First Capital realty inc. AnnuAl RepoRt 10 Corporate Profile first capital realty (TSX:FCR) is canada’s leading owner, developer and operator of supermarket and drugstore anchored neighbourhood and community shopping centres located predominantly in growing metropolitan areas. the company currently owns interests in 179 properties, including three under development, totalling approximately 22.3 million square feet of gross leasable area and eight land sites in the planning stage for future retail development. first capital realty has an enterprise value of over $5.5 billion and trades on the toronto stock exchange. Property rental revenue Gross leasable Area Debt to Aggregate Assets ($ millions) (millions of sq. ft.) ($ billions) for the year, at December 31, at December 31, % DeBT 485 4.6 21.6 20.8 442 20.2 4.0 4.1 410 19.4 377 18.2 3.6 326 3.2 55.4 56.6 53.5 50.3 52.2 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 Building Value 2010 2009 ($ millions) enterprise value $ 5,253 $ 4,508 Debt to aggregate assets 52.2% 50.3% Debt to market capitalization 45.8% 45.9% property rental revenue $ 485.0 $ 442.1 net operating income (NOI) $ 316.1 $ 285.2 2010 2009 2010 2009 ($ millions) ($ per share) funds from operations (FFO) – core operations $ 154.7 $ 144.5 $ 0.97 $ 0.96 FFO – non-recurring items (1) 2.4 6.8 0.01 0.05 total FFO $ 157.1 $ 151.3 $ 0.98 $ 1.01 Weighted average diluted shares for FFO (thousands) 160,031 150,190 adjusted funds from operations (AFFO) – core operations $ 156.2 $ 143.5 $ 0.87 $ 0.87 AFFO – non-recurring items (1) 4.4 8.3 0.02 0.05 total AFFO $ 160.6 $ 151.8 $ 0.89 $ 0.92 Weighted average diluted shares for AFFO (thousands) 180,917 164,695 (1) see Management’s Discussion and analysis. Funds From Operations 17 Years of Dividends ($ millions) ($ per share) (1) 157 (2) % PAYOUT RATIO (1) 152 1.08 146 126 (1) 117 0.88 0.28 0.77 0.79 0.80 0.80 0.73 0.13 0.68 0.71 0.62 0.58 0.53 0.56 0.48 0.51 0.36 78 79 77 79 82 0.30 06 07 08 09 10 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 (1) See Management’s Discussion and analysis (1) includes special dividend of $0.13 paid on april 6, 2005. for the year ended December 31, 2009. (2) includes Gazit america dividend-in-kind of $0.28 distributed on august 14, 2009. first capital realty annual report 2010 1 A Growth Strategy applieD to A Stable BuSiness 2010 Operating Highlights Sustainable Cash Flow • Property rental revenue increased 9.7% to $485 million • 154 of 178 properties are supermarket • net operating income increased 10.8% to $316 million and/or drugstore anchored • Invested $473 million in acquisitions, development • 21.6 million square feet of gross leasable area activities and property improvements • Top 40 tenants provide 57.3% of annual rents • Average rent per occupied square foot increased and occupy 60.7% of the gross leasable area by 4.1% to $16.35 • 25 of the top 40 tenants have investment-grade • 3.9% same property noi growth including expansion credit ratings and redevelopment space • approximately 47% of all annual rents are from • Occupancy of 96.4% tenants with investment-grade credit ratings • Dense urban locations with strong demographics Tenant Profile • supermarkets, drugstores and liquor stores 34% • national and discount retailers 16% Medical, gyms, daycare and other 13% • personal uses • restaurants, fast food and coffee shops 11% • banks and governments 10% • other retailers 16% • Over 90% of our rents % are froM urban Markets • Over 90% of our rents are froM shoppinG centres anchoreD by superMarkets anD/or DruGSTORES 902 first capital realty annual report 2010 urban Markets FOCuSSeD + GrOwTH STrateGY non- • Grow a portfolio of neighbourhood and community shopping centres in urban markets in canada Discretionary • Actively manage the portfolio to meet our tenant’s needs for upgrades, expansion and relocation • Acquire older urban shopping centres for repositioning Goods and redevelopment • Acquire properties and sites adjacent to the company’s & Services existing properties for tenant expansion, increased retail offering and other density • Acquire newer, high-quality properties where they = complement or add value to the portfolio • Develop new properties in selective growth areas in our target markets to provide superior returns Defensive • All development projects are built to leeD standards (since May 2006) Asset Class URBAn MArKeTS Our 7 Target urban Markets 1. Greater vancouver area 2. calgary 3. edmonton 4. Greater toronto area 5. ottawa region 6. Greater Montreal area 7. Quebec city 3 2 1 7 6 5 4 first capital realty annual report 2010 3 Message from the President KeePinG FiT in last year’s annual report, i looked back over the first decade • second, we wanted to grow to a sufficient size and critical that our team has managed first capital realty. i outlined the mass where we could leverage the skills and expertise of our transformation we have gone through from a small company people across a broad base of properties and urban markets to a large scale, well diversified organization with significant to generate economies of scale and operating synergies, as capabilities in the business of owning, developing and operating well as better position our value-creating activities to service supermarket and drugstore anchored shopping centres in urban national tenants across the country. markets, while at the same time strengthening our balance sheet, i believe we have achieved these objectives. financial position and risk profile.t hese were significant accom- although the portfolio and our company are now large, they plishments, and in 2010 we continued to build on the progress were built brick-by-brick, enabling us to know and understand achieved over the prior ten years. each and every one of our properties. We live and breathe our in 2010, we invested $473 million in acquisitions of properties locations every day – our people are on site and are familiar with as well as in development, redevelopment and expansion each property’s operation, the tenants and the neighbourhoods in activities, all 100% in line with our strategy and focus. the which we are situated. this knowledge of the risks and opportuni- location of our properties and our proactive management style ties for each of our markets and for each of our properties is a key produced a 3.9% increase in same property net operating factor in our success and our ability to build value going forward. income in 2010, while funds from operations from our core The right Tenants operations increased 7.1% to $154.7 million. We were also from the outset, we built our property portfolio specifically to very pleased to have announced in June 2010 that first capital meet the needs of consumers who are “shopping for everyday realty’s common shares are now included in the s&p/TSX ® life” . by providing shoppers with essentially non-discretionary composite index. goods and services, we have positioned the company in a in addition to these strong operating results, we continued unique and highly stable asset class. over 90% of our rents are to maintain our conservative capital structure, debt ratios, derived from centres anchored by a supermarket or drugstore, and well-balanced debt portfolio. of note, at year-end we had with more than 80% of rents coming from tenants providing daily approximately $1.52 billion in unencumbered assets, a key necessities, including supermarkets and drugstores, banks and element of our financial strength, with a conservative debt to other financial institutions, national and discount retailers, liquor market capitalization ratio of 45.8% and interest coverage stores, medical clinics and gyms, fast food and coffee shops, as of 2.5 times. well as daycare centres and schools. this is a powerful value in my report this year i’d like to discuss where we are today, proposition for both consumers and our company. and what this means for the future. as i look ahead, i firmly as the canadian retail landscape changes over the next believe we are where we want to be, with the right portfolio, the few years with the arrival of large, well-capitalized and highly right tenants, the right people, the financial strength and the right competitive participants from the united states and overseas, strategies to continue delivering value to our shareholders over the unique defensive nature of our asset and tenant profile the mid-to long-term. should serve us very well. The right Portfolio for example, almost 9% of our rents are derived from retail as of the year-end, our portfolio consisted of 178 properties bank branches, a highly stable and secure business. on average, well-located in seven targeted urban growth markets in Western, we have at least one or two financial institutions located in every central and eastern canada totalling 21.6 million square feet of one of our properties. in addition, our medical clinic and fitness gross leaseable area. We also owned 287 acres of land either centre tenants attract consumers to our centres and complement under development or held for future expansion. first capital’s shopping in our grocery and drugstore anchors. our use of shop- portfolio has been assembled carefully and prudently over the ping centres for daycare and schools also enables us to occupy last eleven years to meet two key goals: what may be less attractive space for retailers while at the same • first, we sought to diversify the portfolio geographically to time bringing consumers to our centres where they can shop and ensure the stability and security of our cash flows; dine while picking up their children.