First Capital Real Estate Investment Trust

Alex Correia - Corporate Administrator Adam Paul - President and CEO Kay Brekken - EVP and CFO Jodi Shpigel - SVP, Development

Mark Rothschild - Canaccord Pammi Bir - Scotia Capital Heather Kirk - BMO Capital Markets Michael Smith - RBC Capital Markets Matt Kornack - NBF Alex Avery - CIBC Sam Damiani - TD Securities

Thank you, Melanie. Please note that forward-looking statements may be made during today's conference call.

Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements 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 various securities filings, including our management's discussion and analysis for the year ended December 31, 2014 and quarter ended September 30, 2015, as well as our current annual information form, which are available on SEDAR and on our website. These forward-looking statements are made as of today's date and except as required by securities law, we undertake no obligation to publicly update or revise any such statements.

With us today are our President and CEO, Adam Paul as well as our Senior Executives Kay Brekken, Greg Menzies and Jodi Shpigel. I will now turn over the call over to Adam.

Thanks, Alex and good afternoon, everyone. Thank you for joining us today.

The third quarter was very busy for First Capital as we make meaningful progress in many areas of our business. At the property level, we continue to perform well.

We completed important lease transactions in our same property portfolio and we advanced our development program by achieving significant milestones both from a construction and a leasing perspective. Our review of the business continues part of which resulted in the organizational restructuring we announced in September.

Kay will review our results in detail shortly. But from a macro level, we continued our track record of solid same property NOI growth was which was up 2.2% in the quarter.

On a year-to-date basis, our same property NOI is up 4.6% or 3.5% excluding significant lease termination fees. In the context of a competitive retail environment, we are pleased with this growth and attributed to the high quality in each of our assets, our people and our national operating platform.

Third quarter operating FFO per share increased by 3.8% to $0.27 from the same period last year. On our last conference call I said that our single biggest priority is to translate our strong same property NOI growth into operating FFO per share growth.

Based on our Q3 results we’re heading in the right direction, but a quarter doesn’t make the trend and on the full year basis we continue to expect our 2015 operating FFO per share to be consistent with 2014. In Q3, the strength of our real estate and our leasing teams across the country once again came through in our numbers with rental rates on lease renewals increasing by over 11% and our average rental rate in our total portfolio also continue to increase.

In terms of our target update we were left with two target vacancies in our portfolio following their departure from Canada. One was in our Queenstown place shopping center at Hamilton, we have now leased 68,000 square feet of this space to a Loblaw’s banner grocery store and GoodLife Fitness who are both scheduled to open by the end of the second quarter of 2016.

We’re also in discussions with tenants for the remaining 26,000 square feet of space. At this point, we have great visibility on the outcome of our repositioning exercise for this former target space.

In addition to a higher value for the property we are improving the overall quality of this asset to improve the traffic flow, better parking, and the important addition of a full size grocery store and fitness use. Moving to our second and final former target space which is located in Montreal.

We continue to consider our retail repurposing of the space as well as a redevelopment of the property which has been our intent as this property has been in our major redevelopment category since before Target declared bankruptcy. This is one of our many transit oriented development or redevelopment sites.

As you can see from the aerial on slide five, the property is well situated at the major interchange from the Highway 10 attached to Boulevard. The new Champlain Bridge that connects the Highway 10 will bring Montreal’s future light rail transit line to this area in addition to the existing bus lines.

The new LRTs first stop on the south shore from Downtown Montreal will be adjacent to our site. This entire area will undergo a transformation over the next few years and we have a large position here with 47 acres of land including 7 acres on the other side of the highway.

It will take some time to ensure that we make the right decisions that balance both our short and our long-term objectives. And we look forward to keeping you posted on our plans as we unfold.

Let me now turn things over to Kay to provide a closer look at our third quarter results. Kay?

Thank you Adam. Good afternoon everyone and thank you for joining us on our conference call.

Overall we were pleased with our results in the quarter given the general economic climate and retail market conditions. We were able to maintain our occupancy levels, both generating growth and same property NOI and above average rental lift on lease renewals, all of which led to solid growth in operating FFO.

Starting on slide seven of our conference call deck, we delivered solid growth in operating FFO. For the quarter operating FFO increased 11.7% in dollar term and 3.8% on a per share basis versus the same prior year period.

On a year-to-date basis we achieved operating FFO growth of 9.2% in dollar term and 3.9% on a per share basis. The second table on this slide summarizes the major contributors to the increase in operating FFO for the quarter and the year-to-date period.

The primary drivers of the solid growth in operating FFO in both periods was higher NOI generated by our same property portfolio and lower interest expense as a result of a lower weighted average interest rate on our outstanding debt. Moving to slide eight, we continue to deliver on our solid track record of same property NOI growth.

Same property NOI increased 2.2% for the quarter and 4.6% year-to-date versus the same prior year period. Same property NOI growth was driven by higher rental rates compared to last year in both the quarter and the year-to-date period.

Excluding, two significant lease termination fees we received during the second quarter which totaled $3 million. Year-to-date same property NOI growth remain strong at 3.5%.

We achieved this growth despite the Q2 lease terminations as well as the closure one target within our same property portfolio which also occurred in the second quarter. Both of the locations for which we received lease termination fees have been released as well as the majority of the Target space within the same property portfolio as Adam mentioned earlier.

On slide nine, our Q3 lease renewal rate increase of 11.3% was above our 10 year average of 10%. Our net rental rate increased 11.3% per square foot on 382,000 square feet of lease renewals during the quarter.

As we have always said our renewal rate increase is a metric that is more meaningful to look at over a longer-term than on a quarter-to-quarter basis. Moving to slide 10, our average net rental rate increased 2.7% or $0.49 per square foot over Q3 of last year.

During the quarter we brought online 15,000 square feet of GLA primarily in Montreal and in Calgary and year-to-date we've brought online 147,000 square feet of GLA primarily on our major redevelopments and ground-up developments in Toronto, Montreal and Calgary. On a year-to-date basis, our new developments have achieved average rental rates 66% above our portfolio average.

On slide 11, our total portfolio occupancy rate remained consistent with Q2 of this year at 94.7% despite the loss of Canadian Tire store in our South Park Shopping center in Edmonton. Alberta's is very first whole food store will open in a portion of the space vacated by Canadian Tire.

Our total portfolio occupancy rate was down 1.2% during Q3 of last year primarily due to the second quarter closures of two target locations which represented 1% of total occupancy. At quarter end we were holding 0.7% of our portfolio intentionally vacant for redevelopment.

On slide 12, our growth in NOI run rate continue despite the impact of the Q3 closure of the Canadian Tire store I Just mentioned. Our NOI run rate increased by 2 million over Q2 due to higher rental rates, Q3 acquisitions and higher occupancy rates at recently developed properties.

Assembly of our portfolio by property category is provided on slide 13. This tale also includes the related occupancies and rates per square foot for each property category.

Our same property portfolio now valued at $6.3 billion generates 85% of the NOI run rate from our total portfolio. Slide 14 highlights the properties with the highest development mend during the quarter.

We invested 68.4 million in development and property improvements in the quarter and another 15.4 million to acquire income producing properties adjacent to our existing properties in Calgary and in Toronto. Slide 15 gives the details on the factors driving the solid growth in operating FFO and the related movements over the prior year period which I have already touched on.

Slide 16 summarizes our operating FFO performance compared to the same prior year period. Slide 17 touches on our other gains, losses and expenses.

We recognize 13 million of restructuring cost during the third quarter and expect to recognize an additional $1 to $3 million of restructuring cost over the next few quarters. The 13 million across recognized in the quarter primarily consistent of severance benefits and a 6.4 million write-off of a proprietary information technologies system.

We are in the process of replacing this system with lower cost third party solutions. As a result of the restructuring we expect to realize annual cost savings of $4.5 million to $5.5 million in 2016.

Turning to our financing details. Information on our key financing activities for the nine months ended September 30, 2015 can be found on slide 18.

We continue to take advantage of the low interest rate environment by securing year-to-date on 111.5 million of new long term mortgages add a blended effective rate of 3.2% to replace a 184.8 million of maturing mortgages with a blended effective rate of 5%. Slide 19 shows the continued growth in our unencumbered asset pool which has grown to 5.6 billion or 68% of our total assets.

This large unencumbered asset pool combined with our 800 million five year operating facility, gives us significant liquidity and financial flexibility to fund our future growth. Slide 20 summarizes our debt maturity chart as at quarter-end.

As you can see, we have a well staggered maturity profile with approximately 10% of our debt coming due each year. The maturities of the unsecured debentures in 2022 are spaced 11 months apart within that year, all of our term debt is fixed rate debt that helps to mitigate the impact of any rise in interest rates.

This concludes my comments on the financial results. I will now turn the call back over to Adam.

Thanks Kay. I mentioned earlier that we continued to make significant progress in our development program during the quarter and I’d like to now touch on where some of our major project stand.

We have a series of slides that help support this part of our call that I will refer you to. Starting with the Yorkville Village on slides 22 to 24 where our enthusiasm has never been higher as our years of hardworking planning are starting to become visible.

Construction remains very active in the Interior Mall, the new Yorkville entrance, the expansion in new facade on Avenue Road, and the underground parking facility. On the leasing front, we continue to make progress and are now 93% leased on phase 1.

The final product in finishes are now being revealed in parts of the mall which is one of the factors for the rise in activity and inbound queries we’re seeing on the leasing front. Another contributor to this increased activity is what we’re doing on the Yorkville Avenue with our Street Front retail.

One of our significant accomplishments during the quarter is the lease we entered into with Chanel who will relocate their Brewery Street store into a new 8,500 square foot flagship boutique located in one of our Street Front buildings on Yorkville Avenue. The Chanel lease transaction is a game changer for Yorkville particularly when you combine it with the demographic tailwind occurring in this market.

Based on the high density residential units that are under construction approved or planned, the populations of Yorkville will more than double over the next five to 10 years. First Capital is very well-positioned to participate and benefit from the positive trends occurring in Yorkville.

Our holdings will total 285,000 square feet of leasable area and 515 parking stalls. Staying in Toronto on slides 25 and 26, our King High Line Phase of our Liberty Village portfolio is also moving forward.

We’re now above grade with concrete port for the underground parking facility and a portion of the retail space. During the third quarter, we announced our transaction with CAPREIT who will acquire a one-third interest in the residential component of King High Line.

The CAPREIT transaction is of strategic importance to First Capital as they bring the best in class residential rental expertise to our partnership. When the King High Line phase is complete, our position in downtown Toronto’s Liberty Village will increase to 470,000 square feet of retail and commercial space a 960 parking stalls in addition to the residential component.

Holdings of this scale in such a strong growing urban market are exceptionally rare and should continue to service very well in the years ahead as much more potential exist in these assets. Moving left to Downtown Calgary on slide 27 and 28, the redevelopment of our mixed use complex in Mount Royal Village has now substantially complete with Calgary’s first West down stores successfully opening in August.

Notwithstanding the economic backdrop in Calgary we achieved significant pre-leasing during the third quarter on our next phase of this redevelopment, now Royal West. In this phase we will add a three storey 90,000 square foot retail building anchored by an Urban Fare grocery store and Canadian Tire each to occupy one full level.

The addition of these two retailers will significantly strengthen our other assets in this note. Our new retail building will be directly adjacent to a 34 storey condominium to be constructed on a part of the site that we have agreed to sell to an established residential developer.

Overall Mount-Royal village will total 380,000 square feet of retail and commercial space and 630 parking stalls once the Mount-Royal West phase is complete. An exceptional position to hold in this densely populated high income and gentrifying urban area.

On slides 29 and 30, you can see that our Brewery district development in Edmonton has also come a long way. We are now above grade was structurally erected for several building with pre-leasing in place.

Upon completion this 50% owned property will total 310,000 square feet of lease able area that will be anchored by a Loblaw city market grocery store, GoodLife Fitness, Shoppers Drug Mart and a terrific edition to our tenant roaster who we couldn't announced last quarter, but can now Mountain Equipment Co-op or MEC. MEC will relocate their downtown Edmonton store into a new two level 40,000 square foot building in the Brewery district.

This property will also see residential intensification. We've agreed to sell the rear corner of the sight to an experienced residential developer who will construct an estimated 300 residential units.

Now that this property is vertically taking shape its strong presence adjacent to Edmonton arena district is very apparent. This sizeable property will be a wonderful addition to First Capitals urban retail portfolio.

In Montreal on slides 31 and 32 construction is currently underway on phase 3 of the complete redevelopment of our Carré Lucerne shopping center in the affluent borough of Ville Mont-Royal. The old center has been demolished and Pharmaprix, our shopper’s drug mart has recently open for business.

Construction is well underway on a new two level multi-tenant building that will house a Provigo Le Marché grocery store. And we've agreed to sell the air rights for 110 residential condominium units to approve a local residential developer in the fourth phase of this project.

Once complete we will own approximately 115,000 square feet of high quality urban retail space in this property. Finally we will move back to Toronto for the final project we'd like to discuss today on slides 33 and 34.

During the third quarter, we achieved key milestones related to our development approvals that allows us to shortly begin construction to redevelop our mixed used retail and office property located on Toronto's main subway line at the intersection of Young Street and Lawrence Avenue. A lot is in store for this property which will increase to 250,000 square feet of leasable space.

We are expanding the retail square footage creating a new second floor restaurant space featuring a large South facing indoor, outdoor patio and we are integrating the TTC subway and bus entrance into the property. Since this property was acquired in 2012, the retail space has never generated more than 5% of the property's income.

But this is going to increase to roughly 50% following our redevelopment. While also maintaining the previously existing office income.

Our retail component will be anchored by a Loblaw’s own grocery store. Collectively these properties will comprise approximately $1.2 billion in total investment on completion of the presently active development phases including $240 million of future incremental investment to complete these phases and significant future redevelopment opportunities exist in our portfolio.

Including in many of the assets we review today. Such as Liberty Village where part of our existing property can accommodate an additional million square feet of density.

These are all great projects that we simply can't buy today. There are also large projects that we will continue to expand in most cases.

As we said previously, the review of our business continues with the focus now being on our assets and on capital. One of the likely outcomes for us on the property side is to focus on larger assets.

Such as the properties we reviewed today. I have been cleared that our single biggest priority is to position ourselves to translate our strong same property NOI growth into per share growth in operating FFO.

This priority has and will continue to factor into many decisions we make including decisions with respect to capital. Now this does not mean that we will make decisions to increase our FFO by increasing the risk profile of our business.

But we’re spending a lot of time assessing and analyzing capital allocation decisions. In terms of leverage we’re comfortable where our debt metric stand today.

But overtime we do have an objective to reduce our leverage particularly our debt-to-EBITDA. This will occur naturally as many of our major development projects become income producing over the next two years.

It’s clear that our active developments will bring meaningful additional value and equity to our business. And in addition to this we also see potential multiple expansion or CAPREIT compression in each of our projects.

But we need to get closer to completion to fully gauge the extent of this potential. A good example is Yorkville Village.

There are clear preliminary signs that our deal with Chanel and the opportunities it creates will significantly improve the NOI in multiple of this asset. This is a good example of upside that we would not have underwritten a few months ago.

And it’s important to retain the benefit of our upside potential which is significant when you look at the scale and depth of our value creation opportunities. So we will apply a high degree of scrutiny to decisions related to the allocation of capital including the issuance of equity.

When I look at the business today I take comfort in the very high quality nature of our assets, the covenants of our tenants, the stability of our necessity based retail business and the strength and flexibility of our balance sheet. We have a conservative risk profile that is positioned to get even better overtime.

We aren’t through our review of the business but I hold my comments today to give you a sense of how our thought process is evolving and we look forward to keeping you updated in the quarters ahead. Thank you for your time and attention today, we would now be pleased to answer any questions you may have so Melanie if you can please open up the line for questions.

Thanks good afternoon. Just wanted to I guess ask about capital allocation you alluded to it Adam so we take from that that you will be perhaps looking to dispose some assets that are earning inadequate return over the near term, medium term such as land or just assets that won’t be redeveloped and I guess you could tell us potentially what kind of scale that this program could take place?

Sure. To answer your question on the disposition side if you look at the assets that we have categorized for sale right now it does include a small amount of what we look at as residual land that we will sell, it’s not material.

We sold a significant amount of real estate over the last few years over $800 million between 2012 and 2014 which certainly has bumped up significantly on average asset quality and has shrunk our non-core pool of assets. That being said in the company of our size we will always have non-core assets and certainly we are analyzing our assets and if we believe non-core assets or any assets for that matter can’t deliver what we require out of them including NOI growth.

We will look to dispose them or look to some alternate strategy to make it fit better. I would say that a reasonable run rate for dispositions for us is somewhere the magnitude of a $100 million per annum.

We’re about $30 million year-to-date we don’t expect any material to the balance of the year so next year it could be higher than that. But that’s what I can tell you on dispositions.

That’s helpful. Would it be fair to assume that you’re raising capital say your priority would be through dispositions as opposed to issuing new equity just to capture that, the upside in your portfolio for the existing shareholder base?

Not necessarily I mean what I can tell you is we’re applying a high degree of scrutiny and analysis to all of our capital allocation decisions and so recognizing the backdrop that I went through in terms of the upside I think we have in the business that will certainly factor in but we’re keeping an open mind right now and really still working through the process.

Thanks. Just one last question on the debt side.

You've got some unsecured debentures maturing in 2017 I know that's a little ways off. But is it your intention to replace those with more unsecured debentures and further do some of the refinancing in 2016 was unsecured or should we, expect to see First Capital migrate more toward a secured mortgage financing program.

Hi, Sam. It's Kay.

Unsecured remains our primary and preferred source of debt financing. But obviously we are sensitive to where spread there at and the widening in spread there was a past couple of months.

So we watch those very closely up against mortgage. If the mortgage spread then we've done some additional mortgage financing.

But that doesn't change the overall strategy for unsecured debentures long-term.

Alright. Thanks, I'll turn it back.

Thank you.

Thanks, Sam.

Hey, good afternoon. Adam, you only have a couple of targets in your portfolio.

But obviously there was large portfolio that was vacated and others are being impacted. Are you seeing those vacancies impact your assets at all tenants moving around, would you expect this to impact your portfolio at all?

Certainly when you inject 16 million square feet of available space into a market the size of Canada that certainly has an impact. We've been fortune that we haven't seen anything material in terms of direct impact.

But certainly if you look at the inventory of target spaces that are unclaimed today and you look at the proximity to our assets and in some markets we have assets. It would be - I would say it would be naive to say that it will have no impact.

But from a macro perspective we certainly haven't seen any material impact.

Okay. Finally the question fees and other income were about 2.5 million the quarter.

Is that a recurring number?

Hi Mark. In terms of interesting fee income we did have some loans payout earlier this year that were higher rate loan receivables.

So I would say that the number should come down next year on an annualized basis.

Okay. And maybe one of the smallest as well as the income from marketable securities drop.

I mean there is something that the prime management definitely is more active in, is that something that we should see go away in the future or will you continue to be active in that?

We continue to hold an image here at Lamont as marketable securities. We have no plans to increase our investments over the time.

Okay, thanks.

Thanks, Mark.

Thanks. Just going back to your comment Adam on maintaining consistent operating of 4% for this year as last year.

Where is that drag coming from in Q4 and what about drag carry forward into next year?

I can speak to Q4 of this year. Certainly there is some drag from Target we had a Canadian Tire space in Edmonton that has been vacated and has been backfilled with the first whole through location in Alberta.

But it's broad based, there is nothing specific.

Okay.

I mean it's reflective of the overall environment. In terms of carrying it forward into next year it would be premature at this point to say that's the case.

I mean I have been pretty clear on what our biggest priority in the business is. So I would be disappointed if we ended up with FFO on a per share basis next year that was consistent with '15 and '14.

Right, okay. And then just looking at the Chanel lease can you comment on the terms when it starts and maybe just some color on what drew into site on Yorkville relocating that Blur?

Yeah, in terms of what drew them, so obviously Chanel is one of the most well recognized exclusive brands in the world and what they saw in the opportunity to come to our property and Yorkville is to add an element of uniqueness to their offering which is very consistent with how our merchandising our entire Yorkville portfolio properties and so they are going into the historically designated building after where it is currently in [indiscernible] we’re delighted to say it’s been relocated into the Interior Mall into a great space there and so Ciao look at and said there’s a real opportunity to differentiate themselves and with some of the flagship stores they have in Europe the architectural features of the building are more consistent with that and I think that was the base factor in terms of what driven.

And can you comment on the terms of the lease terms?

I would say that market terms for what you would expect in Yorkville. I mean that can’t really will be on that were downed under confidentiality in any event.

Okay and sorry what about the duration?

So the duration of it, it’s a long term lease.

Okay. And then just going back to the earlier question on the fee income just that 2 million specifically Kay mentioned that interest in other income overall should be coming down out of the next year but just looking specifically at that 2.5 million fee income from the JV partners, is that a recurring amount or is that coming down as well?

I would say a portion of it is recurring but not all of it Pammi.

Great, thanks.

Thanks very much Pammi. .

Good morning. In terms of the development deliveries the number of square feet that were delivered a little bit down this quarter and I know it’s lumpy but I was just wondering if you could give us some color particularly because some of the timeline for delivery I think will push back in this quarter what should we be expecting in 2016 in terms of the pace of deliveries?

Hi Heather. In terms of square footage if you look at the same property which we developed in the MD&A we’ve got 42,000 square feet that plan for the first half of 2016 with the remaining 4,000 plan for the second half of 2016.

Yorkville right now in the MD&A there is 41,000 square feet under development largely looking at the first half of 2016. Carre was shown that which Adam touched on earlier we have majority of that coming online in the Q4 2015.

MRV largely laid-out into 2017 and into 2018. Brewery district [ph] a portion coming online in Q4 disappear with the majority of it occurring in 2016 and then following into 2017.

King High Line about half in 2015 and 2018 and then rest beyond 2018.

And Heather what’s probably more meaningful is that the cost that’s coming online and so every quarter we have enhanced the disclosure on development that will continue one of the things that we think will assist in modeling is putting what we expected to transfer in dollars versus square footage.

That would be great.

But yeah so we’re working on it and you should expect to see that. What we can say is somewhere in the range of $200 million to $250 million is a fair estimate for development completions not only next year but probably the two to three years following that.

Thank you. That’s very helpful.

And in terms of how you’re looking how the yield that you’re expecting all above I know that come in a little bit but that’s probably in part driven by Yorkville assuming that tighter number. What’s the sort of thought on how that yield evolves over the next couple of years?

Well, we have some lower yield in components in the sector of the NDA where we talk about the yields the one that actually brings it down more than Yorkville is King High Line specifically the residential component of the King High Line. So we’re in the mid fives right now, certainly the new developments that we’re looking at would be slightly higher than that.

So in terms of the trend things we’re looking at were closer to six and one thing that is important to note in the context of our development yields is these are estimated year one yields and some of these projects like Yorkville specifically were lot into a handful of lease rates that a regular market for a period of time the growth profile in some of these assets we expect will be better than typical and so what we disclose is one yield. We should get better performance out of the portfolio as time goes on and we have the ability to realize contractual increases in rents and also resetting certain rents to market.

Great, thanks very much.

Thanks, Heather.

Thank you and good afternoon. Just wondering do you expect achieved double-digit or high single-digit double-digit leasing spreads over the next couple of years.

I mean look our long term track record would be reflective of that, our portfolio is the best that's ever been into - is more challenging than I think it's ever been and so per se I would be delighted if we achieve the same track record. I think our portfolio is very well positioned to be at the high end of the range in terms of what's produced in the Canadian context.

Whether it will be double-digits or not it would be premature to say.

Okay and when do you think you'll finish the review of the business? Any sense of that timing?

I mean we made a lot of progress. We've been through the people side.

We are certainly on the back half of the - I would say certainly over the next couple of quarters will be done.

Okay. And any news or updates on Griffin town?

Any news on Griffin town, I mean In terms of the phase that is currently under development?

Yeah.

Well, certainly it's under development and as you know Devemco [ph] is completing the development and we expect to acquire it likely sometime in the first quarter of next year. Unless, is that correct?

Yeah.

Okay, thank you.

Okay. Thanks, Michael.

Hi, guys. I think you touched on it when you answered Heather's question.

But is it possible to give a ballpark figure in terms of the 2016 contribution from Yorkville village from an NOI perspective or can you apply that at this point?

On Yorkville in terms of doing an estimate there what I'd suggest is looking at the MD&A if you start up the beginning of 2015 there was 67,000 square feet under development, which is now 41,000 under development with that coming online largely in the first half of 2016. So using that 67,000 square feet time the average cost per square feet also disclosed in the MD&A and also using the weighted average yield.

You can get an approximation for the NOI coming online next year from Yorkville.

Okay, sounds good, will do that. With regards to the target replacement at Queenstown place.

The 68,000 feet that you least Loblaws and GoodLife will that cover the rent that was being paid by Target or is there still some uptick on the remaining 26,000 leases?

Sorry, just on 100%, can you repeat the question?

Yeah. Just wondering whether the rents were high enough on Loblaws and GoodLife least offset the full sort of down tick that you would have been paying on the space the Target was occupying.

So the Target was in at a very low lease rate and so yes the net rent on just those two deals alone does exceed the net rent that Target was paying in aggregate dollars. Again that's a function of target being in at a very, very low lease rate.

Sure and then finally you've done a fair bit of different things in terms of the density and monetizing it. Just wondering how you make the decision between purpose-built rentals versus selling it to a condo developer even selling air rights in some cases.

We located in the context of the investment opportunity. Residential rental is not our core business we will add to our portfolio where make sense based on a lot of in depth analysis and really understanding the market.

But it will never be a big part of our business. So it's really done on the case-by-case basis and through research and market analysis and it's not more complicated than that.

Sure. And I presume you use any proceeds essentially to offset the cost of redevelopment further retail component.

Certainly there is a benefit of that, yes, but the retail component would have to stand on its own merit without that contribution.

Okay sure. Thanks guys.

Okay, thank you Matt.

Thank you. Just looking at your revolving facilities you got over 700 million of availability on those facilities and you’ve talked a little bit about unsecured being preferred I guess source of capital from the debt so can you talk about the interplay between those two and how we should look at what you might target in terms of a minimum available credit facility?

Sure. Happy to respond to that question Alex.

Essentially our preferred size of an unsecured debenture in the past has been about 300 million and sometimes we’ve done that in three tranches ideally going forward I think we’ve seen more to doing that in two tranches. That operating credit facility gives us great flexibility to finance any short term needs between long term debenture offerings or mortgage financing.

So I think that’s how you can look at it going forward.

Yeah, we’ll always maintain a very comfortable level of undrawn components of that facility. In development program as robust and capital intends to that ours is it is important for us to maintain flexibility, economy can change very quickly, capital markets can change very quickly and it’s important that we do what’s in the best long term interest of the business so we will ensure that we are not under any type of stress from the liquidity perspective and so for that reason you should expect all we see what appears to be a very comfortable amount of liquidity.

Is there like a rule of thumb two years of unsecured debenture maturities plus your development spend or is it just more general than that?

Yeah, it’s not that scientific.

Okay.

So we constantly take a look at it to look at all of our uses of capital proceeds of capital and then we assess our liquidity and that’s something we do literally on weekly basis.

Okay. And then on the strategic review have you looked again at what the timeline might be in terms of ultimately converting to a REIT or is that something later foresee in the future?

Sorry, can you say that again Alex?

Just as you’re undertaking this review of the business and has the structure of the company come up whether you convert to a REIT or do you have any guess on timeline or if that's even the direction you likely to go?

Yeah we regularly update our taxable income forecast and I don’t see any change from what we’ve said previously in that thing in the short term leases down the path is converting to a REIT.

Okay. Thank you.

Thanks Alex.

Thank you just wanted to look at the same property NOI growth on page 35 of the - you’ve got the NOI margin going up like occupancy is obviously down year-over-year and a good reason for that is a greater recovery margin on the property taxes and operating cost. Is that a sustainable thing that higher recovery rates or is this anomaly this year that will correct itself next year?

Sam I think a portion of that was influenced by Canadian Tire being a late exit in the quarter so the occupancy decline happened at the end of the quarter whereas the margin activity is happening throughout the quarter so I would necessarily assume going forward that there’s an uptick here.

Okay I guess just to be clear the higher recovery ratio is it sustainable?

I would assume we would in line with historical norms.

Okay.

Rather than an uptake.

Okay and on that Canadian Tire I mean you’ve got the whole foods replaced in them is that whole foods included in your occupancy now or not until they open up next year?

It’s not included in the occupancy no.

Okay I just finally on the development pipeline last quarter Victoria Park Center was listed as you’re being in planning it’s not there this quarter, is there a change of thought as to what you want to do with that, that asset going forward?

Yeah Jodi will give you the background on that.

Thank you. Hi Sam, it's Jodi.

So really in our assessment of our portfolio in our projects we determine that there were some priority projects that are more near term and then and Victoria Park Center is really more of a mid-term and so that’s why reallocation.

Great. Thank you.

Thanks Sam.

Okay. Thank you for your time this afternoon and your continued interest in First Capital Realty.

As usual, if you have any further questions don’t hesitate to give Kay a call or myself a call at any time. Thank you and enjoy the rest of your afternoon.

Goodbye.