First Capital, Inc.

This conference is being recorded. Cette conférence est enregistrée. Ladies and gentlemen, thank you for standing by. Welcome to the first Capital Rates Q2 2022 results conference call. During the presentation, all participants will be in a listening-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 device's 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 forward-looking 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 31st, 2021, and our current AIF, which are available on CDAR and 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 REITs performance. These non-IFRS measures are further defined and discussed in our MD&A, which should be read in conjunction with this call. I'll now turn the call over to Adam.

Thank you very much, Alison. Good afternoon, everyone, and thank you for joining us today for our Q2 conference call. In addition to Alison, with me today are several members of the FCR team, including Jordy Robbins and Neil Downey, who you will hear from shortly. The second quarter was another busy and productive period for FCR. The hard work of our talented team, coupled with our strategic focus on high quality, grocery anchored and mixed use properties located within Canadian neighborhoods with the most compelling demographic profiles, continued to deliver solid operating results. But before we get into the quarter specifically, I'll spend a moment on our two-pronged real estate strategy that we had discussed last on our conference call a few months ago. Our roots are largely in grocery anchored retail properties located in neighborhoods with superior demographics. These assets are primarily merchandised with necessity based retailers in urban and top tier suburban markets. Examples include our properties in Vaughan, Mississauga and Oakville to use GTA examples. We remain focused on this type of real estate in all of our core markets. It is the largest component of our portfolio, representing roughly 70% of our asset base today. We aim to continuously improve the value of these existing centers through merchandising mix enhancements, property improvements, redevelopment, and or increasing rental rates through leasing activities. These assets typically provide a compelling combination of stability and growth. particularly with the benefit of FCR's platform. We have a proven track record over two decades of extracting maximum value from these types of properties. It is our intent to apply our value-add capabilities to more of these centers, and in fact have added a great one in the GTA subsequent to quarter-end. The second part of our real estate strategy involves properties situated in Canada's most urban markets, or as we refer to them, super urban neighborhoods. These communities are the most transit connected and desirable in terms of where the majority of people want to live, work, and socialize. They're also the most dense. These super urban FCR assets are primarily grocery anchored mixed use properties. examples include our portfolios in yorkville and liberty village two large positions that alone represent approximately 15 percent of fcr's total portfolio our 24 million square foot development pipeline is also focused on properties within our super urban strategy over time these neighborhoods have produced the strongest population growth and have the greatest barriers to entry for new supply As a result, retail sales per square foot in these neighborhoods have generally grown at the highest rates. In many cases, there exists an opportunity for intensification of low-density properties. In time, they can be redeveloped into multi-story, mixed-use developments with meaningful amounts of both FCR-type retail and much-needed residential. Besides Yorkville and Liberty Village, Other examples of super-urban properties are our Christy Cookie development site in Toronto, Falls Creek Village in Vancouver, Brewery District in Edmonton, Mount Royal Village in Calgary, and Griffintown in Montreal, among others. For both types of FCRs properties, so stable, gross-ranked centers, mainly in top-tier suburban neighborhoods, and primarily gross-ranked mixed-use properties in super-urban neighborhoods, supply is and will continue to be constrained given replacement costs are now well above market values. In addition, tenant sales are continuing to rise and leasing demand from tenants remains elevated. This combination of factors should bode very well for future rent growth for both types of assets in our portfolio. With the prospect of an economic slowdown higher today than last quarter, it's also important to note that our portfolio has demonstrated tremendous stability through previous recessions given our prime locations and necessity-based nature of our tenant base. With that strategic framework as a backdrop, we'll now move into the second quarter. We all know how critical leasing is to our business. and it's been a validating bright spot for FCR for a long time and through various economic cycles and world events. The strength we have demonstrated for quite some time now continued in the second quarter, with over 800,000 square feet of leasing at very healthy rent increases. This contributed to solid same property and wide growth of 6%, or 3.8% without bad debts and lease termination fees for those who prefer to exclude them. It also contributed to our average in-place rental rate increasing to an all-time high for the 24th consecutive quarter. Our retail portfolio continued to see broad base strength across geographies and property types. Last quarter, we noted the positive momentum that had started to surface in our new residential rental assets in Toronto. That momentum accelerated through the second quarter with rental rates and demand strengthening. In Toronto's Liberty Village, our King Highline residential property is fully stabilized where market rents have increased by roughly 10% in the last three months alone and are continuing to rise. Our even newer Station Place asset is leasing up according to plan and is now roughly 70% leased with rents exceeding pro forma. We expect stabilization to occur in Q4 of this year. We also made investments during the quarter to advance our real estate strategy and our development program specifically, which Jordi will review. And while we didn't have substantial closings in the quarter, we advanced several dispositions that we remain active on. To take advantage of the large disconnect between our intrinsic value or NAV and our current trading price, we implemented an NCIB during the quarter and repurchased approximately 4.6 million FCR units for a total of $71 million. The $15.23 average price per unit represents an implied cap rate in the mid-6% range and a price per square foot of approximately $350. which is less than half of replacement costs. Today, repurchasing FCR units provides the best risk-adjusted opportunity that we have available to us, even if asset values modestly decline in the short term. So we will continue taking advantage of this to the extent the magnitude of the disconnect persists. This quarter, we continue to deliver on our ESG commitments outlined in our three-year ESG roadmap that can be found on our website. Fresh on the heels of last quarter's announcement as being recognized as one of Canada's greenest employers, we achieved our 127th LEED certification at our Chartwell Shopping Centre in Scarborough, Ontario. This brings our portfolio to 4.4 million square feet of LEED-certified assets, In addition to this milestone, FCR received two certificates of excellence from BOMA Canada. One for our head office property at 85 Hanna and the second for our Brooklyn Town Centre. Thank you to our ESG and operations teams who passionately make our properties and our company better. While accolades are nice, it is clearly not why we do what we do. We've discussed many times that our approach to ESG has many tentacles. and that the philosophy is deeply ingrained in our culture. One priority in our ESG plan has been to foster biodiversity in our neighborhoods. As an example, we know bees play a critical role in a functioning ecosystem. So we were pleased to add an additional five new beehives across the country, totaling 16 in our portfolio. And we've installed our first urban farm at our head office in Liberty Village. which will yield approximately 300 pounds of vegetables that will be donated as fresh organic produce to the Second Harvest Food Bank. Reducing the impact of climate change on our cities and neighborhoods takes all of us. Partnering with our tenants in mutually beneficial green lease agreements leads to higher performing buildings and healthier, more sustainable communities. We're very pleased that FCR received the 2022 Green Lease Leader Gold Award issued by the Institute for Market Transformation and the Department of Energy's Better Building Alliance. We have been at the forefront of environmental best practices in the Canadian real estate industry for well over a decade, and I know our team appreciates this recognition. We'll provide more updates on ESG in the future, And in the meantime, the ESG section of our website is regularly updated and has a wealth of information on our activities. So, overall, a busy and productive quarter with healthy and strengthening operating metrics. We are a real estate company first and foremost, and accordingly, we will continue to focus on our real estate and executing our strategy. And with that, I will now pass things over to Neil.