TSX:FCR.UN - Post by User
Post by
retiredcfon Nov 01, 2023 9:37am
57 Views
Post# 35710992
RBC
RBC October 31, 2023
First Capital REIT
Underlying Q3 results in line; progress on key fronts
TSX: FCR.UN | CAD 13.04 | Outperform | Price Target CAD 19.00
Sentiment: Neutral
Our view: FCR reported headline Q3/23 FFOPU of $0.32, ahead of RBC/Street at $0.30E/$0.30E, and +4% from last year ($0.31). Excluding $3.8MM ($0.02/unit) of legal settlement income on forgone rent, results were largely in line. While SP NOI growth slowed mainly from the previously announced Nordstrom closure, progress on backfilling vacancy is encouraging (more colour on re-leasing rents expected on the call). As well, additional advances were made on the disposition program, helping drive debt/ EBITDA incrementally lower. The $433MM portfolio write-down was large, but not entirely unexpected given the sizeable move in rates (units are still trading well below revised IFRS NAVPU). Conference call Nov-1 (2 pm ET; 1-800-898-3989; ID 6949753).
Highlights:
-
SP-stable NOI +1.4% (+2.6% YTD), mainly from rent steps, with total SP NOI (including redevelopments) at +1.2% (+2.5% YTD). Nordstrom Rack’s lease termination in June (from CCAA filing) at 1 Bloor St. E. adversely impacted SP NOI by 140 bps (prior year recoveries in Q3/22 also hit Q3/23 SP NOI by ~50 bps).
-
Progress on backfilling 1 Bloor St. E. vacancy. Post Q3, FCR leased 32K sf of the former Nordstrom space to an upscale wellness/ fitness club (AVANT by Altea Active) for possession in early 2024. FCR also leased 20K sf to Nike for a flagship store and another prominent global retailer. Talks are in progress for the remaining 8K sf of ground floor space.
-
Total occupancy stable at 95.9% (flat QoQ, +20 bps YoY), with SP-occupancy at 95.8% (flat YoY).
-
Renewal leasing spreads were solid at +12% (12% YTD). In-place net rent increased to $23.08/sf (+0.5% QoQ, +1% YoY).
-
Reported NAVPU fell to $21.26 (-8% QoQ, -9% YoY). While acknowledging limited transactions, FCR booked $433MM ($2.02/ unit) of portfolio fair value charges to reflect a broad-based revaluation (higher cap rates) given the sizeable increase in the 10Y GoC. The IFRS cap rate rose to 5.6% (+30 bps QoQ, +50 bps YoY) vs. our 5.4% NAV cap rate and the current 7.1% implied cap.
-
More progress on portfolio optimization. In Q3, FCR completed $114MM of asset sales (16% above IFRS value), with another $58MM slated to close in Q4. The latter includes a 25% interest in the Yonge/Roselawn development site and a single tenant property in Vancouver. Including firm deals, total dispositions to date have increased to $517MM (vs. $1B target by end of 2024) at a <3% yield, or an average 14% above IFRS values.
-
Debt/assets 46.3% (+180 bps QoQ, +90 bps YoY); 10.1x debt/EBITDA (-0.2x QoQ, -0.8x YoY), or 9.9x excl. activism costs. In Oct., FCR arranged a $150MM unsecured term loan due Oct-2026 (with extension options to 2028) and entered a swap to convert the 5Y term loan to a fixed rate of 5.985%. Proceeds were applied to repay the $300MM, 3.9% Series Q debentures due Oct-30/23.