First Capital Real Estate Investment Trust

Good afternoon. Thank you for standing by. Welcome to the first Capital REIT Q3 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 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 securities filing, including our Q3 MD&A, our MD&A for the year ended December 31, 2022, 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 REAP'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.

Thank you very much, Allison. Good afternoon, everyone, and thank you for joining us for our conference talk. Overall, Q3 was a good quarter. Neil will provide details on the key metrics, while my remarks will speak to some of the things we are seeing in the business that will have more of an impact on our future. Earlier this month, we held an internal conference for our real estate services team, which is comprised of our property operations and leasing personnel. To kick off the conference, I had the opportunity to lead a discussion on the secular change underway that is impacting the fundamentals for the space we own. Starting with inflation, both with respect to replacement costs as well as tenant sales. Replacement costs have escalated significantly over the past few years. Today, we estimate they are roughly 50% higher than the market value of the necessity-based retail space FCR owns. This dynamic will continue to keep new supply effectively muted, as has been the case for several years now. The space our tenants occupy is more valuable today than ever before on a replacement cost basis. Secondly, FCR's tenant sales have been positively impacted by inflation. Just as important, margins have generally been protected across our tenant categories, Higher sales with stable margins means that tenant rent-paying capability has improved. Next, we discuss Canada's robust population growth. The neighborhoods in which SCR's properties are located continue to attract a significant share of this growth. The lack of supply, coupled with higher population, continues to decrease the retail square footage per capita in our trade areas. Now, to bring this all together, inflation has increased replacement costs and increased tenant sales, while margins have largely been protected. This significantly improves FCR's tenants' renting capability, even as rental rates rise. The population of the trade areas we operate are also growing significantly, which increases the customer base of our tenants. And next to no new supply has or will be created, absent exceptional rental rate growth. These factors underpin the fundamentals of the grocery-anchored, necessity-based retail properties we own, and that is a good segue into our third quarter results. Occupancy remains in the range of full at 96%, with some positively impactful vacant spaces to come online in the near future. Some of those are at our One Bloor East property. Last quarter, we unexpectedly got back 40,000 square feet of space previously occupied by Nordstrom Rack. I'm pleased to share that we have entered into a long-term lease with Altia for an upscale wellness and fitness concept that is very well suited for the area. They will occupy the entire second level of the former Nordstrom space with a ground floor entrance totaling 32,000 square feet. we have strong demand for the remaining 8,000 square feet of the former Nordstrom space, which is located on the ground floor at the hard corner of Yonge and Bloor. We expect to share good news on that space soon. It's clear at this point, current market rents are significantly higher than the Nordstrom rents set a decade ago. Rounding out one Bloor East, beyond the former Nordstrom space, the property had 20,000 square feet of available space, all of which fronts Bloomer Street. We're thrilled to announce that all of the space has been leased to two tenants, the larger being Nike for a flagship location. We're making great progress on leasing opportunities in other properties as well. Consistent with the strong fundamentals I touched on, our leasing pipeline is deep. This strength in leasing will continue to benefit FCR as we navigate through some of the macro headwinds that are out of our control, such as interest rates. We continue to take a proactive approach to expense management while maintaining a high-performance culture. This is not new to us. Our past includes a major restructuring that reduced our headcount by 20%. Over time, we've also right-sized our executive leadership team reducing it from nine to six. And there are many other expense management initiatives we've undertaken. During the third quarter, we incurred nearly a million dollars of severance costs. These costs will have a payback period of less than one year. Our optimization plan continues to progress well and remains well on track. Jory will provide some color on our recent transactions, both during and subsequent to the quarter. In total, we're now at $517 billion of dispositions under the plan, at an average yield of less than 3%, and an average premium to pre-mark IFRS carrying values equal to 14%. This progress is a result of the outstanding work and incredible execution by our investment team. and a market that's become less constructive since we started a year ago. But they continue to find the right buyer for each asset, which has been a lot of work, but has resulted in numerous transactions at very strong pricing. We continue to surface unrecognized value that we have created in numerous low-yielding assets in which we have seen our short-to-medium-term value-enhancing goals achieved. And we have another wave of properties in which our rezonings have or will be imminently secured and will contribute to a future batch of asset sales under our plan. These include our Staples Logitech property in Burnaby and 801 York Mills in Toronto, among numerous others. The sales of the properties under our plan have the rare and impactful effect of improving both our balance sheet and our earnings or FFO per unit at the same time. This is a key differentiator for FCR, particularly in an environment of higher interest rates. It's also a testament to the expertise and hard work of our development team in continuing to successfully build and execute our entitlements program. Speaking of higher interest rates, the significant increase in long bond yields by approximately 75 basis points during the quarter is not helpful for stable IPP values. It is true that transaction volumes remain very limited, but that does not mean IFRS cap rates should be unaffected. Accordingly, and responsibly in our view, we adjusted our average in-place cap rate for IPP assets by 30 basis points. Neil will cover this further in his remarks. I'll importantly point out, though, that the assets in our optimization plan are generally not stable IPP properties. And therefore, these were not subject to any appreciable fair value markdowns. In fact, the assets that remained in the optimization plan saw a modest net fair value increase of $12 million during the quarter. Turning to our environmental and climate-related activities, During the quarter, we received Gresby Sector Leader status in the Development Benchmark in the North American Retail Peer Group with a score of 90. And we ranked second in the Gresby Standing Investments Benchmark in the listed Canadian Retail Centers Peer Group with a score of 82. And to close my remarks today, on the social side, I am pleased to note that the SCR Thriving Neighborhoods Foundation team raised more than $220,000 for kids' health homes through the foundation's second annual commercial real estate softball classic held in September. This brings our total fundraising for kids' health homes to over $400,000. I'd like to thank all of the ICRT members and our real estate friends and partners for coming together to support such an important cause. And with that, I will now pass things over to Neil.