Ladies and gentlemen, thank you for standing by. Welcome to the First Capital REIT Q4 2022 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press star one on your telephone keypad. I would now like to turn the conference over to Alison. Please proceed with your presentation.
Thank you and good afternoon, everyone. 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 forward-looking 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 31st, 2022, and our current AIF, which are available on SEDAR and our website. These statements are made as of today's date, and except as required by securities laws, we undertake no obligation to publicly update or revise any such statements.
During today's call, we will also be referencing certain financial measures that are non-IFRS 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 measures 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 the call over to Adam.
Thank you very much, Alison. Good afternoon, everyone, thank you for joining us today for our year-end conference call. In addition to Alison, with me today are several members of the FCR team, including Neil Downey and Jordie Robins, who you will hear from shortly. I'll start with First Capital's announcement yesterday as part of the Board's ongoing strategic approach to refreshment and plan Chair succession process. Bernie McDonell, who was given over 15 years of service to First Capital, is retiring. Bernie has contributed so much to this company, and I'd like to personally thank him for his many contributions, but also for his leadership and stewardship, initiating and throughout the transition process.
Paul Douglas, who is retiring from his role as Group Head, Canadian Business Banking at TD Bank Group, and who has been an Independent Trustee on our Board since 2019, is our new Chair. Joining the Board is Ira Gluskin. Both Paul and Ira have tremendous experience in both the Capital Markets and the Real Estate industry, which will be of great value to First Capital. I know all of us on the FCR team are excited to leverage their respective experience. Consistent with this approach, the Board will continue, as it always has, with ongoing Board renewal and enhancement. This is an exciting time for First Capital. Despite the challenges caused by macroeconomic factors, First Capital's efforts to surface value have been working, which is a fitting segue into our quarterly and annual results. 2022 was a year of progress for FCR.
Operationally, the impact of the pandemic proved to be behind us. Once again, our operating metrics and property-level performance in Q4 were both very solid. The year started out with continued stability, but that shortly changed by the end of Q1 with inflation and consequently interest rates rising rapidly. This created a lot of volatility in the capital markets across our sector from which we were not immune. We stayed focused on our portfolio and the important strategy work that was underway and planned. In May, we announced an NCIB in order for the REIT to take advantage of the major disconnect between the intrinsic value of FCR or NAV and our unit price.
To the benefit of all unitholders, we acquired and canceled 6.2 million trust units in 2022 for just over CAD 94 million, resulting in a weighted average cost per unit of CAD 15.14. This capital was funded entirely from retained operating cash flow and property dispositions. In September, we followed through on our promise to unitholders and announced the full restoration of our distribution. This was planned for nearly two years and fulfills the pledge we made to unitholders in early 2021. The decision to restore the distribution was straightforward, as we outlined last quarter. Most importantly, given our tax profile, we had virtually no flexibility other than to restore the distribution without compromising our REIT status.
I'd like to reiterate once again that the restored distribution is fully covered by our operating cash flow after deducting all maintenance CapEx, all leasing CapEx-All revenue sustaining CapEx and even revenue enhancing CapEx. From a capital allocation perspective, this is very important because it allows for 100% of disposition proceeds under our plan to be allocated to several potential options, which I will discuss shortly. The distribution is not one of them, given our operating cash flow fully covers it. For several years now, including throughout 2022, our team has worked hard to advance our very deep density pipeline. As a result of this work, passion, expertise, and sweat equity, we now have an abundance of low or no yielding assets that are primed for either development or monetization.
Far, we have rezoned over 8.6 million sq ft of space with another 9 million sq ft that is currently underway in many of Canada's most desirable neighborhoods. While these types of assets have and are expected to continue contributing to NAV growth, the cumulative impact of this sizable development pipeline has created a drag on EBITDA and FFO, while also adversely impacting our debt metrics. As a public company, striking the right balance is key. Given the success of our value-creating strategies in these types of assets, our portfolio composition today is overweight long-term development opportunities for a public company. Following months of work last year by Management and the Board on how best to unlock the value we've created over the past few years, we announced the details of our enhanced capital allocation and portfolio optimization plan toward the end of the third quarter.
Executing this plan ensures that our capital is allocated in ways that drive the most value for unitholders over the short, medium, and long term. It will also rebalance FCR's portfolio to a higher proportion of income-producing assets that contribute to key metrics such as EBITDA and FFO. It will further strengthen our balance sheet, which remains a very important element of our plan that our Board and Management team are fully committed to. Earlier, I noted that our operating cash flow more than covers our distribution. Therefore, the entire CAD 1 billion of monetizations will be allocated to a variety of other uses. Specifically, at least CAD 400 million will be used to repay outstanding debt. This will have a positive impact on our debt metrics, especially debt to EBITDA, given the relatively minimal EBITDA we will be selling under this plan.
With the transactions completed in Q4, we have already seen the initial impact of this in our quarterly results, with debt to EBITDA improving by 70 basis points from Q3 to 10.2 times, while at the same time meaningfully growing FFO per unit. This is exactly the combination that our plan is designed to deliver. Roughly another CAD 400 million is anticipated to be invested in value-enhancing development assets over the next 2 years. That is a cumulative number. The remainder will be allocated in the most optimal and impactful means, which will be assessed and determined as our sales progress. Options include further debt reduction, NCIB purchases, opportunistic real estate investments consistent with our strategy, and other opportunities that we identify. Our plan remains on track.
In addition to King High Line, just before year-end, we also closed on a partial interest in our Yonge and Roselawn development site. In 2022, we closed on a total of CAD 277 million of dispositions at an average premium to IFRS NAV equal to 15%. We are keenly aware of the high-quality nature of our portfolio to date. We also know that there continues to be capital seeking investment in great assets. Consequently, we expect and require stronger premium pricing for the assets we are selling. We have a track record of achieving this through various cycles and events, including through more challenging times, such as the past few years.
Between 2020 through 2022, a time period which captures both the pandemic and rising interest rates, we sold CAD 874 million of properties at an average premium to IFRS NAV equal to 17%. The current market is most constructive for smaller transactions versus very large ones, which is where we are currently focused and works well for our plan. It's important to balance transparency to unitholders while ensuring we retain as much leverage as possible with prospective purchasers as we negotiate transactions. In that regard, it's not prudent for us to provide the full list of properties that comprise our plan.
We do look forward to providing additional disclosure as appropriate, but to give some color, of the initial CAD 1 billion pool, following the 2 sales in Q4. We have 28 assets remaining that have an average value of roughly CAD 30 million. Most are development sites, none are multi-tenant grocery anchored centers, and no sale or even the aggregate of the CAD 1 billion pool materially changes the composition of our primarily grocery anchored portfolio, nor our long-term growth trajectory. They are expected to meaningfully impact the key metrics our plan is designed to deliver. We continue to make good progress with several properties under conditional agreement, several under negotiation, and others that are being ready, which are primed for sale. We look forward to reporting on these in the future as they progress. Now, Neil will walk through the details of the quarter.
To summarize, the quality of our portfolio and the strategic decisions we have made really came through in our fourth quarter results. Same property NOI growth, lease renewal lifts, and FFO per unit growth were all very solid. Importantly, we achieved this while also improving our debt to EBITDA. A powerful combination of FFO per unit growth, while at the same time improving debt to EBITDA is a key objective of our plan. Leasing was solid once again, with 1 million sq ft of leasing across 231 transactions at very healthy rent increases. This contributed to our average in-place net rental rate nearly breaching CAD 23 per sq ft, setting another all-time high for the 26th quarter in a row.
Jordie will provide a more detailed update on our investment activity, but needless to say, we've been busy with some amazing work done by Jordie's team, which we expect will continue to positively impact NAV as we execute. Throughout 2022, we continued to advance our ESG priorities, further embedding environmental, social, and governance principles into our business and culture. First, an update on our carbon reduction planning. Rooted in practical plans today but focused on the future, our 2030 greenhouse gas emissions reduction target of 46% has been approved by the Science Based Targets initiative, with our longer-term goal of reaching net zero by 2050. To reach these ambitious goals, FCR is actively working on asset-level greenhouse gas reduction plans that include operational efficiencies, retrofit initiatives, tenant engagement, and renewable energy generation, among other things.
We know that getting to net zero cannot be done in isolation. We need collaboration and partnership with our national tenants and industry peers to achieve our common goal of net zero. To that end, in November, we hosted an inaugural Collaboration for Climate Action Forum for solutions-focused discussion and planning around decarbonization of retail buildings in Canada. We intend to continue to engage with forum participants on this important ongoing initiative. As part of our corporate accountabilities last year, we encouraged our employees to volunteer at least 1 day towards a charity that matters to them. We set a target of 75% participation. Thanks to the passion of our team to support the communities where we operate, we exceeded that target with 82% participation.
In addition to our volunteering efforts, the FCR Thriving Neighbourhoods Foundation team raised close to CAD 200,000 in support of Kids Help Phone. I would like to personally thank our employees, our Board members, and our corporate friends who continue to support our foundation. When I look back over 2022, we have made significant progress on our ED&I initiatives and our ESG roadmap, we look forward to providing more updates on ESG in the future. In the meantime, please visit the ESG section of our website for regular updates. Overall, a very busy year in fourth quarter with healthy operating metrics, solid earnings growth, and a stronger balance sheet. Before I pass it over to Neil, I'll comment on the special meeting requisition. For the last few months, as we always do, we have engaged closely with many of our unitholders.
We believe now more than ever, that the optimization plan is the right path forward. First Capital has a credible and executable plan that delivers enhanced earnings growth while at the same time strengthening our balance sheet. Management and the Board unanimously support this plan and are excited to continue executing it and delivering its benefits to unitholders. I firmly agree with our new Chair and every member of our Board that we have the right plan at the right time with the right team to continue to execute it. With that, I will now pass things over to Neil.
Thanks, Adam. Good afternoon to all of our call participants. As is customary with my prepared remarks today, I will refer to our quarterly conference call presentation, which is available on our website at fcr.ca. From my perspective, the three themes within First Capital's Q4 results are, number one, leasing remains strong. Secondly, the REIT's financial results continue their solid underlying growth trends. Thirdly, First Capital continues to make significant progress in improving key leverage metrics, including a step function decrease in Q4 debt to EBITDA. This leverage reduction has been achieved while also growing underlying FFO per unit and maintaining very strong liquidity. Let's review some of the details behind the results, starting with slide 6.
At the bottom line, Q4 2022 funds from operations of CAD 80.5 million increased by 32% from CAD 60 million in the fourth quarter of 2021. Aided by a lower unit count related to our unit repurchase program, fourth quarter FFO per unit increased 36% to CAD 0.37. This compares to CAD 0.28 per unit in the fourth quarter of 2021. Collectively, FCR's other gains, losses, and expenses, or OGLE for short, often drive variability in the reported FFO, and the Q4 results were no exception. As shown near the bottom of slide 6, Q4 FFO included other aggregate gains of CAD 12.7 million versus other losses and expenses of CAD 3.6 million in the prior period. This roughly CAD 16 million swing year-over-year in OGLE equated to almost CAD 0.08 per unit.
The large gain recognized in the fourth quarter of 2022 relates to our sale of the 50% non-managing interest in the residential component of King High Line. When we placed long-term fixed rate financing on the property, we had an in-the-money interest rate hedge. This was solely to the benefit of FCR. Once FCR no longer owned the property, the accounting rules are such that we were required to take all of this benefit into net income and by extension, FFO. Prior to OGLE, Q4 FFO totaled CAD 67.8 million, representing an increase of 5% from the prior year. On a per unit basis, this measure of FFO equated to CAD 0.32 in the fourth quarter of this year, an increase of 8% over a similarly derived CAD 0.29 per unit in the fourth quarter of 2021.
In providing some additional context with respect to the Q4 results, let's walk from top to bottom through the FFO statement. Returning to the top of slide 6. Q4 net operating income of CAD 112.1 million increased by 5% from CAD 106.6 million in the prior year. Here, too, there are several points of note. Firstly, Q4 results included CAD 3.6 million of termination receipts versus essentially nil in the prior year. These settlements related to several tenants that closed their doors during the depths of the COVID lockdowns back in 2020. Moreover, Q4 2022 bad debt expense was actually a recovery of CAD 2.1 million.
This reflects strong collections in 2022 and progress with and increased confidence in certain tenants that had acute operating challenges through the mandated closures of 2020 and 2021. On a year-over-year basis, higher base rents from new and renewal leasing, net of leases lost, contributed CAD 2.2 million to NOI growth. That against these drivers were several adjustments related to current and prior year CAM and tax recoveries that adversely impacted Q4 NOI by CAD 1.4 million. Finally, lost income related to disposition activity reduced Q4 net operating income by CAD 2 million relative to the fourth quarter of 2021.
Reflecting on some of the elements of fourth quarter NOI, specifically the lease termination receipts, the bad debt recovery, the CAM and tax adjustments, it certainly feels like a fourth theme inherent in the results is that we've now authored the final and closing chapter on the COVID pandemic story. Q4 same property NOI increased by CAD 8.1 million, equating to a strong 8.3% year-over-year growth rate. This growth was primarily driven by higher lease termination receipts, lower bad debt, and higher base rents. Excluding the bad debt expense and lease termination fees, Q4 same property NOI growth was 0.8%.
Adjusting for the change in some of the CAM and tax amounts that I mentioned a moment ago, we estimate that a normalized Q4 same property NOI growth rate, ex bad debt and lease termination fees, was about 2.5% to the positive. On a sequential basis, Q4 NOI was CAD 2.6 million or 2% higher than that earned in Q3. There were a number of factors behind the improvement. First, we have the higher lease termination receipts and lower bad debt expense contributing CAD 5.9 million to growth. Higher base rental income contributed CAD 1.1 million. Adjustments related to current and prior year CAM and tax recoveries adversely impacted Q4 NOI by CAD 2.3 million. Reflecting seasonality and variable revenue contributions were CAD 1.4 million lower in the fourth quarter relative to Q3.
Finally, the impact of lost NOI related to net disposition activity was $700,000. Turning to interest and other income of $5.8 million, this was an increase of 39% year-over-year and an increase of 19% from Q3 of 2022. In each case, the increase was primarily due to higher average interest rates on mortgages and loans receivable. At December 31st, FCR's mortgages and loans receivables totaled $174 million, and these investments carried a weighted average interest rate of 6.9%. Comparatively, the mortgages and loans receivable book was $240 million at September 30th and $237 million at December 31st last year.
We expect Q1 2023 interest income to decline to approximately $2.7 million from $3.8 million in the fourth quarter. This is due to loan repayments. For added color, our partners in our 2150 Lakeshore Boulevard West development project repaid a $50 million loan in December. The loan receivable and the timing of the repayment were all in accordance with the terms of their initial investment in the project, which occurred in September 2021. Also repaid during the fourth quarter were approximately $25 million of other loans. In mid-January of this year, our 2150 Lakeshore partners provided the early repayment of their remaining $50 million loan. This was ahead of the September 2026 maturity date.
While the early repayment will cause a small earnings drag, perhaps an FFO impact of close to CAD 0.01 per unit annualized, the very clear and significant benefit to FCR are a further bolstering of the REIT's liquidity position and further advancements on debt reduction in the new year. Turning to G&A and corporate expenses. Here, too, there are several items of note in the fourth quarter results. Corporate expenses charged to FFO were CAD 10 million in Q4 of 2022. This was an increase of CAD 900,000 or 8% from the third quarter and an increase of CAD 2.7 million or 38% from the expenses in the fourth quarter of 2021. Expenses of note incurred in the fourth quarter of last year included CAD 1.4 million of legal and advisory costs related to addressing activist activities.
We also incurred an additional CAD 500,000 of legal expenses related to a property sale or a property transaction that occurred all the way back in 2014. Unexpectedly, this situation went to trial. Notably, in January of this year, the judge fully awarded in FCR's favor. Unfortunately, being under Quebec jurisdiction, there was no provision for recoveries of costs available to FCR. Hopefully, our transparency on these matters aid in your understanding of the underlying corporate expense trends. Moving to slide 7, you can see FCR's full year 2022 and comparative 2021 results. With today's call and prior calls, we've essentially covered the detail behind all 4 quarters. While there's a few puts and takes within each of the annual results, the big picture is clear. Firstly, leasing velocity and rent growth had been strong and occupancy steady.
Through last year in particular, we continued to actively manage FCR's capital through a variety of initiatives, including asset monetizations at prices that exceeded IFRS values on average. We allocated a portion of these funds towards debt repayments, a portion towards value accretive units repurchases, while also continuing to invest in growing the business through development and selective acquisitions. As a result of these activities and accomplishments, total FFO increased by 5% in 2022 to CAD 263 million. On a per unit basis, growth was 6%. Excluding OGLE items, 2022 FFO was CAD 261 million, an increase of 10% year-over-year. FFO per unit, also excluding OGLE, reached CAD 1.20 per unit in 2022, up 11% year-over-year. FCR's full year 2022 results were strong on many accounts.
Moving to our fourth quarter operating performance metrics on slide 9. The portfolio rounded out the fourth quarter with an occupancy of 95.8%. This was consistent with the 95.7% reported in Q3 and a modest 30 basis point decline year-over-year. During the fourth quarter, we had 157,000 sq ft of tenant possessions set against 122,000 sq ft of tenant closures. Moving to slide 10, we turn to the subject of leasing velocity. On this front, Q4 volume and spreads were strong. Renewal leasing volumes were 711,000 sq ft in the fourth quarter, 28% higher than the renewals in Q3 and 57% above the 452,000 sq ft of renewal leasing in Q4 of 2021.
Fourth quarter renewal leases were affected an average rent increase of 9.9% when measuring the first year renewal re-rent of CAD 25.45 per sq ft relative to a rent of CAD 23.16 per sq ft in the final year of the expiring lease. On a platform basis, Q4 new and renewal leasing was 1 million sq ft in the fourth quarter, and for the year as a whole it was 3.6 million sq ft. Over the past 5 years, this volume was only outdone back in 2018 when FCR leased 4 million sq ft across the platform. As referenced on slide 10, our average in place net rental rate per sq ft reached CAD 22.95 at December 31st. FCR's in place rent continues to make new highs.
Net rent growth during the fourth quarter was $0.15 per sq ft, and on a year-over-year basis, growth was $0.53 per sq ft or 2.4%. Rent escalations and renewal lifts provided more than 85% of the growth in 2022 net rent per sq ft, with the impact of new tenant openings, net of closures accounting for the balance. Slides 11 and 12 provide distribution payout ratio metrics on an FFO, AFFO, and ACFO basis. These are largely for informational purposes to provide indications as to how we view and measure the cash generation and sustaining capital expenditure requirements of the business. For calendar 2022, FCR's total sustaining capital expenditures, including leasing costs, totaled approximately $38 million. Over time, we generally expect to incur $30 million-$40 million annually for sustaining CapEx.
Similar to last year, we currently have a plan for 2023 to be at the upper end of that range. Advancing to slide 13, the net asset value per unit at December 31st was $23.48. This was virtually unchanged through the fourth quarter, and it was $0.78 per unit or 3% lower relative to December of 2021. During the fourth quarter, retained FFO was roughly equivalent to the very small net fair value loss on investment properties. On the subject of property valuations, during the fourth quarter, more than 100 individual properties were subject to cash flow updates, yield changes, or a combination of both. To give a bit of color, assets with more than $3 billion of total fair value were subject to upward valuations aggregating $55 million.
Assets with more than CAD 5 billion of total fair value were subject to aggregate downward revisions totaling CAD 80 million. Substantially, all of the net fair value adjustments relate to income properties, while a very modest CAD 7 million fair value loss related to de-density and development sites. On a portfolio basis, FCR's stabilized cap rate increased to 5.2% at December 31st from 5.1% at September 30th. Providing an update on capital deployment as summarized on slide 14, we invested CAD 43 million into development, leasing and residential development and other CapEx during the fourth quarter. Most of this capital was invested into assets located in Toronto, Montreal, and Vancouver.
For 2022 in its entirety, we invested CAD 162 million into the property portfolio, including CAD 103 million into development expenditures and residential development. Over the course of the year, FCR also invested CAD 62 million into complementary and strategic property acquisitions, while roughly CAD 95 million was allocated to repurchase 6.2 million trust units at a weighted average price that was 36% below the year-end net asset value per unit. Anticipating that the question might otherwise be asked, as we look forward this year, we currently anticipate development-related capital expenditures to increase to a range of CAD 200 million-CAD 225 million. All other capital expenditures, including sustaining, revenue enhancing, and recoverable CapEx, are currently anticipated to be in the range of CAD 70 million-CAD 80 million for 2023.
Turning to slide 15, we've summarized key financing activities. During the fourth quarter alone, we reduced total net debt by CAD 252 million. This included the repayment of our CAD 250 million Series P unsecured debentures in early December, as well as the purchaser's assumption of the CAD 80 million share of the mortgage on the residential component of King High Line. We also secured a new CAD 100 million term loan that we've swapped to a fixed interest rate of 5.0% for a four-year term. On slide 16 of the presentation, you'll see a summary of some of FCR's debt metrics. These metrics are strong, and on several key fronts, they've posted significant improvements. As at December 31st, the REIT's net debt to total assets ratio was 44.0%.
This is consistent with the Q4 2021 metric and 140 basis points lower than the 45.4% at the end of the third quarter. Notably, FCR's net debt to EBITDA ratio declined to 10.2x, a marked improvement from 11.2x one year ago, and 10.9x at September 30th. At December 31st, general corporate liquidity was CAD 654 million. In addition, several of the redevelopment projects are funded by dedicated construction facilities. Since year-end, we funded CAD 234 million of 10-year mortgages carrying a weighted average interest rate of 5.35%. These mortgages are secured against a portfolio of six shopping centers located in Alberta.
The net proceeds have allowed for the full repayment of amounts outstanding under FCR's CAD 800 million of revolving credit facilities. They've reduced floating rate debt exposure to approximately 5% from 10% formerly. Of course, they've also bolstered pro forma liquidity to approximately CAD 900 million. Again, excluding amounts that are available on our construction facilities. We believe these are all very strong financial metrics. This concludes my prepared remarks for the afternoon. I'll now turn the call to Jordie Robins, FCR's Chief Operating Officer, to provide some commentary on property investments, operations, and developments.
Thanks, Neil, and good afternoon. Our high-quality, grocery-anchored portfolio continues to perform. As you've heard, we finished 2022 strongly with a very positive fourth quarter. As we reflect both on the quarter and the year, we're pleased with the advancements we made with our entitlement ladder, our active development program, our enhanced capital allocation plan, and of course, our active leasing program. Our annual leasing volume and the associated growth and renewal rates is a gauge of how our business is tracking. Based on our performance in 2022, we have good reason for optimism. This past year, we leased 3.6 million sq ft on a platform-wide basis. For context, this annual total is greater than our 2017 through 2019 three-year pre-pandemic average. Over 1 million sq ft of this leasing volume was completed in Q4.
The 3.6 million sq ft is made up of over 600,000 sq ft of new deals and 3 million sq ft of renewals, the most we've completed since 2018. Lift on these renewals in the quarter at our share was 9.9%. 3.6 million sq ft of leasing volume does not include our 1.4 million sq ft leasing pipeline, representing new and renewal lease agreements committed or under negotiation where the tenant is not yet in possession. This pipeline is a window into the future. As it converts, we expect it will have a positive impact on occupancy and FFO. We're seeing strong tenant demand, primarily from grocery stores, dollar stores, full-service sit-down restaurants, discount food stores like Bulk Barn, off-price retailers like TJX, health and wellness, QSR, and pet retailers.
In 2022, we finalized leases and successfully delivered possession to a number of new and notable tenants that we are confident will have a meaningful impact upon the FCR neighborhoods in which they operate. To name a few, these tenants include a 30,000 sq ft Marcello's Urban Market grocery store at our Aquavista Bayside property in Toronto, and a 20,000 sq ft PetSmart at Clairfields Commons in Guelph. We also delivered to Dollarama 32,000 sq ft of space located at Mount Royal Village in Calgary, 3080 Yonge in Toronto, and at Maple Grove Centre in Oakville. We made great progress in Yorkville with respect to luxury brands as well. This past quarter, we gave possession of a 14,000 sq ft space to a renowned, soon-to-be-announced retailer who chose Yorkville as their first location in the country.
Their possession follows on the heels of our recently opened 7,000 sq ft Balenciaga deal, who we had also brought to the market in 2021. Balenciaga first took their space as a pop-up. Shortly thereafter, agreed to execute a long-term lease based on their initial success and the long-term commitment we had secured with the other luxury brand co-tenants in the neighborhood. Recognizing the constraint on supply for new space in light of rising construction costs, national tenants have become quite active, driving demand for larger space in particular. For example, in 2022, we made significant progress releasing the former Walmart stores at Fairview in St. Catharines, Cedarbrae in Toronto, and Stanley Park in Kitchener. In all three locations, Walmart was paying single-digit gross rents.
We are in the process of replacing these low gross rent deals with leases with new tenants, all of whom will pay double-digit net rents. The re-leasing we have done will not only reposition these centers, improve the tenant mix, and the associated consumer draw, it will also serve to reduce the common area costs for the balance of the tenants, increase the NOI and the value of each of these assets. Our investment team had a very busy quarter capping off what was a very solid year with gross disposition proceeds of CAD 277 million. The total proceeds represented a 15% premium to our IFRS NAV. In Q4, as part of our CAD 1 billion enhanced capital allocation and portfolio optimization plan, we realized CAD 179 million in gross proceeds from sales.
This includes $149 million from the sale of our remaining 50% interest in our King High Line residential property. During the quarter, we also closed on the sale of a 25% interest in our Yonge and Roselawn development site in Toronto. The project is approved as a mixed-use retail and multi-family property with a total of 548 residential rental units and approximately 65,000 sq ft of retail space. We sold this interest to Woodbourne and a highly regarded institutional investor for approximately $30 million, plus the assumption of their pro rata share of the development costs. We retain the role of co-development manager.
While we did have offers to buy 100% interest in this property from condominium developers for a significantly higher price, we'll realize more value developing and owning this zoned, shovel-ready, mixed-use project with 65,000 sq ft of retail space as purpose-built rental. We view this as an extraordinary development in an extraordinary neighborhood, which has been designated as an urban center in Toronto. Our partner, Woodbourne, is like-minded, and collectively, we are driven to build one of the best, most energy and carbon-efficient purpose-built rental properties in Toronto. It was a quieter quarter and year for acquisitions. In 2022, we did still manage to close on approximately CAD 60 million of principally tuck-in assets that form part of a larger assemblies at Avenue and Lawrence in Toronto, at Bloor and Spadina in Toronto, and on Montgomery at Yonge and Eglinton in Toronto.
As at December 31, 2022, we've submitted for entitlements on over 16.7 million sq ft of incremental density, representing 69% of our 24.1 million sq ft pipeline. Today, over 8.6 million sq ft of this pipeline is now entitled. We expect that another 3 million sq ft of this pipeline should be entitled by year-end. For context, this to-be-approved density includes, amongst other assets, 385,000 sq ft of incremental density at York Mills and Leslie in Toronto, and 540,000 sq ft of incremental density at Staples Lougheed in Burnaby, BC. The remaining 6 million sq ft of these entitlement submissions that we've made are currently with staff at various municipalities and will be approved in 2024 and 2025.
As set out in our disclosures, only 7 million sq ft of our 24.1 million square foot pipeline is carried on our balance sheet at approximately $72 per square foot. With this in mind, there will no doubt be meaningful NAV growth as properties like those which I've referenced and those other properties in the queue, including, for example, Avenue and Lawrence, 221 Sterling, 332 Bloor, and Yonge and Montgomery, all located in Toronto, are approved. As I'd mentioned on our last call, even after the sale of the density contemplated in our enhanced capital allocation and portfolio optimization plan, we still expect to possess over 17 million sqe ft of incremental density in our residual pipeline, resulting in a very substantial long-term growth profile. This past quarter, we continued to advance our active developments as well. Starting first with our high-rise program.
The structure of 200 Esplanade in North Vancouver is now complete. With 97% of the costs awarded, we are on budget and on schedule for a late 2023 delivery. Here in Toronto, the P1 level is being completed at Edenbridge, our 209 unit condominium development located on our Humber Town Shopping Center lands. 95% of the costs have been awarded and 88% of the units at Edenbridge are now sold. Shoring and excavation at 400 King Street West, our 460,000 sq ft retail and residential condominium development in Toronto is now well underway. 97% of the units there have been sold, and we are holding back the sale of the final units until the project is closer to completion. Next week, shoring and excavation will commence at our 138 Yorkville development site.
Sales for this exclusive project will commence in the second half of 2023. In 2022, we also made tremendous progress with our remerchandising program. At Cedarbrae in Toronto, the extensive renovation to the former Walmart store is well underway and on schedule for delivery in the second half of 2023. Their departure had presented us with the opportunity to both renovate and retenant their former premises and create a comprehensive plan for the center. The former Walmart space is being redemised into a variety of larger format, exterior facing, and interior units.
As part of this re-merchandising plan, we're constructing a new facade and a new point of access to and from the renovated center. We will also relocate several tenants from 3434 Lawrence, our property located across the road, into the former Walmart premises. In addition to increasing traffic to the center, relocating these tenants from across the street will serve to remove the related lease encumbrances at 3434 Lawrence and provide us with the ability to initiate its redevelopment upon receipt of the related entitlements. At Stanley Park in Kitchener, Ontario, demolition of the former Walmart is now complete, and we have just commenced our pad preparation. We expect to give Canadian Tire possession of their pad in the spring of 2023 so they can begin the construction of their new store with a planned opening in the first half of 2024.
While the pace of inflation for material and labor has slowed, we've remained fixated on protecting our projects from cost escalations. With this in mind, we've awarded 100% of the trade contracts at both Stanley Park and Cedarbrae. As I mentioned, we have also awarded between 80%-90% of the associated contracts and fixed a large portion of our costs for our high rise program. In summary, 2022 was a solid year, capped off by a very solid quarter in Q4. It was highlighted by strong quarter-over-quarter metrics, including same-property NOI growth, leasing volume, and leasing spreads. In Q4, we also continued to advance our entitlement program, our active development program, and our enhanced capital allocation plan. With that, operator, we can now open it up for questions.
Certainly. Thank you. We will now take questions from the telephone lines. We ask that each participant limit themselves to two questions. Should you have any further questions, you may re-queue. If you have a question and you're using a speakerphone, please lift your handset prior to making your selection. If you have a question, please press star one on your device's keypad. You may cancel your question at any time by pressing star two. Please press star one at this time if you have a question. There will be a brief pause while the participants register. Thank you for your patience. The first question is from Sam Damiani with TD Securities. Please go ahead.
Thanks. Good afternoon. First question, just on occupancy. You've talked a lot about the leasing, the robust environment that we're in, yet the face occupancy rate of the portfolio is still about 100 basis points below pre-pandemic averages. I guess we've got some Walmarts that are still underway, but what would be other key reasons why are holding back that occupancy rate from ratcheting back up closer to 97%?
Hey, Sam, it's Neil. It principally relates to large format retailers that we've talked about in the past, i.e., Walmart. In fact, you know, we anticipate that will largely be the case again for 2023. We do have a 40 to 50 basis point occupancy headwind with, as you've alluded to, I think, in one of your reports, a Walmart that's departing mid-year this year. You know, I would say that is in a nutshell, the principal reason for the stability in the occupancy. Without providing specific guidance, you know, we have a general expectation of a similar occupancy rate as we progress through this year.
Okay, that's helpful. Second quick question for me, just on King High Line. This is hopefully the last time we talk about it, but just on the sale, how do you think about that property's NOI growth prospects over the medium and longer term, particularly in relation to the remaining portfolio that FCR has? How do you think about the sale pricing at CAD 925 a foot compared to replacement cost or other recent market transactions? Just wondering how that sale might compare to other assets you're thinking about selling over the next couple of years. Thank you.
As you know, Sam, when we press-released the transaction, it was a CAD 149 million sale. At the time, we indicated that was a yield equal to 2.9% on income in place or run rate income. I guess, you know, maybe to flush that out a little bit for you, the actual NOI on our share of that asset was CAD 4 million last year. You know, that's about a probably a 2.6% yield, if you take 2022 actual NOI relative to the sale price. You know, we concur with you that it's a very high-quality asset.
You know, I think in terms of you leading me here in the questioning, we concur that we'll have a good growth profile. You know, our internal budgets would have that asset at our share as an NOI number that would be approaching CAD 5 million if we look, say, 3 years out, so CAD 1 million of growth. That's from a 2.6% starting yield. Yes, the growth in the asset looks good, you know, it's a very low-yielding asset. We achieved what we view as being a premium pricing. We did indicate the sale price was a premium to our IFRS net asset value.
Importantly, we were able to redeploy that capital immediately and accretively in a way that also, in the eyes of, I believe many of our equity investors, reduces the leverage by a significant degree in our business. We think we achieved a lot with the transaction.
Thanks. I'll turn it back.
Thank you.
Thank you. The next question is from Mario Saric with Scotiabank. Please go ahead.
Hi, good afternoon, thanks for taking the question. I just want to focus on the optimization plan and specifically the targeted CAD 1 billion of dispositions over the next couple of years, of which almost CAD 200 has been completed. Another CAD 200 is presumably held for sale. Can you just kind of walk through what the key factors are that will dictate kind of the pace of that disposition activity?
Yeah. Thank you very much, Mario. There's a few factors that are gonna determine the pace, and it will be spread out over the 2-year timeframe that we laid out. Some of the factors are how prime the asset is for sale, we're on the cusp of, you know, achieving zoning on some of them. We don't wanna prematurely sell those and have zoning risk priced into the sale price. Another factor that will dictate the pace of the sales is our tax profile. You know, it's something that's important for us to manage as well. Those are some of the key factors.
Okay. Then just maybe a clarification point, Adam, from your prepared remark earlier about expecting, I believe you said stronger premium pricing in relation to the dispositions. Is that expectation kind of relative to the bids that you've received to date relative to IFRS values? Just wanted maybe a bit more color in terms of what you meant by expecting stronger premium pricing.
Yeah, well, what I mean is, you know, when you have an active sales program, how you approach it, and how you're thinking about it, I think is quite important. While we're motivated to achieve the objectives we've laid out, by no means does that result in our views of being, you know, flexible on price, or, you know, fire selling the assets. I touched on where the pockets of strength are today in the market, and it's not a perfect market, it really is. We've said before, it's constructive enough to achieve what we're going to achieve.
The assets we sold from 2019, and the 2 or 3 years following that, we're geared to a very different objective, which is enhancing the quality of the portfolio. Where we sit today, this is an exceptional portfolio. The assets we're selling are great. Great assets in this country should command very strong pricing. That's our mentality and our expectation as we pursue sales. Hopefully that's enough color to give you what you're looking for.
Yeah. Great. Thanks, Adam. I'll close your mic too. I'll get back. Thank you.
Thank you.
Thank you. The next question is from Pammi Bir with RBC Capital Markets. Please go ahead.
Thanks. Hi, everyone. Just maybe coming back to the disposition program, what are you seeing in terms of the types of buyers for both, you know, whether it's income producing or land or density in the current environment? Just curious if you're seeing any perhaps changes relative to perhaps the second half of last year?
The one common theme that we're seeing across virtually every buyer that we're dealing with, which has been the case for quite some time now, so I wouldn't call it a change. The common theme is we're dealing almost exclusively with private capital. It ranges from very high net worth, you know, family businesses and portfolios to private equity. The common thread is it's private capital versus some of the other forms.
Okay. Just thinking about, I guess, the overall strategic plan, and I think you highlighted, if I recall, a 4% FFO CAGR from, you know, on a three-year basis, 2021 to 2024, and I think you've also excluded the other gains and losses. You know, there's obviously some additional factors this year. You know, is that the, you know, within the range of the growth that you see perhaps for this year? Or what can you share just in terms of your thinking for 2023?
Hi, Pammi, it's Neil. As you know, we gave an objective of greater than CAD 1.20 of FFO per unit, not by this year, but rather by next. We do not give specific guidance in terms of what our annual FFO objectives are. I think as you can appreciate, some of the challenges to earnings growth in the current environment do relate to interest rates and the fact that we and, gonna go out on a limb here, probably every other REIT in Canada face refinancing costs that are higher, not lower. There is some general G&A pressure as it relates to, you know, salary and wages growth. You know, we've given you an indication as to how we see our operating FFO at about CAD 1.20 for last year.
We think you can work down to a Q4 sort of run rate. From that, I would say that there are definitely some challenges, but we still expect our FFO per unit off of those numbers to be better in 2023 versus 2022.
Thanks very much. I will turn it back.
Thank you, Pammi.
Thank you. The next question is from Gaurav Mathur with iA Capital Markets. Please go ahead.
Thank you, and good afternoon, everyone. Just firstly, when we're looking at leasing activity through the lens of an upcoming recession, is there any segment of the tenant mix where you're witnessing a change in sentiment that may cause any concern?
I thank you very much for the question. You know, just getting right to the point, no, we're absolutely not seeing that. If you look historically through previous recessions and you look at First Capital's key operating metrics, whether it be same property NOI growth, lease renewal lifts, occupancy, you simply cannot see the recession or correlate to the recession. You know, we've said this many times before, we're not a barometer for all things retail. We operate in a very specific subsector of retail, both in location, and very importantly to the nature of your question, the way we merchandise our assets. Grocery stores, medical facilities, coffee shops, restaurants, discount retailers, through the likes of, you know, Winners, et cetera, daycare facilities, pharmacies.
You know, through recessions, you know, we see consumer habits changing, but they just simply don't flow through to FCR and the business that we do with our tenants.
Okay, great. You know, lastly, just focusing on the disposition pipeline again, and thank you for sharing your thoughts on the buyer pool, but I'm just wondering, you know, as you go through the process of dispositions, how much of that activity is being determined by, say, the bid-ask spread versus, you know, where financing rates tend to stabilize at the end of it? Is that something that's being discussed a lot as you undergo through the process?
Yeah, look, there's the reality is there's a lot of factors at play that are impacting the market dynamics. I think what underpins the program and the success we've had thus far and all the signals that we're seeing on the ground that indicate we will continue to have success, is that a lot of what we're selling is residential density. We're all very familiar with the shortage of housing in literally every major Canadian city. That's where we're located. Our sites are typically within the best locations, when you look at amenities, population density, access to transit, and all the other things that make neighborhoods great neighborhoods.
You know, there are a lot of businesses out there and investors out there that are positioning their capital to continue building the housing that we clearly need, across the board. You know, the government's very focused on it, and, I think that's the fundamental element that's underpinning the success that we've had so far.
Great. Thank you for the color. I'll turn it back to the operator.
Thank you very much.
Thank you. The next question is from Tal Woolley with National Bank Financial. Please go ahead.
Hi, good afternoon.
Hi, Tal.
Just to you know, over the last couple of years, you've highlighted a couple Walmart exits. I'm just wondering, is that something strategic on your end that you wanna, you know, merchandise away from discount or, you know, something in the relationship or just that, you know, they're opening a new box across the street? I have no idea. Can you give a little color there?
Yeah. Well, yeah, absolutely we can give you the color. We don't have many left. The decisions on the Walmarts that have vacated have been Walmart's decisions. In some cases, you know, we've played a role where they, you know, they need a food restriction, and we can potentially facilitate that. We've declined to facilitate that. The issue for us with Walmart is it's a very tough tenant to earn a return on because the nature of their leases are very in their favor with respect to qualitative elements like what you can do with the balance of your center, whether it be no builds or use exclusivities. Financially, the leases are real tough, right? They're typically very long-term leases, often, you know, 99-year leases when you include their options.
The toughest part about them is most typically their net rent is flat throughout that entire time period, so their real effective rent declines every year. They don't pay the same level of operating costs that typical tenants do. That burden either gets borne on the landlord or inflated in terms of what the rest of the tenants pay to bridge that. It's a very tough tenant for us to make money on. We wouldn't want them all back at one time because, as you've seen, the repurposing exercise has been fruitful and profitable and increased value, but it does result in a fairly lengthy period of cash flow interruption. So, you know, getting them back on a staggered basis works.
Like, wonderful retailer, but very tough to make money on from our perspective, given our model.
Okay. Then with 200 Esplanade coming close to fruition here, just wondering what kind of development yield you expect to have on that project and where you're, you know, where you're thinking about, you know, apartment rents that you're gonna be going out at when you start to market the building?
Yeah, I'll touch on the first part, and then Jordie can touch on the rental rate part. This is inherently the challenge for us with residential development, particularly in Vancouver, because the development yield on an unlevered basis starts with a 4, which is less attractive to us. Our partner, who's a private developer, is a lot more excited about the development metrics on the day that that project's completed because. You know, we're cognizant of this too, and obviously this is the main reason why we went forward on the development. The market cap rate for it is lower, notably lower.
The development profit, certainly the way the current pro forma continues to indicate it, is quite attractive, but the going in yields are. It starts with a 4.
Okay. Then, sorry, just, what sort of rents do you think that translates into? Like
Oh, hi, Tal. Yeah, Tal, it's Jordie. Sorry about that.
Yep.
Yeah. I would suggest you, we expect to get, in the high fours. You know, the units are relatively, I'll say, small. The expectation is that, they will lease up relatively quickly. It's a small, a relatively small building and in an area that, remains strategic for us. We have the center, adjacent to it, and there's some additional overflow retail at the base as well.
Okay. Just lastly, on the Yonge and Roselawn transaction. I'm just, you know, like you decided to do a partial stake here, which, you know, is great 'cause it raised a little cash for you and, you know, you keep your interest in the project, which means, you know, you'll be, you know, funding its development over time. I'm just wondering, like, when you look at, like, the disposition program ahead, how you're sort of thinking about, "Yeah, that's one we wanna stay in on, and that's one we might exit entirely.
Yeah, that's a great question, Tal. The first thing we do is we step back and we say, "Is this a, you know, an impactful development that fits what we're trying to do and what do the returns look like on it?" From there, like we've done in other larger projects that we've developed, we've said, "Is there a potential partner that not only brings capital, but brings in expertise that improves the development capability of the team, you know, reduces risk and increases the probability of success?" When we look at the Yonge and Roselawn property, and, you know, Jordie touched on it in his prepared remarks that we could have sold the land for more and exited the project.
We do believe there's a lot of development profit that can be realized through the development. We believe that Woodbourne brings in expertise. You know, this is not our first partnership with Woodbourne, so we've got a good handle on their platform. We do think they bring value to the table while we're still the development manager working with them. They also brought an institution from overseas that we'll disclose at a later date at their request that we also think can grow into a larger strategic partnership. That's certainly our desire, and that is also that institution's desire. That's how we look at it. You know, obviously for ones that are less compelling for us and what we're trying to do, those are the ones we'll exit entirely.
We should expect to see some, like, 100% exits of more development sites going forward?
Absolutely.
Okay. Thanks, Adam. Appreciate it.
Thank you very much.
Thank you. The next question is from Dean Wilkinson with CIBC. Please go ahead.
Thank you, good afternoon. Question's for Neil. You didn't go out on a limb with the debt refinancing, that's an absolute fact. What was the thought process when you looked at that stuff you did in Calgary to take 10-year term at, sort of the 5.35%?
Yeah. Hi, Dean. You know, a number of considerations. One for sure is the fact, and this has been pointed out by probably you and a few of your peers, the fact that our debt ladder has been shortening.
Mm.
That's really been, you know, the natural process of us repaying debt as it comes due and not being in the market, you know, originating new long-term debt. That was certainly a factor. You know, secondly, these are great quality, very stable, very solid cash flowing assets. Given the cash flow that these assets throw off, they were capable of supporting a fairly high LTV, you know, by our financing standards anyway. You know, the assets were financed at a mid-60% LTV, and so we got a nice loan amount, we got lots of term, and the overall blended rate in the low 5s worked very well for us.
All right. The sort of corollary to that is when you look at those debt financing costs, and they've increased some 100 and whatever basis points year-over-year, how do you square that against cap rates that are, you know, flat or up 20 basis points, depending on who you would talk to? You know, I mean, you've been doing this for a while. What's your thought on that sort of negative differential there and how that could play out?
Yeah. Well, look, we've seen, Dean, for quite some time now that cap rates and interest rates are far from perfectly correlated. Certainly the movement in rates relative to cap rate is one element. you know, we've been So far, at least we've been at the forefront on property write-downs. 20 basis points may sound small, but it's over 4%, of our asset value that we've written down. What's countering that is where are rental rates? How is cash flow growing? The whole dynamic around increased replacement costs and what that should mean to rents over the next number of years. you know that's all that's a counter balance to that.
You know, the reality is we're in neighborhoods, including in Calgary, where the population continues to grow at a very attractive rate with healthy household income and very, very little new retail supply. The retail square footage per capita in these neighborhoods continues to go in the right direction. You know, we think that's part of the counterbalance why, you know, cap rates have held in so well. Look, grocery anchored retail has proved its resiliency through the pandemic. I think performed significantly better than most people would have expected in the early and mid part of 2020. I think that those are probably some of the reasons. Clearly we've seen for quite some time now, you know, there is not a perfect correlation between interest rates and cap rates.
Sounds good. Thanks, guys.
Thank you very much.
Thank you. There are no further analyst questions at this time. This will conclude the question and answer session. I will turn the call over to Adam.
Okay, thank you very much. Look, we apologize for running over in time, clearly we've got a lot going on. We wanted to make sure we also got through all of the questions from analysts that cover us. Thank you very much everyone, for your participation and interest in First Capital. Have a wonderful afternoon.
Thank you. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.