First Capital Realty Inc (FCR.UN) announced on April 11 that it would sell four properties for $184 million. The properties include the Hazelton Hotel in Toronto’s Yorkville neighborhood, a 50% interest in the ONE Restaurant located in the hotel, a residential development site at Montreal’s Wilderton Shopping Centre, and 5146-5164 Queen Mary Road, also in Montreal. [All figures in Canadian dollars, unless otherwise specified.]

The sale is part of the real estate investment trust’s Enhanced Capital Allocation and Portfolio Optimization Plan initiated in September 2022.

“The Plan aims to unlock value through the monetization of targeted low-yielding assets in which value-enhancing goals have been achieved, while maintaining an attractive pipeline of development opportunities and redeploying capital to generate a more meaningful near-term impact,” stated CEO Adam Paul in its press release announcing the sale.

FCR stock is up 10.7% since the September plan announcement. By comparison, the Vanguard FTSE Canadian Capped ETF (CA:VRE) is up 9% in the same period. That exchange-traded fund holds First Capital as its seventh-biggest position, at 5.7% of its 21-stock portfolio.

Nearing Goal

The REIT aims to generate more than $1 billion in gross proceeds from selling non-core properties by the end of 2024. Including the $184 million from its latest divestitures, it has generated $360 million toward the $1 billion-plus target set last September.

While the sale of properties has gotten off to a good start, FCR intends to secure the best price for every asset sold. As a result, it set an end-of-year 2024 goal to ensure it met its target while obtaining value for those assets.

“First Capital expects to deliver an attractive combination of income and growth through its cash distribution (paid monthly) and an anticipated multi year FFO per unit growth rate of at least 4%,” stated its Sept. 22, 2022, press release.

“The development pipeline will be some of the most attractive development assets in the Canadian REIT sector with a focus on FCR’s best-in-class, grocery-anchored, necessity-based retail located in thriving neighbourhoods with superior demographics.”

Enter Activist

Activist investor Sandpiper Group, which had held a stake in First Capital since before the pandemic began, launched a proxy fight in December to nominate four of its own board members. Owning 9% of the stock, Sandpiper was highly critical of the REIT’s disposition strategy.

However, in early March, First Capital reached an agreement with Sandpiper and affiliate Artis Investment Trust (CA:AX-UN) that sees none of its four proposed directors added to the board.

The REIT did refresh its board by adding former CIBC executive Richard Nesbitt and real estate investor Ira Gluskin while also inserting Paul Douglas, a former Toronto-Dominion Bank executive as board chair.

“There is strong momentum in this asset class and with the recent Board changes, including the appointment of a new chair, we look forward to a renewed commitment to govern and steward the REIT in a manner that will enhance value for all unitholders,” said Samir Manji, Sandpiper’s founder and CEO.

Bright Future

First Capital finished 2022 with 19.3 million square feet of gross leasable area in 145 neighborhoods across Canada. In addition, it has 24.3 million square feet of future incremental density available from its development pipeline.

Nearly 100% of its properties are within a five-minute walk of public transit, giving its properties an average Walk Score of 71. In addition, the average population within 5 kilometers is very high; at 300,000, that’s considerably higher than its peers.

Ontario and Quebec account for 70% of the REIT’s fair value, with the remainder from properties in Vancouver, Edmonton and Calgary.

This article originally appeared on Fintel

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