First Capital Realty announces solid Q1 2010 results

TORONTO, May 6 /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 solid financial results for the quarter ended March 31, 2010.

FIRST QUARTER HIGHLIGHTS

    
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                                                           $ millions
    Quarter Ended March 31                          -------------------------
                                                       2010         2009
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    Enterprise value                                $     4,688  $     3,861
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    Debt to aggregate assets                              51.4%        54.5%
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    Debt to total market capitalization                   46.4%        58.1%
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    Property rental revenue                         $     118.1  $     110.3
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    Net operating income (NOI)                      $      74.7  $      68.3
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                                $ millions                 per share
    Quarter Ended March 31 --------------------------------------------------
                             2010         2009         2010         2009
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      Funds from operations
       (FFO) - Core
       Operations         $      37.3  $      34.5  $      0.38  $      0.38
    -------------------------------------------------------------------------
      FFO - EQY and Other
       Non-Recurring
       Items              $       0.1  $       3.7  $      0.00  $      0.04
    -------------------------------------------------------------------------
    Total FFO             $      37.4  $      38.2  $      0.38  $      0.42
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    Weighted average
     diluted shares for
     FFO (000's)               97,298       91,172
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      Adjusted funds from
       operations (AFFO) -
       Core Operations    $      39.6  $      35.4  $      0.36  $      0.36
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      AFFO - EQY and
       Other Non-Recurring
       Items              $       1.3  $       1.4  $      0.01  $      0.01
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    Total AFFO            $      40.9  $      36.8  $      0.37  $      0.37
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    Weighted average
     diluted shares for
     AFFO (000's)             110,872       99,552
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FIRST QUARTER 2010 OPERATING HIGHLIGHTS

    
    -   Invested $114 million in development activities, property
        improvements and acquisitions
    -   Added 278,000 square feet of gross leasable area from development and
        redevelopment coming on line, and acquisitions
    -   Acquired one income-producing property and an additional interest in
        an existing shopping centre totalling 200,000 square feet, a 50%
        interest in one property adjacent to an existing shopping centre
        totalling 28,000 square feet, two properties held for development and
        two land parcels adjacent to existing properties for future
        development comprising a total of 5.0 acres
    -   5.2% same property NOI growth; 3.0% excluding redevelopment and
        expansion space
    -   7.2% increase on rate per square foot on 259,000 square feet of
        renewal leases
    -   Occupancy of 96.3% compares to 96.2% at December 31, 2009 and 96.0%
        at March 31, 2009. Vacancy includes 0.6% of space held for
        redevelopment
    -   Gross new leasing totalled 196,000 square feet including development
        and redevelopment coming on line; lease closures totalled 138,000
        square feet and closures for redevelopment totalled 22,000 square
        feet
    -   Completed new leasing on existing space totalling 146,000 square feet
        at an average rate of $17.37 per square foot
    -   Lease rates on openings and redevelopment coming on line increased by
        9% versus all lease closures
    -   Average lease rate per occupied square foot increased by 4.0% from
        March 31, 2009 to $15.85 at March 31, 2010
    

"Our results are in line with our expectations," said Dori J. Segal, President & CEO, "In the quarter we recorded some one time gains offset by the short term effect of our long term financing strategy."

FINANCING AND CAPITAL MARKET HIGHLIGHTS

In the first quarter of 2010, the Company issued $125 million principal amount senior unsecured debentures, Series H, with a coupon rate of 5.85%, maturing January, 2017. As a result, the Company further reduced the availability of the syndicated secured revolving credit facility to $250 million and reduced its $75 million secured revolving credit facility to $50 million.

The Company also issued 1.3 million common shares for total proceeds of $24.8 million in the first quarter of 2010 through payment-in-kind of the interest due to holders of the 5.50% and 6.25% convertible debentures and through warrants and options exercised.

Subsequent to quarter end, the Company issued $75 million principal amount senior unsecured debentures, Series I, with a coupon rate of 5.70%, maturing November, 2017. The Company also committed to one secured financing transaction for gross proceeds of $19 million at an interest rate of 5.33% with a 2019 maturity. Furthermore, the Company repriced its revolving credit facilities.

On March 29, 2010, the Company announced that its board of directors unanimously approved, subject to the approval of shareholders and the Toronto Stock Exchange ("TSX"), the subdivision of its common shares at a ratio of 3.2 common shares for each two common shares. If approved by shareholders and the TSX, it is expected that the record date for the subdivision will be May 27, 2010 (or such other date to be announced by First Capital Realty).

Quarterly Dividend

The Company announced that it will pay a second quarter dividend of $0.20 per common share on July 8, 2010 to shareholders of record on June 25, 2010, which represents the regular quarterly dividend on a post split basis. In the event the split is not completed prior to the dividend record date, the quarterly dividend will be $0.32 per common share.

FINANCIAL RESULTS SUMMARY

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 (FFO)

    
    -------------------------------------------------------------------------
    (thousands of dollars, except
     per share amounts)                 Three months ended March 31, 2010
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                                                      FFO - EQY
                                                      and Other
                                                           Non-
                                        FFO - Core    recurring
                                        Operations        items    Total FFO
    -------------------------------------------------------------------------
    Net operating income                $   74,675   $        -   $   74,675
    Interest expense - Canadian
     operations                            (34,153)           -      (34,153)
    Interest expense - US operations             -            -            -
    Corporate expenses                      (5,389)           -       (5,389)
    Interest and other income                1,280            -        1,280
    Other gains (losses) and (expenses)      1,672           74        1,746
    Funds from operations from Equity
     One                                         -            -            -
    Amortization of non real estate
     assets                                   (813)           -         (813)
    Current income taxes                         -            -            -
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    Funds from operations               $   37,272   $       74   $   37,346
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    FFO per diluted share               $     0.38   $        -   $     0.38
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    Weighted average diluted shares
     - FFO                              97,297,868   97,297,868   97,297,868
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    -------------------------------------------------------------------------
    (thousands of dollars, except
     per share amounts)                 Three months ended March 31, 2009
    -------------------------------------------------------------------------
                                                      FFO - EQY
                                                      and Other
                                                           Non-
                                        FFO - Core    recurring
                                        Operations        items    Total FFO
    -------------------------------------------------------------------------
    Net operating income                $   68,300   $        -   $   68,300
    Interest expense - Canadian
     operations                            (28,211)         (60)     (28,271)
    Interest expense - US operations             -       (2,008)      (2,008)
    Corporate expenses                      (5,449)           -       (5,449)
    Interest and other income                  589            -          589
    Other gains (losses) and (expenses)          -          (48)         (48)
    Funds from operations from Equity
     One                                         -        6,869        6,869
    Amortization of non real estate
     assets                                   (724)           -         (724)
    Current income taxes                         -       (1,015)      (1,015)
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    Funds from operations               $   34,505   $    3,738   $   38,243
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    FFO per diluted share               $     0.38   $     0.04   $     0.42
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    Weighted average diluted shares
     - FFO                              91,172,216   91,172,216   91,172,216
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The Company's funds from operations - core operations for the quarter ended March 31, 2010 totalled $37.3 million or $0.38 per diluted common share which compares to $34.5 million or $0.38 per diluted common share for the three months ended March 31, 2009. FFO - core operations was positively affected by same property NOI growth and the effect of acquisitions and development coming on line. This gain was partially offset by increased interest and amortization expense. Interest expense increased due to the increase in total debt related to growth in the Company's core operations, and the increase in the proportion of higher cost fixed rate debt since the first quarter of 2009. In addition, the number of weighted average shares outstanding increased by 6.7% over the prior year.

FFO - EQY and other non-recurring items includes other gains (losses) and (expenses) and in the prior year, the effect of Equity One and its related interest expense and income taxes. For the three months ended March 31, 2010, FFO - EQY and other non-recurring items totalled $0.07 million or $nil per diluted common share basis which compares to $3.7 million or $0.04 per diluted common share in the corresponding prior year period.

During the quarter, the Company settled its litigation with the former co-owner of the Royal Oak Shopping Centre, resulting in the completion of the acquisition of the remaining 40% of the property that it did not already own. As a result, the Company recorded a gain of $1.7 million which consists of the collected net operating cash flow after interest expense from 40% of the property, less the additional cost of acquiring the property as a result of the settlement. The Company has included the entire net operating cash flow after interest expense, from the 40% of the property up to the acquisition date, in the calculation of AFFO for the quarter.

In addition, FFO - EQY and other non-recurring items included items such as gains on marketable securities offset by losses on debt extinguishment and losses on terminations of hedges, specifically:

    
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    Three months ended March 31                    2010                 2009
                                                           Non-         Non-
                                              Core    recurring    recurring
    ($ in thousands)                    Operations        items        items
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    Losses on debt extinguishment       $        -   $     (0.5)  $     (0.7)
    Realized loss on termination
     of hedges                                   -         (1.6)           -
    Unrealized gain on interest rate
     swaps not designated as hedges              -          0.6            -
    Gains on marketable securities               -          1.5          0.6
    Gains on sales of land                       -            -          0.1
    Gain on Royal Oak Shopping Centre
     settlement                                1.7            -            -
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    Total                               $      1.7   $      0.0   $      0.0
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Adjusted Funds from Operations (AFFO)

    
    -------------------------------------------------------------------------
                                        Three months ended March 31, 2010
    -------------------------------------------------------------------------
                                                     AFFO - EQY
                                                      and Other
                                                           Non-
    (thousands of dollars, except      AFFO - Core    recurring
     per share amounts)                 Operations        items   Total AFFO
    -------------------------------------------------------------------------
    Funds from operations               $   37,272   $       74   $   37,346
      Add/(Deduct):
      Interest expense payable
       in shares                             5,503            -        5,503
      Rental revenue recorded on a
       straight-line basis
       and market rent adjustments          (2,216)           -       (2,216)
      Non-cash compensation expense            665          (58)         607
      Revenue sustaining capital
       expenditures and leasing costs       (3,257)           -       (3,257)
      FFO from Equity One                        -            -            -
      Dividends from Equity One (Regular)        -            -            -
      Return of Capital portion of
       marketable securities - net               -            -            -
      Change in cumulative unrealized
       gain on marketable securities             -         (114)        (114)
      Loss on extinguishment of debt             -          477          477
      Additional pre-settlement net
       cash from property acquisition        1,605            -        1,605
      Realized losses on termination
       of hedges                                 -        1,588        1,588
      Unrealized gains on interest
       rate swaps not designated
       as hedges                                 -         (623)        (623)
      Gain on disposition of land                -            -            -
    -------------------------------------------------------------------------
    Adjusted funds from operations      $   39,572   $    1,344   $   40,916
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    AFFO per diluted share              $     0.36   $     0.01   $     0.37
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    Weighted average diluted shares
     for AFFO                          110,872,459  110,872,459  110,872,459
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    -------------------------------------------------------------------------
                                        Three months ended March 31, 2009
    -------------------------------------------------------------------------
                                                     AFFO - EQY
                                                      and Other
                                                           Non-
    (thousands of dollars, except      AFFO - Core    recurring
     per share amounts)                 Operations        items   Total AFFO
    -------------------------------------------------------------------------
    Funds from operations               $   34,505   $    3,738   $   38,243
      Add/(Deduct):
      Interest expense payable
       in shares                             3,458            -        3,458
      Rental revenue recorded on a
       straight-line basis
       and market rent adjustments          (1,690)           -       (1,690)
      Non-cash compensation expense            872            -          872
      Revenue sustaining capital
       expenditures and leasing costs       (2,427)           -       (2,427)
      FFO from Equity One                        -       (6,869)      (6,869)
      Dividends from Equity One (Regular)        -        5,328        5,328
      Return of Capital portion of
       marketable securities - net             636            -          636
      Change in cumulative unrealized
       gain on marketable securities             -       (1,352)      (1,352)
      Loss on extinguishment of debt             -          738          738
      Additional pre-settlement net
       cash from property acquisition            -            -            -
      Realized losses on termination
       of hedges                                 -            -            -
      Unrealized gains on interest
       rate swaps not designated
       as hedges                                 -            -            -
      Gain on disposition of land                -         (118)        (118)
    -------------------------------------------------------------------------
    Adjusted funds from operations      $   35,354   $    1,465   $   36,819
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    AFFO per diluted share              $     0.36   $     0.01   $     0.37
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    Weighted average diluted shares
     for AFFO                           99,552,226   99,552,226   99,552,226
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Management views AFFO as an effective measure of cash generated from operations. AFFO for the three months ended March 31, 2010 totalled $40.9 million or $0.37 per diluted common share compared to $36.8 million or $0.37 per diluted common share in the prior year period. AFFO is calculated by adjusting FFO for actual costs incurred for capital expenditures and leasing costs for maintaining shopping centre infrastructure, current lease revenues, and non-cash items including straight-line and market rent adjustments, non-cash compensation expenses, interest paid in shares, and gains or losses on debt and hedges. Land sales are excluded from AFFO. The Company's proportionate share of Equity One FFO is excluded and only the regular cash dividends received are included in the prior year's AFFO. The weighted average diluted number of shares outstanding for AFFO is adjusted to assume conversion of the outstanding convertible debentures. Non-recurring AFFO items primarily consists of dividends from Equity One, net of the associated interest expense and realized gains on marketable securities.

Net Income

    
    -------------------------------------------------------------------------
                                                Three months ended March  31
    ($ thousands, except per share amounts)                2010         2009
    -------------------------------------------------------------------------
    Net income                                       $    9,769   $    9,082
    Earnings per share (diluted)                     $     0.10   $     0.10
    Weighted average common shares - diluted (000's)     97,298       91,172
    -------------------------------------------------------------------------
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Net income for the three months ended March 31, 2010 was $9.8 million or $0.10 per share (basic and diluted) compared to $9.1 million or $0.10 per share (basic and diluted) for the prior year comparable period. The increase in net income is primarily due to the increase in NOI resulting from development projects coming on line and same property NOI growth, increased interest and other income, increased other gains (losses) and (expenses) offset by increased interest expense, increased amortization expense and decreased income from Equity One as a result of the dividend-in-kind. 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 ACTIVITIES

The Company invested $30 million in active development projects and improvements to existing properties during the first quarter of 2010. Development and redevelopment of 50,000 square feet was brought on line in the first quarter, leased at an average rate of $20.52 per square foot.

In addition, during the quarter, the Company invested $84 million in the acquisition of one income-producing property and the remaining 40% interest in Royal Oak Shopping Centre in Calgary, Alberta adding 200,000 square feet of gross leasable area, a 50% interest in one property adjacent to an existing shopping centre totalling 28,000 square feet, two parcels adjacent to existing properties and two properties held for development.

OPERATING SUMMARY

Net operating income for the three months ended March 31, 2010 totalled $74.7 million, compared to $68.3 million for the three months ended March 31, 2009, an increase of $6.4 million or 9.4%. NOI includes $980,000 of lease termination payments from 11 tenants in the quarter comprising of 32,000 square feet. Same property NOI increased by 5.2% in the first quarter of 2010, compared to the same prior year period, generating NOI growth of $3.4 million, primarily attributed to redevelopment and expansion space coming on line, lease termination payments and increases in lease rates and occupancy. Same property NOI for the first quarter of 2010, excluding expansion or redevelopment space, increased by $1.9 million or 3.0% over the same prior year period. Acquisitions completed in 2010 and 2009 contributed $1.4 million to NOI in the first quarter of 2010, while greenfield development activities contributed a further $2.2 million.

Gross new leasing in the first quarter of 2010 totalled 196,000 square feet including development and redevelopment space coming on line. The Company achieved a 7.2% increase on 259,000 square feet of renewal leases over the expiring rates.

The average rate per occupied square foot at March 31, 2010 increased to $15.85. This compares to an average rate of $15.24 per square foot at March 31, 2009 and $15.71 at December 31, 2009.

Portfolio occupancy at March 31, 2010 of 96.3% compares to 96.2% at December 31, 2009 and 96.0% at March 31, 2009. Closures for redevelopment totalled 22,000 square feet for the first quarter of 2010 providing potential for future income growth through leasing and redevelopment activities.

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 while enhancing the quality of its portfolio.

The current environment remains competitive with little transaction activity. Both debt and equity markets are accessible, but continue to be challenging relative to pricing currently being asked by property 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, and equity and debt capital can be priced and committed to maintain conservative leverage.

Development and redevelopment activities continue to provide the Company with opportunities to grow within its existing portfolio of assets. 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 given the current cost of capital.

Specifically, Management will focus on the following five areas to achieve its objectives in 2010:

    
    -   same property net operating income growth, taking into account
        maintaining high occupancy;
    -   development and redevelopment activities;
    -   selective acquisitions;
    -   increasing efficiency and productivity of operations; and
    -   improving the cost of capital, for both debt and equity.
    

Overall, Management is confident that the quality of the Company's balance sheet, the defensive nature of its assets and operations will continue to serve it well in the current environment.

2010 GUIDANCE

    
    -------------------------------------------------------------------------
    (before the effect of the proposed stock split)         Low         High
    -------------------------------------------------------------------------
                                FFO Guidance
    -------------------------------------------------------------------------
    Projected diluted net income per share                $0.38        $0.41
    Adjustments
      Projected amortization and future income taxes       1.14         1.16
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    Projected FFO per share                               $1.52        $1.57
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    Projected FFO                                       $150.5M      $155.0M
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    Projected weighted average shares outstanding for
     per share FFO calculations before the effect of
     the proposed stock split                                   99.2M
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                                AFFO Guidance
    -------------------------------------------------------------------------
    Projected FFO                                       $150.5M      $155.0M
    -------------------------------------------------------------------------
    Projected weighted average shares outstanding for
     per share AFFO calculations (including conversion
     of convertible debentures) before the effect of
     the proposed stock split                                  112.4M
    -------------------------------------------------------------------------
    Projected FFO per share (using weighted average
     AFFO shares outstanding)                             $1.34        $1.38
      Projected revenue sustaining capital expenditures   (0.12)       (0.12)
      Projected non-cash items, net                        0.13         0.15
    -------------------------------------------------------------------------
    Projected AFFO per share                              $1.35        $1.41
    -------------------------------------------------------------------------
    

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, corporate expenses, the level and timing of acquisitions of income-producing properties, the Company's capital structure and share price, the number of shares outstanding and numerous other factors. Not all factors which affect our range of projected funds from operations and adjusted funds from operations are determinable at this time, 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.

Guidance is based on first quarter 2010 actual results and specific assumptions including:

    
    -   Same property NOI growth of 1.0% to 1.5% (excluding redevelopment and
        expansion);
    -   Development, redevelopment and expansion coming on-line of 400,000 to
        450,000 square feet with approximate gross book value of $100 to $120
        million;
    -   Income-producing property acquisitions totalling $100 million;
    -   Development property acquisitions totalling $30 million; and
    -   Revenue sustaining capital expenditure is expected to be
        approximately $0.65 per average square foot.
    

The ranges presented represent Management's estimate of results based upon these assumptions as of the date of this press release. The purpose of the Company's guidance is to provide readers with Management's view as to the expected financial performance of the Company for 2010, using factors that are commonly accepted and viewed as meaningful indicators of financial performance in the real estate industry.

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

First Capital Realty invites you to participate in its live conference call with senior management announcing our first quarter 2010 results on Friday, May 7, 2010 at 1:00 p.m. E.S.T.

First quarter financial results will be released prior to the call and made available on First Capital Realty's website in the Pressroom section. The Supplemental Package link will be on our Home Page at www.firstcapitalrealty.ca or click on Investor Relations, investor 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 May 14, 2010 and can be accessed by dialing toll free 800-408-3053 or 416-695-5800 with access code 7662338.

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 the 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' followed by '4' 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 '1' followed by '3'. 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 176 properties, including three under development, totalling approximately 20.8 million square feet of gross leasable area and eight land sites in the planning stage for future retail development.

Forward Looking Statements

This press release and in particular the "Outlook" and "2010 Guidance" section, contains forward-looking statements and information within the meaning of applicable securities legislation. Forward-looking statements can generally be identified by the expressions "anticipate", "believe", "plan", "estimate", "expect", "intend", "outlook", "objective", "may", "will", "should", "continue" and similar expressions. 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. All forward-looking statements in this press release are qualified by these cautionary 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 "Risks and Uncertainties" in the Company's Management's Discussion and Analysis for the year ended December 31, 2009.

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 "Risk and Uncertainties" section 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, the relative illiquidity of real property, unexpected costs or liabilities related to acquisitions, construction, environmental matters, legal matters, reliance on key personnel, 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. The assumptions underlying the Company's forward-looking statements contained in the "Outlook" and "2010 Guidance" section of this press release include that consumer demand will remain stable, demographic trends will continue and there will continue to be barriers to entry in the markets in which the Company operates.

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 May 6, 2010.

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. These measures are the primary methods used in analyzing real estate organizations in Canada. 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) are not to be considered as alternatives to GAAP net income for the purpose of evaluating operating performance.

Funds from Operations ("FFO")

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 on depreciable assets 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.

FFO is considered a meaningful additional measure of operating performance, as it excludes amortization of real estate assets. FFO also adjusts for certain items included in GAAP net income that may not be the most appropriate determinants of the long-term operating performance of the Company including gains and losses on depreciable real estate assets.

Net Operating Income

NOI is defined as property rental revenue less property operating costs. In Management's opinion, NOI is useful in analyzing the operating performance of the Company's shopping centre portfolio. NOI is not a measure defined by GAAP and as such there is no standard definition. As a result, NOI may not be comparable with similar measures presented by other entities. NOI is not to 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)                                        March 31  December 31
    (thousands of dollars)                                 2010         2009
    -------------------------------------------------------------------------

    ASSETS
    Real Estate Investments
    Shopping centres                                $ 3,337,161  $ 3,288,759
    Land and shopping centres under development         268,078      224,772
    Deferred leasing costs                               17,642       17,471
    Intangible assets                                    21,868       22,549
    -------------------------------------------------------------------------
                                                      3,644,749    3,553,551
    Loans, mortgages and other real estate assets        59,318       59,220
    -------------------------------------------------------------------------
                                                      3,704,067    3,612,771
    Other assets                                         32,537       28,726
    Amounts receivable                                   49,546       45,598
    Cash and cash equivalents                             2,350        4,548
    -------------------------------------------------------------------------
                                                    $ 3,788,500  $ 3,691,643
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Mortgages, loans and credit facilities          $ 1,333,334  $ 1,354,668
    Accounts payable and other liabilities              125,380      137,658
    Intangible liabilities                               13,593       13,193
    Senior unsecured debentures                         841,294      717,040
    Convertible debentures                              330,252      329,739
    Future income tax net liabilities                    46,362       43,502
    -------------------------------------------------------------------------
                                                      2,690,215    2,595,800
    SHAREHOLDERS' EQUITY                              1,098,285    1,095,843
    -------------------------------------------------------------------------
                                                    $ 3,788,500  $ 3,691,643
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF EARNINGS

    -------------------------------------------------------------------------
                                                          Three months ended
    -------------------------------------------------------------------------
    (unaudited)                                        March 31     March 31
    (thousands of dollars, except per share amounts)       2010         2009
    -------------------------------------------------------------------------

    REVENUE
    Property rental revenue                         $   118,113  $   110,343
    Interest and other income                             1,280          589
    -------------------------------------------------------------------------
                                                        119,393      110,932
    -------------------------------------------------------------------------
    EXPENSES
    Property operating costs                             43,438       42,043
    Interest expense                                     34,153       30,279
    Amortization
      Shopping centres                                   22,182       20,550
      Deferred leasing costs                              1,014          929
      Intangible assets                                   1,362        2,107
      Deferred financing fees                               429          328
      Other assets                                          384          396
    Corporate expenses                                    5,389        5,449
    -------------------------------------------------------------------------
                                                        108,351      102,081
    -------------------------------------------------------------------------
    Income before the undernoted items                   11,042        8,851
    -------------------------------------------------------------------------

    Equity income from Equity One, Inc.                       -        4,030
    Other gains (losses) and (expenses)                   1,727          163
    -------------------------------------------------------------------------
    Income before income taxes                           12,769       13,044
    -------------------------------------------------------------------------
    Income taxes
      Current                                                 -        1,015
      Future                                              3,000        2,947
    -------------------------------------------------------------------------
                                                          3,000        3,962
    -------------------------------------------------------------------------
    Net income                                      $     9,769  $     9,082
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per common share, basic and diluted    $      0.10  $      0.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    -------------------------------------------------------------------------
                                                          Three months ended
    -------------------------------------------------------------------------
    (unaudited)                                        March 31     March 31
    (thousands of dollars)                                 2010         2009
    -------------------------------------------------------------------------

    NET INCOME                                      $     9,769  $     9,082
    -------------------------------------------------------------------------

    OTHER COMPREHENSIVE INCOME (LOSS)

    Unrealized foreign currency gains on translating
     self-sustaining foreign operations
      Gains arising during the period                         -        1,658
    Other comprehensive  income of Equity One, Inc.
      Gains arising during the period                         -        3,365
    Unrealized gains on cash flow hedges
     of interest rates
      Unrealized gains arising during the period              -          421
    Change in cumulative unrealized gains (losses)
     on available-for-sale marketable securities
      Unrealized losses arising during the period             -       (2,309)
      Reclassification adjustments for gains
       included in net income                            (1,093)           -
    -------------------------------------------------------------------------
    Other comprehensive (loss) income before
     income taxes                                        (1,093)       3,135
    -------------------------------------------------------------------------
    Future income tax (recovery) expense                   (175)         233
    -------------------------------------------------------------------------
    Other comprehensive (loss) income                      (918)       3,368
    -------------------------------------------------------------------------

    COMPREHENSIVE INCOME                            $     8,851  $    12,450
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS

    -------------------------------------------------------------------------
    (thousands of dollars, except per share amounts)      Three months ended
    -------------------------------------------------------------------------
                                                       March 31     March 31
                                                           2010         2009
    -------------------------------------------------------------------------

    Net income for the period                       $     9,769  $     9,082

    Add (deduct):
      Amortization of shopping centres, deferred
       leasing costs and intangible assets               24,558       23,586
      Loss (gain) on disposition of income-producing
       shopping centres                                      19         (211)
      Equity income from Equity One                           -       (4,030)
      Funds from operations from Equity One                   -        6,869
      Future income taxes                                 3,000        2,947
    -------------------------------------------------------------------------
    Funds from operations ("FFO")                        37,346       38,243
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    FFO per diluted share                           $      0.38  $      0.42
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average diluted shares - FFO            97,297,869   91,172,216
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    FIRST CAPITAL REALTY INC.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    -------------------------------------------------------------------------
                                                          Three months ended
    -------------------------------------------------------------------------
    (unaudited)                                        March 31     March 31
    (thousands of dollars)                                 2010         2009
    -------------------------------------------------------------------------

    CASH FLOW PROVIDED BY (USED IN):
    OPERATING ACTIVITIES
    Net income                                      $     9,769  $     9,082
    Items not affecting cash
      Amortization                                       25,371       24,310
      Amortization of above- and below-market leases       (513)        (713)
      Rent revenue recognized on a straight-line
       basis                                             (1,703)        (977)
      Gain on disposition of income-producing
       property                                              19         (211)
      Gains on disposition of land                            -         (118)
      Realized (gains) losses on sale of marketable
       securities                                        (1,379)         780
      Change in cumulative unrealized (gains) losses
       on marketable securities held-for-trading           (114)      (1,352)
      Loss on settlement of debt                            477          738
      Non-cash compensation expense                         607          872
      Interest paid in excess of effective interest
       on assumed mortgages                                (282)        (320)
      Effective interest rate in excess of coupon
       rate on senior unsecured and convertible
       debentures                                           338          218
      Convertible debenture interest paid in
       common shares                                      8,710        6,360
      Other non-cash interest expense                       825          652
      Equity income from Equity One, Inc.                     -       (4,030)
      Unrealized gains on interest rate swaps not
       designated as hedges                                (623)           -
      Loss on foreign currency exchange                      35            -
      Future income taxes                                 3,000        2,947
    Deferred leasing costs                               (1,184)      (1,025)
    Dividends received from Equity One, Inc.                  -        5,328
    Net change in non-cash operating items              (11,643)     (18,411)
    -------------------------------------------------------------------------
    Cash provided by operating activities                31,710       24,130
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES
    Acquisition of shopping centres                     (32,343)      (5,685)
    Acquisition of land and shopping centres held
     for development                                    (21,167)      (1,399)
    Proceeds from disposition of shopping centre            200            -
    Proceeds from disposition of land held for
     development                                              -           70
    Expenditures on shopping centres                     (5,478)      (6,183)
    Expenditures on land and shopping centres under
     development                                        (23,227)     (30,833)
    Changes in accounts payable and accrued
     liabilities related to investing activities         (8,950)     (23,455)
    Increase in loans and mortgages receivable              (90)        (693)
    Investment in marketable securities                 (10,551)      (2,687)
    Return of capital from investments in marketable
     securities                                            (179)         636
    Proceeds from disposition of marketable securities    9,848        3,295
    -------------------------------------------------------------------------
    Cash used in investing activities                   (91,937)     (66,934)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES
    Mortgage financings, loans and credit facilities
      Borrowings, net of financing costs                 29,151      267,843
      Principal instalment payments                      (8,633)     (10,078)
      Other repayments on maturity                      (71,092)    (186,186)
    Issuance of convertible debentures, net of
     issue costs                                            (40)           -
    Issuance of senior unsecured debentures, net of
     issue costs                                        123,950            -
    Issuance of common shares, net of issue costs        15,427          (60)
    Payment of dividends                                (30,734)     (29,103)
    -------------------------------------------------------------------------
    Cash provided by financing activities                58,029       42,416
    -------------------------------------------------------------------------
    Effect of currency rate movement on cash balances         -        1,205
    -------------------------------------------------------------------------
    (Decrease) increase in cash and cash equivalents     (2,198)         817
    Cash and cash equivalents, beginning of
     the period                                           4,548        7,263
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of the period    $     2,350  $     8,080
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    SUPPLEMENTARY INFORMATION
    Cash income taxes paid                          $         -  $       458
    -------------------------------------------------------------------------
    Cash interest paid                              $    28,966  $    30,587
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE First Capital Realty Inc.

For further information: For further information: Dori J. Segal, President & C.E.O., or Karen H. Weaver, Executive Vice President & 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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