
First Capital Real Estate Investment Trust
TSX:FCR.UN

First Capital Real Estate Investment Trust
Tucked into the fabric of Canada's bustling urban landscapes is First Capital Real Estate Investment Trust, a prominent player in the commercial real estate sector. First Capital REIT specializes in owning, operating, and developing mixed-use properties that are predominantly retail-focused, situated in densely populated neighborhoods. As a forward-thinking entity, the company strategically positions its assets in urban areas with strong demographic trends and income levels, thereby fostering a thriving environment for tenants while attracting staggering foot traffic. These locations typically house grocery-anchored shopping centers, which cater to everyday consumer needs, thereby reinforcing their significance to local communities and ensuring consistent demand for their spaces.
First Capital REIT’s financial model hinges on generating stable and growing cash flows through leasing its properties to a diverse mix of tenants. These range from well-known national and international retail chains to local businesses, providing a balanced tenant base. Moreover, the trust is active in the realm of property development and redevelopment, continuously seeking opportunities to enhance its portfolio by maximizing the value of its properties through both expansion and innovative use of space. This ability to dynamically adapt and upgrade its holdings, while capitalizing on urban growth trends, positions First Capital REIT to achieve steady financial performance, simultaneously benefitting its stakeholders and bolstering its market position.
Earnings Calls
In Q1 2025, FCR reported operating FFO of $69 million, reflecting robust leasing activity despite a slight year-over-year decrease. Key performance indicators demonstrated a 5.3% growth in same-property NOI, supported by record rents at $24.23 per square foot. FCR expects full-year NOI growth of 4% and remains on track for a 3% FFO per unit growth target over the strategic plan. Adjustments include a revised total disposition target of $750 million, down from $1 billion, reflecting market conditions. The company reported a debt-to-EBITDA ratio of approximately 8.9x, signaling improved financial health.
Good afternoon. Thank you for standing by. Welcome to the Q1 2025 Conference Call. [Operator Instructions] I would now like to turn the meeting over to Alison. Please proceed with your presentation.
Thank you, and good afternoon. In discussing our financial and operating performance and responding to your questions during today's call, we may make forward-looking statements. These statements are based on our current estimates and assumptions, many of which are beyond our control and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in these statements.
A summary of these underlying assumptions, risks and uncertainties is contained in our securities filings including our MD&A for Q1 and for the year ended December 31, 2024, and our current AIF, which are available on SEDAR+ and our website. These forward-looking statements are made as of today's date, and except as required by law, we undertake no obligation to publicly update or revise any such statements.
During today's call, we will also be referencing certain non-IFRS financial measures. These do not have standardized meanings prescribed by IFRS and should not be construed as alternatives to net income or cash flow from operating activities determined in accordance with IFRS. Management provides these as a complement to IFRS measures to aid in assessing the REIT's performance. These non-IFRS measures are further defined and discussed in our MD&A, which should be read in conjunction with this call. I'll now turn it over to Adam.
Thank you very much, Alison. Good afternoon, everyone, and thank you for joining us today for our Q1 2025 conference call. We're really pleased with how the year has started. Our first quarter financial results were characterized by continued strength in our operating performance, which was driven by robust leasing activity and the execution of our capital allocation strategy.
These results demonstrate how our grocery-anchored retail properties provide insulation from today's macroeconomic uncertainty. Same-property cash NOI grew by a very strong 5.3% before factoring in lease termination fees and bad debt expense, which had a very small impact. This growth was primarily driven by higher rents. Q1 occupancy matched an all-time high of 96.9% last set in Q4 of 2019. However, rents in place are notably higher today than they were then.
In Q1, we surpassed our previous all-time high, setting a new record with an average net rent in place of $24.23 per square foot. During Q1, we renewed just over 500,000 square feet across 98 spaces. Renewal rental rates in year 1 of the renewal term averaged $24.91 per square foot, representing a year 1 renewal and increase of 13.6%, which is once again above our long-term average.
This included six fixed rate renewals, which, if excluded, increases our year 1 renewal lift to roughly 17%. We also extended our track record of securing meaningful contractual rent escalations to take effect during the renewal terms. In Q1, 74% of our renewed leases included contractual rent escalations, resulting in a renewal lift of nearly 19% when comparing net rents in the last year of the expiring term to the average net rent during the renewal term.
In addition to renewal leasing, we also completed approximately 90,000 square feet of new leasing across 42 spaces, carrying an average year on rent of approximately $32 per square foot. In short, leasing activity continues to be very strong. We see a long runway for rent growth, given that economic rents remain well in excess of both market rents and in-place rents. As most of you know, we are now almost halfway into a three-year strategic plan that we presented to our investors at the beginning of 2024.
At its heart, plan is focused on delivering our primary objectives. These primary objectives are quite simply delivering on a per unit basis, ability and consistent growth in FFO, growth in net asset value and absolutely stable, reliable monthly cash distributions to our investors and growth in those distributions over time. The three-year plan that we outlined for investors was designed to deliver on two key metrics. The first is delivering operating FFO per unit growth of at least 3% on average over the three-year timing. The second key metric is achieving a net debt to adjusted EBITDA ratio that is in the low 8x range by the end of 2026.
I'm pleased to say that we remain on track to deliver both targets. Beneath the service, there are several things that contribute to the achievement of these two key metrics. Both of the assumptions are consistent with those provided at our Investor Day. However, there are two assumptions that we have updated this quarter. First, over the three-year time frame, development completions are now expected to be $300 million in total versus $200 million previously. This is a result of us tracking ahead of what we initially expected. This change positively impacts achieving our key metrics and debt to EBITDA specifically. Second, dispositions are now expected to be in the range of $750 million in total over the three-year period versus $1 billion previously. So why don't we make this change? While given the increased macro uncertainty, our appropriate assumption is that it may take a little bit longer to achieve the initial $1 billion of dispositions. So we reduced it to $750 million.
The business continues to perform exceptionally well, and we remain on track to achieve the operating FFO per unit growth and the debt-to-EBITDA metrics that have a core premise of our three-year plan. Through the first 15 months of the plan, our operating FFO per unit CAGR, excluding several positive but non-recurring items is approximately 5%. Our debt to EBITDA has improved to 8.9x or the low 9 adjusting for some of those same non-recurring items. Needless to say, we're very pleased with our results to date. And with that, I will pass things over to Neil.
Thanks, Adam, and good afternoon to all of our call participants. Consistent with our usual practice, we have a slide deck available on our website at fcr.ca. And in my remarks today, I believability in reference to that presentation. So let's start with Slide 6. FCR generated operating FFO of $69 million in the first quarter. This was up slightly from $68 million in the fourth quarter of 2024, and down from $78 million in the first quarter of last year.
On a per unit basis, Q1 OFFO was $0.321, up slightly from $0.316 in Q4, but down from $0.365 in Q1 2024. In providing context to the year-over-year decline, recall that our Q1 2024 results included a $9.5 million assignment fee in interest and other income. Multi-accounting standards required us to include this amount in income, in substance, we view it as being more akin to property decision proceeds.
Excluding this fee from the Q1 results last year would equate to $0.321 per unit or a flat growth rate year-over-year. First quarter results from last year also included an abnormally large $5.5 million lease termination fee. Now lease termination income is a normal part of our business, but this amount was exceptional. If you further adjust for the termination fee, OFFO per unit last year was $0.295 per unit, thus elevating this year's growth rate to 9%.
Let's dig a bit further into the results. At the core of FCR's performance in Q1 was same-property NOI growth, which excluding lease termination fees and bad debt expense was 5.3% or approximately $5 million. This exceeded our internal business plan with the key drivers being higher base rents and improvements in operating cost recoveries. This strong Q1 print reinforces our confidence in FCR's ability to deliver same-property NOI growth of approximately 4% on a full year basis. The year-over-year NOI impact from acquisitions, dispositions and the NOI same property growth was essentially nil on a net basis.
Now in terms of the NOI run rate, I will highlight several property transactions from the quarter. Firstly, on February 3rd, we acquired 1549 Avenue Road, Toronto for $22 million. This is the final property to complete our large-scale Avenue & Lawrence development assembly. Secondly, we completed two Toronto property sales during the last week of March, including 895 Lawrence Avenue West (sic) [East] and Sheridan Plaza. Gross proceeds were $72 million and the assets were sold free and clear. Both properties were fully leased when sold, and the NOI yield on the aggregate selling price was in the mid- to high 4s. Therefore, as we move into the second quarter, you should expect to see a small amount of NOI dilution related to the timing and the nature of the Q1 acquisition and disposition activity.
Moving down to the rest of the FFO statement. Q1 2025 interest and other income included about $0.5 million of non-recurring income. If you adjust for this, and the $9.5 million assignment fee earned a year ago and Q1 interest and other income was generally consistent on a year-over-year basis. Further down the page, interest expense, general and administrative expenses and other expenses were also fairly consistent year-over-year. Slides 7 and 8 cover key operating metrics, some of which Adam already touched upon.
In insurance, the theme really remains consistent again through the first quarter with continued and broad strength across key occupancy, leasing velocity, leasing spreads, and rental rate metrics.
Slides 9 and 10 provide distribution and ratio metrics. Commencing with the month of January, FCR's distribution per unit was increased by 3% with annualized rate of $0.89. Results for the first quarter of 2025 show that FCR's payout ratio was 69% on an OFFO basis and in the mid-80% range when measured on either an AFFO or ACFO basis. Advancing to Slide 11. The REIT's March 31st, net asset value was $22.06 per unit. This was consistent with $22.05 per unit at December 31st, and little changed from $22.10 per unit one year ago.
During Q1, fair value gains on investment properties were $2.5 million. This, of course, is a net number, so I'll provide a bit more color on the two largest components. Firstly, we recorded upward valuation marks of $39 million related mostly to higher NOI assumptions in the DCF models. With strong leasing results over the past several years now, upward valuations related to cash flow modeling have been a recurring theme. Secondly, the biggest offsetting factor in the quarter with a $26 million fair value markdown related principally to Toronto development sites.
On this second point, I expect that some of our more avid readers will note that the carrying value of FCR's debt fleet and development land was $429 million at March 31st. This is an increase of $52 million from year-end 2024, and there are four major items that contributed to this net increase. The first two I touched upon. They include the purchase of 1549 Avenue Road, which, of course, is in addition to the value, and then there's the fair value adjustments going the other way. The third component relates to property categorization changes. During Q1, we added two properties to the density and development land category, while we also removed one property.
The first addition relates to the Avenue & Lawrence Assembly, which is a 3.7-acre sites situated on a prominent corner in the North Toronto neighborhood with fantastic demographics. As mentioned, the assembly was completed during Q1. This followed the approval of our official plan by the OLT in the fourth quarter of 2024, whereby we secured 660,000 square feet of total density. Currently, the assembly has approximately 51,000 square feet of existing built form across nine separate products. And we generated a run rate NOI yield of a little under 3% on total value.
Previously, some of the properties were classified as income properties and several as development lands. As of March 31st, all nine properties were uniformly categorized as a single development site in our disclosures. The second addition related to a property located on the island of Montreal. During Q1, we were successful in removing certain lease encumbrances. And as such, the value of this site more appropriately reflects its intensification potential versus its income potential, hence the property was recategorized in density and development land from stable same-property previously.
Now the third reclassification relates to a greater Vancouver area property where the change with the other way from density and development land to stable-same property. This is a good news story. For many years, this property has generated a steady rental yield, but our few has been that its intrinsic value principally related to its future residential intensification potential. However, with significant growth in retail market rents over time, we recently signed a long-term lease with a national grocer for this property.
And I might add, we did so at a rental rate and with escalators that we would not have envisioned a few years ago. While the new gross release will not take effect for approximately two years, the timing of which is actually aligned with the current tenant's lease expiry. It's now clear that the property value was appropriately reflected by the capitalized income, hence the reclassification.
Turning next to capital investment as outlined on Slide 12. During Q1, $72 million of capital was invested into the business. This includes the $22 million acquisition I mentioned a few minutes ago, along with $50 million into the operating portfolio and $35 million into development activities. The most significant development spend during the quarter related to our Yonge & Roselawn development, the Humbertown Shopping Centre redevelopment for Phases 2 and 3 are now underway as well as advancing our small number of active condominium projects.
Slide 13 summarizes key financing activities. There were no significant financing during the quarter, but FCR did continue to carry sizable cash balances totaling $152 million. You should expect to see this cash drawn down over the next three months. For instance, on April 14th, we used $75 million to repay a maturing term loan that had an interest rate of 3.35%. On June 2nd, we also expect to pay out a $56 million maturing mortgage that carries an interest rate of 3.26%. And so with the yield curve once again upward slowing, we're unlikely to carry the same sort of substantial cash balances than we did through much of the last 2 years.
To wrap up, Slide 14, 15, and 16 summarize some of FCR's key credit metrics and the debt maturity profile. FCR is in a strong financial position. The REIT ended Q1 with more than $800 million of liquidity in the form of cash and our undrawn revolvers. FCR's unencumbered asset pool had a total value of $6.3 billion, representing nearly 70% of total assets. The REIT secured debt to total asset ratio remains low at 16%. Moreover, floating rate debt was only 3% of total and the debt-to-EBITDA multiple continues to trend lower. And FCR has only one sizable refinancing to address the balance of this year when our $300 million Series S senior unsecured debenture matures during the third quarter. This concludes my remarks, and I'm now pleased to turn the session over to Jordie for his comments.
Thank you, Neil, and good afternoon. Today, I'm going to provide you with a brief update on our investment, development, and entitlement activities. In his remarks, Neil mentioned our sale of two Toronto properties, including 895 Lawrence Avenue West (sic) [East], a 30,000 (sic) [29,288] square foot income-producing retail center; and Sheridan Plaza, a 170,000 (sic) [170,746] square foot set located at Jane and Wilson. I will add to his comments by noting that the aggregate selling price of these assets equates to more than a 20% premium to our IFRS carrying values.
With respect to new transitions, subsequent to the quarter, we entered into a binding agreement to sell property located on the island of Montreal for approximately $33 million. While pursuant to our agreement, certain details about this residential development site are still subject to confidentiality. We can say that the sale price equates to a mid-2% yield based on the current income in place and it represents more than a 25% premium to our Q1 2025 IFRS value. The deal is now firm and slated for a June 2025 closing. I should also note that we're actively working on several other transactions that are similarly consistent with our strategy.
I look forward to updating you all this activity in future calls. We're busy advancing our two active mixed-use developments as well. At Yonge & Roselawn, we remain on schedule and on budget. At the end of Q1, the project decking had been installed in preparation for the first floor slab pool. We own 50% of the 636-unit residential rental building with 65,000 square feet of retail space and serve as the development manager. 75% of the project costs are awarded, with a further 12% being tender or other negotiation.
This past quarter, city planning issued the revised notice of approval conditions permitting an additional four-storey at our 24 and 30 storey tower plans now contemporary. While still several years from occupancy, we have very strong demand for the 65,000 square feet of large and smaller format retail space. Construction of our 1071 King Street West development project in Liberty Village is also on schedule and on budget. You will recall, we own 25% of this 298-unit, 225,000 square foot purpose-built residential rental project, which includes 6,000 square feet of at-grade retail space Today, 81% of the project costs have been awarded in the structure has now reached grid.
Moving to retail redevelopment. Last quarter, I touched on a large gap between economic rents and market rents for new build commercial retail space. Specifically, the required rent to rationalize the construction of ground-up retail space is significantly higher than current market rent. This continues to limit supply of new retail space. At the same time, however, it's created an opportunity for FCR to invest capital into the redevelopment of our existing retail properties and achieve very attractive returns. These redevelopments take many forms.
The ongoing redevelopment of Humbertown shop in Toronto is a tremendous example of this type of investment opportunity. In the fourth quarter of 2024, after completing the project's first phase, we entered into a new long-term market rent fully net leased with Loblaws. They will remain on site and in large premises that we have created by consolidating their former space with 13,000 square feet of contiguous CRU space.
This expanded Loblaw store sits in the second phase of our redevelopment, which commenced this past quarter. Phase 3 is the final phase of the refill. These phase, which includes a newly created 20,000 square foot Shoppers Drug Mart at TD Bank and Scotiabank amongst other tenants also commenced this quarter. On completion of the redevelopment expected in 2026, we will have removed or converted to leasable all of the enclosed common area of the center. In so doing, we'll have grown the gross leasable area of Humbertown shopping center by 17,000 square feet and among the existing leasable area will become much more valuable as a result of our improvements.
In total, we will invest $47 million in the redevelopment of Humbertown and will benefit from unlevered returns exceeding 7% on this invested capital. Another smaller but impactful example of our execution of this growing opportunity set is Cliffcrest Plaza. Cliffcrest is an 80,000 square foot center located at Kingston Road and McCowan in Toronto. The center is a Shoppers Drug Mart, LCBO, and Dollarama, along with select other smaller national and local tenants.
A notable absence in terms of merchandising mix for the center was a grocery store and that changed last quarter. We entered into long-term lease with Loblaw for Urban No Frills store. We were able to accomplish this by first securing control on 10,000 square feet of contiguous CRU space in the center. The No Frills store opened in Q1 of this year.
The gross rental rate they pay is at market, which is 70% higher than the former in-place rent. Also, unlike the former tenants, that the No Frills has replaced the new Loblaw's lease is fully met and includes annual escalators. Moving west, Staples was located at Burnaby within the Greater Vancouver area. Staples to occupy 27,000 of the 30,000 square foot center. Their lease expires in 2027 with no options to extend the churn.
Given the population growth, increase in density on the surrounding properties and its proximity to the, SkyTrain, we believe high-density residential was the highest and best use. So a number of years ago, we submitted a rezoning application to permit 470,000 square feet of residential density. While this form of density remains valuable in Burnaby, over the last several years, there has been a significant growth in market rents for retail space in the note.
Today, based upon the rent that we can secure, the site is more valuable than a retail development site. Accordingly, and as Neil had mentioned in his formal remarks, this quarter, we entered into a long-term unconditional lease with Loblaws for the entire property, coinciding with Staples' expiry, the new lease will not take effect until 2027. However, this recently categorized stable same-property asset with meaningful income growth over the contractual rental period of the new Loblaws' lease. What's more, the discounted value of this new Loblaws' income stream is greater than the value of the site has high-density residential. Another example of our retail redevelopment that we've undertaken is a property located in a very attractive neighborhood called Bridgeland, very close to downtown Calgary.
We knew this 0.5 acre site on medium-term redevelopment potential and purchase it with that view in 2018. At the time of purchase, it was tenanted by a Molson-owned brew hub. With Molson making the sight on the expiration of its lease, we were able to enter into a long-term lease with Shoppers Drug Mart to construct a new 18,000 square foot store. Demolition of the former building commenced in the first quarter, and we expect to provide shoppers position of its new prices in the next 12 months.
With respect to entitlement in 2024, we secured approvals for 2 million square feet of incremental density on our properties. In 2025, we anticipate we will receive approvals for an additional 1.8 million square feet of incremental density. During this year, we also expect to submit reasonable applications for a further 1 million square feet of incremental density. To date, netting on the density we've already sold, we have submitted for entitlements on approximately 18 million square feet of incremental density. This represents 77% of our 23 million square foot pipeline.
Once selling permissions are secured, they provide FCR with great optionality. As I think it's clear, we remain focused on the successful execution of our objectives. Thank you all for your time today and your continued support of FCR. And with that, operator, we can now open it up to questions.
[Operator Instructions] Our first question is from Lorne Kalmar from Desjardins.
Just quickly on the disposition target. Obviously, I think it's pretty understandable getting revised down. The market for land has not exactly been hot. Based on what you guys are seeing and what you know, do you think there's any risk of it getting revised down further by a material amount? Or you're fairly confident that this $750 million by 2026 is achievable?
Hey, Lorne, it's Adam. So we're fresh hot off the presses with the $750 million. So we're going to stick with that for now, but there are several points that I think are worth making with respect to the change in our disposition assumption, and I know you've got a keen interest in it. So I'll make a couple of points. First, the world has changed over the last 1.5 years when we made our initial assumptions, but particularly over the last quarter, and macro uncertainty and volatility are clearly up. We recognize the macro environment is something that has an impact on our disposition program and also happens to be out of our control. And so all we really wanted to do is be realistic and that it may take a little longer to achieve the $1 billion of dispositions.
Second, the impact strictly timing, like I really want to stress that. We're very confident in our ability to monetize properties over time and at premium pricing levels and we've established a pretty solid track record in doing so. We just think it may take a bit longer given the macro environment. And third, and this is the most relevant point is that the impact of this change in assumptions on the two key metrics, and to your point, this is something to keep in mind if the assumptions change down the road, which at this stage, we're saying at $750 million to $750 million. But if they do change, it's really important to keep in mind that the change we just made on the two key metrics from our disposition program and along with other activities, all of these are designed to achieve two things.
Operating FFO objectives that we laid out on that front, very little impact from the change that we've made, all of which is entirely offset by strong operating results. And the second is our debt to EBITDA. And that -- the change in dispositions have a more pronounced impact on debt to EBITDA. But we left that on change too, and that's because and the change to disposition has been largely offset by both strong operating results and our expectations around the acceleration of development completions. And so the bottom line, Lorne is that we're very pleased with our disposition progress to be.
Most importantly, and this is where I think those who view this change to our disposition assumptions negatively and missed the mark is that we believe that we will achieve the two key objectives of our plan being operating FFO per unit growth and debt to EBITDA with less dispositions in the three-year time frame, and we think that's a good thing.
Okay. That's fair enough and kind of tough to brief you there. Maybe I'll switch over to the operating side of things. Obviously, you guys are constantly talking to tenants. Have you noticed any changes in behavior or leasing time lines as a result of the broader macro uncertainty?
Yes, that's a very good question. It's something as a management group, we have a heightened sensitivity too. And so what that means is we've been speaking to our frontline leasing staff more frequently. And the good news is we can tell you from their perspective, they see absolutely no change. So the depth of demand the way lease negotiations are progressing the type of interest. We have no change from 3 months ago, 6 months ago, 12 months ago. And as you know, that's a good thing because demand has been very robust. So certainly something we're paying close attention to. And fortunately, what we can tell you, certainly, as of today is that we've seen absolutely no indication of any change on that front as a result of the increased macro uncertainty.
[Operator Instructions] Following question is from Gaurav Mathur from Green Street.
Just in terms of the markets that you're in, are you somehow seeing any cracks amongst the retail tenants currently, just given the broader macroeconomic uncertainty?
Thanks very much for the question. So firstly, no, we're not seeing any cracks from the macro uncertainty. And two, we're seeing remarkable consistency across geographic markets and neighborhoods that we're in. There's no discernible difference to how our properties are performing from whether it's in Vancouver, Edmonton, or Calgary or Montreal, Toronto, or Ottowa, actually remarkable consistency. And it's actually been that way for many, many years. But to your point, we're not in a normal environment now, but we can tell you that from that perspective, we have seen that consistency remain in place.
Okay. And then I guess if you're looking at wicked average lease terms for -- on renewals, I believe in the past that you've alluded -- you mentioned the fact that those lease terms are increasing as you're signing on tenants given the demand. Is that something that's expected to happen over the rest of the year as well?
Yes, it's a good question. So answer is we're not sure. So our long-term average was somewhere in the range of 5 years in terms of your typical renewal term. The last 2 quarters, and I wouldn't necessarily say 2 quarters makes a trend, but it's been 2 quarters now where it's been closer to 6 year or about a year longer. We're okay with that because we're comfortable with the rents in place. And as you've seen from 1 of the 2 renewal lift metrics we disclosed, we're getting above average contractual rent growth. So from our perspective, we see the same things as our tenants green fundamentals, our real estate is expected to become more and more valuable over time. Market rents are expected to grow.
And so obviously, the longer you walk in and lease term, the longer it will take you to reset your rents to market. So that's something we're certainly cognizant of. But if we have a rate tenant in place with the rate starting rent, and an escalator throughout the renewal term, we're happy with -- we've been happy to move from a 5-year typical turn to something that's 6 or 6.5 years. But in terms of how the balance of negotiations, I would say, it's something that we typically don't guide to and to be frank, we remain flexible on because it's very case specific.
The following question is from Sam Damiani from TD Cowen.
Just wondering what your thoughts are about sort of pending economic slowdown if it happens and how it might impact the tenant base this time around compared to past slowdowns or recessions, just wondering if you see a different mix of the impact between larger national retailers versus smaller local ones. Are you seeing any of your -- any categories of your tenant base starting to feel the pressure of less confidence or less consumer spending?
Yes. Again, a very good question, Sam. It's something that we've talked a lot about as the management group because we do think there's clearly a heightened risk of an economic slowdown. The short answer is today, we're seeing no impact at the property level, whether its large national or local tenants. And we take some comfort in the fact that previous downturns have demonstrated FCR resiliency. There's very little correlation with previous recessions in our key operating metrics.
For example, the last recession we had in Canada was in the 2008 and 2009 period. 2009 same property NOI growth for FCR was north of 5%. Renewal list were well into the double digits in occupancy held in around 96%. So that being said, every downturn is different and this will certainly have its unique characteristics. Something else that has become pretty evident that the management group is that a local tenant base across our portfolio today is the strongest local tenant base we've ever had. We went through a bit of a quick cleansing in the second quarter of 2020.
COVID really flush through any the marginal local operators. And in many -- in many cases, we replaced them with local operators for merchandising mix purposes. But the one that were leasing space at that time were very, very strong, established businesses, well-capitalized, really well-run operations. And so we're feeling pretty good about the tenant base today, notwithstanding, we do think there's obviously the risk for an economic downturn to materialize. Those -- that usually hit discretionary in the retail the most. And as you know, that's a segment of retail that is not an abundant in our business by any stretch.
We are focused on the necessity end of the spectrum. And in Canada, getting that type of space has been very tough. Our tenants are planning years and decades in advance. And so we're quite optimistic that even if the downturn materializes that our operating metrics will continue to hold in very strongly.
That's helpful. And last one for me, just on the Yorkville node. Just wondering if there's any updates to share on leasing activity or investment plans in that cluster of properties in the near term.
Yes. Leasing has been pretty good. And so we've had a little bit of churn. We were able to have one of our tenants, which is Versace, terminated their lease early with a payment of First Capital while we simultaneously lease that space to the adjacent retailer on a new London extend that creates a lot of value for the property.
We're dealing with a number of other new tenants in the node, but Yorkville is in a very good spot as a node from a demand perspective relative to the last few years. So not much more to report there. But in terms of investment activity that you've touched on, we think there's a likelihood that some of the properties we own in Yorkville over, let's say, the course of our three-year plan will be ready for sale. And so you shouldn't be surprised if we monetize some of the great real estate. We need a big price. And if we can get that, then we think it's in our investors' best interest to do that and reallocate the capital.
The following question is from Brad Sturges from Raymond James.
You touched on it already, but I'm just curious to get some more thoughts on it. As you talked about you're running ahead of plan on the three-year objectives and then you've made a change to your disposition program. But I guess the question is, what kind of cushion do you think you still have to hit your sort of FFO per unit growth objectives in your debt-to-EBITDA if, in fact, you think it's prudent or necessary to further reduce the disposition cadence or, let's say, leasing fundamentals moderate a bit from here?
Yes. Look, we -- I mean, you're referencing a cushion. We're telling you what we think the realistic outcome is based on our forecast to date. So I wouldn't read into that, that there's a cushion. That's what we expect to happen. A lot of moving parts. If our expectations change in the future, we will certainly let you know, but this is our best guess today. And overall, the business is performing very well. And we're a lot less fuss about disposition volume.
We're really focused on driving operating asset per unit growth that exceeds 3%. And we are very focused on continuing to improve our debt-to-EBITDA down to the low 8x. That's what will determine success for us, not disposition volume, not developing completions, not several of the other supporting metrics. But we do think it's important to articulate our current expectations and a couple have changed this quarter. And so if that happens in the future, we will certainly let you know.
I appreciate that. And just, I guess, thinking about the current environment for asset sales, just what you're seeing in the private market in terms of the depth of the buyer pool of the composition, has that potentially changed, I guess, in the last month or so since liberation day?
Yes, it's become a bit tougher. That's what resulted in us taking our expectation down, but we didn't take it down to zero. So hopefully, Jordie gave you the sense that we are active because we are selective and post quarter end, we've got a great deal over the line, which is that Montreal development site. There are others that Jordie has got good traction on and the team have good traction on. We hope they materialize.
But look, it's been a tough environment since we started, and we've had a lot of success, and we've sold assets that fit the criteria of what we said we would sell it at big prices, but we're just concerned with the state of the world today, and that it just may take a little bit longer. But the market is not bad. It's just not as good as it was.
The following question is from Pammi Bir from RBC Capital Markets.
Just on the $300 million of development completions. Can you remind us what range of yield do you expect? And how does that yield sort of spread to acquisitions, how would that compare?
Hi, Pammi, it's Neil. It's a good question. And maybe I should have addressed the business upfront. So two things. I guess, first is the change in the assumption of the expectation rather at our February 2024 Investor Day and subsequently, the $200 million of expected development completions included approximately $100 million of income property development and redevelopments coming online.
And in 2026, specifically, it includes the delivery of Edenbridge condos at Humbertown. And so FCR's 50% share of the estimated gross proceeds from the Edenbridge closings should be just over $100 million. Now as many of you know, we also have a 35% interest in the 400 King Street condos in Toronto. And for purposes of the 3-year plan, we had been assuming that those condo closings would occur in early 2027. Now the project is continuing to advance quite nicely on time and on budget. And so we've now assumed that FCR will receive approximately 60% of the total proceeds from those closings in late 2026 with the balance still falling into 2027.
So that's the lion's share actually by a very wide margin of the increase in development deliveries to $300 million from $200 million previously. now more specifically, your question related to the yields on IPP developments and redevelopments in round numbers, that's about 7% yields.
Okay. So the 7% yield, I think, was what you had expected at the beginning of last year at the Investor Day. So the change really just is on the condos at 400 King. So on 400 King and Edenbridge, how much of the -- what sort of gains or residential gains or do you expect to -- for that to contribute to EBITDA?
Yes. So as you know, Pammi, we talked about this at our Investor Day as well. We specifically excluded those from our baseline OFFO per unit objective of growing by at least 3% on average over the 3-year time frame. I'm actually not quantify specifically what the profits from those deliveries are at this point.
But they are included in your debt-to-EBITDA metric, you will be including the profits in EBITDA.
Yes, they are including EBITDA. But I would say relative to our, call it, $430 million run rate, they're not that sizable.
Our following question is from Matt Kornack from National Bank Financial.
Just wondering if the uncertainty in the market, do you think that will flush out any potential opportunities for you guys that you wouldn't have otherwise thought you'd be able to get access to? Or are these assets pretty precious to the current holders in them?
Yes. Look, we're talking grocery-anchored retail, that certainly an asset type that certainly on a relative basis has become more attractive to investors. So when you look at the owners of the majority of the types of assets we own. It's the help much that's traded, especially since interest rates started rising in 2022. So the fundamentals are really strong and all of us would on these types of assets to understand that. So hard to imagine, but we'll see. We'll see what unfolds.
Fair enough. And then just on occupancy, you mentioned it's an all-time high. Is there any more room to move that? Or is there some structural aspect to it or strategic as to the vacancy?
Yes, I think it's more strategic. So we've always been more proactive and changing our tenant mix, maximizing the merchandising mix, making sure we got the best operator within a desired use category. So we've said this was not a portfolio that one should expect 99% occupancy. We do that -- we're missing on rent growth opportunities. So we're pretty full today, but the environment is really strong, and we'll see, hopefully, and maybe we can push through the current 96.9% all-time high.
That's all the time we have for questions. I would now like to turn the meeting back over to Alison.
Thanks, everyone, for attending the meeting. We appreciate your support. Good afternoon.
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