First Capital Real Estate Investment Trust

Roger Chouinard - General Counsel and Corporate Secretary Adam Paul - President & Chief Executive Officer Kay Brekken - Executive Vice President & Chief Financial Officer Jodi Shpigel - Senior Vice President, Development

Sam Damiani - TD Securities Alex Avery - CIBC World Markets Michael Smith - RBC Capital Markets Matt Kornack - National Bank Financial Pammi Bir - Scotia Capital

Thank you. 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 forward-looking 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 quarter ended March 31, 2016 and our current Annual Information Form, both of 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 here today are our President and CEO, Adam Paul, as well as our senior executives, Kay Brekken and Jodi Shpigel. I will now turn over the call to Adam.

Thank you, Roger, and good afternoon, everyone. Thank you very much for joining us for our first quarter conference call.

As you know, our executive team and dedicated employees have done a lot of work over the last year to ensure our business is well-positioned to continue our long-term track record of creating significant shareholder value. We have a culture of perpetual improvement.

So our work will never be done, but we have certainly made a lot of progress. I’ve said many times that real estate is a long-term business.

So it is best suited for investors with an investment horizon that spans over many years. Notwithstanding our long-term focus, I’ve also been clear that 2016 is a slightly more important year than most for First Capital.

It goes without saying that we continue to remain intensely focused on several key financial matters, such as growing our NAV per share, a metric that we have consistently delivered on for many years, but growing our operating FFO per share is our current top priority, and we’re very well-positioned to accomplish this goal. By year-end, my expectation is that, we will have started to establish what will become a long-term track record of translating our same property NOI growth into operating FFO per share growth.

So let’s talk about our first quarter results against that backdrop. We were very pleased with our strong start to 2016.

We had another quarter of solid operating performance at the property level, higher rental rates more than offset the expected decline in occupancy from the anchor tenant space that is in transition in our same property portfolio that Kay and I have previously spoken about. The net result was 2.3% growth in same property NOI.

Our ability to grow same property NOI with lower occupancy is a true reflection of the quality of our portfolio and the strength of our operating platform. At our year end conference call, we noted this transitional anchor tenant space was expected to weigh on our 2016 financial results and that we expected low single-digit growth in operating FFO per share for the full-year.

In Q1, we executed well on various parts of our business, resulting in operating FFO growth that was better than we expected. In total, we delivered very strong 8.8% growth in operating FFO on a per share basis.

Now given the long-term nature of our business, I don’t believe a lot of focus should be placed on any one quarter. But we’re pleased our Q1 results show that we’re heading in the right direction.

As a result, we have revised upward our expected operating FFO per share growth to be in the low to mid single-digits for the full 2016 year. We still expect our weakest quarter to be Q2, where we continue to expect negative same property NOI growth primarily from our anchor tenant space that is in transition, combined with items in Q2 of 2015 that are difficult to comp against, which Kay will explain.

But growth should resume in the back-half of the year. I’ll now turn things over to Kay for a closer look at our results.

Kay?

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

Overall, we were very pleased with our strong results for the quarter. We approve – we improved our occupancy levels from Q4, generated growth in same property NOI, while reducing our G&A expense and our interest expense, all of which led to very strong growth in operating FFFO.

Starting on Slide 6 of our conference call deck. Our operating FFO increased $6.4 million, or 11.7% in dollar terms and $0.2, or 8.8% on a per share basis versus Q1 of 2015.

The second table on this slide summarizes the major contributors to the increase in operating FFO. The key factors driving the strong growth in operating FFO were higher same property NOI, lower G&A expense, and lower interest expense.

G&A expenses declined primarily due to the organizational restructuring completed last September. There were some one-time expenses that occurred in the prior year period and some vacant positions that remained open during the current quarter, which we do intend to fill.

Therefore, the G&A in the quarter is somewhat lower than what we expect in future quarters. As previously mentioned in our disclosure, the total savings expected from the organizational restructure, which occurred last fall remain in the range of $4.5 million to $5.5 million and those savings are in NOI, G&A, and in amortization.

Our interest and other income declined as expected at some of our higher rate loan receivable were repaid last year, as I mentioned on prior calls. Additionally, there are some one-time fees we earned last year related to our development projects, which we do not expect to earn this year.

Moving to Slide 7. Same property NOI increased 2.3% for the quarter versus the prior year, primarily due to rent escalations, lifts on renewals, lower operating costs, and higher lease termination fees.

We achieved this growth despite the Q2 2015 closure of one Target store in the same property portfolio and the Q3 2015 closure of a Canadian Tire location in Edmonton. The majority of these spaces have been re-leased at substantially higher lease rates.

In addition to Whole Foods taking part of the Canadian Tire space, we have now executed deals for the remainder of this space with Designer Shoe Warehouse and petland. We expect our same property NOI, which is calculated on a cash basis to be positively impacted once our new tenants begin to pay cash rent, which will occur during the remainder of this year and in the first-half of 2017.

As a reminder, we do expect to recognize higher than normal leasing CapEx costs in 2016 associated with retenanting the Target and the Canadian Tire spaces. Additionally, as I mentioned last quarter, we do not expect to be able to comp in our second quarter, the $3 million in higher than lease – in higher than normal lease termination fees we received from two tenant in Q2 of 2015.

On Slide 8, we achieved healthy lift on our lease renewals during the quarter. Our same property lease renewal lift was 9% on 295,000 square feet of renewals.

Our total portfolio lease renewal lift was 8.5% on 312,000 square feet of renewals. On Slide 9, our average net rental rate grew a solid 3.4%, or $0.62 over the prior year period to $19.02 per square foot.

During the quarter, we brought online 85,000 square feet of new GLA with an invested cost of $33.7 million. The new space included a Shoppers Drug Mart and a GoodLife Fitness in our Edmonton Brewery District project.

On Slide 10, our total portfolio occupancy rate was down 0.6% versus Q1 of 2015, primarily due to the remaining vacant space related to the closure to two target locations, one in the same property category and one in major redevelopments during the second quarter of 2015 and one Canadian Tire location during the third quarter of 2015, which I mentioned earlier. Total same property and total portfolio occupancy rates, both increased 0.2% since the start of the year, primarily due to new tenants taking possession of the portion of the vacated Target and Canadian Tire space.

At quarter end, we were holding 0.6% of our portfolio intentionally vacant for redevelopment. On Slide 11, our NOI run rate increased significantly by $6 million over Q4 of 2015, due to higher occupancy rates, acquisitions completed in the quarter, higher rent from ground-up developments completed last year, and higher occupancy rates, as I mentioned.

Slide 12, highlights the properties with the highest development spend during the quarter. We invested $31.1 million in development and redevelopment and another $153.3 million to acquire four income-producing properties adjacent to our existing properties, as well as the remaining 50% interest in a development land parcel.

We also disposed of a 50% nonmanaging interest in a portfolio of income-producing properties in the Greater Montréal area for $71 million, while retaining our 50% managing interest. Slide 13 gives the details on the factors driving the growth in operating FFO and the related movements over the prior year period, which I have already touched on.

Slide 14, summarizes our operating AFFO performance compared to the prior year period. Our operating AFFO per share increased 7.9%, primarily due to the 8.8% improvement in operating FFO per share.

Slide 15, touches on our other gains, losses, and expenses. Our other gains for FFO of 400,000 were consistent with the prior year.

Turning to our financing summary. Information on our key financing activities for the quarter can be found on Slide 16.

We completed $118.5 million of new long-term borrowings at an average rate of 3.3%, a historic low for us on 10-plus-year debt financing. Post -quarter end, we continued to take advantage of the low interest rate environment by securing new lower rate debt.

On April 1, we redeemed our 5.25% Series G and our 4.95% Series H convertible debentures totaling $120.6 million. On May 6, we issued $150 of new 10-year unsecured debentures at a coupon rate of 3.6%.

Slide 17, shows the continued growth in our unencumbered asset pool, which is now $5.9 billion, or 70% of our total assets. This very large unencumbered asset pool combined with our $800 million operating facility gives us significant liquidity and financial flexibility.

Slide 18, summarizes our debt maturity chart as at quarter end. We continue to focus on maintaining a well staggered maturity profile 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. The financing activities completed during the quarter, along with the new unsecured debentures we issued subsequent to quarter end extended our term to maturity to 5.7 years and lowered our effective interest rate to 4.6%.

All of our term debt continues to be fixed rate debt, which helps to mitigate the impact of any rise in interest rates. We continued to refine our MD&A this quarter.

On page 23, we added additional disclosure, which shows the factors driving our same property NOI growth year-over-year. Starting on page 14, which is the development section, we simplified the presentation of the information.

The tables now include only projects that remained in active development at quarter end. Four projects were completed during the quarter and one new project commenced.

On all projects that include, both an income-producing component and an underdevelopment component, we have broken the invested cost into these two components. So you can see how much of the project is under active development, both on an invested cost and on a square footage basis.

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

Okay. Thanks, Kay.

We had an active quarter on the investments front in Q1. On the development side, we transferred 85,000 square feet of space to our income-producing portfolio in our key Toronto, Edmonton and Montréal markets, and we expected development transfers to accelerate as the year progresses in properties that are exceptional in quality, assets that we simply cannot buy today.

And our experienced and focused team continues to create meaningful net asset value in these properties through the development process. During the quarter, we acquired $155 million and sold $71 million for a net investment of $84 million in income-producing properties.

Our acquisitions were highlighted by a strong performing property in Vancouver’s lower mainland that has both short and long-term value enhancing opportunities, as well as an exceptional piece of urban retail real estate located in the heart of Griffintown in downtown Montréal. We also entered into our first partnership with Allied REIT, on a property out West that we jointly acquired.

The property has great holding income and significant upside through intensification and redevelopment in the future. In prior conference calls and presentations, I talked about various aspects of First Capital’s business, and what I believe we are so well-positioned to outperform as I look ahead.

As you know, we have largely completed the organizational transition that we embarked upon last year, and we recently announced new executives added to our team. I’ve spent a significant amount of my time on this part of our business over the last year or so.

And while there are still some work to be done integrating our new people, I will now be able to focus more of my time on advancing and executing our growth strategy, both internally and externally. Now it’s important to note, given our current size and competitive position growth for First Capital is squarely focused on getting better, not necessarily bigger.

That being said, given our opportunities, both will inevitably occur. Our growth strategy continues to focus on retail real estate in Canada’s major urban markets in properties where we can apply the proven capabilities of our platform and where value creation opportunities exist.

Our development program is the single most important part of this strategy. It stems from many years of experience in what we do.

Our development capabilities are well advanced, which allows us to continue building what can’t be bought, at least, at a reasonable price. So we will continue to undertake a measured amount of development as it provides us with several additional benefits, development enhances our portfolio by making our existing assets better and it adds new assets, but do the same.

Both results in more profitability and more growth for First Capital. Our current scale largely impacted by properties we have developed over many years has also given us a competitive advantage in Canada’s major urban markets.

We have become a large landlord to many of Canada’s strongest retailers. And this competitive position continues to get stronger with each new development and acquisition we complete.

At a recent conference call, I provided an update on each of our larger active development properties, which continued to progress very well, and we’ll continue to provide First Capital with meaningful growth for many years to come. One area of growth that I haven’t spoken as much about is acquisitions, primarily because the environment for acquisitions continues to be very competitive, which limits opportunities.

Now I should also note, given the solid growth from our existing portfolio, we are under no pressure whatsoever to acquire externally, which affords us the opportunity could be selective and opportunistic. And based on the strong relationships we have developed across the real estate industry and the talent we have in our investments group, I believe, we will continue to create opportunities periodically like we did in the first quarter.

So I’d like to spend a couple of minutes discussing our philosophical approach to acquisitions. Looking head, I believe future acquisitions will generally fall into three categories, the first, our large development or redevelopment properties in our core urban markets.

The two key words here are large and development, and of course always focused on retail. These types of properties also have significant long-term value creation.

A historical example is when First Capital acquired its initial position in Liberty Village. This was a large property with a lot of retail development potential that would spend many years.

These types of acquisitions typically don’t occur on an annual basis. They’re generally few and far between.

When they do occur, each of these properties has the potential to meaningfully impact our business. The relative infrequency of the type of acquisitions is fine because practically, we’re limited in the amount of capital we want invested in sizable non-income generating assets at any given time.

As a result, when we find these opportunities, we will most likely acquire them with a partner going forward. First Capital will be the Managing Partner, responsible for development, leasing and property management and will learn market fees for the services.

The partnership approach will allow us to manage our risk and more efficiently allocate our capital. We have not recently acquired a property in this category, but we certainly have the expertise and the resources to act on these opportunities when we find them.

The second category of properties are those located adjacent two or in close proximity to existing First Capital properties. These acquisitions build our presence and competitive position in our markets and add to our overall economies of scale and cost synergies further enhancing returns on the acquired properties.

We can also more effectively influence the merchandising mix of the retail that services, a strong demographic markets in which we invest and operating. We continue to make acquisitions of this nature, including smaller properties like the 18,000 square feet of new retail space at the base of the DNA3 Condo, and Toronto’s high growth Liberty Village and larger properties like the recently acquired Peninsula Village located in close proximity to our semiannual asset in South Surrey, British Columbia, where we plan to significantly intensify the property with retail and residential over the coming years.

Given our current scale and competitive position, we will be strictly opportunistic meeting investments in this category will almost always stand on their own merit with respect to value creation, which will be further enhanced when combined with our adjacent or existing properties. And the third and final category of properties, we will look to acquire our assets that are similar to existing First Capital properties, but our new trade areas within our existing urban markets.

Some relatively recent examples include our initial Griffintown acquisition in Downtown, Montreal, our False Creek Village acquisition in Downtown, Vancouver, and the acquisition of Hazelton Lanes in Toronto’s Bloor-Yorkville area that also falls into our major redevelopment category within our development program. These are all examples of investments in exceptional properties that are situated within existing First Capital urban growth markets, but there are new trade areas within those markets.

So in summary, our acquisitions activity will be focused on this strategic framework. So that it fits together with our development program and most importantly, it fits with our existing portfolio properties that now stand at over $8 billion in value.

In closing, we’re very pleased with our solid start to 2016 and we look forward to keeping you apprised of our progress in the quarters ahead. Now we would be pleased to answer any questions that you may have, so operator if you can please open up the line.

Thanks and good afternoon. Just wanted to touch on the capital ratios and capital recycling, the leverage metrics did tick up a little bit in the quarter given the opportunities that you found.

But just wondering where you see leverage sort of on a stabilized basis going forward for First Capital Realty and how do you expect to fund this overall asset growth over time? Is there a large pool of dispositions that you see embarking on over the next rollout to fund or are you looking at resources?

Hi Sam, it’s Kay. I’ll speak to the leverage metrics and then let Adam talk about capital allocation funding.

As I mentioned on last quarter’s conference call, our EBITDA interest coverage has improved over 2.5 times now. Our unencumbered assets have growing now to 70% of the portfolio or $5.9 billion.

Our secured debt to total assets ratio has dropped about half was in 2010. You are correct that EBITDA did tick up in the quarter, partially as a result of the acquisition net of disposition, as we had the full amount of the debt on the balance sheet at the end of the quarter and only partial income in the quarter.

We are still very much comfortable with the range of debt metrics for our business. We generate over 80% of our revenues from everyday essentials.

Ultimately the goal is over the long-term to grow the EBITDA and ultimately to bring leverage down, but I wouldn’t expect that in the short-term.

How far would leverage come down over the long-term like you were in sort of posted nine times EBITDA now, which you would be targeting eight times or sub eight times. How do you see sort of five years out?

We haven’t set specific leverage target Sam, thus far the guidance we given is that we expect lower over the long-term.

And Sam, just to touch on your capital question, so there’s been no change in terms of we looked at that in the past, and what you’ve seen us do is recycle some capital through dispositions, which I expect we will continue to do. I expect that our business going forward will retain even more operating cash flow then we do today.

So that is another very efficient form of capital that will fund our growth, and the balance will be through new debt and new equity to some degree like we have in the past. So when you look at the guidance for this year, I guess a couple questions on that, it was complicated – contemplate excuse me, the leverage sort of staying where it was at the end of the quarter or does it contemplate some decline and secondly the increase in guidance, how much that is from the outperformance in the Q1 FFO or OFFO?

Sam I wouldn’t expect a decline in leverage over the course of the year. And can you say your second part of the question again?

Yes, thank. Just on the Q1 FFO as you said was the ahead of your own expectations.

Was that key driver to increasing your guidance for the year in terms of OFFO growth?

Yes, definitely and with a very strong quarter and when you drill that and look at it, part of it I would say is G&A in positions that haven’t been filled, which is more temporary in nature that obviously isn’t – didn’t have a big impact on the guidance, but the core NOI growth in the more sustainable components of the contribution is what ended up with us tweaking our expectations for the year.

Thank you. I’ll turn it back.

Thank you.

Okay, thanks Sam.

Thank you. Adam in your introductory remarks, you talked about I guess the acquisitions and the way that you are looking at different acquisitions.

You mentioned partners and I was curious to hear a little bit more about that in terms of what type of institutions or partners you might be looking at involving and also whether you would consider bringing in partners on existing assets as a capital recycling strategy?

Good afternoon Alex and thanks for the question. To answer the second one, yes.

We certainly would consider bringing in partners on certain existing assets that we own, and you saw us do that in Q1 in Montreal. In terms of how we view partnerships, as you know I have a lot of experience over the years in joint ventures.

And I think that they’re in the right circumstances are significant benefits to partnerships. When I look at our business where I think there is a role for partnerships is a number of categories.

So one is in the context of mixed use projects, where we can bring in a partner that brings the specific strategic expertise to the table that the partnership can benefit from. And so the deal we did last year with CAPREIT and King High Line is a great example of that and I would expect us to do more of those, where the opportunity is appropriate.

Second our situations where we can combine assets or an asset that we own with assets that others own in a particular trade area and that enhances our position in those markets, it gives us more options to provide tenants and how the merchandising mix works, so that’s another example where I can see that happening. Third one is on projects that I touched on earlier, which is kind of a first category of acquisitions, which are very large generally longer development timeline development projects.

And just given the timelines and the significant capital contributions very much there would be a desire on those going forward for us to do them with a non-managing institutional quality partner. And then the last category really that I can think of where it makes a lot of sense for us is on assets that we own that are great asset, but may not have the same short to medium-term growth prospects that some of our other properties do.

And in some cases the right capital allocation decision for those properties would be to bring in a partner and recycle some of that capital elsewhere enhance our returns on the invested capital that stays in those assets from the fee income that we earn.

Okay, and so I guess just on the existing assets, do you have a – is this part of the strategy where you’ve identified a number of assets, or is this more on an ad hoc when the opportunity presents itself are you looking for capital?

It’s the truth, it is combination of both.

Okay, and then just sort of tying that back to your comments that building a lot of the things that you’re going to be pursuing in terms of growth. And can you talk about what you’re seeing in the market for cap rates for the types of assets that are core to First Capital?

Absolutely, as you know there aren’t a ton of data points, because the transaction activity for these types of assets is generally pretty thin, but what we have seen would indicate cap rates would be more likely to tighten or go down than go up. And think it’s just a factor of a significant amount of capital that has the desire to be invested in these types of assets and very little supply of it.

And to some extent there has been some influence from I think foreign capital as well where Canada looks attractive on a risk adjusted returns basis. And I think that’s pushed and certainly you’ve seen it in the office sector where you’ve seen cap rates kind of set new lows from foreign investors.

Okay, so you’re talking in last nine or 12 months I would assume?

Yes.

Okay, and then just lastly yes in your disclosure you noted that the shareholders agreement between the Gazit and Alony Hetz was terminated on April 3. I was wondering if you can shed any light on what led to that agreement being terminated or what are any implications might be?

Yes, Alex so implications are there are really are none for First Capital that process was really triggered by Alony Hetz and as you know they’ve been involved in First Capital pretty much from the very beginning and at that time they held a large position in First Capital and that is no longer the case. And overtime, this has become a smaller investment for them.

And Nathan Hetz who the representative on our board just the fact that we didn’t feel that it made sense anymore to be on the board. He also lives overseas and in the context of that holding that’s what drove the decision and it was on their initiative.

And certainly I’d like to take the opportunity now to thank Nathan Hetz for his contributions and support to First Capital is invaluable to me not only in the time I’ve been here, but through his 16 years of being on the board I know that he has been a valuable board member and on behalf of the rest of the board and management I know why we have only good wishes and thanks for Nathan. So that’s the color that we can provide on that situation Alex.

And of course they continue to be shareholders so you’re working for them on an ongoing basis, okay that’s great. Thank you.

Okay thanks Alex.

Thank you. I just wanted to just get a little bit more color on your acquisitions that your large acquisitions urban acquisitions that would require a major redevelopment.

So and your partner basically your partnership approach. So would it be 50-50 or could it possibly 75-25 would there be do you see the possibility of incentives for performance fees, which you do another Yorkville Village again and if you did you do you have capacity within the organization?

Okay so there’s a lot of questions and there Michael so if I miss any please remind me. I always think of it as 50-50, but that’s not a hard and fast rule.

I think if it was First Capital going to 75 then that would be unlikely I mean I think if we prepare to go to 75 that probably makes more sense to just stay at 100. But depending on the opportunity certainly it could be slightly less than 50, but generally at least in my mind the way I think of it is on a 50-50 basis.

You raise a very good point in terms of capacity and this company is very busy and is busy and it’s busy on a number of large important complex developments and we’ve been doing a great job at it, but that’s because there’s been a lot of man hours spent that the most senior levels of this company on them. And so you do have a certain amount of capacity it’s not unlimited.

And I would say that what we had on the goal the last couple of years would be add or near the maximum capacity that I would like to undertake. So I wouldn’t expect us at any given time to be significantly more than what we have right now, but as you know the project generally over the next couple of years move into a more stabilized position and we’re in the process where we’ve identified some assets that will move into development or redevelopment behind them.

But that’s how I look at it, Michael.

Okay, and incentive for performance type fees is that something you’re thinking about or?

It all depends my experience in partnerships is that they generally work best when the alignment is as tight as possible. That being said certainly there could be deal structures and investments were made sense for performance enhancing arrangements.

But my commentary today was more to illustrate a more macro framework there’s just no specific deal structures. So anyway I hope that answers your question.

Yes, it does. Thank you and just on your new disclosure with major redevelopment.

So you’ve taken Humbertown, Semiahmoo and the cloud trail out of there just because it’s not under active development. Can we infer that it’s been pushed back a bit, or is it just a new completely new disclosure type item?

Michael, you should assume as new disclosure, it has – the change had nothing to do with the any relationship to timing. It’s really about a focus on what’s under asset development being in the MD&A only.

But you now just add to that, so you raise a good point and one of the things I’d like to make clear that’s a benefit for us when you look at our development program is that our development sites by and large has really over the next 10 to 15 years have an existing carry, meaning there’s income in place. And Humbertown is a great example and there was a time where we thought we would move that into asset development sooner than we plan to now.

And we’re not under pressure to do that, because the truth is the – the property is generating a satisfactory yield right now whether we redevelop it in year or two years, or five years or even beyond we’re not under pressure to do that. And so we did decide to move that out a bit, because we think we’ll end up doing better on it and we have lot on the go right now and there’s a number of other properties that are like that.

When you caring land with no income, you don’t have that flexibility, and so one of the benefits we do have to go back to your initial question on capacities to manage it, because we’re not, it sound like you’re sitting there ticking away and costing us more money every month that we own it.

Okay, thank you. That makes sense, and just how likely is it for you to do another JV with Allied?

I hope it’s very likely I mean I think that our organizations have a lot of similarities culturally what we do with real estate, the type of vision that we have. We’re just in different asset classes.

So when you at where our portfolio situated in where theirs is, I’ll be quite surprised a few years down the road from now is there haven’t been other opportunities that make sense to do together.

Right, and just lastly okay, how big or – Adam how big of unencumbered asset pool do you want to – do you have a target in mind, your at 70% now. Is there a specific target that you think would be ideal?

I don’t think we have a specific target in my mind. Michael, I think we will always do the mortgages.

I think it’s important to maintain our relationship with our mortgage lenders. The unsecured market has been always a favorable market given how wide spread can get.

And so the financing opportunity really takes place at the time when we need the fun and where these spread differential is between the unsecured and the secured market.

So it’s basically based on what the market conditions are as long as you keep your relationship with the mortgage type lenders?

Yes.

Okay, thank you.

Okay, thanks Michael.

Hi, guys just going back to Humbertown, I mean in this acquisition market that is fairly frothy, would you say that if you had the zoning in place that essentially a buyer would pay for most of the potential work that could be done on that site?

So as you want to make sure, I’m clear on the question Matt, would you mind reviewing it?

Yes, so I mean how much – I mean in underwriting assets and you bid on assets and I’m sure day-to-day, are people today giving value for excess density beyond sort of where a cap rate would be in your IFRS valuation?

Well, the short answer is, it depends. In the case of Humbertown, yes, because we actually are fully rezoned now.

So clearly when entitlements are in place and you would always get credit, but when you’re seeing specially on the high-density res site is site that are not zoned or being priced based on their zoning potential. So I mean the market is very competitive right now generally across the Board.

Now if you have a shopping center like the one we bought in South Surrey or you have leases in place and I think what we’re planning for Semiahmoo in that market, which is a huge amount of intensification in the future. We bought Peninsula Village, two-thirds of the property is covered with the parking lot, right so.

But it’s encumbered with leases and so we acquired that on the basis of the income in place not on the future density potential. So the short answer is, it really depends.

Okay, so that’s where you can somewhat find an opportunities if your long-term investor and willing to take on these leases and have a longer-term view in terms of the redevelopment you can still get some value on acquisitions?

Yes, I think so when you get as great land with an accretive carry and that’s a great situation and given our size and scale now, especially when leases encumber the property. There will be times in the future where the retailer need something for us elsewhere and we’re hopeful we can make a deal and do some trade-offs and obviously the bigger we are and the better portfolio that we have the more chips we have to work with to try and unlock that value in less time versus a longer period of time.

Interesting, and on the Griffintown acquisition, is that the final tranche or is there more to come out of that agreement, again just remind me again remember at this point?

So this was the – in our mind, the crown jewel of that assembly and so this is the piece with the largest component of retail, in our view, the strongest component of retail. And as of right now, this forms the final transaction that we initially entered in to.

Okay, presumably you want to own that trade area to some extend though you would acquire more assets in that areas is making available?

Absolutely, yes, at the pricing made sense and the real estate was good. In functional within the trader, yes generally we really like the trade area.

It’s got a phenomenal demographic profile and it only gets better from year or so. Yes, we like it a lot.

Great, thanks.

Okay thanks Matt.

Thanks, good afternoon. Just going back to the convert reductions, could you maybe just share your thoughts on how you think about payment of the interest and principal between cash and shares, and a bit of change up in this reduction and then what the applications are for the balance of the year, the remaining series?

Hi, Pammi. Given we were redeeming two debentures at the same time and equity markets at the time were fairly volatile and additionally the final equity prices uncertain because we’re subject to a 20 day [indiscernible] pricing we elected to settle this time, for the first time 50% in cash and 50% in shares.

In terms of going forward, we’ll make the call at the time we have the right to redeem the debenture really based on where our share prices at the time, the state of the equity market our key financial ratios, any of our financial requirements among other considerations.

So, it’s no longer the case that we should just be assuming that they will be funded with shares. It’s really on a depending on the share price?

That’s correct.

Okay.

Yes, not only the share price, but what Kay has mentioned in terms of you exposed to market conditions to price that equity for not in immediate period of time. And so when you’re pricing a larger block like we were the volatility in the market were retreating is obviously a factor it’s not only about the stock price though.

Okay and then just one last one for me. In terms of the King High Line project in Urban Corp’s bankruptcy restructuring, I understand that that project wasn’t part of their filing.

But can you give me thoughts on the implications if any at all for your position in that in that property. And would you consider buying them out?

Yes, look it’s obviously quite unfortunate what’s unfolding at Urban Corp from a First Capital perspective. We’re partners with an Urban Corp entity as you highlighted on the – in the King High Line development.

But since the beginning of that partnership, we’ve – we had a majority on the Board of the partnership. We have the full right and ability to make all the decisions in the partnership, which is a right we’ve used really to benefit both partners meaning we do what’s in the best interest of the real estate.

And Urban Corp’s role now is limited to that of a non-managing owner in the project and the project is fully funded. So you alluded to that that particular entity hadn’t filed for bankruptcy, but the reality is whether it does or doesn’t this development is and will continue to be on track without interruption regardless of whether they file or not.

So the project is in good shape and we’re not affected by it obviously it’s unfortunate for Urban Corp, but we’re not affected by it.

Okay. Thank you.

Okay, thanks Pammi

Okay, thank you very much, and thank you everyone for your time this afternoon and your continued interest in First Capital. We just wanted to remind everyone that we have our annual shareholders meeting coming up it’s on May 31 at 10 AM in the Grand Banking Hall at 1 King West, at the corner of Young Street and King Street in Downtown Toronto.

We hope you can join us and as always if you have any further questions, please don’t hesitate to give Kay a call or myself a call at any time. Thank you very much.