First Capital Realty announces continued strong Q2 financial results



    TORONTO, Aug. 7 /CNW/ - First Capital Realty Inc. ("First Capital
Realty") (TSX:FCR) Canada's leading owner, developer and operator of
supermarket and drugstore-anchored neighbourhood and community shopping
centres, located predominantly in growing metropolitan areas, announced today
strong financial results for the second quarter ended June 30, 2008.

    SECOND QUARTER 2008 HIGHLIGHTS:

    
    -------------------------------------------------------------------------
    ($ millions, except                      30 June     30 June  Percentage
    per share amounts)                          2008        2007      Change
    -------------------------------------------------------------------------
    Enterprise value                        $  4,328    $  4,165       3.9 %
    -------------------------------------------------------------------------
    Property rental revenue                 $  101.9    $   93.5       9.0 %
    -------------------------------------------------------------------------
    Net operating income (NOI)              $   64.0    $   60.2       6.3 %
    -------------------------------------------------------------------------
    Funds from operations (FFO)             $   34.5    $   30.0      15.0 %
    -------------------------------------------------------------------------
    FFO per diluted share                   $   0.40    $   0.39       2.6 %
    -------------------------------------------------------------------------
    Adjusted funds from operations (AFFO)   $   35.1    $   30.6      14.7 %
    -------------------------------------------------------------------------
    AFFO per diluted share                  $   0.37    $   0.36       2.8 %
    -------------------------------------------------------------------------
    Debt to aggregate assets
     (Properties at 8.3% Cap rate and
     EQY at $14 USD per share)                 53.6%       55.5%
    -------------------------------------------------------------------------
    Debt to total market capitalization        46.8%       46.4%
    -------------------------------------------------------------------------
    Weighted average diluted shares for
     FFO (000's)                              87,269      77,904      12.0 %
    -------------------------------------------------------------------------
    Weighted average diluted shares for
     AFFO (000's)                             95,899      85,251      12.5 %
    -------------------------------------------------------------------------


    OPERATIONS HIGHLIGHTS:

    -   Invested $71 million in development activities, property improvements
        and acquisitions
    -   49,000 square feet of gross leasable area from development and
        redevelopment coming on line
    -   2.8% same property NOI growth; 1.6% excluding redevelopment and
        expansion space
    -   15.9% increase on 281,000 square feet of renewal leases
    -   Occupancy of 95.5% compares to 95.3% at December 31, 2007. Vacancy
        includes 1.4% of space held for redevelopment
    -   Gross new leasing totalled 122,000 square feet including development
        and redevelopment coming on line; lease closures totalled
        72,000 square feet and closures for redevelopment totalled
        54,000 square feet
    -   Average lease rate per occupied square foot increased by 4.2% to
        $14.80 at June 30, 2008 compared to $14.20 at June 30, 2007

    SIX MONTHS HIGHLIGHTS:

    -------------------------------------------------------------------------
    ($ millions, except                      30 June     30 June  Percentage
    per share amounts)                          2008        2007      Change
    -------------------------------------------------------------------------
    Property rental revenue                 $  203.7    $  184.1      10.6 %
    -------------------------------------------------------------------------
    Net operating income (NOI)              $  127.0    $  116.9       8.6 %
    -------------------------------------------------------------------------
    Funds from operations (FFO)             $   68.8    $   61.1      12.6 %
    -------------------------------------------------------------------------
    FFO per diluted share                   $   0.82    $   0.79       3.8 %
    -------------------------------------------------------------------------
    Adjusted funds from operations (AFFO)   $   66.8    $   58.7      13.8 %
    -------------------------------------------------------------------------
    AFFO per diluted share                  $   0.72    $   0.69       4.3 %
    -------------------------------------------------------------------------
    Weighted average diluted shares for
     FFO (000's)                              84,316      77,351       9.0 %
    -------------------------------------------------------------------------
    Weighted average diluted shares for
     AFFO (000's)                             92,793      84,831       9.4 %
    -------------------------------------------------------------------------

    -   Invested $122 million in development activities, property
        improvements and acquisitions
    -   192,000 square feet of gross leasable area coming on line from
        development and redevelopment activities and acquisitions
    -   Acquired one income-producing property totalling 49,000 square feet,
        one land site and six land parcels adjacent to existing properties
        comprising a total of 15.1 acres of commercial land for future
        development
    -   3.9% same property NOI growth; 2.1% excluding redevelopment and
        expansion space
    -   15.1% increase on 504,000 square feet of renewal leases
    -   Gross new leasing totalled 296,000 square feet including development
        and redevelopment coming on line; lease closures totalled
        250,000 square feet and closures for redevelopment totalled
        99,000 square feet;
    -   Lease rates on openings and redevelopment coming on line increased by
        21.7% versus all lease closures
    -   In aggregate, 9.8 million common shares were issued year-to-date,
        including equity offerings, dividend reinvestment plan, payment in
        shares of the interest due to holders of the 5.50% convertible
        debentures, options and warrants exercised for total equity of
        $215 million
    

    "We continue to generate strong organic growth through our development
and redevelopment activities, as well as higher lease rates" said Dori J.
Segal, President & CEO. "Looking ahead we remain focussed on creating value
from our existing portfolio of shopping centres and land assets. Over the next
six to twelve months we expect to bring on line approximately 1.3 million
square feet of leaseable space with a gross book value of approximately $350
million, all in keeping with our strategy of operating in major urban markets
with high barriers to entry and home to tenants providing shopping for
everyday life."

    FINANCIAL HIGHLIGHTS

    FFO and AFFO presented herein are key financial measures used by the real
estate industry to measure and compare the operating performance of real
estate organizations. FFO and AFFO are supplemental non-GAAP financial
measures and a complete reconciliation containing adjustments from GAAP net
income to FFO and AFFO is included in this press release.

    Funds from Operations

    Funds from operations for the three months ended June 30, 2008 totalled
$34.5 million or $0.40 per diluted common share and increased from
$30.0 million or $0.39 per diluted common share in the same period in 2007.
FFO for the six months ended June 30, 2008 totalled $68.8 million or $0.82 per
diluted common share, and increased from $61.1 million or $0.79 per diluted
common share in the same period in 2007. The increase in FFO for the quarter
and year-to-date was primarily due to an increase in net operating income
resulting from acquisitions and development projects coming on line, same
property NOI growth, lower interest expense and corporate expenses; partially
offset by a decrease in Equity One FFO. In addition, there was an increase in
the basic and weighted average diluted shares outstanding compared to the same
prior year period.

    Adjusted Funds from Operations

    Management views AFFO as an effective measure of cash generated from
operations. For the three months ended June 30, 2008, AFFO rose 2.8% to $0.37
per diluted common share from $0.36 per diluted common share in the same
period in 2007. AFFO for the first six months of 2008 totalled $66.8 million
or $0.72 per diluted common share compared to $58.7 million or $0.69 per
diluted common share in the first six months of 2007. AFFO is calculated by
adjusting FFO for amortization of non-cash financing costs, accretion of debt
discounts, straight-line and market rent adjustments, non-cash compensation
expenses, interest payable in shares, non-cash gains or losses on debt, hedges
and land sales and actual costs incurred for capital expenditures and leasing
costs for maintaining shopping centre infrastructure and current lease
revenues. The Company's proportionate share of Equity One FFO is excluded and
only the regular cash dividends received are included in AFFO. The weighted
average diluted shares outstanding for AFFO is adjusted to assume conversion
of the outstanding convertible debentures.

    
    Net Income

    -------------------------------------------------------------------------
    ($ thousands, except               Three months ended   Six months ended
     per share amounts)                       June 30            June 30
    -------------------------------------------------------------------------
                                          2008      2007      2008      2007
    -------------------------------------------------------------------------
    Net income                        $ 10,168  $  6,286  $ 18,529  $ 14,161
    -------------------------------------------------------------------------
    Earnings per share (diluted)      $   0.12  $   0.08  $   0.22  $   0.18
    -------------------------------------------------------------------------
    Weighted average common shares -
     diluted (000's)                    87,269    77,904    84,316    77,351
    -------------------------------------------------------------------------
    

    Net income for the three and six months ended June 30, 2008 amounted to
$10.2 million or 12 cents per share (basic and diluted) and $18.5 million or
22 cents per share (basic and diluted), respectively. This compares to
$6.3 million or eight cents per share (basic and diluted) and $14.2 million or
18 cents per share (basic and diluted), respectively, for the three and six
months ended June 30, 2007. The increase in net income is primarily due to the
Company's income-producing property acquisitions and development projects
coming on line, offset by increased amortization expense. In addition, there
was an increase in the basic and weighted average diluted shares outstanding
compared to the same prior year period.

    DEVELOPMENT AND ACQUISITION HIGHLIGHTS

    During the second quarter of 2008, the Company invested $70 million in
active development projects and improvements to existing properties bringing
the six month total investment to $101 million.
    Development of 39,100 square feet was brought on line in the second
quarter with 38,600 square feet leased at an average rate of $19.55 per square
foot. The Company also reopened 10,200 square feet of redeveloped space at an
average rate of $15.30 per square foot. Year-to-date the Company brought on
line 111,000 square feet with 92,100 leased at an average rate of $20.20 per
square foot and reopened 32,000 square feet of redeveloped space at an average
rate of $19.64 per square foot.
    In addition, the Company acquired one land parcel in the second quarter
adjacent to an existing property comprising a total of 0.8 acres of commercial
land for future development. Through the first six months of 2008, the Company
invested $20.7 million in one income-producing property comprising 49,000
square feet and one land site and six land parcels adjacent to existing
properties comprising a total of 15.1 acres of commercial land for future
development.
    On August 6, 2008, the Company acquired Deer Valley Shopping Centre, a
196,000 square foot shopping centre located in Calgary, Alberta. Major tenants
include Co-op Grocery Store, Zellers, Shoppers Drug Mart and Royal Bank. The
purchase price of $31.6 million including closing costs was satisfied in cash.
The Company intends to redevelop the property.

    OPERATING HIGHLIGHTS

    Net operating income for the three months ended June 30, 2008 totalled
$64.0 million, compared to $60.2 million in the second quarter of 2007, an
increase of $3.8 million or 6.3%. Same property NOI increased 2.8% generating
growth of $1.4 million in the second quarter 2008 over the second quarter of
2007, due to redevelopment and expansion space and increases in lease rates
and occupancy. Same property NOI excluding expansion or redevelopment space
increased by $0.8 million or 1.6% over the same prior year period.
    Year-to-date, acquisitions completed in 2008 and 2007 contributed
$6.4 million, while greenfield development activities contributed a further
$9.7 million. Same property net operating income increased 3.9%, generating
growth of $4.0 million in the six month period ended June 30, 2008. Excluding
redevelopment and expansion space, same property NOI grew by $2.1 million or
2.1% over the same period in 2007.
    Gross new leasing in the second quarter totalled 122,000 square feet
including development and redevelopment coming on line. Lease rates on
openings and redevelopment coming on line increased by 27.9% versus all lease
closures. The Company achieved a 15.9% increase on 281,000 square feet of
renewal leases over the expiring rates. For the six months ended June 30,
2008, gross new leasing totalled 296,000 square feet. Renewal leasing totalled
504,000 square feet with a 15.1% increase over expiring rates.
    The average rate per occupied square foot at June 30, 2008 increased to
$14.80. This compares to an average rate of $14.56 per square foot at
December 31, 2007.
    Portfolio occupancy at June 30, 2008 of 95.5% up from 95.3% at
December 31, 2007 and 95.0% at June 30, 2007. Closures for redevelopment
totalled 54,000 square feet for the second quarter of 2008 providing potential
for future income growth through leasing and redevelopment activities.

    FINANCING AND CAPITAL MARKET HIGHLIGHTS

    For the six month ending June 30, 2008, First Capital Realty issued
common shares to further enhance the Company's financial flexibility and
provide capital for continued growth. In the aggregate, 7.1 million common
shares were issued primarily from the following activities:

    
    -   On January 9, 2008, the Company issued 862,363 common shares at a net
        price of $22.79 to participants in the Dividend Reinvestment Plan
        ("DRIP");

    -   On March 26, 2008, the Company issued 4,900,000 common shares at a
        price of $22.25 for gross proceeds of $109 million;

    -   On March 31, 2008, the Company issued 301,432 common shares at a net
        price of $21.51 as payment of the interest due to holders of the
        5.50% convertible debentures;

    -   On April 9, 2008, the Company issued 908,107 common shares at a net
        price of $21.84 to participants in the DRIP.
    

    SUBSEQUENT EVENT HIGHLIGHTS

    Common Share Issue

    On July 3, 2008, the Company completed the sale of 1,600,000 common
shares as well as 240,000 additional shares pursuant to the exercise of the
over-allotment option by the underwriters at a price of $23.60 per common
share for gross proceeds of $43.4 million.

    Dividend Reinvestment Plan

    On July 10, 2008, the Company issued 914,578 common shares at a net price
of $22.42 to participants in the DRIP.
    The Company announced today that it is suspending the DRIP. Accordingly,
any dividend payable to shareholders after this date, including the third
quarter dividend will not be subject to the DRIP. The suspension will be in
effect unless and until further notice is given. The Company will consider
from time-to-time reinstating the DRIP.

    Quarterly Dividend
    ------------------
    The Company announced that it will pay a third quarter dividend of $0.32
per common share on October 9, 2008 to shareholders of record on September 26,
2008.

    OUTLOOK

    Over the past several years First Capital Realty has made significant
progress in growing its business and generating accretive growth in funds from
operations.
    The current environment remains extremely competitive, however the
competition seems to have shifted to the capital side of the Company's
business. Both debt and equity markets are challenging relative to pricing
currently being asked by the vendors. The Company will continue to selectively
acquire properties that are well-located and of high quality, where they add
strategic value and/or operating synergies provided they will be accretive to
FFO over the long term.
    Development and redevelopment activities continue to provide the Company
with opportunities to grow within its existing portfolio and to participate in
new growth markets. Once completed, these activities typically generate higher
returns on investment.
    With respect to acquisitions of both income-producing and development
properties, the Company will continue to focus on maintaining the
sustainability and growth potential of rental income to ensure that among
other things, refinancing risk is minimized. This is particularly important in
the current environment of low capitalization rates and the increasing cost
and scarcity of capital.
    Specifically, Management will focus on the following four areas to
achieve its objectives in 2008:

    
    -   same property net operating income growth;

    -   development and redevelopment activities;

    -   increasing efficiency and productivity of operations; and

    -   capital preservation in order to decrease dependence on capital
        markets.
    

    Overall, Management is confident that the quality of the Company's real
estate will continue to generate sustainable and growing cash flows while
producing superior returns on investment over the long term.

    2008 GUIDANCE

    
    -------------------------------------------------------------------------
    (per share amounts)                                        Low      High
    -------------------------------------------------------------------------
    Projected diluted net income                             $0.41     $0.43
    -------------------------------------------------------------------------
    Adjustments
    -------------------------------------------------------------------------
      Projected FFO from Equity One                           0.22      0.23
    -------------------------------------------------------------------------
      Projected equity income from Equity One                (0.15)    (0.17)
    -------------------------------------------------------------------------
      Projected amortization and future income taxes          1.16      1.18
    -------------------------------------------------------------------------
    Projected FFO                                            $1.64     $1.67
    -------------------------------------------------------------------------
    

    Projections involve numerous assumptions such as rental income (including
assumptions on timing of lease-up, development coming on line and levels of
percentage rent), interest rates, tenant defaults, the U.S. - Canadian foreign
currency exchange rate, corporate expenses, level and timing of acquisitions
of income-producing properties, number of shares outstanding and numerous
other factors. In addition, the projected range of funds from operations
includes Equity One based on publicly available information. Not all factors
which affect our range of projected funds from operations are determinable at
this time and actual results may vary from the projected results in a material
respect, and may be above or below the range presented in a material respect.
Specific assumptions include same property NOI growth of 2-3% (excluding
redevelopment and expansion activities), income-producing property
acquisitions totalling $50 million, development coming on line of 700,000 to
800,000 square feet with approximate gross book value of $200 million to $230
million and the current interest rate environment and current US-Canadian
foreign exchange rate. The range presented represents Management's estimate of
results based upon these assumptions as of the date of this press release.
    Readers should refer to the section below titled "Forward Looking
Statements" for important information relating to our guidance, including risk
factors.

    MANAGEMENT CONFERENCE CALL AND WEBCAST

    Management will hold a conference call on Friday, August 8, 2008 at
1:00 p.m. EST. Second quarter financial results will be released prior to the
call and made available on First Capital Realty's website in the News section.
The Supplemental Package link will be on our Home Page at
www.firstcapitalrealty.ca or click on Investor Relations, Downloads.

    Teleconference:

    You may participate in the live conference toll free at 866-299-6657 or
at 416-641-6135. To ensure your participation, please call five minutes prior
to the scheduled start of the call. The call will be archived through August
15, 2008 and can be accessed by dialing toll free 800-408-3053 or 416-695-5800
with access code 3266666.

    Webcast:

    To access the webcast, go to First Capital Realty's website at
www.firstcapitalrealty.ca, and click on the link for the webcast at the bottom
of our Home Page. The webcast will be archived on our Home Page for 30 days
and can be accessed, thereafter, in our Conference Calls section of our
website.

    Slide Presentation

    A slide presentation to accompany Management's comments during the
conference call will be available. To view the slides, please go to First
Capital Realty's website at www.firstcapitalrealty.ca, and click on the link
for the Conference Call at the top of our Home Page.
    Management's presentation will be followed by a question and answer
period. To ask a question, press '(*) 1' on a touch-tone phone. The conference
call coordinator is immediately notified of all requests in the order in which
they are made, and will introduce each questioner. To cancel your request,
press the pound key '#'. If you hang up, you can reconnect by dialing
866-299-6657 or 416-641-6135. For assistance at any point during the call,
press '(*)0'.

    ABOUT First Capital Realty (TSX:FCR)

    First Capital Realty is Canada's leading owner, developer and operator of
supermarket and drugstore-anchored neighbourhood and community shopping
centres, located predominantly in growing metropolitan areas. The Company
currently owns interests in 169 properties, including eleven under
development, totalling approximately 19.5 million square feet of gross
leasable area and seven land sites in the planning stage for future retail
development. In addition, the Company owns 14.0 million shares of Equity One
(approximately 19.05%), one of the largest shopping centre REITS in the
southern U.S., that trades on the New York Stock Exchange under the ticker
symbol EQY. Including its investment in Equity One, the Company has interests
in 327 properties totalling approximately 35.4 million square feet of gross
leasable area.

    Forward Looking Statements

    Certain statements included in this press release constitute
forward-looking statements, including those identified by the expressions
"anticipate", "believe", "plan", "estimate", "expect", "intend" and similar
expressions to the extent they relate to the Company or its Management. The
forward-looking statements are not historical facts but reflect the Company's
current expectations regarding future results or events and are based on
information currently available to Management. Certain material factors and
assumptions were applied in providing these forward-looking statements.
    Management believes that the expectations reflected in forward-looking
statements are based upon reasonable assumptions; however, Management can give
no assurance that actual results will be consistent with these forward-looking
statements. These forward-looking statements are subject to a number of risks
and uncertainties that could cause actual results or events to differ
materially from current expectations, including the matters discussed under
"Risk Management" in the Management's Discussion and Analysis ("MD&A")
contained in the Company's 2007 Annual Report which is available on SEDAR at
www.sedar.com.
    Factors that could cause actual results or events to differ materially
from those expressed, implied or projected by forward-looking statements in
addition to those described in the MD&A, include, but are not limited to,
general economic conditions, the availability of new competitive supply of
retail properties which may become available either through construction or
sublease, First Capital Realty's ability to maintain occupancy and to lease or
re-lease space at current or anticipated rents, tenant bankruptcies, financial
difficulties and defaults, changes in interest rates and credit spreads,
changes in the U.S.- Canadian foreign currency exchange rate, changes in
operating costs, First Capital Realty's ability to obtain insurance coverage
at a reasonable cost and the availability of financing.
    Readers, therefore, should not place undue reliance on any such
forward-looking statements. Further, a forward-looking statement speaks only
as of the date on which such statement is made. First Capital Realty
undertakes no obligation to publicly update any such statement or to reflect
new information or the occurrence of future events or circumstances except as
required by securities laws.
    These forward-looking statements are made as of August 7, 2008.


    NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES

    Funds from Operations and Adjusted Funds from Operations

    In Management's view, funds from operations ("FFO") and adjusted funds
from operations ("AFFO") are commonly accepted and meaningful indicators of
financial performance in the real estate industry. First Capital Realty
believes that financial analysts, investors and shareholders are better served
when the clear presentation of comparable period operating results generated
from FFO and AFFO disclosures supplement Canadian generally accepted
accounting principles ("GAAP") disclosure. The Company's method of calculating
FFO and AFFO may be different from methods used by other corporations or REITs
(real estate investment trusts) and accordingly, may not be comparable to such
other corporations or REITs. FFO and AFFO are presented to assist investors in
analyzing the Company's performance. FFO and AFFO: (i) do not represent cash
flow from operating activities as defined by GAAP, (ii) are not indicative of
cash available to fund all liquidity requirements, including payment of
dividends and capital for growth and (iii) should not be considered as
alternatives to GAAP net income for the purpose of evaluating operating
performance.

    Funds from Operations - RealPac Recommendations

    First Capital Realty calculates FFO in accordance with the
recommendations of the Real Property Association of Canada ("RealPac"). The
definition is meant to standardize the calculation and disclosure of FFO
across real estate entities in Canada, modelled on the definition adopted by
the National Association of Real Estate Investment Trusts ("NAREIT") in the
United States. FFO as defined by RealPac differs in two respects from the
definition adopted by NAREIT. Under the RealPac definition, future income
taxes are excluded from FFO, whereas under the NAREIT definition, they are
included. In addition, impairment losses are excluded from the RealPac FFO
definition, whereas the NAREIT definition includes them. As a result, when
calculating FFO, the Company adjusts the FFO reported by Equity One to comply
with the RealPac definition, when appropriate.

    Net Operating Income

    Net operating income ("NOI") is defined as property rental revenue less
property operating costs. In Management's opinion, net operating income is
useful in analyzing the operating performance of the Company's shopping centre
portfolio. Net operating income is not a measure defined by GAAP and there is
no standard definition of net operating income. Accordingly, net operating
income may not be comparable with similar measures presented by other
entities. Net operating income should not be construed as an alternative to
net income or cash flow from operating activities determined in accordance
with GAAP.


    
    FIRST CAPITAL REALTY INC.

    CONSOLIDATED BALANCE SHEETS

    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    (unaudited)                                        June 30   December 31
    (thousands of dollars)                                2008          2007
    -------------------------------------------------------------------------

    ASSETS
    Real Estate Investments
    Shopping centres                              $  2,743,509  $  2,718,078
    Land and shopping centres under development        345,574       284,077
    Deferred costs                                      75,941        79,606
    Intangible assets                                   31,591        35,938
    -------------------------------------------------------------------------
                                                     3,196,615     3,117,699
    Investment in Equity One, Inc.                     195,456       191,536
    Loans, mortgages and other real estate assets       18,370        11,589
    -------------------------------------------------------------------------
                                                     3,410,441     3,320,824
    Other assets                                        36,426        32,395
    Amounts receivable                                  39,715        36,008
    Cash and cash equivalents                            5,208        10,451
    Future income tax assets                             9,758         9,731
    -------------------------------------------------------------------------
                                                  $  3,501,548  $  3,409,409
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Mortgages, loans and credit facilities        $  1,434,709  $  1,471,114
    Accounts payable and other liabilities             117,221       110,006
    Intangible liabilities                              16,683        17,795
    Senior unsecured debentures                        595,818       595,376
    Convertible debentures                             217,624       217,030
    Future income tax liabilities                       50,559        46,757
    -------------------------------------------------------------------------
                                                     2,432,614     2,458,078
    SHAREHOLDERS' EQUITY                             1,068,934       951,331
    -------------------------------------------------------------------------
                                                  $  3,501,548  $  3,409,409
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF EARNINGS


    -------------------------------------------------------------------------

                               Three months ended          Six months ended
    -------------------------------------------------------------------------
    (unaudited)
    (thousands of dollars,
     except per share         June 30      June 30      June 30      June 30
     amounts)                    2008         2007         2008         2007
    -------------------------------------------------------------------------
    REVENUE
    Property rental
     revenue              $   101,905  $    93,547  $   203,667  $   184,056
    Interest and other
     income                       110        1,942        1,905        5,058
    -------------------------------------------------------------------------
                              102,015       95,489      205,572      189,114
    -------------------------------------------------------------------------
    EXPENSES
    Property operating
     costs                     37,864       33,335       76,686       67,147
    Interest expense           27,587       29,272       57,202       57,675
    Amortization
      Shopping centres         15,109       13,574       29,533       26,608
      Deferred costs            4,436        3,717        8,768        7,373
      Intangible assets         2,061        2,078        4,274        3,829
      Deferred financing
       fees                       202            -          406            -
      Other assets                341          250          614          488
    Corporate expenses          5,357        7,148       11,232       12,363
    -------------------------------------------------------------------------
                               92,957       89,374      188,715      175,483
    -------------------------------------------------------------------------
    Equity income from
     Equity One, Inc.           5,007        3,241        8,817        7,667
    Loss on settlement
     of debt                        -            -            -         (483)
    -------------------------------------------------------------------------
    Income before
     income taxes              14,065        9,356       25,674       20,815
    -------------------------------------------------------------------------
    Income taxes:
      Current                     687          648        1,329        1,267
      Future                    3,210        2,422        5,816        5,387
    -------------------------------------------------------------------------
                                3,897        3,070        7,145        6,654
    -------------------------------------------------------------------------
    Net income            $    10,168  $     6,286  $    18,529  $    14,161
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per
     common share
    Basic                 $      0.12  $      0.08  $      0.22  $      0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Diluted               $      0.12  $      0.08  $      0.22  $      0.18
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS


    -------------------------------------------------------------------------

                               Three months ended          Six months ended
    -------------------------------------------------------------------------
    (unaudited)
    (thousands of dollars,
    except per share          June 30      June 30      June 30      June 30
    amounts)                     2008         2007         2008         2007
    -------------------------------------------------------------------------

    Net income for
     the period           $    10,168  $     6,286  $    18,529  $    14,161

    Add (deduct):
    Amortization of
     shopping centres,
     deferred costs
     and intangible
     assets                    21,606       19,369       42,575       37,810
    Loss (gain) on
     disposition of
     income-producing
     shopping centre                -           10            -         (323)
    Equity income from
     Equity One, Inc.          (5,007)      (3,241)      (8,817)      (7,667)
    Funds from operations
     from Equity One, Inc.      4,519        5,203       10,701       11,720
    Future income taxes         3,210        2,422        5,816        5,387
    -------------------------------------------------------------------------

    Funds from
     operations           $    34,496  $    30,049  $    68,804  $    61,088
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    FFO per diluted
     share                $      0.40  $      0.39  $      0.82  $      0.79
    Weighted average
     diluted shares
     - FFO                 87,269,113   77,904,479   84,315,976   77,350,655
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    CONSOLIDATED STATEMENTS OF ADJUSTED FUNDS FROM OPERATIONS


    -------------------------------------------------------------------------

                               Three months ended          Six months ended
    -------------------------------------------------------------------------
    (unaudited)
    (thousands of dollars,
    except per share          June 30      June 30      June 30      June 30
    amounts)                     2008         2007         2008         2007
    -------------------------------------------------------------------------

    FFO                   $    34,496  $    30,049  $    68,804  $    61,088
      Add/(Deduct):
      Amortization of
       deferred
       financing fees             499          504        1,053        1,067
      Amortization of
       deferred
       debenture
       issue costs                308          286          614          636
      Rental revenue
       recorded on a
       straight line
       basis and market
       rent adjustments        (2,006)      (2,249)      (3,892)      (4,317)
      Non-cash
       compensation
       expense                  1,102        1,264        2,067        1,846
      Accretion and
       amortization of
       discount on debt           215          142          422          280
      Interest paid in
       excess of
       implicit
       interest on
       assumed
       mortgages                 (384)        (565)        (849)        (821)
      Interest expense
       payable in shares        3,186        2,720        6,373        5,432
      Change in
       cumulative
       unrealized (gains)
       losses on
       marketable
       securities                 268        1,865          259          821
      Non-cash loss
       on extinguishment
       of debt                      -            -            -          483
      Funds from
       operations from
       Equity One              (4,519)      (5,203)     (10,701)     (11,720)
      Dividends from
       Equity One
       (Regular)                4,278        4,469        8,584        9,285
      Gain on interest
       rate swaps not
       designated as
       hedges                       -         (538)           -         (926)
      Gain on disposition
       of land                      -            -       (1,275)           -
      Revenue sustaining
       capital
       expenditures and
       leasing costs(1)        (2,318)      (2,136)      (4,651)      (4,454)
    -------------------------------------------------------------------------
    Adjusted funds from
     operations           $    35,125  $    30,608  $    66,808  $    58,700
    -------------------------------------------------------------------------
    Adjusted funds from
     operations per
     diluted share        $      0.37  $      0.36  $      0.72  $      0.69
    -------------------------------------------------------------------------
    Weighted average
     diluted shares
     for AFFO(2)           95,898,743   85,250,633   92,793,235   84,831,374
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Estimated at $0.50 per square foot per annum on average gross
        leasable area for the quarter.
    (2) Includes the weighted average outstanding shares that would result
        from the conversion of the convertible debentures.


    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


    -------------------------------------------------------------------------

                               Three months ended         Six months ended
    -------------------------------------------------------------------------
    (unaudited)               June 30      June 30      June 30      June 30
    (thousands of dollars)       2008         2007         2008         2007
    -------------------------------------------------------------------------

    NET INCOME            $    10,168  $     6,286  $    18,529  $    14,161
    -------------------------------------------------------------------------

    OTHER COMPREHENSIVE
     INCOME

    Unrealized foreign
     currency (loss)
     gain on translating
     self-sustaining
     foreign operations          (326)      (5,767)       1,268       (6,481)
    Other comprehensive
     (loss) income of
     Equity One, Inc.            (613)         857       (1,887)         891
    Gain (loss) on cash
     flow hedges of
     interest rates             1,457          640         (418)         345
    Change in cumulative
     unrealized loss on
     available-for-sale
     marketable securities       (244)        (299)        (295)        (604)
    Reclassification of
     adjustment for gains
     and losses on cash
     flow hedges of
     interest rates
     included in income             -         (163)           -         (436)
    -------------------------------------------------------------------------
    Other comprehensive
     income (loss) before
     income taxes                 274       (4,732)      (1,332)      (6,285)
    Future income tax
     recovery                     381          376         (295)          96
    -------------------------------------------------------------------------
    Other comprehensive
     (loss) income               (107)      (5,108)      (1,037)      (6,381)
    -------------------------------------------------------------------------

    COMPREHENSIVE INCOME  $    10,061  $     1,178  $    17,492  $     7,780
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                               Three months ended         Six months ended
    -------------------------------------------------------------------------
    (unaudited)               June 30      June 30      June 30      June 30
    (thousands of dollars)       2008         2007         2008         2007
    -------------------------------------------------------------------------
    CASH FLOW PROVIDED
     BY (USED IN):

    OPERATING ACTIVITIES

    Net income            $    10,168  $     6,286  $    18,529  $    14,161
    Items not affecting
     cash
      Amortization             22,149       19,619       43,595       38,298
      Amortization of
       above- and
       below-market
       leases                    (543)        (514)      (1,087)        (993)
      Rent revenue
       recognized on a
       straight-line
       basis                   (1,463)      (1,735)      (2,805)      (3,324)
      Gain on disposition
       of shopping centre           -           10            -         (323)
      Gain on disposition
       of land                      -            -       (1,275)           -
      Realized (gains)
       losses on sale of
       marketable securities        -       (2,590)          52       (3,273)
      Unrealized losses
       (gains) on investment
       in marketable
       securities                 268        1,865          259          821
      Loss on settlement
       of debt                      -            -            -          483
      Non-cash compensation
       expense                  1,102        1,264        2,067        1,846
      Interest paid in
       excess of coupon
       interest on assumed
       mortgages                 (384)        (565)        (849)        (821)
      Debenture interest
       in excess of coupon        215          142          422          280
      Convertible debenture
       interest paid in
       common shares                -            -        6,483        5,485
      Other non-cash
       interest expense           605          790        1,261        1,703
      Equity income from
       Equity One, Inc.        (5,007)      (3,241)      (8,817)      (7,667)
      Future income taxes       3,210        2,422        5,816        5,387
      Unrealized gains on
       interest rate swaps
       not designated -
       as hedges                    -         (622)           -         (765)
    Deferred leasing costs       (626)      (1,081)      (1,584)      (1,628)
    Dividends received from
     Equity One, Inc.           4,278        4,469        8,584        9,285
    Net change in non-cash
     operating items           11,794       12,200       (1,445)       2,595
    -------------------------------------------------------------------------
    Cash provided by
     operating activities      45,766       38,719       69,206       61,550
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES

    Acquisition of
     shopping centres               -      (41,337)      (6,648)    (165,001)
    Acquisition of land
     for development              (90)      (4,845)     (11,107)     (20,374)
    Proceeds from disposition
     of income-producing
     property, net of
     costs of disposition           -            -            -        6,400
    Proceeds from disposition
     of land for development,
     net of costs of
     disposition                1,826            -        1,826            -
    Expenditures on
     shopping centres          (3,967)      (4,985)      (7,848)      (8,097)
    Expenditures on land
     and shopping centres
     under development        (65,074)     (34,321)     (91,587)     (57,017)
    Investment in common
     shares of Equity One,
     Inc.                           -       (2,254)           -       (2,254)
    Increases in loans and
     mortgages receivable         (81)         (67)        (300)        (294)
    Investment in marketable
     securities                (9,016)      (7,994)      (9,188)     (27,944)
    Proceeds from disposition
     of marketable securities   2,130        9,947        2,130       22,489
    -------------------------------------------------------------------------
    Cash used in investing
     activities               (74,272)     (85,856)    (122,722)    (252,092)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES

    Mortgage financings,
     loans and credit
     facilities
      Borrowings, net of
       financing costs        136,237       47,401      223,627      161,887
      Principal instalment
       payments                (9,380)      (9,857)     (18,741)     (19,856)
      Repayments on
       maturity              (130,321)    (111,635)    (248,682)    (167,530)
    Issuance of common
     shares, net of issue
     costs                        838        2,647      105,500        2,986
    Issuance of senior
     unsecured debentures,
     net of issue costs             -       99,202            -      198,304
    Issuance of convertible
     debentures, net of
     issue costs                    -       53,306            -       53,306
    Payment of dividends       (7,517)      (5,155)     (13,366)     (10,222)
    -------------------------------------------------------------------------
    Cash (used in) provided
     by financing
     activities               (10,143)      75,909       48,338      218,875
    -------------------------------------------------------------------------
    Effect of currency
     rate movement on
     cash balances                (39)        (799)         (65)        (767)
    -------------------------------------------------------------------------
    (Decrease) increase in
     cash and cash
     equivalents              (38,688)      27,973       (5,243)      27,566
    Cash and cash
     equivalents,
     beginning
     of the period             43,896        6,403       10,451        6,810
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of the period        $     5,208  $    34,376  $     5,208  $    34,376
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTARY
     INFORMATION

    Cash income taxes
     paid                 $       613  $       458  $       926  $       904
    -------------------------------------------------------------------------
    Cash interest
     paid                 $    29,586  $    26,143  $    59,981  $    53,489
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    





For further information:

For further information: Dori J. Segal, President & C.E.O., or Karen H.
Weaver, C.F.O., First Capital Realty Inc., 85 Hanna Avenue, Suite 400,
Toronto, Ontario, Canada, M6K 3S3, Tel: (416) 504-4114, Fax: (416) 941-1655,
www.firstcapitalrealty.ca


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