First Capital Real Estate Investment Trust (TSE:FCR.UN) reported what management described as a strong finish to 2025, highlighted by solid occupancy, leasing spreads, and same-property net operating income (NOI) growth. Executives also provided early expectations for 2026, including a moderation in same-property NOI growth as the REIT compares against an unusually strong 2025.
Same-property NOI growth and leasing momentum
For the full year 2025, management said same-property cash NOI increased 5.9% excluding lease termination fees and bad debt expense. CEO Adam (last name not provided in the transcript) said roughly 2% of that growth came from increased occupancy and new tenants paying cash rent at One Bloor East, while higher rents across the rest of the portfolio contributed about 4%.
Management highlighted significant leasing activity during 2025:
- Renewals: approximately 2.2 million square feet across 535 spaces, with year-one renewal net rents up nearly 15% versus expiring net rents.
- New leasing: approximately 500,000 square feet across 193 spaces, with an average year-one net rent of C$28.23 per square foot.
Adam said demand continues to exceed supply for “FCR-type retail space,” noting a positive tenant tone at recent ICSC conferences in Toronto and Whistler, with increased tenant attendance seeking additional locations.
Fourth-quarter results and key drivers
CFO Neil (last name not provided) said operating funds from operations (OFFO) totaled C$72 million in the fourth quarter, up 7% from C$68 million a year earlier. OFFO per unit was C$0.34, up 6.6% year-over-year, and 1% higher than the third quarter.
Same-property NOI excluding bad debt expense and lease termination fees was C$112 million in Q4, up from C$106 million in Q4 2024, representing growth of 5.7%. Neil noted that same-property NOI represented 95% of total NOI.
Lease termination fees were C$2.6 million in the quarter, higher than the REIT’s prior expectation. The REIT secured termination fees from seven tenants representing 47,000 square feet, which management said would add about 25 basis points of portfolio vacancy and cause a short-term loss of recurring rental income. However, Neil said the REIT expects strong backfill prospects during 2026 and views the transactions as positive in net present value terms.
On expenses, Neil said fourth-quarter interest expense was C$40 million, down 5% year-over-year, though he noted the year-ago quarter included a C$1.7 million realized swap loss tied to early debt repayment. General and administrative expense was C$11 million in Q4, up 4% year-over-year, while full-year G&A was held flat at C$43.5 million.
Distribution increase and payout ratios
Management said the board approved a 2.5% increase to the monthly distribution effective with the January 2026 distribution (to be paid the week of the call). Adam framed the increase as part of a longer-term objective to establish a “track record of regular distribution increases” supported by funds-from-operations growth. He referenced a 3% increase implemented a year earlier.
Neil reported that the OFFO payout ratio was 67% for 2025, and the adjusted cash flow from operations (ACFO) payout ratio was 83%.
NAV, capital investment, and balance sheet actions
Neil said year-end net asset value (NAV) was C$22.57 per unit, up C$0.28 sequentially in Q4. For the full year, NAV per unit increased C$0.52, or 2.4%.
During Q4, the REIT invested C$63 million of capital, bringing full-year capital investment to C$223 million. Full-year development expenditures were C$163 million, while operating capital was C$60 million. Neil said major development spending related to Yonge & Roselawn, the Humbertown Shopping Centre redevelopment (phase three), and the 1071 King purpose-built rental project.
On financing, Neil said the REIT originated C$531 million in Q4 financing, primarily through C$500 million of senior unsecured debentures issued in two offerings. The newly issued bonds had an 8.7-year weighted average term and a weighted average spread of 149 basis points. Proceeds were used mainly to repay a C$175 million term loan due in April 2026 and C$300 million of Series T unsecured debentures callable in early February 2026.
Including term loan extension options, the weighted average term to maturity of the debt ladder increased to 4.6 years at year-end, up from 3.7 years one year earlier and 3.3 years at the start of the three-year plan presented at the beginning of 2024. Neil said 2026 term debt maturities totaled C$129 million, or 3% of total debt, at December 31, 2025. He added that in the first six weeks of 2026, the REIT had already repaid about C$85 million of maturing mortgages, mostly from cash on hand.
Neil also highlighted liquidity of more than C$700 million, an unencumbered asset pool of C$6.3 billion (nearly 70% of total assets), and a secured debt-to-total asset ratio of 16%.
2026 outlook: NOI growth, interest expense headwind, and development ramp
For 2026, Neil said the REIT expects same-property NOI growth of approximately 3%, excluding potential lease termination fees and bad debt expense or recovery. He emphasized that this outlook reflects a “very high growth year” in 2025 and noted that the REIT took back space late in 2025. He also said the failure of Toys “R” Us in the first quarter resulted in additional vacancy in January.
Management discussed a near-term interest expense headwind tied to the Q4 refinancing. The C$500 million of debentures issued in November carried a weighted average effective interest rate of 4.7%, replacing debt with a weighted average effective rate of 3.5%. Neil said the 120-basis-point increase on C$500 million equates to about C$6 million of annual funding cost, with the full run-rate impact beginning in Q1 2026.
Development spending is expected to increase in 2026, with expenditures forecast in a range of C$200 million to C$240 million. Neil said the ramp-up will be driven in part by the 50%-owned Yonge & Roselawn project, and the REIT also anticipates commencing a large-scale retail redevelopment initiative at Westmount Shopping Centre in Edmonton.
On deliveries, Neil said the REIT expects C$55 million to C$65 million of retail development and redevelopment to come online in 2026, with a stabilized NOI yield of 6.5% to 7%. He added that NOI benefits would be weighted toward the end of the year and into 2027, with Humbertown phase three and the Calgary Bridgeland development as the largest components.
During the Q&A, executives addressed condo-related cash flows and reporting, tenant events, and disposition progress. Neil said Edenbridge’s gross revenue opportunity at the REIT’s share is roughly C$115 million to C$120 million, with about 33% collected as of December 31, and expected a further C$50 million to C$60 million of proceeds from closings in the first quarter. Management also confirmed condo gains would be included in OFFO, described as a “low single-digit number.”
Regarding Toys “R” Us, management said two locations stopped paying rent in January (after paying December rent), and temporary tenants are in place while the REIT negotiates permanent backfills at higher rents. Management also said two Beer Store locations were among the main lease termination items in Q4, with termination fees equating to a little over two years of gross rent remaining on the terms and expectations to re-lease at higher rents.
On dispositions, executives said 2025 included completed or firm agreements to sell 10 properties for C$193 million, with run-rate NOI yields well under 3% and sale proceeds representing roughly a 40% premium to pre-marked IFRS value. They also said offers received for two marketed Yorkville assets exceeded IFRS value but were not at a sufficiently high premium to justify selling at this time.
About First Capital Real Estate Investment Trust (TSE:FCR.UN)
First Capital owns and operates, acquires, and develops open-air grocery-anchored shopping centres in neighbourhoods with the strongest demographics in Canada.
