TSX:FCR.UN - Post by User
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retiredcfon Aug 02, 2023 9:30am
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Post# 35568633
TD
TDOn their Action Buy List with a $19.00 target. GLTA
First Capital REIT
(FCR.UN-T) C$14.63
Q2/23 First Look: Leasing Spreads Jump; Dispos Continue Event
Q2/23 Results. Conference call is at 2:00 PM ET today (416-406-0743, passcode: 4501769#).
Impact: SLIGHTLY POSITIVE
Our Take: FCR's Q2 results demonstrated steady growth from the REIT's necessity- based property portfolio, while achieving near-record renewal leasing spreads and continuing to execute on its plan of reducing leverage by disposing of low-yielding assets.
Results vs. Forecast (Exhibit)
Q2 FFO/unit of $0.30 (vs. TD/consensus both at $0.29) increased +8% y/y, driven by SPNOI growth, NCIB accretion, and other gains/losses, all partially offset by higher interest costs and G&A. The favourable variance to our estimate largely resulted from the gain on the sale of ONE Restaurant. AFFO/unit (our calculation) was also slightly ahead and +5% y/y.
Operations
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Total occupancy of 95.9% slipped 30bps q/q but would have risen +40bps q/q if not for two known vacancies (Nordstrom Rack at 1 Bloor East and Walmart at Westmount Centre).
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Adjusted SPNOI growth decelerated to 2.2% from 4% TTM due to the Nordstrom Rack closure (40bps), tougher y/y occupancy comps, and unfavourable CAM/tax adjustments.
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Lease renewal uplift to initial rents jumped to +14% (+16% to average full- term rents) — both excluding any pandemic relief impacts, and well ahead of the 9% historical average.
Balance Sheet
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FCR announced $91mm of new dispositions under firm agreements that are in aggregate 40% above IFRS fair value, debt-free, and are all-cash deals (i.e., no VTBs). These include Yonge-Davis Centre (52,600sf, non-grocery anchored), 30/30A Hazelton Avenue, and the remaining Place Panama development lands. This brings cumulative activity under the $1bln+ disposition plan to $460mm (17% above FV) with a sub-3% average yield.
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FCR acquired the lands at Centre Commercial Maisonneuve just prior to the ground lease's expiry (leasehold interest held since 2003) for $55mm (works out to $480/sf for the property's 114,400sf leasable area). Simultaneously, FCR tripled the property's average rent by negotiating new leases with all major tenants (e.g., Canadian Tire, Loblaw).
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ND/Assets of 44.5% and ND/EBITDA of 10.3x (10.1x excluding activism costs), both declined marginally. IFRS NAV/unit slipped 1.5% q/q to $23.13 on ~$0.1bln of FV losses (cap rate +10bps).