First Capital Real Estate Investment Trust

All participants, please stand by. Your conference is ready to begin. Good afternoon. Thank you for standing by. Welcome to the first Capital Reach Q4 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 meeting over to Addison. 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 MD&A for the year ended December 31, 2023, and our current AI apps, 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 REIT's 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, Allison. Good afternoon, everyone, and thank you for joining us today for our year-end conference talk. 2023 was a busy and successful year, but before we get into our results, I want to start with some perspective on the strong fundamentals supporting our business. One of the main drivers of these underlying fundamentals has been the significant increase in the customer base of our tenants. Over the last two years alone, Canada's population has grown by 2.1 million people. That's a staggering number for a country of our size, representing a 5.4% increase. First Capital's properties are located in neighborhoods within Canada's largest markets, which are precisely the areas that are attracting the majority of this growth. This population increase creates more demand for everything, particularly the necessity-based goods and services that our tenants sell. Against that backdrop, there has been almost no new supply of grocery anchorage centers for several years. There are two main barriers to entry for new supply in the neighborhoods our properties are located. The first are physical barriers. Sites are scarce, given the urban nature of our portfolio, and for sites that do exist, high-density residential is typically the highest value used. The second barrier is economic. Replacement costs, mainly from higher construction and soft costs, have increased significantly over the last few years. They are well in excess of current market values for grocery and food centers, which makes it highly unlikely there will be any new supply over the foreseeable future. The combination of high population growth and a lack of new supply continues to reduce the square footage per capita of FTR-type retail. In terms of inflation, it too is having an impact. 75% of our top 20 tenants are public companies. So we know that inflation has benefited their top-line sales, and importantly, their profit margins have largely remained intact. This means that store profitability and therefore rent-paying capability have improved. Against that backdrop, our leasing pipeline remains deep, with many of our tenants pursuing an expansion of their physical footprint. This includes all the major grocery stores. For instance, our largest tenant, Loblaw's Ambition, is to open 40 new stores across their grocery and pharmacy banners. It also includes restaurants across the spectrum, such as Chick-fil-A, McDonald's, Firehouse Subs, Chipotle, and many others seeking large expansions. Jersey Mike's is another example. They're seeking 300 locations across BC, Ontario, and Alberta. It includes the fitness category with Good Life, Planet Fitness, and Anytime Fitness growing their location count. It also includes the pet category across multiple retailers. For instance, Pet Value is targeting 40 to 50 new stores per year. Daycares are expanding as well. So are general merchandise retailers such as Winners and the likes of Dollarama, who, for example, are aiming for 30 new stores per year over the foreseeable future. I could go on. The point is, fundamentals are solid, so we continue to expect strong operating performance, and that came through in our 2023 results. Occupancy improved by 30 basis points since Q3 to 96.2%. Lease renewal spreads also continue to track well. In 2021, they were 8.6%. In 2022, they increased to 9.5%. And in 2023, they jumped to 12.1%, our strongest since 2009. Our leasing activity led to an average in-place rental rate at year-end of $23.34 per square foot. This is higher than all of our peers, and it's also a record at FCR, a record we expect to eclipse this year. Throughout 2023, we made important and meaningful progress on our optimization plan. Our investment team had an outstanding year executing this plan. Dory will provide some color on the transactions we announced yesterday, but in total, we are now at over $630 million of dispositions under the plan, at an average yield of less than 3%, and an average premium to pre-marked IFRS carrying value equal to 21%. The new sales we announced yesterday had a much higher premium. This outsized premium was heavily weighted to a development property in which our zoning progress is well advanced. However, under our valuation policy, the value uplift isn't recognized until a series of conditions are met. One of these conditions is obtaining the formal zoning permissions, which is imminent Therefore, we believe the buyer values the property on a fully zoned basis, which drove such a high premium to IFRS now. Our collective investment activity continues to demonstrate that we can sell the right assets for SCR at big prices. I know many are focused on how we're tracking against our billion-dollar target, and we are clearly on track. But what's more meaningful than disposition volume is that we're tracking ahead on the objectives of the plan. Specifically, our targets on growth in FFO per unit and on lower debt to EBITDA. Our disposition activity is largely neutralizing a significant headwind that the entire real estate sector is facing, which is of course higher interest rates. This is having a positive impact on FFO per unit. Now we have some noise impacting the headline number in Q4, but As Neil will explain, it is just noise, with continued strength in the underlying business. Our investment activities are also having a positive impact on our debt to EBITDA, which has decreased by one full turn in the last five quarters and heading lower still. Lower debt to EBITDA is important for our cost of unsecured debt capital, and it's also important to our equity investors and our FFL multiples specifically. Lastly, we believe that many of the assets we're selling have not been fully valued by traditional REIT investors when they assess FCR. The bottom line is that our investment activities are increasing the value of First Capital. Now, we're pleased with our progress, but we will continue pushing forward and working hard for our investors. That's a good segue into our upcoming Investor Day, which We've also been very busy preparing for it. We're going to cover several important things on February 21st. This is an in-person event, and based on our current registration levels, we're going to have a great turnout. For those who haven't registered, please do so, and we look forward to welcoming you. And with that, I will now pass things over to Neil.