FCR-UN.TOFCR-UN.TOTSX
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Operator: Hello, everyone, and thank you for joining us for today's First Capital REIT's Q4 2025 Results Webcast and Conference Call. [Operator Instructions] And now to get us started with opening remarks and introductions, I am pleased to turn the floor over to Alison Harnick. Please go ahead, Alison.
Alison Harnick: Thank you, and good afternoon. In discussing our financial and operating performance and in 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 the year ended December 31, 2025, 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 securities law, we undertake no obligation to publicly update or revise any such statements. Also during today's call, we will reference 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.
Adam Paul: Okay. Thank you very much, Alison. Good afternoon, everyone, and thank you for joining us today for our Q4 and year-end conference call. We're very pleased to deliver another strong set of operating and financial results in Q4, which rounded out a very solid year for First Capital. For the full 2025 year, same-property cash NOI grew by a healthy 5.9%. This excludes lease termination fees and bad debt expense. In round numbers, approximately 2% of the NOI growth was from increased occupancy and new tenants paying cash rent at One Bloor East. Primarily higher rents across the balance of the portfolio contributed roughly 4% of same-property NOI growth. This is a very strong growth rate for our business. And as you heard from Neil on prior calls, it exceeded our expectation from the beginning of the year. The primary driver of this outperformance has been better-than-expected leasing. Following a record high occupancy level of 97.2% set in Q2, occupancy remained solid at 97.1% at year-end. Our average in-place net rental rate now stands at $24.73 per square foot, which is an all-time high. During 2025, we renewed approximately 2.2 million square feet across 535 spaces. Net rental rates in year 1 of the renewal terms saw an average increase of nearly 15% over expiring their rents. Approximately 3/4 of our renewed leases in 2025 included contractual rent escalations during the renewal terms. This resulted in a renewal lift of nearly 20% when comparing net rents in the last year of the expiring terms to the average net rents during the renewal terms. In addition to renewal leasing, we also completed approximately 500,000 square feet of new leasing last year. This related to 193 spaces with an average year 1 net rent of $28.23 per square foot. Following a strong Toronto ICSC last fall, we've recently concluded another productive ICSC in Whistler last month. Both conferences had a very positive tone with a notable increase in tenant attendance seeking additional First Capital locations. With demand continuing to exceed supply for FCR-type retail space, leasing continues to be very strong. We own great assets in great markets and our leasing team's deep understanding of the strong fundamentals for our product type, which I discussed in detail a couple of quarters ago, positions us well to continue to capitalize on opportunities for rent growth. We continue to have confidence that market dynamics provide a very long runway for strong and sustained rent growth for our portfolio. We're now 2/3 of our way through the 3-year strategic plan that we presented to our investors at the beginning of 2024. At its heart, the plan is focused on delivering on 3 primary investor objectives: stability and consistent growth in FFO per unit, growth in net asset value per unit and absolutely stable, reliable monthly cash distributions to our investors and growth in those distributions over time. The business continues to perform exceptionally well. We remain on track to achieve the operating FFO per unit growth and debt-to-EBITDA metrics that are the core premise of our 3-year plan. For the first 2 years of the plan, our OFFO per unit CAGR is approximately 6%. We're tracking ahead on operating FFO. Our debt-to-EBITDA has improved to the low 9s and is on track to improve further by the end of 2026. While we strengthened our balance sheet, we've also extended the weighted average term of our debt in a meaningful way, which Neil will touch on. With strong results, significant balance sheet strength and positive outlook the Board approved a 2.5% increase to FCR's monthly distribution, effective with the January 2026 distribution that will be paid next week. As we've discussed, stable and growing distribution is one of First Capital's key long-term objectives. We believe that we will look back on our 3% increase a year ago, together with the 2.5% increase this year as the beginning of a long-term track record of regular distribution increases for our investors, supported by healthy FFO growth. As we enter the final year of our 3-year plan, we're very pleased with our progress to date. And with that, I will now pass things over to Neil.
Neil Downey: Thanks, Adam, and good afternoon, everyone. Consistent with our usual practice, we have a slide deck available on our website at www.fcr.ca. And in my remarks today, I will make references to that presentation. So starting with Slide 6. As shown here at the bottom of the page, FCR generated operating FFO of $72 million during the fourth quarter. This was an increase of 7% from $68 million in the fourth quarter of 2024 and a 1% increase sequentially from Q3. OFFO per unit was $0.34, representing a 6.6% increase from $0.32 earned 1 year ago and it was 1% higher than the $0.33 earned in the third quarter of 2025. Once again, we characterize the fourth quarter results as being very strong with same property NOI growth as the key driver. Now moving back to the top of the slide to net operating income. Same-property NOI, excluding bad debt expense and lease termination fees was $112 million in Q4. This was a $6 million increase from $106 million in Q4 2024, representing growth of 5.7%. I also note that same property underlying represents 95% of FCR's total NOI. Below the same-property NOI line item, you can see that Q4 lease termination fees were $2.6 million. This was higher than the expectations stated on our third quarter results call. During the fourth quarter, we ultimately secured these termination fees from 7 tenants, representing 47,000 square feet of space. While these vacancies will represent about 25 basis points of portfolio vacancy and they will result in a short-term loss of recurring rental income, we see strong backfill prospects through this year. And clearly, we expect these transactions to have a positive net present value. Acquisition and disposition activity had very little impact on Q4. On the disposition front, we closed on 2 sales in the quarter for $67 million. Both were development sites and collectively, they provided a slightly negative NOI contribution. Finally, within the other non-same-property NOI line, you'll see that there's a $3.5 million year-over-year decrease. A big piece of this, in fact, $2.9 million specifically relate to straight line rent. About $1.2 million is an accelerated straight-line rent charge-off that's actually related to the lease terminations that I just mentioned a minute ago. Most of the balance of the straight-line rent decrease related to the lease-up of our One Bloor East property, which turned cash NOI positive during the second quarter of 2025. Moving further down the FFO statement. Interest and other income of $6.1 million was consistent with the $6.4 million earned in Q4 2024. And it was $700,000 higher sequentially from Q3 due to higher fee income and higher interest income. The increase in interest income occurred specifically because FCR carried about $300 million of cash for most of the month of December. Interest expense of $40 million was 5% lower year-over-year relative to $42 million, the year ago amount included a $1.7 million realized swap loss that was related to debt that we repaid early. So if you normalize for that amount, interest expense is a little changed year-over-year. Moving to general and administrative expenses, which were $11 million. This was a 4% year-over-year increase for the quarter. Overall, we're very pleased to have held G&A flat at $43.5 million for the year. As I've noted on prior calls, we've been very focused on containing discretionary expenses. Quickly moving to Slide 7, just to touch on the 2025 results. It included $466 million of NOI for the year, an $11 million increase. Same-property NOI, again, ex lease termination fees and bad debt expense increased by nearly $25 million, equating to a strong growth of 5.9%. Also benefiting from proactive management of the debt ladder, the good G&A expense containment, FCR was able to flow this growth through to operating FFO which reached $286 million for the year or $1.33 per unit, and that was relative to $270 million or $1.26 per unit in 2024 on what I'll refer to as a comparable basis. Slides 8 and 9 cover key operating metrics, many of which Adam touched upon already. And at the risk of being repetitive, the theme really remained consistent again through the fourth quarter with continued and broad strength across key occupancy, leasing velocity, leasing spreads and rental rate metrics. Slides 10 and 11 provide various distribution payout ratio metrics. FCR's OFFO payout ratio was 67% for 2025. Similarly, the ACFO payout ratio registered 83%. Advancing to Slide 12. FCR's year-end net asset value was $22.57 per unit. Sequentially, this is an increase of $0.28 during Q4. The largest contributor to the change was a $36 million net fair value increase on investment properties. Beneath the surface of this net number, FCR recorder Q4 total fair value increases of $42 million related to higher NOI and cash flow assumptions and increases of just over $20 million related to mark to sale values across 4 newly announced disposition transactions. Offsetting these contributions were net fair value markdowns of $27 million related to development intensity properties and some very small asset specific adjustments to cap rates and discount rates. For 2025, as a whole, FCR's NAV per unit increased by $0.52 or 2.4%. The primary drivers were retained FFO and net fair value increases on investment properties of approximately $160 million related to the passage of time and higher cash flows. The biggest offsetting factor was just over $100 million of fair value reductions related to density and development land and residential development properties. Turning next to capital investments as outlined on Slide 13. During Q4, $63 million of capital was invested into the business, bringing the full year to $223 million. Q4 investments included $47 million of development-related expenditures and $16 million of leasing costs and CapEx into the operating portfolio. Full year 2025 development expenditures were $163 million, while operating capital was $60 million. The more significant development expenditures during the quarter and frankly, for the year for that matter related to our Yonge and Roselawn development, the Humbertown Shopping Centre redevelopment, where Phase 3 continues to advance very nicely and our 1071 King purpose-built rental project. Moving to Slide 14. Q4 was a very productive quarter on the financing front with $531 million of originations, primarily comprised of the issuance of $500 million of senior unsecured debentures through 2 offerings. The newly issued bonds had an 8.7 year weighted average terms and a weighted average spread of 149 basis points. The net proceeds were principally applied towards the early repayment of $175 million term loan that was due in mid-April of this year, and the $300 million Series T unsecured debentures, which were callable in early February of this year. One of the objectives we clearly stated at our 2024 Investor Day was to extend our debt ladder. And in just under 2 years, we've made very good progress on this front, which you can see on Slides 15 and 16. Including term loan extension options in the REIT's favor, the debt ladder now has a 4.6-year weighted average term to maturity. One year ago, this figure was 3.7 years and that the outset of our Investor Day and our 3-year plan, the weighted average term was 3.3 years. Therefore, over the past 2 years, the REIT debt ladder has been extended by approximately 40%. Moreover, the Q4 financing activities dramatically reduced FCR's near-term debt maturity exposure. As of December 31, 2025, term debt maturities in 2026 totaled only $129 million or 3% of total debt. And notably, during the first 6 weeks of 2026, we have already paid out mostly from cash on hand approximately $85 million of maturing mortgages carrying a weighted average interest rate of 3.3%, thus further reducing 2026 debt roles. Slide 17 summarizes a number of important credit metrics. FCR finished the year in an exceptional financial position with more than $700 million of liquidity in the form of cash on hand and availability under 3 revolving credit facilities, an unencumbered asset pool of $6.3 billion, equating to nearly 70% of total assets and a low 16% secured debt to total asset ratio. Now before turning the call to Jordie, I will make a few comments related specifically to the year ahead. 2026 is the third and final year of our 3-year plan. And in this regard, we continue to track towards or ahead of the key 3-year objectives that we outlined at our 2024 Investor Day. So in terms of 2026, specifically, I'll speak to 3 items. Firstly, we believe same-property NOI growth should be approximately 3% and for clarity, this growth excludes potential lease termination fees and bad debt expense or recovery. The important context here is that, look, we're comping against a very high growth year in 2025. And moreover, we took back some space late last year, as I discussed in my comments related to the Q4 lease termination fees. And with the failure of Toys "R" Us in Q1, we received some additional vacancy in the month of January. But to stand back, assuming FCR delivers 3% organic growth for the year, this means the 2-year stacked same-property NOI growth over the 2025, 2026 time frame will cumulatively be more than 9%. Secondly, financing costs. A moment ago, I touched on the significant derisking benefits of our Q4 financing activities, in particular. Now these benefits do come with a short-term cost as they bring forward by a few months. Some of the higher interest expense that FCR was inevitably going to incur in 2026 and beyond. The $500 million of unsecured debentures issued in mid to late November carried a weighted average effective interest rate of 4.7%. The funds were applied to the early repayment of debentures and term loans that had a weighted average effective interest rate of 3.5%. So the impact of 120 basis point yield increase on $500 million of debt equates to an annual increase in funding costs or interest expense of $6 million. And beginning in Q1 2026, FCR will be subject to that full run rate impact. Finally, turning to developments. We expect 2026 expenditures to be within a range of $200 million to $240 million. This is higher than the spend in each of the last 2 years and we expect it to be higher than the spend in each of the 2 years beyond 2026. So there will be a ramp-up in the pace of development spend, specifically at our 50% owned Yonge and Roselawn project, and this should be our single largest project development spend this year. As the year progresses, we also anticipate commencing a large-scale retail redevelopment initiative at our Westmount Shopping Centre in Edmonton. So I think this gives you a bit of flavor for the year ahead. On the delivery side, we expect $55 million to $65 million of retail development and redevelopment to come online. The stabilized NOI yield on this capital should be between 6.5% and 7%. The NOI impact, however, will be quite weighted towards the end of the year and into 2027 based upon the timing of the deliveries. Phase 3 of our Humbertown Shopping Centre redevelopment and our Calgary and Bridgeland development are the largest components of these deliveries. So this concludes my prepared remarks. I'm pleased now to turn the session to Jordie to elaborate further on FCR's investing and related activities.
Jordan Robins: Thank you, Neil, and good afternoon. Today, I plan to update you on our investment, development and entitlement activities. Starting with dispositions. It was a productive fourth quarter. We closed or entered into binding agreements to sell 5 properties for gross proceeds of $85 million, including $43 million of newly announced transactions. One of these sales that both went firm and close in the fourth quarter with the development site located to the southeast corner of Leslie Street in York Mills in Toronto. After assembling and entitling the property for midrise residential, we sold it to a seniors housing developer for $25 million. We entered into binding agreements on 3 additional properties this past quarter for total sale proceeds of $18 million. The largest is the disposition of a 1.5-acre parcel of land adjacent to our Plateau Des Grives shopping center located in Gatineau, Quebec. This $10.5 million transaction is under contract to close in the first half of 2026. Altogether, in 2025, we completed or secured firm agreements to sell 10 properties for $193 million. The run rate NOI yield of these assets is well under 3% and the sale proceeds represent roughly a 40% premium to our pre-mark IFRS value. Turning to active redevelopments. Our $45 million modernization and expansion of Humbertown Shopping Centre is advancing nicely and is on schedule. When completed, we will have demolished all of the common area and added 23,000 square feet of additional leasable area to the center. Humbertown will present as a brand-new unenclosed grocery and pharmacy-anchored shopping center. It will have modern prototypical retail units providing retailers with ideal space and reduced operating costs. Considering this and the excellent surrounding neighborhood demographics, the center commands premium market rents. The Loblaws grocery store is scheduled to open and are enlarged 34,000 square foot premises towards the end of Q2. We will turn over the final phase, which includes a newly created 20,000 square foot Shoppers Drug Mart, a Scotiabank, a TD Bank, along with a number of other to-be-announced tenants in the second quarter of 2026. The redevelopment of the former Molson building in Calgary is also tracking on time and on budget. This property is located in Bridgeland, a very desirable rapidly gentrifying neighborhood close to downtown. We demolished the former building on site and are well under construction of a new 29,000 square foot building that will be occupied by Shoppers Drug Mart. Shoppers took possession of their new premises in Q4 of 2025 and plan to open in Q3 of 2026. Considering the locational advantage of our portfolio, we continue to source value creation opportunities by applying our retail redevelopment expertise, which is one of our core competencies. In this regard, and as Neil had touched on in his formal remarks, we are finalizing plans on several other shopping center redevelopments, including Westmount Centre in Edmonton. We look forward to providing you with details on it and others we're working on in the coming months. Our mixed-use development program continues to advance as well. This quarter, we'll top off our 17-story 298-unit rental project at 1071 King Street West, in which we retained a 25% interest. Precast and window installations reached the fifth floor. 95% of the costs have been awarded, and we remain on budget. We expect first occupancy in mid-2027. Structural formwork is also moving steadily at our Yonge and Roselawn project in Toronto. The 4th floor of the podium is nearing completion and decking has started on the 5th floor. We own a 50% interest in the 636-unit residential rental building and serve as its development manager. The Yonge and Roselawn project also includes 65,000 square feet of prime retail space. Unsurprisingly, tenant interest for the newly built retail space is very strong. 85% of the construction costs have been awarded, and we remain on budget. We expect first occupancy of the residential space in the first half of 2028. Turning now to residential inventory. Registration and final closing and our even bridge condominium project will occur in Q1 2026. 177 owners now have taken occupancy with 3 additional contracted sales defaulting and for going on their 20% deposits. 2025 was another active and productive year for our entitlement program. We secured approvals for 3 million square feet of incremental density, and submitted rezoning applications for a further 1.7 million square feet. To date, net of the density we've already sold, we've submitted for approximately 18 million square feet or 75% of our 23 million square foot pipeline. Since initiating our entitlement program, we have sold over 5.5 million square feet of density at premium prices. As these entitlements are secured, our strategy remains to sell the majority of it while maintaining flexibility to retain partial interest in specific instances. Thank you all for your time and your continued support of FCR. Operator, you can please open the line for questions.
Operator: [Operator Instructions] We'll hear first from Sam Damiani at TD Cowen.
Sam Damiani: Just on the 2026 outlook for same property. It's a tough year-over-year comp, as you said. But if you were to strip out the impact of One Bloor East last year and this year, what would the same property number look like for 2026 relative to that 3% you provided?
Adam Paul: Sam, it's Adam. Thanks for the question. So we're not prepared with what the number is, excluding each property we own. So we can definitely get back to you on it, but leave it with us.
Sam Damiani: Okay. That would be great. And just on the condos, coming to sort of finalization this year, early next year? Any guidance on how that's going to impact financials in terms of FFO and capital repatriation?
Neil Downey: Yes. Sam, it's Neil. We've not given specific profit guidance on that. And what we've really focused on, I would say, is our recurring FFO number at any rate. You've seen us exclude transactional type income in the past. So we just encourage you to focus on the core number. And similarly, that's the way we look at metrics such as our debt-to-EBITDA. From a cash receipt perspective, it's obviously beneficial. For instance, Edenbridge at our share is a gross revenue opportunity of somewhere in the range of $115 million to $120 million. And at December 31, we had already collected in terms of initial deposits and then deposits as occupants move in about 33% of the gross revenue number. So there's a round of closings that will occur. We anticipate in the first quarter, and that's another $50 million to $60 million of I'll call it proceeds. And then there is a balance of some unsold inventory, which we anticipate being spread over a number of quarters as we monetize those units. 400 King, is, as you know, a much larger building, although we have a smaller share. The gross revenue opportunity there is bigger and we currently anticipate it will be completed either late in 2026 or possibly turned over in early 2027. That would be a delevering event that you would measure in terms of somewhere in the range of 0.4 turns on a debt-to-EBITDA basis. So it's more significant.
Sam Damiani: And again, Neil, the impact on debt-to-EBITDA is purely from reduced debt? You're not including the EBITDA from the condo profits?
Neil Downey: Well, there will be a headline EBITDA number, an impact to the extent there's profit, yes. But again, we focus on the trend of the core and you've seen us reference a normalized debt-to-EBITDA in the past when there's unusual or positive lumpy contributions in the EBITDA. So we look at the trend.
Sam Damiani: Okay. And the last one for me, just on -- I think the MD&A does reference that low 8x debt-to-EBITDA target for the end of 2026. Just wanted really to confirm that. And if there's any other I guess, information you want to relay as to sort of the building blocks getting from 9.1x to low 8 in the next 4 quarters.
Neil Downey: Well, I would say, generally speaking, some growth in EBITDA and some continued execution on asset sales.
Operator: Our next question will come from Mike Markidis at BMO Capital Markets.
Michael Markidis: Congrats on the strong end to the year and the great outlook for this year, guys. Just with following up, and I hate -- it's ticky-tack, but on the condo gains, so your OFFO will include condo gains. I know you're encouraging us to focus on core, but we do have to tie a number to what you report for consensus numbers. So I just want to get some clarity there.
Neil Downey: The short answer, Mike, is yes. It will be included in OFFO. It will be most [indiscernible] per unit number.
Michael Markidis: Okay. Got it. Okay. Just with respect to your mezz loan balance, I think maybe it was 2 or 3 quarters ago, you were expecting that number to come down, and it's actually been fairly stable. So maybe if you could just give us your outlook for that balance for the rest of this year? Is it expected to stay where it is currently? Or do you expect that number to -- that you're going to get some capital back from there as well?
Neil Downey: Sorry, Mike. We just missed the question. Which balance is that?
Michael Markidis: Your loans receivable program, mezz loan balance.
Neil Downey: Mezz loan balance. Yes, we actually did roll a couple of loans in the back half of the year. We actually also received repayments on some loans. So your point actually is valid. We had originally anticipated that balance might come down. Our current modeling for what it's worth, continues to anticipate that, that balance will come down. But look, we're always on the lookout for opportunities and ways to accretively deploy capital while still meeting our core objectives as it relates to leverage metrics.
Michael Markidis: Okay. And I'll ask one more before I turn it back. Just with respect to sources of capital coming in, you're still on track to hit your disposition target by the end of this year. Mezz loan balance, sounds like you're modeling it to come down, but who knows. But just from the early refis that you've done, where do you see the opportunities to repay debt early without any material frictional cost? Or is that opportunity to exists if you do get capital back?
Neil Downey: Yes, Mike, there's actually -- there's not a lot of opportunity candidly. But we also, as I indicated, put capital out every quarter to remind everyone through development. So I would say in the first 6 months of this year, we actually don't contemplate much in the way of net debt repayment.
Operator: [Operator Instructions] Moving forward, we'll hear from Lorne Kalmar at Desjardins.
Lorne Kalmar: Maybe just on the Toys "R" Us just quickly. Obviously, they declared the CCAA. Can you remind us when does the -- when did they cease paying rent or when did they cease paying rent?
Adam Paul: So 2 locations, Lorne, they ceased paying rent in January. So they paid December rent, they did not pay January rent.
Lorne Kalmar: That's very helpful. And then any plans -- early plans? I mean I'm sure you guys kind [ of the writing was on the wall ] for this one. Just wondering if there was any plans put in motion to backfill those spaces.
Jordan Robins: So it's Jordie. We have temp tenants in place at 2 of the locations and it gives us an opportunity to find permanent solutions. We have a couple of tenants that we're in negotiations with [indiscernible] park in particular. And interest seems to be, I'll say, fulsome. So we'll update you as that progresses.
Adam Paul: Yes, just to expand on that. So we've got a roster of temp tenants that are a good, very quick plug, which, as Jordie mentioned are in place. So those rents would be lower than what Toys was paying. We are in negotiations with permanent tenants on both spaces. Those rents are clearly going to be higher than what Toys was paying.
Lorne Kalmar: Can you give a rough idea of what the type of tenant, is it grocery, value?
Adam Paul: Look, we're dealing with more than one. They would be very typical core FCR tenants for that size of space. So you would recognize them in our existing portfolio.
Lorne Kalmar: Okay. Fair enough. And then maybe just lastly, on the lease term income, we hear how strong in demand for spaces. Can you give us a little bit of color on what happened there and maybe the NOI impact? Or was the NOI impact already realized in 4Q?
Adam Paul: Yes. The 2 main ones are 2 beer store locations. So there was an opportunity to get both back. We ended up with roughly a little over 2 years of gross rent of the remaining term. We've got great prospects. They're fantastic spaces and great shopping centers. We will release them this year, but for certain at higher rents, but they primarily relate to 2 Beer Store locations.
Operator: Our next question will come from Matt Kornack at National Bank Financial.
Matt Kornack: Maybe a quick follow-up to that line of discussion and the context of your outlook for '26. Beyond Toys and what you experienced in Q4, are you expecting to see any additional kind of tenant turnover? And then if you could give us -- I know things don't change rapidly, but an updated lay of the land in terms of how tenants are approaching current economic uncertainty and immigration, everything that we've seen up to this point.
Adam Paul: Yes. So nothing other than ordinary from what we see right now in terms of tenant turnover. For what it's worth in prior calls, we've been asked what's your watch list? Our response was you can count the retailers on one hand and the store locations on 2. We didn't give the names because they were current on their rent. We can tell you now one of those was toys. So no surprise. Other than them, we're not -- and this will turn out to be an opportunity. There's no question about it at this point. But there's no one else that we're aware of that there's no large space we're aware of that's going to turn over this year. From what we see, it's going to be normal churn from this point. In terms of tenant tone, you highlighted a couple of macroeconomic events that are sounded a bit negative, Matt. I can tell you, we're not seeing that at all in the lease negotiations. Things are just as robust as we've ever seen them. We're fresh off the ICSC in Whistler, very well attended. A lot of demand for FCR space. Our leasing pipeline is deep and very strong. So we are not seeing any pulling back whatsoever from tenants as a result of the things that you just mentioned or for anything else for that matter.
Matt Kornack: No, that's good to hear. And then maybe just a last quick one. Neil, it sounds like 2026's losses, to some extent, 2027's gain in terms of -- I'm looking at FFO growth and that the interest rate stuff's temporary. And it also sounds like towards the back half of this year, you'll see the benefits of lease-up and some of the vacant space. So am I thinking about that kind of an average between the next 2 years kind of a normal number for what you get from an FFO growth standpoint?
Neil Downey: Well, Matt, you're as good at modeling as the next guy, I'm sure. I mean I brought these points to everyone's attention for a reason. Interest rate roll-up is a factor for FCR. It's not a unique factor to FCR. And I do think that actually when you look at the debt roll and the weighted average in place debt, it does actually extend through 2027 as well. So it's a challenge we're all facing. And we've got a plan that we're applying to deal with it. And we have, of course, strong core organic growth in the business, and we're dealing with it through an asset allocation strategy to continue to monetize low and no-yielding density value in other properties. So our core objective is -- one of our core objectives is growth in FFO per unit. We have been dramatically exceeding our stated target for our 3-year plan to date. We're going to work hard to continue to exceed those numbers -- that number rather. But the interest rate headwind does kick in probably more so over the next 24 months than it actually has over the last 24...
Matt Kornack: That's fair. Sorry, I said that was the last one. But just quickly on your point with regards to disposition activity. It seems like it had moderated a bit, but then you've made good progress over the last call it, 6 months. So can you give us a sense of -- as investor demand remained very strong the type of assets that you're looking to dispose of? And it seems like the pricing is consistent with what you've said historically, if not a little bit ahead. So just a confirmation of that comment, if anything?
Adam Paul: Yes. Look, it's definitely been a grind given the nature of the assets we're selling majority and the investment team have done a fantastic job of being very methodical, very tactical and selling assets at great prices. But yes, it's certainly been tough and tough for a couple of years, and we expect it to continue to be tough. It's not materially different today than it was 6 months ago or even 12 months ago. So we're about 66% of our way through our 3-year plan. We're about 60% of our way through the disposition volume, so still some wood to chop, but still generally on track.
Operator: Our next question today will come from Pammi Bir at RBC Capital Markets.
Pammi Bir: Can you just maybe sticking to that disposition theme. Can you maybe just speak to what's maybe currently being marketed for sale? And is there anything that might be in advanced stages? And how maybe that mix might have changed from a few months ago when we last spoke on the -- on that topic?
Adam Paul: Yes. Not much of a change, Pammi. They are low and no-yielding assets. This has been a market where generally most of the stuff that Jordie and his group sold have not been broadly marketed. Some of them have been a more subtle marketing campaign through a broker, some we've done directly within our investments team. But it's the low, no-yielding assets -- some we think are more prime for sale than others. And so we're out there working on a bunch of them. Some we think we'll get done, some probably don't get done. But it'd be very similar in nature to what Jordie and his group has sold over the last couple of years.
Pammi Bir: Okay. And I think, Neil, your comment that I think you said no significant debt paydown in the first half of the year. Would -- are you implying then any transactions are probably more second half weighted in order to hit that -- your -- the balance of your $750 million target, $750 million?
Neil Downey: Yes, Pammi. I mean debt that will get repaid is related to condo construction debt at Edenbridge, for instance. But I think the question really related to, is there any debt that we can prepay. So I guess that was more of the focus of my response. Having said that, we do anticipate that the reduction in net debt will be more weighted to the back half of the year than the front half of the year.
Adam Paul: Yes. And the dispositions, just for clarity. So yes, you're right, Pammi.
Operator: [Operator Instructions] We'll move forward to Mario Saric at Scotiabank.
Mario Saric: It may be a bit more granular, but just sticking to the disposition theme. Any relevant update in terms of selling some of the Yorkville assets that you talked about the last quarter or 2?
Adam Paul: Yes. Well, there were 2 assets that were marketed. Jordie, do you want to give the update on those specific asset?
Jordan Robins: Yes. So we had listed, as you know, Mario, 2 properties in Yorkville. We were very clear from the outset that these were great assets, very attractive growth profiles. And by virtue of that, we would need a large premium to transact. Otherwise, we're very happy to keep them and take advantage of the NOI growth and value growth that would result. What I can say is we received offers for the properties. The offers we received were in excess of our IFRS value. But we really didn't see it as a high enough premium for us to agree to sell those assets now. So we'll continue to hold them until such time as we can transact at the prices we think makes sense.
Mario Saric: Got it. Okay. And more of a broader question, Adam. I think you depicted the transaction environmental market for grocery anchored in Canada has been very strong, but largely kind of dominated by private smaller investors. To what extent has that changed in terms of incremental institutional capital, especially for institutional capital coming into the market?
Adam Paul: Yes. So just so all my comments are clear. There are 2 main buckets of assets FCR holds and the disposition environment for the 2 are dramatically different. So the low and no-yielding properties, the ones that have a lot of residential development density. That's the one that I described has been more of a grind, but the sale of those are the ones that advance our strategic plan. So that's what we're focused on. The core grocery-anchored shopping center portfolio, that's the area of our portfolio that we view as core and is an area we're actually keen to grow in. The demand for that type of space is much stronger, it's much deeper. The stuff we've been selling has been largely to smaller private type outfits. There's a lot more institutional capital that would be interested in investing in grocery-anchored shopping centers. It's broad-based. We haven't seen a material change in foreign capital that you touched on foreign capital. So we haven't seen a meaningful change in that over the last year. I would still describe the demand as being heavily weighted to more domestic investors.
Mario Saric: Got it. Okay. And my last question, in '24, you put out a 3-year business plan. Arguably, it was a transformational time for the REIT. Looking out, should our expectation be kind of similar 2, 3-year plan on a rolling basis? Or are we more likely to see annual updates in terms of the outlook?
Adam Paul: Well, I mean, to be frank, that's to be determined. We thought it was an important time to put out a 3-year strategic plan. I'm glad you used the word transformational because that's how we viewed it as well. It was transformational from a real estate portfolio perspective and monetizing a lot of assets that don't contribute to our key objectives that we feel a lot of REIT investors perhaps don't fully value in the same way as the balance. And so monetizing those and deploying the capital that gets repatriated into lower debt, strengthening the balance sheet and into assets that do fit more appropriately. So we've made a lot of progress on that front. We will continue selling those types of assets I mean, given the size of the pool we have probably for the next decade with just the assets we own today. And so it was transformational from that perspective. Our balance sheet has also been transformed on the debt side. Our credit has been totally rerated. I think in the last couple of years, our unsecured spreads are in over 200 basis points when the peers are in roughly half of that. So we're going to continue executing the plan where we've now entered our final year. It's gone exceptionally well. We still have wood to chop, and so we're focused on that. And likely as we navigate throughout the balance of the year, we will certainly be coming to you and other stakeholders in a manner that describes how we're thinking about the future. It will likely be one of the 2 options you put out. I don't know for sure we're going to put out another 3-year plan, but we'll certainly provide some guidance in terms of how we're thinking about the business and what we think it can deliver on a regular annual basis at minimum.
Operator: We have no further signals from our phone audience today. I would like to turn the floor back to our management team for any additional or closing remarks.
Adam Paul: Okay. Thank you very much, and thank you, everyone, for your time, your interest and support for First Capital. We look forward to continuing to execute well and keeping you updated on our activities. Have a great afternoon.
Operator: Ladies and gentlemen, this does conclude First Capital REIT's Q4 2025 Results Webcast and Conference Call. We thank you all for your participation, and you may now disconnect your lines.