adjustments is bad debt expense (recovery) for the year ended December 31, 2023 of
($1.6) million (year ended December 31, 2022 – ($0.7) million).
For the year ended December 31, 2023, property operating costs include $24.5 million (year ended December 31, 2022 –
$23.4 million) related to employee compensation.
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
Salaries, wages and benefits
Unit-based compensation
Other corporate costs (1)
Total corporate expenses
Amounts capitalized to investment properties under development
Corporate expenses
$
Note
6
6
6
Year ended December 31
2023
5,491
79
10,543
8,762
$
2022
565
76
13,889
5,340
$
24,875
$
19,870
Note
10 $
10
11
13
Year ended December 31
2023
55,613
45,988
72,988
48
174,637
(20,541)
$
2022
46,557
34,638
85,446
42
166,683
(16,641)
$
154,096
$
150,042
1,852
1,570
13
(7,419)
4,863
1,284
17
(6,965)
$
150,112
$
149,241
Year ended December 31
2023
2022
$
32,060
$
29,542
9,363
20,310
61,733
(7,831)
7,393
15,496
52,431
(7,196)
$
53,902
$
45,235
(1)
Includes approximately $7 million in legal, advisory and settlement costs related to the Unitholder activism for the year ended December 31, 2023 (year ended December
31, 2022 - approximately $2 million).
95
FIRST CAPITAL REIT ANNUAL REPORT 2023
20. OTHER GAINS (LOSSES) AND (EXPENSES)
Year ended December 31
Realized gain (loss) on sale of marketable securities
$
Unrealized gain (loss) on marketable securities
Net gain (loss) on early settlement of debt (1)
Transaction costs
Gain on Investment (2)
Gain (loss) on loan receivable modification
Pre-selling costs of residential inventory
Investment property selling costs
Gain (loss) on foreign currency translation
Gain (loss) on mark-to-market of derivatives (3)
Total
$
2023
—
(533)
—
—
1,007
—
(36)
(3,336)
8,659
(18,008)
2022
5,591
(15,167)
12,845
(572)
—
(566)
(31)
(4,440)
4,251
(4,228)
(2,317)
$
(12,247)
$
(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 of 2022, 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) On June 9, 2023, the Trust sold its 50% interest of the partnership units in the ONE Restaurant and recognized a $1.0 million gain on investment.
(3) The Trust enters into cross-currency swap derivatives to manage interest rate risk and foreign currency risk on its US denominated variable rate debt instruments.
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 $
(11,356) $
(65,024) $
— $
(565) $
(76,945)
December 31, 2022
Net income (loss)
Recognized in OCI
Equity and other December 31, 2023
Deferred tax liabilities related to difference
in tax and book basis primarily related to
real estate, net
780,744
60,228
(11,264)
257
829,965
Net deferred taxes
$
769,388 $
(4,796) $
(11,264) $
(308) $
753,020
As at December 31, 2023, the corporate subsidiaries of the Trust had approximately $204.4 million of non-capital losses,
which expire between 2028 and 2043.
Deferred taxes related to non-capital losses $
(29,213) $
22,555 $
— $
(4,698) $
(11,356)
December 31, 2021
Net income (loss)
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.
FIRST CAPITAL REIT ANNUAL REPORT 2023
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, 2023 and 2022.
Income tax computed at the Canadian statutory rate of Nil applicable to the Trust at December 31,
2023 and 2022
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
Release of reserves
Other
Year ended December 31
2023
—
$
2022
—
$
56,654
(61,495)
—
45
58,134
(38,237)
(12,177)
(523)
7,197
Deferred income taxes expense (recovery)
$
(4,796)
$
22. RISK MANAGEMENT
In the normal course of its business, First Capital is exposed to a number of risks that can affect its operating
performance. Certain of these risks, and the actions taken to manage them, are as follows:
(a) Interest rate risk
First Capital structures its financings so as to stagger the maturities of its debt, thereby mitigating its exposure to interest
rate and other credit market fluctuations. A portion of FCR’s mortgages, loans and credit facilities are floating rate
instruments. From time to time, FCR may enter into interest rate swap contracts, bond forwards or other financial
instruments to modify the interest rate profile of its outstanding debt or highly probable future debt issuances without an
exchange of the underlying principal amount.
Interest represents a significant cost in financing the ownership of real property. As at December 31, 2023, First Capital
has a total of $358.3 million of outstanding debt bearing interest at variable rates on a consolidated basis. If the average
variable interest rate was 100 basis points higher or lower than the existing rate, FCR’s annual interest cost would
increase or decrease, respectively, by $3.6 million.
First Capital has a total of $1.9 billion principal amount of fixed rate interest-bearing instruments outstanding including
mortgages, senior unsecured debentures and secured credit facilities maturing between January 1, 2024 and December
31, 2026 at a weighted average coupon interest rate of 4.1%. 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 $18.6 million.
As at December 31, 2023, First Capital’s loans and mortgages receivable that earn interest at variable rates total
$77.3 million. If the average variable interest rate was 100 basis points higher or lower than the existing rate, FCR’s
annual interest income would increase or decrease, respectively, by $0.8 million.
First Capital’s loans and mortgages receivable that earn interest at fixed rates total $48.6 million. If the loans were
refinanced at 100 basis points higher than the existing rate, FCR’s annual interest income would increase by
approximately $0.5 million. If the loans were refinanced at 100 basis points lower than the existing rate, FCR’s annual
interest income would decrease by approximately $0.3 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, 2023, Loblaw Companies Limited
(“Loblaw”) is FCR's largest tenant and accounts for 10.5% of FCR’s annualized minimum rent and has an investment grade
97
FIRST CAPITAL REIT ANNUAL REPORT 2023
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
2023
$
403,733
1,037,585
592,567
$ 2,033,885
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, 2023 is set out below:
As at December 31, 2023
Payments due by period
2024
2025 to 2026
2027 to 2028
Thereafter
Total
Scheduled mortgage principal amortization
$
35,541 $
63,283 $
53,901 $
42,264 $
194,989
Mortgage principal repayments on maturity
108,478
161,330
225,586
651,434
1,146,828
Credit facilities and bank indebtedness
28,051
886,912
38,944
200,000
1,153,907
Senior unsecured debentures
Interest obligations (1)
Land leases (expiring between 2027 and 2061)
Contractually committed costs to complete current
development projects
Other committed costs
Total contractual obligations
300,000
600,000
700,000
—
1,600,000
161,411
211,023
92,093
59,894
524,421
679
1,284
1,279
15,723
18,965
42,761
58,101
33,450
—
—
—
—
100,862
—
33,450
$
710,371 $ 1,981,933 $ 1,111,803 $
969,315 $ 4,773,422
(1)
Interest obligations include expected interest payments on mortgages and credit facilities as at December 31, 2023 (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, 2023, there was $1.0 billion (December 31, 2022 – $1.0 billion) of cash
advances drawn against First Capital’s unsecured credit facilities.
In addition, as at December 31, 2023, First Capital had $28.6 million (December 31, 2022 – $27.6 million) of outstanding
letters of credit issued by financial institutions primarily to support certain of FCR’s contractual obligations and $Nil
(December 31, 2022 – $1.6 million) of bank overdrafts.
(d) Unit price risk
First Capital was exposed to Trust Unit price risk as a result of the issuance of Exchangeable Units up until December 29,
2023, which are economically equivalent to and exchangeable for Trust Units, as well as the issuance of unit-based
FIRST CAPITAL REIT ANNUAL REPORT 2023
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
compensation. Exchangeable Units and unit-based compensation liabilities are recorded at their fair value based on
market trading prices. Exchangeable Units and unit-based compensation negatively impact net income when the Trust
Unit price rises and positively impact net 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: N/A (December 31, 2022 – $0.1 million); and
(ii) Unit-based compensation liabilities: $2.7 million (December 31, 2022 – $3.3 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
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
Note
2023
2022
2023
2022
6
6
6
6
8
10
10
11
13
15
12
$
2,801 $
3,334 $
2,801 $
—
1,506
—
3,334
1,506
131,227
174,993
124,683
178,178
11,393
23,702
9,595
43,861
11,393
23,702
9,595
43,861
$ 1,338,041 $ 1,140,490 $ 1,272,874 $ 1,046,429
1,153,907
1,104,614 1,153,907
1,104,614
1,598,941
1,898,824 1,535,423
1,775,836
—
22,008
25,586
1,009
23,722
—
—
22,008
25,586
1,009
23,722
—
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, 2023, the risk-adjusted interest rates ranged from 6.7% to 14.0%
(December 31, 2022 – 3.0% to 13.8%).
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, 2023, these rates ranged from 5.0% to 6.9%
(December 31, 2022 – 5.4% to 6.4%).
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, 2023, these rates ranged from 5.4%
to 6.1% (December 31, 2022 – 6.2% to 6.5%).
The fair value of the Exchangeable Units are based on the Trust's closing price on the last business day of each reporting
period. As at December 31, 2023, the closing price was $15.34 (December 31, 2022 - $16.81).
99
FIRST CAPITAL REIT ANNUAL REPORT 2023
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, 2023.
• 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, 2023
December 31, 2022
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
Financial Liabilities
Mortgages
Credit facilities
Senior unsecured debentures
$
2,801 $
—
—
—
—
—
—
— $
— $
—
—
23,702
—
22,008
25,586
— $
—
11,393
—
3,334 $
—
—
—
— $
—
—
43,861
—
—
—
—
—
—
1,009
23,722
—
—
1,506
9,595
—
—
—
—
— $ 124,683 $
— $
— $
178,178
—
—
—
1,272,874
1,153,907
1,535,423
—
—
—
—
—
—
1,046,429
1,104,614
1,775,836
—
—
—
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, 2023, the interest rates ranged from
5.2% to 7.0% (December 31, 2022 – 3.3% to 6.2%). The fair values of First Capital's asset (liability) hedging instruments
are as follows:
Designated as
Hedging Instrument Maturity as at December 31, 2023
December 31, 2023 December 31, 2022
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
N/A
April 2024 - March 2027
N/A
April 2026 - January 2029
March 2024 - October 2028
$
$
$
$
—
23,702
—
23,702
8,143
17,443
25,586
$
$
$
$
1,903
41,394
564
43,861
—
—
—
FIRST CAPITAL REIT ANNUAL REPORT 2023
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
As at December 31, 2023, the $20.2 million decrease in the fair value of outstanding derivative assets year-over-year is
primarily due to significant fluctuations in market rates (BA rate, CORRA 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, 2023, 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, 2023
December 31, 2022
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, 2023 December 31, 2022
$
206,595
$
184,375
1,040
207,635
3,938
14
3,952
203,683
62,780
1,029
185,404
4,148
34
4,182
$
$
181,222
55,922
Year ended December 31
2023
6
$
(320)
(841)
(1,155)
(308)
$
$
2022
4
1,290
(465)
829
236
Year ended December 31
2023
(646)
10,607
(9,951)
$
10
$
2022
(1,215)
12,745
(11,470)
60
$
$
$
$
$
$
$
As at
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets
Non-controlling interest
Revenue
Share of profit (loss) from joint ventures
Expenses
Net income (loss)
Non-controlling interest
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 2023
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
320-326 Bloor Street West
261 Queens Quay East (Bayside Village)
Midland (land)
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
West Springs Village
216 Elgin Street
221 - 227 Sterling
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
Ottawa, ON
Gatineau, QC
Ottawa, ON
Lachenaie, QC
Oakville, ON
Whitby, ON
Whitby, ON
St. Hubert, QC
Ottawa, ON
December 31, 2023
50%
50%
50%
50%
50%
50%
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
Calgary, AB
Ottawa, ON
Toronto, ON
50%
50%
50%
50%
50%
33.3%
50%
50%
50%
50%
35%
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%
50%
50%
50%
50%
50%
33.3%
50%
50%
50%
50%
35%
(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 2023
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
Property
London Portfolio (1)
906-1st Avenue North East (Molson Building)
1071 King Street West
200 West Esplanade (Empire Theatres)
400 King Street West (2)
1120 Kingston Road (2)
Location
London, ON
Calgary, AB
Toronto, ON
North Vancouver, BC
Toronto, ON
Toronto, ON
Ownership Interest
December 31, 2023
December 31, 2022
49.5%
100%
66.6%
50%
50%
60%
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
2023
2022
Unrealized gain (loss) 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
14,496
(17,618)
(3,122)
(18,818)
33,314
14,496
$
14,496 $
(17,618) $
(3,122) $
(18,818) $
33,314 $
14,496
(b) Tax effects relating to each component of other comprehensive income (loss)
Year ended December 31
2023
2022
Unrealized gain (loss) on cash flow
hedges
Reclassification of net (gain) loss on
cash flow hedges to net income
(loss)
Before-Tax
Amount
Tax (Expense)
Recovery
Net of Tax
Amount
Before-Tax
Amount
Tax (Expense)
Recovery
Net of Tax
Amount
$
(32,727) $
12,764 $
(19,963) $
64,686 $
(25,228) $
39,458
3,845
(1,500)
2,345
(10,072)
3,928
(6,144)
Other comprehensive income (loss)
$
(28,882) $
11,264 $
(17,618) $
54,614 $
(21,300) $
33,314
103
FIRST CAPITAL REIT ANNUAL REPORT 2023
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) loss on Investment
Unit-based compensation expense
(Gain) loss on foreign currency translation
Increase (decrease) in value of Exchangeable Units
Increase (decrease) in value of unit-based compensation
Deferred income taxes expense (recovery)
(Gain) loss on mark-to-market of derivatives
Total
(b) Net changes in other working capital items
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
Year ended December 31
Note
16 $
20
20
20
20
20
20
15
20
13
15
21
20
2023
414 $
3,336
—
533
—
—
(1,007)
9,583
(8,659)
(88)
(6,237)
(4,796)
18,008
$
11,087 $
2022
567
4,440
(5,591)
15,167
566
(12,845)
—
7,772
(4,251)
(321)
(5,250)
7,197
4,228
11,679
Year ended December 31
2023
$
4,522 $
2,788
396
2,261
(34,242)
(4,046)
2022
1,814
(3,225)
3,254
(800)
(1,845)
(9,376)
$
(28,321) $
(10,178)
Year ended December 31
2023
$
(10,558) $
66,146
(1,798)
—
$
53,790 $
2022
(65,018)
137,787
(3,794)
13,066
82,041
FIRST CAPITAL REIT ANNUAL REPORT 2023
104
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – continued
(d) Cash and cash equivalents
As at
Cash and cash equivalents
December 31, 2023
December 31, 2022
$
87,421
$
32,694
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 $168.1 million
(December 31, 2022 – $149.9 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 $28.6 million (December 31, 2022 –
$27.6 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 $0.7 million (December 31, 2022 – $0.9 million) with a total obligation of $19.0 million
(December 31, 2022 – $18.2 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:
Year ended December 31
2022
2023
4,626
4,483
5,457
6,822
10,083
11,305
$
$
Salaries and short-term employee benefits
Unit-based compensation (non-cash compensation expense)
$
$
105
FIRST CAPITAL REIT ANNUAL REPORT 2023
Unitholder Information
FCR.CA