TD Currently have a $19.00 target. GLTA
First Capital REIT
(FCR.UN-T) C$16.61
FCR Provides Robust Outlook Ahead of Its Investor Day
Event
FCR announced its outlook to 2026, including SPNOI and FFO growth and further
disposition/leverage targets, ahead of its investor day presentation at 1:30 pm today.
Impact: SLIGHTLY POSITIVE
Our Initial Take: This affirmed clarity on long-term strategic priorities and well-
located grocery-anchored shopping centres, together with continued focus on FFO/
unit growth, should enhance the investor appeal of FCR's units, in our view. The
better-than-expected leverage goals demonstrate the visibility management has on
robust SPNOI growth and monetizing its low-yielding assets.
Clarifying What is Non-Core, and Disposing More Of It
FCR disclosed a separation of its $9bln portfolio into core/non-core: 80% or "over
$7bln" is in core grocery anchored shopping centres, and 20% or $1.7bln is in non-
core properties, which continue to exclusively represent the source of planned
dispositions.
On dispositions, FCR affirmed its existing 2024 goal of $400mm+ and added
a further $600mm planned dispositions for 2025-2026 at the same sub-3%
targeted NOI yield (bringing the total to $1.6bln+ since the 2022 Optimization
Plan).
Dispositions will continue including a mix of development sites and select low-
yielding income properties. Completed sales to-date have been at a 20%-plus
premium to IFRS fair value, demonstrating past value-creation. We believe future
dispositions could include FCR's Bloor-Yorkville cluster of properties.
We like the push to further purify FCR's portfolio on grocery-anchored
shopping centres with high population density, especially during this time
of historically-strong leasing demand and rental rate uplifts.
Low-8x Leverage Target Impresses
ND/EBITDA in the low-9x range is now targeted by year-end 2024 (prior target:
sub-10x), while the new low-8x range target by year-end 2026 would put FCR
closer to most peers (our current model has 9.0x at year-end 2025).
Targeting 3%-Plus SPNOI and FFO/unit Growth
Management expects adjusted SPNOI growth of 2.0%-2.5% in 2024 and
averaging "at least 3%" annually through 2026 (capturing 1 Bloor East lease
commencements).
Management expects FFO/unit growth (excluding condo profits and other gains/
losses) to average "at least 3%" annually through 2026.
Also in the Three-Year Plan to 2026
$500mm invested in development/redevelopment.
- $200mm of development completions.
- 100mm-$150mm in acquisitions focused on core grocery-anchored properties
- plus smaller strategic tuck-in deals.