First Capital REIT Announces Normal Course Issuer Bid Strategy
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TORONTO, May 16, 2022 /CNW/ – First Capital REIT (“First Capital”, “FCR” or the “REIT”) (TSX: FCR.UN) announced earlier today that the TSX has approved an issuer bid in normal course of business (“OPRCN”) pursuant to which he may redeem his Trust Units for cancellation commencing on May 18, 2022. The redemption of Trust Units will be primarily funded by the disposal of non-core properties that are expected to be sold at IFRS value or above.
Debt capital and ORCN
Over the past three years, the REIT has realized approximately $1.5 billion disposals, while continuing to invest significantly in the company. Together, 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 achieved these goals while selling properties at prices generally above their respective IFRS values.
Adam-PaulChairman and Chief Executive Officer of First Capital, said, “Our investing activity over the past three years has significantly enhanced our best-in-class grocery anchored portfolio, while strengthening our balance sheet. Given the strong fundamentals of our real estate, our focus is squarely on capitalizing on the significant opportunities we have to grow the intrinsic value of FCR, which today includes continuing to advance our real estate strategy and selling non-core properties at IFRS book value or above, while acquiring FCR units to the extent they are trading well below net asset value, which is currently $24.55.”
Despite the significant improvement in the REIT’s real estate portfolio and financial condition, market price dynamics have made the unsecured debenture market an impractical source of capital for FCR from a cost perspective. With over $7.5 billion unencumbered, best-in-class grocery-anchored assets located in from Canada densely populated neighborhoods, the depth and reliability of the secured debt market is not only adequate but sufficient to support the execution of First Capital’s strategy and capitalize on growth opportunities for the foreseeable future. The REIT is comfortable with its current leverage ratio of approximately 40% and therefore is not focused on deleveraging beyond current levels at this time.
First Capital has implemented an issuer bid pursuant to which it may repurchase its trust units for cancellation commencing on May 18, 2022. The significant mismatch that currently exists between the intrinsic value of the REIT’s assets and its publicly traded securities presents a significant opportunity to generate value through the redemption of its Trust Units. Therefore, from time to time, the purchase of Trust Units of the FCR at certain market prices below the Net Asset Value presents an attractive use of REIT funds which should provide additional value and liquidity for the Units issued and in circulation while benefiting the remaining Unitholders by increasing their proportionate ownership of the REIT.
First Capital has agreed to sell a 100% interest in two properties: (i) La Porte de Gatineau situated in Gatineau, Quebecand (ii) Bayview Lane Squaresituated in Thorn Hill, ON for an overall sale price of approximately $80 million. The aggregate sale price is in line with the first quarter 2021 IFRS value of the properties, which had previously been increased at the end of 2021 to reflect expected sale prices. Closing of the transactions remains subject to certain closing conditions typical of transactions of this type and is expected to occur during the second and third quarters.
These transactions are another example of the premium demand and value of the REIT’s assets in the private markets. The properties sold by FCR are non-essential and their disposal frees up capital to be reallocated to higher growth opportunities, including the redemption of the REIT’s shares, which are trading at a significant discount to net asset value.
About First Capital REIT (TSX: FCR.UN)
First Capital is a leading owner, operator and developer of mixed-use, grocery-anchored properties located in from Canada most densely populated cities. First Capital’s goal is to create thriving urban neighborhoods to generate value for businesses, residents, communities and our investors.
Notice on Forward-Looking Statements
This press release contains forward-looking statements and information within the meaning of applicable securities laws, including, but not limited to, statements relating to First Capital’s intention to make purchases of units in within the framework of an OPR, the depth and reliability of the guaranteed debt market and the real estate portfolio. These forward-looking statements are not historical facts, but rather reflect First Capital’s current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include the risks described in First Capital’s MD&A for the year ended December 31, 2021 and for the quarter ended March 31, 2022 and in its current Annual Information Form. Accordingly, readers should not place undue reliance on these forward-looking statements. First Capital undertakes no obligation to publicly update these forward-looking statements or to reflect new information or the occurrence of future events or circumstances, except as required by applicable securities law.
SOURCE First Capital Real Estate Investment Trust
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