The company, which owns 166 properties across the country comprising about 25 million square feet of space, made the announcement with the release Tuesday night of its 2018 financial results. Converting to a REIT would move First Capital from one form of a publicly traded company to another.
“The key to our long-term success has always been our ability to evolve our strategy to capitalize on new opportunities and remain ahead of changing market conditions,” said president and CEO Adam Paul in the earnings statement.
“Our executive team and board of directors have worked to advance our business strategy to focus investment in our highest value urban market assets, surface unrecognized value, and ultimately, to look beyond asset class to create high quality, super urban neighbourhoods that deliver value to communities and investors, and ensure we retain our best-in-class position.
“In pursuing a conversion to a REIT structure, First Capital expects to benefit from access to a larger and, until now, untapped investment capital pool, enhanced comparability with sector peers and a more efficient vehicle to deliver returns to investors.”
First Capital’s management has also created a two-pronged business strategy to:
* increase investment in “high-quality, mixed-use properties with a focus on building large positions in targeted high growth urban neighbourhoods”;
* and dispose of up to 10 per cent of its current portfolio to provide capital for investments and to increase the overall value of its holdings.
Conversion to a REIT
The company has engaged legal and tax advisors to begin the conversion process. First Capital says the conversion will enhance long-term shareholder value by: expanding its investor base and investment profile by being eligible for inclusion in various REIT-specific indices, REIT ETF’s and REIT-dedicated investment funds; enhancing comparability with the company’s peers; and providing a more efficient vehicle to deliver the benefits of urban real estate ownership to investors.
The reorganization remains subject to customary conditions, including the approval of the shareholders. First Capital said it will release further information when the conversion plans have been approved by the board of directors.
New urban investment strategy
The “evolved” investment strategy is designed to create a portfolio of properties with average population density of more than 300,000 people within five kilometres, within the next 24 months. The strategy represents a 20 per cent increase over its current average population density of 250,000.
In its divestment plans, First Capital plans to sell 100 per cent interests in properties which don’t meet this standard. It will also sell 50 per cent non-managing interests to institutional partners in “certain stable but growing properties.”
This will allow First Capital to expand its interest in these markets without increasing its invested capital.
If it achieves these objectives, First Capital would increase the weighting of large strategic assets and create an incremental density pipeline which exceeds its current leasable area of approximately 24 million square feet.
MORE TO COME: RENX will update this breaking story with additional details as they become available.