First Capital, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the First Capitol REIT Q2 2020 results conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press star 1 on your telephone keypad. I would now like to turn the conference over to Alison. Please proceed with your presentation.

Thank you, and good afternoon, everyone. In discussing our financial and operating performance and in responding to your questions during today's call, we may make forward-looking statements. These statements are based on our current estimates and assumptions, many of which are beyond our control and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements. A summary of these underlying assumptions, risks, and uncertainties is contained in our various securities filings, including our Q2 MD&A, our MD&A for the year ended December 31, 2019, and our current AIF, which are available on CDAR and on our website. These forward-looking statements are made as of today's date, and except as required by securities law, we undertake no obligation to publicly update or revise any such statements. During today's call, we will also be referencing certain financial measures that are non-IFRS measures. These do not have standardized meanings prescribed by IFRS and should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS. Management provides these measures as a complement to IFRS measures to aid in assessing the REIT's performance. These non-IFRS measures are further defined and discussed in our MD&A, which should be read in conjunction with this conference call. I'll now turn the call over to Adam.

Okay, thank you very much, Alison. Good afternoon, everyone, and thank you for joining us today for our Q2 conference call. In unusual and volatile times, there seems to be a hyper-focus on short-term metrics, so let's get these out of the way up front. Our Q2 rent collection number both before and after adjusting for agreed upon deferrals and abatements is 75% and 93% respectively. We saw an improvement in July where these numbers currently stand at 79% and 97% respectively. And based on what we're seeing thus far, we believe that this will further improve in August. We view these results as decent and improving under the current circumstances. However, they are not indicative of the quality of our real estate and little, if anything, can be taken from these numbers to assess the value of First Capital. Real estate quality is the most paramount element of how our business was built. The driving force behind our real estate decisions is and always will be long-term value creation. At FCR, we have always believed that over time, good things happen when you own great real estate. The capital market's short-term focus will ultimately revert back to real estate fundamentals, and that should serve FCR increasingly well. Leasing is a critical part of real estate fundamentals. Given the environment brought upon by the pandemic and government imposed lockdowns of much of the economy, it seems that many expect next to no leasing has taken place in retail during the quarter. Not so for First Capital. During the COVID quarter or Q2, when the government lockdowns were most prevalent, we renewed 438,000 square feet of tenant space a number which stands well against pre-COVID leasing stats. Not only did we renew a meaningful amount of space, but we achieved a double-digit increase in the renewal rental rates. But how did we do this in the middle of the pandemic? Simply put, a talented team and great real estate. In spite of the pandemic and the temporary and permanent changes that will come as a result, Retailers in our portfolio appreciate the long-term value of high-quality locations to their business and how difficult these locations can be to secure. In short, existing retailers are reluctant to give these locations up and new tenants are keen to secure them when they become available. In the second quarter, we also had 131,000 square feet of new tenant openings. in a time of restricted opening across many of our markets. A much larger amount of space is currently under active negotiation. Combining great real estate with necessity-based tenancies has allowed us to maintain occupancy and avoid more vacancy on a relative basis to the general retail industry. A review of the many tenant bankruptcies and closures that have occurred, even pre-COVID but also during COVID, tells the story. As of today, throughout the nearly five month COVID period, we have had a total of 142,000 square feet of space come back to us, most of which was offset by new tenant openings. But that doesn't tell you a whole lot beyond it's a pretty small number in the context of our 23 million square foot portfolio. Allow me to drill a touch deeper. First off, The average net rental rate on this space was only $14 a square foot, well below our average in-place rent of $21.70 and well below market rates for this space. Of the 142,000 square feet that has come back, 63,000 square feet, or nearly 45% of it, is one tenant, Army and Navy, who occupied space in our Langley properties. a space that FCR had previously tried to buy back control from this tenant. By the end of June, just a few weeks after we learned of this tenant failure, a new tenant was secured and in occupancy for the entire space. Now, this new tenant is more temporary in nature, but it ensured immediate occupancy at a similar rent Army and Navy was paying. We're now in negotiations with several permanent and complementary tenants for the space, including full-size grocery, fitness, and others who are prepared to pay market rent, which is significantly higher than in place. This will work out quite well for FCR. Of the remaining 79,000 square feet of space that unexpectedly has come back, the average size is 1,600 square feet and the average net rent $22 a square foot, well below market rates for this type of space. This is a great average size as there is deepest demand for small space. This is a trend that started well before COVID. These small spaces also require less leasing capital, which should help reduce concerns about excessive lease up capital requirements for COVID generated vacancies. So not only is the cumulative amount of space very low thus far, it is also very manageable in terms of size, replacement rent, and anticipated leasing costs. We have no concern about our ability to release this type of space to great tenants at acceptable financial returns. CARM's team has already released some of it. No question, it is and will continue to be more busy than normal on the leasing side, and we will undoubtedly have more space that comes back to us. However, not all space is created equal. and given the quality of our portfolio, we're very comfortable that we will deal with any such space in a reasonable timeframe and in a manner that is both economically viable and creates value for the long term. Notably, we're in a very good position from an occupancy perspective, which currently stands at 96.3%. Our portfolio is generally leased to tenants with viable and profitable businesses. Our grocery stores, pharmacies, and numerous other tenants deemed essential through this pandemic have seen an increase in sales. However, some of our tenants who were deemed non-essential were negatively impacted by government-imposed lockdowns and restrictions. Many of these tenants need a bridge over the lockdown timeframe. This mix of tenants includes both large and small tenants. So first, I'd like to start with the smaller tenant group. In March, right at the onset of government-imposed closures, we launched our Small Business Support Program to provide immediate relief to our small business tenants. Subsequently, the government launched SECRA, which has largely replaced this program. SECRA targets small and medium-sized businesses most impacted by the pandemic. Some view SECRA participation as an indication of an unhealthy tenant base. We view this very differently, as the vast majority of our impacted tenants have profitable businesses that were turned upside down over the last few months, strictly because of the imposed lockdowns, which have now largely been lifted. Furthermore, most of our tenants who qualify for SECRA represent important additions to our tenant mix, especially over the long term. These tenants simply need a bridge to make it through to the other side. Despite the administrative burdens of the SECRA program and the bad debt accounting treatment, we view our participation in SECRA as a wise investment which should stabilize our long-term value. In the absence of SECRA, our Q2 numbers would look significantly better. But consider the health and viability of our SECRA qualifying tenants. Absent this program, these tenants owed 100% of their rent for the last five months. With it, They owe 25%, which puts them in a much better position to adapt, to invest in their stores as we come out of this, and it is also strength in relationships with FCR. Largely owing to our participation in the program, we made the largest investment ever in our tenant base to help them through this highly unusual period. Besides the fact it's the right thing to do socially, it is indicative of our long-term view on real estate. But this pandemic has not only impacted small and medium-sized retailers. Others, including some very large ones, were also negatively impacted. It's been a lot of work and we have made progress. Of our 40 largest tenants, all but one have now paid full rent or now have a deal in place with the final one under active discussions. Our approach, however, was slightly different with our large tenants. In many cases, we deferred a portion of rent and in rare cases provided some abatement. However, these concessions, especially where an abatement was provided, generally came with lease amendments in FCR's favor. These include the extension of term with meaningful rental rate increases in some cases, And in others, we secured valuable redevelopment rates at a number of prime super-urban properties, as well as the relaxation of other restrictions, such as no-build areas or use exclusions. In summary, for concessions provided to non-secret qualifying tenants, FCR has generally received a meaningful benefit in exchange for rent deferrals, and in some cases abatement, once again demonstrating our commitment to long-term value creation. We continued to make progress on our entitlement submissions. Most notably in Q2, we submitted our rezoning application for our Christy Cookie property and held a virtual town hall to present this to the community. We were once again pleased to see the continued high levels of engagement from the community. This future development has long been deemed a high priority for the city of Toronto, as it will represent community building and we continue to make good progress with both the city and Metrolinx. We look forward to continue to providing updates as we achieve future milestones. On our last conference call, we noted that the transaction market had largely been on hold. Since then, we have seen an improvement. Accordingly, we are currently in discussions with several parties on potential dispositions, including on a portion of our density pipeline. While still preliminary, these will be beneficial to our deleveraging objective, which we continue to prioritize. In terms of IFRS values, we continue to use a property by property, tenant by tenant approach, which resulted in our IFRS NAV of $22.40 per unit at quarter end. As you know, Q1 included a much larger write-down than Q2. Our auditors again noted to our audit committee the very high standard FCR has set in terms of the rigor and process around IFRS valuations. Stepping back, the main question regarding the shape of our business is not tied to short-term rent collection numbers and it's not about how large our bad debt provision will ultimately be from COVID. Barring something drastic and unexpected, Q2 will be the largest charge we take. It's $16.8 million, or less than 8 cents per unit. This investment in our tenants is immaterial from a current valuation perspective, but perhaps important to long-term value creation. The main question is, where will vacancy slash NOI bottom and when will we return to pre-COVID levels? That's the real question in our view. Clearly, there is a large disconnect between market expectations and reality thus far. While we likely won't have a definitive answer for a few months, we are increasingly encouraged by what we are seeing in the business. Our investments in SECRA and concessions we have offered to some of our larger tenants will serve to strengthen their respective businesses and this de-risks our future beyond COVID. In summary, things look and feel better than they did three months ago at our Q1 call. Nearly all of our retail tenants are now open and doing increasingly higher sales volumes. Our development properties have also resumed with no material impact. Our density pipeline continues to be advanced through the entitlement process. We are in discussions with prospective buyers and our leasing team has been quite active. It's been a busy period for our team, supporting our tenants initially through FCR Small Business Program, and then mainly SECRA. This has and continues to take a huge employee effort. So a very big thank you to the many FCR team members who have gone above and beyond, not only with SECRA, but everything that has come about during this pandemic. I am more proud of you than ever. Before I finish my prepared remarks, I wanted to touch on ESG, starting with sustainability, which has become increasingly more important to our stakeholders. We are committed to upholding our position as an industry leader in sustainability. Last month, we published our 11th annual CRS report, or Corporate Responsibility and Sustainability. Some of the highlights included a 10% reduction in absolute greenhouse gas emissions over the last five years, 175 BOMA best certifications representing 76% of our portfolio, and four new construction projects achieving LEED certification. In December, we were named one of Greater Toronto's top 100 employers by the Globe and Mail for the first time And in June, we were named one of Canada's top small and medium employers. Our strength in ESG was recognized through numerous ratings, including our AAA rating, the highest possible from MSCI for the past three years. We were also an honoree in the Globe and Mail's inaugural 2020 Women Lead Here list with 63% of our eight executive roles occupied by strong women. Beyond gender, FCR has taken meaningful steps regarding equity, diversity, and inclusion. While we have a lot more planned in this regard, some of the things we have done so far is establish an equity, diversity, and inclusion council to evolve FCR's strategy in this area. As well, together with over 200 leading Canadian companies, FCR has signed the CEO pledge for the Black North Initiative to End Systemic Racism in Canada. In 2020, we will sharpen our focus on ESG further as we work across the company to establish a new five-year ESG roadmap. So with that, I will now pass things over to Kay, who will speak about the quarter in more detail. Kay?